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WorksheetsCMA-ICA-01-October 2024
Total questions: 133
Worksheet time: 2hrs 13mins
The total costs are calculated as the sum of the (a) costs and the variable costs.
(a) costs don't vary as the business changes its output
(a) costs change directly with output.
Fixed or Variable?
Wages paid for factory labour?
Fixed
Variable
Fixed or Variable?
Raw materials
Fixed
Variable
Fixed or Variable?
Transport costs
Fixed
Variable
Fixed or Variable?
Office rent
Fixed
Variable
Fixed or Variable?
Insurance
Fixed
Variable
Fixed or Variable?
Salaries
Fixed
Variable
A loan payment is a fixed expense.
True
False
Dara makes bracelets and sells them in her shop. Which are fixed expenses for Dara’s business?
the cost of the beads
the cost of the string
the cost of advertising
rent for her shop
If Sam's Sandwiches use 25p of material for each sandwich, what will be their variable costs for 10 sandwiches
10 x 0.25 = £2.50
2.5 x 10 = £25
25 x 10 = £250
0.25/10 = 2.5p
Materials used to produce goods are an example of ___.
Fixed Costs
Variable Costs
Total Revenue = $50,000
Total Cost = $35,000
Which statement is correct?
The business made a loss of $15,000.
The business made a profit of $15,000.
The business made a profit of $85,000.
The business made a loss of $85,000.
A ___ is made when total revenue is greater than total cost.
Profit
Loss
Fixed Cost
Variable Cost
A ___ is made when total revenue is less than total cost.
Profit
Loss
Fixed Cost
Variable Cost
A business that wishes to make a profit will strive to ___ revenue and ___ costs.
minimise, maximise
minimise, minimise
maximise, maximise
maximise, minimise
Which of the following is not a component of prime cost?
Direct materials
Direct labour
Direct expenses
Overhead
Form of specific order costing where work is undertaken to customer's special requirements and each order is comparatively of short duration.
Job Order Costing
Batch Costing
Contract Costing
Process Costing
Which one of the following items is not excluded while preparing a cost sheet?
Goodwill written off
Provision for taxation
Property tax on factory building
Transfer to reserves
A company has to pay Rs. 10,000 per unit royalty to the designer of a product which it manufactures and sells. The royalty charge would be classified as a
Direct expense
Production overhead
Administrative overhead
Selling overhead
Research and development cost relating to an existing product
shall be treated as Capital Expenditure
shall be treated as deferred revenue expenditure
shall be treated as Direct Expenses
shall be ignored
Which of the following is not a component of prime cost?
Direct materials
Direct labour
Direct expenses
Overhead
Recruitment costs
shall form part of Prime Cost
shall form part of Works Cost
shall form part of Overheads
shall be ignored
In the cost sheet, abnormal costs eg. due to accident shall be
added to cost of production
deducted from cost of production
deducted from sales
ignored
Prime Cost + Factory Overhead =
Fixed Cost
Works Cost
Cost of Production
Cost of goods sold
Total Cost - Selling and distribution overheads =
Cost of goods sold
Closing stock
Cost of production
Net Profit
Cost of Production - Administration Overheads =
Prime Cost
Cost of Sales
Works Cost
Work- in- Progress
Prime Cost + Overheads =
Works Cost
Total Cost
Cost of Sales
Cost of Production
Prime Cost is
all cost incurred in manufacturing a product
the total of direct costs
the material cost of a product
the cost of operating a department
What is the primary purpose of management accounting?
Conducting market research and analysis
Managing human resources within the organization
Preparing financial statements for external stakeholders
Internal decision-making and planning
Explain the difference between financial accounting and management accounting in the context of a business scenario.
Financial accounting focuses on reporting past financial performance to external stakeholders, while management accounting focuses on providing information for internal decision-making and planning.
Financial accounting focuses on future financial performance, while management accounting focuses on reporting past performance.
Financial accounting and management accounting are the same and can be used interchangeably.
