Cost Accounting — Cost sheet, marginal costing, cost‑volume‑profit analysis, standard costing and variance analysis. - Question Bank

1. Which of the following is an example of an overhead variance?
A) Material yield variance
B) Labor idle time variance
C) Variable overhead spending variance
D) Sales margin variance
2. The primary goal of variance analysis is to:
A) Justify cost overruns
B) Identify deviations from planned performance and investigate their causes
C) Eliminate all unfavorable variances
D) Prove that standards are accurate
3. In marginal costing, the selling price of a product must cover at least:
A) Prime costs and variable overheads
B) Prime costs and fixed overheads
C) Total costs
D) Only variable costs
4. The cost sheet typically presents:
A) Only direct costs
B) Direct costs and direct expenses
C) Direct costs, direct expenses, and allocated overheads
D) Only variable costs
5. A favorable fixed overhead expenditure variance occurs when:
A) Actual fixed overhead costs are less than budgeted fixed overhead costs
B) Actual fixed overhead costs are more than budgeted fixed overhead costs
C) Actual production volume is higher than budgeted volume
D) Actual production volume is lower than budgeted volume
6. Which variance is calculated as (Actual Rate - Standard Rate) * Actual Hours?
A) Labor efficiency variance
B) Labor rate variance
C) Labor idle time variance
D) Labor cost variance
7. Standard costing helps in:
A) Inventory valuation for financial accounting
B) Determining the cost of products for pricing decisions
C) Performance appraisal of managers
D) All of the above
8. The 'relevant range' in CVP analysis refers to:
A) The range of production capacity
B) The range of sales volume for which cost and revenue behavior patterns are assumed to be linear
C) The range of acceptable profit margins
D) The range of selling prices
9. If a company's break-even point decreases, it could be due to:
A) An increase in selling price per unit
B) An increase in variable cost per unit
C) An increase in total fixed costs
D) A decrease in contribution margin per unit
10. A company has fixed costs of $50,000 and a contribution margin ratio of 40%. What is the break-even point in sales dollars?
A) $125,000
B) $20,000
C) $75,000
D) $200,000
11. Which of the following is a key component of marginal cost?
A) Fixed manufacturing overhead
B) Variable manufacturing overhead
C) Depreciation on factory equipment
D) Sales salaries
12. In standard costing, the purpose of setting standards is to provide a basis for:
A) Determining historical costs
B) Measuring performance and controlling costs
C) Calculating depreciation
D) Forecasting future sales
13. The standard labor rate variance measures the difference between:
A) Actual labor hours and standard labor hours
B) Actual labor rate and standard labor rate for actual hours worked
C) Actual labor rate and standard labor rate for standard hours allowed
D) Actual total labor cost and standard total labor cost
14. Which of the following is a controllable cost variance?
A) Idle capacity variance
B) Material price variance
C) Sales volume variance
D) Fixed overhead volume variance
15. The sales volume variance for profit is calculated as:
A) (Actual Units Sold - Budgeted Units Sold) * Standard Profit per Unit
B) (Actual Units Sold - Budgeted Units Sold) * Standard Contribution Margin per Unit
C) (Actual Sales Revenue - Budgeted Sales Revenue) * Standard Profit Margin
D) (Actual Sales Revenue - Budgeted Sales Revenue) * Standard Contribution Margin Ratio
