COST MANAGEMENT MCQ

1. Costing is a technique of

a) Inventory control

b) Management control

c) Ascertainment of cost

d) Calculation of cost

e) Reduction of cost

2. Cost accounting has been developed because of ......... of financial accounting.

a) limitations

b) expenditure

c) statutory requirements

d) both (a) and (b)

e) None of these

3. Cost accountancy is the science, art and .......... of cost accountant.

a) Profession

b) Management

c) Administration

d) Practice

e) All of these

4. In automobile industry cost unit is

a) Number

b) Automobile quality

c) Number of automobile industry

d) Either (a) or (c)

e) None of these

5. Cost unit in a college may be

a) teacher

b) Non teacher staff

c) Student

d) Number of departments

e) None

6. .......... costing is suitable for mines, quarries, cement works etc.

COST MANAGEMENT MCQ
a) Process

b) Contract

c) Batch

d) Operation

e) Job

7. . .........is an extension of job costing.

a) Process costing

b) Batch costing

c) Contract costing

d) Operation costing

e) None of these

8. When job is very big and spread over long periods of time the method of costing adopted

is

a) Process

b) Job

c) Contract

d) Operation

e) Batch

9. Continuous costing is also called

a) Operation costing

b) Process costing

c) Batch costing

d) Contract costing

e) None of these

10. The main types of costing for ascertaining costs do not include

a) Uniform costing

b) Standard costing

c) Marginal costing

d) Historical costing

11. Cost accounting is based on ......... figures.

a) Approximated
COST MANAGEMENT MCQ
b) Estimated

c) Historical

d) Either (a) or (c)

e) None of these

12. ...........costing is used in transport undertaking.

a) Operating

b) Standard

c) marginal

d) Absorption

e) Service

13. In ............. costing the cost of a group of products is ascertained.

a) Process

b) Job

c) Batch

d) Service

e) Marginal

14. The total of all direct expenses is known as

a) Total cost

b) Overhead

c) Prime cost

d) Work cost

e) None of these

15. An opportunity cost is a

a) Direct expense

b) Indirect expense

c) Variable expense

d) Fixed expense

e) Semi-variable expense

16. Work cost is the total of

COST MANAGEMENT MCQ
a) Direct cost

b) Indirect cost

c) Variable cost

d) Controllable cost

e) Uncontrollable cost

17. Opportunity cost does not involve

a) Cash inflow

b) Cash outflow

c) Cash outlay

d) Either (a) or (b)

e) None of these

18. Depreciation is ...........expenditure.

A) variable

b) Fixed

c) Direct

d) Indirect

e) Semi-variable

19. Out of pocket payment involves payment to

a) Managers

b) Promoters

c) Directors

d) Shareholders

e) Outsiders

20. Value added is the change in

a) Face value

b) Market value

c) Book value

d) Realizable value

e) None of these

21. Re-ordering level is = Maximum consumption x ...........

COST MANAGEMENT MCQ
a) Minimum consumption

b) Maximum re-orders period

c) Minimum re-orders period

d) Both (a) and (b)

e) None of these

22. .......... represents that quantity of material which is normally ordered when a particular

material reaches the ordering level.

a) EOQ

b) BOQ

c) EBQ

d) Re-order period

e) All of these

23. The quantity of material to be ordered at one time is known as

a) EOQ

b) BOQ

c) EBQ

d) Re-order period

e) All of these

24. Stock verification sheets are maintained to record the result of ......... verification.

a) Conceptual

b) Physical

c) Economic

d) Detailed

e) All of these

25. The two levels of material controls are quantity control and

a) Financial control

b) Value control

c) Quality control

d) Both (b) and (c)

e) All of these
COST MANAGEMENT MCQ

26. The two aspects of material control are accounting aspect and ............. aspect.

a) Financial

b) Economic

C) social

d) Operational

e) None of these

27. Material control aims at achieving effective ............. management.

a) Marketing

b) Production

c) Organization

d) Material

e) None of these

28. Stores ledger is maintained in the ......... department.

a) Cost accounting

b) Stores

c) Purchase

d) Production

e) None of these

29. Bin card is a record of .......... only.

a) Quality

b) quanity

c) Numbers

d) Value

e) None

30. Bin card is maintained by

a) Purchase department

b) Production department

c) Marketing department

d) Stores keeper
COST MANAGEMENT MCQ
e) None of these

31. 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

32. 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

33. 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

34. 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

COST MANAGEMENT MCQ
35. 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 : sts of `

b. 3,000

c. 5,000

d. 7,500

36. 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

37. 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 38 and 39:

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

COST MANAGEMENT MCQ
38. 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

39. 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

40. 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

41. 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

42. 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

COST MANAGEMENT MCQ
43. 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

44. 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

45. 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.

46. 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

47. The basic research cost should be treated as :

a. Product cost

b. Production cost

c. Production overhead

d. Period cost
COST MANAGEMENT MCQ

48. 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

49. 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

50. The standard time required per unit of a product is 20 minutes. In a day of 8 working hours

a worker gave 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. ` 16

50. The standard time required per unit of a product is 20 minutes. In a day of 8 working hours

a worker had 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
COST MANAGEMENT MCQ
c. ` 180

d. ` 16

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

a. Scrap

b. Waste

c. Spoilage

d. Material loss

52. The process of distribution of overheads allotted to a particular department or cost center over

the units produced is called:

a. Allocation

b. Apportionment

c. Absorption

d. Departmentalization

53. 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

54. 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

55. 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
COST MANAGEMENT MCQ
d. Absorption

56. Interest on own capital is a:

a. Cash cost

b. Notional cost

c. Sunk cost

d. Part of prime cost

57. 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

58. 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

59. 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

60. 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.

61. The methods of treating cost of small tools in cost accounts include

a. Charging to expense

b. Charging to stores
COST MANAGEMENT MCQ
c. Capitalizing in a small tools account

d. All of the above

62. 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

63. 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

64. 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

65. 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

66. 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

COST MANAGEMENT MCQ
67. 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

68. 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

69. 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

70. 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

71. 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

72. Depreciation on plant and machinery is :

a. Not a cash cost, so is ignored in the cost accounts

b. Part of manufacturing overheads

COST MANAGEMENT MCQ
c. Part of prime cost

d. Always calculated using the straight-line method

73. 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

74. Types of maintenance include the following except:

a. Routine

b. Overhaul

c. Emergency

d. Periodic

75. 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

76. 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

77. 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

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

COST MANAGEMENT MCQ
a. Set-up and change-over time

b. Lack of supervision and instruction

c. Lack of materials and tools

d. Strike

79. 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

80. 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

81. 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

82. In account ting for labourcost:

a. A. direct labour cost and indirect labour cost are charged to prime cost

b. Direct labour cost and indirect labour cost are charged to overheads

c. Direct labour cost is charged to prime cost and indirect labour cost is charged to overheads

d. All of the above

83. Productive causes of idle time include the following except :

a. Power failure

b. Fall in demand

c. Machine breakdown

d. Waiting for materials, tools, instructions, etc.

84. The treatment of idle time in cost includes the following:

COST MANAGEMENT MCQ
a. Cost of normal and controllable idle time is charged to factory overheads

b. Cost of normal but uncontrollable idle time is treated as prime cost

c. Cost of abnormal and uncontrollable idle time is charged to costing profit and loss account

d. All of the above

85. Overtime premium may be treated, depending on the circumstances, as:

a. Part of direct wages

b. Part of production overheads

c. Part of capital order

d. All of the above

86. A manufacturing firm is very busy and is working overtime. The amount of overtime

premium contained in direct wages would normally be classed as:

a. Part of prime cost

b. Factory overheads

c. Direct labour cost

d. Administrative overheads

87. Fringe benefits are those for which efforts of the workers are not necessary and may include

the following except:

a. Holiday pay

b. Attendance bonus

c. Production bonus

d. Employer‘s contribution to P.F.

