CA.

Prakash Patel 1

Cost and Management Accounting MCQs-2

Chapter-: Introduction to Cost and Management

1. Batch Costing is suitable for-

A. Sugar Industry
B. Chemical Industry
C. Pharma Industry
D. Oil Industry

2. Joint Cost is suitable for-

A. Infrastructure Industry
B. Ornament Industry.
C. Oil Industry
D. Fertilizer Industry
3. Cost units of Hospital Industry is-
A. Tonne
B. Student per year
C. Kilowatt Hour
D. Patient Day

4. Cost units of Automobile Industry is-

A. Cubic meter
B. Bed Night
C. Number of Call
D. Number of vehicle

5. Depreciation is a example of-

A. Fixed Cost
B. Variable Cost
C. Semi Variable Cost
D. None of these

6. Process costing method is suitable for:

A. Steel industry
B. Crane manufacturing organization
C. Road roller manufacturing company
D. Transport industry
E. None of the above

7. Which of the following classification is meant for distinction between direct cost and
indirect cost?
A. Function
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B. Element
C. Variability
D. Controllability
E. None of the above

8. is a method of dealing with overheads which involves spreading common costs over cost
centers on the basis of benefit received.
A. overhead absorption
B. overhead apportionment
C. overhead allocation
D. overhead analysis

9. Absorption costing is also referred as

a. Historical costing
b. Traditional costing
c. Full costing
d. All of the above terms
10. What is the primary objective of cost accounting?
a. Maximize profits
b. Record financial transactions
c. Provide financial statements
d. Facilitate cost control and decision-making
11. What does the term “opportunity cost” refer to in cost accounting?
a. Actual monetary expenditure
b. Cost of the next best alternative foregone
c. Fixed manufacturing costs
d. Variable selling expenses
12. In the context of cost elements, which category includes the cost of raw materials, direct
labour, and direct expenses?
a. Prime Cost
b. Conversion Cost
c. Overhead Cost
d. Indirect Cost
13. What type of cost is incurred to support multiple cost objects but cannot be directly traced to any
specific one?
a. Direct Cost
b. Indirect Cost
c. Variable Cost
d. Fixed Cost
14. What is the formula for calculating the cost of production in a manufacturing entity?
a. Total Cost - Opening Stock
b. Opening Stock + Purchases - Closing Stock
c. Direct Materials + Direct Labour + Factory Overhead
d. Selling Price - Gross Profit
15. Which of the following is deducted from the total cost to calculate the net profit?
a. Selling Expenses
b. Opening Stock
c. Direct Materials
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d. Indirect Labour
16. If a business has an opportunity cost of ₹10,000 for choosing one project over another, what
is the economic cost?

a. ₹ 10,000
a. ₹0
b. The same as opportunity cost
c. Cannot be determined
17. If direct materials cost ₹ 20,000, direct labour is ₹ 15,000, and direct expenses are ₹ 5,000, what
is the
prime cost?
a. ₹ 40,000
b. ₹ 35,000
c. ₹ 20,000
d. ₹ 15,000
18. If fixed manufacturing costs are ₹ 50,000 and the number of units produced is 5,000, what is the
fixed cost per unit?

a. ₹10
b. ₹5
c. ₹ 50
d. ₹ 0.1
19. If the direct materials consumed are ₹ 30,000, direct labour is ₹ 20,000, and factory overhead is
₹15,000,
what is the total manufacturing cost?
a. ₹ 50,000
b. ₹ 65,000
c. ₹ 30,000
d. ₹ 20,000
20. If the gross profit is ₹ 40,000, selling expenses are ₹ 10,000, and administrative expenses are ₹
5,000,
what is the net profit?
a. ₹ 40,000
b. ₹ 35,000
c. ₹ 25,000
d. ₹ 15,000
 CA. Prakash Patel 4

