WorksheetsManagementAccounting-121Questions
Total questions: 121
Worksheet time: 2hrs 45mins
What does the term 'overhead cost' refer to?
Direct materials
Indirect costs
Fixed costs
Variable costs
Which of the following is NOT a component of prime cost?
Direct materials
Direct labor
Manufacturing overhead
All of the above
Audit and Directors fees is an indirect cost taken under
Administration o/h
Factory o/h
COP
COS
Carriage outwards is taken to
Selling and Distribution o/h
Factory o/h
COP
COS
Factory cost is also known as
Work in Progress means
Administrative overheads are added to the factory cost to get
Opening stock of raw materials + Purchases – Closing stock of raw materials =
Cost of goods manufactured
Raw materials consumed
Prime cost
Total cost
Which item is deducted while calculating cost of goods sold?
Closing stock of raw material
Closing stock of finished goods
Opening stock of finished goods
Selling overheads
Which of the following is not a component of total cost?
Direct wages
Factory rent
Interest on capital
Advertisement expenses
Profit-Volume ratio (P/V) equals:
VC / Sales (Variable Cost / Sales)
Sales / CM (Sales / Contribution Margin)
CM / Sales (Contribution Margin / Sales)
Sales / VC (Sales / Variable Cost)
Which of the following is the accurate formula for Conversion Cost?
Direct Material Cost+Direct Labour Cost
Direct Labour Cost+Manufacturing Overhead Cost
Direct Material Cost+Direct Labour Cost+Manufacturing Overhead Costs
Direct Material Cost+Direct Labour Cost+Manufacturing Overhead Cost+Non Manufacturing Overhead Cost
Prime cost is calculated as:
Direct Material + Direct Labour + Direct Expense
Direct Labour - Direct Expense
Direct Expense + overheads
Direct Cost + Indirect Cost
Costs that remain the same in total regardless of changes in the activity level.
Variable Cost
Fixed Cost
Relevant Cost
Sunk Cost
Are costs that vary in total directly and proportionately with changes in the activity level.
Fixed Cost
Variable Cost
Mixed Cost
Irrelevant Cost
INDIRECT LABOR, INDIRECT MATERIALS, DEPRECIATION OF FACTORY EQUIPMENT AND THE LIKE ARE MANUFACTURING COSTS KNOWN AS
SUPPLIES
DIRECT MATERIALS
PRIME COSTS
FACTORY OVERHEAD
What is the meaning of overtime?
Idle time
Unproductive time of employees for which they are still paid
Any hours worked that exceed normally scheduled working hours
A sum of money added to a person's wages as a reward for good performance
Cost of Raw Material Used is $500,000 Beginning raw material is $50,000 and Ending raw material is $25,000. What is the cost of raw material purchased?
$450,000.
$525,000
$475,000
$550,000
Which of the following is an example of a fixed cost?
Raw materials used in production.
Electricity cost for the factory.
Rent for a factory building.
Direct labor hours.
Indirect costs are:
Directly traceable to a cost object.
Costs that cannot be easily traced to a specific cost object.
Always variable costs.
Always fixed costs.
A company incurred the following costs during a production period:
Direct materials cost: $10,000
Direct labor cost: $8,000
Factory overhead cost: $5,000
Calculate the prime cost for the period.
$10,000
13,000
18,000
23,000
What is the cost of goods manufactured if beginning work in process inventory is $50, total manufacturing cost is $345, and ending work in process inventory is $65?
$330
$250
$280
$400
Marginal cost is _____ cost.
Fixed
Variable
Semi-Variable
Stepped
Contribution is fixed cost + _____.
sales
variable
profit
margin of safety
_____ is excess of actual sales over break even sales.
Contribution
Desired Sales
Margin of Safety Sales
Profit
Profit is excess of _____ over fixed cost.
Sales
Variable Cost
Contribution
Loss
_________ is the difference between actual sales and Break Even sales.
Contribution
Margins of Safety
Profit Volume
Profit
Contribution is excess of sales over _____.
Variable Cost
Fixed Cost
Profit
Loss
An increase in sales price of a product _______
does not affect the break-even point
lowers the net profit
increases the break-even point
lowers the break-even point
Fixed cost per unit decreases when __________
production volume increases
production volume decreases
variable cost per unit decreases
prime cost per unit decreases
A company has sales of Rs. 2,00,000; P/V Ratio is 20% and fixed cost is Rs. 15,000; the profit will be ______
Rs. 40,000
Rs. 35,000
Rs. 25,000
Rs. 20,000
An increase in variable costs results in
An increase in P/V Ratio
Reduces contribution
Increase in Profit
None of the above
When fixed cost is Rs.20,000 and P/V Ratio is 40%, the breakeven point will be
75,000
40,000
20,000
50,000
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
P/V Ratio is an indicator of
the measurement of rate at which goods and services are bought and sold
the measurement of change in profit due to change in volume of sales
the measurement of volume of profit to be earned
None of the above
Break Even Point refers to the point in which
total cost is equal to fixed cost
total cost is equal to total revenue
total cost is equal to contribution
total cost is equal to variable cost
A high margin of safety indicates that
over production
business is dull
over capitalisation
business is going on well
Marginal costing technique classifies cost into
variable cost and fixed cost
operation and Maintainance cost
semi-variable cost
standard and floating cost
Marginal costing helps the management to
Fix the price of products
Take various decisions
Calculate profit
All the above
which is not included in primecost?
