INTRODUCTION TO COST ACCUNTING SYSTEM

Multiple Choice Questions:

1) Prime cost is _____
a) all costs incurred in manufacturing a product.
b) the total of direct costs
c) the material cost of a product
d) the cost of operating a department
2) A company employs three drivers to deliver goods to its customers. The salaries paid to these driver’s
arc:
a) a part of prime cost
b) a direct production expense.
c) a production overhead
d) a selling and distribution overhead
3) A company has to pay a ₹ 1 per unit royalty to the designer of a product which it manufactures and
sells.
The royalty charge would be classified in the company's accounts as a
a) Direct expense
b) Production overhead
c) Administrative overhead
d) Selling overhead
4) ______is a method of dealing with overheads which involves spreading common costs over cost
centers on the basis of benefit received.
a) overhead absorption
b) overhead apportionment
c) overhead allocation
d) overhead analysis
5) Which of the following classification is meant for distinction between direct cost and indirect cost?
a) Function
b) Element
c) Variability
d) Controllability
6) Which of the following is applicable for Cost Control?
a) It is related with the future
b) It is a corrective function
c) It ends when the targets arc achieved
d) It challenges the standards set

7) _is anything for which a separate measurement of cost is required.

a) Cost driver
b) Cost centre
c) Cost unit
 d) Cost object
8) Ticket counter in a Metro Station is an example of
a) Profit centre
b) Investment centre
c) Cost centre
d) Revenue centre
9) Which of the following is an example of functional classification of cost?
a) Direct labour cost
b) Direct material cost
c) Factory overhead
d) Indirect material cost
10) Absorption costing is also referred as
a) Historical costing
b) Traditional costing
c) Full costing
d) All of the above terms

COST ASCERTAINMENT-ELEMENTS OF COST

1) Which of the following is considered as normal loss of material?
a) Pilferage
b) Loss due to accident
c) Loss due to careless handling of material
d) None of these
2) The most important element of cost is
a) Material
b) Labour
c) Overheads
d) All of these
3) Direct Material is a
a) Administration Cost
b) Selling and Distribution Cost
c) All of these
d) None of these
4) Which of the following is considered as accounting record?
a) Bind Card
b) Bill of Material
c) Store Ledger
d) None of these
5) Direct Material can be classified as
a) Fixed Cost
b) Semi-Variable Cost
c) Variable Cost
d) Prime Cost
6) In which of the following methods of pricing, costs lag behind the current economic values?
a) Replacement price method
b) Last in first out price method
c) First in first out price method
d) Weighted average price method
7) In which of the following methods, issues of materials arc priced at pre-determined rate?
a) Replacement price method
b) Inflated price method
c) Specific price method
d) Standard price method

8) Which of the following methods smoothes out the effect of fluctuations when material prices fluctuate
widely?
a) FIFO
b) Simple Average
c) LIFO
d) Weighted average
9) In which of the following incentive plan of payment, wages on time basis arc not Guaranteed?
a) Halsey Plan
b) Rowan Plan
c) Taylor's differential piece rate system
d) Gantt’s task and bonus system
10) Cost of idle time arising due to non-availability of raw material is
a) Charged to costing profit and loss account
b) Charged to factory overheads
c) Recovered by inflating the wage rate
d) Ignored
11) When overtime is required for meeting urgent order, overtime premium should be
a) Charged to costing profit and loss account
b) Charged to overhead costs
c) Charged to respective jobs
d) Ignored
12) Labour turnover is measured by
a) Number of workers replaced / average number of workers
b) Number of workers left / number in the beginning plus number at the end
 c) Number of workers joining / number in the beginning of the period
d) All of these
13) Idle time is____
a) Time spent by workers in factory
b) Time spent by workers in office
c) Time spent by workers oft' their work
d) Time spent by workers on their job

14) Overtime is___

a) Actual hours being more than normal time
b) Actual hours being more than standard time
c) Standard hours being more than actual hours
d) d. Actual hours being less than standard time
15) Labour productivity is measured by comparing
a) Total output with total man-hours
b) Added value for the product with total wage cost
c) Actual time and standard time
d) All of the above
16) If the time saved is less than 50% of the standard time, then the wages under Rowan and Halsey
premium plan on comparison gives:
a) Equal wages under two plans
b) More wages to workers under Halsey Plan than Rowan Plan
c) More wages to workers under Rowan Plan than Halsey Plan
d) None of the above
17) Under Taylor's differential piece rate scheme, if a worker fails to complete the task within the standard
time, then he is paid
a) 83% of the piece work rate
b) 175% of the piece work rate
c) 67% of the piece work rate
d) 125% of the piece work rate
18) Direct Expenses____includes imputed cost.
a) Shall
b) Shall not
c) Shall be
d) None of these

19) Direct expenses do not meet the test of materiality can be part of overhead.
a) Treated
b) Not treated
c) All of these
d) None of these
20) Example of Direct Expenses.
a) Rent
b) Royalty charged on production
c) Bonus to employee
d) None of these
21) The allotment of whole items of cost of centres or cost unit is called
a) Cost Allocation
b) Cost Apportionment
c) Overhead Absorption
d) None of the above
22) Directors' remuneration and expenses form a part of
a) Production Overhead
b) Administration Overhead
c) Selling Overhead
d) Distribution Overhead
23) Charging to a cost centre those overheads that result solely for the existence of that cost centre is
known as
a) Allocation
b) Apportionment
c) Absorption
d) Allotment
24) Absorption means
a) Charging of overheads to cost centres
b) Charging of overhead to cost units
c) Charging of overheads to cost centres or cost units
d) None of the above
25) When the amount of under or over absorption is significant, it should be disposed of by
a) Transferring to costing profit and loss account
b) The use of supplementär)' rates
c) Carrying over as a deferred charge to the next accounting year
d) None of the above
26) When the amount of overhead absorbed is less than the amount of overhead incurred, it is called
a) Under absorption of overhead
b) Over absorption of overhead
c) Proper absorption of overhead
d) None of the above
27) Selling and Distribution overhead arc absorbed on the basis of
a) Rate per unit
b) Percentage on works cost
 c) Percentage on selling price of each unit
d) Any of these
28) Primary packing cost is a part of
a) Direct material cost
b) Distribution overhead
c) Selling overhead
d) Production cost
29) Normal capacity of a plant refers to the difference between:
a) Maximum capacity and practical capacity
b) Maximum capacity and actual capacity
c) Practical capacity and estimated idle capacity as revealed by long term sales trend
d) Practical capacity and normal capacity
30) Find out from the following scientific and accurate method of factory overhead absorption:
a) Percentage of prime cost method
b) Machine hour rate method
c) Percentage of direct material cost method
d) Percentage of direct labour cost method

