Inter PN-12 Management Accounting Quiz 4

1. M Group has two divisions, Division P and Division Q. Division P manufactures an item that is transferred to Division Q. The item has no external market and 6,000 units produced are transferred internally each year. The costs of each division are as follows?Variable Cost Division P₹100 per unit Division Q ₹120 per unitFixed cost each year ₹1,20,000 ₹90,000 Head Office management decided that a transfer price should be set that provides a profit of ₹30,000 to Division P. What should be the transfer price per unit?

2. Method of pricing, when two separate pricing methods are used to price transfer of products from one subunit to another, is called:

3. Which one of the following is not considered as a method of Transfer Pricing?

4. In which of the following circumstances is there a strong argument that profit centre accounting is a waste of time?

5. Division P transfers its output to Division Q at variable cost. Once a year P charges a fixed fee to Q, representing an allowance for P’s fixed costs. This type of transfer pricing system is commonly known as:

6. The Eastern division sells goods internally to the Western division of the same company. The quoted external price in industry publications from a supplier near Eastern is ₹200 per ton plus transportation. It costs ₹20 per ton to transport the goods to Western. Eastern’s actual market cost per ton to buy the direct materials to make the transferred product is ₹100. Actual per ton direct labour is ₹50. Other actual costs of storage and handling are ₹40. The company president selects a ₹220 transfer price. This is an example of:

7. Method of pricing, when two separate pricing methods are used to price transfer of products from one subunit to another, is called:

8. Which one of the following is not considered as a method of Transfer Pricing

9. The sales and profit of a firm for the year 2021 are ₹1,50,000 and ₹20,000 and for the year 2022 are ₹1,70,000 and ₹ 25,000 respectively. The P/V Ratio of the firm is

10. X Ltd. has 1000 units of an obsolete item which are carried in inventory at the original price of ₹ 50,000. If these items are reworked for ₹ 20,000, they can be sold for ₹ 36,000. Alternatively, they can be sold as a scrap for ₹6,000 in the market. In a decision model used to analyze the reworking proposal, the opportunity cost should be taken as

11. XYZ Ltd. makes a special gadget for the car it manufactures. The machine for the gadget works to full capacity and incur ₹15 Lakhs and ₹40 Lakhs respectively as Variable and Fixed Costs. If all the gadgets were purchased from an outside supplier, the machine could be used to produce other items, which would earn a total contribution of ₹ 25 Lakhs. What is the maximum price that XYZ Ltd. should be willing to pay to the outside supplier for the gadgets, assuming there is no change in Fixed Costs?

12. Product A generates a contribution to sales ratio of 40%. Fixed cost directly attributable to Product A amounted to ₹60,000. The sales revenue required to achieve a profit of ₹15,000 is

13. The break-even point of a manufacturing company is ₹1,60,000. Fixed cost is ₹48,000. Variable cost is ₹12 per unit. The PV ratio will be:

14. PQR Ltd. manufactures a single product which it sells for ₹ 40 per unit. Fixed cost is ₹ 60,000 per year. The contribution to sales ratio is 40%. PQR Ltd.’s Break Even Point in units is

15. Which of the following costs would not be accounted for in a company’s recordkeeping system?

16. The profit at which total revenue is equal to the total cost is known as:

17. Relevant costs are:

18. The difference in total cost that results from two alternative courses of action is called:

19. What is the opportunity cost of making a component part in a factory given no alternative use of the capacity?

20. Contribution margin in marginal costing is also known as:

21. Which of the following assumptions are made while calculating marginal cost

22. While computing profit in marginal costing:

23. The costing method where fixed factory overheads are added to inventory is called:

24. Which of the following statements are true about marginal costing?

25. If the total cost of 1000 units is ₹ 60,000 and that of 1001 units is ₹60,400, then the increase of ₹400 in the total cost is: