Prof Naresh Shroff’s ACE Tutorials CS Executive...a. Selling overheads b. prime cost c. distribution overheads d. factory overheads 9. Warehousing cost is an item of a. Office overhead

Prof Naresh Shroff’s ACE Tutorials CS Executive

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CHAPTER 1 COSTING CONCEPTS

MCQ’s 1. Fixed cost -------- in the same proportion in which output changes-

a. does not change b. changes c. increases d. none of these

2. Fixed cost per unit -------- with rise in output and ----- with fall in output- a. Decreases, increases b. increases, decreases c. is constant, remains same d. none of the

above

3. The total of all direct expenses is known as ------cost- a. Prime b. Works c. Production d. both a & b

4. -------expenses are partly fixed and partly variable- a. All expenses b. variable c. fixed d. semi-variable

5. Salary paid to general manager is an item of --------- expenses. a. Fixed b. Variable c. semi-variable d. estimated

6. Fancy packing is an example of -----expenses- a. Selling b. Distribution c. administration d. factory

7. Telephone expense is ------expense- a. Variable b. semi-variable c. fixed d. none of these

8. Primary packing is an item of ------ a. Selling overheads b. prime cost c. distribution overheads d. factory overheads

9. Warehousing cost is an item of a. Office overhead b. distribution overhead c. material cost d. works overhead

10. Fixed cost per unit decreases when: a. Production volume increases. c. Variable cost per unit decreases. b. Production volume decreases. d. Variable cost per unit increases.

11. Find the value of purchases if Raw material consumed Rs. 90,000; Opening and closing stock of raw material is Rs. 50,000 and 30,000 respectively.

a. Rs. 10,000 b. Rs. 20,000 c. Rs. 70,000 d. Rs. 1,60,000

12. R Company manufactures desks. The beginning balance of Raw Material Inventory was Rs.4,500; raw material purchases of Rs.29,600 were made during the month. At month end, Rs.7,700 of raw material was on hand. Raw material used during the month was

a. Rs.26,400 b. Rs.34,100 c. Rs.37,300 d. Rs.29,600

13. Fixed cost per unit ---------with increase in output- a . decreases b. increases c. changes d. sometime

14. Variable cost increases with -----in output- a. Increase b. decrease c. increase or decrease d. none of these

15. An average cost is also known as a) Variable cost c) total cost b) Unit cost d) fixed cost

16. Electricity charges are partly…………and partly…….. a) Fixed, variable c) job, process b) Allocation, operating d) none of the above

17. Telephone expenses is a a) Fixed cost c) semi-fixed cost b) Variable cost d) none of the above

18. An example of fixed cost is: a. Materials consumed b. Depreciation c. Factory power d. Packing material

19. A cost per unit which increases or decreases when volume of output increase or decreases is known as


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a. Fixed cost b. Variable cost c. Semi-variable cost d. None of the above

20. Which of the following would not be considered a fixed cost? a. Rent c. Cost of bottles used in the production of soft drinks b. Depreciation d. Property taxes

21. An example of variable cost is a. Property taxes c. Direct material cost b. remains constant d. Depreciation of machinery

22. Direct material is a a. Manufacturing cost c. Selling and distribution cost b. Administrative expense d. Any of the above

23. A particular cost is classified as being semi-variable. What is the effect on the TOTAL COST if activity increases by 20%?

a. Stays the same c. Increases by 20% b. Decreases by less than 20% d. Increases by less than 20%

24. A production worker paid salary of 700 per month plus an extra 5 for each unit produced during the month. This labour cost is best described as

a. A fixed cost b. A variable cost c. A semi-variable cost d. A step fixed cost

25. The cost per unit of a product manufactured in a factory amounts to Rs.80 (75% variable) when the production is 5000 units. When production increases by 25%, cost of production will be Rs…….per unit

a) Rs.76 b) Rs.72.5 c) Rs.65 d) Rs.70

26. Which of the following are direct expenses? i. The cost of special designs, drawing or layouts

ii. The hire of tools or equipment for a particular job iii. Salesman’s wages iv. Rent, rates and insurance of a factory

a.(i) and (ii) b. (i) and (iii) c. (i) and (iv) d. (iii) and (iv)

27. Functionally, administration expenses may comprise expenses of the following activities a. Secretarial and board of directors c. Audit and personnel b. Accounting, financing, tax and legal d. All of these

28. Which of the following is not an example of marketing overheads? a. Salary of the foreman c. Salaries of sales staff b. Publicity expenses d. Secondary packing charges

29. Packing cost is a a) Production cost c) distribution cost b) Selling cost d) all of these

30. With the change in quantum of production ____cost remains the same per unit a) Variable c) semi variable b) Fixed variable d) none of the above

31. Increase in total variable cost is due to ______in production a) Increase c) opposite b) Decrease d) none of these

33. Warehouse expenses is an example of a. Production overhead c. Distribution overhead b. Selling overhead d. None of the above

34 Director’s remuneration and expenses form a part of a) Production overhead c) Administration overhead b) Selling overhead d) Distribution overhead


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CHAPTER 4 LABOUR COST 1. Departmental Involved

a. Personnel Department: To recruit workers, impart training to workers so that they can perform the assigned jobs in an efficient manner.

b. Engineering and work study department: To undertake job analysis, perform time and motion study, to prepare plans and specifications, to supervise production activities, etc.

c. Time-keeping Department: To maintain attendance records of employees and time spent by them on various jobs.

d. Pay roll Department: To prepare wage sheet (payroll) of the employees. e. Cost accounting Department: To collect, classify and analyse labour costs over various jobs,

products, processes and departments and to generate various reports for managerial decision making.

MCQ’s

1. Wage sheet is prepared by a. Timekeeping department c. payroll department b. Personnel department d. engineering department

2. Time and motion study is conducted by the a. Time-keeping department c. payroll department b. Personnel department d. engineering department

3. Time study is for a. Measurement of work c. Ascertainment of actual hours b. Fixation of standard time d. Ascertainment of labour cost\

4. Idle time is a. Time spent by workers in factory c. time spent by workers off their work b. Time spent by workers in office d. time spent by workers on their job

5. Over time is a. Actual hours being more than normal time c. standard hours being more than actual hours b. Standard hours being more than actual hours d. actual hours being less than standard time

6. Difference between attendance time and job time is

a. Standard Time b. Overtime c. Actual Time d. Idle time

7. Direct labour is an element of a) Prime cost c) total production cost b) Conversion cost d) all of the given options

8. The salary of factory clerk is treated as a) Direct labour cost c) conversion cost b) Indirect labor cost d) prime cost

9. Salaries paid to time office clerks are an example of______labour cost a) Indirect c) (a) and (b) b) Direct d) none of the above

10. Any labour cost that is specifically incurred or can be readily identifiable with a specific job, work,

contract, or order is known as a) direct labour b) Indirect labour c) cost labour d) non controllable

11. godown keeper, office staff, salesmen etc. are treated as a) direct labour b) indirect labour c) additional labour d) none of the above


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12. the department responsible for recruiting and training workers and placing them to the jobs they are best fitted in labour cost control is known as a) payroll department b) time keeping department c) personnel department d) cost accounting department

13. The department which prepares the plan and specification for each job in Labour cost control is known as a) payroll department b) time keeping department c) personnel department d) engineering and work study dept.

14. The department which maintains a check on the attendance of the workers and the time recorded by the worker on various jobs etc. in labour cost control is known as a) time keeping dept. b) payroll dept. c) personnel dept. d) cost accounting dept.

