110+ Cost Management Solved MCQs

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1.

Which of the following is true of standards?

A. Standards represent a benchmark or a norm
B. Standards relate to input quantity
C. Standards relate to input cost
D. All of the above
Answer» D. All of the above
discuss
2.

Standards that can be attained only under the best circumstances are referred to as:

A. Attainable standards
B. Budget standards
C. Ideal standards
D. Practical standards
Answer» C. Ideal standards
discuss
3.

Which of the following equations can be used to calculate a material price variance?

A. (AQ X AP) – (AQ X SP)
B. (AP X SP) – (AQ X SP)
C. (AQ X SP) – (SQ X SP)
D. (AQ X SP) – (AQ X AP)
Answer» A. (AQ X AP) – (AQ X SP)
discuss
4.

Who is most likely to be held responsible for a material price variance?

A. Line workers
B. Production supervisors
C. Purchasing managers
D. Production schedulers
Answer» C. Purchasing managers
discuss
5.

Which of the following equations can be used to calculate a material quantity variance?

A. (AQ X AP) – (AQ X SP)
B. (AP X SP) – (AQ X SP)
C. (AQ X SP) – (SQ X SP)
D. (AQ X SP) – (AQ X AP)
Answer» C. (AQ X SP) – (SQ X SP)
discuss
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?

A. 2,000.00 favourable
B. 5,000.00 favourable
C. 5,000.00 unfavourable
D. None of these
Answer» B. 5,000.00 favourable
discuss
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?

A. 7.20
B. 6.80
C. 7.00
D. Cannot be determined from the information given
Answer» D. Cannot be determined from the information given
discuss
8.

Which of the following is not an advantage of standard costing?

A. It provides a basis for sensible cost comparisons
B. It enables managers to employ management by exception
C. It provides a mean of performance evaluation and employee rewards
D. It is usually less expensive than actual or normal costing
Answer» C. It provides a mean of performance evaluation and employee rewards
discuss
9.

Which of the following is NOT a criticism of a standard-costing system?

A. It is more expensive than other systems
B. Variances calculated under standard-costing come too late to be useful
C. It can cause dysfunctional behaviour in a JIT/FMS environment
D. Traditional cost variances are not tied to specific product line
Answer» B. Variances calculated under standard-costing come too late to be useful
discuss
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?

A. 20,000 unfavourable
B. 25,000 favourable
C. 25,000 unfavourable
D. Cannot be determined from the information provided
Answer» C. 25,000 unfavourable
discuss
11.

The monetary value attributed to normal losses in a process should be:

A. A share of the process cost according to the stage of completion of the losses.
B. A nil value with no other monetary adjustment under any circumstances.
C. A full share of process cost on the same as good output.
D. A nil share of process costs which have been reduced by the scrap value of the normal loss.
Answer» D. A nil share of process costs which have been reduced by the scrap value of the normal loss.
discuss
12.

An abnormal gain in a process occurs in which of the following situations?

A. When actual losses are greater than the normal loss level.
B. When costs are reduced through increased machine speed.
C. When actual losses are less than the normal level.
D. When the process output is greater than planned.
Answer» C. When actual losses are less than the normal level.
discuss
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?

A. At the same price as it sold externally
B. At the cost of normal losses.
C. At the cost attached to abnormal losses
D. Nil value.
Answer» A. At the same price as it sold externally
discuss
14.

Which of the following is the best explanation of the relevance of equivalent production units in process costing?

A. A means of equalising production charged into stock each period.
B. The conversion partly completed units into an equivalent number of completed units in order that costs may be shared on an equitable basis.
C. The expression of losses in terms of an equivalent number of units of good production in order that their value may be calculat
Answer» B. The conversion partly completed units into an equivalent number of completed units in order that costs may be shared on an equitable basis.
discuss
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:

A. Not change the amount transferred to the next department.
B. Decrease total work in process inventory.
C. Increase the factory overhead portion of the ending work-in-process inventory.
D. Increase total unit cost.
Answer» D. Increase total unit cost.
discuss
16.

The physical flow of units into and out of departments is shown on the:

A. Quantities schedule.
B. Equivalent production schedule.
C. Cost of account for schedule.
D. Cost of Accounted for schedule.
Answer» A. Quantities schedule.
discuss
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:

A. Change the direct labour cost percentage in the ending work-in-process inventory.
B. Cause no adjustment to the unit cost transferred in from the first department.
C. Increase total units costs.
D. Decrease total ending work-in-process inventory.
Answer» B. Cause no adjustment to the unit cost transferred in from the first department.
discuss
18.

