MEPL CLASSES

INDEX
MCQ BOOK

1. Introduction to Cost Accounting 1.1 – 1.3

Cost Ascertainment – Elements of Cost

Material Costs
2. Employee Costs 2.1-2.9
Direct Expenses
Overheads

3. Cost Accounting Standards (CAS 1 to CAS 24) 3.1 – 3.2

4. Cost Book Keeping 4.1 – 4.6

Methods of Costing
Job Costing
Batch Costing
Contract Costing
5. 5.1 – 5.9
Process Costing – Normal and Abnormal Losses,
Equivalent Production, Inter- process Profit, Joint and
By Products
Operating Costing – Transport, Hotel and Healthcare

Cost Accounting Techniques

Marginal Costing
6. 6.1 – 6.10
Standard Costing and Variance Analysis
Budget and Budgetary Control

Past Exam Paper

December 2021 1-5
December 2019 6-9
June 2019 10-13
December 2018 14-17
 1. Introduction to Cost Accounting

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 drivers are:
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
1.1

B. Element
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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 are 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
Answer:
1 b 2 d 3 a 4 b 5 b
1.2

6 c 7 d 8 d 9 c 10 d
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Fill in the blanks
1. Historical costs that cannot be recovered by any decision made now or in the future are
called .
2. Factory overhead costs are all manufacturing costs incurred in the factory except for and
and .
3. The sum of direct labour and factory overhead is termed.
4. Product costs are costs, that is, they are until they are sold; whereas period costs are
matched immediately against the in the period in which it is earned.
5. Variable costs change in direct proportion to changes in output.
6. The net revenue forgone as a result of the rejection of an alternative is called an .
7. Three inventory accounts are commonly used in manufacturing firms. They are raw
materials, , and finished goods.
8. The beginning finished goods inventory plus the minus the ending finished
goods inventory equals the cost of goods sold for a manufacturer.
9. The cost of direct materials used is the plus minus the ending
inventory of direct materials.
10. A variable cost is per unit.

Answer:
direct materials, direct labour, direct
1 sunk costs 2
expenses
3 conversion cost 4 inventoriable, assets, revenue
5 in total 6 opportunity cost
7 work-in-process 8 cost of goods manufactured
beginning inventory of
9 10 constant
direct materials, purchases
1.3
Page
 2. Cost Ascertainment – Elements of Cost
[Material Costs | Employee Costs | Direct Expenses | Overheads]

Multiple Choice Questions

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
2.1

D. Prime Cost
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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 are 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 are 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
2.2
Page
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 off 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. 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
2.3

C. More wages to workers under Rowan Plan than Halsey Plan

D. None of the above
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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
2.4

C. Selling Overhead
D. Distribution Overhead
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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 supplementary 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 are 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
2.5
Page
 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

Answer:
1 C 2 A 3 D 4 C 5 C 6 C 7 D 8 D
9 C 10 A 11 B 12 A 13 C 14 A 15 D 16 C
17 A 18 B 19 A 20 B 21 A 22 B 23 A 24 B
25 B 26 A 27 D 28 D 29 C 30 B

2.6
Page
State True or False
1. Perpetual inventory system enables management to ascertain stock at any time without
physical inventory being taken.
2. Continuous stock taking is not an essential feature to the perpetual inventory system.
3. Stores ledger is maintained in the stores department.
4. Purchase requisition is usually prepared by the storekeeper.
5. In centralized purchasing all purchases are made by the purchasing department.
6. Weighted average method of pricing issue of materials involves adding all the different
prices and dividing by the number of such prices.
7. Material returned note is prepared to keep a record of return of surplus materials to stores.
8. Waste and Scrap of material have small realization value.
9. Bin card are not the part of accounting records.
10. Store Ledger is maintained inside the stores of store keeper.
11. Direct employee cost shall be presented as a separate cost head in the financial statement.
12. As per the Payment of Bonus Act, 1965 the maximum limit of bonus is 20% of gross
earning.
13. Flux method means for measurement of labour turnover
14. Is overtime premium is directly assigned to cost object?
15. Time recording clocks can be successfully used for recording time of workers in large
undertakings.
16. Idle time arises only when workers are paid on time basis.
17. Personnel department is concerned with proper recruitment, placement and training of
workers.
18. Wages paid for abnormal idle time are added to wages for calculating prime cost.
19. The two principal systems of wage payment are payment on the basis of time and payment
on the basis of work done.
20. The piece rate system of wage payment cannot be successfully applied where quantity of
output can be measured.
21. If an expense can be identified with a specific cost unit, it is treated as direct expense.
22. Travelling expenses to site is a direct expense.
23. Identification of direct expenses shall be based on traceability in an economically feasible
2.7

manner.
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24. CAS – 9 is for Direct Expenses as issued by the cost accounting standard board (CASB) of
the Institute of Cost Accountants of India
25. Finance cost shall form part of direct expenses.
26. Departments that assist producing department indirectly are called service departments.
27. Factory overhead cost applied to a job is usually based on a predetermined rate.
28. When actual overheads are more than absorbed overheads, it is known as over absorption.
29. A blanket overhead rate is a single overhead rate computed for the entire factory.
30. Under absorption of overheads means that actual overheads are more than absorbed
overhead

