MGT402 Quiz 3

Q1. All of the following compose cost of goods sold except:

1. Plant & Machinery
2. FOH
3. Direct Labor
4. Raw material

Correct answer: Plant & Machinery

Q2. The current sales price is Rs. 25 per unit and the current variable cost is Rs. 17 per unit. Fixed costs are Rs. 40,000. If the sales price is increased by Rs. 2 and all other costs remain unchanged, what will happen to the break-even point in units?

1. It will increase by 1,000 units
2. It will decrease by 1,000 units
3. It will not change
4. It will decrease by 2,000 units

Correct answer: It will decrease by 1,000 units

Q3. Which of the following is the main objective of direct material budget?

1. Financial Arrangements
2. All of the given options
3. Developing purchasing requirements
4. Determination of minimum and maximum stock level

Correct answer: Developing purchasing requirements

Q4. An assumption of CVP analysis is that a change in total costs is caused because of a change in which of the following factors?

1. Sales commission per unit
2. Direct labor cost
3. The number of units sold
4. Direct material cost

Correct answer: The number of units sold

Q5. Which of the following is true of the manufacturing overhead budget?

1. Depreciation has to be deducted as a non-cash expense in order to determine the level of cash required for overhead
2. Includes both variable and fixed costs associated with overhead
3. Provides a schedule of all costs of production other than direct materials and direct labor
4. All of the given options

Correct answer: All of the given options

Q6. Which one of the following factors would cause budgeted revenue to be less than the expected demand?

1. Demand exceeds capacity
2. Abundant resources are available
3. Excess capacity exists
4. Excess supply of labor exists

Correct answer: Demand exceeds capacity

Q7. All of the following are assumptions in constructing a Break even chart EXCEPT:

1. There is no change of time value of money
2. Price of cost factors remains constant
3. Cost is effected by volume
4. Long term period will be considered

Correct answer: Long term period will be considered

Q8. Production cost budget is also known as:

1. Direct labor budget
2. Factory overhead budget
3. Direct material budget
4. Manufacturing budget

Correct answer: Manufacturing budget

Q9. When a budget is administered wisely, it will

1. Eliminate coordination and communication between subunits
2. Discourage strategic planning
3. Discourage managers and employees
4. Provide a framework for performance evaluation

Correct answer: Provide a framework for performance evaluation

Q10. Amount of Depreciation on fixed assets will be fixed, in nature, if calculated under which one of the following methods?

1. Reducing balance method
2. Straight line method
3. Double declining method
4. Sum of years' digits method

Correct answer: Straight line method