BBA II SEMESTER (FINANCIAL & MANAGEMENT ACCOUNTING-II) UNIT -IV

Question 1.
Dec 2014: The budgeting system designed to change in relation to the level of activity actually attained is known as
(A) Fixed budgeting
(B) Flexible budgeting
(C) Performance budgeting
(D) Functional budgeting
Answer:
(B) Flexible budgeting

Question 2.
Dec 2014: From the following, which one is a functional budget
(A) Master budget
(B) Fixed budget
(C) Sales budget
(D) Current budget
Answer:
(C) Sales budget

Question 3.
Dec 2014: The following information is available:
Wages for January: ₹ 20,000
Wages for February: ₹ 22,000
Delay in payment of wages: 1 /2 month
The amount of wages paid during the month of February is
(A) ₹ 11,000
(B) ₹ 22,000
(C) ₹ 20,000
(D) ₹ 21,000
Hint:

Answer:
(D) ₹ 21,000

pattern in each quarter is based on 80% of the sales of the current quarter and 20% of the sales of the next quarter. The production for quarter IV will be
(A) 36,000 units
(B) 42,000 units
(C) 48,250 units
(D) 38,250 units
Hint:

Answer:
(C) 48,250 units

department
(C) Flexible budget allows management latitude in meeting goals, whereas a static budget is based on a fixed standard
(D) A flexible budget considers only variable costs, but a static budget considers all costs
Answer:
(A) A static budget is based on one specific level of production and a flexible budget can be prepared for any production level within a relevant range

Question 17.
Dec 2015: Match the following:

List-I	List-II
P.            Performance budgeting	1. Fixed budget
Q.           Zero base budgeting	2. Production oriented
R.            Summary of all functional budgets	3. Jimmy Carter
S.            Remain unchanged irrespective of the level of activity actually attained	4. Master budget

Select the correct answer from the options given below


Answer:
(D)

(A) Interest paid to debenture holders
(B) Salaries and wages
(C) Bonus shares issued
(D) Income-tax paid
Answer:
(C) Bonus shares issued

Question 28.
Dec 2016: Budgeted standard hours of a factory are 15,000. The capacity utilization ratio for May 2016 is 85% and the efficiency ratio for the month is 120%. The standard hours for actual production in the month will be
(A) 12,750
(B) 18,000
(C) 15,300
(D) 18,000
Hint:


Answer:
(C) 15,300

Question 29.
June 2017: A plant produces a product in the quantity of 10,000 units at a cost of ₹ 3 per unit. If 20,000 units are produced, the cost per unit will be ₹ 2.50. The selling price per unit is ₹ 4. The variable cost per unit will be:
(A) ₹ 2
(B) ₹ 3
(C) ₹ 4
(D) ₹ 1
Answer:
(A) ₹ 2

Question 30.
June 2017: When demand forecasting is difficult, the budget which is prepared:
(A) Sales Budget
(B) Production Budget
(C) Financial Budget
(D) Flexible Budget
Answer:
(D) Flexible Budget

Question 47.
June 2019: The following information extracted from the records of P. Ltd. Sales for October, November and December 2018 is ₹ 90,000, ₹ 1,10,000 and ₹ 80,000 respectively. 40% of its sales are expected to be for cash. Of its credit sales, 70% are expected to pay in the month after-sales and take a 2% discount on it. Balance is expected to pay in second-month after-sales and 3% of it is expected to bad debts.
What are the sales receipts to be shown in the cash budget for the month of December?
(A) ₹ 92,990
(B) ₹ 1,23,174
(C) ₹ 95,609
(D) ₹ 1,25,793
Note: MCQ is wrongly drafted; for further clarification please see the hints.
Hint:

None of the options contains a figure of 91,856 and hence MCQ is wrong.
Answer:

Question 48.
June 2019: Which of the following is not a step for successful implementation of the budgetary control system?
(A) Budget manual
(B) Budget controller
(C) Budget period
(D) Budget standard
Answer:
(D) Budget standard

