COST ACCOUNTING
1. According to CIMA, England, “the technique and process of ascertaining cost” is called
a. Costing
b. Cost Accounting
c. Cost Accountancy
d. Cost
2. Which among the following costs are not useful for managerial decision making?
a. Sunk Cost
b. Marginal Cost
c. Standard Cost
d. None of the above
3. The main function of cost accounting is _______ reporting
a. Internal
b. External
c. Government
d. Bank
4. The information provided by financial statements is ________ in nature.
a. Standard
b. Historical
c. Marginal
d. Uniform
5. The principle of matching costs with revenues is known as _____ principle.
a. Cost
b. Matching
c. Consistency
d. Revenue
6. In cost accounting, stock is valued at _______
a. Market price
b. Cost price
c. Selling 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
b. Financial accounting
c. Management accounting
d. Information
8. The exact cause of increase or decrease in profit or loss is disclosed by
a. Management accounting
system
b. Financial accounting system
c. Cost accounting system
d. Management information
system
9. Data required for the fixation of selling price is provided by
a. Management accounting system
b. Financial counting system
c. Cost accounting system
d. All of these
10. Cost accounting has developed due to the ___________ of financial accounting
a. Advantages
b. Limitations
c. Merits
d. Expansion
11. The main objective of cost accounting is
a. Recording of cost
b. Fixation of selling price
c. Cost control
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
b. Cost accountancy
c. Cost Control
d. Cost Ascertainment
13. Cost accountancy is considered an art because it _____
a. Has systematic body of
knowledge
b. requires necessary ability and
skills
c. involves continuous efforts of
cost accountant
d. None of the above
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
b. Revenue expenditure
c. Cost
d. Value
16. Cost accountancy is considered a science because _____
a. It has a systematic body of
knowledge
b. It requires necessary ability
and skills
c. Involves continuous efforts of
a cost accountant
d. None of the above
17. _______ is a “measurement in monetary terms of the amount of resources used for some
purpose”.
a. Cost
b. Revenue expenditure
c. Expense
d. Value
18. Cost accounting mainly helps the management in
a. Earning profit
b. Providing information to
management
c. Fixing prices of the products
d. All of the above
19. ______ is that portion of expired cost resulting from a productive usage of an asset.
a. Cost
b. Expense
c. Loss
d. None of these
20. Expired cost is recorded in _____
a. Balance Sheet
b. Profit & Loss A/c
c. Cash flow statement
d. None of the above
21. Unexpired cost is recorded in _____
a. Balance Sheet
b. Profit & Loss A/c
c. Cash flow statement
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
b. Expense
c. Loss
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
b. Revenue centre
c. Profit centre
d. Responsibility centre
24. ______ is the segment of activity of a business which is responsible for both revenue and
expenses.
a. Cost centre
b. Revenue centre
c. Profit centre
d. Responsibility centre
25. ______ is a small segment of activity or responsibility for which cost are accumulated.
a. Cost centre
b. Revenue centre
c. Profit centre
d. Responsibility centre
26. ______ cost centre consists of a group of persons like foremen, storekeeper, etc.
a. Personal
b. Production
c. Process
d. Impersonal
27. ______ cost centre consists of allocation or an item of equipment or a group of these.
a. Operation
b. Personal
c. Production
d. Impersonal
28. _______ cost centre consists of persons or machines carrying out similar operations.
a. Operation
b. Personal
c. Production
d. Impersonal
29. ________ consists of a process or a continuous sequence of operations.
