1) Which of the below is an asset?

a) Accounts Receivable
b) Accounts payable
c) Advance Income
d) Outstanding Expense

2) Which concept states that revenue can be recorded when earned not when the cash is received and
expense can be recorded when incurred and not when cash is paid

a) Dual Aspect concept

b) Accrual concept
c) Matching Concept
d) Realisation concept

3) Which of the below expense is termed as cash less expense

a) Travel Expense
b) Salary expense
c) Depreciation
d) Purchase of raw material

4) Which of the below is a liability

a) Inventory
b) Bank Loan
c) Land
d) Cash

5) Which concept tells about expenses incurred during a period to be recorded in the same period in
which revenues are earned

a) Dual Aspect concept

b) Accounting period Concept
c) Matching concept
d) Realisation concept

6) Cash outflow resulting due to selling of a land will be mentioned under

a) Financing cash flow

b) Investing cash flow
c) Operating Cash flow
d) Terminal cash flow

7) Cash outflow resulting due to repayment of loan will be mentioned under

a) Financing cash flow

b) Investing cash flow
c) Operating Cash flow
d) Terminal cash flow
8) Based on the below information calculate the total shareholders’ equity

Total Current Assets – Rs 80000

Total Noncurrent Assets – Rs 120000

Total Non-Current liability – Rs 75,000

Total Current Liability – Rs 65,000

a) Rs 65000
b) Rs 60000
c) Rs 200000
d) Rs 80000

9) Advance salary paid to an employee is a

a) Asset
b) Expense
c) Income
d) Liability

10) Which of the below forms of ownership has unlimited liability

a) Sole proprietorship
b) Private Limited
c) Public Limited
d) One person company

11) Which of the below is an Activity ratio

a) Debt Equity Ratio

b) Inventory Turnover ratio
c) Price Earnings Ratio
d) Earnings per Share

12) The net profit margin of a company is 12% on a sales of Rs 240000. If the total outstanding shares
are 2000 what will be the Earnings per share.

a) 28.8
b) 14.4
c) 12
d) 10

13) Which of the below ratio indicates the financial leverage of a company

a) Net profit Margin

b) Debt equity Ratio
c) Price Earnings Multiple
d) Inventory turnover ratio
14) The value of PE ratio is 10 and the Earnings per share is 20. What is the price of the share

a) Rs 200
b) Rs 2000
c) Rs 20
d) Rs 2

15) Which of the below is a solvency ratio

a) Interest coverage Ratio

b) Receivable turnover ratio
c) Current Ratio
d) Earnings Per share

16) Which of the below ratio is preferred to have a lower value

a) Inventory Turn over

b) Asset Turnover
c) Receivable Turnover
d) Payable Turnover

17) If net profit margin is 12% and Asset turnover is 1.5. What is the Return on Assets?

a) 8%
b) 18%
c) 15%
d) 10%

18) Calculate the prime cost based on the information given.

Direct Material - Rs 2000

Direct Labor – Rs 3000

Manufacturing overhead – Rs 2000

Selling and Admin overhead – Rs 3000

a) Rs 2000
b) Rs 5000
c) Rs 7000
d) Rs 10000

19) The potential benefit that is given up when one alternative is selected over the other is called

a) Opportunity cost
b) Variable cost
c) Direct cost
d) Sunk Cost
20) The cost that has already been incurred and that cannot be changed by any decision made now or in
the future is called

a) Opportunity cost
b) Variable cost
c) Direct cost
d) Sunk Cost

21) Contribution is calculated using which of the below formula

a) Contribution = Sales – fixed cost – variable cost

b) Contribution = Sales – fixed cost
c) Contribution = Sales – variable cost
d) Contribution = Fixed cost – Variable cost

22) What is the break even in units if the selling price is Rs 30 per unit, variable cost is Rs 15 per unit and
the fixed cost is Rs 4500

a) 30
b) 200
c) 300
d) 150

23) The fixed cost is Rs 5000, the selling price is Rs 200 and the variable cost is Rs 100. If the variable cost
increase by Rs 50 by how many units will the breakeven increase.

