Cost Accounting BBA MCQs
Cost Accounting BBA MCQs
1. According to CIMA, England, “the technique and process of ascertaining cost” is called
a. Costing c. Cost Accountancy
b. Cost Accounting d. Cost
2. Which among the following costs are not useful for managerial decision making?
a. Sunk Cost c. Standard Cost
b. Marginal Cost d. None of the above
3. The main function of cost accounting is reporting
a. Internal c. Government
b. External d. Bank
4. The information provided by financial statements is in nature.
a. Standard c. Marginal
b. Historical d. Uniform
5. The principle of matching costs with revenues is known as principle.
a. Cost c. Consistency
b. Matching d. Revenue
6. In cost accounting, stock is valued at
a. Market price c. Selling price
b. Cost price d. Standard price
7. The installation of a system will create confidence in the minds of public about the
fairness of the prices charged.
a. Costing c. Management accounting
b. Financial accounting d. Information
8. The exact cause of increase or decrease in profit or loss is disclosed by
a. Management accounting c. Cost accounting system
system d. Management information
b. Financial accounting system system
9. Data required for the fixation of selling price is provided by
a. Management accounting system c. Cost accounting system
b. Financial counting system d. All of these
10. Cost accounting has developed due to the of financial accounting
a. Advantages c. Merits
b. Limitations d. Expansion
11. The main objective of cost accounting is
a. Recording of cost c. Cost control
b. Fixation of selling price d. Maximise profit
12. is the application of costing and cost accounting principles, methods and techniques
to the art, science and practice of cost control and the ascertainment of profitability.
a. Cost accounting c. Cost Control
b. Cost accountancy d. Cost Ascertainment
13. Cost accountancy is considered an art because it
a. Has systematic body of c. involves continuous efforts of
knowledge cost accountant
b. requires necessary ability and d. None of the above
skills
14. Which of the following statements are not true regarding cost
accounting?
a. Information obtained is used by management for decision making
b. Stock is valued at cost
c. Deals partly with facts & partly with estimates
d. Accounts are mandatory according to Companies Act and IT Act
15. “The amount of expenditure (actual or notional) incurred or attributable to a given thing” is
a. Expense c. Cost
b. Revenue expenditure d. Value
16. Cost accountancy is considered a science because
a. It has a systematic body of c. Involves continuous efforts of
knowledge a cost accountant
b. It requires necessary ability d. None of the above
and skills
17. is a “measurement in monetary terms of the amount of resources used for some
purpose”.
a. Cost c. Expense
b. Revenue expenditure d. Value
18. Cost accounting mainly helps the management in
a. Earning profit c. Fixing prices of the products
b. Providing information to d. All of the above
management
19. is that portion of expired cost resulting from a productive usage of an asset.
a. Cost c. Loss
b. Expense d. None of these
20. Expired cost is recorded in
a. Balance Sheet c. Cash flow statement
b. Profit & Loss A/c d. None of the above
21. Unexpired cost is recorded in
a. Balance Sheet c. Cash flow statement
b. Profit & Loss A/c d. None of the above
22. is that portion of expired cost resulting from the decline in the service potential of an
asset that generated no benefit to the firm.
a. Cost c. Loss
b. Expense d. None of the above
23. is a location, person or item of equipment (or group of these) for which costs may be
ascertained and used for the purpose of control.
a. Cost centre c. Profit centre
b. Revenue centre d. Responsibility centre
24. is the segment of activity of a business which is responsible for both revenue and
expenses.
a. Cost centre c. Profit centre
b. Revenue centre d. Responsibility centre
25. is a small segment of activity or responsibility for which cost are accumulated.
a. Cost centre c. Profit centre
b. Revenue centre d. Responsibility centre
26. cost centre consists of a group of persons like foremen, storekeeper, etc.
a. Personal c. Process
b. Production d. Impersonal
27. cost centre consists of allocation or an item of equipment or a group of these.
a. Operation c. Production
b. Personal d. Impersonal
28. cost centre consists of persons or machines carrying out similar operations.
a. Operation c. Production
b. Personal d. Impersonal
29. consists of a process or a continuous sequence of operations.
