Management Accounting MCQs
Management Accounting MCQs
The following Management Accounting MCQs have been compiled by our experts through research, in order to test your knowledge of the subject of Management Accounting. We encourage you to answer these multiple-choice questions to assess your proficiency.
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1: True or False: Payback period in capital budgeting refers to the period of time required for the return on an investment to "repay" the sum of the original investment.
A. False
B. True
2: Which of the following businesses would generally use job/order costing rather than process costing?
A. Manufacturing canned fruit
B. Building houses
C. Baking bread
D. Manufacturing instant coffee
E. Manufacturing bags of cement
3: True or False: Decreasing a company's fixed expenses should reduce the break-even point.
A. True
B. False
4: What order of inventory classification best describes the manufacturing process?
A. Raw material-Work in process- Finished Goods
B. work in Process- Finished Goods
C. None of these
D. Raw material- Finished Goods work in process
5: True or False: While depreciation does not result in a payment of cash, tax depreciation does reduce the cash payments for income taxes.
A. False
B. True
6: Costs that cannot be easily or economically traced accurately to the final product are known as ...?
A. Indirect costs
B. Service costs
C. Direct costs
D. Manufacturing costs
E. Product costs
7: What is the name given to the difference between the actual cost of a product's inputs and the standard cost of one of the product's inputs?
A. Difference
B. Variance
8: The management accounting function produces a variety of financial reports set by the needs of management.
A. True
B. False
9: What is a hurdle rate?
A. The rate which company earns after investing in Stock Exchange in securities.
B. Bank interest rate is also called the hurdle rate.
C. In capital budgeting, hurdle rate is the minimum rate that a company expects to earn when investing in a project.
10: A company makes computers. Which one of the following is likely to be a Variable Cost?
A. The salary of the managing director
B. Salary of the accounts manager
C. The salary of the factory manager
D. Salary of the Admin manager
E. The wages of shop workers paid by piece rate
11: Should a project be accepted if the NPV is -632?
A. Yes - The project should be accepted
B. No - The project should not be accepted
12: True or False: In calculating the cash flow in capital budgeting, depreciation is added back in the net profit to arrive at the cash flow figure.
A. False
B. True
13: Which of the following would NOT be a labor-related cost?
A. Payroll taxes
B. Long-service leave
C. Holiday leave
D. Depreciation on staff cafeteria equipment
E. Workers accident insurance
14: True or False: In variable costing, variable costs are considered for product costing inventory valuation and other allied management decisions.
A. True
B. False
15: True or False: BOTH variable and fixed manufacturing overhead are included in the Absorption Costing Method
A. False
B. True
16: Net present value (NPV) is best defined as:
A. The different between the cash inflow and present value of cash outflow
B. The difference between cash out flow and inflow
C. The difference between the present value of cash inflows and the present value of cash outflows
17: True or False: Actual Costing is the system of costing in which actual cost incurred during the period is charged to the product.
A. True
B. False
18: Which option below correctly completes the statement: Involvement in the budgeting process should _____.
A. be restricted to qualified accountants
B. be open to everyone in the organisation who thinks they have some good ideas
C. never include people below tactical level management
D. be restricted to top-level management
E. include the management and the people responsible for achieving the budgeted outcomes
19: True or False: Just in time (JIT) is a production strategy that strives to improve a business return on investment by reducing in-process inventory and associated carrying costs.
A. False
B. True
20: If the profitability index of the project is greater than 1 then this project should be...?
A. NOT accepted
B. Accepted
21: The project with shorter payback period should be...
A. Not accepted
B. Accepted
22: Which of the following costs would NOT be an element of product (manufacturing) costs?
A. Material costs
B. Factory overhead costs
C. Financial costs
D. Labor costs
23: Which of the following is an example of qualitative data ...?
A. product cost
B. customer satisfaction
C. net worth
D. inventory cost
E. net income
24: Product and service costing information is prepared for...
A. manufacturing companies without inventory
B. manufacturing companies with inventory
C. merchandising companies
D. all of these
E. service providers
25: The appropriate and careful selection of financial resources results in ...?
A. greater profitability
B. improvement in the brand image
C. a higher skilled workforce
D. increased production
E. more efficient work groups
26: Sunk cost is best defined as...
A. the cost which has already been incurred in the past any future or present action could not affect it
B. a cost which is incurred due to increase in the volume of production
C. a cost which will incurred in the future
D. a cost which remains fixed
E. a cost which changes due to volume
27: Manufacturing costs typically consist of ...?
A. direct materials, direct labor, marketing and administrative costs
B. direct materials, direct labor, and administrative costs
C. production and marketing costs
D. direct materials, direct labor, and manufacturing overhead
E. production and shipping costs
28: Complete the sentence - Perpetuity is the annuity that lasts...?
