Question Bank

Strategic Cost management SYBMS Sem IV

Sr. No. Particular A B C D Answer

1 _________ is a cost driver for personnel activities. Capital Expenditure No. of System Recruitment Volume of Activity C

__________ is based on past averages adjusted to anticipated

2 Ideal Standard Normal Standard Basic Standard Perfection Standard B
future changes.

___________ can be defined as a system which intends to

3 control the cost of each unit through prior determination of what Absorption costing Marginal costing Activity Based Costing Standard costing D
should be the cost and then its comparison with actual cost.

If the marginal cost is _________ buying price, additional

4 requirement of the component should be met by making rather Equal to Less than More than Similar to B
than buying.

5 Kaizen refers to _________ Intermittent improvement Discontinuous improvement Stop improvement Continuous improvement D

________ identifies cost improvement opportunities in different

6 Activity Based Budgeting Budgetary Control Cost Reconciliation Cost Audit A
functions of business.
________ requires constant revision according to the real
7 Ideal Standard Current Standard Basic Standard Perfection Standard B
circumstances.
_________ is responsible for setting up of materials price
8 Purchase department Production department Engineering department Finance department A
standard.
_________ is the series of work that add value at each stage of
9 Business process Value chain Business operations Business structure B
transformation.
__________ is a product costing system generally used in a just-
10 Backflush costing Absorption Costing Kaizen Costing Activity Based Costing A
in-time (JIT) inventory system
__________ is a product costing system generally used in a just-
11 Backflush costing Absorption Costing Kaizen Costing Activity Based Costing A
in-time (JIT) inventory system
__________ is the process of reducing cost through improved
12 Cost Prevention Cost Redudancy Cost Control Cost Reduction D
design, better methods, new layout etc.
__________ provides valuable information to the management
13 Strategic cost management Budgeted cost management Efficient cost management Standard cost management A
so that right decision can be taken.
___________ costing is a technique which takes into account
14 total cost of owing a physical asset or making a product during Product Design cycle Product Process cycle Product Division cycle Product life cycle D
its economic life.
15 ___________ is a residue material which has a recovery value. Scrap Defectives Spoilage Waste A
____________ is a part of production that does not meet quality
16 Scrap Defectives Spoilage Waste B
specifications of a product but it can be reworked
_____________ involves chain of activities from manufacturing
17 Business value chain Business process Business operations Business structure A
to marketing.
_____________ is simply the prevention of waste of all the
18 Cost Prevention Cost Redudancy Cost Control Cost Reduction C
types in the organization
_____________ is the critical analysis and radical redesign of
Business Process Re- Business Process Re- Business Process Re- Business Process Re-
19 existing business processes to achieve improvement in A
Engineering Designing Evaluating Processing
performance measures.
 _____________ is the unyielding and continuous efforts by
Total Productive Total Preventive
20 everyone in the firm to understand, meet and exceed the Total Quality Maintenance Total Quantity Maintenance C
Maintenance Maintenance
expectations of customers.
______________ is an accounting practice that represents the
21 price that one division in a company charges another division for Divisional pricing Standard pricing Related pricing Transfer pricing D
goods and services provided.

______________ is used to measure performance of divisions of

22 Real Accounting Responsive Accounting Divided Accounting Responsibility Accounting D
an organisation rather than organisation as a whole.

_______________ consists of activities that seek to identify

23 conservation opportunities preliminary to the development of an Environment audit Efficiency audit Energy audit E Commerce audit C
energy savings program.
_______________ is done with a view to find out the
24 Management Audit Operational Audit Statutory Audit System Audit A
weaknesses and inefficiencies of the management.
________________ is responsible for both profits and
25 Returns Centre Intenal Centre Investment Centre Profit Centre C
investments.
________________is a system of maintaining and improving
the integrity of production and quality systems through Total Productive Total Preventive
26 Total Quality Maintenance Total Quantity Maintenance A
machines, equipments, processes and employees that add Maintenance Maintenance
business value to an organization.
____________is a system whereby an organization can sub- Business Process Business Process
27 Business Process Operations Business Process Objectives C
contract certain work to a specialist or a third party. Ombudsman Outsourcing
To make things easier for To provide a distinct measure To minimize the cost per unit To control the cost and hurt
28 A primary purpose of using Standard cost system is __________ managers in the production of cost control of production the quality of the product B
facility

analysing the activities assigning manufacturing

A well-designed activity-based costing system starts with computing the activity-based identifying the activity-cost
29 performed to manufacture a overhead costs for each D
_________________ overhead rate pools
product activity cost pool to products

An accounting system that collects financial and operating data

30 on the basis of the underlying nature and extent of the cost Direct costing Activity-based costing Standard costing Cycle Time costing B
drivers is ______________.