Answer:
1 T 2 F 3 F 4 T 5 T 6 F 7 T 8 F
9 T 10 F 11 F 12 T 13 T 14 T 15 T 16 T
17 T 18 F 19 T 20 F 21 T 22 T 23 T 24 F
25 F 26 T 27 T 28 F 29 F 30 T

2.8
Page
Fill in the Blanks
1. In systems, two piece rates are set for each job.
2. In Halsey plan, a worker gets bonus equal to of the time saved.
3. Under Gantt Task and Bonus Plan, no bonus is payable to a worker, if his efficiency is less
than .
4. Cost of normal idle time is charged to .
5. Idle time arises only when workers are paid on - basis.
6. Direct Expenses relating to or .
7. Penalties / damages paid to statutory authorities be form part of direct expenses.
8. A direct expense related to a form part of Prime Cost.
9. Direct expenses incurred for bought out resources shall be determined at .
10. Direct expenses incurred lump – sum shall be .
11. Example of after sales service areand .
12. The difference between actual and absorbed factory overhead is called .
13. The difference between practical capacity and the capacity based on sales expectancy is
known as .
14. Under or over absorption of overheads arises only when overheads are absorbed by .
15. In Absorption Costing cost is added to inventory.

Answer:
1 Taylor’s differential piece rate 2 50%
3 100% 4 factory overhead
manufacture of a product, rendering
5 time 6
of service
7 shall not 8 Product
9 Invoice Price 10 Amortized
Repair and Maintenance,
11 12 Under or over absorbed overheads.
Replacement of Components
13 Idle Capacity 14 Predetermined overheads rates
15 Fixed
2.9
Page
 3. Cost Accounting Standards (CAS 1 to CAS 24)

Multiple Choice Questions

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 Service 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 averages/ 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
3.1

D. CAS 16
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Answer

1 D 2 D 3 C 4 D 5 D

State True or False

1. CAS 19 stands for Joint Cost.
2. Cost Accounting Standard Board should have minimum three eminant practicing members
of the Insititute of Cost Accounts of India.
3. The function of CASB is to issue the framework for the Cost Accounting Standard.
4. CAS 2 stands for classification of cost.
5. The objective of CAS 10 is to bring uniformity and consistency in the period and methods
of determining the direct expenses with reasonable accuracy.

Answer

1 True 2 False 3 True 4 False 5 True

Fill in the Blanks

1. CAS 9 stands for .
2. Theof the CASB will be nominated by the council of The Institute of Cost Accountants of
India.
3. nominee from the regulate like CAG, RBI to the CASB Board.
4. CAS stands for cost of service cost centre.
5. The function of CASB is to assists the members in preparations of uniform under
various statue.
Answer
1 Predetermined 2 chairman
3 four 4 13
5 cost statement
3.2
Page
 4. Cost Book Keeping
Multiple Choice Questions
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 off
B. Provision for taxation
C. Property tax on factory building
D. Transfer to reserves
3. Which of the following are 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 csots
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
4.1

C. Factory repairman’s wages

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D. Product inspector’s salary

6. For the purpose of Cost Sheet preparation, costs are 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 are part of:
A. Direct expenses
B. Quality control cost
C. Works overheads
D. Research and development cost
10. Canteen expenses for factory workers are part of:
A. Administration cost
B. Factory overhead
C. Marketing cost
D. None of the above
11. Which of the following does 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
4.2

C. Cost of packing
Overtime premium paid to workers
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D.
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 Statements, expenses shown only in financial accounts are:
A. Added to financial profit
B. Deducted from financial profit
C. Ignored
D. Added to costing profit
14. In Reconciliation Statement, expenses shown only in cost accounts are:
A. Added to financial profit
B. Deducted from financial profit
C. Ignored
D. Deducted from costing profit
15. In Reconciliation Statement, transfers to reserves are:
A. Added to financial profit
B. Deducted from financial profit
C. Ignored
D. Added to costing profit
16. In Reconciliation Statement, incomes shown only in financial accounts are:
A. Added to financial profit
B. Deducted from financial profit
C. Ignored
D. Deducted from costing profit
17. In Reconciliation Statement, Closing Stock undervalued in Financial Accounts is
A. Added to financial profit
B. Deducted from financial profit
C. Ignored
4.3

