Costing

✅ The correct answer is A.
Component of total cost, which never changes with change in level of production is classified as fixed cost. A fixed cost is an expense that does not change as production volume increases or decreases within a relevant range.

✅ The correct answer is A.
Cost function, in which graph of total cost would not result in straight line is classified as nonlinear cost function. A nonlinear cost function is a cost function where, within the relevant range, the graph of total costs versus the level of a single activity related to that cost is not a straight line.

✅ The correct answer is C.
Net realizable value is added into separate costs to calculate final sales. Net realizable value (NRV) is the value for which an asset can be sold, minus the estimated costs of selling or discarding the asset. The NRV is commonly used in the estimation of the value of ending inventory.

✅ The correct answer is B.
Budgeted indirect cost rate = Budgeted annual indirect cost ÷ Budgeted annual quantity of cost allocation
= $60000 ÷ $3600 = 16.67 per piece

✅ The correct answer is B.
Required rate of return, is multiplied per unit cost of purchased units to calculate relevant opportunity cost of capital.

✅ The correct answer is C.
An implementation of activity based costing would be possible only if accountants find cost driver for each activity. A cost driver is the unit of an activity that causes the change in activity’s cost. cost driver is any factor which causes a change in the cost of an activity.

✅ The correct answer is C.
An approach in which company under-costs it’s one product and over-costs at least one product is classified as product-cost cross subsidizing. Product-cost cross-subsidization is the strategy of pricing a product above its market value to subsidize the loss of pricing a different product below its market value.

✅ The correct answer is A.
The most important element of cost in manufacturing industries is material. Material is the first and most important element of cost. In most of the manufacturing organisations, materials form the single largest component of cost.

✅ The correct answer is C.
Buying of goods or materials for production in a way that they are delivered directly on manufacturing facility of company is called just in time purchasing. Just-in-time purchasing (JIT purchasing) is a cost accounting purchasing strategy. You purchase goods so that they’re delivered just as they’re needed to meet customer demand.

✅ The correct answer is A.
Means budget expense = Rs. 300000 – Rs. 18000
= Rs. 282000
Budgeted variable overhead = Rs. 282000 – (fixed cost) Rs. 87000
= Rs.195000
Variable cost pr unit is = 195000 / 162500
= Rs. 1.20