Cost Accounting Multiple Choice Questions ( MCQS) Page-1. 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.

Multiple Choice
Questions on Cost Accounting

1. Costs that change in
response to alternative courses of action are called:

a. Relevant costs

b. Differential costs

c. Target costs

d. Sunk costs

2. The cost data
pertaining to Product ―X‖ of XL Ltd. are as follows :

Maximum capacity 30,000
units

Normal capacity 15,000
units

Increase in inventory
1,880 units

Variable cost per unit `
12

Selling price per unit `
50

Fixed manufacturing
overhead costs ` 3,60,000

If the profit under
Absorption costing method is ` 1,01,000, the profit under Marginal costing
method

would be

a. 1,46,120

b. 1,23,560

c. 55,880

d. 73,340

3. The total cost
incurred in the operation of a business undertaking other than the cost
of

manufacturing and
production is known as

a. Direct cost

b. Variable cost

c. Commercial cost

d. Conversion cost

4. Consider the following
data for a company during the month of June 2012

Budgeted hours 4,000 Standard hours for actual production 4,400 Maximum possible hours in the budget period 4,800 Actual hours 3,800 The activity ratio of the company during the month is

a. 111%

b. 120%

c. 95%

d. 117%

5. Total unit costs are

a.Independent of the
cost system, used to generate them

b.Needed for determining
product contribution

c.Irrelevant in marginal
analysis

d.Relevant for
cost-volume-profit analysis

6. Which of the following
bases is not appropriate for apportionment of Transport department‘s cost ?

a. Crane hours

b. Crane value

c. Truck Mileage

d. Truck value

7. The cost of obsolete
inventory acquired several years ago, to be considered in a keep vs.
disposal decision is an example of :

a.Uncontrollable cost

b.Sunk cost

c.Avoidable cost

d.Opportunity cost

8. Budgeted sales for the
next year is 5,00,000 units. Desired ending finished goods inventory is 1,50,000 units and equivalent units in ending W-I-P inventory is 60,000 units. The opening finished goods inventory for the next year is 80,000 units, with 50,000 equivalent units in beginning W-I-P inventory How many equivalent units should be produced?

a. 5,80,000

b. 5,50,000

c. 5,00,000

d. 5,75,000

9. If the asset turnover
and profit margin of a company are 1.85 and 0.35 respectively, the return
on investment is.

a. 0.65

b. 0.35

c. 1.50

d. 5.29

10. A company is
currently operating at 80% capacity level. The production under normal
capacity level is 1,50,000 units. The variable cost per unit is ` 14 and the total fixed costs are ` 8,00,000. If the company wants to earn a profit of ` 4,00,000, then the price of the product per unit should be

a. 37.50

b. 38.25

c. 24.00

d. 35.00

11. Consider the following
data pertaining to the production of a company for a particular month :

Opening stock of raw
material ` 11,570

Closing stock of raw
material ` 10,380

Purchase of raw material
during the month ` 1,28,450

Total manufacturing cost
charged to product ` 3,39,165

Factory overheads are
applied at the rate of 45% of direct labour cost.

The amount of factory
overheads applied to production is

a. 65,025

b. 94,287

c. 95,020

d. 1,52,624

12. The budgeted annual
sales of a firm is ` 80 lakhs and 25% of the same is cash sales. If the
average amount of debtors of the firm is ` 5 lakhs, the average collection period of credit sales months.

a. 1.50

b. 1.00

c. 0.50

d. 1.75

13. If the minimum stock
level and average stock level of raw material ―A‖ are 4,000 and 9,000 units
respectively, find out its reorder quantity.

a. 8,000 units

b. 11,000 units

c. 10,000 units

d. 9,000 units

14. A worker has a time
rate of ` 15/hr. He makes 720 units of component (standard time : 5
minutes/ unit) in a week of 48 hours. His total wages including Rowan bonus for the week is

a. 792

b. 820

c. 840

d. 864

15. A company maintains a
margin of safety of 25% on its current sales and earns a profit of ` 30 lakhs
per annum. If the company has a profit volume (P/V) ratio of 40%, its current
sales amount to

a. 200 lakhs

b. 300 lakhs

c. 325 lakhs

d. None of the above

16. Sale for two
consecutive months, of a company are ` 3,80,000 and ` 4,20,000. The company‘s
net profits for these months amounted to ` 24,000 and ` 40,000 respectively. There is no change in contribution/sales ratio or fixed costs. The contribution/sales ratio of the company is.

a. 1/3

b. 2/5

c. ¼

d. None of the above

17. A Limited has fixed
costs of ` 6,00,000 per annum. It manufactures a single product which it sells
for 200 per unit. Its contribution to sales ratio is 40%. A Limited‘s
break-even in units is

a. 7,500

b. 8,000

c. 3,000

d. 1,500

[Hint : Break-even units
= Fixed cost / contribution per unit

= ` 6,00,000/ 40% of `
200

= 7,500]

18. The current
liabilities of Akash Ltd. is ` 30,000. If its current ratio is 3:1 and Quick
ratio is 1:1, the value of stock-in-trade will be

a. 20,000

b. 30,000

c. 60,000

d. Insufficient
information

[Hint : Current Ratio =
Current Assets = 3:1

Current Liabilities

Current Assets = `
30,000 x 3 = ` 90,000

Quick Ratio =
Quick Assets = 1:1

Quick Liabilities

Liquid assets = `
30,000 x 1 = ` 30,000

Hence, value of
stock-in-trade : CA – LA = ` (90,000 – 30,000)

= ` 60,000]

19. If the capacity usage
ratio of a production department is 90% and activity ratio is 99% then
the efficiency ratio of the department is.

1. 100%

2. 120%

3. 110%

4. 105%

[Hint : Efficiency ratio
(ER) = Std. hr. of production ÷ Actual hrs.

Activity ratio
(AR) = Std. hrs. for production ÷ Budgeted hrs.

Capacity ratio
(CR) = Actual hrs. ÷ Budgeted hrs.

Hence, ER = AR /
CR = 99% / 90% = 110%]

20. In two consecutive
periods, sales and profit were ` 1,60,000 and ` 8,000 respectively in the
first period and ` 1,80,000 and ` 14,000 respectively during the second period. If there is no change in fixed cost between the two periods then P-V ratio must be.

1. 20%

2. 25%

3. 30%

4. 40%

## Answers

1 b 2 c 3 c 4 a 5 c 6 b
7 b

8 a 9 a 10 c 11 a 12 b
13 c 14 d

15 b 16 b 17 a 18 c 19 3 20 3