Paper 10 Cost & Management Accounting and Financial Management MCQ



Paper 10 Cost & Management Accounting and Financial Management

Paper 10 Cost & Management Accounting and Financial Management

A. Choose the most appropriate alternative for the following  

(i) Management Accounting

a) accumulates, summarises and analyses the available data.

b) is primarily concerned with the requirements of the management.

c) makes Corporate Planning and Strategy effective.

d) All of the above.

(ii) XYZ Ltd. makes a special gadget for the car it manufactures. The machine for the gadget works to full capacity and incurs Rs. 15 Lakhs and Rs. 40 Lakhs respectively as Variable and Fixed Costs. If all the gadgets were purchased from an outside supplier, the machine could be used to produce other items, which would earn a total contribution of Rs. 25 Lakhs. What is the maximum price that XYZ Ltd. should be willing to pay to the outside supplier for the gadgets, assuming there is no change in Fixed Costs?

a) Rs. 40 Lakhs.

b) Rs. 65 Lakhs.

c) Rs. 25 Lakhs.

d) Rs. 15 Lakhs.

(iii) When a manager is concerned with monitoring total cost, total revenue and net profit conditioned upon the level of productivity, an accountant should normally recommend

Flexible                        Standard

Budgeting                   costing

a)   Yes                               Yes.

b)   Yes                               No.

c)   No                                Yes.

d)   No                                 No.

(iv) In a system whereby all activities are re-evaluated each time a budget is formulated and starts with assumption that requirement of funds does not exist is called

a) Performance Budgeting.

b) Programme Budget.

c) Flexible Budget.

d) Zero-based Budgeting.

(v) The difference between hours paid and hours worked is known as

a) Labour rate variance.

b) Labour efficiency variance.

c) Idle time variance.

d) Net efficiency variance.

(vi) The difference in total cost that results from two alternative courses of action is called

a) Relevant Cost.

b) Opportunity Cost.

c) Differential Cost.

d) Marginal Cost.

B. Choose the most appropriate alternative for the following  

(i) Objective of Financial Management is

a) Management of Liquidity.

b) Maximization of Profit.

c) Maximization of Shareholders’ Wealth.

d) Management of Fixed Assets.

(ii) Which of the following variables is not known in Internal Rate of Return?

a) Initial Cash Flows.

b) Discount Rate.

c) Terminal Inflows.

d) Life of the Project.

(iii) Cost of Capital refers to

a) Floatation Cost.

b) Dividend.

c) Required Rate of Return.

d) None of the above.

(iv) Working Capital Management involves financing and management of

a) All Assets.

b) All Current Assets.

c) Cash and Bank Balance.

d) Receivables and Payables.

(v) All listed companies are required to prepare

a) Funds Flow statement.

b) Cash Flow Statement.

c) Statement of Affairs.

d) All of the above.

(vi) Ratio Analysis can be used to study liquidity, turnover, profitability etc., of a firm. What does Debt-Equity Ratio help to study?

a) Solvency.

b) Liquidity.

c) Profitability.

d) Turnover.

C. Choose the most appropriate alternative for the following  

(i) Decision-marking concerns with:

a) Past.

b) Future.

c) Past and Future both.

d) None of the above.

(ii) A large Margin of Safety indicates

a) Over-Capitalization.

b) The soundness of business.

c) Over Production.

d) None of the above.

(iii) Revision of budgets is

a) Unnecessary.

b) Cannot determine.

c) Necessary.

d) Inadequate data.

(iv) Which of the following operating measures would a manager would like to see decreasing over time?

a) Merchandise Inventory Turn-over.

b) Total quality cost.

c) % of on-time deliveries.

d) Finished Goods Inventory Turn-over.

(v) Which of the following departments is most likely responsible for a Price Variance in Direct Materials?

a) Warehousing.

b) Receiving.

c) Purchasing.

d) Production.

(vi) Another name for the 'Learning Curve' is

a) Exponential Curve.

b) Growth Curve.

c) Production Curve.

d) Experience Curve.

D. Choose the most appropriate alternative for the following  

(i) Which of the following is a Profitability Ratio?

a) Proprietary Ratio.

b) Debt-Equity Ratio.

c) Price-Earning Ratio.

d) Fixed Asset Ratio.

(ii) Which of the following is not a source of fund?

a) Issue of Capital.

b) Issue of Debenture.

c) Decrease in Working Capital.

d) Increase in Working Capital.

