SIKKIM MANIPAL UNIVERSITY - DDE

Bachelor of Business Administration BBA Semester 4

BBA 402 Management Accounting 4 Credits
(Book Id B1713)
Model Question Paper
Duration: 2 hours

Total marks: 140

_____________________________________________________________________________
Part A (1 Mark questions)

(50 * 1 = 50 marks)

1. ___________ sets the targets for each individual, reviews their working and points out
their effectiveness and inefficiencies.
A) Responsibility accounting
B) Ratio Analysis
C) Cost Accounting
D) Cause and effect analysis

2. If the ________ ratio of the company is more than that of other companies, it is worth
investing.
A) Dividend yield
B) Earnings per share
C) Dividend payout
D) Return on Investment

3. The finished products, when sold on credit, get converted into ________.
A) Short-term funds
B) Sundry creditors
C) Sundry debtors
D) Circulating capital

4. _____________ is a method of budgeting income earned and adjusting some part of the
budget downwards for each part that should be adjusted upwards.

A) Zero-base budgeting
B) Performance budgeting
C) Labour budgeting
D) Cash budgeting

5. Ratio analysis helps to compare items found in ____________ with other items with the
aim of analysing the financial state of a business.
A) Budget report
B) Database
C) Inventory
D) Financial statements

6. In which of the following policy, a company can use short-term financing to obtain funds
for a part of its permanent current assets.
A) Dividend policy
B) Credit policy
C) Conservative policy
D) Aggressive policy

7. ___________ ratio portrays the long-term solvency, that is, long-term financial position
of a business and are useful to the long-term creditors, owners and the management?
A) Capital structure ratio
B) Turnover ratio
C) Profitability ratio
D) Coverage ratio

8. In _____________________, managers justify only the differences compared to the

previous years assuming that the "baseline" is approved.
A) Zero-base budgeting
B) Traditional budgeting
C) Performance budgeting

D) Conventional budgeting

9. Which among the following are the objectives of management accounting?

A) Documenting a company's financial transactions.
B) Keeping a record of company's financial growth.
C) Ascertaining cost and profitability and controlling cost
D) Analysing financial statements to enable management to formulate future policies

10. Which of the following budget is prepared after sales budget?

A) Flexible budget
B) Purchase budget
C) Production budget
D) Master budget

11. Which of the following approaches does a company follow when it uses more short-term
financing?
A) Aggressive approach
B) Matching approach
C) Conservative approach
D) Decision theory approach

12. ____________ ratio measures the real rate of return on shares.

A) Dividend payout
B) Operating cost ratio
C) Dividend yield
D) Return on capital employed

13. ________ refers to that part of total working capital which is required by a business over
and above permanent working capital.
A) Permanent working capital
B) Zero working capital

C) Temporary working capital

D) Net working capital

14. Which among the following provides information to outsiders such as shareholders,
debenture holders, creditors and bankers?
A) Tax accounting
B) Management accounting
C) Financial accounting
D) Project accounting

15. Which among the following is the correct calculation of budgeted production?
A) Estimated sales + estimated closing stock - estimated opening stock
B) Estimated sales - estimated closing stock + estimated opening stock
C) Estimated opening stock + estimated closing stock - estimated production
D) Estimated opening stock + estimated closing stock - estimated purchase

16. Which of the following has failed to communicate proper information to the
management?
A) Cost accounting
B) Financial accounting
C) Management accounting
D) Project accounting

17. Which among the following options summarises the sources and uses of working capital?
A) Funds flow statement
B) Income statement
C) Marginal cost statement
D) Cash flow statement

18. Which among the following deals with the operation of the business as a whole in terms
of revenue and expenditure and hence considered extensive?
A) Budgetary control
B) Standard costing
C) Historical costing
D) Variance analysis

19. The _____________ department ascertains the quality of the material by referring to
historic records.
A) Marketing
B) Purchase
C) Production
D) Logistics

20. __________ is an application of fund.

