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business
management cost accounting

Questions and Answers of Management Cost Accounting

Describe the various methods of absorption of overheads?
What do you understand by absorption of overheads?
Discuss the importance of MHR.
Explain the terms underabsorption and overabsorption.
The process of grouping costs according to their common characteristics is called(a) cost allocation (b) cost apportionment(c) cost department (d) cost classification
MHR is computed for(a) factory (b) all the machines(c) each machine (d) computers Ans: (c)
Factory overheads include all of the following except(a) salary of plant manager (b) depreciation on delivery department(c) small tool expenses (d) taxes on factory building Ans: (b)
Which of the following is usually classified as stepped cost?(a) telephone (b) raw materials(c) rates (d) supervisor’s wages Ans: (d)
Allotment of proportions of items of cost to cost centres or cost units is known as(a) allocation (b) absorption(c) measurement (d) apportionment Ans: (d)
The difference between the practical capacity and the capacity based on sales expectancy is termed as(a) idle capacity (b) ideal capacity(c) return capacity (d) ordinary capacity Ans: (a)
When the amount of overhead absorbed is less than the amount of overhead incurred, it is known as(a) underabsorption of overhead (b) overabsorption of overhead(c) proper absorption of overhead (d)
Wages of machine operator is included in(a) ordinary MHR (b) depreciation(c) plant (d) comprehensive MHR
The allotment of whole items of cost to cost centres or cost units is known as(a) allocation (b) absorption(c) measurement (d) apportionment Ans: (a)
Aggregate of indirect materials, labour and expenses is termed as(a) income (b) overhead(c) expenses (d) tax Ans: (b)
For calculating depreciation, scrap value is irrelevant.
Rent is apportioned based on the floor area.
Basis of apportionment of Crèche expense is the number of male employees.
Basis of apportionment of welfare department expenses is the number of employees.
Basis of apportionment of store’s service expenses is the value of the material consumed.
Underabsorption of overheads means that actual overheads are more than absorbed overheads.
Underabsorption of overhead results in understatement of cost.
MHR is separately computed for each machine.
A blanket overhead rate is a single overhead rate computed for the entire factory.
When actual overheads are more than absorbed overheads, it is known as overabsorption.
Calculate the overheads allocated to production departments A and B from the following: There are two service departments X and Y. X renders service to A and B in the ratio 3:2 and Y renders service
Indicate the basis you would adopt for apportionment of the following items of overhead expenses to different departments:(a) Factory rent(b) Factory lighting(c) Power(d) Depreciation of plant and
Explain the terms appropriation and apportionment of overheads.
Explain the differences between primary and secondary distribution of overheads.
What are the methods of secondary distribution of overheads?
What do you understand by allocation and apportionment in relation to overhead?
Explain various classifications of overheads.
Explain fixed, variable and semi-variable overheads.
What is the meaning of the term overhead?
Over which of the following costs is the management likely to have least control?(a) Advertising cost (b) Building insurance cost(c) Machine breakdown cost (d) Wage cost
Information regarding depreciation is obtained from(a) Plant register (b) Invoice(c) Cash book (d) Store requisition
Salary to a foreman should be classified as a(a) Variable overhead (b) Fixed overhead(c) Semi-variable or semi-fixed overhead (d) None of the above
Which of the following is not a selling overhead?(a) Royalty on sales (b) Distribution of samples(c) Legal cost for debt realization (d) Insurance to cover sold goods while in transit
Warehouse expenses is an example of(a) Factory overhead (b) Administrative overhead(c) Selling overhead (d) Distribution overhead
A cost seeking to create and stimulate demand and secure orders is(a) Distribution cost (b) Selling cost(c) Administrative cost (d) Research cost
Administration overheads are recorded as a percentage of(a) Works cost (b) Prime cost(c) Direct materials (d) Direct wages
Factory overheads should be absorbed on the basis of(a) Machine hours (b) Direct labour hours(c) Direct labour cost (d) Relationship to cost incurred
Packing cost is a(a) Manufacturing overhead (b) Selling overhead(c) Distribution overhead (d) Any of the above
Which of the following is a service department?(a) Finishing department (b) Refining department(c) Receiving department (d) Machine department
Variable overhead cost is a discretionary cost.State whether the following statements are true or false:
Depreciation is a semi-variable expense.State whether the following statements are true or false:
Fixed overhead cost is a committed cost.State whether the following statements are true or false:
Fixed overhead cost is an output cost.State whether the following statements are true or false:
Variable overhead cost is a periodic cost.State whether the following statements are true or false:
Director’s remuneration and expenses form a part of administrative overheads.State whether the following statements are true or false:
Cost of indirect material is apportioned to various departments.State whether the following statements are true or false:
Variable overheads vary with time.State whether the following statements are true or false:
Departments that assist producing departments indirectly are called service departments.State whether the following statements are true or false:
‘Factory overhead’ and ‘other expenses’ are synonymous terms.State whether the following statements are true or false:
Explain with the help of a chart the various elements of cost.
Bring out the important methods of costing.
What are the types of costing?
Explain the classification of cost in detail.
What do you mean by chargeable expenses?
What is a cost unit?
What do you mean by sunk cost?
Define absolute cost and discretionary cost.
What do you mean by imputed and inventoriable cost?
Define opportunity cost.
What do you mean by marginal cost?
Define the term predetermined and standard cost.
Salary for clerical staff is a(a) Indirect expense (b) Indirect labour(c) Indirect material (d) Direct expense
Royalty is considered as ______ expenses.(a) Direct expense (b) Indirect expense(c) Indirect material (d) Indirect labour
The practice of charging all costs, both variable and fixed costs, to operation is(a) Absorption costing (b) Operation cost(c) Multiple cost (d) Process costing
The ascertainment of cost after it has been incurred is(a) Job costing (b) Batch costing(c) Absorption costing (d) Historical costing
The ascertainment of marginal cost by differentiating between fixed and variable cost is(a) Standard costing (b) Marginal costing(c) Direct costing (d) Absorption cost
Historical cost incurred in the past are known as(a) Shutdown costs (b) Sunk cost(c) Differential cost (d) Predetermined cost
_____ cost concept is a short-run concept used in decision making related to fixation of selling price in recession.(a) Inventoriable cost (b) Sunk cost(c) Out-of-pocket cost (d) Imputed cost
_____ cost are not assigned to the product but are charged as expenses against revenue.(a) Discretionary cost (b) Period cost(c) Absolute cost (d) Sunk cost
A predetermined cost that is calculated from management standards of efficient operations is(a) Standard cost (b) Opportunity cost(c) Out-of-pocket cost (d) Shutdown cost
A cost that is computed in advance before production starts is(a) Marginal cost (b) Standard cost(c) Predetermined cost (d) Opportunity cost
Variable cost increases as the fixed cost.State whether the following statements are true or false:
Abnormal cost is controllable.State whether the following statements are true or false:
Costs and expenses are the same.State whether the following statements are true or false:
Costing and cost accounting are the same.State whether the following statements are true or false:
Sunk costs are relevant for decision making.State whether the following statements are true or false:
Total variable cost does not increase in total proportion to output.State whether the following statements are true or false:
Direct costs are those identified with a particular cost unit.State whether the following statements are true or false:
Variable cost per unit remains variable.State whether the following statements are true or false:
Fixed cost per unit remains fixed.State whether the following statements are true or false:
All costs are controllable.State whether the following statements are true or false:
’Freight paid should be added to the cost of a specific purchase.
‘Return to supplier’ is like an issue, but at the original purchase price.
‘Returned to store’ is treated like a fresh receipt and issue is as per the method used.
What are the conditions that favour the adoption of FIFO and LIFO methods?
Which of the pricing methods would you recommend under conditions of rising prices and why?
Indicate the different methods used for pricing materials.
Explain the merits and demerits of average cost method.
Write the advantages and disadvantages of LIFO method.
What is base stock?
Write a short note on average cost method.
What do you mean by standard price?
Write short notes on LIFO and FIFO methods.
A purchase requisition is prepared by(a) Storekeeper (b) Supplier(c) Foremen (d) Purchase manager
Materials are issued at the price prevailing at the time of issue in(a) Specific price method (b) Replacement price method(c) Inflated price method (d) Standard price method
A method of stock valuation seldom used by companies is(a) Standard cost (b) FIFO(c) LIFO (d) Weighted average cost

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