A. 1 years
B. Forever
C. 10 years
D. 3 years
E. 5 years
29: If a product cost $50 and the required mark-up was 50%, what would the selling price be?
A. $75.00
B. $250.00
C. $52.50
D. $100.00
E. $25.00
30: Working capital is ...?
A. cash at bank
B. all the assets of the organisation
C. the total of all the investments of the business
D. current assets less current liabilities
E. money held on the business premises
31: The project should be accepted if NPV of the Cash flow is...
A. Positive
B. 0
C. Negative
D. 1
32: Indirect costs that cannot be easily and economically traced to a finished product are known as ....?
A. material costs
B. service costs
C. factory overheads
D. labor costs
E. product costs
33: Which of the following would NOT be classified as a production department?
A. painting
B. assembly
C. stores
D. machining
34: True of False: A general rule for profit maximization in the short run is: If the additional revenues exceed the additional expenses, do it.
A. True
B. False
35: True or False: Setup cost is an example of a batch-level cost.
A. True
B. False
36: True or False: In zero base budgeting, each item is redefined from zero instead of using last year's budget as a base.
A. True
B. False
37: The break-even point is the level of sales that ....?
A. meets the expected sales target
B. ensures a sustainable net profit
C. is exactly equal to the fixed costs
D. is needed to pay the bank loans
E. will result in no profit or loss.
38: The Discounted Payback Period is the length of time required for an investment's discounted cash flows to equal its initial cost. True or False?
A. True
B. False
39: Which of the mentioned payroll cost(s) represent direct labor?
A. Hourly pay to production employees and Salaries to production managers
B. Hourly pay to factory Cleaning employees
C. Hourly pay to administrative employees
D. Hourly pay to security employees
40: Partly finished goods that a manufacturer may have on hand at the end of an accounting period is known as ...?
A. Material on hand
B. Finished goods
C. Merchandise inventory
D. Work in progress
41: True or False: Activity-based costing can be used to allocate SG&A expenses in order to assist management with pricing and other marketing decisions.
A. False
B. True
42: True or False: The standard cost of direct materials is the cost the manufacturer should have used to make the good output.
A. True
B. False
43: True or False: If a company requires a profit of $30,000 (instead of breaking even), the $30,000 should be combined with the fixed expenses in order to compute the point at which the company will earn $30,000.
A. True
B. False
44: True or False: The value of inventory under full costing is higher then variable costing.
A. True
B. False
45: Which statement best describes the current role of the managerial accountant?
A. Managerial Accountants are solely staff advisors in an organization.
B. Managerial accountants prepare the financial statements for an organization.
C. Managerial accountants facilitate the decision-making process within an organization.
D. Managerial accountants are primarily information collectors.
E. Managerial accountants make the key decisions within an organization.
46: Which of the following is NOT a type of internal benchmark?
A. Pareto Diagrams
B. Control charts
C. Cause and Effect (fishbone) diagram
D. Government economic indicators
47: If marginal costing toal sales is $10000, total variable cost is $5000, and total fixed cost is $2500, what will the profit be?
A. 8500
B. 2500
C. 7500
D. 4500
E. 5000
48: A company is considering building a factory in Lahore. Which one of the following is a sunk cost to the decision?
A. The wages rate of the workers
B. The cost of the investigation so far
C. The business rates of the factory
D. None of these.
49: The time value of money primarily focuses on ...?
A. current earnings.
B. future cash flow predictions.
C. accrual net income.
D. earnings per share.
E. accounting net income.
50: Variable costs do NOT include:
A. direct labor
B. variable manufacturing overhead
C. rent
D. direct materials
51: The project should be accepted if its Profitability index is greater then
A. 4
B. 2
C. 1
D. 0
E. 3
52: True or False: Activity based costing is recommended for the allocation of SG&A expenses in order to determine the true profitability of a product or a customer.
A. True
B. False
53: Which of the following is not considered to be an appropriate form of finance for capital investment projects?
A. Issue of debenture
B. Bank overdraft
C. Issuance of share capital
D. Leasing
54: The most likely strategy to reduce the breakeven point would be to:
A. decrease both fixed costs and the contribution margin
B. increase both fixed costs and the contribution margin
C. increase fixed costs and decrease the contribution margin
D. Decrease fixed costs and increase the contribution margin
55: Marginal cost is:
A. The variable cost of units
B. The fixed cost of units
C. None of these
D. The cost of one extra unit produced
56: Opportunity cost in management accounting is best described as ...?
