Cost and Managerial Accounting

1. Abnormal cost is the cost:

  1. Cost normally incurred at a given level of output
  2. Cost not normally incurred at a given level of output
  3. Cost which is charged to customer
  4. Cost which is included in the cost of the product
Correct answer: (B)
Cost not normally incurred at a given level of output

2. Describe the method of costing to be applied in case of Nursing Home:

  1. Operating Costing
  2. Process Costing
  3. Contract Costing
  4. Job Costing
Correct answer: (A)
Operating Costing

3. Total cost of a product: Rs. 10,000
Profit: 25% on Selling Price
Profit is:

  1. Rs. 2,500
  2. Rs. 3,000
  3. Rs. 3,333
  4. Rs. 2,000
Correct answer: (C)
Rs. 3,333

4. Out of the following, what is not the work of purchase department:

  1. Receiving purchase requisition
  2. Exploring the sources of material supply
  3. Preparation and execution of purchase orders
  4. Accounting for material received
Correct answer: (D)
Accounting for material received

5. Which of the following is an abnormal cause of Idle time:

  1. Time taken by workers to travel the distance between the main gate of factory and place of their work
  2. Time lost between the finish of one job and starting of next job
  3. Time spent to meet their personal needs like taking lunch, tea etc.
  4. Machine break downs
Correct answer: (D)
Machine break downs

6. Calculate the labour turnover rate according to replacement method from the following:
No. of workers on the payroll:
- At the beginning of the month: 500
- At the end of the month: 600

During the month, 5 workers left, 20 workers were discharged and 75 workers were recruited. Of these, 10 workers were recruited in the vacancies of those leaving and while the rest were engaged for an expansion scheme.

  1. 4.55%
  2. 1.82%
  3. 6%
  4. 3%
Correct answer: (B)
1.82%

7. During a period 17, 500 labour hours were worked at a standard cost of Rs 6.50 per hour. The labour efficiency variance was Rs 7,800 favourable. How many standard hours were produced?

  1. 1,200
  2. 16,300
  3. 17,500
  4. 18,700
Correct answer: (D)
18,700

8. In process costing, if an abnormal loss arises, the process account is generally

  1. Debited with the scrap value of the abnormal loss units
  2. Debited with the full production cost of the abnormal loss units
  3. Credited with the scrap value of the abnormal loss units
  4. Credited with the full production cost of the abnormal loss units
Correct answer: (D)
Credited with the full production cost of the abnormal loss units

9. In case of joint products, the main objective of accounting of the cost is to apportion the joint costs incurred up to the split off point. For cost apportionment one company has chosen Physical Quantity Method. Three joint products 'A', 'B' and 'C' are produced in the same process. Up to the point of split off the total production of A, B and C is 60,000 kg, out of which 'A' produces 30,000 kg and joint costs are Rs. 3,60,000. Joint costs allocated to product A is

  1. Rs. 1,20,000
  2. Rs. 60,000
  3. Rs. 1,80,000
  4. None of the these
Correct answer: (C)
Rs. 1,80,000

10. Re-order level is calculated as:

  1. Maximum consumption x Maximum re-order period
  2. Minimum consumption x Minimum re-order period
  3. 1/2 of (Minimum + Maximum consumption)
  4. Maximum level - Minimum level
Correct answer: (A)
Maximum consumption x Maximum re-order period
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