Question 49.
June 2019:
Assertion (A):
The purpose of performance budgeting is to focus on work to be done and services to be rendered.
Reason (R):
The main purpose of performance budgeting is not to inter-relate the physical and financial aspects of every program, project, or activity.
Select the correct answer from the options given below.
(A) Both A and R are true and R is the correct explanation of A.
(B) Both A and R are true but R is not the correct explanation of A.
(C) A is true but R is false
(D) A is false but R is true
Answer:
(C) A is true but R is false

Q1. The classification of fixed and variable cost is useful for the preparation of: 

1. Master budget
2. Flexible budget
3. Cash budget
4. Capital budget

Answer: 2

Q2. Budget manual is a document:

1. Which contains different type of budgets to be formulated only.
2. Which contains the details about standard cost of the products to be made.
3. Setting out the budget organization and procedures for preparing a budget including fixation of responsibilities, formats and records required for the purpose of preparing a budget and for exercising budgetary control system. 
4. None of the above

Answer: 3

Q3. The budget control organization is usually headed by a top executive who is known as: 

1. General manager
2. Budget director/budget controller
3. Accountant of the organization
4. None of the above

Answer: 2

Q4. A budget report is prepared on the principle of exception and thus-

1. Only unfavourable variances should be shown
2. Only favourable variance should be shown
3. Both favourable and unfavourable variances should be shown
4. None of the above 

Answer: 3

Q5. Purchases budget and materials budget are same:  

1.  Purchases budget is a budget which includes only the details of all materials purchased  
2.  Purchases budget is a wider concept and thus includes not only purchases of materials but also other item’s as well 
3. Purchases budget is different from materials budget; it includes purchases of other items only
4. None of the above

Answer: 2

Q6. Efficiency ratio is: 

1. The extent of actual working days avoided during the budget period
2. Activity ratio/ capacity ratio
3. Whether the actual activity is more or less than budgeted activity
4. None of the above

Answer: 2

Answer: a

1. Which of the following is the true meaning of timekeeping?
   1. The time spent by a worker in the factory
   2. The time spent by a worker without work
   3. The time spent by a worker off their job
   4. The time spent by a worker on their job

Answer: a

2. It is not possible to measure labour productivity by comparing ______.
   1. Standard time with actual time
   2. Total output with total wage
   3. Total person-hours with the total output
   4. None of the above

Answer: b

3. The loss that arises in manufacturing due to the nature of a product is known as ______.
   1. Abnormal loss
   2. Net loss
   3. Normal loss
   4. None of the above

Answer: c

4. A company maintains a _____ to avoid stopping production due to the shortage of material.
   1. Minimum stock level
   2. Reorder level
   3. Maximum stock level
   4. None of the above

Answer: a

5. The discarded materials that have zero value are called _______.
   1. Scrap
   2. Waste
   3. Spoilage
   4. None of the above

Answer: b

1. A variance is the difference between a planned, budgeted or standard cost and the actual cost incurred. The same comparisons may be made for revenues.
1. 1. True
   2. False
2. The process by which the total difference between standard and actual results is analysed is known as variance analysis.
1. 1. False
   2. True
3. Variances can be divided into:
1. 1. Variable cost variances
   2. Sales variances
   3. Fixed production overhead variances
   4. All of the above
4. A cost variance is the difference between an actual cost and a standard cost.
• • When actual cost is higher than standard cost, the cost variance is adverse (A) or unfavourable (U).
  • When actual cost is less than standard cost, the cost variance is favourable (F).
    1. The above is correct
    2. The above is incorrect
5. Variances are calculated, relating to:
1. 1. Direct materials, direct labour
   2. Variable production overhead and fixed production overhead
   3. Both A&B
   4. None
6. In a cost accounting system, cost variances are adjustments to the profit in an accounting period.
• • Favourable variances increase the reported profit.
  • Adverse variances reduce the reported profit.
    1. True
    2. False
7. The method of calculating cost variances is similar for all variable production cost items (direct materials, direct labour and variable production overhead), while a different method of calculating cost variances is required for fixed production overhead.
1. The above statement is incorrect
2. The above statement is correct. 

