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.

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

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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

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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

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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.

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?”

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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

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?”

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10.1% decrease
11.2% decrease
13.3% decrease
16.0% decrease
✅ The correct answer is B.