Amity Campus

Uttar Pradesh
India 201303

ASSIGNMENTS
PROGRAM: MFC
SEMESTER-II
Subject Name
Study COUNTRY
Roll Number (Reg.No.)
Student Name

:
:
:
: TOH LO-OH HONEST

INSTRUCTIONS
a) Students are required to submit all three assignment sets.
ASSIGNMENT
Assignment A
Assignment B
Assignment C

DETAILS
Five Subjective Questions
Three Subjective Questions + Case Study
Objective or one line Questions

MARKS
10
10
10

b)
c)
d)
e)

Total weightage given to these assignments is 30%. OR 30 Marks

All assignments are to be completed as typed in word/pdf.
All questions are required to be attempted.
All the three assignments are to be completed by due dates and need to be submitted for
evaluation by Amity University.
f) The students have to attached a scan signature in the form.

Signature :
Date
:

_________________________________

( ) Tick mark in front of the assignments submitted

Assignment
Assignment
A
B

Assignment
C

Cost Accounting
SECTION A:
Q1 What is cost accounting? What are its objectives?
Cost accounting is that part of accounting that deals with the systematic recording, summarizing and
reporting of cost informaion and oher quantitative data. The informatin generated by the cost accounting system
is used by organizations for internal purposes as well as external purposes. For this reasons, cost accounting
encompasses financial and management accounting. Internal sources in cost accounting is to provide cost
information to managres to assist them in decision making (management accounting). Some cost information is
provided to external users such as shareholders and creditors as part of financial statements.
The objective of cost accounting is to render information for guidance of the management for proper
planning, organizational control and decision making. Cost accounting helps management in the preparation of
cost sheet which is prepared usually to present the detailed costs of total production during the period in
question. The cost sheet provides informations relating to cost per unit at different stages of the total cost of
production or at different stages during completion of a product which will help to provide data about profitable
and unprofitable product and activities.
To conclude, cost accounting is an important tool in any organisation because of its numerous
advantages as listed below:
-An adequate cost accounting system ensures maximum utilization of physical &
human resources, checks fraud & manipulations & helps employees as well as the
employers in their basic goals of getting higher earnings & maximizing the profits
of the concern.
-Cost accounting also provides data cost data & information to determine the price
of the product
-Cost accounting helps management in avoiding losses arising due to many factors,
such as low demand, competitive conditions, change in technology, seasonal
demand for the product.
-All items of costs can be analyzed to minimize the losses & wastage emerging
from the manufacturing processes & reduce the costs associated with different
activities.
Q2 Briefly explain the different ways of classifying cost.
Cost which can be defined as an amount that has to be paid or spent by a company to produce a product
can be classified into different stages. Cost classification is the process of grouping costs according to their
common characteristics. Costs can be classified according by their by nature,functions, traceability variability,
controllability, normality, capital or revenue, time, association with product for managerial decisions and
according to planning and control.
According by nature of element costs are divided into three categories tht is material, labor and
overhead. Materials are further divided into direct material (which can be easyly traced to finishe d goods)
andindirect material ( which form a part of the manufacturing overheads). Labor refers to the human effort to
produce goods and services and it can also be further divided into direct labor ( employes who transforms direct
material into finish goods) and indirect labor (which is not traceable to the finish product).
Classifying costs by functions leads to grouping of costs according to the broad division of functions of
a business activities. Manufacturing and production costs includes the total of costs incurred in manufactured,
contruction, and fabrication of units of production and it comprises of direct material, direct labour and factory
overhead.
Costs can also be classified by variability. This clasification is based on the behaviour of cost in relation
to changes in the level of activity or volume of production. On this basis costs is classified into fixed, variable
and semi variable costs.