An equivalent unit of material or conversion cost is equal to:

A. The amount of material conversion cost necessary to complete one unit of production.
B. A unit of work-in-process inventory.
C. The amount of material or conversion cost necessary to start a unit of production into work in process inventory.
D. Fifty percent of material or conversion cost of a unit to finished goods inventory.
Answer» A. The amount of material conversion cost necessary to complete one unit of production.
discuss
19.

Financial Accounting is concerned with the:

A. recording of business expenses and revenues
B. recording of the cost of products and services
C. recording of day-to-day business transactions
D. none of the above
Answer» C. recording of day-to-day business transactions
discuss
20.

The nature of financial accounting is:

A. historical
B. forward-looking
C. analytical
D. social
Answer» A. historical
discuss
21.

The main object of cost accounting is:

A. to record day-to-day transactions of the business
B. to reveal managerial efficiency
C. to ascertain true cost of products and services
D. to determine tender price
Answer» C. to ascertain true cost of products and services
discuss
22.

Cost accounting emerged mainly on account of:

A. Statutory requirements
B. Competition in the market
C. Labour unrest
D. Limitations of financial accounting
Answer» D. Limitations of financial accounting
discuss
23.

Advantages of cost accounting system accrue:

A. only to workers
B. only to government
C. only to consumers
D. to management, workers, consumers and government
Answer» D. to management, workers, consumers and government
discuss
24.

Cost Accounting is applied to:

A. Public undertakings only
B. Large business enterprises only
C. Small business enterprises only
D. Manufacturing and services concerns
Answer» D. Manufacturing and services concerns
discuss
25.

A colliery company employs:

A. Contract Costing
B. Batch Costing
C. Operating Costing
D. Single Costing
Answer» D. Single Costing
discuss
26.

Marginal Costing is concerned with:

A. Fixed Costs
B. Variable Costs
C. Semi-fixed Costs
D. None of the above three
Answer» B. Variable Costs
discuss
27.

A biscuit manufacturing concern employs:

A. Operating costing
B. Departmental Costing
C. Batch Costing
D. Contract Costing
Answer» C. Batch Costing
discuss
28.

A just in time manufacturing system should lead to:

A. A wider range of stock items being made available
B. An increase in the number of suppliers of stocks.
C. Higher levels of stock being held in the warehouse
D. Lower stock holding costs being incurred
Answer» D. Lower stock holding costs being incurred
discuss
29.

TQM revolves around the concept of:

A. Providing adequate back up support once the product leaves the factory
B. Recruiting the best managers in their field
C. Making the best quality products regardless of the cost
D. Getting things right first time
Answer» D. Getting things right first time
discuss
30.

Which of the following management accounting systems places a very strong emphasis on incorporating external data into the preparation of management reports?

A. Sales variance analysis
B. Activity based management
C. Strategic management accounting
D. Flexible budgeting
Answer» C. Strategic management accounting
discuss
31.

What term is given to the idea that traditional budgeting should be replaced by a new type of budgeting?

A. Behavioural budgeting
B. Beyond budgeting
C. Flexible budgeting
D. Better budgeting
Answer» B. Beyond budgeting
discuss
32.

Which of the following statements is true?

A. There is an accounting standard covering environmental reporting
B. Professional accountancy bodies are encouraging the development of environmental reporting
C. By law company directors must report to shareholders on environmental matters.
D. The Chartered Institute of Management Accountants (CIMA) requires its members to prepare reports on environmental issues for company directors
Answer» B. Professional accountancy bodies are encouraging the development of environmental reporting
discuss
33.

What term best describes the use of both financial and non-financial measures in assessing whether an entity has achieved its objectives?

A. balanced scorecard
B. Benchmarking
C. performance measurement
D. target setting
Answer» C. performance measurement
discuss
34.

Which management accounting technique is sometimes referred to as super variable costing?

A. Throughput accounting
B. Marginal costing
C. Direct costing
D. Product life cycle costing
Answer» A. Throughput accounting
discuss
35.

Which management accounting technique involves the identification of value adding activities?

A. Backflush costing
B. Target costing
C. Activity based management
D. Value chain analysis
Answer» D. Value chain analysis
discuss
36.

Which one of the following items is relatively unimportant in decision making?

A. Relevant costs
B. Net cash flow
C. Opportunity costs
D. Accruals and prepayments
Answer» D. Accruals and prepayments
discuss
37.

What is an alternative term for expected value?

A. Estimated profit
B. Forecasted profit
C. Eventual outcome
D. Weighted average
Answer» D. Weighted average
discuss
38.

Which of the following cost classification categories is almost identical to a relevant cost?