COST ACCOUNTING STANDARDS

1) CAS 21 stands for :
a) Capacity Determination
b) Joint Cost
c) Direct Expenses
d) None of these.
2) CAS 13 is dealt with_____
a) Joint Cost
b) Interest and financing charges
c) Employee Cost
d) Cost of Serv ice cost centre
3) Which standard deals with the principles and methods of determining the manufacturing Cost of
excisable goods?
a) CAS 2
b) CAS 12
c) CAS 15
d) CAS 22
4) Which standards deals with determination of averages1' equalized transportation cost?
a) CAS 5
b) CAS 6
c) CAS 9
 d) CAS 22
5) Which standards deals with the principles and methods of determining depreciation and amortization
cost?
a) CAS 9
b) CAS 12
c) CAS 15
d) CAS 16

COST BOOK KEEPING

1) Which of the following items is not included in preparation of cost sheet?
a) Carriage inward
b) Purchase returns
c) Sales commission
d) Interest paid
2) Which of the following items is not excluded while preparing a cost sheet?
a) Goodwill written olf
b) Provision for taxation
c) Property tax on factory building
d) Transfer to reserves
3) Which of the following arc direct expenses?
i) The cost of special designs, drawings or layouts
ii) The hire of tools or equipment for a particular job
iii) Salesman's wages
iv) Rent, rates and insurance of a factory
a) (i) and (ii)
b) (i) and (iii)
c) (i) and (iv)
d) (iii) and (iv)
4) What is prime cost?
a) Total direct cost only
b) Total indirect costs only
c) Total non-production costs
d) Total production costs
5) Which of the following is not an element of works overhead?
a) Sales manager’s salary
b) Plant manager's salary
c) Factory repairman’s wages
d) Product inspector's salary
6) For the purpose of Cost Sheet preparation, costs arc classified based on:
a) Functions
b) Relevance
c) Variability
d) Nature
7) Salary paid to an office supervisor is a part of:
a) Direct expenses
b) Administration cost
c) Quality control cost
d) Factory overheads
8) Audit fees paid to cost auditors is part of:
a) Selling and distribution cost
b) Production cost
c) Administration cost
d) Not recorded in the cost sheet
9) A company has set up a laboratory for testing of products for compliance with standards. Salary of this
laboratory stuffs arc part of:
a) Direct expenses
b) Quality control cost
c) Works overheads
d) Research and development cost
10) Canteen expenses for factory workers arc part of:
a) Administration cost
b) Factory overhead
c) Marketing cost
d) None of the above
11) Which of the following docs not form part of prime cost?
a) GST paid on raw materials (input credit can be claimed)
b) Cost of transportation paid to bring materials to factory
c) Cost of packing
d) Overtime premium paid to workers
12) A company pays royalty to State Government on the basis of production, it is treated as:
a) Direct expenses
b) Factory overheads
c) Direct Material Cost
d) Administration Cost
13) In Reconciliation Statement, expenses shown only in cost accounts arc:
a) Added to financial profit
b) Deducted from financial profit
c) Ignored
 d) Deducted from costing profit
14) In Reconciliation Statement, transfers to reserves arc:
a) Added to financial profit
b) Deducted from financial profit
c) Ignored
d) Added to costing profit
15) In Reconciliation Statement, incomes shown only in financial accounts arc:
a) Added to financial profit
b) Deducted from financial profit
c) Ignored
d) Deducted from costing profit
16) In Reconciliation Statement, Closing Stock undervalued in Financial Accounts is
a) Added to financial profit
b) Deducted from financial profit
c) Ignored
d) Added to costing profit
17) Under non-integrated accounting system:
a) Separate ledgers arc maintained for cost and financial accounts
b) Same ledger is maintained for cost and financial accounts by accountants
c) (A) and (B) both
d) None of the above
18) Under non-integrated accounting system, the account made to complete double entry
a) Finished goods control account
b) Work in progress control account
c) Stores ledger control account
d) General ledger adjustment account

19) Under non-integrated system of accounting, purchase of raw material is debited to

a) Purchase account
b) Material control account / stores ledger control account
c) General ledger adjustment account
d) None of the above

20) When costing loss is ₹ 5.600. administrative overhead under-absorbed being ₹ 600. the loss as per
financial accounts should be .
a) ₹ 5.000
b) ₹ 5,600
c) ₹ 6,200
d) None of the above
21) Which of the following items should be added to costing profit to arrive at financial profit?
a) Income tax paid
 b) Over absorption of works overhead
c) Interest paid on debentures
d) All of the above
22) Integral accounts eliminate the necessity of operating .
a) Cost ledger control account
b) Store ledger control account
c) Overhead adjustment account
d) None of the above