Any casual vacancy in the office of the cost auditor shall be

31 Board of Directors Shareholders Investors Government A
filled in by ____________ within 30 days of such vacancy

identify its strengths and imitate those ideas that are improve on methods in use Improve Recruitment
32 Benchmarking NOT allows a company to _______________ D
weaknesses readily transferable by others Policies
Contribution / P/V Fixed Costs / P/V
33 Break even point = ____________. Profit / P/V Ratio Marginal Costs / P/V Ratio D
Ratio Ratio

34 Fixed cost + Profit Profit + Variable cost Sales – Fixed cost + profit Sales - Profit A
Contribution Margin is equal to __________
Cost allocation bases in activity-based costing should be on
35 cost drivers value-added activities activity centers processes A
________
36 Cost driver for inspection costs is ____________. No. of Trainings Production runs Order Value No. of Inspections D
37 Cost driver for set up costs is _________. No. of Set ups No. of Machinery No. of Production runs No. of Material handling A
a group of individual costs selected to minimize
38 Cost drivers are used to assign costs equivalent to cost pools B
whose total is allocated allocated costs
 Standard Cost - Marginal Standard Cost - Budgeted
39 Cost Variance is the difference between _____________. Standard Cost - Fixed Cost Standard Cost - Actual Cost D
Cost Cost
Costs that are common to many different activities within an
40 Product-level Facility-level Product-level Unit-level B
organization are known as __________costs.
Difference between actual and standard cost is known as
41 Standard deviation Variance Gross gain Margin B
__________.
42 Elements of Six Sigma does NOT include __________. The Customers The Employees The Process The Management D
Evaluation Criteria includes financial criterion such as
43 Customer loyalty Inventory Turnover Residual Income Sales orders booked C
_________ for evaluation of performance.
Evaluation Criteria includes non-financial criterion such as
44 Return on Investments On Time Delivery Contribution Margin Residual Income B
_________ for evaluation of performance.
45 Fixed Costs + Profit = ____________. Sales - Variable Costs Sales - Fixed Costs Sales - Contribution Sales - Profit A
Formula for Desired sales (in ₹) = (Fixed Cost + ________) /
46 Variable Cost Fixed Cost Semi Variable Cost Desired Profit D
PVRatio

Given production is 1,00,000 units, fixed costs is Rs 2,00,000

47 Selling price is Rs 10 per unit and variable cost is Rs 6 per unit. 600000 1000000 200000 400000 D
Determine contribution using technique of marginal costing?

Given production is 1,00,000 units, fixed costs is Rs 2,00,000

48 Selling price is Rs 10 per unit and variable cost is Rs 6 per unit. 600000 1000000 800000 200000 D
Determine profit using technique of marginal costing?

49 Idle hours are not deducted in _____________. Labour efficiency variance Labour effective variance Labour rate variance Labour mix variance C

