Cost and Managerial Accounting Online MCQ Set 13

QN01. Over applied FOH will always result when a predetermined FOH rate is applied and:

  1. Production is greater than defined capacity
  2. Actual overhead costs are less than budgeted overhead
  3. Budgeted capacity is less than normal capacity
  4. Actual overhead incurred is less than applied Overhead
Answer

(D)Actual overhead incurred is less than applied Overhead

QN02. ______________ is the time worked over and above the employee's basic working week.

  1. Flex time
  2. Overtime
  3. Shift allowance
  4. Commission
Answer

(B)Overtime

QN03. Which of the following is a mechanical device to record the exact time of the workers?

  1. Clock Card
  2. Store Card
  3. Token System
  4. Attendance Register
Answer

(A)Clock Card

QN04. In order to ensure efficient functioning of the stores department and steady flow of materials to the production departments, the restocking of stores is duty of:

  1. Managers
  2. Storekeeper
  3. Production In charge
  4. Sales supervisor
Answer

(B)Storekeeper

QN05. A high inventory turnover may indicate:

  1. An efficient use of the investment in inventory
  2. A high risk of stock-outs
  3. Stock position of store room
  4. All of the given options
Answer

(A)An efficient use of the investment in inventory

QN06. The Term Minimum Level Represents.

  1. The quantity below which the stock of any item should not be allowed to fall
  2. The quantity below which the stock of any item should be allowed to fall
  3. The estimated time period in number of days or in weeks or in months.
  4. The Lead time period in number of days or in weeks or in months.
Answer

(A)The quantity below which the stock of any item should not be allowed to fall

QN07. Which of the following is likely to be classified as a direct material cost of a motor car wheel?

  1. The metal used to manufacture it.
  2. The metal used to manufacture one of the tools used in the car wheel factory.
  3. The cost of operating the raw material stores in the factory.
  4. The cost of the quality operation on the finished car wheels.
Answer

(A)The metal used to manufacture it.

QN08. What is the company's contribution margin ratio?

  1. 30%
  2. 50%
  3. 150%
  4. None of given options
Answer

(B)50%

QN09. The margin of safety can be defined as:

  1. The excess of budgeted or actual sales over budgeted or actual variable expenses
  2. The excess of budgeted or actual sales over budgeted or actual fixed expenses
  3. The excess of budgeted sales over the break-even volume of sales
  4. The excess of budgeted net income over actual net income
Answer

(C)The excess of budgeted sales over the break-even volume of sales

QN10. The break-even point in units is calculated using ______________

  1. Fixed expenses and the contribution margin ratio
  2. Variable expenses and the contribution margin ratio
  3. Fixed expenses and the unit contribution margin
  4. Variable expenses and the unit contribution margin
Answer

(C)Fixed expenses and the unit contribution margin

QN11. The cost expended in the past that cannot be retrieved on product or service

  1. Relevant Cost
  2. Sunk Cost
  3. Product Cost
  4. Irrelevant Cost
Answer

(B)Sunk Cost

QN12. The combination of direct material and direct labor is :-

  1. Total production Cost
  2. Prime Cost
  3. Conversion Cost
  4. Total manufacturing Cost
Answer

(B)Prime Cost

QN13. Prime cost + Factory overhead cost is:

  1. Conversion cost.
  2. Production cost.
  3. Total cost.
  4. None of given option.
Answer

(B)Production cost.

QN14. Juniper Limited's budgeted overhead in the last period was 170,000. Its overhead absorbed and incurred for the same period were 180,000 and 195,000 respectively. What is its amount of over- or under-absorption of overhead?

  1. Under-absorption of 15,000
  2. Under-absorption of 25,000
  3. Over-absorption of 15,000
  4. Over-absorption of 25,000
Answer

(A)Under-absorption of 15,000

QN15. The distinction between direct and indirect labour helps to:

  1. Measure efficiency of performance
  2. Determine product cost more accurately
  3. Ensure better cost analysis for decisions and control
  4. All of the above
Answer

(D)All of the above

QN16. The objective of work study is:

  1. Material conservation
  2. Time saving
  3. Quality improvement and cost reduction
  4. All of the above
Answer

(D)All of the above

QN17. Contribution margin contributes to meet which one of the following options?

  1. Variable cost
  2. Fixed cost
  3. Operating cost
  4. Net profit
Answer

(B)Fixed cost

QN18. Non-monetary incentives may include the following except:

  1. Health and safety
  2. Housing facilities
  3. Education and training
  4. Dearness allowance
Answer

(D)Dearness allowance

QN19. Production overheads are absorbed into production units by the use of an overhead absorption rate. Which one of the following best describes how the absorption rate is calculated?

  1. Total number of units produced divided by the total cost centre overheads.
  2. Total number of units produced multiplied by the unit overhead cost.
  3. Total cost centre overheads divided by the cost centre activity level.
  4. Total indirect costs for the business divided by the total number of units produced.
Answer

(C)Total cost centre overheads divided by the cost centre activity level.

QN20. If a company uses predetermined overhead recovery rates and at the end of a period finds that there has been an under-recovery of overhead, which of the following best explains how the under-recovery has occurred?

