Costing

Costing MCQs with Answers and Explanations | Cost Accounting Objective Questions

Sharpen your understanding of Costing and Cost Accounting with our collection of MCQs with answers and detailed explanations. Covering key topics such as marginal costing, standard costing, process costing, job order costing, variance analysis, budgeting, cost control, and managerial decision-making, these objective questions are highly useful for students, teachers, and candidates preparing for professional and competitive exams (CA, ACCA, ICMA, MBA, CSS, PMS, NTS, FPSC, PPSC, UPSC, etc.). Each question includes a clear solution and explanation to strengthen concepts, improve problem-solving skills, and enhance exam preparation. Perfect for practice, self-assessment, and revision in the field of Cost Accounting.

3. When output of earlier process is transferred at a profit to the subsequent process, it is ________.

by
A) inter departmental profit
B) abnormal gain
C) inter process profit
D) manufacturing profit
✅ ANSWER: C
When output of earlier process is transferred at a profit to the subsequent process, it is inter process profit. The profit associated with the transfer of goods from one process to another process is called inter-process profit.

4. Use of variables to signal whether strategies are effective or ineffective is classified as

by
A) evaluating strategy
B) performing strategy
C) warned strategy
D) weighted strategy
✅ ANSWER: A
Use of variables to signal whether strategies are effective or ineffective is classified as evaluating strategy. Strategy evaluation means collecting information about how well the strategic plan is progressing.

5. An analysis and estimation method of cost, by classifying cost accounts as fixed or variable with respect for specific output level is considered as

by
A) manufacturing analysis method
B) price analysis method
C) unit analysis method
D) account analysis method
✅ ANSWER: D
An analysis and estimation method of cost, by classifying cost accounts as fixed or variable with respect for specific output level is considered as account analysis method. The account analysis method is a cost accounting method for estimating the different costs associated with producing a product.

6. LIFO method of pricing of materials is more suitable when _________.

by
A) material prices are rising
B) material prices are falling
C) material prices are constant
D) material prices are fluctuating
✅ ANSWER: A
LIFO method of pricing of materials is more suitable when material prices are rising. LIFO method of pricing issues is suitable because materials are issued at the current market prices which are high. This method thus helps in showing a lower profit because of increased charge to production during periods of rising prices and lower profit reduces burden of income-tax.

7. Static budget amount is subtracted from flexible budget amount to calculate the

by
A) sales budget variance
B) cost budget variance
C) resultant budget variance
D) static budget variance
✅ ANSWER: A
Static budget amount is subtracted from flexible budget amount to calculate the sales budget variance. A sales budget is management’s estimate of sales for a future financial period. A business uses sales budgets to set department goals, estimate earnings and forecast production requirements.

8. Labour turnover is ______.

by
A) productivity of labour
B) efficiency of the labour
C) change in labour force
D) total cost of the labour
✅ ANSWER: C
Labour turnover is change in labour force. Labour turnover may be defined as the number of workers replaced during a given period relative to the average labour force during the period. It is the number of workers who left the job during a period relative to the average labour force during the period.

10. Procedure of assigning direct cost to any cost abject is classified as

by
A) sales allocation
B) cost tracing
C) cost allocation
D) sales tracing
✅ ANSWER: C
Procedure of assigning direct cost to any cost abject is classified as cost allocation. Cost allocation is the process of identifying, aggregating, and assigning costs to cost objects. A cost object is any activity or item for which you want to separately measure costs.