A) Redemption of debentures
B) Issue of shares
C) Issue of debentures
D) Borrowing of loans

21. _____________ can rearrange the firm's financing more effectively on the basis of
information received from fund flow statement.
A) Production manager
B) Marketing manager
C) Finance manager
D) Sales manager

22. One of the preliminaries of standard costing is ________________________.

A) Ascertaining overhead
B) Constituting a standard committee
C) Calculating rate

D) Ascertaining labour hours

23. Which among the following options is a classification of fixed overhead volume
variance?
A) Yield variance
B) Rate of pay variance
C) Idle time variance
D) Calendar variance

24. Which among the following options is an example of controllable variances?

A) Change in market price
B) Excess usage of materials
C) Government restrictions
D) Wage rate increased due to strike

25. Which among the following variances is calculated on the basis of time expended?
A) Standard cost
B) Historical cost
C) Labour cost
D) Material cost

26. Transactions that increase the cash position of the entity are called ____________.
A) Cash inflows
B) Cash outflows
C) Reserve fund
D) Deposits

27. Which among the following are the limitations of Cash flow statement?
A) Not a substitute for an income statement
B) No controversies over the term 'Cash'
C) Non-cash transaction are included

D) Considers the accrual concept

28. Which among the following is a cash inflow from investing activity?
A) Cash payments to acquire shares.
B) Cash proceeds from issuing shares.
C) Cash receipts from the repayment of advances and loans made to third parties.
D) Cash repayments of amounts borrowed and redemption of debentures.

29. The payback reciprocal is a helpful tool for quickly estimating the rate of return of a
project provided its life is _____________ the payback period.
A) At least four times
B) At least once
C) At least thrice
D) At least twice

30. Decisions that involve planning for an activity like installing machinery or setting up a
factory can be termed as ______________.
A) Capital budgeting
B) Expense budgeting
C) Revenue budgeting
D) Cash budgeting

31. Which among the following is the method to calculate the period within which the total
cash inflows from the project equal the cost of project?
A) Discounted cash flows
B) Average Rate of Return (ARR)
C) Payback reciprocal
D) Payback period

32. In this form of dividend the directors decide to pay between two annual general meetings.
A) Interim dividend

B) Regular dividend
C) Stock dividend
D) Scrip dividend

33. __________________ states that a company's dividend policy has no direct impact on the
cost of its capital or value.
A) Property Dividend
B) The Residual Dividend Policy
C) The Optimal Dividend Policy
D) The Dividend Irrelevance Theory
34. In fund flow statement the term 'Fund refers to ____________ and flow refers to
movement.
A) Debt capital
B) Working capital
C) Equity capital
D) Long-term capital

35. _______________ is suitable only for short term assessment of profitability.

A) Absorption costing
B) Standard costing
C) Total costing
D) Marginal costing

36. The relation of contribution to sales is called ______________.

A) Profit volume ratio
B) Gross profit ratio
C) Net profit ratio
D) Current ratio

37. Which centre among the following accounts for inputs in terms of costs, outputs in terms
of revenues and assets used in terms of their values?
A) Investment centre
B) Profit centre
C) Cost centre
D) Expense centre

38. In ___________________, the profit per unit is affected by the actual volume of
production in any period.
A) Absorption costing
B) Direct costing
C) Variable costing
D) Marginal costing

39. Which among the following options is equal to total sales minus the sales at breakeven
point?
A) Total revenue
B) Total cost
C) Margin of safety
D) Standard cost

40. Which among the following options calculates and records the interviewing, selecting,
training and development costs of employees?
A) Human resource accounting
B) Inflation accounting
C) Financial accounting
D) Responsibility accounting

41. Fixed cost is also known as _______________.

A) Marginal cost
B) Product cost

C) Period cost
D) Standard cost

42. Which among the following ratios is used when the business is dealing with a range of
products and breakeven has to be found out for each product?
A) Profit volume ratio
B) Net profit ratio
C) Gross profit ratio
D) Operating ratio

43. Financial accounts do not consider the effect of the increase in the prices of assets and
output as they are kept on ____________ basis.
A) Estimated cost
B) Standard cost
C) Historical cost
D) Material cost

44. Marginal cost is equal to _____________________.

A) Total cost minus fixed cost
B) Total cost minus variable cost
C) Total cost plus fixed cost
D) Total cost plus period cost

45. Which among the following options refers to personnel who do not have access to the
books of accounts?
A) Financial planner
B) Auditor
C) Creditors
D) Cost accountant

46. _______________ is also known as final dividend because it is usually paid after
finalisation of accounts.
A) Stock dividend
B) Regular dividend
C) Interim dividend
D) Bond dividend

47. Standard costing is applicable to industries that deal in __________________ products.

A) Standardised
B) Semi-manufactured
C) Customer-specific
D) Feature-based

48. Splitting up or regrouping of the figures found in the financial statements in to the desired
homogeneous component parts is known as ___________________.
A) Analysis of the component parts
B) Comparison of the component parts
C) Interpretation of component parts
D) Preparation of organisation chart

49. The size of ____________ variance reflects the degree of efficiency of the person or
department concerned.
A) Controllable
B) Uncontrollable
C) Favourable
D) Unfavourable

50. Which among the following options is the objectives of financial analysis?
A) To indicate the trend of achievements
B) To measure the variances and control of cost
C) Ascertainment of cost

D) Determination of selling price

Part B (Two marks questions)

(25*2 = 50 marks)

51. Consider the below mentioned statements:

1.

