Cost and Managerial Accounting Questions and Answers





Cost and Managerial Accounting solved MCQ Questions :

Cost accounting is a form of managerial accounting that aims to capture a company's total cost of production by assessing all of its variable and fixed costs. This section focus on all topics of the Cost and Managerial Accounting subject. Here you can get important mcq questions on Cost and Managerial Accounting with answers. These questions will help you to prepare for interviews, entrance exams, online tests, and semester exams. These Cost and Managerial Accounting multiple choice questions are for both freshers and experienced candidates.

Cost and Managerial Accounting MCQ Chapter Wise :

Here you will find a list of important questions and answers with detailed solution on cost and managerial accounting in MCQ quiz style for competitive exams and interviews. Here, You can practice these MCQs chapter-wise for FREE.

Below section consists of important multiple choice questions on cost and managerial accounting with answers -:

1. Opening work in process inventory can be calculated as under
a) FIFO and Average costing
b) LIFO and Average costing
c) FIFO and LIFO costing
d) None of given option.

Answer: a

2. Which of the following statement measures the financial position of the entity on particular time?
a) Income Statement
b) Balance Sheet
c) Cash Flow Statement
d) Statement of Retained Earning

Answer: b

3. Which of the following is a characteristic of process cost accounting system?
a) Material, Labor and Overheads are accumulated by orders
b) Companies use this system if they process custom orders
c) Opening and Closing stock of work in process are related in terms of completed units
d) Only Closing stock of work in process is restated in terms of completed units

Answer: c

4. Fixed cost per unit decreases when ______________
a) Production volume increases.
b) Production volume decreases
c) Variable cost per unit decreases.
d) Variable cost per unit increases.

Answer: a

5. Cost of production report is a ______________
a) Financial statement
b) Production Process report
c) Order Sheet
d) None of above

Answer: b

6. The difference between total revenues and total variable costs is known as ______________
a) Contribution margin
b) Gross margin
c) Operating income
d) Fixed costs

Answer: a

7. For which one of the following industry would you recommend a Process Costing system?
a) Grain dealer
b) Television repair shop
c) Law office
d) Auditor

Answer: a

8. How many units would the company have to sell to attain target profits of Rs. 600,000?
a) 88,000 units
b) 100,000 units
c) 106,668 units
d) None of given options

Answer: a

9. Jan 1; finished goods inventory of Manuel Company was Rs.3, 00,000. During the year Manuel’s cost of goods sold was Rs. 19, 00,000, sales were Rs. 2, 000,000 with a 20% gross profit. Calculate cost assigned to the December 31; finished goods inventory.
a) Rs. 4,00,000
b) Rs. 6,00,000
c) Rs. 16,00,000
d) None of the given options

Answer: d

10. The Process of cost apportionment is carried out so that ______________
a) Cost may be controlled
b) Cost unit gather overheads as they pass through cost centers
c) Whole items of cost can be charged to cost centers
d) Common costs are shared among cost centers

Answer: d

11. The The components of the prime cost are
a) Direct Material + Direct Labor + Other Direct Cost
b) Direct Labor + Other Direct Cost + FOH
c) Direct Labor + FOH
d) None of the given options

Answer: a

12. For which one of the following industry would you recommend a Job Order Costing system?
a) Oil Refining
b) Grain dealing
c) Beverage production
d) Law Cases

Answer: d

13. Which of the following represents a CVP equation?
a) Sales = Contribution margin (Rs.) + Fixed expenses + Profits
b) Sales = Contribution margin ratio + Fixed expenses + Profits
c) Sales = Variable expenses + Fixed expenses + profits
d) Sales = Variable expenses - Fixed expenses + profits

Answer: c

14. Inventory control aims at ______________
a) Achieving optimization
b) Ensuring against market fluctuations
c) Acceptable customer service at low capital investment
d) Discounts allowed in bulk purchase

Answer: c

15. When a manufacturing process requires mostly human labor and there are widely varying wage rates among workers, what is probably the most appropriate basis of applying factory costs to work in process?
a) Machine hours
b) Cost of materials used
c) Direct labor hours
d) Direct labor dollars

Answer: c

16. Wh When prices are rising over time, which of the following inventory costing methods will result in the lowest gross margin/profits?
a) FIFO
b) LIFO
c) Weighted Average
d) Cannot be determined

Answer: b

17. Cost accounting concepts include all of the following EXCEPT ______________
a) Planning
b) Controlling
c) Sharing
d) Delegating.