D. Added to costing profit

Page
18. Under non-integrated accounting system:
A. Separate ledgers are 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
19. Under non-integrated accounting system, the account made to complete double entry is:
A. Finished goods control account
B. Work in progress control account
C. Stores ledger control account
D. General ledger adjustment account
20. 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
21. 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
22. 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
23. Integral accounts eliminate the necessity of operating .
A. Cost ledger control account
B. Store ledger control account
4.4

C. Overhead adjustment account

None of the above
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D.
Answer:

1 D 2 C 3 A 4 A 5 A 6 A 7 B 8 C

9 B 10 B 11 D 12 A 13 A 14 B 15 A 16 B

17 A 18 A 19 D 20 B 21 C 22 B 23 A

State True or False

1. Total cost = Prime cost + All indirect costs.
2. Closing of work in progress should be valued on the basis of prime cost.
3. Closing stock of finished goods should be valued on the basis of cost of sales.
4. Production cost includes only direct costs related to the production.
5. Primary packaging cost is included in distribution cost.
6. Notional interest on owner’s capital appears only in financial profit and loss account.
7. Goodwill written off appears only in cost accounts.
8. Overheads are taken on estimated basis in financial accounts.
9. Expenses which appear only in financial accounts and not in cost accounts, are generally
notional items.
10. Need for Reconciliation arise in case of integrated system of accounts.
11. Cost ledger control account makes the cost ledger self-balancing.
12. Stock ledger contains the accounts of all items of finished goods.
13. The purpose of cost control accounts is to control the cost.
14. Cost control accounts are prepared on the basis of double entry system.
15. The balancing in costing profit and loss account represents under or over absorption of
overheads.

Answer:
1 T 2 F 3 F 4 F 5 F 6 F 7 F 8 F
9 F 10 F 11 T 12 T 13 F 14 T 15 F
4.5
Page
Fill in the Blanks
1. Prime cost + Overheads =
2. Total cost + Profit =
3. + Profit = Sales
4. Direct Material + + Direct Expenses = Prime Cost
5. Salary paid to factory manager is an item of .
6. In Reconciliation Statements, income shown only in Financial Accounts are .
7. In Reconciliation Statements, expenses shown only in cost accounts are .
8. In Reconciliations Statements, overheads Over-Recovered in cost accounts are .
9. In Reconciliation Statements, overheads Under Recovered in cost accounts are.
10. Notional remuneration to owner is expense debited only in .
11. All the transactions relating to materials are recorded through .
12. The net balance of represents net profit or net loss.
13. WIP ledger contains the accounts of all the which are under .
14. The two traditional systems of accounting for integration of cost and financial accounts
are the and .
15. Under integrated accounting system, the accounting entry for payment of wages is to
debit and to credit cash

Answer:
1 Total Cost 2 Selling price
3 Cost of sales 4 Direct Wages
5 Factory Overhead 6 Added to Costing Profit.
Deducted from Financial Profit / Deducted from financial profit / added
7 8
Added to Costing Profit to costing profit
Added to financial profit / deducted
9 10 Cost Accounts
from costing profit.
11 Stores ledger control account 12 Costing Profit and Loss
Jobs or works in process, several job Double entry method, third entry
13 14
accounts method
4.6

15 Wages Control Accounts

Page
 5. Methods of Costing
[Job Costing | Batch Costing | Contract Costing | Process Costing|
Operating Costing]

Multiple Choice Questions

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 are 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 case of .
A. Cost plus contracts
B. Escalation clause
C. De-escalation clause
D. All of the above
5. Most of the expenses are direct in.
A. Job Costing
B. Batch Costing
5.1

C. Contract Costing
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D. None of the above

6. Cost plus contract is usually entered into those cases 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 to determine cost of the products or services, 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:
5.2

A. Process becomes a cost unit

B. Job becomes a cost unit
Page
 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.
14. Which of the following documents are 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
5.3
Page
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 realisable value of normal loss less value of transferred out
goods.
D. Total process cost less realisable 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 realisable value of normal loss
D. Cost of good unit less realisable 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
5.4
Page
23. Method of apportioning joint costs on the basis of output of each joint product at the point
of split-offs 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 realisable 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 realisable value method
C. Technical estimates, using market value of similar goods
D. Market value at spit-off method
28. Cost of a particular service under operating costing is ascertained by preparing:
5.5

