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Test answers for Management Accounting 2016

(210, CL) Last updated: January 27
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210 Answered Test Questions:

1. What is net profit if the contribution margin was $100,000  fixed costs were $60,000 and variable costs were $30,000?

Answers:

• $10,000

• $40,000

• $100,000

• $30,000

• $70,000

2. Which of the following businesses would generally use job/order costing rather than process costing?

Answers:

• Manufacturing bags of cement

• Building houses

• Baking bread

• Manufacturing instant coffee

• Manufacturing canned fruit

3. True or False: Payback period in capital budgeting refers to the period of time required for the return on an investment to "repay" the sum of the original investment.

Answers:

• True

• False

4. Which of the following is more a management accounting function than a financial accounting function?

Answers:

• Tax accounting

• Financial statement preparation

• Cost accounting

• Auditing

• Statutory compliance

5. The time value of money primarily focuses on ...?

Answers:

• accrual net income.

• accounting net income.

• current earnings.

• future cash flow predictions.

• earnings per share.

6. Which of the following is more the management accounting function than a financial accounting function?

Answers:

• It is focused on producing the balance sheet and income statement

• The central outputs are audited financial statements

• The information produced is not made public and is used for internal decision making only

• The information produced allows outsiders to judge the overall past performance of a business

• It is focused on producing a limited set of specific prescribed financial statements in accordance with generally accepted accounting principles

7. A Learning curve shows that as experience increases the amount of time taken to perform a function ________.

Answers:

• experience has no link with time

• increases

• remains the same

• none of these

• decreases

8. Variable costs do NOT include:

Answers:

• direct materials

• rent

• direct labor

• variable manufacturing overhead

9. Indirect costs that cannot be easily and economically traced to a finished product are known as ....?

Answers:

• material costs

• factory overheads

• labor costs

• service costs

• product costs

10. Partly finished goods that a manufacturer may have on hand at the end of an accounting period is known as ...?

Answers:

• Work in progress

• Merchandise inventory

• Material on hand

• Finished goods

11. True or False: Just in time (JIT) is a production strategy that strives to improve a business return on investment by reducing in-process inventory and associated carrying costs.

Answers:

• True

• False

12. If a product cost $50 and the required mark-up was 50%, what would the selling price be?

Answers:

• $25.00

• $250.00

• $100.00

• $52.50

• $75.00

13. Costs that cannot be easily or economically traced accurately to the final product are known as ...?

Answers:

• Manufacturing costs

• Service costs

• Product costs

• Indirect costs

• Direct costs

14. Net present value (NPV) is best defined as:

Answers:

• The difference between the present value of cash inflows and the present value of cash outflows

• The difference between cash out flow and inflow

• The different between the cash inflow and present value of cash outflow

15. What is the name given to the difference between the actual cost of a product's inputs and the standard cost of one of the product's inputs?

Answers:

• Difference

• Variance

16. The management accounting function produces a variety of financial reports set by the needs of management.

Answers:

• False

• True

17. A company makes computers. Which one of the following is likely to be a Variable Cost?

Answers:

• The salary of the factory manager

• Salary of the Admin manager

• Salary of the accounts manager

• The wages of shop workers paid by piece rate

• The salary of the managing director

18. Should a project be accepted if the NPV is -632?

Answers:

• No - The project should not be accepted

• Yes - The project should be accepted

19. Which of the following costs would NOT be an element of product (manufacturing) costs?

Answers:

• Factory overhead costs

• Labor costs

• Material costs

• Financial costs

20. Which of the following would NOT be a labor-related cost?

Answers:

• Depreciation on staff cafeteria equipment

• Workers accident insurance

• Long-service leave

• Payroll taxes

• Holiday leave

21. True or False: In calculating the cash flow in capital budgeting, depreciation is added back in the net profit to arrive at the cash flow figure.

Answers:

• False

• True

22. Which option below correctly completes the statement: Involvement in the budgeting process should _____.

Answers:

• include the management and the people responsible for achieving the budgeted outcomes

• never include people below tactical level management

• be restricted to top-level management

• be open to everyone in the organisation who thinks they have some good ideas

• be restricted to qualified accountants

23. What order of inventory classification best describes  the manufacturing process?

Answers:

• None of these

• work in Process- Finished Goods

• Raw material- Finished Goods work in process

• Raw material-Work in process- Finished Goods

24. True or False: BOTH variable and fixed manufacturing overhead are included in the Absorption Costing Method

Answers:

• False

• True

25. Complete the sentence - Perpetuity is the annuity that lasts...?

Answers:

• 5 years

• 3 years

• 10 years

• Forever

• 1 years

26. What is a hurdle rate?

Answers:

• Bank interest rate is also called the hurdle rate.

• The rate which company earns after investing in Stock Exchange in securities.

• In capital budgeting, hurdle rate is the minimum rate that a company expects to earn when investing in a project.