A. The economic value of what is given up when a person chooses one option over another.
B. The economic value derived from the chosen opportunity
C. The cost of analyzing various opportunities.
D. The amount of money required to invest in an opportunity
E. All the financial and non-financial costs in relation to sourcing and trialing new opportunities.
57: What is the most important purpose of a balanced scorecard?
A. develop cause-and-effect linkages
B. develop strategy
C. set priorities
D. Measure performance
58: The time value of money focuses on:
A. cash flow
B. net income
C. current earnings
D. earnings per share
59: Which one of the following statements about budgeting is NOT true?
A. Budgeting is a bookkeeping task.
B. The focus of budgeting is planning.
C. Budgeting helps managers determine the resources needed to meet their goals and objectives.
D. Budgeting is an executive responsibility.
E. Budgeting is a key ingredient in good decision-making.
60: The profit center's revenues and expenses are held separate from the main company's in order to determine their profitability?
A. False
B. True
61: Which of the following is a monetary objective rather than a non-monetary objective?
A. to increase the production output per employee
B. to achieve a targeted return on investment
C. to conduct a specific number of inspections per shift
D. to reduce product delivery times to customers
E. to reach a targeted % occupancy rate for a hospital
62: True or False: Depreciation Expense is a negative cash flow that needs to be discounted.
A. True
B. False
63: Which of the following reports would be a produced under the management accounting function rather than the financial accounting function?
A. Income Statement
B. Variance report
C. Balance sheet
D. Equity Statement
E. Notes to the financial statements
64: A subsidiary ledger containing only those accounts related to manufacturing costs is known as ....?
A. Branch ledger
B. Factory ledger
C. Fixed assets schedule
D. Accounts payable ledger
E. Accounts receivable ledger
65: True or False: If a company has mixed expenses, the fixed component can be combined with the company's fixed expenses and the variable component can be combined with the company's variable expenses.
A. True
B. False
66: A Learning curve shows that as experience increases the amount of time taken to perform a function ________.
A. none of these
B. increases
C. experience has no link with time
D. remains the same
E. decreases
67: What is the formula for the contribution margin?
A. sales - variable costs
B. sales - fixed cost
C. sales - fixed costs - variable costs
D. sales - expenses
E. fixed cost - variable cost
68: The comprehensive budget that covers all the activities of the organisation and which integrates the individual budgets that cover each of the subsidiary functions, is known as the ...?
A. cashflow budget
B. operating expenses budget
C. master budget
D. capital expenditure budget
E. sales budget
69: If production increases, fixed cost per unit...
A. increases
B. decreases
C. remains the same
70: Which of the following is more the management accounting function than a financial accounting function?
A. The information produced allows outsiders to judge the overall past performance of a business
B. The information produced is not made public and is used for internal decision making only
C. It is focused on producing the balance sheet and income statement
D. The central outputs are audited financial statements
E. It is focused on producing a limited set of specific prescribed financial statements in accordance with generally accepted accounting principles
71: Under responsibility accounting, the bottling plant of a soft drink company will most likely be treated as .....?
A. a cost center
B. an investment center
C. a revenue center
D. a profit center
72: If sales are 100,000 variable costs are 40,000 and fixed costs are 10,000, what is contribution margin?
A. 50,000
B. 40,000
C. 90,000
D. 30,000
E. 60,000
73: Which cost remains constant in total, but vary per unit?
A. fixed costs
B. product costs
C. variable costs
D. period costs
74: The contribution margin (CM) is calculated by deducting all the .................... costs from sales?
A. Discretionary
B. Prime
C. Fixed
D. Variable
E. Conversion
75: True or False: Break-even analysis is useful for companies that sell products, but it is not useful for companies that provide services.
A. True
B. False
76: SG&A is the acronym for ...?
A. Selling, General And Administration
B. Selling, General And Accounting
C. Selling, Goods And Accruals
D. Special Goods And Assets
E. Special Goals And Aims
77: A budget that is continuously updated by adding a new incremental period and dropping off the period just completed, is known as ...?
A. a master budget
B. a rolling budget
C. a period budget
D. an operating budget
E. a static budget
78: Which is the correct set of equations for cost objects?
A. prime costs = direct materials + manufacturing overhead, conversion costs = direct labor + direct materials
B. prime costs = direct labor + manufacturing overhead, conversion costs = direct labor + direct materials
C. prime costs = direct labor + direct materials, conversion cost = direct labor + manufacturing overhead
79: What is the equation to calculate a difference in variance analysis?
A. Standard + Actual = Difference
B. Standard = Actual + Difference
C. Standard - Actual = Difference
D. Standard = Actual - Difference
80: True or False: Depreciation Expense can be ignored when computing the accounting rate of return.
