15 Nov 2014

Cost Accounting Mcqs Set 4

Cost Accounting Multiple Choice Questions ( MCQS) Page-8. The following Cost Accounting Questions from different Past Papers etc, PPSC Past Papers, Fpsc Pass Papers, NTS and also from MCQS Bank. These Questions are helpful for the preparation of Written test for the Posts of Accountant, Cost Accountant, Auditor and any for any Accounts Related Jobs Tests.

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Multiple Choice Questions on Cost Accounting

450. Which of the following is not a production cause of idle capacity ?

a. Set-up and change-over time
b. Lack of supervision and instruction
c. Lack of materials and tools
d. Strike

451. Functionally, administration expenses may comprise expenses of the following activities :

a. Secretarial and board of directors
b. Accounting, financing, tax and legal
c. Audit and personnel
d. All of these

452. Which of the following is not a possible method of accounting for administration overheads ?

a. Include as part of production overheads
b. Apportion to production, selling and distribution functions
c. Treat administration as a separate entity and treat the costs as such
d. Transfer to costing profit and loss account

453. Which of the following is not used as a base for apportionment of administration overheads ?

a. Direct wages
b. Works cost
c. Conversion cost
d. Sales value

454. Which of the following is/are the basic object/s of job analysis? 

a. Determination of wage rates
b. Ascertain the relative worth of each job
c. Breaking up job into its basic elements
d. All of the given options

455. Analysis of selling and distribution overheads is done by :

a. Nature of expenses and functions
b. Areas, products and salesmen
c. Types of customers and channels of distribution
d. All of the above

456. For exercising control over selling and distribution overheads, the following techniques may be 
used :

a. Comparison with past results
b. Budgetary control
c. Standard costing
d. All of the above

457. Depreciation is a :

a. Measure of consumption of assets
b. Process of allocation and not of valuation
c. Wear and tear due to use and/or lapse of time
d. All of the above

458. Which of the following does not influence the useful life of an asset ?

a. Expected physical wear and tear
b. Cost of the asset
c. Obsolescence
d. Legal or other limits on the use of the asset

459. For computing depreciation of an asset, the factors that are taken into consideration include the 
following except :

a. Historical cost
b. Expected useful life
c. Insurance premium
d. Estimated residual value

460. Depreciation on plant and machinery is :

a. Not a cash cost, so is ignored in the cost accounts
b. Part of manufacturing overheads
c. Part of prime cost
d. Always calculated using the straight-line method

461. Which of the following methods of depreciation results in fixed per unit cost of depreciation ?

a. Straight line
b. Reducing balance
c. Sinking fund
d. Production unit

462. Types of maintenance include the following except :

a. Routine
b. Overhaul
c. Emergency
d. Periodic

463. Which of the following is not included in the objectives of maintenance of plant and machinery ?

a. Reducing idle time
b. Reducing breakdown
c. Maintaining efficiency
d. Increasing life

464. Regular maintenance expenses are :

a. Capitalized
b. Part of manufacturing overheads
c. Written-off to costing profit and loss account
d. Part of prime cost

465. Obsolescence is the measure of the loss of value of an asset due to :

a. Technological innovation
b. Changes in market conditions
c. Both (a) and (b) above
d. None of the above

466. Interest on own capital is a:

a. Cash cost
b. Notional cost
c. Sunk cost
d. Part of prime cost

467. Objectives of research and development costs include :

a. Maintaining present competitive position
b. Improving enterprise‘s competitive position
c. Exploring now market/products
d. All of the above

468. Normal stores losses are :

a. Part of prime cost
b. Part of production overheads
c. Part of selling and distribution overheads
d. Written-off to costing and profit and loss account

469. Secondary packing expenses are :

a. Part of prime cost
b. Part of production overheads
c. Part of distribution overheads
d. Written-off to costing profit and loss account

470. If you know that with 8 units of output, average fixed cost is `12.50 and average variable cost is 81.25, then total cost at this output level is:

a. ` 93.75.
b. ` 97.78.
c. ` 750.
d. ` 880.

