Cost and Managerial Accounting

411. The cost expended in the past that cannot be retrieved on product or service

  1. Relevant Cost
  2. Sunk Cost
  3. Product Cost
  4. Irrelevant Cost
Correct answer: (B)
Sunk Cost

412. The combination of direct material and direct labor is :-

  1. Total production Cost
  2. Prime Cost
  3. Conversion Cost
  4. Total manufacturing Cost
Correct answer: (B)
Prime Cost

413. Prime cost + Factory overhead cost is:

  1. Conversion cost.
  2. Production cost.
  3. Total cost.
  4. None of given option.
Correct answer: (B)
Production cost.

414. Juniper Limited's budgeted overhead in the last period was 170,000. Its overhead absorbed and incurred for the same period were 180,000 and 195,000 respectively. What is its amount of over- or under-absorption of overhead?

  1. Under-absorption of 15,000
  2. Under-absorption of 25,000
  3. Over-absorption of 15,000
  4. Over-absorption of 25,000
Correct answer: (A)
Under-absorption of 15,000

415. The distinction between direct and indirect labour helps to:

  1. Measure efficiency of performance
  2. Determine product cost more accurately
  3. Ensure better cost analysis for decisions and control
  4. All of the above
Correct answer: (D)
All of the above

416. The objective of work study is:

  1. Material conservation
  2. Time saving
  3. Quality improvement and cost reduction
  4. All of the above
Correct answer: (D)
All of the above

417. Contribution margin contributes to meet which one of the following options?

  1. Variable cost
  2. Fixed cost
  3. Operating cost
  4. Net profit
Correct answer: (B)
Fixed cost

418. Non-monetary incentives may include the following except:

  1. Health and safety
  2. Housing facilities
  3. Education and training
  4. Dearness allowance
Correct answer: (D)
Dearness allowance

419. Production overheads are absorbed into production units by the use of an overhead absorption rate. Which one of the following best describes how the absorption rate is calculated?

  1. Total number of units produced divided by the total cost centre overheads.
  2. Total number of units produced multiplied by the unit overhead cost.
  3. Total cost centre overheads divided by the cost centre activity level.
  4. Total indirect costs for the business divided by the total number of units produced.
Correct answer: (C)
Total cost centre overheads divided by the cost centre activity level.

420. If a company uses predetermined overhead recovery rates and at the end of a period finds that there has been an under-recovery of overhead, which of the following best explains how the under-recovery has occurred?

  1. Actual overhead cost has exceeded the amount used as a basis for the establishment of the predetermined rate.
  2. Actual overhead cost has been less than the amount used as a basis for the establishment of the predetermined rate.
  3. Actual activity levels were higher than planned due to an increase in demand.
  4. An expected price increase in the overhead costs which was built into the overhead recovery rate did not take place.
Correct answer: (A)
Actual overhead cost has exceeded the amount used as a basis for the establishment of the predetermined rate.
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