Cost Accounting exam quiz with answer

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Cost Accounting

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Q: In the long run a business must:

1. Charge a price that covers its variable costs only

2. Charge a price that covers both fixed and variable costs

3. Charge a price that covers its fixed costs only

4. Charge a price that leads to a positive contribution

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Q: If actual units produced are lower than the budgeted level of production which of the following types of cost would you expect to be lower than the budget?

1. Variable costs per unit

2. Fixed costs per unit

3. Total fixed costs

4. Total variable costs

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Q: A company has a budgeted level of fixed overheads of £385,000 and the overhead recovery rate is £4.25 per machine hour, What is the number of machine hours we expect to use?

1. 90,600

2. 4,250

3. 385,000

4. 1,636,25

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Q: Overhead absorption exercises will be most useful where:

1. The market determines the selling price of a product

2. The total direct cost of a department is needed

3. Selling prices can be based on costs

4. A departmental manager will be held responsible for the costs that are apportioned to them

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Q: Which of the following is an unsatisfactory method of dealing with reciprocal service costs?

1. Ignore the service department costs

2. Use mathematical apportionment techniques

3. Apportion the service costs over production departments only

4. Use a specified order of apportioning service department costs

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Q: An example of a production overhead would be:

1. Labour costs

2. Rent

3. Supervisory costs

4. Materials

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Q: The weighted average method of stock valuation would be most appropriate for:

1. A food retailer

2. A motor components retailer

3. A building contractor

4. A chemical manufacturer

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Q: Costs that are not relevant for decision-making and are not affected by increase or decrease in volume are

1. Out of pocket cost

2. Sunk cost

3. Differential cost

4. Imputed cost

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Q: The costing approach wherein actual costs are ascertained after they have been incurred is

1. Marginal costing

2. Direct costing

3. Standard costing

4. Historical costing

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Q: Which of the following is a limitation of activity-based costing?

1. More cost pools

2. Less control over overhead costs

3. Poorer management decisions

4. Some arbitrary allocations continue

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Q: All of the following statements are correct except that

1. activity-based costing has been widely adopted in service industries

2. the objective of installing ABC in service firms is different than it is in a manufacturing firm

3. A larger proportion of overhead costs are company-wide costs in service industries

4. the general approach to identifying activities and activity cost pools is the same in a service company as in a manufacturing company

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Q: Which of the following is false with regard to the supplementary rate method for accounting of under or over absorption of overheads?

1. It facilitates the absorption of actual overhead for production

2. Correction of costs through supplementary rates is necessary for maintaining data for comparison

3. The supplementary rate can be determined only after the end of the accounting period

4. It requires a lot of clerical work

5. The value of stock is distorted under this method

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Q: The prime function of management accounting is to

1. Assist tax authorities

2. Assist the management in performing its functions effectively

3. Interpret the financial data

4. Record business transactions

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Q: The Rowan Plan

1. Is the best for efficient workers

2. Pays lower bonus that that of Halsey beyond 50% saving in time

3. Pays increased bonus at an increasing rate as the efficiency

4. None of the above

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Q: Which of the following can improve break-even point?

1. Increase in fixed cost

2. Increase in sale price

3. Increase in sales volume

4. Increase in production volume

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Q: Which of the following is false about standard costing system?

1. It assumes stability in the current manufacturing process

2. The goal is to meet cost performance standards

3. It assumes production workers have the best knowledge to reduce costs

4. It motivates employees to try to reach target established

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Q: If the price rises, which of the following methods of valuing stock will give the highest profit?

1. Replacement cost method

2. FIFO method

3. Simple average method

4. Specific order method

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Q: A company's approach to a make or buy decision

1. Depends on whether the company is operating at or below normal volume

2. Depends on whether the company is operating at practical capacity level

3. Involves an analysis of avoidable costs

4. Requires use of absorption costing

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Q: In process costing, equivalent units, using first in first out (FIFO) are a measure of

1. Work done on units started in the production process during the period

2. Work done in the department during the period

3. Work required to complete the beginning work-in-process inventory

4. Work performed on the ending work-in-process inventory

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Q: The classification of costs as either direct or indirect depends upon

1. The timing of the cash outlay for the cost

2. The cost object to which the cost is being related

3. The behavior of the cost in response to volume changes

4. Whether the cost is expensed in the period in which it is incurred

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FAQ Cost Accounting exam quiz

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Cost Accounting exam quiz with answer

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