Year: TYBCom

Subject: Costing (Objectives)

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Introduction to Cost Accounting

1) Cost Accounting is directed towards the needs of

c) Internal users
a) Government
b) External users
d) Shareholders
2) Measurement, in monetary terms, of the amount of resources used for the purpose of production of goods or
rendering services is known as
c) Cost
a) Revenue expenditure
b) Capital expenditure
d) None of the above
3) Process of ascertainment of costs is known as
a) Costing
c) Cost control
b) Cost reporting
d) None of the above
4) Cost Accounting covers
a) The preparation of statistical data
b) The application of cost control methods
c) The ascertainment of the profitability of activities carried out or planned
d) All of above
5) Cost behavior refers to
a) How costs react to a change in the level of activity
b) Classifying costs as either product or period costs
c) Verifying legitimacy of costs
d) Whether a cost is incurred in a manufacturing, trading or service company
6) A cost per unit which increases or decreases when volume of output increases or decreases is known as
a) Fixed cost
c) Semi-variable cost
b) Variable cost
d) None of the above
7) Variable cost per unit
a) Varies with output
c) Increases when output increase
b) Remains constant
d) Decreases when output decrease
8) If level of activity increases,
a) variable cost per unit and total fixed costs increase
b) fixed cost per unit and total variable cost increase
c) total variable cost increase and fixed cost per unit will decrease
d) variable cost per unit and total cost increase
9) If level of activity decreases,
a) variable cost per unit and total fixed costs increase
b) fixed cost per unit and total variable cost increase
c) total variable cost increase and fixed cost per unit will decrease
d) total variable cost decrease and fixed cost per unit will increase
10) When 5,000 units are produced, total fixed cost was Rs. 50,000. Therefore, when 10,000 units are produced
a) Total fixed cost will be Rs. 1,00,000
c) Fixed cost per unit will remain at Rs. 10
b) Total fixed cost will remain at Rs. 50,000
d) Fixed cost per unit will increase to Rs. 20
11) When 50,000 units are produced, total fixed cost was Rs. 5,00,000. Therefore, when 1,00,000 units are produced
a) Total fixed cost will be Rs. 10,00,000
c) Fixed cost per unit will remain at Rs. 10
d) Fixed cost per unit will fall to Rs. 5
b) Total fixed cost will increase by Rs. 5,00,000
12) Costs that are ascertained after they have been incurred are known as
c) Historical costs
a) Imputed costs
b) Sunk costs
d) Opportunity costs
13) Raw material consumed + Direct wages + Direct expenses =

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Year: TYBCom
Subject: Costing (Objectives)

14)

15)

16)

17)

18)

19)

20)

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a) Prime cost
c) Cost of production
b) Factory cost
d) Cost of sales
Prime Cost + Factory overheads Sale of scrap =
a) Prime cost
c) Cost of production
b) Factory cost
d) Cost of sales
Factory cost + Office overheads + Selling overheads =
a) Prime cost
c) Cost of production
d) Cost of sales
b) Factory cost
Which of the following expenses are not considered in financial accounting but taken in cost accounting?
a) Opportunity cost
c) Sunk cost
b) Imputed cost
d) Marginal cost
Indirect costs are known as
c) Overheads
a) Variable costs
b) Fixed costs
d) Semi-variable costs
Classification of costs into Fixed, Variable and Semi-variable is
a) Classification by nature
c) Classification by function
b) Classification by behavior
d) Classification by value
Classification of costs into Prime cost, Factory overheads, Office overheads and Selling overheads is
c) Classification by function
a) Classification by nature
b) Classification by behavior
d) Classification by value
Classification of costs into Direct and Indirect costs is
a) Classification by nature
c) Classification by function
b) Classification by behavior
d) Classification by value

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Year: TYBCom
Subject: Costing (Objectives)

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Material, Labour and Overheads Costing

