Definition of cost Accounting :Cost accounting is a branch of accounting that deals with the process of identifying, measuring, analyzing, and allocating the costs of goods or services produced by a business. It involves the recording of all costs incurred during the production process, including direct and indirect costs, and provides valuable information to management for decision-making purposes.
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Direct expense?
a) Rent of the factory
b) Depreciation of machinery
c) Cost of raw material
d) Salaries of the administrative staff
Answer: c) Cost of raw material
Overhead cost?
a) Wages of factory workers
b) Cost of power consumed by the factory
c) Cost of raw material
d) Cost of goods sold
Answer: b) Cost of power consumed by the factory
Which of the following is an example of a direct expense for
a restaurant?
a) Rent of the building
b) Cost of utilities
c) Cost of food ingredients
d) Cost of advertising
Answer: c) Cost of food ingredients
Which of the following is an example of an overhead cost for
a hotel?
a) Cost of linen
b) Cost of food ingredients
c) Salaries of the reception staff
d) Cost of room service
Answer: c) Salaries of the reception staff
Variable overhead cost?
a) Rent of the building
b) Cost of electricity
c) Salary of the supervisor
d) Cost of raw material
Answer: b) Cost of electricity
Which of the following is a fixed overhead cost?
a) Cost of raw material
b) Wages of the workers
c) Rent of the building
d) Cost of packaging
Answer: c) Rent of the building
Which of the following is an example of a direct expense for
a clothing store?
a) Rent of the building
b) Cost of clothing hangers
c) Cost of advertising
d) Salary of the store manager
Answer: b) Cost of clothing hangers
Which of the following is an example of an overhead cost for
a car manufacturing company?
a) Cost of raw material
b) Cost of machinery
c) Cost of utilities
d) Cost of transportation
Answer: c) Cost of utilities
Which of the following is a period cost?
a) Cost of raw material
b) Depreciation of machinery
c) Cost of goods sold
d) Cost of advertising
Answer: d) Cost of advertising
Which of the following is a product cost?
a) Cost of advertising
b) Cost of packaging
c) Cost of insurance
d) Cost of salaries
Answer: b) Cost of packaging
Which of the following is an example of a direct expense for
a law firm?
a) Cost of utilities
b) Rent of the office
c) Cost of law books
d) Salary of the receptionist
Answer: c) Cost of law books
Which of the following is an example of an overhead cost for
a software development company?
a) Cost of computers
b) Cost of software licenses
c) Cost of rent
d) Cost of office supplies
Answer: c) Cost of rent
Which of the following is a variable direct expense?
a) Salary of the supervisor
b) Cost of raw material
c) Rent of the building
d) Cost of utilities
Answer: b) Cost of raw material
Which of the following is an example of an overhead cost for
a construction company?
a) Cost of raw material
b) Wages of the workers
c) Cost of equipment rental
d) Cost of transportation
Answer: c) Cost of equipment rental
Which of the following is a fixed direct expense?
a) Cost of advertising
b) Cost of raw material
c) Rent of the building
d) Cost of utilities
Answer: C) Rent of the building
ABC is a costing system that:
a) Allocates overhead costs based on a single cost driver
b) Allocates overhead costs based on multiple cost drivers
c) Allocates direct costs based on a single cost driver
d) Allocates direct costs based on multiple cost drivers
Answer: b) Allocates overhead costs based on multiple
cost drivers
Limitation of traditional costing systems?
a) They are too complex
b) They only allocate overhead costs to products based on a
single cost driver
c) They are too expensive
d) They are too time-consuming
Answer: b) They only allocate overhead costs to products
based on a single cost driver
ABC
Benefit of ABC?
a) It is easier to implement than traditional costing
systems
b) It leads to more accurate product costs
c) It reduces the amount of data needed to allocate costs
d) It is less expensive than traditional costing systems
Answer: b) It leads to more accurate product costs
Which of the following is a primary cost driver for the cost
of ordering materials?
a) Number of units produced
b) Number of orders placed
c) Machine hours
d) Direct labor hours
Answer: b) Number of orders
placed
Which of the following is a primary cost driver for the cost
of machine maintenance?