a) 100
b) 50
c) 200
d) 75

24) The contribution is Rs 50 per unit. The breakeven is 80 units. How many units should be sold to have
a profit of Rs 1000

a) 20
b) 100
c) 60
d) 120

25) The fixed cost is Rs 10000 and the total variable cost is Rs 3000. How much Sales should be made to
break even?

a) Rs 15000
b) Rs 7000
c) Rs 13000
d) Rs 20000

26) The selling price is Rs 200 and the variable cost is Rs 150. What is the contribution margin ratio

a) 50
 b) 0.25
c) 25
d) 1.5

27) In decision making, the cost that can be avoided by choosing one alternative over other is called as

a) Relevant cost
b) Irrelevant cost
c) Sunk cost
d) Unavoidable cost

28) Which of the following cost is NOT relevant when considering the closure of a department in a
factory?

a) Variable overhead
b) Fixed Overhead
c) Direct material
d) Direct labor

29) Cash Conversion Cycle =

a) Debtor Days + Inventory Days + Creditor Days

b) Debtor Days - Inventory Days – Creditor Days
c) Debtor Days + Creditor Days – Inventory Days
d) Debtor Days + Inventory Days – Creditor Days

30) Cash Flow statement is prepared to ascertain

a) Closing Cash Balance of the company

b) Cash position of the company
c) Cash Flow of different activities in the company
d) The financial position of the company

31) Which of the below cash flow is not good for the company?

a) Cash Outflow under Investment

b) Cash Inflow under Financing
c) Cash Inflow under Investment
d) Cash Outflow under Operations

32) Increase in loan in a year is an example of

a) Cash Outflow under Financing

b) Cash Outflow under Investment
c) Cash Inflow under Financing
d) Cash Outflow under Operation

33) The only fixed asset which does not depreciates is

 a) Cash
b) Vehicles
c) Land
d) Good Will

34) Liquidity Ratio helps the analyst to understand the

a) Profitability of the company

b) Efficiency of the company
c) Expense as a % on sales
d) Organization’s debt meeting ability

35) If net profit is Rs. 35,000 after writing off good will Rs. 6,000 and loss on sale of furniture Rs. 1,000,
cash flow from operating activities will be

a) Rs. 42000
b) Rs. 36000
c) Rs. 41000
d) Rs. 28000

36) Why is it important to identify the most appropriate cost drivers for a particular product?

a) So managers can identify the activities necessary to manufacture a produce

b) So managers can control product costs better
c) So managers can maximize the revenue
d) So managers can minimize the wastages

37) As cost driver level decreases in the relevant range, fixed costs per unit of cost driver __________,
but total fixed costs ____________

a) Increases, do not change

b) Decreases, do not change
c) Do not change, Increases
d) Do not change, Decrease

38) Which of the following is a fixed cost?

a) Fuel used by delivery trucks

b) Packing materials
c) Manufacturing manager salary
d) Raw material cost

39) A compensation plan where the sales force is paid salary plus commission is a

a) Variable cost
b) Fixed cost
c) Mixed cost
d) Step cost
40) A company has a net profit of Rs 4000 and it pays Rs 5 per share as dividend for a total of 100 shares.
What is the dividend payout ratio

a) 0.00125
b) 0.125
c) 12.5
d) 5

41) In a company, which budget is the first to be prepared in the budgeting process

a) Cash budget
b) Sales Budget
c) Production budget
d) Capital Expenditure budget

42) A fixed budget is

a) A budget that never changes

b) A budget that considered only fixed cost
c) A budget that is set for a specified level of activity
d) A budget with no forecast

43) What is the minimum price below which a company may not accept a special order?

a) Lower than Total Cost

b) Lower than Fixed cost
c) Lower than Variable cost
d) Lower than Sunk cost

44) A tool for comparing actual and planned performance is

a) Master Budget
b) Production Budget
c) Variance Analysis
d) Flexible Budget

45) The Actual quantity consumed is 50 kg, the standard quantity is 40 kg and the stand price is Rs 100.
What is the Material Quantity variance?

