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!
Q. What does CVP analysis primarily help management to determine?
A.
The total cost of production
B.
The contribution margin
C.
The break-even point
D.
The return on investment
Show solution
Solution
CVP analysis helps management determine the break-even point, where total revenues equal total costs.
Correct Answer:
C
— The break-even point
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Q. What does CVP analysis primarily help managers understand?
A.
The relationship between cost, volume, and profit
B.
The impact of fixed costs on profitability
C.
The break-even point of a product
D.
The effect of taxes on net income
Show solution
Solution
CVP analysis helps managers understand the relationship between cost, volume, and profit.
Correct Answer:
A
— The relationship between cost, volume, and profit
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Q. What does the term 'cost driver' refer to in activity-based costing?
A.
A factor that causes a change in cost
B.
A method of allocating fixed costs
C.
A type of variable cost
D.
A measure of production efficiency
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Solution
A cost driver is a factor that causes a change in the cost of an activity, used in activity-based costing to allocate costs accurately.
Correct Answer:
A
— A factor that causes a change in cost
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Q. What happens to the contribution margin if the selling price increases while variable costs remain constant?
A.
Decreases
B.
Increases
C.
Remains the same
D.
Becomes negative
Show solution
Solution
If the selling price increases while variable costs remain constant, the contribution margin increases.
Correct Answer:
B
— Increases
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Q. What happens to the contribution margin if variable costs increase while selling price remains constant?
A.
Increases
B.
Decreases
C.
Remains the same
D.
Cannot be determined
Show solution
Solution
If variable costs increase while selling price remains constant, the contribution margin decreases.
Correct Answer:
B
— Decreases
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Q. What is the break-even point in CVP analysis?
A.
The point where total revenue equals total costs
B.
The point where fixed costs are covered
C.
The point where variable costs exceed fixed costs
D.
The point where profit is maximized
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Solution
The break-even point is where total revenue equals total costs, resulting in neither profit nor loss.
Correct Answer:
A
— The point where total revenue equals total costs
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Q. What is the break-even point in sales dollars if the break-even point in units is 1,000 and the selling price per unit is $25?
A.
$15,000
B.
$20,000
C.
$25,000
D.
$30,000
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Solution
Break-even Sales = Break-even Units * Selling Price per Unit = 1,000 * $25 = $25,000.
Correct Answer:
C
— $25,000
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Q. What is the break-even point in sales dollars if the fixed costs are $100,000 and the contribution margin ratio is 40%?
A.
$250,000
B.
$400,000
C.
$100,000
D.
$150,000
Show solution
Solution
Break-even point in sales dollars = Fixed Costs / Contribution Margin Ratio = $100,000 / 0.40 = $250,000.
Correct Answer:
A
— $250,000
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Q. What is the break-even point in sales dollars?
A.
Fixed costs divided by contribution margin ratio
B.
Total costs divided by total sales
C.
Total variable costs divided by contribution margin
D.
Sales revenue minus total costs
Show solution
Solution
The break-even point in sales dollars is calculated by dividing fixed costs by the contribution margin ratio.
Correct Answer:
A
— Fixed costs divided by contribution margin ratio
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Q. What is the break-even point in units if fixed costs are $10,000 and the contribution margin per unit is $50?
A.
100 units
B.
200 units
C.
300 units
D.
400 units
Show solution
Solution
Break-even point (units) = Fixed costs / Contribution margin per unit = $10,000 / $50 = 200 units.
Correct Answer:
B
— 200 units
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Q. What is the break-even point in units if fixed costs are $10,000 and the contribution margin per unit is $25?
A.
400 units
B.
500 units
C.
600 units
D.
300 units
Show solution
Solution
Break-even point (units) = Fixed costs / Contribution margin per unit = $10,000 / $25 = 400 units.
Correct Answer:
B
— 500 units
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Q. What is the break-even point in units if fixed costs are $10,000, selling price per unit is $50, and variable cost per unit is $30?
A.
500 units
B.
1,000 units
C.
250 units
D.
750 units
Show solution
Solution
Break-even point (units) = Fixed Costs / (Selling Price - Variable Cost) = $10,000 / ($50 - $30) = 500 units.
Correct Answer:
B
— 1,000 units
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Q. What is the break-even point in units if fixed costs are $100,000, variable cost per unit is $20, and selling price per unit is $50?
A.
2,000 units
B.
1,500 units
C.
4,000 units
D.
5,000 units
Show solution
Solution
Break-even point (units) = Fixed Costs / (Selling Price - Variable Cost) = $100,000 / ($50 - $20) = 2,000 units.
Correct Answer:
A
— 2,000 units
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Q. What is the break-even point in units if fixed costs are $12,000 and the contribution margin per unit is $40?
A.
300 units
B.
400 units
C.
500 units
D.
600 units
Show solution
Solution
Break-even point (units) = Fixed costs / Contribution margin per unit = $12,000 / $40 = 300 units.
Correct Answer:
B
— 400 units
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Q. What is the break-even point in units if fixed costs are $20,000 and contribution margin per unit is $5?
A.
4,000 units
B.
5,000 units
C.
2,000 units
D.
10,000 units
Show solution
Solution
Break-even point (units) = Fixed Costs / Contribution Margin per unit = $20,000 / $5 = 4,000 units.