(iii) β (Beta) of a security measures its

a) Divisible Risk.

b) Financial Risk.

c) Market Risk.

d) None of the above.

(iv) The following is not a Discounted Cash Flow Technique:

a) NPV.

b) PI.

c) Accounting of Average Rate of Return.

d) IRR.

(v) The 'Dividend-Payout Ratio' is equal to

a) The Dividend yield plus the capital gains yield.

b) Dividends per share divided by Earning per Equity Share.

c) Dividends per share divided by par value per share.

d) Dividends per share divided by current price per share.

(vi) If EBIT = Rs. 1,00,000, Fixed Assets = Rs. 2,00,000, Sales = Rs. 10,00,000 and Variable Cost = Rs. 7,00,000. Then, the Operating Leverage will be

a) 2.

b) 3.

c) 6.

d) 4.

E. Choose the most appropriate alternative for the following  

(i) The well-known basic function of management is

a) Motivating.

b) Leadership.

c) Decision-making.

d) Communicating.

(ii) Contribution margin is equal to

a) Sales – Fixed Cost– Profit.

b) Profit + Variable Cost.

c) Fixed Cost– Loss.

d) None of the above.

(iii) In a system whereby all activities are revaluated each time a budget is formulated and starts with the assumption that requirement of funds does not exist is called

a) Performance Budgeting.

b) Programme Budgeting.

c) Flexible Budgeting.

d) Zero– based Budgeting.

(iv) The management’s time is saved by reporting only the deviations from the predetermined standards is called

a) Management by objectives.

b) Budgetary Control.

c) Standard Costing.

d) Management by Exception.

(v) Marginal Costing is also known as

a) Direct Costing.

b) Absorption Costing.

c) Variable Cost.

d) Variable Costing.

(vi) Another name for ‘Contribution’ is

a) Marginal Income.

b) Gross Profit.

c) Net Income.

d) None of the above.

F. Choose the most appropriate alternative for the following  

(i) Which of the following does not help to increase Current Ratio?

a) Issue of Debentures to buy Stock.

b) Issue of Debentures to pay Creditors.

c) Sale of Investment to pay Creditors.

d) Avail Bank Overdraft to buy Machine.

(ii) Which of the following is not considered while preparing cash budget?

a) Accrual Principal.

b) Difference in Capital and Revenue items.

c) Conservation Principle.

d) All of the above.

(iii) Cost of capital may be defined as:

a) Weighted Average cost of all debts.

b) Rate of Return expected by Equity Shareholders.

c) Average IRR of the Projects of the firm.

d) Minimum Rate of Return that the firm should earn.

(iv) At Indifference level of EBIT, different capitals have:

a) same EBIT.

b) same EPS.

c) same PAT.

d) same PBT.

(v) ABC Analysis is used in

a) Inventory Management.

b) Receivables Management.

c) Accounting Policies.

d) Corporate Governance.

(vi) Which of the following is not incorporated in Capital Building?

a) Tax-Effect.

b) Time Value of Money.

c) Required Rate of Return.

d) Rate of Cash Discount.

G. Choose the most appropriate alternative for the following  

(i) Which statement best describes the role of the management accountant?

a) Management accountants prepare the financial statements for an organization.

b) Management accountants facilitate the decision-making process within an organization.

c) Management accountants make the principal decisions within an organization.

d) Management accountants are basically information collectors.

(ii) In a factory when production is increased within the relevant range then:

a) variable costs will vary on a per unit basis.

b) variable costs will vary in total.

c) fixed costs will vary in total.

d) fixed and variable cost stay the same in total.

(iii) The main objective of budgetary control is:

a) to define the goal of the firm.

b) to coordinate different departments.

c) to plan to achieve its goals.

d) All of the above.

(iv) Method of pricing, when two separate pricing methods are used to price transfer of products from one subunit to another, is called:

a) dual pricing.

b) functional pricing.

c) congruent pricing.

d) optimal pricing.

(v) When are overhead variances recorded in a standard costing system?

a) When the goods are transferred out of work-in-progress.

b) When the factory overhead is applied to work-in-progress.

c) When the cost of goods sold is recorded.

d) When the direct labour is recorded.

(vi) Which of the following factors does not affect Learning Curve?

a) Method of Production.

b) Labour Strike.

c) Shut Down.

d) Efficiency Rate.

e) *Wrong question and no options are true. Student attempting this question has been given full 1 mark.