Management Accounting(New)

Multiple and Single Choice Question Answer:-
Question: Cost Accounting basic objectives are:
Answer: Acertainment of cost and profitability, Cost control and Managerial decision making.

Question: Techniques of Management Accounting are
Answer: Marginal Costing, Budgetary Control, Standard Costing and Uniform Costing.

Question: Financial Accounting considers those transactions
a) Which can be expressed in terms of money
b) Which can be referred to as historical form of accounting
c) Which include both cash and credit transactions
d) All of the above
Answer: d

Question: Financial Accounting protects the interest of
a) Investors
b) Suppliers
c) Financial institution and government
d) All of the above
Answer: d

Question: Which concept of accounting proposes that the assets acquired by the organisation are recorded at their cost of acquisition?
a) Cost concept
b) Dual Aspect Concept
c) Mathing concept
d) Business entity concept
Answer: a

Question: Main Causes of depriciation are

a) User factor

b) Time Factor

c) Obsolescence

d) All of the above

Answer: d

Question: Types of quotaion may be

Answer: Single Tender, Limited Tender, Open Tender & Global Tender

Numerical Question specially for Management Accounting

Problem: From the following detail available, calculate Net sales,Prime Cost, Gross profit. Sales of product 7,80,000Rs. sales of returns 30,000Rs. Opening Stock 1,15,275Rs. Purchases 3,83,275Rs. Closing Stock 57,250 Rs.

Solution: Net Sales = total sales - Totol returns of sales

Net sales = 7,80,000-30,000
Net Sales = 7,50,000 Rs.

Prime Cost (Material Consumed) = Opening stock+Purchases-Closing Stock

Prime Cost (Material Consumed) = 1,15,275+3,83,275-57,250

Prime Cost (Material Consumed) = Rs. 44,1300

Gross Profit =Net Sales - Prime Cost

Gross Profit= 7,50,000 - 44,1300

Gross Profit= Rs. 30,8700

Problem: From the books of account of M/s. Sandeep Enterprises, the following details habe been extracted from the year ending March 1994.

Stock of materials -Opening = Rs. 1,88,000

Closing = Rs. 2,00,000

Material Purchased during the year =Rs. 8,32,000

Direct wages paid =Rs. 2,38,400

Indirect Wages = Rs. 16,000

Other Factory Overheads = Rs. 1,84,000

Freight -Inward = Rs 32,000

- Outward = Rs 20,000

From the above details calculate Prime Cost, Factory Overheads.

Solution: Prime Cost is basically material consumed cost.

Direct Material Cost(Prime Cost) = Opening Stock + Purchses - Closing Stock + Freight Inward + Direct wages.

Prime Cost = 1,88,000 + 8,32,000 - 2,00,000 + 32,000 + 2,38,400

Prime Cost = 10,90,400 Rs.

Factory Overheads = Indirect wages + Others( It includes Repairs of Plant & machine , Rent , Taxes, Depriciation, Electricity Charges, Fuel for boiler, manager salary etc.)

Factory Overheads = 16,000 + 1,84,000

Factory Overheads = 2,00,000 Rs.

Problem: An Advertising Agency has received an enquiry for the quotation. Production department states the following requirement of material:

paper - 10 reams@ Rs. 1800 per ream

Ink & Other print material - Rs 5,000

Other Consumables - Rs. 3,000. For photography a professional is hired fee of Rs. 10,000. Payable amout to the employee on following basis :

Artist - 80 Hr paid Rs. 12,000 p.m., CopyWriter - 75 Hr paid Rs. 10,000 p.m., Client Servicing - 30 Hr. paid Rs. 9,000 p.m., Rs. 4000 required for the primary packing material.

Assume month consist of 25 working days and one working day consists of 6 working hours. Production overheads are likely to be 40 % of Direct Cost while selling and administration overheads are likely to be 25% of production Cost.Agency expect the profit of 10 % on basic quotation price.

Solution: First need to calculate the Total Cost then we can calculate the quotation price.