A. Cost sheet
Page

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

Answer:
1 D 2 B 3 B 4 A 5 C 6 D 7 C 8 C 9 B
10 C 11 C 12 D 13 B 14 D 15 B 16 D 17 C 18 B
19 D 20 C 21 C 22 C 23 A 24 C 25 B 26 C 27 C
28 C 29 D 30 C 31 C 32 B
5.6
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Numerical Multiple Choice Questions
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 × 60%)
2. In a process 8,000 units are introduced during a period. 5% of input is normal loss.
Closing work in progress 60% complete is 1,000 units. 6,600 completed units are
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% × 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}

Answer
1 C 2 D 3 B
5.7
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State True or False
1. Operating costing is applied to ascertain the cost of products.
2. Cost of operating the service is ascertained by preparing job account.
3. The problem of equivalent production arises in case of operating costing.
4. FIFO methods are followed for evaluation of equivalent production when prices are
fluctuating.
5. Work in progress is the inherent feature of processing industries.
6. Costs incurred prior to the split off point are known as “Joint Costs”.
7. No distinction is made between Co products and Joint Products.
8. Contact costing is variant of job costing.
9. In contract costing, the unit of cost is a job.
10. Job costing is applied only in small concerns.

Answer:
1 F 2 F 3 F 4 F 5 T
6 T 7 F 8 F 9 F 10 F

5.8
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Fill in the Blanks
1. Cost of loss is not borne by good units.
2. If the actual loss in a process is less than the normal loss, the difference is known as .
3. Costs are incurred after split off point.
4. Theproduct generally has a greater sale value than by product.
5. Statement of cost per unit of equivalent production shows the per unit cost .
6. Two principal methods of evaluation of equivalent production are and .
7. In hospital the cost unit is .
8. In electricity companies, the cost unit is .
9. The method of costing used in undertaking like gas companies, cinema houses, hospitals
etc is known as .
10. In motor transport costing two example of fixed cost areand .

Answer:
1. Abnormal 2. Abnormal Gain 3. Subsequent 4. Main
FIFO and
per bed / per
5. Element wise, 6. Average 7. 8. kilowatt–hour
patient day
Method
Operating Insurance and
9. 10.
Costing Depreciation.

5.9
Page
 6. Cost Accounting Techniques
[Marginal Costing | Standard Costing and Variance Analysis |
Budget and Budgetary Control]

Multiple Choice Questions

1. The cost of a product under marginal costing 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
6.1

C. Marginal costing is lower than that of absorption costing

Page

D. None of the above

6. Which of the following factors responsible for change 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
6.2

D. Performance standards in operation

Page
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
6.3
Page
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 factory 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
6.4

B. Flexible budget
Page

C. Cash budget
 D. Raw materials budget
23. The entire budget organisation 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.
Answer:
1 A 2 B 3 C 4 C 5 A 6 D 7 B 8 C
9 D 10 D 11 D 12 B 13 D 14 B 15 D 16 D
17 A 18 B 19 B 20 B 21 A 22 B 23 C 24 D
25 A 26 A
6.5
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Multiple Choice Questions (Practical)
1. If sales are ₹ 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 are ₹ 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 ₹ 16,200. The material cost variance is:
A. ₹ 1,200 (A)
6.6

B. ₹ 16,200 (A)
C. ₹ 15,000 (F)
Page

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 are 400 @ ₹ 2
per hour and actual hours taken are 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
6.7
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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

Answer:
1 B 2 A 3 B 4 A 5 B 6 D 7 A 8 B
9 B 10 A 11 C 12 B 13 D

6.8
Page
State True or False
1. Excess of Actual cost over Standards Cost is treated as unfavourable variance.
2. Variances are calculated for both material and labour.
3. While fixing standards, normal losses and wastages are taken into account.
4. Standard costing is an ideal name given to the estimate making.
5. Pre-determined standards provide a yardstick for the measurement of efficiency.
6. Material cost variance and labour cost variance are always equal.
7. Fixing standards is the work of industrial engineer or the production people and not of cost
accountant.
8. Standards costing are more profitability employed in job order industries than in process
type industries.
9. Budget is a means and budgetary control is the end result.
10. To achieve the anticipated targets, Planning, Co-ordination and Control are the important
main tasks of management, achieved through budgeting and budgetary control.
11. A key factor or principal factor does not influence the preparation of all other budgets.
12. Budgetary control does not facilitate introduction of ‘Management by Exception’.
13. Generally, budgets are prepared to coincide with the financial year so that comparison of
the actual performance with budgeted estimates would facilitate better interpretation and
understanding.
14. A flexible budget is one, which changes from year to year.
15. A flexible budget recognises the difference between fixed, semi-fixed and variable cost and
is designed to change in relation to the change in level of activity.
16. Sales budget, normally, is the most important budget among all budgets.
17. The principal factor is the starting point for the preparation of various budgets.
18. A budget manual is the summary of all functional budgets.

