multiple choice questions - dimr

DNYANSAGAR ARTS AND COMMERCE COLLEGE, BALEWADI, PUNE – 45

Subject: Management Accounting Subject code: B305FM Class: SY BBA

PROF. MUBINA ATTARI www.dacc.edu.in

Unit :1 Introduction

Multiple Choice Questions:

1. ………………………Accounting is concerned with measurement of the

cost and value of people for the organization.

a) Financial Accounting

b) Management Accounting

c) Corporate Accounting

d) Human resource Accounting

2. The important objective of …………………..accounting is to organize the

accumulated financial data into meaningful information.





3. ……………………..accounting is the adoption and analysis of accounting

information and its diagnosis and explanation in such a way so as to assist the

decision -makers.





4. Planning is that function of ……………………..which requires an efficient system

of decision – making.

a) Finance

b) Management

c) H.R

d) Administration.

5. Financial ……………..ensures effective utilization of available financial resources

in the long period.

a) Accounting

b) Planning

c) Management




d) Administration.

6. …………………..costs are pre-determined targets adainst which actual results

are evaluated.

a) Marginal

b) Standard

c) Actual

d) Budgeted

7. Financial Accounting data is primarily meant for …………………

a) External users

b) Internal users

c) Employees

d) Bank

8. Cost Accountant should report to the ……………management.

a) Top

b) Middle.

c) Administration

d) Lower

9. The transaction which increase working capital are ………….. of funds

a) Sources

b) Application

c) Utilization

d) Diversion

10. Management accounting begins where………………. accounting ends.



c) Cost Accounting


Answer key

1d 2a 3b 4b 5b 6b 7a 8a 9a 10c




Unit2: Analysis & interpretation of financial statement


1. When the concept of ratio is defined in respect to the item shown in the

financial statements, it is termed as

A. Accounting ratio

B. Financial ratio

C costing ratio

D. none of the above

2. The relationship between two financial variables can be expressed in:

A Pure ratio

B. Percentage

C. Rate or time

D. all the above

3. Stock is considered as a liquid asset as anytime it can be converted into cash

immediately.

A. Yes

B. No

C. Only YES

D. None of the above

4 . Return on properties funds is also known as.

A. Return on net worth

B. Return on shareholders fun

C. Return on the shareholders investment

D. All the above




5. What will be the Gross Profit if , total sales is Rs 2,60,000,cost of net goods sold

is Rs 2,00,000 & sales return is Rs10,000 ?

A. 13 %

B. 28%

C. 26%

D. 20%

6.Liquid asset is determined by

A. Current asset - stock - prepaid expense

B. Current asset + Stock +prepaid expense

C. Current asset + prepaid expense

D .None of the above

7.Which of the following is not included in current assets.

A. Debtors

B. Stock

C. Cash at bank

D. Cash in hand

8. Liquidity ratios are expressed in

A. Pure ratio form

B. Percentage

C. Rate or time


9. Working capital turnover ratio can be determined by :

A. ( Gross profit / Working capital )

B. ( Cost of goods sold / Net sales )

C. ( Cost of goods sold / Working capital)





10. Determine Working capital turnover ratio if, Current asset is Rs 1,50,000,

current liability is Rs 1,00,000 & cost of goods sold is Rs 3,00,000.

A. 5 times

B. 6 times

C. 3 times

D. 1.5 times

11. The ratio analysis is helpful to management in taking several decisions, but as

a mechanical substitute for judgement and thinking, it is worse than useless.

A. True

B. False

C. may be false

D. both a and b

12. Profit for the objective of calculating a ratio may be taken as

A. Profit before tax but after interest

B. Profit before interest &tax

C. Profit after interest & tax

D. All the above

13. If sales is Rs 5,00,000 & net profit is Rs 1,20,000 Net profit ratio is

A. 24%

B. 416%

C. 60%





14. General profitability ratios are based on

A. Investment

B. Sales

C. A & B


15. Determine stock turnover ratio if, Opening stock is Rs 31,000 , Closing stock is

Rs 29,000, Sales is Rs 3,20,000 & Gross profit ratio is 25% on sales.

