Management Accounting

Absorption and variable costing are two different methods of measuring profit and valuing inventory. Explain

Multiple choices:

Q1. If the variable cost(VC) be Rs 5 and the sales revenue(SR) be Rs 8 then the V/V ratio is given by

1. 1.6

2. 3

3. 40

4. 0.625

Q2. Re-order level =

1. Minimum level + (normal usage * average delivery time)

2. (Daily usage + lead time) * safety stock

3. (Daily usage * lead time) + average stock

4. (Average stock level – minimum level)/2

Q3. Acid test ratio is the ratio between

1. Quick assets and current liabilities

2. Net credit sales and average debtors

3. Cost of goods sold and average inventory

4. None

Q4. In select account standards AS-17 is a

1. Related party disclosure

2. Segment reporting

3. Discontinuing operation

4. Interim financial reporting

Q5. Ledger is

1. A kind of payment

2. A kind of strategy

3. A book in which bank accounts are kept

4. It is a receipt of selling

Q6. Which of the following industries does not use process costing?

1. Oil refineries

2. Distilleries

3. Sugar

4. Chemical

5. Aircraft manufacturing

Q7. The demand curve is also called the

1. Total revenue curve

2. Marginal revenue curve

3. Average revenue curve

4. Marginal cost curve

5. Profit curve

Q8. To decrease the Break Even Point one must

1. Increase the fixed Cost

2. Decrease the unit contribution

3. Decrease the selling price

4. Increase variable Cost

5. Decrease fixed Cost

Q9. Rent to be paid for a factory premises is an example of

1. Discretionary Cost

2. Programmed Cost

3. Future Cost

4. Committed Cost

5. Opportunity Cost

Q10. Performa statements are otherwise called as

1. Master budget

2. Capital budget

3. Strategic plan

4. Rolling budget

5. There is no such budget

Absorption and variable costing

Part Two:

1. Define ‘Liquidity Ratio’.

2. Define ‘Debt Equity’ ratio.

3. What do you mean by ‘Batch costing’?

4. Explain ‘The margin of safety’.

5. Based on the financial analysis, what recommendation would you, as the finance manager, make to the CEO of PCL?

6. Managerial accounting information is sometimes described as a means to an end whereas financial accounting information is described as an end in itself. In what sense is this true?

7. Absorption and variable costing are two different methods of measuring profit and valuing inventory. Explain.

    

   

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