a) Rs 1000 Unfavorable
b) Rs 1000 favorable
c) Rs 3000 Unfavorable
d) Rs 3000 Favourable

46) The actual and standard price are Rs 35 and Rs 40 respectively and the actual and standard quantity
are 500 kg and 450 kg respectively. What is the material price variance?

a) Rs 2500 Favorable
b) Rs 2500 Unfavorable
c) Rs 2250 Favorable
 d) Rs 2250 Unfavorable

47) The actual and standard labor hours are 42 mins/units and 54 mins per unit. The standard rate is Rs
50 per hour. What is the labour efficiency variance if 1000 units were produced

a) Rs 10000 Favorable
b) Rs 10000 Unfavorable
c) Rs 5000 Favorable
d) Rs 5000 Unfavorable

48) Which of the below can be the reason for an unfavorable material variance?

a) Overestimation of Standard cost

b) Employment of highly skilled labor
c) Reduced waste
d) Increased waste with increased price

49) Which of the below is an advantage of Activity based Costing

a) Accuracy in Cost allocation

b) Low cost of implementation
c) Less time to execute
d) Ease of Use

50) When closing inventory is given as adjustment which two accounts will be affected

a) Expense and Liability

b) Asset and Liability
c) Expense and Asset
d) Income and Asset

51) A firm buys products but does not pay to suppliers instantly. This is recorded as

a) Accounts Receivables b) Current Liabilities c) Accounts Payable d) Accumulated Earnings

52) Earnings that have a cumulative amount and are not paid to the stockholder as a dividend is known
as

a) Common Earnings
b) Preferred Earnings
c) Non-paid Earnings
d) Retained Earnings

53) Depreciation and Amortization are ________________ expenses

a) Manufacturing Expenses
b) Administrative Expenses
c) Non-Cash Expenses
d) One Time Expenses

54) Which one of the below is not a cash flow under financing activity?
 a) Raising cash through issuance of Equity Shares
b) Payment of Interest to loan
c) Cash received by selling land
d) Payment of dividend to Preference share holders

55) Turnover of Excel Ltd for Jan’21 is Rs. 1.5 Crores and in which Rs. 25 lakhs is a credit sale. The
company didn’t receive any cash from the prior month sales or it didn’t receive any advance for future
sale. The company received a loan amount of Rs. 2 crores. Which of the below statement is true?

a) Cash Inflow from Investment is Rs. 2 Crore

b) Cash Outflow under Financing is Rs. 2 Crore
c) Cash Inflow from Operation is Rs. 1.5 Crore
d) Cash Inflow from Operation is Rs. 1.25 Crore

56) Dividend is

a) Interest given on Equity share capital

b) Sharing of company’s liabilities
c) Given to bond holders
d) Appropriation of profits with the share holders

57) If the sale price of an asset is higher than the book value of the asset, then the difference is

a) Profit on sale of asset

b) Sales value
c) Loss on sale of asset
d) Cost for the company

58) A portion of long term loan which become due in the current year is called as

a) Long Term Liability

b) Fixed Asset
c) Provision
d) Short Term Liability

59) A company has a Net Profit of Rs. 50 lakhs. It has Preference Capital for Rs. 1 Crore with 10%
dividend commitment. The Earnings available for Equity share holders are

a) Rs. 50 Lakhs
b) Rs. Zero
c) Rs. 40 Lakhs
d) Rs. 25 Lakhs

60) A company shows Accounts Receivable and Accounts Payable in its book of accounts because of the
_____________ concept.

a) Accrual Concept
b) Consistency Concept
c) Matching Concept
d) Cost Concept
61) Company A has a PE multiple of 18 and Company B has a PE multiple of 21. Which company is better
for investment?

a) Company A is better
b) Company B is better
c) Both Company A and Company B
d) Neither of them

62) Stock Split will result in

a) Increase in number of shares and increase in market capitalization of the company

b) Increase in number of shares but not in the market capitalization of the company
c) Same number of share but increase in market capitalization of the company
d) No change in shares or market capitalization

