2. Standards that can be attained only under the best circumstances are referred to as:
Correct : C. Ideal standards
3. Which of the following equations can be used to calculate a material price variance?
Correct : A. (AQ X AP) – (AQ X SP)
4. Who is most likely to be held responsible for a material price variance?
Correct : C. Purchasing managers
5. Which of the following equations can be used to calculate a material quantity variance?
Correct : C. (AQ X SP) – (SQ X SP)
6. To produce a particular batch of product, Falcon Corporation paid its workers 12.00 per hour for 4,000
hours of work. The standards for the quantity of work represented by the batch were 12.50 per hour and 4,400 hours. What was the labour efficiency variance?
Correct : B. 5,000.00 favourable
7. The firm’s direct-labour rate variance was 4,800 unfavourable. Actual labour was 24,000 direct-labour
hours, at a cost of 1,68,000, for 25,000 units of finished product that require 1 hour of direct labour each, at standard. What is the standard rate per direct-labour hour?
Correct : D. Cannot be determined from the information given
8. Which of the following is not an advantage of standard costing?
Correct : C. It provides a mean of performance evaluation and employee rewards
9. Which of the following is NOT a criticism of a standard-costing system?
Correct : B. Variances calculated under standard-costing come too late to be useful
10. The organization budgeted 400,000 for 40,000 hours of direct labour to complete 16,000 units of
finished product. The firm used 42,000 direct-labour hours and completed 17,000 units of finished product. What is the direct-labour rate variance?
Correct : C. 25,000 unfavourable
11. The monetary value attributed to normal losses in a process should be:
Correct : D. A nil share of process costs which have been reduced by the scrap value of the normal loss.
12. An abnormal gain in a process occurs in which of the following situations?
Correct : C. When actual losses are less than the normal level.
13. Where process scrap is recycled for use in conjunction with new material as well as being so externally, which of the following is most likely to be the value at which is debited to the process?
Correct : A. At the same price as it sold externally
14. Which of the following is the best explanation of the relevance of equivalent production units in process costing?
Correct : B. The conversion partly completed units into an equivalent number of completed units in order that costs may be shared on an equitable basis.
15. Purchased materials are added in the second department of a three-department process, this order does
not increase the number of units produced in the second department and would:
Correct : D. Increase total unit cost.
16. The physical flow of units into and out of departments is shown on the:
Correct : A. Quantities schedule.
17. Purchased materials are added in the second department of a three-department process; this
increases the number of units produced in the second department and would always:
Correct : B. Cause no adjustment to the unit cost transferred in from the first department.
18. An equivalent unit of material or conversion cost is equal to:
Correct : A. The amount of material conversion cost necessary to complete one unit of production.
19. Financial Accounting is concerned with the:
Correct : C. recording of day-to-day business transactions
20. The nature of financial accounting is:
Correct : A. historical
21. The main object of cost accounting is:
Correct : C. to ascertain true cost of products and services
22. Cost accounting emerged mainly on account of:
Correct : D. Limitations of financial accounting
23. Advantages of cost accounting system accrue:
Correct : D. to management, workers, consumers and government
24. Cost Accounting is applied to:
Correct : D. Manufacturing and services concerns
25. A colliery company employs:
Correct : D. Single Costing
26. Marginal Costing is concerned with:
Correct : B. Variable Costs
27. A biscuit manufacturing concern employs:
Correct : C. Batch Costing
28. A just in time manufacturing system should lead to:
Correct : D. Lower stock holding costs being incurred
29. TQM revolves around the concept of:
Correct : D. Getting things right first time
30. Which of the following management accounting systems places a very strong emphasis on
incorporating external data into the preparation of management reports?
Correct : C. Strategic management accounting
31. What term is given to the idea that traditional budgeting should be replaced by a new type of budgeting?
Correct : B. Beyond budgeting
32. Which of the following statements is true?
Correct : B. Professional accountancy bodies are encouraging the development of environmental reporting
33. What term best describes the use of both financial and non-financial measures in assessing
whether an entity has achieved its objectives?
Correct : C. performance measurement
34. Which management accounting technique is sometimes referred to as super variable costing?
Correct : A. Throughput accounting
35. Which management accounting technique involves the identification of value adding activities?
Correct : D. Value chain analysis
36. Which one of the following items is relatively unimportant in decision making?
Correct : D. Accruals and prepayments
37. What is an alternative term for expected value?
Correct : D. Weighted average
38. Which of the following cost classification categories is almost identical to a relevant cost?
Correct : D. Avoidable cost
39. Which costs may normally be ignored when determining whether to close a factory for a short period?
Correct : A. Fixed costs
40. What is the minimum cost below which a company would be unwilling to price a one-off special contract?
Correct : C. Variable cost
41. What is the ideal transfer price?
Correct : D. Opportunity cost
42. In what circumstances might a company be prepared to price a special contract at less than its
relevant cost?
Correct : C. In the expectation that additional profitable orders will be placed by the same customer
43. The standard cost of a product is:
Correct : D. The planned unit cost of products produced during a particular period
44. What term is used to describe the level of efficiency achieved that appropriately trained, motivated and resourced employees can achieve in the long-run?