27. Which of the following is an example of qualitative data ...?

Answers:

• customer satisfaction

• net worth

• product cost

• inventory cost

• net income

28. Sunk cost is best defined as...

Answers:

• a cost which remains fixed

• a cost which is incurred due to increase in the volume of production

• the cost which has already been incurred in the past any future or present action could not affect it

• a cost which will incurred in the future

• a cost which changes due to volume

29. The appropriate and careful selection of financial resources results in ...?

Answers:

• improvement in the brand image

• increased production

• more efficient work groups

• greater profitability

• a higher skilled workforce

30. If the profitability index of the project is greater than 1 then this project should be...?

Answers:

• NOT accepted

• Accepted

31. The project with shorter payback period should be...

Answers:

• Not accepted

• Accepted

32. True or False: Actual Costing is the system of costing in which actual cost incurred during the period is charged to the product.

Answers:

• False

• True

33. The project should be accepted if NPV of the Cash flow is...

Answers:

• Positive

• 0

• Negative

• 1

34. Working capital is ...?

Answers:

• money held on the business premises

• current assets less current liabilities

• cash at bank

• the total of all the investments of the business

• all the assets of the organisation

35. True or False: In variable costing, variable costs are considered for product costing inventory valuation and other allied management decisions.

Answers:

• True

• False

36. Which of the following would NOT be classified as a production department?

Answers:

• painting

• stores

• assembly

• machining

37. Manufacturing costs typically consist of ...?

Answers:

• production and shipping costs

• direct materials, direct labor, marketing and administrative costs

• direct materials, direct labor, and manufacturing overhead

• production and marketing costs

• direct materials, direct labor, and administrative costs

38. The break-even point is the level of sales that ....?

Answers:

• is exactly equal to the fixed costs

• ensures a sustainable net profit

• will result in no profit or loss.

• meets the expected sales target

• is needed to pay the bank loans

39. Which of the following is not considered to be an appropriate form of finance for capital investment projects?

Answers:

• Issuance of share capital

• Bank overdraft

• Leasing

• Issue of debenture

40. True or False: Setup cost is an example of a batch-level cost.

Answers:

• False

• True

41. True or False: In zero base budgeting, each item is redefined from zero instead of using last year's budget as a base.

Answers:

• True

• False

42. Product and service costing information is prepared for...

Answers:

• merchandising companies

• all of these

• service providers

• manufacturing companies with inventory

• manufacturing companies without inventory

43. If marginal costing toal sales is $10000, total variable cost is $5000, and total fixed cost is $2500, what will the profit be?

Answers:

• 4500

• 8500

• 5000

• 7500

• 2500

44. A company is considering building a factory in Lahore. Which one of the following is a sunk cost to the decision?

Answers:

• None of these.

• The wages rate of the workers

• The business rates of the factory

• The cost of the investigation so far

45. True of False: A general rule for profit maximization in the short run is: If the additional revenues exceed the additional expenses, do it.

Answers:

• True

• False

46. Which of the mentioned payroll cost(s) represent direct labor?

Answers:

• Hourly pay to factory Cleaning employees

• Hourly pay to production employees and Salaries to production managers

• Hourly pay to security employees

• Hourly pay to administrative employees

47. True or False: While depreciation does not result in a payment of cash, tax depreciation does reduce the cash payments for income taxes.

Answers:

• True

• False

48. True or False: Activity-based costing can be used to allocate SG&A expenses in order to assist management with pricing and other marketing decisions.

Answers:

• False

• True

49. The project should be accepted if its Profitability index is greater then

Answers:

• 1

• 2

• 4

• 0

• 3

50. The Discounted Payback Period is the length of time required for an investment's discounted cash flows to equal its initial cost. True or False?

Answers:

• True

• False

51. True or False: The standard cost of direct materials is the cost the manufacturer should have used to make the good output.

Answers:

• True

• False

52. True or False: If a company requires a profit of $30,000 (instead of breaking even), the $30,000 should be combined with the fixed expenses in order to compute the point at which the company will earn $30,000.

Answers:

• False

• True

53. Which of the following is NOT a type of internal benchmark?

Answers:

• Pareto Diagrams

• Government economic indicators

• Control charts

• Cause and Effect (fishbone) diagram

54. What is the most important purpose of a balanced scorecard?

Answers:

• develop cause-and-effect linkages

• develop strategy

• Measure performance

• set priorities

55. Opportunity cost in management accounting is best described as ...?

Answers:

• The economic value of what is given up when a person chooses one option over another.

• The economic value derived from the chosen opportunity

• The amount of money required to invest in an opportunity

• The cost of analyzing various opportunities.

• All the financial and non-financial costs in relation to sourcing and trialing new opportunities.

56. Which statement best describes the current role of the managerial accountant?

Answers:

• Managerial accountants prepare the financial statements for an organization.

• Managerial accountants facilitate the decision-making process within an organization.

• Managerial accountants make the key decisions within an organization.

• Managerial accountants are primarily information collectors.

• Managerial Accountants are solely staff advisors in an organization.

57. Which one of the following statements about budgeting is NOT true?

Answers:

• Budgeting is an executive responsibility.

• Budgeting helps managers determine the resources needed to meet their goals and objectives.

• The focus of budgeting is planning.

• Budgeting is a key ingredient in good decision-making.

