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480+ Cost Accounting Solved MCQs

These multiple-choice questions (MCQs) are designed to enhance your knowledge and understanding in the following areas: Bachelor of Management Studies (BMS) , Bachelor of Accounting and Finance (BAF) , Bachelor of Commerce (B Com) .

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1.

Which of the following statements is false ?

A. the limitations of financial accounting have led to the origin and evolution of cost accounting
B. financial accounts fail to give a product wise break up of profit or loss
C. financial accounts helps to judge the efficiency or productivity of the concern
D. cost accounting techniques helps the management in making decision or planning for future
Answer» C. financial accounts helps to judge the efficiency or productivity of the concern
discuss
2.

Cost Accounting is directed towards the needs of

A. government
B. external users
C. internal users
D. shareholders
Answer» C. internal users
discuss
3.

Which of the following is not function of Cost Accounting

A. cost ascertainment
B. planning and control
C. decision making
D. external reporting
Answer» D. external reporting
discuss
4.

Cost behaviour refers to

A. how costs react to a change in the level of activity
B. whether a cost is incurred in a manufacturing trading or service company
C. classifying costs as either product or period costs
D. whether a particular expense has been incurred honestly
Answer» A. how costs react to a change in the level of activity
discuss
5.

An example of fixed cost is

A. materials consumed
B. depreciation
C. factory power
D. packing material
Answer» B. depreciation
discuss
6.

Which of the following would not be considered a fixed cost

A. rent
B. depreciation
C. cost of bottles use in the production of soft drinks
D. property taxes
Answer» C. cost of bottles use in the production of soft drinks
discuss
7.

Variable Cost per Unit

A. varies when output varies
B. remain constant
C. increases when output increases
D. decreases when output decreases
Answer» B. remain constant
discuss
8.

Which of the following is not an example of variable cost

A. straight line depreciation on a machine expected to last five years
B. piece-rate wages paid to manufacturing workers
C. wood used to make furniture
D. commissions paid to sales personnel
Answer» A. straight line depreciation on a machine expected to last five years
discuss
9.

Which of the following costs will vary directly with the level of production

A. total manufacturing costs
B. total cost of sales
C. variable selling costs
D. variable product costs
Answer» D. variable product costs
discuss
10.

Which of the following is / are true with regard to the period of budget?
i) the budget period depends on the nature of industry
ii) master budget is prepared annually while functional budget may be for different periods
iii) Basic budget is the long term budget

A. only (i) above
B. only (ii) above
C. both (i) and (ii) above
D. all (i), (ii) and (iii) above
Answer» D. all (i), (ii) and (iii) above
discuss
11.

Which of the following statements is / are true with regard to flexible budgeting?

A. both (a) and (b)
B. it involves a careful differentiation between fixed and variable expenses
C. it is a system of budgeting under which budgets are recast quickly for changes in the volume of activity
D. a flexible budget is one which changes from year to year
Answer» A. both (a) and (b)
discuss
12.

The classification of fixed and variable cost has a specific significance in the preparation of

A. zero-based budget
B. flexible budget
C. capital budget
D. cash budget
Answer» B. flexible budget
discuss
13.

When a flexible budget is used a decrease in the actual production level within a relevant range would

A. increased total fixed cost
B. decrease variable cost per unit
C. decrease variable cost
D. increase variable cost per unit
Answer» C. decrease variable cost
discuss
14.

If the activity level is reduced from 80 % to 70%, the fixed cost

A. will increase by 10%
B. per unit will decrease
C. will decrease by 10%
D. per unit will increase
Answer» D. per unit will increase
discuss
15.

Which of the following are purpose of a budget?
i) Establishing strategic options ii)Motivating management
iii) Establishing long term objectives iv) Planning operations

A. (i) and (ii) only
B. (ii), (iii) and (iv) only
C. (i) and (iv) only
D. (ii) and (iv) only
Answer» D. (ii) and (iv) only
discuss
16.

Which of the information below should be contained in a budget manual?

A. a list of account codes
B. an organisation chart
C. timetable for budget preparation
D. all of the above
Answer» D. all of the above
discuss
17.

