Paper 8 Cost Accounting MCQ : Multiple Choice Questions and Answers

CMA INTERMEDIATE EXAMINATION

Paper 8 COST ACCOUNTING

Paper 8 Cost Accounting Multiple Choice Questions and Answers

Also Read :-

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Paper 7 Direct Taxation MCQ

Paper 6 Laws and Ethics MCQ 

A. Choose the most appropriate alternative for the following  

1. The main purpose of Cost Accounting is

1. to maximise profit.
2. to help in inventory valuation.
3. to help in the fixation of selling price.
4. to provide information to management for decision making.

Answer :- to provide information to management for decision making.

2. Which of the following is considered to be a normal loss of material?

1. Loss due to accident.
2. Pilferage.
3. Loss due to breaking the bulk.
4. Loss due to careless handling of material.

Answer :- Pilferage.

3. In Reconciliation Statement expenses shown only in financial accounts are

1. added to financial profit.
2. added to costing profit.
3. ignored.
4. deducted from financial profit.

Answer :- added to financial profit.

4. Which of the following is a service department?

1. Refining department.
2. Machining department.
3. Receiving department.
4. Finishing department.

Answer :- Receiving department.

5. Which of the following items is not included in preparation of cost sheet?

1. Purchase returns.
2. Carriage inwards.
3. Sales commission.
4. Interest paid.

Answer :- Interest paid.

6. In job costing to record the issue of direct materials to a job which of the following document is used?

1. Purchase order.
2. Goods receipt note.
3. Material requisition.
4. Purchase requisition.

Answer :- Material requisition.

7. In a process 4000 units are introduced during a period. 5% of input is normal loss. Closing work-in-progress 60% complete is 500 units. 3300 completed units are transferred to next process. Equivalent production for the period is

1. 3550 units.
2. 3600 units.
3. 3800 units.
4. 3950 units.

Answer :- 3600 units.

8. Product A generates a contribution to sales ratio of 40%. Fixed cost directly attributable to A amount Rs. 60,000. The sales revenue required to achieve a profit of Rs.15,000 is

1. Rs 2,00,000.
2. Rs 1,85,000.
3. Rs1,87,500.
4. Rs 2,10,000.

Answer :- Rs 1,87,500.

9. During a period 13600 labour hours were worked at a standard rate of Rs. 8 per hour. The direct labour efficiency variance was Rs. 8,800 (Adv). How many standard hours were produced?

1. 12000 hours.
2. 12500 hours.
3. 13000 hours.
4. 13500 hours.

Answer :- 12500 hours.

10. Cash Budget of ABC Ltd. forewarns of a short-term surplus. Which of the following would be appropriate action to be taken in such a situation?

1. Purchase new fixed assets.
2. Repay long-term loans.
3. Write off preliminary expenses.
4. Pay creditors early to obtain a cash discount.

Answer :- Pay creditors early to obtain a cash discount.

B. Choose the most appropriate alternative for the following 

1. Batch costing is suitable for

1. Oil Industry.
2. Sugar Industry.
3. Chemical Industry.
4. Pharmaceutical Industry.

Answer :- Pharmaceutical Industry.

2. Idle time is

1. Time spent by workers in office.
2. Time spent by workers in factory.
3. Time spent by workers off their work
4. Time spent by workers on their job.

Answer :- Time spent by workers off their work

3. Warehouse expense is an example of

1. Production overhead.
2. Administration overhead.
3. elling overhead.
4. Distribution overhead.

Answer :- Distribution overhead.

4. Standard deals with the principles and methods of determining depreciation and amortization cost is

1. CAS-8.
2. CAS -11.
3. CAS-16.
4. CAS-20.

Answer :- CAS-16.

5. In Reconciliation Statement expenses shown only in cost accounts are

1. Added to financial profit.
2. Deducted from financial profit.
3. Ignored.
4. Deducted from costing profit.

Answer :- Ignored.

6. In a job cost system, costs are accumulated

1. On a monthly basis.
2. By specific job.
3. By department or process.
4. By kind of material used.

Answer :- By specific job.

7. In a process 6,000 units are introduced during a period. 5% of input is normal loss. Closing work-in-process 60% complete is 800 units. 4,900 completed units are transferred to next process. Equivalent production for the period is

1. 6,800 units.
2. 5,700 units.
3. 5,680 units.
4. 5,380 units.

Answer :- 5,380 units.