a. Service cost centre c. Process cost centre
b. Operation cost centre d. Production cost centre
30. Which cost centre undertakes production of a product i.e. conversion of raw materials into
finished products?
a. Service cost centre c. Process cost centre
b. Operation cost centre d. Production cost centre
31. Centres like maintenance department and power supply department which provide services to
other departments of an organisation is called
a. Operation cost centre c. Process cost centre
b. Impersonal cost centre d. Service cost centre
32. Segment of activity of a business which is responsible for both revenue and cost is
a. Responsibility centre c. Profit centre
b. Revenue centre d. Cost centre
33. Which is not true about a profit centre?
a. Segment responsible for both revenue and
cost
b. Created to delegate responsibility and measure their performance
c. Each profit centre has a profit target
d. It is not autonomous
34. Segment or unit of an organisation having accountability to a higher authority
for performance of function assigned and costs incurred is
a. Responsibility centre c. Profit centre
b. Revenue centre d. Cost centre
35. A responsibility centre in which inputs are measured in monetary terms and outputs
not recorded is called
a. Expense Centre c. Investment centre
b. Profit centre d. None of the above
36. Responsibility centre in which performance is measured on the basis of return on investment:
a. Expense Centre c. Investment centre
b. Profit centre d. None of the above
37. A responsibility centre where performance is judged on the basis of costs incurred is called
a. Expense Centre c. Investment centre
b. Profit centre d. None of the above
38. According to CIMA, England, “a unit of product, service or time in relation to which cost
may be ascertained or expressed” is called
a. Cost centre c. Cost unit
b. Cost d. None of the above
39. Costs incurred in the past and has no effect on future decision making is called
a. Opportunity cost c. Conversion cost
b. Imputed cost d. Sunk Cost
40. Costs which do not involve any cash outlay is called
a. Out of stock cost c. Imputed cost
b. Conversion cost d. Discretionary cost
41. “The value of a benefit sacrificed in favour of an alternative course of action” is
a. Sunk cost c. Imputed cost
b. Opportunity cost d. Notional cost
42. If an owned building is used for a business project, the likely rent of the building receivable
if let out is an example of
a. Sunk cost c. Opportunity cost
b. Imputed cost d. Notional cost
43. Cost incurred due to shortage of stock is known as
a. Imputed cost c. Abnormal cost
b. Urgent cost d. Out of stock cost
44. Depreciation on machinery is an example of
a. Imputed cost c. Shut down cost
b. Opportunity cost d. Discretionary cost
45. Cost incurred even after shutting down of plant or temporary stoppage of production is
a. Shut down cost c. Opportunity cost
b. Imputed cost d. Discretionary cost
46. Costs to be incurred to avoid the hampering of production is called
a. Out of stock cost c. Discretionary cost
b. Shut down cost d. Urgent cost
47. Cost that arises from top management policies and controlled by the management is called
a. Expired cost c. Standard cost
b. Discretionary cost d. Marginal cost
48. Costs which can be shifted or postponed to a future period without affecting the efficiency of
current production is called
a. Carrying cost c. Research cost
b. Postponable cost d. Out of Pocket cost
49. Cost of money locked up in inventory, inventory obsolescence, etc. are examples of
a. Normal Cost c. Unavoidable cost
b. Carrying cost d. Marginal cost
50. Costs incurred for the maintenance of inventory is
called c. Period cost
a. Carrying cost d. Explicit cost
b. Ordering cost
51. Cost incurred for production of a new product or improved method of production is
a. Replacement cost c. Differential cost
b. Development cost d. None of the above
52. Cost which is related to current period as an expense is known as
a. Implicit cost c. Carrying cost
b. Marginal cost d. None of the above
53. Cost to be incurred at present or in future to replace an asset or material is
a. Development cost c. Expired cost
b. Research cost d. Replacement cost
54. Change in costs due to change in the level of activity is called
a. Marginal cost c. Abnormal cost
b. Differential cost d. Uncontrollable cost
55. Incremental cost and decremental cost are classifications of
a. Marginal cost c. Uncontrollable cost
b. Abnormal cost d. Differential cost
56. When cost increases due to change in level of activity, such increase in known as
a. Unavoidable cost c. Incremental cost
b. Uncontrollable cost d. None of the above
57. Any cost ascertained after being incurred and has no use in cost control decisions are called
a. Predetermined cost c. Unavoidable cost
b. Historical cost d. None of the above
58. He additional cost incurred to produce one additional unit is called
a. Incremental cost c. Marginal cost
b. Development cost d. Cost of production
59. Which among the following is the cost of searching for a new product or improved
products or improved methods of production?
