US CMA PART 1...100 OBJECTIVE QUESTIONS WITH ANSWERS
*SECTION A: TRUE / FALSE [1-15]*
1. *T/F*: Direct costs can be traced to cost object in an economically feasible way.
*Ans: TRUE*
2. *T/F*: Factory rent is an example of non-production overhead.
*Ans: FALSE* - It is production overhead.
3. *T/F*: Inventoriable costs become expense only when goods are sold.
*Ans: TRUE*
4. *T/F*: Gross Profit = Sales - Operating Expenses.
*Ans: FALSE* - GP = Sales - COGS
5. *T/F*: High-Low method is used to separate mixed cost into fixed and variable.
*Ans: TRUE*
6. *T/F*: In merchandising business, COGS includes Direct Material + Direct Labor.
*Ans: FALSE* - COGS = Beg Inventory + Purchases - End Inventory
7. *T/F*: A stock dividend decreases total shareholders equity.
*Ans: FALSE* - Only composition changes
8. *T/F*: Other Comprehensive Income includes unrealized gain on AFS securities.
*Ans: TRUE*
9. *T/F*: Operating leverage increases when fixed costs increase.
*Ans: TRUE*
10. *T/F*: Trading on equity means using debt to increase ROE.
*Ans: TRUE*
11. *T/F*: Interim dividend requires approval in Annual General Meeting.
*Ans: FALSE* - Board can declare
12. *T/F*: Sunk costs are relevant for decision making.
*Ans: FALSE*
13. *T/F*: Throughput accounting considers only Direct Material as product cost.
*Ans: TRUE*
14. *T/F*: Book value of asset = Historical cost - Accumulated depreciation.
*Ans: TRUE*
15. *T/F*: Equity shareholders have preemptive right to buy new shares.
*Ans: TRUE*
*SECTION B: ODD MAN OUT [16-25]*
16. *Odd One*: Direct Material, Direct Labor, Factory Supervisor Salary, Sales Commission
*Ans: Sales Commission* - Non-production cost
17. *Odd One*: Liquidity, Solvency, Profitability, Benchmarking
*Ans: Benchmarking* - Others are financial ratios
18. *Odd One*: Cash Dividend, Stock Dividend, Property Dividend, Interim Dividend
*Ans: Interim Dividend* - Based on timing, others by form
19. *Odd One*: FIFO, LIFO, Weighted Avg, Depreciation
*Ans: Depreciation* - Others are inventory methods
20. *Odd One*: Skilled Labor, Unskilled Labor, Blue Collar, White Collar
*Ans: White Collar* - Others are factory floor workers
21. *Odd One*: Financial, Customer, Internal Process, Stakeholder
*Ans: Stakeholder* - Others are BSC perspectives
22. *Odd One*: Step Fixed, Variable, Semi-variable, Opportunity
*Ans: Opportunity* - Others are cost behavior types
23. *Odd One*: AGM, Board Meeting, Audit Report, Minutes
*Ans: Audit Report* - Others are meeting related
24. *Odd One*: APIC, Retained Earnings, Share Premium, Treasury Stock
*Ans: Treasury Stock* - Others increase equity
25. *Odd One*: Purchase Order, Invoice, Delivery Note, Annual Report
*Ans: Annual Report* - Others are in sales/purchase cycle
*SECTION C: FILL IN THE BLANKS [26-35]*
26. *Fill*: *_*_ costs remain constant in total within relevant range.
*Ans: Fixed Costs*
27. *Fill*: *_*_ is the difference between Sales and Variable Costs.
*Ans: Contribution Margin*
28. *Fill*: *_*_ dividend is paid in form of assets other than cash.
*Ans: Property Dividend*
29. *Fill*: *_*_ leverage measures % change in EBIT due to % change in Sales.
*Ans: Operating Leverage*
30. *Fill*: *_*_ costs are incurred for R&D and product design.
*Ans: Engineering Costs*
31. *Fill*: *_*_ is the time from purchase of inventory to collection of cash.
*Ans: Operating Cycle*
32. *Fill*: *_*_ shareholders elect the Board of Directors.
*Ans: Equity*
33. *Fill*: *_*_ method is best when data points are only two.
*Ans: High-Low Method*
34. *Fill*: *_*_ is excess of selling price over cost expressed as % of cost.
*Ans: Markup*
35. *Fill*: *_*_ are costs that cannot be avoided even if production stops.
