Tag: fundamental concepts of cost

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Questions Related to fundamental concepts of cost

Multiple choice book keeping and accountancy cost accounting: an introduction fundamental concepts of cost meaning, elements and classification of cost methods of costing

For the proper appreciation of the material control, which of the following step is not necessary ?

  1. Purchasing of materials

  2. Receiving and inspecting of materials

  3. Using of materials

  4. Accounting of materials
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Material control involves the systematic management of purchasing, receiving, storing, and accounting for materials. Using materials is an operational activity, not a control step.

Multiple choice book keeping and accountancy cost accounting: an introduction fundamental concepts of cost meaning, elements and classification of cost methods of costing

Which of the following sets of expenses are the direct expenses of the business?

  1. Salaries, wages and shop rent

  2. Stationery, postage and telephone

  3. Wages, carriage inward, local taxes

  4. Advertisement, legal fees, audit fees
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Direct expenses are costs directly attributable to the production of a specific product or service. Wages, carriage inward, and local taxes are directly linked to production or procurement.

Multiple choice book keeping and accountancy cost accounting: an introduction fundamental concepts of cost meaning, elements and classification of cost methods of costing

A Joint Venture has a life of fixed period of time.

  1. True

  2. False
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

A joint venture is typically formed for a specific project or purpose, but it is not strictly limited to a fixed period of time by definition; it can continue until the project is completed.

Multiple choice book keeping and accountancy cost accounting: an introduction fundamental concepts of cost meaning, elements and classification of cost methods of costing

_______ are costs that can be influenced or regulated by the manager or head responsible for it.

  1. Uncontrollable costs

  2. Opportunity costs

  3. Controllable costs

  4. Sunk costs
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Controllable Costs are the costs that can be influenced by the manager or head responsible for it. It is a cost that the management at its discretion increase or decrease. These are raw material cost, labour cost and some amount of fixed costs also.

Multiple choice book keeping and accountancy cost accounting: an introduction fundamental concepts of cost meaning, elements and classification of cost methods of costing

_____ are the costs which have been created by a decision that was made in the past and cannot be changed by any decision that will be made in the future.

  1. Shutdown costs

  2. Fixed costs

  3. Sunk costs

  4. Variable costs
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Sunk costs are the costs which have been created by a decision that was made in the past and cannot be changed by any decisions that will be made in the future. A sunk cost cannot be recovered and are considered irrelevant for future decision making. They are he past expenditures and are also known as retrospective costs.

Multiple choice book keeping and accountancy cost accounting: an introduction fundamental concepts of cost meaning, elements and classification of cost methods of costing

______ is concerned with the cost of the next best alternative opportunity which was foregone in order to pursue a certain action.

  1. Opportunity cost

  2. Outlay cost

  3. Sunk cost

  4. Shutdown cost
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Opportunity cost is concerned with the cost of the next best alternative opportunity which was forgone in order to pursue a certain action. In other words it is cost of the next best alternative forgone. 

Multiple choice book keeping and accountancy cost accounting: an introduction fundamental concepts of cost meaning, elements and classification of cost methods of costing

Which of the following would not cause either an under- or over-absorption of overheads ?

  1. Actual direct labour time per unit being greater than budget.

  2. Actual cost of direct labour being greater than budget.

  3. Actual overheads incurred being less than budget.

  4. The number of units produced being grater than budget.
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Under- or over-absorption occurs when actual overheads or activity levels differ from budgeted rates. Actual cost of direct labour (a financial value) does not affect the absorption rate calculation, which is based on units or hours.

Multiple choice book keeping and accountancy cost accounting: an introduction fundamental concepts of cost meaning, elements and classification of cost methods of costing

Variable costs are volume related and fixed costs are time related.

  1. True

  2. False
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Variable costs are the costs which vary with the change in the level of production. Fixed costs are the costs which do not vary with the level of production. Variable cost are fixed per unit whereas fixed cost vary per unit.