MCQS of Activity based costing ||Managment acce

 S.Y B.COM

SEMESTER - 4

MANAGEMENT ACCOUNTING

(MA)

MCQS = UNIT - II

CHAPTER-1

ACTIVITY BASED COSTING

MULTIPLE CHOICE QUESTIONS

1. Activity based costing identifies the activities which cause to be incurred and trace cost ..............  of these activities.

a) center

b) objects

c) drivers

d) pools

2. ......... Is possible to ascertain most accurate and realistic product cost.

a) Activity Based Information

b) Activity Based Accounting

c) Activity Based Costing

d) Activity Based Management

3. In Activity Based Costing, costs are accumulated by -

a) Cost benefit analysis

b) Cost pool 

c) Cost objects

d) None of the above

4. The appropriate Cost driver for maintenance of cost poo| is number of - 

a) machine hours

b) delivers 

c) customers

d) set-ups

5. ......... is the final point to which costs are traced.

a) Cost pool

b) Cost object

c) Cost activity

d) Cost driver

6. In tracing costs, of products by using a measure of resources consumed by each activity ............ is used.

a) Cost driver

b) Cost pool

c) Cost object

d) Cost unit

7. Costs are grouped into .......... according to the activities which drive them. 

a) Cost drivers

b) Cost objects

c) Cost pools

d) Cost units

8. Activity based costing is defined as cost attribution to ............  on the basis of benefit received from indirect activities.

a) Cost units

b) Cost pools

c) Cost objects

d) Cost drivers

9. Under ABC system, the aggregate of closely related tasks is known as ......... 

a) Pool

b) Cost Unit

c) Activity

d) Driver

10. The point of focus for the costs relating to a particular activity in Activity Based Costing system is known as-

a) Cost system

b) Cost ascertainment 

c) Cost object

d) Cost pool

11. The method in which cost attribution to cost units on the basis of benefits received from indirect activities is known as -

a) Activity Based Accounting

b) Activity Based Budgeting

c) Activity Based Costing

d) Activity Based Management

12. Under traditional cost system, direct costs are ......... to the units of output in proportion to the volume of production.

a) apportioned

b) allotted

c) added

d) allocated

13. ......... deals with collection, recording, analysis, controlling and reporting of activity related costs rather than departmental or cost center related costs.

a) Activity Based Accounting

b)Activity Based Budgeting

c) Activity Based Costing

d) Activity Based Management

14. ............ is the management philosophy that focuses on the planning, execution and measurement of activities as the key to the competitive advantage.

a) Activity Based Costing

b) Activity Based Budgeting

c) Activity Based Management

d) Activity Based MIS

15. Cost pools under ABC are similar to ............. in traditional cost system. 

a) Machine center

b) Cost object

c) Cost center

d) Cost unit

16. ............. is an activity which generates cost.

a) Cost object

b) Cost driver 

c) Cost pools 

d) Activity based budgeting (ABB) 

17. .............  is the reason for performing an activity.

a) Cost object

b) Cost driver 

c) Cost pools 

d) Activity based budgeting (ABB)

18. Cost object includes -

a) Products

b) Services

c) Customers

d) Contracts

a) (i), (ii), (iii), (iv)

b) (ii), (iii), (iv), (v)

c) (i), (iii), (iv), (v)

d) All of the above

19. .............. Costing is beneficial to the complex and large organization.

a) Activity based

b) Marginal

c) Standard

d) Throughput

20. The cost objects are linked to the objective of the organization.

a) True

b) False

c) Partly True

d) Partly False

21. Cost objects can be defined as those activities or transactions that are significant determinants of cost.

a) True

b) False

c) Partly True

d) Partly False

22. .............. are used to trade costs to products by using a measure of resources consumed by each activity. 

a) Cost object

b) Cost driver 

c) Cost pools 

d) Activity based budgeting (ABB)

23. .............. requires the identification of the activities of the organization, establishing the factors which cause costs, the cost drivers, and the collecting the costs of activities in the cost pools.

a) Cost object

b) Cost driver 

c) Cost pools 

d) Activity based budgeting (ABB)

24. Activity based budgeting (ABB) is a planning and control system which seeks to support the objective of continuous improvement.

a) Partly False

b) Partly True

c) True

d) False

25. Out of the following, Non-value added activity is -

a) Move time

b) Storage time

c) Idle time

d) Both (a) and (b)

26. A company manufactures two products using common handling facility. The total budgeted material handling cost is Rs.1,20,000. The other details are:

Particulars	Product A	Product B
Number of units produced	60	60
Material moves per product line	10	30
Direct labor hours per unit	400	400