METHODS OF COSTING
1) Job Costing is used in:
a) Furniture making
b) Repair shops
c) Printing press
d) All of the above
2) In a job cost system, costs arc accumulated_____.
a) On a monthly basis
b) By specific job
c) By department or process
d) By kind of material used
3) The most suitable cost system where the products differ in type of material and work performed is____
a) Operating Costing
b) Job Costing
c) Process Costing
d) All of these
4) Cost Price is not fixed in ease of ____
a) Cost plus contracts
b) Escalation clause
c) De-escalation clause
d) All of the above
5) Most of the expenses arc direct in _____
a) Job Costing
b) Batch Costing
c) Contract Costing
d) None of the above
6) Cost plus contract is usually entered into those eases where_____.
a) Cost can be easily estimated
b) Cost of certified and uncertified work
c) Cost of certified work, cost of uncertified work and amount of profit transferred to Profit and Loss
Account
 d) Determination of contract cost with reasonable accuracy is not possible
7) In order lo determine cost of the products or serv ices, different business firms follow:
a) Different techniques of costing
b) Uniform costing
c) Different methods of costing
d) None of the above
8) In case product produced or jobs undertaken are of diverse system, the system of costing to be used
should be:
a) Operating Costing
b) Process Costing
c) Job Costing
d) None of the above
9) Job Costing is:
a) Suitable where similar products are produced on mass scale
b) Methods of costing used for non-standard and non-repetitive products
c) Technique of costing
d) Applicable to all industries regardless of the products or services provided
10) Batch costing is a type of:
a) Direct Costing
b) Process Costing
c) Job Costing
d) Differential Costing
11) Batch costing is similar to that under job costing except with the difference that:
a) Process becomes a cost unit
b) Job becomes a cost unit
c) Batch become the cost unit instead of a job
d) None of the above
12) Economic batch quantity is that size of the batch of production where:
a) Carrying cost is minimum
b) Set-up cost of machine is minimum
c) Average cost is minimum
d) Both A. and B.
13) MISSING IN ICMAI SOURCE (BUT ANSWER IS AVAILABLE IN KEY)

14) Which of the following documents ate used in job costing to record the issue of direct materials to a
job:
a) Purchase order
b) Purchase requisition
c) Goods received note
 d) Material requisition

15) Which of the following statements is true:

a) Batch costing is a variant of jobs costing
b) Job cost sheet may be used for estimating profit of jobs
c) Job costing cannot be used in conjunction with marginal costing
d) In cost plus contracts, the contractor runs a risk of incurring a loss
16) Which of the following statement is true:
a) Job costing can be suitably used for concerns producing any specific product uniformly
b) Job costing cannot be used in companies applying standard costing
c) Job cost sheet may be prepared to facilitate routing and scheduling of the job
d) Neither A. nor B. nor C.
17) The type of process loss that should not be allowed to affect the cost of good units is called:
a) Standard Loss
b) Normal Loss
c) Abnormal Loss
d) Seasonal Loss
18) Spoilage that occurs under inefficient operating conditions and is generally controllable is called
a) Normal defectives
b) Abnormal spoilage
c) Normal spoilage
d) None of the above
19) In which of the following situations an abnormal gain in a process occurs:
a) When normal loss is equal to actual loss
b) When the actual output is greater than the planned output
c) When actual loss is more than the expected
d) When actual loss is less than the expected loss
20) The value of abnormal loss is equal to:
a) Total cost of materials
b) Total process cost less cost of scrap
c) Total process cost less realizable value of normal loss less value of transferred out goods.
d) Total process cost less realizable value of normal loss
21) A process account is debited by abnormal gain, the value is determined as:
a) Equal to the value of good units less closing stock
b) Equal to the value of normal loss
c) Cost of good units less realizable value of normal loss
d) Cost of good unit less realizable value of actual loss

22) In sugar manufacturing industry molasses is also produced along with sugar. Molasses may be of
small value as compared with the value of sugar and is known as:
a) Joint product
 b) Common product
c) By-product
d) None of them
23) Method of apportioning joint costs on the basis of output of each joint product at the point of split-oils is
known as:
a) Physical unit method
b) Sales value method
c) Average cost method
d) Marginal cost and contribution method
24) The main purposes of accounting of joint products and by-products is to:
a) Determine the replacement cost
b) Determine the opportunity cost
c) Determine profit or loss on each product line
d) None of the above
25) Under net realizable value method of apportioning joint costs to joint products, the selling & distribution
cost is:
a) Ignored
b) Deducted from sales value
c) Deducted from further processing cost
d) Added to joint cost
26) Which of the following is an example of by-product:
a) Mustard seeds and mustard oil
b) Diesel and Petrol in an oil refinery
c) Edible oils and oil cakes
d) Curd and butter in a diary
27) Which of following methods can be used when the joint products are of unequal quantity and used for
captive consumption:
a) Physical units method
b) Net realizable value method
c) Technical estimates, using market value of similar goods
d) Market value at spit-off method

28) Cost of a particular serv ice under operating costing is ascertained by preparing:
a) Cost sheet
b) Process account
c) Job cost sheet
d) Production account
29) Operating costing is applicable to:
a) Hospitals
b) Cinemas
c) Transport undertaking
 d) All of the above
30) Composite cost unit for a hospital is:
a) Per day
b) Per bed
c) Per patient day
d) Per patient
31) Cost units used in power sector is called:
a) Number of hours
b) Number of electric points
c) Kilowatt-hour (KWH)
d) Kilo meter (K.M.)
32) Absolute Tonne-Km is an example of:
a) Composite unit for bus operation
b) Composite unit of transport sector
c) Composite unit for oil and natural gas
d) Composite unit in power sector

COST ACCOUNTING TECHNIQUES

1) The cost of a produc! under marginal cosling system includes
a) Prime cost plus variable overhead
b) Prime cost plus fixed overhead
c) Prime cost plus factory overhead
d) Only prime cost
2) The difference between absorption costing and marginal costing is in regard to the treatment of
a) Direct materials
b) Fixed overhead
c) Prime cost
d) Variable overhead
3) Fixed costs are treated as
a) Overhead costs
b) Prime costs
c) Period costs
d) Conversion costs

4) When sales and production (in units) are same then profits under
a) Marginal costing is lower than that of absorption costing
b) Marginal costing is higher than that of absorption costing
c) Marginal costing is equal to that of absorption costing
d) None of the above
5) When sales exceed production (in units) then profit under
a) Marginal costing is higher than that of absorption costing
b) Marginal costing is equal to that of absorption costing
c) Marginal costing is lower than that of absorption costing
d) None of the above
6) Which of the following factors responsible for dränge in the break-even point?
a) Change in selling price
b) Change in variable cost
c) Change in fixed cost
d) All of the above
7) Variable cost
a) Remains fixed in total
b) Remains fixed per unit
c) Varies per unit
d) Nor increase or decrease
8) Marginal Costing technique follows the following basic of classification
a) Element wise
b) Function Wise
c) Behaviour wise
d) Identifiability wise
9) P/V ratio will increase if the
a) There is a decrease in fixed cost
b) There is an increase in fixed cost
c) There is a decrease in selling price per unit.
d) There is a decrease in variable cost per unit.