8. Which of the following best describes a fixed cost?

1. It may change in total where such change is unrelated to changes in production.
2. It may change in total where such change is related to changes in production.
3. It is constant per unit of change in production.
4. It may change in total where such change depends on production within the relevant range.

Answer :- It may change in total where such change is unrelated to changes in production.

9. Z Ltd. is planning to sell 1,00,000 units of product A for Rs. 12.00 per unit. The fixed costs are Rs.2,80,000. In order to realize a profit of Rs. 2,00,000, what would the variable costs be?

1. 4,80,000.
2. 7,20,000.
3. 9,00,000.
4. 9,20,000.

Answer :- 7,20,000.

10. Sales budget is an example of

1. Expenditure budget.
2. Functional budget.
3. Capital budget.
4. Master budget.

Answer :- Functional budget.

C. Choose the most appropriate alternative for the following 

1. Joint Cost is suitable for

1. Oil Industry.
2. Fertilizer Industry.
3. Ornament Industry.
4. Infrastructure Industry.

Answer :- Oil Industry.

2. Cost of idle time arising due to non-availability of raw materials is

1. recovered by inflating the raw materials cost.
2. recovered by inflating the wage rate.
3. charged to factory overheads.
4. charged to costing profit and loss account.

Answer :- charged to costing profit and loss account.

3. Charging to a cost center those overheads that result solely for the existence of that cost center is known as

1. Allotment.
2. Allocation.
3. Absorption.
4. Apportionment.

Answer :- Allocation.

4. Standard deals with the cost of service cost center is

1. CAS-9.
2. CAS-13.
3. CAS-16.
4. CAS-22.

Answer :- CAS-13.

5. In Reconciliation Statement income shown only in financial accounts is

1. added to financial profit.
2. deducted from financial profit.
3. ignored.
4. deducted from costing profit.

Answer :- deducted from financial profit.

6. The most suitable cost system where the products differ in type of material and work performed is

1. Process Costing.
2. Batch Costing.
3. Job Costing.
4. Operating Costing.

Answer :- Job Costing

7. In a process 10000 units are introduced during a period. 10% of input is normal loss. Closing work-in-process 70% complete is 1500 units. 7500 completed units are transferred to next process. Equivalent production for the period is

1. 9550 units.
2. 9000 units.
3. 8550 units.
4. 8500 units.

Answer :-  8550 units.

8. The sales and profit of a firm for the year 2016 are Rs.1,50,000 and Rs.20,000 and for the year 2017 are Rs.1,70,000 and Rs.25,000 respectively. The P/V Ratio of the firm is

1. 15%.
2. 20%.
3. 25%.
4. 30%.

Answer :- 25%.

9. Standard quantity of material for one unit output is 10 kg @ Rs.8 per kg. Actual output during a given period is 600 units. The standard quantity of material for actual output is

1. 1200 kg.
2. 6000 kg.
3. 4800 kg.
4. 48000 kg.

Answer :- 6000 kg.

10. Which of the following is a long-term Budget?

1. Master Budget.
2. Production Budget.
3. Flexible Budget.
4. Capital Budget.

Answer :- Capital Budget.

D. Choose the most appropriate alternative for the following 

1. Cost of idle time arising due to non-availability of raw material is

1. recovered by inflating the raw material rate.
2. recovered by inflating the wage rate.
3. charged to factory overheads.
4. charged to costing profit and loss account.

Answer :- charged to costing profit and loss account.

2. Selling and distribution overheads are absorbed on the basis of

1. rate per unit.
2. percentage on works cost.
3. percentage on selling price of each unit.
4. Any of the above.

Answer :- Any of the above.

3. What entry will be passed under integrated system for purchase of stores on credit?

1. Stores. Cr. Creditors.
2. Purchases. Cr. Creditors.
3. Stores Ledger Control A/c. Cr. Creditors.
4. Dr. Stores Ledger Control A/c. Cr. General Ledger Adjustment A/c.

Answer :- Stores Ledger Control A/c. Cr. Creditors.

4. In a process 800 units are introduced during 2016-17. 5% of input is normal loss. Closing work-in-progress 60% complete is 100 units. 660 completed units are transferred to next process. Equivalent production for the period is

1. 760 units.
2. 744 units.
3. 540 units.
4. 720 unit.

Answer :- 720 unit.

5.  _________ deals with the principles and methods of determining the production or operation overheads.

1. CAS-3.
2. CAS-5.
3. CAS-9.
4. CAS-16.

Answer :- CAS-3.

6. There is a loss as per financial accounts Rs.10,600, donations not shown in cost accounts Rs. 6,000. What would be the profit or loss as per cost accounts?

