Cost & Management Accounting MCQ & Objective Questions
Cost & Management Accounting is a crucial subject for students preparing for various school and competitive exams in India. Mastering this topic not only enhances your understanding of financial principles but also significantly boosts your exam scores. Practicing MCQs and objective questions helps in reinforcing key concepts and identifying important questions that frequently appear in exams.
What You Will Practise Here
Fundamentals of Cost Accounting
Costing Methods: Job Costing, Process Costing, and Activity-Based Costing
Budgeting and Variance Analysis
Break-even Analysis and Cost-Volume-Profit Relationships
Standard Costing and Performance Measurement
Financial Statements Analysis
Key Formulas and Definitions in Cost & Management Accounting
Exam Relevance
Cost & Management Accounting is an integral part of the curriculum for CBSE, State Boards, and various competitive exams such as NEET and JEE. Questions often focus on practical applications, theoretical concepts, and problem-solving skills. Common question patterns include multiple-choice questions that test your understanding of key principles and calculations related to costs and management strategies.
Common Mistakes Students Make
Confusing different costing methods and their applications.
Misunderstanding the concepts of fixed and variable costs.
Overlooking the importance of accurate budgeting and variance analysis.
Neglecting to memorize essential formulas and definitions.
Failing to practice enough objective questions to build confidence.
FAQs
Question: What are the key topics I should focus on for Cost & Management Accounting exams?Answer: Focus on costing methods, budgeting, variance analysis, and key formulas to excel in your exams.
Question: How can I improve my performance in Cost & Management Accounting MCQs?Answer: Regular practice of MCQs and understanding the underlying concepts will significantly improve your performance.
Start solving practice MCQs today to test your understanding of Cost & Management Accounting and enhance your exam preparation. Remember, consistent practice is the key to success!
Q. In a flexible budget, how are variable costs treated?
A.
They remain constant regardless of activity level
B.
They change in total with changes in activity level
C.
They are ignored in the budget
D.
They are fixed at the highest level of activity
Show solution
Solution
Variable costs in a flexible budget change in total with changes in activity level.
Correct Answer:
B
— They change in total with changes in activity level
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Q. In a flexible budget, what is adjusted based on actual activity levels?
A.
Fixed costs
B.
Variable costs
C.
Total costs
D.
Sales revenue
Show solution
Solution
In a flexible budget, variable costs are adjusted based on actual activity levels.
Correct Answer:
B
— Variable costs
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Q. In a flexible budget, what remains constant regardless of the level of activity?
A.
Variable costs
B.
Total costs
C.
Fixed costs
D.
Contribution margin
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Solution
In a flexible budget, fixed costs remain constant regardless of the level of activity, while variable costs change with activity levels.
Correct Answer:
C
— Fixed costs
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Q. In a flexible budget, what remains constant?
A.
Variable costs per unit
B.
Total fixed costs
C.
Total variable costs
D.
Sales price per unit
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Solution
In a flexible budget, total fixed costs remain constant regardless of the level of activity.
Correct Answer:
B
— Total fixed costs
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Q. In a marginal costing system, how are fixed costs treated?
A.
Included in product costs
B.
Expensed in the period incurred
C.
Allocated to each unit produced
D.
Ignored completely
Show solution
Solution
In marginal costing, fixed costs are expensed in the period incurred and not included in product costs.
Correct Answer:
B
— Expensed in the period incurred
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Q. In a marginal costing system, which of the following is used to assess performance?
A.
Net profit
B.
Gross profit
C.
Contribution margin
D.
Total costs
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Solution
In marginal costing, performance is often assessed using the contribution margin.
Correct Answer:
C
— Contribution margin
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Q. In a standard costing system, what is the purpose of setting standard costs?
A.
To provide a benchmark for measuring performance
B.
To eliminate all variances
C.
To increase actual costs
D.
To simplify the budgeting process
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Solution
Standard costs are set to provide a benchmark for measuring performance and to help in variance analysis.
Correct Answer:
A
— To provide a benchmark for measuring performance
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Q. In a variance analysis, what does a favorable variance indicate?
A.
Costs are higher than budgeted
B.
Revenues are lower than budgeted
C.
Costs are lower than budgeted or revenues are higher than budgeted
D.