Answer:
1 T 2 T 3 T 4 F 5 T 6 F 7 F 8 F
9 T 10 T 11 F 12 F 13 T 14 F 15 T 16 T
17 T 18 F
6.9
Page
Fill in the Blanks
1. are not assigned to the product but are recognized as expenses in the period incurred.
All nonmanufacturing costs are period costs
2. Only difference between variable costing and absorption costing is the classification of .
3. Under marginal costing the difference in the magnitude of does not affect the
unit cost of production.
4. compare favourably with the economist’s definition of marginal cost, viz. that
marginal cost is the amount which at any given volume of output is changed if output is
increased or decreased by one unit
5. Historical costing uses post period costs while standards costing uses costs.
6. Three types of standards are , , .
7. Theis usually the co-ordinator of the standards committee.
8. Basically there are two types of standards viz; and .
9. When actual cost is less than the standards cost, it is known as variance.
10. A flexible budget is geared toward rather than a single level of activity.
11. is a system for reporting revenue and cost information to the individual responsible for
the revenue-causing and/or cost-incurring function.
12. Budgets are useful for the operating activities and of a business enterprise.
13. The is the starting point in preparing the master budget (given that sales are
the principal budget factor.
14. Responsibility Accounting is a system of accounting that recognizes various throughout
the organisation

Answer:
1 Period Cost 2 fixed factory overhead
3 opening stock and closing stock 4 Differential Costs
5 Predetermined 6 Basic, Ideal and Current
7 Cost Accountants 8 ideal standard attainable standard
9 Favourable 10 A range of activity
11 Responsibility accounting 12 forecasting, financial position
13 Sales Budget 14 responsibility centres
6.10
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 PAST EXAMS
DECEMBER 2021
Multiple Choice Questions
1. Cost units used in power sector is called:
A. Number of hours
B. Kilo meter (K. M)
C. Number of electric points
D. Kilowatt-hour(KWH)
2. Cost units of Automobile Industry is . Which word(s) according to you appropriately fills
in above blank?
A. Cubic meter
B. Number of vehicle
C. Bed Night
D. Number of call
3. Which of the following most appropriately defines 'Idle time'?
A. Time spent by workers in factory
B. Time spent by workers in office
C. Time spent by workers off their work
D. Time spent by workers on their job
4. The allotment of whole items of cost of centers or cost unit is called:
A. Overhead absorption
B. Cost allocation
C. None of these
D. Cost apportionment
5. If an organization has all the resources it needs for production, then the principalbudget
factor is most likely to be
A. labour supply
B. sales demand
C. raw materials
D. non-existing
6. Time and motion study is conducted by the
A. Time –keeping department
B. Payroll department
C. Personnel department
D. Engineering department
7. Sales budget is an example of
A. Functional budget
B. Master budget
C. Expenditure budget
1
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D. Capital budget
8. Absolute Tonne-km. is an example of:
A. Composite unit in power sector
B. Composite unit for oil and natural gas
C. Composite unit for bus operation
D. Composite unit of transport sector
9. Which of the following is not an element of master budget?
A. Capital Expenditure Budget
B. Production Schedule
C. Operating Expenses Budget
D. All of these
10. Selling and distribution overheads are absorbed on the basis of
A. rate per unit
B. Any of these
C. percentage on selling price of each unit
D. percentage on works cost.
11. Standards deals with the principles and methods of determining depreciation and
amortization cost-
A. CAS 12
B. CAS 9
C. CAS 16
D. CAS 15
12. Which of the following is a service department?
A. Machining department
B. Finishing department
C. Refining department
D. Receiving department
13. Batch Costing is a type of .
Which word(s) according to you appropriately fills in the above blank?
A. Direct Costing
B. Process Costing
C. Job costing
D. Differential Costing
14. Audit fees paid to cost auditors is part of:
A. Administration Cost
B. None of these
C. Selling & Distribution cost
D. Production cost
2
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15. Which of the following is not an element of works overhead?
A. Sales manager’s salary
B. Factory repairman’s wages
C. Product inspector’s salary
D. Plant manager’s salary
16. In Reconciliation Statement expenses shown only in cost accounts are
A. Deducted from financial profit
B. Ignored
C. Added to financial profit
D. Deducted from costing profit
17. From cost control point of view the standard most commonly used is:
A. Theoretical standard
B. Expected standard
C. Normal standard
D. Basic standard
18. Which of the following is generally a long term budget?
A. Sales budget
B. Cash budget
C. Research and Development budet
D. Capital expenditure budget
19. Which method of absorption of factory overheads do you suggest in a concern which
Produces only one uniform time of product?
A. Direct labour rate
B. Percentage of direct wages basis
C. Machine hour rate
D. A rate per units of output
20. In the context of Contract a/c, work completed and not yet certified will be shown
A. at cost under 'Completed Work'
B. at cost under WIP a/c
C. at cost plus notional profit less retention money under 'Completed Work'
D. at cost plus + 2/3rd of the notional profit under 'Completed Work'

