Cost & Management Accounting for Competitive Exams

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Cost & Management Accounting

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Cost & Management Accounting MCQ & Objective Questions

Cost & Management Accounting is a crucial subject for students preparing for various school and competitive exams in India. Mastering this topic not only enhances your understanding of financial principles but also significantly boosts your exam scores. Practicing MCQs and objective questions helps in reinforcing key concepts and identifying important questions that frequently appear in exams.

What You Will Practise Here

Fundamentals of Cost Accounting
Costing Methods: Job Costing, Process Costing, and Activity-Based Costing
Budgeting and Variance Analysis
Break-even Analysis and Cost-Volume-Profit Relationships
Standard Costing and Performance Measurement
Financial Statements Analysis
Key Formulas and Definitions in Cost & Management Accounting

Exam Relevance

Cost & Management Accounting is an integral part of the curriculum for CBSE, State Boards, and various competitive exams such as NEET and JEE. Questions often focus on practical applications, theoretical concepts, and problem-solving skills. Common question patterns include multiple-choice questions that test your understanding of key principles and calculations related to costs and management strategies.

Common Mistakes Students Make

Confusing different costing methods and their applications.
Misunderstanding the concepts of fixed and variable costs.
Overlooking the importance of accurate budgeting and variance analysis.
Neglecting to memorize essential formulas and definitions.
Failing to practice enough objective questions to build confidence.

FAQs

Question: What are the key topics I should focus on for Cost & Management Accounting exams?
Answer: Focus on costing methods, budgeting, variance analysis, and key formulas to excel in your exams.

Question: How can I improve my performance in Cost & Management Accounting MCQs?
Answer: Regular practice of MCQs and understanding the underlying concepts will significantly improve your performance.

Start solving practice MCQs today to test your understanding of Cost & Management Accounting and enhance your exam preparation. Remember, consistent practice is the key to success!

Budgeting and Variance Analysis Budgeting and Variance Analysis - Advanced Concepts Budgeting and Variance Analysis - Applications Budgeting and Variance Analysis - Case Studies Budgeting and Variance Analysis - Competitive Exam Level Budgeting and Variance Analysis - Higher Difficulty Problems Budgeting and Variance Analysis - Numerical Applications Budgeting and Variance Analysis - Problem Set Budgeting and Variance Analysis - Real World Applications Cost Classification and Terminology Cost Classification and Terminology - Advanced Concepts Cost Classification and Terminology - Applications Cost Classification and Terminology - Case Studies Cost Classification and Terminology - Competitive Exam Level Cost Classification and Terminology - Higher Difficulty Problems Cost Classification and Terminology - Numerical Applications Cost Classification and Terminology - Problem Set Cost Classification and Terminology - Real World Applications Marginal Costing Basics Marginal Costing Basics - Advanced Concepts Marginal Costing Basics - Applications Marginal Costing Basics - Case Studies Marginal Costing Basics - Competitive Exam Level Marginal Costing Basics - Higher Difficulty Problems Marginal Costing Basics - Numerical Applications Marginal Costing Basics - Problem Set Marginal Costing Basics - Real World Applications

Q. A business has fixed costs of $10,000 and a contribution margin of $15 per unit. How many units must be sold to break even?

A. 500
B. 600
C. 700
D. 800

Solution

Break-even point (units) = Fixed costs / Contribution margin per unit = $10,000 / $15 = 667 units (rounded to 600 for options)

Correct Answer: B — 600

Q. A business has fixed costs of $50,000 and a contribution margin of $10 per unit. How many units must be sold to break even?

A. 5,000
B. 4,000
C. 6,000
D. 3,000

Solution

Break-even point (units) = Fixed costs / Contribution margin = $50,000 / $10 = 5,000 units

Correct Answer: A — 5,000

Q. A company budgeted $200,000 for direct materials but actually spent $220,000. What is the direct materials variance?

A. $20,000 Favorable
B. $20,000 Unfavorable
C. $40,000 Favorable
D. $40,000 Unfavorable

Solution

Direct materials variance = Actual Cost - Budgeted Cost = $220,000 - $200,000 = $20,000 Unfavorable.

Correct Answer: B — $20,000 Unfavorable

Q. A company budgeted $200,000 for production costs but incurred $220,000. What is the variance?

A. $20,000 Favorable
B. $20,000 Unfavorable
C. $200,000 Favorable
D. $200,000 Unfavorable

Solution

Variance = Actual Costs - Budgeted Costs = $220,000 - $200,000 = $20,000 Unfavorable.

Correct Answer: B — $20,000 Unfavorable

Q. A company budgeted for $200,000 in production costs but incurred $220,000. What is the cost variance?

A. $20,000 Favorable
B. $20,000 Unfavorable
C. $40,000 Favorable
D. $40,000 Unfavorable

Solution

Cost variance = Actual Costs - Budgeted Costs = $220,000 - $200,000 = $20,000 Unfavorable.

Correct Answer: B — $20,000 Unfavorable

Q. A company budgeted for 5,000 hours of labor at a rate of $20 per hour. If the actual labor cost was $110,000 for 6,000 hours, what is the labor efficiency variance?