Under Activity costing system, the material handling costs to be allocated to Product A (per unit) would be

a) Rs.2,500

b) Rs.1,500

c) Rs.500

d) Rs.1000

SOLUTIONS :

c) Rs.500

Total moves in material handling = 10 + 30 = 40

Percentage move for product A = 10/40 = 0.25 or 25%

Material handling cost to be allocated to product A = Rs.1,20,000 × 25/100 = Rs.30,000

Or,   Rs.30,000 / 60 Units

     = Rs.500 per unit

27. A Ltd. is preparing its annual profit plan. As part of its analysis of the profitability of individual products, the accountant estimates the amount of overhead that should be allocated to the individual product lines from the information given below:

Particulars	X	Y
Units products	60	60
Material moves/Product line	10	30
Direct labor hours / unit	400	400

Under Activity based costing (ABC), the material handling costs to be allocated to one unit of X would be 

a) Rs.2,500

b) Rs.1,500

c) Rs.500

d) Rs.1,000

SOLUTIONS :

c) Rs.500

A Ltd. Allocates overhead to the activity that specifically drives the overhead cost. There will be 20 moves caused by X and Y, of which X require 5. So, X shall be allocated 5/20 of the material handling costs of

Rs.12,500. 25 units of X will be moved. Hence, material handling cost per unit of X = Rs.12,500 / 25

 =  Rs.500

Management accounting|| MCQ of Marginal costing and break even analysis

  Management accounting|| MCQ of Marginal costing and break even analysis

1.Marginal costing technique helps the management in deciding _____

1. Pricing
2. To accept fresh orders at low price
3. To make or buy
4. All of the above

2.

1. The other name of marginal costing is _______
1. Direct costing
2. Variable costing
3. Incremental costing
4. All of the above

3.

1. The term gross margin refers to _______
1. Total profit
2. Contribution
3. Profit before tax
4. Profit before interest and tax

4.

1. Sales Rs. 100000, variable cost Rs. 50000 and net profit ratio is 10% on sales, find out fixed cost.
1. 50000
2. 40000
3. 20000
4. The data inadequate

5.

1. Profit volume ratio establishes the relationship between _______
1. Contribution and profit
2. Fixed cost and contribution
3. Profit and sales
4. Contribution and sales value

6.

1. Contribution/sales is equal to _______
1. P/V ratio
2. Net profit ratio
3. BEP
4. EPS

7.

1. The profit of an undertaking is affected by _______
1. Selling price of the products
2. Volume of sales
3. Variable cost per unit and total fixed cost
4. All of the above

8.

1. The profit at which total revenue is equal to total cost is called ______
1. BEP
2. Margin of safety
3. Break even analysis
4. None

9.

1. The break even chart helps the management in ______
1. Forecasting costs and profits
2. Cost control
3. Long term planning and growth
4. All of the above

10.

1. Break even chart presents only cost volume profits. It ignores other considerations such as ________
1. Capital
2. Marketing aspects
3. Government policy
4. All of the above

11.

1. Expenses that do not vary with the volume of production are known as _______
1. Fixed expenses
2. Variable expenses
3. Semi‐variable expenses
4. None

12.

1. ________ is the excess of sales over the break even sales.
1. Actual sales
2. Total sales
3. Margin of safety
4. Net sales

13.

1. __________ indicates the extent of which the sales can be reduced without resulting in loss.
1. BEP
2. Key factor
3. Contribution
4. Margin of safety

14.

1. The formula for Margin of Safety is one of the following ________
1. PV ratio/profit
2. Profit/P/v ratio
3. Profit/sales
4. Contribution/fixed cost

16.

1. Margin of safety can be improved by ________
1. Increasing production
2. Increasing selling price
3. Reducing the costs
4. All of the above

17.

1. If a firm is dealing in several products the________ is calculated.
1. Composite BEP
2. BEP
3. Break even sales
4. Cash BEP

18.

1. _________ refers to a situation where the costs of operating two alternative plants are equal.
1. Simple BEP
2. Cost BEP
3. Contribution BEP
4. None

19.

1. The angle formed by the sales line and total cost line at the break even point is known as _________
1. Profit variable
2. Margin of safety
3. Angle of incidence
4. None

20.

1. A high margin of safety indicates the more actual sales than break even sales.
1. True
2. False

21.

1. The term contribution margin refers to _________
1. Marginal income
2. Marginal cost
3. Gross profit
4. Net income

22.

1. Overvaluation of stock is practiced on absorption costing technique.
1. True
2. False

23.

1. The BEP decreases if the fixed cost ________
1. Increases
2. Decreases
3. Remains constant
4. Inadequate data

24.