Objective Questions on Standard Costing.

A Fill in the blanks with correct answer.

1 The objective of standard costing is ___________

a) Determine profitability of product b) Determine break even production level

 c) control costs d ) Allocate costs with more accuracy 

2 An estimate of what cost should be is known as ___________

a) Actual cost b) Ideal cost 

c) Standard cost d) Forecast cost 

 3 What standard is based on the assumption of most favourable conditions possible ?

a) Ideal standard b) Normal standard

c) Expected standard d)Attainable standard 

4 If the standard cost is lower than the actual cost , the difference is known as ______

a) Favourable b) Adverse

c) Positive d) Negative 

5 The standard cost card contains quantities and costs for ________

a) Direct material only b) Direct labour only

c) Direct material and Direct labour only d) Direct material, Direct labour and 

overheads 

6 There is a ____________ Variance , whenever the actual rupees spent are greater than 

the standard cost 

a)Favourable b) Adverse 

c) Positive d) Negative 

 7 Standard cost is decided for ____________

a) Labour b) Overheads 

b) c) Materials d) All the elements. 

B State whether the following statements are True or False

1 Standard costing helps to know “what the cost will be”.

 2 Variance analysis is part of Marginal costing .

3 Standard price is used while computing Material price variance .

4 Standard Quantity is used while, computing Material price variance .

5 Standard cost can be used for valuation of stock and work in progress .

6 The main purpose of standard costing is cost control.

7 Total cost variances are calculated based on budgeted sales level.

8 Standard rate is used while calculating all labour cost variances .

9 Actual price is used while ,computing Material price variance .

10 If the standard cost is lower than the actual cost , the variance is Favourable

Responsibility Accounting - Finance (MCQ) Questions and answers

1). There are three departments A, B and C in a company, The sales of A, B and C are Rs 3,52,000, Rs 2,88,000 and Rs 1,60,000, respectively. The variable costs of A, B and C are Rs 2,40,000, Rs 1,76,000 and Rs 1,44,000 respectively. The direct fixed costs of A, B and C are Rs 28,000, Rs 22,400 and Rs 12,800. Rank the different departments on basis of relative profitability. a. A- Rank 3, B- Rank 1 and C- Rank 2 b. A- Rank 2, B- Rank 1 and C- Rank 3 c. A- Rank 3, B- Rank 2 and C- Rank 1 d. Insufficient data   ANSWER: A- Rank 2, B- Rank 1 and C- Rank-3