  1. Actual overhead cost has exceeded the amount used as a basis for the establishment of the predetermined rate.
  2. Actual overhead cost has been less than the amount used as a basis for the establishment of the predetermined rate.
  3. Actual activity levels were higher than planned due to an increase in demand.
  4. An expected price increase in the overhead costs which was built into the overhead recovery rate did not take place.
Answer

(A)Actual overhead cost has exceeded the amount used as a basis for the establishment of the predetermined rate.

QN21. The break-even point is that at which:

  1. The level of activity at which the business operates most economically.
  2. The level of activity at which the business makes neither a profit nor a loss.
  3. The fixed costs are lowest.
  4. The variable cost per unit is minimized.
Answer

(B)The level of activity at which the business makes neither a profit nor a loss.

QN22. Cost accounting has been developed because of ______________ of financial accounting.

  1. limitations
  2. expenditure
  3. statutory requirements
  4. both (a) and (b)
  5. None of these
Answer

(A)limitations

QN23. Continuous costing is also called

  1. Operation costing
  2. Process costing
  3. Batch costing
  4. Contract costing
  5. None of these
Answer

(B)Process costing

QN24. The total of all direct expenses is known as

  1. Total cost
  2. Overhead
  3. Prime cost
  4. Work cost
  5. None of these
Answer

(C)Prime cost

QN25. Value added is the change in

  1. Face value
  2. Market value
  3. Book value
  4. Realizable value
  5. None of these
Answer

(B)Market value

QN26. The two aspects of material control are accounting aspect and ______________ aspect.

  1. Financial
  2. Economic
  3. social
  4. Operational
  5. None of these
Answer

(D)social

QN27. With regard to break -even charts and break-even analysis, which of the following is true?

  1. It is assumed that variable cost fluctuates in direct proportion to output
  2. The break the break-even point is at the intersection of the sales line and the variable cost line
  3. A break-even chart shown the maximum profit possible
  4. A break-even chart is capable of dealing with any change of product mix
Answer

(A)It is assumed that variable cost fluctuates in direct proportion to output

QN28. ABC Ltd. Has fixed costs of 60,000 p.a.. It manufactures a single product, which it sells for 20 per unit. Its contribution to sales ratio is 40%. ABC Ltd's break-even point in units is: sts of

  1. 3,000
  2. 5,000
  3. 7,500
Answer

(C)7,500

QN29. Selling a product at a price equivalent to or below marginal cost is recommended for a short period in certain special circumstances, such as

  1. Introducing a new product
  2. Exploring foreign market
  3. Driving out a weaker competitor
  4. All of the above
Answer

(D)All of the above

QN30. A firm requires 16,000 nos. of a certain component, which is buys at 60 each. The cost of placing an order and following it up is 120 and the annual storage charges works out to 10% of The cost of the item. To get maximum benefit the firm should place order for ______________ Units at a time.

  1. 1,000
  2. 900
  3. 800
  4. 600
Answer

(C)800

QN31. A material loss during production or storage due to evaporation or shrinkage is called:

  1. Scrap
  2. Waste
  3. Spoilage
  4. Material loss
Answer

(B)Waste

QN32. Objectives of research and development costs include:

  1. Maintaining present competitive position
  2. Improving enterprise's competitive position
  3. Exploring now market/products
  4. All of the above
Answer

(D)All of the above

QN33. Which of the following definitions describe marginal cost?

  1. The variable cost of one unit of product or service
  2. A principle whereby variable costs are charged to cost units and the fixed costs attributable to the relevant period are written-off in full against the contribution for that period
  3. Costs appropriate to aiding the making of specific management decisions
  4. The price at which material identical to that which is used up could be replaced on the date of usage
Answer

(A)The variable cost of one unit of product or service

QN34. For computing depreciation of an asset, the factors that are taken into consideration include the following except:

  1. Historical cost
  2. Expected useful life
  3. Insurance premium
  4. Estimated residual value
Answer

(C)Insurance premium

QN35. Which of the following is not included in the objectives of maintenance of plant and machinery?

  1. Reducing idle time
  2. Reducing breakdown
  3. Maintaining efficiency
  4. Increasing life
Answer

(D)Increasing life

QN36. Which of the following is not used as a base for apportionment of administration overheads?

  1. Direct wages
  2. Works cost
  3. Conversion cost
  4. Sales value
Answer

(A)Direct wages

QN37. Fringe benefits are those for which efforts of the workers are not necessary and may include the following except:

  1. Holiday pay
  2. Attendance bonus
  3. Production bonus
  4. Employer's contribution to P.F.
Answer

(C)Production bonus

QN38. Which of the following is not a cost implication of labourturnover?

  1. Training
  2. Recruiting
  3. Ageing labour force
  4. Damage of machine
Answer

(C)Ageing labour force

QN39. Which of the following techniques is not meant for labour cost control?

  1. Budgetary control
  2. Standard costing
  3. ABC analysis
  4. Ratio analysis
Answer

(C)ABC analysis

QN40. Which of the following is TRUE regarding Departmental Rates.

  1. A departmental absorption rate is a rate of absorption based upon the particular department's overhead cost and activity level
  2. A departmental absorption rate is a rate of absorption not based upon the particular department's overhead cost and activity level
  3. A single rate of absorption used throughout an organization's production facility and based upon its total production costs and activity
  4. None of the given options
Answer

(A)A departmental absorption rate is a rate of absorption based upon the particular department's overhead cost and activity level

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