Cost Mcqs2

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Costing MCQ Questions and Solutions with Explanations | Commerce
Home / Commerce / Costing
Section 1 Section 2 Section 3 Section 4 Section 5 Section 6 Section 7 Section 8 Section 9Section
10 Section 11
1.
Basic objective of cost accounting is ________
A. tax compliance.
B. financial audit.
C. cost ascertainment.
D. profit analysis.
Answer & Solution Discuss in Board Save for Later
Answer & Solution
Answer: Option C
No explanation is given for this question Let's Discuss on Board
2.
Process costing is suitable for ________.
A. hospitals
B. oil reefing firms
C. transport firms
D. brick laying firms
Answer & Solution
Answer: Option B
3.
Cost classification can be done in ________.
A. two ways
B. three ways
C. four ways
D. several ways
Answer & Solution
Answer: Option D
4.
The cost which is to be incurred even when a business unit is closed is
a _____.
A. imputed cost
B. historical cost
C. sunk cost
D. shutdown cost
Answer & Solution
Answer: Option D
5.
Direct expenses are also called ________.
A. major expenses
B. chargeable expenses
C. overhead expenses
D. sundry expenses
Answer & Solution
Answer: Option B
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Each Section contains maximum 70 questions. To get more questions visit other sections.
 Costing - Section 2
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10 Section 11
6.
Indirect material used in production is classified as ________.
A. office overhead
B. selling overhead
C. distribution overhead
D. factory overhead
Answer & Solution
Answer: Option D
7.
Warehouse rent is a part of ________.
A. prime cost
B. factory cost
C. distribution cost
D. production cost
Answer & Solution
Answer: Option C
8.
Indirect material scrap is adjusted along with ________.

A. prime cost
B. factory cost
C. labour cost
D. cost of goods sold
Answer & Solution
Answer: Option B
9.
Tender is an _______.
A. estimation of profit
B. estimation of cost
C. estimation of selling price
D. estimation of units
Answer & Solution
Answer: Option C
10.
Total of all direct costs is termed as ________.
A. prime cost
B. works cost
C. cost of sales
D. cost of production
Answer & Solution
Answer: Option A
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10 Section 11
11.
Audit fess is a part of _______.
A. works on cost
B. selling overhead
D. administration overhead
Answer & Solution
Answer: Option D
12.
Cost accounting concepts include all the following except ________.
A. planning
B. controlling
C. profit sharing
D. product costing
Answer & Solution
Answer: Option C
13.
Toy manufacturing industry should use _______.
A. unit costing
B. process costing
C. batch costing
D. multiple costing
Answer & Solution
Answer: Option C
14.
Cost unit of a sugar industry can be ________.
A. per litre
B. per tonne
C. per acre
D. per metre
Answer & Solution
Answer: Option B
15.
The ascertainment of costs after they have been incurred is known as

_________.
A. marginal costing
B. historical costing
C. sunk cost
D. notional cost
Answer & Solution
Answer: Option B
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10 Section 11
16.
Over time 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

Answer & Solution
Answer: Option A
17.
Time keeping refers to _______.
A. time spent by worker on their job
B. time spent by workers in the factory
C. time spent by workers without work
D. time spent by workers off their job
Answer & Solution
Answer: Option B
18.
Labour productivity can NOT be measured by comparing ________.
A. actual time with standard time
B. total output with total man hours
C. added value for the product with total wage cost
D. total wage and total output

Answer & Solution
Answer: Option D
19.
Given that for a job standard time is 8 hrs, actual time taken is 6 hrs and
the time rate is Rs 2 per hr What is the total wages under Halsey
premium plan?
A. Rs. 12
B. Rs. 14
C. Rs. 16
D. Rs. 18
Answer & Solution
Answer: Option B
20.
Comparing Rowan plan and Halsey plan, it is seen that when the time
saved is less than 50% of the standard time ________._
A. Rowan plan allows more wages to a worker than Halsey plan
B. Rowan plan allows less wages to a worker than Halsey plan
C. Rowan and Halsey plan allow equal wages to a worker
D. Rowan plan and Halsey plan are equal to ordinary time wage
Answer & Solution
Answer: Option A
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10 Section 11
21.
Bonus under Rowan scheme is paid ________.
A. as a proportion of standard time to actual time
B. as a proportion of actual time to standard time
C. as a proportion of time saved to standard time
D. as a proportion of standard time to time saved
Answer & Solution
Answer: Option C
22.
Labour cost is the second element of ________.
A. cost
B. profit
C. sales
D. task

Answer & Solution
Answer: Option A
23.
How many rate are used to calculate wages under Taylorss differential
piece rate system?
A. two
B. three
C. four
D. five
Answer & Solution
Answer: Option A
24.
The loss which arise in manufacturing activity on account of inherent

nature of the product is ________.
A. normal loss
B. abnormal loss
C. net loss
D. gross loss

Answer & Solution
Answer: Option A
25.
Generally types of stores are classified into ________.
A. two types
B. three types
C. four types
D. five types
Answer & Solution
Answer: Option B
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10 Section 11
26.
In order to avoid the stoppage of production due to shortage of material

_______.
A. maximum stock level is maintained
B. minimum stock level is maintained
C. re-order level is maintained
D. average stock level is maintained

Answer & Solution
Answer: Option B
27.
Discarded material substances having no value is called ________.
A. waste
B. scrap
C. defectives
D. spoilage
Answer & Solution
Answer: Option A
28.
Discarded material substances having some value is ________.
A. waste
B. scrap
C. defective
D. spoilage
Answer & Solution

Answer: Option B
29.
Which of the following is NOT a selling overhead?
A. Insurance to cover sold goods while in transit
B. Royalty on sales
C. Legal cost on debt realization
D. Distribution of samples
Answer & Solution
Answer: Option C
30.
Idle capacity of a plant refers to the difference between ________.
A. maximum capacity and practical capacity
B. practical capacity and normal capacity
C. practical capacity and capacity based on sales expectancy
D. maximum capacity and actual capacity
Answer & Solution
Answer: Option D
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10 Section 11
31.
Number of worker employed is used as basis for the apportionment of

________.
A. rent
B. canteen expenses
C. PF contribution
D. rate and tax
Answer & Solution
Answer: Option B
32.
Fixed cost per unit increases when _______.
A. variable cost per unit increases
B. variable cost per unit decreases
C. production volume increases
D. production volume decreases
Answer & Solution
Answer: Option D
33.
The process of grouping of costs according to some common

characteristics ________.
A. absorption
B. primary distribution
C. secondary distribution
D. classification
Answer & Solution
Answer: Option D
34.
Which of the following is an example of semi-variable cost?
A. Salary
B. Tax
C. Telephone expenses
D. Office expenses
Answer & Solution
Answer: Option C
35.
Fire insurance of stock can be apportioned on the basis of ________.
A. value of stock
B. volume of stock
C. number of stores requisition
D. material used
Answer & Solution
Answer: Option A
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10 Section 11
36.
Appropriate basis for apportionment of material handling charges is

________.
A. material purchased
B. material in stock
C. material consumed
D. material wasted
Answer & Solution
Answer: Option C
37.
Recreation expenses in factory are apportioned on the basis of
________.
A. material cost
B. wages
C. prime cost
D. number of employees
Answer & Solution
Answer: Option D
38.
Charging output with overhead at reasonable rate is called ________.
A. allocation
B. appropriation
C. apportionment
D. absorption
Answer & Solution
Answer: Option C
39.
Comprehensive machine hour rate includes ________.
A. machine operators wages
B. managing directors salary
C. income tax
D. office rent
Answer & Solution
Answer: Option A
40.
In labour oriented manufacturing industry which method of overhead

absorption is suitable?
A. Direct material cost method
B. Prime cost method
C. Labour hour method
D. Machine hour method
Answer & Solution
Answer: Option C
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10 Section 11
41.
The type of loss that should not affect cost of inventories is ________.
A. normal loss
B. abnormal loss
C. seasonal loss
D. standard loss
Answer & Solution
Answer: Option A
42.
The expenses relating to a particular process is ________.
A. debited to that process a/c
B. credited to that process a/c
C. debited to costing profit and loss a/c
D. debited to profit and loss a/c
Answer & Solution
Answer: Option A
43.
Normal loss in the manufacturing process leads to _______.

A. reduction in unit price of other good units
B. increase in unit price of other good units
C. reduction in costing profit
D. increase in costing profit
Answer & Solution
Answer: Option B
44.
Abnormal loss and its value are _______.
A. debited to process a/c
B. credited to process a/c
C. debited to costing profit and loss a/c
Answer & Solution
Answer: Option B
45.
Actual loss is more than the predetermined normal loss, it is ________.
A. normal loss
B. abnormal loss
C. seasonal loss
D. standard loss
Answer & Solution
Answer: Option B
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10 Section 11
46.
Classification and accumulation of costs by fixed and variable costs is

of special importance in ________.
A. process costing
B. unit costing
C. operation costing
D. operating costing
Answer & Solution
Answer: Option D
47.
Process cost is ascertained and recorded in ________.
A. balance sheet
B. profit and loss a/c

C. separate statement
D. separate ledger a/c
Answer & Solution
Answer: Option D
48.
Batch costing is useful to determine ________.
A. maximum quantity of output
B. minimum quantity of output
C. economic batch quantity
D. profit of batches
Answer & Solution
Answer: Option C
49.
The basis for the payment of cash by contractee under contract is

________.
A. work certified
B. work uncertified
C. contract cost
D. value of plant used in the contract
Answer & Solution
Answer: Option A
50.
Contract a/c is _______.
A. a nominal a/c
B. a real a/c
C. a personal a/c
D. either nominal or real a/c
Answer & Solution
Answer: Option A
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10 Section 11
51.
operating costing is a ________.
A. method of costing
B. technique of costing
C. norm of costing
D. procedure of costing
Answer & Solution
Answer: Option A
52.
In goods transport service the cost unit is ________.
A. cost per ton
B. cost per hour
C. cost per ton kilo meters
D. cost per vehicle
Answer & Solution
Answer: Option C
53.
Difference between job time and attendance time is
A. job time
B. actual time
C. over time
D. idle time

Answer & Solution
Answer: Option D
54.
Overhead cost is the total of ________.
A. all indirect costs
B. all direct costs
C. indirect and direct costs
D. all specific costs
Answer & Solution
Answer: Option A
55.
Operating costing is suitable for _______.
A. job order business
B. contractors
C. sugar industries
D. service industries
Answer & Solution

Answer: Option D
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10 Section 11
56.
Prime cost plus variable overheads is known as________.
A. Cost of sales
B. Production Cost
C. Total Cost
D. Marginal cost
Answer & Solution
Answer: Option D
57.
Wages paid to a labour who was engaged in production activities can

be termed as _______.
A. direct cost
B. indirect cost
C. sunk cost
D. imputed cost
Answer & Solution

Answer: Option A
58.
Classification of cost is useful ________.
A. to find gross profit
B. to find net profit
C. to identify costs
D. to identify efficiency
Answer & Solution
Answer: Option C
59.
The purpose of financial accounting is to provide information for

________.
A. fixing prices
B. controlling cost
C. locating factors leading to wastages and losses
D. assessing the profitability and financial position of the firm
Answer & Solution
Answer: Option D
60.
Defectives ________.
A. cannot be rectified and made into good units
B. can be rectified and mad made into good units
C. can be a part of finished product
D. can be termed as spoilage
Answer & Solution
Answer: Option B
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10 Section 11
61.
The stores keeper should initiate a purchase requisition when stock

reaches ________.
A. Average stock level
B. Minimum stock level
C. Maximum stock level
D. Re-order level
Answer & Solution
Answer: Option D
62.
Direct cost incurred can be identified with ________.
A. each department
B. each unit of output
C. each month
D. each executive
Answer & Solution
Answer: Option B
63.
Costing refers to the techniques and processes of ________.
A. ascertainment of costs
B. allocation of costs
C. apportion of costs
D. distribution of costs
Answer & Solution
Answer: Option A
64.
Cost accounting was developed because of the _________.
A. limitations of the financial accounting
B. limitations of the management accounting
C. limitations of the human resource accounting
D. limitations of the double entry accounting
Answer & Solution
Answer: Option A
65.
Multiple costing is a technique of using two or more costing methods

for ascertainment of cost by _______.
A. the same firm
B. the several firms
C. the same industry
D. the several industries
Answer & Solution
Answer: Option A
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10 Section 11
66.
Which one of the following is not considered for preparation of cost
sheet?
A. Factory cost
B. Goodwill written off
C. Labour cost
D. Selling cost
Answer & Solution
Answer: Option B
67.
Sale of defectives is reduced from ________.
A. prime cost
B. works cost
C. cost of production
D. cost of sales
Answer & Solution
Answer: Option C
68.
Cost of sales plus profit is _______.
A. selling price
B. value of finished product
C. value of goods produced
D. value of stocks
Answer & Solution
Answer: Option A
69.
Prime cost includes _______.
A. direct materials, direct wages and indirect expenses
B. indirect materials and indirect labour and indirect expenses
C. direct materials, direct wages and direct expenses
D. direct materials, indirect wages and indirect expenses
Answer & Solution
Answer: Option C
70.
Depreciation of plant and machinery is a part of ________.

A. factory overhead
B. selling overhead
D. administration overhead
Answer & Solution
Answer: Option A
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10 Section 11
1.
Factory overhead can be charged on the basis of _______.
A. material cost
B. labour cost
C. prime cost
D. direct expenses
Answer & Solution
Answer: Option A
2.
Office and administrative expenses can be charged on the basis of

_______.
A. material cost
B. labour cost
C. prime cost
D. factory cost
Answer & Solution
Answer: Option C
3.
Job costing used in ________.
A. paper mills
B. chemical works
C. printing works
D. textile mill
Answer & Solution
Answer: Option C
4.
A document which provides for the detailed cost centre and cost unit is
_______.
A. tender
B. cost sheet
C. invoice
D. profit statement
Answer & Solution
Answer: Option B
5.
Direct material is a _______.
A. fixed cost
B. variable cost
C. semi variable cost
D. semi fixed cost
Answer & Solution
Answer: Option B
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10 Section 11
6.
The most important element of cost in manufacturing industries is

_________.
A. material
B. labour
C. direct costs
D. indirect costs
Answer & Solution
Answer: Option A
7.
According to which method of pricing issues is close to current

economic values?
A. Last In First Out
B. First In First Out
C. Highest In First Out
D. weighted average price
Answer & Solution
Answer: Option A
8.
Continuous stock taking is a part of ________.
A. annual stock taking
B. perpetual inventory
C. ABC analysis
D. VED analysis
Answer & Solution
Answer: Option B
9.
Which of the following methods of stock control aims at concentrating

efforts on selected items of material?
A. Perpetual inventory system
B. Material turnover ratio
C. Level setting
D. ABC analysis
Answer & Solution
Answer: Option D
10.
Material control involves ________.
A. consumption of material
B. issue of material
C. purchase of material
D. purchase, storage and issue of material

Answer & Solution
Answer: Option D
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10 Section 11
11.
Material requisition is meant for ________.
A. purchase of material
B. supply of material from stores
C. sale of material
D. storage of material
Answer & Solution
Answer: Option B
12.
ABC analysis is ________.
A. At best Control
B. Always better Control
C. Average better Control
D. All best control

Answer & Solution
Answer: Option B
Solution:
ABC analysis is a way of categorizing the material on the basis of the quantity of consumption and
their relative values. Some material might be consumed in lower quantities but their period may be
very high. Such materials are kept in group "A". Similarly, some material may be consumed in large
quantities but their values may be lower. Such materials are kept in group 'C'. In between these
two, some materials may be consumption in moderate quantity with the moderated price. Such
materials are kept in group 'B' under ABC analysis very close control is exercised over the material
in group 'A' whereas a very little control is exercise is exercised over the material in group 'C'.
13.
___________ is the value of economic resources used as a result of

producing or doing the thing costed.
A. Cost
B. Inventory
C. Labour
D. overhead
Answer & Solution
Answer: Option A
14.
Perpetual inventory system involves __________
A. bincard and stores ledger
B. bill of material and material requisition
C. purchase requisition and purchase order

D. inward and outward invoices
Answer & Solution
Answer: Option A
15.
FIFO is ________.
A. Fast Investment in Future Order
B. First In First Out
C. Fast In Fast Out
D. Fast Issue Of Fast Order
Answer & Solution
Answer: Option B
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10 Section 11
16.
LIFO method of pricing of materials is more suitable when _________.
A. material prices are rising
B. material prices are falling
C. material prices are constant
D. material prices are fluctuating

Answer & Solution
Answer: Option A
17.
Average method of pricing the material issues is useful when

___________.
A. material prices are rising
B. material prices are falling
C. material prices are constant
D. material prices are fluctuating
Answer & Solution
Answer: Option D
18.
Scrap is ________.
A. residue of material
B. wastage of material
C. surplus material
D. abnormal loss of material

Answer & Solution
Answer: Option A
19.
Material is issued by store keeper against ________.
A. material requisition
B. material order
C. goods received note
D. purchase requisition
Answer & Solution
Answer: Option A
20.
EOQ stands for ________.
A. Economic Order Quantity
B. Essential Order Quantity
C. Economic Output Quantity
D. Essential Output Quantity
Answer & Solution

Answer: Option A
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10 Section 11
21.
GRN number refers to________.
A. goods received note number
B. goods returned note number
C. goods shortage note number
D. goods requisition note number
Answer & Solution
Answer: Option A
22.
Bin card is maintained by ________.
A. costing department
B. stores department
C. finance department
D. accounting department
Answer & Solution
Answer: Option B
23.
Labour turnover is ______.
A. productivity of labour
B. efficiency of the labour
C. change in labour force
D. total cost of the labour
Answer & Solution
Answer: Option C
24.
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
Answer & Solution
Answer: Option C
25.
In__________ the workers are paid on the basis of hourly daily,weekly
rate
A. time rate system
B. piece rate system
C. premium bonus system
D. emerson efficiency plan
Answer & Solution
Answer: Option A
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10 Section 11
26.
Difference between attendance time and job time is _______.
A. job time
B. over time
C. actual time
D. idle time
Answer & Solution
Answer: Option D
27.
Piece workers are paid on the basis of ________.
A. output sold
B. output produced
C. output in stock
D. input received
Answer & Solution
Answer: Option B
28.
Time wages are paid on the basis of ________.
A. actual time
B. standard time
C. time saved
D. overtime
Answer & Solution
Answer: Option A
29.
Differential piece wages means _______.

