Kaizen costing focuses on:
Kaizen means continuous improvement.
Cost & Management Accounting MCQs
Explore Cost and Management Accounting MCQs with answers and explanations. Topics include costing methods, cost classification, material and labour costing, overheads, budgeting, budgetary control, standard costing, variance analysis and management decision-making. Suitable for FPSC, PPSC and other competitive examinations.
A just-in-time (JIT) system aims to:
JIT uses a pull system to minimize inventory holding and waste.
Annual demand is 10,000 units, ordering cost is Rs. 50 per order and holding cost is Rs. 4 per unit per year. The Economic Order Quantity (EOQ) is:
EOQ = square root of (2 x 10,000 x 50 / 4) = square root of 250,000 = 500.
Target costing computes the target cost as:
Under target costing, price is set by the market and cost is managed to achieve the required profit.
A cash budget shows:
Cash budgets help plan borrowing and surplus investment.
A manager who is responsible for both revenues and costs of a division is in charge of a:
A profit center is responsible for revenues and costs; an investment center is also responsible for invested capital.
Operating income is Rs. 150,000 and average invested assets are Rs. 1,000,000. Return on investment (ROI) is:
ROI = 150,000 / 1,000,000 = 15%.
Operating income is Rs. 200,000, invested assets are Rs. 1,000,000 and the required rate of return is 12%. Residual income is:
RI = 200,000 - (12% x 1,000,000) = 200,000 - 120,000 = Rs. 80,000.
A transfer price is:
Transfer pricing affects divisional performance measurement.
The four perspectives of the Balanced Scorecard are:
The Balanced Scorecard by Kaplan and Norton uses these four perspectives.
Actual labor rate is Rs. 22 per hour, standard rate is Rs. 20 and actual hours are 100. The labor rate variance is:
LRV = (AR - SR) x AH = (22 - 20) x 100 = Rs. 200 adverse.
Actual hours are 90, standard hours allowed are 100 and the standard rate is Rs. 20. The labor efficiency variance is:
LEV = (SH - AH) x SR = (100 - 90) x 20 = Rs. 200 favorable.
A favorable cost variance means that:
A favorable variance increases profit relative to standard; it does not automatically mean good performance.
A master budget is:
The master budget combines operating and financial budgets.
A flexible budget is a budget that:
Flexible budgets allow fair comparison of actual costs with costs allowed at the actual activity level.
In zero-based budgeting, managers must:
ZBB requires each activity to be justified afresh rather than relying on the previous year.
The principal budget factor is:
Also called the limiting factor; it is usually sales demand, but may be materials, labor or capacity.
Actual price is Rs. 12, standard price is Rs. 10 and 500 units were purchased. The material price variance is:
MPV = (AP - SP) x AQ = (12 - 10) x 500 = Rs. 1,000 adverse.
Actual quantity used is 480 units, standard quantity allowed is 500 units and the standard price is Rs. 10. The material usage variance is:
MUV = (SQ - AQ) x SP = (500 - 480) x 10 = Rs. 200 favorable.
Overhead is under-absorbed when:
Under-absorption means too little overhead was charged to production compared with the actual amount.
Activity-based costing (ABC) assigns overhead costs to products on the basis of:
ABC traces costs to activities and then to products using cost drivers.
A cost driver is:
Examples include number of set-ups, machine hours and number of orders.
Standard costing is a technique in which:
Standard costs act as benchmarks for control through variance analysis.
In process costing, the weighted average method:
Weighted average pools opening WIP cost and current cost to compute the average cost per equivalent unit.
Normal loss in a process is:
Normal loss is inherent in the process and its cost is included in the cost of good output.