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90+ Strategic Cost Accounting Solved MCQs

These multiple-choice questions (MCQs) are designed to enhance your knowledge and understanding in the following areas: Master of Commerce (M.com) .

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1.

Marginal costing is a …………….

A. Method of costing
B. Technique of costing
C. Process of costing
D. None of the above
Answer» B. Technique of costing
discuss
2.

Contribution is known as ………..

A. Marginal income
B. Marginal cost
C. Gross profit
D. Net income
Answer» A. Marginal income
discuss
3.

Margin of safety may be improved by

A. Increasing sales volume
B. Lowering variable cost
C. Lowering fixed cost
D. All of the above
Answer» D. All of the above
discuss
4.

PV ratio may be improved by

A. Increasing the sales price
B. Lowering variable cost
C. Lowering fixed cost
D. None of the above
Answer» A. Increasing the sales price
discuss
5.

For decision making purpose, which is more suitable to the management

A. Standard costing
B. Marginal costing
C. Absorption costing
D. Traditional costing
Answer» B. Marginal costing
discuss
6.

Increasing in selling price

A. Increase PV ratio
B. Decrease break even point
C. Increase margin of safety
D. None of the above
Answer» D. None of the above
discuss
7.

Increase in variable cost

A. Increases in PV ratio
B. Decreases breakeven point
C. Increases margin of safety
D. None the above
Answer» D. None the above
discuss
8.

Marginal costing technique helps the management in deciding

A. Price of the product
B. Make or buy decision
C. To accepts fresh orders at low price
D. All of the above
Answer» D. All of the above
discuss
9.

Which of the following is true at breakeven point

A. Contribution = fixed cost
B. Sales = total cost
C. Sales curve cuts total cost line
D. All of the above
Answer» D. All of the above
discuss
10.

Activity-based costing:

A. Uses a plant-wide overhead rate to assign overhead
B. Is not expensive to implement
C. Typically applies overhead costs using direct labor-hours
D. Uses multiple activity rates
Answer» D. Uses multiple activity rates
discuss
11.

Assigning overhead using ABC often:

A. Shifts overhead costs from high-volume products to low-volume products
B. Shifts overhead costs from low-volume products to high-volume products
C. Provides the same results as traditional costing
D. Requires one predetermined overhead rate
Answer» A. Shifts overhead costs from high-volume products to low-volume products
discuss
12.

Painting the product would be an example of which activity level groups

A. Facility-level activity
B. Product-level activity
C. Unit-level activity
D. Batch-level activity
Answer» C. Unit-level activity
discuss
13.

Plant depreciation is an example of which activity-level group?

A. Unit-level activity
B. Facility-level activity
C. Batch-level activity
D. Product-level activity
Answer» B. Facility-level activity
discuss
14.

Assume that a company produces two products in a manufacturing plant. One is a low volume specialty product that is produced on a demand pull basis, while the other is a high volume product that is produced on a push basis for inventory. A production volume based cost allocation system would tend to

A. Accurately reflect the product cost of the two products.
B. Overstate the product cost of the low volume product.
C. Understate the product cost of the low volume product.
D. Overstate the product cost of both products.
Answer» C. Understate the product cost of the low volume product.
discuss
15.

In the situation stated in the question above, the company’s net income based on a production volume based system will tend to be ________ relative to net income based on an activity based costing system.

A. Overstated.
B. Understated.
C. Overstated for the low volume product and understated for the high volume product.
D. b and d.
Answer» D. b and d.
discuss
16.

Cooper and Kaplan recommend using which of the following as the basis, or denominator, when developing activity cost pool rates for activity based costing.

A. The maximum capacity for each activity.
B. The practical capacity for each activity.
C. The planned or budgeted for each activity.
D. The normal capacity for each activity.
Answer» B. The practical capacity for each activity.
discuss
17.

Which of the following is not an argument for using a separate stand alone system for activity based costing, i.e., rather than integrating ABC with the general ledger system used for GAAP?

A. GAAP product costs may be incorrect relative to ABC product costs
B. It is faster to develop.
C. It is less costly to develop.
D. Subjective information can be used that auditors might question.
Answer» A. GAAP product costs may be incorrect relative to ABC product costs
discuss
18.

Which of the following arguments support integrating ABC with the general ledger system used for GAAP, rather than using a separate stand alone ABC system?

A. Managers tend to prefer a single accounting system for product costing.
B. Two separate systems tend to be confusing for management.
C. Two separate systems tend to create redundant information and staff.
D. all of the above.
Answer» D. all of the above.
discuss
19.

Which of the following types of characteristics tend to cause too little overhead costs to be charged to the product using traditional cost allocations?

