Download UOC (University of Calicut) M.Com (Master of Commerce) Accounting for Managerial Decisions 1 Question Bank (Important Questions)
ACCOUNTING
FOR MANAGERIAL
DECISIONS
is not suitable where selling price is determined on the basis
of cost-plus method.
a. Absorption costing
b. Marginal costing
c. Both a and b
d. None of the above
2. The problems
associated with marginal costin g are
a. Difficulties in divisions of costs
b. Problem of valuation of stocks
a. Ignores time elements
d. All of the above
3. Managers utilizes marginal costing for
a, Make or buy decision
b. Utilization of additional capacity
c. Determination of dumping price
d. All of the above
4. Which of the following are advantages of marginal costing?
a. Makes the process of cost accounting more simple
b. Helps in proper valuation of closing stock
c. Useful for standard and budgetary control
d. All of the above
5. Under absorption costing, managerial decisions are based on
a. Profit
b. Contribution
c. Profit volume ratio
d. None of the above
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l.
ACCOUNTING
FOR MANAGERIAL
DECISIONS
is not suitable where selling price is determined on the basis
of cost-plus method.
a. Absorption costing
b. Marginal costing
c. Both a and b
d. None of the above
2. The problems
associated with marginal costin g are
a. Difficulties in divisions of costs
b. Problem of valuation of stocks
a. Ignores time elements
d. All of the above
3. Managers utilizes marginal costing for
a, Make or buy decision
b. Utilization of additional capacity
c. Determination of dumping price
d. All of the above
4. Which of the following are advantages of marginal costing?
a. Makes the process of cost accounting more simple
b. Helps in proper valuation of closing stock
c. Useful for standard and budgetary control
d. All of the above
5. Under absorption costing, managerial decisions are based on
a. Profit
b. Contribution
c. Profit volume ratio
d. None of the above
6. Which of the following statements are true about absorption & marginal
costing?
a. In absoqption costing, cost is divided into three major parts while in
marginal costing, cost is divided into two main parts
b. In absorption costing period is important and in marginal costing
product is important
c. Both a and b
d. None of the above
7. Given production is 1,00,000 units, fixed costs is Rs 2,00,000 Selling
price is Rs l0 per unit and variable cost is Rs 6 per unit. Determine profit
using technique of marginal costing.
a.Rs 2,00,000
b.Rs 8,00,000
c.Rs 6,00,000
d. None of the above
8. While computing profit in marginal costing
a. Total marginal cost is deducted from total sales revenues
b. Total marginal cost is added to total sales revenues
c. Fixed cost is added to contribution
d. None of the above
9. Marginal costing is also known as
a. Direct costing b. Variable costing c. Both a and b d. None of
the above
l0.When contribution is negative but less than fixed cost,
a. There is loss equal to fixed costs
b. There is loss more than fixed costs
c. There will be loss less than fixed costs
d. All of above are false
I l.Which of the following is the correct description of the break-even
point?
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l.
ACCOUNTING
FOR MANAGERIAL
DECISIONS
is not suitable where selling price is determined on the basis
of cost-plus method.
a. Absorption costing
b. Marginal costing
c. Both a and b
d. None of the above
2. The problems
associated with marginal costin g are
a. Difficulties in divisions of costs
b. Problem of valuation of stocks
a. Ignores time elements
d. All of the above
3. Managers utilizes marginal costing for
a, Make or buy decision
b. Utilization of additional capacity
c. Determination of dumping price
d. All of the above
4. Which of the following are advantages of marginal costing?
a. Makes the process of cost accounting more simple
b. Helps in proper valuation of closing stock
c. Useful for standard and budgetary control
d. All of the above
5. Under absorption costing, managerial decisions are based on
a. Profit
b. Contribution
c. Profit volume ratio
d. None of the above
6. Which of the following statements are true about absorption & marginal
costing?
a. In absoqption costing, cost is divided into three major parts while in
marginal costing, cost is divided into two main parts
b. In absorption costing period is important and in marginal costing
product is important
c. Both a and b
d. None of the above
7. Given production is 1,00,000 units, fixed costs is Rs 2,00,000 Selling
price is Rs l0 per unit and variable cost is Rs 6 per unit. Determine profit
using technique of marginal costing.
a.Rs 2,00,000
b.Rs 8,00,000
c.Rs 6,00,000
d. None of the above
8. While computing profit in marginal costing
a. Total marginal cost is deducted from total sales revenues
b. Total marginal cost is added to total sales revenues
c. Fixed cost is added to contribution
d. None of the above
9. Marginal costing is also known as
a. Direct costing b. Variable costing c. Both a and b d. None of
the above
l0.When contribution is negative but less than fixed cost,
a. There is loss equal to fixed costs
b. There is loss more than fixed costs
c. There will be loss less than fixed costs
d. All of above are false
I l.Which of the following is the correct description of the break-even
point?
a.
Where
total revenue
equals
total variable
costs
b.Wheretotalrevenueequalstotallrxedandvariablecosts
c. Where
total
revenue
equals
total
fixed
costs
d. Where
total
revenue
equals
total contribution
l2.Inaprofit.volumechart,whatdoesthepointatwhichthecontributionline
touches
the vertical
axis
represent?
a. Total fixed costs
b' The break-even
point
c. Total contribution
d' Total
variable
costs
13.Which
one of the following
best describes
the margin
of safety?
a,Theextenttowhichthetotalsalesrevenueexceedsthetotal
variable
costs
b.Theextenttowhichthetotalsalesrevenueexceedsthetotalfixed
costs
a.Fixedcosts/(Salesrevenueperunit_variablecostsperunit)
d.Theextenttowhichthetotalsalesrevenueexceedsthetotalfixed
and variable
costs
l4.Iftheactivitylevelincreasesl0%o,totalvariablecostswill
a. remain
the same b' increase
by more
than 10%
c. decrease
by less than 10%d'
increase
by10%
l5.CVP
analYsis
does not consider
a.level
of activity
b.fixed
cost
per unitc'variable
cost
per unitd'sales
mix
l6.Which
of the following
is not an underlying
assumption
of cvP
analysis?
a.Changesinactivityaretheonlyfactorsthataffectcosts
b.Cost classifications
are reasonably
accurate
c.Beginning
inventory
is larger than ending
inventory
d.Sales mix is constant
l T.Which of the following
would not be an acceptable
way to express
contributionmargin?
a.Sales minus variable
costs
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l.
ACCOUNTING
FOR MANAGERIAL
DECISIONS
is not suitable where selling price is determined on the basis
of cost-plus method.
a. Absorption costing
b. Marginal costing
c. Both a and b
d. None of the above
2. The problems
associated with marginal costin g are
a. Difficulties in divisions of costs
b. Problem of valuation of stocks
a. Ignores time elements
d. All of the above
3. Managers utilizes marginal costing for
a, Make or buy decision
b. Utilization of additional capacity
c. Determination of dumping price
d. All of the above
4. Which of the following are advantages of marginal costing?
a. Makes the process of cost accounting more simple
b. Helps in proper valuation of closing stock
c. Useful for standard and budgetary control
d. All of the above
5. Under absorption costing, managerial decisions are based on
a. Profit
b. Contribution
c. Profit volume ratio
d. None of the above
6. Which of the following statements are true about absorption & marginal
costing?
a. In absoqption costing, cost is divided into three major parts while in
marginal costing, cost is divided into two main parts
b. In absorption costing period is important and in marginal costing
product is important
c. Both a and b
d. None of the above
7. Given production is 1,00,000 units, fixed costs is Rs 2,00,000 Selling
price is Rs l0 per unit and variable cost is Rs 6 per unit. Determine profit
using technique of marginal costing.
a.Rs 2,00,000
b.Rs 8,00,000
c.Rs 6,00,000
d. None of the above
8. While computing profit in marginal costing
a. Total marginal cost is deducted from total sales revenues
b. Total marginal cost is added to total sales revenues
c. Fixed cost is added to contribution
d. None of the above
9. Marginal costing is also known as
a. Direct costing b. Variable costing c. Both a and b d. None of
the above
l0.When contribution is negative but less than fixed cost,
a. There is loss equal to fixed costs
b. There is loss more than fixed costs
c. There will be loss less than fixed costs
d. All of above are false
I l.Which of the following is the correct description of the break-even
point?
a.
Where
total revenue
equals
total variable
costs
b.Wheretotalrevenueequalstotallrxedandvariablecosts
c. Where
total
revenue
equals
total
fixed
costs
d. Where
total
revenue
equals
total contribution
l2.Inaprofit.volumechart,whatdoesthepointatwhichthecontributionline
touches
the vertical
axis
represent?
a. Total fixed costs
b' The break-even
point
c. Total contribution
d' Total
variable
costs
13.Which
one of the following
best describes
the margin
of safety?
a,Theextenttowhichthetotalsalesrevenueexceedsthetotal
variable
costs
b.Theextenttowhichthetotalsalesrevenueexceedsthetotalfixed
costs
a.Fixedcosts/(Salesrevenueperunit_variablecostsperunit)
d.Theextenttowhichthetotalsalesrevenueexceedsthetotalfixed
and variable
costs
l4.Iftheactivitylevelincreasesl0%o,totalvariablecostswill
a. remain
the same b' increase
by more
than 10%
c. decrease
by less than 10%d'
increase
by10%
l5.CVP
analYsis
does not consider
a.level
of activity
b.fixed
cost
per unitc'variable
cost
per unitd'sales
mix
l6.Which
of the following
is not an underlying
assumption
of cvP
analysis?
a.Changesinactivityaretheonlyfactorsthataffectcosts
b.Cost classifications
are reasonably
accurate
c.Beginning
inventory
is larger than ending
inventory
d.Sales mix is constant
l T.Which of the following
would not be an acceptable
way to express
contributionmargin?
a.Sales minus variable
costs
b.Sales minus unit costs
c.Unit selling price minus unit variable costs
d.Contribution margin per unit divided by unit selling price
18.The level of activity at which total revenues equal total costs is the
a.variable point b.fixed point c.semi-variable point d.break-even
point
19.The break-even point in units is compured by dividing fixed costs by the
a.contribution margin ratio. b.contribution margin per unit.
c.total contribution margin. d.unit selling price.
20.\n a CVP graph, the break-even point is at the intersection of the sales line
and the
a.fixed cost line b.variable cost line c.total cost line d.mixed cost line
2l.ln evaluating the margin of safbty. the
a.break-even point is not relevant b.higher the ratio, the greater the
margin of safety
c.higher the dollar amount, the lower the margin of safety
d.higher the ratio, the lower the flxed costs
22.\f Cost of goods sold
:
Rs. 40,000GP Margin:20o/o of salesCalculate the
Gross profit margin.
a.Rs. 32,000 b.Rs.48,000 c.Rs.8,000 d.Rs. 10,000
23.The cost of equity capital is all of the following EXCEPT:
a. the minimum rate that a firm should earn on the equity-financed
part of an investment.
b. a return on the equity-financed portion of an investment that, at
worst, leaves the market price of the stock unchanged.
c. by lar the most difficult component cost to estimate.
d. generally lower than the before-tax cost of debt.
24.To compute the required rate of return fbr equity in a company using the
CAPM, it is necessary to know all of the following EXCEPT:
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l.
ACCOUNTING
FOR MANAGERIAL
DECISIONS
is not suitable where selling price is determined on the basis
of cost-plus method.
a. Absorption costing
b. Marginal costing
c. Both a and b
d. None of the above
2. The problems
associated with marginal costin g are
a. Difficulties in divisions of costs
b. Problem of valuation of stocks
a. Ignores time elements
d. All of the above
3. Managers utilizes marginal costing for
a, Make or buy decision
b. Utilization of additional capacity
c. Determination of dumping price
d. All of the above
4. Which of the following are advantages of marginal costing?
a. Makes the process of cost accounting more simple
b. Helps in proper valuation of closing stock
c. Useful for standard and budgetary control
d. All of the above
5. Under absorption costing, managerial decisions are based on
a. Profit
b. Contribution
c. Profit volume ratio
d. None of the above
6. Which of the following statements are true about absorption & marginal
costing?
a. In absoqption costing, cost is divided into three major parts while in
marginal costing, cost is divided into two main parts
b. In absorption costing period is important and in marginal costing
product is important
c. Both a and b
d. None of the above
7. Given production is 1,00,000 units, fixed costs is Rs 2,00,000 Selling
price is Rs l0 per unit and variable cost is Rs 6 per unit. Determine profit
using technique of marginal costing.
a.Rs 2,00,000
b.Rs 8,00,000
c.Rs 6,00,000
d. None of the above
8. While computing profit in marginal costing
a. Total marginal cost is deducted from total sales revenues
b. Total marginal cost is added to total sales revenues
c. Fixed cost is added to contribution
d. None of the above
9. Marginal costing is also known as
a. Direct costing b. Variable costing c. Both a and b d. None of
the above
l0.When contribution is negative but less than fixed cost,
a. There is loss equal to fixed costs
b. There is loss more than fixed costs
c. There will be loss less than fixed costs
d. All of above are false
I l.Which of the following is the correct description of the break-even
point?
a.
Where
total revenue
equals
total variable
costs
b.Wheretotalrevenueequalstotallrxedandvariablecosts
c. Where
total
revenue
equals
total
fixed
costs
d. Where
total
revenue
equals
total contribution
l2.Inaprofit.volumechart,whatdoesthepointatwhichthecontributionline
touches
the vertical
axis
represent?
a. Total fixed costs
b' The break-even
point
c. Total contribution
d' Total
variable
costs
13.Which
one of the following
best describes
the margin
of safety?
a,Theextenttowhichthetotalsalesrevenueexceedsthetotal
variable
costs
b.Theextenttowhichthetotalsalesrevenueexceedsthetotalfixed
costs
a.Fixedcosts/(Salesrevenueperunit_variablecostsperunit)
d.Theextenttowhichthetotalsalesrevenueexceedsthetotalfixed
and variable
costs
l4.Iftheactivitylevelincreasesl0%o,totalvariablecostswill
a. remain
the same b' increase
by more
than 10%
c. decrease
by less than 10%d'
increase
by10%
l5.CVP
analYsis
does not consider
a.level
of activity
b.fixed
cost
per unitc'variable
cost
per unitd'sales
mix
l6.Which
of the following
is not an underlying
assumption
of cvP
analysis?
a.Changesinactivityaretheonlyfactorsthataffectcosts
b.Cost classifications
are reasonably
accurate
c.Beginning
inventory
is larger than ending
inventory
d.Sales mix is constant
l T.Which of the following
would not be an acceptable
way to express
contributionmargin?
a.Sales minus variable
costs
b.Sales minus unit costs
c.Unit selling price minus unit variable costs
d.Contribution margin per unit divided by unit selling price
18.The level of activity at which total revenues equal total costs is the
a.variable point b.fixed point c.semi-variable point d.break-even
point
19.The break-even point in units is compured by dividing fixed costs by the
a.contribution margin ratio. b.contribution margin per unit.
c.total contribution margin. d.unit selling price.