15. ……department handles the wage payment of the workers in labour cost control a) time keeping b) payroll c) personnel d) cost accounting

16. time and motion study involves the classification of labour movement into a) direct and indirect b) fixed and variable c) necessary and wasteful d) none of the above


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CHAPTER 5 MARGINAL COSTING

1. A company wishes to make a profit of Rs.1,50,000. It has fixed cost of Rs.75000 with a C/S ratio of 0.75 and a selling price o Rs.10 per unit. How many units would the company need to sell in order to achieve the required level of profit?

a) 10,000 units c) 22,500 units b) 15,000 units d) 30,000 units

2. A company has the following budgeted information of for the coming month : budgeted sales revenue Rs.5,00,000, budgeted contribution Rs.2,00,000, budgeted profit Rs.50,000. What is the budgeted break even sales revenue?

a) Rs.125000 c) Rs.375000 b) Rs.350000 d) Rs.450000

3. Under marginal costing, the breakeven point is found by the following formula a) Fixed costs per unit divided by the total contribution b) Total fixed costs, divided by the contribution per unit c) Total sales divided by the contribution per unit d) Total variable costs divided by the contribution per unit

4. A retail company sells computers, each of which is sold for Rs.250 and bought from the manufacturer for Rs.100. the retailer’s fixed costs are Rs.1,50,000. Maximum possible sales are 3000. How many computers must be sold to breakeven?

a) 1000 c) 3000 b) 2000 d) 750

5. Using the information in question 5, how much profit or loss would be made if 2700 computers were sold? a) Rs.4,50,000 profit c) Rs.1,62,000 profit b) Rs.2,55,000 profit d) Rs.,150,000 loss

6. Using the information in question 5, how many computers would have to be sold for the company to earn a profit of Rs.1,80,000?

a) 1200 c) 2200 b) 1000 d) 720

7. On a breakeven chart, which of the following indicates the point where a business breaks even? a) Where the variable costs line crosses the fixed costs line b) Where the fixed line crosses the sales line c) Where the total costs line crosses the fixed costs line d) Where the sales line crosses the total costs line

8. A breakeven chart shows maximum units sales at 5000 at Rs.100 each, maximum profit of Rs.1,00,000. A breakeven point of 2143 units, and a loss of Rs.75,000 if no units are sold. What is the total of fixed costs?

a) Rs.75000 c) Rs.1,00,000 b) Rs.2,00,000 d) Rs.5,00,000

9. Using the information given in question 9, what is the margin of safety? a) 2857 untis c) 7143 units b) 2143 units d) 5000 units

10. Using the information given in question 9, what profit or loss would be earned if 2500 units are sold? a) Rs.75000 loss c) Rs.12500 profit b) Rs.30,000 profit d) Rs,75000 profit

11. Which one of the following is a limitation of a breakeven chart? a) The split between fixed and variable costs may not be clear-cut b) The breakeven point cannot be indicated on it c) You can only show losses, not profits d) Variable costs are not shown on the chart


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12. Which one of the following would be shown on a breakeven chart, but not a profit / volume chart ? a) Total costs at maximum sales c) Maximum loss at zero sales b) Maximum profit at maximum sales d) The breakeven point

13. The Y-axis (vertical axis) on a breakeven chart has which one of the following labels? a) Production levels c) costs and revenues b) Variable costs d) profit and losses

14. On a breakeven chart, if total costs increased and sales decreased, the breakeven point would change in which one of the following ways?

a) It would not change b) It would move to the left along the total sales line c) The business would not breakeven, so there would be no breakeven point d) It would move to the right along the total sales line

15. A company has a very small margin of safety on a specific product. Which one of the following events would be likely to result in a loss on that product?

a) The business achieving no more than maximum activity level as shown on existing breakeven chart b) An increase in the selling price but no changes to costs c) A significant increase in variable costs of the product but no changes to the selling price or fixed

costs d) An increase in the selling price but no changes to costs

16. A company’s fixed cost amounts to Rs.120 lacs p.a. and its overall P/V ratio is 0.4. The annual sales of the company should be Rs……lacs to have a margin of safety of 25%

a) 400 c) 600 b) 500 d) none of the above

17. The variable cost of a product increases by 10% and the management raises the unit selling price by 10%. The fixed cost remain unchanged. Then BEP of the firm…

a) Increases c) remain the same b) Decreases d) none of the above

18. A company with a contribution / sales ratio of 33 1/3% and fixed cost of Rs.3 lacs per month should have a monthly sales of Rs…..lacs to maintain a margin of safety of 10%

a) 8 c) 12 b) 10 d) none of the above

19. The variable cost of product increases by 10% and the management raise the unit selling price by equal amount. The fixed costs remain unchanged. The BEP of the firm…….

a) Increase c) unchanged b) Decrease d) none of the above

20. Sales of two consecutive months of a company are Rs.3,80,000 and Rs.4,20,000 the company’s net profit for these months amounted to Rs.24,000 and the Rs.40,000 respectively. There is no change in P/v ratio of fixed costs. The P/V ratio of the company is.

a) 33.33% c) 25% b) 40% d) none of the above

21. A company has fixed costs of Rs.6,00,000 per annum. It manufactures a single product which it sells for Rs.200 per unit. Its contribution to sales ratio is 40%. Its breakeven in units is

a) 7500 units c) 3000 units b) 8000 units d) 1500 units

22. Unique Co. sells a single product for Rs.28 per unit. If variable costs are 65% of sales and fixed cost total Rs.9800, the breakeven point will be

a) 15077 units c) 539 units b) 18200 units d) 1000 units

23. ……..is obtained by deducting ….cost from……. a) Contribution, variable, sales c) Single, notional, uniform b) Selling, distribution, selling d) None of the above


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CHAPTER 6 BUDGETARY CONTROL Definition : Budgetary Control is defined as “the establishment of budgets and the continuous comparison of actual with budgeted results either to secure by individual action the objective of that policy or to provide a base for its revision.” Features

1. Objectives: Determining the objectives to be achieved, over the budget period. 2. Activities: Determining the variety of activities that should be undertaken for achievement of the

objectives. 3. Plans: Drawing up a plan or a scheme of operation in respect of each class of activity 4. Performance Evaluation: Laying out a system of comparison of actual performance with the relevant

budget and determination of causes for the discrepancies. 5. Control Action: Ensuring that when the plans are not achieved, corrective action are taken.

ZERO BASED BUDGETING (ZBB) 1. Zero Base Budgeting (ZBB) is a method of budgeting whereby all activities are re-evaluated each time

when a budget is formulated. 2. Each functional budget starts with the assumption that the function does not exist and it is at zero cost.

RESPONSIBILITY ACCOUNTING The basic approach is that a manager should be held responsible for those activities which are under his control. A responsibility centre is created in the form of an individual, a department, a division.

1. A target is fixed for every responsibility centre 2. Actual performance is compared with the targets set 3. Deviations are analysed to fix the responsibility for each centre

MCQ’s 1. The budget control organization is usually headed by a top executive who is known as…

a) Budget controller c) production controller b) Cash controller d) none of the above

2. In order to prepare a flexible budget, items of anticipated expenditure are classified into a) Fixed, variable and semi variable c) semi variable b) Variable and fixed d) none of the above

3. ………budget is a summary of all the functional budgets and the budgeted profit or loss a) Master c) production b) Cash d) none of the above

4. ….budget is most suited for fixed expenses a) Fixed c) semi variable b) Variable d) none of the above

5. Budget shows the anticipated sources and utilization of cash a) Cash c) both (a) and (b) b) Cheque d) none of the above

6. The two main methods of preparing cash budget are…..method and …….method a) Receipts and payments c) profit and loss account b) Income and expenditure d) none of the above

7. Zero base budgeting was first used by …. a) Jimmy Carter c) F. W. Taylor c) Koontz and Donald d) none of the above

8. Master budget incorporates all …budgets a) Functional c) selling b) Production d) distribution

9. A factor which influences all other budgets, is called…………factor


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a) Key c) cash budget b) Master d) none of the above

10. Budgetary control is a system of controlling………. a) Costs c) account b) Finance d) management

11. Which of the following usually a long term budget? a) Sales budget c) capital expenditure budget b) Cash budget d) fixed budget

12. The fixed variable cost classification has a special significance in the preparation of

a) Flexible budget c) cash budget b) Master budget d) capital expenditure budget

13. The budget that is set first and all the other budgets are subordinate to it, as : a) Cash budget c) capital expenditure budget b) Master budget d) budget for the key factor

14. Cash budget is prepared because it a) Is legally compulsory c) encourages over spending b) Indicates profitability d) helps in cash management