88. Avoidable causes of labour turnover include the following except:

a. Redundancy

b. Low wages

c. Bad working conditions

d. Marriage

89. The unavoidable causes of labour turnover include the following except:

a. Personal betterment

b. Dissatisfaction with the job

COST MANAGEMENT MCQ
c. Illness

d. Retirement

90. Labour turnover can be measured by the following methods except:

a. Attrition method

b. Separation method

c. Replacement method

d. Flux method

91. At the start of the quarter there were 14,630 workers. 750 employees left during the quarter

while 600 joined the organization during the same period. Using the flux method, the labour

turnover was:

a. 5.13%

b. 9.23%

c. 9.32%

d. 9.28%

92. Which of the following is not a cost implication of labourturnover?

a. Training

b. Recruiting

c. Ageing labour force

d. Damage of machine

93. Preventive costs of labour turnover include the following except:

a. Cost of recruitment and training

b. Medical services

c. Welfare

d. Gratuity and pension

94. Replacement costs of labour turnover include the following except :

a. Loss of output

b. Cost of personnel administration

c. Cost of tool and machine breakage

d. Cost of scrap and defective work

95. Cost of labour turnover may be treated as :

COST MANAGEMENT MCQ
a. Direct wages

b. Prime cost

c. Overhead

d. None of the above

96. 1) labour cost control leads to minimization of cost of labour per unit of output. (2) When

labour cost is fixed nature, any reduction in total labour cost may not result in lower cost per unit.

True or false?

(a. (1) True; (2) False

b. (1) False; (2) True

c. (1) and (2) False

97. Labour cost control embraces the following activities except:

a. Recruitment and promotion

b. Formulation of wage policy and payment and accounting for wages

c. Allocation of cost

d. Preparation of financial statement

98. (1) Payment of higher wages does not necessarily mean that labour cost per unit is high. (2)

Control over payment of wages aims at reducing or eliminating irregularities during actual

disbursements. True or False?

a. (1) and (2) True

b. (1) and (2) False

c. (1) False; (2) True

d. (1) True; (2) False

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99. Which of the following techniques is not meant for labour cost control?

a. Budgetary control
COST MANAGEMENT MCQ
b. Standard costing

c. ABC analysis

d. Ratio analysis

100. Ratios which may be used for comparing labour cost over time include the following except :

a. Gross profit ratio

b. Efficiency ratio

c. Illness ratio

d. Absenteeism ratio

101. Cost of production is equal to

a. Prime costs+ other manufacturing costs.

b. Production costs + Administration expenses.

c. Prime costs + Manufacturing costs + Opening W.I.P – Closing W.I.P.

d. None of the above.

102. The cost of goods sold is equal to

a. Total Purchases - Total Sales.

b. Opening stock + Total Purchase.

c. Opening stock - Total Purchases +Closing Stock+ Direct Costs.

d. Opening stock + Total Purchases – Closing Stock + Direct Costs.

103. Which of the following is false regarding the LIFO method of inventory valuation?

a. The material issue will be priced at the price of the material that is purchased last.

b. The pattern of cash flow does not necessarily coincide with the actual flow pattern of materials.

c. It permits management to influence net income by timing the purchases.

d. LIFO determines closing inventory at recent costs.

104. Which of the following is NOT a reason for carrying inventory?

a. To maintain independence of operations

b. To take advantage of economic purchase-order size

c. To make the system less productive

d. To meet variation in product dem

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COST MANAGEMENT MCQ

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Website: - www.taxationlawcodes.com

105. Which of the following is TRUE regarding Departmental Rates.

a. A departmental absorption rate is a rate of absorption based upon the particular department's

overhead cost and activity level

b. A departmental absorption rate is a rate of absorption not based upon the particular
department's

overhead cost and activity level

c. A single rate of absorption used throughout an organization‘s production facility and based upon

its total production costs and activity

d. None of the given options

106. Inventory of ` 96,000 was purchased during the year. The cost of goods sold was ` 90,000

and the ending inventory was ` 18,000. What was the inventory turnover ratio for the year?

a. 5.0 times

b. 5.3 times

c. 6.0 times

d. 6.4 times

107. In a perpetual inventory system, an inventory flow assumption (i.e. LIFO or FIFO) is used

primarily for determining costs which are used in

a. Forecasts of future sale.

b. Recording the cost of goods sold.

c. Recording Sales Revenue.

d. Forecasts of future operating results.

