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. What is the term for the difference between actual costs and budgeted costs?
A.
Cost Variance
B.
Cost Control
C.
Cost Allocation
D.
Cost Classification
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Solution
Cost variance measures the difference between actual costs incurred and budgeted costs.
Correct Answer:
A
— Cost Variance
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Q. What is the total contribution if a company sells 300 units with a contribution margin of $40 per unit?
A.
$12,000
B.
$10,000
C.
$15,000
D.
$8,000
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Solution
Total contribution = Contribution margin per unit * Number of units = $40 * 300 = $12,000.
Correct Answer:
A
— $12,000
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Q. What is the total contribution margin if a company sells 150 units at a contribution margin of $25 per unit?
A.
$2,500
B.
$3,000
C.
$3,500
D.
$4,000
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Solution
Total contribution margin = Contribution margin per unit * Number of units = $25 * 150 = $3,750.
Correct Answer:
A
— $2,500
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Q. What is the total contribution margin if a company sells 500 units at a selling price of $80 per unit and a variable cost of $50 per unit?
A.
$15,000
B.
$20,000
C.
$25,000
D.
$30,000
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Solution
Contribution margin per unit = Selling price - Variable cost = $80 - $50 = $30. Total contribution margin = Contribution margin per unit * Number of units sold = $30 * 500 = $15,000.
Correct Answer:
B
— $20,000
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Q. What is the total cost if fixed costs are $10,000, variable cost per unit is $5, and 1,000 units are produced?
A.
$10,000
B.
$15,000
C.
$20,000
D.
$25,000
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Solution
Total Cost = Fixed Costs + (Variable Cost per Unit * Number of Units) = $10,000 + ($5 * 1,000) = $10,000 + $5,000 = $15,000.
Correct Answer:
C
— $20,000
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Q. What is the total variable cost if a company produces 1,000 units with a variable cost per unit of $40?
A.
$40,000
B.
$50,000
C.
$60,000
D.
$70,000
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Solution
Total Variable Cost = Variable Cost per unit * Number of units = $40 * 1,000 = $40,000.
Correct Answer:
A
— $40,000
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Q. What type of cost is associated with the opportunity lost when choosing one alternative over another?
A.
Sunk cost
B.
Fixed cost
C.
Variable cost
D.
Opportunity cost
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Solution
Opportunity cost represents the potential benefits lost when one alternative is chosen over another.
Correct Answer:
D
— Opportunity cost
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Q. What type of cost is associated with the production of goods but cannot be directly traced to specific units?
A.
Direct Materials
B.
Direct Labor
C.
Manufacturing Overhead
D.
Selling Expenses
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Solution
Manufacturing overhead includes indirect costs that cannot be traced directly to specific units.
Correct Answer:
C
— Manufacturing Overhead
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Q. What type of cost is directly associated with the production of a specific product?
A.
Fixed Cost
B.
Variable Cost
C.
Sunk Cost
D.
Opportunity Cost
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Solution
Variable costs change with the level of production and are directly tied to the manufacturing of a product.
Correct Answer:
B
— Variable Cost
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Q. What type of cost is directly associated with the production of goods?
A.
Fixed Cost
B.
Variable Cost
C.
Sunk Cost
D.
Opportunity Cost
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Solution
Variable costs change with the level of production and are directly associated with the production of goods.
Correct Answer:
B
— Variable Cost
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Q. What type of cost remains constant in total regardless of changes in the level of activity within a relevant range?
A.
Variable Cost
B.
Fixed Cost
C.
Mixed Cost
D.
Step Cost
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Solution
Fixed costs do not change with the level of production or sales within a relevant range.
Correct Answer:
B
— Fixed Cost
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Q. Which budgeting approach starts with the previous year's budget and adjusts for changes?
A.
Zero-based budgeting
B.
Incremental budgeting
C.
Activity-based budgeting
D.
Flexible budgeting
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Solution
Incremental budgeting takes the previous year's budget as a base and makes adjustments for the new period.
Correct Answer:
B
— Incremental budgeting
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Q. Which budgeting method involves preparing budgets based on previous periods' performance?
A.
Zero-based budgeting
B.
Incremental budgeting
C.
Flexible budgeting
D.
Activity-based budgeting
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Solution
Incremental budgeting uses previous periods' budgets as a base and adjusts for expected changes.
Correct Answer:
B
— Incremental budgeting
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Q. Which budgeting method involves preparing budgets based on the previous year's performance?
A.
Zero-based budgeting
B.
Incremental budgeting
C.
Activity-based budgeting
D.
Flexible budgeting
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Solution
Incremental budgeting uses the previous year's budget as a base and adjusts for changes.
Correct Answer:
B
— Incremental budgeting
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Q. Which cost classification includes 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 are those that can be traced directly to a specific product.
