Which of the following is the main objective of direct material budget?

• A) All of the given options
• B) Developing purchasing requirements
• C) Financial Arrangements
• D) Determination of minimum and maximum stock level

Production cost budget is also known as:

• A) Direct labor budget
• B) Manufacturing budget
• C) Factory overhead budget
• D) Direct material budget

When a budget is administered wisely, it will

• A) Discourage strategic planning
• B) Discourage managers and employees
• C) Eliminate coordination and communication between subunits
• D) Provide a framework for performance evaluation

When using a flexible budget, a decrease in production levels within a relevant range

• A) Increases total fixed costs
• B) Decreases variable cost per unit
• C) Increases variable cost per unit
• D) Decreases total costs

In which of the following way the last month closing inventory figure will be treated?

• A) As closing inventory of next month
• B) As opening inventory of next month
• C) Will not be carried forward
• D) As units sold for the same months

Consider the following data for the month of May:
Sales 150 units,Opening units 120 units,Closing 80 units
Based on the data, production in May will have to be?

• A) 190 units
• B) 150 units
• C) 50 units
• D) 110 units

Flexible budget is based on which of the following capacity?

• A) Expected Capacity
• B) Normal Capacity
• C) Theoretical Capacity
• D) Actual Capacity

While constructing production budget, numbers of units manufactured are calculated by which of the following formula?

• A) Number of units to be sold + closing units – opening units
• B) Number of units to be sold - closing units + opening units
• C) Number of units to be sold + closing units + opening units
• D) Number of units to be sold - closing units – opening units

Which of the following is correct for capital employed?

• A) Profit × capital employed
• B) Profit + capital employed
• C) Profit – capital employed
• D) Profit ÷ capital employed

R & D department of a toy manufacturing company has developed a report suggesting the company to diversify its production line into stuff toys. The cost incurred on this report is known as:

• A) Operating cost
• B) Opportunity cost
• C) Sunk cost
• D) Relevant cost

Which of the following is a method of “capital budgeting”?

• A) Accounting rate of return
• B) Net present value
• C) Payback period
• D) All of the given options

Contribution margin per unit is Rs. 60; sold units are 1,000 and fixed cost is Rs. 50,000.
Required: Identify the profit/loss with the help of provided data.

• A) Rs. 60,000 loss
• B) Rs. 10,000 loss
• C) Rs. 60,000 profit
• D) Rs. 10,000 profit

You have decided to use present value method to a proposed project. What is the condition for acceptance of the project?

• A) NPV is at break-even
• B) NPV is Positive
• C) FPV is greater than investment
• D) NPV is Negative

ABC Company has currently option to work on seven projects but only four projects are with positive Net Present Value (NPV). Total cost to opt these four projects is Rs. six million but the management of the company has imposed limit of Rs. four million for these projects.
Keep into consideration the above mentioned restriction, this situation is known as:

• A) Capital rationing
• B) Capital funding
• C) Capital budgeting
• D) Capital expenditure

In case of IRR the NPV……………. is equal to ZERO, while in case of MIRR the NPV of terminal cash flows………….. is equal to investment.

• A) Positive, Zero
• B) Zero, break-even point
• C) Negative, negative
• D) Negative, Zero

It is assumed that the initial investment for “Project B” is Rs. 170,000. Cash flows are Rs. 40,000, Rs. 90,000, and Rs. 40,000 in the first, second third year respectively.
Required: Identify the payback period of Project B.

• A) 2.80 year
• B) 2.00 year
• C) 3.00 year
• D) 2.40 year

Following information has been extracted from ABC Company to find out the manufacturing cost per unit.
Direct Material: Rs. 6,520 per unit; Direct Labor: Rs. 3,000 per unit; over head cost: Rs. 1,500 per unit.

• A) Rs. 8,020
• B) Rs. 9,520
• C) Rs. 4,500
• D) Rs. 11,020

Following information has been extracted for the year to calculate the capital turnover of RC Company.
Average invested capital: Rs. 340,000 and Net income: Rs. 250,000 and Sales revenue: Rs.700,000
Find the capital turnover with the help of provided information.

• A) 0.14 times
• B) 1.36 times
• C) Required more data to calculate the capital turnover
• D) 2.05 times

Which of the following is a basic characteristic of capital budgeting?

• A) Analysis of potential projects.
• B) Long-term decisions; involve large expenditures.
• C) Determine worth of long term investment
• D) All of the given options

Which of the following is not a weakness of payback period method?

• A) Easy to calculate and understand
• B) Ignores the Time Value of Money
• C) Ignores CFs occurring after payback period
• D) No specification of acceptable payback