MCQ questions with answer on BASIC COST CONCEPTS
MCQ questions with answer on BASIC COST CONCEPTS:(Answers provided at the end, first solve then check yourself)
Cost Concepts, Cost Behavior, Cost Accounting Basics, Manufacturing vs Merchandising vs Service Organizations, Relevant Range, Factors of Production, Short Run, High-Low Method, Cost Drivers, Cost Pools, and Activity-Based Costing (ABC) relevant for ACCA Foundation Management Accounting (FMA) and US CMA Part 1.
COST CONCEPTS & TYPES OF COSTS (1-25)
1. Cost is best defined as:
A. Revenue earned
B. Sacrifice of resources to achieve an objective
C. Profit earned
D. Assets owned
Answer:
2. Direct material cost is:
A. Indirect labor
B. Cost traceable to product
C. Selling expense
D. Administrative expense
Answer:
3. Factory rent is usually a:
A. Direct cost
B. Prime cost
C. Manufacturing overhead
D. Selling cost
Answer:
4. Prime cost consists of:
A. DM + DL B. DL + OH C. DM + OH D. DL + Selling
Answer:
5. Conversion cost consists of:
A. DM + DL
B. DL + MOH
C. DM + MOH
D. Selling + Admin
Answer:
6. Indirect materials are classified as:
A. Prime cost
B. Product cost
C. Manufacturing overhead
D. Period cost
Answer:
7. Product costs are:
A. Selling costs
B. Administrative costs
C. Manufacturing costs
D. Financing costs
Answer:
8. Period costs are expensed when:
A. Product sold
B. Incurred
C. Produced
D. Purchased
Answer:
9. Depreciation of factory equipment is:
A. Selling expense B. Manufacturing overhead C. Direct labor D. Prime cost
Answer:
10. Salary of sales manager is:
A. Product cost
B. Direct labor
C. Selling expense
D. Manufacturing overhead
Answer:
11. Sunk cost is:
A. Future cost
B. Avoidable cost
C. Past cost
D. Relevant cost
Answer:
12. Opportunity cost means:
A. Actual cash paid
B. Cost of next best alternative forgone
C. Fixed cost
D. Variable cost
Answer:
13. Differential cost is:
A. Historical cost B. Difference between alternatives
C. Fixed cost D. Sunk cost
Answer:
14. Relevant costs are:
A. Past costs B. Future costs affecting decisions
C. Sunk costs D. Book values
Answer:
15. Avoidable costs can be:
A. Eliminated by decision
B. Past costs
C. Sunk costs
D. Committed costs
Answer:
16. Fixed cost per unit:
A. Constant
B. Increases with volume
C. Decreases as activity increases
D. Variable
Answer:
17. Variable cost per unit is:
A. Constant
B. Increasing
C. Decreasing
D. Unknown
Answer:
18. Total fixed cost:
A. Changes with units
B. Constant within relevant range
C. Variable
D. Mixed
Answer:
19. Total variable cost:
A. Constant B. Changes proportionately with activity C. Fixed D. Semi-fixed
Answer:
20. Mixed cost contains:
A. Only fixed cost
B. Only variable cost
C. Fixed and variable elements
D. Product cost only
Answer:
21. Step cost remains fixed until:
A. Certain activity level reached
B. Revenue changes
C. Profit changes
D. Sales decrease
Answer:
22. Discretionary fixed cost example:
A. Factory rent
B. Advertising
C. Property tax
D. Insurance
Answer:
23. Committed fixed cost example:
A. Advertising B. Training
C. Building depreciation D. Research
Answer:
24. Incremental cost means:
A. Additional cost from a decision B. Past cost
C. Fixed cost
Answer:
25. Marginal cost usually refers to:
A. Fixed cost
B. Variable cost of one more unit
C. Sunk cost
D. Period cost
Answer:
MANUFACTURING, MERCHANDISING & SERVICE ORGANIZATIONS (26-40)
26. A manufacturing company:
A. Sells services
B. Produces goods
C. Trades securities
D. Lends money
Answer:
27. A merchandising company:
A. Manufactures products
B. Buys and resells goods
C. Provides consulting
D. Produces services
Answer:
28. Example of manufacturing company:
A. Hospital
B. Toyota
C. Bank
D. School
Answer:
29. Example of merchandising company:
A. Walmart
B. Factory
C. Hospital
D. Audit firm
Answer:
30. Example of service company:
A. Factory
B. Retailer
C. CPA Firm
D. Distributor
Answer:
31. Raw materials inventory exists mainly in:
A. Service firms
B. Manufacturing firms
C. Banks
D. Schools
Answer:
32. Work-in-process inventory exists in:
A. Manufacturing firms
B. Retail stores
C. Service firms
D. Banks
Answer:
33. Finished goods inventory exists in:
A. Manufacturing firms B. Audit firms C. Hospitals D. Banks
Answer:
34. Merchandising firms usually have:
A. Raw materials inventory
B. WIP inventory
C. Merchandise inventory
D. None
Answer:
35. Service firms generally have:
A. No inventory
B. WIP inventory
C. Raw materials
D. Finished goods
Answer:
36. Cost of Goods Manufactured applies to:
A. Service firms
B. Manufacturing firms
C. Banks
D. Retailers
Answer:
37. Cost of Goods Sold is found in:
A. Manufacturing only B. Merchandising and manufacturing
C. Service only D. None
Answer:
38. Inventory sequence in manufacturing:
A. FG → RM → WIP
B. RM → WIP → FG
C. WIP → RM → FG
D. FG → WIP → RM
Answer:
39. Merchandising company purchases:
A. Raw materials
B. Finished goods
C. Labor
D. Overhead
Answer:
40. Main output of service company is:
A. Goods
B. Services
C. Inventory
D. Raw material
Answer:
RELEVANT RANGE & COST BEHAVIOR (41-60)
41. Relevant range means:
A. Expected activity range
B. Revenue range
C. Profit range
D. Sales range
Answer:
42. Fixed costs remain constant within:
A. Relevant range B. Entire universe
C. Any activity D. None
Answer:
43. Outside relevant range fixed cost may:
A. Remain same always B. Change
C. Become variable D. Disappear
Answer:
44. Cost behavior studies relationship between:
A. Cost and activity
B. Cost and profit
C. Assets and liabilities
D. Debt and equity
Answer:
45. Variable cost changes with:
A. Activity level
B. Time only
C. Interest rate
D. Inflation only
Answer:
46. Fixed cost per unit decreases when:
A. Output increases
B. Output decreases
C. Cost increases
D. Revenue decreases
Answer:
47. Example of variable cost:
A. Direct materials
B. Rent
C. Insurance
D. Salary
Answer:
48. Example of fixed cost:
A. Direct material B. Sales commission
C. Factory rent D. Freight on units
Answer:
49. Sales commission is usually:
A. Fixed B. Variable C. Sunk D. Opportunity
Answer:
50. Utility bill often represents:
A. Mixed cost
B. Fixed cost
C. Product cost
D. Sunk cost
Answer:
FACTORS OF PRODUCTION & SHORT RUN (61-70)
61. Factors of production include:
A. Land
B. Labor
C. Capital
D. All of these
Answer:
62. Human effort in production is:
A. Capital
B. Labor
C. Land
D. Entrepreneurship
Answer:
63. Machinery is an example of:
A. Labor
B. Capital
C. Land
D. Revenue
Answer:
64. Entrepreneur earns:
A. Rent B. Interest C. Profit D. Wages
Answer:
65. In short run at least one factor is:
A. Variable B. Fixed
C. Revenue D. Profit
Answer:
66. Factory building in short run is generally:
A. Fixed input
B. Variable input
C. Revenue
D. Expense
Answer:
67. Labor is often considered:
A. Fixed input
B. Variable input
C. Asset
D. Liability
Answer:
68. Short run period means:
A. One month
B. One year
C. At least one fixed input
D. No fixed input
Answer:
69. Long run means:
A. All inputs variable
B. All inputs fixed
C. One fixed input
D. No production
Answer:
70. Marginal product refers to:
A. Additional output from additional input
B. Revenue
C. Cost
D. Profit
Answer:
HIGH-LOW METHOD, COST DRIVER, COST POOL, ABC (71-100)
71. High-low method estimates:
A. Fixed and variable costs
B. Profit
C. Revenue
D. Assets
Answer:
72. High-low method uses:
A. Highest and lowest activity levels
B. Highest costs only
C. Lowest costs only
D. Average costs
Answer:
73. Variable cost per unit =
A. Cost difference ÷ Activity difference
B. Revenue difference
C. Profit difference
D. Fixed cost
Answer:
74. Cost driver causes:
A. Revenue
B. Cost to occur
C. Profit
D. Assets
Answer:
75. Machine hours are often a:
A. Cost driver
B. Revenue driver
C. Liability
D. Asset
Answer:
76. Number of setups may be a:
A. Cost driver
B. Product cost
C. Sunk cost
D. Opportunity cost
