✅ US CMA PART 1– Management Account
100 MCQs*
**📌 PART 1 — Nature, Source & Purpose of Management Information
(Q1–10)**
1. Management accounting primarily provides information for:
A. Shareholders
B. External regulators
C. Internal managers
D. Government agencies
Answer:
2. Financial accounting information is usually:
A. Forward-looking
B. For internal decision-making
C. Mandatory for statutory reporting
D. Non-monetary
Answer:
3. Which of the following is qualitative information?
A. Profit margin
B. Machine efficiency %
C. Customer feedback
D. Cash balance
Answer:
4. Data becomes information when it is:
A. Recorded
B. Stored
C. Processed and made meaningful
D. Collected in raw form
Answer:
5. Salary of factory supervisors is a:
A. Direct cost
B. Indirect production cost
C. Administrative cost
D. Selling cost
Answer:
6. Electricity that increases with production volume is:
A. Fixed cost
B. Stepped cost
D. Period cost
Answer:
7. Which costs relate to factory administration?
A. Selling costs
B. Distribution costs
C. Production overheads
D. Administrative overheads
Answer:
8. An example of a stepped cost is:
A. Direct materials
B. Rent increasing after every 500 units
C. Factory rent
D. Machine maintenance cost
Answer:
9. Which user is most interested in management accounting reports?
A. Bank
B. Tax authorities
C. Marketing manager
D. Shareholder
Answer:
10. Which of the following is a non-financial measure?
A. Profit
B. Sales revenue
C. Customer satisfaction score
D. Cost per unit
Answer:
**📌 PART 2 — Cost Classification, Concepts & Behaviour
(Q11–20)**
11. Direct labour is classified as:
A. Direct cost
B. Indirect cost
C. Fixed cost
D. Period cost
Answer:
12. A sunk cost is:
A. Avoidable
B. Future cost
C. Irrecoverable past cost
D. Decision-relevant
Answer:
13. Relevant costs are always:
A. Fixed
B. Historical
C. Future and avoidable
D. Overhead costs
Answer:
14. High-low method is used for:
A. Cost assignment
B. Cost estimation
C. Price determination
D. Inventory valuation
Answer:
15. Committed costs arise from:
A. Future decisions
B. Non-cancellable long-term contracts
C. Short-term variability
D. Direct labour use
Answer:
16. Opportunity cost is the:
A. Historical cost
B. Cost saved by choosing an option
C. Benefit lost by choosing one alternative over the next best
D. Future unavoidable cost
Answer:
17. Variable cost per unit:
A. Decreases as volume increases
B. Increases as volume increases
C. Remains constant per unit
D. Is always fixed in total
Answer:
18. A cost that changes in lumps is known as:
A. Variable cost
B. Stepped cost
C. Mixed cost
D. Fixed cost
Answer:
19. Mixed (semi-variable) cost consists of:
A. Only fixed cost
B. Only variable cost
C. Fixed + variable elements
D. Sunk costs only
Answer:
20. Product costs are included in:
A. Income statement only
B. Cost of goods sold and inventory
C. Capital expenditure
D. Distribution cost
Answer:
**📌 PART 3 — Cost Accounting Techniques
(Q21–25)**
21. EOQ helps in determining:
A. Safety stock
B. Minimum stock level
C. Optimal order quantity
D. Maximum stock level
Answer:
22. Under FIFO, issues are valued at:
A. Latest prices
B. Average costs
C. Oldest prices
D. Market value
Answer:
23. Idle time cost is treated as:
A. Direct labour
B. Indirect labour (overhead)
C. Selling cost
D. Product cost directly
Answer:
24. OAR (Overhead Absorption Rate) =
A. Budgeted overhead / Actual units
B. Actual overhead / Budgeted units
C. Budgeted overhead / Budgeted activity
D. Actual overhead / Actual activity
Answer:
25. Under-absorption of overheads occurs when:
A. Actual OH < Absorbed OH
B. Actual OH > Absorbed OH
C. Actual OH = Absorbed OH
D. No OH is incurred
Answer:
**📌 PART 4 — Job, Batch, Process & Service Costing
(Q26–40)**
26. Job costing is most suitable for:
A. Cement manufacturing
B. Hospital ward
C. Tailoring shop (custom orders)
D. Steel production
Answer:
27. A job cost sheet does NOT include:
A. Direct materials
B. Direct labour
C. Production overhead
D. Selling expenses
Answer:
28. In job costing, indirect materials are treated as:
A. Direct cost
B. Overheads
C. Selling cost
D. Administration cost
Answer:
29. Batch costing is typically used when:
A. Products are unique