Correct Answer:
B
— Direct Costs
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Q. Which costing method assigns all manufacturing costs to the product?
A.
Variable costing
B.
Absorption costing
C.
Marginal costing
D.
Activity-based costing
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Solution
Absorption costing assigns all manufacturing costs, both fixed and variable, to the product, making it a comprehensive costing method.
Correct Answer:
B
— Absorption costing
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Q. Which costing method includes both fixed and variable costs in product costing?
A.
Absorption Costing
B.
Marginal Costing
C.
Activity-Based Costing
D.
Standard Costing
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Solution
Absorption costing includes both fixed and variable costs in the cost of a product.
Correct Answer:
A
— Absorption Costing
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Q. Which costing method includes both fixed and variable costs in product costs?
A.
Marginal costing
B.
Absorption costing
C.
Direct costing
D.
Activity-based costing
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Solution
Absorption costing includes both fixed and variable costs in product costs.
Correct Answer:
B
— Absorption costing
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Q. Which costing method is best for short-term decision-making?
A.
Absorption costing
B.
Marginal costing
C.
Activity-based costing
D.
Standard costing
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Solution
Marginal costing is best for short-term decision-making as it focuses on variable costs and contribution margin.
Correct Answer:
B
— Marginal costing
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Q. Which costing method is most appropriate for a company producing custom-made products?
A.
Job order costing
B.
Process costing
C.
Activity-based costing
D.
Standard costing
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Solution
Job order costing is suitable for custom-made products as it tracks costs for each individual job.
Correct Answer:
A
— Job order costing
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Q. Which costing method is most appropriate for a company that produces custom-made products?
A.
Job order costing
B.
Process costing
C.
Activity-based costing
D.
Standard costing
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Solution
Job order costing is suitable for companies that produce custom-made products, as it tracks costs for each individual job.
Correct Answer:
A
— Job order costing
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Q. Which costing method is primarily used for internal decision-making?
A.
Absorption costing
B.
Marginal costing
C.
Standard costing
D.
Job costing
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Solution
Marginal costing is primarily used for internal decision-making as it focuses on variable costs.
Correct Answer:
B
— Marginal costing
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Q. Which of the following best describes the term 'opportunity cost'?
A.
The cost of the next best alternative foregone
B.
The total cost of production
C.
The fixed costs incurred regardless of production
D.
The variable costs associated with production
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Solution
Opportunity cost refers to the cost of the next best alternative that is foregone when a decision is made.
Correct Answer:
A
— The cost of the next best alternative foregone
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Q. Which of the following costs is considered a sunk cost?
A.
Future marketing expenses
B.
Past research and development costs
C.
Current production costs
D.
Future labor costs
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Solution
Sunk costs are past costs that have already been incurred and cannot be recovered, such as past research and development costs.
Correct Answer:
B
— Past research and development costs
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Q. Which of the following costs would be classified as a direct cost for a manufacturing company?
A.
Factory rent
B.
Direct labor
C.
Depreciation on factory equipment
D.
Utilities for the factory
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Solution
Direct labor costs can be directly traced to the production of specific goods.
Correct Answer:
B
— Direct labor
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Q. Which of the following costs would be classified as a direct cost?
A.
Factory rent
B.
Direct materials used in production
C.
Administrative salaries
D.
Depreciation on office equipment
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Solution
Direct materials used in production are directly traceable to the product and classified as direct costs.
Correct Answer:
B
— Direct materials used in production
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Q. Which of the following costs would be classified as a mixed cost?
A.
Electricity bill with a fixed service charge and variable usage charge
B.
Direct labor
C.
Raw materials
D.
Insurance
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Solution
A mixed cost has both fixed and variable components, such as an electricity bill.
Correct Answer:
A
— Electricity bill with a fixed service charge and variable usage charge
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Q. Which of the following is a characteristic of fixed costs?
A.
They vary with production levels
B.
They remain constant regardless of production levels
C.
They are always controllable
D.
They are only incurred in the short term
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Solution
Fixed costs remain constant regardless of production levels within a relevant range.
Correct Answer:
B
— They remain constant regardless of production levels
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Q. Which of the following is a fixed cost in a manufacturing budget?
A.
Raw materials
B.
Direct labor
C.
Factory rent
D.
Sales commissions
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Solution
Factory rent is a fixed cost as it does not change with the level of production.
Correct Answer:
C
— Factory rent
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Q. Which of the following is a key benefit of using marginal costing?
A.
It provides a detailed analysis of fixed costs.
B.
It simplifies the decision-making process.
C.
It is required by GAAP.
D.
It allocates fixed costs to products.
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Solution
Marginal costing simplifies the decision-making process by focusing on variable costs and contribution.
Correct Answer:
B
— It simplifies the decision-making process.
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