1. Loss Rs. 16,600.
2. Profit Rs. 16,600.
3. Loss 4,600.
4. Profit Rs. 4,600.

Answer :- Loss 4,600.

7. A hotel having 100 rooms of which 80% are normally occupied in summer and 25% in winter. Period of summer and winter be taken as 6 months each and normal days in a month be assumed to be 30. The total occupied room days will be

1. 1525 Room days.
2. 18900 Room days.
3. 36000 Room days.
4. None of the above.

Answer :- 18900 Room days.

8. A firm has fixed expenses Rs. 90,000, sales Rs. 3,00,000 and profit Rs. 60,000. The P/V ratio of the firm is

1. 10%.
2. 20%.
3. 30%.
4. 50%.

Answer :- 50%.

9. Marginal costing technique follows the following basis of classification:

1. Element-wise.
2. Function-wise.
3. Behaviour-wise.
4. Identifiability-wise.

Answer :- Behaviour-wise.

10. Which of the following is not a potential benefits of using a budget?

1. More motivated managers.
2. Enhanced co-ordination of firm activities.
3. Improved inter-departmental communication.
4. More accurate external financial statements.

Answer :- More accurate external financial statements.

E. Choose the most appropriate alternative for the following 

1. In process, conversion cost means

1. Cost of direct materials, direct labour, direct expenses.
2. Direct labour, direct expenses, indirect material, indirect labour, indirect expenses.
3. Prime cost plus factory overheads.
4. All costs up to the product reaching the consumer, less direct material costs.

Answer :- Direct labour, direct expenses, indirect material, indirect labour, indirect expenses.

2. At the economic ordering quantity level, the following is true:

1. The ordering cost is minimum.
2. The carrying cost is minimum.
3. The ordering cost is equal to the carrying cost.
4. The purchase price is minimum.

Answer :- The ordering cost is equal to the carrying cost.

3. When a direct worker is paid on a monthly fixed salary basis, the following is true:

1. There is no idle time lost.
2. There is no idle time cost.
3. Idle time cost is separated and treated as overhead.
4. The salary is fully treated as factory overhead cost.

Answer :- There is no idle time cost.

4. The following is an example of direct expenses as per CAS-10:

1. Special raw material which is a substantial part of the prime cost.
2. Travelling expenses to site.
3. Overtime charges paid to direct worker to complete work before time.
4. Catalogue of prices of finished products.

Answer :- Travelling expenses to site.

5. The following is not treated as a manufacturing overhead:

1. Lubricants.
2. Cotton waste.
3. Apportioned administration overheads.
4. Night shift allowance paid to a factory worker due to general work pressure.

Answer :- Night shift allowance paid to a factory worker due to general work pressure.

6. When you attempt a reconciliation of profits as per Financial Accounts and Cost Accounts, the following is done:

1. Add the under absorption of overheads in Cost Accounts if you start from the profits as per Financial Accounts.
2. Add the under absorption of overheads in Cost Accounts if you start from the profits as per Cost Accounts.
3. Add the over absorption of overheads in Cost Accounts if you start from the profits as per Financial Accounts.
4. Add the over absorption of overheads in Cost Accounts if you start from the profits as per Cost Accounts.

Answer :- Add the under absorption of overheads in Cost Accounts if you start from the profits as per Financial Accounts.

7. Batch Costing is applied effectively in the following situation:

1. paper manufacturing.
2. drug manufacturing.
3. designer clothes manufacturing.
4. oil refining.

Answer :- drug manufacturing.

8. In the context of Contract a/c, work completed and not yet certified will be shown

1. at cost plus + 2/3rd of the notional profit under ‘Completed Work’.
2. at cost plus notional profit less retention money under ‘Completed Work’.
3. at cost under ‘Completed Work’.
4. at cost under WIP a/c.

Answer :- at cost under WIP a/c.

9. A certain process needed standard labour of 24 skilled labour hours and 30 unskilled labour hours at ` 60 and 40 respectively as the standard labour rates. Actually, 20 and 25 labour hours were used at ` 50 and 50 respectively. Then, the labour mix variance will be

1.  Adverse.
2. Favourable.
3. Zero.
4. Favourable for skilled and un favourable for unskilled.

Answer :- Zero.

10. If an organization has all the resources it needs for production, then the principal budget factor is most likely to be

1. non-existing.
2. sales demand.
3. raw materials.
4. labour supply.

Answer :- sales demand.