B. Mass production occurs
C. Products are made in groups
D. Only services are provided
Answer:
30. The cost per unit in batch costing =
A. Total cost × Batch units
B. Total cost / Batch units
C. Variable cost only
D. Fixed cost only
Answer:
31. Process costing is suitable when production is:
A. Customised
B. Continuous and identical
C. Based on contracts
D. Seasonal
Answer:
32. Normal loss is:
A. Avoidable
B. Inefficient loss
C. Unavoidable loss
D. Always valued at selling price
Answer:
33. Abnormal loss is valued at:
A. Nil value
B. Scrap value
C. Cost per unit
D. Market price
Answer:
34. Abnormal gain occurs when:
A. Actual output < expected output
B. Actual output > expected output
C. Scrap value increases
D. Units are lost in transit
Answer:
35. Equivalent units represent:
A. Physical units
B. Completed units plus proportion of WIP
C. Material units only
D. Scrap units
Answer:
36. FIFO process costing assumes:
A. Opening WIP completed first
B. Closing WIP completed first
C. No opening inventory
D. Ending inventory is valued at opening costs
Answer:
37. AVCO (Weighted Average) process costing values units at:
A. Latest cost
B. First purchase cost
C. Weighted average cost
D. Market price
Answer:
38. Service costing uses which measure?
A. Units produced
B. Material consumed
C. Cost per service unit
D. Overhead absorption rate
Answer:
39. In a transport company, cost per service unit may be:
A. Cost per km
B. Cost per tonne produced
C. Cost per batch
D. Cost per contract
Answer:
40. Hospital costing is an example of:
A. Job costing
B. Batch costing
C. Service costing
D. Process costing
Answer:
**📌 PART 5 — Marginal & Absorption Costing
(Q41–50)**
41. Contribution =
A. Sales – Fixed cost
B. Sales – Variable cost
C. Fixed cost – Profit
D. Profit – Variable cost
Answer:
42. Break-even point (units) =
A. Fixed cost / Contribution per unit
B. Fixed + Variable cost
C. Profit / Margin of safety
D. Sales – Variable cost
Answer:
43. Margin of safety =
A. BEP – Actual sales
B. (Actual sales – BEP)
C. Sales – Cost
D. Profit / Contribution
Answer:
44. Under marginal costing, closing inventory is valued at:
A. Total cost
B. Variable production cost
C. Absorbed cost
D. Prime cost only
Answer:
45. Under absorption costing, fixed overheads are:
A. Treated as period cost
B. Ignored
C. Absorbed into product cost
D. Not included in valuation
Answer:
46. When production > sales, absorption costing profit is:
A. Equal to marginal costing
B. Higher than marginal costing
C. Lower than marginal costing
D. Always negative
Answer:
47. When sales > production, marginal costing profit is:
A. Higher than absorption costing
B. Lower than absorption costing
C. Same under both
D. Always zero
Answer:
48. CVP analysis assumes:
A. Variable cost per unit changes
B. Selling price fluctuates
C. Costs behave linearly
D. Fixed costs vary with production
Answer:
49. Multi-product BEP requires:
A. Weighted average contribution
B. FIFO valuation
C. Scrap value consideration
D. Idle time analysis
Answer:
50. Absorption costing difference with marginal costing arises due to:
A. Variable overhead
B. Fixed overhead absorption
C. Direct labour treatment
D. Material costing method
Answer:
**📌 PART 6 — Budgeting & Forecasting
(Q51–75)**
51. A budget is best defined as:
A. A long-term plan
B. A statement of actual results
C. A quantified plan of action for a period
D. A financial report for stakeholders
Answer:
52. Zero-based budgeting starts from:
A. Last year’s budget
B. Zero base and justifies each cost
C. Only fixed cost
D. Only variable cost
Answer:
53. Incremental budgeting:
A. Ignores past results
B. Adds incremental changes to prior budget
C. Is always more accurate
D. Requires zero justification
Answer:
54. A rolling budget is:
A. Adjusted every year
B. Updated continuously (monthly/quarterly)
C. Static for the period
D. Only for cash budgets
Answer:
55. The first budget to prepare in a master budget is usually:
A. Production budget
B. Cash budget
C. Sales budget
D. Overhead budget
Answer:
56. A functional budget includes:
A. Shareholders’ funds
B. Material, labour, and overhead budgets
C. Dividends payable
D. Variance report
Answer:
57. The production budget formula is:
A. Sales + Closing stock – Opening stock
B. Opening stock – Closing stock
C. Sales – Purchases
D. Closing stock / Opening stock
Answer:
58. Material purchase budget =
A. Sales – COGS
B. Required material + Closing stock – Opening stock
C. Opening stock – Closing stock
D. Material used × Selling price
Answer:
59. Labour hour requirement =
A. Labour rate × Total cost
B. Units × Labour hours per unit
C. Overhead absorption rate × Units
D. Material usage × Rate
Answer:
60. Cash budget includes:
A. Only credit sales
B. All income & expenditure whether cash or credit
C. Only cash inflows and outflows
D. Only profit-related items
Answer:
61. Non-cash expenses such as depreciation are:
A. Included in cash budget
B. Excluded from cash budget
C. Treated as cash outflows
D. Included only if asset sold
Answer:
62. Master budget does NOT include:
A. Budgeted income statement
B. Budgeted balance sheet
C. Budgeted cash flow
D. Actual performance report
Answer:
63. A fixed budget is prepared for:
A. A single level of activity
B. Multiple activity levels
C. Flexible operations
D. All departments
Answer:
64. A flexible budget adjusts for:
A. Capital structure
B. Changes in activity level
C. Market demand only
D. Depreciation adjustments
Answer:
65. Behavioural problems in budgeting can arise due to:
A. Too much working capital
B. Tight or unrealistic targets
C. Accurate forecasting
D. Use of flexible budgets
Answer:
66. Budgetary slack occurs when:
A. Managers set realistic targets
B. Managers intentionally underestimate revenue or overestimate costs
C. Targets are too aggressive
D. Zero-based budgeting is used
Answer:
67. Participation in budgeting generally leads to:
A. Lower motivation
B. Higher resistance
C. Greater ownership and motivation
D. Higher costs only
Answer:
68. A top-down budgeting approach means:
A. Lower management prepares the budget
B. Only cash budgets are used
C. Senior management imposes budgets
D. No communication occurs
Answer:
69. Which budget is influenced by production capacity?
A. Sales budget
B. Cash budget
C. Production budget
D. Fixed cost budget
Answer:
70. The principal budget factor (key factor) is:
A. Production cost
B. The limiting factor that restricts activity
C. Sales price
D. Labour efficiency
Answer:
71. If sales demand is the limiting factor, then the first budget prepared is:
A. Production budget
B. Labour budget
C. Sales budget
D. Overhead budget
Answer:
72. In a cash budget, credit sales are included when:
A. Sale is made
B. Cash is received
C. Invoice is raised
D. Profit is calculated
Answer:
73. The main purpose of a cash budget is to:
A. Prepare income statement
B. Control working capital and liquidity
C. Value closing inventory
D. Calculate net worth
Answer:
74. Controllable costs are:
A. Always fixed
B. Always variable
C. Costs that managers can influence
D. Never allocated
Answer:
75. The principal purpose of variance analysis is:
A. Prepare cash budget
B. Compare actual to budget
C. Calculate absorption rate
D. Determine EOQ
Answer:
**📌 PART 7 — Standard Costing & Variance Analysis
(Q76–90)**
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76. A standard cost is:
A. Actual cost
B. Estimated cost per unit for planning & control
C. Historical average
D. Minimum cost achievable
Answer:
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77. Ideal standards assume:
A. Normal inefficiencies
B. No wastage and perfect efficiency
C. Past performance
D. Market fluctuations
Answer:
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78. Material price variance is calculated as:
A. (Standard price – Actual price) × Actual quantity
B. (Standard quantity – Actual quantity) × Standard price
C. (Actual price – Standard price) × Standard quantity
D. Materials used × Actual price
Answer:
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79. Material usage variance =
A. (AQ × SP) – (SQ × SP)
B. (AP × AQ) – (SP × AQ)
C. (Actual cost – Standard cost)
D. (Standard price × Standard quantity)
Answer
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80. Labour rate variance =
A. (Standard rate – Actual rate) × Standard hours
B. (Actual hours – Standard hours) × Standard rate
