1. In VARIABLE EXPENSE, cost per unit remains same and total amt varies.

2. In FIXED EXPENSE, the total amount remains same and cost per unit varies.
3. Total cost = Fixed Cost + Variable Cost

Q1.In variable expense _______ remains same

A. total cost
B. total amt
C. per unit cost
D. none
Answer: C

Q2. In fixed expense _______ remains same

A. total cost
B. total amt
C. per unit cost
D. none
Answer: B

Q3. Sacrificing at the current point of time with the aim of yielding higher returns in future is
known as
A. opportunity cost.
B. Sacrificing cost
C. Gain cost
D. None of the above
Answer A

Q4. The cost of production for product P is as under

Direct mat = 60, direct labour = 80, factory overheads = 60, admin overheads = 50
Total cost is is 250 find the conversion

A. 250

B. 200

C. 140

D. 190

Answer: C (conversion cost = direct labour + factory OH)

The cost which is incurred to convert raw material into finished goods
Q5. The book value of the machine is 8lacs, estimated realisation value is 6lacs, and cost
of new machine to be purchased is 20lacs. Find the replacement cost

A. 20lacs

B. 12lacs

C. 14lacs

D. None of the above

Answer: C

Q6 Direct material cost 5lakhs Direct labour cost 6 lack direct expenses 4 laks factory
overhead 7 lakhs from given example find out prime cost

A. 11

B. 12

C. 15

D. None of above
Prime Cost = DM + DL + DE
Answer C
Direct material cost 5lakhs + Direct labour cost 6 lack + direct expenses 4 laks = 15 Lacs

Q7 Direct material cost 5lakhs Direct labour cost 6 lack direct expenses 4 laks factory
overhead 7 lakhs, Admin OH is 3L and Selling and distribution Oh is 4L from given
example find out Works cost
A. 11
B. 12
C. 15
D. None of above
Prime Cost + Factory Oh = WORKS COST
Answer D

Q8. Direct material cost 5lakhs Direct labour cost 6 lack direct expenses 4 laks factory
overhead 7 lakhs, Admin OH is 3L and Selling and distribution Oh is 4L from given
example find out cost of Production
A. 11
B. 12
C. 25
D. None of above

Answer c
cost of prooduction =work cost + admin exp
Q9. Direct material cost 5lakhs Direct labour cost 6 lack direct expenses 4 laks factory
overhead 7 lakhs, Admin OH is 3L and Selling and distribution Oh is 4L from given
example find out Total Cost
A. 11
B. 12
C. 25
D. 29

Answer --- ?
Ans D
ANS: D (COST OF PROD + S&D COST = TOTAL COST) (25+4=29)

1. In VARIABLE EXPENSE, cost per unit remains same and total amount varies.
2. In FIXED EXPENSE, the total amount remains same and cost per unit varies.

Q10. The cost of production of 10000 units is under -

Direct Material - 80,000
Direct Labor - 40,000
Variable OH - 60,000
Fixed Cost - 90,000
Total Cost - 2,70,000
Calculate total cost for 22000 units
A) 5,94,000
B) 4,86,000
C) 5,28,000
D) None of the above
Answer: 10000 units cost = 80000+ 40000+ 60000 = 180000
Than Variable cost of 1 item = 180000/10000 = 18
22000 units cost - 18 X 22000 = 396000 + 90000 = 486000

Q11. The cost of Production for 5000 unit is as under

DM - 20,000
Direct Labor - 10,000
Semi-variable OH - 50,000 (10,000 Fixed)
Total Cost is 80,000
Find the total cost for 8000 units
A) 1,28,000
B) 1,22,000
C) 1,20,000
D) None of the above

Cost of 5000 units: 20000+10000+40000 (50000-10000)= 70000

So variable per unit cost: 70000/5000 = 14

Hence 8000 units: 14*8000= 112000+10000=122000

Q12. The Total Cost of Production is 24,00,000
Selling OH is 10% of the sales
Profit is 30% of the sales
Find the Total Sales Amount and selling OHs Amount.
A) 50,00,000 and 5,00,000
B) 45,00,000 and 4,50,0,00
C) 30,00,000 and 3,00,000
D) 40,00,000 and 4,00,000

Cost + SOH + Profit =sales

Cost of Prodn 60% 2400000

+ selling Oh 10%

+ Profit 30 %

Sales 100% ?

Cost + SOH + Profit =sales

If sales is 100, then SOH is 10, profit is 30 hence cost is 60

So Sales = 24lacs*100/60 = 40lacs

SOH will be 10% of 40lacs= 4lacs

Q.13) Akshay Ltd pre determined the overheads as 15/- per hour, the actual o/h cost is
85000/- and the actual labour hour is 5750. So whether the exp is under absorbed or over
absorbed?
A. 1000 over
B. 1000 under
C. 1250 over
D. 1250 under
Answer C

Budgeted OH = 15 x 5750 = 86250

Actual OH = 85000

Over Absorption =1250

Chapter2

Q14. Opening stock 400 uts @5, purchases during the period 600 uts@6, 350 uts@7, 450 uts@8, out
of which 1200 uts were issued for production, find the cost of material issued for production by FIFO
method

