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This set of Cost Management Multiple Choice Questions & Answers (MCQs) focuses on Cost Management Set 1
Q1 | Which of the following is true of standards?
- Standards represent a benchmark or a norm
- Standards relate to input quantity
- Standards relate to input cost
- All of the above
Q2 | Standards that can be attained only under the best circumstances are referred to as:
- Attainable standards
- Budget standards
- Ideal standards
- Practical standards
Q3 | Which of the following equations can be used to calculate a material price variance?
- (AQ X AP) – (AQ X SP)
- (AP X SP) – (AQ X SP)
- (AQ X SP) – (SQ X SP)
- (AQ X SP) – (AQ X AP)
Q4 | Who is most likely to be held responsible for a material price variance?
- Line workers
- Production supervisors
- Purchasing managers
- Production schedulers
Q5 | Which of the following equations can be used to calculate a material quantity variance?
- (AQ X AP) – (AQ X SP)
- (AP X SP) – (AQ X SP)
- (AQ X SP) – (SQ X SP)
- (AQ X SP) – (AQ X AP)
Q6 | To produce a particular batch of product, Falcon Corporation paid its workers 12.00 per hour for 4,000hours of work. The standards for the quantity of work represented by the batch were 12.50 per hour and 4,400 hours. What was the labour efficiency variance?
- 2,000.00 favourable
- 5,000.00 favourable
- 5,000.00 unfavourable
- None of these
Q7 | The firm’s direct-labour rate variance was 4,800 unfavourable. Actual labour was 24,000 direct-labourhours, at a cost of 1,68,000, for 25,000 units of finished product that require 1 hour of direct labour each, at standard. What is the standard rate per direct-labour hour?
- 7.20
- 6.80
- 7.00
- Cannot be determined from the information given
Q8 | Which of the following is not an advantage of standard costing?
- It provides a basis for sensible cost comparisons
- It enables managers to employ management by exception
- It provides a mean of performance evaluation and employee rewards
- It is usually less expensive than actual or normal costing
Q9 | Which of the following is NOT a criticism of a standard-costing system?
- It is more expensive than other systems
- Variances calculated under standard-costing come too late to be useful
- It can cause dysfunctional behaviour in a JIT/FMS environment
- Traditional cost variances are not tied to specific product line
Q10 | The organization budgeted 400,000 for 40,000 hours of direct labour to complete 16,000 units offinished product. The firm used 42,000 direct-labour hours and completed 17,000 units of finished product. What is the direct-labour rate variance?
- 20,000 unfavourable
- 25,000 favourable
- 25,000 unfavourable
- Cannot be determined from the information provided
Q11 | The monetary value attributed to normal losses in a process should be:
- A share of the process cost according to the stage of completion of the losses.
- A nil value with no other monetary adjustment under any circumstances.
- A full share of process cost on the same as good output.
- A nil share of process costs which have been reduced by the scrap value of the normal loss.
Q12 | An abnormal gain in a process occurs in which of the following situations?
- When actual losses are greater than the normal loss level.
- When costs are reduced through increased machine speed.
- When actual losses are less than the normal level.
- When the process output is greater than planned.
Q13 | Where process scrap is recycled for use in conjunction with new material as well as being so externally, which of the following is most likely to be the value at which is debited to the process?
- At the same price as it sold externally
- At the cost of normal losses.
- At the cost attached to abnormal losses
- Nil value.
Q14 | Which of the following is the best explanation of the relevance of equivalent production units in process costing?
- A means of equalising production charged into stock each period.
- The conversion partly completed units into an equivalent number of completed units in order that costs may be shared on an equitable basis.
- The expression of losses in terms of an equivalent number of units of good production in order that their value may be calculat
Q15 | Purchased materials are added in the second department of a three-department process, this order doesnot increase the number of units produced in the second department and would:
- Not change the amount transferred to the next department.
- Decrease total work in process inventory.
- Increase the factory overhead portion of the ending work-in-process inventory.
- Increase total unit cost.
Q16 | The physical flow of units into and out of departments is shown on the:
- Quantities schedule.
- Equivalent production schedule.
- Cost of account for schedule.
- Cost of Accounted for schedule.
Q17 | Purchased materials are added in the second department of a three-department process; thisincreases the number of units produced in the second department and would always:
- Change the direct labour cost percentage in the ending work-in-process inventory.
- Cause no adjustment to the unit cost transferred in from the first department.
- Increase total units costs.
- Decrease total ending work-in-process inventory.
Q18 | An equivalent unit of material or conversion cost is equal to:
- The amount of material conversion cost necessary to complete one unit of production.
- A unit of work-in-process inventory.
- The amount of material or conversion cost necessary to start a unit of production into work in process inventory.
- Fifty percent of material or conversion cost of a unit to finished goods inventory.
Q19 | Financial Accounting is concerned with the:
- recording of business expenses and revenues
- recording of the cost of products and services
- recording of day-to-day business transactions
- none of the above
Q20 | The nature of financial accounting is:
- historical
- forward-looking
- analytical
- social
Q21 | The main object of cost accounting is:
- to record day-to-day transactions of the business
- to reveal managerial efficiency
- to ascertain true cost of products and services
- to determine tender price
Q22 | Cost accounting emerged mainly on account of:
- Statutory requirements
- Competition in the market
- Labour unrest
- Limitations of financial accounting
Q23 | Advantages of cost accounting system accrue:
- only to workers
- only to government
- only to consumers
- to management, workers, consumers and government
Q24 | Cost Accounting is applied to:
- Public undertakings only
- Large business enterprises only
- Small business enterprises only
- Manufacturing and services concerns
Q25 | A colliery company employs:
- Contract Costing
- Batch Costing
- Operating Costing
- Single Costing