100+ Cost Accounting MCQs [Free PDF], Multiple Choice Questions and Answers

100+ Cost Accounting MCQs [Free PDF]

Multiple Choice Questions and Answers

1. Financial Accounting is useful for:

a) Ascertaining cost

b) Controlling cost

c) Presenting cost information to the management

d) Ascertaining profit or loss and financial position of a firm

Ans: d) Ascertaining profit or loss and financial position of a firm

2. Cost accounting is useful for:

a) Ascertaining cost

b) Controlling cost

c) Presenting cost information to the management

d) All of the above

Ans: d) All of the above

3. Which of the following is not a method of costing?

a) Contract Costing

b) Operating Costing

c) Batch Costing

d) Marginal Costing

Ans: d) Marginal Costing

4. Which of the following is not a technique of costing?

a) Uniform costing

b) Standard costing

c) Absorption costing

d) Unit costing

Ans: d) Unit costing

5. Specify the cost unit and method of costing suitable for below mentioned industries and enterprises:

Industries Cost unit Method of costing
Textiles

Sugar

Steel and Cement

Hospital

Oil refining

Transport

Toy making

Automobile Industry

Meters

Tonne

Tonne

Bed occupied per day/No of patient visits

Per tonne or per quintal

Passenger or Tonne per kilometer

Number

Number of vehicle

Process Costing

Process Costing

Process Costing

Operating or Service costing

Process costing

Operating or Service costing

Batch Costing

Job costing

6. In which of the following contracts Contract Costing is applied as a specialized system of Job Costing?

a) Short-term contract

b) Long-term contract

c) Medium-term contract

d) Continuous processes

Ans: b) Long-term contract

7. Prime cost includes

a) Direct material + Direct labour + Works expenses.

b) Direct material + Direct labour + Chargeable expenses.

c) Direct material + Direct labour + Office expenses.

d) Sum of all Indirect Expenses

Ans: b) Direct material + Direct labour + Chargeable expenses.

8. Purchase budget should be prepared by the

a) Financial Manager.

b) Production Manager.

c) Purchase Manager.

d) HR Manager

Ans: c) Purchase Manager.

9. Depreciation is a

a) Fixed expenses.

b) Variable expenses.

c) Semi-variable expenses.

Ans: a) Fixed expenses.

10. In process costing, the abnormal loss is treated as

a) Period cost

b) Unit cost

c) Future cost

d) Product cost

Ans: a) Period cost

11. The main purpose of Cost Accounting is

a) to maximise profit.

b) to help in inventory valuation.

c) to help in the fixation of selling price.

d) to provide information to management for decision making.

Ans: d) to provide information to management for decision making.

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

a) Loss due to accident.

b) Pilferage.

c) Loss due to breaking the bulk.

d) Loss due to careless handling of material.

Ans: b) Pilferage.

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

a) added to financial profit.

b) added to costing profit.

c) ignored.

d) deducted from financial profit.

Ans: a) added to financial profit.

14. Which of the following is a service department?

a) Refining department.

b) Machining department.

c) Receiving department.

d) Finishing department.

Ans: c) Receiving department.

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

a) Purchase returns.

b) Carriage inwards.

c) Sales commission.

d) Interest paid.

Ans: d) Interest paid.

16. In job costing to record the issue of direct materials to a job which of the following document is used?

a) Purchase order.

b) Goods receipt note.

c) Material requisition.

d) Purchase requisition.

Ans: c) Material requisition.

17. In a process 4000 units are introduced during a period. 5% of input is normal loss. Closing work-in-progress 60% complete is 500 units. 3300 completed units are transferred to next process. Equivalent production for the period is

a) 3550 units.

b) 3600 units.

c) 3800 units.

d) 3950 units.

Ans: b) 3600 units.

18. Product A generates a contribution to sales ratio of 40%. Fixed cost directly attributable to A amount Rs. 60,000. The sales revenue required to achieve a profit of Rs. 15,000 is

a) Rs 2,00,000.

b) Rs 1,85,000.

c) Rs1,87,500.

d) Rs 2,10,000.

Ans: c) Rs1,87,500.