1 2 3 4 5 6 7 8 9 10
D B C B B D A D B B
11 12 13 14 15 16 17 18 19 20
C D C A A A B D D B
3
Page
Fill in the blanks with appropriate answers.
1. If actual loss in a process is less than normal loss, the difference is known as .
2. Profit volume ratio with increase in fixed cost
3. VED analysis is primarily used for control of .
4. is the name the type of loss for which a Process Account is credited with value for
such loss when scrap value is zero?
5. When raw material is accounted at standard cost, variances due to normal reasons will be
treated as cost
6. CAS stands for cost of service cost centre
7. Notional remuneration to owner is expense debited only in .
8. Historical costing uses post period costs while standards costing uses costs.
9. leads to budgeting and budgeting leads to budgetary control
10. Fixed cost is Rs 30,000 and P/V ratio is 20%. Compute breakeven point
11. The amount of sales of a product is Rs 1,00,000. Its variable cost is Rs 40,000 andfixed
cost is Rs . 50,000. The amount of BEP sales will be
12. A labour cost standard is based on estimates of the to produce a unit of product and
the cost of labour per unit
13. A factory has to produce and supply 24000 units of a component annually to acustomer.
The carrying cost per unit is Rs 2 per component per month. The production run set up
cost is Rs 1,800 per production run. the economic batch size that must be
produced to minimize total costbased on the above information.
14. Standard Costing is one of the techniques
15. Cost variance is the difference between
16. A work measurement study was carried out in a firm for 10 hours. The information
generated was: Units produced 600; Idle time 15%; Performance rating 120%; and
Relaxation Allowance 10% of standard time. The standard time for each unit produced is
?
17. Differential cost is the change in the cost due to change in from one level to another
18. In Absorption costing, cost is added to inventory
19. Margin of safety is
4
Page
Answers:
1. Abnormal Gain 12. Labour hours required
2. is constant 13. Economic Batch Quantity = 1897 units
3. Components or spare parts approx. / batch
4. Abnormal Loss 14. Cost Control
5. Direct Material 15. The standards cost and actual cost
6. CAS 13 16. Standard Time for each unit = 1.133
7. Cost Accounts minutes
8. Predetermined 17. Activity
9. Forecasting 18. Fixed
10. Rs. 1,50,000 19. Actual sales – sales at Breakeven point
11. Rs. 83,334 or Profit/ PV Ratio.

Match the items in Column I with the most appropriate items in Column II

Answer:
(i) (B) Contract costing
(ii) (C) Imputed Cost

5
Page
 DECEMBER 2019

Choose the correct answer from the given alternatives

1. Costs which are ascertained after they have been incurred are known as
A. Sunk Costs
B. Imputed Costs
C. Historical Costs
D. Opportunity Costs

2. Prime cost plus variable overheads is known as

A. Factory Cost
B. Marginal Cost
C. Cost of Production
D. Total Cost

3. In which of thefollowing methods, issue of materials are priced atpre- determined rate?
A. Specific price method
B. Standard price method
C. Inflated price method
D. Replacement price method

4. For reducing the labour cost per unit, which of the following factors is the most important?
A. Low wage rates
B. Longer hours of work
C. Higher input -output ratio
D. Strict control and supervision
5. Maximum possible productive capacity of a plant when no operating time is lost is its
A. Normal capacity
B. Practical capacity
6
Page

C. Theoretical capacity
 D. Capacity based on sales expectancy

6. In job costing, which of the following documents is used to record the issue of direct
materials to a job?
A. Goods Receipt Note
B. Purchase Order
C. Purchase Requisition Note
D. Material Requisition Note

7. The main purpose of accounting of joint products and by -products is to

A. determine the profit/ loss on each product line.
B. determine the selling price.
C. comply with the statutory requirements.
D. identify the cost and load it on the main product.

