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Subject: Costing

Total Number of Question: 40

Time: 41 Minutes

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CMA Madhuri Kashyap

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What is the main purpose of cost accounting?

To calculate profits

To determine costs for production and service

To manage taxes

To evaluate marketing strategies

Which of the following is a variable cost?

Rent

Salary of employees

Raw materials

Depreciation

Which costing method is used to determine the cost of each unit in a batch of products?

Job order costing

Process costing

Activity-based costing

Batch costing

Which of the following is a component of prime cost?

Indirect labor

Direct materials

Depreciation

Factory rent

In marginal costing, fixed costs are:

Treated as product costs

Treated as period costs

Ignored

Always variable

The break-even point is reached when:

Total revenue equals total variable costs

Total fixed costs are covered

Total revenue equals total costs

Profit equals fixed costs

In absorption costing, fixed overhead costs are:

Charged to the profit and loss account immediately

Treated as period costs

Allocated to the cost of goods produced

Only included in the cost of goods sold

In marginal costing, fixed costs are treated as:

Product costs

Period costs

Opportunity costs

Direct costs

Contribution margin is calculated as:

Sales - Fixed costs

Sales - Variable costs

Sales - Total costs

Fixed costs + Profit

10.

Which of the following is an example of direct labor cost?

Wages of factory managers

Wages of workers on the production line

Wages of workers in the warehouse

Salaries of office clerks

11.

Activity-based costing assigns overhead costs based on:

The volume of production

The activities that drive costs

The number of employees

The type of product

12.

A process cost system is used when:

Products are customized

Products are mass-produced

Products are in a job order system

Products are not identical

13.

The total cost of production consists of:

Fixed cost only

Variable cost only

Fixed cost and variable cost

Prime cost only

14.

A sunk cost refers to:

An avoidable cost

An irrelevant cost for decision-making

An incremental cost

A future cost

15.

Which of the following is an example of a semi-variable cost?

Electricity cost

Rent

Salaries of staff

Commission on sales

16.

Which of the following is a characteristic of job order costing?

Costs are averaged across all units produced

Each job or batch is treated separately

It is used for continuous production processes

It does not assign overheads

17.

Which of the following statements is true about fixed costs?

They change in direct proportion to changes in production volume

They remain constant over a wide range of production levels

They are associated with variable costs

They increase with production volume

18.

Which of the following is a direct cost?

Supervisor’s Salary

Factory Rent

Direct Materials

Electricity Expenses

19.

Absorption costing includes:

Only variable costs

Only fixed costs

Both fixed and variable costs

Direct costs only

20.

In absorption costing, overhead is applied based on:

Direct materials

Direct labor hours

Contribution margin

Selling price

21.

The cost of goods sold is calculated by:

Adding all production costs together

Subtracting fixed costs from total costs

Subtracting inventory from sales

Adding direct materials and direct labor costs

22.

The purpose of cost allocation is to:

Separate fixed and variable costs

Assign indirect costs to cost objects

Calculate taxes

Determine profit margins

23.

A cost that varies with the number of units produced is called:

Variable cost

Fixed cost

Mixed cost

Semi-variable cost

24.

Which method of costing is most appropriate for a company that manufactures identical products in large quantities?

Process costing

Job order costing

Activity-based costing

Standard costing

25.

The total cost of an item includes:

Only fixed costs

Only variable costs

Direct costs and indirect costs

Only indirect costs

26.

Which of the following costs is likely to be a direct cost?

Rent of factory

Factory electricity bill

Direct labor wages

Administrative salaries

27.

In job order costing, overhead is applied to a job based on:

Predetermined overhead rate

Direct labor cost

Total production cost

Actual costs

28.

The total contribution margin is calculated as:

Revenue – Fixed costs

Sales – Total costs

Sales – Variable costs

Sales – Selling expenses

29.

Which of the following is not a component of manufacturing overhead?

Factory rent

Depreciation of machinery

Wages of assembly workers

Utilities for the factory

30.

Which method of costing uses a predetermined overhead rate?

Process costing

Job order costing

Direct costing

Standard costing

31.

A cost that remains the same in total regardless of the level of production is:

Variable cost

Fixed cost

Semi-variable cost

Direct cost

32.

A mixed cost is:

Only variable

Only fixed

A combination of fixed and variable costs

Not related to production levels

33.

Which of the following is a typical example of a variable cost?

Depreciation of machinery

Factory rent

Sales commissions

Salaries of factory supervisors

34.

In which of the following situations would a company use process costing?

Custom furniture production

Assembly line production

Construction projects

Consulting services

35.

Which of the following is a characteristic of activity-based costing?

It assigns overhead costs to products based on the activities that drive those costs

It ignores indirect costs

It only applies to large businesses

It uses a single overhead rate for all products

36.

Under absorption costing, fixed manufacturing overhead is:

Excluded from the cost of goods sold

Included in the cost of goods sold

Treated as a period cost

Treated as a variable cost

37.

What does a cost-volume-profit (CVP) analysis primarily help managers determine?

Profit levels at different levels of sales

Optimal sales price

Costs for direct materials only

Break-even analysis for investment

38.

The relevant range is:

The range of sales prices for which a company operates

The range within which total costs will change

The range within which fixed costs remain constant

The total range of production capacity

39.

Standard costing is most useful for:

Companies that produce a variety of customized products

Monitoring actual costs against predetermined costs

Determining fixed costs

Companies using job order costing

40.

The cost of labor that cannot be traced directly to a product is classified as:

Direct labor

Indirect labor

Overhead

Prime cost

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