C. (Standard rate – Actual rate) × Actual hours
D. Actual hours × Standard hours
Answer:
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81. Labour efficiency variance =
A. (SH – AH) × SR
B. (AR – SR) × AH
C. (AQ – SQ) × SP
D. (Actual rate – Standard rate) × SH
Answer:
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82. Variable overhead efficiency variance uses:
A. Hours
B. Units
C. Production cost
D. Selling price
Answer:
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83. A favourable variance means:
A. Actual cost > Standard cost
B. Actual revenue < Standard revenue
C. Actual performance better than expected
D. Budget was unrealistic
Answer:
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84. If actual price > standard price, material price variance is:
A. Favourable
B. Adverse
C. Zero
D. Cannot be computed
Answer:
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85. Sales price variance =
A. (Actual price – Standard price) × Actual units
B. (Standard price – Actual price) × Standard units
C. (Actual units – Standard units) × SP
D. (Sales revenue – COGS)
Answer:
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86. Sales volume variance =
A. (Actual units – Budgeted units) × Standard profit per unit
B. (Actual price – Standard price) × Actual units
C. (AQ – SQ) × SP
D. (SH – AH) × SR
Answer:
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87. Mix variance is used in:
A. Labour
B. Materials
C. Overheads
D. Selling expenses
Answer:
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88. Yield variance measures:
A. Loss due to material mix
B. Output obtained vs expected
C. Price change impact
D. Labour efficiency
Answer:
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89. An adverse variance indicates:
A. Performance is better
B. Costs are lower
C. Actual results worse than expected
D. Budget was unnecessary
Answer:
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90. Revision of standards is required when:
A. There is no inflation
B. Environment is stable
C. Machinery or processes change significantly
D. Variances are zero
Answer:
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**📌 PART 8 — Performance Measurement
(Q91–97)**
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91. ROI =
A. Sales / Profit
B. Profit / Capital employed
C. Profit margin × Asset turnover
D. B + C
Answer:
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92. ROCE measures:
A. Efficiency of labour
B. Return on long-term capital
C. Sales efficiency
D. Liquidity
Answer:
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93. A limitation of ROI is:
A. Easy to calculate
B. Encourages short-term decision making
C. Ignores profitability
D. Always increases with investment
Answer:
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94. Productivity is measured as:
A. Output / Input
B. Profit / Cost
C. Sales / Overheads
D. Output × Input
Answer:
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95. A non-financial performance indicator is:
A. Return on assets
B. Net profit margin
C. Customer satisfaction score
D. Gross margin
Answer:
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96. Quality performance can be measured using:
A. Profit margin
B. Scrap rate
C. Sales revenue
D. ROCE
Answer:
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97. A limitation of financial indicators is:
A. Easy to measure
B. Short-term focus and ignores qualitative factors
C. Widely used
D. Comparable across firms
Answer:
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**📌 PART 9 — Spreadsheets in Management Accounting
(Q98–100)**
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98. Cell referencing “A1” refers to:
A. The entire sheet
B. Column A, Row 1
C. Column 1, Row A
D. A formula
Answer:
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99. The function to calculate average in a spreadsheet is:
A. =SUM()
B. =COUNT()
C. =AVG()
D. =AVERAGE()
Answer:
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100. A risk of spreadsheet use is:
A. Automatic error checking
B. Easy sharing
C. Manual input errors leading to incorrect results
D. Reduced flexibility
Answer:
www.gmsisuccess.in
Answers:
Management Accounting
100 MCQs with Answers (Set 1: Q1–25)**
**📌 PART 1 — Nature, Source & Purpose of Management Information
(Q1–10)**
1. Management accounting primarily provides information for:
A. Shareholders
B. External regulators
C. Internal managers
D. Government agencies
Answer: C
2. Financial accounting information is usually:
A. Forward-looking
B. For internal decision-making
C. Mandatory for statutory reporting
D. Non-monetary
Answer: C
3. Which of the following is qualitative information?
A. Profit margin
B. Machine efficiency %
C. Customer feedback
D. Cash balance
Answer: C
4. Data becomes information when it is:
A. Recorded
B. Stored
C. Processed and made meaningful
D. Collected in raw form
Answer: C
5. Salary of factory supervisors is a:
A. Direct cost
B. Indirect production cost
C. Administrative cost
D. Selling cost
Answer: B
6. Electricity that increases with production volume is:
A. Fixed cost
B. Stepped cost
C. Variable cost
D. Period cost
Answer: C
7. Which costs relate to factory administration?
A. Selling costs
B. Distribution costs
C. Production overheads
D. Administrative overheads
Answer: C
8. An example of a stepped cost is:
A. Direct materials
B. Rent increasing after every 500 units
C. Factory rent
D. Machine maintenance cost
Answer: B
9. Which user is most interested in management accounting reports?
A. Bank
B. Tax authorities
C. Marketing manager
D. Shareholder
Answer: C
10. Which of the following is a non-financial measure?
A. Profit
B. Sales revenue
C. Customer satisfaction score
D. Cost per unit
Answer: C
**📌 PART 2 — Cost Classification, Concepts & Behaviour
(Q11–20)**
11. Direct labour is classified as:
A. Direct cost
B. Indirect cost
C. Fixed cost
D. Period cost
Answer: A
12. A sunk cost is:
A. Avoidable
B. Future cost
C. Irrecoverable past cost
D. Decision-relevant
Answer: C
13. Relevant costs are always:
A. Fixed
B. Historical
C. Future and avoidable
D. Overhead costs
Answer: C
14. High-low method is used for:
A. Cost assignment
B. Cost estimation
C. Price determination
D. Inventory valuation
Answer: B
15. Committed costs arise from:
A. Future decisions
B. Non-cancellable long-term contracts
C. Short-term variability
D. Direct labour use
Answer: B
16. Opportunity cost is the:
A. Historical cost
B. Cost saved by choosing an option
C. Benefit lost by choosing one alternative over the next best
D. Future unavoidable cost
Answer: C
17. Variable cost per unit:
A. Decreases as volume increases
B. Increases as volume increases
C. Remains constant per unit
D. Is always fixed in total
Answer: C
18. A cost that changes in lumps is known as:
A. Variable cost
B. Stepped cost
C. Mixed cost
D. Fixed cost
Answer: B
19. Mixed (semi-variable) cost consists of:
A. Only fixed cost
B. Only variable cost
C. Fixed + variable elements
D. Sunk costs only
Answer: C
20. Product costs are included in:
A. Income statement only
B. Cost of goods sold and inventory
C. Capital expenditure
D. Distribution cost
Answer: B
**📌 PART 3 — Cost Accounting Techniques
(Q21–25)**
21. EOQ helps in determining:
A. Safety stock
B. Minimum stock level
C. Optimal order quantity
D. Maximum stock level
Answer: C
22. Under FIFO, issues are valued at:
A. Latest prices
B. Average costs
C. Oldest prices
D. Market value
Answer: C
23. Idle time cost is treated as:
A. Direct labour
B. Indirect labour (overhead)
C. Selling cost
D. Product cost directly
Answer: B
24. OAR (Overhead Absorption Rate) =
A. Budgeted overhead / Actual units
B. Actual overhead / Budgeted units
C. Budgeted overhead / Budgeted activity
D. Actual overhead / Actual activity
Answer: C
25. Under-absorption of overheads occurs when:
A. Actual OH < Absorbed OH
B. Actual OH > Absorbed OH
C. Actual OH = Absorbed OH
D. No OH is incurred
Answer: B
✅ Management Accounting
MCQs with Answers (Set 2: Q26–50)**
**📌 PART 4 — Job, Batch, Process & Service Costing
(Q26–40)**
26. Job costing is most suitable for:
A. Cement manufacturing