• Budgeting is a bookkeeping task.

58. Which of the following is a monetary objective rather than a non-monetary objective?

Answers:

• to reduce product delivery times to customers

• to reach a targeted % occupancy rate for a hospital

• to conduct a specific number of inspections per shift

• to achieve a targeted return on investment

• to increase the production output per employee

59. Marginal cost is:

Answers:

• The cost of one extra unit produced

• The variable cost of units

• The fixed cost of units

• None of these

60. The time value of money focuses on:

Answers:

• cash flow

• net income

• current earnings

• earnings per share

61. True or False: The value of inventory under full costing is higher then variable costing.

Answers:

• True

• False

62. The most likely strategy to reduce the breakeven point would be to:

Answers:

• increase both fixed costs and the contribution margin

• increase fixed costs and decrease the contribution margin

• Decrease fixed costs and increase the contribution margin

• decrease both fixed costs and the contribution margin

63. True or False: Decreasing a company's fixed expenses should reduce the break-even point.

Answers:

• True

• False

64. Which of the following reports would be a produced under the management accounting function rather than the financial accounting function?

Answers:

• Balance sheet

• Variance report

• Equity Statement

• Notes to the financial statements

• Income Statement

65. What is the formula for the contribution margin?

Answers:

• sales - expenses

• fixed cost - variable cost

• sales - fixed costs - variable costs

• sales - fixed cost

• sales - variable costs

66. True or False: Depreciation Expense is a negative cash flow that needs to be discounted.

Answers:

• False

• True

67. If sales are 100,000 variable costs are 40,000 and fixed costs are 10,000, what is contribution margin?

Answers:

• 50,000

• 60,000

• 40,000

• 90,000

• 30,000

68. True or False: Activity based costing is recommended for the allocation of SG&A expenses in order to determine the true profitability of a product or a customer.

Answers:

• False

• True

69. A subsidiary ledger containing only those accounts related to manufacturing costs is known as ....?

Answers:

• Accounts payable ledger

• Branch ledger

• Accounts receivable ledger

• Fixed assets schedule

• Factory ledger

70. If production increases, fixed cost per unit...

Answers:

• remains the same

• decreases

• increases

71. The comprehensive budget that covers all the activities of the organisation and which integrates the individual budgets that cover each of the subsidiary functions, is known as the ...?

Answers:

• cashflow budget

• master budget

• sales budget

• capital expenditure budget

• operating expenses budget

72. True or False: Depreciation Expense can be ignored when computing the accounting rate of return.

Answers:

• False

• True

73. Under responsibility accounting, the bottling plant of a soft drink company will most likely be treated as .....?

Answers:

• a revenue center

• a cost center

• a profit center

• an investment center

74. Which cost remains constant in total, but vary per unit?

Answers:

• product costs

• period costs

• variable costs

• fixed costs

75. Sale is 100, variable cost is =? ,fixed cost is 20, profit is 25, what will the variable cost be using marginal costing?

Answers:

• 65

• 75

• 45

• 55

• 35

76. You are given the cost/volume information below: 1 unit/$ 15, 10 units/$150, 100 units/$1500. What type of a cost is being described?

Answers:

• rent cost

• mixed cost

• variable cost

• fixed cost

• step cost

77. The profit center's revenues and expenses are held separate from the main company's in order to determine their profitability?

Answers:

• True

• False

78. What is the equation to calculate a difference in variance analysis?

Answers:

• Standard = Actual - Difference

• Standard + Actual = Difference

• Standard = Actual + Difference

• Standard - Actual = Difference

79. True or False: Break-even analysis is useful for companies that sell products, but it is not useful for companies that provide services.

Answers:

• True

• False

80. A budget that is continuously updated by adding a new incremental period and dropping off the period just completed, is known as ...?

Answers:

• a rolling budget

• an operating budget

• a period budget

• a master budget

• a static budget

81. SG&A is the acronym for ...?

Answers:

• Special Goals And Aims

• Special Goods And Assets

• Selling, General And Accounting

• Selling, Goods And Accruals

• Selling, General And Administration

82. The contribution margin (CM) is calculated by deducting all the .................... costs from sales?

Answers:

• Fixed

• Discretionary

• Variable

• Prime

• Conversion

83. A company can accelerate its cash receipts by all of the following except:

Answers:

• selling receivables to a factor

• accepting national credit cards for customer purchases

• offering discounts for early payment

• writing off receivables

84. Which is the correct set of equations for cost objects?

Answers:

• prime costs = direct materials + manufacturing overhead, conversion costs = direct labor + direct materials

• prime costs = direct labor + manufacturing overhead, conversion costs = direct labor + direct materials

• prime costs = direct labor + direct materials, conversion cost = direct labor + manufacturing overhead

85. Which of the following is the best example of discretionary cost?

Answers:

• Advertising, Research

• Research, Rent of Building

• Depreciation, Advertising

• Deprecation, Rent of building

86. Fixed Expense + Target Income / Unit of Contribution Margin is the formula for:

Answers:

• Sale volume in Dollars Required to earn target income

• None of these

• Purchase volume in units required to pay target expense

• Sale volume in units required to earn target income

87. Contribution Margin/Net Income is the formula for

Answers:

• Operating leverage

• Break even point

88. Fixed expense+target income /Contribution margin ratio  is the formula of

Answers:

• Sales volume in dollars required to earn target income

• Sales volume in units require to earn target in income

89. Using Variable costing .IF fixed cost is 2500, variable cost is 3500, profit is 2000, what will be the sales price?

Answers:

• 5000

• 8000

• 7000

• 2500

• 9000

90. True or False: If a company has mixed expenses, the fixed component can be combined with the company's fixed expenses and the variable component can be combined with the company's variable expenses.