A budget that gives a summary of all the functional budget is known as

A. fixed budget
B. capital budget
C. master budget
D. flexible budget
Answer» C. master budget
discuss
18.

Master budget comprises

A. a the budgeted profit and loss account
B. budget cash flow
C. budgeted cash flow budgeted profit and loss budgeted balance sheet
D. entire sets of budgets prepared
Answer» C. budgeted cash flow budgeted profit and loss budgeted balance sheet
discuss
19.

A master budget comprises the

A. budgeted income statement budgeted balance sheet and budgeted cash flow only
B. budgeted income statement and positive cash flow only
C. budgeted income statement and budgeted balance sheet only
D. budgeted income statement and budgeted capital expenditure only
Answer» A. budgeted income statement budgeted balance sheet and budgeted cash flow only
discuss
20.

Which of the following is normally the most appropriate sequence of events in the preparation of the indicated budgets?

A. sales budget, cash budget, production budget, budgeted balance sheet
B. sales budget, cash budget, budgeted balance sheet, production budget
C. sales budget, production budget, budgeted balance sheet, cash budget
D. sales budget, production budget, cash budget, budgeted balance sheet
Answer» D. sales budget, production budget, cash budget, budgeted balance sheet
discuss
21.

When preparing a production budget, the quantity to be produced equals:

A. sales quantity plus opening stock minus closing stock
B. sales quantity - opening stock + closing stock
C. sales quantity + opening stock + closing stock
D. sales quantity - opening stock minus closing stock
Answer» B. sales quantity - opening stock + closing stock
discuss
22.

Which one of the following items would NOT be included in a cash budget?

A. dividend payments
B. capital repayments of loans
C. depreciation charges
D. proceeds of sale of fixed assets
Answer» C. depreciation charges
discuss
23.

Which of the following items should be included in a cash budget?
(i) Loan repayments (ii) depreciation charges
(iii) tax provision (iv) wages paid

A. (i) and (ii)
B. (iii) and (iv)
C. (ii) and (iii)
D. (i) and (iv)
Answer» D. (i) and (iv)
discuss
24.

The CIMA definition of zero-based budgeting is set out below, with two blank sections.
"Zero-based budgeting: A method of budgeting which requires each cost element ____________, as through the activities to which the budget relates ____________."
Which combination of two phrases correctly complete the definition?

A. to be specifically justifies, & were being undertaken for the first time
B. to be set zero, & could be out-sourced to an external supplier
C. to be specifically justifies, & could be out-sourced to an external supplier
D. to be set zero, & were being undertaken for the first time
Answer» A. to be specifically justifies, & were being undertaken for the first time
discuss
25.

A company estimates its direct material requirements for the month of November 2014 to be Rs. 2,40,000 and the direct labour to be Rs. 1,500,00. It is the policy of the company to absorb overheads as under :
Factory overheads 60% of direct wages
Administrative overheads 20% of work cost
Selling and distribution overheads 25% of work cost
it is estimated that the selling and distribution overheads will increase by 15% in November the budgeted sales for the month of November 2014 is

A. rs. 9,21,600
B. rs. 8,56,800
C. rs. 6,87,150
D. rs. 9,09,900
Answer» B. rs. 8,56,800
discuss
26.

A company is preparing a production budget for the next year. The following information is relevant :
Budgeted sales 10,000 units
Opening stock 600 units
Closing stock 5% of budgeted sales
The production process is such that 10% of the units produced are rejected.
What is the number of units required to be produced to meet demand?

A. 8,900 units
B. 9,900 units
C. 11,000 units
D. 10,900 units
Answer» C. 11,000 units
discuss (1)
27.

PP Ltd is preparing the production and material purchase budgets for one of their products,
The SUPERX for the forthcoming year.
The following information is available:
Sales demand (units) 30000
Material usage per unit 7 kgs
Estimated opening inventory 3500 units
Required closing inventory 35% higher than opening inventory
How many units of the SUPERX will need to be produced?

A. 31225
B. 30000
C. 28775
D. 38225
Answer» A. 31225
discuss
28.

A company has the following budget for the six month:
Finished product Materials
Sales - 7,000 units Usage per unit - 3 kg
Production units - 7200 units Opening stock - 400 kg
Closing stock - 500 kg
What is the material purchase budget for the month?

