Description: Cost accounting primarily focuses on managing and controlling costs within an organisation.
2
2. Which of the following is not a component of total manufacturing cost?
Correct!
Wrong :(
Answer - D. Sales and marketing expenses
Description: Total manufacturing cost includes direct materials, direct labour, and manufacturing overhead. Sales and marketing expenses are not part of manufacturing costs.
3
3. What is the formula for calculating the contribution margin?
Correct!
Wrong :(
Answer - A. Contribution Margin = Total Revenue - Total Costs
Description: Contribution margin represents the difference between total revenue and total variable costs.
4
4. Which cost is not considered a variable cost in most businesses?
Correct!
Wrong :(
Answer - C. Rent on factory building
Description: Rent on a factory building is typically a fixed cost as it remains constant within a relevant range of production.
5
5. What is the breakeven point in terms of units sold?
Correct!
Wrong :(
Answer - D. The point where no profit or loss is incurred
Description: The breakeven point is where total revenue equals total costs, resulting in neither profit nor loss.
6
6. Which of the following is an example of a cost centre in an organisation?
Correct!
Wrong :(
Answer - A. Production department
Description: A cost centre is responsible for incurring and managing costs, and the production department is a typical example.
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7. What is the purpose of variance analysis in management accounting?
Correct!
Wrong :(
Answer - B. To identify deviations from budgeted or standard costs
Description: Variance analysis helps identify differences between budgeted or standard costs and actual costs.
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8. What is the primary focus of managerial accounting?
Correct!
Wrong :(
Answer - B. Internal decision-making and planning
Description: Managerial accounting focuses on providing information for internal management to make decisions and plan effectively.
9
9. Which of the following is not a method of cost allocation?
Correct!
Wrong :(
Answer - C. Break-even analysis
Description: Break-even analysis is a tool for determining the level of sales required to cover costs, but its not a method of cost allocation.
10
10. What is the formula for calculating the return on investment (ROI)?
Correct!
Wrong :(
Answer - C. ROI = Net Profit / Total Assets
Description: ROI measures the return on investment relative to the total assets employed.
11
11. What is the primary purpose of a cost allocation base in activity-based costing (ABC)?
Correct!
Wrong :(
Answer - B. To assign indirect costs to cost objects
Description: Cost allocation bases are used in ABC to allocate indirect costs to specific cost objects like products or services.
12
12. What does the term absorption costing refer to?
Correct!
Wrong :(
Answer - A. A costing method that includes both variable and fixed manufacturing costs in product costs
Description: Absorption costing includes all manufacturing costs, both variable and fixed, in the cost of products.
13
13. Which of the following is a direct cost for a manufacturing company?
Correct!
Wrong :(
Answer - B. Wages of production line workers
Description: Direct costs are directly traceable to the production of goods or services, such as labour in a manufacturing process.
14
14. Which type of budget projects income and expenses over a specific future period, usually a fiscal year?
Correct!
Wrong :(
Answer - C. Operating budget
Description: An operating budget focuses on projected income and expenses over a specific future period, typically a fiscal year.
15
15. Which of the following is an example of a variable cost for a manufacturing company?
Correct!
Wrong :(
Answer - C. Raw materials
Description: Raw materials costs vary with production levels and are considered variable costs.
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16. What does the term cost of goods sold (COGS) represent in financial statements?
Correct!
Wrong :(
Answer - C. The cost of producing the goods or services sold by a company
Description: COGS represents the direct costs associated with producing the goods or services sold by a company.
17
17. What is the purpose of cost-volume-profit (CVP) analysis?
Correct!
Wrong :(
Answer - C. To study the relationship between costs, sales volume, and profitability
Description: CVP analysis helps understand how changes in sales volume affect costs and profitability.
18
18. Which method allocates indirect costs based on a predetermined rate per unit of a cost driver, such as machine hours?
Correct!
Wrong :(
Answer - D. Traditional costing
Description: Traditional costing uses a predetermined rate per unit of a cost driver to allocate indirect costs.
19
19. Which type of cost represents the highest level of control for a manager in decision-making?
Correct!
Wrong :(
Answer - D. Opportunity cost
Description: Opportunity cost is the cost of forgoing the next best alternative when making a decision and provides the highest level of control in decision-making.
20
20. What is the formula for calculating the contribution margin ratio?
Correct!
Wrong :(
Answer - C. Contribution Margin Ratio = (Total Revenue - Variable Costs) / Total Revenue
Description: The contribution margin ratio expresses the contribution margin as a percentage of total revenue.
21
21. Which type of cost increases with the increase in the level of production or sales?
Correct!
Wrong :(
Answer - C. Variable cost
Description: Variable costs change in direct proportion to changes in production or sales levels.
22
22. Which type of budget focuses on long-term investment decisions, such as buying new equipment or expanding facilities?
Correct!
Wrong :(
Answer - A. Capital budget
Description: Capital budgeting involves making decisions about significant, long-term investments in assets.
23
23. What is the primary purpose of a master budget?
Correct!
Wrong :(
Answer - C. To provide a comprehensive plan for an entire organisation
Description: A master budget integrates all the individual budgets of an organisation to provide an overall plan.
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24. What is the primary goal of cost control in management accounting?
Correct!
Wrong :(
Answer - C. To keep costs within budgeted limits
Description: Cost control aims to ensure that actual costs remain within the limits of budgeted costs.
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25. In activity-based costing (ABC), what is an activity cost pool?
Correct!
Wrong :(
Answer - B. A grouping of activities that share a common cost driver
Description: Activity cost pools are used to group activities that share the same cost driver.
26
26. What is the formula for calculating the net present value (NPV) of a project?
Correct!