2)   In a company Department A recorded losses in the first half of the current year. The sale of department is Rs 90,000 and uncontrollable costs are Rs 91,000, Advice the management whether its operations should be continued or terminated. a. Continued b. Terminated c. Insufficient information d. None of the above ANSWER: Insufficient informatio 3)   In a control report of Department X, it is mentioned as indirect materials are Rs 1,000, Indirect labour Rs 900, Overtime Charges Rs 100, Depreciation on equipment Rs 500, Allocated factory overhead (38% of factory space) Rs 4300, Allocated overhead of repair shop is Rs 1200. Determine total costs treating department X as a responsibility center. a. Rs 3200 b. Rs 2200 c. Rs 1200 d. None of the above   ANSWER: Rs 3200 4)   Which of the following statements are true about responsibility accounting? a. Responsibility accounting results in inter-departmental conflicts b. In responsibility center more focus is paid on products, processes or jobs c. No focus is paid on controlling costs d. None of the above   ANSWER: Responsibility accounting results in inter-departmental conflicts 5)   Responsibility accounting is not useful in following the principle of management by exception. a. True b. False   ANSWER: False 6)   In profit center revenue represents a monetary measure of output emanating from a profit center in a given period irrespective whether a. The revenue is realized or not b. The output is sold or not c. Both a and b d. None of the above ANSWER: Both a and b 7)   Contribution margin center is also known as a. Expense center b. Profit center c. Investment center d. All of the above ANSWER: Profit center 8)   In cost centers manager have no revenue responsibilities. a. True b. False ANSWER: True 9)   Which of the following is responsibility center? a. Expense center b. Profit center c. Investment center d. All of the above ANSWER: All of the above 10)   The responsibility centers, for control purposes, may be classified into _____ types. a. Five b. Three c. Four d. None of the above   ANSWER: Three 11)   The area of focus on responsibility center is a. Quantum of sales b. Quantum of production c. Optimum utilization of resources d. All of the above ANSWER: Optimum utilization of resources 12)   In responsibility cost accounting the costs in focus are a. Controllable costs b. Uncontrollable costs c. Both a and b d. None of the above   ANSWER: Controllable costs 13)   In responsibility accounting, responsibilities of various groups or individuals are identified in terms of a. Work b. Revenue c. Cost d. All of the above ANSWER: All of the above 14)   Responsibility Accounting is also known as a. Profitability accounting b. Activity accounting c. Both a and b d. None of the above ANSWER: Both a and b 15)   As per R.M. Bhandari, __________ is a system under which costs are accumulated and reported at each level of responsibility so that the accounting and cost data may be used by the management at each level in controlling the operations and their costs. a. Responsibility Accounting b. Cost accounting c. Cost data accounting d. Financial accounting ANSWER: Responsibility Accounting 1.Which of the following correctly describes a cost center? A business segment whose manager has control over costs but not over revenue or investment funds A business segment whose manager has control over both cost and revenue but not investment funds A business segment whose manager has control over cost, revenue, and investments All of the above 2.Which of the following correctly describes a profit center? A business segment whose manager has control over costs but not over revenue or investment funds A business segment whose manager has control over both cost and revenue but not investment funds A business segment whose manager has control over cost, revenue, and investments All of the above 3.Which of the following correctly describes a responsibility center? A business segment whose manager has control over costs but not over revenue or investment funds A business segment whose manager has control over both cost and revenue but not investment funds A business segment whose manager has control over