An organization is divided into a number of responsibility centers and

controllable costs incurred in a particular cost center can be influenced by the action of
the manager responsible for the center. Generally speaking, all direct costs including
direct material, direct labor and some of the overhead expenses are controllable by lower
level of management.
If the costs cannot be influenced by the action of a specified member of an undertaking,
that is to say, which are not within the control of management they are called
uncontrollable costs. Most of the fixed costs are uncontrollable
If the cost is incurred in purchasing assets either to earn income or increasing the
earning capacity of the business it is called capital cost. Revenue expenditure is any expenditure done in
order to maintain the earning capacity of the concern such as cost of maintaining an asset or running
a business.
To conclude, a suitable classification of costs is very helpful in identifying a given
cost with cost centers or cost units.
Q3 What do you mean by ABC analysis? State its advantages.
Activity based costing (ABC) is a managerial accounting system that estimates the cost of products and
services by assigning overhead costs to direct cost. Activity based costing(ABC) was developed to overcome
the shortcomings of the traditional method. Instead of just one cost driver such as machine hours, ABC will use
many cost drivers to allocate amanufacturers indirect costs. A few of the cost drivers that would be used under
ABCinclude the number of machine setups, the pounds of material purchased or used, the number of
engineering change orders, the number of machine hours, and so on. This costing method assigns the cost of
each activity in an organisation to all product and services according to the actual consumtion of the activity
resource of the product or service. The process of ABC entails the following steps.
-Analysis of activity
-Cost data gathering
-Tracing of cost activity
-Tracing of cost activity and
-Establishment of output metrics and cost analysis.
The major advantage of actvity based costing is the ability to estimate the cost of individual products
and services precisely by transferring overhead cost to individual unit of product or services. ABC helps
identify inefficient or non-profitable products or activitiesthat eat into the profitability of efficient process or
highly profitable products.
The advantages extend to
1. Making possible equitable and scientific pricing by reducing prices of products that use less activity
resources and increases prices of product that consume more of the firms activity resources.
2. Activity based cost management also helps in identifying the most and least profitable
customers, products and channels. It also assists in determining the true contributors toand detractors
from- financial performance. Moreover, activity based cost management equips managers with cost
intelligence to drive improvements.
3. By identifying cost pools, or activity centers, activity based accounting assigns costs to products and
services based on the number of transactions involved in the process of providing a product or
service. This supports managers to work out how to maximize shareholder value and improve
performance.
Other benefits of activity based costing include accurately predicting costs, profits and
resource requirements associated with changes in the organization. These changes might include changes in
production volumes, resource costs and organizational structure.
To conclude, activity Based Costing is a very helpful tool if your organization has clarity of
methodology and the process under observation.

Q4 What is idle time? What are the causes for idle time? How should idle time wages be treated in cost
Accounts?
Idle time means that time ffor which the employer pays , but from which he/she obtains no production..
otherwise it is the difference between the time for which workers are paid but the workers do no work which is
a lost therefore to the organisation. It can be minimised but it cannot be controlled. During idle time the workers
remain due and contribute nothing towards production. Idle time is actually the difference between actual hour
and actual hour work. For example if out of 6hours that a worker is suppoosed to put in the factory, the worker
job card shows only 4hours spent on the job, then the 2hours will be idle time in such a case.there are two types
of idle time. Normal and adnormal idle time. Normal time is is that idle time which which cannot be fully
avoided whereas adnormal idle time is that which arises due to various causes that can be avoided if proper
precautions are taken. Thus the factors which are responsible for controlling and avoiding idle time must be
taken care of.
Idle time indicates that time for which wages are paid to the workers but no production is obtained
during that time. The following are the causes of idle time:
Idle time may be caused due to machine breakdown. When there is a breakdown in a machine,
employees are bound to be idle till the mentenance department will take care of the problem. Other causes of
idle time will be power failure and employes waiting for instructions. Waiting for tools or raw materials to start
production constitute another cause for iddle time.economic factors such as seasonal, cyclical or industrial
nature also give rise to idle time.
The idle time wages should be treated in cost accounting as indirect labour cost and should therefore be
included in manufacturing overhead cost. This is so because the idle time is usually caused by a sudden fault in
machine failure, power failure, shortage of raw material, just to name a few. For example, the normal weekly
working hours of a worker are 48 and he is paid Rs, 80 per hour. If he remains idle for 6 hoursdue to power
failure then the cost of 42 hours would be treated as direct cost and the cost of 6hours (idle time) as indirect cost
and included in overhead manufacturing overhead cost.
To conclude, idle time is a lost to the organisation concern and proper precautions should be therefoer
taken in other to avoid the issue of idle time.
Q5 What is cost volume profit analysis? Explain.
Cost Volume-Profit (CVP) analysis a managerial accounting technique that is concerned with the effect
of sales volume and product costs on operaating profit of a business. It deals with how operating profit is
affected by changes in variable cost, fixed cost, selling price per unit and the sale mix of two or more different
products.
It has the following assumptions.
This analysis presumes that costs can be reliably divided into fixed and variable
category. This is very difficult in practice.
This analysis presumes an ability to predict cost at different activity volumes. In
practice, a lot of experience may be required to reliably develop this ability.
A series of break-even charts may be necessary where alternative pricing
policies are under consideration. Therefore, differential price policy makes
break-even analysis a difficult exercise.
It assumes that variable cost fluctuates with volume proportionally, while in
practical life the situation may be different.
This analysis presumes that efficiency and productivity remain unchanged. In
other words, this analysis presents a static picture of a dynamic situation.
The break-even analysis either covers a single product or presumes that product
mix will not change. A change in mix may significantly change the results.
This analysis disregards that selling prices are not constant at all levels of sales.

