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50+ CA Inter Costing MCQs (New Syllabus 2024) : Budgetary Control

Sandeep Arora Sir at KCC Tutorials provides the best free CA Inter MCQs and Objectives for Costing - Budgetary Control for 2024 New Syllabus

CA Intermediate Costing/Cost and Management Accounting Exams

50+ Free Multiple Choice Questions and Answers (Objective Type) - Past Years

Cost Sheet - Past Years Multiple Choice Questions & Answers (MCQs) 2024 New Syllabus

1) A document which sets out the responsibility of the persons engaged in the routine of and the procedures, forms and records required for budgetary control is called —
a) Budget centre
b) Budget report
c) Budget controller
d) Budget manual

2) A budget that gives a summary of all the functional budgets and budgeted statement of profit and loss is called —
a) Flexible budget
b) Master budget
c) Performance budget
d) Zero base budget.

3) Budget which remains unchanged regardless of the actual level of activity is known as:
a) Fixed budget
b) Functional budget
c) Flexible budget
d) Cash budget.

4) A factor which limits the activities of an undertaking and which is taken into account while preparing budget is known as —
a) Budget manual
b) Budget controller
c) Budget key factor
d) Budget centre.

5) If a company wishes to establish a factory overhead budget system in which estimated costs can be derived directly from estimates of activity levels, it should prepare a:
a) Master budget
b) Cash budget
c) Flexible budget
d) Fixed budget

6) The classification of fixed and variable cost is useful for the preparation of:
a) Master budget
b) Flexible budget
c) Cash budget
d) Capital budget

7) Budget manual is a document:
a) Which contains different type of budgets to be formulated only.
b) Which contains the details about standard cost of the products to be made.
c) 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.
d) None of the above

8) The budget control organization is usually headed by a top executive who is known as:
a) General manager
b) Budget director/budget controller
c) Accountant of the organization
d) None of the above

9) “A favourable budget variance is always an indication of efficient performance”. Do you agree, give reason?
a) A favourable variance indicates, saving on the part of the organization hence it indicates efficient performance of the organization.
b) Under all situations, a favourable variance of an organization speaks about its efficient performance.
c) A favourable variance does not necessarily indicate efficient performance, because such a variance might have been arrived at by not carrying out the expenses mentioned in the budget.
d) None of the above.

10) A budget report is prepared on the principle of exception and thus-
a) Only unfavourable variances should be shown
b) Only favourable variance should be shown
c) Both favourable and unfavourable variances should be shown
d) None of the above

11) Purchases budget and materials budget are same:
a) Purchases budget is a budget which includes only the details of all materials purchased
b) Purchases budget is a wider concept and thus includes not only purchases of materials but also other item’s as well
c) Purchases budget is different from materials budget; it includes purchases of other items only
d) None of the above

12) Efficiency ratio is:
a) The extent of actual working days avoided during the budget period
b) Activity ratio/ capacity ratio
c) Whether the actual activity is more or less than budgeted activity
d) None of the above

13) Activity Ratio depicts:
a) Whether actual capacity utilized exceeds or falls short of the budgeted capacity
b) Whether the actual hours used for actual production were more or less than the standard hours
c) Whether actual activity was more or less than the budgeted capacity
d) None of the above

14) Which of the following is usually a short-term budget:
a) Capital expenditure budget
b) Research and development budget
c) Cash budget
d) Sales budget

15) _______ is prepared for the estimation of plant capacity to meet the budgeted production during the budgeted period.
a) Production planning budget
b) Plant layout budget
c) Plant utilization budget
d) Plant capacity estimation budget

16) A factor which will limit the activities of an undertaking and which is taken into account in preparing budgets, is termed as :
a) Environmental factor
b) Governing factor
c) Principal budget factor
d) All of the above

17) A method of budgeting whereby all activities are re-evaluated each time a budget is set. Discrete levels of each activity are valued and a combination chosen to match funds available, it is termed as :
a) Zero-Based Budgeting
b) Programme Budgeting
c) Performance Budgeting
d) Flexible Budget

18) Which of the following items appears in a cash budget ?
a) Capital expenditure
b) Provision for doubtful debts
c) Depreciation
d) Accrued expenditure

19) A budget which is prepared in a manner so as to give the budgeted cost for any level of activity is known as :
a) Master budget
b) Zero base budget
c) Level budget
d) Flexible budget

