Overview of Cost – Corporate and Management Accounting MCQ

Students should practice Overview of Cost – Corporate and Management Accounting CS Executive MCQ Questions with Answers based on the latest syllabus.

Overview of Cost – Corporate and Management Accounting MCQ

Question 1.
Dec 2014: The term used for process of ascertaining the cost’ is known as
(A) Cost
(B) Costing
(C) Cost accounting
(D) Cost accountancy
Answer:
(B) Costing

Question 2.
Dec 2014: Which element of the total cost is common in prime cost and conversion cost
(A) Variable overheads
(B) Fixed overheads
(C) Direct materials
(D) Direct labour
Answer:
(D) Direct labour

Question 3.
Dec 2014: The cost that increases as the volume of activity decreases within the relevant range, is known as
(A) Average cost per unit
(B) Average variable cost per unit
(C) Total fixed cost
(D) Total variable cost
Answer:
(A) Average cost per unit

Question 4.
Dec 2014: Which of the following is generally used as cost unit of brickworks
(A) 1,000 bricks
(B) 100 bricks
(C) 10 bricks
(D) 1 brick
Answer:
(A) 1,000 bricks

Question 5.
Dec 2014: Relevant costs are
(A) Future costs
(B) Standard costs
(C) Controllable costs
(D) Historical costs
Answer:
(A) Future costs

Question 6.
Dec 2014: Which of the following is not considered as a function of management accounting?
(A) Financial planning
(B) Decision making
(C) Reporting
(D) Cost computation
Answer:
(B) Decision making

Question 7.
Dec 2014: The cost of selecting one course of action and forgoing the other is known as
(A) Sunk cost
(B) Differential cost
(C) Opportunity cost
(D) Joint cost
Answer:
(C) Opportunity cost

Question 8.
Dec 2014: Expenditure on labour and materials that cannot be economically identified with a specific saleable cost unit is known as:
(A) Prime cost
(B) Overheads
(C) Direct cost
(D) Abnormal loss
Answer:
(B) Overheads

Question 9.
Dec 2014: For a manufacturing company, which of the following is an example of period cost rather than a product cost
(A) Depreciation on factory equipment
(B) Commission to the salesman
(C) Wages of machine operator
(D) Insurance on factory equipment
Answer:
(D) Insurance on factory equipment

Question 10.
Dec 2014: Which of the following is known as full costing
(A) Variable costing
(B) Differential costing
(C) Marginal costing
(D) Absorption costing
Answer:
(D) Absorption costing

Question 11.
Dec 2014: Which of the following is not true? Fixed costs remain fixed
(A) Over a short period
(B) Over a long period and within a relevant range
(C) Over a short period and within a relevant range
(D) Over a long period
Answer:
(D) Over a long period

Question 12.
Dec 2014: According to Section 2(13) of the Companies Act, 2013, ‘books of account’ does not require maintenance of which of the following records
(A) All sums of money received and expended by a company and matters in relation to which the receipts and expenditure take place
(B) All sales and purchases of goods and services by the company
(C) The assets and liabilities of the company
(D) Cash flow statement
Answer:
(D) Cash flow statement

Question 13.
June 2015: Which of the following is generally used as a cost unit in the cement industry
(A) Per tonne
(B) Per kilolitre
(C) Per kilogram
(D) Per gallon
Answer:
(A) Per tonne

Question 14.
June 2015: Which of the following is not an objective of management accounting
(A) Formulation of plans and policy
(B) Assisting in decision making
(C) Preparation of financial statements
(D) Interpretation of financial documents
Answer:
(C) Preparation of financial statements

Question 15.
June 2015: The establishment of budgets, standard costs and actual costs of operations, processes, activities or products and the analysis of variances, profitability or the social use of funds is known as
(A) Costing
(B) Cost Accounting
(C) Cost Accountancy
(D) Financial Accounting
Answer:
(B) Cost Accounting

Question 16.
June 2015: Costs that are constant for a given level of output and then increase by a fixed amount at a higher level of output are called___
(A) Step costs
(B) Differential costs
(C) Committed costs
(D) Opportunity costs
Answer:
(A) Step costs

Question 17.
June 2015: Interest on internally generated funds is an example of
(A) Differential cost
(B) Joint cost
(C) Common cost
(D) Imputed cost
Answer:
(D) Imputed cost

Question 18.
June 2015: The cost unit applicable to the bicycle industry is
(A) Per part of a bicycle
(B) Per bicycle
(C) Per thousand bicycles
(D) Per day
Answer:
(B) Per bicycle

Question 19.
June 2015: Sunk costs are____
(A) Opportunity costs
(B) Costs to be incurred in future
(C) Not relevant for decision making
(D) Controllable costs
Answer:
(C) Not relevant for decision making

Question 20.
June 2015: Fixed cost is a cost____
(A) Which remains fixed for each unit ‘ of output
(B) Which remains fixed in total during a given period despite changes in output
(C) Which is partly fixed and partly variable in relation to the output
(D) Which changes in total in proportion to the changes in output
Answer:
(B) Which remains fixed in total during a given period despite changes in output

Question 21.
June 2015: Which of the following is the social purpose of cost audit –
(A) Detection and correction of ab-normal losses
(B) Detection of errors and frauds
(C) Determination of inventory valuation
(D) Pinpointing areas of inefficiency and mismanagement for the benefit of shareholders and consumers
Answer:
(D) Pinpointing areas of inefficiency and mismanagement for the benefit of shareholders and consumers

Question 22.
June 2015: Rent, rates and insurance of factory and office are examples of –
(A) Direct expenses
(B) Indirect expenses
(C) Notional expenses
(D) Miscellaneous expenses
Answer:
(B) Indirect expenses

Question 23.
Dec 2015: Management accounting is basically concerned with
(A) The problem of choice
(B) The Causative relationship
(C) Recording of transaction
(D) Both (A) and (B) above
Answer:
(D) Both (A) and (B) above

Question 24.
Dec 2015: Cost accounting is
(A) Nothing more than a detailed analysis of expenditure
(B) An instrument of management control
(C) Useful only in such organization which has profit as the aim
(D) Not needed if prices are beyond the control of the firm.
Answer:
(B) An instrument of management control

Question 25.
Dec 2015: Conversion cost is the summation of
(A) Direct material and direct wages
(B) Direct wages and office over-heads
(C) Direct wages, direct charges and works overheads
(D) None of the above
Answer:
(C) Direct wages, direct charges and works overheads

Question 26.
Dec 2015: A cost centre that is engaged in production activity by conversion of raw material into a finished product is called______
(A) Production cost centre
(B) Impersonal cost centre
(C) Process cost centre
(D) Production unit
Answer:
(A) Production cost centre

Question 27.
Dec 2015: A business unit is known to be a profit centre
(A) If its operations or departments are not directly involved in rev
Renee 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 a decision regarding its products, markets and source of supply
Answer:
(D) If its management is held accountable for both revenues and expenses and has the authority to make a decision regarding its products, markets and source of supply

Question 28.
Dec 2015:
Statement-I:
The activities or operations of every cost centre should be homogeneous so as to ensure a uniform basis of charging expenses within the centre.
Statement-II
The activities or operation of each cost centre must be well defined and clearly identifiable.
Select the correct answer from the following:
(A) Both statements are correct
(B) Both statements are incorrect
(C) Statement-I is correct, but Statement-II is incorrect
(D) Statement-I is incorrect, but Statement-II is correct
Answer:
(A) Both statements are correct

Question 29.
Dec 2015: Match the following:

List-I List-II
P. Cost control purposes 1. _____ is a predetermined cost
Q. Standard cost 2. Responsibility accounting fixes responsibility for _____
R. Integrates 3. Cost accounting guides policies____future
S. Production 4. Budgeting system___ key managerial functions

Select the correct answer from the options given below:
Overview of Cost – Corporate and Management Accounting MCQ 1
Answer:
(B)

Question 30.
June 2016: A process in which management is looking outward to examine how others achieve their performance levels and to understand the process they use, is called___
(A) Balanced scorecard
(B) Target costing
(C) Benchmarking process
(D) Performance analysis
Answer:
(C) Benchmarking process

Question 31.
June 2016: Match the following industry/product with appropriate cost unit:

Industry/Product Cost unit
(i) Toy Industry (a) Per batch
(ii) Steel Industry (b) Tonne-kilometre
(iii) Chemical (c) Tonne
(iv) Transport (d) Gallon

