2. All such expenses which are incurred for creating and enhancing the demands for the
products are
Correct : D. All of the above
3. To control costs it is essential to keep control on
Correct : B. Overheads
4. A cost that is easily traceable to a cost object is known as:
Correct : A. Direct cost
5. Which of the following best describes a fixed cost? A cost which:
Correct : A. Represents a fixed proportion of total costs
6. Which of the following is a valid classification of the salary paid to the foreman in
charge of the packing department?
Correct : D. Service department cost.
7. A cost that changes in total dollar amount with the change in the level of activity is
known as:
Correct : C. Variable cost
8. Which of the following costs is treated as indirect labour?
Correct : D. All of the above
9. Which definition best describes indirect costs?
Correct : B. Indirect costs are those costs which cannot be directly associated with a product or service.
10. What would be the most appropriate way of apportioning depreciation costs across
different manufacturing departments in a business?
Correct : C. Value of buildings and equipment
11. Which of the following cost is also known as overhead cost or on cost:
Correct : D. Indirect expenses
12. Which of the following calculate the actual cost of product:
Correct : D. None of these
13. Costing is specialized branch of accounting which deals with:
Correct : D. Classification, recording, allocation and directing
14. In cinema halls, composite cost unit is ________________:
Correct : A. A seat per show
15. The stage of production at which separate products are identified is known as
_______________:
Correct : A. Process costing
16. What item is not included in cost accounting?
Correct : B. Profit-sharing
17. A total of all the direct costs is known as
Correct : C. Prime cost
18. Which of the following is not included in functional classification of overheads?
Correct : D. Chargeable expenses
19. The process of distribution of overheads allotted to a particular department or cost
center over the units produced is called:
Correct : C. Absorption
20. A product with a high gross profit could be an unprofitable product.
Correct : B. False
21. To control costs it is essential to keep control on
Correct : D. All of the above
22. The overhead cost for a particular job =
Correct : A. man hour rate x man hours spent on that job
23. The following method is an improvement over the percentage on direct labour cost
method.
Correct : D. Man hour rate
24. Which of the following is/are the basic object/s of job analysis?
Correct : A. Determination of wage rates
25. An overhead absorption rate is used to:
Correct : C. Charge overheads to products
26. Economic Batch Quantity depends on ……………….and ……………..costs.
Correct : B. set-up costs, carrying
27. The wages paid to maintenance department workers who do repair work principally for production departments but also on the vehicles in the distribution department should be charged as
Correct : A. Service cost
28. Which of the following costs of management is likely to have least control?
Correct : A. Machine breakdown cost
29. Which of the following best describes a fixed cost? A cost which:
Correct : B. Remains at the same level up to a particular level of output.
30. Which of the following would not be considered as a component of 'cost'
of stock?
Correct : D. Salaries of selling staff
31. . Cost apportionment involves:
Correct : C. The allocation of direct costs to departments
32. . What would be the most appropriate way of apportioning depreciation costs across
different manufacturing departments in a business?
Correct : D. Value of land.
33. . Which of the following is a conventional method of ascertaining cost?
Correct : A. Absorption costing
34. . The total cost of a product will include:
Correct : C. Prime costs plus direct production overhead plus indirect production overhead
35. . Which of the following is not considered to be a benefit of activity-based costing?
Correct : D. More detailed understanding of what drives cost.
36. Wages paid to a labour who was engaged in production activities can be termed as.
Correct : A. direct cost.
37. . The cost which is to be incurred even when a business unit is closed is a.
Correct : D. shutdown cost
38. . Which of the following best describes a fixed cost? A cost which:
Correct : D. The number of units produced being greater than budget.
39. . Which of the following is most likely to be an allocated production
overhead cost to the finishing cost centre?
Correct : C. Power used on finishing cost centre machines.
40. Wages paid to a office cleaning staff who was engaged in Administration activities a
can be termed as.
Correct : B. indirect cost
41. Overhead is the cost incurred in the course of making a product, providing a service or running a department, but which cannot be traced directly and in full to the product, service or department.
Correct : A. Correct
42. Indirect expenses are also known as overheads.
Correct : A. True
43. Overhead is actually the total of:
Correct : D. All of the above
44. Overhead costs may be classified according to the function of the organization as:
Correct : C. Both A&B
45. . Production Overheads are costs related to the production process other than direct labour and materials. They are also known as factory overheads since they are incurred inside the factory, other overheads such as selling and administrative overheads are always charged to in the period in which they are incurred
Correct : A. The above statement is true
46. Production overheads represent indirect materials, indirect wages and indirect expenses attributable to:
Correct : C. Both A&B
47. Indirect production costs are incurred in three main ways:
• Production activities: costs arising in production departments such as fuel, depreciation, supervision • Service activities: the cost of operating non-producing departments such as materials handling, canteen • Establishment costs: general production overheads such as factory rent/rates, heating and lighting
Correct : A. True
48. Which of the following procedure is incorrect for attributing overhead costs to cost units?
I. Collecting production overhead costs by item II. Establishing cost centres III. Allocating and apportioning overhead costs to cost centres IV. Apportioning service cost centre costs to production cost centres V. Absorbing production cost centre costs into cost units
Correct : A. All of the above are correct
49. . The total amount of factory overhead represents:
Correct : D. All of the above
50. Allocation is where overheads are allocated to cost centres. If a cost centre is responsible for the entire cost of an item of expenditure, the entire cost is charged directly to the cost centre.
Correct : A. Correct
51. Apportionment means sharing on a reasonable basis. Many overhead costs are costs that cannot be allocated directly to one cost centre, because they are shared by two or more cost centres. These costs are apportioned between the cost centres.