Chapter-: Material Cost

1. The purchase committee of A Ltd. has been entrusted to review the material procurement policy of
the company. The chief marketing manager has appraised the committee that the company at present
produces a single product X by using two raw materials A and B in the ratio of 3:2. Material A is
perishable in nature and has to be used within
10 days from Goods received note (GRN) date otherwise material becomes obsolete. Material B is
durable in nature and can be used even after one year. Material A is purchased from the local market
within 1 to 2 days of placing order. Material B, on the other hand, is purchased from neighbouring
state and it takes 2 to 4 days to receive the material in the store.
The purchase price of per kilogram of raw material A and B is ₹30 and
₹44 respectively exclusive of taxes. To place an order, the company has to incur an administrative
cost of ₹1,200. Carrying cost for Material A and B is 15% and 5% respectively. At present
material A is purchased ina lot of 15,000 kg. to avail 10% discount on market price. GST applicable
for both the materials is 18% and the input tax credit is availed.
The sales department has provided an estimate that the company could sell 30,000 kg. in January 2024
and also projected the same trend for the entire year.
The ratio of input and output is 5:3. Company works for 25 days in amonth and production is
carried out evenly.
The following queries/ calculations to be kept ready for purchase
committees’ reference:
(i) For the month of January 2024, what would be the quantity of thematerials to be
requisitioned for both material A and B:
(a) 9,000 kg & 6,000 kg respectively
(b) 18,000 kg & 12,000 kg respectively
(c) 27,000 kg & 18,000 kg respectively
(d) 30,000 kg & 20,000 kg respectively.
(ii) The economic order quantity (EOQ) for both the material A & B:
(a) 13,856 kg & 16,181 kg respectively
(b) 16,197 kg & 17,327 kg respectively
(c) 16,181 kg & 17,165 kg respectively
(d) 13,197 kg & 17,165 kg respectively
(iii) What would the maximum stock level for material A:
(a) 18,200 kg.

(b) 12,000 kg.

(c) 16,000 kg.
(d) 16,200 kg.
(iv) Calculate saving/ loss in purchase of Material A if the purchaseorder quantity is equal to
EOQ.
(a) Profit of Rs. 3,21,201.
(b) Loss of Rs. 3,21,201.
(c) Profit of Rs. 2,52,500.
(d) Loss of Rs. 2,52,500.
(v) What would the minimum stock level for material A:(a) 1,800 kg.
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(b) 1,200 kg.

(c) 600 kg.
(d) 2,400 kg.

2. Which of the following is considered as accounting record?

a. Bind Card
b. Bill of Material
c. Store Ledger
d. None of these

3. Calculate Re-order level from following:

Safety stock= 2,000
Annual consumption = 36,500
Lead Time = 10 days.
a. 2,500
b. 2,800
c. 3,000
d. 3,650

4. At WHAT price per unit would Part No. A 32 be entered in the Stores Ledger, if thefollowing invoice was
received from a supplier:

Invoice (₹)
200 units Part No. A 32 @ ₹ 5 1,000.00
Less: 20% discount (200.00)
800.00
Add: CGST @ 12% 96.00
896.00
Add: Packing charges (5 non-returnable boxes) 50.00
946.00
(i) A 2 per cent cash discount will be given if payment is made in 30 days.
(ii) Documents substantiating payment of CGST is enclosed for claiming Input
credit.
a. 4.5
b. 4.25
c. 5.25
d. 5

5. HBL Limited produces product 'M' which has a quarterly demand of 20,000 [Link] product
requires 3 kg. and 4 kg. of material X and Y [Link] cost and other information related with
the materials are as follows:

Particulars Material –X Material-Y

Loss of materials in transit* - 2%
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Loss in process* 4% 5%
*On purchased quantity Other information:
Calculate quantity of material purchased:
a. 2,50,000 and 3,44,086.
b. 2,40,000 and 3,20,000
c. 2,30,400 and 2,97,600
d. 2,49,600 and 3,42,400

6. The stock-out data is as follows:

Stock-out of Tyres No. of

times
100 2
80 5
50 10
20 20
10 30
0 33
M/s Tyrotubes loses ₹ 150 per unit due to stock-out and spends ₹ 50 per unit on carrying of
inventory. Calculate total cost if 50 qty is maintained as safety stock.
a. 2,140
b. 2,875
c. 4,060
d. None

7. What will be E.O.Q. and the total variable cost for the following:

Annual Demand = 5,000 units

Unit price = ₹ 20.00
Order cost = ₹ 16.00
Storage rate = 2% per annum
Interest rate = 12% per annum
Obsolescence rate = 6% per annum
a. EOQ = 200 and variable cost = 1,00,000
b. EOQ = 200 and variable cost = 1,10,800
c. EOQ = 250 and variable cost = 1,00,800
d. EOQ = 200 and variable cost = 1,00,800

8. HBL Limited purchased 100 kg raw material for Rs. 9,800/-. Normal loss is 5% and actual material
received is 85 kg. Material loss can be sold as scrap for Rs. 7 per unit. Calculate Amount of loss to be
debited to costing P/L.
a. 1,050
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b. 1,000
c. 1,031.6
d. 1,027.9

9. M/s. SJ Private Limited manufactures 20000 units of a product per month. The cost of placing an order
is ₹ 1,500. The purchase price of the raw material is ₹ 100 per kg. The consumption of raw materials
varies from 220 kg to 310 kg per week, the averageconsumption being 270 kg. The carrying cost of
inventory is 9.75% per annum. Calculate Re-Order quantity.
a. 2,079
b. 2,100
c. 2,500
d. 8,593.38

10. A company has the option to procure a particular material from two sources:
Source I assures that defectives will not be more than 2% of supplied quantity.
Source II does not give any assurance, but on the basis of past experience of supplies received
from it, it is observed that defective percentage is 2.8%.

