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.
A) indirect method
B) direct method
C) step down method
D) reciprocal method
✅ ANSWER: C
Method, which allocates cost of support department to operating and support departments is known as step down method. The step method (also known as step down method) allocates the cost of a service department to other service departments as well as to operating departments. The cost allocation under step method is a sequential process.
A) linked allocation base
B) direct allocation base
C) indirect allocation base
D) cost allocation base
✅ ANSWER: D
Systematic way of linking group of indirect cost to a cost object is classified as cost allocation base. An allocation base is the basis upon which an entity allocates its overhead costs.
A) cost object line cost
B) cost tracing
C) cost object indirect cost
D) cost object staff cost
✅ ANSWER: B
Direct cost assignment for specific cost object is classified as cost tracing. Cost tracing is the process of directly matching a cost with a product being produced, where cost allocation uses estimates to apply costs to products.
A) Refining department
B) Machining department
C) Receiving department
D) Finishing department
✅ ANSWER: C
Receiving department is a service department. A service department is a cost center that provides services to the rest of a company. The manager of a service department is responsible for keeping costs down, or meeting the costs stated in a budget.
A) Rs 3.25
B) Rs 5.00
C) Rs 97.50
D) Rs 150.00
✅ ANSWER: B
Service occupied = 30 × 40 × 65/100 =780
The room servicing cost per occupied room-night last period, to the nearest Rs, was:
= 3900/780 = Rs. 5.00
A) First incremental user
B) primary user
C) secondary user
D) second incremental user
✅ ANSWER: D
In incremental cost allocation method, cost object user who is ranked third in ranking order is classified as second incremental user.
A) worst
B) independent
C) dependent
D) good
✅ ANSWER: B
In specification analysis, assumptions related to residuals states must be independent. The goal of the Requirements Analysis and Specification is to clearly understand customer requirements and to systematically organize these requirements in a specification document.
A) static budget amount
B) unstated amount
C) constant amount
D) variable amount
✅ ANSWER: A
Sales budget variance is subtracted from flexible budget amount to calculate static budget amount. A static budget is a type of budget that incorporates anticipated values about inputs and outputs that are conceived before the period in question begins.
A) property tax
B) rent for building
C) direct material cost
D) direct wages
✅ ANSWER: B
An example of fixed cost rent for building. A fixed cost is a cost that does not change with an increase or decrease in the amount of goods or services produced or sold.
A) Fixed Cost
B) Variable Cost
C) Total Cost
D) Prime Cost
✅ ANSWER: B
In ‘make or buy’ decision, it is profitable to buy from outside only when the supplier’s price is below the firm’s own Variable Cost. A variable cost is a corporate expense that changes in proportion to production output. Variable costs increase or decrease depending on a company’s production volume; they rise as production increases and fall as production decreases.