A. Opportunity cost
B. Sunk cost
C. Committed cost
D. Avoidable cost
Answer» D. Avoidable cost
discuss
39.

Which costs may normally be ignored when determining whether to close a factory for a short period?

A. Fixed costs
B. Opportunity costs
C. Variable costs
D. Total costs
Answer» A. Fixed costs
discuss
40.

What is the minimum cost below which a company would be unwilling to price a one-off special contract?

A. Between variable cost and total cost
B. Total cost
C. Variable cost
D. Below variable cost
Answer» C. Variable cost
discuss
41.

What is the ideal transfer price?

A. Market price
B. Total cost
C. Total cost less internal savings
D. Opportunity cost
Answer» D. Opportunity cost
discuss
42.

In what circumstances might a company be prepared to price a special contract at less than its relevant cost?

A. When sales of other products will not increase
B. When the company is operating at almost full capacity
C. In the expectation that additional profitable orders will be placed by the same customer
D. When there are signs of improved market conditions
Answer» C. In the expectation that additional profitable orders will be placed by the same customer
discuss
43.

The standard cost of a product is:

A. The average unit cost of products produced during a particular period
B. The unit cost of products incurred at the start of a particular period
C. The average unit cost of products produced in the previous period
D. The planned unit cost of products produced during a particular period
Answer» D. The planned unit cost of products produced during a particular period
discuss
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?

A. Standard performance
B. Standard hours
C. Standard ex ante
D. Standard ex post
Answer» B. Standard hours
discuss
45.

A standard that represents the most likely scenario can be referred to as the:

A. Average standard
B. Attainable standard
C. Basic standard
D. Ideal standard
Answer» B. Attainable standard
discuss
46.

When calculating cost variances under a standard costing system we must:

A. Compare standard costs with actual costs at the standard level of activity
B. Compare actual costs with those that were budgeted
C. Compare actual costs with standard costs at the actual level of output
D. Compare actual outputs against budgeted outputs
Answer» D. Compare actual outputs against budgeted outputs
discuss
47.

When carrying out variance analysis ideally, we should:

A. Look at controllable adverse and favourable variances that are over a predetermined amount
B. Look at adverse variances that are over a predetermined amount
C. Look at all variances
D. Look at all adverse and favourable variances that are over a predetermined amount
Answer» A. Look at controllable adverse and favourable variances that are over a predetermined amount
discuss
48.

The efficiency ratio can be defined as:

A. Actual hours worked / budgeted labour hours
B. Standard hours produced/ actual labour hours worked
C. Standard hours produced / budgeted labour hours
D. Actual hours worked / actual production based on standard hours
Answer» A. Actual hours worked / budgeted labour hours
discuss
49.

The labour rate variance can be calculated by the following equation:

A. (Standard hours - actual hours) x actual wage rate
B. (Standard wage rate - actual wage rate) x standard hours worked
C. (Standard wage rate - actual wage rate) x actual hours worked
D. Budgeted labour costs - actual labour costs
Answer» A. (Standard hours - actual hours) x actual wage rate
discuss
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:

A. 3,250 favourable
B. 1,375 favourable
C. 3,250 adverse
D. 1,375 adverse
Answer» C. 3,250 adverse
discuss
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:

A. 4,400
B. 1,012
C. 4,350
D. 3,450
Answer» A. 4,400
discuss
52.

An adverse material usage variance together with a favourable materials price variance could suggest that:

A. We are paying the same for our materials but we are using more than expected
B. We are paying higher prices for our materials than expected
C. We are paying less for our materials than expected but we are using more materials
D. We are using less material than expected but in total we are paying more than we should
Answer» A. We are paying the same for our materials but we are using more than expected
discuss
53.

An adverse labour efficiency variance together with a favourable labour rate variance may mean that:

A. The business is paying a higher hourly rate than the standard
B. Less labour hours are needed to make the same amount of output
C. Less skilled staff are being used in production
D. More products are being made per hour
Answer» C. Less skilled staff are being used in production
discuss
54.

The formula for calculating the variable overhead total variance is:

A. (Standard hours less actual hours) x variable overhead absorption rate
B. Actual variable overhead less (actual hours x actual hours worked x variable overhead absorption rate)
C. Actual variable overhead expenditure less budgeted variable overhead expenditure
D. Actual variable overhead less (standard hours x actual production x variable overhead absorption rate)
Answer» B. Actual variable overhead less (actual hours x actual hours worked x variable overhead absorption rate)
discuss
55.

