INCOME TAX NOTES

UGC NET COMMERCE- Accounting & Auditing-(Unit-2) (Question-Answer) Part-2




50. Which of the following is not an 

assumption underlying the accountant‘s break-even chart? 

a. Fixed costs remain fixed throughout 

the range charted 

b. Selling prices do not change 

c. Variable costs fluctuate inversely with 

volume 

d. Unit variable costs remain constant 

throughout the range charted 

51. Which of the following is/are the basic object/s of job analysis? 

a. Determination of wage rates 

b. Ascertain the relative worth of each 

job 

c. Breaking up job into its basic elements 

d. All of the given options 

52. Analysis of selling and distribution 

overheads is done by: 

a. Nature of expenses and functions 

b. Areas, products and salesmen 

c. Types of customers and channels of 

distribution 

d. All of the above 

53. For exercising control over selling and 

distribution overheads, the following techniques may be used: 

a. Comparison with past results 

b. Budgetary control 

c. Standard costing 

d. All of the above 

54. Depreciation is a: 

a. Measure of consumption of assets 

b. Process of allocation and not of 

valuation 

c. Wear and tear due to use and/or lapse 

of time 

d. All of the above 

55. Which of the following does not 

influence the useful life of an asset? 


a. Expected physical wear and tear 

b. Cost of the asset 

c. Obsolescence 

d. Legal or other limits on the use of the 

asset 

56. For computing depreciation of an 

asset, the factors that are taken into consideration include the following except: 

a. Historical cost 

b. Expected useful life 

c. Insurance premium 

d. Estimated residual value 

57. Depreciation on plant and machinery 

is : 

a. Not a cash cost, so is ignored in the 

cost accounts 

b. Part of manufacturing overheads 

c. Part of prime cost 

d. Always calculated using the straight- 

line method 

58. Which of the following methods of 

depreciation results in fixed per unit cost of depreciation? 

a. Straight line 

b. Reducing balance 

c. Sinking fund 

d. Production unit 


59. Types of maintenance include the 

following except: 

a. Routine 

b. Overhaul 

c. Emergency 

d. Periodic 

60. Which of the following is not included in the objectives of maintenance of plant and machinery? 

a. Reducing idle time 

b. Reducing breakdown 

c. Maintaining efficiency 

d. Increasing life 

61. Regular maintenance expenses are : 

a. Capitalized 

b. Part of manufacturing overheads 

c. Written-off to costing profit and loss 

account 

d. Part of prime cost 

62. Obsolescence is the measure of the loss of value of an asset due to : 

a. Technological innovation 

b. Changes in market conditions 

c. Both (a) and (b) above 

d. None of the above 

63. Which of the following is not a 

production cause of idle capacity? 

a. Set-up and change-over time 

b. Lack of supervision and instruction 

c. Lack of materials and tools 

d. Strike 

64. Functionally, administration expenses 

may comprise expenses of the following activities: 

a. Secretarial and board of directors 

b. Accounting, financing, tax and legal 

c. Audit and personnel 

d. All of these 

65. Which of the following is not a 

possible method of accounting for administration overheads? 

a. Include as part of production 

overheads 

b. Apportion to production, selling and 

distribution functions 

c. Treat administration as a separate entity and treat the costs as such 

d. Transfer to costing profit and loss 

account 

66. Which of the following is not used as 

a base for apportionment of administration overheads? 

a. Direct wages 

b. Works cost 

c. Conversion cost 

d. Sales value 

67. In account ting for labourcost: 

labour cost are charged to prime cost 

b. Direct labour cost and indirect labour 

cost are charged to overheads 

c. Direct labour cost is charged to prime 

cost and indirect labour cost is charged to overheads 


a. A. direct labour cost and indirect 

d. All of the above 

68. Productive causes of idle time include 

the following except : 

a. Power failure 

b. Fall in demand 

c. Machine breakdown 

d. Waiting for materials, tools, 

instructions, etc. 

69. The treatment of idle time in cost 

includes the following: 

a. Cost of normal and controllable idle 

time is charged to factory overheads 

b. Cost of normal but uncontrollable idle 

time is treated as prime cost 

c. Cost of abnormal and uncontrollable 

idle time is charged to costing profit and loss account 

d. All of the above 

70. Overtime premium may be treated, 

depending on the circumstances, as: 

a. Part of direct wages 

b. Part of production overheads 

c. Part of capital order 


d. All of the above 

71. A manufacturing firm is very busy and is working overtime. The amount of overtime premium contained in direct wages would normally be classed as: 

a. Part of prime cost 

b. Factory overheads 

c. Direct labour cost 

d. Administrative overheads 

72. Fringe benefits are those for which 

efforts of the workers are not necessary and may include the following except: 

a. Holiday pay 

b. Attendance bonus 

c. Production bonus 

d. Employer‘s contribution to P.F. 

73. Avoidable causes of labour turnover 

include the following except: 

a. Redundancy 

b. Low wages 

c. Bad working conditions 

d. Marriage 

74. The unavoidable causes of labour turnover include the following except: 

a. Personal betterment 

b. Dissatisfaction with the job 

c. Illness 

d. Retirement 

75. Labour turnover can be measured by 

the following methods except: 

a. Attrition method 

b. Separation method 

c. Replacement method 

d. Flux method 

76. At the start of the quarter there were 

14,630 workers. 750 employees left during the quarter while 600 joined the organization during the same period. Using the flux method, the labour turnover was: 

a. 5.13% 

b. 9.23% 

c. 9.32% 

d. 9.28% 

77. Which of the following is not a cost 

implication of labourturnover? 

a. Training 

b. Recruiting 

c. Ageing labour force 

d. Damage of machine 

78. Preventive costs of labour turnover 

include the following except: 

a. Cost of recruitment and training 

b. Medical services 

c. Welfare 

d. Gratuity and pension 

79. Replacement costs of labour turnover 

include the following except : 

a. Loss of output 

b. Cost of personnel administration 

c. Cost of tool and machine breakage 

d. Cost of scrap and defective work 


80. Cost of labour turnover may be 

treated as : 

a. Direct wages 

b. Prime cost 

c. Overhead 

d. None of the above 

81. 1) labour cost control leads to 

minimization of cost of labour per unit of output. (2) When labour cost is fixed nature, any reduction in total labour cost may not result in lower cost per unit. True or false? 

(a. (1) True; (2) False 

b. (1) False; (2) True 

c. (1) and (2) False 

82. Labour cost control embraces the 

following activities except: 


a. Recruitment and promotion 

b. Formulation of wage policy and 

payment and accounting for wages 

c. Allocation of cost 

d. Preparation of financial statement 

83. (1) Payment of higher wages does not necessarily mean that labour cost per unit is high. (2) Control over payment of wages aims at reducing or eliminating irregularities during actual disbursements. True or False? 

a. (1) and (2) True 

b. (1) and (2) False 

c. (1) False; (2) True 

d. (1) True; (2) False 

84. Which of the following techniques is 

not meant for labour cost control? 

a. Budgetary control 

b. Standard costing 

c. ABC analysis 

d. Ratio analysis 

85. Ratios which may be used for 

comparing labour cost over time include the following except : 

a. Gross profit ratio 

b. Efficiency ratio 

c. Illness ratio 

d. Absenteeism ratio 

86. Cost of production is equal to 

a. Prime costs+ other manufacturing 

costs. 

b. Production costs + Administration 

expenses. 

c. Prime costs + Manufacturing costs + 

Opening W.I.P – Closing W.I.P. 

d. None of the above. 

87. The cost of goods sold is equal to 

a. Total Purchases - Total Sales. 

b. Opening stock + Total Purchase. 

c. Opening stock - Total Purchases 

+Closing Stock+ Direct Costs. 

d. Opening stock + Total Purchases – 

Closing Stock + Direct Costs. 

88. Which of the following is false 

regarding the LIFO method of inventory valuation? 

a. The material issue will be priced at the price of the material that is purchased last. 

b. The pattern of cash flow does not 

necessarily coincide with the actual flow pattern of materials. 

d. LIFO determines closing inventory at 

recent costs. 