108. The factors to be taken into consideration in formulating incentive schemes include:

a. Quantity and quality of output

b. Incidence of overhead, and effect upon workers

c. Simplicity and legal provisions

d. All of the above

COST MANAGEMENT MCQ
109. Contribution margin contributes to meet which one of the following options ?

a. Variable cost

b. Fixed cost

c. Operating cost

d. Net profit

110. Favorable conditions for the operation of piece rates include:

a. Homogeneous products

b. Long, uninterrupted run of production

c. Inspection

d. High proportion of indirect labour

111. If time allowed for a job is 10 hours, time taken for the job is 8 hours and rate of pay is ` 2

per hour, the bonus to the worker is :

a. ` 1.20

b. ` 2.00

c. ` 3.20

d. None of the above

112. Group bonus schemes are generally suitable where:

a. Output depends on individual efforts

b. Output of individual workers can be measured easily

c. It is necessary to create a collective interest in the work

d. Normal loss rate is high

113. In a profit sharing scheme the available surplus is shared by the following except:

a. Government

b. Shareholders

c. Employees

d. Firm

114. Non-monetary incentives may include the following except:

a. Health and safety

b. Housing facilities
COST MANAGEMENT MCQ
c. Education and training

d. Dearness allowance

115. The purposes served by preparation of payroll or wages sheet include:

a. Spreading the volume of work to be done

b. Computation of labour rate for each department

c. Comparing actual wages with budgeted wages for control

d. All of the above

116. The authorized heads of deduction from wages payable include the following except :

a. Car allowance

b. Income tax

c. Provident fund

d. Employees‘state insurance

117. Wages analysis include :

a. Gross wages per product

b. Gross wages per operation or department

c. Gross wages per labour classification

d. Analysis of constituent of gross wages – direct/ lost time

118. The inventory method where the cost per unit is recomputed after every addition in the

inventory is known as.

a. Specific identification method.

b. Moving average method.

c. Last-in- First – Out method.

d. First-in-First-Out method.

119. Which of the following inventory valuation methods shows higher profits during the period

of rising prices?

a. FIFO method.

b. LIFO method.

c. Weighted average method.

d. Simple average method.

120. Which of the following systems of inventory valuation computes cost of goods sold as a
COST MANAGEMENT MCQ
residual amount?

a. Weighted Average.

b. Last-in-First-out.

c. Periodic Inventory System.

d. Specific Identification.

121. Which of the following is calculated by a formula that uses net sales as denominator?

a. Inventory turnover ratio

b. Gross profit rate

c. Return on Investment

d. None of the given options

121. Overhead expenses can be classified according to:

a. Functions

b. Elements

c. Behavior

d. All of the above

122. Which of the following is not included in functional classification of overheads?

a. Repairs and maintenance

b. Lubricating oil

c. Consumable stores

d. Chargeable expenses

123. Which of the following is not an example of marketing overheads?

a. Salary of the foreman

b. Publicity expenses

c. Salaries of sales staff

d. Secondary packing charges

124. Some overhead charges tend to vary almost directly, some tend to remain constant while

some again vary in part with the volume and in part remain constant. This statement describes

sequentially the following:

a. Variable, fixed and semi-variable overheads

b. Fixed, semi-variable and variable overheads

COST MANAGEMENT MCQ
c. Semi-variable, variable and fixed overheads

d. Variable, semi-variable and fixed overheads

125. Suppose a firm sells its product at a price lower than the opportunity cost of the inputs used

to produce it. Which is true?

a. The firm will earn accounting and economic profits.

b. The firm will face accounting and economic losses.

c. The firm will face an accounting loss, but earn economic profits.

d. The firm may earn accounting profits, but will face economic losses.