The material is supplied in lots of 1,000 units. Source II supplies the lot at a price, which is
lower by ₹ 100 as compared to Source I. The defective units of material can be rectified for
use at a cost of ₹ 5 per unit. You are required to find out which of the two sources is more
economical.
a. Source I is more economical by Rs. 60 per lot
b. Source II is more economical by Rs. 60 per lot
c. Both will result into same cost
d. Both cannot be compared.

11. The demand for plastic bowl has been forecasted at a fairly steady rate of 40,000 packs every year.
The company purchases the bowl direct from manufacturer at ₹ 40 per pack within a three days
lead time. Determine when should the next order to be placed. (Assuming that the company does
maintain a safety stock and that the present inventory level is 333 packs with a year of 360 working
days.
a. Place order immediately.
b. Place order after 3 days.
c. Place order on every 3rd days
d. None of statement is correct.

12. A Ltd has annual demand of 54,000 units and its lead time is 3-9 days. Assuming 360 days in a year,
calculate its safety stock.
a. 550 units
b. 450 units
c. 500 units
d. 380 units
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13. Re-order quantity of material ‘X’ is 5,000 kg.; Maximum level 8,000 kg.; Minimum usage 50 kg. per
hour; minimum re-order period 4 days; daily working hours in the factory is 8 hou₹ You are required
to calculate the re-order level of material ‘X’.
a. 4,800 kg
b. 5,000 kg
c. 4,600 kg.
d. 4,500 kg.

14. Which of the following shall be considered as other attributable cost while determining material cost?
a. GST paid on which credit not available.
b. Freight
c. Penalty.
d. Trade Discount.

15. While calculating carrying cost on safety stock following statement is correct?
a. It is calculated to total safety stock.
b. It is calculated on average inventory.
c. It is calculated on average safety stock.
d. None of above.

16. Average Lead time is 6 days and Difference between minimum and maximum lead time is 4 days.
Calculate maximum lead time.
a. 4 days.
b. 8 days
c. 12 days.
d. None of above.

17. What will be the inventory turnover and holding period if:

Opening stock 90,000

Purchases during the year 2,70,000
Closing stock 1,10,000

a. 7 times and 52 days

b. 2.5 times and 146 days
c. 2.5 times and 52 days
d. None of above.

18. Which of the following statement is true about spoil and defective is:
a. Generally, defective can be further processed but spoil cannot.
b. Generally, Spoil can be further processed but defective cannot.
c. Both can be further processed.
d. None of above can be further processed
 CA. Prakash Patel 9

Chapter-: Employee Cost

1. The board of the J Ltd. has been appraised by the General Manager (HR) that the employee
attrition rate in the company has increased. The following facts has been presented by the
GM(HR):
(1) Training period of the new recruits is 50,000 hours. During this period their productivity
is 60% of the experienced workers. Time required by an experienced worker is 10 hours
per unit.
(2) 20% of the output during training period was defective. Cost of rectification of a defective
unit was ₹ 25.
(3) Potential productive hours lost due to delay in recruitment were1,00,000 hours.
(4) Selling price per unit is ₹ 180 and P/V ratio is 20%.
(5) Settlement cost of the workers leaving the organization was

₹ 1,83,480.
(6) Recruitment cost was ₹ 1,56,340
(7) Training cost was ₹ 1,13,180
You being an associate finance to GM(HR), has been asked the followingquestions:
(i) How much quantity of output is lost due to labour turnover?
(a) 10,000 units
(b) 8,000 units
(c) 12,000 units
(d) 12,600 units
(ii) How much loss in the form of contribution, the company incurreddue to labour
turnover?
(a) ₹ 4,32,000
(b) ₹ 4,20,000
(c) ₹ 4,36,000
(d) ₹ 4,28,000
(iii) What is the cost repairing of defective units?
(a) ₹ 75,000

(b) ₹ 15,000
(c) ₹ 50,000
d) ₹ 25,000
 CA. Prakash Patel 10

(iv) Calculate the profit lost by the company due to increased labourturnover.
(a) ₹ 7,50,000
(b) ₹ 15,00,000
(c) ₹ 5,00,000
(d) ₹ 9,00,000
(v) How much quantity of output is lost due to inexperience of thenew worker?
(a) 1,000 units
(b) 2,600 units
(c) 2,000 units
(d) 12,600 units

2. Overtime is
a. Actual hours being more than normal time
b. Actual hours being more than standard time
c. Standard hours being more than actual hours
d. Actual hours being less than standard time

