Cost Accounting 2024/2025 Trial Test Questions (30) Objective Questions

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Select the correct options for each Questions below

1. What is the primary objective of cost accounting?

a) Maximize profits b) Control costs c) Record financial transactions d) Enhance market share

2. Which cost is incurred in the production of one more unit of a product?

a) Sunk cost b) Fixed cost c) Variable cost d) Opportunity cost

3. What type of cost changes with the level of production or output?

a) Sunk cost b) Fixed cost c) Variable cost d) Direct cost

4. Which cost includes both variable and fixed components?

a) Sunk cost b) Mixed cost c) Variable cost d) Direct cost

5. What is the term for the total cost of producing one unit of a product, including both variable and fixed costs?

a) Average cost b) Marginal cost c) Sunk cost d) Direct cost

6. Which of the following is an example of a direct cost?

a) Rent for the factory building b) Wages of production workers c) Office supplies d) Sales commission

7. What is the term for the cost that has already been incurred and cannot be recovered?

a) Variable cost b) Fixed cost c) Sunk cost d) Opportunity cost

8. Which method of cost allocation assigns overhead costs based on the actual use of resources by cost centers?

a) Absorption costing b) Activity-based costing c) Job costing d) Process costing

9. Which cost is relevant for decision making when considering whether to accept a special order from a customer?

a) Sunk cost b) Fixed cost c) Variable cost d) Opportunity cost

10. What is the formula for calculating the contribution margin ratio?

a) Contribution margin / Total variable cost b) Contribution margin / Sales revenue c) Total variable cost / Contribution margin d) Sales revenue / Contribution margin

11. What is the formula for calculating the break-even point in units?

a) Total fixed costs / Selling price per unit b) Total variable costs / Contribution margin per unit c) Total fixed costs / Contribution margin per unit d) Total variable costs / Selling price per unit

12. Which of the following is NOT a method of cost allocation?

a) Job costing b) Activity-based costing c) Process costing d) Profit costing

13. What is the term for the difference between actual sales revenue and break-even sales revenue?

a) Profit margin b) Contribution margin c) Margin of safety d) Sales variance

14. Which of the following statements about absorption costing is true?

a) It allocates only variable costs to products. b) It does not consider fixed manufacturing overhead. c) It treats fixed manufacturing overhead as a product cost. d) It is used primarily for external financial reporting.

15. What is the formula for calculating the contribution margin?

a) Total revenue - Total variable cost b) Total revenue / Total variable cost c) Total revenue + Total variable cost d) Total revenue * Total variable cost

16. Which of the following is a cost that can be traced directly to a specific cost object?

a) Indirect cost b) Sunk cost c) Direct cost d) Fixed cost

17. What is the term for the excess of actual sales revenue over the break-even sales revenue?

a) Margin of safety b) Contribution margin c) Sales variance d) Profit margin

18. What is the term for costs that cannot be traced directly to a specific cost object?

a) Direct costs b) Variable costs c) Indirect costs d) Fixed costs

19. What is the term for the point at which total revenue equals total cost, resulting in zero profit?

a) Break-even point b) Margin of safety c) Contribution margin d) Profit margin

20. What is the term for the difference between actual or projected sales revenue and break-even sales revenue?

a) Margin of safety b) Contribution margin c) Sales variance d) Profit margin

21. What is the term for the difference between the budgeted or expected profit and the actual profit?

a) Contribution margin b) Profit variance c) Margin of safety d) Sales variance

22. What is the term for the cost incurred when a company produces more than its normal capacity?

a) Sunk cost b) Opportunity cost c) Marginal cost d) Overtime cost

23. What is the term for the cost of goods that are partially completed but not yet finished?

a) Finished goods cost b) Work in process cost c) Variable cost d) Opportunity cost

24. Which method of cost allocation allocates overhead costs based on the number of units produced?

a) Activity-based costing b) Job costing c) Process costing d) Absorption costing

25. What is the term for the ratio of contribution margin to sales revenue?

a) Profit margin ratio b) Margin of safety ratio c) Break-even ratio d) Contribution margin ratio

26. Which of the following costs would be considered a variable cost in the production of furniture?

a) Rent for the factory building b) Cost of wood c) Factory manager's salary d) Depreciation of machinery

27. What is the term for the difference between the actual sales quantity and the budgeted or expected sales quantity?

a) Profit variance b) Sales variance c) Margin of safety d) Contribution margin

28. Which costing method is commonly used in industries with continuous production processes?

a) Job costing b) Activity-based costing c) Process costing d) Absorption costing

29. Which of the following is an example of a fixed cost?

a) Direct labor cost b) Cost of raw materials c) Rent for the factory building d) Sales commission

30. What is the term for the cost that is incurred when a company chooses one alternative over another?

a) Sunk cost b) Variable cost c) Opportunity cost d) Marginal cost