1) Inventories should be out of godown in the sequence in which they arrive is based on
a) FIFO
c) HIFO
b) LIFO
d) Weighted average
2) Under inflationary conditions, ___________ method will show highest value of closing stock
a) FIFO
c) Weighted Average
b) LIFO
d) HIFO
3) When prices fluctuate widely, the method that will smooth out the effect of fluctuations is
a) Simple average price
c) Moving average price
b) Weighted average price
d) Inflated price
4) In which of the following methods, issues of materials are priced at pre-determined rate?
a) Inflated price method
c) Replacement price method
b) Standard price method
d) Specific price method
5) Which of the following is considered to be the normal avoidable loss of materials?
c) Loss due to negligent handling of materials
a) Loss due to humidity
b) Loss due to flood
d) All of these
6) The reorder level is
a) The number of units that should be ordered
c) The safety stock plus the average inventory
b) The level of inventory when next order
d) Both (b) and (c)
should be placed
7) Which of the following methods of stock control aims at concentrating efforts on selected items of materials on the
basis of investment involved?
a) Perpetual inventory system
c) Maximum, minimum and re-order level setting
d) ABC analysis
b) Materials turnover
8) A system which provided a continuous record of the balance of each inventory is known as
a) Periodic inventory system
c) ABC analysis
b) Perpetual inventory system
d) None of the above
9) Bin card is maintained by the
c) Stores
a) Accounts department
b) Costing department
d) None of the above
10) Bin card contains
a) Details of the price of raw material lying in the Bin
b) Details of the price and quantity of raw material lying in the Bin
c) Details of quantity of material lying in the Bin
d) None of the above
11) Which of the following is usually prepared daily by employees for each job on
a) Labour job card
c) Time card
b) Punch card
d) Cost control card
12) Wages sheet is prepared by
c) Payroll department
a) Time-keeping department
b) Personnel department
d) Cost accounting department
13) Time lost due to strike is
a) Abnormal idle time
c) Normal overtime
b) Normal idle time
d) Abnormal overtime
14) Labour turnover is measured by
a) Numbers of workers replaced / average number of workers on roll
b) Number of workers left / number in the beginning plus number at the end

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c) Number of workers joining / number in the beginning of the period

d) All of these
15) Labour efficiency is measured by comparing
a) Actual time with standard time
b) Actual labour cost with Standard labour cost
c) Added value for the product with total wage cost
d) None of these
16) Which of the following methods of wage payment is most suitable where quality and accuracy of work is of
primary importance?
a) Piece rate system
c) Differential piece work system
b) Time rate system
d) Halsey premium system
17) Under the high wage plan, a worker is paid
a) at a time rate higher than the usual industry
c) at a double rate for overtime
rate
d) normal wages plus bonus
b) according to his efficiency
18) In which of the following incentive plans of wage payment, wage on time basis are NOT guaranteed?
c) Taylors differential piece rate
a) Halsey plan
b) Rowan plan
d) Gantts task and bonus system
19) Under Emersons efficiency system, no bonus is payable when efficiency is upto
a) 50%
c) 83.33%
d) 100%
b) 66.67%
20) When the amount of overhead absorbed is less than the amount of overhead incurred, it is called
a) Under-absorption of overhead
b) Over-absorption of overhead
c) Primary distribution of overheads
d) secondary distribution of overhead

Fill in the Blanks:

1) Cost of IDLE time arising due to non-availability of raw materials is charged to Costing Profit & Loss A/c.
2) Wages Sheet is prepared by Payroll department.
3) Labour productivity is measured by comparing any of these:
Actual time with standard time
Total output with total man hours
Added value for the product with total wage cost
4) Labour turnover is Change in labour force
5) IDLE time means time spent by workers off their work
6) OVER time means actual hours being more than normal time
7) Piece workers are paid on the basis of Output produced
8) Time wages are paid on the basis of Actual time worked
9) Differential piece wages means different wages for different level of performance
10) Time and Motion study is conducted by Engineering Dept.
11) Halsey Premium plan is Individual Incentive Scheme
12) Bonus under Rowan scheme is paid as a proportion of actual time taken to standard time allowed
13) Under Emersons Efficiency system, no bonus is payable when efficiency is upto 66 2/3 %
14) The allotment of whole items of cost centres or cost units is called Cost allocation
15) Absorption means charging of overheads to cost units