89. Which of the following is NOT a 

operations 

purchase-order size 

c. To make the system less productive 

d. To meet variation in product dem 


c. It permits management to influence net income by timing the purchases. 

reason for carrying inventory? 

a. To maintain independence of 

b. To take advantage of economic 

90. Which of the following is TRUE regarding Departmental Rates. 

a. A departmental absorption rate is a rate of absorption based upon the particular department's overhead cost and activity level 

b. A departmental absorption rate is a rate 

of absorption not based upon the particular department's overhead cost and activity level 

c. A single rate of absorption used 

throughout an organization‘s production facility and based upon its total production costs and activity 

d. None of the given options 

91. Inventory of ` 96,000 was purchased during the year. The cost of goods sold was ` 90,000 and the ending inventory was ` 18,000. What was the inventory turnover ratio for the year? 

a. 5.0 times 

b. 5.3 times 

c. 6.0 times 

d. 6.4 times 

92. In a perpetual inventory system, an 

inventory flow assumption (i.e. LIFO or FIFO) is used 


primarily for determining costs which are used in 

a. Forecasts of future sale. 

b. Recording the cost of goods sold. 

c. Recording Sales Revenue. 

d. Forecasts of future operating results. 

93. The factors to be taken into 

consideration in formulating incentive schemes include: 

a. Quantity and quality of output 

b. Incidence of overhead, and effect 

upon workers 

c. Simplicity and legal provisions 

d. All of the above 

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

a. Variable cost 

b. Fixed cost 

c. Operating cost 

d. Net profit 

95. Favorable conditions for the 

operation of piece rates include: 

a. Homogeneous products 

b. Long, uninterrupted run of production 

c. Inspection 

d. High proportion of indirect labour 

96. If time allowed for a job is 10 hours, time taken for the job is 8 hours and rate of pay is ` 2 per hour, the bonus to the worker is : 

a. ` 1.20 

b. ` 2.00 

c. ` 3.20 

d. None of the above 

97. Group bonus schemes are generally 

suitable where: 

a. Output depends on individual efforts 

b. Output of individual workers can be 

measured easily 

c. It is necessary to create a collective 

interest in the work 

d. Normal loss rate is high 

98. In a profit sharing scheme the 

available surplus is shared by the following except: 

a. Government 

b. Shareholders 

c. Employees 

d. Firm 

99. Non-monetary incentives may include 

the following except: 

a. Health and safety 

b. Housing facilities 

c. Education and training 

d. Dearness allowance 

100. The purposes served by 

preparation of payroll or wages sheet include: 

a. Spreading the volume of work to be 

done 

b. Computation of labour rate for each 

department 

c. Comparing actual wages with budgeted wages for control 

d. All of the above 

101. The authorized heads of 

deduction from wages payable include the following except : 


a. Car allowance 

b. Income tax 

c. Provident fund 

d. Employees‘state insurance 

102. Wages analysis include : 

a. Gross wages per product 

b. Gross wages per operation or 

department 

c. Gross wages per labour classification 

d. Analysis of constituent of gross wages 

– direct/ lost time 

103. The inventory method where the cost per unit is recomputed after every addition in the inventory is known as. 

a. Specific identification method. 

b. Moving average method. 

c. Last-in- First – Out method. 


d. First-in-First-Out method. 

104. Which of the following inventory valuation methods shows higher profits during the period of rising prices? 

a. FIFO method. 

b. LIFO method. 

c. Weighted average method. 

d. Simple average method. 

105. Which of the following systems of inventory valuation computes cost of goods sold as a residual amount? 

a. Weighted Average. 

b. Last-in-First-out. 

c. Periodic Inventory System. 

d. Specific Identification. 

106. Which of the following is 

calculated by a formula that uses net sales as denominator? 

a. Inventory turnover ratio 

b. Gross profit rate 

c. Return on Investment 

d. None of the given options 

121. Overhead expenses can be classified 

according to: 

a. Functions 

b. Elements 

c. Behavior 

d. All of the above 

122. Which of the following is not 

included in functional classification of overheads? 

a. Repairs and maintenance 

b. Lubricating oil 

c. Consumable stores 

d. Chargeable expenses 

123. Which of the following is not an 

example of marketing overheads? 

a. Salary of the foreman 

c. Salaries of sales staff 

d. Secondary packing charges 

124. Some overhead charges tend to vary 

almost directly, some tend to remain constant while some again vary in part with the volume and in part remain constant. This statement describes sequentially the following: 

a. Variable, fixed and semi-variable 

overheads 

b. Fixed, semi-variable and variable 

overheads 

c. Semi-variable, variable and fixed 

overheads 

d. Variable, semi-variable and fixed 

125. Suppose a firm sells its product at a 

price lower than the opportunity cost of the inputs used to produce it. Which is true? 

a. The firm will earn accounting and 

economic losses. 


b. Publicity expenses 

overheads 

economic profits. 

b. The firm will face accounting and 

c. The firm will face an accounting loss, 

but earn economic profits. 

d. The firm may earn accounting profits, 

but will face economic losses. 

126. Example of semi-variable items 

include the following except: 

a. Telephone 

b. Repairs and maintenance 

c. Depreciation of plant and machinery 

d. Insurance of plant and building 

127. Direct Labor is an element of: 

a. Prime cost 

b. Conversion cost 

c. Total production cost 

d. All of the given options 

128. Which of the following is not a 

production department? 

a. Power department 


b. Machining department 

c. Refining department 

d. Finishing department 

129. Which of the following does not 

match? 

Item of cost Basis of cost allocation 

a. Power H.P. of machine 

b. Supervision of building value of 

materials consumed 

c. Insurance of building area occupied 

d. Time-keeping number of employees 

130. (1) Departmentalization of items of 

costs is known as primary distribution. 

(2) Redistribution of service departments, costs is known as secondary distribution. True or false? 

a. (1) and (2) true 

b. (1) and (2) false 

c. (1) False; (2) True 

d. (1) True; (2) False 

131. Which of the following costs is not a 

factory overhead expense? 

a. Depreciation of equipment used in the 

research department 

b. Salary of quality control inspector 

c. Overtime premium paid to direct 

labour 

d. Machine maintenance labour cost 

132. Which of the following bases would 

be most appropriate to apportion the cost of electric power to factory departments? 

a. Number of outlet points 

b. Amount metered out 

c. Cubic capacity of premises 

d. Kilowatt capacity of machines in 

department 

133. A method of dealing with overheads 

involves spreading common costs over cost centres on the basis of benefit received. This is known as 

a. Overhead absorption 

b. Overhead apportionment 

c. Overhead identification 

d. Overhead analysis 

134. The process of cost apportionment 

is carried out so that : 

a. Costs may be controlled 

b. Cost units gather overheads as they 

pass through cost centres 

c. Whole items of cost can be charged to 

cost centres 

d. Common costs are shared among cost 

centres 

135. An overhead absorption rate is used 

to : 

a. Share out common costs over 

benefiting cost canters 

b. Find the total overheads for a cost 

centre 

c. Charge overheads to products 

d. Control overheads 

136. Which of the following is not a 

means whereby factory overheads can be charged out to production? 

a. Direct labour rate 

b. Overtime rate 

c. Machine hour rate 

d. Blanket rate 


137. A management consultancy recovers 

overheads on chargeable consulting hours. Budgeted overheads were ` 6,15,000 and actual consulting hours were 32,150. Overheads, were under recovered by ` 35,000. If actual overheads, were ` 6,94,075, what was the budgeted overhead absorption rate per hour ? 

a. 19.13 

b. 20.50 

c. 21.59 

d. 22.68 

138. Idle capacity of a plant is defined as 

the difference between: 

a. Practical capacity and normal capacity 

b. Practical capacity and capacity based 

on sale expectancy 

c. Maximum capacity and actual capacity 

d. Maximum capacity and practical 

capacity 


139. The capacity which is based on the 

long-term average of sales expectancy is known as : 

a. Theoretical capacity 

b. Operating capacity 

c. Normal capacity 

d. Derated capacity 

140. Maximum capacity of a plant refers 

to its: 

a. Theoretical capacity 

b. Normal capacity 

c. Practical capacity 

d. Capacity based on sales expectancy 

141. Annual requirement is 7800 units; 

consumption per week is 150 units. Unit price ` 5, order cost ` 10 per order. Carrying cost ` 1 per unit and lead time is 3 week, The Economic order quantity would be. 

a. 395 units 

b. 300 units 

c. 250 units 

d. 150 units 

142. What will be the impact of normal 

loss on the overall per unit cost? 

a. Per unit cost will increase 

b. Per unit cost will decrease 

c. Per unit cost remain unchanged 

d. Normal loss has no relation to unit 

cost 

143. Alpha company purchased a 

machine worth Rs 200,000 in the last year. Now that machine can be 

use in a new project which company has received this year. Now the cost of that machine is to be called: 

a. Project cost 

b. Sunk cost 

c. Opportunity cost 

d. Relevant cost 

144. FOH absorption rate is calculated by 

the way of: 

a. Estimated FOH Cost/Direct labor hours 

b. Estimated FOH Cost/No of units 

produced 

c. Estimated FOH Cost/Prime Cost 

d. All of the given options 

145. Which of the following is/are not 

associated with ordering costs? 

a. Interest 

b. Insurance 

c. Opportunity costs 

d. All of the given options 

146. Under perpetual Inventory system at 

the end of the year: 

a. No closing entry passed 

b. Closing entry passed 

c. Closing value find through closing 

entry only 

d. None of the above. 