15. If period of credit allowed to the customer is 2 months then the credit sales of which month will be considered for cash budget

a) First month c) third month b) Second month d) fourth month

16. While preparing cash budget, cash discount allowed to customers is added to

a) Payments c) sales b) Receipts d) purchases

17. While preparing cash budget, opening balance of cash is added to

a) Receipts c) profits b) Payments d) loss

18. Cash budget is based on

a) Past performance c) average of past performance b) Future performance d) none of these

19. The sales budget is the most important budget and forms the basis on which all the …..built up

a) Other budgets c) spring budgets b) Both a and c d) none of the above

20. A system by which budgets are used as a means of planning and controlling all aspects of a business is

called……. a) Budgetary control c) budgetary system b) Both a and c d) none of the above

21. …….is a budget designed to finish budgeted costs for any level of activity actually allowed a) Flexible budget c) fixed budget b) Both a and c d) none of the above

22. Budgetary control helps management to plan and…… a) Control c) loss b) Both a and b d) none of the above

23. Budget is an expression of a business plan in financial items …….shows the anticipated sources and utilization of cash

a) Cash budget c) pass budget b) Both a and c d) none of the above


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24. ….determines the priorities of functional budgets a) Principal budget factor c) production budget factor b) Both a and c d) none of the above

25. A document which set out the responsibilities of the persons engaged in the routine of and the forms and records required for budgetary control is called…….

a) Budget manual c) principal budget b) Both a and c d) none of the above

26. Cash budget is a ………budget a) Short term budget c) both a and b b) Long term budget d) none of the above

27. …………is a budget which states the additional workers to be engaged in the factory a) Labour procurement budget c) both a and b b) Recognizing different budget d) none of the above

28. It is essential to determine the proper budget period and to have well defined …… a) Responsibility centre c) unresponsibility centre b) Both a and c d) none of the above

29. Sales budget is a a) Functional budget c) expenditure budget b) Master budget d) none of the above

30. The budget which commonly takes the form of budgeted profit and loss account and balance sheet is a) Cash budget c) flexible budget b) Master budget d) none of the above

31. The primary difference between a fixed budget and a variable (flexible) budget is that a fixed budget a) Includes only fixed costs, while a variable budget includes only variable costs b) Is concerned with only future acquisitions of fixed costs, while a variable budget is concerned with

expenses which vary with sales c) Cannot be changed after the period begins, while a variable budget can be changed after the period

begins d) Is a plan for a single level of sales (or other measure of activity), while a variable budget consists of

several plans, one for each of several levels of sales (or other measure of activity)

32. A budget is a) an aid to management b) a postmortem analysis c)a substitute of management.

33. The principal budget factor for consumer goods manufacturer is normally

a) sales demand b) labour supply c) both sales and labor

34. A budget is a projected plan of action in a) physical units b) monetary terms c)physical & monetary units

35. A budget is useful for a) Planning purpose only c) Planning, performance evaluation and feedback control b) Control of performance only d) Nothing at all.

36. The scarce factor of production is known as,

a) Key factor b) Linking factor c) Production factor.

37. Information to prepare a flexible budget includes, a) Total fixed costs, total variable costs b) Total fixed costs, total variable costs and capacity base c) Unit fixed costs and unit variable costs d) Total fixed costs, variable costs per unit, several level of activity.

38. Which of the budget is prepared for a long period of time

a) Production budget c) Purchase budget


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b) Cash budget d) Capital expenditure budget

39. A budget is prepared for a) One year b) One month c) 6 month d) A specified period

40. Budget period depends on a) Type of budget c) Management Policy b) Government policy d) None of the above

41. The object of budgetary control is a) Planning b) Organising c) Forecasting d) None of the above

42. Following is the benefit of budgetary control a) Facilitates control c) Brings down efficiency b) Increases cost d) None of the above

43. Following is the essence of budgetary control a) Well defined objectives c) Small size b) Competent people d) None of the above

44. Budget Manual is a a) Detailed information about plans, policies, procedures and operations b) Annual magazine c) Note book d) Budget prepared manually

45. Production budget is expressed in a) Quantity only b) Cost only c) Quantity and cost d) None of the above

46. Capital expenditure budget is a) A budget for long term investment c) A budget for future expenditure b) A budget for short term investment d) A budget for personal expenditure

47. The budget which is dynamic is a) Fixed budget b) Flexible budget c) Cash budget d) Sales budget

48. production budget is governed by a) cost budget b) material budget c) fixed budget d) sales budget

49. ……..is a method of budgeting whereby all activities are re-evaluated each time a budget is formulated a) tradition budgeting b) zero base budgeting c) flexible budgeting d) all of the above

50. Budget is/an a) financial and/or quantitative statement prepared and approved prior to a defined period of time b) operating profit and financial plan to a business enterprise c) sort of commitment or a target which the management seems to attain on the basis of forecasts made d) all of the above

51. ……..is based on the premise that every rupee of expenditure requires justification a) zero based budgeting (ZBB) c) economic batch quantity (EBQ) b) economic order quantity (EOQ) d) none of the above

52. …..is the detailed budget of income and cash expenditure incorporating both revenue and capital items a) capital budget b) revenue budget c) cash flow budget d) income budget


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CHAPTER 7 COST ACCOUNTING RECORDS & COST AUDIT PURPOSE OF COST AUDIT: The primary purpose of Cost audit is to express an opinion on the cost accounts of the company whether these have been properly maintained.

1. Proper Costing records are maintained 2. Standard Costing norms and procedures are followed 3. Detection of errors and fraud. 4. Determination of inventory valuation. 5. Facilitating the fixation of prices of goods and services. 6. Ensuring optimum utilization of human, physical and financial resources of the enterprise.

MCQ’s

1. Cost auditor is a. Advisable to the company c. unnecessary to the company b. Not advisable to the company d. none of the above

2. The cost auditor should ensure that a. Maximum quantity of materials has been fixed. b. Maximum cost of material has been fixed. c. Customers are informed about the audit. d. None of the above

3. The audit required by the statute is called as a. Internal audit b. Statutory cost audit c. Propriety audit d. Energy audit

4. Cost audit is compulsory for companies a. Which are ordered by Maharashtra Govt. c. Which are ordered by ICAI b. Which are ordered by Central Govt. d. None of these

5. Cost audit ensures a. Accuracy of financial accounts c. accuracy of books of accounts b. Accuracy of cost records d. none of the above

6. An enquiry into the cost accounts for a special purpose is a. Cost investigation b. cost audit c. Financial audit d. Tax audit

7. The purpose of cost investigation is a. To review sick industry c. To control cost b. To study cost system d. To know the truth in accounts

8. The cost auditor has a right to a. Obtain financial information c. visit branches b. Obtain technical advice d. both (b) & (c)

9. Costing records about wages and salaries include a. Finished product ledgers c. Bin cards b. Attendance register d. none of the above

10. The company has to complete all the cost records within a. 80 days b. 90 days c. 180 days d. 40 days

11. Appointment of cost auditor is made by a. Shareholders b. Board of directors c. M.D. d. Director

12. Appointment of cost auditor is subject to the approval of the a. Central Govt. b. State Govt. c. High Court d. ICWAI

13. The person who is having following qualifications is appointed as cost auditor

a. Member of ICAI b. Member of ICSI c. Member of ICWAI d. Member of IMA

14. The object of cost audit is


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a. To curb profiteering c. To curb bad attitude of employees b. To curb corruption d. To curb go slow policies of employees.

15. The object of cost audit is to examine a. Inventory b. fixed assets c. current assets d. none of the above

16. Before commencement of cost audit, the auditor should get information about a. System of production c. organizational chart of the company b. Cost accounting concepts d. all of the above.