Select the correct answer using the codes given below
Overview of Cost – Corporate and Management Accounting MCQ 2
Answer:
(A)

Question 32.
June 2016: Which one of the following statements is false___
(A) Management accountant uses cost accounting tools and techniques for planning and decision making
(B) Management accounting is mostly historical in its approach and it projects the past
(C) Cost accounting system can be installed without a management accounting
(D) Management accounting focuses on wealth maximization
Answer:
(B) Management accounting is mostly historical in its approach and it projects the past

Question 33.
June 2016: Identify the cost which is not relevant or useful for decision-making__
(A) Shut down the cost
(B) Marginal cost
(C) Imputed cost and replacement cost
(D) Sunk cost
Answer:
(D) Sunk cost

Question 34.
June 2016: Cost Accounting Standard is related to bringing uniformity and consistency in the principles and methods of determining the selling and distribution overheads with reasonable accuracy.
(A) 10
(B) 12
(C) 15
(D) 4
Answer:
(C) 15

Question 35.
June 2016: Section of the Companies Act, 2013 gives the cost auditor the same power as the financial auditor has under the section of the Companies Act, 2013.
(A) 148, 143
(B) 143, 148
(C) 147, 148
(D) 143, 144
Answer:
(A) 148, 143

Question 36.
June 2016: Those fixed costs which continue to be incurred even when there is no production are called
(A) Period costs
(B) Discretionary costs
(C) Committed costs
(D) Output costs
Answer:
(C) Committed costs

Question 37.
June 2016: A direct cost is a cost that can be classified on the basis of –
(A) Behaviour
(B) Traceability
(C) Controllability
(D) Relevance
Answer:
(B) Traceability

Question 38.
June 2016: Management accounting does not include the function of
(A) Planning and control
(B) Product costing
(C) Preparation of financial statements
(D) Decision-making
Answer:
(D) Decision-making

Question 39.
Dec 2016: Which of the following is/are a tool(s) and technique(s) of management accounting?
(A) Ratio analysis
(B) Linear programming
(C) Trend analysis
(D) All of the above
Answer:
(D) All of the above

Question 40.
Dec 2016: Match the following:

Statements Objects
P. Collection of cost information and recording them under suitable heads 1. Budgeting
Q. Monitoring idle time, worker’s efficiency and labour turnover 2. Cost Reduction
R. Estimation (both quantities and value) of the cost before the start of the activity 3. Ascertainment
S. Procedures and techniques used to bring down the estimated cost 4. Cost control

Select the correct answer from the options given below:
Overview of Cost – Corporate and Management Accounting MCQ 3
Answer:
(B)

Question 41.
Dec 2016: Statement – I
Sunk cost is one that has already been incurred and cannot be avoided by decisions in the future.
Statement – II
For decision making, it is required that such cost should be incurred.
Select the correct answer from the options given below:
(A) Both statements are correct
(B) Both statements are incorrect
(C) Statement-I is incorrect, but Statement-H is correct
(D) Statement-I is correct, but Statement-II is incorrect
Answer:
(D) Statement-I is correct, but Statement-II is incorrect

Question 42.
Dec 2016: The prime function of management accounting is to:
(A) Record business transactions
(B) Interpret financial data
(C) Assist the management in performing its functions effectively
(D) Assist tax authorities.
Answer:
(C) Assist the management in performing its functions effectively

Question 43.
Dec 2016: Multiple costing is followed in___
(A) Biscuit factory
(B) Steel industry
(C) Brick making
(D) Cycle manufacturing
Answer:
(D) Cycle manufacturing

Question 44.
Dec 2016: The ascertainment of costs after they have been incurred is called
(A) Marginal costing
(B) Historical costing
(C) Differential costing
(D) None of the above
Answer:
(B) Historical costing

Question 45.
Dec 2016: A technique where standardized principles and methods of cost accounting are employed by a number of different companies is termed as
(A) Uniform costing
(B) Absorption costing
(C) Standard costing
(D) ABC costing
Answer:
(A) Uniform costing

Question 46.
Dec 2016: A cost centre is
(A) A production or service location, function, activity or item of equipment whose costs may be attributed to cost units
(B) A centre for which an individual budget is drawn-up
(C) A centre where cost is classified on the basis of variability
(D) An amount of expenditure attributable to an activity
Answer:
(A) A production or service location, function, activity or item of equipment whose costs may be attributed to cost units