10) The technique of differential cost is adopted when

a) To ascertain P/V ratio
b) To ascertain marginal cost
c) To ascertain cost per unit
d) To make choice between two or more alternative courses of action
11) Which of the following would not be used to estimate standard direct material prices?
a) The availability of bulk purchase discounts
b) Purchase contracts already agreed
c) The forecast movement of prices in the market
d) Performance standards in operation
12) What is an attainable standard?
a) A standard which includes no allowance for losses, waste and inefficiencies. It represents the level
of performance which is attainable under perfect operating conditions
 b) A standard which includes some allowance for losses, waste and inefficiencies. It represents the
level of performance which is attainable under efficient operating conditions
c) A standard which is based on currently attainable operating conditions
d) A standard which is kept unchanged, to show the trend in costs

13) Budgets are shown in-Terms

a) Qualitative
b) Quantitative
c) Materialistic
d) both (b) and (c)
14) Which of the following is not an element of master budget?
a) Capital Expenditure Budget
b) Production Schedule
c) Operating Expenses Budget
d) All above
15) Which of the following is not a potential benefit of using a budget?
a) Enhanced coordination of firm activities
b) More motivated managers
c) Improved inter-departmental communication
d) More accurate external financial statements
16) Which of the following is a long-term budget?
a) Master Budget
b) Flexible Budget
c) Cash Budget
d) Capital Budget
17) Materials become key factor, if
a) quota restrictions exist
b) insufficient advertisement prevails
c) there is low demand
d) there is no problem with supplies of materials
18) The difference between fixed cost and variable cost assumes significance in the preparation of the
following budget
a) Master Budget
b) Flexible Budget
c) Cash Budget
d) Capital Budget
19) The budget that is prepared first of all is .
a) Master budget
b) Sales budget assuming that it is the key factor
c) Cash Budget
d) Capital expenditure budget
20) Sales budget is a .
a) expenditure budget
 b) functional budget
c) master budget
d) None of these
21) When a company wants to prepare a factor)' overhead budget in which the estimated costs are
directly derived from the estimates of activity levels, which of the following budget should be prepared
by the company?
a) Flexible budget
b) Fixed budget
c) Master budget
d) . R & D budget
22) Which of the following budgets facilitates classification of fixed and variable costs:
a) Capital expenditure budget
b) Flexible budget
c) Cash budget
d) Raw materials budget
23) The entire budget organization is controlled and headed by a senior executive known as:
a) General Manager
b) Accountant
c) Budget Controller
d) None of the above
24) Which of the following is generally a long term budget:
a) Cash budget
b) Sales budget
c) Research and Development budget
d) Capital expenditure budget
25) A flexible budget requires a careful study of
a) Fixed, semi-fixed and variable expenses
b) Past and current expenses
c) Overheads, selling and administrative expenses.
d) None of these.
26) The basic difference between a fixed budget and flexible budget is that a fixed budget
a) is concerned with a single level of activity, while flexible budget is prepared for different levels of
activity
b) Is concerned with fixed costs, while flexible budget is concerned with variable costs.
c) is fixed while flexible budget changes
d) None of these.
METHODS OF COSTING

NUMERICAL MCQS
1) Equivalent production of 1.000 units. 60% complete in all respect, is:
a) 1,000 units
b) 1,600 units
c) 600 units
d) 1,060 units
(1000 x 60%)
2) In a process 8.000 units arc introduced during a period. 5% of input is normal loss. Closing work in
progress 60% complete is 1.000 units. 6.600 completed units arc transferred to next process.
Equivalent production for the period is:
a) 9,000 units
b) 7,440 units
c) 5.400 units
d) 7,200 units
(6.600 + 60% x 1,000)
3) 400 units were introduced in a process in which 40 units is the normal loss. If the actual output is 300
units, then there is:
a) No abnormal gain
b) Abnormal loss of 60 units
c) No abnormal loss
d) Abnormal gain of 60 units
{(400 - 40) - 300}

COST ACCOUNTING TECHNIQUES

NUMERICAL MCQS
1) If sales arc ₹ 90.000 and variable cost to sales is 75%, contribution is
a) ₹ 21.500
b) ₹ 22,500
c) ₹ 23,500
d) ₹ 67,500
2) If sales are ₹ 1,50.000 and variable cost arc ₹ 50,000. Compute P/V ratio.
a) 66.66%
b) 100%
c) 133.33%
d) 65.66%

3) Contribution is ₹ 3.00,000 and sales is ₹ 15,00,000. Compute P/V ratio.

a) 15%
b) 20%
c) 22%
 d) 17.5%
4) Variable cost to sales ratio is 40%. Compute P/V ratio.
a) 60%
b) 40%
c) 100%
d) None of the these
5) Fixed cost is ₹ 30,000 and P/V ratio is 20%. Compute breakeven point.
a) ₹ 1,60.000
b) ₹ 1,50,000
c) ₹ 1,55.000
d) ₹ 1,45.000
6) Standard price of material per kg ₹ 20, standards consumption per unit of production is 5 kg. Standard
material cost for producing 100 units is
a) ₹ 20,000
b) ₹ 12,000
c) ₹ 8.000
d) ₹ 10,000
7) Standard cost of material for a given quantity of output is ₹ 15,000 while the actual cost of material
used is t 16.200. The material cost variance is:
a) ₹ 1.200(A)
b) ₹ 16.200(A)
c) ₹ 15.000(F)
d) ₹ 31,200 (A)

