Teaching Accountancy Cost Accounting Question Bank

MCQ - Cost Accounting Total Questions - 98

1)

What is the effect of increase in fixed cost?

A)
Reduces profit volume ratio

B)
Raises breakeven point

C)
Increases margin of safety

D)
Reduces contribution
View Solution
2)

Which of the following is correct at breakeven point?

A)
Contribution = Fixed assets

B)
Sales Revenue = Total Cost - Variable Cost

C)
Profit = Fixed Cost + Variable Cost

D)
Sales Revenue = Variable Cost
View Solution

Why is profit volume ratio used?

I. To compute the variable cost for any volume of sales.

II. To determine breakeven point and the level of output required to earn a desired profit.

III. To decide most profitable sales mix.

Select the correct answer using the codes given below

I and II

II and III

I and III

All of these

View Solution

4)

The breakeven point in units is calculated using

A)
Fixed expenses and the contribution margin ratio

B)
Variable expenses and the contribution margin ratio

C)
Fixed expenses and the unit contribution margin

D)
Variable expenses and the unit contribution margin
View Solution
5)

One of the basic differences between marginal costing and absorption costing is regarding the treatment of

A)
Direct material

B)
variable overheads

C)
Fixed overheads

D)
prime cost
View Solution
6)

When is a business unit known to be a profit centre?

A)
If its operations or departments are not directly involved in revenue generating activities, but instead focus on elements of cost control

B)
If its management is evaluated not only on revenues and expenses, but also on asset investment

C)
If its management is compensated based on the level of profitability

D)
If its management is held accountable for both revenues and expenses and has the authority to make decision regarding its products, markets and source of supply
View Solution
7)

What is the most useful information derived from a break even chart?

A)
Relationship between revenue and costs at various levels of output

B)
Volume or output level at which ;the enterprises break even

C)
Amount of sales revenue needed to cover enterprise variable costs

D)
Amount of sales revenue needed to cover enterprise fixed costs
View Solution
8)

What is the basic difference between a static budget and a flexible budget?

A)
A static budget is based on one specific level of production and a flexible budget can be prepared for any production level within a relevant range

B)
A static budget is for an entire production, but a flexible budget is applicable only to a single department

C)
Flexible budget allow management latitude in meeting goals, whereas a static budget is based on a fixed standard

D)
A flexible budget considers only variable costs, but a static budget considers all costs
View Solution
9)

The margin of safety may be defined as

A)
The point at which breakeven point sales are achieved

B)
The excess of planned sales over the current actual sales

C)
The extent to which sales revenue exceeds fixed costs

D)
The difference between planned sales and breakeven point sales
View Solution
10)

Which one of the following cost would not be termed as product costs?

A)
Administrative salaries

B)
Direct labour

C)
Indirect material

D)
Plant supervisors salary
View Solution
11)

In which costing method, the fixed factory overhead are added to inventory valuation?

A)
Marginal costing

B)
Absorption costing

C)
Both [a] and [b]

D)
None of the above
View Solution

12)

Match the following

List I		List II
A.	Overhead efficiency variance	1.	Power failure
B.	Overhead volume variance	2.	Appointing low grade employees
C.	Labour idle time variance	3.	Poor working condition
D.	Labour efficiency variance	4.	Working days being more or less than budgeted

Codes

A\[\to \]4, B\[\to \]3, C\[\to \]2, D\[\to \]3

A\[\to \]3, B\[\to \]4, C\[\to \]1, D\[\to \]2

A\[\to \]3, B\[\to \]1, C\[\to \]4, D\[\to \]2

A\[\to \]2, B\[\to \]1, C\[\to \]4, D\[\to \]3

View Solution

13)

Which budget is prepared first of all?

A)
Cash budget

B)
Master budget

C)
Budget for the key factor

D)
Flexible budget
View Solution
14)

An increase in fixed costs will result, in which of the following?

A)
A decrease in the contribution-sales ratio

B)
A decrease in the contribution per point

C)
An increase in the breakeven point sales level

D)
An increase in the margin of safety
View Solution
15)

Under the marginal costing concept/unit product cost would most likely be increased by

A)
a decrease in the number of units produced

B)
an increase in the number of units produced

C)
an increase in the commission paid to salesman for each units sold

D)
a decrease in the commission paid to salesman for each units sold
View Solution
16)

Breakeven point is

A)
Where total revenue equals total costs

B)
Where total contribution equals variable costs

C)
Where total revenue equals fixed costs

D)
All of the above
View Solution
17)

Prime cost plus factory overhead cost is

A)
conversion cost

B)
production cost

C)
total cost

D)
cost of goods sold
View Solution

18)