Question 47.
Dec 2016: In the management information system (MIS), top-level management uses
(A) Operational information
(B) Tactical information
(C) Transactional information
(D) Strategic information
Answer:
(D) Strategic information

Question 48.
Dec 2016: Which of the following is an irrelevant cost
(A) Sunk cost
(B) Replacement cost
(C) Opportunity cost
(D) All of the above
Answer:
(A) Sunk cost

Question 49.
Dec 2016: Match the following:

List -I List – II
(A) Advertising (1) Operating costing
(B) The Sugar company (2) Job costing
(C) Readymade (3) Process costing garments
(D) Transport (4) Batch costing

Select the correct answer from the options given below:
Overview of Cost – Corporate and Management Accounting MCQ 4
Answer:
(A)

Question 50.
Dec 2014: In an inflationary situation, which system of inventory valuation shows higher profits
(A) LIFO
(B) FIFO
(C) HIFO
(D) Weighted average
Answer:
(B) FIFO

Question 51.
June 2015: Which of the following method is based on the assumption that the costliest materials are issued first and inventory is valued at the lowest possible price___
(A) FIFO method
(B) UFO method
(C) Highest-in-first-out method
(D) Weighted average method
Answer:
(C) Highest-in-first-out method

Question 52.
June 2015: Following information is available regarding a product-X:
1st January 2015:
Opening balance: 50 units @ ₹ 4 Receipts:
5th January 2015: 100 units @ ₹ 5
12th January, 2015:200 units @ ₹ 5.50 Issues:
2nd January 2015: 30 units
18th January 2015: 170 units
The value of closing stock according to the FIFO method is
(A) ₹ 660
(B) ₹ 770
(C) ₹ 825
(D) ₹ 860
Hint:
Overview of Cost – Corporate and Management Accounting MCQ 7
Answer:
(C) ₹ 825

Question 53.
June 2015: In case of rising prices, the FIFO method will provide___
(A) Lowest value of closing stock and profit
(B) Highest value of closing stock and profit
(C) Highest value of the closing stock but the lowest value of profit
(D) Lowest value of the closing stock but highest value of profit
Answer:
(B) Highest value of closing stock and profit

Question 54.
Dec 2015: FIFO method of valuing material issues is suitable in times of___
(A) Rising prices
(B) Falling prices
(C) Price fluctuation
(D) The Boom period
Answer:
(B) Falling prices

Question 55.
June 2016: XYZ Ltd. had 4,000 units of inventory in hand on 1st March 2016, costing ? 4 per unit. Purchases and issues of material during the month were as follows:
Overview of Cost – Corporate and Management Accounting MCQ 5
The cost of inventory as of 31st March 2016 under FIFO and weighted average cost method will be
(A) ₹ 27,000 and ₹ 24,500
(B) ₹ 27,000 and ₹ 23,625
(C) ₹ 22,000 and ₹ 23,625
(D) ₹ 22,000 and ₹ 24,498
Hint:
Overview of Cost – Corporate and Management Accounting MCQ 8
Overview of Cost – Corporate and Management Accounting MCQ 9
Option (A) is correct (there is a difference of ₹ 2 due to rounding of digits)
Answer:
(A) ₹ 27,000 and ₹ 24,500

Question 56.
June 2016: In a situation of rising prices, profit and tax liability would be lower under method than under method of material issue pricing.
(A) FIFO; LIFO
(B) LIFO; FIFO
(C) LIFO; Average
(D) FIFO; Average
Answer:
(B) LIFO; FIFO

Question 57.
June 2016: The technique of economic order quantity is losing significance since the development of
(A) Perpetual inventory
(B) Just-in-time
(C) First-in-first-out
(D) ABC analysis
Answer:
(B) Just-in-time

Question 58.
June 2016: Which one of the following is the correct sequence of the purchase procedure of inventory___
(A) Indenting for material, issuing tenders, receiving quotations, and placing order
(B) Issuing tenders and receiving quotations, indenting for mate-rial, and placing order
(C) Placing order, issuing tenders and receiving quotations, and indenting for material
(D) Indenting for material and placing order
Answer:
(A) Indenting for material, issuing tenders, receiving quotations, and placing order