17. The centre point of cost audit is ……… a) Factory c) management b) Company d) none of the above

18. Cost auditor gives his report to…….

a) Central government c) board of directors b) Shareholder d) none of the above

19. Cost audit protects the interest of….

a) Consumers c) directors b) Shareholders d) none of the above

20. The authority for approving the appointment of cost auditor is………..

a) Department of company affairs. Cost audit branch of the central government b) Corporate governance c) Both a and b d) None of these

21. The cost auditor has to submit his report to the central government within ……days from the close of the

financial year of the company a) 180 c) 225 b) 120 d) none of these

23. ….is the verification of the correctness of cost accounts and adherence to cost accounting principles a) cost audit c) tax audit b) market audit d) none of these 24. Under Companies Act, the cost audit report shall be submitted to the …….of the company a) board of directors c) shareholders b) CEO d) partners


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CHAPTER 8 RATIO ANALYSIS

The users of financial information include: a. Management b. Proprietor / Shareholders c. Lenders – Banks and Financial Institutions d. Suppliers e. Customers f. Government g. Research Scholars

Techniques of Financial Statement Analysis The following are some techniques of financial statement analysis.

h. Ratio Analysis i. Cash Flow and Fund Flow Statements j. Common Size Statements k. Trend Analysis l. Value Added Statements

CASH FLOW STATEMENT Meaning of Cash flow: Cash Flows: Cash flows are inflows and outflows of cash and cash equivalents. It means the movement of cash into the organization and movement of cash out of the organization.

Management Information System (MIS): According to CIMA, MIS is a set of procedures designed to provide managers at different levels in the organization with information for decision making and for control of those parts of the business for which they are responsible. MIS is a necessity of all the organizations. The initial concept of MIS was to process data from the organization but presently it is required for the reports at regular intervals.

CONCEPTS RELATED TO FINANCIAL STATEMENTS Reserves are undistributed profits : General Reserve, Securities Premium, Reserve Fund, Capital Reserve Sinking Fund, Debenture Redemption Fund, Dividend Equilisation Reserve Borrowed funds (Long term Liabilities) :

These are those outsiders liabilities which are not repayable within a period of 12 months. All the loans taken by the company should be assumed to be long term unless otherwise given. e.g. Bank loan, Debentures, Public deposits, Loan from financial institutions, Loan from directors

Current Liabilities & Provisions (Short - term liabilities) : These are those outside liabilities which are payable within a period of 12 months. e.g. Sundry Creditors, Bills payable, O/s Expenses, Provision for tax, Proposed dividend & Bank

overdraft Note: Bank o/d is non Quick liability

Fixed Assets : These are those Real Assets which are Not intended to be disposed off within a period of twelve months. They are intended to be used in the business for a long period. Fixed assets can be further classified into two parts :

a. Tangible Fixed Assets : Land, Buildings, Leasehold premises, Freehold premises Plant & Machinery, Furniture & Fixture, Office Equipments b. Intangible Fixed Assets : Goodwill, Patents, Trade marks, Copy rights etc.

Investment can be long term or even short term : ALL investments should be assumed to LONG TERM EXCEPT Short term investments / Temporary investments / Marketable investments (CA)


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Current Assets (Loans & Advances) : These are those Real Assets which are intended to be disposed off and get it converted into

money/money’s worth within a period of 12 months. for e.g. Sundry Debtors, Bills Receivable, Cash in hand, Bank balance, Short Term Investments, Closing

stock (Inventories),Outstanding Incomes, Pre-paid Expenses, Advance Tax & Loose Tools,

Classification of “Gains/Incomes/Profits” (from Profit & Loss A/c - Cr Side) : Operating Incomes Non - operating Incomes � Operating Incomes : These are the incomes which are : Recurring in nature and Trading in nature (main business incomes) eg.: Discount received, Commission received Bad debts recovered etc. � Non - operating Incomes :

These are the incomes which are either Non - recurring in nature or non - trading in nature eg.: Rent received, Profit on sale of FA/Investment, Interest on Investment, Dividend on shares

Classification of Expenses/Losses (from Profit & Loss A/C - Dr Side) : Non - operating Expenses eg. : - Loss on sale of fixed assets & investments - Abnormal Losses like loss by fire, theft etc.

- All written - off transactions like Goodwill written off, Preliminary expenses w off Depreciation : On Factory fixed assets Cost of goods sold On Delivery van/Show room building Selling & Distribution expenses On Building/Furniture/Motor vehicles etc. Office & Administration expenses

MCQ’s 1. The following information is related to A Ltd.:

Current liabilities Closing inventory

Current ratio Debtors

Rs. 150 lakh Rs. 100 lakh

1.5 Rs. 100 lakh

What is the amount of cash and bank balance (assuming there are no other current assets)? a. Rs. 18 lakh b. Rs. 10 lakh c. Rs. 12 lakh d. Rs. 15 lakh e. Rs. 25 lakh

2. S Ltd. furnished the following information: Particulars Rs.

Profit after tax Average shareholders’ equity

5,00,000 22,50,000

If return on equity is 10%, then the preference dividends of S Ltd., is a. Rs. 17,50,000 b. Rs. 2,25,000 c. Rs. 50,000 d. Rs. 5,00,000 e. Rs. 2,75,000

3. H Ltd., furnished the following information:

Particulars Rs. Cost of goods sold

Net Profit Sales return

6,00,000 3,00,000 1,00,000

If the net profit margin of Harika Ltd. was 25%, then the gross profit margin was a. 55% b. 60% c. 40% d. 50% e. 45%

4. S Ltd., furnished the following information: Particulars Rs.

Sales Gross profit

Dividends paid Net profit

40,00,000 25,00,000

4,00,000 10,00,000

If there were no non-operating expenses, the percentage of operating expenses to sales was


Page 20 of 26

a. 27.50% b. 30.50% c. 37.50% d. 20.50% e. 30.00%

5. P Ltd., has furnished the following data for the year 2012-13. Cost of goods available for sale

Total sales Gross profit margin on sales

Rs. 1,00,000 Rs. 80,000

25% Closing stock of goods as on March 31, 2013 was

a. 80,000 b. Rs. 60,000 c. Rs. 36,000 d. Rs. 40,000 e. Rs. 20,000

6. The following data is extracted from the books of S Ltd., for the year ended March 31, 2013 Creditors turnover ratio 30 times. Average trade creditors Rs. 76,650. The average daily credit purchases of S Ltd., (assuming 365 days in a year) were

a. Rs. 6,300 b. Rs. 3,150 c. Rs. 3,500 d. Rs. 4,200 e. Rs. 2,800

7. R Ltd., furnished the following information for the year 2012-13: Particulars Rs.

Opening balance of trade creditors Closing balance of trade creditors

90,000 1,00,000

If the trade creditors turnover ratio is four times, the net annual credit purchases are a. Rs. 3,80,000 b. Rs. 4,00,000 c. Rs. 3,60,000 d. Rs. 4,20,000 e. Rs. 7,60,000

8. The following information is related to A Ltd.: Current liabilities

Inventory turnover ratio Quick ratio

Cost of good sold Opening stock

Rs. 400 lakh 2

1.5 Rs. 180 lakh

Rs. 40 lakh The total of current assets of the A Ltd., were

a. Rs. 140 lakh b. Rs. 740 lakh c. Rs. 600 lakh d. Rs. 180 lakh e. Rs. 90 lakh

9. The following data is extracted from the books of P Ltd., for the year ended March 31, 2013 Particulars Rs.

Sales Net worth

Sales returns

15,60,000 30,00,000

60,000 If the return on net worth is 0.25, then the net profit margin of P Ltd., was

a. 48.00% b. 50.00% c. 25.00% d. 43.80% e. 40.50%

10. R Ltd., furnished the following information for the year 2012-13: Particulars Rs.

Opening balance of trade creditors Closing balance of trade creditors

Net credit annual purchases

1,80,000 2,00,000 7,30,000

The average payment period (assuming 365 days a year) for the year 2012-08 was a. 100 days b. 95 days c. 80 days d. 55 days e. 65 days

11. The dividend pay-out ratio of C Ltd., was 30%. If the net profit available for distribution was Rs. 1,20,000,

then the dividends paid by the company were a. Rs. 64,000 b. Rs. 36,000 c. Rs. 84,000 d. Rs. 10,000 e. Rs. 16,000