20.\n a CVP graph, the break-even point is at the intersection of the sales line
and the
a.fixed cost line b.variable cost line c.total cost line d.mixed cost line
2l.ln evaluating the margin of safbty. the
a.break-even point is not relevant b.higher the ratio, the greater the
margin of safety
c.higher the dollar amount, the lower the margin of safety
d.higher the ratio, the lower the flxed costs
22.\f Cost of goods sold
:
Rs. 40,000GP Margin:20o/o of salesCalculate the
Gross profit margin.
a.Rs. 32,000 b.Rs.48,000 c.Rs.8,000 d.Rs. 10,000
23.The cost of equity capital is all of the following EXCEPT:
a. the minimum rate that a firm should earn on the equity-financed
part of an investment.
b. a return on the equity-financed portion of an investment that, at
worst, leaves the market price of the stock unchanged.
c. by lar the most difficult component cost to estimate.
d. generally lower than the before-tax cost of debt.
24.To compute the required rate of return fbr equity in a company using the
CAPM, it is necessary to know all of the following EXCEPT:
a. the risk-free ratq.
b. the beta for the firm.
c. the earnings for the next time period'
d. the market return expected for the time period'
25.lncalculating
the costs of the individual
components
of a firm's financing'
the corporate tax rate is important to which of the following
component
cost formulas?
a. common stock.
b. debt.
c. preferred stock.
d. none ofthe above.
26.Market
values are often used in computing
the weighted average cost of
capital because
a. this is the simplest
way to do the calculation'
b. this is consistent
with the goal of maximizing
shareholder
value'
c.thisisrequiredintheU.S.bythesecuritiesandExchange
Commission.
d. this is a very common
mistake'
27.Foran
all-equity
financed
firm, a project whose expected
rate of return
plots should be rejected'
a. above the characteristic
line
b. above the securitY
market line
c. below the securitY
market line
d. below the characteristic
line
28.1n weighted
average
cost of capital, company
can affect its capital cost
through
a. PolicY of caPital
structure
b' PolicY
of dividends
c. PolicY
of investment
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l.
ACCOUNTING
FOR MANAGERIAL
DECISIONS
is not suitable where selling price is determined on the basis
of cost-plus method.
a. Absorption costing
b. Marginal costing
c. Both a and b
d. None of the above
2. The problems
associated with marginal costin g are
a. Difficulties in divisions of costs
b. Problem of valuation of stocks
a. Ignores time elements
d. All of the above
3. Managers utilizes marginal costing for
a, Make or buy decision
b. Utilization of additional capacity
c. Determination of dumping price
d. All of the above
4. Which of the following are advantages of marginal costing?
a. Makes the process of cost accounting more simple
b. Helps in proper valuation of closing stock
c. Useful for standard and budgetary control
d. All of the above
5. Under absorption costing, managerial decisions are based on
a. Profit
b. Contribution
c. Profit volume ratio
d. None of the above
6. Which of the following statements are true about absorption & marginal
costing?
a. In absoqption costing, cost is divided into three major parts while in
marginal costing, cost is divided into two main parts
b. In absorption costing period is important and in marginal costing
product is important
c. Both a and b
d. None of the above
7. Given production is 1,00,000 units, fixed costs is Rs 2,00,000 Selling
price is Rs l0 per unit and variable cost is Rs 6 per unit. Determine profit
using technique of marginal costing.
a.Rs 2,00,000
b.Rs 8,00,000
c.Rs 6,00,000
d. None of the above
8. While computing profit in marginal costing
a. Total marginal cost is deducted from total sales revenues
b. Total marginal cost is added to total sales revenues
c. Fixed cost is added to contribution
d. None of the above
9. Marginal costing is also known as
a. Direct costing b. Variable costing c. Both a and b d. None of
the above
l0.When contribution is negative but less than fixed cost,
a. There is loss equal to fixed costs
b. There is loss more than fixed costs
c. There will be loss less than fixed costs
d. All of above are false
I l.Which of the following is the correct description of the break-even
point?
a.
Where
total revenue
equals
total variable
costs
b.Wheretotalrevenueequalstotallrxedandvariablecosts
c. Where
total
revenue
equals
total
fixed
costs
d. Where
total
revenue
equals
total contribution
l2.Inaprofit.volumechart,whatdoesthepointatwhichthecontributionline
touches
the vertical
axis
represent?
a. Total fixed costs
b' The break-even
point
c. Total contribution
d' Total
variable
costs
13.Which
one of the following
best describes
the margin
of safety?
a,Theextenttowhichthetotalsalesrevenueexceedsthetotal
variable
costs
b.Theextenttowhichthetotalsalesrevenueexceedsthetotalfixed
costs
a.Fixedcosts/(Salesrevenueperunit_variablecostsperunit)
d.Theextenttowhichthetotalsalesrevenueexceedsthetotalfixed
and variable
costs
l4.Iftheactivitylevelincreasesl0%o,totalvariablecostswill
a. remain
the same b' increase
by more
than 10%
c. decrease
by less than 10%d'
increase
by10%
l5.CVP
analYsis
does not consider
a.level
of activity
b.fixed
cost
per unitc'variable
cost
per unitd'sales
mix
l6.Which
of the following
is not an underlying
assumption
of cvP
analysis?
a.Changesinactivityaretheonlyfactorsthataffectcosts
b.Cost classifications
are reasonably
accurate
c.Beginning
inventory
is larger than ending
inventory
d.Sales mix is constant
l T.Which of the following
would not be an acceptable
way to express
contributionmargin?
a.Sales minus variable
costs
b.Sales minus unit costs
c.Unit selling price minus unit variable costs
d.Contribution margin per unit divided by unit selling price
18.The level of activity at which total revenues equal total costs is the
a.variable point b.fixed point c.semi-variable point d.break-even
point
19.The break-even point in units is compured by dividing fixed costs by the
a.contribution margin ratio. b.contribution margin per unit.
c.total contribution margin. d.unit selling price.
20.\n a CVP graph, the break-even point is at the intersection of the sales line
and the
a.fixed cost line b.variable cost line c.total cost line d.mixed cost line
2l.ln evaluating the margin of safbty. the
a.break-even point is not relevant b.higher the ratio, the greater the
margin of safety
c.higher the dollar amount, the lower the margin of safety
d.higher the ratio, the lower the flxed costs
22.\f Cost of goods sold
:
Rs. 40,000GP Margin:20o/o of salesCalculate the
Gross profit margin.
a.Rs. 32,000 b.Rs.48,000 c.Rs.8,000 d.Rs. 10,000
23.The cost of equity capital is all of the following EXCEPT:
a. the minimum rate that a firm should earn on the equity-financed
part of an investment.
b. a return on the equity-financed portion of an investment that, at
worst, leaves the market price of the stock unchanged.
c. by lar the most difficult component cost to estimate.
d. generally lower than the before-tax cost of debt.
24.To compute the required rate of return fbr equity in a company using the
CAPM, it is necessary to know all of the following EXCEPT:
a. the risk-free ratq.
b. the beta for the firm.
c. the earnings for the next time period'
d. the market return expected for the time period'
25.lncalculating
the costs of the individual
components
of a firm's financing'
the corporate tax rate is important to which of the following
component
cost formulas?
a. common stock.
b. debt.
c. preferred stock.
d. none ofthe above.
26.Market
values are often used in computing
the weighted average cost of
capital because
a. this is the simplest
way to do the calculation'
b. this is consistent
with the goal of maximizing
shareholder
value'
c.thisisrequiredintheU.S.bythesecuritiesandExchange
Commission.
d. this is a very common
mistake'
27.Foran
all-equity
financed
firm, a project whose expected
rate of return
plots should be rejected'
a. above the characteristic
line
b. above the securitY
market line
c. below the securitY
market line
d. below the characteristic
line
28.1n weighted
average
cost of capital, company
can affect its capital cost
through
a. PolicY of caPital
structure
b' PolicY
of dividends
c. PolicY
of investment
d. All of above
29.If return on investment is a measure used on the balanced scorecard, under
which perspective would it be listed?
a. Financial perspective
b. Customer perspective
c. Leaming and growth perspective
d. Internal business perspective
e. None of the above.
30.What approach is used to compare organisation operations with those of
other companies?
a. PERT analysis
b. SWOT analysis
c. Competitor performance
assessment
d. Benchmarking
3l.What is 'strategy mapping, in the balanced scorecard?
a. Identifying causal links between the four perspectives
b. Mapping the business,processes
c. Setting the mission
d. Agreeing the strategy with the director of the business
32'The overall (weighted
average) cost of capital is composed
of a weighted
average of
----.
a. the cost of common equity and the cost of debt
b. the cost of common
equity and the cost of preferred
stock
c. the cost of preferred
stock and the cost of debt
d. the cost of common
equity,
the cost of preferred
stock, and the cost
ofdebt
33.which
of the foilowing
is not a recognized
approach
fbr determining
the
cost of equity?
a. Dividend
discount
model
approach.
b' Before-tax
cost of preferred
stock prus
risk premium
approach.
c. Capital_asset
pricing
model
approach.
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ACCOUNTING
FOR MANAGERIAL
DECISIONS
is not suitable where selling price is determined on the basis
of cost-plus method.
a. Absorption costing
b. Marginal costing
c. Both a and b
d. None of the above
2. The problems
associated with marginal costin g are
a. Difficulties in divisions of costs
b. Problem of valuation of stocks
a. Ignores time elements
d. All of the above
3. Managers utilizes marginal costing for
a, Make or buy decision
b. Utilization of additional capacity
c. Determination of dumping price
d. All of the above
4. Which of the following are advantages of marginal costing?
a. Makes the process of cost accounting more simple
b. Helps in proper valuation of closing stock
c. Useful for standard and budgetary control
d. All of the above
5. Under absorption costing, managerial decisions are based on
a. Profit
b. Contribution
c. Profit volume ratio
d. None of the above
6. Which of the following statements are true about absorption & marginal
costing?
a. In absoqption costing, cost is divided into three major parts while in
marginal costing, cost is divided into two main parts
b. In absorption costing period is important and in marginal costing
product is important
c. Both a and b
d. None of the above
7. Given production is 1,00,000 units, fixed costs is Rs 2,00,000 Selling
price is Rs l0 per unit and variable cost is Rs 6 per unit. Determine profit
using technique of marginal costing.
a.Rs 2,00,000
b.Rs 8,00,000
c.Rs 6,00,000
d. None of the above
8. While computing profit in marginal costing
a. Total marginal cost is deducted from total sales revenues
b. Total marginal cost is added to total sales revenues
c. Fixed cost is added to contribution
d. None of the above
9. Marginal costing is also known as
a. Direct costing b. Variable costing c. Both a and b d. None of
the above
l0.When contribution is negative but less than fixed cost,
a. There is loss equal to fixed costs
b. There is loss more than fixed costs
c. There will be loss less than fixed costs
d. All of above are false
I l.Which of the following is the correct description of the break-even
point?
a.
Where
total revenue
equals
total variable
costs
b.Wheretotalrevenueequalstotallrxedandvariablecosts
c. Where
total
revenue
equals
total
fixed
costs
d. Where
total
revenue
equals
total contribution
l2.Inaprofit.volumechart,whatdoesthepointatwhichthecontributionline
touches
the vertical
axis
represent?
a. Total fixed costs
b' The break-even
point
c. Total contribution
d' Total
variable
costs
13.Which
one of the following
best describes
the margin
of safety?
a,Theextenttowhichthetotalsalesrevenueexceedsthetotal
variable
costs
b.Theextenttowhichthetotalsalesrevenueexceedsthetotalfixed
costs
a.Fixedcosts/(Salesrevenueperunit_variablecostsperunit)
d.Theextenttowhichthetotalsalesrevenueexceedsthetotalfixed
and variable
costs
l4.Iftheactivitylevelincreasesl0%o,totalvariablecostswill
a. remain
the same b' increase
by more
than 10%
c. decrease
by less than 10%d'
increase
by10%
l5.CVP
analYsis
does not consider
a.level
of activity
b.fixed
cost
per unitc'variable
cost
per unitd'sales
mix
l6.Which
of the following
is not an underlying
assumption
of cvP
analysis?
a.Changesinactivityaretheonlyfactorsthataffectcosts
b.Cost classifications
are reasonably
accurate
c.Beginning
inventory
is larger than ending
inventory
d.Sales mix is constant
l T.Which of the following
would not be an acceptable
way to express
contributionmargin?
a.Sales minus variable
costs
b.Sales minus unit costs
c.Unit selling price minus unit variable costs
d.Contribution margin per unit divided by unit selling price
18.The level of activity at which total revenues equal total costs is the
a.variable point b.fixed point c.semi-variable point d.break-even
point
19.The break-even point in units is compured by dividing fixed costs by the
a.contribution margin ratio. b.contribution margin per unit.
c.total contribution margin. d.unit selling price.
20.\n a CVP graph, the break-even point is at the intersection of the sales line
and the
a.fixed cost line b.variable cost line c.total cost line d.mixed cost line
2l.ln evaluating the margin of safbty. the
a.break-even point is not relevant b.higher the ratio, the greater the
margin of safety
c.higher the dollar amount, the lower the margin of safety
d.higher the ratio, the lower the flxed costs
22.\f Cost of goods sold
:
Rs. 40,000GP Margin:20o/o of salesCalculate the
Gross profit margin.
a.Rs. 32,000 b.Rs.48,000 c.Rs.8,000 d.Rs. 10,000
23.The cost of equity capital is all of the following EXCEPT:
a. the minimum rate that a firm should earn on the equity-financed
part of an investment.
b. a return on the equity-financed portion of an investment that, at
worst, leaves the market price of the stock unchanged.
c. by lar the most difficult component cost to estimate.
d. generally lower than the before-tax cost of debt.