a. Normal cost c. Product cost
b. Research cost d. Opportunity cost
60. Which of the following is correct about normal
cost? c. Part of Cost of Production
a. Irregular and unexpected cost d. All of the above
b. Charged to Costing P & L a/c
61. Which among the following is correct about abnormal cost?
a. Expected at a given level of output c. Part of Cost of Production
b. Charged to Costing P&L a/c d. None of the above
62. Which among the following costs are charged to Costing P&L a/c?
a. Estimated cost c. Normal cost
b. Controllable costs d. Abnormal Cost
63. Normal costs are generally costs.
a. Controllable c. Discretionary
b. Uncontrollable d. Avoidable
64. Predetermined cost based on technical estimate for materials, labour and overhead for a
selected period of time and for a prescribed set of working conditions is known as
a. Standard cost c. Normal cost
b. Budgeted cost d. Avoidable cost
65. An estimate of expenditure for different phases of business operations for a period of time
in future is called
a. Budgeted cost c. Estimated cost
b. Variable cost d. Development cost
66. Items of cost like wages, rent, etc. which involves cash payment to outsiders are
a. Normal cost c. Out of pocket cost
b. Product cost d. None of the above
67. Costs required for production and will not be incurred if there is no production are
a. Product cost c. Period cost
b. Direct cost d. Committed cost
68. Which among the following is not a part of product b. Direct Labour
cost?
a. Direct Materials
c. Selling OH
d. Factory OH
69. Items of cost like wages, rent, etc. which involves cash payment to outsiders are called
a. Explicit cost c. Product cost
b. Period Cost d. None of the above
70. Certain costs, also known as Economic costs, which do not involve immediate cash payments
are called
a. Explicit cost c. Avoidable cost
b. Indirect cost d. Implicit cost
71. Cost which can be directly identified with and allocated to cost units or centre
a. Indirect costs c. Product cost
b. Direct costs d. None of the above
72. Overheads or on cost is the total of
a. All direct expenses c. Direct Expenses + Factory OH
b. All indirect expenses d. None of the above
73. Prime cost is the total of
a. All direct expenses c. Direct Expenses + Factory OH
b. All indirect expenses d. None of the above
74. Hypothetical costs which do not involve any cash outlay and used solely fo the purpose
of decision making are called
a. Indirect costs c. Explicit costs
b. Notional costs d. None of the above
75. Rent on own building is an example of
a. Imputed cost c. Standard cost
b. Explicit cost d. Abnormal cost
76. The process of charging such costs which are directly identifiable with some products or
departments to such cost centres is called
a. Cost absorption c. Cost Apportionment
b. Cost allocation d. None of the above
77. Distribution of costs which are not directly identifiable with any cost centre, amongst various
cost centres on predetermined basis is called
a. Cost absorption c. Cost Apportionment
b. Cost allocation d. None of the above
78. ‘Regulation by executive action of the costs of operating an undertaking, particularly where
such action is guided by Cost Accounting’ is known as
a. Cost ascertainment c. Cost control
b. Cost planning d. Cost audit
79. Conversion cost is calculated as
a. Sum of all direct materials
b. Sum of all indirect materials
c. Total cost of production –Direct materials
d. Prime cost + Factory OH
80. For exercising control over cost, the best system is costing.
a. Standard c. Marginal
b. Historical d. Estimated
81. system is best suited for undertaking job
works. c. Contract costing
a. Process costing d. Batch costing
b. Job costing
82. system of costing is suitable for toy making.