8) Standard price of material per kg is ₹ 20. standard usage per unit of production is 5 kg. Actual usage
of production 100 units is 520 kgs. all of which was purchase at the rate of ₹ 22 per kg. Material usage
variance is
a) ₹ 400 (F)
b) ₹ 400 (A)
c) ₹ 1.040(F)
d) ₹ 1.040 (A)
9) Standard price of material per kg is ₹ 20. standard usage per unit of production is 5 kg. Actual usage
of production 100 units is 520 kgs. all of which was purchase at the rate of ₹ 22 per kg. Material cost
variance is
a) ₹ 2.440 (A)
b) ₹ 1.440 (A)
c) ₹ 1.440(F)
d) ₹ 2.300 (F)
10) Standard quantity of material for one unit of output is 10 kgs. @ ? 8 per kg. Actual output during a
given period is 800 units. The standards quantity of raw material
a) 8,000 kgs
b) 6,400 kgs
 c) 64.000 kgs
d) None of these
11) What is the labour rate variance if standard hours for 100 units of output arc 400 @ ₹ 2 per hour and
actual hours taken arc 380 @ ₹ 2.25 per hour?
a) ₹ 120 (adverse)
b) ₹ 100 (adverse)
c) ₹ 95 (adverse)
d) ₹ 25 (favourable)
12) In a period. 11280 kilograms of material were used at a total standard cost of ₹ 46.248. The material
usage variance was ₹ 492 adverse. What was the standard allowed weight of material for the period?
a) 11600 kg
b) 11160 kg
c) 12190 kg
d) 10590 kg
13) The operations to produce a unit of product L require 9 active hours. Budgeted idle time of 10% of total
hours paid for is to be incorporated into the standard times for all products. The wage rate is ₹ 4 per
hour. The standard labour cost of one unit of product L is:
a) ₹ 10.00
b) ₹ 36.00
c) ₹ 39.60
d) ₹ 40.00

CS INTER COSTING MCQS

1) Which of these is not an objective of Cost Accounting?
a) Ascertainment of Cost
b) Determination of Selling Price
c) Cost Control and Cost reduction
d) Assisting Shareholders in decision making
2) A profit centre is a centre
a) Where the manager has the responsibility of generating and maximizing profits
b) Which is concerned with earning an adequate Return on Investment
c) Both of the above
d) Which manages cost
3) Responsibility Centre can be categorized into:
a) Cost Centres only
b) Profit Centres only
c) Investment Centres only
d) Cost Centres, Profit Centres and Investment Centres
4) Cost Unit is defined as:
a) Unit of quantity of product, service or time in relation to which costs may be ascertained or
expressed
 b) A location, person or an item of equipment or a group of these for which costs are ascertained and
used for cost control.
c) Centres having the responsibility of generating and maximizing profits
d) Centres concerned with earning an adequate return on investment
5) Fixed cost is a cost:
a) Which changes in total in proportion to changes in output
b) which is partly fixed and partly variable in relation to output
c) Which do not change in total during a given period despise changes in output
d) which remains same for each unit of output
6) Uncontrollable costs are the costs which be influenced by the action of a specified member of an
undertaking.
a) can not
b) can
c) may or may not
d) must
7) Element/s of Cost of a product are:
a) Material only
b) Labour only
c) Expenses only
d) Material, Labour and expenses
8) Abnormal cost is the cost:
a) Cost normally incurred at a given level of output
b) Cost not normally incurred at a given level of output
c) Cost which is charged to customer
d) Cost which is included in the cost of the product
9) Conversion cost includes cost of converting into
a) Raw material, WIP
b) Raw material, Finished goods
c) WIP, Finished goods
d) Finished goods, Saleable goods
10) Sunk costs are:
a) relevant for decision making
b) Not relevant for decision making
c) cost to be incurred in future
d) future costs
11) Describe the method of costing to be applied in case of Nursing Home:
a) Operating Costing
b) Process Costing
c) Contract Costing
d) Job Costing
12) Describe the cost unit applicable to the Bicycle industry:
a) per part of bicycle
b) per bicycle
c) per ton
d) per day
13) Calculate the prime cost from the following information: Direct material purchased: Rs. 1,00,000 Direct
material consumed: Rs. 90,000 Direct Labour: Rs. 60,000 Direct expenses: Rs. 20,000 Manufacturing
overheads: Rs. 30,000
a) Rs. 1,80,000
b) Rs. 2,00,000
c) Rs. 1,70,000
d) Rs. 2,10,000
14) Total cost of a product: Rs. 10,000 Profit: 25% on Selling Price Profit is:
a) Rs. 2,500
b) Rs. 3,000
c) Rs. 3,333
d) Rs. 2,000
15) Calculate cost of sales from the following:
Net Works cost: Rs. 2,00,000
Office & Administration Overheads: Rs. 1,00,000
Opening stock of WIP: Rs. 10,000
Closing Stock of WIP: Rs. 20,000
Closing stock of finished goods: Rs. 30,000
There was no opening stock of finished goods.
Selling overheads: Rs. 10,000
a) Rs. 2,70,000
b) Rs. 2,80,000
c) Rs. 3,00,000
d) Rs. 3,20,000
16) Calculate value of closing stock from the following:
Opening stock of finished goods (500 units): Rs. 2,000
Cost of production (10000 units): Rs. 50,000
Closing stock (1000 units)?
a) Rs. 4,000
b) Rs. 4,500
c) Rs. 5,000
d) Rs. 6,000
17) Which of these is not a Material control technique:
a) ABC Analysis
b) Fixation of raw material levels
c) Maintaining stores ledger
d) Control over slow moving and non moving items
18) Out of the following, what is not the work of purchase department:
a) Receiving purchase requisition
b) Exploring the sources of material supply
c) Preparation and execution of purchase orders
d) Accounting for material received
19) Bin Card is a
a) Quantitative as well as value wise records of material received, issued and balance;
b) Quantitative record of material received, issued and balance
c) Value wise records of material received, issued and balance
d) a record of labour attendance
20) Stores Ledger is a:
a) Quantitative as well as value wise records of material received, issued and balance;
b) Quantitative record of material received, issued and balance
c) Value wise records of material received, issued and balance
d) a record of labour attendance
21) Re-order level is calculated as:
a) Maximum consumption x Maximum re-order period
b) Minimum consumption x Minimum re-order period
c) 1/2 of (Minimum + Maximum consumption)
d) Maximum level - Minimum level
22) Economic order quantity is that quantity at which cost of holding and carrying inventory
a) Maximum and equal
b) Minimum and equal
c) It can be maximum or minimum depending upon case to case.
d) Minimum and unequal
23) ABC analysis is an inventory control technique in which:
a) Inventory levels are maintained
b) Inventory is classified into A, B and C category with A being the highest quantity, lowest value.
c) Inventory is classified into A, B and C Category with A being the lowest quantity, highest value
d) Either bore.
24) Which one out of the following is not an inventory valuation method?
a) FIFO
b) LIFO
c) Weighted Average
d) EOQ
25) In case of rising prices (inflation), FIFO method will:
a) provide lowest value of closing stock and profit
b) provide highest value of closing stock and profit
c) provide highest value of closing stock but lowest value of profit
d) provide highest value of profit but lowest value of closing stock
26) In case of rising prices (inflation), LIFO will:
a) provide lowest value of closing stock and profit
b) provide highest value of closing stock and profit
c) provide highest value of closing stock but lowest value of profit
d) provide highest value of profit but lowest value of closing stock
27) Calculate Re-order level from the following:
Consumption per week: 100-200 units
Delivery period: 14-28 days
a) 5600 units
b) 800 units
c) 1400 units
d) 200 units