B. Hospital ward
C. Tailoring shop (custom orders)
D. Steel production
Answer: C
27. A job cost sheet does NOT include:
A. Direct materials
B. Direct labour
C. Production overhead
D. Selling expenses
Answer: D
28. In job costing, indirect materials are treated as:
A. Direct cost
B. Overheads
C. Selling cost
D. Administration cost
Answer: B
29. Batch costing is typically used when:
A. Products are unique
B. Mass production occurs
C. Products are made in groups
D. Only services are provided
Answer: C
30. The cost per unit in batch costing =
A. Total cost × Batch units
B. Total cost / Batch units
C. Variable cost only
D. Fixed cost only
Answer: B
31. Process costing is suitable when production is:
A. Customised
B. Continuous and identical
C. Based on contracts
D. Seasonal
Answer: B
32. Normal loss is:
A. Avoidable
B. Inefficient loss
C. Unavoidable loss
D. Always valued at selling price
Answer: C
33. Abnormal loss is valued at:
A. Nil value
B. Scrap value
C. Cost per unit
D. Market price
Answer: C
34. Abnormal gain occurs when:
A. Actual output < expected output
B. Actual output > expected output
C. Scrap value increases
D. Units are lost in transit
Answer: B
35. Equivalent units represent:
A. Physical units
B. Completed units plus proportion of WIP
C. Material units only
D. Scrap units
Answer: B
36. FIFO process costing assumes:
A. Opening WIP completed first
B. Closing WIP completed first
C. No opening inventory
D. Ending inventory is valued at opening costs
Answer: A
37. AVCO (Weighted Average) process costing values units at:
A. Latest cost
B. First purchase cost
C. Weighted average cost
D. Market price
Answer: C
38. Service costing uses which measure?
A. Units produced
B. Material consumed
C. Cost per service unit
D. Overhead absorption rate
Answer: C
39. In a transport company, cost per service unit may be:
A. Cost per km
B. Cost per tonne produced
C. Cost per batch
D. Cost per contract
Answer: A
40. Hospital costing is an example of:
A. Job costing
B. Batch costing
C. Service costing
D. Process costing
Answer: C
**📌 PART 5 — Marginal & Absorption Costing
(Q41–50)**
41. Contribution =
A. Sales – Fixed cost
B. Sales – Variable cost
C. Fixed cost – Profit
D. Profit – Variable cost
Answer: B
42. Break-even point (units) =
A. Fixed cost / Contribution per unit
B. Fixed + Variable cost
C. Profit / Margin of safety
D. Sales – Variable cost
Answer: A
43. Margin of safety =
A. BEP – Actual sales
B. (Actual sales – BEP)
C. Sales – Cost
D. Profit / Contribution
Answer: B
44. Under marginal costing, closing inventory is valued at:
A. Total cost
B. Variable production cost
C. Absorbed cost
D. Prime cost only
Answer: B
45. Under absorption costing, fixed overheads are:
A. Treated as period cost
B. Ignored
C. Absorbed into product cost
D. Not included in valuation
Answer: C
46. When production > sales, absorption costing profit is:
A. Equal to marginal costing
B. Higher than marginal costing
C. Lower than marginal costing
D. Always negative
Answer: B
47. When sales > production, marginal costing profit is:
A. Higher than absorption costing
B. Lower than absorption costing
C. Same under both
D. Always zero
Answer: A
48. CVP analysis assumes:
A. Variable cost per unit changes
B. Selling price fluctuates
C. Costs behave linearly
D. Fixed costs vary with production
Answer: C
49. Multi-product BEP requires:
A. Weighted average contribution
B. FIFO valuation
C. Scrap value consideration
D. Idle time analysis
Answer: A
50. Absorption costing difference with marginal costing arises due to:
A. Variable overhead
B. Fixed overhead absorption
C. Direct labour treatment
D. Material costing method
Answer: B
✅ Management Accounting
MCQs with Answers (Set 3: Q51–75)**
**📌 PART 6 — Budgeting & Forecasting
(Q51–75)**
51. A budget is best defined as:
A. A long-term plan
B. A statement of actual results
C. A quantified plan of action for a period
D. A financial report for stakeholders
Answer: C
52. Zero-based budgeting starts from:
A. Last year’s budget
B. Zero base and justifies each cost
C. Only fixed cost
D. Only variable cost
Answer: B
53. Incremental budgeting:
A. Ignores past results
B. Adds incremental changes to prior budget
C. Is always more accurate
D. Requires zero justification
Answer: B
54. A rolling budget is:
A. Adjusted every year
B. Updated continuously (monthly/quarterly)
C. Static for the period
D. Only for cash budgets
Answer: B
55. The first budget to prepare in a master budget is usually:
A. Production budget
B. Cash budget
C. Sales budget
D. Overhead budget
Answer: C
56. A functional budget includes:
A. Shareholders’ funds
B. Material, labour, and overhead budgets
C. Dividends payable
D. Variance report
Answer: B
57. The production budget formula is:
A. Sales + Closing stock – Opening stock
B. Opening stock – Closing stock
C. Sales – Purchases
D. Closing stock / Opening stock
Answer: A
58. Material purchase budget =
A. Sales – COGS
B. Required material + Closing stock – Opening stock
C. Opening stock – Closing stock
D. Material used × Selling price
Answer: B
59. Labour hour requirement =
A. Labour rate × Total cost
B. Units × Labour hours per unit
C. Overhead absorption rate × Units
D. Material usage × Rate
Answer: B
60. Cash budget includes:
A. Only credit sales
B. All income & expenditure whether cash or credit
C. Only cash inflows and outflows
D. Only profit-related items
Answer: C
61. Non-cash expenses such as depreciation are:
A. Included in cash budget
B. Excluded from cash budget
C. Treated as cash outflows
D. Included only if asset sold
Answer: B
62. Master budget does NOT include:
A. Budgeted income statement
B. Budgeted balance sheet
C. Budgeted cash flow
D. Actual performance report
Answer: D
63. A fixed budget is prepared for:
A. A single level of activity
B. Multiple activity levels
C. Flexible operations
D. All departments
Answer: A
64. A flexible budget adjusts for:
A. Capital structure
B. Changes in activity level
C. Market demand only
D. Depreciation adjustments
Answer: B
65. Behavioural problems in budgeting can arise due to:
A. Too much working capital
B. Tight or unrealistic targets
C. Accurate forecasting
D. Use of flexible budgets
Answer: B
66. Budgetary slack occurs when:
A. Managers set realistic targets
B. Managers intentionally underestimate revenue or overestimate costs
C. Targets are too aggressive
D. Zero-based budgeting is used
Answer: B
67. Participation in budgeting generally leads to:
A. Lower motivation
B. Higher resistance
C. Greater ownership and motivation
D. Higher costs only
Answer: C
68. A top-down budgeting approach means:
A. Lower management prepares the budget
B. Only cash budgets are used
C. Senior management imposes budgets
D. No communication occurs
Answer: C
69. Which budget is influenced by production capacity?
A. Sales budget
B. Cash budget
C. Production budget
D. Fixed cost budget
Answer: C
70. The principal budget factor (key factor) is:
A. Production cost
B. The limiting factor that restricts activity
C. Sales price
D. Labour efficiency
Answer: B
71. If sales demand is the limiting factor, then the first budget prepared is:
A. Production budget
B. Labour budget
C. Sales budget
D. Overhead budget
Answer: C
72. In a cash budget, credit sales are included when:
A. Sale is made
B. Cash is received
C. Invoice is raised
D. Profit is calculated
Answer: B
73. The main purpose of a cash budget is to:
A. Prepare income statement
B. Control working capital and liquidity
C. Value closing inventory
D. Calculate net worth
Answer: B
74. Controllable costs are:
A. Always fixed
B. Always variable
C. Costs that managers can influence
D. Never allocated
Answer: C
75. The principal purpose of variance analysis is:
A. Prepare cash budget
B. Compare actual to budget
C. Calculate absorption rate
D. Determine EOQ
Answer: B
✅ Management Accounting
MCQs with Answers (Set 4: Q76–100)**
**📌 PART 7 — Standard Costing & Variance Analysis
(Q76–90)**
