1.

A budget is a plan of action expressed in…

A. financial terms

B. non‐financial terms

C. both

D. subjective matter

Discussion

C. both

2. Budget is prepared for a…

A. indefinite period

B. definite period

C. period of one year

D. six months

Discussion

B. definite period

3. A budget is tool which helps the management in planning and control of…

A. all business activities

B. production activities

C. purchase activities

D. sales activities

Discussion

A. all business activities

4. Budgetary control system acts as a friend, philosopher and guide to the…

A. management

B. share holders

C. creditors

D. employees

Discussion
A. management

5. Budgetary control system defines the objectives and policies of the…

A. production department

B. finance department

C. marketing department

D. all

Discussion

D. all

6. Budgetary control facilitates easy introduction of the…

A. marginal costing

B. ratio analysis

C. standard costing

D. subjective matter

Discussion

C. standard costing

7. Budgetary control helps the management in…

A. obtaining bank credit

B. issue of shares

C. getting grants from government

D. all of these

Discussion

A. obtaining bank credit

8. Budgetary control system helps the management to eliminate…

A. undercapitalization

B. overcapitalization

C. both

D. subjective matter
Discussion

C. both

9. Budgetary control provides a basis for…

A. bonus shares

B. rights shares

C. remuneration plans

D. none

Discussion

C. remuneration plans

10. Budgetary control helps to introduce a suitable incentive and remuneration based
on…

A. changes in government policies

B. inflationary conditions

C. both

D. none

Discussion

B. inflationary conditions

11. The success of budgetary control system depends upon the willing cooperation of…

A. shareholders

B. management

C. creditors

D. all the functional areas of management

Discussion

D. all the functional areas of management

12. Recording of actual performance is….

A. an advantage of budgetary control

B. a step in budgetary control

C. a limitation of budgetary control

D. none

Discussion

B. a step in budgetary control

13. Revision of budgets is…

A. unnecessary

B. can’t determine

C. necessary

D. inadequate data

Discussion

C. necessary

14. Frequent revision of budgets will…

A. affects its reliability

B. increase the accuracy

C. both

D. subjective matter

Discussion

A. affects its reliability

15. Usually the production budget is stated in terms of…

A. money

B. quantity

C. both

D. none

Discussion

C. both

16. Budget period is the…

A. period of budget committee

B. period of budget centres

C. period for which a budget is prepared

D. period of budget officer

Discussion

C. period for which a budget is prepared

17. Budget period depends upon…

A. the type of budget

B. the nature of business

C. the length of trade cycles

D. all of these

Discussion

D. all of these

18. A key factor is one which restricts…

A. the volume of production

B. the volume of sales

C. the volume of purchase

D. all of the above

Discussion

A. the volume of production

19. Plant utilization budget and Manufacturing overhead budgets are types of

A. production budget

B. sales budget

C. cost budget

D. none of the above

Discussion

A. production budget

20. R&D budget and Capital expenditure budget are examples of

A. short-term budget
B. current budget

C. long-term budget

D. none of the above

Discussion

C. long-term budget

21. The scare factors is also known as

A. key factor

B. abnormal factor

C. linking factor

D. none of the above

Discussion

A. key factor

22. A budgeting process which demands each manager to justify his entire budget in
detail from beginning is

A. functional budget

B. master budget

C. zero base budgeting

D. none of the above

Discussion

C. zero base budgeting

23. Budgetary control system facilitates centralized control with…

A. decentralized activity

B. centralized activity

C. both

D. none

Discussion

C. both
Question 15.
June 2015: Crown Ltd. has forecast its sales for the next three months as follows:
April: 12,000 units, May: 15,000 units, June: 17,000 units.
Opening stock as of 1st April is expected to be 3,500 units.
The closing stock should be equal to 20% of the coming month’s sales needs. The number of units
required to be produced in May is-
(A) 14,600 units
(B) 11,500 units
(C) 15,400 units
(D) 13,600 units
Hint:

Answer:
(C) 15,400 units

Question 16.
Dec 2015: The basic difference between a static budget and a flexible budget is
(A) A static budget is based on one specific level of production and a flexible budget can be prepared
for any production level within a relevant range
(B) A static budget is for an entire production, but a flexible budget is applicable only to a single
department
(C) Flexible budget allows management latitude in meeting goals, whereas a static budget is based
on a fixed standard
(D) A flexible budget considers only variable costs, but a static budget considers all costs
Answer:
(A) A static budget is based on one specific level of production and a flexible budget can be prepared
for any production level within a relevant range

Question 17.
Dec 2015: Match the following:

List-I List-II

P. Performance budgeting 1. Fixed budget

Q. Zero base budgeting 2. Production oriented

R. Summary of all functional budgets 3. Jimmy Carter

S. Remain unchanged irrespective of the level of activity

4. Master budget
actually attained

Select the correct answer from the options given below

Answer:
(D)

Question 18.
Dec 2015: X Ltd. has forecast its sales for the next three months as follows:
May: 12,000 units
June: 20,000 units
July: 25,000 units
Opening stock as of 1st April is expected to be 5,000 units. The closing stock should equal 20% of the
coming month’s sales needs. How many units should be produced in June
(A) 20,000 Units
(B) 11,000 Units
(C) 21,000 Units
(D) 25,000 Units
Hint:

Answer:
(C) 21,000 Units

Question 19.
June 2016: QPR Ltd. has prepared the budget for the production of one lakh units of the only
commodity manufactured by them for a costing period as follows:

Cost elements ₹ in lakh

Raw material 252

Direct labour 75

Direct expenses 10

Works overheads (60% fixed) 225

Administrative overheads (80% fixed) 40

Selling overheads (50% fixed) 20

If the actual production during the period was 60,000 units, the revised budget cost per unit will be
(A) ₹ 740
(B) ₹ 800
(C) ₹ 700
(D) ₹ 840
Hint:

Answer:
(A) ₹ 740
Question 20.
June 2016: A budget in which a responsibility centre manager must justify each planned activity and
its budgeted total cost is called
(A) Traditional budget
(B) Zero-based budget
(C) Master budget
(D) Functional budget
Answer:
(B) Zero-based budget

Question 21.
June 2016: To produce one unit of ‘A’, two ingredients, Le., 2 kg of X and 3 kg of Y are required:

What will be the quantity of consumption of ingredients X and Y, if 20,000 units of A are sold
(A) 46,000 kg & 69,000 kg respectively
(B) 49,000 kg & 72,000 kg respectively
(C) 40,000kg & 60,000 kg respectively
(D) 43,000 kg & 63,000 kg respectively
Hint:
Units produced for Product A:
Opening Stock + Units Produced – Closing Stock = Unit Sold
5,000 + x – 8,000 = 20,000 x = Units Produced = 23,000
Consumption of Input X = 23,000 × 2 = 46,000
Consumption of Input Y = 23,000 × 3 = 69,000
Answer:
(A) 46,000 kg & 69,000 kg respectively

Question 22.
June 2016: Which one of the following would not form part of the master budget
(A) Cash budget
(B) Statement of profit and loss
(C) Statement of financial position
(D) None of the above
Answer:
(D) None of the above

Question 23.
June 2016: Which one of the following is not an advantage of budgetary control?
(A) Maximization of profit through effective planning
(B) Planned approach for expenditure
(C) Create necessary conditions for setting-up of standard costs
(D) Based on quantitative data and represent only an impersonal appraisal of the conduct of the
business activity
Answer:
(B) Planned approach for expenditure

Question 24.
June 2016: Kriti Ltd. has provided the following information for the quarter of January to March:

20% of the sales are on a cash basis and balance on a credit basis. The amount to be collected from
debtors in the month of February and March will be
(A) Zero and ₹ 8,000 respectively
(B) ₹ 8,000 & ₹ 16,000 respectively
(C) ₹ 8,000 & ₹ 24,000 respectively
(D) ₹ 16,000 & ₹ 36,000 respectively
Hint:

Amount collected from debtors = Opening Balance + Credit Sales – Closing Balance
Feb = 16,000 + 32,000 – 40,000 = 8,000
Mar = 40,000 + 48,000 – 64,000 = 24,000
Answer:
(C) ₹ 8,000 & ₹ 24,000 respectively

Question 25.
June 2016: For a department, the standard overheads rate is ₹ 2.50 per hour and the overheads
allowances are as follows:

Activity level (hours) Budget overheads allowance (₹)

3,000 10,000

7,000 18,000
11,000 26,000

Calculate the normal capacity level on the basis of which the standard overheads rate has been
worked out
(A) 8,000 Hours
(B) 7,000. Hours
(C) 6,000 Hours
(D) 9,000 Hours
Hint:
Variable cost per hour = Change in cost Change in hours =8,0004,000 = 2

Overhead rate = Total cost Hours

2.5 = Total cost x
2.5x = Total cost
2.5x = Fixed cost + Variable cost
2.5x = 4,000 + (x × 2)
2.5x = 4,000 + 2x
0.5x = 4,000
x = 8,000
Answer:
(A) 8,000 Hours

Question 26.
Dec 2016: The budget which usually takes the form of budgeted profit and loss account and balance
sheet is known as
(A) Cash budget
(B) Master budget
(C) Flexible budget
(D) Sales budget
Answer:
(B) Master budget

Question 27.
Dec 2016: While preparing the cash budget, which of the following items would not be included
(A) Interest paid to debenture holders
(B) Salaries and wages
(C) Bonus shares issued
(D) Income-tax paid
Answer:
(C) Bonus shares issued
Question 28.
Dec 2016: Budgeted standard hours of a factory are 15,000. The capacity utilization ratio for May
2016 is 85% and the efficiency ratio for the month is 120%. The standard hours for actual production
in the month will be
(A) 12,750
(B) 18,000
(C) 15,300
(D) 18,000
Hint:

Answer:
(C) 15,300

Question 29.
June 2017: A plant produces a product in the quantity of 10,000 units at a cost of ₹ 3 per unit. If
20,000 units are produced, the cost per unit will be ₹ 2.50. The selling price per unit is ₹ 4. The
variable cost per unit will be:
(A) ₹ 2
(B) ₹ 3
(C) ₹ 4
(D) ₹ 1
Answer:
(A) ₹ 2

Question 30.
June 2017: When demand forecasting is difficult, the budget which is prepared:
(A) Sales Budget
(B) Production Budget
(C) Financial Budget
(D) Flexible Budget
Answer:
(D) Flexible Budget
Question 31.
June 2017: The budget which usually takes the form of profit and loss account and balance sheet is
known as:
(A) Cash budget
(B) Master budget
(C) Flexible budget
(D) Labour budget
Answer:
(B) Master budget

Question 32.
June 2017: A fixed budget is one which:
(A) is a plan for capital expenditure in monetary terms
(B) is designed to remain unchanged irrespective of the volume of output or turnover attained
(C) deals with income and expenditure applicable to a particular function
(D) deals with none of these
Answer:
(B) is designed to remain unchanged irrespective of the volume of output or turnover attained

Question 33.
June 2017: One of the most significant tools in cost planning is:
(A) Direct material
(B) Budget
(C) Marginal costing
(D) Direct labour
Answer:
(B) Budget

Question 34.
June 2017: When the standard output is 10 units per hour and actual output is 14 units per hour, the
efficiency level will be:
(A) 60%
(B) 120%
(C) 140%
(D) None of the above
Answer:
(C) 140%

Question 35.
Dec 2017: A short term budget, broken down into a quarterly or monthly period and reviewed and
modified in the light of changing conditions is:
(A) Current Budget
(B) Flexible Budget
(C) Rolling Budget
(D) Zero Base Budget
Answer:
(B) Flexible Budget

Question 36.
Dec 2017: While preparing a flexible budget indirect wages was considered as semi-variable
expenses. At 50% level of production, it was estimated as 1,50,000. If it has a tendency to increase
by 10% between 60% to 75% capacity and further will increase by another 5% when production
crosses 75%, the amount of indirect wages at 9096 levels of production is:
(A) ₹ 1,65,000
(B) ₹ 1,72,500
(C) ₹ 1,73,250
(D) None of the above
Hint:
1,50,000 × 110% = 1,65,000
1.65.0 × 105% = 1,73,250
Answer:
(C) ₹ 1,73,250

Question 37.
Dec 2017: The units to be sold for different months are as follows:
Jan Feb Mar April May June 1,200 1,300 1,600 2,000 2,400 3,000
There will be no WIP at the end of any month. Finished units equal to half the sales for the next
month will be in stock at the end of each month. The required production in units for April will be:
(A) 2,800
(B) 2,200
(C) 2,400
(D) 3,200
Hint:
Unit sold + Closing stock – Opening stock = Unit produced
2.0 + 1,200 – 1,000 = 2,200.
Answer:
(B) 2,200

Question 38.
Dec 2017: In budgeting, there was a shift from financial classification to objective classification in
respect of functions, activities etc.
(A) Programme
(B) Performance
(C) Zero base
(D) None of the above
Answer:
(B) Performance

Question 39.
June 2018 & June 2019: The budget which remains unchanged regardless of the actual level of the
activity is known as:
(A) Fixed Budget
(B) Functional budget
(C) Flexible budget
(D) Cash budget
Answer:
(A) Fixed Budget

Question 40.
June 2018:____ is prepared for the estimation of plant capacity to meet the budgeted production
during the budgeted period.
(A) Plant utilization budget
(B) Production budget
(C) Manufacturing overhead budget
(D) Labour budget
Answer:
(A) Plant utilization budget

Question 41.
June 2018: A flexible budget is:
(A) A budget that is designed to furnish budgeted costs at different activity levels
(B) A budget that will be changed at the end of the month in order to reflect the actual costs of a
department
(C) A budget that comprises variable costs only
(D) A budget that is designed for a specific planned output level
Answer:
(A) A budget that is designed to furnish budgeted costs at different activity levels

Question 42.
June 2018: ABC Ltd. has forecast its sales for the next three months as follows:
May : 12,000 units June : 20,000 units July : 25,000 units
As per the company policy, the closing stock should be equal to 20% of the coming month’s sales
forecast. How many units should be produced in June?
(A) 20,000 Units
(B) 11,000 Units
(C) 21,000 Units
(D) 25,000 Units
Hint:

Answer:
(C) 21,000 Units
Question 43.
Dec 2018:_____is a budget that, by recognizing different cost behaviour patterns, is designed to
change in relation to the volume of output.
(A) Production Budget
(B) Performance Budget
(C) Zero Base Budget
(D) Flexible Budget
Answer:
(D) Flexible Budget

Question 44.
Dec 2018:_____is an operating and financial plan of a business enterprise.
(A) Forecast
(B) Budget
(C) Estimate
(D) Standard
Answer:
(B) Budget

Question 45.
Dec 2018: ____ is based on the premise that every rupee of expenditure requires justification.
(A) Zero Base Budgeting
(B) Programme Budgeting
(C) Performance Budgeting
(D) Appraisal Budgeting
Answer:
(A) Zero Base Budgeting

Question 46.
Dec 2018: Under the Balance Sheet Method of preparing a cash budget, budget is prepared on the
basis of :
(A) Current year balance sheet
(B) Previous year balance sheet
(C) Forecasted balance sheet
(D) Consolidated balance sheet
Answer:
(C) Forecasted balance sheet

Question 47.
June 2019: The following information extracted from the records of P. Ltd. Sales for October,
November and December 2018 is ₹ 90,000, ₹ 1,10,000 and ₹ 80,000 respectively. 40% of its sales are
expected to be for cash. Of its credit sales, 70% are expected to pay in the month after-sales and
take a 2% discount on it. Balance is expected to pay in second-month after-sales and 3% of it is
expected to bad debts.
What are the sales receipts to be shown in the cash budget for the month of December?
(A) ₹ 92,990
(B) ₹ 1,23,174
(C) ₹ 95,609
(D) ₹ 1,25,793
Note: MCQ is wrongly drafted; for further clarification please see the hints.
Hint:

None of the options contains a figure of 91,856 and hence MCQ is wrong.
Answer:

Question 48.
June 2019: Which of the following is not a step for successful implementation of the budgetary
control system?
(A) Budget manual
(B) Budget controller
(C) Budget period
(D) Budget standard
Answer:
(D) Budget standard

Question 49.
June 2019:
Assertion (A):
The purpose of performance budgeting is to focus on work to be done and services to be rendered.
Reason (R):
The main purpose of performance budgeting is not to the inter-relate the physical and financial
aspect of every programme, project or activity.
Select the correct answer from the options given below.
(A) Both A and R are true and R is the correct explanation of A.
(B) Both A and R are true but R is not the correct explanation of A.
(C) A is true but R is false
(D) A is false but R is true
Answer:
(C) A is true but R is false
Question 1.
Dec 2014: The budgeting system designed to change in relation to the level of activity actually
attained is known as
(A) Fixed budgeting
(B) Flexible budgeting
(C) Performance budgeting
(D) Functional budgeting
Answer:
(B) Flexible budgeting