24.To compute the required rate of return fbr equity in a company using the
CAPM, it is necessary to know all of the following EXCEPT:
a. the risk-free ratq.
b. the beta for the firm.
c. the earnings for the next time period'
d. the market return expected for the time period'
25.lncalculating
the costs of the individual
components
of a firm's financing'
the corporate tax rate is important to which of the following
component
cost formulas?
a. common stock.
b. debt.
c. preferred stock.
d. none ofthe above.
26.Market
values are often used in computing
the weighted average cost of
capital because
a. this is the simplest
way to do the calculation'
b. this is consistent
with the goal of maximizing
shareholder
value'
c.thisisrequiredintheU.S.bythesecuritiesandExchange
Commission.
d. this is a very common
mistake'
27.Foran
all-equity
financed
firm, a project whose expected
rate of return
plots should be rejected'
a. above the characteristic
line
b. above the securitY
market line
c. below the securitY
market line
d. below the characteristic
line
28.1n weighted
average
cost of capital, company
can affect its capital cost
through
a. PolicY of caPital
structure
b' PolicY
of dividends
c. PolicY
of investment
d. All of above
29.If return on investment is a measure used on the balanced scorecard, under
which perspective would it be listed?
a. Financial perspective
b. Customer perspective
c. Leaming and growth perspective
d. Internal business perspective
e. None of the above.
30.What approach is used to compare organisation operations with those of
other companies?
a. PERT analysis
b. SWOT analysis
c. Competitor performance
assessment
d. Benchmarking
3l.What is 'strategy mapping, in the balanced scorecard?
a. Identifying causal links between the four perspectives
b. Mapping the business,processes
c. Setting the mission
d. Agreeing the strategy with the director of the business
32'The overall (weighted
average) cost of capital is composed
of a weighted
average of
----.
a. the cost of common equity and the cost of debt
b. the cost of common
equity and the cost of preferred
stock
c. the cost of preferred
stock and the cost of debt
d. the cost of common
equity,
the cost of preferred
stock, and the cost
ofdebt
33.which
of the foilowing
is not a recognized
approach
fbr determining
the
cost of equity?
a. Dividend
discount
model
approach.
b' Before-tax
cost of preferred
stock prus
risk premium
approach.
c. Capital_asset
pricing
model
approach.
d. Before-tax aost of debt
plus risk premium approach.
34.How is economic value added (EVA) calculated?
a. It is the difference between
the market value of the firm and the
book value of equitY.
b. It is the firm's net operating profit after tax (NOPAT) less a dollar
cost of capital charge.
c. It is the net incoine of the firm less a dollar cost that equals the
weighted average cost of capital multiplied by the book value of
liabilities and equities.
d. None of the above are
35.what is the main objective of Activity Based costing
a. improve
Product
costing
b. identify non-value adding activities in the production
process which
might be a suitable focus for attention or elimination
c. provide required information
for decision making
d. All of the above
36.Cooper
and Kaplan recommend
using which of the following
as the basis'
or denominator,
when developing
activity cost
pool rates for activity
based
costing.
a. the maximum
capacity
for each activity'
b. the practical capacity
for each activity'
c. the
planned or budgeted
for each activity'
d. the normal
capacity
for each activity'
e. none
of the alternatives
given'
31.Activitybasedcostsystemswouldprobablyprovidethegreatestbenefits
for
organizations
that
use
a.
job order
costing'
b.
Process
costing'
c. historical
costing
FirstRanker.com - FirstRanker's Choice
l.
ACCOUNTING
FOR MANAGERIAL
DECISIONS
is not suitable where selling price is determined on the basis
of cost-plus method.
a. Absorption costing
b. Marginal costing
c. Both a and b
d. None of the above
2. The problems
associated with marginal costin g are
a. Difficulties in divisions of costs
b. Problem of valuation of stocks
a. Ignores time elements
d. All of the above
3. Managers utilizes marginal costing for
a, Make or buy decision
b. Utilization of additional capacity
c. Determination of dumping price
d. All of the above
4. Which of the following are advantages of marginal costing?
a. Makes the process of cost accounting more simple
b. Helps in proper valuation of closing stock
c. Useful for standard and budgetary control
d. All of the above
5. Under absorption costing, managerial decisions are based on
a. Profit
b. Contribution
c. Profit volume ratio
d. None of the above
6. Which of the following statements are true about absorption & marginal
costing?
a. In absoqption costing, cost is divided into three major parts while in
marginal costing, cost is divided into two main parts
b. In absorption costing period is important and in marginal costing
product is important
c. Both a and b
d. None of the above
7. Given production is 1,00,000 units, fixed costs is Rs 2,00,000 Selling
price is Rs l0 per unit and variable cost is Rs 6 per unit. Determine profit
using technique of marginal costing.
a.Rs 2,00,000
b.Rs 8,00,000
c.Rs 6,00,000
d. None of the above
8. While computing profit in marginal costing
a. Total marginal cost is deducted from total sales revenues
b. Total marginal cost is added to total sales revenues
c. Fixed cost is added to contribution
d. None of the above
9. Marginal costing is also known as
a. Direct costing b. Variable costing c. Both a and b d. None of
the above
l0.When contribution is negative but less than fixed cost,
a. There is loss equal to fixed costs
b. There is loss more than fixed costs
c. There will be loss less than fixed costs
d. All of above are false
I l.Which of the following is the correct description of the break-even
point?
a.
Where
total revenue
equals
total variable
costs
b.Wheretotalrevenueequalstotallrxedandvariablecosts
c. Where
total
revenue
equals
total
fixed
costs
d. Where
total
revenue
equals
total contribution
l2.Inaprofit.volumechart,whatdoesthepointatwhichthecontributionline
touches
the vertical
axis
represent?
a. Total fixed costs
b' The break-even
point
c. Total contribution
d' Total
variable
costs
13.Which
one of the following
best describes
the margin
of safety?
a,Theextenttowhichthetotalsalesrevenueexceedsthetotal
variable
costs
b.Theextenttowhichthetotalsalesrevenueexceedsthetotalfixed
costs
a.Fixedcosts/(Salesrevenueperunit_variablecostsperunit)
d.Theextenttowhichthetotalsalesrevenueexceedsthetotalfixed
and variable
costs
l4.Iftheactivitylevelincreasesl0%o,totalvariablecostswill
a. remain
the same b' increase
by more
than 10%
c. decrease
by less than 10%d'
increase
by10%
l5.CVP
analYsis
does not consider
a.level
of activity
b.fixed
cost
per unitc'variable
cost
per unitd'sales
mix
l6.Which
of the following
is not an underlying
assumption
of cvP
analysis?
a.Changesinactivityaretheonlyfactorsthataffectcosts
b.Cost classifications
are reasonably
accurate
c.Beginning
inventory
is larger than ending
inventory
d.Sales mix is constant
l T.Which of the following
would not be an acceptable
way to express
contributionmargin?
a.Sales minus variable
costs
b.Sales minus unit costs
c.Unit selling price minus unit variable costs
d.Contribution margin per unit divided by unit selling price
18.The level of activity at which total revenues equal total costs is the
a.variable point b.fixed point c.semi-variable point d.break-even
point
19.The break-even point in units is compured by dividing fixed costs by the
a.contribution margin ratio. b.contribution margin per unit.
c.total contribution margin. d.unit selling price.
20.\n a CVP graph, the break-even point is at the intersection of the sales line
and the
a.fixed cost line b.variable cost line c.total cost line d.mixed cost line
2l.ln evaluating the margin of safbty. the
a.break-even point is not relevant b.higher the ratio, the greater the
margin of safety
c.higher the dollar amount, the lower the margin of safety
d.higher the ratio, the lower the flxed costs
22.\f Cost of goods sold
:
Rs. 40,000GP Margin:20o/o of salesCalculate the
Gross profit margin.
a.Rs. 32,000 b.Rs.48,000 c.Rs.8,000 d.Rs. 10,000
23.The cost of equity capital is all of the following EXCEPT:
a. the minimum rate that a firm should earn on the equity-financed
part of an investment.
b. a return on the equity-financed portion of an investment that, at
worst, leaves the market price of the stock unchanged.
c. by lar the most difficult component cost to estimate.
d. generally lower than the before-tax cost of debt.
24.To compute the required rate of return fbr equity in a company using the
CAPM, it is necessary to know all of the following EXCEPT:
a. the risk-free ratq.
b. the beta for the firm.
c. the earnings for the next time period'
d. the market return expected for the time period'
25.lncalculating
the costs of the individual
components
of a firm's financing'
the corporate tax rate is important to which of the following
component
cost formulas?
a. common stock.
b. debt.
c. preferred stock.
d. none ofthe above.
26.Market
values are often used in computing
the weighted average cost of
capital because
a. this is the simplest
way to do the calculation'
b. this is consistent
with the goal of maximizing
shareholder
value'
c.thisisrequiredintheU.S.bythesecuritiesandExchange
Commission.
d. this is a very common
mistake'
27.Foran
all-equity
financed
firm, a project whose expected
rate of return
plots should be rejected'
a. above the characteristic
line
b. above the securitY
market line
c. below the securitY
market line
d. below the characteristic
line
28.1n weighted
average
cost of capital, company
can affect its capital cost
through
a. PolicY of caPital
structure
b' PolicY
of dividends
c. PolicY
of investment
d. All of above
29.If return on investment is a measure used on the balanced scorecard, under
which perspective would it be listed?
a. Financial perspective
b. Customer perspective
c. Leaming and growth perspective
d. Internal business perspective
e. None of the above.
30.What approach is used to compare organisation operations with those of
other companies?
a. PERT analysis
b. SWOT analysis
c. Competitor performance
assessment
d. Benchmarking
3l.What is 'strategy mapping, in the balanced scorecard?
a. Identifying causal links between the four perspectives
b. Mapping the business,processes
c. Setting the mission
d. Agreeing the strategy with the director of the business
32'The overall (weighted
average) cost of capital is composed
of a weighted
average of
----.
a. the cost of common equity and the cost of debt
b. the cost of common
equity and the cost of preferred
stock
c. the cost of preferred
stock and the cost of debt
d. the cost of common
equity,
the cost of preferred
stock, and the cost
ofdebt
33.which
of the foilowing
is not a recognized
approach
fbr determining
the
cost of equity?
a. Dividend
discount
model
approach.
b' Before-tax
cost of preferred
stock prus
risk premium
approach.
c. Capital_asset
pricing
model
approach.
d. Before-tax aost of debt
plus risk premium approach.
34.How is economic value added (EVA) calculated?
a. It is the difference between
the market value of the firm and the
book value of equitY.
b. It is the firm's net operating profit after tax (NOPAT) less a dollar
cost of capital charge.
c. It is the net incoine of the firm less a dollar cost that equals the
weighted average cost of capital multiplied by the book value of
liabilities and equities.
d. None of the above are
35.what is the main objective of Activity Based costing
a. improve
Product
costing
b. identify non-value adding activities in the production
process which
might be a suitable focus for attention or elimination
c. provide required information
for decision making
d. All of the above
36.Cooper
and Kaplan recommend
using which of the following
as the basis'
or denominator,
when developing
activity cost
pool rates for activity
based
costing.
a. the maximum
capacity
for each activity'
b. the practical capacity
for each activity'
c. the
planned or budgeted
for each activity'
d. the normal
capacity
for each activity'
e. none
of the alternatives
given'
31.Activitybasedcostsystemswouldprobablyprovidethegreatestbenefits
for
organizations
that
use
a.
job order
costing'
b.
Process
costing'
c. historical
costing
d. standard costing.
e. absorption costing.
3 8. In 2 years you are to receive Rs. 10, 000. If the interest rate were to
suddenly decrease, the present value of that future amount to you
would
a. fall.
b. rise.
c. remain unchanged.
d. cannot be determined
39.The risk arising due to uncertainty about the time element and the
price concession in selling a security is called
a. price risk.
b. market risk.
c. trading risk.
d. liquidity risk.
40. The term
refers to the period in which the
project
will generate
the necessary
cash flow to recoup the initial
investment.
a. internal
return.
b. payback
period.
c. discounting
return.
d. accounting
return.
4 r
'
The project
can be serected
if its profitability
index
is more
rhan
a. lYo.
b.3%.
c.5%o.
I
FirstRanker.com - FirstRanker's Choice
l.
ACCOUNTING
FOR MANAGERIAL
DECISIONS
is not suitable where selling price is determined on the basis
of cost-plus method.
a. Absorption costing
b. Marginal costing
c. Both a and b
d. None of the above
2. The problems
associated with marginal costin g are
a. Difficulties in divisions of costs
b. Problem of valuation of stocks
a. Ignores time elements
d. All of the above
3. Managers utilizes marginal costing for
a, Make or buy decision
b. Utilization of additional capacity
c. Determination of dumping price
d. All of the above
4. Which of the following are advantages of marginal costing?
a. Makes the process of cost accounting more simple
b. Helps in proper valuation of closing stock
c. Useful for standard and budgetary control
d. All of the above
5. Under absorption costing, managerial decisions are based on
a. Profit
b. Contribution
c. Profit volume ratio
d. None of the above
6. Which of the following statements are true about absorption & marginal
costing?
a. In absoqption costing, cost is divided into three major parts while in
marginal costing, cost is divided into two main parts
b. In absorption costing period is important and in marginal costing
product is important
c. Both a and b
d. None of the above
7. Given production is 1,00,000 units, fixed costs is Rs 2,00,000 Selling
price is Rs l0 per unit and variable cost is Rs 6 per unit. Determine profit
using technique of marginal costing.
a.Rs 2,00,000
b.Rs 8,00,000
c.Rs 6,00,000
d. None of the above
8. While computing profit in marginal costing
a. Total marginal cost is deducted from total sales revenues
b. Total marginal cost is added to total sales revenues
c. Fixed cost is added to contribution
d. None of the above
9. Marginal costing is also known as
a. Direct costing b. Variable costing c. Both a and b d. None of
the above
l0.When contribution is negative but less than fixed cost,
a. There is loss equal to fixed costs
b. There is loss more than fixed costs
c. There will be loss less than fixed costs
d. All of above are false
I l.Which of the following is the correct description of the break-even
point?
a.