Wrong :(
Answer - A. NPV = Cash Inflows - Cash Outflows
Description: NPV is calculated by subtracting the present value of cash outflows from the present value of cash inflows.
27
27. What is a cost driver in activity-based costing (ABC)?
Correct!
Wrong :(
Answer - C. A factor that causes costs to be incurred in an activity
Description: A cost driver is a factor that influences the cost of an activity in ABC.
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28. Which of the following statements is true regarding direct and indirect costs?
Correct!
Wrong :(
Answer - B. Direct costs can be traced to a specific cost object, while indirect costs cannot.
Description: Direct costs can be traced to a specific cost object, while indirect costs cannot be easily traced to a specific cost object.
29
29. Which of the following costs is considered a sunk cost?
Correct!
Wrong :(
Answer - D. The cost of research and development for a product that has already been launched
Description: Sunk costs are costs that have been incurred and cannot be recovered, such as research and development for a product that is already in the market.
30
30. What is the purpose of a flexible budget in management accounting?
Correct!
Wrong :(
Answer - B. To compare actual performance to a budget adjusted for actual activity levels
Description: A flexible budget adjusts for actual activity levels and allows for performance comparison based on those levels.
31
31. What is the term for the process of assigning costs to cost objects, such as products or services?
Correct!
Wrong :(
Answer - B. Cost allocation
Description: Cost allocation is the process of assigning costs to specific cost objects.
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32. What is a direct cost in the context of a service industry, such as a consulting firm?
Correct!
Wrong :(
Answer - C. The salary of a specific consultant working on a project
Description: In a service industry, direct costs may include the salary of specific employees working on a project.
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33. What is the primary objective of cost accounting in a manufacturing organisation?
Correct!
Wrong :(
Answer - D. To provide cost information for decision-making and control
Description: Cost accounting in a manufacturing organisation primarily focuses on providing cost information for internal decision-making and control.
34
34. What does the term cost behaviour refer to in management accounting?
Correct!
Wrong :(
Answer - A. How costs change with changes in production levels
Description: Cost behaviour refers to the way costs change as production or sales levels change.
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35. What is a cost variance in variance analysis?
Correct!
Wrong :(
Answer - B. A deviation between actual costs and budgeted or standard costs
Description: Cost variances represent the differences between actual costs and budgeted or standard costs.
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36. What is the term for the process of tracing and assigning direct costs to specific cost objects, such as products or projects?
Correct!
Wrong :(
Answer - C. Cost tracing
Description: Cost tracing is the process of directly assigning costs to specific cost objects.
37
37. What is the term for costs that are not incurred if a particular course of action is taken?
Correct!
Wrong :(
Answer - B. Opportunity costs
Description: Opportunity costs represent the potential benefits foregone when a specific course of action is chosen.
38
38. In process costing, how are costs typically allocated to products?
Correct!
Wrong :(
Answer - C. Based on average costs over a period
Description: Process costing allocates costs based on average costs over a specific time period.
39
39. What is the term for the difference between actual sales revenue and the breakeven sales revenue?
Correct!
Wrong :(
Answer - C. Margin of safety
Description: The margin of safety represents the difference between actual sales revenue and the breakeven sales revenue.
40
40. What is the term for a costing method that assigns all manufacturing costs to products as they are produced?
Correct!
Wrong :(
Answer - A. Absorption costing
Description: Absorption costing assigns all manufacturing costs to products as they are produced, including both variable and fixed costs.
41
41. What is the term for the minimum amount a product can be sold for without incurring a loss?
Correct!
Wrong :(
Answer - B. Target cost
Description: Target cost is the minimum selling price necessary to achieve a desired profit margin.
42
42. What is the formula for calculating the overhead rate in job costing?
Correct!
Wrong :(
Answer - B. Overhead Rate = Total Overhead Costs / Total Direct Labor Hours
Description: The overhead rate in job costing is typically calculated based on direct labour hours.
43
43. In a job costing system, what is the term for a document that specifies the materials, labour, and overhead costs for a specific job or project?
Correct!
Wrong :(
Answer - C. Job cost sheet
Description: A job cost sheet provides details of costs incurred for a specific job or project.
44
44. What is the term for the process of assigning indirect costs to products based on the activities or cost drivers that cause those costs?
Correct!
Wrong :(
Answer - D. Activity-based costing (ABC)
Description: ABC assigns indirect costs to products based on the activities that drive those costs.
45
45. What does the term cost object refer to in cost accounting?
Correct!
Wrong :(
Answer - C. The unit to which costs are assigned, such as a product or project
Description: A cost object is the specific unit to which costs are allocated, such as a product or project.
46
46. What is the term for a cost that does not change with changes in production levels or sales volume?
Correct!
Wrong :(
Answer - D. Fixed cost
Description: Fixed costs remain constant regardless of changes in production levels or sales volume.
47
47. What is the formula for calculating the net operating income in a contribution margin income statement?
Correct!
Wrong :(
Answer - D. Net Operating Income = Total Revenue - Variable Expenses
Description: In a contribution margin income statement, net operating income is calculated by subtracting variable expenses from total revenue.
48
48. What is the term for costs that have already been incurred and cannot be changed or recovered?
Correct!
Wrong :(
Answer - B. Sunk costs
Description: Sunk costs are costs that have been incurred and cannot be changed or recovered.
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49. What is the primary purpose of a cash budget in an organisation?
Correct!
Wrong :(
Answer - C. To provide a plan for cash inflows and outflows
Description: A cash budget helps an organisation plan and manage its cash inflows and outflows.
50
50. What is the term for a costing method that assigns costs to products based on specific job orders or batches of products?
Correct!
Wrong :(
Answer - D. Job costing
Description: Job costing assigns costs to specific job orders or batches of products based on their unique characteristics and production requirements.
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