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financial accounting for managers
Accounting For Managers 2009 Edition Rama Gopal, CA. C. - Solutions
3. True or False With the help of CVP analysis, it is possible to decide which product is most profitable and least profitable.
2. True or False Break-even analysis is fundamentally a static analysis.
1. True or False CVP analysis helps the firm in understanding the impact of change in cost, volume and price on the behaviour of profit.
1. What is ‘Zero-Base Budgeting’? State its utility.
3. What do you mean Zero-Base Budgeting? How does it overcome the weaknesses of the conventional budgeting?
2. Justify Zero-Base Budgeting is superior to conventional budgeting. (17.1, 17.2, 17.3 and 17.5)
1. What is meant by Zero-Base Budgeting? What are the different steps involved in it and how is it useful to the business? Explain its limitations. (17.1 to 17.6)
2. Fill in the Blanks Zero-Base Budgeting is ideal for implementation in …….
1. Fill in the Blanks Zero-Base Budgeting overcomes the weaknesses of …..
8. True or False Zero-Base Budgeting cannot be applied in Government departmental budgets.
7. True or False Cost benefit analysis is the foundation for Zero-Base Budgeting.
6. True or False Non-manufacturing areas are suitable for implementation of Zero-Base Budgeting.
5. True or False Zero-Base Budgeting allows the continuation of ongoing projects, without any review and justification.
4. True or False In Zero-Base Budgeting, zero is taken as base.
3. True or False There is no difference between the conventional budgeting and Zero-Base Budgeting.
2. True or False In Zero-Base Budgeting, the focus of management is on analysis and decision-making.
1. True or False Zero-Base Budgeting is the latest technique of budgeting.
5. Which method of budgeting is preferred and explain the reasoning for preference?
4. What is a Master Budget?
3. What is a key factor in the context of Budgetary Control? What is its importance?
2. What is the importance of Budgetary Control in the current context?
1. What is ‘Budgetary Control’ and how is this achieved?
8. Compare Standard Costing with Budgetary Control and bring out the differences between them.
7. Detail the advantages and limitations of Budgetary Control. (16.7 and 16.11)
6. Bring out the differences between Fixed and Flexible Budget. (16.9)
5. Explain the classification of Budgets. (16.8)
4. Discuss the requisites of a good budgetary control system. Explain briefly the essential steps in setting up of a budgetary control system so that its working efficiency is ensured.(16.5 and 16.6)
3. What does Budgetary Control mean? Discuss, in brief, the objectives and advantages of budgetary control. (16.2 to 16.4, and 16.7)
2. Explain ‘Budget’ and ‘Budgeting’. Describe the characteristics of Budget. (16.2)
1. How Budget fulfils the needs of Modern Management? Explain the meaning of ‘Budget’and describe its characteristics. (16.1 and 16.2)
10. Budgets are shown in ……. Terms(a) Qualitative (b) Quantitative(c) Materialistic (d) both (b) and (c)
9. Which of the following is not an element of master budget?(a) Capital Expenditure Budget (b) Production Schedule(c) Operating Expenses Budget (d) All above(e) None of the above
8. Which of the following is not a potential benefit of using a budget?(a) Enhanced coordination of firm activities(b) More motivated managers(c) Improved interdepartmental communication(d) More accurate external financial statements
7. Which of the following is a long-term budget?(a) Master Budget (b) Flexible Budget(c) Cash Budget (d) Capital Budget
6. Materials become key factor, if(a) quota restrictions exist (b) insufficient advertisement prevails(c) there is low demand (d) there is no problem with supplies of materials
5. The difference between fixed cost and variable cost assumes significance in the preparation of the following budget.(a) Master Budget (b) Flexible Budget(c) Cash Budget (d) Capital Budget
4. The budget that is prepared first of all is …(a) Master budget (b) Budget, with key factor(c) Cash Budget (d) Capital expenditure budget
3. Sales budget is a …(a) expenditure budget(b) functional budget(c) Master budget
2. A flexible budget requires a careful study of(a) Fixed, semi-fixed and variable expenses(b) Past and current expenses(c) Overheads, selling and administrative expenses.
1. The basic difference between a fixed budget and flexible budget is that a fixed budget…….(a) is concerned with a single level of activity, while flexible budget is prepared for different levels of activity.(b) is concerned with fixed costs, while flexible budget is concerned with variable
26. True or False: Before the functional budgets are prepared, master budget is prepared.
25. True or False: Budgetary control has a macro-approach, while standard costing has a micro-approach.
24. True or False: A fixed budget is preferable to flexible budget.
23. True or False: Materials Budget and Purchase Budget mean one and the same.
21. True or False: Standard costing cannot be introduced when budgetary control is in operation.
20. True or False: Standard costing can operate without the support of budgetary control in any manner.
19. True or False: Raw materials supply can be a key factor.
18. True or False: The Master Budget is a summary budget, which incorporates all functional budgets in a summarised form.
