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MCQ on Overview of Cost

1. The cost of selecting one course of action and forgoing the other is known as
(A) Sunk cost
(B) Differential cost
(C) Opportunity cost
(D) Joint cost

2. The cost that increases as the volume of activity decreases within the relevant range, is known as
(A) Average cost per unit
(B) Average variable cost per unit
(C) Total fixed cost
(D) Total variable cost

3. Expenditure on labour and materials that cannot be economically identified with a specific saleable cost unit is known as:
(A) Prime cost
(B) Overheads
(C) Direct cost
(D) Abnormal loss

4. Which of the following is not an objective of management accounting ?
(A) Formulation of plans and policy
(B) Assisting in decision making
(C) Preparation of financial statements
(D) Interpretation of financial documents

5. The term used for process of ascertaining the cost’ is known as
(A) Cost
(B) Costing
(C) Cost accounting
(D) Cost accountancy

6. The establishment of budgets, standard costs and actual costs of operations, processes, activities or products and the analysis of variances, profitability or the social use of funds is known as
(A) Costing
(B) Cost Accounting
(C) Cost Accountancy
(D) Financial Accounting

7. Which element of the total cost is common in prime cost and conversion cost ?
(A) Variable overheads
(B) Fixed overheads
(C) Direct materials
(D) Direct labour

8. Costs that are constant for a given level of output and then increase by a fixed amount at a higher level of output are called _____.
(A) Step costs
(B) Differential costs
(C) Committed costs
(D) Opportunity costs

9. Relevant costs are
(A) Future costs
(B) Standard costs
(C) Controllable costs
(D) Historical costs

10. Which of the following is not considered as a function of management accounting?
(A) Financial planning
(B) Decision making
(C) Reporting
(D) Cost computation

11. Interest on internally generated funds is an example of
(A) Differential cost
(B) Joint cost
(C) Common cost
(D) Imputed cost

12. Which of the following is known as full costing ?
(A) Variable costing
(B) Differential costing
(C) Marginal costing
(D) Absorption costing

13. Sunk costs are____
(A) Opportunity costs
(B) Costs to be incurred in future
(C) Not relevant for decision making
(D) Controllable costs

14. According to Section 2(13) of the Companies Act, 2013, ‘books of account’ does not require maintenance of which of the following records
(A) All sums of money received and expended by a company and matters in relation to which the receipts and expenditure take place
(B) All sales and purchases of goods and services by the company
(C) The assets and liabilities of the company
(D) Cash flow statement

15. For a manufacturing company, which of the following is an example of period cost rather than a product cost
(A) Depreciation on factory equipment
(B) Commission to the salesman
(C) Wages of machine operator
(D) Insurance on factory equipment

16. Fixed cost is a cost ____
(A) Which remains fixed for each unit ‘ of output
(B) Which remains fixed in total during a given period despite changes in output
(C) Which is partly fixed and partly variable in relation to the output
(D) Which changes in total in proportion to the changes in output

17. Management accounting is basically concerned with
(A) The problem of choice
(B) The Causative relationship
(C) Recording of transaction
(D) Both (A) and (B) above

18. Cost accounting is
(A) Nothing more than a detailed analysis of expenditure
(B) An instrument of management control
(C) Useful only in such organization which has profit as the aim
(D) Not needed if prices are beyond the control of the firm

19. Conversion cost is the summation of
(A) Direct material and direct wages
(B) Direct wages and office over-heads
(C) Direct wages, direct charges and works overheads
(D) None of the above

20. A cost centre that is engaged in production activity by conversion of raw material into a finished product is called ______.
(A) Production cost centre
(B) Impersonal cost centre
(C) Process cost centre
(D) Production unit

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