A. 31 times

B. 11 times

C. 8 times

D. 32 times

16. Financial Statement Analysis can be used for assessment of past performance

only.

A. false

B. true

17. Ratio analysis is an important means of expressing the relationship between

two numbers.

A. true

B. false

18. Ratio analysis helps in investment decision.

A. true

B. false

19. Liquid Ratio is also known as 2:1 ratio.

A. false

B. true




20. Current ratio indicates the solvency position of the business.

a. true

b. false

21. An ideal Liquid ratio is considered as 1:1

a. true

b. false

22. The gross profit represents the net margin.

a. false

b. true

23. Reliability of ratios depend upon the reliability of financial data.

a. true

b. false

24. Ratio analysis ensures effective cost control.

a. true

b. false

25. An ideal current ratio is considered as 1:2

a. false

b. true

26.The ratios which reveal the final result of the managerial policies and

performance is .

A. turnover ratios.

B. profitability ratios.

C. short term solvency ratio.

D. long term solvency ratio.




27. Return on investment is a .

A. turnover ratios.

B. short term solvency ratio.

C. profitability ratios.


28. Net profit ratio is a .

A. turnover ratio.

B. long term solvency ratio.

C. short term solvency ratio

D. profitability ratio.

29. Stock turnover ratio is a .

A. turnover ratio.

B. profitability ratio.

C. short term solvency ratio.


30. Current ratio is a

A. short-term solvency ratio.

B. long-term solvency ratio.

C. profitability ratio.

D. turnover ratio.

31.Proprietary ratio is a .




D. turnover ratio.




32. Fixed assets ratio is a




D. turnover ratio.

33. Fixed assets turnover ratio is a




D. turnover ratio.

34.The ratio which measures the profit in relation to capital employed is known as

A. return on investment.

B. gross profit ratio.

C. operating ratio.

D. operating profit ratio.

35. The ratio which determines the profitability from the shareholder’s point of

view is .



C. return on shareholders funds.

D. operating profit ratio.

36.Return on equity is also called



C. return on shareholders funds.

D. return on net worth.




37. Preliminary expenses is an example of

A. fixed assets.

B. current assets.

C. fictitious assets.

D. current liabilities.

38. Prepaid expenses is an example of .

A. fixed assets.

B. current assets.

C. fictitious assets.

D. current liabilities.

39. The ratio which is calculated to measure the productivity of total assets is

A. return on equity.

B. return on share holders funds.

C. return on total assets.

D. return on equity share holders’ funds.

40. The ratio which shows the proportion of profits retained in the business out of

the current year’s profits is

A. retained earnings ratio.

B. pay out ratio

C. earnings per share.

D. price earnings ratio.

41. The ratio which indicates earnings per share reflected by the market price is .

A. retained earnings ratio.

B. pay out ratio.

C. earnings per share.

D. price earnings ratio.




42.The ratio establishes the relationship between profit before interest and tax

and fixed interest charges is .

A. interest cover ratio.

B. fixed dividend cover ratio.

C. debt service coverage ratio.

D. dividend yield ratio.

43.The ratio shows the preference dividend as a proportion of profit available for

shareholders is





44.The dividend is related to the market value of shares in .





45. Turnover ratio is also known as .

A. activity ratios.

B. solvency ratios.

C. liquidity ratios.

D. profitability ratios.

46. Inventory or stock turnover ratio is also called .

A. stock velocity ratio.

B. debtors velocity ratio.

C. creditors velocity ratio.

D. working capital turnover ratio.




47. Which ratio is calculated to ascertain the efficiency of inventory management

in terms of capital investment?

A. stock velocity ratio.




48. The ratio which measures the relationship between the cost of goods sold and

the amount of average inventory is

A. stock turnover ratio.




49. Sales – Gross Profit = .

A. net profit.

B. administrative expenses.

C. cost of production.

D. cost of goods sold.

50. Opening stock + purchases + direct expenses – closing stock =

A. net profit.

B. cost of production

C. administrative expenses.

D. cost of goods sold

51. Which ratio measures the number of times the receivables are rotated in a

year in terms of sales?


B. debtors turnover ratio.






52. Debtors turnover ratio is also called .




D. working capital turnover ratio

53.Creditors turnover ratio is also called .



