UNIT III MCQ

1. Cost estimation include(s) the following expenditure(s)

(A) Pattern making (B) Tool making (C) Selling expenses (D) all of the above
ANS: D
1. To calculate the probable cost of the product, knowledge of following factors involves
(A) Production time required (B) Use of previous estimates of comparable parts
(C) Effect of change in facilities on costing rates (D) All of the above
ANS: D
2. 3-Cost accounting is a specialized branch of accounting which deals with
(A) Classification, recording, allocation and control of costs (B) Classification,
processing, allocation and directing (C) Classification, recording, planning
and control of costs (D) Classification, recording, allocation and directing
ANS: A
3. 4-Expenditure incurred on material, labour, machinery, production and inspection are
summed up to find the
(A) Total cost of product (B) Selling price of product (C) Factory cost of product
(D) None of the above ANS: C
4. 5-Which of the following calculate the actual cost of product
(A) Cost estimation (B) Costing (C) Both (A) and (B) (D) None of the above
ANS: B
5. 6-The cost data provide invaluable information for taking the following managerial
decision(s)
(A) To make or buy (B) To own or hire fixed asset (C) Determining the expansion
or contraction policy (D) All of the above ANS: D
6. The method of unit costing is adopted by
(A) Transport services (B) Steel industry (C) Mines (D) Bicycle industry ANS: C
7. 8.____ costing is a type of job costing.
(A) Multiple (B) Operating (C) Unit (D) Batch ANS: D
8. The following is cost of direct materials
(A) Freight charges (B) Grease (C) Coolant (D) Cotton waste ANS: A
9. The following is cost of indirect materials
(A) Lubricating oil (B) Octopi (C) Import duties (D) Insurance ANS: A
10. The payment made to the following is cost of direct labour.
(A) Machinist B) Supervisor (C) Inspector (D) Sweeper ANS: A
11. Cost of preparing drawings for the manufacture of a particular product is
(A) Cost of direct labour (B) Cost of indirect labour (C) Direct expenses (D)
Indirect expenses ANS: D
12. The following is also known as overhead costs or on costs.
(A) Cost of direct labour (B) Cost of indirect labour (C) Direct expenses (D)
Indirect expenses ANS: D
13. To control costs it is essential to keep control on
(A) Prime cost (B) Overheads (C) Indirect materials and tools cost (D) All of the
above ANS: D
14. Which of the following is not an inventory?
(A)Machines (B)Raw material (C)Finished products (D)Consumable tools ANS: A
15. The following classes of costs are usually involved in inventory decisions except
(A)Cost of ordering (B)Carrying cost (C)Cost of shortages (D)Machining cost ANS:
D
16. The cost of insurance and taxes are included in
(A)Cost of ordering (B)Set up cost (C)Inventory carrying cost (D)Cost of shortages
ANS: C
17. Buffer stock’ is the level of stock
(A)Half of the actual stock (B)At which the ordering process should start
(C)Minimum stock level below which actual stock should not fall (D)Maximum stock
in inventory ANS: C
18. The minimum stock level is calculated as
(A)Reorder level – (Normal consumption x Normal delivery time) (B)Reorder level +
(Normal consumption x Normal delivery time) (C)Reorder level + Normal
consumption) x Normal delivery time (D)Reorder level + Normal consumption) /
Normal delivery time ANS: A
19. Which of the following is true for Inventory control?
(A)Economic order quantity has minimum total cost per order (B)Inventory carrying
costs increases with quantity per order (C)Ordering cost decreases with lo size (D)All
of the above ANS: D
20. The time period between placing an order its receipt in stock is known as
(A)Lead time (B)Carrying time (C)Shortage time (D)Over time ANS: A
21. Re-ordering level is calculated as
22. (A)Maximum consumption rate x Maximum re-order periods (B)Minimum
consumption rate x Minimum re-order period (C)Maximum consumption rate x
Minimum re-order period (D)Minimum consumption rate x Maximum re-order period
ANS: A
23. Which of the following cost is also known as overhead cost or on cost?
(A) cost Of Direct Labour (B)Cost Of Indirect Labour (C)Direct Expenses
(D)Indirect Expenses ANS: D 42. Which of the following calculate the actual
cost of product? (A)Cost Estimation (B)Costing (C)Both A and B (D)None of
These ANS: B
24. Costing is specialized branch of accounting which deals with:
(A)Classification, Recording, Allocation, and Control Of Asset (B)Classification,
Processing, Allocation and Directing (C)Classification, Recording, Planning and
Control Of Asset (D)Classification, Recording, Allocation and Directing ANS: A
25. In cinema halls, composite cost unit is ________________:
26. (A)A Seat per Show (B)Cost of Screening (C)Salary of Staff (D)Rent of Cinema Hall
ANS: A
27. The stage of production at which separate products are identified is known as
_______________:
(A)Process Costing (B)Reverse Cost Method (C) Subsequent Cost (D)Equivalent
Production ANS: C
28. _____________________ in contracts entitles a contractor to suitably enhance the
contract price if the cost rises beyond a given percentage:
