Management accounting assists the management a) Only in control b) Only in direction c) Only in planning d) In planning, direction and control

let's solve these multiple-choice questions.

1. Management accounting assists the management

• Explanation: Management accounting provides information that is crucial for all aspects of management, including setting goals (planning), guiding operations (direction), and evaluating performance (control).
• Answer: d) In planning, direction and control

2. If the stock turnover ratio is 4 times and the collection period is 30 days the operating cycle would be ____ days.

• Explanation: The operating cycle is the sum of Days Inventory Outstanding (DIO) and Days Sales Outstanding (DSO).
  • Days Inventory Outstanding (DIO) = $\frac{360}{\text{Stock Turnover Ratio}} = \frac{360}{4} = 90 \text{ days}$
  • Days Sales Outstanding (DSO) = Collection Period = $30 \text{ days}$
  • Operating Cycle = DIO + DSO = $90 + 30 = 120 \text{ days}$
• Answer: d) 120

3. Given that current liabilities are at N. 300,000, current ratio is 3:1 and quick ratio is 1:1, the value of stock will be:

• Explanation:
  • Current Ratio = $\frac{\text{Current Assets}}{\text{Current Liabilities}}$
  • $3 = \frac{\text{Current Assets}}{\text{N } 300,000} \implies \text{Current Assets} = 3 \times \text{N } 300,000 = \text{N } 900,000$
  • Quick Ratio = $\frac{\text{Current Assets} - \text{Stock}}{\text{Current Liabilities}}$
  • $1 = \frac{\text{N } 900,000 - \text{Stock}}{\text{N } 300,000}$
  • $\text{N } 300,000 = \text{N } 900,000 - \text{Stock}$
  • $\text{Stock} = \text{N } 900,000 - \text{N } 300,000 = \text{N } 600,000$
• Answer: a) 600,000

4. Acid test ratio should normally be ----

• Explanation: The acid-test ratio (or quick ratio) measures a company's ability to meet its short-term obligations with its most liquid assets. A ratio of 1:1 is generally considered healthy.
• Answer: b) 1:1

5. The other name of marginal costing is ____

• Explanation: Marginal costing is also widely known as variable costing or direct costing because it focuses on the variable costs of production. Incremental costing is a related concept used in decision-making, often employing marginal costing principles.
• Answer: d) All of the above.

6. Profit volume ratio establishes the relationship between ____

• Explanation: The Profit/Volume (P/V) ratio, also known as the Contribution Margin Ratio, is calculated as $\frac{\text{Contribution Margin}}{\text{Sales Value}}$. It shows the proportion of sales revenue available to cover fixed costs and generate profit.
• Answer: d) Contribution and sales value

7. ____ is the excess of sales over the break-even sales.

• Explanation: The margin of safety indicates how much sales can decrease before the company reaches its break-even point and starts incurring losses.
• Answer: c) Margin of safety

8. Budgets can be classified according to ____

• Explanation: Budgets can be classified in several ways, including by function (e.g., sales budget, production budget), by time (e.g., short-term, long-term), or by flexibility (e.g., fixed, flexible).
• Answer: function (or time, or flexibility, or purpose)