CHAPTER-6 COST OF PRODUCTION

ICAP MULTIPLE CHOICE QUESTIONS (MCQs) SOLUTIONS

A.1 (d) Sum of direct material and direct labour cost

A.2 (b) Cost object
A.3 (c) Loan interest cost
A.4 (c) Selling cost is NOT included in the cost of product.
A.5 (d) Cost of direct labour + production overhead
A.6 (b) Electricity charges
A.7 (d) Can be directly identified with a product of service
A.8 (d) Chart D. The depreciation expense is fixed and it would decrease per unit when level of
activity increases.
A.9 (c) Cost per unit increases by 100%
A.10 (a) T1 and T3
Cost type Total cost for 125 units Total cost for 180 units
T-1 1,000 1,260
Variable cost/unit 1,000/125 = 8/unit 1,260/180 = 7/unit
T-2 1,750 2,520
Variable cost/unit 1,750/125 = 14/unit 2,520/180 = 14/unit
T-3 2,475 2,826
2,475/125 19.8/unit 2,826/180 = 15.7/unit
T-4 3,225 4,644
Variable cost/unit 3,225/125 =25.5/unit 4,644/180 =25.8/unit

A.11 (c) Product costs

A.12 (d) 2 and 4 only
A.13 (b) Semi-variable
A.14 (c) Fuel
A.15 (a) Carriage inwards on production materials
A.16 Rs.1.25
Rs.
Cost per unit for 6,000 units (60,000+42,000) / 6,000 17
Cost per units for 6,000 units (76,000 + 50,000)/8,000 (15.75)
Reduction in cost per unit 1.25
A.17 Rs.373,000
Rs.
Raw materials – opening 39,000
Raw material purchases 400,000
Raw material available for consumption 439,000
Raw materials – closing (66,000)
Raw material consumed 373,000

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CHAPTER-6 COST OF PRODUCTION

A.18 Rs.673,000
Rs.
Raw materials consumed 373,000
Direct labour 300,000
Prime cost 673,000

A.19 Rs.249,000

Rs.
Indirect labour cost 40,000
Rent for factory 120,000
Depreciation - Factory equipment 70,000
Factory utilities - 60% 12,000
Factory insurance – 70% 7,000
249,000
A.20 Rs.1,460,000
Rs.
Raw materials – opening 80,000
Raw material purchases 500,000
Raw material available for consumption 580,000
Raw materials – closing (120,000)
Raw material consumed 460,000
Direct labour – Rs.2,000,000 x 50% 1,000,000
Prime cost 1,460,000
A.21 (d)
A.22 (c)
A.23 (b)
A.24 (a)

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