S.Y B.COM
SEMESTER - 4
MANAGEMENT ACCOUNTING
(MA)
MCQS - MARGINAL COSTING AND BREAK-EVEN ANALYSIS
1. Increase in capacity reduces the margin of safety, if :
(a) total cost remains unchanged
(b) fixed costs at new capacity are increased
(c) fixed cost increases and sales grow
(d) variable cost per unit increases
2. An increase in sales price :
(a) does not affect the BEP
(b) increases the BEP
(c) lower the BEP
(d) none of the above
3. Which of the following assumptions is not related to the Accountant’s break-even chart ?
(a) fixed costs remain fixed throughout the range charted.
(b) selling prices do not change.
(c) variable costs fluctuate inversely with volume.
(d) operating efficiency will remain unchanged.
4. An increase in variable cost
(a) reduces contribution
(b) increase PV ratio
(c) increases margin of safety
(d) none of the above
5. Angle of incidence defines :
(a) systematic risk in CAPM model
(b) post BEP relationship between total cost and total revenue
(c) incidental factors in investment
(d) marginal cost of production
6. Which of the following can improve break-even point ?
(a) increase in variable cost
(b) increase in fixed cost
(c) increase in sale price
(d) increase in sales volume
7. Which of the following is true at break-even point ?
(a) Total sales revenue = Variable Cost
(b) Profit = Fixed Cost
(c) Sales revenue = Total Cost – Variable Cost
(d) Contribution = Fixed Cost
8. A company’s fixed cost amounts to Rs.120 lakhs p.a. and its overall P/V ratio is 0.4. The annual sales of the company should be Rs._____ lakhs to have a margin of safety of 25%.
(a) 400
(b) 500
(c) 600
(d) 450
9. The variable cost of a product increases by 10% and the management raises the unit selling price by 10%. The BEP of the firm _____.
(a) increases
(b) decreases
(c) remain the same
(d) raises in long-term
10. A company with a contribution / sales ratio of 331/3% and fixed cost of Rs.3 lakhs per month should have a monthly sales of Rs.______ lakhs to maintain a margin of safety of 10%.
(a) 6
(b) 8
(c) 10
(d) 12
11. A company maintain a margin of safety of 25% on its current sales and earns a profit of Rs.30 lakhs per annum. If the company has a profit volume (P/V) ratio of 40%, its current sales
amount to :
(a) Rs.200 lakhs
(b) Rs.300 lakhs
(c) Rs.325 lakhs
(d) None of the above
12. In two consecutive periods, sales and profit were Rs.1,60,000 and Rs.8,000 respectively in the first period and Rs.1,80,000 and Rs.14,000 respectively during the second period. If there is no change in fixed cost between the two periods then P.V. ratio must be ______.
(a) 20%
(b) 25%
(c) 30%
(d) 40%
13. A company has budgeted break-even sales revenue of Rs.8,00,000 and fixed costs of Rs.3,20,000 for the next period. The sales revenue needed to achieve a profit of Rs.50,000 in the period will be :
(a) Rs.8,50,000
(b) Rs.9,25,000
(c) Rs.11,20,000
(d) Rs.12,00,000
14. A company has margin of safety of Rs.40 lakhs and earns and annual profit of Rs.10 lakhs. If the fixed cost amount to Rs.20 lakhs, annual sales will be _____.
(a) Rs.160 lakhs
(b) Rs.140 lakhs
(c) Rs.120 lakhs
(d) Rs.200 lakhs
15. If sales are rs.2 lakhs, fixed cost is Rs.30,000 and P.V. ratio is 40%, the amount of profit will be :
(a) Rs.50,000
(b) Rs.80,000
(c) Rs.12,000
(d) None of the above
16. If profit-volume (P/V) ratio is 40% and sales value is Rs.10,000, the variable cost will be :
(a) Rs.4,000
(b) Rs.6,000
(c) Rs.5,000
(d) None of the above
17. A product sells for Rs.8 each with variable cost of Rs.5 each. Fixed costs are budgeted at Rs.18,000 or Rs.2 per unit. The margin of safety is :
(a) 50%
(b) 33 1/3 %
(c) 33 1/2%
(d) None of the above
18. If the fixed cost is Rs.10,000 and profit-volume (PV) ratio is 50%, the break-even will be :
(a) Rs.20,000
(b) Rs.50,000
(c) Rs.10,000
(d) Rs.40,000
19. If a PV ratio is 40% and the sales value is Rs.10,000, the variable cost is :
(a) Rs.40,000
(b) Rs.4,000
(c) Rs.24,000
(d) Rs.6,000
20. If sales are Rs.2,00,000, fixed cost Rs.30,000 and the PV ratio is 40%, the profit will be :
(a) Rs.50,000
(b) Rs.80,000
(c) Rs.12,000
(d) Rs.40,000
21. X Ltd. Has earned contribution of Rs.2,00,000 and net profit of Rs.1,50,000 on sales of Rs.8,00,000. What is the is the margin of safety ?
