New Microsoft Word Document (12)

1.

The wage costs which are incurred in converting materials into finished goods would be known as: Your Answer: Direct labour

2.

Allocating indirect overheads to the direct cost of production is known as: Your Answer: Absorption costing

3.

Which of the following is a reason why a firm would want to implement ABC? Your Answer: Costs of implementation are too high Correct Answer: It may help make decision making more accurate

4.

When costing takes into account only the variable cost and not the full production cost we will be using: Your Answer: Activity based costing Correct Answer: Marginal costing

5.

Marking up the cost of a product by an amount to represent profit is known as: Your Answer: Price discrimination Correct Answer: Full cost pricing

6.

An area of a business which collects costs is known as: Your Answer: Cost centre

7.

Repairs to factory machinery would be classed as: Your Answer: Factory indirect expenses

8.

Contribution can be defined as: Your Answer: Selling price less variable costs

9.

Any abnormal losses on production are recorded by which one of the following?

Debit

Credit

A Abnormal loss account Process account B Abnormal loss account Cashbook C Profit & Loss account D Process account

Cashbook abnormal loss account

Your Answer: A

10.

A collection of individual costs within a single heading is known as: Your Answer: Cost pool

11.

The total of all direct costs of production is also known as: Your Answer: Prime cost

12.

If a firm experiences an underabsorption of overheads then the closing stock should be adjusted in which way? Your Answer: No adjustment should be made

13.

The best way of allocating fixed overheads between products is: Your Answer: As a proportion of direct cost incurred by each product Correct Answer: There is no ‘best’ way of allocating overheads

14.

Raw materials which are incorporated into goods sold but are not easily identifiable to the goods being made would be known as: Your Answer: Work in progress Correct Answer: Indirect overheads

15.

Wages for staff maintaining machines in factory would be classed as: Your Answer: Administration expenses Correct Answer: Factory indirect expenses

16.

Which of the following would not appear as a direct cost? Your Answer: Royalties on each unit produced Correct Answer: Power costs for factory buildings

17.

Sales staff salaries would be classed as: Your Answer: Indirect expenses Correct Answer: Selling and distribution expenses

18.

A minor product produced at the same time as the main product may be known as a: Your Answer: Scrap Correct Answer: By product

19.

When deciding to accept a special order at below the normal selling price a firm would consider which cost? Your Answer: Absorption cost Correct Answer: Marginal cost

20.

Which of the following would not appear as a factory overhead? Your Answer: Depreciation of factory equipment

Correct Answer: Delivery costs for raw materials

21.

Which of the following would not normally be included in the prime cost of production? Your Answer: Carriage on raw materials. Correct Answer: Salaries.

22.

Which of the following costs has no relationship with the level of output? Your Answer: Stepped fixed costs. Correct Answer: Fixed costs.

23.

Depreciation of machinery would be classed as: Your Answer: direct expenses. Correct Answer: factory indirect expenses.

24.

Adding indirect production expenditure to the direct cost of production can be known as: Your Answer: full costing.

25.

The correct treatment of an amount paid per item produced to the owner of a patent would be to include it in which of the following? Your Answer: Administration expenses. Correct Answer: Direct expenses.

26.

When using Activity Based Costing, a cost centre would be normally be known as a: Your Answer: cost driver. Correct Answer: cost pool.

27.

Which of the following would not normally be classed as an administration expense? Your Answer: Secretarial wages. Correct Answer: Salary of factory manager.

28.

A cost which is connected with production but does not vary directly with the level of output may be known as: Your Answer: factory indirect expense.