63) ABC Ltd has 37% cost of goods sold on sales. PQR Ltd has 39% cost of goods sold on sales.

a) ABC Ltd is doing better compared to PQR

b) PQR Ltd is doing better than ABC Ltd
c) Both the companies are doing good
d) Data is insufficient

65) The variable cost remains same ______________ and the fixed cost remains same ______________

a) For a unit, for a particular period

b) For a particular period, for a unit
c) For a unit, for a unit
d) For a particular period, for a particular period

66) Which of the following is known as overhead cost

a) Direct labour
b) Direct material
c) Direct Packing cost
d) Indirect expenses

67) Basic objective of cost accounting is

a) Tax computation
b) Profit analysis
c) Cost analysis
d) Financial audit

68) Total of all direct cost is termed as

a) Prime cost
b) Works cost
c) Cost of sales
d) Cost of production
69) Cutical Limited produces nail brushes for domestic use. It sells 80,000 in a year. Raw materials cost
Rs. 0.15 per brush and other variable costs per year are Rs. 48,000. Fixed costs amount to Rs. 60,000.
What is the total cost per unit?

a) Rs. 1.50
b) Rs. 0.15
c) Rs. 1.35
d) Rs. 1.25

70) Which of the following type of cost are assumed to stay the same per unit, irrespective of the
volume of output?

a) Overhead
b) Relevant
c) Variable
d) Fixed

71) The break even point can be defined as

a) The level of activity where cash flow is zero

b) The level of activity at which there is neither profit nor loss
c) The level of activity where revenue is equal to fixed cost
d) The level of activity where revenue is equal to variable cost

72) A company has fixed costs of Rs. 50,000 and variable costs per unit of output of Rs. 8. If its sole
product sells for Rs. 18, what is the break-even quantity of output?

a) 5000
b) 2500
c) 3500
d) 6000

73) Contribution Margin is the difference between

a) Selling Price per Unit and Fixed cost per Unit

b) Variable cost per Unit and Fixed cost per Unit
c) Fixed cost per Unit and Variable cost per Unit
d) Selling Price per Unit and Variable cost per Unit

74) Which of the following costs would decrease if production levels increases within the relevant
range?

a) Total Fixed cost

b) Total Variable cost
c) Variable cost per unit
d) Fixed cost per unit

75) Tom & Jerry Ltd sells desks at Rs. 500 per desk. The variable cost is Rs. 300 per desk. The fixed cost is
Rs. 400,000. The contribution margin ratio is
 a) 40%
b) 30%
c) 50%
d) 60%

76) If selling price per unit increases, the break even point

a) Will remain same

b) Will increase
c) Will decrease
d) Insufficient data

77) The Tidel Corporation has fixed cost of Rs. 300,000, SP per unit is Rs. 20 and the VC per unit is Rs. 10.
If the fixed cost is increase to Rs. 600,000 then the Break Even point would increase by

a) 100%
b) 50%
c) 200%
d) 150%

78) Margin of safety is computed by

a) Present sales volume – Previous period sales volume

b) Present (or) projected sales volume – Break even sales volume
c) Break even sales volume – Present (or) projected sales volume
d) Present (or) projected sales volume – Fixed Cost

79) Which of the following would decrease the unit contribution the most?

a) 15% decrease in selling price

b) 15% increase in variable cost
c) 15% decrease in variable cost
d) 15% decrease in fixed cost

80) Which of the following steps are part of the activity based costing process?

a) Allocating direct cost to the product line

b) Identifying the target cost for a product
c) Identifying the cost drivers for cost pool
d) Working out the theoretical and practical capacity

81) Plant utilization budget and manufacturing overhead budget are types of

a) Sales Budget
b) Cash Budget
c) Cost Budget
d) Purchase Budget

82) A budgeting process which demands each manager to justify his entire budget in detail from
beginning is
 a) Functional Budget
b) Master Budget
c) Zero Base Budget
d) Cash Budget

