Tag: meaning, elements and classification of cost

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Multiple choice commercial applications fundamental concepts of cost meaning, elements and classification of cost methods of costing cost accounting: an introduction

Period cost means

  1. Fixed cost

  2. Variable cost

  3. Prime cost

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

A period cost is any cost that cannot be capitalized into prepaid expenses, inventory, or fixed assets. A period cost is more closely associated with the passage of time than with a transactional event.

Examples of period costs are general and administrative expenses, such as rent, office depreciation, office supplies, and utilities.

Multiple choice commercial applications fundamental concepts of cost meaning, elements and classification of cost methods of costing cost accounting: an introduction

The type of costing which is most suitable for cost control purpose is

  1. Post costing

  2. Marginal costing

  3. Continuous costing

  4. Standard costing
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

In accounting, a standard costing system is a tool for planning budgets, managing and controlling costs, and evaluating cost management performance. A standard costing system involves estimating the required costs of a production process.

Multiple choice commercial applications fundamental concepts of cost meaning, elements and classification of cost methods of costing cost accounting: an introduction

All costs are controllable in the __________ .

  1. Short run

  2. Long run

  3. Medium run

  4. Very short run
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

All costs are controllable in long run. In long run all costs are controllable because of the time period. Controllable costs are those cost which can be controlled if taken care of. 

Multiple choice commercial applications fundamental concepts of cost meaning, elements and classification of cost methods of costing cost accounting: an introduction

The type of standard that is best suited from cost control point of view is

  1. Expected standard

  2. Normal standard

  3. Basic standard

  4. Ideal standard
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Expected or attainable Standards: This standard is a compromise between extremes of normal standard & extremes of idle standard. The main features of these standards are:  (a) for the purpose of providing for operating inefficiencies which are unavoidable, these standards are set; (b) conditions prevailing in the period for which use of standards are made are taken into account; (c) for the purpose of evaluation of performance, these standards provide best criterion & are very realistic in nature; (d) as all requirements of good standards are fulfilled by these standards, i.e., these standards are consistent, are attainable, realistic & provide incentive for improvement; they have got the maximum usage. Level of performance expected in these standards is higher than level of performance expected in normal standard. 

Multiple choice commercial applications fundamental concepts of cost meaning, elements and classification of cost methods of costing cost accounting: an introduction

Standard costs are

  1. Ideal costs

  2. Normal costs

  3. Average cost

  4. Reasonable attainable costs
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

A standard cost is a pre-determined or pre-established cost to make a unit of finished product.

Practical standards, which consider normal and reasonable product inefficiencies, are tight, yet attainable.

Multiple choice commercial applications fundamental concepts of cost meaning, elements and classification of cost methods of costing cost accounting: an introduction

Excess direct labour wages will be disclosed in which type of variance?

  1. Yield

  2. Quantity

  3. Direct labour efficiency

  4. Direct labour rate (price)
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Direct labour rate variance is the difference between the standard rate of labour and the actual labour rate on standard ouput/hour.


This variance represent the excess or short wages against the standard cost of labour.

Multiple choice commercial applications fundamental concepts of cost meaning, elements and classification of cost methods of costing cost accounting: an introduction

Preliminaries to setting of standards:
I. Establishment of cost centres
II. Classification and Codification of accounts
III. Period of use
IV. Reasonable or desirable level of attainment
Of these

  1. I and II are correct

  2. II and IV are correct

  3. I and IV are correct

  4. All are correct
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

The following preliminaries are to be carefully considered before introducing standard costing system in any firm:

A. Setting up or Establishment of Cost Centres;

B. Classification and Coding of Accounts;

C. Types of Standards; and

D. Setting up or Establishment of Standards.

Multiple choice commercial applications fundamental concepts of cost meaning, elements and classification of cost methods of costing cost accounting: an introduction

Product costs under direct costing included.

  1. Prime cost only

  2. Prime cost and fixed factory overhead

  3. Prime cost and variable factory overhead

  4. Fixed factory overhead only
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Product cost includes direct materials, direct labor, and overhead. These are the costs that are included in the cost of goods sold and inventory. Only these costs can be included in the inventory.

Multiple choice commercial applications fundamental concepts of cost meaning, elements and classification of cost methods of costing cost accounting: an introduction

Match the following:

1. Total fixed cost a) increase in proportion to output
2. Total variable cost b) remains constant in total
3. Unit variable cost c) decrease with rise in output
4. Unit fixed cost d) remains constant per unit

  1. a b c d

  2. b a d c

  3. b a c d

  4. d c b a
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Total fixed cost remains constant in total (b). Total variable cost increases in proportion to output (a). Unit variable cost remains constant per unit (d). Unit fixed cost decreases with a rise in output (c). Thus, the correct sequence is b, a, d, c.

Multiple choice commercial applications fundamental concepts of cost meaning, elements and classification of cost methods of costing cost accounting: an introduction

Process Cost is very much applicable in _____________.

  1. Construction Industry

  2. Pharmaceutical Industry

  3. Air line company

  4. None of these
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

 Companies that produce identical units such as lumber, tile, brick manufacturers, cereal makers, or pharmaceutical companies utilize process costing. Generally, companies utilize process costing when: Mass production of identical products. Output of products is of low value.