Question 2.
Dec 2014: From the following, which one is a functional budget
(A) Master budget
(B) Fixed budget
(C) Sales budget
(D) Current budget
Answer:
(C) Sales budget

Question 3.
Dec 2014: The following information is available:
Wages for January: ₹ 20,000
Wages for February: ₹ 22,000
Delay in payment of wages: 1 /2 month
The amount of wages paid during the month of February is
(A) ₹ 11,000
(B) ₹ 22,000
(C) ₹ 20,000
(D) ₹ 21,000
Hint:

Answer:
(D) ₹ 21,000

Question 4.
Dec 2014: In an organization, cash sales are 25% and credit sales are 75%. Sales for October, 2013 is
₹ 12,00,000, November, 2013 ₹ 14,00,000, December, 2013 ₹ 16,00,000, January, 2014 ₹ 6,00,000
and February, 2014 ₹ 8,00,000. 60% of credit sales are collected in the next month after-sales, 30%
in the second month and 10% in the third month. No bad debts are anticipated. The cash collected in
the month of February 2014 from debtors is
(A) ₹ 15,00,000
(B) ₹ 9,80,000
(C) ₹ 7,35,000
(D) ₹ 80,000
Hint:

Answer:
(C) ₹ 7,35,000

Question 5.
Dec 2014: ABC Ltd. produces and sells a single product. The sales budget to the calendar year 2015
for each quarter is as under:
No. of units to be sold:
Quarter-I: 12,000
Quarter-II: 15,000
Quarter-III: 16,500
Quarter-TV: 18,000
The year 2015 is expected to open with an inventory of 4,000 units of finished product and close
with an inventory of 6,500 units. Production is customarily scheduled to provide for two-thirds of the
current quarter’s demand plus
one-third of the following quarter’s demand. Production for Quarter-IV would be
(A) 13,500 units
(B) 15,500 units
(C) 17,000 units
(D) 18,500 units
Hint:
Answer:
(D) 18,500 units

Question 6.
Dec 2014: Under which of the following method of budgeting, all activities are re-evaluated each
time a budget is set
(A) Materials budget
(B) Zero base budgeting
(C) Sales budget
(D) Overheads budget
Answer:
(B) Zero base budgeting

Question 7.
June 2015: In Rise Ltd., cash sales is 25% and credit sales 75%. Sales for November, 2014 is ₹
15,00,000, December, 2014 ₹ 14,00,000, January, 2015 ₹ 16,00,000, February, 2015 ₹ 10,00,000 arid
March, 2015 ₹ 9,00,000. 60% of the credit sales are collected in the next month after sales, 30% in
the second month and 10% in the third month. No bad debts are anticipated. The cash collected – in
the month of March, 2015 from debtors is
(A) ₹ 14,60,000
(B) ₹ 14,20,000
(C) ₹ 12,20,000
(D) ₹ 9,15,000
Hint:
Answer:
(D) ₹ 9,15,000

Question 8.
June 2015: A factor that limits the activities of an undertaking and which is taken into account while
preparing a budget is known as
(A) Budget manual
(B) Budget controller
(C) a Budget key factor
(D) Budget centre
Answer:
(C) a Budget key factor

Question 9.
June 2015: A document that sets out the responsibility of the persons engaged in the routine of and
the procedures, forms and records required for budgetary control is called
(A) Budget centre
(B) Budget report
(C) Budget controller
(D) Budget manual
Answer:
(D) Budget manual

Question 10.
June 2015: A budget that gives a summary of all the functional budgets and budgeted statement of
profit and loss is called
(A) Flexible budget
(B) Master budget
(C) Performance budget
(D) Zero base budget
Answer:
(B) Master budget
Question 11.
June 2015: A company estimates its quarter wise sales (in units) for the next year as under:

The opening stock of finished goods is

10,0 units and the company expects to maintain the closing stock of finished goods at 16,250 units at
the end of the year. The production pattern in each quarter is based on 80% of the sales of the
current quarter and 20% of the sales of the next quarter. The production for quarter IV will be
(A) 36,000 units
(B) 42,000 units
(C) 48,250 units
(D) 38,250 units
Hint:

Answer:
(C) 48,250 units

Question 12.
June 2015: Budget which remains unchanged regardless of the actual level of activity is known as –
(A) Fixed budget
(B) Functional budget
(C) Flexible budget
(D) Cash budget
Answer:
(A) Fixed budget

Question 13.
June 2015: Estimated wages for January is ₹ 4,000 and for February ₹ 4,400. If the delay in payment
of wages is 1 /2 month, the number of wages to be considered in the cash budget for the month of
February will be –
(A) ₹ 4,000
(B) ₹ 4,400
(C) ₹ 4,600
(D) ₹ 4,200
Hint:

Answer:
(D) ₹ 4,200

Question 14.
June 2015: Which of the following formulas is used to calculate efficiency ratio –

Answer:
(B)
1. Fixed expenses decrease per unit with the increases in production and increases per unit with
the decrease in production.

a) True
b) False

View Answer / Hide Answer

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

View Answer / Hide Answer

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

View Answer / Hide Answer

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

View Answer / Hide Answer

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

View Answer / Hide Answer

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

View Answer / Hide Answer

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

View Answer / Hide Answer

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

View Answer / Hide Answer

ANSWER: d) A, B C and D
Question 1.
Dec 2014: Which of the following formula cannot be used for calculating the P/V ratio
(A) (Sales value minus variable cost) / Sales value
(B) (Fixed cost plus profit)/Sales value
(C) Change in profits/Change in sales
(D) Profit/Sales value
Answer:
(D) Profit/Sales value

Question 2.
Dec 2014: For a given product, the sales of a company @ ₹ 200 per unit is ₹ 20,00,000. Variable cost
is ₹ 12,00,000 and fixed cost is ₹ 6,00,000. The capacity of the factory is 15,000 units. Capacity
utilization at break-even point level
(A) 40%
(B) 50%
(C) 60%
(D) 100%
Hint:
Sales – Variable Cost = Contribution
20,00,0000 – 12,00,000 = 8,00,000

Answer:
(B) 50%

Question 3.
Dec 2014: The costing method in which fixed factory overheads are added to inventory is known as
(A) Direct costing
(B) Marginal costing
(C) Absorption costing
(D) Activity-based costing
Answer:
(C) Absorption costing
Question 4.
Dec2014: For a given product, the selling price per unit is 15, the variable cost per and units sold
during the period are 35,000. The margin of safety is
(A) ₹ 25,000
(B) ₹ 75,000
(C) ₹ 15,000
(D) ₹ 5,000
Hint:

Answer:
(B) ₹ 75,000

Question 5.
Dec 2014: When the volume is 3,000 units, the average cost is ₹ 4 per unit. When the volume is
4,000 units, the average cost is ₹ 3.50 per unit. The break-even point is 5,000 units.
What is the P/V ratio of the firm
(A) 35%
(B) 37.5%
(C) 40%
(D) 32.5%
Hint:
Total cost at 3,000 units = 3,000 × 4 12,000
Total cost at 4,000 units = 4,000 × 3.5 = 14,000
Variable cost per unit = Change in cost Change in units =2,0001,000 = 2 per unit

At the break-even point profit is NILL.

P/V ratio = Contribution Sales × 100 = 6,00016,000 × 100 = 37.5%
Answer:
(B) 37.5%

Question 6.
Dec 2014: Which of the following formula cannot be used for calculating the contribution
(A) Fixed cost plus profit
(B) Fixed cost minus loss
(C) Sales minus variable cost
(D) Fixed cost plus loss
Answer:
(D) Fixed cost plus loss

Question 7.
Dec 2014: A product is sold at a price of ₹ 120 per unit and its variable cost is ₹ 80 per unit. The fixed
expenses of the business are ₹ 8,000 per year. Break-even point is
(A) ₹ 24,000
(B) ₹ 120,000
(C) ₹ 116,000
(D) ₹ 28,000
Hint:
Contribution per unit = 120 – 80 = 40
P/V Ratio = Contribution Sales × 100 = 40120 × 100 = 33.3333%
BEP (in value) = Fixed Cost P/V Ratio =8,00033.3333% = 24,000
Answer:
(A) ₹ 24,000

Question 8.
Dec 2014: The following information relates to a product:
Direct materials: 10 kg @ ₹ 0.50 per kg.
Direct labour: 1 hour 30 minutes @ ₹ 4 per hour
Variable overheads: 1 hour 30 minutes @ ₹ 1 per hour
Fixed overheads @ ₹ 2 per hour (based on a budgeted production volume of 90,0 direct labour
hours for the year)
Selling price per unit: ₹ 17 The break-even point is
(A) ₹ 40,000 units
(B) ₹ 40,000
(C) ₹ 20,000 units
(D) ₹ 7,200 units
Hint:
Total variable cost per unit = (10 × 0.50) + (1.5 × 4) + (1.5 × 1) = 12.5
Total fixed cost = 90,000 × 2 = 1,80,000

Sales 17

Less: Variable cost (12.5)

Contribution 4.5

P/V Ratio = Contribution Sales × 100 = 4.517 × 100 = 26.4706%

P/V Ratio = Fixed Cost Contribution p.u. =1,80,0004.5 = 40,000
Answer:
(A) ₹ 40,000 units

Question 9.
Dec 2014: A company sells its product at ₹ 15 per unit. In a period, if it produces and sells 8,000
units, it incurs a loss of ₹ 5 per unit. If the volume is raised to 20,000 units, it earns a profit of ₹ 4 per
unit. The break-even point of the company in rupee terms will be
(A) ₹ 1,60,000
(B) ₹ 2,00,000
(C) ₹ 1,80,000
(D) ₹ 2,20,000
Hint:

P/V Ratio = Change in Profit Change in Sales × 100 = 1,00,0004,00,000 × 100 = 25%
Answer:
(C) ₹ 1,80,000

Question 10.
Dec 2014: A company that has a margin of safety of ₹ 4,00,000 makes a profit of ₹ 1,00,000. If its
fixed cost is ₹ 5,00,000, then break-even sales are:
(A) ₹ 20 lakh
(B) ₹ 25 lakh
(C) ₹ 12.5 lakh
(D) ₹ 15 lakh
Answer:
(A) ₹ 20 lakh

Question 11.
Dec 2014: Which of the following costs tire treated as product cost under variable costing:
(A) Only direct costs
(B) Only variable production costs
(C) Only material and labour costs
(D) All variable and fixed manufacturing costs
Answer:
(B) Only variable production costs

Question 12.
Dec 2014: What is the margin of safety, if profit is equal to 140,000 and P/V ratio is 25%
(A) ₹ 1,60,000
(B) ₹ 1,00,000
(C) ₹ 16,000
(D) ₹ 10,000
Hint:
MOS (in value) = Profit P/V ratio =40,00025% = 1,60,000
Answer:
(A) ₹ 1,60,000

Question 13.
June 2015: The costing method in which fixed factory overheads are added to inventory is
(A) Activity-based costing
(B) Marginal costing
(C) Direct costing
(D) Absorption costing
Answer:
(D) Absorption costing

Question 14.
June 2015: A company has an annual fixed cost of ₹ 1,68,000. In the year 2013-2014, sales amounted
to ₹ 6,00,000 as compared to ₹ 4,50,000in the preceding year 2012-2013. The profit in the year
2013-2014 was ₹ 42,000 more than that in the year 2012-2013. The break-even sales of the
company are
(A) 6,00,000
(B) 6,20,000
(C) 5,60,000
(D) 4,08,000
Hint:
Let the profit of last year be ‘x’.
So the profit of current year will be ‘x + 42,000’

Answer:
(A) 6,00,000

Question 15.
June 2015: Sunny Ltd. makes product-A which sells at ₹ 80 per unit.
Total fixed costs are ₹ 28,000 and marginal cost ₹ 42 per unit. The sales level (in units) that will
provide a profit of ₹ 10,000 is
(A) 1,200 Units
(B) 1,500 Units
(C) 1,250 Units
(D) 1,000 Units
Hint:
Let the sales unit be x.

Sales 80x

Less: Variable cost (42x)

Contribution 38x

Net Profit + Fixed Cost = Contribution

28,000 + 10,000 = 38,000
Hence, 38x = 38,000
x = No. of units = 1,000
Answer:
(D) 1,000 Units

Question 16.
June 2015: When the sales increase from ₹ 45,000 to ₹ 60,000, the profit increases by ₹ 5,000. P/V
Ratio would be
(A) 20%
(B) 30%
(C) 33.33%
(D) 66.67%
Hint:
P/V Ratio = Change in profit Change in sales × 100 = 5,00015,000 × 100 = 33.33%
Change in sales 15,000
Answer:
(C) 33.33%

Question 17.
June 2015: The margin of safety can be calculated using the formula
(A) Total sales – Break-even sales
(B) Fixed cost 4- P/V ratio
(C) P/V ratio 4- Profit
(D) Fixed cost 4- Contribution
Answer:
(A) Total sales – Break-even sales

Question 18.
June2015:A product is sold at ₹ 150 per unit and its variable cost is ₹ 70 per unit. The fixed expenses
of the business are ₹ 8,000 per year. The Break-even point (in units) is
(A) 200 units
(B) 50 units
(C) 115 units
(D) 100 units
Hint:
Sale Price – Variable Cost Contribution
150 – 70 = 80
BEP (in units) = Fixed Cost Contribution p.u. =8,00080 = 100 units
Answer:
(D) 100 units

Question 19.
June 2015: Profit-Volume ratio can be improved by
(A) Increasing selling price per unit
(B) Reducing the direct and variable costs
(C) Switching the production to products showing the higher profit-volume ratio
(D) All of the above
Answer:
(D) All of the above

Question 20.
June 2015: The selling price of a product is 1550 per unit, variable cost ₹ 50 per unit and fixed cost ₹
10,000. The number of units required to be sold to earn a profit of ₹ 10,000 will be –
(A) 400
(B) 40
(C) 36
(D) 220
Hint:
Sale Price – Variable Cost = Contribution 50 – 20 = 30
Contribution per kg= 302 = 15 per kg
Answer:
(B) 40

Question 21.
June 2015: Make or buy decisions are made by comparing cost with the outside purchase price.
(A) Fixed
(B) Variable
(C) Sunk
(D) Joint
Answer:
(B) Variable

Question 22.
June 2015: The selling price of a product-X is ₹ 50 per unit, variable cost ₹ 20 per unit and 2 kg of raw
material are needed to produce a unit of product-X. The contribution per kg of raw material will be –
(A) ₹ 30
(B) ₹ 15
(C) ₹ 60
(D) ₹ 50
Hint:
Answer:
(B) ₹ 15

Question 23.
Dec 2015: Following data is given for Gopal Ltd:

Overall P/V ratio of the company will be:

(A) 42.5%
(B) 37.5%
(C) 42.8%
(D) 46.7%
Hint:
Answer:
(B) 37.5%

Question 24.
Dec 2015: Z Ltd. recorded sales of ₹ 60 lakh in 2014 as compared to ₹ 45 lakh in 2013. Profit for 2014
was ₹ 5 lakh higher than that in 2013. If the annual fixed costs amount to ₹ 12 lakh, the profit on
projected sales of ₹ 90 lakh will be
(A) ₹ 15 lakh
(B) ₹ 14 lakh
(C) ₹ 12 lakh
(D) ₹ 18 lakh
Hint:
Profit in 2014 is higher by ₹ 5 lakhs than the profit of 2013. That mean change in profit is ₹ 5 lakhs.
60 – 45 = 15 (change in sales)
P/V Ratio = Change in profit Change in sales x 100
= 515 x 100
= 33.3333%
Variable cost ratio = 100% – 33.3333% = 66.6667%

Answer:
(D) ₹ 18 lakh

Question 25.
Dec 2015: Statement-I:
The contribution concept is based on the theory that the fixed expenses of a business are not a joint
cost.
Statement-II:
Fixed expenses can be equitably apportioned to different segments of the business.
Choose the correct option
(A) Both statements are correct
(B) Both statements are incorrect
(C) Statement-I is correct, but statement-II is incorrect
(D) Statement-I is incorrect, but statement-II is correct.
Hint:
Contribution or the contributory margin is the difference between sales value and the marginal cost
[Contribution (C) = Sales (S) – Variable Cost], It is obtained by subtracting marginal cost from sales
revenue of a given activity. It can also be defined as the excess of sales revenue over the variable
cost. The contribution concept is based on the theory that the profit and fixed expenses of a
business is a ‘joint cost’ that cannot be equitably apportioned to different segments of the business.
In view of this difficulty, the contribution serves as a measure of the efficiency of operations of
various segments of the business.
Answer:
(B) Both statements are incorrect