A high level of sales may only be obtained by offering substantial discounts,

depending on the competition in the market.
This analysis presumes that volume is the only relevant factor affecting cost. In
real life situations, other factors also affect cost and sales profoundly. Breakeven analysis becomes
over-simplified presentation of facts, when other factors
are unjustifiably ignored. Technological methods, efficiency and cost control
continuously influence different variables and any analysis which completely
disregards these over changing factors will be only of limited practical value.
108
This analysis presumes that fixed cost remains constant over a given volume
range. It is true that fixed costs are fixed only in respect of a given capacity, but
each fixed cost has its own capacity. This factor is completely disregarded in the
break-even analysis. While factory rent may not increase, supervision may
increase with each additional shift.
This analysis presumes that influence of managerial policies, technological
methods and efficiency of men, material and machine will remain constant and
cost control will be neither strengthened nor weakened.
This analysis presumes that production and sales will be synchronized at all
points of time or, in other words, changes in beginning and ending inventory
levels will remain insignificant in amount.
The analysis also presumes that prices of input factors will remain constant.
Cost Volume Profit analysis is applied in the following situation;
Planning and forecasting of profit at various levels of activity.
Useful in developing flexible budgets for cost control purposes.
Helps the management in decision-making in the following typical areas:
Identification of the minimum volume of activity that the enterprise must
achieve to avoid incurring loss.
Identification of the minimum volume of activity that the enterprise must
achieve to attain its profit objective.
Provision of an estimate of the probable profit or loss at different
levels of activity within the range reasonably expected.
The provision of data on relevant costs for special decisions relating to
pricing, keeping or dropping product lines, accepting or rejecting particular
orders, make or buy decision, sales mix planning, altering plant layout, channels
of distribution specification, promotional activities, etc.
Guide in fixation of selling price where the volume has a close relationship with
the price level.
Evaluates the impact of cost factors on profit.
To conclude, the application of cost-volume-profit relationship is restricted by the
assumptions on which it is based. Therefore, cost-volume-profit analysis cannot be used
indiscriminately.

SECTIONB:
Q1 What is standard costing? How is it different from Historical costing?
Standard costing can be defined as an estimated or predetermined cost of performing an operation or
producing a good or service under normal conditions. Stardard costs are used as target cost and are developed
from historical data analysis or from time and motion studies. Standard cost always vary from actual cost
because every situation has its share of unpredictable factors.
Historical costs are costs whereby materials and labour may be allocated based on passe dexperience.
Historical costs are a classification of costs bytime and it is a cost incurred in the past. It is the actual cost that
are certained after they are incurred. During the initial stages of developmentof cost accounting, historical
costing system like process costing contract costing service costing etc were available for ascertaining the cost.
The historical costing method are used to determined the cost incurred for the production of a particular
products or completion of a particular job. The historal costing suffer from several limitation. Some of them are
: No bias for control, no yardstick for mrasuring efficency and delay in the availibility of information.
Standard costiing is different from historical costing in that standard costing establishes predetermined
estimates of cost of products and services and compares these costs with the actual costs they incur. Standard
costing can be considerd as a yardstick to measure the efiency with actual cost incurred. Hence standard costing
which makes a comparism between the standard cost of each product or service with its actual cost to determine
the efficiency of the operationwith a view to take corrective actions at the earliest possible time. Thus standard
costing is the preparation and uses of standard costs which involves the following process;
Establishment of standard costs
Ascertainment of actual cost
Mesurement and analysis variances
Reporting to responsibilty centres to take appropriate and necessary remedial actions.