Correct Answer:
B
— 5,000 units
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Q. What is the break-even point in units if fixed costs are $40,000, selling price per unit is $80, and variable cost per unit is $50?
A.
800 units
B.
1,000 units
C.
1,200 units
D.
600 units
Show solution
Solution
Break-even point (units) = Fixed Costs / (Selling Price - Variable Cost) = $40,000 / ($80 - $50) = 1,000 units.
Correct Answer:
B
— 1,000 units
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Q. What is the break-even point in units if fixed costs are $50,000, selling price per unit is $25, and variable cost per unit is $15?
A.
2,500 units
B.
5,000 units
C.
3,000 units
D.
4,000 units
Show solution
Solution
Break-even point = Fixed Costs / (Selling Price - Variable Cost) = 50000 / (25 - 15) = 2500 units.
Correct Answer:
A
— 2,500 units
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Q. What is the break-even point in units if fixed costs are $50,000, variable cost per unit is $20, and selling price per unit is $50?
A.
1,000 units
B.
2,000 units
C.
1,500 units
D.
2,500 units
Show solution
Solution
Break-even point = Fixed Costs / (Selling Price - Variable Cost) = 50,000 / (50 - 20) = 1,000 units.
Correct Answer:
B
— 2,000 units
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Q. What is the break-even point in units?
A.
Total fixed costs divided by contribution margin per unit
B.
Total variable costs divided by selling price
C.
Total sales revenue divided by total costs
D.
Total fixed costs divided by selling price
Show solution
Solution
The break-even point in units is calculated by dividing total fixed costs by the contribution margin per unit.
Correct Answer:
A
— Total fixed costs divided by contribution margin per unit
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Q. What is the contribution margin if the selling price is $200 and variable costs are $120?
A.
$80
B.
$120
C.
$200
D.
$320
Show solution
Solution
Contribution Margin = Selling Price - Variable Costs = $200 - $120 = $80.
Correct Answer:
A
— $80
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Q. What is the contribution margin if the selling price is $200, variable costs are $120, and fixed costs are $50?
A.
$80
B.
$120
C.
$50
D.
$200
Show solution
Solution
Contribution Margin = Selling Price - Variable Costs = $200 - $120 = $80.
Correct Answer:
A
— $80
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Q. What is the contribution margin in CVP analysis?
A.
Sales revenue minus fixed costs
B.
Sales revenue minus variable costs
C.
Total costs minus total revenue
D.
Net income before taxes
Show solution
Solution
The contribution margin is calculated as sales revenue minus variable costs.
Correct Answer:
B
— Sales revenue minus variable costs
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Q. What is the contribution margin in marginal costing?
A.
Sales Revenue - Variable Costs
B.
Sales Revenue - Fixed Costs
C.
Total Costs - Profit
D.
Sales Revenue - Total Costs
Show solution
Solution
The contribution margin is calculated as Sales Revenue minus Variable Costs.
Correct Answer:
A
— Sales Revenue - Variable Costs
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Q. What is the contribution margin per unit if the selling price is $80 and variable costs are $50?
A.
$30
B.
$50
C.
$80
D.
$20
Show solution
Solution
Contribution Margin per unit = Selling Price - Variable Costs = $80 - $50 = $30.
Correct Answer:
A
— $30
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Q. What is the effect of an increase in variable costs on the break-even point?
A.
It decreases the break-even point
B.
It has no effect on the break-even point
C.
It increases the break-even point
D.
It eliminates the break-even point
Show solution
Solution
An increase in variable costs raises the break-even point because it reduces the contribution margin per unit.
Correct Answer:
C
— It increases the break-even point
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Q. What is the effect on contribution margin if the variable cost per unit increases by $5 while the selling price remains unchanged?
A.
Increases by $5
B.
Decreases by $5
C.
Remains the same
D.
Increases by $10
Show solution
Solution
Contribution margin decreases by the same amount as the increase in variable cost, which is $5.
Correct Answer:
B
— Decreases by $5
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Q. What is the effect on contribution margin if variable costs increase by $20 while the selling price remains the same?
A.
Increase by $20
B.
Decrease by $20
C.
No effect
D.
Increase by $40
Show solution
Solution
If variable costs increase by $20, the contribution margin decreases by $20.
Correct Answer:
B
— Decrease by $20
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Q. What is the effect on the contribution margin if fixed costs increase by $5,000 while sales and variable costs remain unchanged?
A.
Increase
B.
Decrease
C.
No effect
D.
Cannot determine
Show solution
Solution
Contribution margin is unaffected by changes in fixed costs; it only depends on sales and variable costs.
Correct Answer:
C
— No effect
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Q. What is the formula for calculating the budgeted profit margin?
A.
Budgeted Sales - Budgeted Costs
B.
Budgeted Sales / Budgeted Costs
C.
Budgeted Costs / Budgeted Sales
D.
Budgeted Sales + Budgeted Costs
Show solution
Solution
The budgeted profit margin is calculated as Budgeted Sales - Budgeted Costs.
Correct Answer:
A
— Budgeted Sales - Budgeted Costs
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Q. What is the formula for calculating the contribution margin ratio?
A.
Contribution Margin / Sales
B.
Sales / Contribution Margin
C.
Fixed Costs / Variable Costs
D.
Variable Costs / Sales
Show solution
Solution
The contribution margin ratio is calculated as Contribution Margin divided by Sales.
Correct Answer:
A
— Contribution Margin / Sales
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