471. The methods of treating cost of small tools in cost accounts include :

a. Charging to expense
b. Charging to stores
c. Capitalizing in a small tools account
d. All of the above

472. Under marginal costing :

a. All costs are classified into two groups – variable and fixed
b. Variable costs form part of the product cost and inventory valuation
c. Fixed costs are treated as period costs
d. All of the above

473. Which of the following definitions describe marginal cost ?

a. The variable cost of one unit of product or service
b. A principle whereby variable costs are charged to cost units and the fixed costs attributable to
the relevant period are written-off in full against the contribution for that period
c. Costs appropriate to aiding the making of specific management decisions
d. The price at which material identical to that which is used up could be replaced on the date
of usage

474. According to Rowan premium plan, which of the following formula is used to calculate the bonus rate? 

a. (Time saved/time allowed) x 100
b. (Time allowed/time saved) x 100
c. (Actual time taken/time allowed) x 100
d. (Time allowed/actual time taken) x 100

475. Which of the following is not an assumption underlying the accountant‘s break-even chart ?

a. Fixed costs remain fixed throughout the range charted
b. Selling prices do not change
c. Variable costs fluctuate inversely with volume
d. Unit variable costs remain constant throughout the range charted

476. With regard to break –even charts and break-even analysis, which of the following is true ?

a. It is assumed that variable cost fluctuates in direct proportion to output
b. The break the break-even point is at the intersection of the sales line and the variable cost line
c. A break-even chart shown the maximum profit possible
d. A break-even chart is capable of dealing with any change of product mix

477. The following data relate to two output levels of a department :
Machine hours 17,000 18,500
Overheads (`) 2,46,500 2,51,750
The variable overhead rate per hour is ` 3.50. The amount of fixed overheads is:

a. ` 5,250
b. ` 59,500
c. ` 1,87,000
d. ` 2,46,500

478. The following data relate to two activity levels of an out-patients‘ department in a hospital :
No. of consultations per patient 4,500 5,750
Overheads ` 2,69,750 ` 2,89,125
Fixed overheads are ` 2,00,000 per period. The variable cost per consultation is :

a. ` 15.50
b. ` 44.44
c. ` 59.94
d. ` none of the above

479. Break-even analysis assumes that over the relevant range :

a. Total costs are unchanged
b. Unit variable costs are unchanged
c. Variable costs are non-linear
d. Unit fixed costs are unchanged

480. ABC Ltd. Has fixed costs of ` 60,000 p.a.. It manufactures a single product, which it sells for ` 20 per unit. Its contribution to sales ratio is 40%. ABC Ltd‘s break-even point in units is :

a. 1,800
b. 3,000
c. 5,000
d. 7,500

481. Sun Ltd. Makes a single product which it sells for ` 10 per unit. Fixed costs are ` 48,000 per month and the product has a contribution to sales ratio of 40%. In a period when actual sales were `
1,40,000. Sun Ltd.‘s margin of safety in units was :

a. 2,000
b. 6,000
c. 8,000
d. 12,000

482. A company produced 500 units of a product and incurred the following costs :
Direct materials 8,000
Direct wages 10,000
Overheads (20% fixed) 45,000
If the sales value of 500 units was ` 1,02,000, what is contribution margin ?

a. 44%
b. 47%
c. 53%
d. 74%

Use the following data for questions 483 and 484:
Budget data for the Happy Ltd.
Sales (1,00,000 units) ` 10,00,000
Costs :
Variable ` 7,00,000
Fixed ` 2,10,000 9,10,000
Operating profit ` 90,000

483. If fixed costs increased by ` 31,500 with no other cost or revenue factors changing, the break-even sales in units would be :

a. 34,500
b. 80,500
c. 69,000
d. 94,500

484. If Happy Ltd. Is subject to an effective income tax rate of 40%, the number of units Happy Ltd. 
Would have to sell to earn an after-tax profit of ` 90,000 is :

a. 1,00,000 units
b. 1,20,000 units
c. 1,12,000 units
d. 1,45,000 units

485. Selling a product at a price equivalent to or below marginal cost is recommended for a short 
period in certain special circumstances, such as :

a. Introducing a new product
b. Exploring foreign market
c. Driving out a weaker competitor
d. All of the above