147. The Hino Corporation has a 

breakeven point when sales are ` 160,000 and variable costs at that level of sales are ` 100,000. How much would contribution margin increase or decrease, if variable expenses dropped by ` 20,000? 


a. 37.5%. 

b. 60%. 

c. 12.5%. 

d. 26% 

148. The short run is a time period in 

which: 

a. All resources are fixed. 

b. The level of output is fixed. 

c. The size of the production plant is 

variable. 

d. Some resources are fixed and others 

are variable 

149. Opportunity cost is the best example 

of: 

a. Sunk Cost 

b. Standard Cost 


c. Relevant Cost 

d. Irrelevant Cost 

150. The components of factory 

overhead are as follows: 

a. Direct material + indirect material + 

direct expenses 

b. Indirect material + Indirect labor + 

others indirect cost 

c. Direct material + indirect expenses + 

indirect labor 

d. Direct labor + indirect labor + indirect 

expenses 

151. The term Maximum level 

represents: 

a. The maximum stock level indicates the 

maximum quantity of an item of material which can be held in stock at any time. 

b. The maximum stock level indicates the 

maximum quantity of an item of material which cannot be held in stock at any time. 

c. The average stock level indicates the 

maximum quantity of an item of material which can be held in stock at any time. 

d. The available stock level indicates the 

maximum quantity of an item of material which can be held in stock at any time. 

152. The FIFO inventory costing method 

(when using a perpetual inventory system) assumes that the cost of the earliest units purchased is allocated in which of the following ways? 

a. First to be allocated to the ending 

inventory 

b. Last to be allocated to the cost of 

c. Last to be allocated to the ending 

inventory 

d. First to be allocated to the cost of 

goods sold 

153. A firm Uses its own capital or Uses 

its owner's time and/or financial resources both are examples of 

a. Implicit Cost 

b. Explicit Cost 

d. Relevant Cost 

154. If Direct Material = 12,000; Direct 

Labor = 8000 and other Direct Cost = 2000 then what will be the Prime Cost? 

a. 12000 

b. 14000 

c. 20000 

d. 22000 

55. Wage, Rent & Materials are examples of : 

a. Implicit Cost 

b. Explicit Cost 

c. Direct Cost 

foregoes the opportunity to invest further in his hotel. The profit which the investor will be getting from the hotel is 


goods sold 

c. Sunk Cost 

d. Manufacturing Cost 

156. An investor invests in stock exchange he 

a. Opportunity cost 

b. Period Cost 

c. Product Cost 

d. Historical Cost 

157. It is possible for an item of overhead 

expenditure to be shared amongst many departments. It is also possible that this same item may relate to just one specific department. 

If the item was not charged specifically to a single department this would be an example of: 

a. Apportionment 

b. Allocation 

c. Re-apportionment 

d. Absorption 

158. Generally, the danger level of stock is 

fixed the minimum level 

a. Below 

b. Above 

c. Equal 

d. Danger level has no relation to 

minimum level 


159. Which of the following is / are time 

based incentive wage plan? 

a. Hasley Premium Plan 

b. Hasley Weir Premium Plan 

c. Rowan Premium Plan 

d. All of the given options 

160. Which of the following is/are reported in 

production cost report? 

a. The costs charged to the department 

b. How the costs were assigned to the 

output? 

c. The equivalent units of production by 

the department 

d. All of the given options 

161. Beginning goods in process were ` 

15,000. The cost of goods manufactured is ` 245,000. What is the cost assigned to the ending goods in process? 

a. ` 45,000 

b. ` 15,000 

c. ` 30,000 

d. There will be no ending Inventory 

162. Sales are ` 450,000. Beginning finished 

goods were ` 23,000. Ending finished goods are ` 30,000. The cost of goods sold is ` 300,000. What is the cost of goods manufactured? 

a. ` 323,000 

b. ` 330,000 

c. ` 293,000 

d. None of the given options 

163. Under Periodic Inventory system 

Purchase of inventory is treated as: 

a. Assets 

b. Expense 

c. Income 

d. Liability 

164. When prices are rising over time, which 

of the following inventory costing methods will result in the lowest gross margin/profits? 

a. FIFO 

b. LIFO 

c. Weighted Average 

d. Cannot be determined 

165. The main difference between the profit 

center and investment center is: 

b. Revenue generation 

c. Cost incurrence 

d. Investment 

166. The Inventory Turnover ratio is 5 times 

and numbers of days in a year is 365.Inventory holding period in days would be 

a. 100 days 

b. 73 days 

c. 50 days 

d. 10 days 

167. Over applied FOH will always result 

when a predetermined FOH rate is applied and: 

a. Production is greater than defined 

capacity 


a. Decision making 

b. Actual overhead costs are less than 

budgeted overhead 

c. Budgeted capacity is less than normal 

capacity 

d. Actual overhead incurred is less than 

applied Overhead 

168. The flux method of labor turnover 

denotes: 

a. Workers appointed against the 

vacancy caused due to discharge or quitting of the organization 

b. Workers appointed in replacement of 

existing employees 

c. Workers employed under the 

expansion schemes of the company 

d. The total change in the composition of 

labor force 

169. Which of the following statement is TRUE about FOH applied rates? 

a. They are used to control overhead 

costs 


b. They are based on actual data for each 

period 

c. They are predetermined in advance for 

each period 

d. None of the given 

170. Cost of Goods Manufactured can be 

calculated as follow 

a. Total factory Cost Add Opening Work 

in process inventory Less Closing Work in process inventory 

b. Total factory Cost Less Opening Work 

in process inventory Add Closing Work in process inventory 

c. Total factory Cost Less Opening Work 

in process inventory Less Closing Work in process inventory 

d. Total factory Cost Add Opening Work 

in process inventory Add Closing Work in process inventory 

171. is the time worked over and 

above the employee's basic working week. 

a. Flex time 

b. Overtime 

c. Shift allowance 

d. Commission 

172. In furniture manufacturing use of nail, pins, glue, and polish which use to increase its esteem value that cost is treated as: 

a. Direct material cost 

b. Indirect material cost 

c. FOH cost 

d. Prime cost 

173. If labor is satisfied with high wages it 

may ultimately lead to: 

a. Increased production and productivity 

b. Increased efficiency 

c. Reduced labor and overhead costs 

d. All of the given options 

174. Which of the following is a mechanical 

device to record the exact time of the workers? 

a. Clock Card 

c. Token System 

d. Attendance Register 

174. Which of the following is a 

mechanical device to record the exact time of the workers? 

a. Clock Card 

b. Store Card 

c. Token System 

d. Attendance Register 

element / s of production payroll? 

a. Direct labor force wages 

b. Administrative wages 

c. Selling wages 

d. All of the given options 

176. If a predetermined FOH rate is not 


b. Store Card 

175. Which of the following is / are 

applied and the volume of 

production is reduced from the planned capacity level, the cost per unit expected to: 

a. Remain unchanged for fixed cost and 

increase for variable cost 

b. Increase for fixed cost and remain 

unchanged for variable cost 

c. Increase for fixed cost and decrease 

for variable cost 

d. Decrease for both fixed and variable 

costs 

177. Which of the following is NOT an 

assumption of the basic economic- order quantity model? 

a. Annual demand is known 

b. Ordering cost is known 

c. Carrying cost is known 

d. Quantity discounts are available 

178. In order to ensure efficient 

functioning of the stores department and steady flow of materials to the production departments, the restocking of stores is duty of: 

a. Managers 

b. Storekeeper 

c. Production In charge 


d. Sales supervisor 

179. In cost Accounting, abnormal loss is 

charged to: 

a. Factory overhead control account 

b. Work in process account 

c. Income Statement 

d. Entire production 

180. A high inventory turnover may 

indicate: 

a. An efficient use of the investment in 

inventory 

b. A high risk of stock-outs 

c. Stock position of store room 

d. All of the given options 

181. Which of the following cost is used 

in the calculation of cost per unit? 

a. Total production cost 

b. Cost of goods available for sales 

c. Cost of goods manufactured 

d. Cost of goods Sold 

182. If, COGS = ` 50,000 GP Margin = 

25% of sales what will be the value of Sales? a. 200,000 

b 66,667 

c. 62,500 

d. None of the given options 

183. When a manufacturing Company 

has highly automated manufacturing plant producing many different products, the most appropriate basis for applying FOH cost to work in process is: 

a. Direct labor hours 

b. Direct labor costs 

c. Machine hours 

d. Cost of material used 

184. All of the following are cases of 

labor turnover EXCEPT: 

a. Workers appointed against the 

vacancy caused due to discharge or quitting of the organization 

b. Workers employed under the 

expansion schemes of the company 

c. The total change in the composition of 

labor force 

d. Workers retrenched 

185. The Term Minimum Level 

Represents. 

a. The quantity below which the stock of any item should not be allowed to fall 

b. The quantity below which the stock of 

any item should be allowed to fall 

c. The estimated time period in number 

of days or in weeks or in months. 

d. The Lead time period in number of 

days or in weeks or in months. 

considered a major aim of a job order costing system? 

a. To determine the costs of producing 

each job or lot 

b. To compute the cost per unit 

c. To include separate records for each 

job to track the costs 

d. All of the given option. 