Answer: c

18. Prime cost + Factory overhead cost is ______________
a) Conversion cost.
b) Production cost.
c) Total cost.
d) None of given option.

Answer: b

19. If 120 units produced, 100 units were sold @ Rs. 200 per unit. Variable cost related to production & selling is Rs. 150 per unit and fixed cost is Rs. 5,000. If the management wants to increase sales price by 10%, what will be increasing sales profit of company by increasing unit sales price? (Cost & volume profit analysis keep in mind while solving)
a) Rs.2,000
b) Rs. 5,000
c) Rs. 7,000
d) None of the given options

Answer: a

20. In the case of plant, the limiting factor may be:
a) Insufficient capacity
b) shortage of experienced salesmen
c) general shortage of power
d) shortage of materials

Answer: a

21. The following information is available for the W hotel for the latest thirty day period.
Number of rooms available per night 40
Percentage occupancy achieved 65%
Room servicing cost incurred Rs. 3900
The room servicing cost per occupied room-night last period, to the nearest Rs, was:
a) Rs 3.25
b) Rs 5.00
c) Rs 97.50
d) Rs 150.00

Answer: b

22. After inviting tenders for supply of raw materials, two quotations are received as follows Supplier P Rs. 2.20 per unit, Supplier Q Rs. 2.10 per unit plus Rs. 2,000 fixed charges irrespective of the units ordered. The order quantity for which the purchase price per unit will be the same
a) 22,000 units
b) 20,000 units
c) 21,000 units
d) None of the above.

Answer: b

23. Statutory cost audit are applicable only to:
a) Firm
b) Company
c) Individual
d) Society

Answer: b

24. The summarized balance sheet of Autolight Limited shows the balances of previous and current year of retained earnings Rs. 25,000 and Rs. 35,000. If dividend paid during the current year amounted to Rs. 5,000 then profit earned during the year will be:
a) Rs. 5,000
b) Rs. 55,000
c) Rs. 15,000
d) Rs. 65,000

Answer: c

25. When the sales increase from Rs. 40,000 to Rs. 60,000 and profit increases by Rs. 5,000, the P/V ratio is ______________
a) 20%
b) 30%
c) 25%
d) 40%.

Answer: c

26. A profit centre is a centre
a) Where the manager has the responsibility of generating and maximising profits
b) Which is concerned with earning an adequate Return on Investment
c) Both of the above
d) Which manages cost

Answer: a

27. Sunk costs are:
a) relevant for decision making
b) Not relevant for decision making
c) cost to be incurred in future
d) future costs

Answer: b

28. Calculate value of closing stock from the following:
Opening stock of finished goods (500 units) : Rs. 2,000
Cost of production (10000 units) : Rs. 50,000 Closing stock (1000 units):?
a) Rs. 4,000
b) Rs. 4,500
c) Rs. 5,000
d) Rs. 6,000

Answer: c

29. Economic order quantity is that quantity at which cost of holding and carrying inventory is:
a) Maximum and equal
b) Minimum and equal
c) It can be maximum or minimum depending upon case to case.
d) Minimum and unequal

Answer: b

30. Calculate Re-order level from the following:
Consumption per week: 100-200 units
Delivery period: 14-28 days
a) 5600 units
b) 800 units
c) 1400 units
d) 200 units

Answer: b

31. ____________ is a detailed budget of cash receipts and cash expenditure incorporating both revenue and capital items.
a) Cash Budget
b) Capital Expenditure Budget
c) Sales Budget
d) Overhead Budget