126. Example of semi-variable items include the following except:

a. Telephone

b. Repairs and maintenance

c. Depreciation of plant and machinery

d. Insurance of plant and building

127. Direct Labor is an element of:

a. Prime cost

b. Conversion cost

c. Total production cost

d. All of the given options

128. Which of the following is not a production department?

a. Power department

b. Machining department

c. Refining department

d. Finishing department

129. Which of the following does not match?

Item of cost Basis of cost allocation

a. Power H.P. of machine

b. Supervision of building value of materials consumed

c. Insurance of building area occupied

d. Time-keeping number of employees

COST MANAGEMENT MCQ

130. (1) Departmentalization of items of costs is known as primary distribution.

(2) Redistribution of service departments, costs is known as secondary distribution. True or

false?

a. (1) and (2) true

b. (1) and (2) false

c. (1) False; (2) True

d. (1) True; (2) False

131. Which of the following costs is not a factory overhead expense?

a. Depreciation of equipment used in the research department

b. Salary of quality control inspector

c. Overtime premium paid to direct labour

d. Machine maintenance labour cost

132. Which of the following bases would be most appropriate to apportion the cost of electric

power to factory departments?

a. Number of outlet points

b. Amount metered out

c. Cubic capacity of premises

d. Kilowatt capacity of machines in department

133. A method of dealing with overheads involves spreading common costs over cost centres on

the basis of benefit received. This is known as

a. Overhead absorption

b. Overhead apportionment

c. Overhead identification

d. Overhead analysis

134. The process of cost apportionment is carried out so that :

a. Costs may be controlled

COST MANAGEMENT MCQ
b. Cost units gather overheads as they pass through cost centres

c. Whole items of cost can be charged to cost centres

d. Common costs are shared among cost centres

135. An overhead absorption rate is used to :

a. Share out common costs over benefiting cost canters

b. Find the total overheads for a cost centre

c. Charge overheads to products

d. Control overheads

136. Which of the following is not a means whereby factory overheads can be charged out to

production?

a. Direct labour rate

b. Overtime rate

c. Machine hour rate

d. Blanket rate

137. A management consultancy recovers overheads on chargeable consulting hours. Budgeted

overheads were ` 6,15,000 and actual consulting hours were 32,150. Overheads, were under

recovered by ` 35,000. If actual overheads, were ` 6,94,075, what was the budgeted overhead

absorption rate per hour ?

a. ` 19.13

b. ` 20.50

c. ` 21.59

d. ` 22.68

a. Practical capacity and normal capacity

b. Practical capacity and capacity based on sale expectancy

c. Maximum capacity and actual capacity

d. Maximum capacity and practical capacity

139. The capacity which is based on the long-term average of sales expectancy is known as :
COST MANAGEMENT MCQ
a. Theoretical capacity

b. Operating capacity

c. Normal capacity

d. Derated capacity

140. Maximum capacity of a plant refers to its:

a. Theoretical capacity

b. Normal capacity

c. Practical capacity

d. Capacity based on sales expectancy

141. Annual requirement is 7800 units; consumption per week is 150 units. Unit price ` 5, order

cost ` 10 per order. Carrying cost ` 1 per unit and lead time is 3 week, The Economic order

quantity would be.

a. 395 units

b. 300 units

c. 250 units

d. 150 units

142. What will be the impact of normal loss on the overall per unit cost?

a. Per unit cost will increase

b. Per unit cost will decrease

c. Per unit cost remain unchanged

d. Normal loss has no relation to unit cost

143. Alpha company purchased a machine worth Rs 200,000 in the last year. Now that machine

can be use in a new project which company has received this year. Now the cost of that machine is

to be called:

a. Project cost

b. Sunk cost

c. Opportunity cost

d. Relevant cost
COST MANAGEMENT MCQ
144. FOH absorption rate is calculated by the way of:

a. Estimated FOH Cost/Direct labor hours

b. Estimated FOH Cost/No of units produced

c. Estimated FOH Cost/Prime Cost

d. All of the given options

145. Which of the following is/are not associated with ordering costs?

a. Interest

b. Insurance

c. Opportunity costs

d. All of the given options

146. Under perpetual Inventory system at the end of the year:

a. No closing entry passed

b. Closing entry passed

c. Closing value find through closing entry only

d. None of the above.