Question 26.
Dec 2015: The following information is given about Zac Ltd. dealing in musical instruments:
P/V ratio 50% Margin of safety 40%
If the sales volume is ₹ 50,00,000 the net profit will be
(A) ₹ 15,00,000
(B) ₹ 10,00,000
(C) ₹ 20,00,000
(D) ₹ 5,00,000
Hint:
If actual sales assumed at 100% then BEP must be at 60% as the Margin of safety is 40%.
BEP Sales = 50,00,000 × 60% = 30,00,000
Contribution at BEP = 30,00,000 × 50% = 15,00,000
At BEP Contribution = Fixed cost hence Fixed Cost is also ₹ 15,00,000

Answer:
(B) ₹ 10,00,000

Question 27.
Dec 2015: Assertion (A):
In management accounting, firm decisions on pricing policy can be taken.
Reason (R):
As the marginal cost per unit is constant from period to period within a short span of time.
Select the correct answer from the option given below
(A) Both A and R are true and R is the correct explanation of A
(B) Both A and R are true, but R is not the correct explanation of A
(C) A is true, but R is false
(D) A is false, but R is true
Answer:
(A) Both A and R are true and R is the correct explanation of A

Question 28.
Dec 2015: Manoj Ltd. manufactures three products P, Q and R. The unit selling price of these
products are ₹ 100, ₹ 160 and ₹ 75 respectively. The corresponding unit variable costs are ₹ 50, ₹ 80
and ₹ 30. The proportions (quantity-wise) in which these products are manufactured and sold are
20%, 30% and 50% respectively. Total fixed costs are ₹ 14,80,000. Overall breakeven quantity is
(A) 26,195 Units
(B) 27,195 Units
(C) 27,165 Units
(D) 28,165 Units
Hint:

Total equivalent contribution = 10 + 24 + 22.5 = 56.5

Composite BEP = 14,80,00056.5 = 26,194.69 say 26,195 units
Answer:
(A) 26,195 Units

Question 29.
Dec 2015: Profits in a company can be increased by:
(1) Decreasing the selling price per unit
(2) Increasing the selling price per unit
(3) Decreasing the volume of sales
(4) Increasing the volume of sales
(5) Decreasing the fixed or variable expenses
(6) Increasing the fixed or variable expenses
(7) Giving more weightage for products having a higher P/V ratio
(8) Giving less weightage for products having a higher P/V ratio
Select the correct answer from the options given below
(A) (1), (3), (5) and (7)
(B) (2), (4), (6) and (8)
(C) (2), (4), (5) and (7)
(D) (1), (3), (6) and (8)
Answer:
(C) (2), (4), (5) and (7)

Question 30.
Dec 2015: Assertion (A):
The business earns a surplus of sale revenue over variable costs, which is called a contribution.
Reason (R):
Once fixed costs are fully recovered such excess contribution is termed as profit.
Select the correct answer from the options given below
(A) Both A and R are true and R is the correct explanation of A
(B) Both A and R are true, but R is not the correct explanation of A
(C) A is true, but R is false
(D) A is false, but R is true
Answer:
(B) Both A and R are true, but R is not the correct explanation of A

Question 31.
Dec 2015: A manufacturer produces 2,00,000 units of a product at a cost of ₹ 3.25 per unit. Later on,
he produces 2,75,000 units at a cost of ₹ 3.20 per unit, when its fixed overheads have increased by
10%. The marginal cost per unit and originally fixed overheads will be:
(A) ₹ 2 and ₹ 45,000 respectively
(B) ₹ 4 and ₹ 47,000 respectively
(C) ₹ 3 and ₹ 50,000 respectively
(D) ₹ 5 and ₹ 45,000 respectively
Hint:
Total cost at 2,00,000 units = 2,00,000 × 3.25 = 6,50,000
Total cost at 2,75,000 units = 2,75,000 × 3.20 = 8,80,000
Check the given option and apply the variable cost and fixed cost as given in option and verify
whether it fits the cost structure as given problem. Select the option.
Data are given in Option (C) fits the cost structure as a given problem.

Alternatively,
Answer:
(C) ₹ 3 and ₹ 50,000 respectively

Question 32.
Dec 2015: The following data is obtained from the records of Mayur Ltd:

Break-even-point in rupees is
(A) ₹ 45,000
(B) ₹ 52,000
(C) ₹ 55,000
(D) ₹ 55,500
Hint:
P/V Ratio = Change in profit Change in sales × 100 = 4,00010,000 × 100 = 40%

BEP (in value) = Fixed Cost P/V Ratio =22,00040% = 55,000

Answer:
(C) ₹ 55,000

Question 33.
Dec 2015:
Assertion (A):
The profit volume ratio is considered to be the best indicator of the profitability of the business.
Reason (R):
If the profit volume ratio is improved, it will result in better profits.
Select the correct answer from the options given below
(A) Both A and R are true and R is the correct explanation of A
(B) Both A and R are true, but R is not the correct explanation of A
(C) A is true, but R is false
(D) A is false, but R is true
Answer:
(A) Both A and R are true and R is the correct explanation of A

Question 34.
Dec 2015:Which of the following are advantages of marginal costing :
(1) Pricing decision
(2) True profit
(3) Difficulty to classify
(4) Ignores time value
(5) Break-even analysis
(6) Contribution is not final
(7) Control over expenditure
Select the correct answer from the options given below
(A) (1), (2). (5) and (7)
(B) (1), (3), (5) and (7)
(C) (3), (4), (6) and (7)
(D) (1), (2), (6) and (7)
Answer:
(A) (1), (2). (5) and (7)

Question 35.
Dec 2015: If sales revenue at 60% capacity is ₹ 4,50,000, sales revenue at 70% capacity on a fall in
selling price by 5% would be
(A) ₹ 4,98,750
(B) ₹ 7,50,000
(C) ₹ 5,25,000
(D) ₹ 7,12,000
Hint:

Answer:
(A) ₹ 4,98,750

Question 36.
Dec 2015: Match the following:

List-I List-II

P. Classification of costs 1. Contribution to fixed and variable costs

Q. Difference between sales and variable

2. P/V ratio
costs

R. Both fixed and variable costs are charged to product costing 3. Marginal

S. Relative profitability 4. Absorption

Select the correct answer from the following options

Answer:
(C)

Question 37.
Dec 2015:
Statement-I:
The margin of safety represents the difference between sales at the break-even point and total
sales.
Statement-II:
The margin of safety can be expressed as a percentage of total sales or in value or in terms of
quantity.
Select the correct answer from the options given below
(A) Both statements are correct
(B) Both statements are incorrect
(C) Statement-I is correct, but Statement-II is incorrect
(D) Statement-I is incorrect, but Statement-II is correct.
Answer:
(A) Both statements are correct

Question 38.
Dec 2015: Match the following:

List-I List-II

P. Excess of actual sales over break-even sale volume 1. Contribution

Q. Sum of fixed cost and profit 2. Cost-volume-profit analysis

R. Break-even analysis 3. No profit, no loss

S. Break-even point 4. Margin of safety

Select the correct answer from the options given below

Answer:
(A)

Question 39.
Dec 2015: Match the following:

List-I List-II

P. Absorption costing 1. Is a logical extension of marginal costing

Q. Fixed expenses 2. Relationship of change in cost and change in profit

R. Marginal costing 3. Contribution = _____ + Profit

S. Break-even analysis 4. Uses classification of costs according to their functions

Select the correct answer from the options given below

Answer:
(D)

Question 40.
Dec 2015: A company sells its product at ₹ 15 per unit. In a period, it produces and sells 8,000 units
and incurs a loss of ₹ 5 per unit. If the sales volume were to be raised to 20,000 units, it could earn a
profit of ₹ 4 per unit. The Break-even point (in units) will be
(A) 24,000 Units
(B) 12,000 Units
(C) 16,000 Units
(D) 30,000 Units
Hint:
Sales = 8,000 × 15 = 1,20,000; Loss = 8,000 × 5 = 40,000
Sales = 20,000 × 15 = 3,00,000; Profit = 20,000 × 4 = 80,000
P/V Ratio = Change in profit Change in sales × 100 = −40,000−80,0001,80,000 × 100 = 66.67%

Contribution per unit = 80,0008,000 = 10

BEP (in units) = Fixed Cost Contribution per unit =1,20,00010 = 12,000
Answer:
(B) 12,000 Units

Question 41.
Dec 2015:
Statement-1:
At the time of replacement of plant, according to marginal cost technique, the proposal which yields
the lowest contribution is to be selected.
Statement-II:
According to the total cost technique, the proposal which involves the highest costs is to be selected.
Select the correct answer from the following
(A) Both statements are correct
(B) Both statements are incorrect
(C) Statement-I is correct, but Statement-II is incorrect
(D) Statement-I is incorrect, but Statement-II is correct
Answer:
(B) Both statements are incorrect

Question 42.
Dec 2015: Choose the correct statements from the following:
(1) Marginal costing and absorption costing are the same
(2) For decision making, absorption costing is more suitable than marginal costing
(3) Cost-volume-profit relationship also denotes break-even point
(4) Marginal costing is based on the distinction between fixed and variable costs.
Correct option is
(A) (1) and (2)
(B) (2) and (3)
(C) (3) and (4)
(D) (2) and (4)
Answer:
(C) (3) and (4)

Question 43.
Dec 2015: The sales and profit during the two periods were as follows:
Sales required to earn a profit of ₹ 5,00,000 is
(A) ₹ 30 lakh
(B) ₹ 40 lakh
(C) ₹ 35 lakh
(D) ₹ 28 lakh
Hint:
P/V Ratio = Change in profit Change in sales × 100 = 2,00,00010,00,000 × 100 = 20%

Sales = 7,00,00020% = 35,00,000

Answer:
(C) ₹ 35 lakh

Question 44.
Dec 2015: Match the following:

List-I List-II

P. Marginal cost 1. ____= Contribution ÷ Sales

Q. P/V ratio 2. Contribution = Selling price – ____

R. Profit 3. ____ = Sales × (1 – P/V ratio)

S. Variable cost 4. Margin of safety = ____ ÷ P/V Ratio

Select the correct answer from the options given below

Answer:
(B)

Question 45.
Dec 2015: Cost-volume-profit (CVP) analysis is based on several assumptions. Which one of the
following is not relevant for such an analysis
(A) Inventory quantity changes in the year
(B) Sales mix of the products is constant
(C) Material price and labour rates do not change
(D) Behaviour of both sales and variable cost is linear throughout the year
Answer:
(A) Inventory quantity changes in the year

Question 46.
Dec 2015: The fixed expenses are ₹ 4,000 and the break-even point is ₹ 10,000. The new break-even
point, if the selling price is reduced by 20% is
(A) ₹ 14,000
(B) ₹ 15,000
(C) ₹ 16,000
(D) ₹ 17,000
Hint:
Assume that the selling price per unit is ₹ 10

New selling price per unit after reduction of 20% = 10 – 2 = 8

Answer:
(C) ₹ 16,000

Question 47.
June 2016: There are two similar plants under the same management. The management desires to
merge these two plants. The following particulars are available:
The capacity of the merged plant to be operated for the purpose of break-even will be
(A) 45.14%
(B) 48.12%
(C) 50.76%
(D) 46.15%
Hint:

P/V Ratio (Merged plant) = Contribution Sales × 100 = 2601,000 × 100 = 26%
BEP(in value) (Merged plant) = Fixed cost P/V ratio =12026% = 461.54 Lakhs
Capacity of merged plant at BEP = 461.541,000 × 100 = 46.15%
Answer:
(D) 46.15%

Question 48.
June 2016: Which of the following statements is/are false?
(i) Product can be sold below marginal cost in certain special circumstances
(ii) Cost per unit of the key factor is the basis of ranking products on profitability
(iii) When there are no inventories, profit figures under marginal and absorption costing are
identical.
Select the correct answer from the options given below
(A) (ii) only
(B) (i) and (ii)
(C) (i) and (iii)
(D) (ii) and (iii)
Answer:
(A) (ii) only

Question 49.
June 2016: Following data are given:
Direct labour hours available are 72,000 hours.
What should be the number of units of A and B to be produced to maximize the profit of the
company?
(A) A-10,000 units, B-5,500 units
(B) B-10,000 units, A-5,500 units
(C) B-10,000 units, A-6,400 units
(D) 10,000 units of each A and B
Hint:

Total hours for producing 10,000 units of Product B = 10,000 × 4 = 40,000

Hours available for producing Product A = 72,000 – 40,000 = 32,000
Possible production of Product A = 32,0005 = 6,400
50. BEP = 100% – 4096 = 6096
BEP sales = 8,00040 × 60 = 12,000
Contribution at BEP = 12,000 – 6,000 = 6,000
At BEP, Contribution = Fixed Cost

Answer:
(C) B-10,000 units, A-6,400 units

Question 50.
June 2016: The margin of safety is ₹ 8,000 which represents 40% of sales. The P/V ratio is 50%. Fixed
cost will be
(A) ₹ 6,000
(B) ₹ 5,500
(C) ₹ 6,500
(D) ₹ 7,000
Answer:
(A) ₹ 6,000

Question 51.
June 2016: Cost-Volume-Profit analysis is based on several assumptions. Which one of the following
is not one of these assumptions
(A) Sales mix of the products is constant
(B) The behaviour of both sales and variable cost is linear throughout the relevant range
(C) Variable cost per unit will remain constant
(D) Productivity and operational efficiency will change according to output
Answer:
(D) Productivity and operational efficiency will change according to output

Question 52.
June 2016: Under marginal costing, unit product cost would most likely be increased by
(A) A decrease in the number of units produced
(B) An increase in the number of units produced
(C) An increase in the commission paid to the salesman for each unit sold
(D) A decrease in the commission paid to the salesman for each unit sold
Answer:
(A) A decrease in the number of units produced

Question 53.
June 2016: A company producing three products, viz., X, Y and Z has a sales mix in the ratio of 2:1:3.
The profit volume ratio of the products X, Y and Z are 15%, 30% and 20% respectively. The total fixed
cost of the company is ₹ 3,50,000. The break-even point of the company will be
(A) ₹ 16,15,390
(B) ₹ 17,50,000
(C) ₹ 23,33,333
(D) ₹ 11,66,667
Hint:
Sales mix is 2:1:3 means 33.33%:16.67%:50%

Total Equivalent P/v ratio = 596 + 596 + 10% = 20%

Composite BEP = 3,50,00020%= 17,50,000
Answer:
(B) ₹ 17,50,000
Question 54.
Dec 2016: From the following particulars, calculate the selling price per unit, if the break-even point
is brought down to 10,000 units :
Selling price per unit: ₹ 20
Variable cost per unit: ₹ 16
Fixed expenses: ₹ 60,000
Choose the correct option
(A) ₹ 25
(B) ₹ 20
(C) ₹ 22
(D) ₹ 32
Hint:

At BEP: Contribution = Fixed cost, hence Contribution = 60,000

Contribution p. u. = 60,00010,000 = 6 p. u.
Contribution p. u. + Variable cost p. u. = Selling price p. u.
6 + 16 = 22
Answer:
(C) ₹ 22

Question 55.
June 2016: Aman Ltd. sells its products at ₹ 16 per unit. In a period, if it produces and sells 20,000
units, it incurs a loss of ₹ 2 per unit. If the volume is doubled, it earns a profit of ₹ 2.20 per unit. The
amount of fixed cost and breakeven point (in units) will be
(A) ₹ 1,68,000 and 26,250 units
(B) ₹ 8,000 and 53,333 units
(C) ₹ 1,60,000 and 25,000 units
(D) ₹ 1,70,000 and 42,500 units
Answer:
(A) ₹ 1,68,000 and 26,250 units

Question 56.
June 2016:
Profit : ₹ 50,000
Contribution : ₹ 70,000
Sales : ₹ 7,00,000
The amount of margin of safety will be
(A) ₹ 4,00,000
(B) ₹ 5,00,000
(C) ₹ 2,50,000
(D) ₹ 1,45,000
Hint:

Answer:
(B) ₹ 5,00,000

Question 57.
June 2016: The ratio of variable cost to sales is 75%. The break-even point occurs at 64% of the
capacity sales when fixed cost is ₹ 1,20,000. The 100% capacity sales will be
(A) ₹ 4,80,000
(B) ₹ 12,50,000
(C) ₹ 7,50,000
(D) None of the above
Hint:

Sales at 100% = 4,80,00064 × 100 = 7,50,000

Answer:
(C) ₹ 7,50,000

Question 58.
Dec 2016: Raj Ltd. furnishes the following information:
Production: 10,000 units
Sales: 5,000 units
Selling price: ₹ 12 per unit
Variable cost: 6 per unit
Fixed costs: ₹ 40,000 p.a.
Profit/loss under marginal costing method will be
(A) ₹ 10,000 (Profit)
(B) ₹ 10,000 (Loss)
(C) ₹ 20,000 (Profit)
(D) ₹ 20,000 (Loss)
Hint:

Sales 60,000

(-) Variable cost (30,000)

Contribution 30,000

(-) Fixed cost (40,000)

Loss (10,000)

Answer:
(B) ₹ 10,000 (Loss)

Question 59.
Dec 2016: A radio manufacturer finds that while it costs 16.25 per unit to make a component, the
same is available in the market at ₹ 5.75 each. Continuous supply is also fully assured. The break-up
of costs per unit is as follows:
Materials: ₹ 2.75
Labour: ₹ 1.75
Other variable expenses: ₹ 0.50
Depreciation & other fixed costs: ₹ 1.25
The best option for the manufacturer will be
(A) To make
(B) To buy
(C) To sell
(D) None of the above
Hint:
In ‘make or buy decisions, it is profitable to buy from outside only when the supplier’s price is below
the firm’s own variable cost.
Buying cost = 5.75
Making variable cost = 2.75 + 1.75 + 0.50 = 5
A radio manufacturer is advised to make the component.
Answer:
(A) To make

Question 60.
Dec 2016: Following data is obtained from the cost records of Moon Ltd.:
P/V ratio will be
(A) 40%
(B) 46%
(C) 52%
(D) 50%
Hint:
P/V Ratio = Change in profit Change in sales × 100 = 30,000−20,0001,20,000−1,00,000 × 100
= 10,00020,000 × 100 = 50%
Answer:
(D) 50%

Question 61.
Dec 2016: In a purely competitive market, 10,000 pocket transistors can be manufactured and sold
and certain
profit is generated. It is estimated that 2.0 pocket transistors need to be manufactured and sold in a
monopoly market to earn the same profit. Profit under both conditions is targeted at ₹ 2,00,000. The
variable cost per transistor is ₹ 100 and total fixed costs are ₹ 37,000. Unit selling price per transistor
under monopoly condition will be
(A) ₹ 218.50
(B) ₹ 234.50
(C) ₹ 267.25
(D) ₹ 274.35
Hint:

Units Monopoly market 2,000

Sales 4,37,000

(-) Variable cost (2,00,000)

Contribution 2,37,000

(-) Fixed cost (37,000)

Profit 2,00,000
Unit selling price = 4,37,0002,000 = 218.50
Answer:
(A) ₹ 218.50

Question 62.
Dec 2016: Following information is related to Product-A:
In 2015, the variable cost was 7200per unit and fixed cost ₹ 40 per unit. Production was 1,20,000
units. It is expected that production in 2016 will increase to 1.60.0 units. The variable cost will
increase by 25% and fixed cost by 10% in 2016. The amount of fixed cost in 2016 will be
(A) ₹ 52,80,000
(B) ₹ 70,40,000
(C) ₹ 64,00,000
(D) ₹ 48,00,000
Hint:
1,20,000 × 40 × 110%= 52,80,000
Answer:
(A) ₹ 52,80,000

Question 63.
Dec 2016: Following information is given for a product of a manufacturing company:
Material ₹ 18 per unit; other variable costs ₹ 22 per unit; and fixed expenses ₹ 18 per unit. The
selling price is ₹ 75 per unit. The company is presently producing 80.0 units at 80% capacity. The
company received an offer for 20,000 units from a foreign customer. The minimum price to be
accepted from a foreign customer, if the company wants to earn 20% on foreign sales will be
(A) ₹ 50
(B) ₹ 58
(C) ₹ 72.50
(D) ₹ 69.60
Hint:

x – 8,00,000 = 0.2.x
0.8x = 8,00,000
x = 10,00,000
Price per unit = 10,00,000/20,000 = 50
Answer:
(A) ₹ 50
Question 64.
Dec 2016: Margin of safety in a company can be improved by:
(1) Reducing the fixed cost and variable cost
(2) Increasing sales volume and price of sales
(3) Increasing stock of material in the expectation of price rise
(4) Expanding business to fulfil the demand of the market
(5) Changing the product mix to increase contribution.
Select the correct answer from the options given below
(A) (1), (2) and (3)
(B) (1), (2) and (5)
(C) (1), (3) and (4)
(D) (2), (3) and (5)
Answer:
(B) (1), (2) and (5)

Question 65.
Dec 2016:
Statement -1
When there are no inventories, the profit figure under marginal costing and absorption costing is
identical.
Statement – II
Inventories are valued at cost of production in absorption and marginal costing systems.
Select the correct answer from the options given below
(A) Both statements are correct
(B) Both statements are incorrect
(C) Statement-I is incorrect, but Statement-!! is correct
(D) Statement-I is correct, but Statement-II is incorrect
Answer:
(D) Statement-I is correct, but Statement-II is incorrect

Question 66.
Dec 2016: The P/V ratio of Akhil & Co. is 50% and margin of safety is 40%. The company sold 500
units for ₹ 5,00,000. The break-even point sales will be
(A) ₹ 2,50,000
(B) ₹ 3,00,000
(C) ₹ 3,50,000
(D) ₹ 4,00,000
Hint:
Margin of safety = Actual sales – Break even sales
4096 = 100% – Break even sales
Break even sales = 60%
5,00,000 × 60% = 3,00,000
Answer:
(B) ₹ 3,00,000
Question 67.
June 2017: Ramya Ltd. furnishes the following information:
Production 10,000 units,
Sales 10,000 units,
Selling price ₹ 12 per unit,
Variable cost ₹ 6 per unit,
Fixed costs ₹ 40,000 per annum (normal capacity of 10,000 units)
Profit/Loss under marginal costing method will be:
(A) ₹ 10,000
(B) ₹ 30,000
(C) ₹ 20,000
(D) ₹ 25,000
Hint:

Answer:
(C) ₹ 20,000

Question 68.
June 2017: A manufacturer produces 2,00,000 units of a product at a cost of ₹ 3.25 per unit. Later
on, he produces 2,75,000 units at a cost of ₹ 3.20 per unit, when its fixed overheads have increased
by 10%. The originally fixed overheads will be:
(A) ₹ 50,000
(B) ₹ 55,000
(C) ₹ 30,000
(D) ₹ 40,000
Hint:
A simple way to solve this MCQ is to apply the figures of the given option in the following ways:
Let’s take the figure of Option (A) ₹ 50,000 as fixed overhead.

Since the variable overhead per unit remains the same, Option (A) is correct.
Answer:
(A) ₹ 50,000
Question 69.
June 2017: Mr Mahesh has a sum of ₹ 3,00,000 which invested in a business. He wishes for a 15%
return on his fund. It is revealed from the present cost data analysis that the variable cost of
operation is 60% of sales and fixed costs are ₹ 1,50,000 p.a. On the basis of this information, you are
required to find out the sales volume to earn a 15% return.
(A) ₹ 4.875 Lakhs
(B) ₹ 4.675 Lakhs
(C) ₹ 4.775 Lakhs
(D) ₹ 5.875 Lakhs
Hint:
Required return = 3,00,000 × 1596 = 45,000

Answer:
(A) ₹ 4.875 Lakhs

Question 70.
June 2017: A radio manufacturer finds that it costs ₹ 6.25 per unit to make component M-140 and
the same is available in the market at ₹ 5.75 each. Continuous supply is also fully assured. The break-
down cost per unit as follows: Materials ₹ 2.75, Labour ₹ 1.75 other variable expenses ₹ 0.50,
Depreciation and other fixed cost ₹ 1.25. What would be your decision, if the supplier offered the
component at ₹ 4.85 per unit?
(A) Make
(B) Buy
(C) Sell
(D) None of the above
Hint:
The present MCQ is based on “make or buy”.
Variable cost of making = 2.75 + 1.75 + 0.50 = 5.00

Answer:
(B) Buy

Question 71.
June 2017: In a purely competitive market, 10,000 pocket transistors can be manufactured and sold
and certain profit is generated. It is estimated that 2,0 pocket transistors need to be manufactured
and sold in a monopoly market to earn the same profit. Profit under both conditions is targeted at ₹
2,00,000. The variable cost per transistor is ₹ 100 and the total fixed costs are ₹ 37,000. You are
required to find out the unit selling price per transistor under competitive condition.
(A) ₹ 125.70
(B) ₹ 123.70
(C) ₹ 128.70
(D) ₹ 228.70
Hint:

Answer:
(B) ₹ 123.70

Question 72.
June 2017: A firm has given the following data:
Fixed expenses at 50% ₹ 15,000, Fixed expenses when factory is close down ₹ 10,000, Additional
expenses in closing down ₹ 1,000, Production at 50% capacity 5,000 units, contribution per unit ₹ 1.
Advise whether to run the factory or close it down:
(A) Close
(B) Run
(C) Continue
(D) None of the above
Hint:

Since the loss is greater when the factory is closed, it advised running the factory.
Answer:
(B) Run

Question 73.
June 2017: From the following data, the P/V ratio will be:

(A) 50%
(B) 10%
(C) 20%
(D) 40%
Hint:
P/V ratio = Change in profit Change in sales × 100 = 10,00,000−5,00,00075,00,000−50,00,000 × 100
= 5,00,00025,00,000 × 100 = 20%
Answer:
(C) 20%

Question 74.
June 2017: You are requested to report to the top management of Eastern India Engineering
Company the point of sales in terms of rupee to break-even. For the purpose, you obtain that:
Fixed overheads remain constant at ₹ 12,000
Variable costs will rise zero to ₹ 12,000 Selling price is ₹ 600 per ton
The tonnage produced and sold is 30 tons.
(A) ₹ 36,000
(B) ₹ 32,000
(C) ₹ 30,000
(D) ₹ 38,000
Hint:

Answer:
(A) ₹ 36,000

Question 75.
June 2017: In a period sales amount to ₹ 2,00,000, net profit ₹ 20,000 and Fixed overheads are ₹
30,000. If sales ₹ 3,00,000 profit will be:
(A) ₹ 48,000
(B) ₹ 50,000
(C) ₹ 40,000
(D) ₹ 45,000
Hint:
Answer:
(D) ₹ 45,000

Question 76.
June 2017: Reliance Furniture House places before you the following trading results:

Fixed cost will be:

(A) ₹ 15,000
(B) ₹ 10,000
(C) ₹ 30,000
(D) ₹ 60,000
Hint:
P/V ratio = Change in profit Change in sales × 100 = 30,000−20,0001,20,000−1,00,000 × 100
= 10,00020,000 × 100 = 50%

Answer:
(C) ₹ 30,000

Question 77.
June 2017: A factory engaged in manufacturing plastic buckets is working at 40% capacity and
produces 10,0 buckets per annum. The present cost-break-up for one bucket is as under:

Materials ₹ 10
Labour ₹3

Overheads ₹ 5 (60% fixed)

The selling price per bucket ₹ 20. If the factory operates 90% of capacity the profit will be:
(A) ₹ 75,000
(B) ₹ 80,000
(C) ₹ 82,500
(D) ₹ 92,500
Hint:

Answer:
(C) ₹ 82,500

Question 78.
June 2017: A company has fixed costs of ₹ 90,000 with sales of ₹ 3,00,000 and profit of ₹ 60,000.
Margin of safety will be:
(A) ₹ 1,00,000
(B) ₹ 1,20,000
(C) ₹ 1,50,000
(D) ₹ 1,30,000
Hint:

MOS (in value) = Profit P/V ratio =60,00050% = 1,20,000

Answer:
(B) ₹ 1,20,000
Question 79.
June 2017: A company sells its product at ₹ 15 per unit. In a period if it produces and sells 8,000
units, it incurs a loss of ₹ 5 per unit. If the volume is raised to 20,000 units, it earns a profit of ₹ 4 per
unit. Break-even point in units will be:
(A) 13,000 units
(B) 12,000 units
(C) 14,000 units
(D) 10,000 units
Hint:

P/V ratio = Change in profit Change in sales × 100 = 80,000−(−40,000)3,00,000−1,20,000 × 100

= 1,20,0001,80,000 × 100 = 66.6667%
BEP (in units) = Fixed cost Contribution p. u. =1,20,00010 = 12,000 units
Answer:
(B) 12,000 units

Question 80.
June 2017: The cost accountant of M Ltd. has ascertained the selling price of a product is ₹ 20 per
unit. The variable cost is ₹ 15 per unit and the break-even point is 21,600 units. Management has
decided to treat 12,000 units of B.E.P. because the production department cannot produce more
than this at the moment. The selling price for 12,000 units B.E.P. will be:
(A) ₹ 20 per unit
(B) ₹ 24 per unit
(C) ₹ 26 per unit
(D) ₹ 28 per unit
Hint:
Answer:
(B) ₹ 24 per unit

Question 81.
June 2017: Yadhav Co. has an annual fixed cost of ₹ 1,20,000. In 2015 sales amounted to ₹ 6,00,000
as compared to ₹ 4,50,000 in 2014 and prophet in 2015 was ₹ 50,000 higher than in 2014. If there is
no need to expand the company’s capacity. The prophet or loss in 2016 on a forecasted sales of ₹
9,00,000 will be:
(A) ₹ 1,80,000
(B) ₹ 1,90,000
(C) ₹ 1,70,000
(D) ₹ 1,85,000
Hint:

P/V ratio = Change in profit Change in sales × 100 = 50,0001,50,000 × 100 = 33.3333%
Answer:
(A) ₹ 1,80,000

Question 82.
June 2017: A company manufactures and sells three types of product namely A, B and C. Total sales
per month is ₹ 80,000 in which the share of these three products are 50%, 30% and 20%
respectively. The variable cost of these products is 60%, 50% and 40% respectively. The combined
P/V Ratio will be:
(A) 49%
(B) 48%
(C) 47%
(D) 50%
Hint:
Combined P/V ratio = (40 × 50%) + (50 × 30%) + (60 × 20%) = 47%

Variable cost per unit = Change in cost Change in units =20,00010,000 = 2

Answer:
(C) 47%

Question 83.
June 2017: A plant is operating at 60% capacity. The fixed costs are ₹ 30,000, the variable costs are ₹
1,00,000 and the sales amount to ₹ 1,50,000. The percentage of capacity at which the plant should
operate to earn a prophet of ₹ 40,000 will be:
(A) 80%
(B) 84%
(C) 90%
(D) 94%
Hint:

601,50,000 × 2,10,000 = 84%

Answer:
(B) 84%

Question 84.
June 2017: When the margin of safety is 20% and the P/V ratio is 60%, the prophet will be:
(A) 30%
(B) 33.3333%
(C) 12%
(D) None of the above
Hint:
Margin of safety = Profit P/V ratio
20% = x60%
x = Profit = 20 × 60% = 12%
Answer:
(C) 12%

Question 85.
June 2017: If the total cost of producing 20,000 units of a product is ₹ 90,000 and if 25,000 units will
be produced, then the total cost will be ₹ 1,05,000 and the selling price is ₹ 8 per unit. The break-
even point will be:
(A) 10,000 units
(B) 8,000 units
(C) 6,000 units
(D) 5,000 units
Hint:
Profit at 20,000 units = 1,60,000 – 90,000 = 70,000
Profit at 25,000 units = 2,00,000 – 1,05,000 = 95,000
P/V ratio = Change in profit Change in sales × 100 = 25,00040,000 × 100 = 62.5%

BEP (in units) = Fixed Cost Contribution p.u. =30,0005 = 6,000

Answer:
(C) 6,000 units

Question 86.
June 2017: P/V ratio 25%, Sales ₹ 1,20,000 and Fixed costs ₹ 17,500, Profit will be:
(A) ₹ 12,500
(B) ₹ 30,000
(C) ₹ 17,500
(D) ₹ 20,000
Hint:

Answer:
(A) ₹ 12,500
Question 87.
June 2017: Under marginal costing system, product costs are:
(A) Equal to fixed cost plus variable costs
(B) Equal to only marginal costs
(C) Equal to semi-variable costs
(D) None of the above
Answer:
(B) Equal to only marginal costs

Question 88.
June 2017: Prime cost plus variable overheads gives:
(A) Cost of sales
(B) Marginal costs
(C) Works cost
(D) Cost of production
Answer:
(B) Marginal costs

Question 89.
Which of the following is not true?
(A) P/V Ratio = Profit Margin of Safety × 100
(B) Break-even Point = Fixed Cost P/V ratio
(C) Break-even Point = Fixed Cost P/V ratio × 100
(D) P/V Ratio = Undefined control sequence \operatorname × 100
Answer:
(C) Break-even Point = Fixed Cost P/V ratio × 100

Question 90.
June 2017:
Assertion (A):
In management accounting firm decisions on pricing policy can be taken.
Reason (R):
As the marginal cost per unit is constant from period to period within a short span of time.
Codes:
(A) A is true, but R is false
(B) A is false, but R is true
(C) Both A & R are true and R is the correct explanation of A
(D) Both A & R are true but R is not the correct explanation of A
Answer:
(C) Both A & R are true and R is the correct explanation of A