28) Calculate EOQ (approx.) from the following details:

Annual Consumption: 24000 units
Ordering cost: Rs. 10 per order
Purchase price: Rs. 100 per unit
Carrying cost: 5%
a) 310
b) 400
c) 290
d) 300
29) Calculate the value of closing stock from the following according to FIFO method:
1st January, 2014: Opening balance: 50 units <g> Rs. 4
Receipts:
5th January, 2014:100 units @ Rs. 5
12th January, 2014: 200 units @ Rs. 4.50
Issues:
2nd January, 2014: 30 units
18th January, 2014:150 units
a) Rs. 765
b) Rs. 805
c) Rs. 786
d) Rs. 700
30) Calculate the value of closing stock from the following according to LIFO method:
1st January, 2014: Opening balance: 50 units <g> Rs. 4 Receipts:
5th January, 2014:100 units @ Rs. 5
12th January, 2014: 200 units @ Rs. 4.50 Issues:
2nd January, 2014: 30 units
18th January, 2014:150 units
a) Rs. 765
 b) Rs. 805
c) Rs. 786
d) Rs. 700
31) Calculate the value of closing stock from the following according to Weighted Average method:
1st January, 2014: Opening balance: 50 units <g> Rs. 4
Receipts:
5th January, 2014:100 units @ Rs. 5
12th January, 2014: 200 units @ Rs. 4.50
Issues:
2nd January, 2014: 30 units
18th January. 2014: 150 units
a) Rs. 765
b) Rs. 805
c) Rs. 786
d) Rs. 700
32) Cost of abnormal wastage is:
a) Charged to the product cost
b) Charged to the profit & loss account
c) charged partly to the product and partly profit & loss account
d) not charged at all.
33) Calculate re-order level from the following:
Safety stock: 1000 units Consumption per
week: 500 units
It takes 12 weeks to reach material from the date of ordering.
a) 1000 units
b) 6000 units
c) 3000 units
d) 7000 units
34) From the following information, calculate the extra cost of material by following EOQ:
Annual consumption: = 45000 units
Ordering cost per order: = Rs. 10
Carrying cost per unit per annum: = Rs. 10
Purchase price per unit = Rs. 50
Re-order quantity at present = 45000 units
There is discount of 10% per unit in case of purchase of 45000 units in bulk.
a) No saving
b) Rs. 2,00.000
c) Rs. 2,22,010
d) Rs. 2,990
35) Which of the following is an abnormal cause of Idle time:
a) Time taken by workers to travel the distance between the main gate of factory and place of their
work
 b) Time lost between the finish of one job and starting of next job
c) Time spent to meet their personal needs like taking lunch, tea etc.
d) Machine break downs
36) If overtime is resorted to at the desire of the customer, then the overtime premium:
a) should be charged to costing profit and loss account;
b) should not be charged at all
c) should be charged to the job directly
d) should be charged to the highest profit making department
37) Labour turnover means:
a) Turnover generated by labour
b) Rate of change in composition of labour force during a specified period
c) Either of the above
d) Both of the above
38) Which of the following is not an avoidable cause of labour turnover:
a) Dissatisfaction with Job
b) Lack of training facilities
c) Low wages and allowances
d) Disability, making a worker unfit for work
39) Costs associated with the labour turnover can be categorised into:
a) Preventive Costs only
b) Replacement costs only
c) Both of the above
d) Machine costs
40) Calculate workers left and discharged from the following:
Labour turnover rates are 20%, 10% and 6% respectively under Flux method. Replacement method
and Separation method. No. of workers replaced during the quarter is 80.
a) 112
b) 80
c) 48
d) 64
41) Calculate workers recruited and joined from the following:
Labour turnover rates are 20%, 10% and 6% respectively under Flux method. Replacement method
and Separation method. No. of workers replaced during the quarter is 80.
a) 112
b) 80
c) 48
d) 64
42) Calculate the labour turnover rate according to replacement method from the following:
No. of workers on the payroll:
· At the beginning of the month: 500
· At the end of the month: 600
 During the month, 5 workers left, 20 workers were discharged and 75 workers were recruited. Of
these. 10 workers were recruited in the vacancies of those leaving and while the rest were
engaged for an expansion scheme.
a) 4.55%
b) 1.82%
c) 6%
d) 3%
43) Calculate the labour turnover rate according to Separation method from the following:
No. of workers on the payroll:
· At the beginning of the month: 500
· At the end of the month: 600
· During the month, 5 workers left, 20 workers were discharged and 75 workers were
recruited. Of these, 10 workers were recruited in the vacancies of those leaving and while the rest
were engaged for an expansion scheme.
a) 4.55%
b) 1.82%
c) 6%
d) 3%
44) A worker is allowed 60 hours to complete the job on a guaranteed wage of Rs. 10 per hour. Under the
Rowan Plan, he gets an hourly wage of Rs. 12 per hour. For the same saving in time, how much he
will get under the Halsey Plan?
a) Rs. 720
b) Rs. 540
c) Rs. 600
d) Rs. 900
45) Overhead refers to:
a) Direct or Prime Cost
b) All Indirect costs
c) only Factory indirect costs
d) Only indirect expenses
46) Allotment of whole item of cost to a cost centre or cost unit is known as:
a) Cost Apportionment
b) Cost Allocation
c) Cost Absorption
d) Machine hour rate
47) Which of the following is not a method of cost absorption?
a) Percentage of direct material cost
b) Machine hour rate
c) Labour hour rate
d) Repeated distribution method
48) Service departments costs should be allocated to:
 a) Only Service departments
b) Only Production departments
c) Both Production and service departments
d) None of the production and service departments
49) Most suitable basis for apportioning insurance of machine would be:
a) Floor area
b) Value of machines
c) No of workers
d) No of machines
50) Blanket overhead rate is
a) One single overhead absorption rate for the whole factory
b) Rate which is blank or nil rate
c) rate in which multiple overhead rates are calculated for each production department, service
department etc.
d) Always a machine hour rate
51) AT Co makes a single product and is preparing its material usage budget for next year. Each unit of
product requires 2kg of material, and 5,000 units of product are to be produced next year.
Opening inventory of material is budgeted to be 800 kg and AT co budgets to increase material
inventory at the end of next year by 20%
The material usage budget for next year is
a) 8,000 Kg
b) 9,840 kg
c) 10,000 Kg
d) 10,160 Kg
52) During a period 17, 500 labour hours were worked at a standard cost of Rs 6.50 per hour. The labour
efficiency variance was Rs 7,800 favourable.
How many standard hours were produced?
a) 1,200
b) 16,300
c) 17,500
d) 18,700
53) Which of the following is not a reason for an idle time variance?
a) Wage rate increase
b) Machine breakdown
c) Illness or injury to worker
d) Non- availability of material
54) During September. 300 labour hours were worked for a total cost of Rs 4800. The variable overhead
expenditure variance was Rs 600 (A). Overheads are assumed to be related to direct labour hours of
active working.
What was the standard cost per labour hour?
a) Rs 14
b) Rs 16.50
c) Rs 17.50
d) Rs 18
55) Which of the following would explain an adverse variable production overhead efficiency variance?
1. Employees were of a lower skill level than specified in the standard
 2. Unexpected idle time resulted from a series of machine breakdown
3. Poor Quality material was difficult to process
a) (1), (2) and (3)
b) (1) and (2)
c) (2) and (3)
d) (1) and (3)
56) A Local Authority is preparing cash Budget for its refuse disposal department. Which of the following
items would not be included in the cash budget?
a) Capital cost of a new collection vehicle
b) Depreciation of the machinery
c) Operatives wages
d) Fuel for the collection Vehicles
57) BDL Ltd. is currently preparing its cash budget for the year to 31 March 2014. An extract from its sales
budget for the same year shows the following sales values.
Rs
March 60.000
April 70.000
May 55.000
June 65.000
40% of its sales are expected to be for cash. Of its credit sales, 70% are expected to pay in month after
sale and take a 2% discount. 27% are expected to pay in the second month after the sale, and the
remaining 3% are expected to be bad debts. The value of sales budget to be shown in the cash budget for
May 2013 is
a) Rs 60,532
b) Rs 61,120
c) Rs 66,532
d) Rs 86,620