C. accounts payables ratio.


54. Which of the following shows details and results of the company's profit-related activities for a period of time? A. Balance sheet B. Income statement C. Statement of cash flows D. Statement of financial position 55. Which of the following financial statements is also known as a statement of financial position?

A. Balance sheet B. Statement of cash flows C. Income statement D. None of the above

56 Which statement is true A. Financial statements are an important source of information to

shareholders and stakeholders.




B. Preparation of Profit & Loss Appropriation A/c is a requirement under the Companies Act, 1956.

C. Ratio Analysis is the only technique of analysis of financial statements. D. In Common Size Statements, each item is expressed as a percentage of

some common items (total).

57 A firm has Capital of Rs. 10,00,000; Sales of Rs. 5,00,000; Gross Profit of Rs. 2,00,000 and Expenses of Rs.1,00,000. What is the Net Profit Ratio?

A. 20%, B. 50%, C. 10%,

D. 40%

58. Which technique used for figures of two or more periods are placed side by

side to facilitate easy and meaningful comparisons?

A. Comparative statement

B. Common‐size statement

C. Trend Analysis

D. None

59. Which of these is NOT a limitation of ratio analysis:

A. They are calculated on past data and there is may not be a true

reflection of the business current performance

B. Financial records may have been manipulated and there are the ratios

calculated could be based on potentially mis leaked

C. Ratios only consider qualitative matters, making than hard to calculate

D. inter-firm comparisons can be difficult to not firms report their

performance/ generate accounts in the Way

60. Comparison of financial statements highlights the trend of the _________ of

the business.

A. Financial position




B. Performance

C. Profitability

D. All of the above

61. Which of the following are techniques, tools or methods of analysis and

interpretation of financial statements?

A. Ratio Analysis

B. Average Analysis

C. Trend Analysis

D. All of the above

62. Which of the following is NOT a key ratio in the prediction of bankruptcy as

developed by Edward Altman?

A. debt to equity

B. current ratio

C. retained earnings as a percent of total assets

D. total assets

63. _______________ ratios measure the ability of a firm to earn an adequate

return on sales, total assets and invested capital.

A. Asset utilization

B. Liquidity

C. Profitability

D. Debt utilization

64. Which of the following statements about liquidity ratios is true?

A. The higher the current ratio, the more likely a firm is able to pay its short-term

obligations.




B. The lower the quick ratios relative to the current ratio, the safer a firm is in

terms of liquidity.

C. The ratio of net working capital to total assets always lies between 0 and 1.

D. Relatively high current ratios are usually a sign of efficient working capital

management.

65. The ________ ratios help determines the degree of financial risk and earnings

volatility present in a firm.

A. profitability

B. asset utilization

C. liquidity

D. none of the above.

66. Which of the following statements are true?

A. Debt to equity and debt to asset ratios measure capital structure and vary

widely among industries.

B. Debt utilization ratios alone do not measure a firm's ability to meet its cash

obligations.

C. DuPont analysis considers the impact of debt on the profitability of the firm

D. All of the above are true.

67. __________ analysis is the process of studying a series of ratios for a company

and/or industry over time.

A. DuPont

B. Trend

C. Common size

D. all of the above

68. Overall Profitability ratios are based on

A. Investments

B. Sales




C. a & B


69. The ideal level of current ratio is

A. 4:2

B. 2:1

C. Both a and b


70. The most precise test of liquidity is

A. Quick ratio

B. Current ratio

C. Absolute Liquid ratio


71. Debt-equity ratio is a sub-part of

A. Short-term solvency ratio

B. Long-term solvency ratio

C. Debtors turnover ratio


72 Quick ratio is 1.8:1, current ratio is 2.7:1 and current liabilities are Rs 60,000.

Determine value of stock.