No impact on financial performance
Show solution
Solution
A favorable variance indicates that costs are lower than budgeted or revenues are higher than budgeted, improving financial performance.
Correct Answer:
C
— Costs are lower than budgeted or revenues are higher than budgeted
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Q. In a variance analysis, what is the formula for calculating the sales volume variance?
A.
(Actual Sales - Budgeted Sales) * Budgeted Price
B.
(Budgeted Sales - Actual Sales) * Actual Price
C.
(Actual Sales - Budgeted Sales) * Actual Price
D.
(Budgeted Sales - Actual Sales) * Budgeted Price
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Solution
Sales volume variance = (Actual Sales - Budgeted Sales) * Budgeted Price.
Correct Answer:
A
— (Actual Sales - Budgeted Sales) * Budgeted Price
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Q. In budgeting, what does a 'flexible budget' allow for?
A.
Adjusting for actual activity levels
B.
Setting fixed costs
C.
Comparing with historical data
D.
Eliminating variable costs
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Solution
A flexible budget adjusts for actual activity levels, providing a more accurate comparison.
Correct Answer:
A
— Adjusting for actual activity levels
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Q. In budgeting, what is the purpose of a variance report?
A.
To forecast future sales
B.
To compare actual performance against budgeted performance
C.
To calculate tax obligations
D.
To determine fixed costs
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Solution
A variance report compares actual performance against budgeted performance to identify discrepancies.
Correct Answer:
B
— To compare actual performance against budgeted performance
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Q. In cost classification, which term refers to costs that can be traced directly to a specific product?
A.
Indirect Costs
B.
Direct Costs
C.
Fixed Costs
D.
Variable Costs
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Solution
Direct costs can be directly traced to a specific product or service.
Correct Answer:
B
— Direct Costs
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Q. In cost control, what is the primary focus?
A.
Maximizing revenue
B.
Minimizing costs
C.
Ensuring quality
D.
Increasing market share
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Solution
Cost control primarily focuses on minimizing costs while maintaining quality.
Correct Answer:
B
— Minimizing costs
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Q. In cost-volume-profit (CVP) analysis, what does the break-even point represent?
A.
Total revenue equals total costs
B.
Total profit is maximized
C.
Total fixed costs are covered
D.
Total variable costs are minimized
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Solution
The break-even point is where total revenue equals total costs, resulting in zero profit.
Correct Answer:
A
— Total revenue equals total costs
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Q. In cost-volume-profit (CVP) analysis, what does the contribution margin represent?
A.
Total sales revenue
B.
Total fixed costs
C.
Sales revenue minus variable costs
D.
Net profit
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Solution
The contribution margin is calculated as sales revenue minus variable costs.
Correct Answer:
C
— Sales revenue minus variable costs
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Q. In CVP analysis, what does the contribution margin represent?
A.
Total sales minus total fixed costs
B.
Sales revenue minus variable costs
C.
Total costs minus total revenue
D.
Net profit before taxes
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Solution
The contribution margin represents sales revenue minus variable costs, indicating how much revenue is available to cover fixed costs and contribute to profit.
Correct Answer:
B
— Sales revenue minus variable costs
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Q. In CVP analysis, which of the following is considered a fixed cost?
A.
Direct materials
B.
Direct labor
C.
Rent expense
D.
Sales commissions
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Solution
Rent expense is considered a fixed cost in CVP analysis.
Correct Answer:
C
— Rent expense
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Q. In marginal costing, fixed costs are treated as:
A.
Product costs
B.
Period costs
C.
Variable costs
D.
Direct costs
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Solution
In marginal costing, fixed costs are treated as period costs and are charged in full to the profit and loss account.
Correct Answer:
B
— Period costs
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Q. In marginal costing, how is contribution margin calculated?
A.
Sales - Total Costs
B.
Sales - Variable Costs
C.
Sales - Fixed Costs
D.
Sales - Direct Costs
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Solution
Contribution margin is calculated as Sales minus Variable Costs.
Correct Answer:
B
— Sales - Variable Costs
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Q. In marginal costing, which costs are considered relevant for decision-making?
A.
All fixed costs
B.
All variable costs
C.
Only incremental costs
D.