12. R Ltd., has 1,00,000 equity shares of Rs. 10 each, fully paid and its retained earnings are half of its equity

share capital. The fixed and current assets are in the ratio of 3 : 1. The fixed assets are Rs. 28,12,500. The outside liabilities of the company are

a. Rs. 21,20,000 b. Rs. 23,00,000 c. Rs. 37,50,000 d. Rs. 35,00,000 e. Rs.22,50,000

13. The return on equity of Z Ltd., is 0.6. The net income of the company is Rs. 5,70,000. The preference dividends paid by the company are Rs. 90,000. The average shareholders’ equity is

a. Rs. 7,00,000 b. Rs. 6,05,000 c. Rs. 6,00,000 d. Rs. 7,50,000 e. Rs. 8,00,000


Page 21 of 26

14. K Ltd., furnished the following information: Particulars Rs.

9% Preference share capital 12% Debentures

Equity Shareholder’s fund

6,00,000 4,00,000

25,00,000 The capital gearing ratio of Kumar Ltd., was

a. 0.60 b. 0.40 c. 1.67 d. 1.44 e. 2.50

15. The total debt-equity ratio of A Ltd. is 4 : 3. Its total assets is Rs. 7000 lakh and its short-term debt is Rs.500 lakh. If total debt consists of long-term debt as well as short-term debt, the amount of long-term debt is

a. Rs. 500 lakh b. Rs. 3,500 lakh c. Rs. 1,000 lakh d. Rs. 1,500 lakh e. Rs. 1,600 lakh

16. Current liabilities and provisions Rs. 150 lakh Net sales = Rs. 700 lakh Inventory turnover ratio = 7 Current ratio = 1.50 Receivables / Quick Assets Ratio = 0.8 What is the amount of cash and bank balance? (Assume 360 days in a year)

a. Rs. 18 lakh b. Rs. 10 lakh c. Rs. 12 lakh d. Rs. 15 lakh e. Rs. 25 lakh

17. S Ltd., has 90,000 equity shares of Rs. 10 each fully paid. If it had a profit after tax of Rs. 9,00,000 in the current year and paid Rs. 3,60,000 by way of equity dividends, the Dividend Pay-out Ratio was

a. 51% b. 40% c. 14% d. 54% e. 55% 18. S Ltd., provided the following information:

Profit before tax Dividend per share

Number of equity shares Tax rate

Rs. 12,00,000 Rs. 10 9,000 40%

The dividend pay-out ratio of Seizens Ltd., is a. 15.00% b. 16.67% c. 12.50% d. 20.00% e. 21.00%

19. the meaning of inventory means a) stock of raw material and stores b) stock of work in progress and semi finished goods c) stock of finished goods d) all of the above

20. the term cash profit indicates

a) net profit + interest + depreciation b) net profit + depreciation c) net profit + interest + tax d) net profit after depreciation, interest and tax

21. consider the following information relating to Shiva Ltd., net worth Rs.250 lakhs; total assets Rs.600 lakhs; long term debt Rs.200 lakhs; current liabilities Rs.150 lakhs; the debt equity ratio of the company is a) 0.555 c) 0.44 b) 0.800 d) 2.800

22. if current ratio is 2.5, liquid ratio is 1.5, liquid assets are Rs.60,000, then the value of the stock will be :

a) Rs.80,000 c) Rs.40,000 b) Rs.20,000 d) Rs.70,000

23. which of the following firms would have the least liquidity a) current ratio = 4.2 and quick ratio = 2.6 b) current ratio = 3.2 and quick ratio = 2.1 c) current ratio = 1.2 and quick ratio = 0.6


Page 22 of 26

d) current ratio = 2.4 and quick ratio = 1.6 24. the …ratios measure the ability of the firm to meet its maturing short term obligations

a) profitability c) liquidity b) solvency d) debt

25. the quick ratio is also called as …….ratio or …….ratio a) financial c) super quick b) operating d) liquid, acid test

26. the …ratio indicates the proportion of long term funds deployed in fixed assets

a) current c) profitability b) proprietary d) fixed assets to long term funds

27. the actual debtors collection period should be compared with ……of the company in analyzing the

efficiency of credit control department a) return on investment c) credit terms b) debtors payment d) price earning

28. the……margin may be compared with that of competition in the industry to assess the operational

performance a) gross profit c) return on equity b) dividend payout d) book value

29. the measure of net profit earned per share is termed as…. a) net profit c) return on equity b) operating d) none of the above

30. a high dividend payout signifies….distribution policy of the company a) liberal c) investment b) profit d) disinvestment

31. ….is used to evaluate relationships among financial items a) Ratio analysis c) accounting ratio b) Trends ratios d) none of the above

32. The ratio are used to identify trends over time for one organization or to compare two or more organizations at one point in time a) True c) partly true b) False d) partly false

33. Ratio analysis focuses on – a) Liability c) solvency b) Profitability d) all of the above

34. Ratio can be used in a form of ……..to identify areas when performance has improved or deteriorated over time a) Short term analysis c) vertical analysis b) Trend analysis d) horizontal analysis

35. ……are relationships, expressed in arithmetical terms, between figures which have a cause and effect relationship or which are connected with each other in some other manner. a) Ratio analysis c) accounting ratio b) Trends ratios d) none of the above

36. Ratio analysis are useful tool for grasping the true message of financial statements & understanding them a) True c) partly true


Page 23 of 26

b) False d) partly false

37. Ratio act as indicators of a) Financial soundness c) position b) Strength d) all of the above

38. The computation of …..is simply a clerical work but interpretation is a test requiring act and skill a) Trend c) cash b) Ratio d) fund

39. Ratio analysis helps to analyse and understand the financial health and trend of a business, its past performance makes it possible to have forecast about future state of a affairs of the business a) True c) partly true b) False d) partly false

40. Ratio useful for all the constituents of the company i.e. i) Management ii) Shareholders iii) Investors iv) Creditors v) Government

a) i,ii,iii,iv c) i,ii,iv,v b) ii,iii,iv,v d) all of the above

41. ……is interested in ratios because they help in the formulation of policies, decision making and evaluating the performance and trends of the business and its various segments a) Management c) investors b) Shareholders d) creditors

42. …..deal with relationship between two items appearing in the balance sheet, e.g., current assets to

current liability or current ratio a) Balance sheet ratio b) Operating ratio or profit and loss ratio c) Combined ratios d) None of the above

43. ….deal with relationship between two individual or group of items appearing in the income or profit and loss statement a) Balance sheet ratio b) Operating ratio or profit and loss ratio c) Combined ratios d) None of the above

44. …………gives some yardstick to measure the profit in relative terms with reference to sales, assets or capital employed.

a) Profitability ratio c) financial ratios b) Turnover ratios d) market test ratios

45. …….are used to measure the effectiveness of the use of capital assets in the business a) Profitability ratio c) financial ratios b) Turnover ratios d) market test ratios

46. ………are calculated to judge the financial position of the organization from short term as well as lon term solvency point of view a) Profitability ratio c) financial ratios b) Turnover ratios d) market test ratios

47. A measure of profitability is the overall measure of efficiency


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a) True c) partly true b) False d) partly false

48. The ratio of all operating expenses (i.e. materials used, labour, factory overheads, office and selling expenses) to sales is the ……ratio a) Gross profit c) operating b) Net profit d) activity

49. The major component of cost is a) Material c) overheads b) Labour d) all of the above

50. ……ratio is used to measure the effectiveness of the employment of resources a) Gross profit c) operating b) Net profit d) activity

51. The overall profitability of the business depend upon – a) The rate of return on sales b) The rate of return on capital employed c) Both (a) and (b) d) None of the above

52. ….ratio shows the efficiency of capital employed in the business a) Capital turnover c) stock turnover b) Total assets turnover d) debtors turnover

53. current ratio indicates the firm’s commitment to meet its long-term obligations a) True c) partly true b) False d) partly false

54. A high current ratio may be taken as adverse on account, when – a) The stock might be piling up because of poor sales b) The amount might be locked up in debtors due to slack collection policy c) The cash or bank balances might be lying idle because of no proper investment d) All of the above

55. …….ratio is also known as quick ratio or acid test ratio a) Current ratio c) debt equity ratio b) Liquid ratio d) proprietary ratio