a. Batch costing c. Operating costing
b. Job costing d. Process costing
83. He sum of direct wages, direct expenses and overhead costs of converting raw materials in
to finished products is called
a. Prime cost c. Direct cost
b. Works cost d. Conversion cost
84. An example of personal cost centre
a. Machinery c. Maintenance department
b. Store yard d. Foreman
85. Cost centres are created for
a. Segregating costs into fixed and variable c. Making decisions
b. Control and fixing responsibility d. Ascertaining profit
86. Conversion cost excludes
a. Direct material c. Direct expenses
b. Direct labour cost d. All of the above
87. Variable costs increase in total due to
a. Increase in sales c. Increase in profit
b. Increase in volume of d. All of the above
production
88. Common cost of facilities or services employed in the output of two or more simultaneously
produced or otherwise closely related operations, commodities or services.
a. Uniform cost c. Joint cost
b. Common cost d. Product cost
89. Costs which are collectively incurred for a number of cost centres and are required to be
suitably apportioned for determining for determining cost of individual cost centres is
a. Uniform cost c. Joint cost
b. Common cost d. Product cost
90. Mention the item of expense which is excluded from cost accounts.
a. Raw materials c. Salaries
b. Office supplies d. Income Tax
91. Cost incurred by undertakings which do not manufacture any product but services is
a. Operation cost c. Joint cost
b. Operating cost d. Sunk cost
92. In cement industry, the method of costing adopted
is c. Contract costing
a. Process costing d. Operating costing
b. Job costing
93. Direct material is a c. Semi-variable cost
a. Fixed cost d. None of the above
b. Variable cost
94. A Bill of Material serves the purpose of c. Purchase requisition
a. Purchase order d. Goods received note
b. Material requisition
95. Thread in garments is an example of c. Variable cost
a. Direct materials d. Indirect materials
b. Prime cost
96. Primary packing materials are examples of c. Selling OH
a. Direct materials d. Factory OH
b. Indirect materials
97. Purchase requisition for regular stock materials is prepared by
a. Costing department c. Storekeeper
b. Production department d. Purchase department
98. The purpose of inventory control is to
a. control flow of raw materials c. control material price
b. maintain optimum level of inventory d. None of these
99. A Bill of Materials is
a. An invoice of materials purchased
b. A voucher of materials received by
supplier
c. A document that shows all the materials required for a job
d. None of these
100. Under decentralized purchasing, which department is responsible for making purchases?
a. Purchase department c. Stores department
b. Department requiring materials d. None of these
101. An example of normal loss of materials is
a. Loss due to accidents c. Loss due to breaking the bulk
b. Pilferage d. Loss due to careless handling
102. Continuous stock taking is a part of
a. Annual stock taking c. ABC analysis
b. Perpetual inventory d. VED analysis
103. Bin card is maintained by
a. Accounts department c. Stores department
b. Costing department d. Purchase department
104. Economic order quantity is a tool for controlling
a. Inventory c. Machinery
b. Price d. Cost
105. is the time between placement of an order and obtaining delivery.
a. Purchase time c. Reordering time
b. Lead time d. Emergency delivery time
106. The rate of change in the material usage is called
a. Input output ratio c. EOQ
b. Inventory turnover ratio d. Inventory control
107. technique is a selective control of materials
a. ABC c. Input output ratio
b. Inventory turnover ratio d. EOQ
108. Fragments of materials that are left from certain type of manufacture are called
a. Scrap c. Defectives
b. Waste d. Spoilage
109. Portion of basic raw material lost in processing having no recovery value (eg. ash) is
a. Scrap c. Defectives
b. Waste d. Spoilage
110. Which among the following will be the suitable method of treatment of realizable value scrap
if it is of little value?
a. Credited to Costing P&L
b. Credited to job/ process
c. Deducted from cost of materials consumed
d. Deducted from factory Over head
111. is the purchase of materials at such a time that delivery immediately precedes demand
or use.