83) _________ is stated as a budget which is made to change as per the levels of activity attained.

a) Fixed Budget
b) Flexible Budget
c) Master Budget
d) Cash Budget

84) ____________, Co-ordination and control are three basis aspects concerned with budgetary control.

a) Cenralizing
b) Planning
c) Capitalizing
d) Socializing

85) The budget prepared according to __________ is known as functional budgets

a) Period
b) Control
c) Function
d) Complexity

86) ABC Company plans to sell of 96,000 units of TV’s is June. The Opening inventory is expected to be
10,000 units and the closing is expected to be 20,000 units for June. The number of units the company
has to manufacture in June is

a) 86,000 Units
b) 96,000 Units
c) 106,000 Units
d) 100,000 Units

87) ABC sells carpets on credit. Jan sales is Rs. 1 Crore, Feb Sales is Rs. 2 Crores. The collection pattern of
the receivables is 50% in the month of sales and 50% in the following month. What is the expected cash
collection for Feb.

a) Rs. 1 Crore
b) Rs. 2 Crore
c) Rs. 1.5 Crore
d) Rs. 0.5 Crore

88) Kangaroo Chemicals sells its products with the markup of 40% on its cost. If the company’s turnover
is Rs. 14,00,000. Then the cost of goods sold is

a) Rs. 8.4 lakhs

b) Rs. 9.4 lakhs
c) Rs. 10 lakhs
 d) Rs. 11 lakhs

89) The term ‘Financial Statement’ does not covers

a) Profit and Loss Statement

b) Balance Sheet
c) Budget
d) Cash Flow Statement

90) Which of the following statement is true?

a) Budget Preparation by organization is mandated by law

b) Budgets has to be filled by the CFO of the company to the Ministry of Corporate Affairs
c) Budget enhances the efficiency of the business operation
d) Budget does not add any value to the Organization

91) Which of the below activity will result in a cash inflow for the company?

a) Payment of salary
b) Purchase of Land
c) Borrowing loan
d) Payment of Dividend

1. Break-even analysis is also called?

(a) Business Analysis

(b) Unit sales

(c) Cost-Volume-Profit analysis

(d) None of the above

2. Break even capacity----------------------?

(a) Breakeven sales in dollar/Normal sales in dollar

(b) Normal sales in dollar/ Break even sales in dollar

(c) All of above

(d) None of above

3. Estimate sales in amount is____________________?

(a) FC+ Profit/Contribution margin per unit

(b) FC+ Profit/Contribution margin Ratio

(c) VC+ Profit/Contribution margin

(d) VC+ Profit/Contribution margin Ratio

4. To find the break-even in dollars, you have to divide the fixed cost by ____________?

(a) Variable cost

(b) Contribution Margin per unit

(c) Contribution Margin

(d) Contribution Margin ratio

5. The break-even point can be defined as?

(a) The level of activity at which there is neither profit nor loss

(b) The level of activity where cash flow is zero

(c) The level of activity where profits equal fixed costs

(d) The level of activity where variable costs are covered by sales revenue

6. The break-even point in units is represented by the equation?

(a) Fixed costs / Variable costs

(b) Fixed costs / selling price per unit

(c) (Sales revenue - Fixed costs) / Contribution per unit

(d) Fixed costs / Contribution per unit

7. If actual units produced are lower than the budgeted level of production which of the following types
of cost would you expect to be lower than the budget?

(a) Variable costs per unit

(b) Total variable costs

(c) Total fixed costs

(d) None

8. Costs that do not change when the activity base fluctuates are known as?

(a) Variable costs

(b) Discretionary costs

(c) Fixed costs

(d) Mixed costs

9. A company's telephone bill consisting of a Rs. 200 monthly base amount, plus long distance charges,
would be classified as a?

(a) Variable cost

(b) Committed fixed cost

(b) Discretionary fixed cost

(d) Mixed cost

10. A company has fixed costs of Rs. 50,000 and variable costs per unit of output of Rs. 8. If its sole
product sells for Rs. 18, what is the break-even quantity of output?