56. …….ratio is an indicator of the liquid position of an enterprise a) Liquid c) debt equity b) Long term solvency d) proprietary

57. ………ratio is the relation between borrowed funds and owner’s capital in a firm a) Liquid b) Long term solvency c) debt equity d) proprietary

58. Debt equity ratio = a) Debts / equity (shareholders funds) c) Debts + equity (shareholders funds) b) Debts x equity (shareholders funds) d) Debts - equity (shareholders funds)

59. The main purpose of …..ratio is to determine the relative stake of outsiders and shareholders a) Liquid b) Long term solvency c) debt equity d) proprietary

60. ………ratio is a variant of debt equity ratio which establishes the relationship between shareholders funds and total assets


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a) Liquid b) Long term solvency c) debt equity d) proprietary

61. The EPS alone reflect the effect of various financial operations of the business a) True b) False c) partly true d) partly false

62. …….ratio establishes relationship between the market price of shares of a company and its earning per share (EPS)

a) Price earning c) dividend yield b) Pay out d) debt equity

63. ……….ratio expresses the relationship between what is available as earnings per share and what is actually paid in the form of dividends out of available earnings

a) Price earning c) dividend yield b) Pay out d) debt equity

64. A lower payout ratio may mean lower retention and ploughing back of profits, a deteriorating liquidity position and little or no increase in the price earning capacity of the company.


65. Dividend yield ratio = a) Dividend per share + 100

Market price per share b) Dividend per share x 100

Market price per share c) Dividend per share - 100

Market price per share d) Dividend per share / 100

Market price per share

66. ………ratio is also known fixed charges cover or interest cover a) Debt service c) market test b) Capital gearing d) earning per share

67. Debt service ratio = net profit before interest and tax ? a) Long term funds c) total assets b) Fixed assets d) interest charges

68. ……..ratio is expressed as ‘number of times’ to indicate that profit is number of times the interest charges a) Debt service c) market test b) Capital gearing d) earning per share

69. The proportion between fixed interest or dividend bearing funds and non-fixed interest or dividend bearing funds in the total capital employed in the business is termed as ………ratio.

a) Debt service c) market test b) Capital gearing d) earning per share

70. EPS = ?___________ No. of equity shares

a) Net profit c) debtors b) Gross profit d) none of the above

71. the ratio total liquid assets to current liabilities is known as …….. a) acid test ratio c) current ratio b) quick ratio d) debt equity ratio


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72. ……..is the indicator of financial position of an enterprise a) acid test ratio c) current ratio b) quick ratio d) debt equity ratio

73. A………….of less than one implies that the working capital is negative a) acid test ratio c) current ratio b) quick ratio d) debt equity ratio

74. Ratio analysis involves a comparison of the relationships between financial statement accounts so as to analyse the financial position and strength of a firm


75. The current ratio and inventory turnover ratio measure the liquidity of a firm. The current ratio measures the relationship of a firm’s current assets to its current liabilities and the inventory turnover ratio measures how rapidly a firm turns its inventory back into a ‘quick’ asset or cash


76. If a firm has high current and quick ratios, this is always a good indication that a firm is managing its liquidity position well.


Prof Naresh Shroff’s ACE Tutorials CS Exec / CMA & FM

28

6. Operating or Services Costing: Cost used in service industries to calculate the cost of service provided to the customers

7. Multiple Costing: It represents a combination of two or more methods of costing outlined above. For example, manufactures bicycles, cars.

TYPES OF RESPONSIBILITY CENTRES Particulars Cost Centres Revenue Centres Profit Centres Investment Centres Meaning A centre where

costs are incurred. A centre devoted to raising revenue (no responsibility for

production)

A centre whose performance is

measured in terms of income earned and cost incurred (profit earning)

A centre responsible for earning profits and also for asset

utilisation.

Primary responsibility

Cost reduction and cost control

Generation of sale revenue

Profit earning Earning return of investments

Performance evaluation

Standard cost less actual cost

Budgeted revenue less actual revenue

Budgeted profits less actual profits

Budgeted ROI less actual ROI.

COSTING SYSTEMS 1. Uniform Costing: When a number of firms in an industry agree among themselves to follow the same

system of costing, by adopting common terminology for various items and processes they are said to follow a system of uniform costing.

2. Historical Costing: It is the ascertainment of costs after they have been incurred. This type of costing has limited utility.

3. Marginal Costing: Here only variable manufacturing costs are considered to value the stock. Fixed costs are considered as period costs and not included in stock valuation

4. Absorption Costing: Here both fixed and variable manufacturing costs are considered to value the stock. Fixed costs are considered as product costs

MCQ’s

1. The following are features of a relevant cost EXCEPT a) They affect the future cost b) They cause an increment in cost c) Relevant cost is a sunk cost d) They affect the future cash flows

2. Which of the following statement is TRUE about the relevant cost? a) It is a sunk cost b) It is an opportunity cost c) It do not affect the decision making process d) All costs are relevant

3. In decision making all costs already incurred in past should always be

a) Ignored c) partially ignored b) Considered d) partially considered

4. Which of the following statement is TRUE about historical cost?

a) It is always relevant to decision making b) It is always irrelevant to decision making c) It is always an opportunity cost d) It is always realizable value

5. Period costs are

a) Expensed when the product is sold b) Included in the cost of goods sold


29

c) Related to specific period d) Not expensed

6. Under which of the following, all cost of production is considered as product cost, regardless of whether they

are variable or fixed in nature? a) Absorption costing c) marginal costing b) Direct costing d) variable costing

7. What would be the attitude of the management in treating sunk costs in decision making? a) A periodic investment of cash resources that has been made and should be relevant for decision

making b) It is a past cost which is not directly relevant in decision making c) Management will treat it as variable cost each time in decision making d) None of the given options

8. Mohan is running his own personal financial services business. He has been offered a job for a salary of Rs.45,000 per month which he does not availed Rs.45,000 will be considered as

a) Sunk cost c) avoidable cost b) Opportunity cost d) historical cost

9. Basic assumption made in direct costing with respect to fixed costs is that a) Fixed cost is a controllable cost b) Fixed cost is uncontrollable cost c) Fixed cost is an irrelevant cost d) Fixed cost is a period cost

10. Cost accounting concepts include all of the following except a) Planning c) sharing b) Controlling d) costing

11. Which of the following would be considered a major aim of a job order costing system?

a) To determine the costs of producing each job b) To compute the cost per unit c) To include separate records for each job to track the costs d) All of the given options

12. Imputed cost is also called a) Explicit cost c) firm cost b) Implicit cost d) period cost

13. The techniques and process of ascertaining costs is called……… a) Costing c) operating b) Allocation d) none of the above

14. A good costing system gives equal emphasis on cost……….and cost…. a) Ascertainment ; control c) job, process b) Variable, fixed d) none of the above

15. Basic methods of costing are……costing and…………..costing a) Job, process c) fixed, variable b) Variable, fixed d) none of the above

16. Single or output costing is used when the production is…….. and a ……..article is produced a) Uniform, single c) operating, fixed b) Fixed, variable d) none of the above

17. Cost of sales is cost of production plus…and…..overhead a) Selling, distribution c) uniform, fixed b) Overhead, process d) none of the above

18. Basic principles of costing are….costing and ………….costing a) Marginal, absorption c) single, uniform


30

b) Selling, allocation d) none of the above

19. Rent of own premises is a …..cost a) Notional c) single b) Selling d) none of the above

20. A cost which has no involvement of cash is called a) Notional cost c) sunk cost b) Out of pocket cost d) none of the above

21. The main purpose of cost accounting is to a) Fix selling price b) Earn maximum profit c) Provide data to management to decision making d) None of the above

22. Cost refers to a) The value of the sacrifice made to get some goods or services b) The present value of future benefits c) An assets which has given benefit and is now expired d) None of the above

23. Ascertainment of cost with the help of actual expenses incurred in termed as a) Historical costing c) marginal costing b) Standard costing d) absorption costing

24. Which method of costing is used in oil industry? a) Process costing c) unit costing b) Batch costing d) cost plus costing

