Cost Accounting

1 .Kavya Ltd is following FIFO method for valuation of inventories. Following are the transactions of
Kavya Ltd.n Receiptsn 20th March 200 units @Rs.4 per unitn 25th March 400 units @ Rs.5 per unitn
Issuesn 31st March 500 units.n What is the cost of goods sold of 500 units?

Rs.2,000

Rs.2,300

Rs.2,500

None of above Ans

2. The total overhead expense is Rs.25000 and the machine hours utilised during the given period is 50
hours. Hence the Machine Hour Rate is :

Rs.50

Rs.500 Ans

Rs.100

Rs.1000

3. Compute the cost of materials consumed.nOpening stock- Rs.20000, Purchases- Rs.80000,Carriage-Rs.

1000, Returns-Rs.2000, Closing stock – Rs.20000.

Rs.79000 Ans

Rs.65000

Rs.100000

Rs.80000

4 .A company had purchased an item X for Rs.10 per kg. Its current market price is Rs.12 per kg. The
replacement cost of X would be Rs.

02

10

11

12

5. Direct Materials Rs.6000, Direct Wages – Rs.2000, Direct expenses – Rs.1500. Administration
Overhead – Rs.1500. Compute the Prime Cost.

Rs.11000

Rs.8000
Rs.9500 ans

Rs.7500

6. From the following calculate ordering level.n Minimum usage – 50 units per dayn Maximum usage-
250 units per dayn Normal usage-150 units per dayn Ordering Quantity -500 unitsn Delivery period – 3-5
days

150 units

250 units

500 units

1,250 units Ans

7. Value of work-in-progress units would be adjusted just before arriving at

Prime cost

Works cost

Cost of production ans

Cost of sales

8. A flexible budget should be prepared keeping in mind the following points, except

It should be prepared on quarterly or monthly basis Ans

It should be based on anticipated capacity and past expenses

It should segregate fixed and variable expenses

It should set standard costs for every item of expense

9. Marginal cost is

Prime cost

Prime cost + variable cost

Prime cost + fixed cost

Prime costs + variable cost + fixed cost. Not sure ans

10. Under this method of secondary distribution of overheads the cost of the most serviceable
department is apportioned first, then the next and

Direct distribution method Ans

Step method

Simultaneous equation method

Trial and error method

11. Selling and distribution overheads may use any of the following methods for absorption, except for

Percentage of works cost

Percentage on selling price

Percentage of prime cost Ans

At an estimated rate per unit

12. Selling and distribution overheads may use any of the following methods for absorption, except for

Percentage of works cost

Percentage on selling price

Percentage of prime cost

At an estimated rate per unit

13. The machine hour rate is usually

Pre-determined Ans

Computed on actuals

Computed for different levels of skills

Based on direct labour hours

14. Which method for absorption of overhead considers both material and labour rate?

Percentage of Direct Material Cost

Percentage of Direct Labour Cost

Percentage of Prime Cost

Machine hour rate

15. The cost which can be directly identified with a cost unit is

Prime cost Ans

Sunk cost

Discretionary cost

Opportunity cost

16. Internal transport service department costs can be apportioned on the basis of

Rate of labour turnover

Floor area

Truck hours/mileage Ans

Machine hours.

17. Building service department costs can be apportioned on the basis of

Rate of labour turnover

No of employees

Truck hours/mileage

Relative area of each department Ans

18. The cost unit for a product such as Chemicals could be:

Number

Ton

Litre, Gallon, Kilogram, Ton Ans

Ton-Kilometre

19. The following is not an advantage of departmentalization

Helps segregate factory overhead costs

Facilitates overhead cost control

Helps ascertain cost contributed by each department to a product

Depreciation overheads Ans

20. Manufacturing costs include:

Direct materials, Direct labour, Direct expenses, packing costs ans

Advertisement, Distribution

Research & Development

Administrative

21. From the following, which is the fixed overhead?

Direct material

Direct labour

Managerial remuneration

Indirect material

22. Depreciation of plant, machinery and equipments can be apportioned on the basis of

Capital values

Direct labour hours

Floor area

No. of light points

23. What are the direct costs?

Costs which are easily traceable to a product

Costs which are not easily traceable to a product

Costs which are incurred on the basis of time

Costs which are ascertained after they are incurred

24. Under inflationary conditions First-in-First-out method will result in

Higher profits Ans

Higher costs

Higher sales

Higher purchases

25. Determining standards help in reducing material losses.

True

False

26. Weighted Average method is an example of

Notional Price Method

Cost Price method

Average Price method

Standard Price Method

27. Which of these is not a method used to measure quantity of stock on hand?

Physical balance method

Book Balance method

Derived balance method Ans

Base stock method

28. The following is not a major method of valuing materials.

At cost

At market price

At cost or market price whichever lower

At cost plus taxes Ans

29. What is the purpose of maintaining safety stock?

To avoid excessive stock

To avoid surplus stock

To avoid stock-out

None of above Ans

30. If the Activity is materials purchase then the related Cost driver in ABC would be

Number of items on shopfloor

Number of orders fulfilled

Number of ordersglaced

Number of items in store

31. Managers manage activities and not products.

True

False

32. In Activity based costing a cost pool is established for each

Cost driver

Cost object

Cost center

Cost unit

33. Traditional costing can lead to under/over costing of products or services as

It does not consider all costs

Overheads are recovered based on volume only

It does not create enough cost centers

None of the options Ans

34. In Activity based costing batch level activities include costs for

Machine hours

Energy

Materials movement

Process Engineering
35. Weighted Average method is an example of

Notional Price Method

Cost Price method

Average Price method

Standard Price Method

36. Material cost- Rs.40000, Labour cost Rs.30000, Direct expenses – Rs.30000. Factory overheads are
80% of labour cost. Compute the Works Cost.