Answer: a

32. If credit sales for the year is Rs. 5,40,000 and Debtors at the end of year is Rs. 90,000 the Average Collection Period will be
a) 30 days
b) 61 days
c) 90 days
d) 120 days

Answer: b

33. Following information is available of PQR for year ended March, 2013: 4,000 units in process, 3,800 units output, 10% of input is normal wastage, Rs. 2.50 per unit is scrap value and Rs. 46,000 incurred towards total process cost then amount on account of abnormal gain to be transferred to Costing P & L will be:-
a) Rs. 2,500
b) Rs. 2,000
c) Rs. 4,000
d) Rs. 3,500

Answer: a

34. Responsibility Centre can be categorised into:
a) Cost Centres only
b) Profit Centres only
c) Investment Centres only
d) Cost Centres, Profit Centres and Investment Centres

Answer: d

35. Calculate the prime cost from the following information:
Direct material purchased: Rs. 1,00,000
Direct material consumed: Rs. 90,000
Direct labour: Rs. 60,000
Direct expenses: Rs. 20,000
Manufacturing overheads: Rs. 30,000
a) Rs. 1,80,000
b) Rs. 2,00,000
c) Rs. 1,70,000
d) Rs. 2,10,000

Answer: c

36. Bin Card is a
a) Quantitative as well as value wise records of material received, issued and balance;
b) Quantitative record of material received, issued and balance
c) Value wise records of material received, issued and balance
d) a record of labour attendance

Answer: b

37. Calculate EOQ (approx.) from the following details:
Annual Consumption: 24000 units
Ordering cost: Rs. 10 per order
Purchase price: Rs. 100 per unit
Carrying cost: 5%
a) 310
b) 400
c) 290
d) 300

Answer: a

38. Calculate the value of closing stock from the following according to Weighted Average method:
1st January, 2014: Opening balance: 50 units @ Rs. 4
Receipts:
5th January, 2014: 100 units @ Rs. 5
12th January, 2014: 200 units @ Rs. 4.50
Issues:
2nd January, 2014: 30 units
18th January, 2014: 150 units
a) Rs. 765
b) Rs. 805
c) Rs. 786
d) Rs. 700

Answer: c

39. Labour turnover means:
a) Turnover generated by labour
b) Rate of change in composition of labour force during a specified period
c) Either of the above
d) Both of the above

Answer: b

40. Overhead refers to:
a) Direct or Prime Cost
b) All Indirect costs
c) only Factory indirect costs
d) Only indirect expenses

Answer: b

41. Calculate re-order level from the following:
Safety stock: 1000 units
Consumption per week: 500 units
It takes 12 weeks to reach material from the date of ordering.
a) 1000 units
b) 6000 units
c) 3000 units
d) 7000 units

Answer: d

42. Which of the following is not an avoidable cause of labour turnover:
a) Dissatisfaction with Job
b) Lack of training facilities
c) Low wages and allowances
d) Disability, making a worker unfit for work

Answer: d

43. Calculate the labour turnover rate according to Separation method from the following:
No. of workers on the payroll:
- At the beginning of the month: 500
- At the end of the month: 600
During the month, 5 workers left, 20 workers were discharged and 75 workers were recruited. Of these, 10 workers were recruited in the vacancies of those leaving and while the rest were engaged for an expansion scheme.
a) 4.55%
b) 1.82%
c) 6%
d) 3%

Answer: a

44. Most suitable basis for apportioning insurance of machine would be:
a) Floor Area
b) Value of Machines
c) No. of Workers
d) No. of Machines

Answer: b

45. Which of the following is not a reason for an idle time variance?
a) Wage rate increase
b) Machine breakdown
c) Illness or injury to worker
d) Non- availability of material

Answer: a

46. The actual output of 162,500 units and actual fixed costs of Rs. 87000 were exactly as budgeted. However, the actual expenditure of Rs 300,000 was Rs. 18,000 over budget. What was the budget variable cost per unit?
a) Rs 1.20
b) Rs 1.31
c) Rs1.42
d) Rs 1.50