Correct : B. Standard hours
45. A standard that represents the most likely scenario can be referred to as the:
Correct : B. Attainable standard
46. When calculating cost variances under a standard costing system we must:
Correct : D. Compare actual outputs against budgeted outputs
47. When carrying out variance analysis ideally, we should:
Correct : A. Look at controllable adverse and favourable variances that are over a predetermined amount
48. The efficiency ratio can be defined as:
Correct : A. Actual hours worked / budgeted labour hours
49. The labour rate variance can be calculated by the following equation:
Correct : A. (Standard hours - actual hours) x actual wage rate
50. In August actual material used amounted to 5,650 kg, budgeted output was 1,000 units and standard material usage was 5 kg per unit. Actual output was 1,075 units. If the standard material cost of each product is 25 the material efficiency variance will be:
Correct : C. 3,250 adverse
51. During July actual labour costs amounted to 19,800, the standard rate of pay was 4.50 per hour
and the labour rate variance amounted to 225 adverse. The actual hours worked were:
Correct : A. 4,400
52. An adverse material usage variance together with a favourable materials price variance could suggest that:
Correct : A. We are paying the same for our materials but we are using more than expected
53. An adverse labour efficiency variance together with a favourable labour rate variance may mean that:
Correct : C. Less skilled staff are being used in production
54. The formula for calculating the variable overhead total variance is:
Correct : B. Actual variable overhead less (actual hours x actual hours worked x variable overhead absorption rate)
55. The formula for calculating the fixed overhead volume variance is:
Correct : D. Budgeted fixed expenditure less (standard hours x actual production x fixed overhead expenditure variance)
56. -------- are the factor which have direct cause and effect relationship with cost
Correct : C. Cost driver
57. ------------ is also known as ‘Transaction Costing’.
Correct : D. Activity based costing
58. ----------- is maximum permissible cost in a competitive business environment.
Correct : B. Target cost
59. Promoters of Activity based Costing was /were----------
Correct : A. Kaplan and Cooper
60. In innovative cost management terminologies ‘BPR’ stands for?
Correct : C. Business Process Re-engineering
61. A cost centre is:
Correct : C. An area for which costs are accumulated
62. An investment centre is a responsibility centre where the manager has control of:
Correct : C. Costs, profits and assets
63. Responsibility accounting aims to:
Correct : A. Ensure that costs become the responsibility of a specific manager
64. Prime cost can be defined as:
Correct : B. The total direct costs of manufacturing a product
65. Which of the following best describes a fixed cost?
Correct : D. Remains constant irrespective of the level of activity
66. Direct labour costs will include:
Correct : C. Total direct labour hours at the normal hourly rate of pay
67. The company which applied first ‘Just in Time’ in its manufacturing is---------
Correct : C. Toyota
68. ----------- is developed on the concept ‘inventory is evil’.
Correct : B. JIT
69. JIT was first developed by:
Correct : A. Taiichi Ohno
70. “Kanban’ system is similar to ---------- philosophy
Correct : C. Just in Time
71. Which of the following is / are the method of establishing ‘target cost’?
Correct : D. All of these
72. Accumulated cost of an activity called------------ in Activity based costing.
Correct : D. Cost Pool
73. ------------ is regarded as ‘Price-led costing’.
Correct : B. Target costing
74. Upstream cost, Down stream cost etc., are the concepts in---------------.
Correct : C. Life cycle costing
75. When output in relation to the input is expressed mathematically it is called as----------
Correct : C. Productivity index
76. If Profit divided by the capital employed, it reveals--------------
Correct : D. None of these
77. The type of spoilage that should not affect the cost of inventories is
Correct : A. Abnormal spoilage
78. Materials may not be put into process
Correct : D. In the shipping department.
79. Process cost method is especially suitable for
Correct : C. Standard costs
80. In process costing, costs follow
Correct : B. Product flow
81. When average costing is used, the opening inventory costs are
Correct : A. Kept separate from the costs for the new period
82. A disadvantage of FIFO costing is that
Correct : B. Several units’ costs are used at the same time.
83. Which of the following method of costing can be used in a large oil refinery?
Correct : A. Process costing
84. Which of the following pair is odd one?
Correct : C. Brick manufacturing – Process costing
85. A product which has practically no sales or utility value is--------
Correct : A. Waste
86. Trimmings in timber industry should be treated as a---------
Correct : C. Scrap
87. The type of process loss that should not affect the cost of inventory is
Correct : A. Abnormal loss
88. The stage where joint products are separated from each other is known as--------
Correct : C. split-off point
89. Fifty units are put in a process at a total cost of Rs. 90. Wastage is normally 10% without any scrap
value. If output is 40 units the amount of abnormal loss would be-----------
Correct : B. Rs. 10
90. Abnormal loss is charged to--------------
Correct : B. costing profit and loss account
91. Classification and accumulation of costs by fixed and variable costs is a distinctive feature of-----------
Correct : C. Operating costing
92. Composite unit is distinctive feature of-------
Correct : D. Operating costing
93. Electricity generating company should employ----------
Correct : C. Operating costing
94. Cinema houses must adopt-------
Correct : A. Operating costing
95. For a library the best method of costing suitable is-----------
Correct : B. Operating costing
96. For an educational institute the right method of costing is------------
Correct : B. Job costing
97. Hospitals must make use of-----------
Correct : A. Operating costing
98. For hotels the best method of costing is----------
Correct : D. Operating costing
99. Flight/Air services must make use of-----------