147. The Hino Corporation has a breakeven point when sales are ` 160,000 and variable costs at

that level of sales are ` 100,000. How much would contribution margin increase or decrease, if

variable expenses dropped by ` 20,000?

a. 37.5%.

b. 60%.

c. 12.5%.

d. 26%

148. The short run is a time period in which:

a. All resources are fixed.

b. The level of output is fixed.

c. The size of the production plant is variable.

d. Some resources are fixed and others are variable

149. Opportunity cost is the best example of:

a. Sunk Cost

b. Standard Cost
COST MANAGEMENT MCQ
c. Relevant Cost

d. Irrelevant Cost

150. The components of factory overhead are as follows:

a. Direct material + indirect material + direct expenses

b. Indirect material + Indirect labor + others indirect cost

c. Direct material + indirect expenses + indirect labor

d. Direct labor + indirect labor + indirect expenses

151. The term Maximum level represents:

a. The maximum stock level indicates the maximum quantity of an item of material which can be

held in stock at any time.

b. The maximum stock level indicates the maximum quantity of an item of material which cannot be

held in stock at any time.

c. The average stock level indicates the maximum quantity of an item of material which can be held

in stock at any time.

d. The available stock level indicates the maximum quantity of an item of material which can be held

in stock at any time.

152. The FIFO inventory costing method (when using a perpetual inventory system) assumes that

the cost of the earliest units purchased is allocated in which of the following ways?

a. First to be allocated to the ending inventory

b. Last to be allocated to the cost of goods sold

c. Last to be allocated to the ending inventory

d. First to be allocated to the cost of goods sold

153. A firm Uses its own capital or Uses its owner's time and/or financial resources both are

examples of

a. Implicit Cost

b. Explicit Cost

c. Sunk Cost

d. Relevant Cost

154. If Direct Material = 12,000; Direct Labor = 8000 and other Direct Cost = 2000 then what

will be the Prime Cost?

COST MANAGEMENT MCQ
a. 12000

b. 14000

c. 20000

d. 22000

55. Wage, Rent & Materials are examples of :

a. Implicit Cost

b. Explicit Cost

c. Direct Cost

d. Manufacturing Cost

156. An investor invests in stock exchange he foregoes the opportunity to invest further in his

hotel. The profit which the investor will be getting from the hotel is _________________.

a. Opportunity cost

b. Period Cost

c. Product Cost

d. Historical Cost

157. It is possible for an item of overhead expenditure to be shared amongst many departments.

It is also possible that this same item may relate to just one specific department.

If the item was not charged specifically to a single department this would be an example of:

a. Apportionment

b. Allocation

c. Re-apportionment

d. Absorption

158. Generally, the danger level of stock is fixed ________ the minimum level

a. Below

b. Above

c. Equal

d. Danger level has no relation to minimum level

159. Which of the following is / are time based incentive wage plan?

a. Hasley Premium Plan

b. Hasley Weir Premium Plan

c. Rowan Premium Plan

COST MANAGEMENT MCQ

d. All of the given options

160. Which of the following is/are reported in production cost report?

a. The costs charged to the department

b. How the costs were assigned to the output?

c. The equivalent units of production by the department

d. All of the given options

161. Beginning goods in process were ` 15,000. The cost of goods manufactured is ` 245,000. What

is the cost assigned to the ending goods in process?

a. ` 45,000

b. ` 15,000

c. ` 30,000

d. There will be no ending Inventory

162. Sales are ` 450,000. Beginning finished goods were ` 23,000. Ending finished goods are `

30,000. The cost of goods sold is ` 300,000. What is the cost of goods manufactured?

a. ` 323,000

b. ` 330,000

c. ` 293,000

d. None of the given options

163. Under Periodic Inventory system Purchase of inventory is treated as:

a. Assets

b. Expense

c. Income

d. Liability

164. When prices are rising over time, which of the following inventory costing methods will

result in the lowest gross margin/profits?

