MCQs on Cost and Management Accounting

What is the primary objective of cost accounting?

• Tax calculation

• Cost ascertainment and control

• Financial reporting

• Employee payroll management

Answer explanation

Cost accounting aims to analyze and classify expenditures to determine the cost of production and control costs efficiently.

Which of the following is NOT a classification of cost based on behavior?

• Fixed cost

• Variable cost

• Sunk cost

• Semi-variable cost

Answer explanation

Sunk costs are past costs that cannot be changed, whereas fixed, variable, and semi-variable costs change based on production levels.

In which costing method is cost accumulated for each individual job separately?

• Process costing

• Batch costing

• Job costing

• Marginal costing

Answer explanation

Job costing is used where production is done as per specific customer orders, with costs accumulated separately for each job.

What does 'ABC' stand for in Activity-Based Costing?

• Accounting-Based Costing

• Activity-Based Costing

• Asset-Based Costing

• Allowance-Based Costing

Answer explanation

ABC assigns overheads to products based on their activities, leading to more accurate cost allocation.

Which of the following is NOT a technique of inventory management?

• FIFO

• LIFO

• ABC Analysis

• Budgetary Control

Answer explanation

FIFO, LIFO, and ABC Analysis are inventory control techniques, while Budgetary Control is a financial planning tool.

Marginal costing technique is based on which principle?

• Fixed cost is variable per unit

• Only variable costs are considered for decision-making

• All costs are included in product cost

• Absorption of fixed costs into product cost

Answer explanation

Marginal costing considers only variable costs for decision-making and ignores fixed costs.

Which method of costing is used in transport services?

• Job costing

• Batch costing

• Service costing

• Process costing

Answer explanation

Service costing is applied to service industries like transport, healthcare, and hotels.

The Break-even Point is achieved when:

• Total revenue = Total cost

• Total cost > Total revenue

• Total fixed cost = Total variable cost

• Contribution margin is zero

Answer explanation

The break-even point is when there is no profit or loss, i.e., revenue covers total cost.

What is the main purpose of cost audit?

• Tax compliance

• Financial statement preparation

• Examining cost records for accuracy and efficiency

• Employee payroll audit

Answer explanation

Cost audits ensure cost records are accurate and help in cost control and efficiency improvements.

Which cost classification is used to analyze decision-making scenarios?

• Period cost

• Opportunity cost

• Product cost

• Historical cost

Answer explanation

Opportunity cost represents the benefits foregone when choosing one alternative over another.