A. $10,000 Favorable
B. $10,000 Unfavorable
C. $20,000 Favorable
D. $20,000 Unfavorable

Solution

Labor Efficiency Variance = (Actual Hours - Budgeted Hours) * Budgeted Rate = (6,000 - 5,000) * $20 = $20,000 (Unfavorable)

Correct Answer: B — $10,000 Unfavorable

Q. A company expects to sell 1,000 units at a price of $20 each. If the variable cost per unit is $12, what is the expected total contribution margin?

A. $8,000
B. $6,000
C. $4,000
D. $2,000

Solution

Total contribution margin = (Selling price - Variable cost) * Number of units = ($20 - $12) * 1,000 = $8,000

Correct Answer: A — $8,000

Q. A company has a budgeted direct material cost of $30,000 but incurs $32,000. What is the direct material variance?

A. $2,000 Favorable
B. $2,000 Unfavorable
C. $1,000 Favorable
D. $1,000 Unfavorable

Solution

Direct Material Variance = Actual Cost - Budgeted Cost = $32,000 - $30,000 = $2,000 Unfavorable.

Correct Answer: B — $2,000 Unfavorable

Q. A company has a budgeted fixed overhead of $100,000 and actual fixed overhead of $90,000. What is the fixed overhead variance?

A. $10,000 Favorable
B. $10,000 Unfavorable
C. $20,000 Favorable
D. $20,000 Unfavorable

Solution

Fixed Overhead Variance = Actual Fixed Overhead - Budgeted Fixed Overhead = $90,000 - $100,000 = -$10,000 (Favorable)

Correct Answer: A — $10,000 Favorable

Q. A company has a budgeted sales revenue of $500,000 and actual sales revenue of $450,000. What is the sales variance?

A. $50,000 Favorable
B. $50,000 Unfavorable
C. $100,000 Favorable
D. $100,000 Unfavorable

Solution

Sales Variance = Actual Sales - Budgeted Sales = $450,000 - $500,000 = -$50,000 (Unfavorable)

Correct Answer: B — $50,000 Unfavorable

Q. A company has a budgeted sales volume of 10,000 units at $20 each. If actual sales are 9,000 units at $22 each, what is the sales volume variance?

A. $2,000 Favorable
B. $2,000 Unfavorable
C. $10,000 Favorable
D. $10,000 Unfavorable

Solution

Sales volume variance = (Actual units - Budgeted units) * Budgeted price = (9,000 - 10,000) * $20 = -$20,000, which is $2,000 Favorable.

Correct Answer: A — $2,000 Favorable

Q. A company has a budgeted sales volume of 5,000 units at a selling price of $50 per unit. What is the total budgeted revenue?

A. $250,000
B. $200,000
C. $300,000
D. $150,000

Solution

Total Budgeted Revenue = Sales Volume * Selling Price = 5,000 * $50 = $250,000.

Correct Answer: A — $250,000

Q. A company has a budgeted variable cost of $3 per unit for 10,000 units. If the actual variable cost is $4 per unit for 12,000 units, what is the total variable cost variance?

A. $12,000 Favorable
B. $12,000 Unfavorable
C. $24,000 Favorable
D. $24,000 Unfavorable

Solution

Total Variable Cost Variance = (Actual Cost - Budgeted Cost) = ($4 * 12,000) - ($3 * 10,000) = $48,000 - $30,000 = $18,000 (Unfavorable)

Correct Answer: D — $24,000 Unfavorable

Q. A company has a fixed cost of $60,000 and a contribution margin of $15 per unit. How many units must be sold to achieve a profit of $24,000?

A. 5,600
B. 4,000
C. 3,200
D. 6,000

Solution

Required units = (Fixed costs + Target profit) / Contribution margin per unit = ($60,000 + $24,000) / $15 = 5,600 units.

Correct Answer: A — 5,600

Q. A company has a selling price of $150, variable costs of $90, and fixed costs of $30,000. What is the break-even point in sales dollars?

A. $150,000
B. $200,000
C. $300,000
D. $400,000

Solution

Break-even point (sales dollars) = Fixed Costs / Contribution Margin Ratio. Contribution Margin = Selling Price - Variable Costs = $150 - $90 = $60. Contribution Margin Ratio = $60 / $150 = 0.4. Break-even point = $30,000 / 0.4 = $75,000.

Correct Answer: C — $300,000

Q. A company has a selling price of $300, variable costs of $180, and fixed costs of $60,000. What is the break-even sales revenue?

A. $120,000
B. $100,000
C. $80,000
D. $60,000

Solution

Break-even sales revenue = Break-even units * Selling Price. Break-even units = Fixed Costs / Contribution Margin per Unit = $60,000 / ($300 - $180) = 600 units. Break-even sales revenue = 600 * $300 = $180,000.

Correct Answer: A — $120,000

Q. A company has a total cost of $100,000, with fixed costs of $40,000. What is the variable cost if 4,000 units are produced?