A. different wages for different level of performance
B. different wages for different time consumed
C. different wages for different level of output
D. different wages for different types of industries
Answer & Solution
Answer: Option A
30.
Those cost which is incurred to prevent the labour turnover

__________.
A. management cost
B. replacement cost
C. preventive cost
D. compensation cost
Answer & Solution
Answer: Option C
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10 Section 11
31.
Normal idle time __________.
A. can be avoided
B. can be minimized
C. cannot be avoided
D. can be controlled
Answer & Solution
Answer: Option C
32.
Cost of idle time arising due to non availability of raw material is

_______.
A. charged to costing profit and loss account
B. charged to financial profit and loss account
C. charged to factory overhead
D. recovered by inflating the wage rate
Answer & Solution
Answer: Option A
33.
Wage sheet is prepared by ________.
A. time keeping department
B. personnel department
C. payroll department
D. cost accounting department
Answer & Solution
Answer: Option C
34.
Time and motion study is conducted by ________.
A. time keeping department
B. personnel department
C. payroll department
D. engineering department
Answer & Solution
Answer: Option D
35.
Under Gantts task and bonus plan no bonus is payable to a worker if

his efficiency is less than ________.
A. 50%
B. 60%
C. 835%
D. 100%
Answer & Solution
Answer: Option D
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10 Section 11
36.
When standard output is 10 units per hour and actual output is 12 units
per hour, the efficiency is ________.
A. 75%
B. 80%
C. 90%
D. 120%
Answer & Solution
Answer: Option D
37.
Bonus under Halsey plan is paid ________.
A. at 50% of time saved
B. at 75% of time saved
C. at 80% of time saved
D. at 90% of time saved

Answer & Solution
Answer: Option A
38.
Halsey premium plan is ________.
A. individual incentive scheme
B. group incentive scheme
C. time and piece wage system
D. differential piece wage system
Answer & Solution
Answer: Option A
39.
Labour cost is the second element of ________.
A. cost
B. profit
C. sales
D. task

Answer & Solution
Answer: Option A
40.
Number of methods available for calculation of Labour turnover is

________.
A. two
B. three
C. four
D. five
Answer & Solution
Answer: Option B
Solution:
Separation Method
Labour Turnover = No. of workers left or separated during a period / Average number of workers on
role during that period x 100
Replacement Method
Labour Turnover = No. of workers replaced during a period / Average number of workers on role
during that period x 100
Flux Method
Labour Turnover = (No.of workers separated in a period + No. of workers replaced in the same
period) / Average number of workers on role during that period x 100
Note : Average No.of. Workers = (No. of workers at the beginning of the period + No. of workers at
the end of the period) / 2
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10 Section 11
41.
Merricks multiple piece rate system has _______.
A. two rates
B. three rates
C. four rates
D. five rates
Answer & Solution
Answer: Option B
42.
Overhead is also known as ________.
A. ongoing cost
B. basic cost
C. extra cost
D. chargeable expenses
Answer & Solution
Answer: Option A
43.
Reorder level = ________.
A. maximum level - minimum level
B. maximum consumption X maximum reorder period

C. minimum consumption x minimum reorder period
D. normal consumption X normal reorder period
Answer & Solution
Answer: Option B
44.
Overhead can be classified according to function-wise as ________.
A. fixed o/h, variable o/h and semi-variable o/h
B. controllable o/h and uncontrollable o/h
C. manufacturing o/h, administration o/h and selling & distribution o/h
D. past cost and future cost
Answer & Solution
Answer: Option C
45.
Allotment of overhead incurred for a particular cost centre to that

specific cost centre is ________.
A. allocation
B. allotment
C. primary distribution
D. secondary distribution
Answer & Solution
Answer: Option A
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10 Section 11
46.
The process of setting standards and comparing actual performance

with standards with a view to control the cost is ________.
A. cost reduction
B. cost control
C. cost allocation
D. cost ascertainment
Answer & Solution
Answer: Option B
47.
Under ABC method of material control, the material are classified

according to __________.
A. its value
B. its usage
C. its nature
D. its availability
Answer & Solution
Answer: Option A
48.
This is a point at which the store keeper should initiate purchase

requisition for fresh supply It is ________.
A. maximum stock level
B. minimum stock level
C. reorder level
D. average stock level
Answer & Solution
Answer: Option C
49.
This is a level at which normal issue of material are stopped, but issued
under special condition It is ________.
A. maximum stock level
B. minimum stock level
C. danger level
D. average stock level
Answer & Solution
Answer: Option C
50.
Annual usage is 6000 units @ Rs 20 per unit Cost of placing an order is

Rs 60 and annual carrying cost of one unit is 10% of inventory value
EOQ = __________.
A. 600 units
B. 750 units
C. 1200 units
D. 1250 units
Answer & Solution
Answer: Option A
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10 Section 11
51.
The method in which issue prices of material is computed by dividing

total purchase cost of material in stock with total quantity in stock
________.
A. Simple average method
B. weighted average method

C. periodical average method
D. periodic simple average method
Answer & Solution
Answer: Option B
52.
Under which method the rate of wages are linked with the cost of living
index?
A. Flat time rate
B. High day rate
C. Measured day rate
D. Graduated time rate
Answer & Solution
Answer: Option D
53.
Under which plan efficiency is shared by employee and employer

equally?
A. Time rate
B. Gantts task and bonus plan

C. Halsey plan
D. Rowan plan
Answer & Solution
Answer: Option C
54.
Which of the following method of wage payment is most suitable where

the speed of production is beyond the control of worker?
A. Time rate system
B. Piece rate system
C. Halsey premium system
D. Rowan premium plan
Answer & Solution
Answer: Option A
55.
Under which method of wage payment, wages are influenced by idle

time?
A. Straight piece rate
B. Differential piece rate

C. Premium and bonus plan
D. Time wage rate
Answer & Solution
Answer: Option D
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10 Section 11
56.
The allotment of whole item of cost to cost centre or cost units is called
_________.
A. cost allocation
B. cost apportionment
C. cost absorption
D. cost disbursement
Answer & Solution
Answer: Option A
57.
Packing cost is ________.
A. production cost
B. selling cost
C. administration cost
D. distribution cost
Answer & Solution
Answer: Option D
58.
Directors remuneration and expenses form part of ________.
A. production overhead
B. administrative overhead
C. selling overhead
D. distribution overhead
Answer & Solution
Answer: Option B
59.
Absorption means ________.
A. charging overheads to cost centres
B. charging of overheads to cost units
C. charging of overheads to cost centres or cost units
D. allotment of overheads to different departments

Answer & Solution
Answer: Option B
60.
Which of the following is a service department?
A. Refining department
B. Machining department
C. Receiving department
D. Finishing department
Answer & Solution
Answer: Option C
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10 Section 11
61.
Bad debt is an example of ________.
A. production overhead
B. administrative overhead
C. selling overhead
D. distribution overhead

Answer & Solution
Answer: Option C
62.
Variable cost per unit ________.
A. varies when output varies
B. remains constant
C. increase when output increases
D. decreases when output decreases
Answer & Solution
Answer: Option B
63.
Increase in total variable cost is due to ________.
A. increase in fixed cost
B. increase in sales
C. increase in production
D. increase in efficiency
Answer & Solution

Answer: Option C
64.
An example of fixed cost ________.
A. property tax
B. rent for building
C. direct material cost
D. direct wages
Answer & Solution
Answer: Option B
65.
The process of allocating and apportioning the costs on suitable basis

to all the departments is _______.
A. departmentalization
D. classification
Answer & Solution
Answer: Option B
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10 Section 11
66.
The process of redistribution of service department costs to production

departments is ________.
A. departmentalization
D. classification
Answer & Solution
Answer: Option C
67.
Depreciation of plant can be apportioned on the basis of ________.
A. plant value
B. plant size
C. working days
D. output produced
Answer & Solution

Answer: Option A
68.
Indirect materials can be apportioned on the basis of ________.
A. direct material
B. prime cost
C. direct labour hour
D. machine hour
Answer & Solution
Answer: Option A
69.
A cost unit is ________.
A. the cost per machine hour
B. the cost per labour hour
C. a unit of production or service in relation to which costs are ascertained
D. a measure of work output in a standard hour
Answer & Solution
Answer: Option C
70.
Factory overhead is also called as ________.
A. sundry overhead
B. extra overhead
C. works overhead
D. total overhead
Answer & Solution
Answer: Option C
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10 Section 11
1.
Sundry overhead expenses may be apportioned in the ratio of

________.
A. material consumed
B. number of employees
C. labour hours
D. machine hours
Answer & Solution
Answer: Option C
2.
Departmentalization of overhead is known as ________.
A. primary distribution
B. secondary distribution
C. absorption
D. allocation
Answer & Solution
Answer: Option A
3.
When the actual overhead is less than the absorbed overhead it is

________.
A. over absorption
B. under absorption
C. equal absorption
D. major absorption
Answer & Solution
Answer: Option A
4.
Factory overhead is Rs 3,00,000 and direct material cost is Rs 5,00,000

What is the overhead rate under direct material cost method?
A. 25%
B. 30%
C. 60%
D. 75%
Answer & Solution
Answer: Option C
5.
Works overhead is Rs 40,000, total machine hours is 8500 hours and

time allowed for machine setting is 500 houRs What is the machine
rate?
A. Rs. 2 per hour
B. Rs. 3 per hour
C. Rs. 4 per hour
D. Rs. 5 per hour
Answer & Solution

Answer: Option D
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10 Section 11
6.
Expenditure over and above prime cost is known as ________.
A. overhead
B. factory cost
C. cost of sales
D. cost of production
Answer & Solution
Answer: Option A
7.
In a machine dominated industry which method of overhead absorption

is suitable?
A. Direct material cost method
B. Prime cost method
C. Labour hour method
D. Machine hour method
Answer & Solution

Answer: Option D
8.
Most appropriate basis for the apportionment of power is ________.
A. no of labour
B. no of output
C. no of machines
D. horse power of machines
Answer & Solution
Answer: Option D
9.
The costing method which can be used in industry where the product
pass through different processes is known as ________.
A. job costing
B. operating costing
C. batch costing
D. process costing
Answer & Solution
Answer: Option D
10.
Value of normal loss is charged to ________.
A. other good product
B. trading a/c
C. profit and loss a/c
D. costing profit and loss a/c
Answer & Solution
Answer: Option A
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10 Section 11
11.
Which of the following will be affected by normal loss?
A. Costing profit
B. Financial profit
C. Process profit
D. cost of Good units
Answer & Solution
Answer: Option D
12.
Actual loss is less than the predetermined normal loss, it is ________.
A. normal loss
B. abnormal loss
C. seasonal loss
D. abnormal gain
Answer & Solution
Answer: Option D
13.
When output of earlier process is transferred at a profit to the

subsequent process, it is ________.
A. inter departmental profit
B. abnormal gain
C. inter process profit
D. manufacturing profit
Answer & Solution
Answer: Option C
14.
100 units are introduced in a process in which normal loss is 5% of

input If actual output is 97 then there is ________.
A. no abnormal loss and normal gain
B. 2 units of abnormal gain
C. 3 units of abnormal gain
D. 3 units of normal loss
Answer & Solution
Answer: Option B
15.
50 units are processed at a cost of Rs 80, normal loss is 10%, each unit
carries a scrap value of 25 paise If output is 40 units, the value of
abnormal loss will be _________.
A. Rs. 1.25
B. Rs. 800
C. Rs. 875
D. Rs. 888
Answer & Solution

Answer: Option C
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10 Section 11
16.
Abnormal process loss can be transferred to ________.
A. costing profit and loss a/c
B. financial profit and loss a/c
C. manufacturing
D. trading
Answer & Solution
Answer: Option A
17.
When two products are simultaneously produced in a process and one

of them has comparatively high value and other is of low value , the low
value product is called __________.
A. joint products
B. by products
C. seasonal products
D. economic products
Answer & Solution

Answer: Option B
18.
If any by-product is produced and sold it is credited to ________.
A. profit and loss a/c
B. by-product a/c
C. process a/c
D. abnormal gain a/c
Answer & Solution
Answer: Option C
19.
Balance of abnormal gain a/c is transferred to ________.
A. balance sheet
B. debit side of profit and loss a/c
C. credit side of profit and loss a/c
D. costing profit and loss a/c
Answer & Solution
Answer: Option D
20.
Inter process profits are ________.
A. credited to each process a/c
B. debited to respective process a/c
C. shown only in the finished stock a/c
D. shown in the balance sheet
Answer & Solution
Answer: Option B
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10 Section 11
21.
Input is 10,000 units and normal loss is 20% of input and abnormal loss
is 400 units What is actual output?
A. 7600 units
B. 10,000 units
C. 10, 400 units
D. 12,000 units
Answer & Solution
Answer: Option A
22.
Cost of process Rs1,60,000 and profit to be charged on the transfer
price is 20% What is the inter process profit?
A. Rs 32,000
B. Rs 40,000
C. Rs 48,000
D. Rs 54,000
Answer & Solution
Answer: Option B
23.
Job costing method is the most suitable method for ________.
A. oil process units
B. transport companies
C. sugar industries
D. repair shops
Answer & Solution
Answer: Option D
24.
Which method of costing can be used in furniture manufacture
industry?
A. Job costing
B. Contract costing
C. Process costing
D. Specific order costing
Answer & Solution
Answer: Option A
25.
Contract costing is most appropriate method of costing for ________.
A. construction industry
B. banking industry
C. textile mills
D. cement industry
Answer & Solution
Answer: Option A
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10 Section 11
26.
Cost of contract and profit or loss thereon are determined by preparing
________.
A. cost sheet
C. trading a/c
D. separate ledger a/c
27.
The basis for determining profit to be taken into account on incomplete

contract is ________.
A. cost of contract
B. contract price
C. percentage of work certified as done
D. uncertified work
Answer & Solution
Answer: Option C
28.
The amount paid to sub-contractor is ________.
A. subtracted from the contract price

B. debited to contract a/c
C. credited to contract a/c
D. added with the contract price
Answer & Solution
Answer: Option B
29.
Work uncertified is ________.
A. debited to contract a/c
B. credited to contract a/c
C. debited to contractor a/c
Answer & Solution
Answer: Option B
30.
In case of complete contract, the whole amount of profit is transferred

to ________.
A. contract a/c
B. work in progress a/c

C. profit and loss a/c
D. contractee a/c
Answer & Solution
Answer: Option C
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10 Section 11
31.
Process a/c is ________.
A. nominal a/c
B. a real a/c
C. personal a/c
D. either nominal or real a/c
Answer & Solution
Answer: Option A
32.
Profit to be transferred to profit and loss a/c, if the contract is complete

to the extent of only 20% is ________.
A. nil
B. 20%
C. 25%
D. 75%
Answer & Solution
Answer: Option A
33.
Operating cost is usually ascertained through ________.
A. a ledger account
C. balance sheet
D. a statement
Answer & Solution
Answer: Option D
34.
The physical distance covered by a vehicle is measured in terms of

________.
A. ton kilometers
B. passenger kilometers
C. vehicle days
D. running kilometers or miles

Answer & Solution
Answer: Option D
35.
Insurance and garage rent is ________.
A. fixed charges
B. maintenance charges
C. operating charges
D. running charges
Answer & Solution
Answer: Option A
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10 Section 11
36.
Which of the following item of expenses will not appear in cost

accounting.
A. Direct material cost
B. Factory overheads
C. Selling Expenses
D. Loss on sale of fixed assets

Answer & Solution
Answer: Option D
37.
The term cost refers to ________.
A. the present value of future benefits
B. the value of sacrifice made to acquire goods or services
C. an asset that has given benefit but now expired
D. the price of products sold or services rendered
Answer & Solution
Answer: Option B
38.
Cost accounting differs from financial accounting in respect of

________.
A. reporting of cost
B. ascertainment of cost
C. control of cost
D. recording of cost

Answer & Solution
Answer: Option B
39.
Which method of costing is best suited for interior decoration.
A. Contract accounting
B. Operating costing
C. Process costing
D. Job costing
Answer & Solution
Answer: Option D
40.
When cash is received from contractee which a/c should be credited.
A. Cash a/c
B. Contract a/c
C. Contractor a/c
D. Contractee a/c
Answer & Solution

Answer: Option D
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10 Section 11
41.
Direct labour means ________.
A. labour which can be conveniently associated with aparticular cost unit
B. labour which completes the work manually
C. permanent labour in the production department
D. labour which is recruited directly and not through contractors
Answer & Solution
Answer: Option A
42.
The type of process loss that should not affect the cost of inventory
value is _________.
A. abnormal loss
B. normal loss
C. seasonal loss
D. standard loss
Answer & Solution

Answer: Option A
43.
If the actual loss is more than the estimated normal loss, then it is
_________.
A. abnormal loss
B. normal loss
C. seasonal loss
D. abnormal gain
Answer & Solution
Answer: Option A
44.
Overvaluation of opening stock in financial accounting results

________.
A. decreases costing profit
B. decreases financial accounts profit
C. increases costing profit
D. increases financial accounts profit
Answer & Solution

Answer: Option B
45.
Under absorption of overhead expenses in cost accounting results in

_________.
A. decrease in costing profit
B. decrease in financial accounts profit
C. increase in costing profit
D. increase in financial accounts profit
Answer & Solution
Answer: Option C
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10 Section 11
46.
________. is refers to the verification of cost accounts and check on the

adherence to the cost accounting plan.
A. Cost Audit
B. Costcentre
C. Costunit
D. Costprofit
Answer & Solution

Answer: Option A
47.
Direct material is a ________.
A. manufacturing cost
B. administrative cost
C. selling cost
D. distribution cost
Answer & Solution
Answer: Option A
48.
________ is a preventive function.
A. Costreduction
B. Costcontrol
C. Costunit
D. Costcentre
Answer & Solution
Answer: Option B
49.
Operating costing is more suitable for ________ industries
A. profit
B. Services
C. Profit and service
D. government organisation
Answer & Solution
Answer: Option B
50.
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
Answer & Solution
Answer: Option D
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10 Section 11
51.
A profit centre is a centre ____________.
A. Where the manager has the responsibility of generating and maximising profits
B. Which is concerned with earning an adequate Return on Investment
C. Both of the above
D. Which manages cost
Answer & Solution
Answer: Option A
52.
Responsibility Centre can be categorised into:
A. Cost Centres only
B. Profit Centres only
C. Investment Centres only
D. Cost Centres, Profit Centres and Investment Centres
Answer & Solution
Answer: Option D
53.
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 maximising profits
D. Centres concerned with earning an adequate return on investment
Answer & Solution
Answer: Option A
54.
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
Answer & Solution
Answer: Option C
55.
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
Answer & Solution
Answer: Option A
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10 Section 11
56.
Element/s of Cost of a product are:
A. Material only
B. Labour only
C. Expenses only
D. Material, Labour and expenses
Answer & Solution
Answer: Option D
57.
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
Answer & Solution
Answer: Option B
58.
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
Answer & Solution
Answer: Option B
59.
Sunk costs are:
A. relevant for decision making
B. Not relevant for decision making

C. cost to be incurred in future
D. future costs
Answer & Solution
Answer: Option B
60.
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
Answer & Solution
Answer: Option A
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10 Section 11
61.
Describe the cost unit applicable to the Bicycle industry:
A. per part of bicycle
B. per bicycle
C. per tonne
D. per day
Answer & Solution
Answer: Option B
62.
"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
Answer & Solution
Answer: Option C
63.
"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
Answer & Solution
Answer: Option C
64.
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
Answer & Solution
Answer: Option C
65.
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
Answer & Solution
Answer: Option D
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10 Section 11
66.
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
Answer & Solution
Answer: Option B
67.
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
Answer & Solution
Answer: Option A
68.
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
Answer & Solution
Answer: Option A
69.
Economic order quantity is that quantity at which cost of holding and

carrying inventory is:
A. Maximum and equal
B. Minimum and equal
C. It can be maximum or minimum depending upon case to case

D. Minimum and unequal
Answer & Solution
Answer: Option B
70.
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 b or c
Answer & Solution
Answer: Option C
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10 Section 11
1.
Which one out of the following is not an inventory valuation method?
A. FIFO
B. LIFO
C. Weighted Average
D. EOQ
Answer & Solution
Answer: Option D
2.
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
Answer & Solution
Answer: Option B
3.
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

Answer & Solution
Answer: Option A
4.
"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
Answer & Solution
Answer: Option B
Solution:
Maximum consumption per week = 200 unit Maximum delivery time = 28 days = 4 week Re-order
level = 200 x 4 = 800 unit
5.
"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
Answer & Solution
Answer: Option A
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10 Section 11
6.
"Calculate the value of closing stock from the following according to

FIFO method:
1st January, 20XX: Opening balance: 50 units @ Rs 4
Receipts:
5th January, 20XX: 100 units @ Rs 5
Issues:
2nd January, 20XX: 30 units
18th January, 20XX: 150 units"
A. Rs. 765
B. Rs. 805
C. Rs. 786
D. Rs. 700

Answer & Solution
Answer: Option A
7.

