1. Under absorption costing, profit is ascertained
a) On the basis of difference between sales and total cost
b) By computation as per desired rate of profit on sales or cost
c) Both a and b
d) None of the above
2. While ascertaining gross profit under absorption costing, only that portion of manufacturing overheads is deducted from sales revenue which is associated with the goods sold.
a) True
b) False
3. Under absorption costing among fixed expenses
a) Fixed manufacturing expenses are included in unit cost
b) Fixed non-manufacturing expenses are included in unit cost
c) Both a and b
d) None of the above
4. Absorption costing is used for
a) Solution of separation of costs
b) Price determination on basis of full cost
c) Calculation of gross and net profit
d) All of the above
5. Absorption costs helps in
a) Difference between product cost and period cost
b) Charged of fixed factory overheads on inventory
c) Both a and b
d) None of the above
6. Which of the following statements are true?
A) Absorption costing helps in preparation of fixed budget.
B) Absorption costing is dependent on level of level of output.
C) Absorption costing is very helpful in taking managerial decisions.
D) Absorption costing helps to conform with accrual and matching concept.
a) A and B
b) B and C
c) A and D
d) B and D
7. Fixed expenses decrease per unit with the increases in production and increases per unit with the decrease in production.
a) True
b) False
8. Marginal costs is taken as equal to
a) Prime Cost minus all variable overheads
b) Prime Cost plus all variable overheads
c) Variable overheads
d) None of the above
9. If total cost of 100 units is Rs 5000 and those of 101 units is Rs 5030 then increase of Rs 30 in total cost is
a) Marginal cost
b) Prime cost
c) All variable overheads
d) None of the above
10. Marginal cost is computed as
a) Prime cost + All Variable overheads
b) Direct material + Direct labor + Direct Expenses + All variable overheads
c) Total costs – All fixed overheads
d) All of the above