A. a relatively small product.
B. a relatively low volume product.
C. a relatively simple product.
D. a and b.
Answer» D. a and b.
discuss
20.

Which audience was activity based costing originally designed to serve?

A. Users of external financial statements.
B. Front line managers who plan & control activities or processes on a daily basis.
C. Managers who make short term strategic decisions such as outsourcing.
D. Managers who make long term strategic decisions concerning investments.
Answer» C. Managers who make short term strategic decisions such as outsourcing.
discuss
21.

A company that uses a traditional two stage cost allocation approach is likely to do the following.

A. Overhead allocations to high volume products will tend to be overstated while overhead allocations to low volume products will tend to be understated.
B. Overhead allocations to high volume products will tend to be understated, while allocations to low volume products will tend to be overstated.
C. Overhead allocations to large products will tend to be understat
Answer» A. Overhead allocations to high volume products will tend to be overstated while overhead allocations to low volume products will tend to be understated.
discuss
22.

The main difference (or differences) between how traditional costing and activity based costing treat indirect manufacturing costs is (are) that

A. Traditional costing uses only production volume based drivers while activity based costing uses only non production volume based drivers.
B. Traditional costing treats only unit level costs as variable, while abc systems treat unit level, batch level and product level costs as variable.
C. Traditional cost allocations are usually based on a plant wide overhead rate, while abc systems use departmental overhead rates.
D. A and b.
Answer» B. Traditional costing treats only unit level costs as variable, while abc systems treat unit level, batch level and product level costs as variable.
discuss
23.

The Cooper/Kaplan "Rule of One" refers to the following:

A. Only one overhead rate should be used to allocate fixed costs.
B. If only one item is represented by an activity cost pool, then the cost can be classified as fixed.
C. If there is more than one activity cost pool, then one of the cost pools must be variable.
D. Traditional cost allocation systems will distort the allocations for at least one cost pool.
Answer» B. If only one item is represented by an activity cost pool, then the cost can be classified as fixed.
discuss
24.

Activity based cost systems would probably provide the greatest benefits for organizations that use

A. Job order costing.
B. Process costing.
C. Historical costing
D. Standard costing.
Answer» A. Job order costing.
discuss
25.

When traditional production volume based overhead allocations are made, rather than activity based allocations,

A. The unit costs of high volume and large size products tend to be overstated, while the unit cost of low volume and small products tend to be understated.
B. The unit costs of high volume and large size products tend to be understated, while the unit cost of low volume and small products tend to be overstated.
C. The unit costs of high volume and small products tend to be overstated, while the unit costs of low volume and large products is understat
Answer» A. The unit costs of high volume and large size products tend to be overstated, while the unit cost of low volume and small products tend to be understated.
discuss
26.

In order to compute equivalent units of production using the Weighted Average method of process costing, the following equation should be used:

A. Equivalent units of beginning work in process + units completed and transferred out
B. Equivalent units of beginning work in process + equivalent units of ending work in process
C. Units completed and transferred out + equivalent units of ending work in process
D. Units completed and transferred out + equivalent units of beginning work in process
Answer» C. Units completed and transferred out + equivalent units of ending work in process
discuss
27.

If beginning work in process is 2,000 units, ending work in process is 1,000 units, and the units accounted for equals 5,000 units, what are the units completed and transferred out?

A. 7000
B. 6000
C. 4000
D. 2000
Answer» C. 4000
discuss (1)
28.

One characteristic of products that are mass-produced in a continuous production process is that

A. The products are identical or very similar in nature.
B. They are grouped in batches.
C. They are produced at the time an order is receiv
Answer» A. The products are identical or very similar in nature.
discuss
29.

Conversion costs are the sum of:

A. Direct materials costs and direct labor costs
B. Indirect materials costs and indirect labor costs
C. Direct materials costs and overhead costs
D. Direct labor costs and overhead costs
Answer» D. Direct labor costs and overhead costs
discuss
30.

A production cost report

A. Used to record the costs chargeable to a specific job
B. Shows only cost data for a production department
C. Provides a basis for evaluating the productivity of a department
D. Combines process cost and job order costing systems costs
Answer» C. Provides a basis for evaluating the productivity of a department
discuss
31.

Which is not a similarity between job order costing and process costing?

A. Methods of assigned costs
B. Tracking of direct materials, direct labor and manufacturing overhead
C. Accumulating journal entries
D. Flow of costs
Answer» A. Methods of assigned costs
discuss
32.

The journal entry that assigns raw materials costs in a process costing system includes

A. Debit to raw materials
B. Credit to raw materials
C. Debit to Accounts Payable
D. Credit to Work in Process
Answer» B. Credit to raw materials
discuss
33.