Question 91.
June 2017:
Assertion (A):
ProRt volume ratio is considered to be the best indicator of the profitability of the business.
Reason (R):
If the profit volume ratio improved, it will result in better profits.
Codes:
(A) A is false, but R is true
(B) A is true, but R is false
(C) Both A & R are true but R is not the correct explanation of A
(D) Both A & R are true and R is the correct explanation of A
Answer:
(C) Both A & R are true but R is not the correct explanation of A

Question 92.
June 2017:
Statement I:
The margin of safety represents the difference between the sales at the breakeven point and the
total sales.
Statement II:
Margin safety can be expressed as a percentage of total sales or in value or in terms of quantity.
Codes:
(A) Statement I is correct but statement II is incorrect
(B) Statement I is incorrect but statement II is correct
(C) Both statements are correct
(D) Both statements are incorrect
Answer:
(C) Both statements are correct

Question 93.
June 2017: Match the following:

List I List II

(a) Classification of costs into a fixed and variable cost (1) Contribution

(b) Difference between sales and variable cost (2) P/V ratio

(c) Both fixed and variable cost are charged to the product (3) Marginal Costing

(d) Relative profitability (4) Absorption

Codes:

Answer:
(B)

Question 94.
June 2017: Consider the following statements:
(1) Marginal costing and absorption costing are the same.
(2) For decision-making, absorption costing is more suitable than marginal costing.
(3) Cost-volume-profit relationship also denotes the break-even point.
(4) Marginal costing is based on the distribution between fixed and variable costs.
Which of the statements given above are correct?
(A) 4 and 2
(B) 2 and 3
(C) 3 and 4
(D) 1 and 2
Answer:
(C) 3 and 4

Question 95.
June 2017: Which of the following are the advantages of marginal costing?
(1) Pricing decision
(2) True profit
(3) Difficulty to classify
(4) Ignores time value
(5) Break-even analysis
(6) Contribution is not final
(7) Control over expenditure Codes:
(A) 1,3, 5 and 7
(B) 1,2, 5 and 7
(C) 3, 4, 6 and 7
(D) 1, 2, 6 and 7
Answer:
(B) 1,2, 5 and 7

Question 96.
Dec 2017: Marginal Costing in America is called as:
(A) Differential costing
(B) Out-of-pocket costing
(C) Direct costing
(D) Variable costing
Answer:
(C) Direct costing

Question 97.
Dec 2017:
Statement-I:
Break-even analysis has gradually become a popular service tool for modern financial management.
Statement-II:
No concrete limitations have been raised anywhere against the utility of break-even analysis.
Select the correct answer from the option given below:
(A) Both statements are correct
(B) Both statements are wrong
(C) Statement I is correct but statement II is not correct
(D) Statement I is not correct but statement II is correct
Answer:
(C) Statement I is correct but statement II is not correct

Question 98.
Dec 2017: When fixed costs are ₹ 90,000, the ratio of variable cost to sales is 75% and the break-
even point occurs at 60% of the capacity sales, the capacity sales are:
(A) ₹ 4,50,000
(B) ₹ 5,60,000
(C) ₹ 6,00,000
(D) ₹ 7,50,000
Hint:

Answer:
(C) ₹ 6,00,000

Question 99.
Dec 2017: The P/V ratio of a company is 40%. If the company reduces its selling price by 20%, the
required percentage of increase in sales value to maintain the same profit is:
(A) 20%
(B) 40%
(C) 60%
(D) 75%
Hint:
The following data is assumed:
Selling price per unit = 20; No. of units = 500; Fixed cost = 1,000.

If the company reduces its selling price by 20% the required percentage of increase in sales value to
maintain the same profit is as shown below:

Percentage increase in sales value = 16,000−10,00010,000 × 100 = 60%

Answer:
(C) 60%

Question 100.
Dec 2017: Mr. R’s sales and profit in 2015 were respectively ₹ 1,20,000 and ₹ 8,000. His sales &
profit in 2016 were ₹ 1,40,000 & ₹ 13,000 respectively. In this case his margin of Safety in 2016 was:
(A) ₹ 32,000
(B) ₹ 52,000
(C) ₹ 88,000
(D) ₹ 1,36,000
Hint:
P/V ratio = Change in profit Change in sales × 100 = 13,000−8,0001,40,000⋅1,20,000 × 100 = 40%
MOS (in value) = Profit P/V ratio =13,00025% = 52,000
Answer:
(B) ₹ 52,000

Question 101.
Dec 2017: Z Ltd. has a margin of safety of 4,000 units and break-even sales at 1,000 units. If its
margin of safety sales is ₹ 2,00,000, total sales shall be:
(A) ₹ 8,00,000
(B) ₹ 6,00,000
(C) ₹ 4,00,000
(D) ₹ 2,50,000
Hint:
2,00,0004,000 × 5,000 = 2,50,000
Answer:
(D) ₹ 2,50,000

Question 102.
Dec 2017: R.V. Ltd., made a sale for ₹ 4,50,000 in the first half and for ₹ 5,00,000 in the second half
of 2016. In this year the total cost for the first and the second half of the year were respectively ₹
4,00,000 and ₹ 4,30,000. If there is no change in selling price and variable cost and that the fixed
expenses are incurred equally, the break-even sales for the whole year is:
(A) ₹ 6,50,000
(B) ₹ 6,00,000
(C) ₹ 5,00,000
(D) ₹ 4,50,000
Hint:
P/V ratio = Change in profit Change in sales × 100 = 20,00050,000 × 100 = 40%
BEP = Fixed Cost P/V Ratio =2,60,00040% × 100 = 6,50,000
Answer:
(A) ₹ 6,50,000

Question 103.
Dec 2017: Following are the particulars relating to products P and Q:

Which product is more profitable when?

(a) Material is the key factor.
(b) Labour hour is the key factor.
(c) Sales potential in units is the key factors.
(d) Sales potential in rupees is the key factors.
Codes:

Hint:
(a) Material is a key factor: Product Q is better as contribution per kg is high.
(b) Labour hour is a key factor: Product P is better as contribution per labour hour is high.
(c) Sales potential in units is the key factor: Product Q is better as contribution per unit is high.
(d) Sales potential in rupee is the key factor: Product Q is better as contribution per rupee is high.
Answer:
(B)

Question 104.
June 2018: If the P/V ratio of a product is 25% and the selling price is ₹ 25 per unit, the marginal cost
of the product would be:
(A) ₹ 18.75
(B) ₹ 16
(C) ₹ 15
(D) ₹ 20
Hint:
The P/V ratio is 25%. This means the variable cost ratio is 75%.
Variable cost per unit = 25 × 75% = 18.75
Answer:
(A) ₹ 18.75

Question 105.
June 2018: Contribution is the difference between:
(A) Selling price and Fixed cost
(B) Selling price and Total cost
(C) Selling price and Variable cost of sales
(D) Selling price and Profit
Answer:
(C) Selling price and Variable cost of sales

Question 106.
June 2018: Which of the statement is not true in respect of cost-volume-profit analysis?
(A) In order to forecast profit accurately, it is essential to know the relationship between profits and
costs on the one hand and volume on the other.
(B) Cost-volume analysis is not suitable for setting up flexible budgets which indicate costs at various
levels of activity.
(C) Cost-volume-profit analysis is of assistance in performance evaluation for the purpose of control.
(D) Analysis of cost-volume-profit relationship may assist in formulating price policies to suit
particular circumstances by projecting the effect which different price structures have on costs and
profits.
Answer:
(C) Cost-volume-profit analysis is of assistance in performance evaluation for the purpose of control.

Question 107.
June 2018: Total cost of a product: ₹ 10,000; Profit: 25% on Selling Price; Profit is:
(A) ₹ 2,500
(B) ₹ 3,000
(C) ₹ 3,333
(D) ₹ 2,000
Hint:
Profit is 25% on selling price which means it is 33.33% on cost.
10,000 × 33.33% = 3,333
Answer:
(C) ₹ 3,333

Question 108.
June 2018: A manufacturing company provides you with the following information for the coming
month:

Budgeted sales revenue ₹ 7,50,000

Budgeted contribution ₹ 3,00,000

Budgeted profit ₹ 75,000

What will be the budgeted break-even sales volume?

(A) ₹ 9,37,500
(B) ₹ 5,25,000
(C) ₹ 5,62,500
(D) ₹ 6,75,000
Hint:
P/V ratio = 3,00,0007,50,000 × 100 = 40%
Fixed cost = 3,00,000 + 75,000 = 3,75,000
BEP (in value) = Fixed Cost P/V ratio =3,75,00040% = 9,37,500
Answer:
(A) ₹ 9,37,500

Question 109.
June 2018: A company, which has a margin of safety of ₹ 2,00,000 makes a profit of ₹ 40,000. If the
fixed cost is ₹ 2,50,000, break-even sales of the company would be:
(A) ₹ 15,00,000
(B) ₹ 12,50,000
(C) ₹ 10,00,000
(D) ₹ 20,00,000\
Hint:
MOS (in value) = Profit P/V ratio
2,00,000 = 40,000x
x = P/V ratio = 20%
Answer:

(B) ₹ 12,50,000

Question 110.
June 2018: The P/V ratio of a company is 50% and the margin of safety is 40%. If present sales are ₹
30,00,000 then Break-Even Point will be:
(A) ₹ 9,00,000
(B) ₹ 18,00,000
(C) ₹ 5,00,000
(D) None of the above
Hint:
The margin of safety is 40%; this means BEP will occur at 60%.
30,00,000 × 60% = 18,00,000
Answer:
(B) ₹ 18,00,000

Question 111.
June 2018: When the sales increase from ₹ 40,000 to ₹ 60,000 and profit increases by ₹ 5,000, the
P/V ratio is:
(A) 20%
(B) 30%
(C) 25%
(D) 40%
Hint:
P/V ratio = Change in profit Change in sales × 100 = 5,00020,000 × 100 = 25%
Answer:
(C) 25%
Question 112.
June 2018:
Assertion (A):
Marginal costing furnishes a better and more logical basis for fixation of sales prices as well as
tendering for contracts.
Reason (R):
Marginal cost provides management with information regarding the behaviour of costs and the
incidence of such cost on the profitability of an undertaking.
Select the correct answer from the options given below:
(A) Both A and R are true and R is the correct explanation of A
(B) Both A and R are true but R is not the correct explanation of A
(C) A is true but R is false
(D) A is false but R is true
Answer:
(A) Both A and R are true and R is the correct explanation of A

Question 113.
June 2018: Actual overheads for the year ending 31st March 2017 were ₹ 21,000, whereas the
overhead absorbed shows an over absorption of ₹ 1,000 for the same period. If the direct labour
cost is ₹ 1,00,000, then the overhead absorption rate based on direct wages would be:
(A) 20%
(B) 21%
(C) 22%
(D) 25%
Hint:
Overhead Absorbed = 21,000 + 1,000 = 22,000
Overhead Absorption Rate = Overhead Absorbed Direct Wages × 100 = 22,0001,00,000 × 100 =
22%
Answer:
(C) 22%

Question 114.
June 2018: If the sales of a product are ₹ 94,080 and the profit margin cost 12%, the amount of
profit will be:
(A) ₹ 7,800
(B) ₹ 11,290
(C) ₹ 8,580
(D) ₹ 10,080
Hint:
94,080 × 12/112 = 10,080
Answer:
(D) ₹ 10,080

Question 115.
June 2018: ABC Ltd. shows break-even sales of ₹ 40,500 and budgeted sales of ₹ 50,000. Compute
the margin of safety ratio?
(A) 19%
(B) 81%
(C) 1.81%
(D) Require more data to calculate
Hint:
[(50,000 – 40,500)/50,000] × 100 = 19%
Answer:
(A) 19%

Question 116.
Dec 2018: P/V Ratio 4096; Sales
₹ 65,00,000 and BEP ₹ 47,50,000. Proht will be:
(A) ₹ 26,00,000
(B) ₹ 19,00,000
(C) ₹ 45,00,000
(D) ₹ 7,00,000
Hint:

Answer:
(D) ₹ 7,00,000

Question 117.
Dec 2018: If the standard output for 8 hours is 200 units and the actual output in 10 hours is 350
units, the efficiency level will be:
(A) 175%
(B) 140%
(C) 57.14%
(D) 71.42%
Hint:
For 8 hrs – 200 units
For 10 hrs – ?
(10 × 200)/8 = 250 units
Efficiency % = Actual output Standard output × 100 = 350250 × 100 = 140%
Answer:
(B) 140%

Question 118.
Dec 2018: From the following data, the P/V Ratio will be:
(A) 12%
(B) 25%
(C) 20%
(D) 33.33%
Note: ThisMCQ is not properly drafted; for further clarification please see the hints.
Hint:
None of the title given options is correct; see title calculation below:

P/V ratio = Change in profit Change in sales × 100 = 10,00,00020,00,000 × 100 = 50%
Answer:

Question 119.
Dec 2018: Given, Sales ₹ 80 Lakh; Net Profit ₹ 8 Lakh and Fixed Cost ₹ 12 Lakh. On the basis of the
data, if sales is ₹ 120 Lakh, then the profit will be:
(A) ₹ 18 Lakh
(B) ₹ 12 Lakh
(C) ₹ 10 Lakh
(D) ₹ 6 Lakh
Hint:

Answer:
(A) ₹ 18 Lakh

Question 120.
Dec 2018: A factory engaged in manufacturing LED Lamps is working at 6096 capacity and produces
1,20,000 LED Lamps per annum. The present cost-break-up and selling price for one LED Lamp is as
under:
 ₹

Direct Material 10

Direct Labour 16

Overheads (60% fixed) 20

Selling Price 60

If the factory operates its 90% capacity, then profit will be:
(A) ₹ 16,80,000
(B) ₹ 32,40,000
(C) ₹ 25,20,000
(D) ₹ 67,20,000
Hint:

Answer:
(B) ₹ 32,40,000

Question 121.
Dec 2018: The production cost of 1,0 units of an article is as follows:

Costs ₹

Direct Material 4,00,000

Direct Wages 3,00,000

Fixed & Variable Overheads 2,00,000

The company produced 5,000 units and sold at ₹ 1,000 per unit and earned a profit of ₹ 10,00,000.
The amount of variable overhead per unit is:
(A) ₹ 200
(B) ₹ 75
(C) ₹ 100
(D) ₹ 120
Hint:

Variable overheads per unit = Change in overheads Change in units =3,00,0004,000 = 75

Answer:
(B) ₹ 75

Question 122.
Dec 2018: P/V Ratio for the firm is 60%, Total fixed costs are ₹ 10,40,000 and variable cost per unit is
₹ 720. If the sales are 20,000 units, then the selling price per unit will be:
(A) ₹ 1,200
(B) ₹ 772
(C) ₹ 1,930
(D) ₹ 1,800
Answer:
(D) ₹ 1,800

Question 123.
Dec 2018: If the P/V Ratio is 30%, Margin of Safety is 40% and BEP is ₹ 48 Lakh, then the profit will
be:
(A) ₹ 9.60 Lakh
(B) ₹ 14.40 Lakh
(C) ₹ 5.76 Lakh
(D) ₹ 24 Lakh
Note: This MCQ is not properly drafted; for further clarification please see the hints.
Hint:
The margin of safety is 40% which means BEP occurs at 40%
Net profit is 21,60,000 hut none of the option given contains this figure.
Answer:

Question 124.
Dec 2018: Fixed costs ₹ 45 Lakh, Variable costs ₹ 120 Lakh and Profit ₹ 35 Lakh, then P/V Ratio is:
(A) 29.17%
(B) 37.5%
(C) 66.67%
(D) 40%
Hint:

Answer:
(D) 40%

Question 125.
Dec 2018: Which of the following techniques of costing is also known as out-of-pocket costing?
(A) Standard Costing
(B) Historical Costing
(C) Marginal Costing
(D) Uniform Costing
Answer:
(C) Marginal Costing

Question 126.
Dec 2018: Sales increased from ₹ 750 Lakh to ₹ 875 Lakh. If P/V Ratio is 30%, then the increase in the
contribution will be:
(A) ₹ 262 Lakh
(B) ₹ 225 Lakh
(C) ₹ 37.50 Lakh
(D) ₹ 125 Lakh
Answer:
(C) ₹ 37.50 Lakh

Question 127.
June 2019: The following information is given:
Selling price ₹ 20 per unit, Variable cost ₹ 15 per unit and Fixed cost ₹ 48,000. What will be BEP sales
(in ₹ ) and Profit if actual sales are 40% more than BEP sales?
(A) ₹ 1,92,000 and 20,800
(B) ₹ 1,80,000 and ₹ 18,000
(C) ₹ 96,000 and ₹ 9,600
(D) ₹ 1,92,000 and ₹ 19,200
Hint:
Contribution = 20 – 15 = 5
P/V ratio = Contribution Sales × 100 = 520 × 100 = 25%
BEP (in value) = Fixed cost P/V ratio =48,00025% = 1,92,000
Answer:
(D) ₹ 1,92,000 and ₹ 19,200

Question 128.
June 2019:
Statement I:
When a factory operates at full capacity, Fixed cost also becomes relevant for make or buy decision.
Statement II:
The margin of safety is the difference between actual sales and standard sales.
Select the correct answer from the options given below:
(A) Both statements are correct
(B) Both statements are incorrect
(C) Statement I is incorrect, but Statement II is correct
(D) Statement I is correct, but Statement II is incorrect
Answer:
(D) Statement I is correct, but Statement II is incorrect

Question 129.
June 2019: The total cost and profit during two periods are as follows:

The profit volume ratio will be:

(A) 15%
(B) 25%
(C) 20%
(D) 33.33%
Hint:
Sales of Period I = 4,50,000 + 50,000 = 5,00,000
Sales of Period 2 = 6,50,000 + 1,00,000 = 7,50,000
P/V ratio = Change in profit Change in sales × 100 = 50,0002,50,000 × 100 = 20%
Answer:
(C) 20%

Question 130.
June 2019: If profit, fixed cost and margin of safety are ₹ 19,20,000; ₹ 25,60,000 and ₹ 64,00,000
respectively, then break-even point will be:
(A) ₹ 44,80,000
(B) ₹ 85,33,333
(C) ₹ 38,40,000
(D) ₹ 48,00,000
Hint:

Answer:
(B) ₹ 85,33,333

Question 131.
June 2019: Selling price per unit ₹ 20, Trade discount 5% of selling price, cash discount 2% on sales,
Material cost ₹ 3, Labour cost ₹ 4, Fixed overheads ₹ 22,000 and variable overheads 80% of labour
cost. what would be the net profit if sales are 10% above the BEP?
(A) ₹ 2,000
(B) ₹ 2,500
(C) ₹ 2,200
(D) ₹ 1,850
Hint:
Trade discount = 20 × 5% = 1
Variable cost = 3 + 4 + 3.2 = 10.2
A cash discount is not considered in cost accounts.