Answer: a

47. S produces and sells one product, P, for which the data are as follows:
Selling price Rs 28
Variable cost Rs 16
Fixed cost Rs 4
The fixed costs are based on a budgeted production and sales level of 25,000 units for the next period. Due to market changes both the selling price and the variable cost are expected to increase above the budgeted level in the next period. If the selling price and variable cost per unit increase by 10% and 8% respectively, by how much must sales volume change, compared with the original budgeted level, in order to achieve the original budgeted profit for the period?
a) 10.1% decrease
b) 11.2% decrease
c) 13.3% decrease
d) 16.0% decrease

Answer: b

48. A company calculates the prices of jobs by adding overheads to the prime cost and adding 30% to total costs as a profit margin. Job number Y256 was sold for Rs1690 and incurred overheads of Rs 694. What was the prime cost of the job?
a) Rs 489
b) Rs 606
c) Rs 996
d) Rs 1300

Answer: b

49. A company makes a single product and incurs fixed costs of Rs. 30,000 per annum. Variable cost per unit is Rs. 5 and each unit sells for Rs. 15. Annual sales demand is 7,000 units. The breakeven point is:
a) 2,000 units
b) 3,000 units
c) 4,000 units
d) 6,000 units

Answer: b

50. The cost per unit of a product manufactured in a factory amounts to Rs. 160 (75% variable) when the production is 10,000 units. When production increases by 25%, the cost of production will be Rs. per unit
a) Rs. 145
b) Rs. 150
c) Rs. 152
d) Rs. 140

Answer: c

51. Blanket overhead rate is:
a) One single overhead absorption rate for the whole factory
b) Rate which is blank or nil rate
c) rate in which multiple overhead rates are calculated for each production department, service department etc
d) Always a machine hour rate

Answer: a

52. Budgeted sales of X for March are 18000 units. At the end of the production process for X, 10% of production units are scrapped as defective. Opening inventories of X for March are budgeted to be 15000 units and closing inventories will be 11,400 units. All inventories of finished goods must have successfully passed the quality control check. The production budget for X for March, in units is:
a) 12,960
b) 14,400
c) 15,840
d) 16,000

Answer: d

53. In process costing, a joint product is
a) a product which is later divided into many parts
b) a product which is produced simultaneously with other products and is of similar value to at least one of the other products.
c) A product which is produced simultaneously with other products but which is of a greater value than any of the other products.
d) a product produced jointly with another organization

Answer: b

54. Which of the following organisations should not be advised to use service costing?
a) Distribution service
b) Hospital
c) Maintenance division of a manufacturing company
d) A light engineering company

Answer: d

55. A company manufactures a single product for which cost and selling price data are as follows:
Selling price per unit - Rs. 12
Variable cost per unit - Rs. 8
Fixed cost for a period - Rs. 98,000
Budgeted sales for a period - 30,000 units
The margin of safety, expressed as a percentage of budgeted sales,is:
a) 20%
b) 25%
c) 73%
d) 125%

Answer: a

56. In 'make or buy' decision, it is profitable to buy from outside only when the supplier's price is below the firm's own ______________.
a) Fixed Cost
b) Variable Cost
c) Total Cost
d) Prime Cost

Answer: b

57. For the financial year ended as on March 31, 2013 the figures extracted from the balance sheet of Xerox Limited as under:
Opening Stock Rs. 29,000; Purchases Rs. 2,42,000; Sales Rs. 3,20,000; Gross Profit 25% of Sales. Stock Turnover Ratio will be :-
a) 8 times
b) 6 times
c) 9 times
d) 10 times

Answer: a

58. In element-wise classification of overheads, which one of the following is not included -
a) Fixed overheads
b) Indirect labour
c) Indirect materials
d) Indirect expenditure.

