Cost Accounting MCQS and Answers
1. Which of the following is a variable cost?
a) Rent
b) Property taxes
c) Direct materials
d) Salary of the CEO
2. What is the formula to calculate the contribution margin ratio?
a) Total sales revenue / Total fixed costs
b) (Total sales revenue – Variable costs) / Total sales revenue
c) Total variable costs / Total fixed costs
d) Total fixed costs / Total variable costs
3. What is the purpose of a cost allocation?
a) To determine the selling price of a product
b) To assign indirect costs to cost objects
c) To calculate total variable costs
d) To identify fixed costs
4. What does the term “relevant range” refer to in cost accounting?
a) The range of production volumes where variable costs remain constant
b) The range of production volumes where fixed costs remain constant
c) The range of production volumes over which cost behavior assumptions are valid
d) The range of production volumes where both variable and fixed costs change
5. Which of the following is an example of a sunk cost?
a) Cost of equipment purchased last year
b) Cost of raw materials for the current production run
c) Cost of hiring temporary workers for a project
d) Cost of marketing a new product
6. What is the formula to calculate the predetermined overhead rate?
a) Estimated total manufacturing overhead / Estimated total direct labor hours
b) Actual total manufacturing overhead / Actual total direct labor hours
c) Estimated total manufacturing overhead / Estimated entire allocation base
d) Actual total manufacturing overhead / Actual entire allocation base
7. Which of the following is an example of a period cost?
a) Direct labor
b) Direct materials
c) Manufacturing overhead
d) Selling and administrative expenses
8. What is the purpose of job costing?
a) To allocate indirect costs to different departments
b) To calculate the total Cost of goods manufactured
c) To assign costs to individual units, products, or services
d) To determine the selling price of a product
9. What formula is used to calculate the Cost of goods sold?
a) Beginning finished goods inventory + Cost of goods manufactured – Ending finished goods inventory b) Beginning finished goods inventory + Cost of goods manufactured – Ending finished goods inventory
c) Beginning work in process inventory + Cost of goods manufactured – Ending work in process inventory
d) Beginning raw materials inventory + Direct labor + Manufacturing overhead
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10. Which of the following represents a fixed cost?
a) Direct materials
b) Direct labor
c) Factory rent
d) Cost of goods sold
11. What does “cost object” refer to in cost accounting?
a) Any item that incurs a cost
b) Any cost that can be traced directly to a product or service
c) Anything for which a separate measurement of costs is desired
d) The total Cost incurred by an organization
12. Which of the following is an example of a variable cost?
a) Cost of raw materials
b) Salary of the production manager
c) Depreciation of factory equipment
d) Property taxes on the factory building
13. What is the formula to calculate the contribution margin?
a) Sales revenue – Total variable costs
b) Sales revenue – Total fixed costs
c) Sales revenue – (Variable costs + Fixed costs)