A. $15,000
B. $20,000
C. $25,000
D. $30,000

Solution

Total Cost = Fixed Costs + Variable Costs; Variable Costs = Total Cost - Fixed Costs = $100,000 - $40,000 = $60,000. Variable Cost per Unit = $60,000 / 4,000 = $15.

Correct Answer: C — $25,000

Q. A company has a total cost of $50,000 for producing 1,000 units. If the fixed cost is $20,000, what is the variable cost per unit?

A. $30
B. $25
C. $20
D. $15

Solution

Total variable cost = Total cost - Fixed cost = $50,000 - $20,000 = $30,000. Variable cost per unit = $30,000 / 1,000 = $30.

Correct Answer: B — $25

Q. A company has a variable cost of $12 per unit and a selling price of $20 per unit. What is the contribution margin ratio?

A. 40%
B. 50%
C. 60%
D. 70%

Solution

Contribution margin = Selling price - Variable cost = $20 - $12 = $8. Contribution margin ratio = Contribution margin / Selling price = $8 / $20 = 0.40 or 40%.

Correct Answer: B — 50%

Q. A company has fixed costs of $12,000 and a contribution margin of $20 per unit. If they sell 1,000 units, what is their profit?

A. $8,000
B. $10,000
C. $12,000
D. $14,000

Solution

Profit = (Contribution margin per unit * Number of units) - Fixed costs = ($20 * 1,000) - $12,000 = $8,000

Correct Answer: B — $10,000

Q. A company has fixed costs of $20,000 and a contribution margin of $10 per unit. How many units must be sold to achieve a profit of $10,000?

A. 2,000 units
B. 3,000 units
C. 4,000 units
D. 5,000 units

Solution

Required units = (Fixed Costs + Target Profit) / Contribution Margin = ($20,000 + $10,000) / $10 = 3,000 units.

Correct Answer: C — 4,000 units

Q. A company has fixed costs of $20,000 and a contribution margin of $10 per unit. How many units must be sold to break even?

A. 1,000
B. 2,000
C. 500
D. 1,500

Solution

Break-even point (units) = Fixed costs / Contribution margin per unit = $20,000 / $10 = 2,000 units.

Correct Answer: B — 2,000

Q. A company has fixed costs of $20,000 and a contribution margin of $5 per unit. How many units must be sold to break even?

A. 2,000
B. 4,000
C. 1,000
D. 5,000

Solution

Break-even point (units) = Fixed costs / Contribution margin per unit = $20,000 / $5 = 4,000 units.

Correct Answer: A — 2,000

Q. A company has fixed costs of $20,000 and a contribution margin ratio of 25%. What is the sales revenue needed to break even?

A. $80,000
B. $100,000
C. $60,000
D. $40,000

Solution

Break-even Sales Revenue = Fixed Costs / Contribution Margin Ratio = $20,000 / 0.25 = $80,000.

Correct Answer: B — $100,000

Q. A company has fixed costs of $30,000 and a contribution margin of $10 per unit. How many units must be sold to achieve a target profit of $10,000?

A. 4,000
B. 3,000
C. 2,000
D. 5,000

Solution

Required sales (units) = (Fixed costs + Target profit) / Contribution margin per unit = ($30,000 + $10,000) / $10 = 4,000 units.

Correct Answer: A — 4,000

Q. A company has fixed costs of $30,000 and a contribution margin of $15 per unit. How many units must be sold to break even?

A. 1,500 units
B. 2,000 units
C. 2,500 units
D. 3,000 units

Solution

Break-even Point (in units) = Fixed Costs / Contribution Margin per Unit = $30,000 / $15 = 2,000 units.

Correct Answer: B — 2,000 units

Q. A company has fixed costs of $50,000 and variable costs of $20 per unit. If they sell 3,000 units, what is the total cost?

A. $50,000
B. $110,000
C. $60,000
D. $80,000

Solution

Total Cost = Fixed Costs + (Variable Cost per Unit * Number of Units) = $50,000 + ($20 * 3,000) = $50,000 + $60,000 = $110,000.

Correct Answer: B — $110,000

Q. A company incurs $10,000 in fixed costs and has a contribution margin of $25 per unit. How many units must be sold to achieve a target profit of $15,000?

A. 1,000 units
B. 600 units
C. 800 units
D. 700 units

Solution

Required Sales = (Fixed Costs + Target Profit) / Contribution Margin per Unit = ($10,000 + $15,000) / $25 = $25,000 / $25 = 1,000 units.

Correct Answer: C — 800 units

Q. A company incurs a total cost of $120,000 to produce 10,000 units. If fixed costs are $40,000, what is the marginal cost per unit?

A. $8
B. $12
C. $10
D. $6

Solution

Marginal cost = (Total cost - Fixed costs) / Number of units = ($120,000 - $40,000) / 10,000 = $8

Correct Answer: B — $12

Q. A company incurs a total cost of $15,000 for producing 1,200 units. If the fixed costs are $5,000, what is the variable cost per unit?

A. $8.33
B. $10.00
C. $12.50
D. $7.50

Solution

Variable cost per unit = (Total cost - Fixed costs) / Number of units = ($15,000 - $5,000) / 1,200 = $8.33

Correct Answer: A — $8.33

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