19. During a period 13600 labour hours were worked at a standard rate of Rs. 8 per hour. The direct labour efficiency variance was Rs. 8,800 (Adv). How many standard hours were produced?

a) 12000 hours.

b) 12500 hours.

c) 13000 hours.

d) 13500 hours.

Ans: b) 12500 hours.

20. Cash Budget of ABC Ltd. forewarns of a short-term surplus. Which of the following would be appropriate action to be taken in such a situation?

a) Purchase new fixed assets.

b) Repay long-term loans.

c) Write off preliminary expenses.

d) Pay creditors early to obtain a cash discount.

Ans: d) Pay creditors early to obtain a cash discount.

21. Batch costing is suitable for

a) Oil Industry.

b) Sugar Industry.

c) Chemical Industry.

d) Pharmaceutical Industry.

Ans: d) Pharmaceutical Industry.

22. Idle time is

a) Time spent by workers in office.

b) Time spent by workers in factory.

c) Time spent by workers off their work.

d) Time spent by workers on their job.

Ans: c) Time spent by workers off their work.

23. Warehouse expense is an example of

a) Production overhead.

b) Administration overhead.

c) Selling overhead.

d) Distribution overhead.

Ans: d) Distribution overhead.

24. Standard deals with the principles and methods of determining depreciation and amortization cost is

a) CAS-8.

b) CAS -11.

c) CAS-16.

d) CAS-20.

Ans: c) CAS-16.

25. In Reconciliation Statement expenses shown only in cost accounts are

a) Added to financial profit.

b) Deducted from financial profit.

c) Ignored.

d) Deducted from costing profit.

Ans: c) Ignored.

26. In a job cost system, costs are accumulated

a) On a monthly basis.

b) By specific job.

c) By department or process.

d) By kind of material used.

Ans: b) By specific job.

27. In a process 6,000 units are introduced during a period. 5% of input is normal loss. Closing work-in-process 60% complete is 800 units. 4,900 completed units are transferred to next process. Equivalent production for the period is

a) 6,800 units.

b) 5,700 units.

c) 5,680 units.

d) 5,380 units.

Ans: d) 5,380 units.

28. Which of the following best describes a fixed cost?

a) It may change in total where such change is unrelated to changes in production.

b) It may change in total where such change is related to changes in production.

c) It is constant per unit of change in production.

d) It may change in total where such change depends on production within the relevant range.

Ans: a) It may change in total where such change is unrelated to changes in production.

29. Cost Accounting provides information primarily for:

a) Shareholders

b) Management

c) Investors

d) Government

Ans: b) Management

30. Direct expenses are:

a) Directly charged to production

b) Added while calculating prime cost

c) Not included in overheads

d) All of the above

Ans: d) All of the above

Cost Accounting MCQs Fill in the Blanks

1. Variable cost per unit remainssame/increases/decreases due to increase in production.

2. Under the ABC analysis of material control, A stands for low value/moderate value/high value items.

3. Idle time represents the time for which the employers the time for which the employer makes payment and gains something in terms of production/makes payment but does not gain anything in terms of production.

4. Fixed overhead cost is aCommitted/Periodcost.

5. Prime cost incurred due to any abnormality is debited toAbnormal Loss Account.

6. In process costing the output of each process is theInputof the next process.

7. Most of the items of costs are direct in contract costing.  True

8. High wages of cost not necessarily mean high cost per unit.  True

9. LIFO method is suitable in times of rising prices.

10. Material control aims at achieving effective material utilisation.

11. Cost audit is concerned with the verification and examination of Cost Accounts.

12. When actual loss is more than the estimated loss, then the difference is considered to be abnormal loss.

13. Depreciation is an indirect expenses in cost.

14. Fixed cost per unit decreases when volume of production increases.

15. Prime cost is the combination of direct materials, direct labour and direct expenses.

16. Cost of abnormal idle time and overtime is transferred to Costing Profit and Loss Account.

17. Depreciation on showroom building is to be treated as Selling and distribution overheads.

18. In contract costing Escalation clause allows adjustment of the prices of materials or rate of labour, etc., when these rises beyond a specified limit.

19. Rent of a factory building is a variable cost / fixed cost / semi-variable cost.

20. A high labour turnover increase / decreases the cost of production.

21. The basis of apportionment for canteen and staff welfare expenses is floor area occupied / number of workers / wages.