A. Rs 54,000

B. Rs 60,000

C. Rs 1, 62,000


73. Which of the following are Non-current assets?

A. Land, Building and plant

B. Leasehold property




C. Computer software

D. All of the above

74. Funds flow statements are prepared so as to

A. To identify the changes in working capital

B. To identify reasons behind change in working capital

C. To know the item-wise outflow of funds during given period

D. All of the above

75. Net Profit ratio is calculated by

A. (Gross Profit/Gross sales) *100

B. (Gross Profit/Net sales) *100

C. (Net Profit/Net sales) *100


76. If sales is Rs 5, 00,000 and net profit is Rs 1, 20,000 Net Profit ratio is

A. 24%

B. 41%

C. 60%


77. Operating ratio is calculated by

A. (Operating Cost/Gross sales) *100

B. (Operating Cost/Gross sales) *100

C. (Operating cost/Net sales) *100


78. Determine Operating ratio, if operating expenses is Rs 60,000, Sales is Rs

9,40,000, Sales Return is Rs 40,000 and Cost of net goods sold is Rs 6,60,000.

A. 80%

B. 15%




C. 25%

D. 11%

79. Stock is considered as a liquid asset as anytime it can be converted into cash

immediately.

A. True

B. False

80. Determine Working capital turnover ratio if, Current assets is Rs 1,50,000,

current liabilities is Rs 1,00,000 and Cost of goods sold is Rs 3,00,000.

A. 5 times

B. 6 times

C. 3 times

D. 1.5 times

ANSWERS - KEY

1. B 2. D 3. B 4. D 5. D 6. A 7. B 8. A 9. A 10. B 11. A 12. D 13. A 14. B 15. 8. 16. A

17. A 18. A 19. A 19.A 20. A 21. A 22. A 23. A

24. A 25. A 26. B 27. C 28. D 29. A 30. A 31. B 32. B 33. D 34. A 35. C 36. D 37. C 38. B 39. C

40. A 41. D 42. A 43. B 44. D 45. A 46. A 47. A 48. A 49. D 50. D 51. B 52.B 53.C 54.B 55.A

56.C 57 A 58A 59C 60D 61D 62A 63C

64A 65C 66A 67C 68B 69B 70C 71A 72C 73D 74D 75C 76A 77A 78A 79B

80B




Unit4: working capital


1.The financial decision making that relates to current assets or short term asset is known as

__________________.

A. working capital

B. non-working capital

C. venture capital

D. all of the above

2. In what order should current assets be present on a statement of financial position?

A. cash, bank, trade receivables, inventories

B. trade receivables, bank, cash, inventories

C. inventories, cash, bank, trade receivables

D. inventories, trade receivables, bank, cash

3. If value of opening inventories increases, what happens to the value of gross profit?

A. decreases

B. increases

C. stays the same

D. gets closer to net profit

4. What does the statement of comprehensive income show?

A. The liquidity position of a business at a point in time

B. The value of assets bought by a business over a period point in time

C. The profit or loss made by a business over a period of time

D. The value of a business at a point in time

5. Depreciation is applied to non-current assets in the statement of financial position in order to

A. Show a profitability valuation of the non-current assets

B. Show a true and fair value of the non-current assets

C. Show how the non-current assets are affected by inflation

D. Show what the non-current assets could make if leased out

6. What would be the most likely impact on trade receivables days if invoice discounting was

offered to and accepted by a large customer of a business?

A. Trade receivables days would no longer exist

B. Trade receivables days would reduce

C. Trade receivables days would increase

D. Trade receivable days would not be affected




7. ___________in accounting, is when the costs to acquire an asset are expensed over the life of

that asset rather than in the period it was incurred?

A. Purchasing.

B. Capitalization.

C. Selling.

D. Financing

8. Capitalization is the sum of a corporation’s stock, long term debts &________?

A. Liquid Liability

B. Retained earnings

C. Fixed asset.

D. Short term debts.

9. __________ is a situation in which actual profits of a company are not sufficient enough to

pay interest on debentures, on loans and pay dividends on shares over a period of time?

A. Under capitalization

B. Over capitalization

C. Market capitalization


10. Asset structure = _________+__________.

A. current asset+fixed asset

B. tangible asset+fixed asset

C. fixed asset+current asset

D. intangible asset+current asset

11. In finance, "working capital" means the same thing as __________.

A. total assets.

B. fixed assets.

C. current assets.

D. current assets minus current liabilities.

12. In deciding the appropriate level of current assets for the firm, management is confronted

with

_____________.

A. a trade-off between profitability and risk.

B. a trade-off between liquidity and marketability.

C. a trade-off between equity and debt.

D. a trade-off between current assets and profitability.

13. ___________ varies inversely with profitability.