a) Number of units produced
b) Number of orders placed
c) Machine hours
d) Direct labor hours
Answer: c) Machine hours
Which of the following is a primary cost driver for the cost
of quality control?
a) Number of units produced
b) Number of orders placed
c) Machine hours
d) Number of inspections performed
Answer: d) Number of inspections performed
Which of the following is a primary cost driver for the cost
of setting up a machine?
a) Number of units produced
b) Number of orders placed
c) Machine hours
d) Number of setups performed
Answer: d) Number of setups performed
Which of the following is a cost that would be included in
the overhead pool in ABC?
a) Direct materials cost
b) Direct labor cost
c) Indirect materials cost
d) Indirect labor cost
Answer: d) Indirect labor cost
Which of the following is a benefit of using cost pools in
ABC?
a) It simplifies the costing process
b) It leads to more accurate product costs
c) It reduces the amount of data needed to allocate costs
d) It is less expensive than traditional costing systems
Answer: b) It leads to more accurate product costs
Which of the following is a limitation of ABC?
a) It is too complex
b) It can be difficult to identify cost drivers
c) It only works for manufacturing companies
d) It leads to inaccurate product costs
Answer: a) It is too complex
Which of the following is a type of activity cost pool in
ABC?
a) Direct materials pool
b) Direct labor pool
c) Manufacturing overhead pool
d) Sales commission’s pool
Answer: d) Sales commission’s pool
Batch-level activity?
a) Machine maintenance
b) Quality control
c) Setup of a machine
d) Placing an order for materials
Answer: d) Placing an order for materials
Which of the following is not a costing system in cost
accounting?
a) Job costing
b) Process costing
c) Standard costing
d) Direct costing
Answer: d) Direct costing
Which of the following costing systems is used by
manufacturers of large, unique, or high-cost products?
a) Job costing
b) Process costing
c) Activity-based costing
d) Target costing
Answer: a) Job costing
Which of the following costing systems is used by manufacturers
of identical or similar units of product?
a) Job costing
b) Process costing
c) Activity-based costing
d) Target costing
Answer: b) Process costing
Disadvantage of job costing?
a) It allows for the accurate tracking of costs for each job
or order.
b) It enables management to determine the profitability of
each job or order.
c) It is suitable for manufacturers of identical or similar
units of product.
d) It enables management to determine the cause of cost
overruns and take corrective actions.
Answer: c) It is suitable for manufacturers of identical
or similar units of product.
Which of the following is not an advantage of process
costing?
a) It is suitable for manufacturers of identical or similar
units of product.
b) It enables management to determine the cost of each
process and the overall cost of production.
c) It is quite easy to implement and use.
d) It allows for the accurate tracking of costs for each job
or order.
Answer: d) It allows for the accurate tracking of costs
for each job or order.
Which of the following costing systems is based on the
identification of the activities involved in producing a product or providing a
service, and the allocation of costs to those activities?
a) Job costing
b) Process costing
c) Activity-based costing
d) Target costing
Answer: c) Activity-based costing
Advantage of activity-based costing?
a) It is suitable for manufacturers of identical or similar
units of product.
b) It enables management to determine the cost of each
process and the overall cost of production.
c) It allows for the accurate tracking of costs for each job
or order.
d) It provides more accurate information for decision-making
by identifying the costs of specific activities.
Answer: d) It provides more accurate information for
decision-making by identifying the costs of specific activities.
Limitation of activity-based costing?
a) It can be costly and time-consuming to implement.
b) It may be difficult to determine the appropriate cost
drivers for each activity.
c) It may not provide enough detail for decision-making.
d) It may not be suitable for small companies with simple
operations.
Answer: c) It may not provide enough detail for decision-making.
Which of the following costing systems involves the use of
predetermined standards for costs and revenues, which are compared to actual
results to identify variances?
a) Job costing
b) Process costing
c) Standard costing
d) Target costing
Answer: c) Standard costing
Advantage of standard costing?
a) It provides a basis for performance evaluation and
motivation.
b) It enables management to determine the cost of each
process and the overall cost of production.
c) It allows for the accurate tracking of costs for each job
or order.
d) It provides more accurate information for decision-making
by identifying the costs of specific activities.
Answer: a) It provides a basis for performance evaluation and motivation
Method of costing
a. Job costing
b. Process costing
c. Activity-based costing
d. Variable costing
Answer: c. Activity-based costing
Which of the following costing methods is suitable for
businesses that produce identical products in large quantities?
a. Job costing
b. Process costing
c. Activity-based costing
d. Variable costing
Answer: b. Process costing
Costing methods involves assigning direct and indirect costs
to each individual job or project?
a. Job costing
b. Process costing
c. Activity-based costing
d. Variable costing
Answer: a. Job costing
Which of the following is NOT an example of a direct cost in
a manufacturing process?
a. Raw materials
b. Wages of production workers
c. Factory rent
d. Electricity used in production
Answer: c. Factory rent
Which of the following is a key advantage of activity-based
costing over traditional costing methods?
a. It is simpler and less time-consuming
b. It provides more accurate information about the costs of
individual products and services
c. It is better suited to businesses that produce identical
products in large quantities
d. It ignores indirect costs, which simplifies the cost
allocation process
Answer: b. It provides more accurate information about
the costs of individual products and services
Which of the following statements about variable costing is
true?
a. It includes fixed manufacturing overhead costs in product
costs
b. It is a more accurate costing method than absorption
costing
c. It is often used for internal decision-making purposes
d. It is only suitable for businesses that produce a single
product
Answer: c. It is often used for internal decision-making
purposes
Period cost example
a. Direct materials used in production
b. Depreciation on factory equipment
c. Wages of production workers
d. Advertising expenses
Answer: d. Advertising expenses
Which of the following is a key disadvantage of traditional
costing methods?
a. They are more complex and time-consuming than other
costing methods
b. They may not accurately reflect the costs of individual
products or services
c. They ignore indirect costs, which can distort cost
allocations
d. They only allocate direct costs to products or services
Answer: b. they may not accurately reflect the costs of
individual products or services
Which of the following is a characteristic of a job costing
system?
a. It is used to allocate costs to a large number of
identical products
b. It is only used by service businesses
c. It assigns costs to each individual job or project
d. It ignores indirect costs
Answer: c. it assigns costs to each individual job or
project
Statements about absorption costing is true?
a. It is a simpler costing method than variable costing
b. It is often used for internal decision-making purposes
c. It includes only variable manufacturing overhead costs in
product costs
d. GAAP requires it for external financial reporting
purposes.
Answer: d. GAAP requires it for external financial
reporting purposes.
Product cost example?
a. Sales commissions
b. Depreciation on office equipment
c. Wages of salespeople
d. Direct labor costs
Answer: d. direct labor costs
Which of the following is an example of a fixed cost in a
manufacturing process?
a. Direct materials
b. Direct labor
c. Factory rent
d. Electricity used in production
Answer: c. Factory rent
Financial vs Cost Accounting.
Which of the following statements is true regarding
financial accounting and cost accounting?
a) Both deal with recording and reporting of financial
transactions.
b) Both are the same thing with different names.
c) Cost accounting is concerned with the future, whereas
financial accounting is concerned with the past.
d) Cost accounting is only used by manufacturing companies,
while financial accounting is used by all types of companies.
Answer: c
Which of the following is an example of a cost that would be
recorded in cost accounting, but not in financial accounting?
a) Rent expense
b) Sales revenue
c) Raw materials used in production
d) Interest paid on a loan
Answer: c
Which of the following is a financial statement that is
prepared as part of financial accounting, but not in cost accounting?
a) Balance sheet
b) Income statement
c) Cash flow statement
d) Cost of goods manufactured statement
Answer: a
Which of the following is an objective of cost accounting,
but not of financial accounting?
a) Determining the profitability of the company
b) Preparing financial statements for external users
c) Controlling costs within the organization
d) Ensuring compliance with accounting standards
Answer: c
Which of the following is a characteristic of financial
accounting, but not of cost accounting?
a) Focuses on future performance
b) Concerned with internal decision making
c) Reports on the financial position of the company
d) Provides detailed information on product costs
Answer: c
Which of the following is a tool that is used in cost
accounting, but not in financial accounting?
a) Budgets
b) General ledger
c) Balance sheet
d) Income statement
Answer: a
Which of the following is an example of a cost that would be
recorded in both financial accounting and cost accounting?
a) Advertising expense
b) Depreciation expense
c) Direct labor cost
d) Interest income
Answer: b
Which of the following is an advantage of cost accounting
over financial accounting?
a) It depicts the company's financial status more
accurately.
b) It is easier to understand for non-accounting
professionals.
c) It is required by law for all companies to prepare cost
accounting reports.
d) It is more useful for making internal business decisions.