58) In process costing, a joint product is

a) a product which is later divided into many parts
b) a product which is produced simultaneously with other products and is of similar value to at least
one of the other products.
c) A product which is produced simultaneously with other products but which is of a greater value
than any of the other products.
d) a product produced jointly with another organization
59) Process B had no opening inventory. 13,500 units of raw material were transferred in at Rs 4.50 per
unit. Additional material at Rs1.25per unit was added in process. Labour and overheads were Rs 6.25
per completed unit and Rs 2.50 per unit incomplete.
If 11,750completed units were transferred out, what was the closing inventory in Process B?
a) Rs. 6562.50
b) Rs. 12,250.00
c) Rs. 14,437.50
d) Rs. 25,375.00
60) A process costing system for J Co used an input of 3,500Kg of materials at Rs20 per Kg and labour
hours of 2,750 at Rs25 per hour. Normal loss is 20% and losses can be sold at a scrap value of
Rs5per Kg. Output was 2.950 Kg. What is the value of the output?
a) Rs 142.485
b) Rs 146.183
c) Rs 149,746
d) Rs 152.986
61) In process costing, if an abnormal loss arises, the process account is generally
a) Debited with the scrap value of the abnormal loss units
b) Debited with the full production cost of the abnormal loss units
c) Credited with the scrap value of the abnormal loss units
d) Credited with the full production cost of the abnormal loss units
62) Which of the following statements is/are correct?
1. A materials requisition note is used to record the issue of direct material to a specific job.
2. A typical job cost will contain actual costs for material, labour and production overheads, and non -
production overheads are often added as a percentage of total production cost
3. The job costing method can be applied in costing batches
a) (1) only
b) (1) and (2) only
c) (1) and (3) only
d) (2) and (3) only
63) A job is budgeted to require 3,300 productive hours after incurring 25% idle time. If the total labour
cost budgeted for the job is Rs36.300. What is the labour cost per hour( to the nearest cent)?
a) Rs 8.25
b) Rs 8.80
c) Rs 11.00
d) Rs 14.67
64) A company calculates the prices of jobs by adding overheads to the prime cost and adding 30% to
total costs as a profit margin. Job number Y256 was sold for Rs1690 and incurred overheads of Rs
694. What was the prime cost of the job?
a) Rs 489
b) Rs 606
c) Rs 996
d) Rs 1300
65) State which of the following are the characteristics of service costing.
1. High levels of indirect costs as a proportion of total costs
2. Use of composite cost units
3. Use of equivalent units
a) (1) only
b) (1) and (2) only
c) (2) only
 d) (2) and (3) only
66) Which of the following organizations should not be advised to use service costing?
a) Distribution service
b) Hospital
c) Maintenance division of a manufacturing company
d) A light engineering company
67) Calculate the most appropriate unit cost for a distribution division of a multinational company using the
following information.
Miles travelled 636.500
Tonnes carried 2,479
Number of drivers 20
Hours worked by drivers 35,520
Tonnes miles carried 375.200
Cost incurred 562.800
a) Rs .88
b) Rs 1.50
c) Rs 15.84
d) Rs28.140
68) The following information is available for the W hotel for the latest thirty day period.
Number of rooms available per night 40 Percentage
occupancy achieved 65%
Room servicing cost incurred Rs. 3900
The room servicing cost per occupied room-night last period, to the nearest Rs, was:
a) Rs 3.25
b) Rs 5.00
c) Rs 97.50
d) Rs 150.00
69) A company makes a single product and incurs fixed costs of Rs. 30,000 per annum. Variable cost per
unit is Rs. 5 and each unit sells for Rs. 15. Annual sales demand is 7,000 units. The breakeven point
is:
a) 2,000 units
b) 3,000 units
c) 4,000 units
d) 6,000 units
70) A company manufactures a single product for which cost and selling price data are as follows:
Selling price per unit - Rs. 12 Variable cost per unit -
Rs. 8 Fixed cost for a period - Rs. 98,000 Budgeted
sales for a period - 30,000 units
The margin of safety, expressed as a percentage of budgeted sales.is:
a) 20%
b) 25%
c) 73%
 d) 125%
Information for Q.77 to Q.79:
a)
71) Capital gearing ratio is .
a) Market test ratio
b) Long-term solvency ratio
c) Liquid ratio
d) turnover ratio