*Ans: Committed Fixed Costs*
*SECTION D: NEGATIVE / "LEAST" / "NOT" TYPE [36-45]*
36. *Which is NOT a production cost?* A. DM B. DL C. Sales Salary D. Factory Depreciation
*Ans: C*
37. *Which is NOT a component of Internal Control?* A. Risk Assessment B. Marketing C. Control Activities D. Monitoring
*Ans: B*
38. *Which is LEAST liquid asset?* A. Cash B. Inventory C. AR D. Marketable Securities
*Ans: B*
39. *Which is NOT an example of OH allocation base?* A. DLH B. Machine Hrs C. Sales Revenue D. Sq Ft
*Ans: C*
40. *Which is NOT a type of stakeholder?* A. Customer B. Government C. Competitor D. Employee
*Ans: C*
41. *Which is NOT a depreciation method?* A. SLM B. DDB C. FIFO D. Units of Production
*Ans: C*
42. *Which is NOT a factor of production?* A. Land B. Capital C. Technology D. Inflation
*Ans: D*
43. *Which is NOT part of Annual Report?* A. Balance Sheet B. Agenda C. Cash Flow D. MD&A
*Ans: B*
44. *Which is NOT a characteristic of debt trap?* A. High interest B. Rollover of debt C. Low leverage D. Default risk
*Ans: C*
45. *Which is NOT adjusted in COGS for overapplied OH?* A. WIP B. FG C. COGS D. Sales
*Ans: D*
*SECTION E: ASSERTION-REASON [46-50]*
_Options: A. Both true, R explains A | B. Both true, R not explain | C. A true, R false | D. A false, R true_
46. *A*: Inflation increases FIFO ending inventory value.
*R*: FIFO assumes latest purchases remain in inventory.
*Ans: A*
47. *A*: Stock dividend does not affect cash.
*R*: Stock dividend transfers amount from RE to APIC.
*Ans: A*
48. *A*: High operating leverage means high business risk.
*R*: Fixed costs do not change with sales volume.
*Ans: A*
49. *A*: Non-executive directors are involved in daily operations.
*R*: Executive directors manage company operations.
*Ans: D*
50. *A*: Overcosting occurs due to improper cost allocation.
*R*: Cross subsidization happens in traditional costing.
*Ans: A*
*SECTION F: STANDARD MCQs [51-100]*
51. *Direct + Indirect Material + Direct Labor = ?*
A. Prime Cost B. Conversion Cost C. Production Cost D. Period Cost
*Ans: A. Prime Cost*
52. *COGS Formula for manufacturer?*
A. Beg FG + COGM - End FG B. Sales - GP
C. Both A and B D. None
*Ans: C*
53. *Markup 25% on cost. Cost $80. Selling Price?*
A. $100 B. $105 C. $120 D. $96
*Ans: A. $100* _Exp: 80 × 1.25_
54. *High-Low: High 10,000 units $70,000. Low 6,000 units $50,000. VC/unit?*
A. $4 B. $5 C. $6 D. $7
*Ans: B. $5* _Exp: 20,000/4,000_
55. *Overcosting means product is:*
A. Consuming more resources but less cost allocated
B. Consuming fewer resources but more cost allocated
C. Profitable D. Loss making
*Ans: B*
56. *Main difference: Manufacturing vs Merchandising?*
A. Inventory type B. Tax rate C. Customers D. Location
*Ans: A*
57. *Economic interest of Customers?*
A. Dividends B. Quality + Price C. Interest D. Salary
*Ans: B*
58. *Current Ratio measures:*
A. Profitability B. Liquidity C. Solvency D. Efficiency
*Ans: B*
59. *Debt to Equity measures:*
A. Liquidity B. Profitability C. Capital Structure D. Activity
*Ans: C*
60. *Cash Dividend JE: Dr RE Cr Cash. Effect on Share Price?*
A. Increase B. Decrease C. No effect D. Cannot say
*Ans: B*
61. *Small Stock Dividend >25%?*
A. TRUE B. FALSE
*Ans: B* _Small ≤20-25%_
62. *OCI as per US GAAP does NOT include:*
A. FX Translation B. Pension Adjustment C. Net Income D. AFS Gain
*Ans: C*
63. *Best method for asset with high early usage?*
A. SLM B. DDB C. Units D. Group
*Ans: B. DDB*
64. *Financial Leverage exists due to:*
A. Fixed Operating Cost B. Fixed Financial Cost
C. Variable Cost D. Sales
*Ans: B*
65. *Trading on Equity is beneficial when:*
A. ROI > Interest Rate B. ROI < Interest Rate
C. ROI = Interest D. Always
*Ans: A*
66. *APIC can be used for:*
A. Cash Dividend B. Stock Dividend C. Bonus Issue D. All
*Ans: D*
67. *JE for inventory sold: Dr COGS Cr Inventory*