Question 59.
Dec 2016: Amaze Ltd. had an opening inventory of 5,000 units costing ₹ 5 per unit on 1st April 2016. Following receipts and issues took place in April 2016:
5th April 2016: Purchased 800 units @ ₹ 8 per unit
12th April 2016: Purchased 200 units @ ₹ 8 per unit
15th April 2016: Issued 3,000 units 25th April 2016: Purchased 1,000 units @ ₹ 9 per unit
Cost of inventory as of 30th April 2016 under weighted average basis will be____
(A) ₹ 25,500
(B) ₹ 27,000
(C) ₹ 20,000
(D) ₹ 23,500
Hint:
Overview of Cost – Corporate and Management Accounting MCQ 10
Answer:
(A) ₹ 25,500

Question 60.
Dec 2014: Which of the following is not a method used for time booking__
(A) Daily timesheets
(B) Weekly timesheets
(C) Job cards
(D) Payroll
Answer:
(D) Payroll

Question 61.
June 2015: Which of the following is not an objective of time-booking__
(A) Apportionment of overheads against jobs
(B) Preparation of payrolls
(C) Ascertaining idle time for the purpose of control
(D) Calculation of labour cost of jobs done
Answer:
(A) Apportionment of overheads against jobs

Question 62.
June 2016: Which of the following is/are not a purpose of time keeping___
(i) Ascertaining labour cost of a job/product/ activity
(ii) Evaluating labour performance by comparing the actual and budgeted time
(iii) Providing internal check against dummy workers.
Select the correct answer from the options given below___
(A) (i) and (ii)
(B) (ii) and (iii)
(C) (i) and (iii)
(D) (ii) only
Answer:
(A) (i) and (ii)

Question 63.
June 2016: Direct labour cost will include___
(A) All labour cost attributable to a production department
(B) Labour cost of production and production support services
(C) Cost of direct labour engaged in converting raw materials into manufactured articles
(D) Cost of labour recruited directly by the management and through contractors
Answer:
(C) Cost of direct labour engaged in converting raw materials into manufactured articles

Question 64.
Dec 2016:
Statement -1
Low time wages do not necessarily mean low cost of production and high wages mean high cost of the product.
Statement – II
Time and motion study, which is a function of the engineering department, is useless for the determination of wages.
Select the correct answer from the options given below:
(A) Both statements are correct
(B) Both statements are incorrect
(C) Statement-I is incorrect, but Statement-II is correct
(D) Statement-I is correct, but Statement-II is incorrect
Answer:
(D) Statement-I is correct, but Statement-II is incorrect

Question 65.
Dec 2014: Rent, rates and taxes paid for the building are apportioned on the basis of____
(A) Floor area
(B) Capital value
(C) No. of employees
(D) Direct labour hours
Answer:
(A) Floor area

Question 66.
Dec 2014: If the actual expenses fall short of the amount absorbed, it is known as___
(A) Under absorption
(B) Over absorption
(C) Allocation
(D) Apportionment
Answer:
(B) Over absorption

Question 67.
Dec 2014: The budgeted fixed overheads amounted to ₹ 84,000. The budgeted and actual production amounted to 20,000 units and 24,000 units respectively. This means that there will be an___
(A) Under-absorption of ₹ 16,800
(B) Under-absorption of ₹ 14,000
(C) Over-absorption of ₹ 16,800
(D) Over-absorption of ₹ 14,000
Hint:
Actual overheads based on budgeted rate:
\(\frac{84,000}{20,000}\) × 24,000 = 1,00,800
Since budgeted overheads are less than actual overheads there is under absorption.
1,00,800 – 84,000 = 16,800.
Answer:
(A) Under-absorption of ₹ 16,800

Question 68.
June 2015: The following data is available for Akhil Ltd. for the year ended 31st March 2015:
Administrative overheads: ₹ 2,50,000
Production overheads: ₹ 2,74,200
Factory cost: ₹ 3,42,800
Work-in- progress: ₹ 74,000
Machine hour: 4,000 hours
The absorption rate for production overheads is____
(A) ₹ 68.55
(B) ₹ 216.75
(C) ₹ 235.25
(D) ₹ 198.25
Hint:
Absorption Rate = \(\frac{\text { Production overheads }}{\text { Machine hours }}\)
\(\frac{75,000}{15,000}\) = 5 per unit
Overhead absorbed = 20,000 units × 5 = 1,00,000. If it assumed that actual overheads are same to that of budgeted figure then 1,00,000 – 75,000 = 25,000. Since absorbed overhead are more than actual overhead this is case of over absorption.
Answer:
(A) ₹ 68.55