22. The method of costing used in a refinery is process costing/job costing.

23. The practice of charging all costs to product is absorption costing/batch costing.

24. Administration expenses are mostly fixed/variable.

25. Variable cost per unit remains same/increases when the volume of production increases.

26. Fixed cost per unit decreases with rise in output and increases with fall in output.

27. Under the ABC analysis of material control, A stands for high value items.

28. Muster roll is necessary for the preparation of the labour attendance register.

29. Fixed overhead cost is a periodical cost.

30. Prime Cost/Production cost is the combination of direct material, direct labour and direct expenses.

31. In ABC analysis, A indicates less value/moderate value/high value material.

32. Fixed cost per unit remains same/increases/decreases when volume of production increases.

33. Standard costing is a method/technique of Cost Accounting.

34. In process costing, output of every process is the input of next process.

35. FIFO method, if pricing issue of material is suitable at the time of decreasing price.

36. Prime cost under abnormal condition is to be debited to costing profit and loss account.

37. Under Rowan plan, bonus is always in decreasing proportion.

38. Cost which can be charged to a particular unit of cost is considered as product cost.

39. Reorder quantity may be measured in units or value.

40. Under the Halsey premium plan, Bonus is a fixed percentage.

41. The basis of apportionment for indirect wages is direct labour.

42. In a printing industry, job costing/process costing is applied.

43. The sum of direct material cost and direct labour cost is termed as prime cost/overhead.

44. Tender form is issued by the purchasing department/production department.

45. Vacation pay for factory workers should be charged to factory overhead/direct labour.

46. Fixed cost per unit decreases/increases with rise in output.

47. For EOQ, Q stands for quality/quantity.

48. Under the Rowan plan, bonus is a fixed/variable percentage.

49. Bases of factory rent apportionment are floor area/direct expenses.

50. In an oil industry, Process costing method is applied.

51. The perpetual inventory system means a continuous stock-taking system.

52. In process costing, costs are calculated at the end of each process.

53. Overheads are the sum of indirect material, indirect labour and indirect expenses.

54. Fixed cost per unit decreases when volume of production increases.

55. In printing industries, the method of process costing is applied.

56. In process costing, the output of each process in the input of the next process.

57. In Cost Accounting, overheads are the combination of indirect material, indirect labour and indirect expenses.

58. Under the ABC analysis of material control, A stands for low value/moderate value/high value items.

59. In a chemical industry, the method of process costing/contract costing is applied.

60. Variable overhead cost is a period cost/an output cost.

61. Cost of abnormal idle time and overtime is transferred to costing Profit and Loss Account/General Profit

62. Overheads are the combination of direct material, direct labour and direct expenses.

63. Fixed cost per unit decreases when volume of production increases.

64. In Cost Accounting, depreciation is the indirect expenses.

65. In process costing, the output of each process is the input of the next process.

66. Variable cost per unit remains same/increases/decreases due to increase in production.

67. Rent of factory building is a variable cost/fixed cost/semi-variable cost.

68. A high labour turnover increases/decreases the cost of production.

69. Standard costing is a method/technique of Cost Accounting.

70. Fixed cost per unit decreases with rise in output.

71. Re-order quantity may be measured in units.

72. Fixed overhead cost is a period cost.

73. The need of reconciliation arises in non-integrated accounting system.

74. Costing is defined as ‘the technique and process of ascertaining costs’.

75. A Bin card provides a complete record of all materials received and the quantity thereof.

76. The rate of change in the composition of labour force in an organization is termed as labour turnover.

77. Overhead is the aggregate of indirect material, indirect labour and indirect expenses.

78. Unit costing / Job costing is employed in paper mill industries.

79. In case of rising prices, LIFO / FIFO method of pricing material issues reports higher income.

80. Cost of normal idle time is always controllable / uncontrollable.

81. Fixed overheads per unit is reduced / increased when volume of output is increased.

Also Read:

Material Costing MCQs Multiple Choice Questions and Answers

Labour Costing MCQs Multiple Choice Questions and Answers

Cost Accounting MCQs [Free PDF]