Answer:
77. Cost pool is:
A. Collection of related costs
B. Revenue account
C. Profit center
D. Asset account
Answer:
78. ABC stands for:
A. Activity Based Costing
B. Annual Budget Costing
C. Accounting Budget Control
D. None
Answer
79. ABC allocates overhead using:
A. Cost drivers
B. Sales
C. Profit
D. Assets
Answer:
80. ABC improves:
A. Cost accuracy
B. Inflation
C. Revenue
D. Tax
Answer:
81. Unit-level activity occurs for:
A. Each unit produced
B. Each factory
C. Each company
D. Each year
Answer:
82. Batch-level activity example:
A. Machine setup
B. Direct material
C. Factory rent
D. CEO salary
Answer:
83. Product-level activity example:
A. Product design
B. Direct labor
C. Materials
D. Packaging
Answer:
84. Facility-level activity example:
A. Factory security
B. Direct labor
C. Direct material
D. Packaging
Answer:
86. Direct labor hours may be used as:
A. Cost driver
B. Revenue driver
C. Asset
D. Liability
Answer:
87. Traditional costing often uses:
A. One cost driver
B. Many drivers
C. No driver
D. Revenue
Answer:
88. ABC generally uses:
A. Multiple drivers B. One driver
C. No drivers D. Profit
Answer:
89. Overhead allocation aims to:
A. Assign indirect costs B. Increase profit
C. Reduce assets D. Increase sales
Answer:
90. Cost driver rate =
A. Cost pool ÷ Driver units
B. Revenue ÷ Units
C. Profit ÷ Units
D. Sales ÷ Units
Answer:
Types of Cost…..
1.
Direct materials are:
A. Indirect costs
B. Prime costs
C. Period costs
D. Selling costs
Answer:
2.
Prime cost consists of:
A. Direct materials + Direct labor
B. Direct labor + Overhead
C. Materials + Overhead
D. Fixed + Variable costs
Answer:
3.
Conversion cost consists of:
A. Direct materials + Direct labor
B. Direct labor + Manufacturing overhead
C. Direct materials + Overhead
D. Selling + Administrative costs
Answer:
4.
Factory supervisor salary is:
A. Direct labor
B. Manufacturing overhead
C. Selling expense
D. Direct material
Answer:
5.
Which is a direct cost?
A. Factory rent
B. Lubricating oil
C. Direct material
D. Security salary
Answer:
6.
Indirect materials are classified as:
A. Prime costs
B. Manufacturing overhead
C. Selling expenses
D. Administrative expenses
Answer:
7.
The depreciation of factory equipment is:
A. Direct labor
B. Product cost
C. Selling expense
D. Administrative expense
Answer:
8.
Product costs include:
A. Manufacturing costs
B. Selling costs
C. Interest costs
D. Marketing costs
Answer:
9.
Period costs are expensed:
A. When incurred
B. When produced
C. When purchased
D. When materials are used
Answer:
10.
Which is a period cost?
A. Direct materials
B. Factory insurance
C. Sales commission
D. Direct labor
Answer:
11.
A variable cost:
A. Remains constant in total
B. Changes in total with activity
C. Never changes
D. Is always indirect
Answer:
12.
An example of variable cost is:
A. Direct material
B. Factory rent
C. Property tax
D. Factory manager salary
Answer:
13.
Total fixed cost:
A. Changes with production volume
B. Remains constant within relevant range
C. Is always zero
D. Is variable per unit
Answer:
14.
Fixed cost per unit:
A. Remains constant
B. Increases with output
C. Decreases as output increases
D. Is irrelevant
Answer:
15.
A mixed cost contains:
A. Only fixed cost
B. Only variable cost
C. Fixed and variable components
D. Product and period costs
Answer:
16.
An example of mixed cost is:
A. Electricity bill
B. Direct materials
C. Factory rent
D. Property tax
Answer:
17.
A step cost:
A. Changes continuously
B. Remains fixed over a range then jumps
C. Is variable per unit
D. Is irrelevant
Answer:
18.
Which cost is relevant to decision making?
A. Sunk cost
B. Historical cost
C. Future cost differing between alternatives
D. Book value
Answer:
19.
A sunk cost is:
A. Future cost
B. Cost already incurred
C. Opportunity cost
D. Avoidable cost
Answer:
20.
Sunk costs are:
A. Relevant
B. Avoidable
C. Irrelevant for decisions
D. Variable
Answer:
21.