(a) Rs.5,75,000
(b) Rs.4,00,000
(c) Rs.7,00,000
(d) Rs.6,00,000
22. When contribution sales ratio is 30% and margin of safety in 10%, then profit will be -
(a) 10%
(b) 30%
(c) 12%
(d) Cannot be computed
23. Margin of safety can be improved by redacting the -
(a) Variable cost
(b) Prime cost
(c) Fixed cost
(d) Period cost
24. Contribution is also known as -
(a) Net margin
(b) Gross margin
(c) Total sales
(d) Net profit
25. When the firm neither earn profit nor incur loss, then it is known as-
(a) Margin of safety
(b) P/V ratio
(c) Break-even point
(d) None of the above
26. Cost volume profit relationship is shown by-
(a) Break even Chart
(b) Profit volume Graph
(c) Cost volume profit Chart
(d) Profit path Chart
27. P/V ratio shows the relation between-
(a) Fixed cost and sales
(b) Variable cost and sales
(c) Profit and sales
(d) Contribution and sales
28. The costing in which all indirect costs are charging to Profit and Loss Account of the period in which they arise are known as -
(a) Batch costing
(b) Marginal costing
(c) Direct costing
(d) Absorption costing
29. There in a clear distribution between the direct cost and period cost in-
(a) Absorption costing
(b) Marginal costing
(c) Operation costing
(d) Standard costing
30. Possibility of under pricing reduces in -
(a) Direct costing
(b) Operation costing
(c) Marginal costing
(d) Absorption costing
31. ___________ is the method in which fixed as well as variable costs are allotted to cost units and total overheads are absorbed according to activity level.
(a) Absorption costing
(b) Marginal costing
(c) Unit costing
(d) Direct costing
32. Variable cost of one unit of a product or a service i.e. a cost which would be avoided if that unit was not produced is known as -
(a) Unit costing
(b) Marginal costing
(c) Unit cost
(d) Marginal cost
33. Marginal costing is also known as -
(a) Variable Costing
(b) Absorption Costing
(c) Variable Cost
(d) Direct costing
34. Sale Volume - Marginal sales =
(a) Fixed cost
(b) Variable cost
(c) Profit
(d) Contribution
35. Contribution - Fixed Cost =
(a) Profit
(b) Marginal cost
(c) Unit cost
(d) Variable cost
36. If the fixed cost exceeds the amount of contribution, it represents -
(a) Deficit
(b) Surplus
(c) Loss
(d) Profit
37. In 'make or buy' decisions, it is profitable to buy from outside only when the suppliers price is below the firm's own-
(a) Profit
(b) Variable cost
(c) Contribution
(d) Fixed cost
38. ___________ costing method is used tor valuation of finished goods inventory provided for over production.
(a) Variable
(b) Direct
(c) Marginal
(d) Absorption
39. Marginal costing technique help in -
(a) Decision Making
(b) Controlling Costs
(c) Both (a) and (b)
(d) None of the above
40. The marginal costing technique suggests that if the existing operations are able to earn atleast same contribution to meet __________ one should continue with operations.
(a) Fixed costs
(b) Sales
(c) Margin
(d) Profit
41. An increase in sales price-
(a) does not affect the Break Even Point Sales
(b) increase the Break Even Point Sales
(c) lowers the Break Even Point Sales
(d) none of the above
42. Out of the following which assumption is not related to the Accountant's break even chart?
(a) Fixed costs remain fixed throughout the range charted
(b) Selling prices do not change
(c) Variable costs fluctuate inversely with volume
(d) Operating efficiency will remain unchanged
43. An increase in variable cost-
(a) increase profit-volume ratio
(b) reduces Contribution
(c) increase margin of safety
(d) none of the above
44. At break even point -
(a) Total Sales Revenue = Variable Cost
(b) Sales Revenue= Total Cost - Variable Cost
(c) Contribution=Fixed Cost
(d) Profit Fixed Cost
45. The variable cost of a product increase by 10% and the management raise the unit selling price by equal amount. The fixed costs remain unchanged. Then BEP of the firm remains
(a) Zero
(b) Unchanged
(c) decreases
(d) increases
46. Angle of incidence means
(a) Systematic risk in CAPM model
(b) Post BEP relationship between total cost and total revenue
(c) marginal cost of production
(d) Incidental factors in investments
47. ________ improves break even point.
(a) Increase in fixed cost
(b) Increase in variable cost
(c) Increase in sales volume
(d) Increase in sale price
48. _______ Would decrease unit contribution margin the most.
(a) 15 % decrease in variable costs
(b) 15% decrease in selling price
(c) 15% decrease in fixed costs
(d) 15% increase in variable costs
49. A firm earns profit when contribution exceeds fixed costs under _________ costing.
(a) Job
(b) Contract
(c) Variable
(d) Margin
50. __________ cost is the ascertainment of marginal cost and the effect on profit of changes in volume or type of output by differencing between fixed cost and variable cost.
(a) semi-variable
(b) Marginal
(c) Variable
(d) Total
51. Marginal costing is a useful technique for ________ planning.
(a) Long-term
(b) Medium-term
(c) Short-term
(d) None of the above
52. The key factor is also known as -
(a) Cost factor
(b) Success factor
(c) Critical success factor
(d) All of the above
53. Absorption costing is basically used for-
(a) Valuation of stock
(b) Pricing decisions
(c) Ascertainment of profitability
(d) All of the above
54. Marginal costing is more useful for managerial decision making.
(a) Partly False
(b) Partly True
(c) False
(d) True
55. The concept of ________ is based on the behavior of costs that vary with the volume of output.
(a) Contract costing
(b) Absorption costing
(c) Marginal costing
(d) Variable costing
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