LIFO method:
Receipts:
Issues:
A. Rs. 765
B. Rs. 805
C. Rs. 786
D. Rs. 700
Answer & Solution
Answer: Option B
8.
Weighted Average method:
Receipts:
Issues:
A. Rs. 765
B. Rs. 805
C. Rs. 786
D. Rs. 700
Answer & Solution
Answer: Option C
9.
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
Answer & Solution
Answer: Option B
10.
"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
Answer & Solution
Answer: Option D
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10 Section 11
11.
"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
Answer & Solution
Answer: Option D
12.
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
Answer & Solution
Answer: Option D
13.
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
Answer & Solution
Answer: Option C
14.
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
Answer & Solution
Answer: Option B
15.
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
Answer & Solution
Answer: Option D
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10 Section 11
16.
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
Answer & Solution
Answer: Option C
17.
"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
Answer & Solution
Answer: Option C
18.
"Calculate workers recruited and joined from the following:
Labour turnover rates are 20%, 10% and 6% respectively under Flux
method, Replacement method andSeparation method No of workers
replaced during the quarter is 80"
A. 112
B. 80
C. 48
D. 64
Answer & Solution
Answer: Option A
19.
"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 Ofthese, 10 workers were recruited in the
vacancies of those leaving and while the rest were engaged for an
expansion scheme"
A. 0.0455
B. 182
C. 6
D. 3
Answer & Solution
Answer: Option B
20.
"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 Ofthese, 10 workers were recruited in the
vacancies of those leaving and while the rest were engaged for an
expansion scheme"
A. 0.0455
B. 182
C. 6
D. 3
Answer & Solution
Answer: Option A
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10 Section 11
21.
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
Answer & Solution
Answer: Option B
22.
Overhead refers to:
A. Direct or Prime Cost
B. All Indirect costs
C. only Factory indirect costs
D. Only indirect expenses
Answer & Solution
Answer: Option B
23.
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
Answer & Solution
Answer: Option B
24.
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
Answer & Solution
Answer: Option D
25.
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

Answer & Solution
Answer: Option C
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10 Section 11
26.
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
Answer & Solution
Answer: Option B
27.
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

Answer & Solution
Answer: Option A
28.
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
Answer & Solution
Answer: Option C
29.
"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. 1650
C. Rs. 1750
D. Rs. 18
Answer & Solution
Answer: Option A
Solution:
Total Cost 4800 Variance was Rs. 600 (A) As Variance adverse means it is higher than standard
cost So standard cost = 4800 - 600 = 4200 Labour worked 300 hours Standard cost per labour hour
= 4200/300 =14
30.
"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)
Answer & Solution
Answer: Option D
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10 Section 11
31.
Budgeted sales of X for March are 18000 units. At the end of the
production process for X, 10% of production units are scrapped as
defective. Opening inventories of X for March are budgeted to be 15000
units and closing inventories will be 11,400 units. All inventories of
finished goods must have successfully passed the quality control
check. The production budget for X for March, in units is:
A. 12960
B. 14400
C. 15840
D. 16000
Answer & Solution
Answer: Option D
32.
CG Co manufactures a single product T. Budgeted production output of

product T during June is 200 units. Each unit of product T requires 6
labour hours for completion and CG Co anticipates 20 per cent idle
time. Labour is paid at a rate of Rs7 per hour. The direct labour cost
budget for March is
A. Rs. 6,720
B. Rs. 8400
C. Rs. 10080
D. Rs. 10500
Answer & Solution
Answer: Option D
33.
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
Answer & Solution
Answer: Option B
34.
"BDL Ltd. is currently preparing its cash budget for the year to 31 March
20XX. 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 20XX is"
A. Rs. 60,532
B. Rs. 61,120
C. Rs. 66,532
D. Rs. 86,620
Answer & Solution
Answer: Option A
35.
The actual output of 162,500 units and actual fixed costs of Rs 87000
were exactly as budgeted. However, the actual expenditure of Rs
300,000 was Rs 18,000 over budget. What was the budget variable cost
per unit?
A. Rs 1.20
B. Rs 1.31
C. Rs1.42
D. Rs 1.50
Answer & Solution
Answer: Option A
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10 Section 11
36.
"A ltd is a manufacturing company that has no production resource

limitations for the foreseeable future. The Managing Director has asked
the company mangers to coordinate the preparation of their budgets for
the next financial year. In what order should the following budgets be
prepared?
(1) Sales budget
(2) Cash budget
(3) Production budget
(4) Purchase budget
(5) Finished goods inventory budget"
A. (2), (3), (4), (5), (1)
B. (1), (5), (3), (4), (2)
C. (1), (4), (5), (3), (2)
D. (4), (5), (3), (1), (2)
Answer & Solution
Answer: Option B
37.
"S produces and sells one product, P, for which the data are as follows:
Selling price Rs 28
Variable cost Rs 16
Fixed cost Rs 4
The fixed costs are based on a budgeted production and sales level of
25,000 units for the next period. Due to market changes both the selling
price and the variable cost are expected to increase above the budgeted
level in the next period. If the selling price and variable cost per unit
increase by 10% and 8% respectively, by how much must sales volume
change, compared with the original budgeted level, in order to achieve
the original budgeted profit for the period?"
A. 10.1% decrease
B. 11.2% decrease
C. 13.3% decrease
D. 16.0% decrease
Answer & Solution
Answer: Option B
38.
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
Answer & Solution
Answer: Option B
39.
"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
Answer & Solution
Answer: Option C
40.
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 Rs 25 per hour.
Normal loss is 20% and losses can be sold at a scrap value of Rs5 per
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
Answer & Solution
Answer: Option A
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10 Section 11
41.
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
Answer & Solution

Answer: Option D
42.
"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
Answer & Solution
Answer: Option C
43.
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 Rs 36,300. 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
Answer & Solution
Answer: Option A
44.
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
Answer & Solution
Answer: Option B
45.
"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
Answer & Solution
Answer: Option B
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10 Section 11
46.
Which of the following organisations 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
Answer & Solution
Answer: Option D
47.
"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
Answer & Solution
Answer: Option B
48.
"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
Answer & Solution
Answer: Option B
49.
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
Answer & Solution
Answer: Option B
50.
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%
Answer & Solution
Answer: Option A
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10 Section 11
51.
"What is the company's breakeven point:

Selling price - Rs 6 per unit
Variable production cost - Rs 1.20 per unit
Variable selling cost - Rs 0.40 per unit
Fixed production cost - Rs 4 per unit
Fixed selling cost - Rs 0.80 per unit
Budgeted production and sales for the year are 10,000 units. "
A. 8,000 units
B. 8,333 units
C. 10,000 units
D. 10,909 units
Answer & Solution
Answer: Option D
52.
"How many units must be sold if company wants to achieve a profit of

Rs 11,000 for the year?
Budgeted production and sales for the year are 10,000 units."
A. 2,500 units
B. 9,833 units
C. 10,625 units
D. 13,409 units
Answer & Solution
Answer: Option D
53.
"It is now expected that the variable production cost per unit and the
selling price per unit will each increase by 10%, and fixed production
cost will rise by 25%. What will be the new break even point?
Budgeted production and sales for the year are 10,000 units. "
A. 8,788 units
B. 11,600 units
C. 11,885 units
D. 12,397 units
Answer & Solution
Answer: Option C
54.
A company's break even point is 6,000 units per annum. The selling
price is Rs 90 per unit and the variable cost is Rs 40 per unit. What are
the company's annual fixed costs?
A. Rs 120
B. Rs 2,40,000
C. Rs 3,00,000
D. Rs 5,40,000
Answer & Solution
Answer: Option C
55.
Capital gearing ratio is ___________.
A. Market test ratio
B. Long-term solvency ratio
C. Liquid ratio
D. Turnover ratio
Answer & Solution
Answer: Option B
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10 Section 11
56.
"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.
Answer & Solution
Answer: Option B
57.
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
Answer & Solution
Answer: Option C
58.
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. 281250
B. 187500
C. 562500
D. None of the above
Answer & Solution
Answer: Option C
59.
The cost per unit of a product manufactured in a factory amounts to Rs

160 (75% variable) when the production is 10,000 units. When
production increases by 25%, the cost of production will be Rs per unit.
A. Rs 145
B. Rs 150
C. Rs 152
D. Rs 140
Answer & Solution
Answer: Option C
60.
In ‘make or buy’ decision, it is profitable to buy from outside only when

the supplier’s price is below the firm’s own ______________.
A. Fixed Cost
B. Variable Cost
C. Total Cost
D. Prime Cost
Answer & Solution
Answer: Option B
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10 Section 11
61.
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
Answer & Solution
Answer: Option D
62.
_________ is also known as working capital ratio.
A. Current ratio
B. Quick ratio
C. Liquid ratio
D. Debt-equity ratio
Answer & Solution
Answer: Option A
63.
___________ is a summary of all functional budgets in a capsule form.
A. Functional Budget
B. Master Budget
C. Long Period Budget
D. Flexible Budget
Answer & Solution
Answer: Option B
64.
_____________ 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
Answer & Solution
Answer: Option A
65.
Statutory cost audit are applicable only to:
A. Firm
B. Company
C. Individual
D. Society
Answer & Solution
Answer: Option B
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10 Section 11
66.
"For the financial year ended as on March 31, 20XX 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
Answer & Solution
Answer: Option A
67.
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
Answer & Solution

Answer: Option B
68.
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
Answer & Solution
Answer: Option B
69.
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
Answer & Solution
Answer: Option C
70.
"Following information is available of XYZ Limited for quarter ended

June, 20XX
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
Answer & Solution
Answer: Option A
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10 Section 11
1.
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
Answer & Solution
Answer: Option B
2.
Following information is available of PQR for year ended March, 20XX:

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
Answer & Solution

Answer: Option A
3.
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
Answer & Solution
Answer: Option A
4.
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. 0.2
B. 0.3
C. 0.25
D. 40%
Answer & Solution

Answer: Option C
5.
Labour related to manufacturing of product can be classified under
A. direct manufacturing labour costs
B. indirect manufacturing labour costs
C. work in process cost
D. finished costs
Answer & Solution
Answer: Option A
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10 Section 11
6.
Direct material costs are added into direct manufacturing costs to

calculate
A. discuss costs
B. prime costs
C. resale cost
D. merchandise costs

Answer & Solution
Answer: Option B
7.
Direct manufacturing labour costs is added into manufacturing

overhead cost to calculate
A. transaction costs
B. conversion costs
C. resale costs
D. merchandise costs
Answer & Solution
Answer: Option B
8.
In cost terms, direct manufacturing labour cost is included in
A. manufacturing costs
B. prime costs
C. conversion costs
D. both B and C
Answer & Solution
Answer: Option D
9.
Conversion cost is $20000 and manufacturing overhead cost is $7000,

then direct manufacturing labour cost will be
A. $27,000
B. $13,000
C. $130,000
D. $29,500
Answer & Solution
Answer: Option B
10.
If direct service labour is $7000, idle time wages are $2000 and
overtime premium is $950, then total figure would be
A. $5,850
B. $5,950
C. $9,950
D. $10,050
Answer & Solution
Answer: Option C
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10 Section 11
11.
Terms used in manufacturing cost systems are
A. manufacturing costs
B. prime costs
C. conversion costs
D. both B and C
Answer & Solution
Answer: Option D
12.
Direct service labour is $5000, idle time wages are $1000 and overtime
premium is $450, then total figure would be
A. $4,450
B. $6,450
C. $21,500
D. $14,300
Answer & Solution
Answer: Option B
13.
In an income statement, when costs become cost of sold goods and

manufactured products are sold, such costs are
A. inventoriable costs
B. finished costs
C. factory overhead costs
D. manufacturing overhead costs
Answer & Solution
Answer: Option A
14.
Calculation of product cost, gathering information for planning and
analyzing information for decisions making are features of
A. information accounting
B. cost accounting
C. analyzing accounts
D. marketing costs
Answer & Solution
Answer: Option B
15.
Prime cost is $50000 and direct manufacturing labour is $10000, then

direct material cost will be
A. $40,000
B. $60,000
C. $52,000
D. $20,000
Answer & Solution
Answer: Option A
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10 Section 11
16.
An inventory, which consists of partially worked goods or work in

progress is called
A. direct materials inventory
B. work in process inventory
C. finished goods inventory
D. indirect material inventory
Answer & Solution
Answer: Option B
17.
Balance sheet, in which all costs of product that must be considered

as its assets, is said to be
A. factory overhead costs
B. manufacturing overhead costs
C. Inventoriable costs
D. finished costs

Answer & Solution
Answer: Option C
18.
Direct material cost is $75000 and direct manufacturing labour is

$20000, then prime cost would be
A. $55,000
B. $37,500
C. $95,000
D. $26,000
Answer & Solution
Answer: Option C
19.
period cost, which consists income statement of manufacturing

companies belongs to
A. inventory costs
B. product costs
C. non-manufacturing costs
D. manufacturing costs
Answer & Solution
Answer: Option C
20.
An acquisition cost of raw material is to be used in manufacturing,

and becoming a component of cost object is classified as
A. direct material costs
B. indirect material costs
C. direct labour costs
D. indirect labour costs
Answer & Solution
Answer: Option A
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10 Section 11
21.
Wages and other benefits, provided to assembly line workers and

operators of machine are classified under
A. work in process costs
B. finished costs
C. direct manufacturing labour costs
D. indirect manufacturing labour costs
Answer & Solution
Answer: Option D
22.
Conversion cost is subtracted from manufacturing overhead cost is to

calculate the
A. manufacturing labour costs
B. direct labour costs
C. direct manufacturing labour costs
D. indirect manufacturing labour costs
Answer & Solution
Answer: Option C
23.
Labour which works as forklift truck, plant guards and rework labour
is classified as
A. prime overhead
B. conversion overhead
C. factory overhead
D. manufacturing overhead
Answer & Solution
Answer: Option D
24.
Inventory of final goods that are not yet sold is called
A. finished goods inventory
B. indirect material inventory
C. direct materials inventory
D. work in process inventory
Answer & Solution
Answer: Option A

25.
Costs which are considered as expenses in accounting period are

also known as
A. inventory costs
B. period costs
C. timed costs
D. labour overheads
Answer & Solution
Answer: Option B
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10 Section 11
26.
Health care premium for workers and pension costs are included in
A. payroll fringe costs
B. health costs
C. premium costs
D. workers costs
Answer & Solution

Answer: Option A
27.
All costs, which are assigned to manufactured products for specific

calculations are classified as
A. contracting costs
B. product cost
C. government costs
D. marketing costs
Answer & Solution
Answer: Option B
28.
If direct material cost is $5500 and prime cost is $25000, then direct
manufacturing labour would be
A. $19,500
B. $30,500
C. $45,500
D. $22,500

Answer & Solution
Answer: Option A
29.
Direct manufacturing labour costs is $40000 and manufacturing

overhead cost is $7000, then conversion cost would be
A. $47,000
B. $33,000
C. $57,000
D. $18,000
Answer & Solution
Answer: Option A
30.
If direct material cost is $85000 and direct manufacturing labour is

$25000, then prime cost would be
A. $13,500
B. $55,600
C. $60,000
D. $110,000
Answer & Solution
Answer: Option D
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10 Section 11
31.
In costing of project, wages paid to workers for unproductive work at

time of material shortage is termed as
A. indirect wages
B. health wages
C. idle time wages
D. shortage time wages
Answer & Solution
Answer: Option C
32.
Conversion cost is subtracted from direct manufacturing labour cost

is to calculate the
A. direct overheads
B. overhead costs
C. factory overhead
D. manufacturing overhead cost
Answer & Solution
Answer: Option D
33.
An inward delivery charges and custom duties are classified as
A. direct labour costs
B. indirect labour costs
C. direct material costs
D. indirect material costs
Answer & Solution
Answer: Option C
34.
Supplies, plant maintenance, plant rent, plant insurance and cleaning

labour comes under which type of costs?
A. labour costs
B. factory overhead costs
C. finished costs
D. manufacturing costs
Answer & Solution
Answer: Option B
35.
If conversion cost is $25000 and direct manufacturing labour cost is

$17000, then manufacturing overhead cost would be
A. $14,700
B. $68,000
C. $8,000
D. $42,000
Answer & Solution
Answer: Option C
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10 Section 11
36.
For companies in service sector, cost which is not considerable is
A. Inventoriable costs
B. finished costs
C. factory overhead costs
D. manufacturing overhead costs
Answer & Solution
Answer: Option A
37.
An overtime is considered in cost accounting as
A. indirect costs
B. overhead costs
C. premium costs
D. both a and b
Answer & Solution
Answer: Option D