Mere financial data is sufficient for effective managerial decision making and
control.

2.

Management accounting does not follow set principles like the double-entry
system.

State true or false:

A) 1-True, 2-True
B) 1-False, 2-True
C) 1-False, 2-False
D) 1-True, 2-False

52. Consider the below mentioned statements:

1. Trade credit is an example of spontaneous financing.
2. The real choice of financing current assets, once the spontaneous sources of financing
have been fully utilised is between long-term and short-term sources.
State true or false
A) 1-False, 2-False
B) 1-True, 2-True
C) 1-True, 2-False
D) 1-False, 2-True

53. The manager can deduce the reasons for the Imbalances in uses of _____________ in the
________ and take necessary corrective actions.
1. Past
2. Present
3. Cash

4. Funds
A) Option 1 & 2
B) Option 2 & 3
C) Option 3 & 4
D) Option 1 & 4

54. Consider the below mentioned statements:

1. Ratios help to judge the efficiency of an organisation only when they are compared
with the previous results.
2. Ratios act as only an indicator and can be considered as final for knowing the good or
bad financial position of an organisation.
State true or false:
A) 1-True, 2-True
B) 1-False, 2-False
C) 1-True, 2-False
D) 1-False, 2-True

55. Which among the following options is an advantage of budgetary control?

1. Tool for communication with the outside world
2. Tool for measuring performance
3. Instrument for allocation of resources
4. Enables systematic planning of expenditure
A) Options 1 & 2
B) Options 1 & 3
C) Options 2 & 4
D) Options 2 & 3

56. Consider the below mentioned statements:

1. A manufacturing concern requires lower working capital than a trading concern.
2. In case of a highly automated plant, the requirements of long-term funds would be
greater.

State true or false:

A) 1-True, 2-True
B) 1-False, 2-False
C) 1-True, 2-False
D) 1-False, 2-True

57. Applications

of

fund

flow

statement

include

___________________

and

___________________
1. Acceptance of deposits
2. Repayment of deposits
3. Purchase of fixed assets
4. Sale of fixed assets
A) Option 1 & 2
B) Option 2 & 3
C) Option 3 & 4
D) Option 1 & 4

58. Consider the below mentioned statements:

1. Financial accounting has failed to communicate proper information to management.
2. Cost accounting, with its emphasis on costs and revenues, has been very helpful to
management
State true or false:
A) 1-True, 2-True
B) 1-False, 2-True
C) 1-False, 2-False
D) 1-True, 2-False

59. Purchase budget is based on the ____________ and ____________ budget.

A) Purchase, Capital requirements
B) Production, Material requirements
C) Sales, Material requirements

D) Customer needs, capital requirements

60. ________ and ________

are compared with each other to know the ability of an

organisation to meet its short-term responsibilities.

A) Current assets, Current liabilities
B) Budgetary statement, Financial statement
C) Stock-in-trade, Sales
D) Gross profit, Estimated profit

61. Consider the below mentioned statements:

1. Standard costing is a tool established by authorities for evaluating performance.
2. In budgetary control, standard cost is compared with marginal cost.
State true or false:
A) 1-True, 2-True
B) 1-False, 2-True
C) 1-False, 2-False
D) 1-True, 2-False

62. The cost price of material comprises _______________ and _______________.

1. Ordering cost
2. Carrying cost
3. Standard cost
4. Estimated cost
A) Options 1 & 3
B) Options 1 & 2
C) Options 2 & 4
D) Options 2 & 3

63. Depending on the actual resulting cost, variances can be classified as ________________
and ___________________.
1. Favourable

