Free Cost Accounting MCQs with Answers
941 Cost Accounting MCQs from Accounting, each with the correct answer and a written explanation of why it is correct. Free and unlimited, with no account needed.
Cost accounting measures and analyses the cost of producing goods or providing services for planning, control and pricing decisions. It covers direct and indirect costs, fixed and variable costs, job and process costing, break-even analysis, marginal costing, overhead allocation, and the difference between product cost and period cost.
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941 questions · page 2 of 48
- A. Wood used in a specific table
- B. Varnish used across many products
- C. Wages paid to a cabinet maker
- D. Commission paid to a sales agent
Explanation: Varnish used across several products cannot usually be traced economically to one unit, so it is treated as indirect material.
Correct answer: Varnish used across many products- A. The original cost of an old machine
- B. An unavoidable factory rent
- C. A future cost that changes between alternatives
- D. Depreciation already recorded in the books
Explanation: A relevant cost is a future cost that differs between the available alternatives.
Correct answer: A future cost that changes between alternatives- A. A cost that varies with output
- B. A cost already incurred and not recoverable
- C. A cost avoided by cancelling an order
- D. A cost expected to arise in the future
Explanation: A sunk cost has already been incurred and cannot be changed by a current decision.
Correct answer: A cost already incurred and not recoverable- A. The historical cost of the factory
- B. The additional cost caused by the order
- C. The allocated head-office rent
- D. The book value of existing equipment
Explanation: With spare capacity, the decision should focus on the incremental costs and revenues created by the order.
Correct answer: The additional cost caused by the order- A. A refinery producing identical output continuously
- B. A bakery producing groups of identical cakes
- C. A hospital providing patient-specific services
- D. A construction firm building a unique bridge
Explanation: Batch costing accumulates costs for a group of similar units produced together, such as a batch of cakes.
Correct answer: A bakery producing groups of identical cakes- A. Measure completed output only
- B. Convert partly completed work into completed-unit terms
- C. Separate selling expenses from factory costs
- D. Calculate the selling price of each customer order
Explanation: Equivalent units express partially completed production as an equivalent number of fully completed units.
Correct answer: Convert partly completed work into completed-unit terms- A. Actual price is higher than standard price
- B. Actual quantity exceeds standard quantity
- C. Actual price is lower than standard price
- D. Standard quantity is lower than actual quantity
Explanation: A favourable material price variance occurs when the actual purchase price is below the standard price for the actual quantity bought.
Correct answer: Actual price is lower than standard price- A. A single plant-wide percentage
- B. The activities that cause overhead costs
- C. The selling price of finished goods
- D. The age of production equipment
Explanation: Activity-based costing identifies cost activities and assigns overhead using cost drivers that cause those activities.
Correct answer: The activities that cause overhead costs- A. Controllable cost
- B. Sunk cost
- C. Committed cost
- D. Discretionary revenue
Explanation: A controllable cost is one that a particular manager can influence during the relevant period.
Correct answer: Controllable cost- A. Rs. 15
- B. Rs. 20
- C. Rs. 24
- D. Rs. 30
Explanation: Variable cost per unit equals total variable cost divided by units produced: Rs. 240,000 divided by 12,000 equals Rs. 20.
Correct answer: Rs. 20- A. Fixed manufacturing overhead
- B. Selling commission on sales
- C. Office rent for administration
- D. Interest on business loans
Explanation: Absorption costing assigns both variable and fixed manufacturing costs to products.
Correct answer: Fixed manufacturing overhead- A. Factory rent that never changes
- B. Direct material cost per unit
- C. Electricity with a fixed charge and usage charge
- D. Annual insurance paid in advance
Explanation: A semi-variable cost contains both a fixed component and a variable component.
Correct answer: Electricity with a fixed charge and usage charge- A. To calculate the selling price of every product
- B. To collect and control costs for a specific location or function
- C. To record only the cash paid to suppliers
- D. To determine the dividend payable to shareholders
Explanation: A cost centre is a department, location or function for which costs are collected and monitored.
Correct answer: To collect and control costs for a specific location or function- A. It is charged entirely to the abnormal loss account
- B. It is absorbed by the good units produced
- C. It is transferred directly to the sales account
- D. It is ignored in calculating the process cost
Explanation: Normal loss is expected under efficient operating conditions, so its cost is usually borne by the units that successfully emerge from the…
Correct answer: It is absorbed by the good units produced- A. The total cost incurred in a previous accounting period
- B. The change in total cost caused by choosing one alternative over another
- C. The average cost assigned to each unit of output
- D. The fixed cost that remains after production stops
Explanation: Differential cost is the difference in total cost between two possible courses of action.
Correct answer: The change in total cost caused by choosing one alternative over another- A. Fixed cost divided by sales
- B. Contribution divided by operating profit
- C. Operating profit divided by variable cost
- D. Sales divided by total assets
Explanation: The degree of operating leverage is calculated as contribution divided by operating profit.
Correct answer: Contribution divided by operating profit- A. Prime cost plus factory overhead
- B. Factory overhead plus selling expenses
- C. Administrative cost plus financial charges
- D. Sales revenue minus operating profit
Explanation: Works cost, also called factory cost, is obtained by adding factory or production overhead to prime cost.
Correct answer: Prime cost plus factory overhead- A. Passenger-kilometre
- B. Machine-hour
- C. Tonne of raw material
- D. Job completed
Explanation: Passenger-kilometre measures one passenger carried through one kilometre and is commonly used in passenger transport costing.
Correct answer: Passenger-kilometre- A. Raw materials are first purchased
- B. Joint products become separately identifiable
- C. All selling expenses are paid
- D. The final product is delivered to customers
Explanation: The split-off point is where joint products can first be identified as separate products.
Correct answer: Joint products become separately identifiable- A. Committed fixed cost
- B. Discretionary fixed cost
- C. Sunk fixed cost
- D. Unavoidable fixed cost
Explanation: Discretionary fixed costs arise from current management decisions, such as advertising or staff training budgets, and may be adjusted more…
Correct answer: Discretionary fixed cost