MGT404 Quiz 1

Q1. Which type of “contribution to key factor ratio” should be selected by us?

1. The highest
2. Any one
3. The lowest
4. The moderate

Correct answer: The highest

Q2. In absorption costing; stock valuation is based on full_________________ .

1. prime cost
2. production cost
3. selling cost
4. conversion cost

Correct answer: production cost

Q3. Which of the given statement is NOT accurate for Margin of Safety?

1. Higher the margin of safety lowers the security
2. It can be calculated by subtracting the breakeven sales from selected sales
3. A good margin of safety would usually indicate relatively low fixed overhead
4. It is a cushion if there is reduction in sales

Correct answer: Higher the margin of safety lowers the security

Q4. Rs. 1.25 million spent to purchase a plant for factory can be classified as ____________ cost.

1. controllable
2. administrative
3. fixed
4. historical

Correct answer: historical

Q5. Following information is extracted from the books of ABC Company. Particular Rs. Sale price 800 per unit Variable cost 550 per unit Fixed cost 50,000 Management would like to earn a target profit of Rs. 150,650 but also increase the advertising budget by Rs. 100,000 to stimulate sales. What will be contribution margin ratio?

1. 0.4125
2. 0.3125
3. 0.1125
4. 0.2025

Correct answer: 0.4125

Q6. How Operating leverage factor is calculated?

1. Contribution margin ÷ Net income
2. None of the given options
3. Contribution margin + Net income
4. Contribution margin x Net income

Correct answer: Contribution margin ÷ Net income

Q7. Management accounting provides information for all of the following EXCEPT:

1. pricing of the roduct
2. external reporting
3. effeicient use of entity's resources
4. management effeciency analysis

Correct answer: external reporting

Q8. Product pricing method in marginal costing is based on _______________ .

1. selling cost
2. variable cost
3. production cost
4. conversion cost

Correct answer: variable cost

Q9. Financial Accounting differs from managerial accounting in such a way that financial accounting is:

1. Not required and unregulated
2. More oriented toward the future
3. Primarily concerned with external financial reporting
4. Heavily involved with decision analysis and implementation of decisions

Correct answer: Primarily concerned with external financial reporting

Q10. Activity Based costing is suitable if:

1. there is no diversity in the product range.
2. products use same amount of the direct labor costs.
3. production overheads are higher in relation to direct cost.
4. direct costs are higher in proportion to production overheads.

Correct answer: production overheads are higher in relation to direct cost.