Answer:
(C) ₹ 2,200
Question 132.
June 2019: A firm manufactures 15,0 units per annum, each taking 1.5 direct labour hours. The
direct labour rate is ₹ 8 per hour and pays rise of 15% is awarded halfway through the year.
What is the total annual direct labour budget amount?
(A) ₹ 1,20,000
(B) ₹ 1,93,500
(C) ₹ 1,80,000
(D) ₹ 2,07,000
Answer:
(B) ₹ 1,93,500

Question 133.
June 2019: A factory is presently working at 50% capacity and producing 4,0 units. The cost data are
as follows: Material and labour cost per unit ₹ 15, Factory overheads (40% variable) ₹ 30,000. What
will be the cost of the work for 60% capacity?
(A) ₹ 1,04,400
(B) ₹ 1,12,400
(C) ₹ 1,18,600
(D) ₹ 1,22,200
Hint:

Answer:
(A) ₹ 1,04,400

Question 134.
June 2019: Based on cost accounting information, which is the tool of Management Accounting for
decision-making?
(A) Marginal Costing
(B) Standard Costing
(C) Differential Costing
(D) All of the above
Answer:
(D) All of the above

Question 135.
June 2019: The effect of sale price reduction always reduces the P/V ratio to raise and shorten the
(A) BEP and Margin of Safety
(B) Fixed Cost and BEP
(C) Margin of Safety and BEP
(D) Profit and BEP
Answer:
(A) BEP and Margin of Safety

Question 136.
June 2019: ABC Ltd. had a marginal costing profit of ₹ 1,25,500 in April 2018. The opening stock was
1,800 units and the closing stock was 1,260 units. The company is considering changing to an
absorption costing system. The fixed overhead absorption rate is ₹ 6 per unit. Profit under
absorption costing will be:
(A) ₹ 1,28,740
(B) ₹ 1,22,260
(C) ₹ 1,14,700
(D) ₹ 1,33,060
Hint:
The difference in profit change in inventory’ level × fixed overhead per unit
Difference in profit = (1,800 – 1.260) × ₹ 6 = ₹ 3,240
The inventory level decreased during the period therefore the absorption costing profit is less than
the marginal costing profit.
Profit as per absorption costing profit = 125,500 – 3,240 = 1,22,260.
Answer:
(B) ₹ 1,22,260

Question 137.
June 2019: The following information is given:

Sales to earn a profit of ₹ 16,000 will be:

(A) ₹ 40,000
(B) ₹ 60,000
(C) ₹ 50,000
(D) ₹ 75,000
Hint:
P/V ratio = Change in profit Change in sales × 100 = 4,000−8,00020,000−30,000 × 100 = 40%

Sales to earn a profit of ₹ 16,000:

Required sales = Contribution P/V ratio =20,00040% = 50,000
Answer:
(C) ₹ 50,000

Question 138.
June 2019: P/V Ratio is 25% and margin of safety is ₹ 6,00,000, the amount of profit is:
(A) ₹ 2,00,000
(B) ₹ 1,60,000
(C) ₹ 1,50,000
(D) ₹ 1,20,000
Hint:
MOS (in value) = Profit P/V ratio =x25% = 6,00,000
Profit = 1,50,000
Answer:
(C) ₹ 1,50,000
 Basic Concepts of Accounting
Chapter 1
Basic Concepts of Accounting
1. ______________ is nothing but the right process of selecting an appropriate, logical, practical
and achievable option from the available alternatives.
(a) Business Decision (b) Planning
(c) Organizing (d) Strategy
2. ______________ is a person who carried on business exclusively by and for himself.
(a) Partner (b) Sole-trader
(c) Executive (d) Manager
3. The relationship between persons who agree to carry on business in a common with a view to
private gain.
(a) Partnership Firm (b) Sole-trading Firm
(c) Joint Stock Company (d) Co-operative Society
4. A ______________ is a form of business organization in which the funds of large number of
investors are managed by a few persons for the purpose of earning profits.
(a) Partnership Firm (b) Sole-trading Firm
(c) Joint Stock Company (d) Co-operative Society
5. ______________ is the language of business.
(a) Marketing (b) Profit Earning Capacity
(c) Accounting (d) Selling
6. The object/s of accounting ______________.
(a) To calculate net profit or net loss of the business.
(b) To know the financial condition of the firm.
(c) To provide information to the management for important managerial decisions.
(d) All of the above
7. Out of the following, which is not the branch of Accounting.
(a) Financial Accounting (b) Management Accounting
(c) Human Resource Accounting (d) Cost Accounting
8. Accounting ______________ are the Rules of Action or the Methods and Procedures of
Accounting commonly adopted while recording Business transactions.
(a) Principles (b) Concepts
(c) Conventions (d) Systems
2 All in One Multiple Choice Questions

9. According to ______________ concept, assets purchased are generally recorded in

accounting books at the cost at which they are purchase(d)
(a) Business Entity Concept (b) Going Concern Concept
(c) Money Measurement Concept (d) Cost Concept
10. According to ______________ concept, revenue is recognized only when the sale is
performed.
(a) Business Entity Concept (b) Going Concern Concept
(c) Money Measurement Concept (d) Realization Concept
11. Accounting ______________ are the traditions, usage and customs which are in used since long.
(a) Principles (b) Concepts
(c) Conventions (d) Systems
12. Out of the following, which is not the convention of Accounting.
(a) Convention of Consistency (b) Convention of Disclosure
(c) Convention of Conservatism (d) Convention of Realization
13. Out of the following, which is not the System of Accounting.
(a) Non-Cash Entry System (b) Cash System
(c) Single Entry System (d) Double Entry System
14. Out of the following, which Transactions are not to be recorded in the Books of Accounts
(a) Cash Transaction (b) Credit Transaction
(c) Financial Transaction (d) Ordinary Transaction
15. Accounts in the names of persons are known as ______________.
(a) Personal Account (b) Real Account
(c) Nominal Account (d) Individual Account
16. Accounts in the names of assets are known as ______________.
(a) Personal Account (b) Real Account
(c) Nominal Account (d) Individual Account
17. Accounts in the respect of expenses and incomes are known as ______________.
(a) Personal Account (b) Real Account
(c) Nominal Account (d) Individual Account
18. Every transaction must have ______________ aspects and involve ______________ accounts.
(a) two, two (b) one, one
(c) one, two (d) two, one
19. A ______________ is an accounting entry that either increases an asset or expense account,
or decreases a liability or equity account.
(a) Debit (b) Credit
(c) Sales (d) Purchase
20. A ______________ is an accounting entry that either increases a liability or equity account,
or decreases an asset or expense account.
(a) Debit (b) Credit
(c) Sales (d) Purchase
All in One Multiple Choice Questions 3

21. Debit the receiver, credit the giver is the rule of ______________.
(a) Personal Account (b) Real Account
(c) Nominal Account (d) Individual Account
22. Debit what comes in, credit what goes out is the rule of ______________.
(a) Personal Account (b) Real Account
(c) Nominal Account (d) Individual Account
23. Debit all expenses and losses, credit all incomes and gains is the rule of ______________.
(a) Personal Account (b) Real Account
(c) Nominal Account (d) Individual Account
24. ______________ is a record of transaction in the books of Accounts.
(a) Entry (b) Recording
(c) Monetary Transaction (d) Ledger
25. ______________ is an exchange of money or money’s worth.
(a) Entry (b) Recording
(c) Transaction (d) Ledger
26. ______________ is a book of original entry.
(a) Journal (b) Ledger
(c) Cash Book (d) Subsidiary Book
27. ______________ is a bound book of different accounts.
(a) Journal (b) Ledger
(c) Cash Book (d) Subsidiary Book
28. ______________ is a summarized record of transactions related to one person, one asset, one
head of expense/loss and one head of income/gain.
(a) Journal (b) Ledger
(c) Cash Book (d) Account
29. ______________ means totaling of sums in the books of accounts.
(a) Casting (b) Summarizing
(c) Journalizing (d) Ledger Posting
30. ______________ are obligations or debts that the enterprise must pay in money or services at
some time in the future.
(a) Assets (b) Liabilities
(c) Responsibilities (d) Salaries
31. ______________ are economic resources of an enterprise that can be usefully expressed in
monetary terms.
(a) Assets (b) Liabilities
(c) Cash & Bank Balance (d) Funds
32. ______________ are commodities, purchased or manufactured for resale with a view to earn
profit.
(a) Assets (b) Goods
(c) Investments (d) Resources
4 All in One Multiple Choice Questions

33. ______________ are the amounts the business earns by selling its products or providing
services to customers.
(a) Assets (b) Goods
(c) Investments (d) Revenues
34. ______________ are the costs incurred by a business in the process of earning revenue.
(a) Assets (b) Expenses
(c) Investments (d) Revenues
35. ______________ are persons and/or other entities who owe to an enterprise an amount for
receiving goods and services on credit.
(a) Debtors (b) Creditors
(c) Shareholders (d) Suppliers
36. ______________ are persons and/or other entities that have to be paid by an enterprise an
amount for providing the enterprise goods and services on credit.
(a) Debtors (b) Creditors
(c) Shareholders (d) Customers
37. ______________ is a list of the entire general ledger account names and balances; it is
prepared to prove the ledger.
(a) Journal (b) Ledger
(c) Cash Book (d) Trial Balance
38. The difference of two sides of an account is called as ______________.
(a) Debit (b) Credit
(c) Balance (d) Cash
39. ______________ deals with expenses related to or identified with products, which may only
be a part of the organization.
(a) Financial Accounting (b) Management Accounting
(c) Human Resource Accounting (d) Cost Accounting
40. In ______________ stocks are valued at lower of cost or market value.
(a) Financial Accounting (b) Management Accounting
(c) Human Resource Accounting (d) Cost Accounting
41. The primary objective of ______________ is to provide necessary information to the
management in the process of its planning, controlling, and performance evaluation, and
decision-making.
(a) Financial Accounting (b) Management Accounting
(c) Human Resource Accounting (d) Cost Accounting
42. The Success of ______________ does not depend upon Management Accounting system.
(a) Financial Accounting (b) Management Accounting
(c) Human Resource Accounting (d) Cost Accounting
43. In______________ no statutory requirement of audit for reports.
(a) Financial Accounting (b) Management Accounting
(c) Human Resource Accounting (d) Cost Accounting
All in One Multiple Choice Questions 5

44. Which is the most popular and acceptable software?

(a) Tally (b) Marg
(c) Saral (d) SAP
45. The Advantage/s of Accounting Software ______________.
(a) Accounting softwares save Time and Money.
(b) No scope for mistakes and errors.
(c) Provides accurate and updated information as and when require(d)
(d) All of the above
46. Internal and external parties are the users of ______________.
(a) Financial Accounting (b) Management Accounting
(c) Human Resource Accounting (d) Cost Accounting
47. Capital A/c generally shows ______________ balance.
(a) Cash (b) Debit
(c) Credit (d) Overdraft
48. Asset A/c shows ______________ balance.
(a) Cash (b) Debit
(c) Credit (d) Overdraft
49. There are ______________ columns in Journal.
(a) Two (b) Three
(c) Four (d) Five
50. Explanatory note written below an entry recorded in the Journal is called as ______________.
(a) Narration (b) Explanation
(c) Brief information (d) Detail information

Answer Key of Chapter 1

1. (a) 11. (a) 21. (a) 31. (a) 41. (b)

2. (b) 12. (d) 22. (b) 32. (b) 42. (d)
3. (a) 13. (a) 23. (c) 33. (d) 43. (b)
4. (c) 14. (d) 24. (a) 34. (b) 44. (a)
5. (c) 15. (a) 25. (c) 35. (a) 45. (d)
6. (d) 16. (b) 26. (a) 36. (b) 46. (a)
7. (c) 17. (c) 27. (b) 37. (d) 47. (c)
8. (a) 18. (a) 28. (d) 38. (c) 48. (b)
9. (d) 19. (a) 29. (a) 39. (d) 49. (d)
10. (d) 20. (b) 30. (b) 40. (a) 50. (a)
6 All in One Multiple Choice Questions

Chapter 2
Understanding of Financial Statements
1. ______________ shows the firm’s assets, liabilities, and stockholders’ equity as of the report
date.
(a) Cash Flow (b) Funds Flow
(c) Income Statement (d) Balance Sheet
2. ______________ shows the results of the firm’s operations and financial activities for the
reporting period.
(a) Trading and Profit & Loss Account (b) Expense Statement
(c) Income Statement (d) Balance Sheet
3. ______________ includes explanations of various activities, additional details of some
accounts, and other items as mandated by the regulatory authorities, bodies from time to time.
(a) Trading and Profit & Loss Account (b) Expense Statement
(c) Income Statement (d) Supplementary Note
4. ______________ is a formal official record of the financial activities and position of a
business, person, or other entity.
(a) Financial Statement (b) Trading Account
(c) Profit & Loss Account (d) Supplementary Note
5. ______________ provides the vital information related to the profitability, liquidity and
solvency of the business.
(a) Financial Statement (b) Trading Account
(c) Profit & Loss Account (d) Cash Flow & Funds Flow
6. ______________ is the simplest business form under which one can operate a business.
(a) Partnership Firm (b) Sole Trading Firm
(c) Private Ltd. Company (d) Public Company
7. ______________ is not a separate legal entity.
(a) Partnership Firm (b) Sole Proprietorship Firm
(c) Private Ltd. Company (d) One Man Company
8. For every item given in Trial Balance, ______________ effect should be given.
(a) Dual (b) Single
(c) Triple (d) None of the above
9. For every item given in Adjustment, ______________ effect should be given.
(a) Dual (b) Single
(c) Triple (d) None of the above
10. ______________ are nothing but the entries which are not included in the original Trial
Balance.
(a) Journal Proper (b) Ledger
(c) Adjustments (d) None of the above
All in One Multiple Choice Questions 7