Financial accounting is used for internal decision-making, while management accounting is used for external reporting.
What are the different types of costs in management accounting?
Direct costs, indirect costs, fixed costs, variable costs, and semi-variable costs
Total costs, average costs, and marginal costs
Operating costs, production costs, and administrative costs
Direct costs, indirect costs, variable costs, and fixed costs
Describe the concept of cost-volume-profit analysis in the context of a manufacturing company.
Cost-volume-profit analysis is a financial accounting technique that examines the relationship between revenue and expenses.
Cost-volume-profit analysis is a human resources technique that examines the relationship between employee costs and productivity.
Cost-volume-profit analysis is a management accounting technique that examines the relationship between costs, volume of production, and profit.
Cost-volume-profit analysis is a marketing technique that examines the relationship between costs and sales volume.
What is a budget and how is it used in management accounting?
A budget is a type of financial report used to track employee attendance in management accounting.
A budget is a financial plan used to set targets, allocate resources, monitor performance, and make strategic decisions in management accounting.
A budget is a form of legal documentation used to file taxes in management accounting.
A budget is a tool used to measure customer satisfaction in management accounting.
Explain the concept of variance analysis in management accounting.
Variance analysis is the method of comparing actual costs and revenues with industry averages to identify and explain differences.
Variance analysis involves comparing actual costs and revenues with budgeted or standard amounts to identify and explain differences.
Variance analysis is the process of comparing actual costs and revenues with competitors' data to identify and explain differences.
Variance analysis involves comparing actual costs and revenues with historical data to identify and explain differences.
What are the key performance indicators (KPIs) used in management accounting?
Number of employees
Customer satisfaction
Financial and non-financial metrics
Company's mission statement
Discuss the role of management accounting in decision-making.
Management accounting only provides irrelevant financial information
Management accounting is only used for record-keeping purposes
Management accounting has no role in decision-making
Management accounting provides relevant financial information to help management make informed decisions.
What are the different methods of costing used in management accounting?
Fixed costing, variable costing, and standard costing
Direct costing, indirect costing, and differential costing
Job costing, process costing, activity-based costing, and marginal costing
Historical costing, absorption costing, and uniform costing
How does management accounting contribute to strategic planning and control?
By ignoring financial information and analysis
By providing valuable financial information and analysis for formulating strategic plans and monitoring performance.
By providing inaccurate financial information and analysis
By focusing only on short-term goals and neglecting long-term strategic planning
1. What is multi-product analysis in marginal costing?
Analyzing the contribution margin and profitability of multiple products within a company.
Assessing the market demand for a single product
Determining the variable costs of a single product
Calculating fixed costs for a single product
2. Explain the concept of contribution margin in multi-product analysis.
Contribution margin in multi-product analysis helps determine the profitability of each product by considering the contribution margin of each product.
Contribution margin is the total sales revenue minus the total costs
Contribution margin is the total sales revenue minus the total variable costs
Contribution margin is the total sales revenue minus the total fixed costs
3. How is the break-even point calculated in multi-product analysis?
Total fixed costs / Weighted average selling price per unit
Total fixed costs / Weighted average variable cost per unit
Total variable costs / Weighted average contribution margin per unit
Total fixed costs / Weighted average contribution margin per unit
4. Discuss the significance of sales mix in multi-product analysis.
Sales mix only affects the pricing strategy, not the overall profitability
The sales mix has no impact on the company's profitability
The sales mix is only relevant for single-product analysis
The sales mix is significant in multi-product analysis because it affects the overall profitability and contribution margin of the company.
5. What are the limitations of using marginal costing for multi-product analysis?
Not suitable for accurate product profitability analysis
Provides accurate product profitability analysis
Does not consider fixed costs
Suitable for multi-product analysis
6. Compare and contrast the use of marginal costing and absorption costing in multi-product analysis.
Marginal costing focuses on fixed costs and treats variable costs as period costs, while absorption costing allocates variable manufacturing overhead to products as part of the cost of production.
