Chapter 4 - Budgetary Control

1} A budgetary control system secures control over performance and costs in the different
parts of a business by?
By establishing budgets
By comparing actual attainments against the budgets
By taking corrective action and remedial measure or revision of the budgets, if
necessary
All of the above
2} _______ is a blue print of the projected plan of action expresses in quantitative terms and
for a specified period time?
Cost
Balance sheet
Budget
None of the above
3} What is the objective of budgetary control?
To reduce losses and waste to the minimum
To bring out clearly where effort is needed to remedy the situation
To see that the firm is not deflected from marching towards its long- term objectives
without being overwhelmed by emergencies
All of the above
4} ________ is statement defining functional representatives of executives responsible for
accomplishment of organizational objectives?
Budget center
Budget manual
Organization chart
Cost budget
5} _________ is a document which sets outstanding instructions governing the responsibilities
of persons and the procedures?
Budget period
Budget control
Budget manual
Budget center
6} _________ is described by CIMA London terminology as a factor which will limit the
activities of an undertaking and which is taken into account in preparing budgets?
Budgets reports
Budget key factors
Budget controller
None of the above
7} A static budget is useful in controlling costs when cost behavior is:
Mixed
Fixed
Variable
Linear
8} _______ is consolidated summary of the various functional budgets?
Principal budget
Master budget
Cash budget
All of the above
9} Flexible budget are prepared in which method?
Tabular method
Formula method
Graphic method
All of the above
10} At 9,000 direct labor hours, the flexible budget for indirect materials is Rs27, 000. If
Rs28,000 of indirect materials costs are incurred at 9,200 direct labor hours, the flexible
budget report should show the following difference for indirect materials:
1,000 unfavorable

1,000 favorable
400 favorable
400 unfavorable
11} Under responsibility accounting, the evaluation of a managers performance is based on
matters that the manager:
Directly controls
Directly and indirectly controls
Indirectly controls
Has shared responsibility for with another manager
12} __________ budgeting is a revolutionary concept of planning the future activities and
there is a sharp contradiction from conventional budgeting activities and there is a sharp
contradiction from conventional budgeting?
Concept budgeting
Zero base budgeting
Performance budgeting
None of the above
13} Responsibility centers include:
Cost centers
Profit centers
Investment centers
All of the above
14} Under responsibility accounting, the evaluation of a managers performance is based on
matters that the manager:
Directly controls
Directly and indirectly controls
Indirectly controls
Has shared responsibility for with another manager
15} At zero direct labor hours in a flexible budget graph, the total budgeted cost line
intersects the vertical axis at Rs30, 000. At 10,000 direct labor hours, a horizontal line drawn
from the total budgeted cost line intersects the vertical axis at RS 90,000. Fixed and variable
costs may be expressed
30,000 fixed plus 6 per direct labor hour variable
30,000 fixed plus 9 per direct labor hour variable
60,000 fixed plus 3 per direct labor hour variable
60,000 fixed plus 6 per direct labor hour variable
Chapter 5 - Cost Volume Relations
1} ____________ Analysis helps management in finding out the relationship of costs and
revenue to profit?
Break even
Cost volume profit
ABC analysis
None of them
2} A joiner charges customer Rs15 per hour, each hour incurring an estimated variable cost
of Rs6. Total fixed cost for next year is estimated at Rs6000 for clerical support and Rs3000
for rent of premises. What is the joiner's breakeven point?
10000
15000
22500
5000
3} A bakery has a margin of safety of 40% and estimated sales revenue of Rs70,000. What
is the bakerys breakeven point?
32000
42000
52000
62000

4} A business requires to sell 22 000 units in order to earn a target profit of Rs1,50,000. The
contribution per unit is Rs15.What is the businesss breakeven point?
15000
14000
10000
12000
5} A single product company has a contribution to sales ratio of 40%. Fixed costs amount to
Rs90 000 per annum. The number of units required to break even is?
3000
4500
5000
Impossible to calculate without further information
6} 66) H Limited manufactures and sells two products - J and K. Annual sales are expected
to be in the ratio of J: 1 K: 3. Total annual sales are planned to be Rs420 000. Product J has a
contribution to sales ratio of 40% whereas that of product K is 50%. Annual fixed costs are
estimated to be Rs120 000.The budgeted breakeven sales value (to the nearest Rs1000)?
196000
253000
255000
200000
7} _________ is the difference between the actual sales and sales at break-even point, sales
beyond break even volume brings in profits?
Margin of safety
Total sales
Profit volume ratio
None of the above
8} Sales is 200000 Rs and variable cost is 120000, find the P/V ratio?
10%
20%
30%
40%
9} Fixed cost is 100000Rs and P/V ratio is 40%, find out the break-even point?
100000
200000
250000
300000
10} If profit is 60000 Rs and P/V ratio is 40% then what will be the margin of safety?
50000
100000
150000
200000
11} A firm sells widgets for Rs14 each. The variable costs for each unit are Rs8. The
contribution margin per unit is?
6
8
10
12
12} The current sales price is $25 per unit and the current variable cost is $17 per unit.
Fixed costs are $40,000. If the sales price is increased by $2, and all other costs remain
unchanged, the break-even point in units will:
Increase by 1,000 units
Decrease by 1,000 units
Decrease by 2,000 units
Decrease by 119 units (rounded to nearest unit)
13} If a firm's margin of safety is 35% on sales of Rs200,000, then its margin of safety on
sales of Rs300,000 will be (assume fixed costs, the variable cost per unit, and the sales price
per unit do not change)?