Answers:

• False

• True

91. What is the difference between break even sales and break even per units?

Answers:

• In break even sale Fixed Cost is divided by Contribution margin ratio ,And in Break even per unit fixed cost is divided by unit contribution margin.

• BE sales uses fixed costs BE units uses variable costs

• No difference

• CM Ratio is for break even units and CM Unit is for break even sales

• BE units uses fixed costs and BE sales uses variable costs

92. Break-even analysis assumes that over the relevant range:

Answers:

• Unit revenues are nonlinear

• Unit variable costs are unchanged

• Total fixed costs are nonlinear

• Total costs are unchanged

93. How do you calculate the break even point?

Answers:

• fixed costs ?? variable costs

• variable costs ?? fixed costs

• fixed cost ?? sales

• fixed cost ?? contribution margin ratio

• sales ?? variable costs

94. Which of the following alternatives is generally chosen from a cost-benefit analysis? The one that shows the ...

Answers:

• highest benefit, regardless of the cost

• lowest benefit to cost ratio

• highest cost to benefit ratio

• lowest cost to benefit ratio

• highest benefit to cost ratio

95. If profit is 10000 Dollars ,and fixed cost is 25000 Dollars ,and variable cost is 40000 dollars what will be the sales price?

Answers:

• 65000 dollars

• 70000 dollars

• 85000 dollars

• 75000 dollars

• 80000 dollars

96. Which of the following factors is irrelevant when using the payback method?

Answers:

• The incidence of cash flows arising from the project

• Cash flow arising from the project

• Depreciation of the initial asset acquired

• Initial investment

97. True or False: The original cost of an asset presently in use is generally not relevant in the decision to replace the asset.

Answers:

• False

• True

98. If sales were $100,000, contribution margin $60,000 and fixed costs $30,000: What would the variable costs be?

Answers:

• $90,000

• $10,000

• $40,000

• $30,000

• $70,000

99. Management by exception means ...?

Answers:

• that management can concentrate on significant matters that require attention

• that management provides different reports for different stakeholders

• that management can concentrate on investigating areas not included in the reports

• that management can report in a no-fault environment

• that management can delegate all responsibilities

100. What is the formula for breakeven?

Answers:

• Fixed costs ?? contribution margin %

• Fixed costs ?? gross profit %

• Variable cost ?? contribution margin %

• Total costs ?? contribution margin %

• Fixed cost ?? net profit %

101. If profit under absorption costing is 4000, and profit under  variable costing is 2000, and contribution margin is 5000 under variable costing, what will be the OPERATING LEVERAGE?

Answers:

• 4

• 4.5

• 3

• 2.5

• 2

102. If sales were $100,000, variable costs $70,000 and fixed costs $10,000: What is contribution margin?

Answers:

• $70,000

• $30,000

• $100,000

• $20,000

• $90,000

103. Which of the following statements regarding graphs of fixed and variable costs is true?

Answers:

• Fixed and Variable costs are curvilinear form above zero on the ???Y??? axis.

• Variable costs are zero when production is equal to zero.

• Fixed costs are zero when production is equal to zero.

• Variable costs can be represented by a straight line where costs are the same for each data point.

• Fixed costs can be represented by a straight line starting at the origin and continuing through each data point.

104. How do you calculate the Contribution Margin?

Answers:

• variable costs - sales

• fixed costs - sales

• sales - variable costs

• sales - fixed costs

• sales - (variable costs + fixed costs)

105. True or False: Activity based costing is considered to be a traditional costing method.

Answers:

• True

• False

106. Which of the following is NOT generally treated as a fixed cost in management accounting?

Answers:

• Direct materials

• Rent

• Depreciation on equipment

• Property rates

• Management salaries

107. True or False: If a company's sales were to triple, some fixed expenses are likely to increase.

Answers:

• True

• False

108. How do you calculate the breakeven point in monetary value?

Answers:

• sales - variable costs

• variable costs ?? contribution margin ratio

• fixed costs ?? sales

• variable costs ?? sales

• fixed costs ?? contribution margin ratio

109. How do you calculate breakeven in units?

Answers:

• variable costs ?? contribution margin per unit

• variable costs ?? unit sales

• fixed costs ?? variable costs

• fixed costs ?? unit sales

• fixed costs ?? contribution margin per unit

110. Which of the following BEST describes target costing?

Answers:

• Setting a cost by adding desired profit margin from a competitive market price

• None of these

• Setting a cost by subtracting a desired profit margin from a competitive market price

