41. What is the ideal transfer price?
A. Market price
B. Total cost
C. Total cost less internal savings
D. Opportunity cost
Answer
D. Opportunity cost
42. In what circumstances might a company be prepared to price a special contract at less than itsrelevant cost?
A. When sales of other products will not increase
B. When the company is operating at almost full capacity
C. In the expectation that additional profitable orders will be placed by the same customer
D. When there are signs of improved market conditions
Answer
C. In the expectation that additional profitable orders will be placed by the same customer
43. The standard cost of a product is:
A. The average unit cost of products produced during a particular period
B. The unit cost of products incurred at the start of a particular period
C. The average unit cost of products produced in the previous period
D. The planned unit cost of products produced during a particular period
Answer
D. The planned unit cost of products produced during a particular period
44. What term is used to describe the level of efficiency achieved that appropriately trained, motivated and resourced employees can achieve in the long-run?
A. Standard performance
B. Standard hours
C. Standard ex ante
D. Standard ex post
Answer
B. Standard hours
45. A standard that represents the most likely scenario can be referred to as the:
A. Average standard
B. Attainable standard
C. Basic standard
D. Ideal standard
Answer
B. Attainable standard
46. When calculating cost variances under a standard costing system we must:
A. Compare standard costs with actual costs at the standard level of activity
B. Compare actual costs with those that were budgeted
C. Compare actual costs with standard costs at the actual level of output
D. Compare actual outputs against budgeted outputs
Answer
D. Compare actual outputs against budgeted outputs
47. When carrying out variance analysis ideally, we should:
A. Look at controllable adverse and favourable variances that are over a predetermined amount
B. Look at adverse variances that are over a predetermined amount
C. Look at all variances
D. Look at all adverse and favourable variances that are over a predetermined amount
Answer
A. Look at controllable adverse and favourable variances that are over a predetermined amount
48. The efficiency ratio can be defined as:
A. Actual hours worked / budgeted labour hours
B. Standard hours produced/ actual labour hours worked
C. Standard hours produced / budgeted labour hours
D. Actual hours worked / actual production based on standard hours
Answer
A. Actual hours worked / budgeted labour hours
49. The labour rate variance can be calculated by the following equation:
A. (Standard hours – actual hours) x actual wage rate
B. (Standard wage rate – actual wage rate) x standard hours worked
C. (Standard wage rate – actual wage rate) x actual hours worked
D. Budgeted labour costs – actual labour costs
Answer
A. (Standard hours – actual hours) x actual wage rate
50. In August actual material used amounted to 5,650 kg, budgeted output was 1,000 units and standard material usage was 5 kg per unit. Actual output was 1,075 units. If the standard material cost of each product is 25 the material efficiency variance will be:
A. 3,250 favourable
B. 1,375 favourable
C. 3,250 adverse
D. 1,375 adverse
Answer
C. 3,250 adverse
51. During July actual labour costs amounted to 19,800, the standard rate of pay was 4.50 per hourand the labour rate variance amounted to 225 adverse. The actual hours worked were:
A. 4,400
B. 1,012
C. 4,350
D. 3,450
Answer
A. 4,400
52. An adverse material usage variance together with a favourable materials price variance could suggest that:
A. We are paying the same for our materials but we are using more than expected
B. We are paying higher prices for our materials than expected
C. We are paying less for our materials than expected but we are using more materials
D. We are using less material than expected but in total we are paying more than we should
Answer
A. We are paying the same for our materials but we are using more than expected
53. An adverse labour efficiency variance together with a favourable labour rate variance may mean that:
A. The business is paying a higher hourly rate than the standard
B. Less labour hours are needed to make the same amount of output
C. Less skilled staff are being used in production
D. More products are being made per hour
Answer
C. Less skilled staff are being used in production
54. The formula for calculating the variable overhead total variance is:
A. (Standard hours less actual hours) x variable overhead absorption rate
B. Actual variable overhead less (actual hours x actual hours worked x variable overhead absorption rate)
C. Actual variable overhead expenditure less budgeted variable overhead expenditure
D. Actual variable overhead less (standard hours x actual production x variable overhead absorption rate)
Answer
B. Actual variable overhead less (actual hours x actual hours worked x variable overhead absorption rate)
55. The formula for calculating the fixed overhead volume variance is:
A. Budgeted fixed expenditure less (actual hours x actual production x fixed overhead absorption rate)
B. Budgeted fixed expenditure less (actual hours x fixed overhead absorption rate)
C. Actual fixed overhead less (standard hours x actual production x fixed overhead absorption rate)
D. Budgeted fixed expenditure less (standard hours x actual production x fixed overhead expenditure variance)
Answer
D. Budgeted fixed expenditure less (standard hours x actual production x fixed overhead expenditure variance)
56. ___ are the factor which have direct cause and effect relationship with cost
A. Cost object
B. Cost pool
C. Cost driver
D. Cost centre
Answer
C. Cost driver
57. ___ is also known as ‘Transaction Costing’.
