Accounting exam MCQ

1. What is the primary focus of management accounting?

A) External reporting

B) Internal decision-making

C) Tax preparation

D) Auditing

Answer: B) Internal decision-making

2. The primary activity of management accounting involves:

A) Preparing tax returns

B) Financial auditing

C) Assisting managers in planning and controlling operations

D) Creating annual reports

Answer: C) Assisting managers in planning and controlling operations

3. Which of the following distinguishes financial accounting from management accounting?

A) Financial accounting is future-oriented

B) Financial accounting focuses on internal users

C) Management accounting is primarily for external stakeholders

D) Financial accounting focuses on historical data

Answer: D) Financial accounting focuses on historical data

4. The primary function of cost and management accounting systems is to:

A) Determine tax liabilities

B) Provide cost information for decision-making

C) Audit financial statements

D) Forecast future stock prices

Answer: B) Provide cost information for decision-making

5. Which factor has significantly influenced changes in the competitive environment?

A) Decreased globalization

B) Reduced technological advancements

C) Increased regulatory compliance

D) Rapid technological advancements

Answer: D) Rapid technological advancements

6. Key success factors that directly affect customer satisfaction include:

A) Price only

B) Quality and service

C) Marketing efforts

D) Brand logo

Answer: B) Quality and service

7. Understanding different cost terms is necessary because:

A) It helps in tax preparation

B) It aids in effective financial reporting

C) It is crucial for effective management decision-making

D) It ensures compliance with regulatory standards

Answer: C) It is crucial for effective management decision-making

8. In the short term, some costs and revenues are not relevant for decision-making because:

A) They are fixed and unavoidable

B) They fluctuate frequently

C) They are not recorded in financial statements

D) They are variable costs

Answer: A) They are fixed and unavoidable

9. Which of the following is a purpose for which cost information is required?

A) To forecast stock market trends

B) To assist in financial reporting

C) To support planning, decision-making, and control

D) To develop marketing strategies

Answer: C) To support planning, decision-making, and control

10. A cost object is defined as:

A) An item excluded from cost calculations

B) Anything for which costs are measured and assigned

C) Only the final product

D) A regulatory requirement

Answer: B) Anything for which costs are measured and assigned

11. What does the materials recording procedure include?

A) Procurement only

B) Storage only

C) Store control only

D) Procurement, storage, and store control

Answer: D) Procurement, storage, and store control

12. Which method is used to compute the cost of materials where the oldest inventory is used first?

A) LIFO

B) FIFO

C) AVO

D) JIT

Answer: B) FIFO

13. The LIFO method results in which of the following during periods of inflation?

A) Lower cost of goods sold

B) Higher cost of goods sold

C) No effect on cost of goods sold

D) Random effect on cost of goods sold

Answer: B) Higher cost of goods sold

14. The Weighted Average method calculates the cost of materials based on:

A) The most expensive items

B) The least expensive items

C) The average cost of all items in inventory

D) The cost of the first items in inventory

Answer: C) The average cost of all items in inventory

15. Which of the following is an advantage of the FIFO method?

A) Simplifies inventory counting

B) Matches recent costs with recent revenues

C) Lowers tax liability during inflation

D) Reduces paperwork

Answer: B) Matches recent costs with recent revenues

16. EOQ stands for:

A) Economic Order Quality

B) Effective Order Quantity

C) Economic Order Quantity

D) Efficient Order Quantity

Answer: C) Economic Order Quantity

17. Maximum stock level is defined as:

A) The point at which stock levels are at their lowest

B) The minimum quantity of stock that should be maintained

C) The highest quantity of stock that can be maintained without excessive costs

D) The reorder point

Answer: C) The highest quantity of stock that can be maintained without excessive costs