d) Sales revenue – Variable costs
14. What is the purpose of absorption costing?
a) To assign only variable manufacturing costs to products
b) To allocate overhead costs to products based on their direct labor hours
c) To allocate all manufacturing costs to products, including fixed overhead
d) To determine the total Cost of goods sold
15. Which of the following represents a mixed cost?
a) Direct materials
b) Utilities expense, which includes a fixed component and a variable component
c) Factory rent
d) Salary of the production supervisor
16. What formula calculates the overhead application rate for machine hours?
a) Estimated total manufacturing overhead / Estimated total direct labor hours
b) Actual total manufacturing overhead / Actual total direct labor hours
c) Estimated total manufacturing overhead / Estimated total machine hours
d) Actual total manufacturing overhead / Actual total machine hours
17. What does “cost behavior” refer to in cost accounting?
a) The way costs are allocated to products
b) The way costs are recorded in the accounting system
c) The way costs change to changes in activity levels
d) The way costs are classified in financial statements
18. Which of the following is an example of a period cost?
a) Direct materials
b) Direct labor
c) Manufacturing overhead
d) Selling and administrative expenses
19. What is the formula to calculate the total manufacturing costs?
a) Direct materials + Direct labor + Manufacturing overhead
b) Beginning work in process inventory + Total manufacturing costs incurred – Ending work in process inventory
c) Beginning raw materials inventory + Purchases of raw materials – Ending raw materials inventory
d) Cost of goods manufactured + Beginning finished goods inventory – Ending finished goods inventory
20. Which of the following costs would be classified as direct?
a) Cost of materials used in manufacturing a product
b) Factory rent c) Salary of the CEO
d) Property taxes on the factory building
21. What is the formula to calculate the contribution margin per unit?
a) (Sales revenue – Total variable costs) / Total units produced
b) (Sales revenue – Total fixed costs) / Total units produced
c) (Sales price per unit – Variable Cost per unit)
d) (Sales price per unit – Total variable costs) / Total units produced
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22. What is the formula to calculate the gross profit?
a) Sales revenue – Cost of goods sold
b) Sales revenue – Total variable costs
c) Sales revenue – Total fixed costs
d) Sales revenue – (Variable costs + Fixed costs)
23. What is the purpose of process costing?
a) To assign costs to individual units, products, or services
b) To assign costs to mass-produced items that are identical or very similar
c) To determine the total Cost of goods manufactured
d) To calculate the total Cost of goods sold
24. Which of the following represents a variable cost?
a) Factory rent
b) Property taxes on the factory building
c) Cost of direct labor
d) Depreciation of factory equipment
25. What formula calculates the predetermined overhead rate based on direct labor hours?
a) Estimated total manufacturing overhead / Estimated total machine hours
b) Estimated total manufacturing overhead / Estimated total direct labor hours
c) Actual total manufacturing overhead / Actual total machine hours
d) Actual total manufacturing overhead / Actual total direct labor hours
26. Which of the following is an example of a fixed cost?
a) Cost of raw materials
b) Factory rent
c) Direct labor
d) Cost of goods sold
27. What formula calculates the total manufacturing overhead applied to production?
a) Predetermined overhead rate × Actual direct labor hours
b) Predetermined overhead rate × Actual machine hours
c) Predetermined overhead rate × Actual activity base
d) Predetermined overhead rate × Estimated activity base
28. What does “relevant cost” refer to in cost accounting?
a) Costs that have already been incurred and cannot be changed
b) Costs that will be incurred in the future and can be changed
c) Costs that are future-oriented and differ between alternatives
d) Costs that are the same across all alternatives
29. What formula calculates the total manufacturing costs incurred during a period?
a) Beginning raw materials inventory + Purchases of raw materials – Ending raw materials inventory + Direct labor + Manufacturing overhead
b) Beginning work in process inventory + Total manufacturing costs incurred – Ending work in process inventory
c) Beginning finished goods inventory + Cost of goods manufactured – Ending finished goods inventory d) Cost of goods manufactured + Beginning finished goods inventory – Ending finished goods inventory
30. Which of the following costs would be classified as direct?
a) Cost of direct labor
b) Factory rent
c) Property taxes on the factory building
d) Administrative salaries
31. What is the formula to calculate the contribution margin ratio?
a) (Sales revenue – Total variable costs) / Total units produced
b) (Sales revenue – Total variable costs) / Sales revenue
c) (Sales revenue – Total fixed costs) / Sales revenue
d) (Sales revenue – Total fixed costs) / Total units produced
32. What is the purpose of activity-based costing (ABC)?
a) To allocate all manufacturing costs to products based on their direct labor hours
b) To allocate overhead costs to products based on the activities that drive those costs
c) To assign costs to individual units, products, or services
d) To determine the total Cost of goods manufactured
33. Which of the following represents a mixed cost?
a) Direct materials
b) Direct labor
c) Utility cost with both fixed and variable components
d) Depreciation expense
34. What is the formula to calculate the predetermined overhead rate based on machine hours?
a) Estimated total manufacturing overhead / Estimated total direct labor hours
b) Estimated total manufacturing overhead / Estimated total machine hours
c) Actual total manufacturing overhead / Actual total direct labor hours
d) Actual total manufacturing overhead / Actual total machine hours
35. Which of the following costs would be considered period costs?
a) Direct materials
b) Direct labor
c) Manufacturing overhead
d) Selling and administrative expenses
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36. What formula is used to calculate the Cost of manufactured goods?