186. Which of the following would be 

187. The Economic order quantity can 

be calculated by 

a. Formula Method 

b. Table Method 

c. Graph Method 

d. All of the given 

188. A chemical process has normal 

wastage of 10% of input. In a period, 2,500 Kg of material were input and there was abnormal loss of 75 Kg. What quantity of good production was achieved? a. 2,175 kg 

b. 2,250 kg 

c. 2,425 kg 

d. 2,500 kg 189. Which of the following is likely to be classified as a direct material cost of a motor car wheel? 

a. The metal used to manufacture it. 

b. The metal used to manufacture one of the tools used in the car wheel factory. 

c. The cost of operating the raw material stores in the factory. 

d. The cost of the quality operation on the finished car wheels. 

190. The first in, first out method of pricing raw material issues, exhibits which one of the 

following features? 

a. The issue price is recalculated each time new deliveries are made into stock. 

b. The issue price is always at the latest price. 

c. The goods are always issued strictly in the physical order in which they are received. 

d. The issue price is always at the earliest price. 

191. Which of the following is not a method of pricing raw material issues from stock? 

a. Standard costing. 

b. Unit cost. 

c. Marginal cost. 

d. Continuous weighted average. 

192. While preparing the Cost of Goods Sold and Income Statement, the over applied FOH is; 

a. Add back, subtracted 

b. Subtracted, add back 

c. Add back, add back 

d. Subtracted, subtracted 

193. Which of the following ratios expressed that how many times the inventory is turning 

over towards the cost of goods sold? 

a. Net profit ratio 

b. Gross profit ratio 

c. Inventory turnover ratio 

d. Inventory holding period 

194.The following is the Income Statement of a Company for last month: Particulars ` 

Sales 4,000,000 

Less: variable expenses 1,800,000 

Contribution margin 2,200,000 Less: fixed expenses 720,000 Net income 1480,000 

The company has no beginning or ending inventories. A total of 80,000 units were produced and sold last month. 

195.What is the company's contribution margin ratio? 

a. 30% 

b. 50% 

c. 150% 

d. None of given options 

196.What is the company's break-even in units? 

a. 48,000 units 

b. 72,000 units 

c. 80,000 units 

d. None of the given options 

197.How many units would the company have to sell to attain target profits of ` 600,000? 

a. 48,000 units 

b. 88,000 units 

c. 106,668 units 

d. None of given options 

198.What is the company's margin of safety in `? 

A 1,600,000 

b 2,400,000 

c 25,60,000 

d. None of the given options 

199.The margin of safety can be defined as: 

a. The excess of budgeted or actual sales over budgeted or actual variable expenses 

b. The excess of budgeted or actual sales over budgeted or actual fixed expenses 

c. The excess of budgeted sales over the break-even volume of sales 

200. To start a partnership business, what should be the minimum number of partners? 

A) 2 

B) 10 

C) 4 

D) 20 

Answer: A 

201. What type of agreement is used to form a partnership business? 

A) Written agreement 

B) Oral agreement 

C) Written or oral agreement 

D) None of them 

Answer: C 

202. In partnership, partners liabilities are 

A) Unlimited 

B) Limited to the capital of the business 

C) Limited 

D) Both A and C 

Answer: A 

203. Is a partnership firm examined as an individual a legal entity? 

A) No 

B) Yes 

C) Partially Yes 

Answer: A 

205. What is interest on drawings? 

A) Credited to partner’s current a/c 

B) Not shown in current account 

C) Debited to partner’s current a/c 

D) None of the above 

Answer: C 

206. What is the partnership written agreement known as?: 

A) Partnership contract 

B) Agreement 

C) Partnership deed 

D) Partnership Act 

Answer: C 

207. No partnership agreement, what will be the percentage of profit sharing ratio between them? 

A) Unequal 

B) Equal 

C) It will depend on the experience of a partner 

D) It will depend on a partner’s capital 

Answer: B 

208 . Which is not a feature of a partnership business? 

A) Ease of formation 

B) Limited liability 

C) Limited life 

D) Mutual agency 

Answer: B 

209. Which kind of partnership one partner has unlimited liability and other partner have limited liability? 

A) Partnership-at-will 

B) Limited partnership 

C) General partnership 

D) Particular partnership 

Answer: B 

210 . Which types of partnership have no agreement in terms of the duration of partnership? 

A) Partnership-at-will 

B) Limited partnership 

C) General partnership 

D) Particular partnership 

Answer: A 

211. ........................provides information for income determination. 

(A) Financial accounting 

(B) cost accounting 

(C) management accounting 

(D) none of these 

Answ er - (A) 

212. ...................helps in ascertaining costs beforehand. 

(A) Financial accounting 

(B) cost accounting 

(C) management accounting 

(D) none of these 

Answ er - (B) 

213. The scope of cost accounting include..............,............... and............... 

(A) Cost ascertainment, cost presentation, cost control 

(B) tax planning, tax accounting, financial accounting 

(C) presentation of accounting information, creation of policy, day-to day operation 

(D) none of the above 

Answ er - (A) 

214. Cost accounting disclose ................ 

(A) The Financial position 

(B) profit/loss of a product, job or service 

(C) effect and impact of cost on business 

(D) none of these 

215. ...........is a post mortem of past costs. 

(A) Financial accounting 

(B) cost accounting 

(C) both a & b 

(D) none of these 

Answ er - (A) 

216. ......................aids in price fixation. 

(A) Financial accounting 

(B) cost accounting 

(C) management accounting 

(D) none of these 

Answ er - (B) 

217. ..................is the oldest branch of accounting. 

(A) Financial accounting 

(B) cost accounting 

(C) management accounting 

(D) none of these 

Answ er - (A) 

218. .................includes financial and cost accounting, tax planning and tax accounting. 

(A) Financial accounting 

(B) cost accounting 

(C) management accounting 

(D) none of these 

Answ er - (C) 

219. In automobile, .....................costing is used 

(A) Process 

(B) batch 

(C) job 

(D) multiple 

Answ er - (D) 

220. Service costing is used in industries producing.................. 

(A) Products 

(B) service 

(C) both a & b 

(D) none of these 

Answ er - (B) 

221. Standard costs is..................... 

(A) Predetermined cost 

(B) budgeted cost 

(C) Actual cost 

(D) none of these 

Answ er - (A) 

222. ........................are costs which have been applied against revenue of particular accounting period. 

(A) Expenses 

(B) income 

(C) loss 

(D) none of these 

Answ er - (A) 

223. ...................is the smallest segment of activity or area or responsibility for which costs are accumulated. 

(A) Cost Object 

(B) Cost centre 

(C) cost driver 

(D) none of the above 

Answ er - (B) 

224. The primary emphasis of....................cost is on the planning function of management. 

(A) Budgeted 

(B) standard 

(C) period 

(D) none of these 

Answ er - (A) 

225. ..............cost is irrecoverable cost. 

(A) marginal 

(B) out of pocket 

(C) Sunk 

(D) none of these 

Answ er - (C) 

226.. ...................is the value of a benefit where no actual cost is incurred. 

(A) Imputed 

(B) sunk 

(C) out of pocket 

(D) none of these 

Answ er - (A) 

227. ...............is the cost which involves payment to outsiders. 

(A) Out of pocket cost 

(B) Imputed cost 

(C) notional cost 

(D) none of these 

Answ er - (A) 

228. ..................... is the maximum possible alternative earning that might have been earned if the productive capacity is put to some alternative use. 

(A) Opportunity 

(B) incremental revenue 

(C) alternative revenue 

(D) none of these 

Answ er - (A) 

229. An item of cost that is direct for one business may be ..............for another business. 

(A) Important 

(B) direct 

(C) Indirect 

(D) none of the above. 