3. Labour productivity is measured by comparing

a. Total output with total man-hours
b. Added value for the product with total wage cost
c. Actual time and standard time
d. All of the above

4. Direct expenses do not meet the test of materiality can be part of overhead.
a. Treated
b. Not treated
c. All of these
d. None of these

5. If overtime is paid to workers as a regular company’s policy then:

a. It shall be adjusted in labour rate.
b. Dr. to Costing P/L
c. Part of general overhead.
d. None of these

6. Assuming that day wages would be guaranteed at ₹ 75 per hour and the piece rate would be based on a standard
hourly output of 10 units, Calculate the earnings of Mr A under piece-rate if total 180 units are produced?
 CA. Prakash Patel 11

a. 1,350
b. 950
c. 600
d. None of these

7. Under Rowan Plan, which of the following statement holds good:

a. Quality of work may suffer.
b. Incentive is linked to time saved.
c. Worker with different efficiency may get same incentive.
d. All of these

8. Replacement cost of labour turnover shall not include:

a. Selection and training cost.
b. Wastage.
c. Decline in output and quality.
d. Medical Facilities.

9. The Accountant of Y Ltd. has computed employee turnover rates for the quarter ended 31stMarch,
20X1 as 10%, 5% and 3% respectively under ‘Flux method’, ‘Replacement method’ and
‘Separation method’ respectively. If the number of workers replaced during that quarter is 30,
FIND OUT the number of workers for the quarter who left and discharged.
a. 42
b. 18
c. 60
d. 90

10. Last year sales amounted to ₹ 83,03,300 and P/V ratio was 20 per cent. The total number ofactual
hours worked by the direct employee force was 4.45 lakhs. As a result of the delays bythe Personnel
Department in filling vacancies due to employee turnover, 1,00,000 potentially productive hours were
lost. The actual direct employee hours included 30,000 hours attributableto training new recruits, out
of which half of the hours were unproductive. Calculate contribution foregone due to labou
turnover.
a. ₹ 5,57,930
b. ₹ 5,00,000
c. ₹ 4.44,130
d. ₹ 4,30,000

11. During the quarter end, if total joined and recruited is 120 and total employee left and discharged
is 150. Find number of employee at end for quarter if total number of employee at beginning is
220.
a. ₹ 190
b. ₹ 250
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c. ₹ 340
d. ₹ 280
 CA. Prakash Patel 13

Chapter-: Overhead-Absorption Costing

1. During half year ending inter departmental review meeting of P Ltd., cost variance report was
discussed and the performance of the departments were assessed. The following figures were
presented.
For a period of first six months of the financial year, following information were extracted
from the books:

Actual production overheads ₹ 34,08,000

The above amount is inclusive of the following payments
made:
Paid as per court’s order ₹ 4,50,000
Expenses of previous year booked in current year ₹ 1,00,000
Paid to workers for strike period under an award ₹ 4,20,000
Obsolete stores written off ₹ 36,000
Production and sales data for the six months are as under:

Production:
Finished goods 1,10,000 units
Works-in-progress
(50% complete in every respect) 80,000 units
Sale:
Finished goods 90,000 units
Machine worked during the period was 3,000 hours.
At the of preparation of revenue budget, it was estimated that a total of
₹ 50,40,000 would be required for budgeted machine hours of 6,000 as production overheads for
the entire year.
During the meeting, a data analytic report revealed that 40% of the over/under-absorption was due
to defective production policies and the balance was attributable to increase in costs.
You were also present at the meeting; the chairperson of the meetinghas asked you to be
ready with the followings for the performance appraisal of the departmental heads:
(i) How much was the budgeted machine hour rate used to recover overhead?
(a) ₹ 760
(b) ₹ 820
(c) ₹ 780
 CA. Prakash Patel 14

(d) ₹ 840
(ii) How much amount of production overhead has been recovered(absorbed) upto the end of
half year end?
(a) ₹ 25,20,000
(b) ₹ 34,08,000
(c) ₹ 24,00,000
(d) ₹ 24,60,000
(iii) What is the amount of overhead under/ over absorbed?
(a) 1,18,000 over-absorbed
(b) 1,18,000 under- absorbed
(c) 18,000 over-absorbed
(d) 18,000 under-absorbed
(iv) What is the supplementary rate for apportionment of over/underabsorbed overheads
over WIP, Finished goods and Cost of sales?
(a) ₹ 0.315 per unit
(b) ₹ 0.472 per unit
(c) ₹ 0.787 per unit
(d) ₹ 1 per unit
(v) What is the amount of over/under absorbed overhead apportionedto Work in Progress?
(a) ₹ 9,440
(b) ₹ 42,480
(c) ₹ 18,880
(d) ₹ 70,800
2. Find out from the following scientific and accurate method of factory overhead absorption:
A. Percentage of prime cost method
B. Machine hour rate method
C. Percentage of direct material cost method
D. Percentage of direct labour cost method
3. Warehouse expense is an example of
A. Production overhead
B. Selling overhead
C. Distribution overhead
D. None of the above
4. Selling and Distribution overhead are absorbed on the basis of
A. Rate per unit
B. Percentage on works cost
C. Percentage on selling price of each unit
D. Any of these
 CA. Prakash Patel 15