Question 69.
June 2015: The budgeted fixed overheads amounted to ₹ 75,000. The budgeted & actual production amounted to 15,000 units & 20,000 units respectively. This means that there will be an___
(A) Under-absorption of ₹ 25,000
(B) Under-absorption of ₹ 18,750
(C) Over-absorption of ₹ 25,000
(D) Over-absorption of ₹ 18,750
Answer:
(C) Over-absorption of ₹ 25,000

Question 70.
June 2015: The following data relates to two activity levels of production:

  Level-I Level-II
No. of units 4,000 5,500
Overheads (₹) 2,80,000 3,50,000

Variable cost per unit would be____
(A) ₹ 46.67
(B) ₹ 133.33
(C) ₹ 70
(D) ₹ 64
Hint:
Variable Overhead Rate = \(\frac{\text { Change in Overheads }}{\text { Change in unit }}\) = 46.67 per unit
Answer:
(A) ₹ 46.67

Question 71.
June 2015: A product “whose direct material costs and direct labour costs are ₹ 200 and ₹ 100 would consume 3 hours, 4 hours and 5 hours in department A, B & C respectively. The overheads absorption rate is – A: ₹ 4.5 per hour, B: ₹ 5 per hour and C: ₹ 10.5 per hour. The total cost of the product is
(A) ₹ 486
(B) ₹ 386
(C) ₹ 214
(D) ₹ 500
Hint:
Overview of Cost – Corporate and Management Accounting MCQ 11
Answer:
(B) ₹ 386

Question 72.
Dec 2015: The following particulars relate to the production department of a factory:
Material used : ₹ 20,000
Direct labour : ₹ 10,000
Overheads : ₹ 7,500
On an order carried out in the department, material consumed was ₹ 4,000 and direct wages paid amounted to ₹ 2,000. The number of overheads chargeable to this order on the basis of the prime cost would be
(A) ₹ 1,500
(B) ₹ 1,510
(C) ₹ 1,700
(D) ₹ 1,710
Hint:
Overhead Absorption Rate = \(\frac{\text { Overheads }}{\text { Prime Cost }}\) × 100
= \(\frac{7,500}{30,000}\) × 100
= 25%
Overhead chargeable to order = (4,000 + 2,000) × 25% = 1,500
Answer:
(A) ₹ 1,500

Question 73.
Dec 2015: Allotment of the entire costs to a cost centre or unit is known as___
(A) Cost apportionment
(B) Cost allocation
(C) Cost absorption
(D) Machine hour rate
Answer:
(B) Cost allocation

Question 74.
June 2016: Following information is given for an order:
Materials (direct) : ₹ 25,000
Wages (direct) : ₹ 20,000
Factory overheads: 75% of wages (direct)
Sales: ₹ 85,800
Profit: 10% on the cost of production
Office overheads are charged as a percentage of factory cost. The number of office overheads and its percentage to factory cost will be___
(A) ₹ 78,000 and 30%
(B) ₹ 18,000 and 30%
(C) ₹ 25,800 and 43%
(D) ₹ 33,000 and 55%
Hint:
Overview of Cost – Corporate and Management Accounting MCQ 12
60,000 + x + 6,000 + 0.1x = 85,800
66,000+ 1.1x =85,800
1.1x = 19,800
x = 18,000
% of factory overheads to factory cost = \(\frac{18,000}{60,000}\) × 100 = 30%
Answer:
(B) ₹ 18,000 and 30%

Question 75.
June 2016: Which of the following statements are true____
(i) Conversion costs and overheads are interchangeable terms
(ii) Notional cost and imputed cost means the same thing
(iii) Cost accounting is not needed by a non-profit organization
(iv) Rent on the owned building is included in cost accounts.
Select the correct answer from the options given below
(A) (i) and (ii)
(B) (iii) and (iv)
(C) (ii) and (iv)
(D) All of the above
Answer:
(A) (i) and (ii)