A. Liquidity.

B. Risk.

C. Accounts.




D. Trade.

14. Permanent working capital ___________.

A. varies with seasonal needs.

B. includes fixed assets.

C. is the amount of current assets required to meet a firm's long-term minimum needs.

D. includes accounts payable.

15. Net working capital refers to ___________.

A. total assets minus fixed assets.

B. current assets minus current liabilities.

C. current assets minus inventories.

D. current assets.

16. To financial analysts, "gross working capital" means the same thing as ________.

A. fixed assets.

B. current assets.

C. working capital.

D. cost of capital.

17. An example of fixed asset is________.

A. Live stock.

B. Value stock.

C. Income stock.

D. All of the above.

18. Which one of the following is not the determinant of the working capital?

A. size of the firm

B. operating cycle

C. terms of credit

D. competitors

19. Permanent working capital ___

A. will vary at all times

B. will vary with volumes

C. fixed at all times

D. fluctuates according to the season

20. Which one of the following is not a method to find working capital requirement?

A. percent of sales method

B. working capital components method

C. operating cycle method

D. physical method




21. The Capital used for meeting routine and repetitive expenses of day to day business

operations is called____.

A. Reserve capital

B. Working capital

C. Fixed capital

D. Regular capital

22. Gross working capital represents __________.

A. total current liabilities

B. the excess of current assets over current liabilities

C. total current assets

D. total liquid assets

23. Net working capital is the excess of current assets over ________.

A. Current liabilities

B. Long term liabilities

C. Contingent liabilities

D. Fixed liabilities

24. A positive (net) working capital will arise when current assets exceed _________.

A. Fixed liabilities

B. Contingent liabilities

C. Long term liabilities

D. Current liabilities

25. The net working capital, being the difference between current assets and current liabilities is

a _______.

A. Misleading concept

B. Quantitative concept

C. Qualitative concept


26. The Funds required by way of permanent working capital should be provided by

__________.

A. Indigenous banks

B. Commercial banks

C. RBI

D. Proprietors

27. Service and Financial concerns may have _____.

A. Longest operating cycle

B. Shortest operating cycle

C. Manufacturing phase

D. None of these




28. _____ is that minimum amount which should always be present in the business to carry out

the activities without a break.

A. Net working capital

B. Gross working capital

C. Permanent working capital

D. Temporary working capital

29. Working capital over and above the fixed working capital would be termed as _______.

A. Temporary working capital

B. Permanent working capital

C. Net working capital

D. Gross working capital

30. __________ denotes a situation of too much or excessive working capital.

A. Gross working capital

B. Redundant working capital

C. Permanent working capital

D. Temporary working capital

31. _________ being the life blood of a business requires to be maintained in reasonably

adequate quantity to run business successfully.

A. Working capital

B. Proper documents

C. Assets

D. Petty cash

32. According to ________ working capital refers to the company’s total investment in current

assets.

A. Net concept

B. Gross concept

C. Equal concept

D. Accounting concept

33. According to ________ working capital refers to the difference between current assets and

current liabilities.

A. Equal concept

B. Accounting concept

C. Net concept

D. Gross concept

34. ___________ refers to all stages involved from raw materials to realization of cash.

A. Loan

B. Operating cycle




C. Business cycle

D. Cash flow cycle

35. The funds required for running an organisation are generally called as ____________.

A. Overdraft

B. Cash credit

C. Working capital

D. Operating profit

36. The __________ is required to ensure circulation of operating cycle.

A. Regular working capital

B. Fixed working capital

C. Reserve working capital

D. Variable working capital

37. ________ is the excess amount over the requirement for regular working capital.

A. Variable working capital

B. Fixed working capital


D. Regular working capital

38. The working capital required to meet the seasonal need of the business is called _______.

A. Fixed working capital

B. Variable working capital

C. Special working capital

D. Seasonal working capital

39. ___________ is required to meet special exigencies such as launching of extensive marketing

campaigns for conducting research.