5. Absorption means
A. Charging of overheads to cost centres
B. Charging of overhead to cost units
C. Charging of overheads to cost centres or cost units
D. None of the above
6. Which method of absorption of factory overheads do you suggest in a concern which produces
only one uniform type of product?
A. Percentage of direct wages basis
B. Direct labour rate
C. Machine hour rate
D. A rate per units of output

7. Under which of the secondary distribution method, overhead are distributed from most serving
department to least serving department:
A. Direct distribution.
B. Step/Ladder method.
C. Reciprocal method.
D. None of above.

8. In case of abnormal increase in quantity, Overhead rate is calculated on:

A. Budgeted production.
B. Actual Production.
C. Actual production of last year.
D. None of above.

9. The budgeted production overheads of the factory are ₹ 10,08,000 and budgeted machine hours
are 96,000. Actual production overheads ₹6,79,000. The actual machine hours worked during the
period were 48,000 hours. It is revealed fromthe analysis of information that ¼ of the under-
absorption was due to defective productionpolicies and the balance was attributable to increase
in costs. What will be supplementary rate if unit sold 15,000 and WIP(50% completion) is 10,000
units.
A. 7.85
B. 8.75
C. 6.56
D. 5.67
10. Over Recovery of overhead shall be:
A. Reduced from cost of good sold, closing stock and WIP
B. Added cost of good sold, closing stock and WIP
C. Credited to Costing P/L
D. Both A and C is correct.
 CA. Prakash Patel 16

11. Blanket rate is more suitable when:

A. Company produces single major product.
B. All product passes through all department with same length of time.
C. Company produces diversified product.
D. Both A and B is correct.

12. Which of the following is not an example of running cost:

A. Consumables.
B. Fuel
C. Depreciation due to operation.
D. Insurance cost.

13. Determine effective hours if total working hours is 2000, Normal Idle time is 100 and Set up
cost(non-productive) is 50:
A. 1850
B. 1900
C. 1950
D. 2000
 CA. Prakash Patel 17

Chapter-: Activity Based Costing

1. Which of following activity cannot be considered as unit level activities.
A. Use of Indirect material.
B. Consumable and supplies
C. Set up cost
D. None.

2. Which of the following cannot be cost driver of Inspection cost?

A. Inspection hours.
B. No. of set up.
C. Machine Hour rate.
D. All can be used.

3. Which of following is not an example of cost object?

A. Mobile
B. Flight fare
C. Specific job
D. Decentralised branch.

4. Which of following activity cannot be considered as batch level activities

A. Set up
B. Inspection
C. Ordering
D. Product design.

5. Under traditional costing, overhead can be absorbed based on:

A. Machine Hour
B. Labour Hour
C. Activity cost driver rate.
D. All of above.
 CA. Prakash Patel 18

Chapter-: Cost-Sheet
1. Which of the following items is not included in preparation of cost sheet?
A. Carriage inward
B. Purchase returns
C. Sales commission
D. Interest paid

2. Which of the following items is not excluded while preparing a cost sheet?
A. Goodwill written off

B. Provision for taxation

C. Property tax on factory building
D. Transfer to reserves

3. Which of the following are direct expenses?

i. The cost of special designs, drawings or layouts

ii. The hire of tools or equipment for a particular job

iii. Salesman’s wages
iv. Rent, rates and insurance of a factory
A. (i) and (ii)
B. (i) and (iii)
C. (i) and (iv)
D. (iii) and (iv)

4. What is prime cost?

A. Total direct cost only

B. Total indirect costs only

C. Total non-production csots
D. Total production costs

5. Which of the following is not an element of works overhead?

A. Sales manager’s salary
B. Plant manager’s salary
C. Factory repairman’s wages
D. Product inspector’s salary
 CA. Prakash Patel 19

Chapter-: Cost Accounting System

1. While Adjustment of normal surplus in material stocks, Following account shall be credited.
A. Store Ledger
B. Factory Overhead.
C. Costing P/L
D. Any of above.

2. Why is an integrated accounting system considered cost-effective?

A. Increased clerical workload

B. Centralization of accounting functions

C. Complexity of financial reporting
D. Limited coordination between staff

3. A firm operates an integrated cost and financial accounting system. The accounting entries for an
issue of direct materials to production would be
A. DR work in progress control account; CR stores control account

B. DR finished goods account; CR stores control account

C. DR stores control account; CR work in progress control account
D. DR cost of sales account; CR work in progress control account

4. A firm operates an integrated cost and financial accounting system. The accounting entries for
direct wages transferred to WIP A/c would be:
A. Debit Wages control account, Credit Work in progress account

B. Debit Work in progress account, Credit Wages control account

C. Debit Cost of sales account, Credit Work in progress account
D. Debit Finished goods account, Credit Work in progress account

5. A firm operates an integrated cost and financial accounting system. The accounting entries for
indirect wages incurred would be:
A. Debit Wages control account Credit Overhead control account

B. Debit Work in progress account Credit Wages control account

C. Debit Overhead control account Credit Wages control account
D. Debit Wages control account Credit Work in progress account
 CA. Prakash Patel 20

6. How is the purchase of raw materials typically recorded in a non-integrated system?

A. Credit to cash account

B. Debit to general ledger

C. Debit to stores control account
D. Credit to sundry creditors
7. What entry is made to record wages paid in a non-integrated system?
A. Credit entry

B. Debit entry
C. Contra entry
D. No entry is made

8. In Reconciliation Statements, expenses shown only in financial accounts are:

A. Added to financial profit

B. Deducted from financial profit

C. Ignored
D. Added to costing profit

9. In Reconciliation Statement, expenses shown only in cost accounts are:

A. Added to financial profit

B. Deducted from financial profit

C. Ignored
D. Deducted from costing profit

10. In Reconciliation Statement, transfers to reserves are:

A. Added to financial profit

B. Deducted from financial profit

C. Ignored
D. Added to costing profit

11. In Reconciliation Statement, incomes shown only in financial accounts are:

A. Added to financial profit

B. Deducted from financial profit

C. Ignored
D. Deducted from costing profit
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12. In Reconciliation Statement, Closing Stock undervalued in Financial Accounts is

A. Added to financial profit

B. Deducted from financial profit

C. Ignored
D. Added to costing profit

13. Allocation of Indirect wages shall be debited to:

A. Wages control A/C

B. Factory Overhead A/C

C. WIP control A/C
D. None.

14. Over-Absorption of Overhead shall be credited to:

A. Respective Overhead A/C

B. Costing P/L
C. Cost of Production A/C
D. None.
 CA. Prakash Patel 22

Chapter-: Unit and Batch Costing

1. Following information is available for the first and second quarter of the year 2013-14
of ABC Limited:
Production (in units) Semi-variable cost (₹)
Quarter I 36,000 2,80,000
Quarter II 42,000 3,10,000
You are required to calculate Total fixed cost:
A. 1,00,000
B. 1,25,000
C. 1,10,000
D. 1,50,000

2. A customer has been ordering 90,000 special design metal columns at the rate of
₹18,000 per order during the past years. The production cost comprises ₹ 120 for
material, ₹ 60 for labour and ₹ 20 for fixed overheads. It costs₹ 1,500 to set up for one
run of 18,000 column and inventory carrying cost is 15% since this customer may buy
at least 5,000 columns this year, the company would like to avoid making five different
production runs. Find the most economic production run.
A. 2,400
B. 3,000
C. 3,600
D. 4,000
 CA. Prakash Patel 23

Chapter-: Job Costing

1. Job Costing is used in:

A. Furniture making
B. Repair shops
C. Printing press
D. All of the above

2. Which of the following statements is true:

A. Batch costing is a variant of jobs costing
B. Job cost sheet may be used for estimating profit of jobs
C. Job costing cannot be used in conjunction with marginal costing
D. In cost plus contracts, the contractor runs a risk of incurring a loss

3. ASA LLP operates a job costing system. The company’s standard net profit margin is 20 per
cent of sales value. The estimated costs for job B124 are as follows.
Direct materials 3 kg @ ₹ 5
per kg Direct labour 4 hours
@ ₹ 9 per hour
Production overheads are budgeted to be ₹ 2,40,000 for the period, to be recovered on
the basis of a total of 30,000 labour hours.
Other overheads, related to selling, distribution and administration, are budgeted to be ₹
1,50,000 for the period. They are to be recovered on the basis of the total budgeted
production cost of ₹ 7,50,000 for the period.
The price to be quoted for job B124 is ₹
A. ₹ 153.50
B. ₹ 124.50
C. ₹ 145.50
D. ₹ 142.50

4. A company calculates the prices of jobs by adding overheads to the prime cost and adding 30% to
total costs as a profit margin. Job number Y256 was sold for ₹ 1,690 and incurred overheads of
₹ 694. What was the prime cost of the job?
 CA. Prakash Patel 24

A. ₹ 489
B. ₹ 606
C. ₹ 996
D. ₹ 1,300
5. A company operates a job costing system. Job number 6789 will require ₹ 345 of direct
materials and ₹ 210 of direct labour, which is paid ₹ 14 per hour. Production overheads are
absorbed at the rate of ₹ 30 per direct labour hour and non-production overheads are absorbed at
the rate of 40% of prime cost. Required What is
the total expected cost of the job?
A. ₹ 7,221
B. ₹ 1,272
C. ₹ 2,127
D. ₹ 1,227

6. A company does job work for customers. Job 947 has direct materials costs of ₹ 125, direct
labour costs of
₹80 and direct expenses of ₹ 25. Direct labour is paid ₹ 20 per hour. Production overheads
are charged at the rate of ₹ 35 per hour and non-production overheads are charged as
60% of prime cost. What is the cost for Job 947?
A. ₹ 493
B. ₹ 508
C. ₹ 514
D. ₹ 592
 CA. Prakash Patel 25

Chapter-: Process Costing

1. A company makes a product, which passes through a single process.

Details of the process for the last period are as follows.
Materials 10,000 kg at 50 paisa per kg
Labour ₹ 1,000
Production overheads 200% of labour
Normal losses are 10% of input in the process, and without further processing any losses
can be sold as scrap for 20 paisa per kg.
The output for the period was 8,400 kg from the process. There was no work in progress at the
beginning or
end of the period.
The value of the abnormal loss for the period is
A. ₹ 200
B. ₹ 220
C. ₹ 80
D. None of the above

2. Process B had no opening inventory. 13,500 units of raw material were transferred in at ₹ 4.50
per unit. Additional material at ₹ 1.25 per unit was added in process. Labour and overheads were ₹
6.25 per completed unit and ₹ 2.50 per unit incomplete.
If 11,750 completed units were transferred out, what was the closing inventory in Process B?
A. ₹ 6,562.50
B. ₹ 12,250.00
C. ₹ 14,437.50
D. ₹ 25,375.00
 CA. Prakash Patel 26

Chapter-: Joint and By- Products

1. Product which is produced incidental with other and have small economic value is called:
A. By-product

B. Joint Product
C. Co-product
D. None of above.

2. When by-product cannot be further processed, following treatment shall be done:

A. Sale vale of by-product credit to costing P/L and total joint cost apportion on main product.

B. Sale vale of by-product reduced from total joint cost and balance joint cost apportion on
main product.
C. Reverse cost of by-product reduced from total joint cost and balance joint cost apportion on
main product.
D. Only A and B are correct.

3. Under contribution margin method, variable joint cost is apportioned based on:
A. Contribution.

B. Physical units.
C. SV at split-off
D. None of above.
 CA. Prakash Patel 27

Chapter-: Service Costing

1. Calculate the most appropriate unit cost for a distribution division of a multinational
company using the
following information.
Miles travelled 636,500
Tonnes carried

2,479 Number

of drivers 20

Hours worked by drivers

35,520 Tonne-miles

carried 375,200

Costs incurred ₹ 562,800

A. ₹ 0.88
B. ₹ 1.50
C. ₹ 15.84
D. ₹ 28,140

2. A road haulage company transports goods. It operates two trucks. During a particular
period, the two trucks travelled a total of 80,000 kilometers carrying goods. The average
load was 3 tonnes per journey. In total they
made 200 journeys. Total costs were ₹ 7,20,000. What is the average cost per tonne-kilometer
transported?
E. ₹ 3
B. ₹ 4.50
C. ₹ 6
D. ₹ 12

3. A hotel has 80 standard twin-bedded rooms. The hotel is fully-occupied for each of the
350 days in each year
that it is open. The total costs of running the hotel each year are ₹ 3,360,000. Calculate
the cost per room/day
A. ₹ 120
B. ₹ 240
C. ₹ 360
E. None of the above
 CA. Prakash Patel 28

Chapter-: Standard Costing

1. The standard and actual figures of product ‘Z’ are as under:

Standard Actual
Material quantity 50 units 45 units
Material price per unit ₹ 1.00 ₹ 0.80
What will be material cost variance:
A. 9(F)
B. 5(F)
C. 14(F)
D. None of above.

2. The standard and actual figures of product ‘Z’ are as under:

Following are the details of the product Alpha for the month of April 2013:
Standardquantity of material required per unit 5 kg

Actual output 1000 units

Actual cost of materials used ₹ 7,14,000
Material price variance ₹ 51,000 (Fav)
Actual price per kg of material is found to be less than standard price per kg of
material by ₹ [Link] are required to calculate:

What will be Actual Quantity of Alpha:

A. 5,000
B. 5,100
C. 4,500
D. None of above.

What will be Actual Price of Alpha:

A. 140
B. 120
C. 130
 CA. Prakash Patel 29

D. None of above.

What will be Material Usage Variance:

A. 15,000(A)
B. 15,000(F)
C. 14,000(A)
D. None of above.

What will be Material Cost Variance:

A. 36,000(F)
B. 36,000(A)
C. 72,000(F)
D. 72,000(A)

3. In a manufacturing company the standard units of production for the year were fixed at 1,20,000
units and overhead expenditures were estimated to be as follows:

Particulars Amount (₹)

Fixed 12,00,000
Semi-variable (60% expenses are of fixed nature and 40% are of 1,80,000
variable nature)
Variable 6,00,000
Actual production during the month of April, 2021 was 8,000 units. Each month has
20 working days. During the month there was one public holiday. The actual
overheads wereas follows:
Particulars Amount (₹)
Fixed 1,10,000
Semi-variable (60% expenses are of fixed nature and 40% are of 19,200
variable)
Variable 48,000

Calculate the following variances for the month of April 2021:

i. Overhead Cost variance
A. 45,200(A)
B. 45,200(F)
 CA. Prakash Patel 30

C. 54,200(F)
D. 54,200(A)

ii. Fixed Overhead Cost variance

A. 43,320(A)
B. 34,320(F)
C. 34,320(A)
D. None.

iii. Calendar Variance

A. 21,200(F)
B. 12,520(A)
C. 5450(F)
D. 5450(A)

4. Which of the following would not be used to estimate standard direct material prices?
A. The availability of bulk purchase discounts

B. Purchase contracts already agreed

C. The forecast movement of prices in the market
D. Performance standards in operation

5. What is an attainable standard?

A. A standard which includes no allowance for losses, waste and inefficiencies. It represents
the level of performance which is attainable under perfect operating conditions
B. A standard which includes some allowance for losses, waste and inefficiencies. It
represents the level of performance which is attainable under efficient operating
conditions
C. A standard which is based on currently attainable operating conditions
D. A standard which is kept unchanged, to show the trend in costs
 CA. Prakash Patel 31

Chapter-: Marginal Costing

1. PREPARE a profit graph for products A, B and C and find break-even point from thefollowing
data:

Products A B C Total
Sales (₹) 7,500 7,500 3,750 18,750
Variable cost (₹) 1,500 5,250 4,500 11,250
Fixed cost (₹) --- --- --- 5,000
A. 12,500
B. 12,250
C. 10,500
D. 7,750

2. The ratio of variable cost to sales is 70%. The break-even point occurs at 60% of the capacitysales.
Find the capacity sales when fixed costs are ₹ 90,000. Also COMPUTE profit at 75% of the
capacity sales.
A. 18,500

B. 20,500
C. 22,500
D. 25,000

3. P/V ratio will increase if the

A. There is a decrease in fixed cost

B. There is an increase in fixed cost

C. There is a decrease in selling price per unit.
D. There is a decrease in variable cost per unit.

4. While calculating profit under marginal costing, variable cost shall be considered as:
A. Actual.

B. Budgeted.
C. Recovered.
D. None.
 CA. Prakash Patel 32

5. Which of the following does not create any difference, while calculating profit as per marginal
costing and absorption costing:
A. Under valuation of closing stock

B. Over valuation of closing stock

C. Under valuation of opening stock.
D. Variable Administrative Expense.

6. Materials become key factor, if

A. quota restrictions exist

B. insufficient advertisement prevails

C. there is low demand
D. there is no problem with supplies of materials

7. The technique of differential cost is adopted when

A. To ascertain P/V ratio

B. To ascertain marginal cost

C. To ascertain cost per unit
D. To make choice between two or more alternative courses of action
 CA. Prakash Patel 33

Chapter-: Budgets and Budgetary Controls.

1. The basic difference between a fixed budget and flexible budget is that a fixed budget

a. is concerned with a single level of activity, while flexible budget is prepared for
different levels of activity
b. Is concerned with fixed costs, while flexible budget is concerned with variable costs.
c. is fixed while flexible budget changes
d. None of these.

2. The budget that is prepared first of all is .

a. Master budget
b. Sales budget assuming that it is the key factor
c. Cash Budget
d. Capital expenditure budget

3. Sales budget is a .
a. expenditure budget
b. functional budget
c. master budget
d. None of these

4. Budgets are shown in-Terms

a. Qualitative
b. Quantitative
c. Materialistic
d. both (b) and (c)

5. Which of the following is not an element of master budget?

a. Capital Expenditure Budget
b. Production Schedule
c. Operating Expenses Budget
d. All above
CA. Prakash Patel 34