Costing Archives

71. If an actual indirect cost incur is $35000 and indirect cost allocated is $43000, then under allocated indirect cost will be

$78,000

($78,000)

($8,000)

$8,000

✅ The correct answer is C.
Under allocated indirect cost = Actual indirect cost incur – Indirect cost allocated = $35000 – $43000 = -$8000

72. Type of relationship stating “how changes in cost driver drives cause changes in cost” will be termed as

marginal plausibility

economic plausibility

financial plausibility

market plausibility

✅ The correct answer is B.
Type of relationship stating “how changes in cost driver drives cause changes in cost” will be termed as economic plausibility. There is a positive relationship between the number of service reports (a cost driver) and the customer- service department costs.

73. CG Co manufactures a single product T. Budgeted production output of product T during June is 200 units. Each unit of product T requires 6 labour hours for completion and CG Co anticipates 20 per cent idle time. Labour is paid at a rate of Rs7 per hour. The direct labour cost budget for March is

Rs. 6,720

Rs. 8400

Rs. 10080

Rs. 10500

✅ The correct answer is D.
For every 100 hours that they pay for, there are 20 hours idle and therefore 80 hours worked.
So, for every 80 hours worked they will have to pay for 100 hours, again with 20 hours idle.

The idle time is 20/80 = 25% of the time worked.

So for this question they need 200 x 6 = 1200 hours of work.
Therefore they will have to pay for 1200 x 100/80 = 1500 hours.
This will cost them 1500 x Rs. 7 = Rs.10,500

74. In activity based costing method implementation, an output unit level costs are classified as

indirect costs

direct cost

labour cost

raw material cost

✅ The correct answer is A.
In activity based costing method implementation, an output unit level costs are classified as indirect costs. Indirect costs are costs used by multiple activities, and which cannot therefore be assigned to specific cost objects.

75. Costs of all activities for individual products or services can be called

purpose level costs

output-unit level costs

input-unit level costs

activity level costs

✅ The correct answer is B.
Costs of all activities for individual products or services can be called output-unit level costs. Output unit level costs are the costs of activities.

76. In regression analysis, if predicted cost value is 65 and observed cost value is 19 then disturbance term will be

✅ The correct answer is A.
In regression analysis, if predicted cost value is 65 and observed cost value is 19 then disturbance term will be 46.
Disturbance term cost = Predicted cost value – Observed cost value
= 65 – 19 = 46.

77. “During September, 300 labour hours were worked for a total cost of Rs. 4800 The variable overhead expenditure variance was Rs. 600 (A) Overheads are assumed to be related to direct labour hours of active working. What was the standard cost per labour hour?”

Rs. 14

Rs. 1650

Rs. 1750

Rs. 18

✅ The correct answer is A.
Total Cost 4800
Variance was Rs. 600 (A)
As Variance adverse means it is higher than standard cost
So standard cost = 4800 – 600 = 4200
Labour worked 300 hours
Standard cost per labour hour = 4200/300 =14

78. Element/s of Cost of a product are:

Material only

Labour only

Expenses only

Material, Labour and expenses

✅ The correct answer is D.
Element/s of Cost of a product are Material, Labour and expenses.

79. “S produces and sells one product, P, for which the data are as follows: Selling price Rs 28 Variable cost Rs 16 Fixed cost Rs 4 The fixed costs are based on a budgeted production and sales level of 25,000 units for the next period. Due to market changes both the selling price and the variable cost are expected to increase above the budgeted level in the next period. If the selling price and variable cost per unit increase by 10% and 8% respectively, by how much must sales volume change, compared with the original budgeted level, in order to achieve the original budgeted profit for the period?”

10.1% decrease

11.2% decrease

13.3% decrease

16.0% decrease

✅ The correct answer is B.

80. Process a/c is ________.

nominal a/c

a real a/c

personal a/c

either nominal or real a/c

✅ The correct answer is A.
Process a/c is nominal a/c. A process account which is similar to a ledger account in financial accounting is an equivalent of a nominal account.