Correct : B. Correct
52. Absorption is also called:
Correct : C. Overhead recovery
53. When overheads have been allocated and apportioned to production cost centres, they are charged to the cost of products manufactured in the cost centre.
Correct : A. The above statement is correct
54. Production overheads are the overhead costs of both the production departments
and the service departments.
Correct : B. True
55. The apportionment of production overhead costs might be in two stages:
• sharing (or dividing) general costs between production centres and service centres; and • then sharing the costs of the service centres between the production centres.
Correct : A. Correct
56. Sharing the costs of the service centres between the production centres is called:
Correct : B. Reallocation
57. The total overhead costs of each production centre should be:
Correct : C. A share of the costs of each service department, apportioned to the production centre
58. The absorption rate may be calculated by the fraction:
• Total overhead costs • Total of absorption basis.
Correct : A. Correct
59. Overheads can be absorbed into cost units by means of:
• Physical unit produced • Percentage of prime cost • Percentage of direct wages • Direct labour hour rate • Machine hour rate
Correct : A. All of the above
60. The purpose of allocation and apportionment of overheads is to calculate an absorption rate for each production department.
Correct : A. False
61. Absorption rates are used to add overhead costs to:
Correct : B. Other expenses
62. A situation may arise where both service departments do work for the other service department, as well as the production departments. The secondary apportionment is more complex. The process is called reciprocal apportionment
Correct : A. The above statement is correct
63. The reciprocal apportionment and can be done using:
Correct : B. Simultaneous equations method
64. A single overhead absorption rate might be used for all the production
departments in the factory.
Correct : A. True
65. Single overhead absorption rate is also known as:
Correct : B. Factory-wide absorption rate
66. A blanket overhead absorption rate is an absorption rate used throughout a factory and for all jobs and units of output irrespective of the department in which they were produced.
Correct : A. True
67. Blanket overhead rates are not appropriate in the following circumstances.
Correct : B. Jobs do not spend an equal amount of time in each department
68. Administration overheads and sales and distribution overheads are not absorbed into product costs. Instead, they are treated in full as an expense in the financial period to which they relate.
Correct : A. The above statement is correct
69. Non-production overhead costs are never added to the value of inventory.
Correct : A. False
70. It is possible to add non-production overheads to the full production cost of units produced and sold (i.e. No cost will be carried forward to the next period in the form of closing stock), to obtain a full cost of sale.
Correct : A. True
71. Overhead absorption is the process whereby overhead costs allocated and apportioned to production cost centres are added to unit, job or batch costs.
Correct : A. True
72. Overhead absorption is sometimes called overhead recovery.
Correct : B. True
73. Overheads are usually added to cost units using a predetermined overhead
absorption rate, which is calculated using figures from the budget.
Correct : B. True
74. Predetermined absorption rates is where, the absorption rate calculated in
advance using estimates for cost and production volume in the annual financial plan or budget.
Correct : A. Correct
75. A predetermined overhead absorption rate is also known as:
Correct : C. The fixed overhead applied
76. If the amount of production overheads absorbed into product costs is more than
the actual production overhead expenditure, there is:
Correct : A. Over-absorbed overhead
77. The over-absorbed overhead is accounted for as an adjustment to the profit in
the period, and is added to profit in the cost accounting income statement.
Correct : A. Correct
78. Under or over absorption is caused by the actual fixed overhead and production
volume being different from those figures used to calculate the predetermined rate.
Correct : B. True
79. Identify the circumstances where under- or over-recovery of overhead will occur:
Correct : C. Actual overhead costs and actual activity level differ from the budgeted costs and level
80. Variable overhead is overhead that increases as more production work is done.
Total variable overhead expenditure therefore depends on the volume of production. Variable overhead is usually calculated as an amount for each direct labour hour worked.
Correct : A. The above statement is correct
81. The loss incurred on an incomplete contract is transferred to …………….account.
Correct : A. Costing profit and loss account
82. When the completion stage of the contract is more than half, the profit to be credited
to Profit and Loss account will be equal to…………..
Correct : C. 2/3rd of Notional profit x cash received Work certified
83. If the amount of work certified is less than………of the contract price,then no profit
should be taken to Profit & Loss Account.
Correct : B. 25%
84. Contract costing is not used in one of the following industries.
Correct : C. Automobiles
85. The sum of value of work certified and uncertified appearing in the Contract Account
is called ……………..
Correct : D. Work in Progress
86. Total costs incur in a production process, is divided by total number of output units to
calculate the
Correct : A. unit costs
87. If beginning work in process equivalent units are 2500 units, work done in current period equivalent units are 3800 units and ending work in process equivalent units are 5000, then complete equivalent units in current period are
Correct : B. 1300 units
88. WIP in contract means:
Correct : B. Work certified and work uncertified
89. Profit remaining as reserve is :
Correct : C. Not taken into account.
90. Profit in incomplete contract in known as notional profit because:
Correct : D. The profit is only an approximation.
91. The contract undertaken are completed away from the ………………premises.
Correct : A. Contractors
92. A contract is generally of ………………..duration.
Correct : A. Long
93. Escalation clause is generally included in case of …………..contract agreement .
Correct : C. Fixed Price
94. Cost -plus- contract are undertaken for production of ……………….products.
Correct : D. Highly specialized
95. Retention money serves as a ………with the contractee.
Correct : A. Security
96. When cash ratio is …….. retention money is 13%.
Correct : B. 87%
97. Work certified in a subsequent year is always ……………… than that the in
preceding year.
Correct : A. Greater
98. Cost of defective materials should be……………………to costing P/L account
and……………….to contract account.
Correct : A. Debited, Credited
99. Escalation Clause aims at safeguarding the interest of the ……………….against unforeseen rise in cost.
Correct : A. Contractor.
100. Sub contract cost is always to be treated as ……………….to the contract.