Calculating equivalent units in a weighted average method:

A. The beginning inventory percentage complete is used only for conversion costs
B. The beginning inventory percentage complete is used for both material and conversion costs
C. The beginning inventory amount is not accounted for
D. The beginning inventory amount is used in total
Answer» C. The beginning inventory amount is not accounted for
discuss
34.

in a process costing system, manufacturing overhead is assigned to work in process by

A. Department based on actual overhead costs incurred
B. Department based on predetermined overhead rates
C. Job based on actual overhead costs incurred
D. Job based on predetermined overhead rates
Answer» B. Department based on predetermined overhead rates
discuss
35.

Which of the following system applies when standard goods are produced under a series of inter connected operations?

A. Job order costing
B. Process costing
C. Standard costing
D. All of the above
Answer» B. Process costing
discuss
36.

The process costing system is best suited for

A. Industries where different types of products are manufactured
B. Industries where homogenous products are manufactured on continuous basis
C. Service industry only
D. All of the above
Answer» B. Industries where homogenous products are manufactured on continuous basis
discuss
37.

Which of the following business is likely to adopt a process costing system?

A. Plan manufactures
B. Construction companies
C. Sugar refining
D. Printing press
Answer» C. Sugar refining
discuss
38.

Materials labor and overhead costs are traced to processing departments rather than individual products or jobs. This statement is true for

A. A job order costing system
B. An activity based costing system
C. A process costing system
D. A variable costing system
Answer» C. A process costing system
discuss
39.

In process costing system, the materials can be added in

A. First department only
B. Last department only
C. First and last department only
D. Any department
Answer» D. Any department
discuss
40.

Which of the following is not relevant to a process costing system?

A. Heterogeneous products
B. Recitative production
C. High production volume
D. Low production flexibility
Answer» A. Heterogeneous products
discuss
41.

Which of the following is not correct about process costing and job order costing?

A. Both the system classify materials as direct material and or indirect materials.
B. Both the system classify labor ans direct labor and or indirect labor
C. Direct materials under job order costing might be indirect under process costing and vice versa.
D. Both the systems assigns costs by process.
Answer» D. Both the systems assigns costs by process.
discuss
42.

In process costing system, when partially completed units are expressed in terms of fully completed units they are known as

A. Completed units
B. Equivalent units
C. Unfinished units
D. Transferred units
Answer» B. Equivalent units
discuss
43.

The direct material costing Rs. 4000 has been used in mixing department. The correct journal entry would be

A. Direct materials Dr. and work in process-mixing department CR
B. Work-in –process-mixing department Dr and Direct materials Cr
C. Finished goods DR and Direct materials Cr
D. Mixing department Dr and Direct material Cr
Answer» B. Work-in –process-mixing department Dr and Direct materials Cr
discuss
44.

In a process costing system, the manufacturing overhead (or factory OH) is usually applied using

A. Predetermined overhead rate
B. An actual overhead rate
C. A conversion overhead rate
D. An indirect labor rate
Answer» A. Predetermined overhead rate
discuss
45.

In process costing system, the predetermined overhead rate is computed.

A. Only once and used for all the processing department
B. Separately for each processing department
C. Only for the first processing department where units are started
D. Only for the last department where units are completed and transferred to finished goods area.
Answer» B. Separately for each processing department
discuss
46.

Where the normal loss in a department is identified at the end of process, its cost is :-

A. Ignored
B. Charged to work in progress ending inventory only
C. Charged to units completed and transferred out only
D. Charged to work in process ending inventory as well as to units completed and transferred out
Answer» C. Charged to units completed and transferred out only
discuss
47.

While preparing the cost of production report of a processing department, use per unit cost from producing department needs to be adjusted when the

A. Normal loss is identified during the process.
B. Normal loss is identified at the end of the process
C. Abnormal loss is identified during the process
D. Abnormal loss is identified at the end of the process.
Answer» A. Normal loss is identified during the process.
discuss
48.

The normal or standard loss in processing department is generally considered

A. An avoidable loss
B. Un avoidable loss
C. An additional loss
D. A basic loss
Answer» B. Un avoidable loss
discuss
49.

A loss in processing departments which can be avoided under normal and efficient working conditions is generally known as

A. Normal loss
B. Extra loss
C. Abnormal loss
D. Department loss
Answer» C. Abnormal loss
discuss
50.

In process costing the abnormal loss occurred in a production department is

A. Charged to finished goods
B. Charged to unfinished goods
C. Charged to factory overhead
D. Ignored
Answer» C. Charged to factory overhead
discuss

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