a. Reorder level c. FIFO
b. JIT d. EOQ
112. Materials damaged in manufacturing operations in such a way that they cannot be rectified
and bought back to normal specifications is called
a. Scrap c. Defectives
b. Waste d. Spoilage
113. Portion of production which can be rectified at some extra cost of re-operation is called
a. Scrap c. Defectives
b. Waste d. Spoilage
114. Which of the following methods is used to control spare parts?
a. FNSD analysis c. ABC analysis
b. VED analysis d. JIT
115. Proportional Parts Value Analysis method is another name for
a. ABC analysis c. FNSD analysis
b. VED analysis d. JIT
116. State which among the following is true about Stores Ledger.
a. Records quantity only
b. Maintained by storekeeper
c. Posting made before transaction takes place
d. Transactions are summarized and posted periodically
117. Calculate EOQ from the details: Annual usage – Rs. 120000, Cost of placing one order – Rs.
60, Annual carrying cost – 10% of inventory value
a. 6000 c. 12000
b. 10000 d. None of the above
118. Level at which normal issue of materials are stopped and materials are issued only for
important jobs is known
a. Minimum level c. Maximum level
b. Re-order level d. Danger level
119. State the formulae for calculation for minimum
level.
a. Re-order level + Re-order quantity
b. Re-order level – (Normal consumption x Normal re-order period)
c. Normal consumption x Maximum re-order period
d. Re-order level – (Normal consumption + Normal Re-order period)
120. Maximum usage – 130 units/ day & Re-order period – 25 to 30 days. Calculate re-order
level.
a. 3900 units c. 7400 units
b. 1150 units d. None of the above
121. Normal usage – 100 units/ day , Minimum usage – 60 units/ day, Maximum usage – 130
units/ day, EOQ – 5000 units & Re-order period – 25 to 30 days. Calculate minimum level.
a. 3900 units c. 7400 units
b. 1150 units d. None of the above
122. Calculate maximum stock level from the details: EOQ – 300 units, Usage rate - 25 to 75
units/ week & Re-order period – 4 to 6 weeks.