Where
total revenue
equals
total variable
costs
b.Wheretotalrevenueequalstotallrxedandvariablecosts
c. Where
total
revenue
equals
total
fixed
costs
d. Where
total
revenue
equals
total contribution
l2.Inaprofit.volumechart,whatdoesthepointatwhichthecontributionline
touches
the vertical
axis
represent?
a. Total fixed costs
b' The break-even
point
c. Total contribution
d' Total
variable
costs
13.Which
one of the following
best describes
the margin
of safety?
a,Theextenttowhichthetotalsalesrevenueexceedsthetotal
variable
costs
b.Theextenttowhichthetotalsalesrevenueexceedsthetotalfixed
costs
a.Fixedcosts/(Salesrevenueperunit_variablecostsperunit)
d.Theextenttowhichthetotalsalesrevenueexceedsthetotalfixed
and variable
costs
l4.Iftheactivitylevelincreasesl0%o,totalvariablecostswill
a. remain
the same b' increase
by more
than 10%
c. decrease
by less than 10%d'
increase
by10%
l5.CVP
analYsis
does not consider
a.level
of activity
b.fixed
cost
per unitc'variable
cost
per unitd'sales
mix
l6.Which
of the following
is not an underlying
assumption
of cvP
analysis?
a.Changesinactivityaretheonlyfactorsthataffectcosts
b.Cost classifications
are reasonably
accurate
c.Beginning
inventory
is larger than ending
inventory
d.Sales mix is constant
l T.Which of the following
would not be an acceptable
way to express
contributionmargin?
a.Sales minus variable
costs
b.Sales minus unit costs
c.Unit selling price minus unit variable costs
d.Contribution margin per unit divided by unit selling price
18.The level of activity at which total revenues equal total costs is the
a.variable point b.fixed point c.semi-variable point d.break-even
point
19.The break-even point in units is compured by dividing fixed costs by the
a.contribution margin ratio. b.contribution margin per unit.
c.total contribution margin. d.unit selling price.
20.\n a CVP graph, the break-even point is at the intersection of the sales line
and the
a.fixed cost line b.variable cost line c.total cost line d.mixed cost line
2l.ln evaluating the margin of safbty. the
a.break-even point is not relevant b.higher the ratio, the greater the
margin of safety
c.higher the dollar amount, the lower the margin of safety
d.higher the ratio, the lower the flxed costs
22.\f Cost of goods sold
:
Rs. 40,000GP Margin:20o/o of salesCalculate the
Gross profit margin.
a.Rs. 32,000 b.Rs.48,000 c.Rs.8,000 d.Rs. 10,000
23.The cost of equity capital is all of the following EXCEPT:
a. the minimum rate that a firm should earn on the equity-financed
part of an investment.
b. a return on the equity-financed portion of an investment that, at
worst, leaves the market price of the stock unchanged.
c. by lar the most difficult component cost to estimate.
d. generally lower than the before-tax cost of debt.
24.To compute the required rate of return fbr equity in a company using the
CAPM, it is necessary to know all of the following EXCEPT:
a. the risk-free ratq.
b. the beta for the firm.
c. the earnings for the next time period'
d. the market return expected for the time period'
25.lncalculating
the costs of the individual
components
of a firm's financing'
the corporate tax rate is important to which of the following
component
cost formulas?
a. common stock.
b. debt.
c. preferred stock.
d. none ofthe above.
26.Market
values are often used in computing
the weighted average cost of
capital because
a. this is the simplest
way to do the calculation'
b. this is consistent
with the goal of maximizing
shareholder
value'
c.thisisrequiredintheU.S.bythesecuritiesandExchange
Commission.
d. this is a very common
mistake'
27.Foran
all-equity
financed
firm, a project whose expected
rate of return
plots should be rejected'
a. above the characteristic
line
b. above the securitY
market line
c. below the securitY
market line
d. below the characteristic
line
28.1n weighted
average
cost of capital, company
can affect its capital cost
through
a. PolicY of caPital
structure
b' PolicY
of dividends
c. PolicY
of investment
d. All of above
29.If return on investment is a measure used on the balanced scorecard, under
which perspective would it be listed?
a. Financial perspective
b. Customer perspective
c. Leaming and growth perspective
d. Internal business perspective
e. None of the above.
30.What approach is used to compare organisation operations with those of
other companies?
a. PERT analysis
b. SWOT analysis
c. Competitor performance
assessment
d. Benchmarking
3l.What is 'strategy mapping, in the balanced scorecard?
a. Identifying causal links between the four perspectives
b. Mapping the business,processes
c. Setting the mission
d. Agreeing the strategy with the director of the business
32'The overall (weighted
average) cost of capital is composed
of a weighted
average of
----.
a. the cost of common equity and the cost of debt
b. the cost of common
equity and the cost of preferred
stock
c. the cost of preferred
stock and the cost of debt
d. the cost of common
equity,
the cost of preferred
stock, and the cost
ofdebt
33.which
of the foilowing
is not a recognized
approach
fbr determining
the
cost of equity?
a. Dividend
discount
model
approach.
b' Before-tax
cost of preferred
stock prus
risk premium
approach.
c. Capital_asset
pricing
model
approach.
d. Before-tax aost of debt
plus risk premium approach.
34.How is economic value added (EVA) calculated?
a. It is the difference between
the market value of the firm and the
book value of equitY.
b. It is the firm's net operating profit after tax (NOPAT) less a dollar
cost of capital charge.
c. It is the net incoine of the firm less a dollar cost that equals the
weighted average cost of capital multiplied by the book value of
liabilities and equities.
d. None of the above are
35.what is the main objective of Activity Based costing
a. improve
Product
costing
b. identify non-value adding activities in the production
process which
might be a suitable focus for attention or elimination
c. provide required information
for decision making
d. All of the above
36.Cooper
and Kaplan recommend
using which of the following
as the basis'
or denominator,
when developing
activity cost
pool rates for activity
based
costing.
a. the maximum
capacity
for each activity'
b. the practical capacity
for each activity'
c. the
planned or budgeted
for each activity'
d. the normal
capacity
for each activity'
e. none
of the alternatives
given'
31.Activitybasedcostsystemswouldprobablyprovidethegreatestbenefits
for
organizations
that
use
a.
job order
costing'
b.
Process
costing'
c. historical
costing
d. standard costing.
e. absorption costing.
3 8. In 2 years you are to receive Rs. 10, 000. If the interest rate were to
suddenly decrease, the present value of that future amount to you
would
a. fall.
b. rise.
c. remain unchanged.
d. cannot be determined
39.The risk arising due to uncertainty about the time element and the
price concession in selling a security is called
a. price risk.
b. market risk.
c. trading risk.
d. liquidity risk.
40. The term
refers to the period in which the
project
will generate
the necessary
cash flow to recoup the initial
investment.
a. internal
return.
b. payback
period.
c. discounting
return.
d. accounting
return.
4 r
'
The project
can be serected
if its profitability
index
is more
rhan
a. lYo.
b.3%.
c.5%o.
I
d. l0%.
4z.Xltd
issues rupees 50,000 8% debentures
at a discount
of 5o/o'The
tax rate is 50% the cost of debtcapital
is
a.4oh.
b.4.2%.
c.4.60/o.
d. s%
43.
of debt capital is a factor infavor of using more debt
capital.
a. Tax advantage.
b. Debt equitY norrns.
c. Leverage
effect.
,
d. Security of assets.
44.Which of the following statements
are true about responsibility
accounting?
a. Responsibility
accounting results in inter-departmental
conflicts
b. In responsibility
center more focus is paid on products, processes or
jobs
c. No focus is paid on controlling costs
d. None of the above
45.In profit center revenue represents a monetary measure of output
emanating from a profit center in a given period irrespective whether
a. The revenue is realized or not
b. The output is sold or not
c. Both a and b
d. None of the above
46.Contribution margin center is also known as
a. Expense center
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l.
ACCOUNTING
FOR MANAGERIAL
DECISIONS
is not suitable where selling price is determined on the basis
of cost-plus method.
a. Absorption costing
b. Marginal costing
c. Both a and b
d. None of the above
2. The problems
associated with marginal costin g are
a. Difficulties in divisions of costs
b. Problem of valuation of stocks
a. Ignores time elements
d. All of the above
3. Managers utilizes marginal costing for
a, Make or buy decision
b. Utilization of additional capacity
c. Determination of dumping price
d. All of the above
4. Which of the following are advantages of marginal costing?
a. Makes the process of cost accounting more simple
b. Helps in proper valuation of closing stock
c. Useful for standard and budgetary control
d. All of the above
5. Under absorption costing, managerial decisions are based on
a. Profit
b. Contribution
c. Profit volume ratio
d. None of the above
6. Which of the following statements are true about absorption & marginal
costing?
a. In absoqption costing, cost is divided into three major parts while in
marginal costing, cost is divided into two main parts
b. In absorption costing period is important and in marginal costing
product is important
c. Both a and b
d. None of the above
7. Given production is 1,00,000 units, fixed costs is Rs 2,00,000 Selling
price is Rs l0 per unit and variable cost is Rs 6 per unit. Determine profit
using technique of marginal costing.
a.Rs 2,00,000
b.Rs 8,00,000
c.Rs 6,00,000
d. None of the above
8. While computing profit in marginal costing
a. Total marginal cost is deducted from total sales revenues
b. Total marginal cost is added to total sales revenues
c. Fixed cost is added to contribution
d. None of the above
9. Marginal costing is also known as
a. Direct costing b. Variable costing c. Both a and b d. None of
the above
l0.When contribution is negative but less than fixed cost,
a. There is loss equal to fixed costs
b. There is loss more than fixed costs
c. There will be loss less than fixed costs
d. All of above are false
I l.Which of the following is the correct description of the break-even
point?
a.
Where
total revenue
equals
total variable
costs
b.Wheretotalrevenueequalstotallrxedandvariablecosts
c. Where
total
revenue
equals
total
fixed
costs
d. Where
total
revenue
equals
total contribution
l2.Inaprofit.volumechart,whatdoesthepointatwhichthecontributionline
touches
the vertical
axis
represent?
a. Total fixed costs
b' The break-even
point
c. Total contribution
d' Total
variable
costs
13.Which
one of the following
best describes
the margin
of safety?
a,Theextenttowhichthetotalsalesrevenueexceedsthetotal
variable
costs
b.Theextenttowhichthetotalsalesrevenueexceedsthetotalfixed
costs
a.Fixedcosts/(Salesrevenueperunit_variablecostsperunit)
d.Theextenttowhichthetotalsalesrevenueexceedsthetotalfixed
and variable
costs
l4.Iftheactivitylevelincreasesl0%o,totalvariablecostswill
a. remain
the same b' increase
by more
than 10%
c. decrease
by less than 10%d'
increase
by10%
l5.CVP
analYsis
does not consider
a.level
of activity
b.fixed
cost
per unitc'variable
cost
per unitd'sales
mix
l6.Which
of the following
is not an underlying
assumption
of cvP
analysis?
a.Changesinactivityaretheonlyfactorsthataffectcosts
b.Cost classifications
are reasonably
accurate
c.Beginning
inventory
is larger than ending
inventory
d.Sales mix is constant
l T.Which of the following
would not be an acceptable
way to express
contributionmargin?
a.Sales minus variable
costs
b.Sales minus unit costs
c.Unit selling price minus unit variable costs
d.Contribution margin per unit divided by unit selling price
18.The level of activity at which total revenues equal total costs is the
a.variable point b.fixed point c.semi-variable point d.break-even
point
19.The break-even point in units is compured by dividing fixed costs by the
a.contribution margin ratio. b.contribution margin per unit.
c.total contribution margin. d.unit selling price.
20.\n a CVP graph, the break-even point is at the intersection of the sales line
and the
a.fixed cost line b.variable cost line c.total cost line d.mixed cost line
2l.ln evaluating the margin of safbty. the
a.break-even point is not relevant b.higher the ratio, the greater the
margin of safety
c.higher the dollar amount, the lower the margin of safety
d.higher the ratio, the lower the flxed costs
22.\f Cost of goods sold
:
Rs. 40,000GP Margin:20o/o of salesCalculate the
Gross profit margin.
a.Rs. 32,000 b.Rs.48,000 c.Rs.8,000 d.Rs. 10,000
23.The cost of equity capital is all of the following EXCEPT:
a. the minimum rate that a firm should earn on the equity-financed
part of an investment.
b. a return on the equity-financed portion of an investment that, at
worst, leaves the market price of the stock unchanged.
c. by lar the most difficult component cost to estimate.
d. generally lower than the before-tax cost of debt.
24.To compute the required rate of return fbr equity in a company using the
CAPM, it is necessary to know all of the following EXCEPT:
a. the risk-free ratq.
b. the beta for the firm.
c. the earnings for the next time period'
d. the market return expected for the time period'
25.lncalculating
the costs of the individual
components
of a firm's financing'
the corporate tax rate is important to which of the following
component
cost formulas?
a. common stock.
b. debt.
c. preferred stock.
d. none ofthe above.
26.Market
values are often used in computing
the weighted average cost of
capital because
a. this is the simplest
way to do the calculation'
b. this is consistent
with the goal of maximizing
shareholder
value'
c.thisisrequiredintheU.S.bythesecuritiesandExchange
Commission.
d. this is a very common
mistake'
27.Foran
all-equity
financed
firm, a project whose expected
rate of return
plots should be rejected'
a. above the characteristic
line
b. above the securitY
market line
c. below the securitY
market line
d. below the characteristic
line
28.1n weighted
average
cost of capital, company
can affect its capital cost
through
a. PolicY of caPital
structure
b' PolicY
of dividends
c. PolicY
of investment
d. All of above
29.If return on investment is a measure used on the balanced scorecard, under
which perspective would it be listed?
a. Financial perspective
b. Customer perspective
c. Leaming and growth perspective
d. Internal business perspective
e. None of the above.