Opportunity cost is:
A. Actual cash paid
B. Cost of forgone alternative
C. Fixed cost
D. Product cost
Answer:
22.
Differential cost means:
A. Historical cost
B. Difference in cost between alternatives
C. Sunk cost
D. Fixed cost
Answer:
23.
Incremental cost is:
A. Additional cost from a decision
B. Sunk cost
C. Fixed cost
D. Product cost
Answer:
24.
Avoidable costs:
A. Cannot be eliminated
B. Can be eliminated by a decision
C. Are sunk costs
D. Are historical costs
Answer:
25.
Unavoidable costs:
A. Can be eliminated
B. Continue regardless of decision
C. Are opportunity costs
D. Are variable costs
Answer:
26.
Direct labor cost is:
A. Prime cost
B. Period cost
C. Selling cost
D. Administrative cost
Answer:
27.
Factory insurance is:
A. Direct material
B. Manufacturing overhead
C. Selling expense
D. Opportunity cost
Answer:
28.
Sales manager salary is:
A. Product cost
B. Selling expense
C. Direct labor
D. Manufacturing overhead
Answer:
29.
Office rent is generally:
A. Administrative expense
B. Direct material
C. Manufacturing overhead
D. Prime cost
Answer:
30.
Research and development cost is usually:
A. Period cost
B. Direct cost
C. Prime cost
D. Conversion cost
Answer:
31.
Marginal cost generally refers to:
A. Fixed cost
B. Additional variable cost of one unit
C. Sunk cost
D. Opportunity cost
Answer:
32.
Controllable costs are:
A. Managed by a responsible manager
B. Always fixed
C. Always variable
D. Never relevant
Answer:
33.
Non-controllable costs:
A. Can be directly influenced
B. Cannot be significantly influenced
C. Are always sunk
D. Are always avoidable
Answer:
34.
Committed fixed costs include:
A. Advertising
B. Factory building depreciation
C. Training costs
D. Promotion costs
Answer:
35.
Discretionary fixed costs include:
A. Factory lease
B. Property tax
C. Advertising
D. Insurance
Answer:
36.
The cost of idle capacity is generally:
A. Direct material
B. Fixed cost
C. Selling cost
D. Prime cost
Answer:
37.Joint costs arise:
A. After split-off point
B. Before split-off point
C. During selling process
D. During marketing
Answer:
38.
Further processing costs incurred after split-off are:
A. Joint costs
B. Sunk costs
C. Separable costs
D. Fixed costs
Answer:
39.
By-product revenue is often:
A. Ignored completely
B. Treated as reduction of production cost
C. Treated as direct material
D. Treated as overhead
Answer:
40.
Which is NOT a product cost?
A. Direct materials
B. Direct labor
C. Manufacturing overhead
D. Sales commission
Answer:
41.
Which cost is most likely variable?
A. Factory rent
B. Direct materials
C. Property taxes
D. Factory insurance
Answer:
42.
Which cost is most likely fixed?
A. Direct materials
B. Direct labor paid per unit
C. Factory rent
D. Sales commission
Answer:
43.
Opportunity costs are:
A. Recorded in accounting records
B. Not recorded in accounting records
C. Historical costs
D. Product costs
Answer:
44.
Relevant costs must be:
A. Past and unavoidable
B. Future and different between alternatives
C. Historical and fixed
D. Sunk and variable
Answer:
45.
The salary of factory maintenance staff is:
A. Direct labor
B. Manufacturing overhead
C. Selling expense
D. Administrative expense
Answer:
46.
Freight paid on raw materials purchased is generally:
A. Product cost
B. Selling cost
C. Administrative cost
D. Opportunity cost
Answer:
47.
Advertising expense is:
A. Product cost
B. Prime cost
C. Selling expense
D. Conversion cost
Answer:
48.
A cost traceable to a cost object is:
A. Direct cost
B. Indirect cost
C. Opportunity cost
D. Sunk cost
Answer:
49.
Cost that cannot be conveniently traced is:
A. Prime cost
B. Direct cost
C. Indirect cost
D. Marginal cost
Answer:
50.
Which cost is most relevant in a special order decision?
A. Sunk cost
B. Historical cost
C. Incremental cost
D. Book value
Answer:
xam Tip (ACCA FMA & US CMA Part 1)
The most frequently tested cost classifications are:
- Direct vs Indirect Cost
- Product vs Period Cost
- Prime vs Conversion Cost
- Fixed vs Variable vs Mixed Cost
- Relevant vs Irrelevant Cost
- Sunk Cost
- Opportunity Cost
- Differential / Incremental Cost
- Avoidable vs Unavoidable Cost
- Committed vs Discretionary Fixed Cost
Case-based questions with answer on BASIC COST CONCEPTS:
Cost Concepts, Cost Behavior, Cost Accounting Basics, Manufacturing vs Merchandising vs Service Organizations, Relevant Range, Factors of Production, Short Run, High-Low Method, Cost Drivers, Cost Pools, and Activity-Based Costing (ABC) relevant for ACCA Foundation Management Accounting (FMA) and US CMA Part 1.
COST CONCEPTS & TYPES OF COSTS (1-25)
1. Cost is best defined as:
A. Revenue earned
B. Sacrifice of resources to achieve an objective
C. Profit earned
D. Assets owned
Answer: B
2. Direct material cost is:
A. Indirect labor
B. Cost traceable to product
C. Selling expense
D. Administrative expense
Answer: B
3. Factory rent is usually a:
A. Direct cost
B. Prime cost
C. Manufacturing overhead
D. Selling cost
Answer: C
4. Prime cost consists of:
A. DM + DL B. DL + OH C. DM + OH D. DL + Selling
Answer: A
5. Conversion cost consists of:
A. DM + DL
B. DL + MOH
C. DM + MOH
D. Selling + Admin
Answer: B
6. Indirect materials are classified as:
A. Prime cost
B. Product cost
C. Manufacturing overhead
D. Period cost
Answer: C
7. Product costs are:
A. Selling costs
B. Administrative costs
C. Manufacturing costs
D. Financing costs
Answer: C
8. Period costs are expensed when:
A. Product sold
B. Incurred
C. Produced
D. Purchased
Answer: B
9. Depreciation of factory equipment is:
A. Selling expense B. Manufacturing overhead C. Direct labor D. Prime cost
Answer: B
10. Salary of sales manager is:
A. Product cost
B. Direct labor
C. Selling expense
D. Manufacturing overhead
Answer: C
11. Sunk cost is:
A. Future cost
B. Avoidable cost
C. Past cost
D. Relevant cost
Answer: C
12. Opportunity cost means:
A. Actual cash paid
B. Cost of next best alternative forgone
C. Fixed cost
D. Variable cost
Answer: B
13. Differential cost is:
A. Historical cost B. Difference between alternatives
C. Fixed cost D. Sunk cost
Answer: B
14. Relevant costs are:
A. Past costs B. Future costs affecting decisions
C. Sunk costs D. Book values
Answer: B
15. Avoidable costs can be:
A. Eliminated by decision
B. Past costs
C. Sunk costs
D. Committed costs
Answer: A
16. Fixed cost per unit:
A. Constant
B. Increases with volume
C. Decreases as activity increases
D. Variable
Answer: C
17. Variable cost per unit is:
A. Constant
B. Increasing
C. Decreasing
D. Unknown
Answer: A
18. Total fixed cost:
A. Changes with units
B. Constant within relevant range
C. Variable
D. Mixed
Answer: B
19. Total variable cost:
A. Constant B. Changes proportionately with activity C. Fixed D. Semi-fixed
Answer: B
20. Mixed cost contains:
A. Only fixed cost
B. Only variable cost
C. Fixed and variable elements
D. Product cost only
Answer: C
21. Step cost remains fixed until:
A. Certain activity level reached
B. Revenue changes
C. Profit changes
D. Sales decrease
Answer: A
22. Discretionary fixed cost example:
A. Factory rent
B. Advertising
C. Property tax
D. Insurance
Answer: B
23. Committed fixed cost example:
A. Advertising B. Training
C. Building depreciation D. Research
Answer: C
24. Incremental cost means:
A. Additional cost from a decision B. Past cost
C. Fixed cost
Answer: A
25. Marginal cost usually refers to:
A. Fixed cost
B. Variable cost of one more unit
C. Sunk cost
D. Period cost
Answer: B
MANUFACTURING, MERCHANDISING & SERVICE ORGANIZATIONS (26-40)
26. A manufacturing company:
A. Sells services
B. Produces goods
C. Trades securities
D. Lends money
Answer: B
27. A merchandising company:
A. Manufactures products
B. Buys and resells goods
C. Provides consulting
D. Produces services
Answer: B
28. Example of manufacturing company:
A. Hospital
B. Toyota
C. Bank
D. School
Answer: B
29. Example of merchandising company:
A. Walmart
B. Factory
C. Hospital
D. Audit firm
Answer: A
30. Example of service company:
A. Factory
B. Retailer
C. CPA Firm
D. Distributor
Answer: C
31. Raw materials inventory exists mainly in:
A. Service firms
B. Manufacturing firms
C. Banks
D. Schools
Answer: B
32. Work-in-process inventory exists in:
A. Manufacturing firms
B. Retail stores
C. Service firms
D. Banks
Answer: A
33. Finished goods inventory exists in:
A. Manufacturing firms B. Audit firms C. Hospitals D. Banks
Answer: A
34. Merchandising firms usually have:
A. Raw materials inventory
B. WIP inventory
C. Merchandise inventory
D. None
Answer: C
35. Service firms generally have:
A. No inventory
B. WIP inventory
C. Raw materials
D. Finished goods
Answer: A
36. Cost of Goods Manufactured applies to:
A. Service firms
B. Manufacturing firms
C. Banks
D. Retailers
Answer: B
37. Cost of Goods Sold is found in:
A. Manufacturing only B. Merchandising and manufacturing
C. Service only D. None
Answer: B
38. Inventory sequence in manufacturing:
A. FG → RM → WIP
B. RM → WIP → FG
C. WIP → RM → FG
D. FG → WIP → RM
Answer: B
39. Merchandising company purchases:
A. Raw materials
B. Finished goods
C. Labor
D. Overhead
Answer: B
40. Main output of service company is:
A. Goods
B. Services
C. Inventory
D. Raw material
Answer: B
RELEVANT RANGE & COST BEHAVIOR (41-60)
41. Relevant range means:
A. Expected activity range
B. Revenue range
C. Profit range
D. Sales range
Answer: A
42. Fixed costs remain constant within:
A. Relevant range B. Entire universe
C. Any activity D. None
Answer: A
43. Outside relevant range fixed cost may:
A. Remain same always B. Change
C. Become variable D. Disappear
Answer: B
44. Cost behavior studies relationship between:
A. Cost and activity
B. Cost and profit
C. Assets and liabilities
D. Debt and equity
Answer: A
45. Variable cost changes with:
A. Activity level
B. Time only
C. Interest rate
D. Inflation only
Answer: A
46. Fixed cost per unit decreases when:
A. Output increases
B. Output decreases
C. Cost increases
D. Revenue decreases
Answer: A
47. Example of variable cost:
A. Direct materials
B. Rent
C. Insurance
D. Salary
Answer: A
48. Example of fixed cost:
A. Direct material B. Sales commission
C. Factory rent D. Freight on units
Answer: C
49. Sales commission is usually:
A. Fixed B. Variable C. Sunk D. Opportunity
Answer: B
50. Utility bill often represents:
A. Mixed cost
B. Fixed cost
C. Product cost
D. Sunk cost
Answer: A
FACTORS OF PRODUCTION & SHORT RUN (61-70)
61. Factors of production include:
A. Land
B. Labor
C. Capital
D. All of these
Answer: D
62. Human effort in production is:
A. Capital
B. Labor
C. Land
D. Entrepreneurship
Answer: B
63. Machinery is an example of:
A. Labor
B. Capital
C. Land
D. Revenue
Answer: B
64. Entrepreneur earns:
A. Rent B. Interest C. Profit D. Wages
Answer: C
65. In short run at least one factor is:
A. Variable B. Fixed
C. Revenue D. Profit
Answer: B
66. Factory building in short run is generally:
A. Fixed input
B. Variable input
C. Revenue
D. Expense
Answer: A
67. Labor is often considered:
A. Fixed input
B. Variable input
C. Asset
D. Liability
Answer: B
68. Short run period means:
A. One month
B. One year
C. At least one fixed input
D. No fixed input
Answer: C
69. Long run means:
A. All inputs variable
B. All inputs fixed
C. One fixed input
D. No production
Answer: A
70. Marginal product refers to:
A. Additional output from additional input
B. Revenue
C. Cost
D. Profit
Answer: A
HIGH-LOW METHOD, COST DRIVER, COST POOL, ABC (71-100)
71. High-low method estimates:
A. Fixed and variable costs
B. Profit
C. Revenue
D. Assets
Answer: A
72. High-low method uses:
A. Highest and lowest activity levels
B. Highest costs only
C. Lowest costs only
D. Average costs
Answer: A
73. Variable cost per unit =
A. Cost difference ÷ Activity difference
B. Revenue difference
C. Profit difference
D. Fixed cost
Answer: A
74. Cost driver causes:
A. Revenue
B. Cost to occur
C. Profit
D. Assets
Answer: B
75. Machine hours are often a:
A. Cost driver
B. Revenue driver
C. Liability
D. Asset
Answer: A
76. Number of setups may be a:
A. Cost driver
B. Product cost
C. Sunk cost
D. Opportunity cost
Answer: A
77. Cost pool is:
A. Collection of related costs
B. Revenue account
C. Profit center
D. Asset account
Answer: A
78. ABC stands for:
A. Activity Based Costing
B. Annual Budget Costing
C. Accounting Budget Control
D. None
79. ABC allocates overhead using:
A. Cost drivers
B. Sales
C. Profit
D. Assets
Answer: A
80. ABC improves:
A. Cost accuracy
B. Inflation
C. Revenue
D. Tax
Answer: A
81. Unit-level activity occurs for:
A. Each unit produced
B. Each factory
C. Each company
D. Each year
Answer: A
82. Batch-level activity example:
A. Machine setup
B. Direct material
C. Factory rent
D. CEO salary
Answer: A
83. Product-level activity example:
A. Product design
B. Direct labor
C. Materials
D. Packaging
Answer: A
84. Facility-level activity example:
A. Factory security
B. Direct labor
C. Direct material
D. Packaging
Answer: A
86. Direct labor hours may be used as:
A. Cost driver
B. Revenue driver
C. Asset
D. Liability
Answer: A
87. Traditional costing often uses:
A. One cost driver
B. Many drivers
C. No driver
D. Revenue
Answer: A
88. ABC generally uses:
A. Multiple drivers B. One driver
C. No drivers D. Profit
Answer: A
89. Overhead allocation aims to:
A. Assign indirect costs B. Increase profit
C. Reduce assets D. Increase sales
Answer: A
90. Cost driver rate =
A. Cost pool ÷ Driver units
B. Revenue ÷ Units
C. Profit ÷ Units
D. Sales ÷ Units
Answer: A
Types of Cost…..
1.
Direct materials are:
A. Indirect costs
B. Prime costs
C. Period costs
D. Selling costs
Answer: B
2.
Prime cost consists of:
A. Direct materials + Direct labor
B. Direct labor + Overhead
C. Materials + Overhead
D. Fixed + Variable costs
Answer: A
3.
Conversion cost consists of:
A. Direct materials + Direct labor
B. Direct labor + Manufacturing overhead
C. Direct materials + Overhead
D. Selling + Administrative costs
Answer: B
4.
Factory supervisor salary is:
A. Direct labor
B. Manufacturing overhead
C. Selling expense
D. Direct material
Answer: B
5.
Which is a direct cost?
A. Factory rent
B. Lubricating oil
C. Direct material
D. Security salary
Answer: C
6.
Indirect materials are classified as:
A. Prime costs
B. Manufacturing overhead
C. Selling expenses
D. Administrative expenses
Answer: B
7.
The depreciation of factory equipment is:
A. Direct labor
B. Product cost
C. Selling expense
D. Administrative expense
Answer: B
8.
Product costs include:
A. Manufacturing costs
B. Selling costs
C. Interest costs
D. Marketing costs
Answer: A
9.
Period costs are expensed:
A. When incurred
B. When produced
C. When purchased
D. When materials are used
Answer: A
10.
Which is a period cost?
A. Direct materials
B. Factory insurance
C. Sales commission
D. Direct labor
Answer: C
11.
A variable cost:
A. Remains constant in total
B. Changes in total with activity
C. Never changes
D. Is always indirect
Answer: B
12.
An example of variable cost is:
A. Direct material
B. Factory rent
C. Property tax
D. Factory manager salary
Answer: A
13.
Total fixed cost:
A. Changes with production volume
B. Remains constant within relevant range
C. Is always zero
D. Is variable per unit
Answer: B
14.
Fixed cost per unit:
A. Remains constant
B. Increases with output
C. Decreases as output increases
D. Is irrelevant
Answer: C
15.
A mixed cost contains:
A. Only fixed cost
B. Only variable cost
C. Fixed and variable components
D. Product and period costs
Answer: C
16.
An example of mixed cost is:
A. Electricity bill
B. Direct materials
C. Factory rent
D. Property tax
Answer: A
17.
A step cost:
A. Changes continuously
B. Remains fixed over a range then jumps
C. Is variable per unit
D. Is irrelevant
Answer: B
18.
Which cost is relevant to decision making?
A. Sunk cost
B. Historical cost
C. Future cost differing between alternatives
D. Book value
Answer: C
19.
A sunk cost is:
A. Future cost
B. Cost already incurred
C. Opportunity cost
D. Avoidable cost
Answer: B
20.
Sunk costs are:
A. Relevant
B. Avoidable
C. Irrelevant for decisions
D. Variable
Answer: C
21.
Opportunity cost is:
A. Actual cash paid
B. Cost of forgone alternative
C. Fixed cost
D. Product cost
Answer: B
22.
Differential cost means:
A. Historical cost
B. Difference in cost between alternatives
C. Sunk cost
D. Fixed cost
Answer: B
23.
Incremental cost is:
A. Additional cost from a decision
B. Sunk cost
C. Fixed cost
D. Product cost
Answer: A
24.
Avoidable costs:
A. Cannot be eliminated
B. Can be eliminated by a decision
C. Are sunk costs
D. Are historical costs
Answer: B
25.
Unavoidable costs:
A. Can be eliminated
B. Continue regardless of decision
C. Are opportunity costs
D. Are variable costs
Answer: B
26.
Direct labor cost is:
A. Prime cost
B. Period cost
C. Selling cost
D. Administrative cost
Answer: A
27.
Factory insurance is:
A. Direct material
B. Manufacturing overhead
C. Selling expense
D. Opportunity cost
Answer: B
28.
Sales manager salary is:
A. Product cost
B. Selling expense
C. Direct labor
D. Manufacturing overhead
Answer: B
29.
Office rent is generally:
A. Administrative expense
B. Direct material
C. Manufacturing overhead
D. Prime cost
Answer: A
30.
Research and development cost is usually:
A. Period cost
B. Direct cost
C. Prime cost
D. Conversion cost
Answer: A
31.
Marginal cost generally refers to:
A. Fixed cost
B. Additional variable cost of one unit
C. Sunk cost
D. Opportunity cost
Answer: B
32.
Controllable costs are:
A. Managed by a responsible manager
B. Always fixed
C. Always variable
D. Never relevant
Answer: A
33.
Non-controllable costs:
A. Can be directly influenced
B. Cannot be significantly influenced
C. Are always sunk
D. Are always avoidable
Answer: B
34.
Committed fixed costs include:
A. Advertising
B. Factory building depreciation
C. Training costs
D. Promotion costs
Answer: B
35.
Discretionary fixed costs include:
A. Factory lease
B. Property tax
C. Advertising
D. Insurance
Answer: C
36.
The cost of idle capacity is generally:
A. Direct material
B. Fixed cost
C. Selling cost
D. Prime cost
Answer: B
37.Joint costs arise:
A. After split-off point
B. Before split-off point
C. During selling process
D. During marketing
Answer: B
38.
Further processing costs incurred after split-off are:
A. Joint costs
B. Sunk costs
C. Separable costs
D. Fixed costs
Answer: C
39.
By-product revenue is often:
A. Ignored completely
B. Treated as reduction of production cost
C. Treated as direct material
D. Treated as overhead
Answer: B
40.
Which is NOT a product cost?
A. Direct materials
B. Direct labor
C. Manufacturing overhead
D. Sales commission
Answer: D
41.
Which cost is most likely variable?
A. Factory rent
B. Direct materials
C. Property taxes
D. Factory insurance
Answer: B
42.
Which cost is most likely fixed?
A. Direct materials
B. Direct labor paid per unit
C. Factory rent
D. Sales commission
Answer: C
43.
Opportunity costs are:
A. Recorded in accounting records
B. Not recorded in accounting records
C. Historical costs
D. Product costs
Answer: B
44.
Relevant costs must be:
A. Past and unavoidable
B. Future and different between alternatives
C. Historical and fixed
D. Sunk and variable
Answer: B
45.
The salary of factory maintenance staff is:
A. Direct labor
B. Manufacturing overhead
C. Selling expense
D. Administrative expense
Answer: B
46.
Freight paid on raw materials purchased is generally:
A. Product cost
B. Selling cost
C. Administrative cost
D. Opportunity cost
Answer: A
47.
Advertising expense is:
A. Product cost
B. Prime cost
C. Selling expense
D. Conversion cost
Answer: C
48.
A cost traceable to a cost object is:
A. Direct cost
B. Indirect cost
C. Opportunity cost
D. Sunk cost
Answer: A
49.
Cost that cannot be conveniently traced is:
A. Prime cost
B. Direct cost
C. Indirect cost
D. Marginal cost
Answer: C
50.
Which cost is most relevant in a special order decision?
A. Sunk cost
B. Historical cost
C. Incremental cost
D. Book value
Answer: C
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