Costing mcqs

✅ 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 D.
Method which ranks cost object incurred by individual users, in ranking order of more responsible users is classified as incremental cost allocation method. Cost allocation methods are designed to allocate costs not necessarily associated with a product, to the appropriate products to get a realistic estimate of costs so that a proper price can be determined for a particular product.

✅ 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 B.
All costs, which are assigned to manufactured products for specific calculations are classified as product cost. Product cost refers to the costs incurred to create a product. These costs include direct labor, direct materials, consumable production supplies, and factory overhead.

✅ The correct answer is D.
Number of observations in regression analysis is considered as degree of freedom. In a regression model, each term is an estimated parameter that uses one degree of freedom. In the regression output below, you can see how each term requires a DF.