Multiple Choice Questions on Costing

Basic objective of cost accounting is

a) Tax Compliance
b) Financial Audit
c) Cost ascertainment
d) Profit Analysis
Direct expenses are also called
a) Major expenses
b) Chargeable expenses
c) Overhead expenses
d) Sundry expenses
Indirect material used in production is called as
a) Office overhead
b) Selling overhead
c) Distribution overhead
d) Factory overhead
Warehouse rent is a part of
a) Prime Cost
b) Factory Cost
c) Distribution Cost
d) Production Cost
Indirect material scrap is adjusted along with
a) Prime cost
b) Factory cost
c) Labour cost
d) Cost of goods sold
Total of all direct costs is termed as
a) Prime cost
b) Works cost
c) Cost of sales
Fixed cost per unit increases when
a) Variable cost per unit increases
b) Variable cost per unit decreases
c) Production volume increases
d) Production volume decreases
Normal loss in manufacturing leads to
a) Reduction in unit price of other good units
b) Increase in unit price of other good units
c) Reduction in costing profit
d) Increase in costing profit
Prime cost plus variable overheads is known as
 a) Cost of sales
b) Production cost
c) Total cost
d) Marginal cost
Depreciation of plant and machinery is a part of
a) Factory overhead
b) Selling overhead
c) Distribution overhead
d) Administration overhead
Recreation expenses in factory are apportioned on the basis of
a) Material cost
b) Wages
c) Prime cost
d) Number of employees
The direct manufacturing labor costs is added into manufacturing overhead cost to calculate

a) Transaction cost
b) Resale cost
c) Conversion cost
d) Merchandise cost
In cost terms, the direct manufacturing labor cost is included in

a) Manufacturing costs
b) Prime costs
c) Conversion costs
d) Both b &c

The prime cost is $50000 and the direct manufacturing labor is $10000, then the direct
material cost will be
a) $40,000
b) $60,000
c) $52,000
d) $20,000
The direct material cost is $75000 and direct manufacturing labor is $20000, then prime cost
would be
a) $55,000
b) $37,500
c) $95,000
d) $26,000
If the direct material cost is $5500 and the prime cost is $25000, then the direct
manufacturing labour would be
a) $19,500
b) $30,500
 c) $40,500
d) $19,500

The term "conversion costs" refers to:

a) Manufacturing costs incurred to produce units of output.
b) All costs associated with manufacturing other than direct labor costs and raw material
costs.
c) Costs which are associated with marketing, shipping, warehousing, and billing
activities.
d) The sum of direct labour costs and all factory overhead costs.
e) The sum of raw material costs and direct labour costs
Step costs are classified as a:
a) Variable costs.
b) Fixed cost.
c) Prime cost.
d) Conversion cost.
e) Mixed cost.
A step cost:
a) Contains only fixed characteristics, whereas a semi-variable cost contains both fixed
and variable characteristics over various relevant ranges of operation.
b) Has a fixed portion which changes abruptly at various activity levels.
c) Is similar to a mixed cost within a very small relevant range.
d) Will usually be converted into a semi-variable cost sound bookkeeping purposes.
Captain Ahab's shipbuilding company constructs huge sailing vessels. Captain Ahab's
accountant would consider the inexpensive stain used only on the wood of the captain's
wheel of a vessel to be:
a. A direct material.
b. A direct material as well as a prime cost.
c. A prime cost.
d. A conversion cost

Which statement is incorrect?

a. Within the relevant range, variable costs change on a per unit basis.
b. Middle-level management is primarily responsible for fixed costs.
c. Direct labor is an element of both prime costs and conversion costs.
d. The work of a plant supervisor would be considered direct labor.