Answ er - (C) 

230. The total of all direct expenses is known as ..............cost. 

(A) Prime 

(B) Works 

(C) Production 

(D) both a & b 

Answ er - (A) 

 50. Which of the following is not an 

assumption underlying the accountant‘s break-even chart? 

a. Fixed costs remain fixed throughout 

the range charted 

b. Selling prices do not change 

c. Variable costs fluctuate inversely with 

volume 

d. Unit variable costs remain constant 

throughout the range charted 

51. Which of the following is/are the basic object/s of job analysis? 

a. Determination of wage rates 

b. Ascertain the relative worth of each 

job 

c. Breaking up job into its basic elements 

d. All of the given options 

52. Analysis of selling and distribution 

overheads is done by: 

a. Nature of expenses and functions 

b. Areas, products and salesmen 

c. Types of customers and channels of 

distribution 

d. All of the above 

53. For exercising control over selling and 

distribution overheads, the following techniques may be used: 

a. Comparison with past results 

b. Budgetary control 

c. Standard costing 

d. All of the above 

54. Depreciation is a: 

a. Measure of consumption of assets 

b. Process of allocation and not of 

valuation 

c. Wear and tear due to use and/or lapse 

of time 

d. All of the above 

55. Which of the following does not 

influence the useful life of an asset? 


a. Expected physical wear and tear 

b. Cost of the asset 

c. Obsolescence 

d. Legal or other limits on the use of the 

asset 

56. For computing depreciation of an 

asset, the factors that are taken into consideration include the following except: 

a. Historical cost 

b. Expected useful life 

c. Insurance premium 

d. Estimated residual value 

57. Depreciation on plant and machinery 

is : 

a. Not a cash cost, so is ignored in the 

cost accounts 

b. Part of manufacturing overheads 

c. Part of prime cost 

d. Always calculated using the straight- 

line method 

58. Which of the following methods of 

depreciation results in fixed per unit cost of depreciation? 

a. Straight line 

b. Reducing balance 

c. Sinking fund 

d. Production unit 


59. Types of maintenance include the 

following except: 

a. Routine 

b. Overhaul 

c. Emergency 

d. Periodic 

60. Which of the following is not included in the objectives of maintenance of plant and machinery? 

a. Reducing idle time 

b. Reducing breakdown 

c. Maintaining efficiency 

d. Increasing life 

61. Regular maintenance expenses are : 

a. Capitalized 

b. Part of manufacturing overheads 

c. Written-off to costing profit and loss 

account 

d. Part of prime cost 

62. Obsolescence is the measure of the loss of value of an asset due to : 

a. Technological innovation 

b. Changes in market conditions 

c. Both (a) and (b) above 

d. None of the above 

63. Which of the following is not a 

production cause of idle capacity? 

a. Set-up and change-over time 

b. Lack of supervision and instruction 

c. Lack of materials and tools 

d. Strike 

64. Functionally, administration expenses 

may comprise expenses of the following activities: 

a. Secretarial and board of directors 

b. Accounting, financing, tax and legal 

c. Audit and personnel 

d. All of these 

65. Which of the following is not a 

possible method of accounting for administration overheads? 

a. Include as part of production 

overheads 

b. Apportion to production, selling and 

distribution functions 

c. Treat administration as a separate entity and treat the costs as such 

d. Transfer to costing profit and loss 

account 

66. Which of the following is not used as 

a base for apportionment of administration overheads? 

a. Direct wages 

b. Works cost 

c. Conversion cost 

d. Sales value 

67. In account ting for labourcost: 

labour cost are charged to prime cost 

b. Direct labour cost and indirect labour 

cost are charged to overheads 

c. Direct labour cost is charged to prime 

cost and indirect labour cost is charged to overheads 


a. A. direct labour cost and indirect 

d. All of the above 

68. Productive causes of idle time include 

the following except : 

a. Power failure 

b. Fall in demand 

c. Machine breakdown 

d. Waiting for materials, tools, 

instructions, etc. 

69. The treatment of idle time in cost 

includes the following: 

a. Cost of normal and controllable idle 

time is charged to factory overheads 

b. Cost of normal but uncontrollable idle 

time is treated as prime cost 

c. Cost of abnormal and uncontrollable 

idle time is charged to costing profit and loss account 

d. All of the above 

70. Overtime premium may be treated, 

depending on the circumstances, as: 

a. Part of direct wages 

b. Part of production overheads 

c. Part of capital order 


d. All of the above 

71. A manufacturing firm is very busy and is working overtime. The amount of overtime premium contained in direct wages would normally be classed as: 

a. Part of prime cost 

b. Factory overheads 

c. Direct labour cost 

d. Administrative overheads 

72. Fringe benefits are those for which 

efforts of the workers are not necessary and may include the following except: 

a. Holiday pay 

b. Attendance bonus 

c. Production bonus 

d. Employer‘s contribution to P.F. 

73. Avoidable causes of labour turnover 

include the following except: 

a. Redundancy 

b. Low wages 

c. Bad working conditions 

d. Marriage 

74. The unavoidable causes of labour turnover include the following except: 

a. Personal betterment 

b. Dissatisfaction with the job 

c. Illness 

d. Retirement 

75. Labour turnover can be measured by 

the following methods except: 

a. Attrition method 

b. Separation method 

c. Replacement method 

d. Flux method 

76. At the start of the quarter there were 

14,630 workers. 750 employees left during the quarter while 600 joined the organization during the same period. Using the flux method, the labour turnover was: 

a. 5.13% 

b. 9.23% 

c. 9.32% 

d. 9.28% 

77. Which of the following is not a cost 

implication of labourturnover? 

a. Training 

b. Recruiting 

c. Ageing labour force 

d. Damage of machine 

78. Preventive costs of labour turnover 

include the following except: 

a. Cost of recruitment and training 

b. Medical services 

c. Welfare 

d. Gratuity and pension 

79. Replacement costs of labour turnover 

include the following except : 

a. Loss of output 

b. Cost of personnel administration 

c. Cost of tool and machine breakage 

d. Cost of scrap and defective work 


80. Cost of labour turnover may be 

treated as : 

a. Direct wages 

b. Prime cost 

c. Overhead 

d. None of the above 

81. 1) labour cost control leads to 

minimization of cost of labour per unit of output. (2) When labour cost is fixed nature, any reduction in total labour cost may not result in lower cost per unit. True or false? 

(a. (1) True; (2) False 

b. (1) False; (2) True 

c. (1) and (2) False 

82. Labour cost control embraces the 

following activities except: 


a. Recruitment and promotion 

b. Formulation of wage policy and 

payment and accounting for wages 

c. Allocation of cost 

d. Preparation of financial statement 

83. (1) Payment of higher wages does not necessarily mean that labour cost per unit is high. (2) Control over payment of wages aims at reducing or eliminating irregularities during actual disbursements. True or False? 

a. (1) and (2) True 

b. (1) and (2) False 

c. (1) False; (2) True 

d. (1) True; (2) False 

84. Which of the following techniques is 

not meant for labour cost control? 

a. Budgetary control 

b. Standard costing 

c. ABC analysis 

d. Ratio analysis 

85. Ratios which may be used for 

comparing labour cost over time include the following except : 

a. Gross profit ratio 

b. Efficiency ratio 

c. Illness ratio 

d. Absenteeism ratio 

86. Cost of production is equal to 

a. Prime costs+ other manufacturing 

costs. 

b. Production costs + Administration 

expenses. 

c. Prime costs + Manufacturing costs + 

Opening W.I.P – Closing W.I.P. 

d. None of the above. 

87. The cost of goods sold is equal to 

a. Total Purchases - Total Sales. 

b. Opening stock + Total Purchase. 

c. Opening stock - Total Purchases 

+Closing Stock+ Direct Costs. 

d. Opening stock + Total Purchases – 

Closing Stock + Direct Costs. 

88. Which of the following is false 

regarding the LIFO method of inventory valuation? 

a. The material issue will be priced at the price of the material that is purchased last. 

b. The pattern of cash flow does not 

necessarily coincide with the actual flow pattern of materials. 

d. LIFO determines closing inventory at 

recent costs. 

89. Which of the following is NOT a 

operations 

purchase-order size 

c. To make the system less productive 

d. To meet variation in product dem 


c. It permits management to influence net income by timing the purchases. 

reason for carrying inventory? 

a. To maintain independence of 

b. To take advantage of economic 

90. Which of the following is TRUE regarding Departmental Rates. 

a. A departmental absorption rate is a rate of absorption based upon the particular department's overhead cost and activity level 

b. A departmental absorption rate is a rate 

of absorption not based upon the particular department's overhead cost and activity level 

c. A single rate of absorption used 

throughout an organization‘s production facility and based upon its total production costs and activity 

d. None of the given options 

91. Inventory of ` 96,000 was purchased during the year. The cost of goods sold was ` 90,000 and the ending inventory was ` 18,000. What was the inventory turnover ratio for the year? 

a. 5.0 times 

b. 5.3 times 

c. 6.0 times 

d. 6.4 times 

92. In a perpetual inventory system, an 

inventory flow assumption (i.e. LIFO or FIFO) is used 


primarily for determining costs which are used in 

a. Forecasts of future sale. 

b. Recording the cost of goods sold. 

c. Recording Sales Revenue. 

d. Forecasts of future operating results. 