Question 76.
June 2016: Classify the following expenses as direct (D) and indirect (I):
(i) Royalties charged as a rate per unit
(ii) Cost of making a design, pattern for a specific job
(iii) Salesman’s commission
(iv) Power, fuel, lighting of factory and office.
Select the correct answer using the codes given below
Overview of Cost – Corporate and Management Accounting MCQ 6
Answer:
(D)

Question 77.
Dec 2016: When the amount of overheads absorbed is less than the number of overheads incurred, it is called___
(A) Under-absorption of overheads
(B) Over-absorption of overheads
(C) Proper absorption of overheads
(D) None of the above
Answer:
(A) Under-absorption of overheads

Question 78.
Dec 2016:
Statement -1
Production departments and service departments are equally important for the manufacturing industry.
Statement – II
To calculate the cost of a product, service department cost should be redistributed among the production department on a reasonable basis.
Select the correct answer from the options given below___
(A) Both statements are correct
(B) Both statements are incorrect
(C) Statement-I is incorrect, but Statement-II is correct
(D) Statement-I is correct, but Statement-II is incorrect
Answer:
(A) Both statements are correct

Question 79.
Dec 2016: Following information has been collected from cost records of Bright Ltd.:
Direct material: ₹ 5,00,000
Direct labour: ₹ 3,00,000
Factory overheads: 20% of factory cost.
The number of factory overheads will be:
(A) ₹ 1,60,000
(B) ₹ 2,00,000
(C) ₹ 1,80,000
(D) ₹ 1,96,000
Hint:
20% of factory cost means 25% of prime cost.
(5,00,000 + 3,00,000) × 25% = 2,00,000
Answer:
(B) ₹ 2,00,000

Question 80.
Dec 2016: Labour hour rate Administrative overheads are absorbed on the basis of
(A) Direct materials
(B) Direct wages
(C) Prime cost
(D) Works cost
Answer:
(D) Works cost

Question 81.
Dec 2016: Following information relates to the production department of a factory:
Materials used : ₹ 80,000
Direct labour : ₹ 60,000
Overheads : ₹ 40,000
On an order carried out in the department, materials consumed amounted to ₹ 16,000. The overheads chargeable to this order on the basis of direct materials will be___
(A) ₹ 8,000
(B) ₹ 9,000
(C) ₹ 8,500
(D) ₹ 9,800
Hint:
Overhead absorption rate = \(\frac{\text { Overheads }}{\text { Material }}\) × 100 = \(\frac{40,000}{80,000}\) × 100 = 50%
Overheads to be absorbed for given order = 16,000 × 50% = 8,000
Answer:
(A) ₹ 8,000

Question 82.
Dec 2014: If the selling price of a product is ₹ 85,800 and the profit margin on cost is 10%, the amount of profit will be___
(A) ₹ 7,800
(B) ₹ 8,580
(C) ₹ 7,200
(D) ₹ 9,533
Hint:
Profit is 10% on cost means 1/11th of the sale price.
Cost + Profit = Sales 100+ 10= 110
Profit = 85,800 × \(\frac{10}{110}\) = 7,800
Answer:
(A) ₹ 7,800

Question 83.
Dec 2014: Which of the following is to be included while preparing a cost sheet
(A) Interest paid
(B) Goodwill written-off
(C) Income-tax paid
(D) Salesman commission
Answer:
(D) Salesman commission

Question 84.
Dec 2014: Cost of production plus opening stock of finished goods minus closing stock of finished goods is equal to___
(A) Cost of goods sold
(B) Cost of sales
(C) Sales
(D) Prime cost
Answer:
(A) Cost of goods sold

Question 85.
Dec 2014: Which of the following is not a type of job costing
(A) Terminal costing
(B) Contract to cost
(C) Batch costing
(D) Operation costing
Answer:
(D) Operation costing

Question 86.
June 2015:
Networks cost: ₹ 3,00,000
Administrative overheads: ₹ 1,00,000
Opening stock of finished goods: Nil
Closing stock of finished goods: ₹ 20,000
Selling overheads: ₹ 10,000
From the above information, the cost of sales will be_____
(A) 4,30,000
(B) 3,90,000
(C) 3,70,000
(D) 4,10,000
Hint:
Overview of Cost – Corporate and Management Accounting MCQ 13
Answer:
(B) 3,90,000