30.What approach is used to compare organisation operations with those of
other companies?
a. PERT analysis
b. SWOT analysis
c. Competitor performance
assessment
d. Benchmarking
3l.What is 'strategy mapping, in the balanced scorecard?
a. Identifying causal links between the four perspectives
b. Mapping the business,processes
c. Setting the mission
d. Agreeing the strategy with the director of the business
32'The overall (weighted
average) cost of capital is composed
of a weighted
average of
----.
a. the cost of common equity and the cost of debt
b. the cost of common
equity and the cost of preferred
stock
c. the cost of preferred
stock and the cost of debt
d. the cost of common
equity,
the cost of preferred
stock, and the cost
ofdebt
33.which
of the foilowing
is not a recognized
approach
fbr determining
the
cost of equity?
a. Dividend
discount
model
approach.
b' Before-tax
cost of preferred
stock prus
risk premium
approach.
c. Capital_asset
pricing
model
approach.
d. Before-tax aost of debt
plus risk premium approach.
34.How is economic value added (EVA) calculated?
a. It is the difference between
the market value of the firm and the
book value of equitY.
b. It is the firm's net operating profit after tax (NOPAT) less a dollar
cost of capital charge.
c. It is the net incoine of the firm less a dollar cost that equals the
weighted average cost of capital multiplied by the book value of
liabilities and equities.
d. None of the above are
35.what is the main objective of Activity Based costing
a. improve
Product
costing
b. identify non-value adding activities in the production
process which
might be a suitable focus for attention or elimination
c. provide required information
for decision making
d. All of the above
36.Cooper
and Kaplan recommend
using which of the following
as the basis'
or denominator,
when developing
activity cost
pool rates for activity
based
costing.
a. the maximum
capacity
for each activity'
b. the practical capacity
for each activity'
c. the
planned or budgeted
for each activity'
d. the normal
capacity
for each activity'
e. none
of the alternatives
given'
31.Activitybasedcostsystemswouldprobablyprovidethegreatestbenefits
for
organizations
that
use
a.
job order
costing'
b.
Process
costing'
c. historical
costing
d. standard costing.
e. absorption costing.
3 8. In 2 years you are to receive Rs. 10, 000. If the interest rate were to
suddenly decrease, the present value of that future amount to you
would
a. fall.
b. rise.
c. remain unchanged.
d. cannot be determined
39.The risk arising due to uncertainty about the time element and the
price concession in selling a security is called
a. price risk.
b. market risk.
c. trading risk.
d. liquidity risk.
40. The term
refers to the period in which the
project
will generate
the necessary
cash flow to recoup the initial
investment.
a. internal
return.
b. payback
period.
c. discounting
return.
d. accounting
return.
4 r
'
The project
can be serected
if its profitability
index
is more
rhan
a. lYo.
b.3%.
c.5%o.
I
d. l0%.
4z.Xltd
issues rupees 50,000 8% debentures
at a discount
of 5o/o'The
tax rate is 50% the cost of debtcapital
is
a.4oh.
b.4.2%.
c.4.60/o.
d. s%
43.
of debt capital is a factor infavor of using more debt
capital.
a. Tax advantage.
b. Debt equitY norrns.
c. Leverage
effect.
,
d. Security of assets.
44.Which of the following statements
are true about responsibility
accounting?
a. Responsibility
accounting results in inter-departmental
conflicts
b. In responsibility
center more focus is paid on products, processes or
jobs
c. No focus is paid on controlling costs
d. None of the above
45.In profit center revenue represents a monetary measure of output
emanating from a profit center in a given period irrespective whether
a. The revenue is realized or not
b. The output is sold or not
c. Both a and b
d. None of the above
46.Contribution margin center is also known as
a. Expense center
b. Profit center
c. Investment center
d. All of the above
47.Which of the following is responsibility center?
a. Expense center
b. Profit center
c. Investment center
d. All of the above
48.1n responsibility accounting, responsibilities of various groups or
individuals are identified in terms of
a. Work
b. Revenue
c. Cost
d. All of the above
49.Responsibility Accounting is also known as
a. Profitability accounting
b. Activity accounting
c. Both a and b
d. None of the above
50.Economic value added, or residual income is a measurement mainly used
to evaluate
a. revenue centre.
b. cost centre
c. profit centre.
d. investment centre
e. responsibility centre.
51 .Residual income is
a. income based on compound or annuity depreciation.
b. income after subtracting interest on long term debt.
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l.
ACCOUNTING
FOR MANAGERIAL
DECISIONS
is not suitable where selling price is determined on the basis
of cost-plus method.
a. Absorption costing
b. Marginal costing
c. Both a and b
d. None of the above
2. The problems
associated with marginal costin g are
a. Difficulties in divisions of costs
b. Problem of valuation of stocks
a. Ignores time elements
d. All of the above
3. Managers utilizes marginal costing for
a, Make or buy decision
b. Utilization of additional capacity
c. Determination of dumping price
d. All of the above
4. Which of the following are advantages of marginal costing?
a. Makes the process of cost accounting more simple
b. Helps in proper valuation of closing stock
c. Useful for standard and budgetary control
d. All of the above
5. Under absorption costing, managerial decisions are based on
a. Profit
b. Contribution
c. Profit volume ratio
d. None of the above
6. Which of the following statements are true about absorption & marginal
costing?
a. In absoqption costing, cost is divided into three major parts while in
marginal costing, cost is divided into two main parts
b. In absorption costing period is important and in marginal costing
product is important
c. Both a and b
d. None of the above
7. Given production is 1,00,000 units, fixed costs is Rs 2,00,000 Selling
price is Rs l0 per unit and variable cost is Rs 6 per unit. Determine profit
using technique of marginal costing.
a.Rs 2,00,000
b.Rs 8,00,000
c.Rs 6,00,000
d. None of the above
8. While computing profit in marginal costing
a. Total marginal cost is deducted from total sales revenues
b. Total marginal cost is added to total sales revenues
c. Fixed cost is added to contribution
d. None of the above
9. Marginal costing is also known as
a. Direct costing b. Variable costing c. Both a and b d. None of
the above
l0.When contribution is negative but less than fixed cost,
a. There is loss equal to fixed costs
b. There is loss more than fixed costs
c. There will be loss less than fixed costs
d. All of above are false
I l.Which of the following is the correct description of the break-even
point?
a.
Where
total revenue
equals
total variable
costs
b.Wheretotalrevenueequalstotallrxedandvariablecosts
c. Where
total
revenue
equals
total
fixed
costs
d. Where
total
revenue
equals
total contribution
l2.Inaprofit.volumechart,whatdoesthepointatwhichthecontributionline
touches
the vertical
axis
represent?
a. Total fixed costs
b' The break-even
point
c. Total contribution
d' Total
variable
costs
13.Which
one of the following
best describes
the margin
of safety?
a,Theextenttowhichthetotalsalesrevenueexceedsthetotal
variable
costs
b.Theextenttowhichthetotalsalesrevenueexceedsthetotalfixed
costs
a.Fixedcosts/(Salesrevenueperunit_variablecostsperunit)
d.Theextenttowhichthetotalsalesrevenueexceedsthetotalfixed
and variable
costs
l4.Iftheactivitylevelincreasesl0%o,totalvariablecostswill
a. remain
the same b' increase
by more
than 10%
c. decrease
by less than 10%d'
increase
by10%
l5.CVP
analYsis
does not consider
a.level
of activity
b.fixed
cost
per unitc'variable
cost
per unitd'sales
mix
l6.Which
of the following
is not an underlying
assumption
of cvP
analysis?
a.Changesinactivityaretheonlyfactorsthataffectcosts
b.Cost classifications
are reasonably
accurate
c.Beginning
inventory
is larger than ending
inventory
d.Sales mix is constant
l T.Which of the following
would not be an acceptable
way to express
contributionmargin?
a.Sales minus variable
costs
b.Sales minus unit costs
c.Unit selling price minus unit variable costs
d.Contribution margin per unit divided by unit selling price
18.The level of activity at which total revenues equal total costs is the
a.variable point b.fixed point c.semi-variable point d.break-even
point
19.The break-even point in units is compured by dividing fixed costs by the
a.contribution margin ratio. b.contribution margin per unit.
c.total contribution margin. d.unit selling price.
20.\n a CVP graph, the break-even point is at the intersection of the sales line
and the
a.fixed cost line b.variable cost line c.total cost line d.mixed cost line
2l.ln evaluating the margin of safbty. the
a.break-even point is not relevant b.higher the ratio, the greater the
margin of safety
c.higher the dollar amount, the lower the margin of safety
d.higher the ratio, the lower the flxed costs
22.\f Cost of goods sold
:
Rs. 40,000GP Margin:20o/o of salesCalculate the
Gross profit margin.
a.Rs. 32,000 b.Rs.48,000 c.Rs.8,000 d.Rs. 10,000
23.The cost of equity capital is all of the following EXCEPT:
a. the minimum rate that a firm should earn on the equity-financed
part of an investment.
b. a return on the equity-financed portion of an investment that, at
worst, leaves the market price of the stock unchanged.
c. by lar the most difficult component cost to estimate.
d. generally lower than the before-tax cost of debt.
24.To compute the required rate of return fbr equity in a company using the
CAPM, it is necessary to know all of the following EXCEPT:
a. the risk-free ratq.
b. the beta for the firm.
c. the earnings for the next time period'
d. the market return expected for the time period'
25.lncalculating
the costs of the individual
components
of a firm's financing'
the corporate tax rate is important to which of the following
component
cost formulas?
a. common stock.
b. debt.
c. preferred stock.
d. none ofthe above.
26.Market
values are often used in computing
the weighted average cost of
capital because
a. this is the simplest
way to do the calculation'
b. this is consistent
with the goal of maximizing
shareholder
value'
c.thisisrequiredintheU.S.bythesecuritiesandExchange
Commission.
d. this is a very common
mistake'
27.Foran
all-equity
financed
firm, a project whose expected
rate of return
plots should be rejected'
a. above the characteristic
line
b. above the securitY
market line
c. below the securitY
market line
d. below the characteristic
line
28.1n weighted
average
cost of capital, company
can affect its capital cost
through
a. PolicY of caPital
structure
b' PolicY
of dividends
c. PolicY
of investment
d. All of above
29.If return on investment is a measure used on the balanced scorecard, under
which perspective would it be listed?
a. Financial perspective
b. Customer perspective
c. Leaming and growth perspective
d. Internal business perspective
e. None of the above.
30.What approach is used to compare organisation operations with those of
other companies?
a. PERT analysis
b. SWOT analysis
c. Competitor performance
assessment
d. Benchmarking
3l.What is 'strategy mapping, in the balanced scorecard?
a. Identifying causal links between the four perspectives
b. Mapping the business,processes
c. Setting the mission
d. Agreeing the strategy with the director of the business
32'The overall (weighted
average) cost of capital is composed
of a weighted
average of
----.
a. the cost of common equity and the cost of debt
b. the cost of common
equity and the cost of preferred
stock
c. the cost of preferred
stock and the cost of debt
d. the cost of common
equity,
the cost of preferred
stock, and the cost
ofdebt
33.which
of the foilowing
is not a recognized
approach
fbr determining
the
cost of equity?
a. Dividend
discount
model
approach.
b' Before-tax
cost of preferred
stock prus
risk premium
approach.
c. Capital_asset
pricing
model
approach.
d. Before-tax aost of debt
plus risk premium approach.
34.How is economic value added (EVA) calculated?
a. It is the difference between
the market value of the firm and the
book value of equitY.
b. It is the firm's net operating profit after tax (NOPAT) less a dollar
cost of capital charge.
c. It is the net incoine of the firm less a dollar cost that equals the
weighted average cost of capital multiplied by the book value of
liabilities and equities.
d. None of the above are
35.what is the main objective of Activity Based costing
a. improve
Product
costing
b. identify non-value adding activities in the production
process which
might be a suitable focus for attention or elimination
c. provide required information
for decision making
d. All of the above
36.Cooper
and Kaplan recommend
using which of the following
as the basis'
or denominator,
when developing
activity cost
pool rates for activity
based
costing.
a. the maximum
capacity
for each activity'
b. the practical capacity
for each activity'
c. the
planned or budgeted
for each activity'
d. the normal
capacity
for each activity'
e. none
of the alternatives
given'
31.Activitybasedcostsystemswouldprobablyprovidethegreatestbenefits
for
organizations
that
use
a.
job order
costing'
b.
Process
costing'
c. historical
costing
d. standard costing.
e. absorption costing.
3 8. In 2 years you are to receive Rs. 10, 000. If the interest rate were to
suddenly decrease, the present value of that future amount to you
would
a. fall.
b. rise.
c. remain unchanged.
d. cannot be determined
39.The risk arising due to uncertainty about the time element and the
price concession in selling a security is called
a. price risk.
b. market risk.
c. trading risk.
d. liquidity risk.
40. The term
refers to the period in which the
project
will generate
the necessary
cash flow to recoup the initial
investment.
a. internal
return.
b. payback
period.
c. discounting
return.
d. accounting
return.
4 r
'
The project
can be serected
if its profitability
index
is more
rhan
a. lYo.
b.3%.
c.5%o.
I
d. l0%.
4z.Xltd
issues rupees 50,000 8% debentures
at a discount
of 5o/o'The
tax rate is 50% the cost of debtcapital
is
a.4oh.
b.4.2%.
c.4.60/o.
d. s%
43.
of debt capital is a factor infavor of using more debt
capital.
a. Tax advantage.
b. Debt equitY norrns.
c. Leverage
effect.
,
d. Security of assets.
44.Which of the following statements
are true about responsibility
accounting?
a. Responsibility
accounting results in inter-departmental
conflicts
b. In responsibility
center more focus is paid on products, processes or
jobs
c. No focus is paid on controlling costs
d. None of the above
45.In profit center revenue represents a monetary measure of output
emanating from a profit center in a given period irrespective whether
a. The revenue is realized or not
b. The output is sold or not
c. Both a and b
d. None of the above
46.Contribution margin center is also known as
a. Expense center
b. Profit center
c. Investment center
d. All of the above
47.Which of the following is responsibility center?
a. Expense center
b. Profit center
c. Investment center
d. All of the above
48.1n responsibility accounting, responsibilities of various groups or
individuals are identified in terms of
a. Work
b. Revenue
c. Cost
d. All of the above
49.Responsibility Accounting is also known as
a. Profitability accounting
b. Activity accounting
c. Both a and b
d. None of the above
50.Economic value added, or residual income is a measurement mainly used
to evaluate
a. revenue centre.
b. cost centre
c. profit centre.
d. investment centre
e. responsibility centre.