A. True
B. False
81: A company can accelerate its cash receipts by all of the following except:
A. writing off receivables
B. selling receivables to a factor
C. accepting national credit cards for customer purchases
D. offering discounts for early payment
82: Sale is 100, variable cost is =? ,fixed cost is 20, profit is 25, what will the variable cost be using marginal costing?
A. 45
B. 55
C. 75
D. 35
E. 65
83: Which of the following is the best example of discretionary cost?
A. Deprecation, Rent of building
B. Depreciation, Advertising
C. Advertising, Research
D. Research, Rent of Building
84: What is the difference between break even sales and break even per units?
A. No difference
B. In break even sale Fixed Cost is divided by Contribution margin ratio ,And in Break even per unit fixed cost is divided by unit contribution margin.
C. BE sales uses fixed costs BE units uses variable costs
D. CM Ratio is for break even units and CM Unit is for break even sales
E. BE units uses fixed costs and BE sales uses variable costs
85: How do you calculate the break even point?
A. fixed cost ÷ contribution margin ratio
B. variable costs ÷ fixed costs
C. sales ÷ variable costs
D. fixed cost ÷ sales
E. fixed costs ÷ variable costs
86: Which of the following is more a management accounting function than a financial accounting function?
A. Financial statement preparation
B. Statutory compliance
C. Tax accounting
D. Cost accounting
E. Auditing
87: You are given the cost/volume information below: 1 unit/$ 15, 10 units/$150, 100 units/$1500. What type of a cost is being described?
A. step cost
B. mixed cost
C. rent cost
D. variable cost
E. fixed cost
88: Which of the following factors is irrelevant when using the payback method?
A. Cash flow arising from the project
B. The incidence of cash flows arising from the project
C. Depreciation of the initial asset acquired
D. Initial investment
89: What is the formula for breakeven?
A. Fixed costs ÷ gross profit %
B. Fixed cost ÷ net profit %
C. Variable cost ÷ contribution margin %
D. Total costs ÷ contribution margin %
E. Fixed costs ÷ contribution margin %
90: If sales were $100,000, variable costs $70,000 and fixed costs $10,000: What is contribution margin?
A. $70,000
B. $30,000
C. $20,000
D. $100,000
E. $90,000
91: Which of the following alternatives is generally chosen from a cost-benefit analysis? The one that shows the ...
A. highest benefit, regardless of the cost
B. highest cost to benefit ratio
C. highest benefit to cost ratio
D. lowest benefit to cost ratio
E. lowest cost to benefit ratio
92: Using Variable costing .IF fixed cost is 2500, variable cost is 3500, profit is 2000, what will be the sales price?
A. 7000
B. 2500
C. 5000
D. 9000
E. 8000
93: Which of the following statements regarding graphs of fixed and variable costs is true?
A. Fixed and Variable costs are curvilinear form above zero on the “Y” axis.
B. Fixed costs can be represented by a straight line starting at the origin and continuing through each data point.
C. Fixed costs are zero when production is equal to zero.
D. Variable costs can be represented by a straight line where costs are the same for each data point.
E. Variable costs are zero when production is equal to zero.
94: Fixed Expense + Target Income / Unit of Contribution Margin is the formula for:
A. Purchase volume in units required to pay target expense
B. Sale volume in units required to earn target income
C. None of these
D. Sale volume in Dollars Required to earn target income
95: If profit is 10000 Dollars ,and fixed cost is 25000 Dollars ,and variable cost is 40000 dollars what will be the sales price?
A. 65000 dollars
B. 70000 dollars
C. 80000 dollars
D. 75000 dollars
E. 85000 dollars
96: How do you calculate the Contribution Margin?
A. sales - fixed costs
B. sales - (variable costs + fixed costs)
C. fixed costs - sales
D. sales - variable costs
E. variable costs - sales
97: How do you calculate breakeven in units?
A. fixed costs ÷ variable costs
B. variable costs ÷ unit sales
C. fixed costs ÷ unit sales
D. fixed costs ÷ contribution margin per unit
E. variable costs ÷ contribution margin per unit
98: Management by exception means ...?
A. that management can report in a no-fault environment
B. that management can delegate all responsibilities
C. that management can concentrate on investigating areas not included in the reports
D. that management can concentrate on significant matters that require attention
E. that management provides different reports for different stakeholders
99: If sales were $100,000, contribution margin $60,000 and fixed costs $30,000: What would the variable costs be?
A. $90,000
B. $30,000
C. $10,000
D. $70,000
E. $40,000
100: Contribution Margin/Net Income is the formula for
A. Operating leverage
B. Break even point
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