105000
170000
100000
35000
14} If the margin of safety is 40% of sales, which are Rs400, 000, the break-even point?
200000
240000
300000
350000
15} Company A's fixed costs were Rs42, 000 its variable costs were Rs24, 000 and its sales
were Rs80, 000 for the sale of 8,000 units. The company's break-even point in units is:
8,000
5,000
6,000
7,000
Chapter 6 - Methods of Costing
1} __________ may be defined as system of costing in which the elements of cost are
accumulated separately for each job or work order undertaken by an organization?
Margin of safety
Job costing
Standard costing
Marginal costing
2} The cost of an incomplete job, i.e., a job on which some manufacturing operation is till
due is termed as?
Raw material
Finished goods
Work in progress
All of the above
3} __________ costing is one form of application of the principles of job order costing?
Job costing
Contract costing
Terminal costing
Both B and C
4} _____________ Method according to which cost data of production are collected according
to the departments or processes and thereafter the total cost is divided by the quantity of
production, to arrive at the cost per unit?
Batch costing
Process costing
Marginal costing
Job order costing
5} If the quantum of loss is less than the determined percentage of normal loss, the
difference is called?
Abnormal loss
Abnormal gain
Normal profit
Normal loss
6} ________ represent the production of a process in terms of completed units?
Normal production
Work in progress
Equivalent production
All of above
7} __________ may be used in job types of plants, particularly where the product or the
particular operations of the job are of a standardized nature?
Marginal costing
Standard costing
Process costing

All of the above

8} ________ Clause is usually provided in the contract as a safeguard against any likely
changes, in the change in the prices or utilization of material and labor?
Escalation
Force majeure
Both A and B
None of the above
9} _______ are defined as any saleable or usable value incidentally produced in addition to
the main product.
Residual
Waste
Garbage
By product
10} If in an oil refinery crude oil is processed what could be the by product?
Sulfur
Bitumen
Chemical
All of the above
11} Abnormal process loss is calculated as?
Normal cost of normal output/Normal output * Units of abnormal loss
Normal cost of normal output/Abnormal output * Units of abnormal loss
Normal cost of abnormal output/Normal output * Units of abnormal loss
Normal cost of normal output/Normal output * Units of abnormal profit
12} Abnormal gain is calculated as?
Normal cost of normal output/units of normal output* Units of abnormal
effective
Normal cost of normal output/units of normal output* 100
Normal cost of normal output/units of normal input* Units of abnormal effective
Normal cost of abnormal output/units of normal output* Units of abnormal effective
13} There are certain industries where two or more products of equal importance are
simultaneously produced such products are regarded as?
Substitute products
Joint products
By products
All of the above
14} In automobile industry what could be the co products are?
Cars
Buses
Trucks
All of the above
15} What are the objectives of joint cost analysis?
Data for price fixation
Data for price fixation
Determination of profit and loss on each time
All of the above
Chapter 7 - Standard Costing
1} ABC Company, a lounge chair manufacturer, uses a standard costing system. Each unit of
a finished product contains 3 yards of cloth. However, there is unavoidable waste of 0.5
yards per unit of finished product that occurs when the cloth is cut for assembly. The cost of
the cloth is Rs10 per yard. The standard direct material cost for cloth per unit of finished
product is?
Rs 5
Rs 10
Rs 25
Rs 35