The wage costs which are incurred in converting materials into finished goods would be known as: Salaries Direct labour Wages & salaries Indirect labour

Allocating indirect overheads to the direct cost of production is known as: Absorption costing Contribution costing Marginal costing Activity based costing

Which of the following is a reason why a firm would want to implement ABC? Costs of implementation are too high

The precision of ABC may be to small to justify its implementation implementation It may help make decision making more accurate The firm only produces a single product

When costing takes into account only the variable cost and not the full production cost we will be using: Absorption costing Activity based costing Full costing Marginal costing

Marking up the cost of a product by an amount to represent profit is known as: Full cost pricing Price discrimination Price skimming Predatory pricing

An area of a business which collects costs is known as: Branch Profit centre Cost unit Cost centre

Repairs to factory machinery would be classed as: Direct expenses Factory indirect expenses Administration expenses Direct materials

Contribution can be defined as: Sales revenue less fixed costs Selling price less total costs Fixed costs less variable costs Selling price less variable costs

Any abnormal losses on production are recorded by which one of the following?

Debit

Credit

A

Abnormal loss account

Process account

B

Abnormal loss account

Cashbook

C

Profit & Loss account

Cashbook

D Process account A B C

abnormal loss account

D

A collection of individual costs within a single heading is known as: Cost total Cost pool Cost centre Overhead centre

The total of all direct costs of production is also known as: Prime cost Production costs Variable cost Total cost

If a firm experiences an underabsorption of overheads then the closing stock should be adjusted in which way? Shortfall should be added to closing stock value A provision equivalent to amount should be deducted from value No adjustment should be made Shortfall should be subtracted from closing stock value

The best way of allocating fixed overheads between products is: Equally between different products There is no ‘best’ way of allocating overheads As a proportion of direct cost incurred by each product Based on number people involved in production of each product

Raw materials which are incorporated into goods sold but are not easily identifiable to the goods being made would be known as: Indirect overheads Direct materials Direct overheads Work in progress

Wages for staff maintaining machines in factory would be classed as: Factory indirect expenses Direct materials Direct labour Administration expenses

Which of the following would not appear as a direct cost? Carriage inwards of raw materials

Power costs for factory buildings Wages for production staff  Royalties on each unit produced

Sales staff salaries would be classed as: Direct labour Administration expenses Selling and distribution expenses Indirect expenses

A minor product produced at the same time as the main product may be known as a: By product Supplementary product Joint product Scrap

When deciding to accept a special order at below the normal selling price a firm would consider which cost? Absorption cost Full cost Overhead cost Marginal cost

Which of the following would not appear as a factory overhead? Power for machines Depreciation of factory equipment Delivery costs for raw materials Wages of factory supervisors

Which of the following would not normally be included in the prime cost of production? Cost of raw materials. Salaries. Direct expenses. Carriage on raw materials.

Which of the following costs has no relationship with the level of output? Fixed costs. Variable costs. Semi-variable costs. Stepped fixed costs.

Depreciation of machinery would be classed as: administration expenses.

factory indirect expenses. direct materials. direct expenses.

Adding indirect production expenditure to the direct cost of production can be known as: marginal costing. full costing. activity based costing. contribution costing.

The correct treatment of an amount paid per item produced to the owner of a patent would be to include it in which of the following? Administration expenses. Indirect expenses. Distribution expenses. Direct expenses.

When using Activity Based Costing, a cost centre would be normally be known as a: cost driver. profit centre. cost unit. cost pool.

Which of the following would not normally be classed as an administration expense? Depreciation of office photocopier. Salary of factory manager. Secretarial wages. Office heating.

A cost which is connected with production but does not vary directly with the level of output may be known as: variable cost. factory indirect expense. direct cost. selling and distribution expense.

1.

The role of management accounting accounting does not normally include the function of  Your Answer: decision-making Correct Answer: cash management

2.

The role of financial management does not usually include responsibility for Your Answer: treasury management Correct Answer: compliance with accounting standards

3.

The management accounting concepts, additional to the fundamental fundamental accounting concepts do not include the Your Answer: going concern concept

4.

Total costs are comprised of  Your Answer: variable costs plus fixed costs Correct Answer: variable costs plus fixed costs plus semi-variable costs

5.

Prime costs are comprised of  Your Answer: materials costs plus direct labour costs Correct Answer: production overheads plus materials costs plus direct labour costs

6.