50 If contribution is zero, there is loss will be _______ fixed costs. equal to less than more than above the A

51 If SP is Rs.10, VC is Rs.6, FC is Rs.400. BEP is _____ units. 400 600 100 40 C

52 If SP is Rs.20, VC is Rs.12, FC is Rs.1000. P/V ratio is _____. 80% 40% 60% 140% B

53 If SP is Rs.20, VC is Rs.12, FC is Rs.800. BEP is _____ units. 400 800 100 40 C

If the actual output is more than the budgeted output, volume

54 Non-favorable Favorable Adverse No impact B
variance is ____________.
In _______ all elements of cost are divided into fixed and
55 Standard Costing Absorption Costing Marginal Costing Activity Costing C
variable components.
In activity-based costing, final cost allocations assign costs to
56 departments processes activities products C
_______________
Determining how much
Comparing the actual direct materials and labour
In an activity-based cost system, to what does ‘pooling costs’ Assigning various overhead Collecting various types of
57 performance of managers should be allocated to a C
refer? costs to products costs that relate to an activity
against the budget specific product
or service
In Transfer Pricing any income arising from an international
58 transaction with associated enterprises shall be computed having Arm’s Transfer Price Arm’s Level Price Arm’s Length Price Arm’s Long Price C
regard to the _______________
 Fixed Costs / P/V Contribution / P/V
59 Margin of Safety = ____________. Marginal Costs / P/V Ratio Profit / P/V Ratio D
Ratio Ratio
Material Usage Variance = (Standard Quantity – _______) x
60 Actual Quantity Standard Quantity Standard Price Actual Price A
Standard price
61 No. of purchase orders is a cost driver for _________. Set up Cost Ordering Cost Warehouse Cost Transport Cost B
Fixed cost of the firm must
Depreciation on asset Opportunity cost must be
Of following points should NOT be considered while taking Only relevant costs are used be examined to see whether
62 purchased in the past is most considered in decision A
decisions in evaluating the alternatives. it will change due to
relevant for decision making. making.
decision.
Reduction in Machinery costs can be done by reducing
63 Labours Output units Machine Hours Production hours C
__________.

Relative to traditional product costing, activity-based costing

64 processed allocated benchmarked incurred B
differs in the way costs are ____________________

Responsibility Accounting collects and reports planned and

65 actual accounting information about the inputs and outputs of reported centres responsibility centres respective centres responsive centres B
_____________
66 Sales - Variable Costs = ____________. Fixed Costs + Profit Fixed Costs - Profit Variable Costs + Profit Fixed Costs + Contribution A
Sales margin mix variance due to sales quantities is measured as Revised standard profit - Standard profit - Revised Standard profit + Revised Revised standard profit +
67 B
___________. Budgeted profit standard profit standard profit Budgeted profit

Standard costing is the preparation of standard costs and their

68 Marginal costs, Variances Variances, Marginal costs Variances, Actual costs Actual costs, Variances D
comparison with _______ and the analysis of ________.

Specified level of activity

69 A specified period Each element of cost Monetary terms only C
Standard is determined for ________ only

Standard material required to make one unit of Product A is 5 kg

70 @ 10 per kg. In Actual the materials were used 5,400 kg @ 9 per ₹ 1,400 adverse ₹ 2,000 adverse ₹ 4,000 favourable ₹ 1,400 favourable D
kg to make 1,000 units. Calculate Material Cost Variance.

Standard which assumes efficient level of operations, but which Ideal standards Normal standards Attainable standards Abnormal standards
71 includes factors such as waste and machine is known as an C
allowance for:
72 Testing hours is ________ for Testing expenses. Cost units Costs driver Budgeting unit Activity B
73 The __________is the total cost assigned to an activity. Cost Pool Cost Sheet Cost Units Cost Drivers A
74 The _________activities are eliminated in due course of time. Non -Value Adding Alternative Competitors Overtime A
The “standard hours allowed” or “standard quantity allowed” is actual output in units × actual output in units × standard output in units × actual input in units ×
75 A
equal to: standard input allowed standard output allowed standard input allowed standard output allowed
76 The activity that generates cost is a ________. Cost Pool Cost Sheet Cost Units Cost Drivers D
The comparison of a company’s practices and performance
77 levels against those of other organizations is most commonly Continuous improvement Benchmarking Re-engineering Comparative analysis B
known as _______________.
78 The Cost Audit Report is to be submitted to the ___________ Shareholders Public Central Government State Government C
The cost reduction technique in comparison to the worth of a
79 Design engineering Value engineering Material engineering Quality engineering B
design of product is known as _____________
The costing system that initially assigns all costs to Cost of
80 Goods Sold and then removes them to the appropriate inventory Process costing system Backflush costing system Just in time costing system Job order costing system B
values is which kind of costing system?
 The following is NOT an objective for Cost Audit to be To decided correct cost of
81 To fix pricing To identify inefficient units To verify financial statements D
conducted. production
The report shall be submitted to the Board within
82 ______________from the closure of the financial year in which 60 days 365 days 180 days 30 days C
the report relates.

The standards that require peak efficiency and do not allow any
83 Normal Standards Practical Standards Ideal Standards Budgeted Standards C
work interruptions are known as _______________.