8. During a period 2560 labour hours were worked at a standard rate of Rs. 7.50 per hour. The
direct labour efficiency variance was Rs. 825 (A). How many standard hours were
produced?
A 2400
B 2450
C 2500
D 2550

9. PQR Ltd. manufactures a single product which it sells for Rs.40per unit. Fixed cost is Rs.
60,000 per year. The contribution to sales ratio is 40% . PQR Ltd.’s Break Even Point in
units is
A. 3500
B. 3700
C. 3750
D. 4000
7
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10. The fixed-variable cost classification has a special significance in the preparation of
A. Cash budget
B. Master budget
C. Flexible budget
D. Capital budget

1 2 3 4 5 6 7 8 9 10
C B B C C D A B C C

Match the statement in Column I with the most appropriate statement in Column II
Column I Column II
(i) Notional cost A Replacement method
(ii) Labour turnover B Cost of utilities
(iii) CAS-10 C Production strategy
(iv) Contract costing D Direct expenses
(v) JIT E Costing department
F Imputed cost
G Esc alation clause
H Decision package

Answer
Column I Column II
(i) Notional cost F Imputed cost
(ii) Labour turnover A Replacement method
(iii) CAS-10 D Direct expenses
(iv) Contract costing G Escalation clause
(v) JIT C Production strategy
8
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State whether the following are 'True' or 'False'
1. Profit is the result of two varying factors sales and variable cost.
2. Bin card is a record of both quantities and value.
3. Overtime premium is directly assigned to cost object.
4. In Reconciliation statements, expenses shown only in financial accounts areadded to
financial profit.
5. P/V ratio remains constant at all levels of activity.

Answer:
1. False 2. False 3. True 4. True 5.True

Fill in the blanks :

1. costs are historical costs which are incurred in the past.
2. In Absorption costing, cost is added to inventory.
3. CAS-2 deals with Cost Accounting Standard on determination.
4. is the summary of all functional budgets.
5. Standard costing is one of the techniques.

Answer:
1. Sunk
2. Fixed
3. Capacity
4. Master budget
5. Cost Control

-
9
Page
 JUNE 2019

Choose the correct answer from the given alternatives

1. The main purpose of Cost Accounting is

A. to maximise profit.
B. to help in inventory valuation.
C. to help in the fixation of selling price.
D. to provide information to management for decision making.

2. Which of the following is considered to be a normal loss of material?

A. Loss due to accident
B. Pilferage
C. Loss due to breaking the bulk
D. Loss due to careless handling of material

3. In Reconciliation Statement expenses shown only in financial accounts are

A. added to financial profit.
B. added to costing profit.
C. ignored.
D. deducted from financial profit.

4. Which of the following is a service department?

A. Refining department
B. Machining department
C. Receiving department
D. Finishing department

5. Which of the following items is not included in preparation of cost sheet?

10

A. Purchase returns
Page

B. Carriage inwards
 C. Sales commission
D. Interest paid

6. In job costing to record the issue of direct materials to a job which of the following
document is used?
A. Purchase order
B. Goods receipt note
C. Material requisition
D. Purchase requisition
7. In a process 4000 units are introduced during a period. 5% of input is normal loss. Closing
work-in-progress 60% complete is 500 units. 3300 completed units are transferred to next
process. Equivalent production for the period is
A. 3550 units
B. 3600 units
C. 3800 units
D. 3950 units

8. Product A generates a contribution to sales ratio of 40%. Fixed cost directly attributable to
A amount Rs. 60,000. The sales revenue required to achieve a profit of Rs.15,000 is
A. Rs 2,00,000
B. Rs 1,85,000
C. Rs 1,87,500
D. Rs 2,10,000
9. During a period 13600 labour hours were worked at a standard rate of Rs. 8 per hour. The
direct labour efficiency variance was Rs. 8,800 (Adv). How many standard hours were
produced?
A. 12000 hours
B. 12500 hours
C. 13000 hours
D. 13500 hours
11
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10. Cash Budget of ABC Ltd. forewarns of a short-term surplus. Which of the following would
be appropriate action to be taken in such a situation?
A. Purchase new fixed assets
B. Repay long-term loans
C. Write off preliminary expenses
D. Pay creditors early to obtain a cash discount

1 2 3 4 5 6 7 8 9 10
D B A C D C B C B D

Match the statement in Column I with the most appropriate statement in Column II

Column I Column II
(i) Pharma Industry A Opportunity Cost
(ii) Management by exception B Direct Allocation
(iii) Assessment of employee with respect to a job C Joint Cost
(iv) Royalties D Batch Costing
(v) CAS-19 E Merit Rating
F Variance Analysis
G Job Evaluation
H Notional Cost

Answer
Column I Column II
(i) Pharma Industry D Batch Costing
(ii) Management by exception F Variance Analysis
Assessment of employee with respect to
(iii) E Merit Rating
a job
(iv) Royalties B Direct Allocation
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(v) CAS-19 C Joint Cost

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State whether the following statements are 'True' or 'False':
1. Bin card is maintained by the costing department.
2. CAS-8 deal with the principles and methods of determining the direct expenses.
3. FIFO method is followed for evaluation of equivalent production when prices are
fluctuating.
4. Profit Volume ratio remains constant at all levels of activity.
5. The principal factor is the starting point for the preparation of various budgets.