72) After inviting tenders for supply of raw materials, two quotations are received as follows—
Supplier P Rs. 2.20 per unit, Supplier Q Rs. 2.10 per unit plus Rs. 2,000 fixed charges irrespective of the
units ordered. The order quantity for which the purchase price per unit will be the same—
a) 22,000 units
b) 20,000 units
c) 21,000 units
d) None of the above.
73) In case of joint products, the main objective of accounting of the cost is to apportion the joint costs
incurred up to the split off point. For cost apportionment one company has chosen Physical Quantity
Method. Three joint products A', B' and C are produced in the same process. Up to the point of split off
the total production of A. B and C is 60,000 kg, out of which 'A' produces 30,000 kg and joint costs are
Rs. 3,60,000. Joint costs allocated to product A is
a) Rs. 1,20,000
b) Rs. 60,000
c) Rs. 1.80,000
d) None of the these
74) A transport company is running five buses between two towns, which are 50 kms apart. Seating
capacity of each bus is 50 passengers. Actually passengers carried by each bus were 75% of seating
capacity. All buses ran on all days of the month. Each bus made one round trip per day.
Passenger kms are:
a) 2,81,250
b) 1,87,500
c) 5,62,500
d) None of the above
75) A budget which is prepared in a manner so as to give the budgeted cost for any level of activity is
known as:
a) Master budget
b) Zero base budget
c) Functional budget
d) Flexible budget
76) ____is also known as working capital ratio.
a) Current ratio
b) Quick ratio
c) Liquid ratio
 d) Debt-equity ratio
77) ____is a summary of all functional budgets in a capsule form.
a) Functional Budget
b) Master Budget
c) Long Period Budget
d) Flexible Budget
78) _____is a detailed budget of cash receipts and cash expenditure incorporating both
revenue and capital items.
a) Cash Budget
b) Capital Expenditure Budget
c) Sales Budget
d) Overhead Budget
79) Statutory cost audit are applicable only to:
a) Firm
b) Company
c) Individual
d) Society
80) For the financial year ended as on March 31, 2013 the figures extracted from the balance sheet of
Xerox Limited as under:
Opening Stock Rs. 29.000; Purchases Rs. 2,42.000; Sales Rs. 3,20.000; Gross Profit 25% of Sales.
Stock
Turnover Ratio will be
a) 8 times
b) 6 times
c) 9 times
d) 10 times
81) If credit sales for the year is Rs. 5,40,000 and Debtors at the end of year is Rs. 90,000 the Average
Collection Period will be
a) 30 days
b) 61 days
c) 90 days
d) 120 days
82) The summarized balance sheet of Rakesh udyog Limited shows the balances of previous and current
year of provision for taxation Rs. 50,000 and Rs. 65,000. If taxed paid during the current year
amounted to
Rs. 70.000 then amount charge from Profit and Loss Account will be:
a) Rs. 55,000
b) Rs. 85,000
c) Rs. 45,000
d) Rs. 1.85,000
83) The summarized balance sheet of Autolight Limited shows the balances of previous and current year
of retained earnings Rs. 25.000 and Rs. 35.000. If dividend paid during the current year amounted to
 Rs.
5,000 then profit earned during the year will be:
a) Rs. 5.000
b) Rs. 55,000
c) Rs. 15,000
d) Rs. 65,000
84) Following information is available of XYZ Limited for quarter ended June, 2013
Fixed cost Rs. 5,00,000
Variable cost Rs. 10 per unit
Selling price Rs. 15 per unit
Output level 1,50.000 units
What will be amount of profit earned during the quarter using the marginal costing
technique?
a) Rs. 2,50,000
b) Rs. 10,00,000
c) Rs. 5.00,000
d) Rs. 17,50,000
85) The P/v ratio of a company is 50% and margin of safety is 40%. If present sales is Rs. 30,00,000 then
Break Even Point in Rs. will be
a) Rs. 9.00,000
b) Rs. 18,00,000
c) Rs. 5.00,000
d) None of the above
86) Following information is available of PQR for year ended March, 2013: 4,000 units in process, 3,800
units output, 10% of input is normal wastage, Rs. 2.50 per unit is scrap value and Rs. 46.000 incurred
towards total process cost then amount on account of abnormal gain to be transferred to Costing P&L
will be-
a) Rs. 2.500
b) Rs. 2.000
c) Rs. 4.000
d) Rs. 3.500
87) In element-wise classification of overheads, which one of the following is not included —
a) Fixed overheads
b) Indirect labour
c) Indirect materials
d) Indirect expenditure.
88) When the sales increase from Rs. 40,000 to Rs. 60,000 and profit increases by Rs. 5,000, the P/V
ratio is —
a) 20%
b) 30%
c) 25%
d) 40%.