51 .Residual income is
a. income based on compound or annuity depreciation.
b. income after subtracting interest on long term debt.
c. income
after subtracting
depreciation.
d. income
after adjusting
assets to
current
value.
e.incomeaftersubtractingaminimumdesiredamountofincome'
52.Which
type of responsibility
center
has the greatest
amount
of autonomy?
a. a revenue
center.
b. a cost center.
c. a
Proht
center.
d. an investment
center'
e. none of these.
53.Which
of the following
is the best description
of zero-base
budgeting?
a. zero-base
budgeting
is a technique
applied
in government
budgeting
in
order to have a neutral
effect on policy issues
b.Zero-basebudgetingrequiresacompletelycleansheetofpaperevery
year, on which each part of the organization
must
justify the budget
it
requires
c,Zero-basebudgetingstartswiththefiguresofthepreviousperiodand
assumes
a zero rate of change
d.Zerobasedbudgetingisanaltemativenameofflexiblebudget
54.A benefit of using activity-based
costing
in a government
is:
a. Understanding
and controlling
the allocation
of indirect costs to
programs.
b. Finding lower cost alternatives'
c. Better measures
of the cost of service outcomes'
d.All of the above.
55.A company
has a capital employed
of Rs.200,000.
It has a cost of capital
of l2%per
year. Its residual income is Rs.36,000.what
is the company's
retrlrn on investment?
a. 30% b.lz%
c'18% d'22%
56. PnI ratio is an indicator of------
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l.
ACCOUNTING
FOR MANAGERIAL
DECISIONS
is not suitable where selling price is determined on the basis
of cost-plus method.
a. Absorption costing
b. Marginal costing
c. Both a and b
d. None of the above
2. The problems
associated with marginal costin g are
a. Difficulties in divisions of costs
b. Problem of valuation of stocks
a. Ignores time elements
d. All of the above
3. Managers utilizes marginal costing for
a, Make or buy decision
b. Utilization of additional capacity
c. Determination of dumping price
d. All of the above
4. Which of the following are advantages of marginal costing?
a. Makes the process of cost accounting more simple
b. Helps in proper valuation of closing stock
c. Useful for standard and budgetary control
d. All of the above
5. Under absorption costing, managerial decisions are based on
a. Profit
b. Contribution
c. Profit volume ratio
d. None of the above
6. Which of the following statements are true about absorption & marginal
costing?
a. In absoqption costing, cost is divided into three major parts while in
marginal costing, cost is divided into two main parts
b. In absorption costing period is important and in marginal costing
product is important
c. Both a and b
d. None of the above
7. Given production is 1,00,000 units, fixed costs is Rs 2,00,000 Selling
price is Rs l0 per unit and variable cost is Rs 6 per unit. Determine profit
using technique of marginal costing.
a.Rs 2,00,000
b.Rs 8,00,000
c.Rs 6,00,000
d. None of the above
8. While computing profit in marginal costing
a. Total marginal cost is deducted from total sales revenues
b. Total marginal cost is added to total sales revenues
c. Fixed cost is added to contribution
d. None of the above
9. Marginal costing is also known as
a. Direct costing b. Variable costing c. Both a and b d. None of
the above
l0.When contribution is negative but less than fixed cost,
a. There is loss equal to fixed costs
b. There is loss more than fixed costs
c. There will be loss less than fixed costs
d. All of above are false
I l.Which of the following is the correct description of the break-even
point?
a.
Where
total revenue
equals
total variable
costs
b.Wheretotalrevenueequalstotallrxedandvariablecosts
c. Where
total
revenue
equals
total
fixed
costs
d. Where
total
revenue
equals
total contribution
l2.Inaprofit.volumechart,whatdoesthepointatwhichthecontributionline
touches
the vertical
axis
represent?
a. Total fixed costs
b' The break-even
point
c. Total contribution
d' Total
variable
costs
13.Which
one of the following
best describes
the margin
of safety?
a,Theextenttowhichthetotalsalesrevenueexceedsthetotal
variable
costs
b.Theextenttowhichthetotalsalesrevenueexceedsthetotalfixed
costs
a.Fixedcosts/(Salesrevenueperunit_variablecostsperunit)
d.Theextenttowhichthetotalsalesrevenueexceedsthetotalfixed
and variable
costs
l4.Iftheactivitylevelincreasesl0%o,totalvariablecostswill
a. remain
the same b' increase
by more
than 10%
c. decrease
by less than 10%d'
increase
by10%
l5.CVP
analYsis
does not consider
a.level
of activity
b.fixed
cost
per unitc'variable
cost
per unitd'sales
mix
l6.Which
of the following
is not an underlying
assumption
of cvP
analysis?
a.Changesinactivityaretheonlyfactorsthataffectcosts
b.Cost classifications
are reasonably
accurate
c.Beginning
inventory
is larger than ending
inventory
d.Sales mix is constant
l T.Which of the following
would not be an acceptable
way to express
contributionmargin?
a.Sales minus variable
costs
b.Sales minus unit costs
c.Unit selling price minus unit variable costs
d.Contribution margin per unit divided by unit selling price
18.The level of activity at which total revenues equal total costs is the
a.variable point b.fixed point c.semi-variable point d.break-even
point
19.The break-even point in units is compured by dividing fixed costs by the
a.contribution margin ratio. b.contribution margin per unit.
c.total contribution margin. d.unit selling price.
20.\n a CVP graph, the break-even point is at the intersection of the sales line
and the
a.fixed cost line b.variable cost line c.total cost line d.mixed cost line
2l.ln evaluating the margin of safbty. the
a.break-even point is not relevant b.higher the ratio, the greater the
margin of safety
c.higher the dollar amount, the lower the margin of safety
d.higher the ratio, the lower the flxed costs
22.\f Cost of goods sold
:
Rs. 40,000GP Margin:20o/o of salesCalculate the
Gross profit margin.
a.Rs. 32,000 b.Rs.48,000 c.Rs.8,000 d.Rs. 10,000
23.The cost of equity capital is all of the following EXCEPT:
a. the minimum rate that a firm should earn on the equity-financed
part of an investment.
b. a return on the equity-financed portion of an investment that, at
worst, leaves the market price of the stock unchanged.
c. by lar the most difficult component cost to estimate.
d. generally lower than the before-tax cost of debt.
24.To compute the required rate of return fbr equity in a company using the
CAPM, it is necessary to know all of the following EXCEPT:
a. the risk-free ratq.
b. the beta for the firm.
c. the earnings for the next time period'
d. the market return expected for the time period'
25.lncalculating
the costs of the individual
components
of a firm's financing'
the corporate tax rate is important to which of the following
component
cost formulas?
a. common stock.
b. debt.
c. preferred stock.
d. none ofthe above.
26.Market
values are often used in computing
the weighted average cost of
capital because
a. this is the simplest
way to do the calculation'
b. this is consistent
with the goal of maximizing
shareholder
value'
c.thisisrequiredintheU.S.bythesecuritiesandExchange
Commission.
d. this is a very common
mistake'
27.Foran
all-equity
financed
firm, a project whose expected
rate of return
plots should be rejected'
a. above the characteristic
line
b. above the securitY
market line
c. below the securitY
market line
d. below the characteristic
line
28.1n weighted
average
cost of capital, company
can affect its capital cost
through
a. PolicY of caPital
structure
b' PolicY
of dividends
c. PolicY
of investment
d. All of above
29.If return on investment is a measure used on the balanced scorecard, under
which perspective would it be listed?
a. Financial perspective
b. Customer perspective
c. Leaming and growth perspective
d. Internal business perspective
e. None of the above.
30.What approach is used to compare organisation operations with those of
other companies?
a. PERT analysis
b. SWOT analysis
c. Competitor performance
assessment
d. Benchmarking
3l.What is 'strategy mapping, in the balanced scorecard?
a. Identifying causal links between the four perspectives
b. Mapping the business,processes
c. Setting the mission
d. Agreeing the strategy with the director of the business
32'The overall (weighted
average) cost of capital is composed
of a weighted
average of
----.
a. the cost of common equity and the cost of debt
b. the cost of common
equity and the cost of preferred
stock
c. the cost of preferred
stock and the cost of debt
d. the cost of common
equity,
the cost of preferred
stock, and the cost
ofdebt
33.which
of the foilowing
is not a recognized
approach
fbr determining
the
cost of equity?
a. Dividend
discount
model
approach.
b' Before-tax
cost of preferred
stock prus
risk premium
approach.
c. Capital_asset
pricing
model
approach.
d. Before-tax aost of debt
plus risk premium approach.
34.How is economic value added (EVA) calculated?
a. It is the difference between
the market value of the firm and the
book value of equitY.
b. It is the firm's net operating profit after tax (NOPAT) less a dollar
cost of capital charge.
c. It is the net incoine of the firm less a dollar cost that equals the
weighted average cost of capital multiplied by the book value of
liabilities and equities.
d. None of the above are
35.what is the main objective of Activity Based costing
a. improve
Product
costing
b. identify non-value adding activities in the production
process which
might be a suitable focus for attention or elimination
c. provide required information
for decision making
d. All of the above
36.Cooper
and Kaplan recommend
using which of the following
as the basis'
or denominator,
when developing
activity cost
pool rates for activity
based
costing.
a. the maximum
capacity
for each activity'
b. the practical capacity
for each activity'
c. the
planned or budgeted
for each activity'
d. the normal
capacity
for each activity'
e. none
of the alternatives
given'
31.Activitybasedcostsystemswouldprobablyprovidethegreatestbenefits
for
organizations
that
use
a.
job order
costing'
b.
Process
costing'
c. historical
costing
d. standard costing.
e. absorption costing.
3 8. In 2 years you are to receive Rs. 10, 000. If the interest rate were to
suddenly decrease, the present value of that future amount to you
would
a. fall.
b. rise.
c. remain unchanged.
d. cannot be determined
39.The risk arising due to uncertainty about the time element and the
price concession in selling a security is called
a. price risk.
b. market risk.
c. trading risk.
d. liquidity risk.
40. The term
refers to the period in which the
project
will generate
the necessary
cash flow to recoup the initial
investment.
a. internal
return.
b. payback
period.
c. discounting
return.
d. accounting
return.
4 r
'
The project
can be serected
if its profitability
index
is more
rhan
a. lYo.
b.3%.
c.5%o.
I
d. l0%.
4z.Xltd
issues rupees 50,000 8% debentures
at a discount
of 5o/o'The
tax rate is 50% the cost of debtcapital
is
a.4oh.
b.4.2%.
c.4.60/o.
d. s%
43.
of debt capital is a factor infavor of using more debt
capital.
a. Tax advantage.
b. Debt equitY norrns.
c. Leverage
effect.
,
d. Security of assets.
44.Which of the following statements
are true about responsibility
accounting?
a. Responsibility
accounting results in inter-departmental
conflicts
b. In responsibility
center more focus is paid on products, processes or
jobs
c. No focus is paid on controlling costs
d. None of the above
45.In profit center revenue represents a monetary measure of output
emanating from a profit center in a given period irrespective whether
a. The revenue is realized or not
b. The output is sold or not
c. Both a and b
d. None of the above
46.Contribution margin center is also known as
a. Expense center
b. Profit center
c. Investment center
d. All of the above
47.Which of the following is responsibility center?
a. Expense center
b. Profit center
c. Investment center
d. All of the above
48.1n responsibility accounting, responsibilities of various groups or
individuals are identified in terms of
a. Work
b. Revenue
c. Cost
d. All of the above
49.Responsibility Accounting is also known as
a. Profitability accounting
b. Activity accounting
c. Both a and b
d. None of the above
50.Economic value added, or residual income is a measurement mainly used
to evaluate
a. revenue centre.
b. cost centre
c. profit centre.
d. investment centre
e. responsibility centre.
51 .Residual income is
a. income based on compound or annuity depreciation.
b. income after subtracting interest on long term debt.
c. income
after subtracting
depreciation.
d. income
after adjusting
assets to
current
value.
e.incomeaftersubtractingaminimumdesiredamountofincome'
52.Which
type of responsibility
center
has the greatest
amount
of autonomy?
a. a revenue
center.
b. a cost center.
c. a
Proht
center.
d. an investment
center'
e. none of these.
53.Which
of the following
is the best description
of zero-base
budgeting?
a. zero-base
budgeting
is a technique
applied
in government
budgeting
in
order to have a neutral
effect on policy issues
b.Zero-basebudgetingrequiresacompletelycleansheetofpaperevery
year, on which each part of the organization
must
justify the budget
it
requires
c,Zero-basebudgetingstartswiththefiguresofthepreviousperiodand
assumes
a zero rate of change
d.Zerobasedbudgetingisanaltemativenameofflexiblebudget
54.A benefit of using activity-based
costing
in a government
is:
a. Understanding
and controlling
the allocation
of indirect costs to
programs.
b. Finding lower cost alternatives'
c. Better measures
of the cost of service outcomes'
d.All of the above.
55.A company
has a capital employed
of Rs.200,000.
It has a cost of capital
of l2%per
year. Its residual income is Rs.36,000.what
is the company's
retrlrn on investment?
a. 30% b.lz%
c'18% d'22%
56. PnI ratio is an indicator of------
a. the rate at which goods are sold.
b. the volume of sales
c. the volume of profit
d. the rate ofprofit
57. An increase in variable costs
a. reduces contribution
b. increases the profit
c. increases p/v ratio
d. increase margin of safety
58. Sales Rs. 25,000; Variable cost Rs. 8,000; Fixed cost Rs. 5,000;
Break Even sales invalue-
a. Rs.7936
b. Rs.7353
c. Rs.8333
d. Rs.9090
59. Sales Rs. 25,000; variable cost Rs. 15,000; Fixed cost Rs. 4,000;
PAy'ratio is
-----------
a. 40%o
b.80o/n
c. l5%o
d.30%
60. Under marginal costing stock are valued at
a. fixed cost
b. semi variable cost
c. variable cost
d. market price
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l.