Marginal costing focuses on variable costs and treats fixed costs as period costs, while absorption costing allocates fixed manufacturing overhead to products as part of the cost of production.
Marginal costing and absorption costing both focus on variable costs and treat fixed costs as period costs.
Marginal costing allocates fixed manufacturing overhead to products as part of the cost of production, while absorption costing focuses on variable costs and treats fixed costs as period costs.
7. How does the presence of constraints affect decision-making in multi-product analysis?
Constraints increase the production and sales of certain products
Constraints only affect the pricing of products
Constraints have no impact on decision-making
Constraints can limit the production and sales of certain products
8. Explain the concept of limiting factor in multi-product analysis.
The concept of limiting factor in multi-product analysis is the factor that restricts the production or sales of a particular product.
The concept of limiting factor in multi-product analysis is the factor that only affects the production or sales of one product, not multiple products.
The concept of limiting factor in multi-product analysis is the factor that has no impact on the production or sales of a particular product.
The concept of limiting factor in multi-product analysis is the factor that increases the production or sales of a particular product.
9. Discuss the role of relevant costs in decision-making for multi-product analysis.
Relevant costs are only considered for long-term decisions
Relevant costs have no impact on decision-making for multi-product analysis
Relevant costs help in determining the profitability of each product and making informed decisions about production and pricing.
Relevant costs are only useful for single-product analysis
10. Provide an example of a real-life scenario where multi-product analysis using marginal costing can be applied.
Service industry with only one type of service offered
Manufacturing company producing multiple products with different variable costs
Online retail store with various products and fixed costs
Fast food restaurant selling different types of meals
_____ is a difference between standard cost and actual cost.
Cost Variance
Favourable
Adverse
Neutral
Standard material cost depends on specification, consumption and _____.
quality
quantity
price
nature
A manager can be blamed for _____ adverse variance.
controllable
non controllable
improvement in quality
reduction in cost
_____ cost represents what the cost should be.
Standard
Process
Contract
Marginal
__________ variance is favourable when actual price is less than standard price.
Material Cost
Material Usage
Material Price
Material
Change in basic wage rate gives rise to ______________.
Labour Cost Variance
Labour Efficiency Variance
Labour Productivity Variance
Labour Rate Variance
Excess of actual cost over standard cost is a
Favourable variance
Unfavourable variance
Abnormal Gain
Normal Gain
Labour efficiency variance is favourable when actual labour hours are less than _____________.
standard labour hours
standard labour rate
actual labour rate
labour cost
Difference between standard cost and actual cost is called as ________
profit
loss
wastage
variance
Standard cost is decided for ________
materials
labour
overheads
all the elements
Material price standard is set by ___________ department.
production
purchases
sales
finance
Labour Rate standard is decided by _________ department.
human resource
sales
purchases
production
Raw materials are an example of
Fixed cost
Stepped cost
Variable cost
Semi-variable cost
A factory supervisor is an example of
Fixed cost
Stepped cost
Variable cost
Semi-variable cost
Office rent is an example of
Fixed cost
Stepped cost
Variable cost
Semi-variable cost
Telephone bill is an example of
Fixed cost
Stepped cost
Variable cost
Semi-variable cost
Total sales is derived from Selling Price Per Unit X Unit produced.
TRUE
FALSE
Cost per unit under Marginal Costing is higher than Absorption Costing
TRUE
FALSE
The value of opening stock under Marginal Costing is higher than Absorption Costing.