a) Beginning finished goods inventory + Cost of goods manufactured – Ending finished goods inventory b) Beginning raw materials inventory + Purchases of raw materials – Ending raw materials inventory
c) Beginning work in process inventory + Total manufacturing costs incurred – Ending work in process inventory
d) Beginning work in process inventory + Direct materials used + Direct labor + Manufacturing overhead – Ending work in process inventory
37. What is the purpose of variance analysis in cost accounting?
a) To determine the total Cost of goods sold
b) To investigate differences between actual and budgeted costs
c) To allocate manufacturing overhead to products
d) To calculate the contribution margin
38. Which of the following represents a fixed cost?
a) Direct materials
b) Factory depreciation
c) Cost of goods sold
d) Cost of raw materials
39. What formula calculates the overhead application rate based on direct labor dollars?
a) Estimated total manufacturing overhead / Estimated total direct labor hours
b) Estimated total manufacturing overhead / Estimated real direct labor dollars
c) Actual total manufacturing overhead / Actual total direct labor hours
d) Actual total manufacturing overhead / Actual real direct labor dollars
40. What is the formula to calculate the predetermined overhead rate based on direct labor dollars?
a) Estimated total manufacturing overhead / Estimated total machine hours
b) Estimated total manufacturing overhead / Estimated real direct labor dollars
c) Actual total manufacturing overhead / Actual total machine hours
d) Actual total manufacturing overhead / Actual real direct labor dollars
41. Which of the following costs would be classified as direct?
a) Cost of materials used in manufacturing a product
b) Factory rent
c) Property taxes on the factory building
d) Administrative salaries
42. What is the formula to calculate the overhead application rate based on machine hours?
a) Estimated total manufacturing overhead / Estimated total direct labor hours
b) Actual total manufacturing overhead / Actual total direct labor hours
c) Estimated total manufacturing overhead / Estimated total machine hours
d) Actual total manufacturing overhead / Actual total machine hours
43. What is the purpose of process costing?
a) To assign costs to individual units, products, or services
b) To assign costs to mass-produced items that are identical or very similar
c) To determine the total Cost of goods manufactured
d) To calculate the total Cost of goods sold
44. Which of the following represents a variable cost?
a) Cost of raw materials
b) Factory rent
c) Direct labor
d) Depreciation of factory equipment
45. What is the formula to calculate the predetermined overhead rate based on direct labor hours?
a) Estimated total manufacturing overhead / Estimated total machine hours
b) Actual total manufacturing overhead / Actual total machine hours
c) Estimated total manufacturing overhead / Estimated total direct labor hours
d) Actual total manufacturing overhead / Actual total direct labor hours
46. Which of the following is an example of a fixed cost?
a) Cost of raw materials
b) Factory rent
c) Direct labor
d) Cost of goods sold
47. What formula calculates the total manufacturing costs incurred during a period?
a) Beginning raw materials inventory + Purchases of raw materials – Ending raw materials inventory + Direct labor + Manufacturing overhead
b) Beginning work in process inventory + Total manufacturing costs incurred – Ending work in process inventory
c) Beginning finished goods inventory + Cost of goods manufactured – Ending finished goods inventory d) Cost of goods manufactured + Beginning finished goods inventory – Ending finished goods inventory
48. What is the formula to calculate the contribution margin ratio?
a) (Sales revenue – Total variable costs) / Sales revenue
b) (Sales revenue – Total variable costs) / Total units produced c) (Sales revenue – Total fixed costs) / Total units produced d) (Sales revenue – Total fixed costs) / Sales revenue
49. What is the purpose of activity-based costing (ABC)?
a) To allocate all manufacturing costs to products based on their direct labor hours
b) To allocate overhead costs to products based on the activities that drive those costs
c) To assign costs to individual units, products, or services
d) To determine the total Cost of goods manufactured