11. Every adjustment has two effects, i.e., ______________.

(a) One Debit & One Credit (b) Debit
(c) Credit (d) None of the above
12. Depreciation is debited to ______________.
(a) BRS (b) Balance Sheet
(c) Trading A/c (d) Profit and Loss A/c
13. Income Accrued but Not Received is recorded to ______________.
(a) Profit and Loss A/c Debit Side (b) Profit and Loss A/c Credit Side
(c) Trading A/c Debit Side (d) Trading A/c Credit Side
14. Prepaid Expenses shown at ______________.
(a) Balance Sheet Asset Side (b) Profit and Loss A/c Credit Side
(c) Trading A/c Debit Side (d) Trading A/c Credit Side
15. Closing Stock is recorded to ______________.
(a) Profit and Loss A/c Debit Side (b) Profit and Loss A/c Credit Side
(c) Trading A/c Debit Side (d) Trading A/c Credit Side
16. Outstanding Expenses shown at ______________.
(a) Balance Sheet Liability Side (b) Profit and Loss A/c Credit Side
(c) Balance Sheet Asset Side (d) Trading A/c Credit Side
17. Goods Withdrawn from business is considered as ______________.
(a) Sales (b) Purchases
(c) Capital (d) Drawings
18. Interest on Capital is debited to ______________.
(a) Capital A/c (b) Balance Sheet
(c) Trading A/c (d) Profit and Loss A/c
19. Interest on Drawings is credited to ______________.
(a) Journal A/c (b) Balance Sheet
(c) Trading A/c (d) Profit and Loss A/c
20. Goods Distributed as Free Samples is debited to______________.
(a) Capital A/c (b) Personal A/c
(c) Trading A/c (d) Profit and Loss A/c
21. Reserve for Discount on Creditors is credited to ______________.
(a) Capital A/c (b) Personal A/c
(c) Trading A/c (d) Profit and Loss A/c
22. ______________ information is ignored in the financial statements.
(a) Cash (b) Credit
(c) Qualitative (d) Quantitative
23. The financial statements are based on the accounting ______________.
(a) Accounting Concepts and Conventions
(b) Accounting Concepts
8 All in One Multiple Choice Questions

(c) Accounting Conventions

(d) None of the above
24. Accounting year starts from ______________.
(a) 1st January (b) 1st April
(c) 1st March (d) 1st June
25. Accounting year ends on ______________.
(a) 31st January (b) 31st August
(c) 31st March (d) 31st December
26. Returns outwards are deducted from ______________.
(a) Sales (b) Purchases
(c) Stock (d) Closing stock
27. Returns inwards are deducted from ______________.
(a) Sales (b) Purchases
(c) Stock (d) Closing stock
28. Carriage inward is debited to ______________.
(a) Capital A/c (b) Personal A/c
(c) Trading A/c (d) Profit and Loss A/c
29. Carriage outward is debited to ______________.
(a) Capital A/c (b) Personal A/c
(c) Trading A/c (d) Profit and Loss A/c
30. Goodwill is recorded to ______________.
(a) Capital A/c (b) Balance Sheet Asset Side
(c) Trading A/c (d) Profit and Loss A/c
31. Depreciation is ______________ in/from asset.
(a) Added (b) Deducted
(c) Not Added (d) Not deducted
32. In ______________ business, all incomes and losses are taxed on the individual’s personal
income tax return.
(a) Sole Proprietorship (b) Partnership
(c) Cooperative (d) Departmental
33. Freight is recorded to ______________.
(a) Profit and Loss A/c Debit Side (b) Profit and Loss A/c Credit Side
(c) Trading A/c Debit Side (d) Trading A/c Credit Side
34. Outstanding Expenses are always ______________.
(a) Added in respective asset (b) Added in respective liability
(c) Added in respective expense (d) Added in respective income
35. Prepaid Expenses are always ______________.
(a) Deducted from respective asset (b) Added in respective liability
(c) Deducted from respective expense (d) Added in respective income
All in One Multiple Choice Questions 9

36. Gross Profit is transferred to ______________.

(a) Capital A/c (b) Balance Sheet
(c) Trading A/c (d) Profit and Loss A/c
37. Goods Withdrawn for Personal Use by Proprietor is treated as ______________.
(a) Income (b) Expense
(c) Liability (d) Asset
38. Royalty is recorded to ______________.
(a) Profit and Loss A/c Debit Side (b) Profit and Loss A/c Credit Side
(c) Trading A/c Debit Side (d) Trading A/c Credit Side
39. Purchase Return is also called as ______________.
(a) Inward (b) Outward
(c) Return Inward (d) Return Outward
40. Sales Return is also called as ______________.
(a) Inward (b) Outward
(c) Return Inward (d) Return Outward
41. RDD is deducted from______________.
(a) Sales (b) Purchases
(c) Creditors (d) Debtors
42. ______________ is a non cash expense.
(a) Depreciation (b) Discount
(c) Purchases (d) Creditors
43. Income Received in Advance is considered as ______________.
(a) Income (b) Expense
(c) Asset (d) Liability
44. An insurance charge of goods is recorded to ______________.
(a) Profit and Loss A/c Debit Side (b) Profit and Loss A/c Credit Side
(c) Trading A/c Debit Side (d) Trading A/c Credit Side
45. Wages and Salaries item is recorded to ______________.
(a) Profit and Loss A/c Debit Side (b) Profit and Loss A/c Credit Side
(c) Trading A/c Debit Side (d) Trading A/c Credit Side
46. Patents item is recorded at ______________.
(a) Profit and Loss A/c Debit Side (b) Profit and Loss A/c Credit Side
(c) Balance Sheet Liability Side (d) Balance Sheet Asset Side
47. ______________ is not a current asset.
(a) Stock (b) Investment
(c) Cash (d) Goodwill
48. ______________ is not a fixed asset.
(a) Land (b) Building
(c) Machinery (d) Debtors
10 All in One Multiple Choice Questions

49. ______________ is not a current liability.

(a) Capital (b) Loan
(c) Bills Payable (d) Creditors
50. Net Profit is added in ______________.
(a) Trading A/c (b) Income A/c
(c) Capital A/c (d) Asset A/c

Answer Key of Chapter 2

1. (d) 11. (a) 21. (d) 31. (a) 41. (d)

2. (a) 12. (d) 22. (c) 32. (a) 42. (a)
3. (d) 13. (b) 23. (a) 33. (c) 43. (d)
4. (a) 14. (a) 24. (b) 34. (c) 44. (a)
5. (a) 15. (d) 25. (c) 35. (c) 45. (c)
6. (b) 16. (a) 26. (b) 36. (d) 46. (d)
7. (b) 17. (d) 27. (a) 37. (b) 47. (d)
8. (b) 18. (d) 28. (c) 38. (c) 48. (d)
9. (a) 19. (d) 29. (d) 39. (d) 49. (a)
10. (c) 20. (d) 30. (b) 40. (c) 50. (c)
All in One Multiple Choice Questions 11

Chapter 3
Cost Accounting
1. ______________ provides a specialized technique, which provides prompt and accurate
information regarding the cost of producing and selling an article.
(a) Cost Accounting (b) Financial Accounting
(c) Management Accounting (d) Cost & Financial Accounting
2. The amount of expenditure incurred on, or attributable to a given thing is called as
______________.
(a) Cost (b) Price
(c) Expense (d) Fixed Cost
3. The techniques and process of ascertaining cost is called as ______________.
(a) Costing (b) Accounting
(c) Financing (d) Management Accounting
4. With the help of ______________, we can control the cost.
(a) Costing Methods (b) Cost Accounting
(c) Management Accounting (d) Costing Techniques
5. With the help of ______________, we can find out the cost.
(a) Costing Methods (b) Cost Accounting
(c) Management Accounting (d) Costing Techniques
6. The total of Direct Material + Direct Labour + Direct Expenses is called as ______________.
(a) Total Cost (b) Factory Cost
(c) Prime Cost (d) Main Cost
7. Direct Expenses are also called as ______________.
(a) Chargeable Expenses (b) Factory Expenses
(c) Works Expenses (d) General Expenses
8. Depreciation is an example of ______________.
(a) Direct Expenses (b) Factory Expenses
(c) General Expenses (d) Indirect Expenses
9. The aggregate of all indirect expenses is ______________.
(a) Total Cost (b) Total Expense
(c) Overheads (d) Factory Overheads
10. Factory Cost is also called as ______________.
(a) Total Cost (b) Cost of Production
(c) Works Cost (d) Factory Overheads
11. Cost of Sales is also called as ______________.
(a) Total Cost (b) Cost of Production
(c) Works Cost (d) Factory Cost
12 All in One Multiple Choice Questions

12. Telephone bill, Electricity bill is an example of ______________.

(a) Total Cost (b) Fixed Overheads
(c) Variable Overheads (d) Semi-variable Overheads
13. Fixed Cost is also called as ______________.
(a) Total Cost (b) Direct Cost
(c) Works Cost (d) Period Cost
14. Material and Labour is an example of ______________.
(a) Fixed Cost (b) Controllable Cost
(c) Non-controllable Cost (d) Period Cost
15. Repairs and Maintenance is an example of ______________.
(a) Fixed Cost (b) Avoidable Cost
(c) Non-controllable Cost (d) Normal Cost
16. Cost incurred because of lock outs is an example of ______________.
(a) Fixed Cost (b) Unavoidable Cost
(c) Abnormal Cost (d) Normal Cost
17. One-time set-up cost of a plant or project is called as ______________.
(a) Fixed Cost (b) Direct Cost
(c) Capital Cost (d) Normal Cost
18. Standard Cost is also called as ______________.
(a) Predetermined Cost (b) Direct Cost
(c) Capital Cost (d) Fixed Cost
19. Variable Cost is also called as ______________.
(a) Predetermined Cost (b) Direct Cost
(c) Marginal Cost (d) Fixed Cost
20. Rent is an example of ______________.
(a) Predetermined Cost (b) Direct Cost
(c) Unavoidable Cost (d) Standard Cost
21. ______________ is the difference between the costs of two alternatives.
(a) Differential Cost (b) Semi-variable Cost
(c) Variable Cost (d) Standard Cost
22. Cost incurred as per policy of top management is called as ______________.
(a) Differential Cost (b) Programmed Cost
(c) Normal Cost (d) Fixed Cost
23. Notional cost is nothing but ______________.
(a) Standard Cost (b) Programmed Cost
(c) Normal Cost (d) Imaginary Cost
24. Depreciation on Plant and Rent is an example ______________.
(a) Committed Cost (b) Programmed Cost
(c) General Cost (d) Imaginary Cost
All in One Multiple Choice Questions 13

25. A Location, person, or item of equipment (or a group of these) for which costs may be
ascertained and used for the purpose of control is called as ______________.
(a) Cost Unit (b) Cost Centre
(c) Cost Department (d) Cost Division
26. ______________ a statement, which shows various components of total cost of a product.
(a) Cost Sheet (b) Cost Account
(c) Cost Report (d) Cost Classification
27. ______________ is prepared on the basis of actual cost incurred.
(a) Historical Cost Sheet (b) Cost Account
(c) Cost Report (d) Estimated Cost Sheet
28. Haulage Charges is an example of ______________.
(a) Fixed Overheads (b) Direct Cost
(c) Factory Overheads (d) Administration Overheads
29. Counting House Salaries is an example of ______________.
(a) Fixed Overheads (b) Selling Overheads
(c) Factory Overheads (d) Administration Overheads
30. Carriage Outward is an example of ______________.
(a) Fixed Overheads (b) Selling Overheads
(c) Factory Overheads (d) Administration Overheads
31. Opening Stock of Finished Goods is added in ______________.
(a) Factory Cost (b) Prime Cost
(c) Cost of Production (d) Works Cost
32. Direct Labour Charges is also called as ______________.
(a) Factory Cost (b) Prime Cost
(c) Fixed Wages (d) Productive Wages
33. Cost unit is divided into ______________.
(a) Units of Production (b) Units of Services
(c) Both a and b (d) None of the above
34. Cost of converting raw material into finished goods is also called as ______________.
(a) Factory Cost (b) Prime Cost
(c) Conversion Cost (d) Productive Cost
35. According to Elements, Cost is divided into ______________ categories.
(a) One (b) Two
(c) Three (d) Four
36. ______________ means the amount spent to sell a company’s products.
(a) Revenue Cost (b) Differential Cost
(c) Fixed Cost (d) Variable Cost
14 All in One Multiple Choice Questions

37. Insurance is an example of ______________.

(a) Revenue Cost (b) Differential Cost
(c) Fixed Cost (d) Variable Cost
38. ______________ cost directly varies with volume of output.
(a) Revenue Cost (b) Differential Cost
(c) Fixed Cost (d) Variable Cost
39. The Expenditure which has been incurred in an accounting period but it is applicable further
periods also is ______________.
(a) Revenue Cost (b) Differential Cost
(c) Differed Revenue Cost (d) Variable Cost
40. The estimate of expenditure for different business operations for a specific period is
______________.
(a) Budgeted Cost (b) Differential Cost
(c) Differed Revenue Cost (d) Variable Cost
41. An up-gradation of Machine, Change in Service/Distribution Channel are the examples of
______________.
(a) Incremental Cost (b) Differential Cost
(c) Opportunity Cost (d) Future Cost
42. The value of benefit sacrificed in favour of an alternative course of action is ______________
cost.
(a) Incremental (b) Fixed
(c) Opportunity (d) Future
43. Opening Stock of WIP & Closing Stock of WIP is added and deducted after addition of
______________ in Prime Cost.
(a) Direct Expenses (b) Factory Overheads
(c) Office Overheads (d) Selling Overheads
44. Carriage Inward is added while calculating ______________.
(a) Cost of Direct Expenses (b) Cost of Direct Overheads
(c) Cost of Direct Labour (d) Cost of Direct Material
45. Profit Margin is added in ______________.
(a) Cost of Sales (b) Fixed Cost
(c) Cost of Production (d) Cost of Goods Sold
46. Abnormal Wastage of Material is added in ______________.
(a) Cost of Sales (b) Cost of Production
(c) Cost of Goods Sold (d) None of the above
47. Discount allowed is an example of ______________.
(a) Direct Expenses (b) Factory Overheads
(c) Office Overheads (d) Selling Overheads
All in One Multiple Choice Questions 15

48. Sale of Scrap is ______________ after addition of factory overheads in Prime Cost.
(a) Added (b) Deducted
(c) Not Considered (d) None of the above
49. Cleaning Charges is an example of ______________.
(a) Direct Expenses (b) Factory Overheads
(c) Office Overheads (d) Selling Overheads
50. ______________ is the process of ascertaining costs whereas ______________ is the process
of recording various costs in a systematic manner, in order to prepare statistical date to
ascertain cost.
(a) Costing, Cost Accounting (b) Cost Accounting, Costing
(c) Costing and Allocation Cost (d) Costing and Absorption of Cost

Answer Key of Chapter 3

1. (a) 11. (a) 21. (a) 31. (c) 41. (a)

2. (a) 12. (d) 22. (b) 32. (d) 42. (c)
3. (a) 13. (d) 23. (d) 33. (c) 43. (b)
4. (d) 14. (b) 24. (a) 34. (c) 44. (d)
5. (a) 15. (d) 25. (b) 35. (c) 45. (a)
6. (c) 16. (c) 26. (a) 36. (a) 46. (d)
7. (a) 17. (c) 27. (a) 37. (c) 47. (d)
8. (d) 18. (a) 28. (c) 38. (d) 48. (b)
9. (c) 19. (c) 29. (d) 39. (c) 49. (b)
10. (c) 20. (c) 30. (b) 40. (a) 50. (a)
16 All in One Multiple Choice Questions

Chapter 4
Cost Control
1. Cost of storing the goods as well as the interest on the capital is called as ______________.
(a) Inventory Carrying Cost (b) Order Placing Cost
(c) Buying Cost (d) Fixed Cost
2. Cost of placing the orders and receiving the goods are called as ______________.
(a) Inventory Carrying Cost (b) Variable Cost
(c) Buying Cost (d) Fixed Cost
3. The main objective of EOQ is to ______________ the total costs.
(a) Minimize (b) Control
(c) Maintain (d) Avoid
4. ______________ analysis is based on Selective Inventory Management.
(a) EOQ (b) JIT
(c) ABC (d) HML
5. Calculate EOQ if Cost of material per unit ` 40, Annual requirement 1600 units, Cost of
placing and receiving one purchase order ` 50, Annual carrying cost of inventory is 10% of
inventory value.
(a) 200 Units (b) 175 Units
(c) 225 Units (d) 250 Units
6. A level of inventory that should never be exceeded is ______________.
(a) Maximum Stock Level (b) Minimum Level
(c) Re-order Stock Level (d) Danger Stock Level
7. A level below which stock should not be allowed to fall is ______________.
(a) Maximum Stock Level (b) Minimum Level
(c) Re-order Stock Level (d) Danger Stock Level
8. A level at which store keeper should intimate purchase department for fresh/new supply is
______________.
(a) Maximum Stock Level (b) Minimum Level
(c) Re-order Stock Level (d) Danger Stock Level
9. A level below which the stock should never be allowed to fall under emergency
circumstances is ______________.
(a) Maximum Stock Level (b) Minimum Level
(c) Re-order Stock Level (d) Danger Stock Level
10. A strategy for inventory management in which raw materials and components are delivered
from the vendor or supplier immediately before they are needed in the manufacturing process
is ______________.
(a) Scientific Purchasing (b) Immediate Buying
(c) JIT (d) None of the above
All in One Multiple Choice Questions 17