Answer
1. False 2. False 3. False 4. True 5. True

Fill in the blanks:

1. Differential cost is the change in the cost due to change in from one level to another.
2. CAS stands for cost of service cost centre.
3. In contract costing, the cost unit is _ _.
4. Marginal cost is the of sales over contribution.
5. When actual cost is less than the standard cost, it is known as _ variance

Answer
1. Activity
2. CAS - 13
3. Per Contract
4. Excess
5. Favourable
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 DECEMBER 2018

1. Joint Cost is suitable for

A. Oil Industry
B. Fertilizer Industry
C. Ornament Industry
D. Infrastructure Industry
2. Cost of idle time arising due to non-availability of raw materials is
A. recovered by inflating the raw materials cost.
B. recovered by inflating the wage rate.
C. charged to factory overheads.
D. charged to costing profit and loss account.
3. Charging to a cost center those overheads that result solely for the existence of that cost
center is known as
A. Allotment
B. Allocation
C. Absorption
D. Apportionment

4. Standard deals with the cost of service cost center is

A. CAS-9
B. CAS-13
C. CAS-16
D. CAS-22

5. In Reconciliation Statement income shown only in financial accounts is

A. added to financial profit.
B. deducted from financial profit.
C. ignored.
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D. deducted from costing profit.

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6. The most suitable cost system where the products differ in type of material and work
performed is
A. Process Costing
B. Batch Costing
C. Job Costing
D. Operating Costing
7. In a process 10000 units are introduced during a period. 10% of input is normal loss.
Closing work-in-process 70% complete is 1500 units. 7500 completed units are transferred
to next process. Equivalent production for the period is
A. 9550 units
B. 9000 units
C. 8550 units
D. 8500 units
8. The sales and profit of a firm for the year 2016 are Rs.1,50,000 and Rs.20,000 and for the
year 2017 are Rs.1,70,000 and Rs.25,000 respectively. The P/V Ratio of the firm is
A. 15%
B. 20%
C. 25%
D. 30%
9. Standard quantity of material for one unit output is 10 kg @ Rs.8 per kg. Actual output
during a given period is 600 units. The standard quantity of material for actual output is
A. 1200 kg
B. 6000 kg
C. 4800 kg
D. (d) 48000 kg
10. Which of the following is a long-term Budget?
A. Master Budget
B. Production Budget
C. Flexible Budget
D. Capital Budget
Answer
15

1 2 3 4 5 6 7 8 9 10
A D B B B C C C B D
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Match the statement in Column I with the most appropriate statement in Column II

Column I Column II
(i) Cash discount allowed (A) Joint Cost
(ii) Escalation Clause (B) Imputed Cost
(iii) CAS-19 (C) Direct Expenses
Not shown is cost sheet but debited to profit
(iv) Notional Cost (D)
and loss account
(v) Zero base budgeting (E) Sunk Cost
(F) Contract Costing
(G) Decision Package
(H) Variable Cost

Answer
Column I Column II
Not shown in cost sheet but debited to
(i) Cash discount allowed (D)
profit and loss account
(ii) Escalation Clause (F) Contract Costing
(iii) CAS-19 (A) Joint Cost

(iv) Notional Cost (B) Imputed Cost

(v) Zero base budgeting (G) Decision Package

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State whether the following statements are „True‟ or „False‟
1. Multiple costing is suitable for banking industry.
2. Slow moving materials have a high turnover ratio.
3. Cost ledger control account makes the cost ledger self-balancing.
4. There is inverse relationship between batch size and carrying costs.
5. Marginal costing follows the identifiability wise classification of costs.

Answer
1. False 2. False 3. True 4. False 5. False

Fill in the blanks

1. is discount allowed to the bulk purchaser.
2. CAS stands for cost of utilities.
3. Under integrated accounting system, the accounting entry for payment of wages is to debit
and to credit cash account.
4. If the actual loss in a process is less than the normal loss, the difference is known as .
5. The principal budget factor for consumer goods manufacturer is normally _ .

Answer:
1. Quantity Discount/ Trade Discount/ Cash Discount
2. CAS – 8
3. Wages Control Account
4. Abnormal gain/Abnormal Profit
5. Sales Demand/Market Demand / Lack of Demand
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