20) _______ is attainable under standard conditions.
a) Basic Budget
b) Current Budget
c) Zero Base Budget
d) Fixed Budget

21) Rajesh Ltd., produces and sells a single product. Sales budget for the current year (quarter wise) is as follows:
Quarter Units to be Sold
I 24,000
II 30,000
III 33,000
IV 36,000
The year is expected to be opened with an inventory of 8,000 units of finished product and closed with an inventory of 13,000 units of finished product.
Production is customarily scheduled to provide for two-thirds of the current quarter’s sales demand plus one-third of the immediately following quarter’s demand. The required production for Quarter IV would be :
a) 32,000 units
b) 37,000 units
c) 33,000 units
d) 35,000 units

22) ABC Ltd. is currently reviewing its cash budget for the year ended 31st March, 2020. An extract from its sales budget for the same year shows the following sales values :
Month Rs.
March 60,000
April 70,000
May 55,000
June 65,000
40% of its sales are expected to be for cash. Out of its credit sales, 70% are expected to pay in the month after sale and take a 2% discount. 27% are expected to pay in the second month after the sale and the remaining 3% are expected to be bad debts. The value of sales to be shown in the cash budget for May 2019 is :
a) Rs. 66,532
b) Rs. 61,120
c) Rs. 60,532
d) Rs. 86,620

23) Which of the following will not appear in cash budget ?
a) Machinery bought without down payment on hire purchase
b) Depreciation of Plant & Machinery
c) Sales revenue from business
d) Wages paid to workers

24) Budgetary control involves all but not one of the following. Find that one :
a) Modifying future plans
b) Analyzing differences
c) Using static budgets
d) Determining differences between actual and planned results

25) Estimated wages for January 2020, are Rs. 4,000 and Estimated wages for February 2020, are Rs. 4,400. If the company’s practice is to delay a payment of wages is half a month, the amount of wages to be considered in the actual cash budget for the month of February, 2020 is :
a) Rs. 4,000
b) Rs. 4,400
c) Rs. 4,600
d) Rs. 4,200

26) Budgeted sales of X for March are 18,000 units. At the end of the production process for X, 10% of production units are scrapped as defective. Opening inventories of X for March are budgeted to be 15,000 units and closing inventories will be 11,400 units. All inventories of finished goods must have successfully passed the quality control check. The production budget for X for March, in units is :
a) 12,960
b) 14,400
c) 15,840
d) 16,000

27) The following information extracted from the records of P Ltd.
Sales for October, November and December, 2018 are Rs. 90,000, Rs. 1,10,000 and Rs. 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 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 cash budget for the month of December?
a) Rs. 92,990
b) Rs. 1,23,174
c) Rs. 95,609
d) Rs. 1,25,793

28) Which of the following is not a step for successful implementation of the budgetory control system?
a) Budget manual
b) Budget controller
c) Budget period
d) Budget standard

29) 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 physical and financial aspects of every programme, 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 and (R) is not the correct explanation of (A)
c) (A) is true, but (R) is false
d) (A) is false, but (R) is true

30) Under Balance Sheet Method of preparing cash budget, budget is prepared on the basis of:
a) Current year balance sheet
b) Previous year balance sheet
c) Forecasted balance sheet
d) Consolidated balance sheet

Answer Key

  1. d) Budget manual
  2. b) Master budget
  3. a) Fixed budget
  4. c) Budget key factor
  5. c) Flexible budget
  6. b) Flexible budget
  7. c) 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.
  8. b) Budget director/budget controller
  9. c) A favourable variance does not necessarily indicate efficient performance, because such a variance might have been arrived at by not carrying out the expenses mentioned in the budget.
  10. c) Both favourable and unfavourable variances should be shown
  11. b) Purchases budget is a wider concept and thus includes not only purchases of materials but also other item’s as well
  12. b) Activity ratio/ capacity ratio
  13. c) Whether actual activity was more or less than the budgeted capacity
  14. c) Cash budget
  15. c) Plant utilization budget
  16. c) Principal budget factor
  17. a) Zero-Based Budgeting
  18. a) Capital expenditure
  19. d) Flexible budget
  20. a) Basic Budget
  21. b) 37,000 units
  22. c) Rs. 60,532
  23. b) Depreciation of Plant & Machinery
  24. c) Using static budgets
  25. d) Rs. 4,200
  26. d) 16,000
  27. a) Rs. 92,990
  28. d) Budget standard
  29. c) (A) is true, but (R) is false

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