Costing MCQs - 2

1. Which of the following is not contained in the cost sheet?

a. Administrative overheads
b. Factory overheads
c. Interest paid
d. Distribution overheads
Ans. c
Solution:
Cost sheet is a document which provides for the assembly of the detailed cost of a cost unit. It is a periodical
statement of cost designed to show in detail the various components of the cost of goods produced like
prime cost, factory cost, cost of production, total cost and cost per unit.
Interest paid is of financial nature and thus not included while preparing a cost sheet.

2. Unit costing method is used in _______.

a. Brick making industry
b. Construction companies
c. Shipbuilding industry
d. Automobile garages
Ans. a
Solution:
Unit costing is used in industries manufacturing a single product or two or more grades of the same product
on large scale. The products need to be homogeneous in this case. Unit or output costing is suitable for
breweries, collieries, cement works, steel, ​brick making​, flour mills etc.

3. Which of the following is a feature of job costing?

a. It is not suitable for industries which produce a variety of products.
b. Each job completed is uniform and hence it is easy to have standardisation of controls.
c. At the end of the accounting period, work in progress will not exist.
d. A product is produced to meet the specific requirements of the order.
Ans. d
Solution:
Job costing may be defined as a system in which the elements of cost are accumulated separately for each
job order undertaken by the organisation. A job is carried out or product is produced to meet the specific
requirements of the order.

4. _______ costing is applied for engineering projects.

a. Unit costing
b. Batch costing
c. Contract costing
d. Process costing
Ans. c
Solution:
In contract costing each contract is treated as a cost unit and costs are ascertained separately for each
contract. It is suitable for businesses concerned with building or engineering projects or structural or
construction contracts.

5. _______ are particular types of products but produced in different varieties.

a. Co-products
b. By-products
c. Joint-products
d. None of the above
Ans. a
Solution:
Co-products are particular types of products but produced in different varieties. For example, in the
automobile industry co-products are, cars, jeeps, trucks, buses, etc.
6. Service costing is also known as ________
a. Operation costing
b. Operating costing
c. Contract costing
d. Output costing
Ans. b
Solution:
Operating costing method is applicable where services are rendered rather than good produced. The total
expenses of operating are divided by the units and cost per unit of service is arrived at. This method is
employed in railways, road transport, water supply undertakings, telephone services, etc.

7. Classification and accumulation of costs by fixed and variable costs is of special importance in ______.
a. Process costing
b. Unit costing
c. Operation costing
d. Operating costing
Ans. d
Solution:
Classification and accumulation of costs by fixed and variable costs is of special importance in operating
costing. Operating costing applies where standardized services are provided by an undertaking.

8. Batch counting is useful to determine ________

a. Maximum quantity of output
b. Minimum quantity of output
c. Economic batch quantity
d. Profit of batches
Ans. c
Solution:
Batch costing is useful to determine economic batch quantity. In each batch, there are a number of units.
The ascertainment of economic batch quantity is very useful. Economic batch quantity may be calculated by
using the formula meant for calculating Economic Order Quantity (EOQ) in case of material control.

9. The basis for the payment of cash by contractee under contract is ________
a. Work certified
b. Work uncertified
c. Contract cost
d. Value of plan used in the contract
Ans. a
Solution:
The basis for the payment of cash by contractee under contract is work certified. During the period of
contract, Contractee has to pay sums of amount to contractor especially where a contractor is engaged in a
big and long term contract. This amount is paid on the basis of certification of work done by surveyors or
architects on behalf of the Contractee, who certified the value of the work done by the contractor.

10. Process cost is ascertained and recorded in _______

a. Balance sheet
b. Profit and loss a/c
c. Separate statement
d. Separate ledger a/c
Ans. d
Solution:
Process cost is ascertained and recorded in separate ledger a/c. Process costing is an accounting
methodology that traces and accumulates direct costs, and allocates indirect costs of a manufacturing
process. Costs are assigned to products, usually in a large batch, which might include an entire month's
production.