TRUE
FALSE
Under Absorption Costing, the non-production fixed costs are treated as period costs
TRUE
FALSE
Calculates contribution per unit of a product
Marginal Costing
Absorption Costing
Under absorption costing some of the period's fixed production overheads will be carried forward
True
False
All fixed cost are period cost
Marginal costing
Absorption costing
It is ethical to switch between marginal and absorption costing to improve the performance of an area of the business
True
False
In marginal costing profitability of each product is measured on the basis of its
Cost
Profit
Contribution
None of the above
Marginal cost is the ……….cost of producing an additional unit of output
Variable
Fixed
Semi-variable
All of the above
The difference between actual sales and break even sales is:
Gross Profit
Contribution
Profit Volume Ratio
Margin of Safety
In a product mix decision, which is the most important factor to consider in order to try to maximise profit?
contribution per unit of the product
product unit selling price
variable cost per unit of the product
contribution per unit of a scarce resource used to make the product
In a make versus buy decision which of the following factors is not relevant?
reliability of bought-in products
reliability of supplier
fixed production costs
opportunity cost of alternative activities
How do you calculate the number of unit to make a target profit?
Contribution - fixed costs
Sales - fixed costs
Fixed costs + target profit/ Contribution per unit
Sales - variable costs
Margin of safety is?
The number of units sold above the break even point
Sales - variable costs
Fixed costs / contribution per unit
________ labour cost is the remuneration paid to the employees who are directly engaged in the manufacturing operations
Direct
Indirect
Normal
Abnormal
Extra payment reuired to be paid for overtime work is called as overtime
Premium
Payment
Salary
Wages
The change in the labour force during a specified period of time. This statement indicates the definition of
Labour turnover
Overtime premium
Flat rate system
Piecework system
Which of the following is NOT an example for direct labour cost?
Cook in the kitchen
Tailor
Cashier at the restaurant
Designer for house
Which of the following is indirect labour cost?
Maintenance worker in chocolate factory
Manager in a company
Cleaner in seafood factory
All of the above
Who is responsible for a materials price variance?
The Purchasing Agent.
The Production Manager
The Production & Maintenance Managers
Supervisor
Who is responsible for a labor efficiency variance?
The Purchasing Agent.
The Production Manager
The Production & Maintenance Managers
Supervisor
20.3 Which of the following statements is correct?
A. The operating standards set for production should be the most ideal possible
B. The operating standards set for production should be the minimal level
C. The operating standards set for production should be the attainable level
D. The operating standards set for production should be the maximum level
An unfavorable materials quantity variance indicates that:
actual usage of material exceeds the standard material allowed for output.
standard material allowed for output exceeds the actual usage of material.
actual material price exceeds standard price.
standard material price exceeds actual price.
The materials price variance is computed based on the amount of materials purchased during the period.
TRUE
FALSE
In general, the production manager is responsible for the materials price variance.
TRUE
FALSE
Which department is responsible for the price of materials?
Purchasing
Human resources
Production
When the actual number of units produced is different to the budgeted number of units produced, SQ is ...
The standard quantity for the budgeted number of units
The standard quantity for the actual number of units
The actual quantity for the budgeted number of units
The actual quantity for the actual number of units
Which of the following items is NOT characteristic of a process costing system?
Once production begins, it continues until the finished product emerges
The products produced are heterogeneous in nature
The focus is on continually producing homogeneous products
When the finished product emerges, all units have precisely the same amount of materials, labour and overhead
In a process cost system, the flow of cost is:
work in process, cost of goods sold, finished goods
finished goods, work in process, cost of goods sold
finished goods, cost of goods sold, work in process
work in process, finished goods, cost of goods sold
Conversion costs are the sum of:
Fixed and variable overhead costs
labour costs and overhead costs
Direct material costs and overhead costs
Direct labour and indirect labour costs
Indicate which of the following statement is NOT correct?
both a job order and process cost system track the same three manufacturing cost elements - Direct material, Direct labour and manufacturing overhead
A job order cost system uses only one work in process account, whereas a process cost system uses multiple work in process account
Manufacturing costs are accumulated the same way in a job order and in a process cost system
Manufacturing costs are assigned the same way in a job order and in a process cost system
Process cost accounting focuses on the process involved in mass-producing products that are very similar in nature.
True
False
In a process cost system, total costs are determined at the end of a month or year.
True
False
What is the formula for break even?
Contribution/fixed costs
Fixed costs/contribution per unit
Sales price - fixed costs
Sales price - variable costs
How do you calculate the number of unit to make a target profit?