Answer: a

59. Cost Unit is defined as:
a) Unit of quantity of product, service or time in relation to which costs may be ascertained or expressed
b) A location, person or an item of equipment or a group of these for which costs are ascertained and used for cost control.
c) Centres having the responsibility of generating and maximising profits
d) Centres concerned with earning an adequate return on investment

Answer: a

60. Fixed cost is a cost:
a) Which changes in total in proportion to changes in output
b) which is partly fixed and partly variable in relation to output
c) Which do not change in total during a given period despise changes in output
d) which remains same for each unit of output

Answer: c

61. Abnormal cost is the cost:
a) Cost normally incurred at a given level of output
b) Cost not normally incurred at a given level of output
c) Cost which is charged to customer
d) Cost which is included in the cost of the product

Answer: b

62. Describe the method of costing to be applied in case of Nursing Home:
a) Operating Costing
b) Process Costing
c) Contract Costing
d) Job Costing

Answer: a

63. Total cost of a product: Rs. 10,000
Profit: 25% on Selling Price
Profit is:
a) Rs. 2,500
b) Rs. 3,000
c) Rs. 3,333
d) Rs. 2,000

Answer: c

64. Out of the following, what is not the work of purchase department:
a) Receiving purchase requisition
b) Exploring the sources of material supply
c) Preparation and execution of purchase orders
d) Accounting for material received

Answer: d

65. Which of the following is an abnormal cause of Idle time:
a) Time taken by workers to travel the distance between the main gate of factory and place of their work
b) Time lost between the finish of one job and starting of next job
c) Time spent to meet their personal needs like taking lunch, tea etc.
d) Machine break downs

Answer: d

66. Calculate the labour turnover rate according to replacement method from the following:
No. of workers on the payroll:
- At the beginning of the month: 500
- At the end of the month: 600
During the month, 5 workers left, 20 workers were discharged and 75 workers were recruited. Of these, 10 workers were recruited in the vacancies of those leaving and while the rest were engaged for an expansion scheme.
a) 4.55%
b) 1.82%
c) 6%
d) 3%

Answer: b

67. During a period 17, 500 labour hours were worked at a standard cost of Rs 6.50 per hour. The labour efficiency variance was Rs 7,800 favourable. How many standard hours were produced?
a) 1,200
b) 16,300
c) 17,500
d) 18,700

Answer: d

68. In process costing, if an abnormal loss arises, the process account is generally
a) Debited with the scrap value of the abnormal loss units
b) Debited with the full production cost of the abnormal loss units
c) Credited with the scrap value of the abnormal loss units
d) Credited with the full production cost of the abnormal loss units

Answer: d

69. . In case of joint products, the main objective of accounting of the cost is to apportion the joint costs incurred up to the split off point. For cost apportionment one company has chosen Physical Quantity Method. Three joint products 'A', 'B' and 'C' are produced in the same process. Up to the point of split off the total production of A, B and C is 60,000 kg, out of which 'A' produces 30,000 kg and joint costs are Rs. 3,60,000. Joint costs allocated to product A is
a) Rs. 1,20,000
b) Rs. 60,000
c) Rs. 1,80,000
d) None of the these

Answer: c

70. Re-order level is calculated as:
a) Maximum consumption x Maximum re-order period
b) Minimum consumption x Minimum re-order period
c) 1/2 of (Minimum + Maximum consumption)
d) Maximum level - Minimum level

Answer: a

71. Costing and cost accounting are ______________
a) Not the same
b) one and the same
c) not related at all
d) none of these

Answer: a

72. ______________ is one which can be conveniently identified with and charged to a particular unit of cost.
a) Direct cost
b) Indirect cost
c) Overhead
d) none of these

Answer: a

73. The primary emphasis of ______________ cost is on the planning function of management.
a) Budgeted
b) standard
c) period
d) none of these

Answer: a

74. An opportunity cost is ______________
a) the advantage foregone
b) the cost
c) the income
d) none of the above.

Answer: a

75. Depreciation is ______________ expenditure.
a) fixed
b) variable
c) adjustable
d) Semi-variable

Answer: d

76. Stores Ledger is maintained in the ______________
a) Store
b) finance department
c) cost accounting department
d) Both a & b

Answer: c

77. Material abstract is also known as ______________
a) Material issue analysis sheet
b) bill of materials
c) stores ledger
d) none of the above