Q2 What is flexible budget. Explain

A budget is a plan for the futue. Hence,budgets are planning tools and they are usually prepared prior to
the start of the period being budgeted. However, the comparism of the budget to actual results provides valuable
information about performance.
A flexible budget is defined as a budget which by recognizing the difference between
fixed, semi-fixed and variable costs, is designed to change in relation to the level of
activity attained. The flexible budget is a performance evaluaton tool and it cannot be prepared before the end
of the period. It adjust the static budget for the actual level output. The flexible budget asks the question. if I
had known at the beginning of the period what my output volume will be, what would my budget look like?.
The motivation for flexible budget is to compare apples to apples. If the factorry actually produced 10000units
then management should compare actual factory costs for 10000units to what the factory should have spent to
make 10000units not to what the factory should have spent to make a 9000units or 11000units or any other
production level. A flexible budget is a budget that is prepared for a range, i.e., for more than one level of
activity. It is a set of alternative budgets to different expected levels of activity.
The following steps (stages) are involved in developing a flexible budget:
-Deciding the range of activity to which the budget is to be prepared.
-Determining the cost behavior patterns (fixed, variable, semi-variable) for each
element of cost to be included in the budget.
-Selecting the activity levels (generally in terms of production) to prepare
budgets at those levels.
-Preparing the budget at each activity level selected by associating the activity

level with corresponding costs. The corresponding costs to be attached with

each activity level are determined in terms of their behavior, i.e., fixed, variable
and semi-variable.
The flexible budget variances is the difference between any line-item in the flexible budget and the
corresponding line-item from the statement of actual results.The following steps are used to prepare a: flexible
budget
1.
Determine the budgeted variable cost per unit of output. Also determine the budgeted sales price per
unit of output, if the entity to which the budget applies generates revenue (e.g., the retailer or the hospital).
2.

Determine the budgeted level of fixed costs.

3.
Determine the actual volume of output achieved (e.g., units produced for a factory, units sold for a
retailer, patient days for a hospital).
4.
Build the flexible budget based on the budgeted cost information from steps 1 and 2, and the actual
volume of output from step 3.
Flexible budgets are prepared at the end of the period, when actual output is known. However, the same
steps described above for creating the flexible budget can be used prior to the start of the period to anticipate
costs and revenues for any projected level of output.

Q3 What is responsibility Accounting. Explain the responsibility centers.

Responsibility accounting is a management control system based on the principles of
delegating and locating responsibility. The authority is delegated on responsibility centre
and accounting for the responsibility centre. Responsibility accounting is a system under
which managers are given decisions making authority and responsibility for each activity
occurring within a specific area of the company. Under this system, managers are made
responsible for the activities of segments. These segments may be called departments,
branches or divisions etc., one of the uses of management accounting is managerial
control. Among the control techniques, responsibility accounting has assumed
considerable significance. While the other control devices are applicable to the
organization as a whole, responsibility accounting represents a method of measuring the
performance of various divisions of an organization. The term division with reference
to responsibility accounting is used in general sense to include any logical segment,

component, sub-component of an organization. Defined in this way, it includes a

decision, a department, a branch office, a service centre, a product line, a channel of
distribution, for the operating performance.
Responsibility Accounting is also a system of management accounting under which
accountability is established according to the responsibility delegated to various levels of
management and management information and reporting system instituted to give
adequate feed back in terms of the delegated responsibility.
The significance of responsibility accounting for management can be explained in the
following way:
Responsibility accounting enables the identification of individual managers responsible for
satisfactory or unsatisfactory performance and motivational benefits are assured if the system is implemented.
Furthermore a mechanism for presenting performance data is provided. A framework of
managerial performance appraisal system can be established on that basis, besides motivating managers
to act in the best interests of the enterprise.
Relevant and up to the minutes information is made available which can be used to
estimate future costs and or revenues and to fix up standards for departmental
budgets and also responsibility accounting helps not only in control but in planning and decision
making too.
The main features of responsibility accounting are that it collects and reports planned and
actual accounting information about the inputs and outputs of responsibility accounting.
Responsibility accounting is a method of dividing the organizational structure into
various responsibility centers to measure their performance. In other words responsibility
accounting is a device to measure divisional performance measurement may be stated as
under:
1. To determine the contribution that a division as a sub-unit makes to the total
organization.
2. To provide a basis for evaluating the quality of the divisional managers performance.