(A)Notional Price (B)Indirect Cost (C) Estimate (D) Escalation Claus ANS: D
29. Which factor that cause change in cost of activity?
(A)Activity Cost (B)Driver Rates (C)Cost Pool (D)Cost Drivers ANS: D
30. Over-absorption of factory overheads, due to inefficiency of management, should be
disposed of by:
(A) Carry Forward To Next Year (B)Supplementary Rate (C)Transfer to Costing
P&L A/C (D)Any of These ANS: C
31. When absorbed overheads are rs.23, 540 and actual overheads are rs.22,400, there is:
(A) Under Absorption of Rs.1, 140 (B) Under Absorption of Rs.45, 940 (C) Over
Absorption of Rs.1, 140 (D)Over Absorption of Rs.45940 ANS: B
32. Danger level= Normal consumption X _____________________
(A)Reorder Period (B)Maximum Reorder Period (C)Maximum Reorder Period in
Emergency (D)Minimum Reorder Period ANS: C
33. The following is(are) the overhead cost(s)
(A) Factory expenses (B) Selling expenses (C) Distribution expenses (D) All of
the above ANS: D
34. All such expenses which are incurred for creating and enhancing the demands for the
products are
(A) Selling expenses (B) Administrative expenses (C) Distribution expenses (D)
All of the above ANS: A
35. Prime cost=
(A) Cost of direct labour + cost of direct material + direct expenses (B) Cost of
indirect labour + cost of indirect material + direct expenses (C) Cost of direct
labour + cost of direct material + indirect expenses (D) Cost of indirect labour
+ cost of direct material + indirect expenses ANS:A
36. Factory Cost =
(A) Prime cost + factory expenses (B) Prime cost + administrative expenses (C)
Prime cost + selling expenses (D) Prime cost + distribution expenses ANS: A
37. Manufacturing cost=
(A) Factory cost + selling cost (B) Factory cost + distribution cost (C) Factory
cost + administrative expenses (D) None of the above ANS: C
38. The following is (are) the method(s) to increase profit (A) Increase the sales price (B)
Increase the market (C) Reduce total cost (D) All of the above ANS: D
39. Which of the following is variable cost?
(A) Salaries of higher officers (B) Prime cost (C) Insurance cost (D) Repair cost
ANS: B
40. Which of the following is not a method of calculating (allocating) overhead cost?
(A) Percentage on prime cost (B) Percentage on direct labour cost (C) Percentage
on indirect labour cost (D) Percentage on direct material cost ANS: C
41. The following method is an improvement over the percentage on direct labour cost
method.
 (A) Machine hour rate (B) Percentage on prime cost (C) Percentage on direct
material cost (D) Man hour rate ANS: D
42. The overhead cost for a particular job =
(A) Man hour rate x man hours spent on that job (B) Man hour rate / man hours
spent on that job (C) Man hour rate + man hours spent on that job (D) Man
hour rate – man hours spent on that jab ANS: A
43. Labour cost per product is Rs. 2/hr and time taken by each product is 2 hr. The
factory overhead is 20% of the labour costs. The factory cost for 100 products if
material cost per product is Rs. 3, is.
(A) Rs. 700 (B) Rs. 740 (C) Rs. 780 (D) Rs. 820 ANS: C
44. The following is (are) true for variable costs
(A) Variable costs are the functions of output (B) Variable costs vary directly with
the quantity produced (C) These become zero when the production is
suspended (D) All of the above ANS: D
45. The following cost helps in taking ‘make or buy’ decision.
(A) Standard cost (B) Marginal cost (C) Differential cost (D) Sunk cost ANS: C
46. To control costs it is essential to keep control on
(A) Prime cost (B) Overheads (C) Indirect materials and tools cost (D) All of the
above ANS:D
47. All of the following would most likely use a job order costing system except:
(A)A Dental Practice. (B)An Auto Repair Shop. (C)A Small Appliance Maker. (D)An
Architectural Firm ANS: C
48. Which of the following costs is not charged to Work in Process in a normal cost
system?
(A)Actual Overhead (B)Actual Direct Materials (C)Actual Direct Labor (D)Estimated
Indirect Labor ANS: A
49. Which of the following product costs would be Charged to Work in Process assuming
a standard Costing system?
(A)Actual Direct Material Costs (B)Actual Overhead Costs (C)Actual Direct Labor
Costs (D)Applied Overhead Costs ANS: D
50. Which of the following serves at a subsidiary Ledger for the Work in Process
account? (A)Standard Cost Card (B)Material Requisition Form (C)Job Requisition
Form (D)Job Order Cost Sheet ANS:D
51. .Which of the following is not a source document used in job order costing systems?
(A)Cost of Production Report (B)Employee Time Sheet (C)Job Cost Sheet
(D)Material Requisition Form ANS: A
52. Which of the following costing systems does not involve computing cost variances?
(A)Actual Costing System (B)Normal Costing System (C)Standard Costing System
(D)All Of The Above Systems Involve Computing Cost Variances ANS: A
53. Actual costs are:
(A)The Costs Incurred (B)Budgeted Costs (C)Estimated Costs (D)Forecasted Cost
ANS: A
54. Budgeted costs are:
 (A) The Costs Incurred This Year (B)The Costs Incurred Last Year (C) Lanned or
Forecasted Costs (D) Competitor’s Costs ANS: C 73. All of the following are
true EXCEPT that indirect Costs:
(A)May Be Included In Prime Costs (B)Are Not Easily Traced To Products or
Services (C) Vary With the Selection of the Cost Object (D) May Be Included In
Manufacturing Overhead ANS: A
55. The general term used to identify both the tracing And the allocation of accumulated
costs to a cost Object is:
(A) Cost accumulation (B) Cost assignment (C) Cost tracing (D) Conversion
costing ANS: B
56. The collection of accounting data in some Organized way is:
(A) Cost accumulation (B) Cost assignment (C) Cost tracing (D) Conversion
costing ANS: A