17. True or False: Budget is drawn by the accountant of the organisation.
16. True or False: A budget is nothing but an estimate based on the past records.
15. True or False: A flexible budget is quickly recast based on changed volumes of activity.
14. True or False: On the basis of budget, next year’s financial statements–profit and loss account and balance sheet can be drawn up.
13. True or False: Standard Costing and Budgetary Control are not complementary to each other for achieving improved performance in an organisation.
12. True or False: Budgets are blueprints for action.
11. True or False: Budgeting is a technique for formulating budgets.
10. A budget manual is the summary of all functional budgets.
9. True or False: The principal factor is the starting point for the preparation of various budgets.
8. True or False: Sales budget, normally, is the most important budget among all budgets.
7. True or False: A flexible budget recognises the difference between fixed, semi-fixed and variable cost and is designed to change in relation to the change in level of activity.
6. True or False: A flexible budget is one, which changes from year to year.
5. True or False: Generally, budgets are prepared to coincide with the financial year so that comparison of the actual performance with budgeted estimates would facilitate better interpretation and understanding.
4. True or False: Budgetary control does not facilitate introduction of ‘Management by Exception’.
3. True or False: A key factor or principal factor does not influence the preparation of all other budgets.
2. True or False: To achieve the anticipated targets, Planning, Co-ordination and Control are the important main tasks of management, achieved through budgeting and budgetary control.
1. True or False: Budget is a means and budgetary control is the end result.
1. What is the purpose of Standard Costing and in what type of industries this is used?
9. Standard costing can be applied in every industry —Discuss.
8. Write the advantages and limitations of Standard Costing? (15.9 and 15.10)
7. Describe material cost variance and labour cost variance? (15.7 and 15.8)
6. What is meant by ‘Variance Analysis’? Whether all variances can be controlled? (15.6)
5. Explain the meaning of Variance Analysis and give a brief note on it. (15.6)
4. Write the preliminaries required for introducing a Standard Costing system in an organisation? (15.5)
3. Explain the different steps in the implementation of Standard Costing? (15.3)
2. What is Standard Costing? In what type of Industries, Standard Costing can be applied?(15.2)
1. Explain the terms “Historical Cost” and “Standard Cost? (15.1)
9. Labour efficiency variance is(a) (SH – AH) × SR (b) (SH + AH) × SR(c) (AH – SH) × SQ (d) (AH + SH + SQ)
8. Material cost variance is the sum of(a) Material quantity variance and Material yield variance(b) Material quantity variance and Material price variance(c) Material mix variance and Material yield variance (d) Material price variance and Material mix variance
7. The formula for material cost variance is:(a) (SP × SQ) – (AP × AQ) (b) (SP × AP) – (SQ × AQ)(c) (AP × AQ) – (SP × SQ) (d) (SP × AQ) – (AP × SQ)
6. Standard costing is useful for all of the following except(a) valuation of closing stock (b) application of ‘Management by exception’ principle(c) cost control (d) maintenance of accounts
5. Technique of evaluating deviations of actual cost from standard cost is called(a) Trend analysis (b) Variance analysis(c) Regression analysis (d) Linear programme
4. Which is the best standard to be adopted in implementing standard costing?(a) Ideal standard (b) Attainable standard(c) Base standard (d) Marginal standard
3. Variances can be divided into the following categories.(a) Controllable and uncontrollable variances(b) Favourable and unfavourable variances(c) Both (a) and (b)(d) None of the above
2. Under standard costing, the cost of product is determined on the basis of(a) historical cost(b) variable cost(c) fixed cost(d) predetermined cost, after technical assessment
1. Variance is(a) the sum of total cost and standard cost.(b) the standard cost(c) the difference between standard cost and actual cost(d) none of the above
32. True or False: Variance analysis is the difference between the standard cost and comparable actual cost during a given period.
31. True or False: Unfavourable variances are always uncontrollable.
30. True or False: Standard costs are compared with the actual costs to find out the differences between the two to analyse and determine the efficiency of the operations so that necessary remedial action may be taken, immediately.
29. True or False: A cost center is a location, person or item of equipment at which costs may be gathered, ascertained and used for the purpose of cost control.
28. True or False: Management can control inefficiencies on the fronts of quantity as well as costs through Standard Costing.
27. True or False: Study of technical aspects of a factory has no relation to the introduction of standard costing.
26. True or False: Standard costs are fixed by the trade association of the concerned industry.
25. True or False: Ideal standards do not create frustration among employees as they are easy to achieve.
24. True or False: Variances are divided into two categories, controllable variance and uncontrollable variance.
23. True or False: Standard costing and budgetary control are complementary to each other.
22. True or False: Ideal standard is based on the assumption of perfect performance, achievable in the normal course of events.
21. True or False: Specific person or department can be held responsible for uncontrollable variance.
20. True or False: Standard Costing is widely used as it is a very effective managerial tool for cost control.
19. True or False: In jobbing industries, standard costing cannot be applied in any of the operations as they are not repetitive and their nature differs.
18. True or False: Historical cost means predetermined cost.
17. True or False: Standards fixed under standard costing do not allow for wastages and any type of idleness, so they are highly theoretical.
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