76. A standard cost is:
A. Actual cost
B. Estimated cost per unit for planning & control
C. Historical average
D. Minimum cost achievable
Answer: B
77. Ideal standards assume:
A. Normal inefficiencies
B. No wastage and perfect efficiency
C. Past performance
D. Market fluctuations
Answer: B
78. Material price variance is calculated as:
A. (Standard price – Actual price) × Actual quantity
B. (Standard quantity – Actual quantity) × Standard price
C. (Actual price – Standard price) × Standard quantity
D. Materials used × Actual price
Answer: A
79. Material usage variance =
A. (AQ × SP) – (SQ × SP)
B. (AP × AQ) – (SP × AQ)
C. (Actual cost – Standard cost)
D. (Standard price × Standard quantity)
Answer: A (Note: AQ-SQ) × SP
80. Labour rate variance =
A. (Standard rate – Actual rate) × Standard hours
B. (Actual hours – Standard hours) × Standard rate
C. (Standard rate – Actual rate) × Actual hours
D. Actual hours × Standard hours
Answer: C
81. Labour efficiency variance =
A. (SH – AH) × SR
B. (AR – SR) × AH
C. (AQ – SQ) × SP
D. (Actual rate – Standard rate) × SH
Answer: A
82. Variable overhead efficiency variance uses:
A. Hours
B. Units
C. Production cost
D. Selling price
Answer: A
83. A favourable variance means:
A. Actual cost > Standard cost
B. Actual revenue < Standard revenue
C. Actual performance better than expected
D. Budget was unrealistic
Answer: C
84. If actual price > standard price, material price variance is:
A. Favourable
B. Adverse
C. Zero
D. Cannot be computed
Answer: B
85. Sales price variance =
A. (Actual price – Standard price) × Actual units
B. (Standard price – Actual price) × Standard units
C. (Actual units – Standard units) × SP
D. (Sales revenue – COGS)
Answer: A
86. Sales volume variance =
A. (Actual units – Budgeted units) × Standard profit per unit
B. (Actual price – Standard price) × Actual units
C. (AQ – SQ) × SP
D. (SH – AH) × SR
Answer: A
87. Mix variance is used in:
A. Labour
B. Materials
C. Overheads
D. Selling expenses
Answer: B
88. Yield variance measures:
A. Loss due to material mix
B. Output obtained vs expected
C. Price change impact
D. Labour efficiency
Answer: B
89. An adverse variance indicates:
A. Performance is better
B. Costs are lower
C. Actual results worse than expected
D. Budget was unnecessary
Answer: C
90. Revision of standards is required when:
A. There is no inflation
B. Environment is stable
C. Machinery or processes change significantly
D. Variances are zero
Answer: C
**📌 PART 8 — Performance Measurement
(Q91–97)**
91. ROI =
A. Sales / Profit
B. Profit / Capital employed
C. Profit margin × Asset turnover
D. B + C
Answer: D
92. ROCE measures:
A. Efficiency of labour
B. Return on long-term capital
C. Sales efficiency
D. Liquidity
Answer: B
93. A limitation of ROI is:
A. Easy to calculate
B. Encourages short-term decision making
C. Ignores profitability
D. Always increases with investment
Answer: B
94. Productivity is measured as:
A. Output / Input
B. Profit / Cost
C. Sales / Overheads
D. Output × Input
Answer: A
95. A non-financial performance indicator is:
A. Return on assets
B. Net profit margin
C. Customer satisfaction score
D. Gross margin
Answer: C
96. Quality performance can be measured using:
A. Profit margin
B. Scrap rate
C. Sales revenue
D. ROCE
Answer: B
97. A limitation of financial indicators is:
A. Easy to measure
B. Short-term focus and ignores qualitative factors
C. Widely used
D. Comparable across firms
Answer: B
**📌 PART 9 — Spreadsheets in Management Accounting
(Q98–100)**
98. Cell referencing “A1” refers to:
A. The entire sheet
B. Column A, Row 1
C. Column 1, Row A
D. A formula
Answer: B
99. The function to calculate average in a spreadsheet is:
A. =SUM()
B. =COUNT()
C. =AVG()
D. =AVERAGE()
Answer: D
100. A risk of spreadsheet use is:
A. Automatic error checking
B. Easy sharing
C. Manual input errors leading to incorrect results
D. Reduced flexibility
Answer: C
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