93. The factors to be taken into 

consideration in formulating incentive schemes include: 

a. Quantity and quality of output 

b. Incidence of overhead, and effect 

upon workers 

c. Simplicity and legal provisions 

d. All of the above 

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

a. Variable cost 

b. Fixed cost 

c. Operating cost 

d. Net profit 

95. Favorable conditions for the 

operation of piece rates include: 

a. Homogeneous products 

b. Long, uninterrupted run of production 

c. Inspection 

d. High proportion of indirect labour 

96. If time allowed for a job is 10 hours, time taken for the job is 8 hours and rate of pay is ` 2 per hour, the bonus to the worker is : 

a. ` 1.20 

b. ` 2.00 

c. ` 3.20 

d. None of the above 

97. Group bonus schemes are generally 

suitable where: 

a. Output depends on individual efforts 

b. Output of individual workers can be 

measured easily 

c. It is necessary to create a collective 

interest in the work 

d. Normal loss rate is high 

98. In a profit sharing scheme the 

available surplus is shared by the following except: 

a. Government 

b. Shareholders 

c. Employees 

d. Firm 

99. Non-monetary incentives may include 

the following except: 

a. Health and safety 

b. Housing facilities 

c. Education and training 

d. Dearness allowance 

100. The purposes served by 

preparation of payroll or wages sheet include: 

a. Spreading the volume of work to be 

done 

b. Computation of labour rate for each 

department 

c. Comparing actual wages with budgeted wages for control 

d. All of the above 

101. The authorized heads of 

deduction from wages payable include the following except : 


a. Car allowance 

b. Income tax 

c. Provident fund 

d. Employees‘state insurance 

102. Wages analysis include : 

a. Gross wages per product 

b. Gross wages per operation or 

department 

c. Gross wages per labour classification 

d. Analysis of constituent of gross wages 

– direct/ lost time 

103. The inventory method where the cost per unit is recomputed after every addition in the inventory is known as. 

a. Specific identification method. 

b. Moving average method. 

c. Last-in- First – Out method. 


d. First-in-First-Out method. 

104. Which of the following inventory valuation methods shows higher profits during the period of rising prices? 

a. FIFO method. 

b. LIFO method. 

c. Weighted average method. 

d. Simple average method. 

105. Which of the following systems of inventory valuation computes cost of goods sold as a residual amount? 

a. Weighted Average. 

b. Last-in-First-out. 

c. Periodic Inventory System. 

d. Specific Identification. 

106. Which of the following is 

calculated by a formula that uses net sales as denominator? 

a. Inventory turnover ratio 

b. Gross profit rate 

c. Return on Investment 

d. None of the given options 

121. Overhead expenses can be classified 

according to: 

a. Functions 

b. Elements 

c. Behavior 

d. All of the above 

122. Which of the following is not 

included in functional classification of overheads? 

a. Repairs and maintenance 

b. Lubricating oil 

c. Consumable stores 

d. Chargeable expenses 

123. Which of the following is not an 

example of marketing overheads? 

a. Salary of the foreman 

c. Salaries of sales staff 

d. Secondary packing charges 

124. Some overhead charges tend to vary 

almost directly, some tend to remain constant while some again vary in part with the volume and in part remain constant. This statement describes sequentially the following: 

a. Variable, fixed and semi-variable 

overheads 

b. Fixed, semi-variable and variable 

overheads 

c. Semi-variable, variable and fixed 

overheads 

d. Variable, semi-variable and fixed 

125. Suppose a firm sells its product at a 

price lower than the opportunity cost of the inputs used to produce it. Which is true? 

a. The firm will earn accounting and 

economic losses. 


b. Publicity expenses 

overheads 

economic profits. 

b. The firm will face accounting and 

c. The firm will face an accounting loss, 

but earn economic profits. 

d. The firm may earn accounting profits, 

but will face economic losses. 

126. Example of semi-variable items 

include the following except: 

a. Telephone 

b. Repairs and maintenance 

c. Depreciation of plant and machinery 

d. Insurance of plant and building 

127. Direct Labor is an element of: 

a. Prime cost 

b. Conversion cost 

c. Total production cost 

d. All of the given options 

128. Which of the following is not a 

production department? 

a. Power department 


b. Machining department 

c. Refining department 

d. Finishing department 

129. Which of the following does not 

match? 

Item of cost Basis of cost allocation 

a. Power H.P. of machine 

b. Supervision of building value of 

materials consumed 

c. Insurance of building area occupied 

d. Time-keeping number of employees 

130. (1) Departmentalization of items of 

costs is known as primary distribution. 

(2) Redistribution of service departments, costs is known as secondary distribution. True or false? 

a. (1) and (2) true 

b. (1) and (2) false 

c. (1) False; (2) True 

d. (1) True; (2) False 

131. Which of the following costs is not a 

factory overhead expense? 

a. Depreciation of equipment used in the 

research department 

b. Salary of quality control inspector 

c. Overtime premium paid to direct 

labour 

d. Machine maintenance labour cost 

132. Which of the following bases would 

be most appropriate to apportion the cost of electric power to factory departments? 

a. Number of outlet points 

b. Amount metered out 

c. Cubic capacity of premises 

d. Kilowatt capacity of machines in 

department 

133. A method of dealing with overheads 

involves spreading common costs over cost centres on the basis of benefit received. This is known as 

a. Overhead absorption 

b. Overhead apportionment 

c. Overhead identification 

d. Overhead analysis 

134. The process of cost apportionment 

is carried out so that : 

a. Costs may be controlled 

b. Cost units gather overheads as they 

pass through cost centres 

c. Whole items of cost can be charged to 

cost centres 

d. Common costs are shared among cost 

centres 

135. An overhead absorption rate is used 

to : 

a. Share out common costs over 

benefiting cost canters 

b. Find the total overheads for a cost 

centre 

c. Charge overheads to products 

d. Control overheads 

136. Which of the following is not a 

means whereby factory overheads can be charged out to production? 

a. Direct labour rate 

b. Overtime rate 

c. Machine hour rate 

d. Blanket rate 


137. A management consultancy recovers 

overheads on chargeable consulting hours. Budgeted overheads were ` 6,15,000 and actual consulting hours were 32,150. Overheads, were under recovered by ` 35,000. If actual overheads, were ` 6,94,075, what was the budgeted overhead absorption rate per hour ? 

a. 19.13 

b. 20.50 

c. 21.59 

d. 22.68 

138. Idle capacity of a plant is defined as 

the difference between: 

a. Practical capacity and normal capacity 

b. Practical capacity and capacity based 

on sale expectancy 

c. Maximum capacity and actual capacity 

d. Maximum capacity and practical 

capacity 


139. The capacity which is based on the 

long-term average of sales expectancy is known as : 

a. Theoretical capacity 

b. Operating capacity 

c. Normal capacity 

d. Derated capacity 

140. Maximum capacity of a plant refers 

to its: 

a. Theoretical capacity 

b. Normal capacity 

c. Practical capacity 

d. Capacity based on sales expectancy 

141. Annual requirement is 7800 units; 

consumption per week is 150 units. Unit price ` 5, order cost ` 10 per order. Carrying cost ` 1 per unit and lead time is 3 week, The Economic order quantity would be. 

a. 395 units 

b. 300 units 

c. 250 units 

d. 150 units 

142. What will be the impact of normal 

loss on the overall per unit cost? 

a. Per unit cost will increase 

b. Per unit cost will decrease 

c. Per unit cost remain unchanged 

d. Normal loss has no relation to unit 

cost 

143. Alpha company purchased a 

machine worth Rs 200,000 in the last year. Now that machine can be 

use in a new project which company has received this year. Now the cost of that machine is to be called: 

a. Project cost 

b. Sunk cost 

c. Opportunity cost 

d. Relevant cost 

144. FOH absorption rate is calculated by 

the way of: 

a. Estimated FOH Cost/Direct labor hours 

b. Estimated FOH Cost/No of units 

produced 

c. Estimated FOH Cost/Prime Cost 

d. All of the given options 

145. Which of the following is/are not 

associated with ordering costs? 

a. Interest 

b. Insurance 

c. Opportunity costs 

d. All of the given options 

146. Under perpetual Inventory system at 

the end of the year: 

a. No closing entry passed 

b. Closing entry passed 

c. Closing value find through closing 

entry only 

d. None of the above. 