(a) Rs. 2,500

(b) Rs. 5,000

(c) Rs. 1,500

(d) Rs. 7,500

11. Fixed cost per unit increases when?

(a) Production volume decreases

(b) Production volume increases

(c) Variable cost per unit decreases

(d) None of the above

12. Contribution margin is also known as____________?

(a) Marginal income

(b) Gross profit

(c) Net income

(d) None of the above

13. Contribution margin is the difference between sales and____________?

(a) Variable cost

(b) Fixed cost

(c) Profit

(d) Revenue

14. An increase in variable costs?

(a) Increases P/V ratio

(b) Reduces the contribution margin

(c) Increase new profit

(d) None of above

15. Those cost that have both fixed and variable element are called________________?

(a) Variable cost

(b) Total fixed cost

(c) Semi variable cost

(d) Prime cost

16. Following are the uses of CVP analysis except?

(a) Estimating future profits

(b) Deciding on selling price for a product

(c) Analyzing margin of safety in budget

(d) Analyze cash flows

17. Which of the following costs would decrease if production levels were increase within the relevant
range?

(a) Total fixed costs

(b) Variable costs per unit

(c) Total variable costs

(d) Fixed costs per unit

18. The indicator that results in total revenues being equal to total cost is called the?

(a) Break-even point

(b) Marginal cost

(c) Profit mix

(d) Marginal volume

19. An example of a semi variable cost would be?

(a) The costs of insuring assets

(b) Electricity costs

(c) The salaries of supervisors in a department

(d) The costs of material to be used for production

20. Which of the following statements hold true for safety stock?

(a) The higher the profit margin per unit, the lower the safety stock necessary
(b) The lower the opportunity cost of the funds invested in inventory, the smaller the safety stock
needed

(c) The greater the risk of running out of stock, the larger the safety stock needed

(d) The greater the uncertainty associated with forecasted demand, the lower the level of safety stock
needed

1. A financial statement that summarizes company revenue and expenses is?

(a) Balance sheet

(b) Statement of owner equity

(c) Income statement

(d) Cash flow statement

2. Which one of the following tangible fixed assets would not normally be depreciated?

(a) Buildings

(b) Machinery

(c) Land

(d) Equipment

3. Which financial statement presents a summary of the Assets, Liabilities, and Owners' Equity of a firm?

(a) General ledger

(b) Work sheet

(c) Balance sheet

(d) Cash flow statement

4. Subtracting all expenses from revenues yields?

(a) Net profit/Loss

(b) Carrying value

(c) Long-term assets

(d) Net liabilities

5. A financial statement to show what a business owns and owes at a particular point in time?

(a) A cash flow statement

(b) The bank statement for the business

(c) A balance sheet

(d) A statement of retained earnings

6. If the Gross profit is Rs. 5,000 and the net profit is 25% of the Gross profit. The expenses must be?

(a) Rs. 3,750

(b) Rs. 1,250

(c) Rs. 4,150

(d) Rs. 6,250

7. A financial document that indicates the success or failure of a business trading over a period of time is
called?

(a) A cash flow statement

(b) A retained earnings statement

(c) An income statement

(d) A bank statement

8. The report of company that shows overall profit on the sale of their goods or the provision of their
services?

(a) Trading and Profit & loss account

(b) Cash flow statement

(c) Income Statement

(d) Both a and c

9. A company has, by the end of its financial period, paid out more Tax than it has to pay. How would
this be shown in the balance sheet?

(a) As an accrual Revenue

(b) As a Prepaid within current assets

(c) As a 'creditor due within one year'

(d) As a creditor due after more than one year'

10. Which of the following financial statements is also known as financial condition?

(a) Balance Sheet

(b) Income Statement

(c) Statement of Cash flows

(d) Bank Statement

>> Read Financial Statement.

