Understanding Costing in Accounting

What is the primary focus of management accounting?

• Preparing financial statements for external stakeholders

• Providing information for internal decision-making

• Auditing financial records

• Tax preparation

Which of the following is a characteristic of financial accounting?

• It is primarily used for internal decision-making

• It focuses on future projections

• It is governed by legal requirements and standards

• It is not concerned with historical data

What is a fixed cost?

• A cost that varies with the level of production

• A cost that remains constant regardless of production levels

• A cost that is directly attributable to a specific product

• A cost that is incurred only when production occurs

Which of the following is an example of a variable cost?

• Rent for factory premises

• Salaries of permanent staff

• Raw materials used in production

• Insurance premiums

What is a direct cost?

• A cost that cannot be traced to a specific product

• A cost that is shared across multiple products

• A cost that can be directly attributed to a specific product

• A cost that is fixed over time

Which of the following is an indirect cost?

• Direct labour

• Factory rent

• Raw materials

• Packaging materials

In marginal costing, which costs are considered?

• Only fixed costs

• Only variable costs

• Both fixed and variable costs

• Only direct costs

What is the main difference between absorption costing and marginal costing?

• Absorption costing includes only variable costs

• Marginal costing includes fixed costs in product costs

• Absorption costing includes both fixed and variable costs in product costs

• Marginal costing includes only direct costs

Which costing method uses direct and indirect costs?

• Marginal costing

• Absorption costing

• Activity-based costing

• Standard costing

What is the primary focus of activity-based costing?

• Allocating costs based on production volume

• Allocating costs based on activities that drive costs

• Allocating costs based on fixed rates

• Allocating costs based on historical data