Contribution - fixed costs
Sales - fixed costs
Fixed costs + target profit/ Contribution per unit
Sales - variable costs
Margin of safety is?
The number of units sold above the break even point
Sales - variable costs
Fixed costs / contribution per unit
When a limiting factor is present we base the decision on which products to make based on the product that gives the highest contribution?
True
False
Marginal costing gives a higher profit than absorption costing if stock levels are reducing?
True
False
Sales price is £45 material is £12, labour is £8 and fixed production costs are £5 the contribution is?
£33
£20
£25
Budgeted sales are 12,000 units and the break even is 7,500 units what is the margin of safety as a %.
62.5%
60%
37.5%
From the following information find out PVR
Variable cost per unit = Rs.15
Sales per unit = Rs.20
Fixed expenses = Rs.54,000
40%
25%
75%
From the following information find out sales at BEP
Variable cost per unit = Rs.15
Sales per unit = Rs.20
Fixed expenses = Rs.54,000
2,70,000
13,500
2,16,000
Calculate PV Ratio
Sales = Rs.1,00,000
Variable Cost = Rs.60,000
Fixed Cost = Rs.20,000
Net Profit = Rs.20,000
80%
60%
40%
Calculate BEP
Sales = Rs.1,00,000
Variable Cost = Rs.60,000
Fixed Cost = Rs.20,000
Net Profit = Rs.20,000
50,000
40,000
80,000
Contribution = ?
Sales-Variable cost
Fixed cost-Profit
Sales-Break Even sales
What is the formula for break even?
Contribution/fixed costs
Fixed costs/contribution per unit
Sales price - fixed costs
Sales price - variable costs
P/V Ratio is the ratio of contribution to sales
True
False
Marginal costing is a ..........
Technique of costing
Method of costing
R Ltd. Sold goods for Rs.30,00,000 in a year. In that year the variable costs were Rs.6,00,000 and Fixed Cost is Rs.8,00,000. Find out break even sales
16,00,000
10,00,000
24,00,000
Calculate the BEP (Value) from the following
Variable cost - Rs.75,000
Profit - Rs.12,000
Sales - Rs.1,50,000
63,000
1,26,000
75,000
If inventory levels are decreasing then marginal costing will give lower profit
True
False
Margin of safety is?
The number of units sold above the break even point
Sales - variable costs
Fixed costs / contribution per unit
Budgeted sales are 12,000 units and the break even is 7,500 units what is the margin of safety as a %.
62.5%
60%
37.5%
Contribution per unit is the difference between total revenue and total variable cost.
True
False
Contribution - fixed cost =
(a)
The total variable cost change _________________________with change in output
Consistently
Constantly
Proportionately
Un proportionately
Fixed cost + profit =
Semi - variable cost
Margin of safety
Contribution
Standard profit
An increase in variable costs results in
An increase in P/V Ratio
Reduces contribution
Increase in Profit
None of the above
Margin of Safety is the difference between the
Planned sales and the planned profit
Actual sales and Break even sales
Planned sales and the break even sales
None of the above
_________________________________ is the excess of sales over the break even sales.
Contrbution
Fixed cost
Variable cost
Margin of Safety
Fixed cost is also known as______________________________
Flexible cost
Marginal cost
Period cost
All of the above
if the total cost of 100 units is Rs. 5,000 and those of 101 units is Rs. 5,040 then increase of Rs. 40 in total cost is
Marginal cost
Prime cost
Fixed cost
None of the above
Marginal costing helps the management to
Fix the price of products
Take various decisions
Calculate profit
All the above
If margin of safety -20%, profit volume ratio -60%, Fixed cost = Rs.75,000. Find Actual sales.
Rs.1,25,000
Rs. 1,58,000
Rs. 1,50,250
Rs. 1,56,250
If PVR=40%, MOS=50%, Sales=Rs.6,00,000. Find Net profit.
Rs 1,50,000
Rs 1,00,000
Rs.1,20,000
Rs.1,60,000