486. Which of the following is not a relevant cost information in a make or buy decision ?

a. Variable cost of making
b. General fixed cost
c. Purchase price
d. Loss of contribution to make the product

487. Which of the following factors are not qualitative factors in a make or buy decision ?

a. Doubt as to the ability of the subcontractor to meet delivery dates
b. Doubt as to ability of the subcontractor to maintain quality
c. The case with which improvements can be made to the product
d. The effect of redundancy on labour relations

488. Raymond Corporation estimates factory overhead of ` 345,000 for next fiscal year. It is estimated 
that 60,000 units will be produced at a material cost of `575,000. Conversion will require 34,500 
direct labor hours at a cost of ` 10 per hour, with 25,875 machine hours. 
FOH rate on the bases on Budgeted Production would be? 

a. ` 5.75 per unit
b. ` 6.65 per unit
c. ` 6.0 per unit
d. ` 1 per unit

489. In a shutdown decision, one has to consider :

a. Contribution
b. Identifiable fixed cost, if any
c. Impact of shutdown on other products, if any
d. All of the above

490. When a firm doubles its inputs and finds that its output has more than doubled, this is known as:

a. Economies of scale.
b. Constant returns to scale.
c. Diseconomies of scale.
d. A violation of the law of diminishing returns.

491. The firms monthly cost of production is ` 1,46,000 at an output level of 8,000 units. If it achieves an output level of 12,000 units it will incur production cost of ` 1,94,000 cost of production for 15,000 units is :

a. ` 1,80,000
b. ` 2,00,000
c. ` 50,000
d. ` 2,30,000

492. The basic research cost should be treated as :

a. Product cost
b. Production cost
c. Production overhead
d. Period cost

493. A firm requires 16,000 nos. of a certain component, which is buys at ` 60 each. The cost of placing 
an order and following it up is ` 120 and the annual storage charges works out to 10% of the cost of 
the item. To get maximum benefit the firm should place order for ……………………. Units at a time.

a. 1,000
b. 900
c. 800
d. 600

494. About 50 items are required every day for a machine. A fixed cost of ` 50 per order is incurred for placing an order. The inventory carrying cost per item amounts to Re. 0.02 per day. The lead period is 32 days. Compute reorder level.

a. 1,200 items
b. 1,400 items
c. 1,600 items
d. 1,800 items

495. The standard time required per unit of a product is 20 minutes. In a day of 8 working hours a worker given an output of 30 units. If he gets a time rate of ` 20/hr., his total earnings under Halsey bonus scheme was : 

a. ` 200
b. ` 192
c. ` 180
d. ` 160

496. A material loss during production or storage due to evaporation or shrinkage is called :

a. Scrap
b. Waste
c. Spoilage
d. Material loss

497. The process of distribution of overheads allotted to a particular department or cost centre over the units produced is called :

a. Allocation
b. Apportionment
c. Absorption
d. Departmentalization

498. Angle of incidence defines :

a. Systematic risk in CAPM model
b. Post BEP relationship between total cost and total revenue
c. Incidental factors in investments
d. Marginal cost of production

499. A Ltd. Has sales of ` 2,200, total fixed cost of ` 570, variable cost of ` 1,540, raw material consumed of ` 1,100, number of units sold 22,000. What shall be the BEP 9in units) if raw material price is reduced 
by 2%?

a. 18,387
b. 18,560
c. 18,750
d. 19,000

500. If an item of overhead expenditure is charged specifically to a single department this would be an example of: 

a. Apportionment
b. Allocation
c. Re-apportionment
d. Absorption


451 d 452 a 453 a 454 b 455 d
456 d 457 d 458 b 459 c 460 b 461 d 462 b
463 d 464 b 465 c 466 b 467 d 468 b 469 c
470 c 471 d 472 d 473 a 474 a 475 c 476 a
477 c 478 a 479 b 480 d 481 a 482 b 483 b
484 b 485 d 486 b 487 d 488 a 489 d 490 a
491 d 492 c 493 c 494 c 495 c 496 b 497 c
498 b 499 a 500 b

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