Raw materials
Manager Salary
Labour expenses
Coal
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
Formula to calculate contribution margin
SALES – VARIABLE COSTS
SALES – VARIABLE COSTS - FIXED COST
SALES – PERIOD COSTS
SALES – COGS
Profit occure, when
fixed cost > contribution margin
fixed cost < contribution margin
variable cost > contribution margin
variable cost < contribution margin
Information: Direct materials $15, direct labor $10, variable overhead $20, variable
selling and distribution cost $15, Total fixed cost $35, Sales $120
Calculate Variable Production Cost of Sales!
$25
$45
$30
$60
Information: Direct materials $15, direct labor $10, variable overhead $20, variable
selling and distribution cost $15, Total fixed cost $35, Sales $120
Calculate Variable Cost of Sales!
$25
$45
$30
$60
Information: Direct materials $15, direct labor $10, variable overhead $20, variable
selling and distribution cost $15, Total fixed cost $35, Sales $120
Calculate Contribution Margin!
$25
$45
$30
$60
Information: Direct materials $15, direct labor $10, variable overhead $20, variable
selling and distribution cost $15, Total fixed cost $35, Sales $120
Calculate Profit!
$25
$45
$30
$60
Information: Variable cost product $7, fixed cost $3, sell product $11.
Calculate contribution per unit!
$1
$8
$4
$7
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
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
A box manufacturer discovers that while it costs Rs 6.25 per unit to make a component T the same is available in the market at Rs 5.75 each. There is reliability of regular supply. The breakdown of costs is materials is Rs 2.75 per unit, Labor is Rs 1.75 per unit, Other variable expenses is Rs 0.50 and depreciation and other fixed costs is Rs 1.25. Will you make or buy?
Buy the product
Make the product
Drop the product
None of the above
While selecting optimum product mix
Ranks are assigned on the basis of highest contribution per unit of key factor
Ranks are assigned on the basis of lowest contribution per unit of key factor
No ranks are assigned
None of the above
In a purely competitive market, 10,000 mobiles can be manufactured and sold for a certain profit. Profit targeted is Rs 2,00,000. The variable cost per mobile is Rs 100 and the total fixed costs are Rs 40,000. Find out unit selling price.
Rs.124 per mobile
Rs.1.24 per mobile
Rs.1240 per mobile
None of the above
While making a pricing decision under Special price, if price is greater than marginal cost,
Acceptance and rejection depends on product type
Order should be rejected
Order should be accepted
None of the above
While preparing Marginal cost and Contribution Statement, if any factor of production is key factor then ________ should be expressed in terms of per unit of Key factor.
Profit
Contribution
Sales
None of the above
Margin of safety is?
The number of units sold above the break even point
Sales - variable costs
Fixed costs / contribution per unit
Telephone bill is an example of
Fixed cost
Stepped cost
Variable cost
Semi-variable cost
Which of the following is a variable cost?
Interest payments
Raw materials costs
Property taxes
All of the above are variable costs
The contribution margin per unit is equal to the?
price of a good
the difference between total revenue and total cost
difference between price and average total cost
difference between price and average variable cost
Which are ways in which profit performance of a business can be improved?
By increasing volume
By increasing selling price
By decreasing variable costs
All of the above
Which of the statement is true?
Selling price-variable cost=contribution
Contribution – fixed cost= profit
Fixed cost + profit = contribution
All of the above
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
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
A company produces and sells a single product whose variable cost is $6 per unit.
Fixed costs have been absorbed over the normal level of activity of 200,000 units and have been calculated as $2 per unit.
The current selling price is $10 per unit.
How much profit is made under marginal costing if the company sells 250,000 units?
$500,000
$600,000
$900,000
$1,000,000
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
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
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%
What is the formula for calculating marginal cost?
Change in Total Cost / Change in Quantity
Change in Total Revenue / Change in Quantity
Total Cost / Quantity
Fixed Cost / Variable Cost
What are the advantages of using marginal costing for decision making?
It is not useful for pricing decisions
It provides information on fixed costs only
It provides information on the contribution margin of each product or service.
It does not consider variable costs
Provide an example of how marginal costing can be used to make pricing decisions.
Calculating the contribution margin for each unit and setting the price based on the desired profit margin
Setting the price based on the total cost of production
Ignoring the variable costs when determining the price
Using historical costing to set the price
How does marginal costing help in determining the break-even point?