A. Seasonal working capital

B. Special working capital


D. Regular working capital

40. The statement of changes in financial position prepared to determine only the sources and

uses of working capital between two dates of balance sheet is known as __________.

A. Cash flow statement

B. Memorandum Balance sheet

C. Fund Flow statement

D. Profit and loss account




41. What are the aspects of working capital management?

a) Inventory management

b) Receivable management

c) Cash management

d) All of the above

42._________ function includes a firm’s attempts to balance cash inflows and outflows.

a) Finance

b) Liquidity

c) Investment

d) Dividend

43.Firms which are capital intensive rely on _________.

a) Equity

b) Short term debt

c) Debt

d) Retained earnings

44.Hirer is entitled to claim ___________.

a) Depreciation

b) Salvage value

c) HP payments

d) None of above

45.Which of the following is not an advantages of trade credit?

a) Easy availability

b) Flexibility

c) Informality

d) Buyout financing

46. Which of the following are theories for dividend relevance?

a) Walter’s Model

b) Mm Approach

c) Game theory

d) Market Value theory




47. What is not a form of dividend?

a) Cash Dividends

b) Bonus Shares(Stock Dividend)

c) Share Split

d) Split Reverse

48.The percentage of earnings paid as dividends is called __________.

a) Dividend policy

b) Payout Ration

c) Cash Dividends

d) Reverse Split

49.What are the various methods of estimating cash?

a) Receipts and payment method

b) Adjusted profit & loss method

c) Balance sheet method

d) All of the above

50.The art of managing, within the acceptable level of risk, the consolidated funds

optimally and profitably is called _________.

a) Integrated treasury

b) Treasury management

c) Merchant banking

d) None of the above

51.What are the different types of underlying assets?

a) Stocks

b) Bonds

c) Currency

d) Stock indices

e) All of the above

52.What are people who buy or sell in the market to make profits called?

a) Hedgers

b) Speculators

c) Arbitrageurs

d) None of the above




53.Which of the following is a technique that helps the exporter to sell the receivables to

any bank or financial institution without recourse?

a) Forfeiting

b) Leading & Lagging

c) Derivatives

d) Netting

54.Money market financial services not include:

a) Bill discounting

b) Merchant banking

c) Leasing

d) Securitization

55.Factoring involves:

a) Providing short term loan

b) Providing long term loan

c) Financing of export receivables

d) Management of receivables of borrower

56.The tools of treasury management does not include:

a) Foreign Exchange Management

b) Cash Management

c) Receivable Management

d) Risk Management

57.Under which type of bank borrowing can a borrower obtain credit from a bank

against its bills?

a) Letter of Credit

b) Cash

c) Purchase or discounting of bills

d) Working Capital Loan

58.The factors that affect dividend policy are:

a) Tax Consideration

b) Privatization

c) Foreign Investment

d) Working cash flow




59.To financial analysts, "working capital" means the same thing as __________.

a) total assets

b) fixed assets

c) current assets

d) current assets minus current liabilities.

60.Which of the following would be consistent with an aggressive approach to financing

working capital?

a) Financing short-term needs with short-term funds.

b) Financing permanent inventory buildup with long-term debt.

c) Financing seasonal needs with short-term funds.

d) Financing some long-term needs with short-term funds.

61.Which of the following would be consistent with a conservative approach to financing

working capital?


b) Financing short-term needs with long-term debt.

c) Financing seasonal needs with short-term funds.


62-Which of the following would be consistent with a hedging (maturity matching)

approach to financing working capital?


b) Financing short-term needs with long-term debt.

c) Financing seasonal needs with long-term funds.