2. Controllable
3. Unfavourable
4. Uncontrollable
A) Options 1 & 3
B) Options 3 & 4
C) Options 1 & 4
D) Options 2 & 4

64. Total sales margin variance is equal to _______________________ minus _____________.

1. Actual margin
2. Total actual margin
3. Standard rate of margin per unit
4. Total budgeted margin
A) Options 1 & 2
B) Options 1 & 3
C) Options 2 & 4
D) Options 2 & 3

65. Which among the following are cash outflows from operating activities?
1. Cash payments relating to futures contracts, forward contracts, option contracts and
swap contracts.
2. Cash payments to acquire shares, warrants or debt instruments of other enterprises.
3. Cash payments of an insurance enterprise for claims, annuities and other policy
benefits.
4. Cash receipts from collecting principal amount of loans made to third parties.
A) Options 1 & 3
B) Options 1 & 4
C) Options 1 & 2
D) Options 2 & 3

66. Which among the following are the accept- reject rule in IRR method?

1. IRR > cost of capital, accept the project

2. IRR < cost of capital, accept the project
3. IRR < cost of capital, reject the project
4. IRR > cost of capital, reject the project
A) Options 2 & 4
B) Options 1 & 2
C) Options 3 & 4
D) Options 1 & 3

67. Capital budgeting process includes four interrelated steps such as _________, evaluation,
selection and _________ that are used to evaluate and select long-term proposals.
A) Proposal generation, Follow-up
B) Analysis, Rejection
C) Research, Suggestion
D) Expansion, Implementation

68. Which among the following are the factors that influence a company in the formulation of
dividend policy?
1. Expansion of new business
2. Obtaining finance
3. Effect on market prices
4. Level of inflation in the economy
A) Options 3 & 4
B) Options 2 & 3
C) Options 1 & 4
D) Options 1 & 2

69. Consider the below mentioned statements.

1. As per Irrelevance Theory, the value of shares is positively correlated with
size of the dividend.

2. Dividend Capitalisation Theory places importance on earnings of a firm and

not on how they are divided or split between dividend and retained earnings.
State true or false:
A) 1-False, 2-False
B) 1-True, 2-True
C) 1- False, 2- True
D) 1- True, 2- False

70. Consider the below mentioned statements:

1. Marginal costing is a separate division of costing.
2. Marginal costs fluctuate from time to time irrespective of the volume of production.
State true or false:
A) 1-True, 2-True
B) 1-False, 2-False
C) 1-True, 2-False
D) 1-False, 2-True

71. Consider the below mentioned statements:

1. In marginal costing, absorption cost varies directly with the volume of production or
output.
2. If cost behaviour is related to purchase, it shows cost-volume-profit relationship.
State true or false:
A) 1-True, 2-True
B) 1-False, 2-False
C) 1-True, 2-False
D) 1-False, 2-True

72. Which options among the following are the problems in responsibility accounting?
1. Inter-departmental conflicts
2. Variations in the price level
3. Too many conversion and calculations

4. Overload of information
A) Options 1 & 2
B) Options 2 & 3
C) Options 1 & 4
D) Options 3 & 4

73. Which among the following options are the features that distinguish marginal costing from
absorption costing?
1. Value of closing stock
2. Over- and under-absorbed overheads
3. Difference in stock valuation
4. Volume of production
A) Options 1 & 2
B) Options 2 & 3
C) Options 1 & 4
D) Options 3 & 4

74. Consider the below mentioned statements:

1. CVP analysis determines breakeven point.
2. Margin of safety chooses the best promotion and sales mix.
State true or false:
A) 1-True, 2-True
B) 1-False, 2-True
C) 1-False, 2-False
D) 1-True, 2-False

75. Consider the below mentioned statements:

1. Increase in reserves created out of profits indicates the increased financial strength of
the company.
2. Reserves and secured loans are treated as assets.
State true or false:

A) 1-True, 2-True
B) 1-False, 2-True
C) 1-False, 2-False
D) 1-True, 2-False

Part C (Descriptive questions)

(4*10 = 40 marks)

1. A) Explain the importance and need for management accounting. [5 marks]

B) Mention the steps involved in budgetary control. [5 marks]

2. A) Differentiate between budgetary control and standard costing. [5 marks]

B) What are the different types of variances? Explain. [5 marks]

3. A) Briefly explain the different types of accounting ratios. [5 marks]

B) Explain the different kinds of working capital. [5 marks]

4. A) Explain the procedure for preparing fund flow statement. [5 marks]

B) Explain the major uses and limitations of cash flow statement. [5 marks]