The technique of marginal costing is based on classification of Long term and Short term
84 Historical and Sunk Cost Fixed and Variable Cost Capital and Revenue Cost B
cost into ________. Cost
Contribution is positive but Contribution is negative but
85 There will be neither profit nor loss, when ___________. Contribution is Nil Fixed cost is Nil A
equal to fixed cost equal to fixed cost

86 Transfer pricing is important for the purpose of measurement of Company's performance Management Performance Division performance Target return C

Improvement of customer Accelerated delivery Improvement of government

87 Value Chain Management does NOT offer the following benefit : Saving of cost D
service schedule policies
To identify what standard To determine a cost object To allocate and assign
To analyse the costs that
88 What is the purpose of ABC? product costs are incurred by for which information is indirect costs based on C
cause variance to increase
a company needed concerned activity
When actual price is higher or lower than the standard price,
89 Sales price variance Sales volume variance Sales mix variance Sales quantity variance A
then it is ____________.
Standard quantity purchased Standard quantity purchased
Which of the following is a correct formula for computing direct Actual quantity purchased × Actual quantity purchased ×
90 × (Actual rate + Standard × (Actual rate - Standard A
materials price variance? (Actual rate - Standard rate) (Actual rate + Standard rate)
rate) rate)
Less control over overhead Poorer management
91 Which of the following is a limitation of activity-based costing? ABC can be expensive to use More cost pools A
costs decisions
A service offered to A machine used for
92 Which of the following is a typical cost pool? Products manufactured Direct labour D
customers packaging products
Which of the following is NOT a benefit of activity-based More accurate product Enhanced control over ABC requires high cost to
93 Better management decisions D
costing? costing overhead costs implement
Composite Uncontrolled Transactional Net Margin
94 Which of the following is NOT a method of transfer pricing? Cost Plus Method Resale Price Method B
Price Method
To make processes To make processes
95 Which of the following is NOT the aim of Kaizen process? To make processes effective To make processes efficient A
uncontrollable controllable
Which of the following would not explain a favourable wage rate Higher unemployment in Reduction in power of New technology Introduction of minimum
96 D
variance? industrial sector trade unions wage legalisation
Which one of the following is a collection of overhead costs
97 Cost Pool Cost Drivers Cost Objects Cost Allocation A
related to a cost object?
Which one of the following is the most appropriate cost driver
98 Number of receiving clerks Number of sales invoices Number of parts ordered Number of purchases orders D
for the ordering and receiving materials cost pool?
While determining material quantity standards, a proper
99 Normal material wastage Abnormal material wastage Accrued material wastage Nominal material wastage A
consideration should be assigned to _____________.
While selecting optimum product mix ___________ is the real Contribution per unit of key
100 Contribution per unit Profit and sales Profit per unit of key factor B
index of profitability. factor
101 _________ is a cost driver for personnel activities. Capital Expenditure No. of System Recruitment Volume of Activity C
__________ is based on past averages adjusted to anticipated
102 Ideal Standard Normal Standard Basic Standard Perfection Standard B
future changes.
 ___________ can be defined as a system which intends to
103 control the cost of each unit through prior determination of what Absorption costing Marginal costing Activity Based Costing Standard costing D
should be the cost and then its comparison with actual cost.

If the marginal cost is _________ buying price, additional

104 requirement of the component should be met by making rather Equal to Less than More than Similar to B
than buying.

105 Kaizen refers to _________ Intermittent improvement Discontinuous improvement Stop improvement Continuous improvement D

________ identifies cost improvement opportunities in different

106 Activity Based Budgeting Budgetary Control Cost Reconciliation Cost Audit A
functions of business.
________ requires constant revision according to the real
107 Ideal Standard Current Standard Basic Standard Perfection Standard B
circumstances.
_________ is responsible for setting up of materials price
108 Purchase department Production department Engineering department Finance department A
standard.
_________ is the series of work that add value at each stage of
109 Business process Value chain Business operations Business structure B
transformation.