Responsibility accounting is used to measure the performance of managers and it

therefore, influence the way the managers behave.
3. To motivate the divisional manager to operate his division in a manner consistent with
the basic goals of the organization as a whole.

CASE STUDY:
A retail dealer in garments is currently selling 24000 shirts annually. He supplies the following details for the
year ended 31st December,2007.
Rs
Selling Price per shirt
40
Variable Cost per shirt
25
Fixed cost:
staff salaries for the year
120000
General office cost for the year
80000
Advertising costs for the year
40000
As a cost accountant of the firm, you are required to answer the following each part independently:(i)
Calculate the break-even point and margin of safety in sales revenue and no of shirts sold.
(ii)
Assume that 20000 shirts were sold in a year. Find out the net profit of the firm.
(iii)
If it is decided to introduce selling commission of Rs 3 per shirt, how many shirts would require to
be sold in a year to earn a net income of Rs 15000/-.

SECTION C
Q1
(a)
(b)
(c)
(d)

Which of the following best describes a fixed cost? A cost which:

Remains at the same level up to a particular level of output
Has a direct relationship with output
Represents a fixed proportion of total costs
Remains at the same level when output increases

Q2 A business's telephone bill should be classified into which one of these categories?
(a)
Fixed cost
(b)
Stepped fixed cost
(c)
Semi-variable cost
(d)
Variable cost
Q3 The total production cost for making 20,000 units was 21,000 & total production cost for making 50,000
was 34,000. When production goes over 25,000 units, more fixed costs of 4,000 occur. So full production
cost per unit for making 30,000 units is:
(a)
0.30
(b)
0.68
(c)
0.84
(d)
0.93
Q4 Which of the following is least likely to be an objective of cost accounting system?
(a) Product Costing
(b) Optimum Sale Mix determination
Maximization of profits
(d)
Sales Commission determination
Q5 The classification of costs as either direct or indirect depends upon
(a) The timing of the cash outlay for the cost
(b)
The cost object to which the cost is being related
(c) The behavior of the cost in response to volume changes
(d) Whether the cost is expensed in the period in which it is incurred
Q6 Which of the following is false with regard to the supplementary rate method for accounting of under or
over absorption of overheads?
(a) It facilitates the absorption of actual overhead for production
(b) Correction of costs through supplementary rates is necessary for maintaining data for
comparison
(c) The supplementary rate can be determined only after the end of the accounting period
(d) It requires a lot of clerical work
(e)
The value of stock is distorted under this method.
Q7 Which of the following factors should not be taken into consideration for determining the basis for
applyingoverheads to products?
(a) Adequacy
(b) Convenience
(c) Time factor
(d)
Seasonal fluctuation of overhead costs
(e) Manual or machine work.
Q8 Storekeeping expenses are to be apportioned on the basis of
(a) Floor area of the production departments

(b) Direct labor hours of each product

(c) Number of units manufactured of each product
(d)
Number of material requisitions
(e) Sales price of each product.
Q9 A company has a margin of safety of Rs.40 lakh and earns an annual profit of Rs.10 lakh. If the fixed costs
amount toRs.20 lakh, the annual sales will be
(a) Rs.160 lakh
(b) Rs.140 lakh
(c) Rs.120 lakh
(d)Rs.200 lakh
(e) Rs.180 lak
Q10 Which of the following statements is false with respect to the use of predetermined overhead absorption
rates?
(a) Product cost can be worked out promptly
(b) Use of predetermined overhead rate will provide data available for decision making but
not for cost control
(c) Product costs are not affected unnecessarily due to the vagaries of the calendar or
seasonal fluctuations
(d) By using normal capacity as base while determine the overhead rate, losses due to idle
capacity is highlighted and real cost of production is reflected
(e) Product cost can be estimated prior to commencement of production and can help the
management in price quotation and fixing selling price well in advance.
Q11 In process costing, equivalent units, using first in first out (FIFO) are a measure of
(a) Work done on the beginning as well as ending work-in-process inventory
(b) Work done on units started in the production process during the period
(c) Work done in the department during the period
(d) Work required to complete the beginning work-in-process inventory
(e) Work performed on the ending work-in-process inventory.
Q12 A companys approach to a make or buy decision
(a) Depends on whether the company is operating at or below break-even level
(b) Depends on whether the company is operating at or below normal volume
(c) Depends on whether the company is operating at practical capacity level
(d) Involves an analysis of avoidable costs
(e) Requires use of absorption costing.
Q13 Which of the following statements is false?
(a)
Historical costs are useful solely for estimating costs that lie ahead
(b) Abnormal cost is controllable
(c) Conversion cost is the production cost minus direct material cost
(d) Administrative expenses are mostly fixed
(e) Notional costs are not included while ascertaining costs.
Q14 Ramesha Ltd. manufactures product DN for last seven years. The company maintains a margin of safety of
37.5%with an overall contribution to sales ratio of 40%. If fixed cost is Rs.5 lakh, the profit of the company is
(a) Rs.12.50 lakh
(b) Rs. 4.25 lakh
(c) Rs. 3.00 lakh
(d) Rs.24.00 lakh