A. 21,700 kg
B. 20,900 kg
C. 21,100 kg
D. 21,500 kg
Answer» A. 21,700 kg
discuss
29.

ABC ltd. uses the following flexible budget formula to annual maintenance cost:
Total cost = Rs. 6720 + Rs. 0.64 for machine hour
The current month's budget is based on 20,000 hours of planned machine time. The maintenance cost included in this flexible budget for the current month is

A. rs. 12,800
B. rs. 13,360
C. rs. 12,240
D. rs. 13,600
Answer» B. rs. 13,360
discuss
30.

ABC Ltd. has furnished the following information for 4,000 units of product for the year 2014-2015 :
Particulars Rs.
Direct materials 2,50,000
Direct labour 2,00,000
Manufacturing overheads 2,80,000 (40 % fixed)
Selling and administrative overheads 2,70,000 (30 % fixed)
The total cost of 4,380 unit is

A. rs. 10,80,120
B. rs. 10,42,500
C. rs. 10,95,000
D. rs. 10,76,665
Answer» D. rs. 10,76,665
discuss
31.

The budgeted cost of electricity is Rs. 62,500 for 5,000 units of production per month and Rs. 71,500 for 6,200 units of production per month. If the company manufactures 6,900 units in the month of May 2014, the budgeted amount of electricity for the month is

A. rs. 77,770
B. rs. 76,750
C. rs. 74,360
D. rs. 79,572
Answer» B. rs. 76,750
discuss
32.

ABC Ltd. has prepared the cash budget for the year 2014-2015 and provided the following information pertaining to sales value :
Month Rs.
April 2014 2,50,000
May 2014 2,80,000
June 2014 3,20,000
July 2014 3,50,000
20% of the monthly sales are expected to be on cash basis. 60% of the credit sales are expected to be realised in the month following the month of sales and remaining 40% are expected to be realized in the second month following the month of sale.
The estimated cash receipts in the month of June 2014 are:

A. rs. 2,78,400
B. rs. 3,00,000
C. rs. 3,20,000
D. rs. 3,32,000
Answer» A. rs. 2,78,400
discuss
33.

The following details have been extracted from the debtors collection records of X limited:
Invoices paid in the month after sale 60%
Invoices pain in the second month after sale 20%
Invoices paid in the third month after sale 15%
Bad debts 5%
Credit sales for June to August 2014 or budgeted as follows:
June Rs. 1,00,000
July Rs. 1,50,000
August Rs. 1,30,000
customers pain in the month after sale are entitled to deduct a 2% cash discount. Invoices are issued on the last day of the month. The amount budgeted to be received in September 2014 from credit sales is

A. rs. 1,16,750
B. rs. 1,15,190
C. rs. 1,23,000
D. rs. 1,21,440
Answer» D. rs. 1,21,440
discuss (1)
34.

Under integrated system of Accounting , purchase of raw material is debited to which account?

A. work in progress control account
B. none of the above
C. stores ledger control account/raw material control account
D. purchase account
Answer» C. stores ledger control account/raw material control account
discuss
35.

Under integrated system of Accounting , issue of raw material is debited to which account?

A. purchase account
B. work in progress control account
C. stores ledger control account/raw material control account
D. none of the above
Answer» B. work in progress control account
discuss
36.

Notional costs

A. none of the above
B. may be included in interlocking accounts
C. cannot be included in interlocking accounts
D. may be integrated accounts
Answer» B. may be included in interlocking accounts
discuss
37.

In a period Rs. 50,000 was incurred on indirect labour. In a Cost Ledger, the double entry will be:

A. wages control a/c dr overhead control a/c cr
B. overhead control a/c dr wages control a/c cr
C. wip control a/c dr wages control a/c cr
D. wages control a/c dr wip control a/c cr
Answer» B. overhead control a/c dr wages control a/c cr
discuss
38.

In an integrated accounting system the accounting entries for factory overhead absorbed would be :

A. cost of sales a/c dr overhead control a/c cr
B. overhead control a/c dr wip control a/c cr
C. overhead control a/c dr cost of sales a/c cr
D. wip control a/c dr overhead control a/c cr
Answer» D. wip control a/c dr overhead control a/c cr
discuss
39.