110 Idle hours are not deducted in _____________. Labour efficiency variance Labour effective variance Labour rate variance Labour mix variance C

111 If contribution is zero, there is loss will be _______ fixed costs. equal to less than more than above the A

112 If SP is Rs.10, VC is Rs.6, FC is Rs.400. BEP is _____ units. 400 600 100 40 C

113 If SP is Rs.20, VC is Rs.12, FC is Rs.1000. P/V ratio is _____. 80% 40% 60% 140% B

114 If SP is Rs.20, VC is Rs.12, FC is Rs.800. BEP is _____ units. 400 800 100 40 C

If the actual output is more than the budgeted output, volume

115 Non-favorable Favorable Adverse No impact B
variance is ____________.
In _______ all elements of cost are divided into fixed and
116 Standard Costing Absorption Costing Marginal Costing Activity Costing C
variable components.
In activity-based costing, final cost allocations assign costs to
117 departments processes activities products C
_______________
Determining how much
Comparing the actual direct materials and labour
In an activity-based cost system, to what does ‘pooling costs’ Assigning various overhead Collecting various types of
118 performance of managers should be allocated to a C
refer? costs to products costs that relate to an activity
against the budget specific product
or service
In Transfer Pricing any income arising from an international
119 transaction with associated enterprises shall be computed having Arm’s Transfer Price Arm’s Level Price Arm’s Length Price Arm’s Long Price C
regard to the _______________
Fixed Costs / P/V Contribution / P/V
120 Margin of Safety = ____________. Marginal Costs / P/V Ratio Profit / P/V Ratio D
Ratio Ratio
Material Usage Variance = (Standard Quantity – _______) x
121 Actual Quantity Standard Quantity Standard Price Actual Price A
Standard price
122 No. of purchase orders is a cost driver for _________. Set up Cost Ordering Cost Warehouse Cost Transport Cost B
 Fixed cost of the firm must
Depreciation on asset Opportunity cost must be
Of following points should NOT be considered while taking Only relevant costs are used be examined to see whether
123 purchased in the past is most considered in decision A
decisions in evaluating the alternatives. it will change due to
relevant for decision making. making.
decision.
Reduction in Machinery costs can be done by reducing
124 Labours Output units Machine Hours Production hours C
__________.

Relative to traditional product costing, activity-based costing

125 processed allocated benchmarked incurred B
differs in the way costs are ____________________

Responsibility Accounting collects and reports planned and

126 actual accounting information about the inputs and outputs of reported centres responsibility centres respective centres responsive centres B
_____________
127 Sales - Variable Costs = ____________. Fixed Costs + Profit Fixed Costs - Profit Variable Costs + Profit Fixed Costs + Contribution A
Sales margin mix variance due to sales quantities is measured as Revised standard profit - Standard profit - Revised Standard profit + Revised Revised standard profit +
128 B
___________. Budgeted profit standard profit standard profit Budgeted profit

Standard costing is the preparation of standard costs and their

129 Marginal costs, Variances Variances, Marginal costs Variances, Actual costs Actual costs, Variances D
comparison with _______ and the analysis of ________.

Specified level of activity

130 A specified period Each element of cost Monetary terms only C
Standard is determined for ________ only

Standard material required to make one unit of Product A is 5 kg

131 @ 10 per kg. In Actual the materials were used 5,400 kg @ 9 per ₹ 1,400 adverse ₹ 2,000 adverse ₹ 4,000 favourable ₹ 1,400 favourable D
kg to make 1,000 units. Calculate Material Cost Variance.

Standard which assumes efficient level of operations, but which Ideal standards Normal standards Attainable standards Abnormal standards
132 includes factors such as waste and machine is known as an C
allowance for:
133 Testing hours is ________ for Testing expenses. Cost units Costs driver Budgeting unit Activity B
134 The __________is the total cost assigned to an activity. Cost Pool Cost Sheet Cost Units Cost Drivers A
135 The _________activities are eliminated in due course of time. Non -Value Adding Alternative Competitors Overtime A
The “standard hours allowed” or “standard quantity allowed” is actual output in units × actual output in units × standard output in units × actual input in units ×
136 A
equal to: standard input allowed standard output allowed standard input allowed standard output allowed
137 The activity that generates cost is a ________. Cost Pool Cost Sheet Cost Units Cost Drivers D
The comparison of a company’s practices and performance
138 levels against those of other organizations is most commonly Continuous improvement Benchmarking Re-engineering Comparative analysis B
known as _______________.
139 The Cost Audit Report is to be submitted to the ___________ Shareholders Public Central Government State Government C
The cost reduction technique in comparison to the worth of a
140 Design engineering Value engineering Material engineering Quality engineering B
design of product is known as _____________
_______________ consists of activities that seek to identify
141 conservation opportunities preliminary to the development of an Environment audit Efficiency audit Energy audit E Commerce audit C
energy savings program.
_______________ is done with a view to find out the
142 Management Audit Operational Audit Statutory Audit System Audit A
weaknesses and inefficiencies of the management.
________________ is responsible for both profits and
143 Returns Centre Intenal Centre Investment Centre Profit Centre C
investments.
 ________________is a system of maintaining and improving
the integrity of production and quality systems through Total Productive Total Preventive
144 Total Quality Maintenance Total Quantity Maintenance A
machines, equipments, processes and employees that add Maintenance Maintenance
business value to an organization.
____________is a system whereby an organization can sub- Business Process Business Process
145 Business Process Operations Business Process Objectives C
contract certain work to a specialist or a third party. Ombudsman Outsourcing
To make things easier for To provide a distinct measure To minimize the cost per unit To control the cost and hurt
146 A primary purpose of using Standard cost system is __________ managers in the production of cost control of production the quality of the product B
facility