25. Cost accounts are maintained compulsorily for compliance to statutory obligation in a) All business concerns c) Certain specific manufacturing companies b) Manufacturing concerns d) All of the above

26. Cost accounting is

a) An art c) art and science both b) A science d) none of these

27. Which method of costing is used in motor car industry

a) Operating costing b) Process costing c) Multiple costing d) Job costing

28. The main purpose of cost accounting is to a) Maximize profits b) Help in inventory valuation c) Provide information to management for decision making d) Aid in the fixation of selling prices

29. Multiple costing methods is used in

a) Oil refinery c) sugar mill b) Car manufacturing company d) multi-product company

30. Electricity generation company should employ

a) Unit costing c) process costing b) Operation costing d) job costing

31. Job costing is used in

a) Paper mills c) printing press b) Chemical works d) textile mill

32. Which method of costing is used in hospitals? a) Job costing c) operating costing


31

b) Unit costing d) no method is used

33. Contract costing is used in a) Ship building c) automobile vehicle industry b) Aero plane industry d) none of these

34. Cost accounting is a branch of….. a) Accounting c) financial accounting b) Cost Accounting d) none of the above

35. Cost accounting originated due to……….. a) Limitation of financial accounting c) Objectives of financial accounting b) Advantage of financial accounting d) None of the above

36. ………….costing method is used in cinemas a) Operating c) none of the above b) Working

37. …..is the technique of ascertaining cost a) Costing c) accounting b) Financial d) none of the above

38. The method of costing used in job order industries is known as… a) Batch costing c) work costing b) Job costing d) none of the above

39. In …….costing, the cost of a group of product is ascertained a) Job costing c) work costing b) Batch d) none of the above

40. The ascertainment of costs after they have been incurred is known as…….

a) Historical costing c) absorption costing b) Conservation costing d) uniform costing

41. Financial accounts …..necessary information for management

a) Do not provide c) will not provide b) Cannot provide d) none of the above

42. To ascertain the cost of a given thing is called ….. a) Financial accounting c) management accounting b) Costing d) none of the above

43. Which of these is not an objective of cost accounting? a) Ascertainment of cost b) Determination of selling price c) Cost control and cost reduction d) Assisting shareholders in decision making

44. A profit centre is a centre a) Where the manager has the responsibility of generating and maximizing profits b) Which is concerned with earning an adequate return on investment c) Both of the above d) Which manage cost

45. Responsibility centre can be categorized into a) Cost centers only c) Investment center only b) Profit centers only d) Cost centers, profit centers and investment centers

46. Cost unit is defined as a) Unit of quantity of product, service or time in relation to which costs may be ascertained or expressed


32

b) A location, person or an item of equipment or a group of these for which costs are ascertained and used for cost control

c) Centers having the responsibility of generating and maximizing profits d) Centers concerned with earning an adequate return on investment

47. Fixed cost is cost a) Which changes in total in proportion to changes in output b) Which is partly fixed and partly variable in relation to output c) Which do not change in total during a given period despite changes in output d) Which remains same for each unit of output

48. Uncontrollable costs are the costs which be influenced by the action of a specified member of an undertaking a) Cannot c) May or may not b) Can d) Must

49. Abnormal cost is the cost a) Cost normally incurred at a given level of output b) Cost not normally incurred at a given level of output c) Cost which is charged to customer d) Cost which is included in the cost of the product

50. Sunk costs are a) Relevant for decision making b) Not relevant for decision making c) Cost to be incurred in future d) Future costs

51. Describe the cost unit applicable to the bicycle industry a) Per part of bicycles b) Per bicycle c) per tonne d) per day

52. Cost accounting is directed toward the needs of a. Government b. External users c. Internal users d. Shareholders

53. Which of the following is not a function of Cost Accounting? a. Cost ascertainment b. Planning and control c. Decision-making d. External reporting

54. Cost information facilitates many important decisions except a. Introduction of a product c. Rate of dividend b. Whether to make or buy d. Exploration of an additional market

55. Measurement, in monetary terms, of the amount of resources used for the purpose of production of goods or rendering services is known as

a. Revenue expenditure b. Capital expenditure c. Cost d. None of the above

56. Process of ascertainment of costs is known as a. Costing b. Cost reporting c. Cost control d. None of the above

57. The guidance and regulation by executive action of the costs of operating an undertaking is known as a. Operating costing b. Cost reduction c. Cost control d. None of the above

58. Cost Accounting covers a. the preparation of statistical data b. the application of cost control methods c. the ascertainment of the profitability of activities carried out or planned d. all the above

59. Cost behavior refers to a. How costs react a change in the level of activity b. Whether a cost is incurred in a manufacturing, trading, or service company c. Classifying costs as either product or period costs d. Whether a particular expense has been incurred honestly

60. Costs which are ascertained after they have been incurred are known as


33

a. Imputed costs b. Replacement cost c. Historical costs d. Opportunity costs

61. Costs which are not relevant for decision-making and are not affected by increase or decrease in volume are a. Imputed costs b. Sunk costs c. Replacement costs d. Opportunity costs

62. When amount deposited in a bank is withdrawn for financing a project, the loss of interest on bank deposit will be referred to as

a. Sunk cost b. Pre-production cost c. Opportunity cost d. Replacement cost

63. The cost of a special device that is a special order is accepted is a a. Relevant cost b. Sunk cost c. Historical cost d. Opportunity cost

64. A cost centre is a. A unit of product or service in relation to which costs are ascertained b. An amount of expenditure attributable to an activity c. A production or service location or item of equipment for which costs are accumulated d. A centre for which an individual budget is drawn up

65. A cost unit is a. the cost per hour of operating a machine b. the cost per unit of electricity consumed c. a unit of product or service in relation to which costs are ascertained d. a measure of work output in a standard hour

66. Costs that change in response to alternative courses of action are called a. Relevant costs b. Differential costs c. Target costs d. Sunk costs

67. --------provides information for income determination- a. Financial accounting c. management accounting b. cost accounting d. none of these

68. -------helps in ascertaining costs beforehand- a. Financial accounting c. management accounting b. cost accounting d. none of these

69. The scope of cost accounting include --------, -------- and-------- a. Cost ascertainment, cost presentation, cost control b. tax planning, tax accounting, financial accounting c. presentation of accounting information, creation of policy, day-to-day operation d. none of the above

70. Cost accounting disclose ------ a. The Financial position c. effect and impact of cost on business b. profit/loss of a product, job or service d. none of these

71. --------aids in price fixation- a. Financial accounting b. cost accounting c. management accounting d. none of these

72. ------is the oldest branch of accounting- a. Financial accounting b. cost accounting c. management accounting d. none of these

73. -------includes financial and cost accounting, tax planning and tax accounting-

a. Financial accounting b. cost accounting c. management accounting d. none of these

74. In automobile -------costing is used a. Process b. batch c. multiple d. job

75. Service costing is used in industries producing------ a. Products b. service c. both a & b d. none of these

76. ---------costing is applicable to printers- a. Process b. batch c. multiple d. job

77. Process costing is also known as-------costing-


34

a. Continuous b. batch c. multiple d. job

78. Operating costing is also known as -------costing- a. Service b. batch c. multiple d. job

79. --------costing is a type or technique of costing- a. Marginal b. batch c. multiple d. job

80. --------costing is a type or technique of costing-

a. Absorption b. batch c. multiple d. job

81. ---------is not the scope of Cost Accountancy- a. Ascertaining cost b. cost accounting c. cost control d. tax planning

82. Cost Accounting has been developed because of------ of Financial Accounting- a. Limitations b. advantages c. both a & b d. none of these

83. Cost Accountancy is the science, art and -------of a cost accountant-

a. Practice b. exercise c. hard work d. effort

84. The ordinary trading a/c is a locked storehouse of most valuable information to which cost system is the------ a. Key b. lock c. house d. none of these

85. Cost accounts deal partly with facts and figures and partly with--- a. Estimates b. costs c. income d. revenue

86. Cost accounting provides data for managerial------ a. Decision making b. recruitment c. retrenchment d. none of the above