38.
In income statement of merchandising costs, period cost includes all

costs which are not related to
A. cost of resale goods
B. cost of manufacturing goods
C. timed resale of goods
D. cost of purchased goods
Answer & Solution
Answer: Option D
39.
Wages paid to workers of factory are termed as
A. workers premium
B. overtime premium
C. factory premium
D. wage premium
Answer & Solution
Answer: Option B
40.
Cost, which is related to specific cost object and economically

traceable, will be classified as
A. direct cost
B. indirect cost
C. line cost
D. staff cost
Answer & Solution
Answer: Option A
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10 Section 11
41.
Material or anything for which cost is to be measured is known as
A. measurement object
B. cost object
C. accounting object
D. budget object

Answer & Solution
Answer: Option B
42.
Cost which is changed in proportion to level total volume is
A. fixed cost
B. variable cost
C. total cost
D. infeasible cost
Answer & Solution
Answer: Option B
43.
Costs are classified as fixed or variable on basis of
A. specific activity
B. given time period
C. common activity
D. both a and b

Answer & Solution
Answer: Option D
44.
Process of tracing direct costs and allocation of indirect costs is

known as
A. cost assignment
B. direct assignment
C. indirect assignment
D. economic assignment
Answer & Solution
Answer: Option A
45.
Cost which remains unchanged, in proportion to level total volume of

production is classified as
A. total cost
B. infeasible cost
C. fixed cost
D. variable cost
Answer & Solution
Answer: Option C
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10 Section 11
46.
In accounting, cost which is predicted to be incurred or future cost is

known as
A. past cost
B. incurred cost
C. actual cost
D. budgeted cost
Answer & Solution
Answer: Option D
47.
Cost which is related to specific cost object and cannot be

economically traceable is classified as
A. line cost
B. staff cost
C. direct cost
D. indirect cost
Answer & Solution
Answer: Option D
48.
Process of assigning indirect costs to any specific cost object is

known as
A. economic cost
B. cost tracing
C. cost allocation
D. non-economic costs
Answer & Solution
Answer: Option C
49.
In accounting, resources sacrifice for achieving or fulfil specific
objective is known as
A. source cost
B. sacrifice cost
C. treated cost
D. cost
Answer & Solution
Answer: Option D
50.
In production, variables such as level of activity or volume of

company activity are known as
A. cost drivers
B. timed drivers
C. variable drivers
D. fixed drivers
Answer & Solution
Answer: Option A
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10 Section 11
51.
Relationship between change in activity and change in total costs is

considered as
A. fixed relationship
B. cause and effect relationship
C. ineffective relationship
D. variable relationship
Answer & Solution
Answer: Option B
52.
Direct cost assignment for specific cost object is classified as
A. cost object line cost
B. cost tracing
C. cost object indirect cost
D. cost object staff cost

Answer & Solution
Answer: Option B
53.
In accounting, cost incurred in past or in historical financial

statements is classified as
A. actual cost
B. budgeted cost
C. past cost
D. incurred cost
Answer & Solution
Answer: Option A
54.
Collection of cost data, according to accounting system in an

organized way is classified as
A. system accumulation
B. accumulated data
C. cost accumulation
D. organized accumulation
Answer & Solution
Answer: Option C
55.
Which of following is an example of purchasing costs?
A. incoming freight
B. storage costs
C. insurance
D. spoilage
Answer & Solution
Answer: Option C
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10 Section 11
56.
If an average inventory is 2000 units, annual relevant carrying cost of

each unit is $5, then annual relevant carrying cost will be
A. $5,000
B. $4,500
C. $5,500
D. $6,000
Answer & Solution
Answer: Option A
57.
If demand of one year is 25000 units, relevant ordering cost for each
purchase order is $210, carrying cost of one unit of stock is $25 then
economic order quantity will be
A. 678 packages
B. 648 packages
C. 658 packages
D. 668 packages
Answer & Solution
Answer: Option B
58.
Cost of product failure, error prevention and appraisals can be
classified under
A. stocking costs
B. stock-out costs
C. costs of quality
D. shrinkage costs
Answer & Solution
Answer: Option C
59.
Activities related to coordinating, controlling and planning flow of

inventory are classified as
A. decisional management
B. throughput management
C. inventory management
D. manufacturing management
Answer & Solution
Answer: Option C
60.
Required rate of return, is multiplied per unit cost of purchased units

to calculate
A. irrelevant inventory carrying costs
B. relevant opportunity cost of capital
C. relevant purchase order costs
D. relevant inventory carrying costs
Answer & Solution
Answer: Option B
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10 Section 11
61.
An ability of an accounting system, to point out use of resources in

every step of production process is called
A. back-flush trails
B. audit trails
C. trigger trails
D. lead manufacturing trails

Answer & Solution
Answer: Option B
62.
Systematic flow of services, goods or information from buying

material for product delivery to customers is known as
A. supply chain
B. value chain
C. material flow chain
D. manufacturing flow chain
Answer & Solution
Answer: Option A
63.
Costs associated with storage of finished goods such as spoilage,

obsolescence and insurance of goods are classified as
A. carrying costs
B. purchasing costs
C. stock-out costs
D. ordering costs
Answer & Solution
Answer: Option A
64.
Costs of goods acquired from suppliers is classified as
A. stock-out costs
B. ordering costs
C. carrying costs
D. purchasing costs
Answer & Solution
Answer: Option D
65.
If demand in units is 18000, relevant ordering cost for each year is

$150 and an order quantity is 1500, then annual relevant ordering cost
would be
A. $200
B. $190
C. $160
D. $180
Answer & Solution
Answer: Option D
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10 Section 11
66.
If relevant opportunity cost of capital is $2950 and relevant carrying

cost of inventory is $6700, then relevant incremental cost will be
A. $9,650
B. $2,350
C. $3,750
D. $2,750
Answer & Solution
Answer: Option C
67.
Profit forgone by capital investment in inventory rather than

investment of capital to somewhere else is classified as
A. relevant purchase order costs
B. relevant inventory carrying costs
C. irrelevant inventory carrying costs
D. relevant opportunity cost of capital
Answer & Solution
Answer: Option D
68.
An example of shrinkage costs is
A. incoming freight
B. storage costs
C. insurance
D. clerical errors
Answer & Solution

Answer: Option D
69.
If relevant incremental costs are $5000 and relevant opportunity cost

of invested capital is $2500, then relevant inventory carrying costs
would be
A. $7,500
B. $7,000
C. $6,500
D. $6,000
Answer & Solution
Answer: Option A
70.
An average inventory in units is multiplied with annual relevant

carrying cost of each unit to calculate
A. annual irrelevant ordering costs
B. annual relevant carrying costs
C. annual relevant ordering costs
D. annual irrelevant carrying costs

Answer & Solution
Answer: Option B
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10 Section 11
1.
A push through system, according to which goods are manufactured

for finished inventory solely, on basis of forecasted demand can be
classified as
A. in-time production
B. materials requirement planning
C. on-time production
D. pull strategy of production
Answer & Solution
Answer: Option B
2.
Relevant incremental costs are added into relevant opportunity cost

of capital to calculate
A. purchase order costs
B. relevant inventory carrying costs
C. irrelevant inventory carrying costs
D. relevant ordering costs
Answer & Solution
Answer: Option B
3.
If economic order quantity for one year is 15000 packages and

demand in units for one year are 1500 units, then number of deliveries
in a year will be
A. 16
B. 12
C. 10
D. 14
Answer & Solution
Answer: Option C

4.
Number of purchase orders for each year is multiplied to relevant

ordering cost for each purchase order to calculate
A. annual irrelevant ordering costs
B. annual relevant carrying costs
C. annual relevant ordering costs
D. annual irrelevant carrying costs
Answer & Solution
Answer: Option C
5.
Costing system, which omits some of journal entries in accounting

system is known as
A. in-time costing
B. trigger costing
C. back flush costing
D. lead time costing
Answer & Solution

Answer: Option C
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10 Section 11
6.
Decision model to calculate optimal quantity of inventory to be

ordered is called
A. efficient order quantity
B. economic order quantity
C. rational order quantity
D. optimized order quantity
Answer & Solution
Answer: Option B
7.
Stage in manufacturing cycle at which journal entries are made in

system of accountancy is known as
A. chaining point
B. recording point
C. lead point
D. trigger point
Answer & Solution
Answer: Option D
8.
If required rate of return is 12% and per unit cost of units purchased is
$35, then relevant opportunity cost of capital will be
A. $6.20
B. $7.20
C. $4.20
D. $5.20
Answer & Solution
Answer: Option C
9.
Method of costing that supports creation of value for customer by

accounting whole value stream, rather than individual departments or
products is classified as
A. economic accounting
B. back-flush accounting
C. lean accounting
D. lead accounting
Answer & Solution
Answer: Option C
10.
Reorder point is divided by number of sold units for per unit of time to
calculate
A. relevant carrying cost
B. relevant ordering cost
C. purchase order lease time
D. number of purchase orders
Answer & Solution
Answer: Option C
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10 Section 11
11.
Buying of goods or materials for production in a way that they are

delivered directly on manufacturing facility of company is called
A. economic order quantity purchasing
B. annual purchasing
C. just in time purchasing
D. both a and b
Answer & Solution
Answer: Option C
12.
Purchase order lead time is multiplied to number of units is sold per

unit of time to calculate
A. carrying costs
B. relevant total costs
C. economic order quantity
D. reorder point
Answer & Solution

Answer: Option D
13.
Costs of issuing purchase orders, making of delivery records for

tracking payments and costs of inspection of items are classified as
A. stock-out costs
B. ordering costs
C. carrying costs
D. purchasing costs
Answer & Solution
Answer: Option B
14.
Relevant ordering costs are added into relevant carrying costs to

calculate
A. relevant total costs
B. contribution costs
C. throughput costs
D. optimized costs

Answer & Solution
Answer: Option A
15.
If purchase order lead time is 35 minutes and number of units sold per
time is 400 units, then reorder point will be
A. 14000 units
B. 14500 units
C. 15000 units
D. 15500 units
Answer & Solution
Answer: Option A
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10 Section 11
16.
Relationship between cost and cost drivers is
A. stationary
B. not stationary
C. intrinsic
D. extrinsic
Answer & Solution
Answer: Option B
17.
Cost function, in which cost does not change with any change in level
of activity is a part of
A. step price functions
B. step object functions
C. step constant functions
D. step cost functions
Answer & Solution
Answer: Option D
18.
Cost pattern, when production inputs are to be used in discrete

functions, but quantities are fractional, will be categorized as
A. continuously variable cost function

B. fixed cost function
C. mixed cost function
D. semi variable cost function
Answer & Solution
Answer: Option A
19.
Range, in which relationship exists between level of activity or total

cost is called
A. functional range
B. relevant range
C. unit range
D. related range
Answer & Solution
Answer: Option B
20.
Relationship based on unrelated level of activity and past data of cost
is measured with help of
A. cost estimation
B. price estimation
C. unit estimation
D. production estimation
Answer & Solution
Answer: Option A
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10 Section 11
21.
Model which states decline in extra time needed to produce last unit,
every time for cumulative quantity of doubled units produced is
classified as
A. incremental unit average model
B. incremental cost learning model
C. incremental unit time learning model
D. incremental price learning model

Answer & Solution
Answer: Option C
22.
A helpful technique, for accurate forecasts about costs to be incurred

in future is a part of
A. unit estimation
B. production estimation
C. cost estimation
D. price estimation
Answer & Solution
Answer: Option C
23.
In specification analysis, assumptions related to residuals states must

be
A. worst
B. independent
C. dependent
D. good
Answer & Solution
Answer: Option B
24.
Deviations between estimated regression line and vertical deviations

are classified as
A. fixed terms
B. indexed terms
C. variable terms
D. residual terms
Answer & Solution
Answer: Option D
25.
In regression analysis, if observed cost value is 50 and predicted cost

value is 7, then disturbance term will be
A. 57
B. 43
C. 67
D. 47
Answer & Solution
Answer: Option B
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10 Section 11
26.
Number of observations in regression analysis is considered as
A. degree of possibility
B. degree of average
C. degree of variance
D. degree of freedom
Answer & Solution
Answer: Option D
27.
Estimation of cost functions, an ignoring information from all points
but considering two observation points can be classified as
A. disadvantage of low high method
B. disadvantage of high low method
C. advantage of high low method
D. advantage of low high method
Answer & Solution
Answer: Option B
28.
Graphical representation of cost driver data and costs is considered

as
A. plotting data
B. plotting costs
C. plotting cost drivers
D. plotting curved line
Answer & Solution
Answer: Option A
29.
Evaluation criteria of regression equation must be considered as
A. goodness of fit
B. economic plausibility
C. significance of independent variable
D. all of above
Answer & Solution
Answer: Option D
30.
In assumptions of specific analysis, normality of residuals is satisfied

with use of
A. real price data
B. real cost data
C. multiplier data
D. divisional data
Answer & Solution

Answer: Option B
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10 Section 11
31.
In quantitative analysis to estimate cost function, fourth step is to
A. write a liner function
B. write price function
C. write manufacturing function
D. plot data
Answer & Solution
Answer: Option D
32.
A concept used to define learning curve in broader application is

called
A. discrete curve
B. fixed curve
C. mixed curve
D. experience curve
Answer & Solution
Answer: Option D
33.
Large residual term and negative slope of line indicate
A. inverse proportion
B. direct proportion
C. badness proportions
D. goodness proportion
Answer & Solution
Answer: Option A
34.
Success of cost reduction initiatives are evaluated by accurate
A. cyclical factors
B. indexed technique
C. price estimation
D. cost estimation
Answer & Solution
Answer: Option D
35.
Which one of following is main advantage of quantitative method?
A. non expression
B. non constant
C. objective
D. non objective
Answer & Solution
Answer: Option C
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10 Section 11
36.
An implementation of activity based costing would be possible only if

accountants find
A. goodness of each activity
B. handling of each activity

C. cost driver for each activity
D. cost object for each activity
37.
In assumptions testing, violation of constant variance is/ is called
A. heteroscedasticity
B. heterogeneous
C. homogenous
D. homoscedasticity
Answer & Solution
Answer: Option A
38.
In cause and effect relationship between cost level and cost driver,
inflationary price effects are removed by dividing cost through
A. price index
B. cost index
C. profit index
D. cost driver index

Answer & Solution
Answer: Option A
39.
Weak relationship between cost and cost driver is indicated on a

regression line, which is
A. curved
B. slightly sloped
C. completely sloped
D. dotted
Answer & Solution
Answer: Option B
40.
For estimation of each cost pool for cost function, attention must be
paid to
A. cost object hierarchy
B. management hierarchy
C. price hierarchy
D. cost hierarchy
Answer & Solution
Answer: Option D
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10 Section 11
41.
A technique for estimating regression line, which minimizes sum of

vertical deviations squares is classified as
A. variable technique
B. least square technique
C. indexed technique
D. fixed technique
Answer & Solution
Answer: Option B
42.
Type of relationship stating "how changes in cost driver drives cause
changes in cost" will be termed as
A. marginal plausibility
B. economic plausibility
C. financial plausibility
D. market plausibility
Answer & Solution
Answer: Option B
43.
Slope coefficient of cost function is zero because it intersects the
A. x-axis at one
B. y-axis at constant
C. x-axis at constant
D. y-axis at one
Answer & Solution
Answer: Option B

44.
An assumption of specification analysis, which states all values of

residuals which are uniformly scattered around regression line is
classified as
A. abnormality of residuals
B. normality of regression
C. normality of residuals
D. abnormality of regression
Answer & Solution
Answer: Option C
45.
Goodness of fit is used to measure wellness of
A. actual values
B. predicted values
C. residual values
D. indexed values
Answer & Solution

Answer: Option B
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10 Section 11
46.
Slope coefficient is 0.75 and difference in machine hours is $65000

then difference in cost would be
A. $86,667
B. $48,750
C. $85,000
D. $55,000
Answer & Solution
Answer: Option A
47.
In regression equation, an evaluation criteria considers significance

of
A. independent variable
B. dependent variable
C. significance plotting
D. insignificance plotting
Answer & Solution
Answer: Option A
48.
High-low method is used for estimation of
A. linear coefficient
B. cost coefficient
C. slope coefficient
D. price coefficient
Answer & Solution
Answer: Option C
49.
If all conditions or assumptions of regression analysis simple

regression can give
A. dependent estimation
B. independent estimation
C. reliable estimates
D. unreliable estimates
Answer & Solution
Answer: Option C
50.
Industrial engineering method is used to analyze relationship between
A. marketing and financing
B. price and costs
C. input and output
D. units and batches
Answer & Solution
Answer: Option C
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10 Section 11
51.
Residual term is also considered as
A. error term
B. disturbance term
C. relevant term
D. both a and b
Answer & Solution
Answer: Option D
52.
Percentage of variation in Y explained by X is measured by
A. coefficient of residual
B. coefficient of prediction
C. coefficient of determination
D. coefficient of index
Answer & Solution
Answer: Option C
53.
Small residual terms and positive slope of line indicate
A. badness proportions
B. goodness proportion
C. inversely proportion
D. directly proportion
Answer & Solution
Answer: Option D
54.
An analysis of data over successive past periods, which pertain to

some plant, activity and organization is called
A. economic series
B. financial series
C. time series
D. analytical series
Answer & Solution
Answer: Option C
55.
Individual variable coefficient's multicollinearity leads to

A. decrease in variance
B. increase in variance error
C. increase in standard error
D. decrease in standard error
Answer & Solution
Answer: Option C
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10 Section 11
56.
constant variance is classified in assumptions testing as
A. homogenous
B. homoscedasticity
C. heteroscedasticity
D. heterogeneous
Answer & Solution
Answer: Option B

57.
As compared to cumulative average-time learning model, learning

model which predicts more cumulative total time to produce more
units is known as
A. incremental unit time learning model
B. incremental price learning model
C. incremental unit average model
D. incremental cost learning model
Answer & Solution
Answer: Option A
58.
Model, in which produced unit doubles every time as cumulative

average time per unit decreases, by a constant percentage can be
classified as
A. cumulative average time learning model
B. cumulative mean learning model
C. cumulative weighted learning model
D. cumulative average pricing model