147. The Hino Corporation has a 

breakeven point when sales are ` 160,000 and variable costs at that level of sales are ` 100,000. How much would contribution margin increase or decrease, if variable expenses dropped by ` 20,000? 


a. 37.5%. 

b. 60%. 

c. 12.5%. 

d. 26% 

148. The short run is a time period in 

which: 

a. All resources are fixed. 

b. The level of output is fixed. 

c. The size of the production plant is 

variable. 

d. Some resources are fixed and others 

are variable 

149. Opportunity cost is the best example 

of: 

a. Sunk Cost 

b. Standard Cost 


c. Relevant Cost 

d. Irrelevant Cost 

150. The components of factory 

overhead are as follows: 

a. Direct material + indirect material + 

direct expenses 

b. Indirect material + Indirect labor + 

others indirect cost 

c. Direct material + indirect expenses + 

indirect labor 

d. Direct labor + indirect labor + indirect 

expenses 

151. The term Maximum level 

represents: 

a. The maximum stock level indicates the 

maximum quantity of an item of material which can be held in stock at any time. 

b. The maximum stock level indicates the 

maximum quantity of an item of material which cannot be held in stock at any time. 

c. The average stock level indicates the 

maximum quantity of an item of material which can be held in stock at any time. 

d. The available stock level indicates the 

maximum quantity of an item of material which can be held in stock at any time. 

152. The FIFO inventory costing method 

(when using a perpetual inventory system) assumes that the cost of the earliest units purchased is allocated in which of the following ways? 

a. First to be allocated to the ending 

inventory 

b. Last to be allocated to the cost of 

c. Last to be allocated to the ending 

inventory 

d. First to be allocated to the cost of 

goods sold 

153. A firm Uses its own capital or Uses 

its owner's time and/or financial resources both are examples of 

a. Implicit Cost 

b. Explicit Cost 

d. Relevant Cost 

154. If Direct Material = 12,000; Direct 

Labor = 8000 and other Direct Cost = 2000 then what will be the Prime Cost? 

a. 12000 

b. 14000 

c. 20000 

d. 22000 

55. Wage, Rent & Materials are examples of : 

a. Implicit Cost 

b. Explicit Cost 

c. Direct Cost 

foregoes the opportunity to invest further in his hotel. The profit which the investor will be getting from the hotel is 


goods sold 

c. Sunk Cost 

d. Manufacturing Cost 

156. An investor invests in stock exchange he 

a. Opportunity cost 

b. Period Cost 

c. Product Cost 

d. Historical Cost 

157. It is possible for an item of overhead 

expenditure to be shared amongst many departments. It is also possible that this same item may relate to just one specific department. 

If the item was not charged specifically to a single department this would be an example of: 

a. Apportionment 

b. Allocation 

c. Re-apportionment 

d. Absorption 

158. Generally, the danger level of stock is 

fixed the minimum level 

a. Below 

b. Above 

c. Equal 

d. Danger level has no relation to 

minimum level 


159. Which of the following is / are time 

based incentive wage plan? 

a. Hasley Premium Plan 

b. Hasley Weir Premium Plan 

c. Rowan Premium Plan 

d. All of the given options 

160. Which of the following is/are reported in 

production cost report? 

a. The costs charged to the department 

b. How the costs were assigned to the 

output? 

c. The equivalent units of production by 

the department 

d. All of the given options 

161. Beginning goods in process were ` 

15,000. The cost of goods manufactured is ` 245,000. What is the cost assigned to the ending goods in process? 

a. ` 45,000 

b. ` 15,000 

c. ` 30,000 

d. There will be no ending Inventory 

162. Sales are ` 450,000. Beginning finished 

goods were ` 23,000. Ending finished goods are ` 30,000. The cost of goods sold is ` 300,000. What is the cost of goods manufactured? 

a. ` 323,000 

b. ` 330,000 

c. ` 293,000 

d. None of the given options 

163. Under Periodic Inventory system 

Purchase of inventory is treated as: 

a. Assets 

b. Expense 

c. Income 

d. Liability 

164. When prices are rising over time, which 

of the following inventory costing methods will result in the lowest gross margin/profits? 

a. FIFO 

b. LIFO 

c. Weighted Average 

d. Cannot be determined 

165. The main difference between the profit 

center and investment center is: 

b. Revenue generation 

c. Cost incurrence 

d. Investment 

166. The Inventory Turnover ratio is 5 times 

and numbers of days in a year is 365.Inventory holding period in days would be 

a. 100 days 

b. 73 days 

c. 50 days 

d. 10 days 

167. Over applied FOH will always result 

when a predetermined FOH rate is applied and: 

a. Production is greater than defined 

capacity 


a. Decision making 

b. Actual overhead costs are less than 

budgeted overhead 

c. Budgeted capacity is less than normal 

capacity 

d. Actual overhead incurred is less than 

applied Overhead 

168. The flux method of labor turnover 

denotes: 

a. Workers appointed against the 

vacancy caused due to discharge or quitting of the organization 

b. Workers appointed in replacement of 

existing employees 

c. Workers employed under the 

expansion schemes of the company 

d. The total change in the composition of 

labor force 

169. Which of the following statement is TRUE about FOH applied rates? 

a. They are used to control overhead 

costs 


b. They are based on actual data for each 

period 

c. They are predetermined in advance for 

each period 

d. None of the given 

170. Cost of Goods Manufactured can be 

calculated as follow 

a. Total factory Cost Add Opening Work 

in process inventory Less Closing Work in process inventory 

b. Total factory Cost Less Opening Work 

in process inventory Add Closing Work in process inventory 

c. Total factory Cost Less Opening Work 

in process inventory Less Closing Work in process inventory 

d. Total factory Cost Add Opening Work 

in process inventory Add Closing Work in process inventory 

171. is the time worked over and 

above the employee's basic working week. 

a. Flex time 

b. Overtime 

c. Shift allowance 

d. Commission 

172. In furniture manufacturing use of nail, pins, glue, and polish which use to increase its esteem value that cost is treated as: 

a. Direct material cost 

b. Indirect material cost 

c. FOH cost 

d. Prime cost 

173. If labor is satisfied with high wages it 

may ultimately lead to: 

a. Increased production and productivity 

b. Increased efficiency 

c. Reduced labor and overhead costs 

d. All of the given options 

174. Which of the following is a mechanical 

device to record the exact time of the workers? 

a. Clock Card 

c. Token System 

d. Attendance Register 

174. Which of the following is a 

mechanical device to record the exact time of the workers? 

a. Clock Card 

b. Store Card 

c. Token System 

d. Attendance Register 

element / s of production payroll? 

a. Direct labor force wages 

b. Administrative wages 

c. Selling wages 

d. All of the given options 

176. If a predetermined FOH rate is not 


b. Store Card 

175. Which of the following is / are 

applied and the volume of 

production is reduced from the planned capacity level, the cost per unit expected to: 

a. Remain unchanged for fixed cost and 

increase for variable cost 

b. Increase for fixed cost and remain 

unchanged for variable cost 

c. Increase for fixed cost and decrease 

for variable cost 

d. Decrease for both fixed and variable 

costs 

177. Which of the following is NOT an 

assumption of the basic economic- order quantity model? 

a. Annual demand is known 

b. Ordering cost is known 

c. Carrying cost is known 

d. Quantity discounts are available 

178. In order to ensure efficient 

functioning of the stores department and steady flow of materials to the production departments, the restocking of stores is duty of: 

a. Managers 

b. Storekeeper 

c. Production In charge 


d. Sales supervisor 

179. In cost Accounting, abnormal loss is 

charged to: 

a. Factory overhead control account 

b. Work in process account 

c. Income Statement 

d. Entire production 

180. A high inventory turnover may 

indicate: 

a. An efficient use of the investment in 

inventory 

b. A high risk of stock-outs 

c. Stock position of store room 

d. All of the given options 

181. Which of the following cost is used 

in the calculation of cost per unit? 

a. Total production cost 

b. Cost of goods available for sales 

c. Cost of goods manufactured 

d. Cost of goods Sold 

182. If, COGS = ` 50,000 GP Margin = 

25% of sales what will be the value of Sales? a. 200,000 

b 66,667 

c. 62,500 

d. None of the given options 

183. When a manufacturing Company 

has highly automated manufacturing plant producing many different products, the most appropriate basis for applying FOH cost to work in process is: 

a. Direct labor hours 

b. Direct labor costs 

c. Machine hours 

d. Cost of material used 

184. All of the following are cases of 

labor turnover EXCEPT: 

a. Workers appointed against the 

vacancy caused due to discharge or quitting of the organization 

b. Workers employed under the 

expansion schemes of the company 

c. The total change in the composition of 

labor force 

d. Workers retrenched 

185. The Term Minimum Level 

Represents. 

a. The quantity below which the stock of any item should not be allowed to fall 

b. The quantity below which the stock of 

any item should be allowed to fall 

c. The estimated time period in number 

of days or in weeks or in months. 

d. The Lead time period in number of 

days or in weeks or in months. 

considered a major aim of a job order costing system? 

a. To determine the costs of producing 

each job or lot 

b. To compute the cost per unit 

c. To include separate records for each 

job to track the costs 

d. All of the given option. 