Match the following

List I		List II
A.	Labour cost variance	1.	Actual hours paid (Standard rate - Actual rate)
B.	Labour rate variance	2.	Standard cost - Actual cost
C.	Efficiency variance	3.	Idle hours \[\times \] standard rate per hour
D.	Idle time variance	4.	Standard rate (Standard hours - Actual hours worked)

Codes

A\[\to \]4, B\[\to \]3, C\[\to \]2, D\[\to \]1

A\[\to \]2, B\[\to \]3, C\[\to \]4, D\[\to \]1

A\[\to \]4, B\[\to \]1, C\[\to \]2, D\[\to \]3

A\[\to \]2, B\[\to \]1, C\[\to \]4, D\[\to \]3

View Solution

19)

Product cost is normally

A)
Equal in both absorption and marginal costing

B)
Higher in marginal costing than absorption costing

C)
Higher in absorption costing than marginal costing

D)
None of the above
View Solution

20)

Which of the following are advantages of marginal costing?

I. Pricing decision

II. True profit

III. Difficult to classify

IV. Ignores time value

V. Break even analysis

VI. Contribution is not final

VII. Control over expenditure

Select the correct answer using the codes given below

I, II, V and VII

I, III, V and VII

III, IV, VI and VII

I, II, VI and VII

View Solution

21)

Which inventory costing method is based on the assumption that costs should be charged against revenue in the order, in which they were incurred?

A)
Perpetual inventory

B)
LIFO

C)
FIFO

D)
Average cost
View Solution

22)

Match the following

List I		List II
A.	Variable costing	1.	Absorption costing
B.	Valuation of stock is higher	2.	Fixed costs excluded from inventory valuation
C.	Marginal and differential costs are same	3.	Marginal costing
D.	Marginal costing	4.	No change in fixed cost

Codes

A\[\to \]3, B\[\to \]4, C\[\to \]1, D\[\to \]2

A\[\to \]3, B\[\to \]1, C\[\to \]4, D\[\to \]2

A\[\to \]4, B\[\to \]3, C\[\to \]1, D\[\to \]2

A\[\to \]4, B\[\to \]3, C\[\to \]2, D\[\to \]1

View Solution

23)

Match the following

List I		List II
A.	Classification of costs into fixed and variable costs	1.	Contribution
B.	Difference between sales and variable costs	2.	P/V ratio
C.	Difference between sales at breakeven point and the total sales	3.	Marginal costing
D.	Relative profitability	4.	Margin of safety

Codes

A\[\to \]4, B\[\to \]3, C\[\to \]1, D\[\to \]2

A\[\to \]3, B\[\to \]4, C\[\to \]1, D\[\to \]2

A\[\to \]3, B\[\to \]1, C\[\to \]4, D\[\to \]2

A\[\to \]4, B\[\to \]3, C\[\to \]2, D\[\to \]1

View Solution

24)

Match the following

List I		List II
A.	Excess of actual sales over the break even sales volume	1.	Contribution
B.	Sum of fixed cost and profit	2.	Cost volume profit analysis
C.	Break even chart	3.	Unaffected by change in output
D.	Breakeven point	4.	Margin of safety

Codes

A\[\to \]4, B\[\to \]1, C\[\to \]2, D\[\to \]3

A\[\to \]4, B\[\to \]3, C\[\to \]2, D\[\to \]1

A\[\to \]4, B\[\to \]3, C\[\to \]1, D\[\to \]2

A\[\to \]3, B\[\to \]1, C\[\to \]4, D\[\to \]2

View Solution

25)

Under marginal costing, only ......costs are charged to products.

A)
Fixed

B)
variable

C)
Both [a] and [b]

D)
None of the above
View Solution
26)

Which of the following pairs is/are correctly matched?

A)
Difference between sales and total cost is profit - Absorption costing

B)
Fixed costs recovered from contribution - Standard costing

C)
Both [a] and [b]

D)
None of the above
View Solution

27)

Match the following

List I		List II
A.	Absorption costing	1.	.....is a logical extension of marginal costing
B.	Fixed expenses	2.	.....is a valuable adjust to standard costing and budgetary costing
C.	Marginal costing	3.	Contribution = ..+ Profit
D.	Break even analysis	4.	..is not very helpful in taking managerial decisions

Codes

A\[\to \]4, B\[\to \]3, C\[\to \]2, D\[\to \]1

A\[\to \]2, B\[\to \]1, C\[\to \]4, D\[\to \]3

A\[\to \]3, B\[\to \]2, C\[\to \]4, D\[\to \]1

A\[\to \]4, B\[\to \]3, C\[\to \]1, D\[\to \]2

View Solution

28)

Match the following

List I		List II
A.	Marginal cost	1.	..= Contribution\[\div \]Sales
B.	P/V ratio	2.	Contribution = Selling price -....
C.	Profit	3.	..... = Sales (1 - P/V Ratio)
D.	Variable costs	4.	Margin of safety =..... \[\div \] P/V Ratio

Codes