1. Marginal costing is the most useful technique for the ______
1. Shareholders
2. Management
3. Auditors
4. Creditors

1. Fixed expenses decrease per unit with the increases in production and increases per unit with the decrease in production.

a) True
b) False

ANSWER: a) True

2. Marginal costs is taken as equal to

a) Prime Cost plus all variable overheads
b) Prime Cost minus all variable overheads
c) Variable overheads
d) None of the above

ANSWER: a) Prime Cost plus all variable overheads

3. If total cost of 100 units is Rs 5000 and those of 101 units is Rs 5030 then increase of Rs 30 in total cost is

a) Marginal cost
b) Prime cost
c) All variable overheads
d) None of the above

ANSWER: a) Marginal cost

4. Marginal cost is computed as

a) Prime cost + All Variable overheads
b) Direct material + Direct labor + Direct Expenses + All variable overheads
c) Total costs – All fixed overheads
d) All of the above

ANSWER: a) Prime cost + All Variable overheads

5. Marginal costing is also known as

a) Direct costing
b) Variable costing
c) Both a and b
d) None of the above

ANSWER: c) Both a and b

6. Which of the following statements are true?

A) Marginal costing is not an independent system of costing.

B) In marginal costing all elements of cost are divided into fixed and variable components.

C) In marginal costing fixed costs are treated as product cost.

D) Marginal costing is not a technique of cost analysis.

a) A and B
b) B and C
c) A and D
d) B and D

ANSWER: a) A and B

7. While computation of 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

ANSWER: a) Total marginal cost is deducted from total sales revenues

8. Which of the following are the assumptions of marginal costing?

A) All the elements of cost can be divided into fixed and variable components.

B) Total fixed cost remains constant at all levels of output.

C) Total variable costs varies in proportion to the volume of output.

D) Per unit selling price remain unchanged at all levels of operating activity.

a) A and B
b) B and C
c) A and D
d) A, B C and D

ANSWER: d) A, B C and D

MCQ of break even analysis :

1. At breakeven point there is

1. Profit
2. Loss
3. No profit or loss
4. None of these

(Ans:c)

 

2.  At breakeven point

1. Total expenses = Total revenue
2. Total expenses > Total revenue
3. Total expenses < Total revenue
4. Any of the above

(Ans:a)

 

3.  In any organization, profits depends mainly upon

1. Production cost
2. Production output
3. Revenue
4. All of the above

(Ans:d)

 

4. .There are various methods to reduce cost of production, except

1. Increase in production output
2. Reduction in number of rejections
3. Maintaining maximum inventory levels
4. Producing standardized products

(Ans:c)

 

5. The following assumptions are made in case of break even analysis, except

1. All fixed costs are fixed
2. All variable costs are fixed
3. The prices of input factors are constant
4. Volume of production and volumes of sales are equal

(Ans:b)

 

6.  The breakeven point is obtained at intersection of

1. Total revenue and Total cost line
2. Total cost and variable cost line
3. Variable cost and fixed cost line
4. Fixed cost and total cost line

(Ans:a)

 

7.  Margin of safety is equal to

1. Actual sales – Sales at Break even point
2. Actual sales + Sales at Break even point
3. Actual sales x Sales at Break even point
4. Actual sales / Sales at Break even point

(Ans:a)

8.  To increase margin of safety, the following measures can be taken

1. Increase in sales price
2. Increase the output
3. Reduce the fixed and variable costs

Which of the following is/are true?

1. Only i
2. i & ii
3. ii & iii
4. All of the above

(Ans:d)

 

9.  Angle of incidence is the angle at which

1. Total revenue line intersects the total cost line
2. Total cost line intersects the variable cost line
3. Variable cost line intersects fixed cost line
4. Fixed cost line intersects total revenue line

(Ans:a)

 

10. Contribution per unit is equal to

1. Selling price per unit – variable cost per unit
2. Selling cost per unit + variable cost per unit
3. Selling cost per unit x variable cost per unit
4. Selling cost per unit / variable cost per unit

(Ans:a)

 

11.  The quantity required to have desired profit is

1. (Fixed cost + Desired profit)/Contribution per unit
2. (Fixed cost – Desired profit)/Contribution per unit
3. (Fixed cost x Desired profit)/Contribution per unit
4. Fixed cost / (Desired profit x Contribution per unit)

(Ans:a)

12. An industry is selling a product for Rs. 10 per unit. The fixed cost for assets is Rs. 40000 with variable cost of Rs. 6 per unit. How many units should be produced to break even?

1. 8,000
2. 10,000
3. 12,000
4. 14,000

(Ans:b)

 

13.  The data for an industrial unit is as follow:

Fixed costs of assets = Rs. 20,000

Sales price per unit = Rs. 8

Variable cost= Rs. 60,000

Contribution for 6000 units = Rs. 12,000

The sales volume for breakeven is

1. 8,000
2. 10,000
3. 12,000
4. 14,000

(Ans:b)