186. Which of the following would be 

187. The Economic order quantity can 

be calculated by 

a. Formula Method 

b. Table Method 

c. Graph Method 

d. All of the given 

188. A chemical process has normal 

wastage of 10% of input. In a period, 2,500 Kg of material were input and there was abnormal loss of 75 Kg. What quantity of good production was achieved? a. 2,175 kg 

b. 2,250 kg 

c. 2,425 kg 

d. 2,500 kg 189. Which of the following is likely to be classified as a direct material cost of a motor car wheel? 

a. The metal used to manufacture it. 

b. The metal used to manufacture one of the tools used in the car wheel factory. 

c. The cost of operating the raw material stores in the factory. 

d. The cost of the quality operation on the finished car wheels. 

190. The first in, first out method of pricing raw material issues, exhibits which one of the 

following features? 

a. The issue price is recalculated each time new deliveries are made into stock. 

b. The issue price is always at the latest price. 

c. The goods are always issued strictly in the physical order in which they are received. 

d. The issue price is always at the earliest price. 

191. Which of the following is not a method of pricing raw material issues from stock? 

a. Standard costing. 

b. Unit cost. 

c. Marginal cost. 

d. Continuous weighted average. 

192. While preparing the Cost of Goods Sold and Income Statement, the over applied FOH is; 

a. Add back, subtracted 

b. Subtracted, add back 

c. Add back, add back 

d. Subtracted, subtracted 

193. Which of the following ratios expressed that how many times the inventory is turning 

over towards the cost of goods sold? 

a. Net profit ratio 

b. Gross profit ratio 

c. Inventory turnover ratio 

d. Inventory holding period 

194.The following is the Income Statement of a Company for last month: Particulars ` 

Sales 4,000,000 

Less: variable expenses 1,800,000 

Contribution margin 2,200,000 Less: fixed expenses 720,000 Net income 1480,000 

The company has no beginning or ending inventories. A total of 80,000 units were produced and sold last month. 

195.What is the company's contribution margin ratio? 

a. 30% 

b. 50% 

c. 150% 

d. None of given options 

196.What is the company's break-even in units? 

a. 48,000 units 

b. 72,000 units 

c. 80,000 units 

d. None of the given options 

197.How many units would the company have to sell to attain target profits of ` 600,000? 

a. 48,000 units 

b. 88,000 units 

c. 106,668 units 

d. None of given options 

198.What is the company's margin of safety in `? 

A 1,600,000 

b 2,400,000 

c 25,60,000 

d. None of the given options 

199.The margin of safety can be defined as: 

a. The excess of budgeted or actual sales over budgeted or actual variable expenses 

b. The excess of budgeted or actual sales over budgeted or actual fixed expenses 

c. The excess of budgeted sales over the break-even volume of sales 

200. To start a partnership business, what should be the minimum number of partners? 

A) 2 

B) 10 

C) 4 

D) 20 

Answer: A 

201. What type of agreement is used to form a partnership business? 

A) Written agreement 

B) Oral agreement 

C) Written or oral agreement 

D) None of them 

Answer: C 

202. In partnership, partners liabilities are 

A) Unlimited 

B) Limited to the capital of the business 

C) Limited 

D) Both A and C 

Answer: A 

203. Is a partnership firm examined as an individual a legal entity? 

A) No 

B) Yes 

C) Partially Yes 

Answer: A 

205. What is interest on drawings? 

A) Credited to partner’s current a/c 

B) Not shown in current account 

C) Debited to partner’s current a/c 

D) None of the above 

Answer: C 

206. What is the partnership written agreement known as?: 

A) Partnership contract 

B) Agreement 

C) Partnership deed 

D) Partnership Act 

Answer: C 

207. No partnership agreement, what will be the percentage of profit sharing ratio between them? 

A) Unequal 

B) Equal 

C) It will depend on the experience of a partner 

D) It will depend on a partner’s capital 

Answer: B 

208 . Which is not a feature of a partnership business? 

A) Ease of formation 

B) Limited liability 

C) Limited life 

D) Mutual agency 

Answer: B 

209. Which kind of partnership one partner has unlimited liability and other partner have limited liability? 

A) Partnership-at-will 

B) Limited partnership 

C) General partnership 

D) Particular partnership 

Answer: B 

210 . Which types of partnership have no agreement in terms of the duration of partnership? 

A) Partnership-at-will 

B) Limited partnership 

C) General partnership 

D) Particular partnership 

Answer: A 

211. ........................provides information for income determination. 

(A) Financial accounting 

(B) cost accounting 

(C) management accounting 

(D) none of these 

Answ er - (A) 

212. ...................helps in ascertaining costs beforehand. 

(A) Financial accounting 

(B) cost accounting 

(C) management accounting 

(D) none of these 

Answ er - (B) 

213. The scope of cost accounting include..............,............... and............... 

(A) Cost ascertainment, cost presentation, cost control 

(B) tax planning, tax accounting, financial accounting 

(C) presentation of accounting information, creation of policy, day-to day operation 

(D) none of the above 

Answ er - (A) 

214. Cost accounting disclose ................ 

(A) The Financial position 

(B) profit/loss of a product, job or service 

(C) effect and impact of cost on business 

(D) none of these 

215. ...........is a post mortem of past costs. 

(A) Financial accounting 

(B) cost accounting 

(C) both a & b 

(D) none of these 

Answ er - (A) 

216. ......................aids in price fixation. 

(A) Financial accounting 

(B) cost accounting 

(C) management accounting 

(D) none of these 

Answ er - (B) 

217. ..................is the oldest branch of accounting. 

(A) Financial accounting 

(B) cost accounting 

(C) management accounting 

(D) none of these 

Answ er - (A) 

218. .................includes financial and cost accounting, tax planning and tax accounting. 

(A) Financial accounting 

(B) cost accounting 

(C) management accounting 

(D) none of these 

Answ er - (C) 

219. In automobile, .....................costing is used 

(A) Process 

(B) batch 

(C) job 

(D) multiple 

Answ er - (D) 

220. Service costing is used in industries producing.................. 

(A) Products 

(B) service 

(C) both a & b 

(D) none of these 

Answ er - (B) 

221. Standard costs is..................... 

(A) Predetermined cost 

(B) budgeted cost 

(C) Actual cost 

(D) none of these 

Answ er - (A) 

222. ........................are costs which have been applied against revenue of particular accounting period. 

(A) Expenses 

(B) income 

(C) loss 

(D) none of these 

Answ er - (A) 

223. ...................is the smallest segment of activity or area or responsibility for which costs are accumulated. 

(A) Cost Object 

(B) Cost centre 

(C) cost driver 

(D) none of the above 

Answ er - (B) 

224. The primary emphasis of....................cost is on the planning function of management. 

(A) Budgeted 

(B) standard 

(C) period 

(D) none of these 

Answ er - (A) 

225. ..............cost is irrecoverable cost. 

(A) marginal 

(B) out of pocket 

(C) Sunk 

(D) none of these 

Answ er - (C) 

226.. ...................is the value of a benefit where no actual cost is incurred. 

(A) Imputed 

(B) sunk 

(C) out of pocket 

(D) none of these 

Answ er - (A) 

227. ...............is the cost which involves payment to outsiders. 

(A) Out of pocket cost 

(B) Imputed cost 

(C) notional cost 

(D) none of these 

Answ er - (A) 

228. ..................... is the maximum possible alternative earning that might have been earned if the productive capacity is put to some alternative use. 

(A) Opportunity 

(B) incremental revenue 

(C) alternative revenue 

(D) none of these 

Answ er - (A) 

229. An item of cost that is direct for one business may be ..............for another business. 

(A) Important 

(B) direct 

(C) Indirect 

(D) none of the above. 

Answ er - (C) 

230. The total of all direct expenses is known as ..............cost. 

(A) Prime 

(B) Works 

(C) Production 

(D) both a & b 

Answer - (A)