a. FIFO

b. LIFO

c. Weighted Average

d. Cannot be determined

165. The main difference between the profit center and investment center is:
COST MANAGEMENT MCQ
a. Decision making

b. Revenue generation

c. Cost incurrence

d. Investment

166. The Inventory Turnover ratio is 5 times and numbers of days in a year is 365.Inventory

holding period in days would be

a. 100 days

b. 73 days

c. 50 days

d. 10 days

167. Over applied FOH will always result when a predetermined FOH rate is applied and:

a. Production is greater than defined capacity

b. Actual overhead costs are less than budgeted overhead

c. Budgeted capacity is less than normal capacity

d. Actual overhead incurred is less than applied Overhead

168. The flux method of labor turnover denotes:

a. Workers appointed against the vacancy caused due to discharge or quitting of the organization

b. Workers appointed in replacement of existing employees

c. Workers employed under the expansion schemes of the company

d. The total change in the composition of labor force

169. Which of the following statement is TRUE about FOH applied rates?

a. They are used to control overhead costs

b. They are based on actual data for each period

c. They are predetermined in advance for each period

d. None of the given

170. Cost of Goods Manufactured can be calculated as follow

a. Total factory Cost Add Opening Work in process inventory Less Closing Work in process inventory

b. Total factory Cost Less Opening Work in process inventory Add Closing Work in process inventory

c. Total factory Cost Less Opening Work in process inventory Less Closing Work in process inventory

d. Total factory Cost Add Opening Work in process inventory Add Closing Work in process inventory
COST MANAGEMENT MCQ
171. __________ is the time worked over and above the employee's basic working week.

a. Flex time

b. Overtime

c. Shift allowance

d. Commission

172. In furniture manufacturing use of nail, pins, glue, and polish which use to increase its

esteem value that cost is treated as:

a. Direct material cost

b. Indirect material cost

c. FOH cost

d. Prime cost

173. If labor is satisfied with high wages it may ultimately lead to:

a. Increased production and productivity

b. Increased efficiency

c. Reduced labor and overhead costs

d. All of the given options

174. Which of the following is a mechanical device to record the exact time of the workers?

a. Clock Card

b. Store Card

c. Token System

d. Attendance Register

174. Which of the following is a mechanical device to record the exact time of the workers?

a. Clock Card

b. Store Card

c. Token System

d. Attendance Register

175. Which of the following is / are element / s of production payroll?

a. Direct labor force wages

b. Administrative wages

c. Selling wages
COST MANAGEMENT MCQ
d. All of the given options

176. If a predetermined FOH rate is not applied and the volume of production is reduced from

the planned capacity level, the cost per unit expected to:

a. Remain unchanged for fixed cost and increase for variable cost

b. Increase for fixed cost and remain unchanged for variable cost

c. Increase for fixed cost and decrease for variable cost

d. Decrease for both fixed and variable costs

177. Which of the following is NOT an assumption of the basic economic-order quantity model?

a. Annual demand is known

b. Ordering cost is known

c. Carrying cost is known

d. Quantity discounts are available

178. In order to ensure efficient functioning of the stores department and steady flow of

materials to the production departments, the restocking of stores is duty of:

a. Managers

b. Storekeeper

c. Production In charge

d. Sales supervisor

179. In cost Accounting, abnormal loss is charged to:

a. Factory overhead control account

b. Work in process account

c. Income Statement

d. Entire production

180. A high inventory turnover may indicate:

a. An efficient use of the investment in inventory

b. A high risk of stock-outs

c. Stock position of store room

d. All of the given options

181. Which of the following cost is used in the calculation of cost per unit?

a. Total production cost

COST MANAGEMENT MCQ
b. Cost of goods available for sales

c. Cost of goods manufactured

d. Cost of goods Sold

182. If, COGS = ` 50,000 GP Margin = 25% of sales what will be the value of Sales?

a. ` 200,000

b. ` 66,667

c. ` 62,500

d. None of the given options