• Setting standard cost for the purpose of target customer

111. Breakeven $ is calculated by which formula?

Answers:

• 'Total costs' ?? 'Contribution margin ratio'

• 'Fixed costs' ?? 'Contribution margin ratio'

• 'Variable costs' ?? 'Contribution margin ratio'

• 'Fixed costs' ?? 'Variable cost %'

112. How do you calculate the margin of safety?

Answers:

• sales - fixed sales - break even sales

• sales - variable costs

• sales - break even sales

• break even sales - sales

• sales - fixed costs

113. How to you calculate breakeven in sales?

Answers:

• contribution margin ?? fixed costs

• fixed costs ?? contribution margin ratio

• variable costs ?? contribution margin ratio

• variable costs ?? sales

• fixed costs ?? sales

114. At the breakeven point, the contribution margin equals the total of the  .........?

Answers:

• sales revenues

• selling and administrative costs

• fixed costs

• variable costs

115. Net terminal value is=

Answers:

• All of these

• value after payment of capital payment

• Repayment of capital payment + interest due on it or surplus arising after the repayment of capital amount with interest

• value after payment of interest amount

116. Out of pocket cost requires

Answers:

• expenditure of fixed cost

• expenditure of variable cost

• cash expenditure

• None of these

117. The Scattergraph method is...

Answers:

• none of these.

• relatively less accurate method of analyzing mixed cost than the high and low method.

• not an accurate method of analyzing mixed cost than high and low method

• a more accurate method of analysing mixed costs than the high-low method

118. Which of the following is NOT generally identified as a reporting center under responsibility accounting?

Answers:

• cost center

• revenue center

• profit center

• equity center

• investment center

119. How do you calculate the Margin of Safety?

Answers:

• total sales - variable costs

• total sales - break even sales

• total sales - fixed costs

• fixed costs - variable costs

• break even sales - fixed costs

120. The best example of committed cost is...

Answers:

• Depreciation, Research

• Advertising, Rent of building

• Advertising, Research

• Depreciation, Rent of building

121. The difference between the budgeted sales and the break-even sales, is known as ....?

Answers:

• the margin of safety

• the contribution margin

• the gross profit margin

• the actual variance

• the margin call

122. Under responsibility accounting, reports that show the budget and actual figures along with the variances that may arise, is known as ......?

Answers:

• cost/benefit analysis reports

• statutory reports

• performance reports

• compliance reports

• financial statements

123. Which of the following specialist information systems is management accounting least engaged?

Answers:

• Cost accounting

• Operational budgets

• Material requirement planning

• Management information system

• Double-entry bookkeeping system

124. In a "Cost of Quality" report, which of the following is a nonconforming cost, as opposed to a conforming cost?

Answers:

• Internal Costs

• External failure reworking costs

• Prevention Costs

• Appraisal costs

125. If the selling price was $100 per unit, the variable cost was $50 per unit and the fixed cost was $10,000 what would be the sales break even point in units?

Answers:

• 500

• 400

• 100

• 200

• 300

126. Malik makes plastic windows and doors. Which one of the following is likely to be a Fixed Cost?

Answers:

• The labor cost of assembly

• Non of these

• The cost of heating the factory

• Sales commission

• All of these

127. A business sells a product for $30 per unit. The variable cost of production per unit is $18 and the fixed cost has been calculated at $8 per unit. The contribution per unit is ...?

Answers:

• $8

• $4

• $22

• $12

• $30

128. In capital budgeting using profitability index if Npv of the cash flow is 2000, and initial investment is 2500, what will be the profitability index?

Answers:

• 1.25

• .825

• .85

• .8

• 2.25

129. Which of the following is NOT a job or process costing used in management accounting?

Answers:

• Joint or by-product costing

• Job/order costing

• Process costing

• Accumulation costing

• Operation costing

130. The contribution margin is calculated by ...?

Answers:

• deducting all fixed costs from sales

• deducting all costs from sales

• deducting variable costs from total costs

• deducting variable costs from gross profit

• deducting all variable costs from sales

131. Which of the following correctly completes the statement? "As production increases within the relevant range ..."

Answers:

• fixed and variable cost stay the same in total.

• variable costs will vary in total.

• none of the other four answers is true.

• variable costs will vary on a per unit basis.

• fixed costs will vary in total.

132. If a budgeted expense for the month was $100 and the actual was $110, the variance would be ....?

Answers:

• +10% and favorable

• +10% and unfavorable

• -10% and unfavorable

• +9.09% and unfavorable

• +110% and favorable

133. What is the flow of costs after direct materials, direct labor and manufacturing overhead is utilized?

Answers:

• work in process, cost of goods sold, finished goods

• cost of goods sold, finished goods, work in process

• Work in Process, finished goods, cost of goods sold

• finished goods, work in process, cost of goods sold

134. True or False: The most relevant amounts for making a decision are found in the general ledger.

Answers:

• True

• False

135. True or False: A project whose future cash flows are discounted by 10% will have a larger net present value than the same cash flows discounted by 8%.