cost, revenue, and investment All of the above 4.Which of the following is a false statement about segmented income statements? They may be prepared according to traditional methods with little attention paid to differentiating fixed and variable costs They should be prepared in a variable costing format Variable and fixed costs should be listed in separate sections If a segmented income statement indicates a negative segment margin, that segment should be eliminated 5.Which of the following is true about common fixed costs? A common fixed cost is incurred due to the existence of the segment If any segment did not exist, the common fixed cost would not occur Only common fixed costs are charged to individual segments in the segmented income statement Common fixed costs support the operations of more than one segment  Select the most appropriate answers from the alternatives given below  and rewrite the sentences : 1. In the words of …………… “ Management accounting is concerned with  accounting information that is useful to management.” (a) J. Betty (b) Robert Anthony (c) Institute of charted Accounts of England (d) All of the above Ans- b 2. Main emphasis of management accounting is ………….. to maximise  profit. (a) Planning (b) Controlling  (c) Decision Making (d) All of the above Ans- c 3. CIMA Stands of : ………….. (a) Charted Institute of Management Accountants (b) Comman Institute of Management Accountants (c) Charted International of Management Accountants (d) Comman International of Management Accountants Ans- a 4. …………… is a important tools and techniques of management accounting. (a) Double Entry System (b) Budegeting (c) Cash flow statement (d) b and c Ans- b 5. …………… is not a techniques of management accounting. (a) Responsibility accounting (b) Funds flow statement (c) Final accounts of company (d) Break even analysis Ans - c 6. Which of the following words DOES NOT describe a main focus of management accounting ?  (a) Planning (b) Control (c) External (d) Decision-making Ans - c 7. CIMA defines management accounting as:  “The application of the principles of accounting and financial management  to create, protect, preserve and increase value for the _________________  of for-profit and not-for profit enterprises in the public and private sectors”.  (a) Auditors (b) Stakeholders (c) Owners (d) Customers Ans - b 8. Which of the following statements are true?  1. The main role of the management accountant is to produce financial  accounts  2. Management accountants always work within the finance function  3. Management accountants always work in partnership with business  managers  (a) 1 and 2 only (b) 2 and 3 only (c) 1 and 3 only (d) None of the above Ans - d 9. Which of the following words complete the statement below?  ____________ accounts are prepared for external stakeholders.  Management accounts are prepared for _____________ stakeholders.  (a) Shadow, Internal (b) Financial, Internal (c) Financial, External (d) Internal, Budget Ans- b 10. Which THREE of the following statements about CIMA are true?  A. CIMA was established over 90 years ago  B. CIMA members may only work in the UK  C. CIMA members and students must comply with the CIMA code of  ethics  D. CIMA members work mainly on the production of financial accounts  E. CIMA members are not qualified to work as finance directors  F. CIMA members work in all areas of business  (a) A,C,F (b) A,B,F (c) A,B,D (d) A,C,E Ans- a  Select the most appropriate answers from the alternatives given below  and rewrite the sentences : 1. Ratio analysis implies the process of ……….. the relationship of items and  group of items financial statements. (a) Computing (b) Determining  (c) Presenting (d) All of the above 2. Ratio analysis may take the …………. Complicated and misleading on  account of change in price level. (a) Comparative study (b) Financial study (c) Cost study (d) Management study 3. Quick ratio of ……… is considered to represent a satisfactory current  financial position. (a) 1 : 2 (b) 2 : 1 (c) 1 : 1 (d) 3 : 1 4. ………. Attempts to measure the relationship between long term debts and  shareholder’s funds. (a) Proprietary Ratio (b) Debt-equity ratio (c) Debt to Total fund ratio (d) Capital gearing ratio 5. ………. Indicates the relationship between net credit sales and trade  debtors. (a) Debt-equity ratio (b) Debt to Total fund ratio (c) Debtors Turnover ratio (d) All of the above 6. Accounting Ratios are important tools used by ……….  (a) Managers (b) Researchers  (c )Investors (d) All of the above 7. Net Profit Ratio Signifies : ……….  (a) Operational Profitability (b) Liquidity Position  (c) Big-term Solvency (d) Profit for Lenders 8. Working Capital Turnover measures the relationship of Working Capital  with : ……….  (a) Fixed Assets (b) Sales  (c) Purchases (d) Stock 9. In Ratio Analysis, the term Capital Employed refers to:  (a) Equity Share Capital (b) Net worth  (c) Shareholders' Funds (d) None of the above 10. Dividend Payout Ratio is : ……….  (a) PAT Capital (b) DPS ÷ EPS  (c) Pref. Dividend ÷ PAT (d) Pref. Dividend ÷ Equity Dividend 11. DU PONT Analysis deals with : ……….  (a) Analysis of Current Assets (b) Analysis of Profit  (c) Capital Budgeting (d) Analysis of Fixed Assets 12. In Net Profit Ratio, the denominator is : ……….  (a) Net Purchases (b) Net Sales  (c) Credit Sales (d) Cost of goods sold 13. Inventory Turnover measures the relationship of inventory with : ……….  (a) Average Sales (b) Cost of Goods Sold  (c)Total Purchases (d) Total Assets 14. The term 'EVA' is used for : ……….  (a) Extra Value Analysis (b) Economic Value Added  (c) Expected Value Analysis (d) Engineering Value Analysis 15. Return on Investment may be improved by : ……….  (a) Increasing Turnover (b) Reducing Expenses  (c) Increasing Capital Utilization (d) All of the above 16. In Current Ratio, Current Assets are compared with : ……….  (a) Current Profit (b) Current Liabilities  (c) Fixed Assets (d) Equity Share Capital 17. ABC Ltd. has a Current Ratio of 1.5: 1 and Net Current Assets of  Rs. 5,00,000. What are the Current Assets ?  (a) Rs. 5,00,000 (b) Rs. 10,00,000  (c) Rs. 15,00,000 (d) Rs. 25,00,000 18. There is deterioration in the management of working capital of XYZ Ltd.  What does it refer to ?  (a) That the Capital Employed has reduced  (b) That the Profitability has gone up  (c) That debtors collection period has increased  (d) That Sales has decreased 19. Which of the following does not help to increase Current Ratio ?  (a) Issue of Debentures to buy Stock  (b) Issue of Debentures to pay Creditors  (c) Sale of Investment to pay Creditors  (d) Avail Bank Overdraft to buy Machine 20. Debt to Total Assets Ratio can be improved by : ……….  (a) Borrowing More (b) Issue of Debentures  (c) Issue of Equity Shares (d) Redemption of Debt Answers : 1. (d) All of the above 2. (a) Comparative study 3. (c) 1 : 1 4. (b) Debt-equity ratio 5. (c) Debtors Turnover ratio  6. (d) All of the above 7. (a) Operational Profitability  8. (a) Fixed Assets 9. (d) None of the above  10. (b) DPS ÷ EPS 11. (b) Analysis of Profit  12. (b) Net Sales 13. (b) Cost of Goods Sold  14. (b) Economic Value Added 15. (d) All of the above  16. (b) Current Liabilities 17. (c) Rs. 15,00,000  18. (c) That debtors collection period has increased 19. (d) Avail Bank Overdraft to buy Machine 20. (d) Redemption of Debt  Select the most appropriate answers from the alternatives given below  and rewrite the sentences : 1. A budget is a plan of action expressed in………………… a. Financial terms  b. Non‐financial terms  c. Both  d. Subjective matter  2. Budget is prepared for a………………… a. Indefinite period  b. Definite period  c. Period of one year  d. Six months  3. A budget is tool which helps the management in planning and control  of………………… a. All business activities  b. Production activities  c. Purchase activities  d. Sales activities  4. Revision of budgets is………………… a. Unnecessary  b. Can’t determine  c. Necessary  d. Inadequate data  5. Frequent revision of budgets will………………… a. Affects its reliability  b. Increase the accuracy  c. Both  d. Subjective matter 6. Usually the production budget is stated in terms of………………… a. Money  b. Quantity  c. Both  d. None  7. Budget period is the………………… a. Period of budget committee  b. Period of budget centres  c. Period for which a budget is prepared  d. Period of budget officer  8. Budget period depends