Only sunk costs
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Solution
Marginal costing considers only incremental costs, which are relevant for decision-making regarding pricing and production.
Correct Answer:
C
— Only incremental costs
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Q. In marginal costing, which costs are treated as period costs?
A.
Fixed manufacturing costs
B.
Variable manufacturing costs
C.
Direct materials costs
D.
Direct labor costs
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Solution
In marginal costing, fixed manufacturing costs are treated as period costs and not included in product costs.
Correct Answer:
A
— Fixed manufacturing costs
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Q. In marginal costing, which of the following costs is included in product costs?
A.
Fixed manufacturing overhead
B.
Variable manufacturing overhead
C.
Selling and administrative expenses
D.
All of the above
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Solution
In marginal costing, only variable manufacturing costs are included in product costs.
Correct Answer:
B
— Variable manufacturing overhead
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Q. In marginal costing, which of the following costs is treated as a period cost?
A.
Direct materials
B.
Direct labor
C.
Variable manufacturing overhead
D.
Fixed manufacturing overhead
Show solution
Solution
In marginal costing, fixed manufacturing overhead is treated as a period cost and is expensed in the period incurred.
Correct Answer:
D
— Fixed manufacturing overhead
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Q. In variance analysis, what does a favorable variance indicate?
A.
Higher costs than budgeted
B.
Lower costs than budgeted
C.
Higher revenues than budgeted
D.
Lower revenues than budgeted
Show solution
Solution
A favorable variance indicates that actual revenues are higher than budgeted or actual costs are lower than budgeted.
Correct Answer:
C
— Higher revenues than budgeted
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Q. In variance analysis, what does a negative variance indicate?
A.
Better performance than expected
B.
Worse performance than expected
C.
No variance
D.
Increased sales
Show solution
Solution
A negative variance indicates worse performance than expected, meaning actual results fell short of budgeted expectations.
Correct Answer:
B
— Worse performance than expected
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Q. In variance analysis, what is the formula for calculating the material price variance?
A.
(Actual Price - Standard Price) x Actual Quantity
B.
(Standard Price - Actual Price) x Standard Quantity
C.
(Actual Quantity - Standard Quantity) x Standard Price
D.
(Standard Quantity - Actual Quantity) x Actual Price
Show solution
Solution
Material price variance is calculated as (Actual Price - Standard Price) x Actual Quantity.
Correct Answer:
A
— (Actual Price - Standard Price) x Actual Quantity
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Q. In variance analysis, what is the formula for calculating the sales volume variance?
A.
(Actual Sales - Budgeted Sales) * Budgeted Contribution Margin
B.
(Budgeted Sales - Actual Sales) * Actual Contribution Margin
C.
(Actual Sales - Budgeted Sales) * Actual Contribution Margin
D.
(Budgeted Sales - Actual Sales) * Budgeted Contribution Margin
Show solution
Solution
The sales volume variance is calculated by taking the difference between actual and budgeted sales and multiplying it by the budgeted contribution margin.
Correct Answer:
A
— (Actual Sales - Budgeted Sales) * Budgeted Contribution Margin
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Q. What does a favorable variance indicate?
A.
Costs are higher than budgeted
B.
Sales are lower than budgeted
C.
Costs are lower than budgeted or sales are higher than budgeted
D.
No impact on financial performance
Show solution
Solution
A favorable variance indicates that actual costs are lower than budgeted or actual sales are higher than budgeted.
Correct Answer:
C
— Costs are lower than budgeted or sales are higher than budgeted
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Q. What does a negative direct labor efficiency variance indicate?
A.
Workers are more efficient than expected
B.
Workers are less efficient than expected
C.
Labor costs are lower than budgeted
D.
Labor costs are higher than budgeted
Show solution
Solution
A negative direct labor efficiency variance indicates that workers are less efficient than expected, leading to higher labor costs.
Correct Answer:
B
— Workers are less efficient than expected
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Q. What does a negative variance in budget analysis typically indicate?
A.
Underperformance in revenue generation
B.
Overperformance in cost control
C.
Excessive spending compared to budget
D.
Accurate forecasting
Show solution
Solution
A negative variance indicates that actual spending exceeded the budgeted amount, suggesting excessive spending.
Correct Answer:
C
— Excessive spending compared to budget
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