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Midterm IMT

The document contains 10 multiple choice questions related to cost accounting concepts. The questions cover topics such as objectives of cost accounting systems, classification of costs as direct vs indirect, cost behavior, cost-volume-profit analysis, calculation of prime costs from financial statements, break-even analysis, and identification of sunk costs.

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Injimamul Islam
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51 views

Midterm IMT

The document contains 10 multiple choice questions related to cost accounting concepts. The questions cover topics such as objectives of cost accounting systems, classification of costs as direct vs indirect, cost behavior, cost-volume-profit analysis, calculation of prime costs from financial statements, break-even analysis, and identification of sunk costs.

Uploaded by

Injimamul Islam
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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1. Which of the following is least likely to be an objective of a cost accounting system?

(a) Product pricing (b) Product mix determination

(c) Department efficiency (d) Inventory valuation

(e) Sales commission determination.

2. A manager of a company wants to control and reduce, if possible, the company's production costs. He must
determine how the production costs are related to and affected by the various business activities. The manager
needs to understand the 
(a)  Cost behaviors                                               (b)  Relevant ranges     (c)  Fixed costs
(d)  Variable costs                                                 (e)  Total costs.
3. Which of the following is an indirect labor?
(a)  A stores assistant in a factory store
(b)  An audit clerk in a firm of auditors
(c)  An assembly worker in a company manufacturing televisions
(d)  A mason of a construction company
(e)  A technician of a machine tool shop.

4. The classification of cost as either direct or indirect depends upon


(a)     The cost object to which the cost is being related
(b)    The timing of the cash outlay for the cost
(c)     The behavior of the cost in response to volume changes
(d)    The controllability of costs
(e)     The avoidability of costs.
5. Cost-volume-profit analysis is most important for the determination of
(a)     Volume of operations necessary to break-even
(b)    Margin of safety necessary to equal fixed costs
(c)     Sales revenue necessary to equal fixed costs
(d)    Relationship between revenues and costs at various level of operations
(e)     Sales revenue necessary to equal total costs.
6. From the books of Ajanta Ltd. the following detail has been extracted for the year 2016;
Stock of Material: opening Rs. 188000
Closing Rs. 200000
Material purchased during the year Rs. 832000
Direct wages paid Rs. 238400
Indirect wages Rs. 16000
Salaries to administrative staff Rs. 40000
Freight: Inwards Rs. 32000
Freight: Outwards Rs. 20000
Cash discount allowed Rs. 14000
Bad debt w/o Rs. 18800
Repairs to plant Rs. 42400
Rent, Rates & Taxes: Factory Rs. 12000
: office Rs. 6400
Travelling Expenses Rs. 12400
Salesmen Salary & Comm. Rs. 33600
Depreciation : plant Rs. 28400
: furniture Rs. 2400
Director`s Fees Rs. 24000
Electricity charges(factory) Rs. 48000
Fuel (for boiler) Rs. 64000
General charges Rs. 24800
Managers salary Rs. 48000
The manager`s time is shared between the factory and the office in the ratio of 20:80. From the above details what
should be the prime cost for the product manufactured
(a) 1090400 (b) 1138400 (c) 1110400 (d) 1102400 (e) 1106400

7. The total production cost for making 20,000 units was Rs. 21,000 and the total production cost for making
50,000 units was Rs. 34,000. Once production exceeds 25,000 units, additional fixed costs of Rs. 4,000 are
incurred. If the company manufactures 26,000 Units and its total production cost is 35,000 what will be the cost
per unit:

(a) 1.34 paise (b) 50 paise (c) 68 paise (d) 84 paise (e) 1.5 paise.

8. An increase in variable costs where selling price and fixed cost remain constant will result in which of the
following?

(a) An increase in margin of safety


(b) A fall in the sales level at which break even point will occur
(c) A rise in the sales level at which break even point will occur
(d) No change in the sales level at which break even point will occur
(e) No change in margin of safety.

9. Leo Ltd. sells its products at Rs.40 per unit. In a period if the company manufactures and sells 12,000 units, it
incurs a loss of Rs.2 per unit and if the volume increases to 18,000 units, it earns a profit of Rs.3.50 per unit. The
break-even point in rupees is
a. Rs.5,70,000
b. Rs.1,98,000
c. Rs.6,00,000
d. Rs.3,10,600
e. Rs.5,46,207.

10. The cost of obsolete inventory acquired several years ago, to be considered in a keep-versus disposal decision
is an example of
a. Uncontrollable cost
b. Opportunity cost
c. Sunk cost
d. Avoidable cost
e. Relevant cost.

Solution:
1. c
2. a
3. a
4. a
5. d
6. a
7. e
8. c
9. e
10. c

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