a. Service cost centre
b. Operation cost centre
c. Process 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
b. Operation cost centre
c. Process 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
b. Impersonal cost centre
c. Process 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
b. Revenue centre
c. Profit 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
b. Revenue centre
c. Profit 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
b. Profit centre
c. Investment centre
d. None of the above
36. Responsibility centre in which performance is measured on the basis of return on investment:
a. Expense Centre
b. Profit centre
c. Investment 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
b. Profit centre
c. Investment 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
b. Cost
c. Cost unit
d. None of the above
39. Costs incurred in the past and has no effect on future decision making is called _____
a. Opportunity cost
b. Imputed cost
c. Conversion cost
d. Sunk Cost
40. Costs which do not involve any cash outlay is called ______
a. Out of stock cost
b. Conversion cost
c. Imputed cost
d. Discretionary cost
41. “The value of a benefit sacrificed in favour of an alternative course of action” is
a. Sunk cost
b. Opportunity cost
c. Imputed 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
b. Imputed cost
c. Opportunity cost
d. Notional cost
43. Cost incurred due to shortage of stock is known as _____
a. Imputed cost
b. Urgent cost
c. Abnormal cost
d. Out of stock cost
44. Depreciation on machinery is an example of
a. Imputed cost
b. Opportunity cost
c. Shut down cost
d. Discretionary cost
45. Cost incurred even after shutting down of plant or temporary stoppage of production is
a. Shut down cost
b. Imputed cost
c. Opportunity cost
d. Discretionary cost
46. Costs to be incurred to avoid the hampering of production is called _____
a. Out of stock cost
b. Shut down cost
c. Discretionary cost
d. Urgent cost
47. Cost that arises from top management policies and controlled by the management is called
a. Expired cost
b. Discretionary cost
c. Standard 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
b. Postponable cost
c. Research cost
d. Out of Pocket cost
49. Cost of money locked up in inventory, inventory obsolescence, etc. are examples of _______
a. Normal Cost
b. Carrying cost
c. Unavoidable cost
d. Marginal cost
50. Costs incurred for the maintenance of inventory is called
a. Carrying cost
b. Ordering cost
c. Period cost
d. Explicit cost
51. Cost incurred for production of a new product or improved method of production is
a. Replacement cost
b. Development cost
c. Differential cost
d. None of the above
52. Cost which is related to current period as an expense is known as _____
a. Implicit cost
b. Marginal cost
c. Carrying 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
b. Research cost
c. Expired cost
d. Replacement cost
54. Change in costs due to change in the level of activity is called _____
a. Marginal cost
b. Differential cost
c. Abnormal cost
d. Uncontrollable cost
55. Incremental cost and decremental cost are classifications of ______
a. Marginal cost
b. Abnormal cost
c. Uncontrollable cost
d. Differential cost
56. When cost increases due to change in level of activity, such increase in known as
a. Unavoidable cost
b. Uncontrollable cost
c. Incremental 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
b. Historical cost
c. Unavoidable cost
d. None of the above
58. He additional cost incurred to produce one additional unit is called _____
a. Incremental cost
b. Development cost
c. Marginal 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
b. Research cost
c. Product cost
d. Opportunity cost
60. Which of the following is correct about normal cost?
a. Irregular and unexpected cost
b. Charged to Costing P & L a/c
c. Part of Cost of Production
d. All of the above
61. Which among the following is correct about abnormal cost?
a. Expected at a given level of output
b. Charged to Costing P&L a/c
c. Part of Cost of Production
d. None of the above
62. Which among the following costs are charged to Costing P&L a/c?
a. Estimated cost
b. Controllable costs
c. Normal cost
d. Abnormal Cost
63. Normal costs are generally ______ costs.
a. Controllable
b. Uncontrollable
c. Discretionary
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
b. Budgeted cost
c. Normal 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
b. Variable cost
c. Estimated cost