Answer & Solution
Answer: Option A
59.
In specification analysis, assumptions related to variance states that:
A. variance of residuals is constant
B. variance of goodness is constant
C. goodness of fit is constant
D. standard error is constant
Answer & Solution
Answer: Option A
60.
If slope coefficient is 0.60 and difference in machine hours is $50000,

then difference in cost can be
A. $68,700
B. $58,700
C. $30,000
D. $83,333.34
Answer & Solution
Answer: Option C
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10 Section 11
61.
Fifth step in quantitative analysis of estimating cost function is to
A. estimate cost function
B. estimate price function
C. estimate supply function
D. estimate demand function
Answer & Solution
Answer: Option A
62.
Lower level of production leads to
A. higher setup cost
B. lower repair cost
C. higher setup cost

D. higher repair cost
Answer & Solution
Answer: Option B
63.
In plotting cost functions, number of machine hours and batches are

represented on
A. unit axis
B. term axis
C. x-axis
D. y-axis
Answer & Solution
Answer: Option D
64.
An error term, disturbance term or residual term is calculated as
A. U=A-b
B. u=A-a
C. u=Y-y
D. u=X-x
Answer & Solution
Answer: Option C
65.
Cost function, in which graph of total cost would not result in straight
line is classified as
A. nonlinear cost function
B. linear cost function
C. linear price function
D. nonlinear price function
Answer & Solution
Answer: Option A
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10 Section 11
66.
An assumption, which states that there must be linear relationship
between independent variable and dependent variable is
A. irrelevant range of linearity
B. relevant range of linearity
C. significant range
D. insignificant range
Answer & Solution
Answer: Option B
67.
Vertical difference, which measures distance between estimated and

actual cost for every single observation is classified as
A. residual term
B. positive term
C. negative term
D. squared term
Answer & Solution
Answer: Option A
68.
In cost accounting, conference, quantitative analysis and account

analysis methods are considered as
A. cost estimation methods
B. price estimation methods
C. unit estimation method
D. variable estimation method
Answer & Solution
Answer: Option A
69.
Component of total cost, which never changes with change in level of

production is classified as
A. fixed cost
B. constant
C. variable
D. both a and b

Answer & Solution
Answer: Option A
70.
Strength of relationship between cost driver and cost is considered as
A. badness of residual
B. goodness of residual
C. badness of fit
D. goodness of fit
Answer & Solution
Answer: Option D
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10 Section 11
1.
In regression equation Y = $6000 + (per unit cost x number of units),

'$6000' is a
A. constant
B. variable
C. expression
D. base and exponent
Answer & Solution
Answer: Option A
2.
In linear cost function, fixed cost is considered as
A. constant
B. variable
C. exponent
D. base
Answer & Solution
Answer: Option A
3.
Description in mathematical form to represent changes in cost, with

level of activity related to that cost is classified as
A. cost function
B. revenue function
C. unit function
D. relative function
Answer & Solution
Answer: Option A
4.
In step cost functions, cost is increased by
A. discrete amounts
B. same amounts
C. linear amounts
D. nonlinear amounts
Answer & Solution
Answer: Option A
5.
Individual activities such as machine setups, material handling,

customer service and distribution of products are a part of
A. activity based costing
B. margin based costing
C. goodness of costing
D. handling based costing
Answer & Solution
Answer: Option A
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10 Section 11
6.
A problem which arises because of presence of systematic pattern in

residual value sequence is considered as
A. parallel correlation
B. serial correlation
C. auto correlation
D. both B and C
Answer & Solution
Answer: Option D
7.
If difference between costs linked to highest and lowest observation

of cost driver is $8000 and observation of cost driver is 40 machine
hours, then slope coefficient will be
A. $16,000
B. $200
C. $400
D. $20,000
Answer & Solution
Answer: Option B
8.
Standard error of regression analysis is known as
A. average of coefficient
B. variance of residual
C. mean of residual
D. average of residual

Answer & Solution
Answer: Option B
9.
An analysis and estimation method of cost, by classifying cost

accounts as fixed or variable with respect for specific output level is
considered as
A. manufacturing analysis method
B. price analysis method
C. unit analysis method
D. account analysis method
Answer & Solution
Answer: Option D
10.
An estimation of relationship between two or more independent

variables and dependent variable is classified as
A. One variable series
B. multiple regression
C. simple regression
D. Two way regression
Answer & Solution
Answer: Option B
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10 Section 11
11.
Second step for estimation of cost function by using quantitative

analysis is to
A. choose independent variable
B. choose cost estimation method
C. choose price estimation method
D. choose dependent variable
Answer & Solution
Answer: Option A
12.
An estimation of relationship between one independent variable and

dependent variable is known as
A. simple regression
B. Two way regression
C. One variable series
D. multiple regression
Answer & Solution
Answer: Option A
13.
Goodness of fit predicted values is also known as
A. coefficient of determination
B. coefficient of index
C. coefficient of residual
D. coefficient of prediction
Answer & Solution
Answer: Option A
14.
Factor used to predict dependent variable is named as
A. independent variable
B. function variable
C. evaluation variable
D. estimation variable
Answer & Solution
Answer: Option A
15.
In regression analysis, if observed cost value is 62 and predicted cost

value is 29, then disturbance term would be
A. 33
B. 91
C. 81
D. 43
Answer & Solution
Answer: Option A
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10 Section 11
16.
An amount by which total cost changes with respect to change in

level of activity is classified as
A. activity coefficient
B. cost coefficient
C. change coefficient
D. slope coefficient
Answer & Solution
Answer: Option D
17.
An assumption of specification analysis states: any observation does

not belong to any other observation's residual value, is classified as
A. independence of residuals
B. dependence of residuals
C. independence of correlation
D. dependence of residuals
Answer & Solution

Answer: Option A
18.
Most frequently used methods of quantitative analysis include
A. variable equation
B. high low method
C. low high method
D. constant equation
Answer & Solution
Answer: Option B
19.
If residual error is 25 and predicted cost value is 50, then observed

cost value would be
A. 100
B. 25
C. 50
D. 75

Answer & Solution
Answer: Option D
20.
In multicollinearity, correlation coefficient between two independent

variables must be greater than
A. 0.7
B. 0.6
C. 0.5
D. 0.4
Answer & Solution
Answer: Option A
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10 Section 11
21.
If coefficients are similar for two accounting periods, then single cost
relationship is estimated with help of
A. data of fixed cost
B. cost driver of data

C. pool of data
D. cost object of data
Answer & Solution
Answer: Option C
22.
Relationship between independent variable and dependent variable

must be
A. general ledger
B. non-achievable
C. non measureable
D. economically plausible
Answer & Solution
Answer: Option D
23.
In adjustment issues of costing, database must contain reliable

measure of
A. fixed cost driver
B. cost driver and cost
C. cost driver and object
D. mixed cost driver
Answer & Solution
Answer: Option B
24.
If difference in costs is $7000 and difference in machine hours of is

$18000, then slope coefficient would be
A. 2.571
B. 0.39
C. 0.2571
D. 3.39
Answer & Solution
Answer: Option B
25.
In adjustment issues and data collection, inflation affects the
A. cost driver and cost
B. cost object and cost
C. heterogeneous cost
D. homogenous cost
Answer & Solution
Answer: Option A
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10 Section 11
26.
Higher level of production leads to
A. higher repair cost
B. higher setup cost
C. lower repair cost
D. higher setup cost
Answer & Solution
Answer: Option A

27.
Method of estimation of cost function, by making opinions and

analysis about cost and cost drivers is classified as
A. conference method
B. inference method
C. pricing method
D. manufacturing method
Answer & Solution
Answer: Option A
28.
Within relevant range, cost function which cost does not change in
narrow ranges of activity is called
A. fixed cost function
B. variable cost function
C. step variable cost function
D. step fixed cost function
Answer & Solution

Answer: Option C
29.
In linear cost function which is y=a + bx, objective is to find the
A. values of a and b
B. values of x and y
C. values of a and x
D. values of b and y
Answer & Solution
Answer: Option A
30.
Statistical method used to measure average change in dependent

variable, with respect to change of one unit in independent variable is
called
A. times series method
B. time horizon method
C. aggression method
D. regression method

Answer & Solution
Answer: Option D
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10 Section 11
31.
Line which uses to join observations with lower and highest values of
cost driver is called
A. straight line
B. curved line
C. horizontal line
D. vertical line
Answer & Solution
Answer: Option A
32.
A technique which minimizes sum of squared vertical difference, to

determine regression line is considered as
A. negative square technique
B. positive square technique

C. least square technique
D. most square technique
Answer & Solution
Answer: Option C
33.
In Regression Analysis, if an observed cost value is 85 and

disturbance error is 25 then predicted cost value will be
A. 110
B. 125
C. 60
D. 70
Answer & Solution
Answer: Option C
34.
Better fit between estimated cost and actual observations is

represented by
A. variable residual terms
B. smaller residual terms
C. larger residual terms
D. zero residual terms
Answer & Solution
Answer: Option B
35.
If an unexplained variation is 456870 and total variation is 955000,

then coefficient of determination will be
A. 0.4528
B. 0.4783
C. 0.5216
D. 0.5425
Answer & Solution
Answer: Option C
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10 Section 11
36.
In Regression Analysis, testing of assumptions if these are true or not

is classified as
A. weighted analysis
B. average analysis
C. significance analysis
D. specification analysis
Answer & Solution
Answer: Option D
37.
In estimation of cost functions, variations in a single activity level

represents the
A. related total costs
B. related fixed cost
C. related variable cost
D. related per unit cost
Answer & Solution

Answer: Option A
38.
An estimated coefficient, which indicates degree by which estimated

values are affected by random factors is known as
A. standard error of estimated coefficient
B. weighted error of estimated coefficient
C. average of estimated coefficient
D. variance of estimated coefficient
Answer & Solution
Answer: Option A
39.
Regression Analysis Method of quantitative analysis of cost function

considers
A. all data points
B. One data point
C. Two data points
D. Four data points

Answer & Solution
Answer: Option A
40.
If difference between costs linked to highest and lowest observation

of cost driver is $36000 and observation of cost driver is 30 machine
hours, then slope coefficient would be
A. $1,200
B. $1,400
C. $1,600
D. $1,800
Answer & Solution
Answer: Option A
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10 Section 11
41.
In quantitative analysis of estimating cost function, last and foremost

step is to
A. evaluate variable driver
B. evaluate cost driver

C. evaluate price driver
D. evaluate demand driver
Answer & Solution
Answer: Option B
42.
Work measurement method of cost estimation is also called
A. price engineering method
B. industrial engineering method
C. measuring engineering method
D. unit engineering method
Answer & Solution
Answer: Option B
43.
Function which is used to measure decline in per unit cost of different

business functions is classified as
A. mixed curve
B. experience curve
C. discrete curve
D. fixed curve
Answer & Solution
Answer: Option B
44.
Worse fit between estimated cost and actual observations is shown

on regression line with
A. larger residual terms
B. zero residual terms
C. variable residual terms
D. smaller residual terms
Answer & Solution
Answer: Option A
45.
Slope coefficient of linear cost function is

A. zero
B. one
C. two
D. three
Answer & Solution
Answer: Option A
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10 Section 11
46.
Learning curve models include
A. cumulative average time learning model
B. incremental unit time learning model
C. incremental production learning model
D. both a and b
Answer & Solution
Answer: Option D

47.
For slope coefficient b, value of estimated coefficient is considered as
A. d-value
B. c-value
C. t-value
D. b-value
Answer & Solution
Answer: Option C
48.
Cause and effect relationship between activity and costs is result of
A. contractual agreement
B. knowledge of operations
C. measureable unit relationship
D. all of above
Answer & Solution
Answer: Option D

49.
To decide whether cost is variable cost or fixed cost with respect to

some specific activity depends upon
A. units of labour
B. unit of production
C. time horizon
D. units of inventory
Answer & Solution
Answer: Option C
50.
In a given scenario, if cost is considered as indirect cost then

independent variable will be considered as
A. demand allocation base
B. supply allocation base
C. cost allocation base
D. price allocation base
Answer & Solution

Answer: Option C
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10 Section 11
51.
Cost analysis method, which uses mathematical method to use fit

between past data observations and cost functions is termed as
A. quantitative analysis method
B. qualitative analysis method
C. account analysis method
D. conference analysis method
Answer & Solution
Answer: Option A
52.
Third step in estimation of cost function, by using quantitative

analysis is collection of data for
A. cost and cost object
B. price and cost driver
C. dependent variable and cost driver

D. independent variable and cost driver
Answer & Solution
Answer: Option C
53.
If residual error is 51 and predicted cost value is 37, then observed

cost value will be
A. 14
B. 88
C. 24
D. 68
Answer & Solution
Answer: Option B
54.
In estimation of cost function, an example of independent variable is
A. level of activity
B. quantity stored
C. quantity manufactured
D. quality of product
Answer & Solution
Answer: Option A
55.
Formula of 1 - unexplained variation / total variation is used to

calculate
A. coefficient of determination
B. coefficient of index
C. coefficient of residual
D. coefficient of prediction
Answer & Solution
Answer: Option A
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10 Section 11
56.
Cause and effect relationship that exists between change in total cost
level and change in level of activity, is measured with help of
A. production driver
B. cost driver
C. price driver
D. estimation driver
Answer & Solution
Answer: Option B
57.
Cost that has elements of variable and fixed costs at same time is
A. variable cost
B. mixed cost
C. semi variable cost
D. Both B and C
Answer & Solution
Answer: Option D

58.
If difference in costs is $32000 and slope coefficient is 0.40, then

difference in machine hours would be
A. $80,000
B. $12,800
C. $70,000
D. $22,800
Answer & Solution
Answer: Option A
59.
In plotting of cost functions, level of activities according to which

charged cost is represented on
A. x-axis
B. y-axis
C. unit axis
D. term axis
Answer & Solution

Answer: Option A
60.
Function used to measure decline in labour hours per unit as units of

production increases is called
A. fixed curve
B. learning curve
C. linear curve
D. mixed curve
Answer & Solution
Answer: Option B
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10 Section 11
61.
In linear cost function, which is y = a + bx, y is classified as
A. predicted fixed cost
B. predicted variable cost
C. predicted cost
D. predicted price

Answer & Solution
Answer: Option C
62.
In specification analysis, assumptions related to linearity states but

linearity must be within
A. irrelevant range
B. relevant range
C. significant range
D. insignificant range
Answer & Solution
Answer: Option B
63.
In regression analysis, if predicted cost value is 65 and observed cost

value is 19 then disturbance term will be
A. 46
B. 56
C. 36
D. 76
Answer & Solution
Answer: Option A
64.
In adjustment issues of costing, database must consider wide range

values of
A. fixed object
B. cost driver
C. cost object
D. mixed object
Answer & Solution
Answer: Option B
65.
Method, which considers cost and cost drivers of departments such

as employee relations and process engineering is termed as
A. pricing method
B. manufacturing method
C. conference method
D. inference method
Answer & Solution
Answer: Option C
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10 Section 11
66.
Examples of nonlinear cost functions are
A. step constant functions
B. step cost functions
C. step price functions
D. step object functions
Answer & Solution
Answer: Option B
67.
Relationship between cost and cost driver is economically plausible if
goodness of fit
A. has meaning
B. has no meaning
C. has index values
D. has no index values
Answer & Solution
Answer: Option A
68.
Situation in which two or more independent variables are highly

correlated is known as
A. price linearity
B. cost linearity
C. division linearity
D. multi-collinearity
Answer & Solution
Answer: Option D
69.
First step in estimation of cost function by using quantitative analysis

is to
A. choose price estimation method
B. choose dependent variable
C. choose independent variable
D. choose cost estimation method
Answer & Solution
Answer: Option B
70.
If an unexplained variation is 350050 and total variation is 700505,

then coefficient of determination would be
A. 3
B. 0.5003
C. 0.7003
D. 2

Answer & Solution
Answer: Option B
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10 Section 11
1.
Considering relationship of variables, relationship in which activity

cost is included in dependent variable, which has similar cost driver is
classified as
A. heterogeneous relationship
B. extreme relationship
C. no homogeneous relationship
D. homogeneous relationship
Answer & Solution
Answer: Option D
2.
Method which considers lowest and highest values of cost driver and
cost within relevant range is called
A. low high method

B. constant equation
C. variable equation
D. high low method
Answer & Solution
Answer: Option D
3.
Vertical dashed line in graphical representation of cost function

represents the
A. cost representation
B. irrelevant range
C. relevant range
D. graphical representation
Answer & Solution
Answer: Option C
4.
In dependent variable cost pool, relationship between individual cost
items and cost drivers can be classified as
A. no homogeneous relationship
B. homogeneous relationship
C. heterogeneous relationship
D. an extreme relationship
Answer & Solution
Answer: Option A
5.
Value, which measures that how large is value of standard error in

relevance to value of estimated coefficient is termed as
A. t-value
B. b-value
C. d-value
D. c-value
Answer & Solution
Answer: Option A
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10 Section 11
6.
Chances of cost to be considered as variable are more, if the
A. time horizons are long
B. time horizons are short
C. time horizons are irrelevant
D. time horizons are relevant
Answer & Solution
Answer: Option A
7.
If actual result is $25000 and flexible budget amount is $11000, then

flexible budget amount is
A. $36,000
B. $46,000
C. $56,000
D. $14,000

8.
Flexible budget variance for revenues of company is classified as
A. selling price variance
B. investment variance
C. profit variance
D. primary variance
Answer & Solution
Answer: Option A
9.
If actual selling price is $500, actual result is $250 and actual units
sold are 350, then selling price variance will be
A. $87,500
B. $97,500
C. $67,500
D. $57,500
Answer & Solution
Answer: Option A
10.
If actual result is $26000, flexible budget amount is $13000, then

flexible budget amount will be
A. $39,000
B. $49,000
C. $13,000
D. $15,000
Answer & Solution
Answer: Option C
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10 Section 11
11.
If static budget amount is $9000, flexible budget amount is $20000,

then sales volume variance will be
A. $29,000
B. $11,000
C. $15,000
D. $10,000
Answer & Solution
Answer: Option B
12.
If static budget is $208000 and flexible budget amount is $305000,

then sales budget variance will be
A. $67,000
B. $97,000
C. $57,000
D. $47,000
Answer & Solution
Answer: Option B
13.
Subtracted flexible budget amount can form an actual result to

calculate
A. unstated budget variance
B. flexible budget variance

C. constant budget variance
D. static budget variance
Answer & Solution
Answer: Option B
14.
If sales budget variance for operating income is $68000 and static

budget amount is $19000, then flexible budget amount will be
A. $47,000
B. $57,000
C. $87,000
D. $97,000
Answer & Solution
Answer: Option C
15.
Sales budget variance is subtracted from flexible budget amount to

calculate
A. static budget amount
B. unstated amount
C. constant amount
D. variable amount
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10 Section 11
16.
If flexible budget amount is $62000 and an actual result is $35000,

then flexible budget amount would be
A. $27,000
B. $37,000
C. $97,000
D. $87,000
Answer & Solution
Answer: Option A
17.
Flexible budget amount is added to flexible budget variance to

calculate
A. static result
B. actual result
C. secondary result
D. primary result
Answer & Solution
Answer: Option B
18.
Flexible budget amount is $57000 and flexible budget variance is