Answers:

• False

• True

136. Which one of the following is a Period Cost?

Answers:

• Direct labor

• Fixed Overhead

• Raw material

• Variable Overhead

137. If the selling price was $200 and the cost price was $100, what is the Gross Profit %?

Answers:

• 100%

• 25%

• 33.33%

• 50%

• 10%

138. Definition of  cost accounting

Answers:

• The establishment of budget standard cost and actual cost of operation process activities or products and the analysis of the variance profitability or the social use of funds.

• cost accounting deals in cost of the products,like raw material ,labor and Factory overhead

• all of the above

• Cost accounting deals in the cost of producing the good

• none of the above

139. Which of the following does NOT describe 'Backflush Costing'?

Answers:

• A product costing system that requires detailed tracking of costs throughout the production process

• A product costing system generally used in a just-in-time inventory environment or where inventory is kept at a minimum.

• A costing system that delays recording changes in the status of a product being produced until good finished units appear

• A product costing system that usually eliminates separate accounting for work-in-process

• A product costing system also called delayed costing, endpoint costing or post-deduct costing.

140. A company wishes to evaluate a division which has the following extracts from income statement and statement of financial position. Income statement: $???000 Sales 500 Gross profit 200 Net profit 120 Statement of financial position: $???000 Non current assets 750 Current assets 350 Current liabilities (450) Net assets 650 What is the residual income for the division if the company has a cost of capital of 18%?

Answers:

• 1,000

• 3,000

• 4,000

• 5,000

• 2,000

141. Managment accounting is LEAST concerned with which of the following?

Answers:

• Preparing financial reports for future periods.

• Preparing financial statements for prior periods.

• decisions about the day to day operations of a business.

• Internal controls.

• focusing on particular products and cost centers

142. Which component is included in BOTH prime and conversion costs?

Answers:

• factory overhead

• direct labor

• direct materials

143. Which of the following would NOT be a feature of 'bottom up' budgeting?

Answers:

• greater involvement by staff at all levels

• management only provide structural budgetary guidelines

• budget outcomes are more flexible and less ridged

• determined by senior management

• goals are generally more realistic

144. A company used the net present value method for evaluating a project. The project requires an immediate cash outlay of $950,000. The company discounted the cash flows by 16% and determined that the net present value of the project was a negative $600. From this information it is likely that the project...

Answers:

• had positive internal rate of return

• had negative internal rate of return

• had an internal rate of return that was slightly LESS than 16%

• had an internal rate of return that was slightly Greater than 16%

145. What expenses are NOT included in fixed factory overhead?

Answers:

• indirect labor

• insurance and taxes

• depreciation

• fringe benefits

• freight in

146. if ending inventory under absorption costing is 2500, and under variable costing is 1000 what is the difference between the profit under variable costing and absorption costing?

Answers:

• The profit under absorption costing will be lower 1500 from variable costing

• The profit under variable costing will be same

• The profit under variable costing will be higher 1500 from absorption costing

• The profit under absorption costing will be higher 1500 from variable costing

147. True or False: Selling expenses should be allocated to the cost of goods sold for external financial reporting.

Answers:

• True

• False

148. 'Relevant range' in budgeting and cost accounting relates to the:

Answers:

• the types of expenses

• the number of projects

• the number of accounts

• the range of inventory valuation methods

• the span of activity

149. In management accounting the terms 'cost' and 'expense' can be accurately used interchangeably?

Answers:

• True

• False

150. A budget where past information is not considered relevant for future decisions, is known as a ...?

Answers:

• master budget

• continuous budget

• program budget

• global budget

• zero-sum budget

151. Which of the following bases is a volume-based cost driver in relation to applying overheads?

Answers:

• number of inspections

• number of materials requisitions

• actual units made

• number of set-ups

• number of design change orders

152. The costs involved in converting raw materials into finished products is known as ...?

Answers:

• Fixed costs

• Conversion costs

• Prime costs

• Direct manufacturing costs

• Variable costs

153. Which of the following specifically describes an 'expense' rather than a 'cost'?

Answers:

• it is the monetary value that was used up in the generation of revenue for an accounting period

• it is the sacrifice of resources where we cease to have the ability to use that resource to buy something else.

• it is a measured value that includes unused economic benefit

• it is the amount of cash or cash equivalents paid to initially acquire an asset

154. A system whereby actual results for each sub-unit is an organisation is measured against budgets and significant differences investigated, is known as...?

Answers:

• financial accounting

• responsibility accounting

• bookkeeping

• cost accounting

• tax accounting

155. In ABC the assumption is that __________________ use resources or cause costs.

Answers:

• Products

• Indirect cost

• Direct cost

• All of the above

• Activites

156. According to full costing method, if cost of sale is 800, Gross profit is 200, and variable cost is 400, what is the contribution margin?