A. 7000 /-

B. 8450/-

C. 7800/-

D.7767/-

Answer: by FIFO method: 400*5=2000 , 600*6= 3600 and 200*7=1400

Cost of issue: 2000+3600+1400=7000

Q15. Opening stock 400 uts @5, purchases during the period 600 uts@6, 350 uts@7, 450
uts@8, out of which 1200 uts were issued for production, find the cost of material issued for
production by LIFO

A. 7000 /-
B. 8450/-
C. 7800/-
D.7767/-

Answer by LIFO: 450*8 =3600+ 350*7=2450 + 400*6=2400

=Hence cost of issue: 3600 + 2450 + 2400 =8450

Q16. Opening stock 400 uts @5, purchases during the period 600 uts@6, 350 uts@7, 450
uts@8, out of which 1200 uts were issued for production, find the cost of material issued for
production by WAM

A. 7000 /-
B. 8450/-
C. 7800/-
D.7767/-

Answer by weighted average method: 400*5 = 2000, 600*6=3600, 350*7=2450,

450*8=3600

2000 + 3600 + 2450 + 3600 =11650

Total Qty: 400+600+350+450= 1800

Total: 11650/1800=6.472*1200= 7766

Q17. Opening stock 400 uts @5, purchases during the period 600 uts@6, 350 uts@7, 450
uts@8, out of which 1200 uts were issued for production, find the cost of material issued for
production by Simple Avg method
A. 7000 /-
B. 8450/-
C. 7800/-
D.7767/-

Answer by simple average method: Total rate: 5+6+7+8=26/4=6.5

Hence 1200*6.5=7800

Q18 Half yearly consumption for production is 5000 units(raw material) , cost per unit
of raw material is 80/- Cost of placing order is 400/- and the storage cost is 20% of the
cost of raw material . Find EOQ- economic order quantity

a. 500
b. 507
c. 700
d. 707
nswer: EOQ = SQRT ( 2*U*P/S) Economic Ordering Quantity = SQRT ( 2X Annual Unit
consumption X Cost of placing order/Storage cost)
Storage cost = 20% of 80 = 16
(2*10000*400)/16= 500000

Sqr root of( 500000)=707

707units

Q.19) Raw material purchased 240000/-, op stock 50000/-, closing stock 60000/-, Admin exp
10000/-, Carriage inward 20000/-, freight outward 32000/-, Direct Labour 140000 and Direct
Expense 60000 prime cost during the year is?

A. 512000/-
B. 482000/-
C. 450000/-
D. 460000/-
Prime cost = Raw material consume( DM) + Direct Labour + Direct Expense

DM= Opg stock+material purchased+freight inward-clg stock

50000+240000+20000-60000
=250000+140000+60000=450000

Q.20) Material A is used as follows:

Minimum usage 500/ week
Maximum usage 1500/week
Normal usage 1000/week
Re-ordering quantity- 5000 units. Delivery Period- 4 to 6 weeks. Calculate A) Reordering
level
A. 2000
B. 3000
C. 6000
D. 9000
Reordering level = Max Period x Max consumption

= 6 x 1500 = 9000

Answer = D

Q.21) Material A is used as follows:

Minimum usage 500/ week
Maximum usage 1500/week
Normal usage 1000/week
Re-ordering quantity- 5000 units. Delivery Period- 4 to 6 weeks. Calculate A) Minimum level
of stock

A. 2000

B. 7000

C. 9000

D. 4000

Min level = Reordering level - ( Avg Cosumption x Avg period)

= 9000 – ( 1000 x 5)
= 4000
Answer D

Q.22) Material A is used as follows:

Minimum usage 500/ week
Maximum usage 1500/week
Normal usage 1000/week
Re-ordering quantity- 5000 units. Delivery Period- 4 to 6 weeks. Calculate A) Maximum level
of stock
A. 12000
B. 17000

C. 19000

D. 4000

Max Level = Reorder level+ reordering quantity - ( min. consumption * min. delivery
period)
(9000+5000)-(500*4) = 12000
Answer A

Chapter 3

Q23. Company produces 8000 units of A and 10000 units of B. The storage dept cost is
25lacs and the total number of material deals is 10000 of which 3000 is used for A and
7000 is used for B. Find the Storage cost per unit to be charged of storage to each
product by ABC costing Method

a. 138.88 for each A and B

b. 93.75 for A and 175 For B
c. 93.75 for B and 175 For A

Answer: Cost driver: number of material deal

2500000/10000= 250 per material handling charges

Total Cost A=3000*250=750000

Total Cost B=7000*250=1750000

Cost per unit A: 750000/8000=93.75

Cost per unit B: 1750000/10000= 175

Q24. Purchase Deptt Cost 24L. Company produces 2 products – P & Q. Number of units produced are
10000 for P & 10000 for Q. Total number of times purchased by departments is 20000 out of which
6000 times is for P & 14000 is for Q. What is the cost per unit charged for P & Q as per ABC:

A. 8.2 for P & 178 for Q

B. 10.2 for P & 168 for Q

C. 72 for P & 168 for Q

D. 168 for P & 72 for Q

2400000/20000=120rs
P= 6000*120=720000
Q=14000*120=1680000
Cost P =720000/10000=72
Cost Q=1680000/10000=168