INTERMEDIATE EXAMINATION
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.