MCQs 11 To 20

11. Prepaid interest given in the adjusted trial balance will be treated as a (an)?

(a) Asset

(b) Liability

(c) Revenue

(d) Deferred expense

12. Which of the following is the largest single expense of most merchandising firms?

(a) Cost of goods sold

(b) Rent Expense

(c) Amortization Expense

(d) Salaries Expense

13. The primary source of revenue for a wholesaler is?

(a) Investment income

(b) Service fees

(c) The sale of merchandise

(d) The sale of fixed assets the company owns

14. Retained earnings will change over time because of several factors. Which of the following factors
would explain a decrease in retained earnings?

(a) Net loss

(b) Net income

(c) Dividends

(d) Investments by stock holders

15. A Profit is earned if?

(a) Assets exceed Expenditure

(b) Income exceeds Expenditure

(c) Cash Inflow exceeds Cash Outflow

(d) Income exceeds Liabilities

16. What is the difference between the total incoming and the total outgoings?

(a) Net cash flow

(b) Cash inflow

(c) Direct cost

(d) Indirect cost

17. Which of the following is true regarding the income statement?

(a) The income statement is sometimes called the statement of operations

(b) The income statement reports revenues, expenses, and liabilities

(c) The income statement reports only revenue at the point of sale

(d) It shows financial position of a business at a particular period of time

18. Presents the revenue earned and expenses are incurred by an entity during a specific time period?

(a) Income statement

(b) Statement of owner equity

(c) Balance sheet

(d) None of them

19. The format of the balance sheet reflects which of the following?

(a) The basic accounting equation

(b) Worksheet

(c) Statement of Owner Equity

(d) Income statement

20. How is the balance sheet linked to the other financial statements?

(a) The beginning retained earnings balance on the statement of retained earnings becomes the amount
of retained earnings reported on the balance sheet

(b) Retained earnings is added to total assets and reported on the balance sheet
(c) Net income increases retained earnings on the statement of retained earnings, which ultimately
increases retained earnings on the balance sheet

(d) There is no link between the balance sheet and the other statements

21. The cost that behaves as irrelevant costs in process of decision making are classified as

a) Past costs
b) Future costs
c) Expected costs
d) Sunk costs

22. Why is it important to identify the most appropriate cost drivers for a particular product?

A) so managers can identify the activities necessary to manufacture a product

B) so managers can control product costs better

C) so managers can predict product costs better and make better decisions

D) B and C

23. A brainstorming group in the Research and Development area is charged with developing new

product ideas for the company. What is a good cost driver of the cost of this activity?

A) number of parts in new products proposed

B) number of new product proposals

C) number of workers

D) number of engineering hours

24. Janitors clean the factory at the end of each workday. The wages of the janitors are used to
determine

the cost of the only manufactured product in the factory. What is a good cost driver for the wages of the

janitors?

A) number of janitors

B) number of kilowatt hours used

C) number of machine hours on cleaning machines

D) number of labor hours worked by janitors

25. Cost drivers are ________.

A) the different functions in the value chain

B) different types of functional areas in the firm

C) measures of activities that require the use of resources and thereby cause costs

D) different types of cost calculations

26. Within the relevant range, the total amount of ________ cost changes in direct proportion to
changes in the cost driver. Within the relevant range, the total amount of ________ cost does not
change in direct proportion to changes in the cost driver.

A) fixed; variable

B) variable; fixed

C) step; mixed

D) mixed; step

27. Two types of costs that each combine fixed cost and variable cost behaviors are ________ and
________.

A) capacity costs; incremental costs

B) semi-fixed costs; semivariable costs

C) composite costs; average costs

D) step costs; mixed costs

28. In a small construction firm, a crew supervisor is added for every ten workers employed. The salaries

of the crew supervisors are a ________.

A) variable cost

B) mixed cost

C) step cost

D) fixed cost

29. A cost-volume-profit graph has a line for ________ and a line for ________.

A) revenues; variable costs only

B) revenues; fixed costs only

C) revenues; total costs

D) net profit; net loss

30. On a cost-volume-profit graph, at the point where the Total Revenue line intersects the Total Cost
line,

________.

A) net income is positive

B) net income is negative

C) net income is zero

D) not enough information is given