18. Labour recording methods include:

A) Only method of remuneration

B) Only time-based schemes

C) Method of remuneration and time-based schemes

D) Method of remuneration, time-based schemes, and labour turnover

Answer: D) Method of remuneration, time-based schemes, and labour turnover

19. Overhead costs can be classified into:

A) Direct and indirect costs

B) Fixed and variable costs

C) Material and labour costs

D) Administrative and selling costs

Answer: B) Fixed and variable costs

20. Absorption of overheads involves:

A) Allocating overheads to cost centers only

B) Apportioning overheads to departments only

C) Charging overheads to cost units

D) Excluding overheads from cost calculations

Answer: C) Charging overheads to cost units

21. Which of the following is included in product costs under absorption costing but not under
variable costing?

A) Direct materials

B) Direct labor

C) Variable manufacturing overhead

D) Fixed manufacturing overhead

Answer: D) Fixed manufacturing overhead

22. Under variable costing, how are fixed manufacturing overhead costs treated?

A) As part of product costs

B) As a period cost

C) As a direct cost

D) As a sunk cost

Answer: B) As a period cost

23. The profit calculated using absorption costing is higher than that calculated using variable
costing when:

A) Production is greater than sales

B) Sales are greater than production

C) Production equals sales

D) Production is less than sales

Answer: A) Production is greater than sales

24. Which of the following statements is true regarding absorption costing?

A) It expenses fixed manufacturing overhead as incurred.

B) It is not allowed under generally accepted accounting principles (GAAP).

C) It includes both variable and fixed manufacturing overhead in product costs.

D) It treats fixed manufacturing overhead as a variable cost.

Answer: C) It includes both variable and fixed manufacturing overhead in product costs.

25. Budgeting is defined as:

A) The process of recording financial transactions

B) The process of preparing detailed plans for the future

C) The process of external auditing

D) The process of managing cash flows

Answer: B) The process of preparing detailed plans for the future

26. One primary purpose of budgeting is to:

A) Prepare financial statements

B) Ensure compliance with tax regulations

C) Provide a framework for performance evaluation

D) Minimize the cost of goods sold

Answer: C) Provide a framework for performance evaluation

27. Which type of budget includes detailed plans for all departments in a company?

A) Cash budget

B) Sales budget

C) Master budget

D) Production budget

Answer: C) Master budget

28. A flexible budget:

A) Is prepared for only one level of activity

B) Adjusts for changes in the level of activity

C) Is only used in manufacturing companies

D) Is prepared after the end of the accounting period

Answer: B) Adjusts for changes in the level of activity

29. Which budget is specifically designed to manage the inflow and outflow of cash?

A) Production budget

B) Sales budget
C) Cash budget

D) Capital expenditure budget

Answer: C) Cash budget

30. The difference in profits between variable and absorption costing can be attributed to:

A) The treatment of direct labor costs

B) The treatment of fixed manufacturing overhead costs

C) The treatment of variable selling expenses

D) The treatment of administrative expenses

Answer: B) The treatment of fixed manufacturing overhead costs

31. A product is being produced that requires manufacturing space costing $1,000 per

month and the lease of equipment for $700 per month. The material cost will be $12

per unit and the labour cost will be $13 per unit. Advertising and promotion will cost

$2,000 per month. Advertising and promotion is a:

A) Fixed Period Cost

B) Variable Period Cost

C) Fixed Product Cost

D) Variable Product Cost

Answer: A) Fixed Period Cost

32. Russ has developed a new device that he hopes to produce and market on a large scale. Russ

will rent a production space for $500 per month and production equipment for $800 per month.

Russ estimates the material cost per unit will be $5 and the labour cost per unit will be $3.

Advertising and promotion will cost $900 per month. He will hire workers so he can spend his

time promoting the product. In this context, the production space rental is a:

A) Fixed Period Cost

B) Variable Period Cost

C) Fixed Product Cost

D) Variable Product Cost

Answer: C) Fixed Product cost

33. A factory manager’s salary is a:

A) Fixed Period Cost

B) Variable Period Cost

C) Fixed Product Cost

D) Variable Product Cost

Answer: C) Fixed Product Cost