a. 650 units c. 1100 units
b. 450 units d. None of these
123. According to ABC analysis, materials grouped as A constitutes
a. 5 -10 % qty & 60-70 % value c. 65-70 % qty & 5 – 10 % value
b. 15-20% qty & 15-25% value d. None of these
124. Inventory system in which stock taking is made at the end of the accounting year is
a. Perpetual inventory system c. JIT
b. Periodic inventory system d. Continuous stock Taking
125. When prices fluctuate widely, the method that will smooth out the effect of fluctuations is
a. Simple average c. FIFO
b. Weighted average d. LIFO
126. Materials issued are priced at the latest price in –
a. FIFO c. Standard price
b. LIFO d. Weighted average
127. The value of closing stock approximates to the market value under
a. FIFO c. NIFO
b. LIFO d. HIFO
128. Materials issue are priced by dividing the total cost of material in stock by the total quantity
of materials is called method
a. Simple average price c. Specific price
b. Weighted average price d. Standard price
129. Direct labour means
a. Labour completing the work manually
b. Labour recruited directly and not through contractors
c. Permanent labour in the production department
d. Labour which can be conveniently allocated to a particular cost unit
130. Fringe benefits are
a. Related to labour productivity c. contract labour costs
b. indirect forms of employee d. monetary benefits
compensation
131. The difference between attendance time and work time is known as
a. Idle time c. Standard time
b. Overtime d. Time taken
132. Which of the following is a direct worker?
a. Foreman c. Machine operator
b. Sweeper d. Watchman
133. A document used for time keeping
a. Job card c. Daily time sheet
b. Time card d. All of these
134. Job wise analysis of time of direct workers
a. Time booking c. Labour turnover
b. Time keeping d. Idle time
135. Which among the following is an example of normal idle time?
a. Time lost due to shortage of c. Time lost due to waiting for
materials instructions
b. Time lost due to power failure d. Time taken for machine set up
136. Idle Time is
a. Time spent by workers to take lunch
b. Time spent by workers on their jobs
c. Time spent by workers in the factory
d. The difference between time paid for and time spent on job
137. Labour cost per unit can be reduced by 138. Cost of abnormal idle time is
a. Offering low rates of wages transferred to
b. Reducing the labour force a. Costing P&L a/c
b. Cost of production
139. Labour turnover is measured by c. Higher input output ratios
a. Replacement method d. All of the above
b. Separation method
140. A satisfactory system of wage payment should c. Factory OH
a. Deprive the employer of a fair margin d. None of the above
of profit
b. Guarantee a minimum living wage c. Flux method
141. Time wage system d. All of the above
a. Benefits the less efficient workers
b. Increase cost of production c. Provide non financial
142. Wage sheet is prepared by incentives
a. Payroll department d. None of the above
b. Personnel department
c. Satisfies trade unions
d. Pays bonus
1. “The term ‘cost’ must be qualified according to its context”. Discuss this statement referring to
important concepts of cost.
2. Distinguish between costing and cost accounting or Costing’ and ‘cost accounting’ are the same.
3. “Financial accounting treats costs very broadly while the cost accounting does this in much
greater detail” Explain this statement and state the limitations of financial accounting.
4. Define costing and discuss the objectives of cost accounting. What are the methods of costing that
are used in cost accounting ?
5. Cost accounting assists: (a) in controlling efficiency; (b) in pricing products; and (c) in providing a
basis for operating policy. Amplify these points, giving reasons for your views.
6. State the advantages that may be derived from a sound system of cost accounting.
7. What do you mean by elements of cost ? Discuss the various elements of cost.
8. Define and explain the terms (a) cost centre and (b) cost unit.
9. You have been asked to design a system of cost accounting for installation in a factory. Describe
the essentials that should be considered before you design such a system.
10. Write note on the following, indicating in which kinds of industries or undertakings, the different
methods could be suitably applied: (i) Single or output costing (ii) Process costing (iii) Operating
Costing
11. What methods of costing would you apply in the following industries ? State how cost should be
ascertained in each case ? (i) Building, (ii) Colliery, (iii) Soap works, (iv) Motor cars, (v) Radio sets,
(vi) Ship building.
17. Define ‘Variance analysis’. What are the ways of disposing of cost variances?
18. Variance analysis is an integral part of standard costing system.
19. What is budgetary control? Discuss the various preliminaries required for adoption of a system
of budgetary control.
20. What are the main steps in budgetary control? State the main objectives of budgetary control.
21. What factors generally determine a budget period? Give examples?
22. Distinguish between ‘fixed budget’ and ‘flexible budget’.
23. What do you understand by master budget? Into what sections is it usually divided, and what are
the purposes of the divisions?
24. Name the different types of budgets that are built up for effective control.
25. What is a budget report? State the matters that should be incorporated in a good report. How
does it assist the management?
26. What is a principal budget factor? Give a list of such ‘principal budget factors’ and state the
effect of the existence of two or more budget factors in a business.
27. Write a note on (i) zero base budget and (ii) performance budget.
28. Define marginal cost and marginal costing. How variable costs and fixed costs are treated in
marginal costing?
29. What is contribution? How it is related to profits?
30. Explain the role of contribution technique in decision making, giving suitable illustrations.
31. “Fixed costs do not change with changes in volume and it is difficult for management to control
them”. Discuss.
32. “While variable costs are fixed per unit of output, the fixed costs are variable per unit of output
although all costs tend to be variable in the long run”. Explain.
33. What do you understand by P/V ratio? Discuss the importance of P/V ratio and state how P/V
ratio can be improved?
34. What is a break-even chart? What is a profit graph? State the purposes of constructing such
charts.
35. Taking suitable data construct a simple break-even chart and show the break-even point, angle
of incidence and margin of safety on the chart.
36. Draw a break-even chart that will show contribution more clearly than the orthodox
presentation. Mention two other forms of break-even charts.
37. State the limitations of break-even charts.
38. Construct a profit graph with suitable data and obtain an equation of the profit line. Use this
equation to profit planning.
39. “The effect of a price reduction is always to reduce the P/V ratio to raise break-even point and to
shorten the margin of safety”. Explain and illustrate by numerical examples.
40. (a) What do you understand by break-even point? (b) Explain the concept of break-even
analysis.
41. (a) Distinguish between P/V ratio and break-even point? (b) Explain the uses of profit volume
analysis. (c) What are the limitations of break-even analysis?