At the end of a financial period, accounting entries for under absorbed overheads would be

A. overhead control a/c dr p&l a/c cr
B. wip control a/c dr overhead control a/c cr
C. p&l a/c dr wip control a/c cr
D. p&l a/c dr overhead control a/c cr
Answer» D. p&l a/c dr overhead control a/c cr
discuss
40.

The double entry for factory cost of production in a cost ledger is

A. costing p&l a/c dr finished goods control a/c cr
B. cost of sales a/c dr finished goods control a/c cr
C. wip control a/c dr finished goods control a/c cr
D. finished goods control a/c dr wip control a/c cr
Answer» D. finished goods control a/c dr wip control a/c cr
discuss
41.

Entry under Integrated System for : Credit purchase of materials for stock

A. stores ledger a/c dr general ledger adjustment a/c cr
B. stores ledger a/c dr creditors a/c cr
C. purchases a/c dr general ledger adjustment a/c cr
D. purchases a/c dr sundry creditors a/c cr
Answer» B. stores ledger a/c dr creditors a/c cr
discuss
42.

Entry under Integrated System for : Cash purchase of materials for stock

A. store ledger control a/cdr general ledger adjustment a/c cr
B. purchases a/c dr cash a/c cr
C. store control a/c dr cash a/c cr
D. general ledger adjustment a/c dr cash a/c cr
Answer» C. store control a/c dr cash a/c cr
discuss
43.

Entry under Integrated System for : Cash purchase of special materials for direct use in a job

A. work in progress a/c dr cash a/c cr
B. purchases a/c dr cost ledger control cr
C. purchases a/c dr cash a/c cr
D. wip control a/c dr cost ledger a/c cr
Answer» A. work in progress a/c dr cash a/c cr
discuss
44.

Entry under Integrated system for : Materials returned to supplier from stock

A. creditors a/c dr store control a/c cr
B. cost ledger control a/c dr stores control a/c cr
C. cost ledger control a/c dr purchases a/c cr
D. sundry creditors a/c dr purchases a/c cr
Answer» A. creditors a/c dr store control a/c cr
discuss
45.

Entry under Integrated system for : Issues of Direct Materials for production

A. wip control a/c dr store control a/c cr
B. factory overhead control a/c dr store control a/c cr
C. wip control a/c dr store control a/c cr
D. no entry
Answer» C. wip control a/c dr store control a/c cr
discuss
46.

Entry under Integrated system for : Purchases of Direct Materials for production

A. factory overhead control a/c dr store control a/c cr
B. wip control a/c dr store control a/c cr
C. wip control a/c dr store control a/c cr
D. no entry
Answer» A. factory overhead control a/c dr store control a/c cr
discuss
47.

Entry under Integrated system for : Transfer of goods completed from production to finished goods

A. wip a/c dr finished goods control a/c cr
B. wip control a/c dr finished goods a/c cr
C. finished goods control a/c dr wip a/c cr
D. no entry
Answer» C. finished goods control a/c dr wip a/c cr
discuss
48.

Purchase of raw materials of Rs. 1,000 on credit. Under Integrated Accounts, the transaction will appear as

A. cost ledger control a/c dr 1,000 to creditors a/c cr 1,000
B. store ledger control a/c dr 1,000 to creditors a/c cr 1,000
C. purchases a/c dr 1,000 to creditors a/c cr 1,000
D. store ledger control a/c dr 1,000 to general ledger adjustment a/c cr 1,000
Answer» B. store ledger control a/c dr 1,000 to creditors a/c cr 1,000
discuss
49.

Payment of wages Rs. 5,000. Under Integrated Accounts, the transaction will appear as

A. wages a/c dr 5,000 to cash/bank a/c cr 5,000
B. wages control a/c dr 5,000 to general ledger adjustment a/c cr 5,000
C. wages control a/c dr 5,000 to cash/bank a/c cr 5,000
D. cost ledger control a/c dr 5,000 to general ledger adjustment a/c cr 5,000
Answer» B. wages control a/c dr 5,000 to general ledger adjustment a/c cr 5,000
discuss
50.

What accounting entry under integrated system will be passed for payment to creditors for supplies made?

A. creditors a/c dr to cash a/c cr
B. creditors a/c dr to stores ledger control a/c cr
C. no entry required
D. stores ledger a/c dr to cash a/c cr
Answer» A. creditors a/c dr to cash a/c cr
discuss

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