Answer: a

78. Specific price method of valuing material issue is used when ______________
a) Materials are purchased for specific job or work order
b) materials are subject to natural wastage
c) prices fluctuate
d) none of these

Answer: a

79. The principle types of inventories are raw materials and , ______________ and finished goods
a) Processed materials
b) Goods-in-progress
c) stored goods
d) goods for dispatch

Answer: b

80. ______________ is a technique of stock control which leads to saving of time of the management because attention is required to be paid only to some of the items rather than on all the items.
a) ABC Analysis
b) JIT Inventory System
c) VED Analysis
d) Perpetual Inventory System

Answer: a

81. ______________ forms part of cost of production
a) Abnormal waste
b) normal waste
c) both a & b
d) none of these

Answer: b

82. ______________ is a method of evaluating the job in terms of its money value.
a) Job analysis
b) Job evaluation
c) work measurement
d) Motion study

Answer: b

83. ______________ is the assessment of the relative worth of jobs within a company whereas ______________ is the assessment of the relative worth of man behind the job.
a) Job evaluation , merit rating
b) job analysis, job evaluation
c) job analysis, merit rating
d) none of these

Answer: a

84. Taylors differential piece rate system provides for higher rate to ______________ workers.
a) Inefficient
b) efficient
c) both a & b
d) lazy

Answer: b

85. Under Merrick's multiple piece rate system, 120% of the ordinary piece rate is given to workers whose level of performance is between ______________ of the standard output.
a) 83% and 100%
b) 100% and 120%
c) 0% and 83%
d) none of these

Answer: d

86. Basis of apportionment of stores service expenses is ______________
a) Value of materials consumed
b) units of material consumed
c) products produced
d) none of these

Answer: a

87. Machine hour rate is obtained by dividing the total running expenses of a machine during a particular period by the ______________
a) Number of hours
b) number of products produced
c) number of workers
d) wages

Answer: a

88. Expenses incurred during production other than direct materials and direct labour are called ______________ factory expenses; those charged to production on estimated basis are called ______________
a) Actual, applied
b) applied, actual
c) indirect, direct
d) none of these

Answer: a

89. Salary paid to general manager is an item of ______________ expenses
a) Fixed
b) Variable
c) semi-variable
d) estimated

Answer: a

90. Warehousing cost is an item of
a) Office overhead
b) distribution overhead
c) material cost
d) works overhead

Answer: b

91. An automobile service unit uses ______________ costing.
a) specific order
b) batch
c) job
d) contract

Answer: c

92. Economic Batch Quantity depends on ______________ and ______________ costs.
a) Material, labour
b) set-up costs, carrying
c) transportation, carrying
d) warehousing, labour

Answer: b

93. When the completion stage of a contract is less than %, the total expenditure on the contract is transferred to ______________ account.
a) Work-in-Progress
b) Profit and loss account
c) miscellaneous account
d) none of these

Answer: a

94. Room/day is the cost unit used in ______________
a) Hotels
b) hospital
c) schools
d) none of these

Answer: a

95. In transportation costing a composite unit such as ______________ is used.
a) passenger mile/km or Ten kilometer
b) per km
c) per passenger
d) per stop

Answer: a

96. A bus carries 25 passengers daily for 25 days and its mileage per month is 1000 kms. Its passenger miles are ______________
a) 30,000
b) 12,500
c) 20,000
d) 25,000

Answer: d

97. Where raw material is to pass certain stages, before it is converted into finished goods, the method of costing used is ______________
a) Job costing
b) Operating costing
c) Process Costing
d) both b and c

Answer: c

98. When actual loss is ______________ than the estimated loss, the difference between the two is considered to be abnormal gain
a) More
b) less
c) higher
d) none of these

Answer: b

99. The cost of ______________ process loss is absorbed in the cost of production of good units.
a) Abnormal
b) normal
c) both a & b
d) none of these

Answer: b

100. ______________ arises where the actual process loss is less than the normal predetermined process loss.
a) Normal loss
b) abnormal loss
c) abnormal gain
d) none of these

Answer: c