Direct Material Cost = Paper +Ink & other printing material + Other Consumables + Primary packing material

Direct Material Cost = 18,000+5,000+3,000+4,000

Direct Material Cost = Rs. 30,000

Direct Labour Cost = Artist + CopyWriter+ Client Servicing

Direct Labour Cost = (80*1200/150)+(75*10,000/150)+(30*9000/150)

Direct Labour Cost = 6,400 + 5,000 + 1,800

Direct Labour Cost = Rs. 13,200

Direct expenses = Photogrphy Charges= Rs. 10,000

Direct Cost = Direct material Cost + Direct labour Cost + Direct Expanses

Direct Cost = 30,000+ 13,200+10,000

Direct Cost = Rs. 53,200

Production overheads = 40 % Direct Cost

Production overheads = 40*53200/100

Production overheads = Rs. 21,280.

Production Cost = Direct Cost + Production overheads

Production Cost = 53,200 + 21,280

Production Cost = Rs. 74,480

Selling & Administration Overheads = 25 % Production Cost

Selling & Administration Overheads = 25 * 74,480/100

Selling & Administration Overheads = Rs. 18,620

Total Cost = Direct Cost + Production Overheads+ Selling & Administration Overheads

Total Cost = 53,200+ 21,280+18,620

Total Cost = Rs. 93,100

Now to calculate quotation price, lets assume quotation price (X).

Total Cost + Profit = Quotation Price

93,100 + (10*X/1oo) = X

9310000+ 10 X = 100X

90 X = 9310000

X = 9310000/90

X= 103444

Quotation Price is Rs. 103444

Question: A manufacturer uses the 200 units of a components every month and he buys them entirely from outsider supplier. The order placing and receiving cost is Rs. 100 and annual carrying cost is Rs. 12. Calculate Economic Order Quantity.

Answer: Given:

A= Annual requirement of material in units = 200*12

O= cost of placing an order=Rs. 100

C= carrying cost one unit per year= Rs. 12

EOQ= sqrt(2*A*O/C) = sqrt(2*2400*100/12)

EOQ= 200 units

Question: From the following data, Calculate EOQ and Total cost of managing inventory.

Annual Demand= 5000 Units

Ordering Cost = Rs. 60 per Order

Price Per Unit = Rs. 100

Inventory carrying Cost = 15% on average inventory

Solution: EOQ = sqrt(2*A*O/C*i)

A = 5000 Units

O = Rs. 60

C = Rs. 100

i = 15% on average inventory

EOQ= sqrt(2*5000*60/15% of 100)

EOQ = sqrt(600000/15)=200 Units

Total cost of managing inventory will be = Ordering cost + Carrying Cost

Total cost= A*O/Q+Q*C/2=5000*60/200+ 200*15% of 100= 1500+ 1500

Total Cost= Rs. 3000

Fill in the Blanks
Question: Research and Development expenditure is a .............................
Answer: Deferred Revenue expenditure

Question: Discount received from the supplier or allowed to customer for making the early payment of due is termed as ........................
Answer: Cash Account

Question: ................ is quantitative record of receipts, issues and closing balance of an item of material.

Answer: Bin Card

Question: Account of a customer is ..............................
Answer: Personal Account

Question: Goodwill Account, Patents and Trade Marks Account are type of ......................

Answer: Real Account

Question: Assets are equal to the Liabilities implies....................

Answer: Dual Aspect Concept

True/False

Question: Bin Card is maintained by store department while store ledger is maintained by costing department.
Answer: True

Question: Bin Card is not an acconting record but only a quantity record.
Answer: True

Question: Management Accounting is not at all a legal requirement.
Answer: True

Question: Cost Accounting is not at all a legal requirement.
Answer: True

Question: Financial accounting comprises of Profitability Statement and Balance Sheet.
Answer: True

Question: Audit deals with the devising of the internal control system and internal audit system to cover the various operational systems.
Answer: True

Question: Financial Accounting is referred to as the historical form of accounting.
Answer: True

Question: Management Accounting considers only historical cost.
Answer: False

Question: Depriciation calculated by Written Down Method can be zero.
Answer: false