upon………………… a. The type of budget  b. The nature of business  c. The length of trade cycles  d. All of these  9. A key factor is one which restricts………………… a. The volume of production  b. The volume of sales  c. The volume of purchase  d. All of the above  10. Key factor is also known as………………… a. Limiting factor  b. Governing factor  c. Principal factor  d. All  11.Budget relating to the key factor is prepared………………… a. After other budgets  b. With other budgets  c. Before other budgets  d. None  12. The budgets are classified on the basis of………………… a. Time  b. Function  c. Flexibility  d. All 13. An example of long period budget is………………… a. R & D budget  b. Master budget  c. Sales budget  d. Personnel budget  14. Sales budget shows the sales details as………………… a. Month wise  b. Product wise  c. Area wise  d. All of the above  15. Production budget is………………… a. Dependent on purchase budget  b. Dependent on sales budget  c. Dependent on cash budget  d. None  Answers : 1. c. Both  2. b. Definite period  3. a. All business activities  4. c. Necessary  5. a. Affects its reliability  6. c. Both  7. c. Period for which a budget is  prepared  8. d. All of these  9. a. The volume of production  10. d. All  11. c. Before other budgets  12. d. All  13. a. R & D budget  14. d. All of the above  15. b. Dependent on sales budget  Select the most appropriate answers from the alternatives given below  and rewrite the sentences : 1. Budgetary control system acts as a friend, philosopher and guide to  the………………… a. Management  b. Share holders  c. Creditors  d. Employees  2. Budgetary control system defines the objectives and policies of  the………………… a. Production department  b. Finance department  c. Marketing department  d. All  3. Budgetary control system facilitates centralized control with………………… a. Decentralized activity  b. Centralized activity  c. Both  d. None  4. Budgetary control facilitates easy introduction of the………………… a. Marginal costing  b. Ratio analysis  c. Standard costing  d. Subjective matter  5. Budgetary control helps the management in………………… a. Obtaining bank credit  b. Issue of shares  c. Getting grants from government  d. All of these 6. Budgetary control system helps the management to eliminate ……………… a. Undercapitalization  b. Overcapitalization  c. Both  d. Subjective matter  7. Budgetary control provides a basis for………………… a. Bonus shares  b. Rights shares  c. Remuneration plans  d. None  8. Budgetary control helps to introduce a suitable incentive and remuneration  based on………………… a. Changes in government policies  b. Inflationary conditions  c. Both  d. None  9. Budgetary control __________ replace management in decision‐making.  a. Can  b. Cannot  c. Sometimes  d. Inadequate data  10. The success of budgetary control system depends upon the willing  cooperation of………………… a. Shareholders  b. Management  c. Creditors  d. All the functional areas of management  11. Recording of actual performance is….……………… a. An advantage of budgetary control  b. A step in budgetary control  c. A limitation of budgetary control  d. None 12. The main objective of budgetary control is………………… a. To define the goal of the firm  b. To coordinate different departments  c. To plan to achieve its goals  d. All of the above  13. A budget centre is………………… a. Department or part of the department  b. Meeting place for budget committee  c. Office of the budget officer  d. None  14. The budget committee consists of………………… a. Managers  b. Budget officers  c. Creditors  d. Both  15. Fixed budget is useless for comparison when the level of  activity………………… a. Increases  b. Fluctuates both ways  c. Decreases  d. Constant  Answers : 1. a. Management  2. d. All  3. c. Both  4. c. Standard costing  5. a. Obtaining bank credit  6. c. Both  7. c. Remuneration plans  8. b. Inflationary conditions  9. b. Cannot  10. d. All the functional areas of management 11. b. A step in budgetary control  12. c. To plan to achieve its goals  13. a. Department or part of the  department  14. b. Budget officers  15. b. Fluctuates both ways  Select the most appropriate answers from the alternatives given below  and rewrite the sentences : 1. P/V Ratio is mainly known as ______________. (a) Contribution to Sales Ratio (b) Contribution Margin Ratio (c) Variable Profit Ratio (d) All of the above 2. ______________ that point where no profit or no loss position is observed. (a) Centre Point (b) BEP (c) Starting Point (d) Ending Point 3. ______________ is the difference between sales revenue and variable cost. (a) P/V Ratio (b) BEP (c) MOS (d) Contribution 4. Contribution is also called as ______________. (a) P/V Ratio (b) Net Margin (c) MOS (d) Gross Margin 5. ______________ is the difference between actual sales or output and the  break even sales. (a) P/V Ratio (b) Net Margin (c) MOS (d) Gross Margin 6. If contribution is ` 3,00,000 and Sales is ` 10,00,000, then what is P/V  Ratio? (a) 20% (b) 30% (c) 33.33% (d) 1/3 7. If P/V Ratio is 25%, then what is the % of Variable Cost? (a) 70% (b) 80% (c) ¾ (d) ½ 8. If Fixed Cost is ` 2,50,000 and P/V Ratio is 60%, then what is BEP in ` ? (a) ` 4,16,667 (b) ` 3,83,333 (c) ` 3,75,000 (d) ` 4,10,000 9. If Fixed Cost is ` 2,50,000 and Profit is ` 3,50,000, then what is the amount  of Contribution? (a) ` 1,00,000 (b) ` 6,00,000 (c) ` 3,75,000 (d) ` 4,10,000 10. If Sales are ` 50,000 and P/V Ratio is 20%, then what is the amount of  Variable Cost? (a) ` 40,000 (b) ` 10,000 (c) ` 25,000 (d) ` 30,000 11. If contribution is ` 3,00,000 and Profit is ` 1,00,000, then what is the  amount of Fixed Cost? (a) ` 4,00,000 (b) ` 2,00,000 (c) ` 2,50,000 (d) ` 3,00,000 12. If Sales are ` 3,00,000 and P/V ratio is 20%, then what is the amount of  Variable Cost? (a) ` 2,40,000 (b) ` 80,000 (c) ` 2,70,000 (d) ` 2,00,000 13. The correct formula of Contribution is ______________. (a) Contribution = Sales – Variable Cost (b) Contribution = Fixed Cost + Profit or – Loss (c) Contribution = Sales × P/ V Ratio (d) All of the above 14. The correct formula of P/V Ratio is ____________. (a) P/ V Ratio = [Contribution/Sales ] × 100 (b) P/ V Ratio = [Change in Profit/Change in Sales ] × 100 (c) P/ V Ratio = [Sales−Variable Cost/Sales] × 100 (d) All of the above 15. ______________ is the budget in which adjustment is possible according to  change in business conditions. (a) Flexible Budget (b) Fixed Budget (c) Sales Budget (d) Cash Budget 16. When forecasts about budget shows greater revenue to be received or  generated than the expenses to be incurred during budgeted period that  is known as ______________. (a) Surplus Budget (b) Best Budget (c) Favourable Budget (d) Non-favourable Budget 17. ______________ budget highlights that the expenditures to be incurred in  budget period will be greater than the revenues to be received during the   same period. (a) Surplus Budget (b) Deficit Budget (c) Favourable Budget (d) Non-favourable Budget 18. Fixed Budget is also known as ______________. (a) Static Budget (b) Standard Budget (c) Master Budget (d) Flexible Budget 19. Normal Profit means ______________. (a) No Profit No Loss (b) Less Profit (c) Expected Profit (d) None of the above 20. Personnel Budget is also called as ______________. (a) Cost Budget (b) Labour Budget (c) Employee Budget (d) None of the above 21. In cash budget, ______________ transactions are considered. (a) Cash (b) Credit (c) all financial (d) None of the above 22. Budget is prepared for a ______________ period of time. (a) Fixed (b) One Month (c) One Year (d) None of the above 23. Purchase Budget is also called as ______________. (a) Production Budget (b) Material Budget (c) Cost Budget (d) None of the above 24. ______________ is the plan of proposed investment in the fixed assets. (a) Fixed Budget (b) Capital Expenditure Budget (c) Cash Budget (d) Purchase Budget Answers : 1. (a) Contribution to Sales  Ratio 2. (b) BEP 3. (d) Contribution  4. (d) Gross Margin 5. (c) MOS  6. (b) 30% 7. (c) ¾  8. (a) ` 4,16,667 9. (b) ` 6,00,000  10. (a) ` 40,000  11. (b) ` 2,00,000  12. (a) ` 2,40,000  13. (d) All of the above  14. (d) All of the above 15. (a) Flexible Budget  16. (a) Surplus Budget  17. (b) Deficit Budget  18. (a) Static Budget 19. (a) No Profit No Loss  20. (b) Labour Budget 21. (c) all financial  22. (c) all financial 23. (b) Material Budget  24. (b) Capital Expenditure Budget Thank you so much Regards : Sana Farooqui