Cost allocation is the charging of a Your Answer: cost centre with the direct labour and materials costs relating to the cost centre Correct Answer: cost centre with the overhead costs resulting solely from the existence of the cost centre

7.

Which of the following examples of bases of cost apportionment may relate to rent, heating and lighting? Your Answer: number of employees Correct Answer: area

8.

Which costs are charged to a product using the method of absorption costing Your Answer: materials costs plus direct labour costs Correct Answer: total production costs

9.

Using the marginal costing method, contribution is equal to total sales revenue less Your Answer: variable costs

10.

Marginal costing may be preferred to absorption costing because because it Your Answer: complies with International Accounting Standard (IAS) 2 Correct Answer: enables use of the opportunity cost approach

The role of management accounting does not normally include the function of  decision-making planning and control cash management product costing

The role of financial management does not usually include responsibility for corporate finance risk management treasury management compliance with accounting standards

The management accounting concepts, additional to the fundamental accounting concepts do not include the reliability concept going concern concept controllability concept

interdependency interdependency concept

Total costs are comprised of  variable costs plus fixed costs plus semi-variable costs variable costs plus fixed costs variable costs plus semi-variable costs fixed costs plus semi-variable costs

Prime costs are comprised of  direct labour costs plus production overheads materials costs plus direct labour costs materials costs plus production overheads production overheads plus materials costs plus direct labour costs

Cost allocation is the charging of a cost centre with the direct labour and materials costs relating to the cost centre cost centre with the overhead costs resulting solely from the existence of the cost centre product with the direct labour costs relating to the product product with the direct labour and materials costs relating to the product

Which of the following examples of bases of cost apportionment may relate to rent, heating and lighting?

weight area number of products number of employees

Which costs are charged to a product using the method of absorption costing production overheads plus direct labour costs total production costs materials costs plus direct labour costs direct labour costs

Using the marginal costing method, contribution is equal to total sales revenue less fixed costs variable costs total costs direct labour costs

Marginal costing may be preferred to absorption costing because it ensures the recovery of total costs in sales pricing complies with the accruals or matching concept enables use of the opportunity cost approach complies with International Accounting Standard (IAS) 2

1-Cost estimation include(s) the following expenditure(s) (A) pattern making

(B) tool making (C) selling expenses (D) all of the above 2-To calculate the probable cost of the product, knowledge of following factors involves i nvolves (A) Production time required

(B) Use of previous estimates of comparable parts (C) Effect of change in facilities on costing rates (D) All of the above 3-Cost accounting is a specialized branch of accounting which deals with (A) classification, recording, allocation and control of costs

(B) classification, processing, allocation and directing (C) classification, recording, planning and control of costs (D) classification, recording, allocation and directing 4-Expenditure incurred on material, labour, machinery, production and inspection are summed up to find the (A) Total cost of product

(B) Selling price of product (C) Factory cost of product (D) None of the above 5-Which of the following calculate the actual cost of product (A) Cost estimation

(B) Costing (C) Both (A) and (B) (D) None of the above

6-The cost data provide invaluable information for taking the following managerial decision(s) (A) To make or buy

(B) To own or hire fixed asset (C) Determining the expansion or contraction policy (D) All of the above

7-Match the following

Type of costing

Type of industry

a. Job costing

1. Utility services

 b. Process costing

2. Automobile industry

c. Departmental costing

3. ship building

d. Operating costing

4. paper making

The correct answer is (A). a-2, b-3, c-1, d-4 (B). a-3, b-4, c-2, d-1 (C). a-4, b-2, c-1, d-3 (D). a-3, b-2, c-1, d-4 8-The method of unit costing is adopted by (A) Transport services

(B) Steel industry (C) Mines (D) Bicycle industry 9- ____ costing is a type of job costing. (A) Multiple

(B) Operating (C) Unit (D) Batch

10-The following is cost of direct materials (A) Freight charges

(B) grease (C) coolant (D) cotton waste 11-The following is cost of indirect i ndirect materials (A) Lubricating oil

(B) Octroi (C) Import duties (D) Insurance 12-The payment made to the following is cost of direct labour. (A) Machinist

(B) Supervisor (C) Inspector (D) Sweeper 13-The payment made to the following is cost of indirect labour. (A) Time keeper

(B) Welder (C) Moulder (D) Turner 14-Cost of preparing drawings for the manufacture of a particular product is (A) Cost of direct labour

(B) Cost of indirect labour (C) Direct expenses (D) Indirect expense 15-The following is also known as overhead costs or on costs. (A) Cost of direct labour

(B) Cost of indirect labour (C) Direct expenses (D) Indirect expenses Answers: 1-(D), 2-(D), 3-(A), 4-(C), 5-(B), 6-(D), 7-(B), 8-(C), 9-(D), 10-(A), 11-(A), 12-(A), 13-(A), 14(C), 15-(D)

16-The following is(are) the overhead cost(s) (A) Factory expenses

(B) Selling expenses (C) Distribution expenses (D) All of the above

17-All such expenses which are incurred for creating and enhancing the demands for the products are (A) Selling expenses

(B) Administrative expenses (C) Distribution expenses (D) All of the above

18-Prime cost= (A) cost of direct labour + cost of direct material + direct expenses

(B) cost of indirect labour + cost of indirect material + direct expenses (C) cost of direct labour + cost of direct material + indirect expenses (D) cost of indirect labour la bour + cost of direct material + indirect i ndirect expenses

19-Factory Cost = (A) Prime cost + factory expenses

(B) Prime cost + administrative expenses (C) Prime cost + selling expenses (D) Prime cost + distribution expenses

20-Manufacturing cost= (A) Factory cost + selling cost

(B) Factory cost + distribution cost (C) Factory cost + administrative expenses (D) None of the above

21-The following is(are) the method(s) to increase profit (A) Increase the sales price

(B) Increase the market (C) Reduce total cost (D) All of the above

22-Which of the following is variable cost? (A) Salaries of higher officers

(B) Prime cost (C) Insurance cost (D) Repair cost

23-Which of the following is not a method of calculating (allocating) overhead cost? (A) Percentage on prime cost

(B) Percentage on direct labour cost (C) Percentage on indirect labour cost (D) Percentage on direct material cost

24-The following method is an improvement over the percentage on direct labour cost method. (A) Machine hour rate

(B) Percentage on prime cost (C) Percentage on direct material cost (D) Man hour rate

25-This method is useful where the products are manufactured by manual operations. (A) Percentage on prime cost

(B) Percentage on direct material cost (C) Percentage on direct labour cost (D) Machine hour rate

26-The overhead cost for a particular job = (A) man hour rate x man hours spent on that job

(B) man hour rate / man hours spent on that job (C) man hour rate + man hours spent on that job (D) man hour rate  –  man  man hours spent on that jab

27- Labour cost per product is Rs. 2/hr and time ti me taken by each product is 2 hr. The factory overhead is 20% of the labour costs. The factory f actory cost for 100 products if material cost per product is Rs. 3, is. (A) Rs. 700

(B) Rs. 740 (C) Rs. 780 (D) Rs. 820

28-The following is (are) true for variable costs (A) Variable costs are the functions of output

(B) Variable costs vary directly with the quantity produced (C) These become zero when the production is suspended (D) All of the above 29-The following cost helps in taking ‘make ‘make or  or buy’ buy’ decision.  decision. (A) Standard cost

(B) Marginal cost (C) Differential cost (D) Sunk cost 30-To control costs it is essential to keep control on (A) Prime cost