11. Out of the following, which is the method of issuing material.

(a) LIFO (b) FIFO
(c) Simple Average (d) All of the above
12. Full Form of LIFO is ______________.
(a) Latest in First Out (b) Last in First Out
(c) Largest in First Out (d) Lowest in First Out
13. The formula of Re-order Stock Level is ______________.
(a) Maximum Consumption × Maximum Reorder Period
(b) Reorder Level − (Normal Consumption × Normal Reorder Period)
(c) Reorder Level + Reorder Quantity − (Minimum Consumption × Minimum Reorder
Period)
(d) Average Usage × Maximum Reorder Period for Emergency Purchases
14. The formula of Minimum Stock Level is ______________.
(a) Maximum Consumption× Maximum Reorder Period
(b) Reorder Level − (Normal Consumption × Normal Reorder Period)
(c) Reorder Level + Reorder Quantity − (Minimum Consumption × Minimum Reorder
Period)
(d) Average Usage × Maximum Reorder Period for Emergency Purchases
15. The formula of Maximum Stock Level is ______________.
(a) Maximum Consumption× Maximum Reorder Period
(b) Reorder Level − (Normal Consumption × Normal Reorder Period)
(c) Reorder Level + Reorder Quantity − (Minimum Consumption × Minimum Reorder
Period)
(d) Average Usage × Maximum Reorder Period for Emergency Purchases
16. The formula of Danger Stock Level is ______________.
(a) Maximum Consumption× Maximum Reorder Period
(b) Reorder Level − (Normal Consumption × Normal Reorder Period)
(c) Reorder Level + Reorder Quantity − (Minimum Consumption × Minimum Reorder
Period)
(d) Average Usage × Maximum Reorder Period for Emergency Purchases
17. Material Losses are generally classified into two categories, i.e., ______________.
(a) Normal and Abnormal
(b) Avoidable and Unavoidable
(c) Controllable and Non-controllable
(d) Fixed and Variable
18. ______________ is the example of Material Losses.
(a) Wastage (b) Scarp
(c) Spoilage or Defectives (d) All of the above
18 All in One Multiple Choice Questions

19. Material Control includes ______________.

(a) Fixed Cost Control (b) Debtors Control
(c) Inventory Control (d) Creditors Control
20. The main objective/s of store-keeping is/are ______________ .
(a) To protect materials from losses and damages
(b) To avoid over and under-stocking of materials
(c) To minimize the storage costs of materials
(d) All of the above
21. Wages which can be indentified with and allocated to cost centers and cost units is
______________.
(a) Direct Labour Cost (b) Indirect Labour Cost
(c) Fixed Labour Cost (d) Variable Labour Cost
22. ______________ is defined as the rate of change of labour force in an organization during a
specified period.
(a) Labour Turnover (b) Labour Rate
(c) Labour Cost (d) Employee Change Rate
23. Labour Turnover Causes are classified into ______________.
(a) Personal Causes (b) Avoidable Causes
(c) Unavoidable Causes (d) All of the above
24. ______________ includes all those costs which are incurred to keep the workers satisfied, so
that they are prevented from leaving the organization.
(a) Direct Labour Cost (b) Preventive Cost
(c) Maintenance Cost (d) Variable Labour Cost
25. Labour Turnover Rate is calculated as per ______________.
(a) Separation Method (b) Replacement Method
(c) Flux Method (d) All of the above
26. ______________ is recording of incoming and outgoing time of all employees in factory.
(a) Time Keeping (b) Time Booking
(c) Time Noting (d) All of the above
27. ______________ is recording of the time of employees spent on various job.
(a) Time Keeping (b) Time Booking
(c) Time Noting (d) All of the above
28. ______________ study is concerned with determining the proper method for performing the
job so that there is no wastage in movement.
(a) Time (b) Motion
(c) General (d) Special
29. ______________ study is concerned with the determination of standard time required by a
person of average ability to perform a jo(b)
(a) Time (b) Motion
(c) General (d) Special
All in One Multiple Choice Questions 19

30. Out of the following, which factor/s affecting the Labour Cost.
(a) Assessment of Manpower Requirement
(b) Time and Motion Study
(c) Control over Idle Time and Overtime
(d) All of the above
31. Which department/s is/are closely associated with the Control of Labour Cost?
(a) Personnel and Payroll Department
(b) Time Keeping Department
(c) Engineering and Work Study Department
(d) All of the above
32. ______________ arises from replacement of workers who leave the organization.
(a) Direct Labour Cost (b) Preventive Cost
(c) Maintenance Cost (d) Replacement Cost
33. Method/s of Time Keeping is/are ______________.
(a) Attendance Register Method
(b) Token or Disc Method
(c) Time Recording Clocks & Dial Time Records
(d) All of the above
34. Method/s of Time Booking is/are ______________.
(a) Daily Time Sheet (b) Weekly Time Sheet
(c) Job Cards or Job Tickets (d) All of the above
35. ______________ refers to the estimation of standard time, i.e., the time allowed for
completing one piece of job using the given metho(d)
(a) Work Measurement (b) Time Measurement
(c) Period Measurement (d) None of the above
36. ______________ costs are the operating costs of a business enterprise which cannot be traced
to a particular unit of output.
(a) Material (b) Labour
(c) Overhead (d) Foxed & Variable
37. The ______________ is the process of recording each item of cost in the books of accounts
maintained for the purpose of ascertainment of cost of each Cost Centre or Cost Unit.
(a) Collection of Overhead (b) Allocation of Overhead
(c) Apportionment of Overhead (d) Classification of Overhead
38. ______________ means, the allotment of whole items of cost to cost centres or cost units.
(a) Collection of Overhead (b) Allocation of Overhead
(c) Apportionment of Overhead (d) Classification of Overhead
39. ______________ means, the allotment to two or more departments or cost centers of
proportions of common items of cost on estimated basis of benefit received.
(a) Collection of Overhead (b) Allocation of Overhead
(c) Apportionment of Overhead (d) Classification of Overhead
20 All in One Multiple Choice Questions

40. The process of apportionment is also known as ______________ of overhead.

(a) Departmentalization (b) Centralization
(c) Decentralization (d) Classification
41. Methods for Allocation & Apportionment of Overhead/s is/are ______________.
(a) Primary Distribution of Overhead
(b) Secondary Distribution of Overhead
(c) Simultaneous Equation Method of Overhead
(d) All of the above
42. The overhead, which can be easily identified with a particular department that is charged only
to the specific department, is called ______________.
(a) Collection (b) Allocation
(c) Apportionment (d) Classification
43. Insurance of Plant is distributed on the basis ______________.
(a) Value of Plant (b) Ratio of Plant
(c) Quantity of Production (d) None of the above
44. Recreation Expenses is distributed on the basis ______________.
(a) No. of Workers (b) Days Spend by Workers
(c) Time Spent by Workers (d) None of the above
45. Electric Power is distributed on the basis ______________.
(a) Horse Power (b) KWH
(c) No. of Machine Hours (d) All of the above
46. Materials Handling Charges is distributed on the basis ______________.
(a) Value of Materials (b) No. of Stores Requisitions
(c) Weight or Value of Materials (d) All of the above
47. Allocation of Overheads is ______________ process of allotment of overheads.
(a) direct (b) indirect
(c) fixed (d) variable
48. Apportionment of Overheads is ______________ process of allotment of overheads.
(a) direct (b) indirect
(c) fixed (d) variable
49. ______________ deals with the whole items of cost.
(a) Collection of Overhead (b) Allocation of Overhead
(c) Apportionment of Overhead (d) Classification of Overhead
50. ______________ deals with only proportion of items of cost.
(a) Collection of Overhead (b) Allocation of Overhead
(c) Apportionment of Overhead (d) Classification of Overhead
22 All in One Multiple Choice Questions

Chapter 5
Decision-making Tools
1. Marginal Costing is also called as ______________.
(a) Variable Costing (b) Standard Costing
(c) Material Costing (d) Job Costing
2. In ______________ total costs cannot be easily segregated into fixed costs and variable costs.
(a) Marginal Costing (b) Standard Costing
(c) Material Costing (d) Job Costing
3. P/V Ratio is mainly known as ______________.
(a) Contribution to Sales Ratio (b) Contribution Margin Ratio
(c) Variable Profit Ratio (d) All of the above
4. ______________ analysis classifies all costs as either fixed or variable.
(a) CVP (b) ABC
(c) JIT (d) HML
5. ______________ that point where no profit or no loss position is observed.
(a) Centre Point (b) BEP
(c) Starting Point (d) Ending Point
6. ______________ is the difference between sales revenue and variable cost.
(a) P/V Ratio (b) BEP
(c) MOS (d) Contribution
7. Contribution is also called as ______________.
(a) P/V Ratio (b) Net Margin
(c) MOS (d) Gross Margin
8. ______________ is the difference between actual sales or output and the break even sales.
(a) P/V Ratio (b) Net Margin
(c) MOS (d) Gross Margin
9. ______________ is an angle where sales line intersects total cost line which indicates profit
earning capacity over the BEP.
(a) Angle of Incidence (b) Contribution
(c) Margin of Safety (d) Gross Margin
10. If contribution is ` 3,00,000 and Sales is ` 10,00,000, then what is P/V Ratio?
(a) 20% (b) 30%
(c) 33.33% (d) 1/3
11. If P/V Ratio is 25%, then what is the % of Variable Cost?
(a) 70% (b) 80%
(c) ¾ (d) ½
All in One Multiple Choice Questions 23

12. If Fixed Cost is ` 2,50,000 and P/V Ratio is 60%, then what is BEP in `?
(a) ` 4,16,667 (b) ` 3,83,333
(c) ` 3,75,000 (d) ` 4,10,000
13. If Fixed Cost is ` 2,50,000 and Profit is ` 3,50,000, then what is the amount of Contribution?
(a) ` 1,00,000 (b) ` 6,00,000
(c) ` 3,75,000 (d) ` 4,10,000
14. If Sales are ` 50,000 and P/V Ratio is 20%, then what is the amount of Variable Cost?
(a) ` 40,000 (b) ` 10,000
(c) ` 25,000 (d) ` 30,000
15. If contribution is ` 3,00,000 and Profit is ` 1,00,000, then what is the amount of Fixed Cost?
(a) ` 4,00,000 (b) `2,00,000
(c) ` 2,50,000 (d) `3,00,000
16. If Sales are ` 3,00,000 and P/V ratio is 20%, then what is the amount of Variable Cost?
(a) ` 2,40,000 (b) ` 80,000
(c) ` 2,70,000 (d) ` 2,00,000
17. The correct formula of Contribution is ______________.
(a) Contribution = Sales – Variable Cost
(b) Contribution = Fixed Cost + Profit or – Loss
(c) Contribution = Sales × P/ V Ratio
(d) All of the above
18. The correct formula of P/V Ratio is ____________.
(a) P/ V Ratio = [Contribution/Sales ] × 100
(b) P/ V Ratio = [Change in Profit/Change in Sales ] × 100
(c) P/ V Ratio = [Sales−Variable Cost/Sales] × 100
(d) All of the above
19. Marginal Costing is a Costing ______________.
(a) Technique (b) Method
(c) System (d) Convention
20. Under absorption and over absorption of overheads problems are not arisen under
______________.
(a) Marginal Costing (b) Standard Costing
(c) Job Costing (d) Budgetary Control
21. Standard cost is the ______________ cost.
(a) Pre-determined (b) Pre-decided
(c) Pre-planned (d) None of the above
22. Small organizations cannot adopt ______________ technique.
(a) Standard Costing (b) Marginal Costing
(c) Budgetary Control (d) None of the above
24 All in One Multiple Choice Questions

23. ______________ means difference between standard cost and actual cost.
(a) Balance Cost (b) Variance
(c) Marginal Cost (d) Variable Cost
24. ______________ helps management to understand the present costs and then to control the
future costs.
(a) ABC Analysis (b) Variance Analysis
(c) Marginal Analysis (d) Budget Analysis
25. Variances are classified in ______________ categories.
(a) One (b) Two
(c) Three (d) Four
26. If Standard Cost ` 80 and Actual Cost ` 70, then what is the amount of Material Cost
Variance?
(a) 10 (b) –10
(c) 150 (d) 20
27. If Standard Price ` 8 & Standard Qty.10, Actual Price ` 7 & Actual Qty.10, then what is the
amount of Material Price Variance?
(a) 10 (b) –10
(c) 150 (d) 20
28. If Standard Price ` 8 & Standard Qty.10, Actual Price ` 7 & Actual Qty.10, then what is the
amount of Material Usage Variance?
(a) 10 (b) –10
(c) 50 (d) 0
29. If Standard Rate ` 1.50 & Standard Hours 1600, Actual Rate ` 2 & Actual Hours 1500, then
what is the amount of Labour Cost Variance?
(a) 600 (b) –600
(c) 500 (d) 400
30. If Standard Rate ` 1.50 & Standard Hours 1600, Actual Rate ` 2 & Actual Hours 1500, then
what is the amount of Labour Rate Variance?
(a) 750 (b) –750
(c) 600 (d) 400
31. If Standard Rate ` 1.50 & Standard Hours 1600, Actual Rate `2 & Actual Hours 1500, then
what is the amount of Labour Efficiency Variance?
(a) 150 (b) –150
(c) 300 (d) 200
32. The correct formula for verification of Material Cost Variance is ______________.
(a) MCV = MPV + MUV (b) MCV = MPV – MUV
(c) MCV = MPV × MUV (d) None of the above
All in One Multiple Choice Questions 25

33. The correct formula for verification of Labour Cost Variance is ______________.
(a) LCV = LRV + LEV (b) LCV = LRV – LEV
(c) LCV = LRV × LEV (d) None of the above
34. In Standard Costing comparison between ______________ is carried out.
(a) Standard Cost and Actual Cost (b) Fixed Cost and Variable Cost
(c) Normal Cost and Abnormal Cost (d) None of the above
35. The Disadvantages of Standard Costing is/are ______________.
(a) Establishments of standards are difficult in practice.
(b) Standards are requires to revise continuously.
(c) Inaccurate, unreliable and outdated standards do more harm than benefit
(d) All of the above
36. ______________ is a concrete precise picture of the total operation of an enterprise in
monetary terms.
(a) Budget (b) Plan
(c) Strategy (d) Goal
37. Accuracy cannot be maintained is a limitation of ______________.
(a) Budgetary Control (b) Scientific Planning
(c) Standard Costing (d) Marginal Costing
38. Pre- requisitions for effective implementation of Budgetary Control system is/are
______________.
(a) Deciding budget centres & budget period
(b) Preparation of a budget manual
(c) Determination of budget key factor
(d) All of the above
39. ______________ is the budget in which adjustment is possible according to change in
business conditions.
(a) Flexible Budget (b) Fixed Budget
(c) Sales Budget (d) Cash Budget
40. When forecasts about budget shows greater revenue to be received or generated than the
expenses to be incurred during budgeted period that is known as ______________.
(a) Surplus Budget (b) Best Budget
(c) Favourable Budget (d) Non-favourable Budget
41. ______________ budget highlights that the expenditures to be incurred in budget period will
be greater than the revenues to be received during the same period.
(a) Surplus Budget (b) Deficit Budget
(c) Favourable Budget (d) Non-favourable Budget
26 All in One Multiple Choice Questions

42. The establishment of budgets relating the responsibilities of executives to the requirements of
a policy and the continuous comparison of actual with budgeted results, either to secure by
individual action the objective of that policy or to provide basis for its revision is called as
______________.
(a) Budget (b) Budgeting
(c) Budgetary Control (d) None of the above
43. A ______________ is a powerful tool available to the management for the purpose of
maximizing profits.
(a) Budget (b) Decrease in selling price
(c) Standard Norm (d) Increase in selling price
44. Fixed Budget is also known as ______________.
(a) Static Budget (b) Standard Budget
(c) Master Budget (d) Flexible Budget
45. Normal Profit means ______________.
(a) No Profit No Loss (b) Less Profit
(c) Expected Profit (d) None of the above
46. Personnel Budget is also called as ______________.
(a) Cost Budget (b) Labour Budget
(c) Employee Budget (d) None of the above
47. In cash budget, ______________ transactions are considered.
(a) Cash (b) Credit
(c) all financial (d) None of the above
48. Budget is prepared for a ______________ period of time.
(a) Fixed (b) One Month
(c) One Year (d) None of the above
49. Purchase Budget is also called as ______________.
(a) Production Budget (b) Material Budget
(c) Cost Budget (d) None of the above
50. ______________ is the plan of proposed investment in the fixed assets.
(a) Fixed Budget (b) Capital Expenditure Budget
(c) Cash Budget (d) Purchase Budget