The formula for calculating the fixed overhead volume variance is:

A. Budgeted fixed expenditure less (actual hours x actual production x fixed overhead absorption rate)
B. Budgeted fixed expenditure less (actual hours x fixed overhead absorption rate)
C. Actual fixed overhead less (standard hours x actual production x fixed overhead absorption rate)
D. Budgeted fixed expenditure less (standard hours x actual production x fixed overhead expenditure variance)
Answer» D. Budgeted fixed expenditure less (standard hours x actual production x fixed overhead expenditure variance)
discuss
56.

-------- are the factor which have direct cause and effect relationship with cost

A. Cost object
B. Cost pool
C. Cost driver
D. Cost centre
Answer» C. Cost driver
discuss
57.

------------ is also known as ‘Transaction Costing’.

A. Target costing
B. Kaizen costing
C. Throughput costing
D. Activity based costing
Answer» D. Activity based costing
discuss
58.

----------- is maximum permissible cost in a competitive business environment.

A. Activity cost
B. Target cost
C. Kaizen cost
D. None of these
Answer» B. Target cost
discuss (1)
59.

Promoters of Activity based Costing was /were----------

A. Kaplan and Cooper
B. Galloway
C. Goldratt
D. Ouchy
Answer» A. Kaplan and Cooper
discuss
60.

In innovative cost management terminologies ‘BPR’ stands for?

A. Business Process Reconstruction
B. Business Production Reschedule
C. Business Process Re-engineering
D. None of these
Answer» C. Business Process Re-engineering
discuss
61.

A cost centre is:

A. The part of the business where all costs are paid to suppliers
B. A production department where all production costs are aggregated
C. An area for which costs are accumulated
D. An area of the business accountable for both costs and revenues
Answer» C. An area for which costs are accumulated
discuss
62.

An investment centre is a responsibility centre where the manager has control of:

A. Costs
B. Costs, profits and product quality
C. Costs, profits and assets
D. Costs and profits
Answer» C. Costs, profits and assets
discuss
63.

Responsibility accounting aims to:

A. Ensure that costs become the responsibility of a specific manager
B. Ensure that a manager is punished if things go wrong
C. Reduce the costs that a department incurs
D. Allocate costs to all areas of a business
Answer» A. Ensure that costs become the responsibility of a specific manager
discuss
64.

Prime cost can be defined as:

A. The total costs of manufacturing a product
B. The total direct costs of manufacturing a product
C. The total costs of operating the production department where the product is made
D. The cost of the first stage of the manufacture of a product
Answer» B. The total direct costs of manufacturing a product
discuss
65.

Which of the following best describes a fixed cost?

A. Has a direct relationship with output
B. Increases proportionately with output
C. Represents a fixed proportion of total costs
D. Remains constant irrespective of the level of activity
Answer» D. Remains constant irrespective of the level of activity
discuss
66.

Direct labour costs will include:

A. Direct labour costs plus any bonuses and overtime premiums
B. Direct labour costs plus any bonuses
C. Total direct labour hours at the normal hourly rate of pay
D. All labour costs attributable to a product
Answer» C. Total direct labour hours at the normal hourly rate of pay
discuss
67.

The company which applied first ‘Just in Time’ in its manufacturing is---------

A. GE Electricals
B. Motorola
C. Toyota
D. Suzuki
Answer» C. Toyota
discuss
68.

----------- is developed on the concept ‘inventory is evil’.

A. Quality circle
B. JIT
C. Kaizen
D. All of these
Answer» B. JIT
discuss
69.

JIT was first developed by:

A. Taiichi Ohno
B. Ouchy
C. Kaplan
D. None of these
Answer» A. Taiichi Ohno
discuss
70.

“Kanban’ system is similar to ---------- philosophy

A. Kaizen
B. Cost driver
C. Just in Time
D. None of these
Answer» C. Just in Time
discuss
71.

Which of the following is / are the method of establishing ‘target cost’?

A. Addition method
B. Subtraction method
C. Integration method
D. All of these
Answer» D. All of these
discuss
72.

Accumulated cost of an activity called------------ in Activity based costing.

A. Cost driver
B. Cost object
C. Cost centre
D. Cost Pool
Answer» D. Cost Pool
discuss
73.

------------ is regarded as ‘Price-led costing’.

A. Activity based costing
B. Target costing
C. Kaizen costing
D. Back flush costing
Answer» B. Target costing
discuss
74.

Upstream cost, Down stream cost etc., are the concepts in---------------.

A. Target costing
B. Kaizen costing
C. Life cycle costing
D. Activity based costing
Answer» C. Life cycle costing
discuss
75.