$14000, then actual result amount will be
A. $61,000
B. $71,000
C. $43,000
D. $24,000
Answer & Solution
Answer: Option B
19.
Static budget amount is subtracted from flexible budget amount to
calculate the
A. sales budget variance
B. cost budget variance
C. resultant budget variance
Answer & Solution
Answer: Option A
20.
If sales budget variance is $57000 and flexible budget amount is

$97000, then static budget amount will be
A. $40,000
B. $154,000
C. $164,000
D. $124,000
Answer & Solution
Answer: Option A
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10 Section 11
21.
Difference between flexible budget amount and corresponding actual

result is called
A. corresponding variance
B. resultant variance
C. flexible budget variance
Answer & Solution
Answer: Option C
22.
An actual selling price is subtracted from budgeted selling price, and

then multiplied to actual sold units to calculate
A. profit variance
B. investment variance
C. cost variance
D. selling price variance

Answer & Solution
Answer: Option D
23.
Number of units are multiplied to per unit price, to calculate
A. multiple budget variable
B. fixed budget variable
C. flexible budget variable
D. constant budget
Answer & Solution
Answer: Option C
24.
Budget which calculates expected revenues and expected costs,

based on actual output quantity is named as
A. flexible budget
B. fixed budget
C. variable budget
D. multiplied budget
Answer & Solution
Answer: Option A
25.
If flexible budget amount is $27000 and flexible budget variance is

$12000, then actual result amount would be
A. $27,000
B. $15,000
C. $39,000
D. $49,000
Answer & Solution
Answer: Option C
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10 Section 11
26.
Number of units are 5000 and per unit price is $60, then flexible
budget variable would be
A. $5,000,000
B. $3,000,000
C. $2,000,000
D. $1,000,000
Answer & Solution
Answer: Option B
27.
If flexible budget amount is $82000 and actual result is $45000 then

flexible budget amount will be
A. $97,000
B. $87,000
C. $27,000
D. $37,000
Answer & Solution
Answer: Option D
28.
Difference between flexible budget amount and corresponding static

budget amount is classified as
A. sales revenue variance
B. cost profit variance
C. profit volume variance
D. sales volume variance
Answer & Solution
Answer: Option D
29.
If an actual selling price is $400, an actual result is $250 and an actual

units sold are 500, then selling price variance will be
A. $45,000
B. $55,000
C. $75,000
D. $65,000
Answer & Solution
Answer: Option C
30.
If number of units are 3000 and per unit price is $500, then flexible
budget variable will be
A. $1,500,000
B. $2,500,000
C. $3,500,000
D. $4,500,000
Answer & Solution
Answer: Option A
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10 Section 11
31.
If static budget amount is $6000 and flexible budget amount is $15000,

then sales volume variance will be
A. $9,000
B. $8,000
C. $12,000
D. $21,000
Answer & Solution
Answer: Option A
32.
An approach in which company under-costs it's one product and

over-costs at least one product is classified as
A. service-cost across subsidizing
B. product-price cross subsidizing
C. product-cost cross subsidizing
D. product cross subsidizing
Answer & Solution

Answer: Option C
33.
Budgeted total cost in indirect cost pool is divided by budgeted total

quantity of cost allocation base is to calculate by
A. budgeted direct cost rate
B. budgeted indirect cost rate
C. expected indirect cost rate
D. direct budget percentage
Answer & Solution
Answer: Option B
34.
In an activity based cost system; an activity/unit of work or task with

differentiated purposes will be classified as
A. different task
B. purpose cost
C. an activity
D. an allocation cost

Answer & Solution
Answer: Option C
35.
Costs of all activities for individual products or services can be called
A. purpose level costs
B. output-unit level costs
C. input-unit level costs
D. activity level costs
Answer & Solution
Answer: Option B
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10 Section 11
36.
In an activity based costing implementation, product's diverse

demand is based on
A. batch size
B. complexity
C. process steps
D. all of above
Answer & Solution
Answer: Option D
37.
Broad's average use to assign cost of revenue to cost objects will be

classified as
A. refined costing system
B. refined selling system
C. undefined costing
D. defined selling system
Answer & Solution
Answer: Option A
38.
Costs of all activities for a group of products, rather than individual

product can be classified as
A. activity level costs

B. input level costs
C. batch level costs
D. output level costs
Answer & Solution
Answer: Option C
39.
Product which requires low amount of resources, but incur high per
unit cost is classified as
A. expected under cost
B. expected over cost
C. product under costing
D. product over costing
Answer & Solution
Answer: Option D
40.
In activity based costing system, description of activity can be
classified as
A. activity list
B. activity dictionary
C. active purpose
D. both a and b
Answer & Solution
Answer: Option D
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10 Section 11
41.
Factors that accelerate process of refining a costing system include
A. increase in product diversity
B. increase in indirect costs
C. product market competitions
D. all of above
Answer & Solution
Answer: Option D
42.
Cost pool category, which have similar cause and effect relationship,
with each cost driver uses as an allocation base is classified as
A. heterogeneous price pool
B. homogenous cost pool
C. heterogeneous cost pool
D. homogenous price pool
Answer & Solution
Answer: Option B
43.
In activity based costing method implementation, indirect costs are

allocated by using the
A. no cost pool
B. One or two cost pools
C. sustained tracing
D. support tracing

Answer & Solution
Answer: Option B
44.
Costing system, in which individual activities are identified as cost

object is considered as
A. manufactured costing
B. activity based costing
C. allocation costing
D. base costing
Answer & Solution
Answer: Option B
45.
Type of costs that cannot be traced for individual products but help in
supporting an organization are classified as
A. individual sustaining costs
B. facility sustaining costs
C. sustained tracing
D. support tracing
Answer & Solution
Answer: Option B
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10 Section 11
46.
In activity based costing method implementation, an output unit level

costs are classified as
A. indirect costs
B. direct cost
C. labour cost
D. raw material cost
Answer & Solution
Answer: Option A
47.
Hierarchy which is based on different types of cost allocation and

drivers, is to categorize cost pool activity is classified as
A. cost hierarchy
B. price hierarchy
C. activity hierarchy
D. purpose hierarchy
Answer & Solution
Answer: Option A
48.
Product which requires large amount of resources, but incur low per
unit cost is classified as
A. product under costing
B. product over costing
C. expected under cost
D. expected over cost
Answer & Solution
Answer: Option A
49.
Costs of undertaken activities is to support individual products are
known as
A. expected sustaining
B. input sustaining
C. output sustaining
D. product sustaining costs
Answer & Solution
Answer: Option D
50.
Difference between budgeted amounts and actual results is classified

as
A. standard deviation
B. variances
C. mean average
D. weighted average
Answer & Solution
Answer: Option B
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10 Section 11
51.
A manager who is responsible for only cost of company belongs to
A. cost center
B. revenue center
C. profit center
D. investment center
Answer & Solution
Answer: Option A
52.
A manager, who is responsible for both cost and revenues belongs to

department of
A. cost center
B. revenue center
C. profit center
D. investment center

Answer & Solution
Answer: Option C
53.
Larger number of manager subordinates and higher level manager are

termed as
A. activity subordinates
B. broader responsibility center
C. broader subordinates
D. activity ordinates
Answer & Solution
Answer: Option B
54.
An assignment of task for managers, who are accountable for their

actions in controlling and budgeting of resources is classified as
A. coordinating company effort
B. action plan
C. action accountability
D. project accountability
Answer & Solution
Answer: Option A
55.
Manager who is responsible for investments of company, its costs

and revenues is known as
A. profit center
B. investment center
C. cost center
D. revenue center
Answer & Solution
Answer: Option B
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10 Section 11
56.
Use of variables to signal whether strategies are effective or

ineffective is classified as
A. evaluating strategy
B. performing strategy
C. warned strategy
D. weighted strategy
Answer & Solution
Answer: Option A
57.
Segment of subunit of company, whose manager is responsible for

specific set of instructions and activities perform is classified as
A. subunit center
B. instruction center
C. responsibility center
D. activity segment
Answer & Solution
Answer: Option C
58.
Which of following is an example of revenue center?
A. sales department
B. investing center
C. marketing department
D. segment department
Answer & Solution
Answer: Option A
59.
Variance, if used to alert managers before time of problem is called
A. varied warning
B. times warning
C. managers warning
D. early warning
Answer & Solution
Answer: Option D
60.
An arrangement of line of authority within company is classified as
A. company structure
B. organization structure
C. line of authority
D. line of responsibility
Answer & Solution
Answer: Option B
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10 Section 11
61.
Variance used by managers to check whether company has

performed well and properly implemented strategies is considered as
A. strategic implementation
B. proper implementation
C. performance evaluation
D. well evaluated
Answer & Solution
Answer: Option C
62.
Manager who is responsible only for revenues of company can be

categorized under the
A. profit center
B. investment center
C. cost center
D. revenue center
Answer & Solution
Answer: Option D
63.
System which measures budget, action and plan of each

responsibility center is known as
A. budgeted accounting
B. action accounting
C. planned accounting
D. responsibility accounting

Answer & Solution
Answer: Option D
64.
Significant feature of Kaizen Budgeting is
A. employee suggestion
B. customer suggestion
C. cost suggestion
D. price suggestion
Answer & Solution
Answer: Option A
65.
Budgeting method, which incorporates an improvement anticipated in

budgeting period into budget numbers can be classified as
A. anticipated budgeting
B. number budgeting
C. predict budgeting
D. kaizen budgeting
Answer & Solution
Answer: Option D
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10 Section 11
66.
Part of master budget, which covers capital expenditures, budgeted

statement of cash flows and balance sheet is classified as
A. financial budget
B. capital budget
C. cash flows budget
D. balanced budget
Answer & Solution
Answer: Option A
67.
Third step in developing operating budget is
A. analysis of batches
B. analysis of batches
C. analysis of products
D. making predictions about future
Answer & Solution
Answer: Option D
68.
Cost influences by responsibility center manager who is considered

as
A. manager cost
B. influential cost
C. center cost
D. controllable cost
Answer & Solution
Answer: Option D
69.
If indirect manufacturing labour is $20000, power cost is $5000,

maintenance and supplies are of $10000 then manufacturing budget
will be
A. $5,000
B. $35,000
C. $15,000
D. $45,000
Answer & Solution
Answer: Option B
70.
Last step in developing operating budget is
A. implementing income
B. implementing decision
C. efficient implementation
D. effective implementation
Answer & Solution
Answer: Option B
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10 Section 11
1.
In master budgeting, cost drivers for manufacturing overhead costs

are
A. direct manufacturing labour-hours
B. setup labour-hours
C. budgeted labour-hours
D. both a and b
Answer & Solution
Answer: Option D
2.
Document, which contains information about used material sequence,

detail and quantity of raw material is classified as
A. bill of materials
B. bill of sequence
C. bill of detail
D. bill of raw materials
Answer & Solution

Answer: Option A
3.
Type of budget, which is always available for specified period of

future is called
A. period budget
B. batch budget
C. discontinued budget
D. continuous budget
Answer & Solution
Answer: Option D
4.
Plan of action; how an organization meets its opportunities and

capabilities is classified as
A. action plan
B. strategy
C. step wise plan
D. complex plan

Answer & Solution
Answer: Option B
5.
Focus on budget cost of all activities necessary to sell and produce

market offerings is known as
A. cost based budgeting
B. activity based budgeting
C. production based budgeting
D. raw material budgeting
Answer & Solution
Answer: Option B
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10 Section 11
6.
Budgeted income statement and supporting budget schedules are

categorized under
A. focused statement
B. slack statement
C. budgeted income statement
D. operating budget
Answer & Solution
Answer: Option D
7.
If budget sales units are 5000, ending inventory is 4000 units and
beginning inventory is 1000, then budget production will be
A. 4000 units
B. 5000 units
C. 8000 units
D. 10000 units
Answer & Solution
Answer: Option C
8.
Budget sales, plus target ending finished goods inventory, minus

beginning finished goods inventory is equal to
A. budget production
B. planned production
C. setup production
D. stand by production
Answer & Solution
Answer: Option A
9.
Budget, which predicts effect of given level of operations on a cash

position is classified as
A. market budget
B. price schedule
C. planned schedule
D. cash budget
Answer & Solution
Answer: Option D
10.
Higher and accurate budgeted profit forecast of managers lead to
A. high incentive bonus
B. low incentive bonus
C. influence bonus
D. revenue bonus
Answer & Solution
Answer: Option A
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10 Section 11
11.
starting point in operating budget is
A. cost budget
B. material list
C. revenue budget
D. list of investors
Answer & Solution
Answer: Option C

12.
Financial statements and budget plans of some companies are also

called
A. cost statement
B. preformed statement
C. sales statement
D. market statement
Answer & Solution
Answer: Option B
13.
Quantitative expression, of action plan by management of firm for a

specified period of time is classified as
A. complexity
B. process
C. budget
D. batching
Answer & Solution

Answer: Option C
14.
Budget plan in many companies is also referred as
A. profit plan
B. sales plan
C. cost plan
D. marketing plan
Answer & Solution
Answer: Option A
15.
Type of plan of a company, which quantities expectations of cash

flows, income and financial position is known as
A. budget
B. batching
C. complexity
D. process

Answer & Solution
Answer: Option A
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10 Section 11
16.
Practice, which makes target more achievable by underestimating

revenues or overestimating cost is called
A. cost slack
B. target slack
C. budgetary slack
D. revenue slack
Answer & Solution
Answer: Option C
17.
An act of making sure, that all employees must understand goals is

classified as
A. coordination
B. communication
C. annual profit plan
D. budgeting
Answer & Solution
Answer: Option B
18.
better administration of budget in budgeting plans require
A. intelligent interpretations
B. participation
C. persuasion
D. all of above
Answer & Solution
Answer: Option D
19.
Non-financial and financial aspects of plan by company management,

is classified as
A. complexity
B. process
C. budget
D. batching
Answer & Solution
Answer: Option C
20.
Planning of financial aid to coordinate; what is to be done for

implementation of plan is classified as
A. budget
B. batching
C. complexity
D. process
Answer & Solution
Answer: Option A
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10 Section 11
21.
In Kaizen budgeting, costs are based on all improvements which is
A. to be implemented
B. based on current practice
C. based on past prices
D. based on sold quantity
Answer & Solution
Answer: Option A
22.
Mathematical relationships exist between operating and financing

activities that affect master budget are called
A. math plan model
B. financial planning models
C. operating plan models
D. master plan models
Answer & Solution
Answer: Option B
23.
Degree of influence that a manager would have on revenues, cost,

profit and investment is known as
A. controllability
B. influential power
C. responsibility
D. all of above
Answer & Solution
Answer: Option A
24.
Compelling strategic plan, promoting coordination and providing

framework of performance are
A. advantages of budget
B. disadvantages of budget
C. advantages of costing method
D. disadvantages of costing method

Answer & Solution
Answer: Option A
25.
Type of accounting, which focuses on whom should be asked for

information and whom not will be categorized as
A. focused accounting
B. responsibility accounting
C. information accounting
D. blame accounting
Answer & Solution
Answer: Option B
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10 Section 11
26.
Cash receipts is added in to beginning cash balance to calculate
A. total goods manufactured
B. total cash available
C. total revenue
D. total goods sold
Answer & Solution
Answer: Option B
27.
If budget sales units are 2000, an ending inventory is 3000 units and
beginning inventory is 1000, then budget production would be
A. 6000 units
B. 4000 units
C. no units
D. 8000 units
Answer & Solution
Answer: Option B
28.
Direct labour and salary outlays direct material purchases, which are
classified as
A. price disbursements
B. cash disbursements
C. budget disbursements
D. goods disbursements
Answer & Solution
Answer: Option B
29.
Master budget includes all projections of company's budget and

focuses on
A. serial correlation
B. marketing plan
C. financial plan
D. both B and C
Answer & Solution
Answer: Option D
30.
Model which refers possibility for management to conduct sensitivity
analysis can be categorized under
A. investment planning models
B. financial planning models
C. cost planning models
D. revenues forecast models
Answer & Solution
Answer: Option B
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10 Section 11
31.
Fourth step in development of operating budget is to
A. choose alternatives
B. evaluate alternatives
C. efficiency improvements
D. predicted improvements
Answer & Solution
Answer: Option A
32.
What-if technique, which examines changes in results if original

prediction would not be achieved is called
A. change analysis
B. original analysis
C. sensitivity analysis
D. predicted analysis
Answer & Solution
Answer: Option C
33.
Continuous budget is also known as
A. rolling budget
B. pin budget
C. specific budget
D. past budget
Answer & Solution

Answer: Option A
34.
Budget which specifies an operating and financial plan, usually for a

fiscal year or any specific period of time is classified as
A. annual budget
B. operating budget
C. specific budget
D. master budget
Answer & Solution
Answer: Option D
35.
First step in developing an operating budget is to
A. identify product
B. identify problem
C. identify quartiles
D. identify percentiles

Answer & Solution
Answer: Option B
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10 Section 11
36.
Second step in developing operating budget is to
A. plan coordination
B. plan accounts
C. obtain information
D. coverage information
Answer & Solution
Answer: Option C
37.
Factor which provides hedge to managers in adverse and unexpected

circumstances is known as
A. budgetary slack
B. costly slack
C. influential slack
D. target slack
Answer & Solution
Answer: Option A
38.
Balancing of all aspects of products or services and all departments

in company are classified as
A. annual profit plan
B. budgeting
C. coordination
D. complex plan
Answer & Solution
Answer: Option C
39.
Schedule of expected disbursements and cash receipts is considered

as
A. planned schedule
B. cash budget
C. market budget
D. price schedule
Answer & Solution
Answer: Option B
40.
If budget sales units are 8000, ending inventory is 2000 units and
beginning inventory is 3000, then budget production would be
A. 11000 units
B. 13000 units
C. 10000 units
D. 7000 units
Answer & Solution
Answer: Option D
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10 Section 11
41.
Cash sales, accounts receivables and rental receipts all are known as
A. cash receipts
B. budget receipts
C. goods manufactured
D. total goods sold
Answer & Solution
Answer: Option A
42.
Centers such as revenue, cost, investment and profit all are known as
A. marketing center
B. financial center
C. responsibility center
D. planning center
Answer & Solution
Answer: Option C