Answers:

• 300

• 400

• 700

• 200

• 600

157. Which of the following is NOT a prime cost in management accounting?

Answers:

• Job subcontracting costs

• Direct labor

• Factory overhead costs

• Direct materials

158. Royalties paid are which type of cost?

Answers:

• Semi-variable

• Fixed

• Variable

159. Which of the following correctly completes the statement: Capital budgets are ...?

Answers:

• prepared for operational activities

• prepared for the acquisition of capital items

• prepared for production activities

• only prepared by the top-level management

• the detailed capital investments of the owners

160. Which of the following is NOT used as a treatment of fixed manufacturing costs in management accounting?

Answers:

• Absorption costing

• Margin costing

• Direct costing

161. Engineered cost is best defined as:

Answers:

• Cost that does not have clear relationship between the input and output of that process

• Cost that is related to the newest technology used in the production

• Cost that has a clear relationship between the input and output of that process

162. Which of the following cost classification methods is not relevant in decision-making?

Answers:

• Direct and Indirect Cost

• Avoidable and unavoidable cost

• Fixed and variable cost

• Controllable an Uncontrollable cost

163. What is the ideal transfer price that would satisfy both the supplying and receiving segment?

Answers:

• Variable price plus profit

• Fixed price plus variable price

• opportunity cost plus the Standard variable cost

• Market price

164. If sale is 1000, fixed cost is 200, and profit is 500, what is contribution margin ratio?

Answers:

• 30%

• 50%

• 80%

• 40%

• 70%

165. The accumulation of the costs incurred in buying and/or making inventory items is known as ....?

Answers:

• Service costs

• Overheads

• Product costs

• Direct costs

• Merchandising

166. Which of the following bases is more an activity-based cost driver rather than a volume based cost driver in relation to applying overheads?

Answers:

• materials cost

• machine hours

• number of inspections

• actual units made

• direct labor costs

167. What is the formula for operating leverage?

Answers:

• contribution margin / fixed expense

• Contribution margin/net income

• Contribution margin/variable expense

• net income / contribution margin

168. A company has a capital employed of $200,000. It has a cost of capital of 12% per year. Its residual income is $36,000 What is the company???s return on investment?

Answers:

• 20%

• 40%

• 10%

• 30%

• 50%

169. Rolling budgets are useful when

Answers:

• Future events can be forecast ed with assurance

• All of the above

• Future events can be forecast reliably

• Non of the above

• Future event cannot be forecast reliably

170. Which of the following businesses would generally use process costing rather than job/order costing?

Answers:

• Manufacturing cars

• Dressmaking to order

• Public accountants

• Renovating kitchens

• Quick printing/photocopying service

171. NIFO (Next-In First-Out) is an inventory valuation system where the cost of sale of the item is based on ...?

Answers:

• the cost flow based on a weighted average of unit costs

• the cost flow on the chronological order purchases are made

• the cost flow in a reverse chronological order

• the cost to replace it rather than on historical cost.

• the estimated selling price less any expense incurred to dispose of the good

172. When more factory overheads are incurred than have been applied to the product costing, it is known as...?

Answers:

• under-applied overhead

• over-applied overhead

• under-utilized assets

• depreciation

• amortization

173. Which of the following would NOT be treated as a period cost in management accounting?

Answers:

• Selling and distribution costs

• Audit and accounting fees

• Interest and finance costs

• Marketing costs

• Material costs

174. Which of the following would NOT be a reason for setting up a standard cost system?

Answers:

• for management control of costs

• for inventory valuation

• for motivation of employees

• for financial statement auditing purposes

175. In throughput accounting if the sale is 100, fixed cost is 25, and variable material cost is 45, what is throughput ?

Answers:

• 55

• 60

• 30

• 75

• 45

176. Which of the following models for evaluating capital expenditures considers the time value of money by discounting the future cash flows?

Answers:

• Internal Rate of Return

• Accounting rate of return

• Payback period

• Net present value

• Profitability Index

177. In a manufacturing overhead variance, which is excluded from a two-way variance, as opposed to a three-way?

Answers:

• spending variance

• volume (uncontrollable) variance

• budget (controllable) variance

178. If  contribution margin is 10000 and fixed expense is 8000, net income is 2000 what is OPERATING LEVERAGE?

Answers:

• 80%

• 20%

• 5

• 6

• 4

179. A manufacturing company benchmarks the performance of its accounts receivable department with that of a leading credit card company, what type of benchmarking is the company using?

Answers:

• None of these

• Functional benchmarking

• Internal benchmarking

• Continuous benchmarking

• External benchmarking

180. Goal congruence best describes as

Answers:

• Employees working in their own personal interest help to meet the overall goal of the organization

• Employees working in the organization's interest help to meet the overall goal of the organization

• Employees working in the management's interest

• All of these

181. Find EVA (ECONOMIC VALUE ADDED) if operating profit is 10000, weighted averege cost of capital is 12%, and operating assets are 75000.

Answers:

• 8500

• 9500

• 1000

• 12000

• 7500

182. A cost classification that identifies the degree to which a cost can be changed in the short term is known as ...?

Answers:

• Discretionary costs

• Historical costs

• Conversion costs

• Prime costs

183. Which of the following should you use 'process costing' rather than 'job/product' costing?

Answers:

• building yachts to customer specifications

• law firms cases

• accounting firm audit work

• Brick and tile manufacturing

• producing movies

184. Which of the following asset accounts is NOT used to record and capture the flow of manufacturing costs?

Answers:

• Materials control

• Finished goods

• Cost of Goods Sold

• Work in progress

185. Which of the following is *NOT* a benefit likely to arise from the implementation of a ???just in time??? cost approach?