When output in relation to the input is expressed mathematically it is called as----------

A. Outcome index
B. Efficiency index
C. Productivity index
D. All the above.
Answer» C. Productivity index
discuss
76.

If Profit divided by the capital employed, it reveals--------------

A. Labour productivity
B. Machine productivity
C. Material productivity
D. None of these
Answer» D. None of these
discuss
77.

The type of spoilage that should not affect the cost of inventories is

A. Abnormal spoilage
B. Seasonal spoilage
C. Normal spoilage
D. Indirect spoilage
Answer» A. Abnormal spoilage
discuss
78.

Materials may not be put into process

A. At the beginning of an operation
B. Continuously
C. At the end of the operation
D. In the shipping department.
Answer» D. In the shipping department.
discuss
79.

Process cost method is especially suitable for

A. Custom production
B. FIFO
C. Standard costs
D. LIFO
Answer» C. Standard costs
discuss
80.

In process costing, costs follow

A. Price rise
B. Product flow
C. Price declines
D. Finished goods
Answer» B. Product flow
discuss
81.

When average costing is used, the opening inventory costs are

A. Kept separate from the costs for the new period
B. Added to the costs of the new period
C. Subtracted from the new costs
D. Averaged with other costs to arrive at total cost.
Answer» A. Kept separate from the costs for the new period
discuss
82.

A disadvantage of FIFO costing is that

A. The first units produced cannot be distinguished from later production.
B. Several units’ costs are used at the same time.
C. The units have to be kept separate
D. The shipping costs are higher
Answer» B. Several units’ costs are used at the same time.
discuss
83.

Which of the following method of costing can be used in a large oil refinery?

A. Process costing
B. Unit costing
C. Operating costing
D. Job costing
Answer» A. Process costing
discuss
84.

Which of the following pair is odd one?

A. Construction-Contract costing
B. Ship-building-Job costing
C. Brick manufacturing – Process costing
D. Transport undertaking – Operating costing
Answer» C. Brick manufacturing – Process costing
discuss
85.

A product which has practically no sales or utility value is--------

A. Waste
B. Spoilage
C. Scrap
D. Defectives
Answer» A. Waste
discuss
86.

Trimmings in timber industry should be treated as a---------

A. Waste
B. Spoilage
C. Scrap
D. Defectives
Answer» C. Scrap
discuss
87.

The type of process loss that should not affect the cost of inventory is

A. Abnormal loss
B. Seasonal loss
C. normal loss
D. standard loss
Answer» A. Abnormal loss
discuss
88.

The stage where joint products are separated from each other is known as--------

A. break-even point
B. angle of incidence
C. split-off point
D. Point of indifference
Answer» C. split-off point
discuss
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-----------

A. Rs. 80
B. Rs. 10
C. Rs. 8
D. Rs. 9
Answer» B. Rs. 10
discuss
90.

Abnormal loss is charged to--------------

A. process account
B. costing profit and loss account
C. Normal loss account
D. None of these.
Answer» B. costing profit and loss account
discuss
91.

Classification and accumulation of costs by fixed and variable costs is a distinctive feature of-----------

A. Process costing
B. Unit costing
C. Operating costing
D. Batch costing
Answer» C. Operating costing
discuss
92.

Composite unit is distinctive feature of-------

A. Single or output costing
B. Process costing
C. Job costing
D. Operating costing
Answer» D. Operating costing
discuss
93.

Electricity generating company should employ----------

A. Unit costing
B. Process costing
C. Operating costing
D. Multiple costing
Answer» C. Operating costing
discuss
94.

Cinema houses must adopt-------

A. Operating costing
B. Job costing
C. Batch costing
D. Contract costing
Answer» A. Operating costing
discuss
95.

For a library the best method of costing suitable is-----------

A. Output costing
B. Operating costing
C. Process costing
D. Multiple costing
Answer» B. Operating costing
discuss
96.

For an educational institute the right method of costing is------------

A. Output costing
B. Job costing
C. Operating costing
D. Process costing
Answer» B. Job costing
discuss
97.

Hospitals must make use of-----------

A. Operating costing
B. Batch costing
C. Process costing
D. Multiple costing
Answer» A. Operating costing
discuss
98.

For hotels the best method of costing is----------

A. Single or output
B. Contract costing
C. Process costing
D. Operating costing
Answer» D. Operating costing
discuss
99.

Flight/Air services must make use of-----------

A. Job costing
B. Operating costing
C. Batch costing
D. Process costing
Answer» B. Operating costing
discuss
100.

Indian Railways must adopt----------

A. Operating costing
B. Unit costing
C. Batch costing
D. Multiple costing
Answer» A. Operating costing
discuss

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