87. Cost accounting is based on-------figures- a. Estimated b. historical c. actual d. none of these

88. Cost accounting provides detailed information about -------of various products, processes, services and operations-

a. Costs b. income c. either a or b d. none of these-

89. Cost accounting records both monetary and ----- units- a. Physical b. cost c. both a & b d. none of these

90. The method of costing used in a refinery is-------costing- a. Process b. batch c. multiple d. job

91. -------costing is used in transport undertakings- a. Process b. service c. multiple d. job

92. Sunk costs are ------- for decision-making a. irrelevant b. relevant c. useful d. none of these

93. Costing and cost accounting are -------

a. Not the same b. one and the same c. not related at all d. none of these

94. Abnormal cost is --------- a. Uncontrollable b. controllable c. fixed d. none of these

95. Cost centre and cost unit are-------- a. not the same b. the same c. not related d. none of these

96. Period costs charged to------- a. cost of production b. Products c. Period d. none of these

97. --------are costs which have been applied against revenue of particular accounting period- a. Expenses b. income c. loss d. none of these

98. ------cost is irrecoverable cost- a. marginal b. out of pocket c. Sunk d. none of these


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99. -------is the value of a benefit where no actual cost is incurred- a. Imputed b. sunk c. out of pocket d. none of these

100. -----is the cost which involves payment to outsiders- a. Out of pocket cost b. Imputed cost c. notional cost d. none of these

101. ------- is the maximum possible alternative earning that might have been earned if the productive capacity

is put to some alternative use- a. Opportunity b. incremental revenue c. alternative revenue d. none of these

102. An item of cost that is direct for one business may be ------for another business a. Important b. direct c. Indirect d. none of the above

103. -----costs are partly fixed and partly variable in relation to output- a. Variable b. fixed c. Semi-variable d. both a & b

104. An opportunity cost is --------- a. the advantage foregone b. the cost c. the income d. none of the above

105. An opportunity cost does not involve---- a. Cash outlays b. direct cost c. indirect cost d. none of the above

106. Variable costs change --------with change in output- a. Proportionately b. Inversely c. Disproportionately d. Sometimes

107. Out of pocket costs involve payment to ------- a. Outsiders b. self c. employees d. none of the above

108. -------- Accounting is not only a positive science but also a normative science because it includes techniques of budgetary control and standard costing-

a. Financial b. Cost c. both a & b d. none of these

109. Research and Development Cost is an example of a) discretionary cost b) Joint cost c) relevant cost d) common cost

110. Maintenance charges are in the nature of -------expenses- a. Fixed b. Variable c. semi-variable d. none of these 111 A responsibility centre that has control over both cost and revenue is known as a) profit centre b) cost centre c) investment centre d) none of the above

112. Form of specific order costing where work is undertaken to customer’s special requirements and each order is comparatively of short duration.

a. Job Order Costing b. Batch Costing c. Contract Costing d. Process Costing

113. From of specific order costing which consists of a group of similar articles which maintain its identity throughout one or more stages of production.

a. Job Order Costing b. Batch Costing c. Contract Costing d. Process Costing

114. -------expenses are excluded from cost- a. Normal b. abnormal c. both a & b d. none of these


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CHAPTER 5 LABOUR COST 1. Departmental Involved

a. Personnel Department: To recruit workers, impart training to workers so that they can perform the assigned jobs in an efficient manner.

b. Engineering and work study department: To undertake job analysis, perform time and motion study, to prepare plans and specifications, to supervise production activities, etc.

c. Time-keeping Department: To maintain attendance records of employees and time spent by them on various jobs.

d. Pay roll Department: To prepare wage sheet (payroll) of the employees. e. Cost accounting Department: To collect, classify and analyse labour costs over various jobs,

products, processes and departments and to generate various reports for managerial decision making.

2. Techniques of labour cost control:a. Time-keeping and time- booking. b. Time and Motion Study. c. Idle Time analysis and control. d. Overtime Analysis and control. e. Wage and incentive system. f. Job Evaluation and merit rating.

TIME KEEPING It means keeping a record of total time spent by a worker inside a factory.

1. Manual Methods a. Attendance Register: An attendance register is kept at the factory gate or in each department for

workers engaged therein. b. Metal Disc Method: Each worker is allotted a metal disc/ token bearing his identification

number. These tokens/discs are placed on a board at the gate. 2. Mechanical Methods

a. Time Recording Clocks: Each worker is given a Time Card which is valid for particular duration, usually one week.

b. Dial Time Recorder: The dial time recorder is a machine, which has a dial around the clock. This dial has a number of holes and each hole bears a number, each corresponding to the indentification number of worker

TIME AND MOTION STUDY It is a technique of cost reduction, which seeks to reduce labour cost by reducing unnecessary movements during the course of work and by determining the standard time to be spent on a job.

MCQ’s

1. Wage sheet is prepared by a. Timekeeping department c. payroll department b. Personnel department d. engineering department

2. Time and motion study is conducted by the a. Time-keeping department c. payroll department b. Personnel department d. engineering department

3. Time study is for a. Measurement of work c. Ascertainment of actual hours b. Fixation of standard time d. Ascertainment of labour cost\

4. Time keeping refers to a. Time spent by worker on their job c. time spent by workers without work b. Time spent by workers in the factory d. time spent by workers off their job


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5. Time booking refers to a. Time spent by worker on their job c. time spent by workers without work b. Time spent by workers in the factory d. time spent by workers off their job

6. Difference between attendance time and job time is a. Standard Time b. Overtime c. Actual Time d. Idle time

7. Time and motion study is conducted by a. Time keeping department c. Payroll department b. Personnel department d. Engineering department

8. --------is maintained to know how the worker's time shown by the time card is spent on various jobs-

A. Daily time sheets B. weekly time sheets C. job cards D. none of the above

9. Which of the following is a direct labour cost? a) The wages of an operative paid on the basis of output achieved b) Costs of the payroll accounting section c) Supervisor’s salaries kin the factory d) A bonus paid to the store man

10. If B Ltd. shows required production of 120 cases of product for the month, direct labour per case is three hours at Rs.12 per hour. Budgeted labor costs for the month should be

a) Rs.2880 c) Rs.4320 b) Rs.1440 d) Rs.5346

11. Direct labour is an element of a) Prime cost c) total production cost b) Conversion cost d) all of the given options

12. The salary of factory clerk is treated as a) Direct labour cost c) conversion cost b) Indirect labor cost d) prime cost

13. labour cost which cannot be allocated but can be apportioned to or absorbed by cost units or cost centres is known as a) direct labour b) indirect labour c) labour turnover d) none of the above

14. …..are the most sensitive, as they are associated with human beings a) labour costs b) material cost c) labour turnover d) high turnover

15. Any labour cost that is specifically incurred or can be readily identifiable with a specific job, work, contract, or order is known as a) direct labour b) Indirect labour c) cost labour d) non controllable

16. Bonus paid to indirect workers is always treated as a) selling overhead b) factory overhead c) distribution overhead d) office overhead

17. godown keeper, office staff, salesmen etc. are treated as a) direct labour b) indirect labour c) additional labour d) none of the above

18. the department responsible for recruiting and training workers and placing them to the jobs they are best fitted in labour cost control is known as a) payroll department b) time keeping department c) personnel department d) cost accounting department


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19. The department which prepares the plan and specification for each job in Labour cost control is known as a) payroll department b) time keeping department c) personnel department d) engineering and work study dept.

20. The department which maintains a check on the attendance of the workers and the time recorded by the worker on various jobs etc. in labour cost control is known as a) time keeping dept. b) payroll dept. c) personnel dept. d) cost accounting dept.

21. ……department handles the wage payment of the workers in labour cost control a) time keeping b) payroll c) personnel d) cost accounting

22. time and motion study involves the classification of labour movement into a) direct and indirect b) fixed and variable c) necessary and wasteful d) none of the above

23. The system of recording time spent by workers on different jobs is known as a) time keeping b) time booking c) job evaluation d) merit rating

Documents

Prof Naresh Shroff’s ACE Tutorials CS Executive...a. Selling overheads b. prime cost c. distribution overheads d. factory overheads 9. Warehousing cost is an item of a. Office overhead