43.
Method which ranks cost object incurred by individual users, in

ranking order of more responsible users is classified as
A. bundled products allocation method
B. variable cost allocation method
C. stand-alone cost allocation method
D. incremental cost allocation method
Answer & Solution
Answer: Option D
44.
First ranked product, in incremental revenue allocation method, is

classified as
A. primary product
B. First incremental product
C. Second incremental product
D. Third incremental product
Answer & Solution

Answer: Option A
45.
Products, divisions and customers are examples of
A. revenue increment
B. reciprocal revenue
C. revenue allocation
D. revenue object
Answer & Solution
Answer: Option D
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10 Section 11
46.
In incremental cost allocation method, cost object user who is ranked

third in ranking order is classified as
A. First incremental user
B. primary user
C. secondary user
D. second incremental user

Answer & Solution
Answer: Option D
47.
Cost of operating activity, facility or any cost object which usually

shares by two or more than two users is classified as
A. bundled cost
B. common cost
C. stand-alone cost
D. incremental cost
Answer & Solution
Answer: Option B
48.
cost object user, who is ranked first in incremental cost allocation

method is known as
B. primary user
C. secondary user
Answer & Solution
Answer: Option B
49.
Costs, which consist of interdepartmental cost allocations plus cost

of support department are classified as
A. complete reciprocal costs
B. artificial costs
C. operating costs
D. flexible operating costs
Answer & Solution
Answer: Option A
50.
Third ranked product in incremental revenue-allocation method is

known as
A. primary product
Answer & Solution
Answer: Option D
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10 Section 11
51.
In stand-alone revenue-allocation method, type of weights available

for this method is
A. selling prices as weight
B. unit costs as weights
C. physical units as weights
D. all of above
Answer & Solution
Answer: Option D
52.
Method, which uses specific information on products as weights to

allocate bundled revenues for each product in bundle is classified as
A. step down allocation method
B. stand-alone revenue allocation method
C. incremental revenue allocation method
D. revenue mix allocation method
Answer & Solution
Answer: Option B
53.
Method which divides support department cost into two dimensions

such as fixed and variable cost pool is classified as
A. sales mix allocation method
B. dual-rate cost-allocation method
C. single rate cost allocation method
D. quantity variance allocation method

Answer & Solution
Answer: Option B
54.
A particular term for which specific revenue measurement is required

is known as
A. revenue allocation
B. revenue object
C. revenue increment
D. reciprocal revenue
Answer & Solution
Answer: Option B
55.
Support department cost allocation method which makes no

difference between variable and fixed costs is classified as

D. quantity variance allocation method
Answer & Solution
Answer: Option C
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10 Section 11
56.
Department which provides assisting services to internal departments

is classified as
A. supply department
B. support department
C. production department
D. allocation base department
Answer & Solution
Answer: Option B
57.
If employees of division A work for 8000 hours for $90 per hour, then
rate must be paid in division B in accordance of single rate method
will be
A. $90 per hour
B. less than $90 per hour
C. greater than $90 per hour
D. none of above
Answer & Solution
Answer: Option A
58.
Department which directly adds value to product or service is known

as
A. production department
B. operating department
C. allocation base department
D. both a and b
Answer & Solution
Answer: Option D
59.
According to incremental method, party which receives highest
ranking in allocation of common cost is classified as
A. Third incremental party
B. second incremental party
C. primary party
D. First incremental party
Answer & Solution
Answer: Option C
60.
Method of revenue allocation, which ranks products included in

bundle according to predetermined criteria of management is known
as
A. step down allocation method
B. stand-alone revenue allocation method
C. incremental revenue allocation method
D. revenue mix allocation method
Answer & Solution

Answer: Option C
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10 Section 11
61.
Method, which allocates cost of support department for operating

departments by recognizing all mutual services provided is classified
as
A. indirect method
B. direct method
C. step down method
D. reciprocal method
Answer & Solution
Answer: Option D
62.
Package which consists of two or more products to be sold for single

price, but components of products in package have separate stand-
alone price is called
A. step down product
B. dual mix product

C. bundled product
D. reciprocal product
Answer & Solution
Answer: Option C
63.
Method, which allocates cost of support department to operating and

support departments is known as
A. indirect method
B. direct method
C. step down method
Answer & Solution
Answer: Option C
64.
Approaches to allocate costs of support department do not include

D. both b and c
Answer & Solution
Answer: Option D
65.
In incremental cost allocation method, cost object user who is ranked

second in ranking order is known as
B. primary user
C. secondary user
Answer & Solution
Answer: Option A
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10 Section 11
66.
Second ranked product in incremental revenue allocation method is

termed as
A. primary product
Answer & Solution
Answer: Option B
67.
Methods used to allocate costs of reciprocal support departments

include
A. direct method
B. step down
C. reciprocal method
D. all of above
Answer & Solution

Answer: Option D
68.
Method which allocates cost of support department to only operating

departments is called
A. indirect method
B. direct method
C. step down method
Answer & Solution
Answer: Option B
69.
Process in which earned revenue is related to specific revenue object,

which can cannot trace it in cost effective way is known as
A. revenue allocation
B. revenue object
C. revenue increment
D. reciprocal revenue

Answer & Solution
Answer: Option A
70.
Considering dual rate method, if employees work for 8500 budgeted

hours at $120 per hour and work for 9500 actual hours at $110 per
hour, then total cost would be
A. $2,078,000
B. $3,078,000
C. $2,065,000
D. $3,065,000
Answer & Solution
Answer: Option C
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10 Section 11
1.
Method which determines weights of cost allocation by considering

cost of each user as separate entity is known as
A. bundled products allocation method

B. variable cost allocation method
C. stand-alone cost allocation method
D. incremental cost allocation method
Answer & Solution
Answer: Option C
2.
Budgeted total direct labour cost is divided with budgeted total direct
labour to calculate
A. budgeted indirect labour cost rate
B. expected direct labour cost rate
C. budgeted direct labour cost rate
D. expected indirect labour cost rate
Answer & Solution
Answer: Option C
3.
Budgeted direct labour hours are multiplied to direct labour cost rate
to calculate
A. expected total direct labour cost
B. budgeted total direct labour cost
C. budgeted total indirect labour cost
D. expected labour hours
Answer & Solution
Answer: Option B
4.
Term which describes assigning of indirect cost to any cost abject is

classified as
A. cost allocation
B. sales tracing
C. sales allocation
D. cost tracing
Answer & Solution
Answer: Option A
5.
A document which contains information about materials of specific

product, in specific department comes under
A. costing method
B. selling method
C. material acquisition method
D. none of above
Answer & Solution
Answer: Option C
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10 Section 11
6.
If budgeted annual indirect cost is $60000, budgeted annual quantity

of cost allocation base is $3600, then budgeted indirect cost rate will
be
A. 15.67 per piece
B. 16.67 per piece
C. 14.67 per piece
D. 13.67 per piece

Answer & Solution
Answer: Option B
7.
An under allocated indirect cost is also called
A. under applied indirect cost
B. under absorbed indirect cost
C. absorbed indirect cost
D. both a and b
Answer & Solution
Answer: Option D
8.
In normal costing, situation in which allocated amount of indirect cost

is greater than incurred cost, is considered as
A. incurred indirect cost
B. over allocated indirect cost
C. applied indirect cost

D. applied direct cost
Answer & Solution
Answer: Option B
9.
A group of individual indirect cost item is defined as
A. direct pool
B. cost pool
C. indirect pool
D. item pool
Answer & Solution
Answer: Option B
10.
Total indirect cost in pool by an actual quantity of cost allocation base

is used to calculate
A. actual manufacturing overhead rate
B. manufacturing overhead costs

C. overhead rate
D. direct rate
Answer & Solution
Answer: Option A
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10 Section 11
11.
An approach which yields benefits of normal costing and actual

manufacturing overhead is classified as
A. unadjusted allocation rate approach
B. adjusted budget rate approach
C. unadjusted budget rate approach
D. adjusted allocation rate approach
Answer & Solution
Answer: Option D
12.
Process of assigning direct or indirect cost to any cost object is
known as
A. cost assignment
B. cost expectation
C. event assignment
D. probability assignment
Answer & Solution
Answer: Option A
13.
An average unit cost, applicable to each similar produced units is

classified as
A. per unit cost
B. per post cost
C. per price cost
D. application cost
Answer & Solution
Answer: Option A
14.
If budgeted direct labour hours are 4550 and direct labour cost rate is
$600 per labour hour then, total direct labour cost would be
A. $4,730,000
B. $3,730,000
C. $2,730,000
D. $1,730,000
Answer & Solution
Answer: Option C
15.
If an overhead cost of operating a machine is $500000 for 1000 hours,

then cost allocation rate will be
A. $1500 per machine hour
B. $250 per machine hour
C. $500 per machine hour
D. $1000 per machine hour

Answer & Solution
Answer: Option C
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10 Section 11
16.
Single or multiple units of distinct services or products are classified

as
A. cost
B. job
C. post
D. price
Answer & Solution
Answer: Option B
17.
A document which consists information about labour time usage, for

specific job in a specific department, is known as
A. selling time record
B. labour time record

C. buying time record
D. direct time record
Answer & Solution
Answer: Option B
18.
If budgeted total direct labour hours are 3800 and budgeted direct
labour cost is $480000, then budgeted direct labour cost rate will be
A. $126.32 per labour hour
B. $128.32 per labour hour
C. $130 per labour hour
D. $132 per labour hour
Answer & Solution
Answer: Option A
19.
If budgeted total direct labour hours are 5500 and budgeted direct
labour cost is $755000, then budgeted direct labour cost rate is
A. $138 per labour hour
B. $137.27 per hour
Answer & Solution
Answer: Option B
20.
In accounting system, a document which consists of all assigned cost

for specific job is classified as
A. job cost record
B. job cost sheet
C. source document
D. both a and b
Answer & Solution
Answer: Option D
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10 Section 11
21.
Manufacturing overhead cost allocated to individual jobs is classified

as
A. manufacturing overhead allocated
B. cost overhead applied
C. manufacturing overhead applied
D. both A and C
Answer & Solution
Answer: Option D
22.
If budgeted annual indirect cost is $85000 and budgeted annual

quantity of cost allocation base is $7500, then budgeted indirect cost
rate would be
A. 112.34 per piece
B. 113.34 per piece
C. 111.34 per piece
D. 110.34 per piece

Answer & Solution
Answer: Option B
23.
Costing and allocating situation, in which indirect cost allocated

amount is less than actually incurred amount is known as
A. over allocated budget
B. under allocated budget
C. under allocated indirect cost
D. over allocated direct cost
Answer & Solution
Answer: Option C
24.
Systematic way of linking group of indirect cost to a cost object is

classified as
A. linked allocation base
B. direct allocation base
C. indirect allocation base

D. cost allocation base
Answer & Solution
Answer: Option D
25.
In a normal accounting period, an allocated amount of indirect cost is

$700 and an actual amount is $800, then this can be classified as
A. under allocated indirect cost
B. over allocated direct cost
C. over allocated budget
D. under allocated budget
Answer & Solution
Answer: Option A
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10 Section 11
26.
If an actual indirect cost incur is $35000 and indirect cost allocated is

$43000, then under allocated indirect cost will be
A. $78,000
B. -$78000
C. -$8000
D. $8,000
Answer & Solution
Answer: Option C
27.
If an actual manufacturing overhead costs is $225000 and actual total

quantity of cost allocation base is 2500 labour hours, then overhead
rate will be
A. $60
B. $90
C. $80
D. $70
Answer & Solution
Answer: Option B
28.
Costing technique, in which actual direct rates are multiplied to

quantity of direct cost inputs is classified as
A. priced costing
B. actual costing
C. direct costing
D. indirect costing
Answer & Solution
Answer: Option B
29.
In normal costing, manufacturing overhead allocated is also called
A. manufacturing overhead applied
B. labour overhead applied
C. cost overhead applied
D. budget overhead applied
Answer & Solution
Answer: Option A
30.
If an actual manufacturing overhead costs is $485000 and actual total

quantity of cost allocation base is 4500 labour hours, then overhead
rate would be
A. 109.87
B. $107.78
C. $106.56
D. $104.34
Answer & Solution
Answer: Option B
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10 Section 11
31.
An allocation approach, in which all overhead entries are restated

using actual cost rates in place of budgeted rates is called
A. unadjusted budget rate approach
B. adjusted allocation rate approach
C. unadjusted allocation rate approach
D. adjusted budget rate approach
Answer & Solution
Answer: Option B
32.
If budgeted cost in indirect cost pool is $144500 and total quantity of

cost allocation base is $165500, then budgeted indirect cost rate will
be
A. 67.30%
B. 87.31%
C. 55.50%
D. 45.50%
Answer & Solution
Answer: Option B
33.
Procedure of assigning direct cost to any cost abject is classified as
A. sales allocation
B. cost tracing
C. cost allocation
D. sales tracing
Answer & Solution
Answer: Option C
34.
If an actual indirect cost incurred is $25000 and indirect cost allocated

is $23000, then over allocated indirect cost would be
A. $48,000
B. -$2000
C. $2,000
D. -$48000
Answer & Solution
Answer: Option C
35.
In an accounting system, document which supports journal entries is

classified as
A. cost document
B. priced document
C. source document
D. direct document
Answer & Solution
Answer: Option C
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10 Section 11
36.
If budgeted indirect cost arte is $115 and budgeted cost allocation

base is $830 per hour, then annual indirect cost (budgeted) will be
A. $93,450
B. $94,560
C. $96,450
D. $95,450
Answer & Solution
Answer: Option D
37.
If budgeted annual manufacturing indirect cost is $2250000 and cost

allocation base is 2800 labour hour, then budgeted manufacturing
overhead rate will be
A. $803.571 per labour hour
B. $805 per labour hour
Answer & Solution
Answer: Option A

38.
In a normal accounting period, allocated amount of indirect cost is

$2000 and actual amount is $2200, then this is classified as
A. over allocated budget
B. under allocated budget
C. under allocated indirect cost
D. over allocated direct cost
Answer & Solution
Answer: Option A
39.
Spread of over allocated overhead and under allocated overhead

among work in process, finished goods and goods sold cost is
classified as
A. proration approach
B. appreciation approach
C. depreciation approach
D. adjusted approach

Answer & Solution
Answer: Option A
40.
If budgeted indirect cost arte is $225 and budgeted cost allocation

base is $750 per hour, then annual indirect cost (budgeted) would be
A. $168,750
B. $148,570
C. $186,750
D. $125,680
Answer & Solution
Answer: Option A
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10 Section 11
41.
If budgeted cost in indirect cost pool is $139600 and total quantity of

cost allocation base is $155600, then budgeted indirect cost rate
would be
A. 69.72%
B. 79.72%
C. 99.75%
D. 89.72%
Answer & Solution
Answer: Option D
42.
Total cost of producing similar products divided by number of units

produced is a technique known as
A. sale costing system
B. job costing system
C. price costing system
D. process costing system
Answer & Solution
Answer: Option D
43.
In normal costing, budgeted rate is multiplied to an actual quantity,

which have been used as allocation base to calculate
A. budget overhead applied
B. manufacturing overhead applied
C. labour overhead applied
D. none of above
Answer & Solution
Answer: Option B
44.
Budgeted annual indirect costs are divided to budgeted annual

quantity of cost allocation base to calculate
A. expected indirect cost rate
B. expected direct cost rate
C. budgeted indirect cost rate
D. budgeted direct cost rate
Answer & Solution
Answer: Option C
45.
Situation in which cost object has any job, customer or product is
known as
A. cost application base
B. sale application base
C. price application base
D. direct application base
Answer & Solution
Answer: Option A
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10 Section 11
46.
If an allocated indirect cost is $1500 and actual incurred indirect cost

is $1200, then this is classified as
A. applied indirect cost
B. applied direct cost
C. incurred indirect cost

D. over allocated indirect cost
Answer & Solution
Answer: Option D
47.
Cost of previous department is a part of
A. transferred-in costs
B. transferred-out costs
C. FIFO costs
D. LIFO costs
Answer & Solution
Answer: Option A
48.
Total costs incur in a production process, is divided by total number

of output units to calculate the
A. cost of indirect labour
B. cost of direct labour

C. cost of direct material
D. unit costs
Answer & Solution
Answer: Option D
49.
If beginning work in process equivalent units are 2500 units, work

done in current period equivalent units are 3800 units and ending
work in process equivalent units are 5000, then complete equivalent
units in current period are
A. 1800 units
B. 1500 units
C. 1300 units
D. 1500 units
Answer & Solution
Answer: Option C
50.
A unit cost calculated in costing system, by assigning total costs
incurred to many similar units is categorized as
A. accounting period costing system
B. process costing system
C. job costing system
D. none of above
Answer & Solution
Answer: Option B
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10 Section 11
51.
If beginning work in process equivalent units is 2500 units, work done

in current period equivalent units is 3800 units and units completed in
current period are 4000, then ending work in process equivalent units
will be
A. 1800 units
B. 2300 units
C. 10300 units
D. 1500 units

Answer & Solution
Answer: Option B
52.
First step in process costing system is to
A. summarize flow of output
B. compute output in units
C. summarize total costs
D. compute cost for each equivalent unit
Answer & Solution
Answer: Option A
53.
Costs that are incurred in last department, where product has been
processed and will be carried to next department for further
processing are called
A. partial work costs
B. transferred-in costs
C. transferred-out costs
D. weighted average costs
Answer & Solution
Answer: Option B
54.
In process costing method, when work done in current accounting

period and beginning inventory before current accounting period, is
classified as
A. partial inventory costing method
B. current period inventory method
C. Last-in, first-out method
D. First-in, first-out method
Answer & Solution
Answer: Option D
55.
Fifth step in process costing system is to
A. allocate separable costs

B. allocate joint costs
C. compute gross margin
D. assign total cost to completed units
Answer & Solution
Answer: Option D
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10 Section 11
56.
Forth step in process costing system is to
A. summarize total costs
B. compute cost for each equivalent unit
C. summarize flow of output
D. compute output in units
Answer & Solution
Answer: Option B
57.
Costing method, which calculates per equivalent unit cost of all
production related work done till calculate date is termed as
A. weighted average method
B. net present value method
C. Gross production method
D. net present value method
Answer & Solution
Answer: Option A
58.
Second step in processing costing system is to
A. summarize total costs
B. compute cost for each equivalent unit
C. summarize flow of output
D. compute output in units
Answer & Solution
Answer: Option D

59.
Standardized technique that is performed repetitively on different kind

of materials to convert them into different finished products is known
as
A. conversion process
B. operation
C. hybridization
D. both a and b
Answer & Solution
Answer: Option B
60.
If total incurred cost in a production process are $30000 and number

of output units are 5000 units, then units cost will be
A. $16
B. $60
C. $6
D. $26