A. Target costing
B. Kaizen costing
C. Throughput costing
D. Activity based costing
Answer
D. Activity based costing
58. ___ is maximum permissible cost in a competitive business environment.
A. Activity cost
B. Target cost
C. Kaizen cost
D. None of these
Answer
B. Target cost
59. Promoters of Activity based Costing was /were ___
A. Kaplan and Cooper
B. Galloway
C. Goldratt
D. Ouchy
Answer
A. Kaplan and Cooper
60. In innovative cost management terminologies ‘BPR’ stands for?
A. Business Process Reconstruction
B. Business Production Reschedule
C. Business Process Re-engineering
D. None of these
Answer
C. Business Process Re-engineering
61. A cost centre is:
A. The part of the business where all costs are paid to suppliers
B. A production department where all production costs are aggregated
C. An area for which costs are accumulated
D. An area of the business accountable for both costs and revenues
Answer
C. An area for which costs are accumulated
62. An investment centre is a responsibility centre where the manager has control of:
A. Costs
B. Costs, profits and product quality
C. Costs, profits and assets
D. Costs and profits
Answer
C. Costs, profits and assets
63. Responsibility accounting aims to:
A. Ensure that costs become the responsibility of a specific manager
B. Ensure that a manager is punished if things go wrong
C. Reduce the costs that a department incurs
D. Allocate costs to all areas of a business
Answer
A. Ensure that costs become the responsibility of a specific manager
64. Prime cost can be defined as:
A. The total costs of manufacturing a product
B. The total direct costs of manufacturing a product
C. The total costs of operating the production department where the product is made
D. The cost of the first stage of the manufacture of a product
Answer
B. The total direct costs of manufacturing a product
65. Which of the following best describes a fixed cost?
A. Has a direct relationship with output
B. Increases proportionately with output
C. Represents a fixed proportion of total costs
D. Remains constant irrespective of the level of activity
Answer
D. Remains constant irrespective of the level of activity
66. Direct labour costs will include:
A. Direct labour costs plus any bonuses and overtime premiums
B. Direct labour costs plus any bonuses
C. Total direct labour hours at the normal hourly rate of pay
D. All labour costs attributable to a product
Answer
C. Total direct labour hours at the normal hourly rate of pay
67. The company which applied first ‘Just in Time’ in its manufacturing is ___
A. GE Electricals
B. Motorola
C. Toyota
D. Suzuki
Answer
C. Toyota
68. ___ is developed on the concept ‘inventory is evil’.
A. Quality circle
B. JIT
C. Kaizen
D. All of these
Answer
B. JIT
69. JIT was first developed by:
A. Taiichi Ohno
B. Ouchy
C. Kaplan
D. None of these
Answer
A. Taiichi Ohno
70. “Kanban’ system is similar to ___ philosophy
A. Kaizen
B. Cost driver
C. Just in Time
D. None of these
Answer
C. Just in Time
71. Which of the following is / are the method of establishing ‘target cost’?
A. Addition method
B. Subtraction method
C. Integration method
D. All of these
Answer
D. All of these
72. Accumulated cost of an activity called ___ in Activity based costing.
A. Cost driver
B. Cost object
C. Cost centre
D. Cost Pool
Answer
D. Cost Pool
73. ___ is regarded as ‘Price-led costing’.
A. Activity based costing
B. Target costing
C. Kaizen costing
D. Back flush costing
Answer
B. Target costing
74. Life Cycle Costing is advocated by ___
A. R. Kaplan
B. R. Cooper
D. G. Woodward d. S. Goldratt
Answer
C.
75. Upstream cost, Down stream cost etc., are the concepts in ___
A. Target costing
B. Kaizen costing
C. Life cycle costing
D. Activity based costing
Answer
C. Life cycle costing
76. When output in relation to the input is expressed mathematically it is called as ___
A. Outcome index
B. Efficiency index
C. Productivity index
D. All the above.
Answer
C. Productivity index
77. If Profit divided by the capital employed, it reveals ___
A. Labour productivity
B. Machine productivity
C. Material productivity
D. None of these
Answer
D. None of these
78. The type of spoilage that should not affect the cost of inventories is
A. Abnormal spoilage
B. Seasonal spoilage
C. Normal spoilage
D. Indirect spoilage
Answer
A. Abnormal spoilage
79. Materials may not be put into process
A. At the beginning of an operation
B. Continuously
C. At the end of the operation
D. In the shipping department.
Answer
D. In the shipping department.
80. Process cost method is especially suitable for
A. Custom production
B. FIFO
C. Standard costs
D. LIFO
Answer
C. Standard costs