63.Which of the following statements is most correct?

a) For small companies, long-term debt is the principal source of external

financing.

b) Current assets of the typical manufacturing firm account for over half of its

total assets.

c) Strict adherence to the maturity matching approach to financing would call for

all current assets to be financed solely with current liabilities.

d) Similar to the capital structure management, working capital management

requires the financial manager to make a decision and not address the issue

again for several months




64.The amount of current assets that varies with seasonal requirements is referred to

as __________ working capital.

a) permanent

b) net

c) temporary

d) gross

65. Rate of return on capital is exceptionally high in (a) Under – capitalization (b) Over – capitalization (c) Working capital (d) Fixed capital

ANSWER KEY

1A 2D 3A 4C 5B 6B 7B 8B 9B 10C 11C 12A 13A 14C 15B 16B 17A 18D 19C 20D 21B 22C 23A 24D 25C 26D 27B 28C 29A 30B 31A 32B 33C 34B 35C 36A 37C 38D 39B 40C 41D 42B 43C 44A 45D 46A 47D 48B 49D 50B 51D 52B 53A 54B 55D 56D 57C 58A 59C 60D 61B 62A 63B 64C 65A




Unit5: Budgetary Control


1. A budget is a plan of action expressed in…

a. Financial terms

b. Non‐financial terms

c. Both

d. Subjective matter

2. Budget is prepared for a…

a. Indefinite period

b. Definite period

c. Period of one year

d. Six months

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

a. All business activities

b. Production activities

c. Purchase activities

d. Sales activities

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

a. Management

b. Share holders

c. Creditors

d. Employees

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

a. Production department

b. Finance department

c. Marketing department

d. All

6. Budgetary control system facilitates centralized control with…

a. Decentralized activity

b. Centralized activity

c. Both




d. None

7. Budgetary control facilitates easy introduction of the…

a. Marginal costing

b. Ratio analysis

c. Standard costing


8. Budgetary control helps the management in…

a. Obtaining bank credit

b. Issue of shares

c. Getting grants from government

d. All of these

9. Budgetary control system helps the management to eliminate…

a. Undercapitalization

b. Overcapitalization

c. Both


10.Budgetary control provides a basis for…

a. Bonus shares

b. Rights shares

c. Remuneration plans

d. None

11.Budgetary control helps to introduce a suitable incentive and remuneration based

on…

a. Changes in government policies

b. Inflationary conditions

c. Both

d. None

12.Budgetary control __________ replace management in decision‐making.

a. Can

b. Cannot

c. Sometimes

d. Inadequate data




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

a. Shareholders

b. Management

c. Creditors

d. All the functional areas of management

14.Recording of actual performance is….

a. An advantage of budgetary control

b. A step in budgetary control

c. A limitation of budgetary control

d. None

15.Revision of budgets is…

a. Unnecessary

b. Can’t determine

c. Necessary

d. Inadequate data

16.Frequent revision of budgets will…

a. Affects its reliability

b. Increase the accuracy

c. Both


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

a. Money

b. Quantity

c. Both

d. None

18.Budget period is the…

a. Period of budget committee

b. Period of budget centres

c. Period for which a budget is prepared

d. Period of budget officer




19.Budget period depends upon…

a. The type of budget

b. The nature of business

c. The length of trade cycles

d. All of these

20.A key factor is one which restricts…

a. The volume of production

b. The volume of sales

c. The volume of purchase

d. All of the above

21……………….plan serving as a pattern for and a control over future operations is

known as budget.

a. Operational

b. Financial

c. Functional

22………………… control is the most useful technique in implementing the objectives of

the company with minimum possible cost and maximum possible efficiency.

a. Budgetary

b. Inventory

c. Capability

23. ………………….Co-ordination and control are three basis aspects concerned with

budgetary control.

a. Centralizing

b. De-centralizing

c. Planning

24. ………………..is a section of the organisation of an undertaking defined for the

purpose of budgetary control.

a. Cost centre

b. Budget centre

c. Cost Unit




25. A document which sets out the responsibilities of the persons engaged in the routine

of and the forms and records required for budgetary control is known as ________ .

a. Budget Policy

b. Budget Book

c. Budget Manual

26. On the basis of ______ , budget is classified into long term budget, short term

budget and current budget.

a. Functions

b. Control

c. Time

27. On the basis of flexibility budget is classified into two types such as fixed budget and

________ budget.

a. variable

b. Semi-variable

c. Constant

28. Variable budget is also known as _______ budget.

a. Fixed

b. Semi-variable

c. Flexible

29. The budget prepared according to ________ is known as functional budgets.

a. Period

b. Controls

c. Functions

30……………….. budget is a budget which is designed to remain unchanged

irrespective of the volume of output or turnover achieved.