(B) Overheads (C) Indirect materials and tools cost

(D) All of the above

Answers: 16-(D), 17-(A), 18-(A), 19-(A), 20-(C), 21-(D), 22-(B), 23-(C), 24-(D), 25-(C), 26-(A), 27-(C), 28-(D), 29-(C), 30-(D) MCQs 1 To 10 1. A financial statement that summarizes company revenue and expenses is? (a) Balance sheet (b) Statement of owner equity (c) Income statement (d) Cash flow statement 2. Which one of the following tangible fixed fixed assets would not normally be depreciated? (a) Buildings (b) Machinery (c) Land (d) Equipment 3. Which financial statement presents a summary of the Assets, Liabilities, and Owners' Equity of a firm? (a) General ledger (b) Work sheet (c) Balance sheet (d) Cash flow statement 4. Subtracting all expenses from revenues yields? (a) Net profit/Loss (b) Carrying value (c) Long-term assets (d) Net liabilities 5. A financial statement to show what a business owns and owes at a particular point in time? (a) A cash flow statement (b) The bank statement for the business (c) A balance sheet (d) A statement of retained earnings 6. If the Gross profit is Rs. 5,000 and the net profit is 25% of the Gross profit. The expenses must be? (a) Rs. 3,750 (b) Rs. 1,250 (c) Rs. 4,150 (d) Rs. 6,250

7. A financial document that indicates the success or failure of a business trading over a period of time is called? (a) A cash flow statement (b) A retained earnings statement (c) An income statement (d) A bank statement 8. The report of company that shows overall profit on the sale of their goods or the provision of their services? (a) Trading and Profit & loss account (b) Cash flow statement (c) Income Statement (d) Both a and c 9. A company has, by the end of its financial period, paid out more Tax than it has to pay. How would this be shown in the balance sheet? (a) As an accrual Revenue (b) As a Prepaid within current assets (c) As a 'creditor due within one year' (d) As a creditor due after more than one year' Correct ! 10. Which of the following financial financial statements is also known as financial condition? (a) Balance Sheet (b) Income Statement (c) Statement of Cash flows (d) Bank Statement  Wrong ! >> Read Financial Statement. Statement. MCQs 11 To 20 11. Prepaid interest given in the adjusted adjusted trial balance will be treated as a (an)? (a) Asset (b) Liability (c) Revenue (d) Deferred expense 12. Which of the following is the largest single expense of most merchandising firms? firms ? (a) Cost of goods sold (b) Rent Expense (c) Amortization Expense (d) Salaries Expense 13. The primary source of revenue for a wholesale wholesalerr is? (a) Investment income (b) Service fees

(c) The sale of merchandise (d) The sale of fixed assets the company owns 14. Retained earnings will change over time because of several factors. Which of the following factors factors would explain a decrease in retained earnings? (a) Net loss (b) Net income (c) Dividends (d) Investments by stock holders 15. A Profit is earned if? (a) Assets exceed Expenditure (b) Income exceeds Expenditure (c) Cash Inflow exceeds Cash Outflow (d) Income exceeds Liabilities 16. What is the difference between between the total incoming and the total outgoings? (a) Net cash flow (b) Cash inflow (c) Direct cost (d) Indirect cost 17. Which of the following is true regarding the income statement? statement? (a) The income statement is sometimes called the statement of operations (b) The income statement reports revenues, expenses, and liabilities (c) The income statement reports only revenue at the point of sale (d) It shows financial position of a business at a particular period of time 18. Presents the revenue earned and expenses are incurred by an entity during a specific time period? (a) Income statement (b) Statement of owner equity (c) Balance sheet (d) None of them 19. The format of the balance sheet reflects which of the following? (a) The basic accounting equation (b) Worksheet (c) Statement of Owner Equity (d) Income statement 20. How is the balance sheet linked to the other financial statements? (a) The beginning retained earnings balance on the statement of retained earnings becomes the amount of retained earnings reported on the balance sheet (b) Retained earnings is added to total assets and reported on the balance sheet (c) Net income increases retained re tained earnings on the statement of retained earnings, which ultimately increases retained earnings on the balance sheet (d) There is no link between the balance sheet and the other statements