*Ans: TRUE*
68. *Semi-variable cost example:*
A. Rent B. DM C. Telephone Bill D. Insurance
*Ans: C*
69. *Opportunity cost of using owned building?*
A. $0 B. Rent foregone C. Depreciation D. Maintenance
*Ans: B*
70. *Discretionary cost example:*
A. Property Tax B. Advertising C. Lease D. Salary
*Ans: B*
71. *Marginal Cost = ?*
A. Total Cost/Units B. Change in TC / Change in Qty
C. FC + VC D. None
*Ans: B*
72. *Throughput = ?*
A. Sales - VC B. Sales - DM C. Sales - All Costs D. GP
*Ans: B*
73. *Purpose of Benchmarking:*
A. Cost Reduction B. Compare with Best Practice C. Budgeting D. Tax
*Ans: B*
74. *Best base to allocate maintenance dept cost:*
A. Sales B. Machine Hrs C. #Employees D. Sq Ft
*Ans: B*
75. *Relevant range is where:*
A. Costs are zero B. Cost behavior is linear
C. Sales are max D. Profit is max
*Ans: B*
76. *Short run = period where at least one input is:*
A. Variable B. Fixed C. Zero D. Infinite
*Ans: B*
77. *Factor of production "Entrepreneurship" earns:*
A. Rent B. Wages C. Interest D. Profit
*Ans: D*
78. *Work Supervisor reports to:*
A. CEO B. Factory Manager C. HR D. CFO
*Ans: B*
79. *Blue collar workers are:*
A. Managers B. Manual factory workers C. Sales staff D. Directors
*Ans: B*
80. *Stock Dividend JE does NOT use:*
A. RE B. Common Stock C. APIC D. Cash
*Ans: D*
81. *Step Fixed Cost example:*
A. DM B. Supervisor Salary C. Electricity D. Sales Commission
*Ans: B*
82. *Production OH example:*
A. CEO Salary B. Factory Insurance C. Advertising D. Salesman Salary
*Ans: B*
83. *OCI example:*
A. Sales B. Unrealized loss on Cash Flow Hedge
C. Rent Expense D. Interest Income
*Ans: B*
84. *Operating Cycle = Inventory Period + ?*
A. AP Period B. AR Period C. Cash Period D. None
*Ans: B*
85. *Sustainable Growth Rate formula:*
A. ROE × Retention Ratio B. ROA × Payout
C. NI/Equity D. Sales/Assets
*Ans: A*
86. *Insolvency means:*
A. Negative Equity B. Cannot pay debts as they fall due
C. Both A and B D. High Profit
*Ans: C*
87. *Production Dept function:*
A. Sales B. Converting RM to FG C. Hiring D. Accounting
*Ans: B*
88. *Inflation causes LIFO COGS to be:*
A. Lower B. Higher C. Same D. Zero
*Ans: B*
89. *Executive Director is:*
A. Outside Director B. Full-time employee Director
C. Auditor D. Shareholder
*Ans: B*
90. *Board Meeting is held:*
A. Yearly B. Quarterly/Monthly C. Daily D. Never
*Ans: B*
91. *Preemptive right protects shareholders from:*
A. Dilution B. Bankruptcy C. Tax D. Dividend cut
*Ans: A*
92. *Voting right is based on:*
A. # of shares held B. Tenure C. Age D. Gender
*Ans: A*
93. *Profit Margin = GP/Sales. Markup = GP/Cost*
*Ans: TRUE*
94. *High-Low method is useful for:*
A. Budgeting B. Cost Estimation C. Forecasting D. All
*Ans: D*
95. *Finance cost can be claimed in court but equity dividend cannot because:*
A. Debt is legal obligation B. Equity is residual
C. Both A and B D. None
*Ans: C*
96. *Agenda of meeting includes:*
A. Items to discuss B. Minutes C. Audit Report D. FS
*Ans: A*
97. *Important doc in Purchase Cycle:*
A. Sales Invoice B. Purchase Order C. Receipt D. Both B and C
*Ans: D*
98. *Period cost example:*
A. DM B. DL C. CEO Salary D. Factory Rent
*Ans: C*
99. *Fair value is:*
A. Historical Cost B. Exit Price in market
C. Book Value D. Replacement Cost
*Ans: B*
100. *ROA measures:*
A. Liquidity B. Profitability C. Solvency D. Market
*Ans: B*
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*MASTER FORMULA SHEET*
**Concept** **Formula**
**Prime Cost** DM + DL
**Conversion Cost** DL + MOH
**COGS** Beg FG + COGM - End FG
**GP Margin** GP / Sales
**Markup** GP / Cost
**High-Low VC** [High Cost - Low Cost]/[High Qty - Low Qty]
**ROI** Income / Investment
**RI** Income - [Investment × Req Rate]
**SGR** ROE × Retention Ratio
**Operating Cycle** Inventory Days + AR Days
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