(e) Rs.20.00 lakh.

Q15 Which of the following statements is true for a firm that uses variable costing?
(a) Profits fluctuate with sales
(b) An idle facility variation is calculated
(c) Product costs include variable administrative costs
(d)
Product costs include variable selling costs
(e)The cost of a unit of product changes because of changes in number of units
manufactured.
Q16 If the price rises, which of the following methods of valuing stock will give the highest profit?
(a) LIFO method
(b)
Replacement cost method
(c) FIFO method
(d) Simple average method
(e) Specific order method.
Q17 An accounting system that collects financial and operating data on the basis of underlying nature and
extent to the costdrivers is
(a) Direct costing
(b) Target costing
(c)
Activity based costing
(d) Variable costing
(e) Cycle-time costing.
Q18 In allocating factory service department costs to producing departments, which of the following items
would mostlikely be used as an activity base?
(a)
Salary of service department employees
(b) Units of electric power consumed
(c) Direct materials usage
(d) Units of finished goods shipped to customers
(e) Units of product sold.
Q19 Apportionment of overhead cost may be defined as
(a) Charge to a cost center of an overhead cost item with no estimation
(b) Charge to cost center for the use of an overhead cost
(c) Charge to cost units for the use of an overhead cost
(d) Classification of overhead cost as fixed or variable
(e)
Charge each cost center with a share of an overhead cost using an apportionment basis
to estimate the benefit extracted by each cost center.
Q20 An increase in variable costs where selling price and fixed cost remain constant will result in which of the
following?
(a) An increase in margin of safety
(b) No change in margin of safety
(c) A fall in the sales level at which break even point will occur
(d) A rise in the sales level at which break even point will occur
(e) No change in the sales level at which break even point will occur.
Q21 Which of the following is a cause of materials usage variance?
(a) Emergency buying in smaller quantities
(b) Carriage, freight and other charges absorbed instead of being charged to suppliers

(c)
Cash discount not taken
(d) Rectification required when many components do not pass through inspection
(e) Claims not made on suppliers for substandard materials or short receipt of materials.
Q22 The following are the causes of labour efficiency variance except
(a)
Bad working condition
(b) Defective tools, equipment and materials
(c) Defective supervision
(d) Bad workmanship due to dissatisfaction among the workers
(e) Employing people of different grades than planned.
Q23 Which of the following transfer pricing methods will preserve the sub-unit autonomy?
(a) Cost-based pricing
(b) Negotiated pricing
(c) Variable-cost pricing
(d) Full-cost pricing
(e) Marginal cost pricing.
Q24 The most fundamental responsibility center affected by the use of market-based transfer prices is
(a) Revenue center
(b) Cost center
(c) Profit center
(d) Investment center
(e) Production center.
Q25 Target pricing
(a) Is a pricing strategy used to create competitive advantage
(b) Considers the variable costs and excludes fixed costs
(c) Is often used when costs are difficult to control
(d) Is more appropriate when applied to mature and long-established products
(e) Is well suited for complex products that require many sub-assemblies.
Q26 A segment of an organization is referred to as a profit center if it has
(a) Responsibility for developing markets and selling the output of the organization
(b) Responsibility for combining materials, labor and other factors of production into a final output
(c) Authority to provide specialized support to other units within the organization
(d) Authority to make decisions affecting the major determinants of profit, including the power to choose its
markets and sources of supply
(e) Authority to make decisions affecting the major determinants of profit, including the power to choose its
markets and sources of supply and significant control over the amount of invested capital.
Q27 Which of the following is false about standard costing system?
(a) It is based on a cost control concept
(b) It assumes stability in the current manufacturing process
(c)
The goal is to meet cost performance standards
(d) It assumes production workers have the best knowledge to reduce costs
(e) It motivates employees to try to reach target established.
Q28 Which of the following service departments costs is apportioned on the basis of rate of labor turnover?
(a) Payroll department
(b)
Personnel department
(c) Canteen service