d. Development cost
66. Items of cost like wages, rent, etc. which involves cash payment to outsiders are
a. Normal cost
b. Product cost
c. Out of pocket 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
b. Direct cost
c. Period cost
d. Committed cost
68. Which among the following is not a part of product cost?
a. Direct Materials
b. Direct Labour
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
b. Period Cost
c. Product 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
b. Indirect cost
c. Avoidable cost
d. Implicit cost
71. Cost which can be directly identified with and allocated to cost units or centre
a. Indirect costs
b. Direct costs
c. Product cost
d. None of the above
72. Overheads or on cost is the total of
a. All direct expenses
b. All indirect expenses
c. Direct Expenses + Factory OH
d. None of the above
73. Prime cost is the total of
a. All direct expenses
b. All indirect expenses
c. Direct Expenses + Factory OH
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
b. Notional costs
c. Explicit costs
d. None of the above
75. Rent on own building is an example of _____
a. Imputed cost
b. Explicit cost
c. Standard 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
b. Cost allocation
c. Cost Apportionment
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
b. Cost allocation
c. Cost Apportionment
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
b. Cost planning
c. Cost control
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
b. Historical
c. Marginal
d. Estimated
81. ______ system is best suited for undertaking job works.
a. Process costing
b. Job costing
c. Contract costing
d. Batch costing
82. ______ system of costing is suitable for toy making.
a. Batch costing
b. Job costing
c. Operating 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
b. Works cost
c. Direct cost
d. Conversion cost
84. An example of personal cost centre
a. Machinery
b. Store yard
c. Maintenance department
d. Foreman
85. Cost centres are created for
a. Segregating costs into fixed and variable
b. Control and fixing responsibility
c. Making decisions
d. Ascertaining profit
86. Conversion cost excludes
a. Direct material
b. Direct labour cost
c. Direct expenses
d. All of the above
87. Variable costs increase in total due to
a. Increase in sales
b. Increase in volume of
production
c. Increase in profit
d. All of the above
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
b. Common cost
c. Joint 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
b. Common cost
c. Joint cost
d. Product cost
90. Mention the item of expense which is excluded from cost accounts.
a. Raw materials
b. Office supplies
c. Salaries
d. Income Tax
91. Cost incurred by undertakings which do not manufacture any product but services is
a. Operation cost
b. Operating cost
c. Joint cost
d. Sunk cost
92. In cement industry, the method of costing adopted is
a. Process costing
b. Job costing
c. Contract costing
d. Operating costing
93. Direct material is a _____
a. Fixed cost
b. Variable cost
c. Semi-variable cost
d. None of the above
94. A Bill of Material serves the purpose of _____
a. Purchase order
b. Material requisition
c. Purchase requisition
d. Goods received note
95. Thread in garments is an example of _____
a. Direct materials
b. Prime cost
c. Variable cost
d. Indirect materials
96. Primary packing materials are examples of _____
a. Direct materials
b. Indirect materials
c. Selling OH
d. Factory OH
97. Purchase requisition for regular stock materials is prepared by ______
a. Costing department
b. Production department
c. Storekeeper
d. Purchase department
98. The purpose of inventory control is to ______
a. control flow of raw materials
b. maintain optimum level of inventory
c. control material price
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
b. Department requiring materials
c. Stores department
d. None of these
1 -a
2 -a
3 -a
4 -b
5 -a
6 -b
7 -a
8 -c
9 -c
10 -b
11 -c
12 -b
13 -b
14 -d
15 -c
16 -a
17 -a
18 -b
19 -b
20 -b
21 -a
22 -c
23 -a
24 -c
25 -a
26 -a
27 -d
28 -a
29 -c
30 -d
31 -d
32 -c
33 -c
34 -a
35 -a
36 -c
37 -a
38 -c
39 -d
40 -c
41 -b
42 -c
43 -d
44 -c
45 -a
46 -d
47 -b
48 -b
49 -b
50 -a
51 -a
52 -d
53 -d
54 -b
55 -d
56 -c
57 -b
58 -c
59 -b
60 -c
61 -b
62 -d
63 -b
64 -a
65 -a
66 -c
67 -a
68 -c
69 -a
70 -d
71 -b
72 -b
73 -a
74 -b
75 -a
76 -b
77 -c
78 -c
79 -c
80 -a
81 -b
82 -a
83 -d
84 -d
85 -b
86 -a
87 -b
88 -c
89 -b
90 -d
91 -b
92 -a
93 -b
94 -b
95 -d
96 -a
97 -c
98 -b
99 -c
100 -b