Answer & Solution
Answer: Option C
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10 Section 11
61.
If cost incurred for work in process inventory is $350000 and total

equivalent units completed till date are 3500, then weighted average
cost will be
A. $10
B. $100
C. $1,000
D. $1,200
Answer & Solution
Answer: Option B
62.
Third step in process costing system is to
A. summarize flow of output
B. compute output in units

C. summarize total costs
D. compute cost for each equivalent unit
Answer & Solution
Answer: Option C
63.
Hybrid costing system, which is applied to batches of similar

products, but are not identical is classified as
A. incremental costing system
B. split off costing system
C. inventoriable costing system
D. operation costing system
Answer & Solution
Answer: Option D
64.
Costing system, which classify cost into cost categories in a way

when an expense is incurred in process is called
A. conversion expense costing system
B. inventory costing system
C. process costing system
D. job costing system
Answer & Solution
Answer: Option C
65.
Total cost related to work in process inventory is divided by total

units of work done is used to calculate
A. Gross weighted margin
B. weighted average revenue
C. weighted average cost
D. weighted average conversion cost
Answer & Solution
Answer: Option C
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10 Section 11
66.
Costing system, which is a combination of process costing and job

costing system is classified as
A. weighted costing system
B. average costing system
C. hybrid costing system
D. double costing system
Answer & Solution
Answer: Option C
67.
First step in constant gross margin percentage NRV method is to

allocate joint to compute
A. Gross margin percentage
B. total production cost of each product
C. allocated joint costs
D. cost of split off point
Answer & Solution

Answer: Option A
68.
An additional cost, incurred for some specific activity to bring

processed product on to next production stage is
A. partial cost
B. relevant cost
C. incremental cost
D. irrelevant cost
Answer & Solution
Answer: Option C
69.
A joint cost allocation method is based on relative value of total sales,

at point of split off is classified as
A. sales value at split off method
B. joint costs at split off point method
C. joint products value at split off method
D. main product cost at split off method

Answer & Solution
Answer: Option A
70.
In a joint process of production, product which yields low volume of

sales as compared to total sales of other products is known as
A. Second incremental product
C. step down product
D. by-product
Answer & Solution
Answer: Option D
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10 Section 11
1.
Difference between final sales value and separable costs is equal to
A. net income
B. net realizable value

C. Gross margin
D. Gross realizable value
Answer & Solution
Answer: Option B
2.
As compared to sale value of main products, by-products have
A. low sale value
B. high sale value
C. unstable sale value
D. relevant sale value
Answer & Solution
Answer: Option A
3.
If final sales are $50000 and separable costs are $35000, then net
realizable value will be
A. $15,000
B. $85,000
C. $35,000
D. $50,000
Answer & Solution
Answer: Option A
4.
Joint cost allocation method, in which individual product from joint

products must gain a gross margin percentage is classified as
B. joint products value at split off method
C. constant gross margin percentage NRV method
D. Gross realizable value method
Answer & Solution
Answer: Option C
5.
Manufacturing, distribution and marketing costs incur after split off
point is classified under
A. separable costs
B. joint costs
C. main costs
D. split off costs
Answer & Solution
Answer: Option A
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10 Section 11
6.
Method which allocates joint costs of joint products, considering

physical measures such as volume or relative weight at point of split
off is known as
A. direct cost measure method
B. indirect cost measure method
C. physical-measure method
D. relative-measure method

Answer & Solution
Answer: Option C
7.
If value of final sales is $48000 and net realizable value is $35000, then
value of sales costs would be
A. $35,000
B. $13,000
C. $83,000
D. $48,000
Answer & Solution
Answer: Option B
8.
Second step, in constant gross margin percentage NRV method, to

allocate joint cost is to compute
A. allocated joint costs
B. cost of split off point
C. Gross margin percentage

D. total production cost of each product
Answer & Solution
Answer: Option D
9.
In a joint process of production, a product which yields high volume

of sales as compared to total sales volume of other products is known
as
A. incremental product
B. sunk product
C. main product
D. split off product
Answer & Solution
Answer: Option C
10.
An expected future revenue, which diverges in unconventional course

of action is classified as
A. partial revenue
B. total revenue
C. relevant revenues
D. irrelevant revenues
Answer & Solution
Answer: Option C
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10 Section 11
11.
Gross margin is subtracted from sales value of all production to yield
A. labour cost incurred on product
B. production cost incurred on product
C. marketing cost incurred on product
D. all of above
Answer & Solution
Answer: Option B
12.
In a joint process of production, two or more products that yield high
volume of sales as compared to total sales of other products are
classified as
A. split off product
B. joint product
C. sunk product
D. main product
Answer & Solution
Answer: Option B
13.
Joint cost allocation method for joint products, which is based on

achievable value is known as
A. joint products value at split off method
B. main product cost at split off method
C. Gross realizable value method
D. net realizable value method
Answer & Solution

Answer: Option D
14.
Any output that has total positive sales is a
A. joint product
B. main product
C. product
D. all of above
Answer & Solution
Answer: Option D
15.
Point in joint production process, in which two or more products are

separately identifiable is termed as
A. step down point
B. incremental point
C. split off point
D. inseparability point

Answer & Solution
Answer: Option C
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10 Section 11
16.
Costs incurred in production process that yield range of products

simultaneously are known as
A. separable costs
B. joint costs
C. main costs
D. split off costs
Answer & Solution
Answer: Option B
17.
Percentage of overall gross margin is multiplied to final sales value of

products total production is used to calculate
A. Gross margin in terms of amount of money
B. Gross margin in terms of separable costs

C. Gross margin in terms of total cost
D. Gross margin in terms of labour cost
Answer & Solution
Answer: Option A
18.
Final sales is subtracted from net realizable value is used to calculate
A. separable costs
B. inseparable costs
C. joint costs
D. floating costs
Answer & Solution
Answer: Option A
19.
If percentage of overall gross margin is 15 and final sales value of

whole production is $20000, then gross margin (in dollars) will be
A. $30,000
B. $300,000
C. $40,000
D. $400,000
Answer & Solution
Answer: Option B
20.
Approaches used to allocate joint costs include
B. net realizable value method
C. constant gross margin percentage NRV method
D. all of above
Answer & Solution
Answer: Option D
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10 Section 11
21.
Net realizable value is added into separate costs to calculate

A. split off costs
B. final cost of direct labour
C. final sales
D. final costs
Answer & Solution
Answer: Option C
22.
Gross margin percentage in constant gross-margin percentage NRV

method is based on
A. total labour costs
B. total production
C. total revenues
D. total costs
Answer & Solution
Answer: Option B
23.
Third step in constant gross margin percentage NRV Method to
allocate joint cost is to compute
A. Gross margin percentage
B. total production cost of each product
C. allocated joint costs
D. cost of split off point
Answer & Solution
Answer: Option C
24.
An expected future cost which diverges in unconventional course of

action is known's as
A. partial cost
B. total cost
C. irrelevant cost
D. relevant cost
Answer & Solution
Answer: Option D
25.
If net realizable value is $20000 and separable costs are $18000, then
final sales will be
A. $20,000
B. $18,000
C. $2,000
D. $38,000
Answer & Solution
Answer: Option D
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10 Section 11
26.
Value of sales considers sales value at split off method is of
A. entire direct material of accounting period
B. entire production of accounting period
C. portion of production of accounting period
D. entire indirect material of accounting period

Answer & Solution
Answer: Option B
27.
Partial or completed units of manufactured goods, that do not meet

customer specifications and get sold at reduced price or simply
discarded, are called
A. spoilage
B. rework
C. scrap
D. equivalence
Answer & Solution
Answer: Option A
28.
In process and job costing system, normal spoilage cost is

considered as
A. conversion costs
B. sunk costs
C. inventoriable costs
D. non inventoriable costs
Answer & Solution
Answer: Option C
29.
Types of spoilage include
A. normal spoilage
B. abnormal spoilage
C. weighted spoilage
D. both a and b
Answer & Solution
Answer: Option D
30.
Which one of following is an example of spoilage?
A. short lengths from wood work
B. defective aluminium cans recycled by manufacturer
C. detection of defective pieces before shipment

D. all of above
Answer & Solution
Answer: Option B
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10 Section 11
31.
Units of normal spoilage are divided to total completed units, rather

than total actual produced units to calculate
A. normal spoilage rates
B. abnormal spoilage rates
C. normal scrap rates
D. abnormal scrap rates
Answer & Solution
Answer: Option A
32.
An amount of spoilage that is not natural in a specific production

process is categorized as
A. normal scrap
B. normal spoilage
C. abnormal spoilage
D. weighted spoilage
Answer & Solution
Answer: Option C
33.
Sum of beginning work in process inventory units and started units, is

subtracted from sum of ending work in process inventory units and
transferred out units of goods to calculate
A. Gross weighted spoilage
B. inventoriable spoilage
C. partial spoilage
D. total spoilage
Answer & Solution
Answer: Option D
34.
Stage in production process, where manufactured goods are checked;
whether units are acceptable or not is classified as
A. rework point
B. inspection point
C. spoilage point
D. scrap point
Answer & Solution
Answer: Option B
35.
Production units that do not meet customer specification, but can be

sold to other customers as finished goods are classified as
A. reduced work
B. spoilage
C. rework
D. scrap
Answer & Solution
Answer: Option C
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10 Section 11
36.
An example of rework is
A. short lengths from wood work
B. defective aluminium cans recycled by manufacturer
C. detection of defective pieces before shipment
D. none of above
Answer & Solution
Answer: Option C
37.
If transferred out total cost is $1850000 and number of good units

(produced), then cost per good unit transferred out and completed
can be
A. 245.1724
B. 255.1724
C. 278.1724
D. 268.1724

Answer & Solution
Answer: Option B
38.
Aspects of accounting for scrap includes
A. physical tracking
B. non-inventoriable costing
C. inventory costing
D. both a and c
Answer & Solution
Answer: Option D
39.
Normal spoilage is subtracted from total spoilage to calculate
A. abnormal spoilage
B. Gross weighted spoilage
C. inventoriable spoilage
D. partial spoilage

Answer & Solution
Answer: Option A
40.
If beginning work in process inventory units are 2600, units started

are 9000, ending work in process units are 2300 and completed good
units are 8000 then total spoilage will be
A. 1200 units
B. 990 units
C. 1100 units
D. 1000 units
Answer & Solution
Answer: Option C
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10 Section 11
41.
Residual material which results from manufacturing products is called
A. reduced work
B. spoilage
C. rework
D. scrap
Answer & Solution
Answer: Option D
42.
Costing, which explains how and when scrap affects operating

income of company is classified as
A. inventory costing
B. conversion costing
C. normal scrap costing
D. abnormal scrap costing
Answer & Solution
Answer: Option A
43.
An amount of spoilage that is natural in any particular production

process is classified as
A. normal scrap
B. normal spoilage
C. abnormal spoilage
D. weighted spoilage
Answer & Solution
Answer: Option B
44.
Cost of abnormal spoilage is not treated as
A. conversion costs
B. sunk costs
C. inventoriable costs
D. non inventoriable costs
Answer & Solution
Answer: Option D
45.
If units of normal spoilage are 150 and total good units manufactured
are 1500, then normal spoilage rate would be
A. 14.00%
B. 15.00%
C. 10.00%
D. 12.00%
Answer & Solution
Answer: Option C
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10 Section 11
46.
Total transferred-out cost plus normal spoilage is divided by number

of goods units produced to calculate
A. cost per good units transferred out
B. cost per good units transferred in
C. revenue per good units transferred out
D. revenue per good units transferred in
Answer & Solution

Answer: Option A
47.
Type of spoilage, which is considered as controllable and can be

avoided is called
A. abnormal spoilage
B. normal spoilage
C. transferred-in spoilage
D. transferred-out spoilage
Answer & Solution
Answer: Option A
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Cost Accounting and control – Multiple Choice Questions (MCQ) with Answers
1-Cost estimation include(s) the following expenditure(s)
(A) pattern making
(B) tool making
(C) selling expenses
(D) all of the above
2-To calculate the probable cost of the product, knowledge of following factors involves
(A) Production time required
(B) Use of previous estimates of comparable parts
(C) Effect of change in facilities on costing rates
(D) All of the above
3-Cost accounting is a specialized branch of accounting which deals with

(A) classification, recording, allocation and control of costs
(B) classification, processing, allocation and directing
(C) classification, recording, planning and control of costs
(D) classification, recording, allocation and directing
4-Expenditure incurred on material, labour, machinery, production and inspection are

summed up to find the
(A) Total cost of product
(B) Selling price of product
(C) Factory cost of product

(D) None of the above
5-Which of the following calculate the actual cost of product

(A) Cost estimation
(B) Costing
(C) Both (A) and (B)
6-The cost data provide invaluable information for taking the following managerial decision(s)
(A) To make or buy
(B) To own or hire fixed asset
(C) Determining the expansion or contraction policy
7-Match the following

Type of costing Type of industry
a. Job costing 1. Utility services
b. Process costing 2. Automobile industry
c. Departmental costing 3. ship building
d. Operating costing 4. paper making
The correct answer is
(A). a-2, b-3, c-1, d-4
(B). a-3, b-4, c-2, d-1
(C). a-4, b-2, c-1, d-3
(D). a-3, b-2, c-1, d-4
8-The method of unit costing is adopted by

(A) Transport services
(B) Steel industry
(C) Mines
(D) Bicycle industry
9- ____ costing is a type of job costing.

(A) Multiple
(B) Operating
(C) Unit
(D) Batch
10-The following is cost of direct materials

(A) Freight charges
(B) grease
(C) coolant
(D) cotton waste
11-The following is cost of indirect materials

(A) Lubricating oil
(B) Octroi
(C) Import duties
(D) Insurance
12-The payment made to the following is cost of direct labour.

(A) Machinist
(B) Supervisor
(C) Inspector
(D) Sweeper
13-The payment made to the following is cost of indirect labour.
(A) Time keeper
(B) Welder
(C) Moulder
(D) Turner
14-Cost of preparing drawings for the manufacture of a particular product is

(A) Cost of direct labour
(B) Cost of indirect labour
(C) Direct expenses
(D) Indirect expenses
15-The following is also known as overhead costs or on costs.

(A) Cost of direct labour
(B) Cost of indirect labour
(C) Direct expenses
(D) Indirect expenses
Answers:
1-(D), 2-(D), 3-(A), 4-(C), 5-(B), 6-(D), 7-(B), 8-(C), 9-(D), 10-(A), 11-(A), 12-(A), 13-(A), 14-(C),
15-(D)
16-The following is(are) the overhead cost(s)

(A) Factory expenses
(B) Selling expenses
(C) Distribution expenses
17-All such expenses which are incurred for creating and enhancing the demands for the
products are
(A) Selling expenses
(B) Administrative expenses
(C) Distribution expenses
18-Prime cost=
(A) cost of direct labour + cost of direct material + direct expenses
(B) cost of indirect labour + cost of indirect material + direct expenses
(C) cost of direct labour + cost of direct material + indirect expenses
(D) cost of indirect labour + cost of direct material + indirect expenses
19-Factory Cost =
(A) Prime cost + factory expenses
(B) Prime cost + administrative expenses
(C) Prime cost + selling expenses
(D) Prime cost + distribution expenses
20-Manufacturing cost=
(A) Factory cost + selling cost
(B) Factory cost + distribution cost
(C) Factory cost + administrative expenses
21-The following is(are) the method(s) to increase profit

(A) Increase the sales price
(B) Increase the market
(C) Reduce total cost

22-Which of the following is variable cost?
(A) Salaries of higher officers
(B) Prime cost
(C) Insurance cost
(D) Repair cost
23-Which of the following is not a method of calculating (allocating) overhead cost?

(A) Percentage on prime cost
(B) Percentage on direct labour cost
(C) Percentage on indirect labour cost
(D) Percentage on direct material cost
24-The following method is an improvement over the percentage on direct labour cost method.
(A) Machine hour rate
(B) Percentage on prime cost
(C) Percentage on direct material cost
(D) Man hour rate
25-This method is useful where the products are manufactured by manual operations.
(A) Percentage on prime cost
(B) Percentage on direct material cost
(C) Percentage on direct labour cost
(D) Machine hour rate
26-The overhead cost for a particular job =

(A) man hour rate x man hours spent on that job
(B) man hour rate / man hours spent on that job
(C) man hour rate + man hours spent on that job
(D) man hour rate – man hours spent on that jab

27- Labour cost per product is Rs. 2/hr and time taken by each product is 2 hr. The factory
overhead is 20% of the labour costs. The factory cost for 100 products if material cost per
product is Rs. 3, is.
(A) Rs. 700
(B) Rs. 740
(C) Rs. 780
(D) Rs. 820
28-The following is (are) true for variable costs

(A) Variable costs are the functions of output
(B) Variable costs vary directly with the quantity produced
(C) These become zero when the production is suspended
29-The following cost helps in taking ‘make or buy’ decision.

(A) Standard cost
(B) Marginal cost
(C) Differential cost
(D) Sunk cost
30-To control costs it is essential to keep control on

(A) Prime cost
(B) Overheads
(C) Indirect materials and tools cost
Answers:
16-(D), 17-(A), 18-(A), 19-(A), 20-(C), 21-(D), 22-(B), 23-(C), 24-(D), 25-(C), 26-(A), 27-(C), 28-
(D), 29-(C), 30-(D).

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Basic objective of cost accounting is ________

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Answer & Solution

Process costing is suitable for ________.

B. oil reefing firms

D. brick laying firms

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Answer & Solution

Cost classification can be done in ________.

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Answer & Solution

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Answer & Solution

Direct expenses are also called ________.

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Answer & Solution

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Answer & Solution

Warehouse rent is a part of ________.

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Answer & Solution

Indirect material scrap is adjusted along with ________.

D. cost of goods sold

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Answer & Solution

C. estimation of selling price

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Answer & Solution

Total of all direct costs is termed as ________.

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Answer & Solution

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Audit fess is a part of _______.

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Answer & Solution

Cost accounting concepts include all the following except ________.

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Answer & Solution

Toy manufacturing industry should use _______.

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Answer & Solution

Cost unit of a sugar industry can be ________.

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Answer & Solution

The ascertainment of costs after they have been incurred is known as

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Answer & Solution

Read More Section(Costing)

Over time 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

Answer & Solution

Time keeping refers to _______.

A. time spent by worker on their job

B. time spent by workers in the factory

C. time spent by workers without work

D. time spent by workers off their job

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Answer & Solution

Labour productivity can NOT be measured by comparing ________.

A. actual time with standard time