Answer: d
Which of the following is a disadvantage of cost accounting?
a) It can be time-consuming and costly to implement.
b) It provides inaccurate information for decision making.
c) It is not useful for managing costs within an organization.
d) It does not adhere to commonly recognized accounting
rules.
Answer: a
Which of the following is an example of a direct cost that
would be recorded in cost accounting?
a) Rent expense for the factory
b) Salaries for the administrative staff
c) Depreciation expense for the office equipment
d) Raw materials used in production
Answer: d
Which of the following is an example of an indirect cost
that would be recorded in cost accounting?
a) Wages for production workers
b) Utilities expense for the factory
c) Cost of goods sold
d) Sales revenue
Answer: b
Which of the following is an example of a period cost that
would not be recorded in cost accounting?
a) Depreciation expense on production equipment
b) Rent expense on the sales office
c) Direct materials used in production
d) Salaries for the CEO
Answer: b
Financial vs Managerial Accounting.
Which of the following is true about financial accounting
and managerial accounting?
a) Both types of accounting provide information for internal
use
b) Both types of accounting provide information for external
use
c) Financial accounting provides information for internal
use, while managerial accounting provides information for external use
d) Financial accounting is used for internal purposes,
whereas management accounting is used for external purposes.
Answer: d) Financial accounting is used for internal
purposes, whereas management accounting is used for external purposes.
Which of the following is a primary focus of financial
accounting?
a) Cost analysis
b) Decision making
c) External reporting
d) Budgeting
Answer: c) External reporting
Which of the following is a primary focus of managerial
accounting?
a) Cost analysis
b) Decision making
c) External reporting
d) Budgeting
Answer: b) Decision making
Not type of financial statement?
a) Income statement
b) Balance sheet
c) Statement of cash flows
d) Cost accounting statement
Answer: d) Cost accounting statement
Which of the following financial statements provides
information on a company's revenue and expenses over a period of time?
a) Income statement
b) Balance sheet
c) Statement of cash flows
d) Retained earnings statement
Answer: a) Income statement
Which of the following financial statements provides
information on a company's assets, liabilities, and equity at a specific point
in time?
a) Income statement
b) Balance sheet
c) Statement of cash flows
d) Retained earnings statement
Answer: b) Balance sheet
Which of the following financial statements provides
information on a company's cash inflows and outflows over a period of time?
a) Income statement
b) Balance sheet
c) Statement of cash flows
d) Retained earnings statement
Answer: c) Statement of cash flows
Which of the following is an example of a cost that would be
included in managerial accounting, but not in financial accounting?
a) The cost of goods sold
b) The cost of advertising
c) The cost of raw materials
d) The cost of depreciation
Answer: b) The cost of advertising
Which of the following is an example of a cost that would be
included in both managerial accounting and financial accounting?
a) The cost of goods sold
b) The cost of advertising
c) The cost of raw materials
d) The cost of depreciation
Answer: a) The cost of goods sold
Which of the following is an example of a financial
statement that would be used by external stakeholders?
a) Income statement
b) Budget
c) Sales report
d) Production report
Answer: a) Income statement
Which of the following is an example of a financial
statement that would be used by internal stakeholders?
a) Income statement
b) Budget
c) Sales report
d) Production report
Answer: b) Budget
Which of the following is not a reason for using managerial
accounting information?
a) To make informed decisions
b) To evaluate performance
c) To comply with regulatory requirements
d) To plan future activities
Answer: c) to comply with regulatory requirements
not a characteristic of financial accounting information?
a) It is prepared according to generally accepted accounting
principles (GAAP)
b) It is used by internal stakeholders to make decisions
c) It is used by external stakeholders to evaluate a
company's financial health
d) It is historical in nature
Answer: b) It is used by internal stakeholders to make
decisions