a. Flexible

b. Cash

c. Fixed

31.A Flexible budget is one which permits the change in accordance with the changes

in the level of activity.

a. Fixed

b. Flexible




c. Sales

32. Flexible budgets are more useful in actual practice because it is more realistic and

has great practical utility in the business.

a. realistic

b. non-realistic

c. Predictable

33. A _______ budget is the budget which shows the quantity and value of goods to be

purchased during the budget period to meet the day-to-day needs of the business.

a. Sales

b. Cash

c. Purchase

34. One of the basic purpose to prepare _______ budget is to estimate the cash

requirements for the purchases to be made during the budgeted period.

a. purchase

b. cash

c. sales

35. Purchase budget is prepared by the ________ manager.

a. Finance

b. Stores

c. Purchase

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

a. Production budget

b. Sales budget

c. Cost budget

d. None of the above

37. A factory produces two types of articles Y and Z. Article Y takes 8 hours to make

and Z takes 16 hours. In a month ( 25 days * 8 hours) 600 units of X and 400 units of Z

are produced. Given budgeted hours 8000 per month and men employed are 50.

Determine Activity ratio, Capacity ratio and efficiency ratio.

a. 112%, 140%, 140%

b. 140%, 112%, 140%




c. 140%, 140%, 112%


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

a. Short-term budget

b. Current budget

c. Long-term budget


39. Capacity ratio * Efficiency ratio = Activity ratio.

a. True

b. False

40. The scare factors is also known as

a. Key factor

b. Abnormal factor

c. Linking factor


41A budgeting process which demands each manager to justify his entire budget in

detail from beginning is

a. Functional budget

b. Master budget

c. Zero base budgeting


42. Activity Ratio -------------------- i) (Actual hours worked / Budgeted hours) * 100

B) Capacity Ratio ------------------ ii) (Standard hours of actual production / Actual hours

worked) * 100

C) Efficiency Ratio ----------------- iii) (Standard hours for actual output / Budgeted hours)

* 100

A-ii, B-iii, C-i

b. A-i, B-ii, C-iii

c. A-iii, B-i, C-ii





43. Given Production at 60% activity, 600 units, Material Rs 50 per unit, Labour Rs 20

per unit, Direct expenses Rs 5 per unit, Factory overheads Rs 20,000 ( 60% variable)

and Administration expenses Rs 15,000 ( 60% fixed). What will be the total cost per unit

for production at 80% capacity?

a. Rs 1,01,000

b. Rs 126.25

c. Rs 122

d. Rs 1,22,000

44. In fixed budgets costs are classified according to their nature.

a. True

b. False

45. Given the budgeted output in second quarter is 8,000 units. In the first quarter, Fixed overheads were Rs 40,000 Variable overheads were Rs 5 per unit ( Rs 40,000) and semi variable were 20,000 ( 60% varying @ Rs 3 per unit). Determine the total manufacturing overhead budget for the second quarter. a. Rs 1,12,000 b. 1,12,000 units c. Insufficient data d. None of the above

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

a. Production department

b. Finance department

c. Marketing department

d. All

47. Budgetary control system facilitates centralized control with…

a. Decentralized activity

b. Centralized activity

c. Both

d. None




48. Budgetary control system helps the management to eliminate…

a. Undercapitalization

b. Overcapitalization

c. Both


49. Budgetary control helps the management in… a

. Obtaining bank credit

b. Issue of shares

c. Getting grants from government

d. All of these

50. Budgetary control helps to introduce a suitable incentive and remuneration based

on…

a. Changes in government policies

b. Inflationary conditions

c. Both

d. None

ANSWER KEY

1C 2B 3A 4A 5D 6C 7C 8A 9C 10C

11B 12B 13D 14B 15C 16A 17C 18C 19D 20A

21B 22A 23C 24B 25C 26C 27A 28C 29C 30

31B 32A 33C 34A 35C 36A 37C 38C 39A 40A

41C 42C 43B 44B 45A 46D 47C 48C 49A 50B

multiple choice questions - dimr

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