Rs.100000

Rs.110000

Rs.124000

Rs.180000 Ans

37. The Works cost is Rs.50,000, Office Overheads – Rs.10,000, Selling overheads – Rs.20,000. The Cost
of Production would be:

Rs.70,000

Rs.60,000

Rs.50,000

Rs.80,000

38. If Clean Cookware uses 100,000 pieces of steel plates annually in manufacturing, the cost of placing
an order is Rs.500, the plates cost Rs.200 per piece, and inventory carrying cost is 8%, then EOQ is

1600 pieces

2000 pieces

2500 pieces

4000 pieces

39. Direct Materials – Rs.6000, Direct Wages – Rs.2000, Direct expenses- Rs.1500, Administration
Overhead – Rs.1500. Compute the Prime Cost.

Rs.11000

Rs.8000

Rs.9500

Rs.7500
40. The maximum level is 1300 units, ordering level is 800 units, normal usage is 150 units and the
normal delivery period is 3 weeks. Calculate th minimum level.

500 units

400 units

350 units

300 units

41. The appropriate system of costing for the firms such as Automobiles garages is:

Uniform Costing

Standard Costing

Process Costing

Job Costing

42. The maximum rate of consumption is 30 units, average rate of consumption is 16 units and the lead
time is 4 weeks. Calculate the safety stock level.

64 units

46 units

56 units

48 units

43. Indirect materials originate in

Store requisitions

Cash book

Pay bills

job cards

44. Fixed costs remain unaffected by fluctuations in the:

Material costs

Levels of activity

Labour costs

Overhead costs

45. Legal charges, Audit fees etc are termed as :

Administration overheads Ans

Production overheads

Selling overheads

Distribution Overheads

46. Imputed costs are:

Notional costs

Costs actually incurred

Relevant costs

Fixed costs

47. Only when the capital and revenue costs are properly differentiated the Of a particular period can be
correctly determined.

Income Cost Accounting – An introduction Ans

Sales

Cost of Goods Sold

Cost of Sales

48. Prime cost includes

Consumables

Machine Depreciation

Raw material materi

Plant manager’s salary

49. Indirect expenses originate from

Salary bills and time card

Cash Book/ Factory Vouchers

Stores requisitions

Purchase order

50. Financial accounting aims at –

Ascertainment of cost

Measurement of profitability

Preparing budgets

Measurement of creditability
51. This is an example of variable cost.

Sales commission

Advertising campaign expense

Travel and conveyance

Printing and stationery

52.Estimated costs are :

More accurate than standard costs

Less accurate than standard costs

Equal to standard costs

incurred after production

53. This method gives unreliable results when different grades of workers perform the same kind of
work.

Percentage of direct labour cost

Machine hour rate

Rate per unit of production

Direct labour hour rate

54. Following are ways in which over or under-absorption of overheads is treated, except for

Use of supplementary rates when amount is significant

Writing off to Profit and Loss A/c

Mount Transfer of the over or underabsorbed amount to overhead suspense A/C

Equal distribution of the over or underabsorbed amount over the total production

55. This method gives good results when the prices of materials are stable and the output is uniform.

Percentage of direct materials cast

Percentage of direct labour cost

Machine hour rate

Percentage of prime cost

56. Semi-variable overheads-

Remains fixed for all level of activity

Changes in the proportion to the level of activity

Fixed within a certain activity level, but after that level, increase in direct proportion to the output

Fixed within a certain activity level, but after that level, increase but not in direct proportion to the
output

57. This method fails to distinguish between jobs performed by manual labour and machines.

Percentage of direct labour cost

Percentage of prime cost

Rate per unit of production

Machine hour rate

58. The method of pricing inventory when all units are assigned the same price is

LIFO

Rearzable Price

Average cost

Market Price

59. In ABC plan, items A, B & C are categorised as

A- Fast moving, B- Slow moving, C- Non-moving.

B- A- High value, B- Medium value, C-Low value.
C- A-Critical, B- Medium critical, C- Non-critical.
D- A- Capital items, B – Raw matekals, C- Office Items.

60 . When perpetual inventory system is in use which of the following methods is best suited?

Physical Balance method

Book Balance method

Derived Balance method

None of the options

61. What is the formula for calculating danger level of stock?

Reorder level – (Normal consumption x Normal reorder period)

Reorder level + Reordering quantity – (Minimum consumption x Minimum reorder period)

Ordering level – (Average rate of consumption x Reorder period)

Maximum consumption x Maximum reordering period

62. The appropriate cost driver for packing activity:

Number of receiving orders

Number of packing orders

Number of store deliveries

Inspection per item