Answers:

• Reduction in the inventory carrying cost

• A reduction in production delays as a result of ???stockouts???.

• Reduction in the ordering cost

• Reduction in the inventory handling cost

186. Operating Leverage Indicates

Answers:

• how for an organization used historical cost for the period

• how for an organization used current cost for the period

• how for an organization used variable cost for the period

• how for an organization used fair cost for the period

• how for an organization used fixed cost for the period

187. Total fixed costs 150000; contribution margin 60% of revenue per unit; unit price 125; What is break even in units?

Answers:

• 2000

• 250,000

• 2500

• 1200

• cant be determined

188. Internal rate of return is the rate of return at which net present value becomes?

Answers:

• 1

• negative

• 0

• positive

189. Which of the following is considered a financial statement budget?

Answers:

• Purchasing budget

• Capital expenditure budget

• Trading account budget

• Sales budget

• Production budget

190. The total asset turnover ratio is calculated by which formula?

Answers:

• Net Annual Sales ?? Total assets

• Total assets ?? Cost of good sold

• Cost of sales ?? Total assets

• Total assets ?? Net Annual Sales

191. Which one of the following is not a technique used for capital investment appraisal?

Answers:

• Accounting rate of return

• Capital budgeting.

• Net present value

• Payback method

• Discounted cash flow technique

192. True or False: A variable expense means that the per unit amount will vary with sales.

Answers:

• False

• True

193. What is break even point if profit is 10000,fixed cost is 25000, and the sale is 60000?

Answers:

• 41900

• 42860

• 45000

• 52000

194. If profit before tax is 10 000, taxation is 35%, and depreciation for the year is 1 000, what will the cash flow be?

Answers:

• 4 500

• 7 500

• 8 500

• 6 500

• 5 500

195. Which one of the following is not normally a characteristic of major capital expenditure projects?

Answers:

• The project is likely to involve considerable expenditure.

• The costs can be estimated with a fair degree of certainty.

• The project is an important part of a company???s strategic planning

• The benefits from the expenditure will rise over a number of years.

196. Which of the following is NOT a generally accepted method of valuing inventory for a business?

Answers:

• Standard cost

• Liquidation value

• FIFO

• Weighted average

• Specific identification

197. Which of the following costs is likely to be the minimum price charged for a special order?

Answers:

• Labor Cost

• Fixed cost

• Material cost

• Variable cost

• All of the above

198. True or False: If the net present value of a project is $0, the project should be rejected.

Answers:

• False

• True

199. Which of the following would be the appropriate cost driver for the cost Package and Wrapping?

Answers:

• staff hours worked

• pallets delivered

• kilometers traveled

• customers served

• machine hours worked

200. Job/order costing is used when there is a continuous production of similar products. True or false?

Answers:

• True

• False

201. Operating leverage shows...

Answers:

• how an organization used contribution margin

• how an organization used net profit for the period

• how an organization used fixed cost for the period

• how an organization used variable cost for the period

202. The factory overhead recovery rate is best set based on a ........ analysis?

Answers:

• weekly

• yearly

• fortnightly

• daily

• monthly

203. Total fixed cost 150000; CM 60% of revenue per unit; Price 125; What is break even in dollars?

Answers:

• 2500

• 120000

• 250000

• 1200

204. Eddy Corporation had net credit sales during the year of $800,000 and cost of goods sold of $500,000. The balance in receivables at the beginning of the year was $100,000 and at the end of the year was $150,000. What was the receivables turnover ratio?

Answers:

• 8.0

• 4.0

• 5.3

• 6.4

205. Which of the following expense groups is deducted from Gross Profit to calculate the Net Contribution Margin?

Answers:

• Variable administration and sales expenses

• Cost of Goods sold

• Fixed factory overheads

• Depreciation expense

• Fixed administration costs

206. Which of the following models does NOT use cash flows?

Answers:

• Accounting Rate of Return

• Internal Rate of Return

• Discounted Payback Period

• Net Present Value

• Profitability Index

207. The formula for material turnover ratio is...

Answers:

• Cost of sale / Avg Stock

• Material consumed / Avg Stock

• Gross Operating Profit / Average Operating Assets

• Sales / Avg Stock

• Average Operating Assets / Avg Stock

208. Which of the following is NOT a method used to allocate costs in management accounting?

Answers:

• Standard costing

• Activity-based costing

• Normal costing

• Indirect costing

209. Which of the following would NOT be classified as a service department in managerial accounting?

Answers:

• cafeteria

• stores

• repairs

• assembly

210. In variable costing or marginal costing if sale is 100 per unit, material cost 20 per unit, labour cost 10 per unit, variable overhead 10 per unit, fixed overhead 10 per unit, variable selling is expense 10 per unit, what will be the CONTRIBUTION MARGIN?

Answers:

• 60

• 50

• 80

• 70

• 40