analysing the activities assigning manufacturing

A well-designed activity-based costing system starts with computing the activity-based identifying the activity-cost
147 performed to manufacture a overhead costs for each D
_________________ overhead rate pools
product activity cost pool to products

An accounting system that collects financial and operating data

148 on the basis of the underlying nature and extent of the cost Direct costing Activity-based costing Standard costing Cycle Time costing B
drivers is ______________.

Any casual vacancy in the office of the cost auditor shall be

149 Board of Directors Shareholders Investors Government A
filled in by ____________ within 30 days of such vacancy

identify its strengths and imitate those ideas that are improve on methods in use Improve Recruitment
150 Benchmarking NOT allows a company to _______________ D
weaknesses readily transferable by others Policies
Contribution / P/V Fixed Costs / P/V
151 Break even point = ____________. Profit / P/V Ratio Marginal Costs / P/V Ratio D
Ratio Ratio
If the marginal cost is _________ buying price, additional
152 requirement of the component should be met by making rather Equal to Less than More than Similar to B
than buying.

153 Kaizen refers to _________ Intermittent improvement Discontinuous improvement Stop improvement Continuous improvement D

________ identifies cost improvement opportunities in different

154 Activity Based Budgeting Budgetary Control Cost Reconciliation Cost Audit A
functions of business.
________ requires constant revision according to the real
155 Ideal Standard Current Standard Basic Standard Perfection Standard B
circumstances.
_________ is responsible for setting up of materials price
156 Purchase department Production department Engineering department Finance department A
standard.
_________ is the series of work that add value at each stage of
157 Business process Value chain Business operations Business structure B
transformation.

158 Idle hours are not deducted in _____________. Labour efficiency variance Labour effective variance Labour rate variance Labour mix variance C

159 If contribution is zero, there is loss will be _______ fixed costs. equal to less than more than above the A

160 If SP is Rs.20, VC is Rs.12, FC is Rs.1000. P/V ratio is _____. 80% 40% 60% 140% B

161 If SP is Rs.20, VC is Rs.12, FC is Rs.800. BEP is _____ units. 400 800 100 40 C

If the actual output is more than the budgeted output, volume

162 Non-favorable Favorable Adverse No impact B
variance is ____________.
In _______ all elements of cost are divided into fixed and
163 Standard Costing Absorption Costing Marginal Costing Activity Costing C
variable components.
 In activity-based costing, final cost allocations assign costs to
164 departments processes activities products C
_______________
Determining how much
Comparing the actual direct materials and labour
In an activity-based cost system, to what does ‘pooling costs’ Assigning various overhead Collecting various types of
165 performance of managers should be allocated to a C
refer? costs to products costs that relate to an activity
against the budget specific product
or service
In Transfer Pricing any income arising from an international
166 transaction with associated enterprises shall be computed having Arm’s Transfer Price Arm’s Level Price Arm’s Length Price Arm’s Long Price C
regard to the _______________
Fixed Costs / P/V Contribution / P/V
167 Margin of Safety = ____________. Marginal Costs / P/V Ratio Profit / P/V Ratio D
Ratio Ratio
Material Usage Variance = (Standard Quantity – _______) x
168 Actual Quantity Standard Quantity Standard Price Actual Price A
Standard price