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16) When the amount of overhead absorbed is less than the amount of overhead incurred, it is called Underabsorption of overhead
17) When the amount of overhead absorbed is more than the amount of overhead incurred, it is called Overabsorption of overhead
18) Bad Debt is an example of Selling Overheads
19) Machine hour rate is a scientific and accurate method of absorption of factory overheads.
20) The term cost allocation is described as the costs that can be identified with specific cost centers

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COST SHEET & RECONCILIATION STATEMENT

1) Form of specific order costing where work is undertaken to customers special requirements and each order is
comparatively of short duration.
a) Job Order costing
c) Contract costing
b) Batch costing
d) Process costing
2) Form of specific order costing which consists of a group of similar articles which maintains its identity throughout
one or more stages of production.
a) Job Order costing
c) Contract costing
b) Batch costing
d) Process costing
3) Which of the following items is not included in preparation of a cost sheet?
a) Carriage inward
c) Sales commission
d) Interest paid
b) Purchase returns
4) Which of the following items is not excluded in preparation of a cost sheet?
c) Property tax on Factory building
a) Goodwill written-off
b) Provision for taxation
d) Transfer to reserves
5) Which of the following are direct expenses?
a) Cost of special designs, drawings or
c) Salesmans wages
layouts
d) Rent, rates and insurance of a factory
b) Depreciation on plant & machinery
6) Research and Development cost relating to an existing product
a) Shall be treated as Capital expenditure
b) Shall be treated as Deferred revenue expenditure
c) Shall be treated as direct expense
d) Shall be ignored
7) Warehouse expense is an example of
c) Distribution overhead
a) Production overhead
b) Office overhead
d) None of these
8) Which of the following is not a component of prime cost?
a) Direct materials
c) Direct expenses
d) Factory overheads
b) Direct labour
9) Overheads consists of all the following except.
c) Direct labour
a) Indirect materials
b) Factory utilities
d) Indirect labour
10) Which of the following is an example of imputed (notional) cost?
a) Rent on owned property
c) Rent on rented premises
b) Depreciation on building owned by business
d) Hire charges of equipments
11) Cost of Production Administration overheads = ___________
c) Works Cost
a) Prime Cost
b) Cost of Sales
d) Work-in-Progress
12) In Cost sheet, abnormal costs e.g. due to accident shall be
a) Added to cost of production
c) Deducted from sales
d) Ignored
b) Deducted from cost of production
13) Calculate sales, when cost is Rs. 75,000 and profit margin is 25%
a) 93,750
c) 90,000
b) 1,00,000
d) 80,000
14) In reconciliation statement, notional rent considered in costing is
a) Added to costing profit
b) Deducted from costing profit

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c) Added to financial profit

d) Deducted from financial loss
15) In Reconciliation statement, undervaluation of closing stock in financial accounts is
a) Deducted from financial profit
c) Added to costing profit
b) Added to financial profit
d) Added to financial loss
16) In reconciliation statement, depreciation undercharged in cost accounts is
c) Deducted from costing profit
a) Added to costing profit
b) Deducted from costing loss
d) Deducted from financial profit
17) In reconciliation statement, share transfer fees not recorded in costing shall be
a) Added to financial loss
c) Added to financial profit
b) Deducted from financial loss
d) Deducted from costing profit
18) In reconciliation statement, administrative overheads overcharged in cost accounts shall be
a) Added to costing loss
b) Deducted from costing profit
c) Added to financial loss
d) Deducted from costing loss
19) In reconciliation statement, selling and distribution overheads unrecorded in cost accounts shall be
a) Added to costing loss
c) Added to financial loss
b) Deducted from costing profit
d) Deducted from costing loss
20) In reconciliation statement, sales under-recorded in cost accounts shall be
a) Added to costing loss
b) Deducted from financial loss
c) Added to financial profit
d) Added to costing profit

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