ACCOUNTING
FOR MANAGERIAL
DECISIONS
is not suitable where selling price is determined on the basis
of cost-plus method.
a. Absorption costing
b. Marginal costing
c. Both a and b
d. None of the above
2. The problems
associated with marginal costin g are
a. Difficulties in divisions of costs
b. Problem of valuation of stocks
a. Ignores time elements
d. All of the above
3. Managers utilizes marginal costing for
a, Make or buy decision
b. Utilization of additional capacity
c. Determination of dumping price
d. All of the above
4. Which of the following are advantages of marginal costing?
a. Makes the process of cost accounting more simple
b. Helps in proper valuation of closing stock
c. Useful for standard and budgetary control
d. All of the above
5. Under absorption costing, managerial decisions are based on
a. Profit
b. Contribution
c. Profit volume ratio
d. None of the above
6. Which of the following statements are true about absorption & marginal
costing?
a. In absoqption costing, cost is divided into three major parts while in
marginal costing, cost is divided into two main parts
b. In absorption costing period is important and in marginal costing
product is important
c. Both a and b
d. None of the above
7. Given production is 1,00,000 units, fixed costs is Rs 2,00,000 Selling
price is Rs l0 per unit and variable cost is Rs 6 per unit. Determine profit
using technique of marginal costing.
a.Rs 2,00,000
b.Rs 8,00,000
c.Rs 6,00,000
d. None of the above
8. While computing profit in marginal costing
a. Total marginal cost is deducted from total sales revenues
b. Total marginal cost is added to total sales revenues
c. Fixed cost is added to contribution
d. None of the above
9. Marginal costing is also known as
a. Direct costing b. Variable costing c. Both a and b d. None of
the above
l0.When contribution is negative but less than fixed cost,
a. There is loss equal to fixed costs
b. There is loss more than fixed costs
c. There will be loss less than fixed costs
d. All of above are false
I l.Which of the following is the correct description of the break-even
point?
a.
Where
total revenue
equals
total variable
costs
b.Wheretotalrevenueequalstotallrxedandvariablecosts
c. Where
total
revenue
equals
total
fixed
costs
d. Where
total
revenue
equals
total contribution
l2.Inaprofit.volumechart,whatdoesthepointatwhichthecontributionline
touches
the vertical
axis
represent?
a. Total fixed costs
b' The break-even
point
c. Total contribution
d' Total
variable
costs
13.Which
one of the following
best describes
the margin
of safety?
a,Theextenttowhichthetotalsalesrevenueexceedsthetotal
variable
costs
b.Theextenttowhichthetotalsalesrevenueexceedsthetotalfixed
costs
a.Fixedcosts/(Salesrevenueperunit_variablecostsperunit)
d.Theextenttowhichthetotalsalesrevenueexceedsthetotalfixed
and variable
costs
l4.Iftheactivitylevelincreasesl0%o,totalvariablecostswill
a. remain
the same b' increase
by more
than 10%
c. decrease
by less than 10%d'
increase
by10%
l5.CVP
analYsis
does not consider
a.level
of activity
b.fixed
cost
per unitc'variable
cost
per unitd'sales
mix
l6.Which
of the following
is not an underlying
assumption
of cvP
analysis?
a.Changesinactivityaretheonlyfactorsthataffectcosts
b.Cost classifications
are reasonably
accurate
c.Beginning
inventory
is larger than ending
inventory
d.Sales mix is constant
l T.Which of the following
would not be an acceptable
way to express
contributionmargin?
a.Sales minus variable
costs
b.Sales minus unit costs
c.Unit selling price minus unit variable costs
d.Contribution margin per unit divided by unit selling price
18.The level of activity at which total revenues equal total costs is the
a.variable point b.fixed point c.semi-variable point d.break-even
point
19.The break-even point in units is compured by dividing fixed costs by the
a.contribution margin ratio. b.contribution margin per unit.
c.total contribution margin. d.unit selling price.
20.\n a CVP graph, the break-even point is at the intersection of the sales line
and the
a.fixed cost line b.variable cost line c.total cost line d.mixed cost line
2l.ln evaluating the margin of safbty. the
a.break-even point is not relevant b.higher the ratio, the greater the
margin of safety
c.higher the dollar amount, the lower the margin of safety
d.higher the ratio, the lower the flxed costs
22.\f Cost of goods sold
:
Rs. 40,000GP Margin:20o/o of salesCalculate the
Gross profit margin.
a.Rs. 32,000 b.Rs.48,000 c.Rs.8,000 d.Rs. 10,000
23.The cost of equity capital is all of the following EXCEPT:
a. the minimum rate that a firm should earn on the equity-financed
part of an investment.
b. a return on the equity-financed portion of an investment that, at
worst, leaves the market price of the stock unchanged.
c. by lar the most difficult component cost to estimate.
d. generally lower than the before-tax cost of debt.
24.To compute the required rate of return fbr equity in a company using the
CAPM, it is necessary to know all of the following EXCEPT:
a. the risk-free ratq.
b. the beta for the firm.
c. the earnings for the next time period'
d. the market return expected for the time period'
25.lncalculating
the costs of the individual
components
of a firm's financing'
the corporate tax rate is important to which of the following
component
cost formulas?
a. common stock.
b. debt.
c. preferred stock.
d. none ofthe above.
26.Market
values are often used in computing
the weighted average cost of
capital because
a. this is the simplest
way to do the calculation'
b. this is consistent
with the goal of maximizing
shareholder
value'
c.thisisrequiredintheU.S.bythesecuritiesandExchange
Commission.
d. this is a very common
mistake'
27.Foran
all-equity
financed
firm, a project whose expected
rate of return
plots should be rejected'
a. above the characteristic
line
b. above the securitY
market line
c. below the securitY
market line
d. below the characteristic
line
28.1n weighted
average
cost of capital, company
can affect its capital cost
through
a. PolicY of caPital
structure
b' PolicY
of dividends
c. PolicY
of investment
d. All of above
29.If return on investment is a measure used on the balanced scorecard, under
which perspective would it be listed?
a. Financial perspective
b. Customer perspective
c. Leaming and growth perspective
d. Internal business perspective
e. None of the above.
30.What approach is used to compare organisation operations with those of
other companies?
a. PERT analysis
b. SWOT analysis
c. Competitor performance
assessment
d. Benchmarking
3l.What is 'strategy mapping, in the balanced scorecard?
a. Identifying causal links between the four perspectives
b. Mapping the business,processes
c. Setting the mission
d. Agreeing the strategy with the director of the business
32'The overall (weighted
average) cost of capital is composed
of a weighted
average of
----.
a. the cost of common equity and the cost of debt
b. the cost of common
equity and the cost of preferred
stock
c. the cost of preferred
stock and the cost of debt
d. the cost of common
equity,
the cost of preferred
stock, and the cost
ofdebt
33.which
of the foilowing
is not a recognized
approach
fbr determining
the
cost of equity?
a. Dividend
discount
model
approach.
b' Before-tax
cost of preferred
stock prus
risk premium
approach.
c. Capital_asset
pricing
model
approach.
d. Before-tax aost of debt
plus risk premium approach.
34.How is economic value added (EVA) calculated?
a. It is the difference between
the market value of the firm and the
book value of equitY.
b. It is the firm's net operating profit after tax (NOPAT) less a dollar
cost of capital charge.
c. It is the net incoine of the firm less a dollar cost that equals the
weighted average cost of capital multiplied by the book value of
liabilities and equities.
d. None of the above are
35.what is the main objective of Activity Based costing
a. improve
Product
costing
b. identify non-value adding activities in the production
process which
might be a suitable focus for attention or elimination
c. provide required information
for decision making
d. All of the above
36.Cooper
and Kaplan recommend
using which of the following
as the basis'
or denominator,
when developing
activity cost
pool rates for activity
based
costing.
a. the maximum
capacity
for each activity'
b. the practical capacity
for each activity'
c. the
planned or budgeted
for each activity'
d. the normal
capacity
for each activity'
e. none
of the alternatives
given'
31.Activitybasedcostsystemswouldprobablyprovidethegreatestbenefits
for
organizations
that
use
a.
job order
costing'
b.
Process
costing'
c. historical
costing
d. standard costing.
e. absorption costing.
3 8. In 2 years you are to receive Rs. 10, 000. If the interest rate were to
suddenly decrease, the present value of that future amount to you
would
a. fall.
b. rise.
c. remain unchanged.
d. cannot be determined
39.The risk arising due to uncertainty about the time element and the
price concession in selling a security is called
a. price risk.
b. market risk.
c. trading risk.
d. liquidity risk.
40. The term
refers to the period in which the
project
will generate
the necessary
cash flow to recoup the initial
investment.
a. internal
return.
b. payback
period.
c. discounting
return.
d. accounting
return.
4 r
'
The project
can be serected
if its profitability
index
is more
rhan
a. lYo.
b.3%.
c.5%o.
I
d. l0%.
4z.Xltd
issues rupees 50,000 8% debentures
at a discount
of 5o/o'The
tax rate is 50% the cost of debtcapital
is
a.4oh.
b.4.2%.
c.4.60/o.
d. s%
43.
of debt capital is a factor infavor of using more debt
capital.
a. Tax advantage.
b. Debt equitY norrns.
c. Leverage
effect.
,
d. Security of assets.
44.Which of the following statements
are true about responsibility
accounting?
a. Responsibility
accounting results in inter-departmental
conflicts
b. In responsibility
center more focus is paid on products, processes or
jobs
c. No focus is paid on controlling costs
d. None of the above
45.In profit center revenue represents a monetary measure of output
emanating from a profit center in a given period irrespective whether
a. The revenue is realized or not
b. The output is sold or not
c. Both a and b
d. None of the above
46.Contribution margin center is also known as
a. Expense center
b. Profit center
c. Investment center
d. All of the above
47.Which of the following is responsibility center?
a. Expense center
b. Profit center
c. Investment center
d. All of the above
48.1n responsibility accounting, responsibilities of various groups or
individuals are identified in terms of
a. Work
b. Revenue
c. Cost
d. All of the above
49.Responsibility Accounting is also known as
a. Profitability accounting
b. Activity accounting
c. Both a and b
d. None of the above
50.Economic value added, or residual income is a measurement mainly used
to evaluate
a. revenue centre.
b. cost centre
c. profit centre.
d. investment centre
e. responsibility centre.
51 .Residual income is
a. income based on compound or annuity depreciation.
b. income after subtracting interest on long term debt.
c. income
after subtracting
depreciation.
d. income
after adjusting
assets to
current
value.
e.incomeaftersubtractingaminimumdesiredamountofincome'
52.Which
type of responsibility
center
has the greatest
amount
of autonomy?
a. a revenue
center.
b. a cost center.
c. a
Proht
center.
d. an investment
center'
e. none of these.
53.Which
of the following
is the best description
of zero-base
budgeting?
a. zero-base
budgeting
is a technique
applied
in government
budgeting
in
order to have a neutral
effect on policy issues
b.Zero-basebudgetingrequiresacompletelycleansheetofpaperevery
year, on which each part of the organization
must
justify the budget
it
requires
c,Zero-basebudgetingstartswiththefiguresofthepreviousperiodand
assumes
a zero rate of change
d.Zerobasedbudgetingisanaltemativenameofflexiblebudget
54.A benefit of using activity-based
costing
in a government
is:
a. Understanding
and controlling
the allocation
of indirect costs to
programs.
b. Finding lower cost alternatives'
c. Better measures
of the cost of service outcomes'
d.All of the above.
55.A company
has a capital employed
of Rs.200,000.
It has a cost of capital
of l2%per
year. Its residual income is Rs.36,000.what
is the company's
retrlrn on investment?
a. 30% b.lz%
c'18% d'22%
56. PnI ratio is an indicator of------
a. the rate at which goods are sold.
b. the volume of sales
c. the volume of profit
d. the rate ofprofit
57. An increase in variable costs
a. reduces contribution
b. increases the profit
c. increases p/v ratio
d. increase margin of safety
58. Sales Rs. 25,000; Variable cost Rs. 8,000; Fixed cost Rs. 5,000;
Break Even sales invalue-
a. Rs.7936
b. Rs.7353
c. Rs.8333
d. Rs.9090
59. Sales Rs. 25,000; variable cost Rs. 15,000; Fixed cost Rs. 4,000;
PAy'ratio is
-----------
a. 40%o
b.80o/n
c. l5%o
d.30%
60. Under marginal costing stock are valued at
a. fixed cost
b. semi variable cost
c. variable cost
d. market price
6l.In.makeorbuy'decision,itisprofitabletobuyfromoutsideonly
when the supplier's
price is below
the firm's
own
a. Fixed
Costb'
Variable
Costc'
Total Costd'
Prime
Cost
62.Decisionsaremadebycompanywhichproductstomanufactureand
sellandinwhatqudntitiesoutofmanyproductlinesareconsidered
AS
a.lncremental
decisionsb'Outsource
decisions
c.Product
mix decisionsd'In-source
decisions
63. which
one of the following
responsibility
centres
has independent
d. Investment
control
of its sales
income
and its fixed assets?
a. Profit
centre
b' Cost
centre
c' Revenue
centre
centre
64. Which
one of the following
is the formula
for Residual
Income
(RIX
a. Net cash flow for year
* notional
interest
charge
b. Net cash flow for year
-
notional
interest
charge
c. Profit before
tax
* notional
interest
charge
d. Profit before
tax
-
notional
interest
charge
65.The
term'EVA'
is used for:
a. Extra Value Analysis,
b' Economic
Value Added'
c. Expected
Value Analysis,
d' Engineering
Value Analysis'
66.Return
on Investment
may be improved
by:
a. Increasing
Turnover,b'
Reducing
Expenses'
c. Increasing
Capital'Utilization,
d' All of the above'
67.Which
of the following
has Net protit as basis for calculation
a. Net present value
b' Average
rate of retum
c. Internal
rate of return d' Payback
period
68.Which of the performance
evaluation
methods
takes into consideration
tax
effects?
a
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l.