2} Mahindra Company employs a standard cost system in which direct materials inventory is
carried at standard cost. The company has established the following standard for the
materials costs of one unit of product Standard Quantity 6 kg Standard price 7 Rs/kg
Standard cost 42 Rs During June, the company purchased 165,000 Kg of direct material at a
total cost of Rs1, 171,500. The company manufactured 25,000 units of product during June
using 151,000 Kg of direct materials. (Note that this is the same data that was provided for
the previous question.) The direct material quantity variance for June is?
7,000 favorable
7,000 unfavorable
7,100 favorable
7,100 unfavorable
3} The "standard quantity allowed" is computed by multiplying the?
Actual input in units by the standard output allowed
Actual output in units by the standard input allowed
Actual output in units by the standard output allowed
Standard output in units by the standard input al
4} MUKESH Company employs a standard cost system in which direct materials inventory is
carried at standard cost. The company has established the following standard for the direct
labor costs of one unit of product Standard quantity 1.3 hours Standard price 22RS/ per hour
Standard cost 28.60 Rs The total factory wages for June were Rs800, 000, 90 percent of
which were for direct labor. The company manufactured 25,000 units of product during June
using 32,000 direct labor hours. The direct labor rate variance for June is?
16,000 favorable
16,000 unfavorable
96,000 favorable
96,000 unfavorable
5} Houghton Company maintains warehouses that stock items carried by its e-retailer
clients. When one of Houghton's clients receives an order from an online customer, the order
is forwarded to Houghton. Houghton then pulls the item from the warehouse, packs it and
ships it to the customer. Houghton uses a predetermined variable overhead rate based on
direct labor-hours. According to the company's records, 0.04 direct labor-hours are required
to fulfill an order for one item and the variable overhead rate is $6.50 per direct-labor hour.
During July, Houghton shipped 240,000 orders using 9,200 direct labor-hours. The company
incurred a total of $58,880 in variable overhead costs. The variable overhead rate variance
during July was?
920 favorable
920 unfavorable
2,600 favorable
2,600 unfavorable
6} PQR Company maintains warehouses that stock items carried by its e-retailer clients.
When one of PQR clients receives an order from an online customer, the order is forwarded
to PQR. PQR then pulls the item from the warehouse, packs it and ships it to the customer.
PQR uses a predetermined variable overhead rate based on direct labor-hours. According to
the company's records, 0.04 direct labor-hours are required to fulfill an order for one item
and the variable overhead rate is $6.50 per direct-labor hour. During July, PQR shipped
240,000 orders using 9,200 direct labor-hours. The company incurred a total of $58,880 in
variable overhead costs. (Note that this is the same data that was provided for the previous
question.) The variable overhead efficiency variance during July was?
920 favorable
920 unfavorable
2,600 favorable
2,600 unfavorable
7} Standards that do not allow for machine breakdowns or other work interruptions and that
require peak efficiency at all times are known as?
Budgeted standards
Ideal standards
Normal standards

Practical standards
8} Oman Company reported a favorable materials price variance and an unfavorable
materials quantity variance. Based on these variances, the company's cost accountant
would most likely conclude that?
The actual cost per unit of materials was less than the standard cost per
unit
The actual usage of materials was less than the standard allowed
More materials were purchased than were used
More materials were used than were purchased
9} Material A has standard price per kg is 5 Rs, standards usage per unit is 7 kg, actual price
per kg is 4.5 Rs, actual usage per unit is 8 kg, material price variance would be?
4 Rs adverse
4 Rs favorable
3.5 Rs adverse
3.5 Rs favorable
10} What term can be defined as a means of assessing the difference between a
predetermined amount and the actual amount?
Activity based costing
Variance analysis
Master budgeting
Investment appraisal
11} Job X has standard hours worked 64.5, actual hours worked 61.25, standard wage rate is
4.15 Rs, actual wage rate 4.25 Rs, actual labor variance will be?
7.36 favorable
6.13 adverse
6.13 favorable
13.49 favorable
12} The formula for the materials price variance is?
Standard price less actual price multiplied by standard quantity
Standard hours less actual hours multiplied by actual quantity
Standard price less actual price multiplied by actual quantity
Standard materials quantity less actual quantity multiplied by standard price
13} A favorable labor variance combined with an adverse wage rate variance could be
caused by?
Higher unemployment in local economy
Introduction of performance related pay
Cheaper raw materials imported due to exchange rate depreciation
Cost cutting exercises implement by management
14} When analyzing sale variances, which of the following would not be an important factor?
Volume variance
Recovery rate variance
Selling price variance
Mix variance
15} Job ABC has standard hours worked 28, actual hours worked 26.5, standard wage rate is
5.60 Rs, actual wage rate 6.05 Rs, actual labor efficiency variance will be?
9.08 favorable
3.53 adverse
11.93 adverse
8.40 favorable
Chapter 8 - Marginal Costing
1} __________ costing is a costing method in which only variable costs are accumulated and
cost per unit is ascertained only on the basis of variable costs?
Fixed costing
Variable costing
Labor costing
None of the above

2} Marginal costing is also known as direct costing?

True
False
3} Which of the following is a variable cost?
Interest payments
Raw materials costs
Property taxes
All of the above are variable costs
4} Which of the following is an implicit cost?
The salary earned by a corporate executive
Depreciation in the value of a company-owned car as it wears out
Property taxes
All of the above are implicit costs
5} 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
6} The law of diminishing returns begins at the level of output where?
Marginal cost is at a minimum
Average variable cost is at a minimum
Average fixed cost is at a maximum
None of the above is correct
7} Short-run marginal cost is equal to?
The change in total cost divided by the change in output
The change in total variable cost divided by the change in output
The cost per unit of the variable input divided by the marginal product of the variable
input
All of the above
8} 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
9} Profit planning is the planning of future operations to attain maximum profit or to
maintain a specified level of profit?
True
False
10} _______ costing is a principle whereby fixed as well as variable costs are allotted to cost
units?
Absorption costing
Variable costing
Fixed costing
All of the above
11} __________ is the difference between selling price and marginal cost?
Profit
Contribution
Fixed cost
All of the above
12} Profit emerges only after charging which costs?
Prime costs
Variable cost
Both A and B
None of the above
13} Contribution or gross margin is the difference between sales and the marginal cost of
sales?
True

False
14} Which of the statement is true?
Selling price-variable cost=contribution
Contribution fixed cost= profit
Fixed cost + profit = contribution
All of the above