(d) Store-keeping department

(e) Maintenance department.
Q29 Which of the following bases is appropriate to apportion the cost incurred on supervision of machine?
(a)
Floor area occupied by each machine
(b) Equitable basis
(c) Value of each machine
(d) On the basis of past experience
(e) Estimated time devoted.
Q30 Which of the following bases is used for apportionment of overtime premium of workers engaged in a
particular department?
(a) Direct allocation
(b)
Direct labor hours
(c) Number of workers
(d) Technical estimates
(e) Relative areas of departments.
Q31 The rate used in addition to the original rates for ascertaining the true profit for adjusting the under or over
absorption of
overheads is known as
(a) Predetermined rate
(b) Blanket rate
(c)
Moving average rate
(d) Supplementary overhead rate
(e) Multiple overhead rate.
Q32 Any activity for which a separate measurement of costs is desired is known as
(a) Cost unit
(b)
Cost center
(c) Cost object
(d) Cost pool
(e) Cost allocation.
Q33 Which of the following is true regarding the difference between marginal costing and absorption costing?
(a)Under marginal costing, fixed costs are treated as product costs while it is excluded under absorption costing
(b)Under absorption costing, under absorption or over absorption of overhead occurs but it does not occur under
marginal costing
(c)The net income under absorption costing is always more than the net income under marginal costing
(d)If production is equal to sales, net income under absorption costing is greater than net income under marginal
costing
(e)In case of decreased inventory, the net income under marginal costing is less than the net income under
absorption costing.
Q34 Which of the following statements is false?
(a) The aggregate of indirect material, indirect wages and indirect expenses is overhead costs
(b)
Direct costs are never treated as overhead costs even in cases where efforts
involved in identifying and accounting are disproportionately large
(c)The overheads can be apportioned to a cost center in accordance with the principles of benefit and/or
responsibilities
(d) Capital expenditure should be excluded from costs and should not be treated as overhead
(e) Expenditure that does not relate to production shall not be treated as overhead.

Q35 An increase in variable costs where selling price and fixed cost remain constant will result in which of the
following?
(a) An increase in margin of safety
(b) A fall in the sales level at which break even point will occur
(c) A rise in the sales level at which break even point will occur
(d) No change in the sales level at which break even point will occur
(e)No change in angle of incidence.
Q36 Which of the following statements is true for a firm that uses variable costing?
(a)
Product costs include variable selling costs
(b) An idle facility variation is calculated
(c) The cost of a unit of product changes because of changes in number of units manufactured
(d) Profits fluctuate with sales
(e) Product costs include variable administrative costs.
Q37 Which of the following can improve break-even point?
(a) Increase in variable cost
(b) Increase in fixed cost
(c) Increase in sale price
(d)
Increase in sales volume
(e) Increase in production volume.
Q38 Which of the following statements is/are true?
I. A cost unit is a unit of output in the production of which costs are incurred.
II. A cost center is the smallest segment of activity or area of responsibility for which costs are accumulated.
III. Typically departments are cost centers and there may be many departments in a cost center.
(a) Only (I) above
(b) Only (II) above
(c) Both (I) and (III) above
(d)
Both (I) and (II) above
(e) Both (II) and (III) above.
Q39 The Rowan Plan
(a)
Is the best for efficient workers
(b)
Pays lower bonus that that of Halsey beyond 50% saving in time.
(c)
Pays increased bonus at an increasing rate as the efficiency
(d)
None of the above
Q40 A written request to a supplier for specified goods at an agreed upon price is called a
(a) Receiving Report
(b)
Purchase order
(c) Material requisition form
(d) Purchase requisition