Cost Accounting Multiple Choice Questions and Answers for Practice

16. In cost accounting, the term "fixed cost" refers to costs that:

1. Vary with production volume
2. Do not change with production levels
3. Are incurred only when production is high
4. Depend on the number of units sold

17. What is a cost allocation method used for?

1. To distribute overhead costs to different departments or products
2. To track direct labor costs
3. To record sales revenue
4. To calculate gross profit

18. Which of the following is an example of a variable cost?

1. Direct materials
2. Rent on factory buildings
3. Depreciation on machinery
4. Salaries of management

19. The "cost of goods sold" is calculated as:

1. Beginning inventory + Purchases - Ending inventory
2. Direct materials + Direct labor + Factory overhead
3. Sales revenue - Total costs
4. Total production cost + Ending inventory

20. What is the role of "cost behavior analysis" in cost accounting?

1. To classify costs as fixed, variable, or mixed and understand their impact on production
2. To allocate costs between departments
3. To track actual costs against budgeted costs
4. To compute profitability ratios

21. What is the main objective of "budgetary control" in cost accounting?

1. To control costs by comparing actual performance with budgeted performance
2. To calculate break-even points
3. To allocate overhead costs
4. To manage direct costs effectively

22. What is a "fixed cost" per unit in cost accounting?

1. It decreases as production volume increases
2. It increases as production volume increases
3. It remains constant regardless of production volume
4. It is affected by changes in the cost of raw materials

23. What is the formula for calculating the contribution margin per unit?

1. Sales price per unit - Variable cost per unit
2. Sales price per unit - Fixed cost per unit
3. Selling cost per unit - Direct materials cost
4. Contribution margin ratio - Variable cost

24. What is the cost of goods manufactured?

1. The total cost incurred to produce goods during a specific period
2. The total cost of goods sold
3. The cost of raw materials purchased
4. The cost of selling and distribution

25. What is a "cost center" in cost accounting?

1. A department or function within an organization that is responsible for generating revenue
2. A unit or department where costs are incurred and measured
3. The process of allocating fixed costs to products
4. The overall cost of manufacturing

26. What is the "weighted average cost" method used for?

1. To assign costs to inventory using the average cost per unit
2. To determine the total cost of production
3. To allocate overhead costs to products
4. To calculate the cost of direct labor

27. Which of the following is NOT a feature of a "process costing" system?

1. Used for mass production of identical products
2. Costs are accumulated for each department
3. Unit costs are averaged over a period of time
4. Costs are assigned to specific jobs

28. What does "contribution margin ratio" represent?

1. The percentage of each sales dollar that contributes to covering fixed costs
2. The ratio of direct labor costs to total production costs
3. The fixed cost per unit produced
4. The proportion of direct material cost in the production process

29. What is "absorption costing"?

1. A method that assigns both fixed and variable manufacturing costs to the cost of a product
2. A method that assigns only variable costs to the cost of a product
3. A method that calculates the cost of labor and materials only
4. A method that calculates profit based on sales revenue

30. Which of the following is true about "marginal costing"?

1. Only variable costs are assigned to products
2. Fixed costs are not considered in product costing
3. It provides better information for decision-making
4. It is used for external financial reporting