16. If actual hours worked exceed standard hours allowed for the actual output, the labor efficiency variance is:
A) Favorable
B) Unfavorable
C) Zero
D) Neither favorable nor unfavorable
17. Which costing method is preferred for external financial reporting under GAAP/IFRS?
A) Marginal costing
B) Absorption costing
C) Direct costing
D) Activity-based costing
18. In absorption costing, fixed factory overheads are:
A) Treated as period costs
B) Included in the cost of goods sold
C) Excluded from product costs
D) Apportioned to administrative expenses
19. Which of the following is NOT a component of prime cost?
A) Direct materials
B) Direct labor
C) Direct expenses
D) Factory rent
20. The break-even point in sales dollars can be calculated using the contribution margin ratio as:
A) Total Fixed Costs / Contribution Margin Ratio
B) Total Variable Costs / Contribution Margin Ratio
C) Total Sales / Contribution Margin Ratio
D) Total Contribution Margin / Contribution Margin Ratio
21. In CVP analysis, the term 'contribution margin ratio' is defined as:
A) Total Contribution Margin / Total Sales
B) Total Sales / Total Contribution Margin
C) Total Variable Costs / Total Sales
D) Total Fixed Costs / Total Contribution Margin
22. What does an unfavorable variance generally indicate?
A) Costs were lower than expected or revenues were higher than expected
B) Costs were higher than expected or revenues were lower than expected
C) Performance met expectations
D) No action is required
23. What does a favorable variance generally indicate?
A) Costs were higher than expected or revenues were lower than expected
B) Costs were lower than expected or revenues were higher than expected
C) A deviation from the budget, regardless of direction
D) A need to revise the standards
24. If the actual selling price is higher than the standard selling price, it results in:
A) Unfavorable sales price variance
B) Favorable sales price variance
C) Unfavorable sales volume variance
D) Favorable sales volume variance
25. Fixed overhead variances are usually analyzed into:
A) Spending, efficiency, and volume variances
B) Rate and efficiency variances
C) Budget and volume variances
D) Idle capacity and controllable variances
26. Variable overhead variances are typically analyzed into:
A) Rate and efficiency variances
B) Spending and volume variances
C) Price and quantity variances
D) Idle capacity and efficiency variances
27. Which variance measures the difference between the actual overhead cost and the overhead cost applied to production?
A) Labor efficiency variance
B) Material usage variance
C) Overhead variance
D) Sales margin variance
28. An unfavorable material quantity variance suggests that:
A) More material was used than the standard allowed for the output
B) Less material was used than the standard allowed for the output
C) The price paid for material was higher than the standard price
D) The price paid for material was lower than the standard price
29. A favorable labor rate variance occurs when:
A) Actual wages paid are less than standard wages for the hours worked
B) Actual wages paid are more than standard wages for the hours worked
C) Actual hours worked are less than standard hours allowed for the output
D) Actual hours worked are more than standard hours allowed for the output
30. Which of the following is a type of material variance?
A) Labor efficiency variance
B) Overhead variance
C) Material price variance
D) Sales volume variance
31. Variance analysis involves:
A) Comparing actual results with budgeted results
B) Comparing actual results with standard costs
C) Comparing budgeted costs with standard costs
D) Calculating the break-even point
32. The main objective of standard costing is to:
A) Eliminate all costs
B) Control costs and measure performance
C) Set the selling price of products
D) Calculate depreciation
33. What is a standard cost?
A) The actual cost incurred during a period
B) The budgeted cost for a future period
C) A predetermined cost that should be incurred under efficient operating conditions
D) The average cost of production over the last five years
34. Standard costing is a technique of:
A) Historical cost accounting
B) Management accounting
C) Financial accounting
D) Tax accounting
35. What is the margin of safety?
A) The difference between actual sales and break-even sales
B) The difference between total costs and total revenue
C) The ratio of fixed costs to variable costs
D) The percentage of profit to sales
36. A higher contribution margin ratio generally indicates:
A) Higher fixed costs
B) Lower profitability
C) Greater profitability for each sales dollar
D) Lower variable costs
37. Which assumption is NOT typically made in CVP analysis?
A) Selling prices per unit remain constant
B) Variable costs per unit remain constant
C) Fixed costs change in total with changes in volume
D) The relevant range of activity is considered
38. Cost-Volume-Profit (CVP) analysis is primarily concerned with the relationship between:
A) Costs, profits, and dividends
B) Sales volume, costs, and profits
C) Fixed costs, variable costs, and capital expenditure
D) Production capacity, market share, and revenue
39. The break-even point in units can be calculated as:
A) Total Fixed Costs / Contribution Margin per Unit
B) Total Revenue / Contribution Margin per Unit
C) Total Variable Costs / Contribution Margin per Unit
D) Total Fixed Costs / Selling Price per Unit
40. What does the break-even point (BEP) represent?
A) The level of sales where profit is maximized
B) The level of sales where total revenue equals total costs
C) The level of sales where contribution margin equals variable costs
D) The point where fixed costs are fully recovered
41. Which formula correctly calculates the contribution margin?
A) Sales Revenue - Total Costs
B) Sales Revenue - Variable Costs
C) Total Costs - Fixed Costs
D) Profit / Sales Revenue
42. The difference between the selling price per unit and the variable cost per unit is known as:
A) Contribution margin
B) Profit per unit
C) Break-even point
D) Fixed cost per unit
43. In marginal costing, what is the treatment of fixed costs?
A) They are allocated to each unit of product
B) They are treated as period costs and charged against revenue
C) They are included in the variable cost per unit
D) They are capitalized as part of inventory
44. When is marginal costing most useful?
A) For long-term strategic pricing decisions
B) For short-term decision making like accepting a special order
C) For calculating the value of closing inventory based on absorption costing principles
D) For allocating fixed costs to products
45. Factory overheads include:
A) Sales commission
B) Office rent
C) Indirect factory wages
D) Interest on debentures
46. Which cost is the sum of direct materials, direct labor, and direct expenses?
A) Factory cost
B) Cost of goods sold
C) Prime cost
D) Total cost
47. Indirect costs that are not directly traceable to a specific product are known as:
A) Direct expenses
B) Prime costs
C) Overheads
D) Variable costs
48. Which of the following is a direct cost?
A) Factory rent
B) Sales manager's salary
C) Wages paid to machine operators
D) Depreciation on office equipment
49. What is the primary purpose of preparing a cost sheet?
A) To determine the selling price of a product
B) To summarize the costs incurred in manufacturing a product or rendering a service
C) To analyze the profitability of different departments
D) To forecast future sales revenue
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