Question 87.
June 2015: Following information is available regarding an organization:
Direct material purchased: ₹ 1,50,000
Direct material consumed: ₹ 80,000
Direct labour: ₹ 50,000
Direct expenses: ₹ 30,000
Manufacturing overheads: ₹ 20,000
The prime cost for the organization is –
(A) 1,60,000
(B) 2,90,000
(C) 2,30,000
(D) 1,80,000
Answer:
(A) 1,60,000

Question 88.
June 2015: If the sales of a product are ₹ 94,080 and the profit margin cost 12%, the amount of profit will be –
(A) ₹ 7,800
(B) ₹ 11,290
(C) ₹ 8,580
(D) ₹ 10,080
Hint:
Cost + Profit = Sales
100 + 12 = 112
Profit = 94,080 × \(\frac{12}{112}\) = 10,080
Answer:
(D) ₹ 10,080

Question 89.
Dec 2015: Item(s) excluded from the cost sheet are
(A) Direct material.
(B) Administrative overheads
(C) Provision for taxation
(D) All of the above
Answer:
(C) Provision for taxation

Question 90.
Dec 2015: The following information is extracted from the job ledger in respect of Job No. 404:
Material: ₹ 3,400
Wages: 80 hours @ ₹ 2.50 per hour
Variable overheads incurred for all jobs: ₹ 5,000 for 4,000 labour hours
If the job is billed for ₹ 4,200 the profit will be
(A) ₹ 600
(B) ₹ 500
(C) ₹ 700
(D) ₹ 650
Hint:
Overview of Cost – Corporate and Management Accounting MCQ 14
Answer:
(B) ₹ 500

Question 91.
June 2016: From the following particulars relating to Job No. 555, ascertain the total cost:
Direct materials 16,000
Direct labour 8,000
Direct expenses 1,600
Works overheads are recovered on the basis of 50% on prime cost and administrative overheads at 10% of works cost. Choose the correct option
(A) 45,000
(B) 45,240
(C) 42,240
(D) 43,000
Hint:
Overview of Cost – Corporate and Management Accounting MCQ 15
Answer:
(C) 42,240

Question 92.
June 2016: Direct material cost f 45,000; Direct labour cost is 40% of direct material cost; Royalties on production ₹ 4,000; Other direct expenses are 20% of prime cost. The prime cost will be
(A) ₹ 78,750
(B) ₹ 83,750
(C) ₹ 80,400
(D) None of the above
Hint:
Let the prime cost be ‘x’

Direct material 45,000
Direct labour 18,000
Royalties 4,000
Direct expense 0.2
x

45,000 + 18,000 + 4,000 + 0.2x = x
67,000 + 0.2x = x
67,000= 0.8x
x = 83,750
Answer:
(B) ₹ 83,750

Question 93.
June 2016: Cost of production for 10,000 units: ₹ 1,60,000
Opening stock of finished goods (1,000 units): ₹ 18,000
Closing stock of finished goods (FIFO): ₹ 2,000 units
Selling & distribution overheads: ₹ 2 per unit sold
Pro ht mark-up on selling price: 20%
The amount of profit will be____
(A) ₹ 39,800
(B) ₹ 40,500
(C) ₹ 41,000
(D) ₹ 40,800
Hint:
Overview of Cost – Corporate and Management Accounting MCQ 16
Answer:
(C) ₹ 41,000

Question 94.
Dec 2016: Following information is given:
Direct material purchased: ₹ 6,00,000
Direct material consumed : ₹ 7,00,000
Direct labour: ₹ 3,00,000
Direct expenses: ₹2,50,000
Manufacturing overheads: ₹ 3,00,000
Prime cost will be____
(A) ₹ 14,50,000
(B) ₹ 11,50,000
(C) ₹ 12,50,000
(D) ₹ 15,50,000
Hint:
Overview of Cost – Corporate and Management Accounting MCQ 17
Answer:
(C) ₹ 12,50,000

Question 95.
Dec 2016: Which of the following is not a part of the job order cost sheet___
(A) Direct material
(B) Direct labour
(C) Actual factory overheads
(D) Applied factory overheads
Answer:
(C) Actual factory overheads

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