By separating fixed and variable costs, allowing for a more accurate calculation of the point at which total revenue equals total costs.
By including only fixed costs in the calculation
By using historical data instead of current costs
By ignoring variable costs altogether
Explain the concept of variable cost in the context of marginal costing.
Cost that varies with the level of production or sales
Cost that is not affected by the level of production or sales
Cost that is only incurred when production or sales reach a certain level
Cost that remains constant regardless of production or sales
What are the limitations of marginal costing?
Suitable for long-term decision making
Considers only fixed costs
May lead to overpricing of products
The limitations of marginal costing include: not suitable for long-term decision making, does not consider fixed costs, may lead to underpricing of products, and can be complex to implement.
How does marginal costing assist in performance evaluation?
By separating fixed and variable costs, allowing for better analysis of cost behavior and contribution margin.
By focusing only on fixed costs
By ignoring variable costs
By including all costs in the analysis
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
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
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
Which of the following statements are correct.
a. Prime cost is the total of direct wages and variable overheads.
b. Abnormal cost is uncontrollable.
c. Contract costing method is used in ship building.
d. Cost accounting is a techinique of managerial control.
All statements are correct
Statements A , C & D are correct
Except statement 'C' is correct
Only statements 'C' & 'D' are correct
floor area may be used as a basis for the apportionment of-------
rent and rate
building insurance
lighting
all of these
variable overhead----
remains constant per unit
remains varies per unit
remains constant total cost
remains varies total cost
standing charges are also known as-----expenses
variable
semi-variable
fixed
semi-fixed
can we plan, control and reduce cost with cost accounting
yes
no
may be
not sure
The Information obtained from cost accounts is
Total cost
Per unit cost
Total & Per unit Cost
All of above
Ascertainment of cost with the help of actual expenses incurred in the past termed as..
Historical Costing
Standard Costing
Marginal Costing
Operating costing
Loss of material due to fire is treated as
An overhead
Direct expenses
Normal Loss
Abnormal Loss
Variable cost_____________
Decreases with increase in production
fluctuates with fluctuation in the volume of production
always remains fixed
Increase with decrease in production
an example of variable cost is______________
Interest on capital
Direct labour
Depreciation
Insurance
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
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.
A business receives a contribution of £19 from a unit of output that is sold for £65. What is the variable cost of that unit?
£19
£84
£46
£65
Which of the following is not likely to be included as a marginal cost of production?
Rent
Raw materials
Packaging
Royalties
What is marginal cost if output rises from 10 units to 11 units and total cost rises from £4,000 to £4,500?
£4,000
1 unit
£500
£4,500
Marginal revenue is ...
the cost of selling one additional unit.
the revenue from selling all of the new quantity of units.
the revenue from selling one additional unit.
the cost of selling all of the new quantity of units.
The wages of the employees making tables in a factory is an example of a ...
Fixed cost
Variable cost
Stepped cost
Semi-variable cost
The table tops used in making tables in a factory is an example of a ...
Fixed cost
Variable cost
Stepped cost
Semi-variable cost
Factory rent is an example of a ...
Fixed cost
Variable cost
Stepped cost
Semi-variable cost
If a second factory is required because production has increased, this is a ...
Fixed cost
Variable cost
Stepped cost
Semi-variable cost
Costs which increase by a large amount all at once are
Fixed costs
Variable costs
Stepped costs
Semi-variable costs
Costs which have a fixed part and a variable part are ...
Fixed costs
Variable costs
Stepped costs
Semi-variable costs
A limitation of marginal costing is that:
It ignores sales data
It is hard to implement
It ignores fixed costs in decision making
It does not calculate variable costs
Marginal costing is best suited for:
Long-term capital investment
Short-term decision making
Preparing cash budgets
Legal compliance
A high PV ratio indicates:
Low profitability
High variable cost
Better profitability
High fixed cost
At break-even point, the profit is:
Maximum
Minimum
Zero
Equal to contribution
Marginal costing can help in:
Calculating GDP
Export pricing decisions
Setting government taxes
Determining market share
In make-or-buy decisions, marginal costing helps by:
Comparing fixed costs
Ignoring material cost
Considering relevant variable costs
Increasing purchase cost
In a special order decision, marginal costing:
Considers only fixed cost
Ignores contribution
Accepts the order if it covers variable cost and contributes to fixed cost
Rejects low-price orders
In key factor analysis, marginal costing helps in:
Planning capital
Allocating resources to most profitable product
Cutting employee wages
Reducing machinery cost
A company should shut down temporarily if:
Sales are low but contribution is positive
Contribution is negative
Fixed cost is high
Variable cost is constant
Raw materials that can be physically and directly associated with the finished product during the manufacturing process are called:
Direct Materials
Indirect Materials
Variable Cost
Manufacturing Overhead
The work of factory employees that can be physically and directly associated with converting raw materials into finished goods is called:
Direct Labor
Indirect Labor
Variable Cost
Manufacturing Overhead
