Management Accounting for Decision Making

Prof. M S Narasimhan
Practice Questions

Week 2 – Practice Questions

The following questions are for your practice. These will not count towards your grade.

1. Which one of the following industry is likely to use JOB Costing?

A. Sugar Manufacturer
B. Telecom Service Provider
C. Audit Firm
D. Grain Dealer

2. Which one of the following is not likely to use JOB Costing?

A. Transport Service Provider

B. Construction company
C. Law Firm
D. Automobile Service Station

3. Which one of the following industry is likely to use PROCESS Costing?

A. Movie Production House

B. Cement manufacturer
C. Management Consultants
D. Interior Decorator

4. Which one of the following industry is not likely to use PROCESS Costing?

A. Power Generating Company

B. Book Publishing Company
C. Tractor manufacturer
D. E-Commerce Retailer

5. Under which method(s) of job costing, direct material is charged on actual basis?
I. Normal Job Costing

II. Actual Job Costing

III. Standard Job Costing

© All Rights Reserved. This document has been authored by Prof M S Narasimhan and is permitted for use only within the course "Management
Accounting for Decision Making" delivered in the online course format by IIM Bangalore. No part of this document, including any logo, data,
illustrations, pictures, scripts, may be reproduced, or stored in a retrieval system or transmitted in any form or by any means – electronic,
mechanical, photocopying, recording or otherwise – without the prior permission of the author.
 Management Accounting for Decision Making
Prof. M S Narasimhan
Practice Questions

A. I and II
B. II and III
C. III and I
6. National Highways Authority has invited tender for an elevated road project. Your
company wants to participate in the tender. Which of the following job costing method
will be used by your costing department?

A. Normal Job Costing

B. Actual Job Costing
C. Standard Job Costing

7. Which one of the following statements is true for normal job costing?

A. Both direct and indirect costs are on actual basis

B. Both direct and indirect costs are on budgeted basis
C. Direct costs are on budgeted basis and indirect costs are on actual basis
D. Indirect costs are on budgeted basis and direct costs are on actual basis

8. Which one of the following company would find customer costing relevant?

A. Fertilizer Manufacturer
B. Customised Plastic Bottle manufacturer
C. Business School
D. Automobile Service Station

9. Equivalent unit refers to ___________.

A. Partially completed units expressed as full unit

B. Fully completed units
C. Machine hours related to partially completed units
D. Budgeted Material Quantity per unit

10. Using the following information, compute the conversion cost.

Direct Material Cost: 50000;

Direct Labour: 10000

© All Rights Reserved. This document has been authored by Prof M S Narasimhan and is permitted for use only within the course "Management
Accounting for Decision Making" delivered in the online course format by IIM Bangalore. No part of this document, including any logo, data,
illustrations, pictures, scripts, may be reproduced, or stored in a retrieval system or transmitted in any form or by any means – electronic,
mechanical, photocopying, recording or otherwise – without the prior permission of the author.
 Management Accounting for Decision Making
Prof. M S Narasimhan
Practice Questions

Manufacturing Overhead: 60000;

Administrative Expenses: 5000:

Selling Expenses: 20000;

Distribution Expenses: 8000

A. 128,000
B. 148,000
C. 120,000
D. 70,000

11. The following are related to conversion cost: Opening WIP: 100 units (20%
completed); New units taken up during the period: 500 units; Closing WIP: 50 units
(80% completed). The Equivalent Units is equal to:

A. 550 Units
B. 600 Units
C. 590 Units
D. 540 Units

12. Refer the input given in the above question. You have the following additional
information: Value of Opening Work-in-process: 2000; Expenses incurred during the
period: 40,000. The cost per EU

A. 71.19
B. 70.00
C. 72.73
D. None of the above

© All Rights Reserved. This document has been authored by Prof M S Narasimhan and is permitted for use only within the course "Management
Accounting for Decision Making" delivered in the online course format by IIM Bangalore. No part of this document, including any logo, data,
illustrations, pictures, scripts, may be reproduced, or stored in a retrieval system or transmitted in any form or by any means – electronic,
mechanical, photocopying, recording or otherwise – without the prior permission of the author.
 Management Accounting for Decision Making
Prof. M S Narasimhan
Practice Questions

13. Normal losses are charged to:

A. Completed units
B. Work-in-process
C. Both completed units and work-in-process
D. Profit and Loss Account directly

14. Treating abnormal loss as normal loss leads to:

A. Increase in profit
B. Decrease in profit
C. No change in profit
D. Unrelated to profit

15. Which of the following statements is true for joint-products?

A. An outcome of the same raw material and process/operations.

B. May often require further processing.
C. Cannot be produced separately.
D. All of the above

Answer: 1-C, 2-A, 3-B, 4-B, 5-A, 6-C, 7-D, 8-B, 9-A, 10-D, 11-C, 12-A, 13-C, 14-A, 15-D

© All Rights Reserved. This document has been authored by Prof M S Narasimhan and is permitted for use only within the course "Management
Accounting for Decision Making" delivered in the online course format by IIM Bangalore. No part of this document, including any logo, data,
illustrations, pictures, scripts, may be reproduced, or stored in a retrieval system or transmitted in any form or by any means – electronic,
mechanical, photocopying, recording or otherwise – without the prior permission of the author.