ACCOUNTING
FOR MANAGERIAL
DECISIONS
is not suitable where selling price is determined on the basis
of cost-plus method.
a. Absorption costing
b. Marginal costing
c. Both a and b
d. None of the above
2. The problems
associated with marginal costin g are
a. Difficulties in divisions of costs
b. Problem of valuation of stocks
a. Ignores time elements
d. All of the above
3. Managers utilizes marginal costing for
a, Make or buy decision
b. Utilization of additional capacity
c. Determination of dumping price
d. All of the above
4. Which of the following are advantages of marginal costing?
a. Makes the process of cost accounting more simple
b. Helps in proper valuation of closing stock
c. Useful for standard and budgetary control
d. All of the above
5. Under absorption costing, managerial decisions are based on
a. Profit
b. Contribution
c. Profit volume ratio
d. None of the above
6. Which of the following statements are true about absorption & marginal
costing?
a. In absoqption costing, cost is divided into three major parts while in
marginal costing, cost is divided into two main parts
b. In absorption costing period is important and in marginal costing
product is important
c. Both a and b
d. None of the above
7. Given production is 1,00,000 units, fixed costs is Rs 2,00,000 Selling
price is Rs l0 per unit and variable cost is Rs 6 per unit. Determine profit
using technique of marginal costing.
a.Rs 2,00,000
b.Rs 8,00,000
c.Rs 6,00,000
d. None of the above
8. While computing profit in marginal costing
a. Total marginal cost is deducted from total sales revenues
b. Total marginal cost is added to total sales revenues
c. Fixed cost is added to contribution
d. None of the above
9. Marginal costing is also known as
a. Direct costing b. Variable costing c. Both a and b d. None of
the above
l0.When contribution is negative but less than fixed cost,
a. There is loss equal to fixed costs
b. There is loss more than fixed costs
c. There will be loss less than fixed costs
d. All of above are false
I l.Which of the following is the correct description of the break-even
point?
a.
Where
total revenue
equals
total variable
costs
b.Wheretotalrevenueequalstotallrxedandvariablecosts
c. Where
total
revenue
equals
total
fixed
costs
d. Where
total
revenue
equals
total contribution
l2.Inaprofit.volumechart,whatdoesthepointatwhichthecontributionline
touches
the vertical
axis
represent?
a. Total fixed costs
b' The break-even
point
c. Total contribution
d' Total
variable
costs
13.Which
one of the following
best describes
the margin
of safety?
a,Theextenttowhichthetotalsalesrevenueexceedsthetotal
variable
costs
b.Theextenttowhichthetotalsalesrevenueexceedsthetotalfixed
costs
a.Fixedcosts/(Salesrevenueperunit_variablecostsperunit)
d.Theextenttowhichthetotalsalesrevenueexceedsthetotalfixed
and variable
costs
l4.Iftheactivitylevelincreasesl0%o,totalvariablecostswill
a. remain
the same b' increase
by more
than 10%
c. decrease
by less than 10%d'
increase
by10%
l5.CVP
analYsis
does not consider
a.level
of activity
b.fixed
cost
per unitc'variable
cost
per unitd'sales
mix
l6.Which
of the following
is not an underlying
assumption
of cvP
analysis?
a.Changesinactivityaretheonlyfactorsthataffectcosts
b.Cost classifications
are reasonably
accurate
c.Beginning
inventory
is larger than ending
inventory
d.Sales mix is constant
l T.Which of the following
would not be an acceptable
way to express
contributionmargin?
a.Sales minus variable
costs
b.Sales minus unit costs
c.Unit selling price minus unit variable costs
d.Contribution margin per unit divided by unit selling price
18.The level of activity at which total revenues equal total costs is the
a.variable point b.fixed point c.semi-variable point d.break-even
point
19.The break-even point in units is compured by dividing fixed costs by the
a.contribution margin ratio. b.contribution margin per unit.
c.total contribution margin. d.unit selling price.
20.\n a CVP graph, the break-even point is at the intersection of the sales line
and the
a.fixed cost line b.variable cost line c.total cost line d.mixed cost line
2l.ln evaluating the margin of safbty. the
a.break-even point is not relevant b.higher the ratio, the greater the
margin of safety
c.higher the dollar amount, the lower the margin of safety
d.higher the ratio, the lower the flxed costs
22.\f Cost of goods sold
:
Rs. 40,000GP Margin:20o/o of salesCalculate the
Gross profit margin.
a.Rs. 32,000 b.Rs.48,000 c.Rs.8,000 d.Rs. 10,000
23.The cost of equity capital is all of the following EXCEPT:
a. the minimum rate that a firm should earn on the equity-financed
part of an investment.
b. a return on the equity-financed portion of an investment that, at
worst, leaves the market price of the stock unchanged.
c. by lar the most difficult component cost to estimate.
d. generally lower than the before-tax cost of debt.
24.To compute the required rate of return fbr equity in a company using the
CAPM, it is necessary to know all of the following EXCEPT:
a. the risk-free ratq.
b. the beta for the firm.
c. the earnings for the next time period'
d. the market return expected for the time period'
25.lncalculating
the costs of the individual
components
of a firm's financing'
the corporate tax rate is important to which of the following
component
cost formulas?
a. common stock.
b. debt.
c. preferred stock.
d. none ofthe above.
26.Market
values are often used in computing
the weighted average cost of
capital because
a. this is the simplest
way to do the calculation'
b. this is consistent
with the goal of maximizing
shareholder
value'
c.thisisrequiredintheU.S.bythesecuritiesandExchange
Commission.
d. this is a very common
mistake'
27.Foran
all-equity
financed
firm, a project whose expected
rate of return
plots should be rejected'
a. above the characteristic
line
b. above the securitY
market line
c. below the securitY
market line
d. below the characteristic
line
28.1n weighted
average
cost of capital, company
can affect its capital cost
through
a. PolicY of caPital
structure
b' PolicY
of dividends
c. PolicY
of investment
d. All of above
29.If return on investment is a measure used on the balanced scorecard, under
which perspective would it be listed?
a. Financial perspective
b. Customer perspective
c. Leaming and growth perspective
d. Internal business perspective
e. None of the above.
30.What approach is used to compare organisation operations with those of
other companies?
a. PERT analysis
b. SWOT analysis
c. Competitor performance
assessment
d. Benchmarking
3l.What is 'strategy mapping, in the balanced scorecard?
a. Identifying causal links between the four perspectives
b. Mapping the business,processes
c. Setting the mission
d. Agreeing the strategy with the director of the business
32'The overall (weighted
average) cost of capital is composed
of a weighted
average of
----.
a. the cost of common equity and the cost of debt
b. the cost of common
equity and the cost of preferred
stock
c. the cost of preferred
stock and the cost of debt
d. the cost of common
equity,
the cost of preferred
stock, and the cost
ofdebt
33.which
of the foilowing
is not a recognized
approach
fbr determining
the
cost of equity?
a. Dividend
discount
model
approach.
b' Before-tax
cost of preferred
stock prus
risk premium
approach.
c. Capital_asset
pricing
model
approach.
d. Before-tax aost of debt
plus risk premium approach.
34.How is economic value added (EVA) calculated?
a. It is the difference between
the market value of the firm and the
book value of equitY.
b. It is the firm's net operating profit after tax (NOPAT) less a dollar
cost of capital charge.
c. It is the net incoine of the firm less a dollar cost that equals the
weighted average cost of capital multiplied by the book value of
liabilities and equities.
d. None of the above are
35.what is the main objective of Activity Based costing
a. improve
Product
costing
b. identify non-value adding activities in the production
process which
might be a suitable focus for attention or elimination
c. provide required information
for decision making
d. All of the above
36.Cooper
and Kaplan recommend
using which of the following
as the basis'
or denominator,
when developing
activity cost
pool rates for activity
based
costing.
a. the maximum
capacity
for each activity'
b. the practical capacity
for each activity'
c. the
planned or budgeted
for each activity'
d. the normal
capacity
for each activity'
e. none
of the alternatives
given'
31.Activitybasedcostsystemswouldprobablyprovidethegreatestbenefits
for
organizations
that
use
a.
job order
costing'
b.
Process
costing'
c. historical
costing
d. standard costing.
e. absorption costing.
3 8. In 2 years you are to receive Rs. 10, 000. If the interest rate were to
suddenly decrease, the present value of that future amount to you
would
a. fall.
b. rise.
c. remain unchanged.
d. cannot be determined
39.The risk arising due to uncertainty about the time element and the
price concession in selling a security is called
a. price risk.
b. market risk.
c. trading risk.
d. liquidity risk.
40. The term
refers to the period in which the
project
will generate
the necessary
cash flow to recoup the initial
investment.
a. internal
return.
b. payback
period.
c. discounting
return.
d. accounting
return.
4 r
'
The project
can be serected
if its profitability
index
is more
rhan
a. lYo.
b.3%.
c.5%o.
I
d. l0%.
4z.Xltd
issues rupees 50,000 8% debentures
at a discount
of 5o/o'The
tax rate is 50% the cost of debtcapital
is
a.4oh.
b.4.2%.
c.4.60/o.
d. s%
43.
of debt capital is a factor infavor of using more debt
capital.
a. Tax advantage.
b. Debt equitY norrns.
c. Leverage
effect.
,
d. Security of assets.
44.Which of the following statements
are true about responsibility
accounting?
a. Responsibility
accounting results in inter-departmental
conflicts
b. In responsibility
center more focus is paid on products, processes or
jobs
c. No focus is paid on controlling costs
d. None of the above
45.In profit center revenue represents a monetary measure of output
emanating from a profit center in a given period irrespective whether
a. The revenue is realized or not
b. The output is sold or not
c. Both a and b
d. None of the above
46.Contribution margin center is also known as
a. Expense center
b. Profit center
c. Investment center
d. All of the above
47.Which of the following is responsibility center?
a. Expense center
b. Profit center
c. Investment center
d. All of the above
48.1n responsibility accounting, responsibilities of various groups or
individuals are identified in terms of
a. Work
b. Revenue
c. Cost
d. All of the above
49.Responsibility Accounting is also known as
a. Profitability accounting
b. Activity accounting
c. Both a and b
d. None of the above
50.Economic value added, or residual income is a measurement mainly used
to evaluate
a. revenue centre.
b. cost centre
c. profit centre.
d. investment centre
e. responsibility centre.
51 .Residual income is
a. income based on compound or annuity depreciation.
b. income after subtracting interest on long term debt.
c. income
after subtracting
depreciation.
d. income
after adjusting
assets to
current
value.
e.incomeaftersubtractingaminimumdesiredamountofincome'
52.Which
type of responsibility
center
has the greatest
amount
of autonomy?
a. a revenue
center.
b. a cost center.
c. a
Proht
center.
d. an investment
center'
e. none of these.
53.Which
of the following
is the best description
of zero-base
budgeting?
a. zero-base
budgeting
is a technique
applied
in government
budgeting
in
order to have a neutral
effect on policy issues
b.Zero-basebudgetingrequiresacompletelycleansheetofpaperevery
year, on which each part of the organization
must
justify the budget
it
requires
c,Zero-basebudgetingstartswiththefiguresofthepreviousperiodand
assumes
a zero rate of change
d.Zerobasedbudgetingisanaltemativenameofflexiblebudget
54.A benefit of using activity-based
costing
in a government
is:
a. Understanding
and controlling
the allocation
of indirect costs to
programs.
b. Finding lower cost alternatives'
c. Better measures
of the cost of service outcomes'
d.All of the above.
55.A company
has a capital employed
of Rs.200,000.
It has a cost of capital
of l2%per
year. Its residual income is Rs.36,000.what
is the company's
retrlrn on investment?
a. 30% b.lz%
c'18% d'22%
56. PnI ratio is an indicator of------
a. the rate at which goods are sold.
b. the volume of sales
c. the volume of profit
d. the rate ofprofit
57. An increase in variable costs
a. reduces contribution
b. increases the profit
c. increases p/v ratio
d. increase margin of safety
58. Sales Rs. 25,000; Variable cost Rs. 8,000; Fixed cost Rs. 5,000;
Break Even sales invalue-
a. Rs.7936
b. Rs.7353
c. Rs.8333
d. Rs.9090
59. Sales Rs. 25,000; variable cost Rs. 15,000; Fixed cost Rs. 4,000;
PAy'ratio is
-----------
a. 40%o
b.80o/n
c. l5%o
d.30%
60. Under marginal costing stock are valued at
a. fixed cost
b. semi variable cost
c. variable cost
d. market price
6l.In.makeorbuy'decision,itisprofitabletobuyfromoutsideonly
when the supplier's
price is below
the firm's
own
a. Fixed
Costb'
Variable
Costc'
Total Costd'
Prime
Cost
62.Decisionsaremadebycompanywhichproductstomanufactureand
sellandinwhatqudntitiesoutofmanyproductlinesareconsidered
AS
a.lncremental
decisionsb'Outsource
decisions
c.Product
mix decisionsd'In-source
decisions
63. which
one of the following
responsibility
centres
has independent
d. Investment
control
of its sales
income
and its fixed assets?
a. Profit
centre
b' Cost
centre
c' Revenue
centre
centre
64. Which
one of the following
is the formula
for Residual
Income
(RIX
a. Net cash flow for year
* notional
interest
charge
b. Net cash flow for year
-
notional
interest
charge
c. Profit before
tax
* notional
interest
charge
d. Profit before
tax
-
notional
interest
charge
65.The
term'EVA'
is used for:
a. Extra Value Analysis,
b' Economic
Value Added'
c. Expected
Value Analysis,
d' Engineering
Value Analysis'
66.Return
on Investment
may be improved
by:
a. Increasing
Turnover,b'
Reducing
Expenses'
c. Increasing
Capital'Utilization,
d' All of the above'
67.Which
of the following
has Net protit as basis for calculation
a. Net present value
b' Average
rate of retum
c. Internal
rate of return d' Payback
period
68.Which of the performance
evaluation
methods
takes into consideration
tax
effects?
a
a. Economic
value added b. Retum on sales
c. Residual income d. Return on investment
69.Which
of the fbllowing
statements is correct?
a. If the NPV of a project is greater
than 0, its
pl
will equal 0.
b. If the IRR of a project is Tyo, its Npv, using a discount rate, k, greater
than 0, will be 0.
c. If the PI of a project
is less than I
,
its Npv should be less than 0.
d. If the IRR of a project
is greater
than the discount rate, k, its
pI
will be
less than I and its NpV will be greater
than 0.
70.The
method provides
correct rankings
of mutuaily excrusive projects,
when the firm is not subject to capital rationing.
a. net present
value
b. internal rate of retum.
c. payback
period
d. profitability
index
/'
-/
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This post was last modified on 26 December 2019