Q. In a cost sheet, how is the total cost of production calculated?
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A.
Direct materials + Direct labor + Manufacturing overhead
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B.
Direct materials + Selling expenses + Administrative expenses
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C.
Direct labor + Selling expenses + Manufacturing overhead
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D.
Direct materials + Direct labor + Selling expenses
Solution
The total cost of production is calculated by summing direct materials, direct labor, and manufacturing overhead.
Correct Answer:
A
— Direct materials + Direct labor + Manufacturing overhead
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Q. What does the term 'prime cost' refer to in a cost sheet?
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A.
Total cost of production
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B.
Direct materials and direct labor costs
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C.
Total manufacturing overhead
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D.
Selling and administrative expenses
Solution
Prime cost refers to the sum of direct materials and direct labor costs incurred in production.
Correct Answer:
B
— Direct materials and direct labor costs
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Q. What is the effect of depreciation on the cost sheet?
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A.
Increases direct materials cost
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B.
Increases direct labor cost
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C.
Increases manufacturing overhead
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D.
Has no effect
Solution
Depreciation is included in manufacturing overhead, thus increasing the total cost reflected in the cost sheet.
Correct Answer:
C
— Increases manufacturing overhead
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Q. What is the formula for calculating the cost of goods sold (COGS) from a cost sheet?
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A.
Opening inventory + Purchases - Closing inventory
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B.
Purchases - Opening inventory + Closing inventory
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C.
Opening inventory - Purchases + Closing inventory
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D.
Closing inventory + Purchases - Opening inventory
Solution
COGS is calculated using the formula: Opening inventory + Purchases - Closing inventory.
Correct Answer:
A
— Opening inventory + Purchases - Closing inventory
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Q. What is the primary purpose of a cost sheet?
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A.
To record sales transactions
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B.
To summarize the costs of production
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C.
To prepare financial statements
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D.
To calculate tax liabilities
Solution
A cost sheet summarizes the costs incurred in the production of goods, helping in pricing and profitability analysis.
Correct Answer:
B
— To summarize the costs of production
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Q. What is the significance of a cost sheet in managerial accounting?
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A.
It helps in tax planning
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B.
It aids in pricing decisions
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C.
It is used for external reporting
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D.
It is not significant
Solution
A cost sheet is significant in managerial accounting as it aids in pricing decisions by providing detailed cost information.
Correct Answer:
B
— It aids in pricing decisions
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Q. What is the significance of preparing a cost sheet for management?
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A.
To determine tax obligations
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B.
To assess financial performance
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C.
To aid in pricing decisions
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D.
To prepare cash flow statements
Solution
A cost sheet aids management in making informed pricing decisions based on the costs of production.
Correct Answer:
C
— To aid in pricing decisions
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Q. When preparing a cost sheet, which of the following is considered a fixed cost?
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A.
Direct materials
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B.
Direct labor
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C.
Rent of factory
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D.
Sales commissions
Solution
Rent of the factory is considered a fixed cost as it does not vary with the level of production.
Correct Answer:
C
— Rent of factory
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Q. Which accounting standard is primarily concerned with the preparation of cost sheets?
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A.
IFRS
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B.
GAAP
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C.
IAS
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D.
AS-2
Solution
AS-2 (Accounting Standard 2) deals with the valuation of inventories, which is relevant for cost sheet preparation.
Correct Answer:
D
— AS-2
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Q. Which of the following is a key component of a cost sheet?
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A.
Net income
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B.
Total revenue
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C.
Total cost of production
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D.
Cash flow
Solution
The total cost of production is a key component of a cost sheet, summarizing all costs incurred.
Correct Answer:
C
— Total cost of production
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Q. Which of the following is a method of inventory valuation that can affect the cost sheet?
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A.
FIFO
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B.
LIFO
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C.
Weighted average
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D.
All of the above
Solution
All of the mentioned methods (FIFO, LIFO, and Weighted average) can be used for inventory valuation, impacting the cost sheet.
Correct Answer:
D
— All of the above
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Q. Which of the following is NOT typically included in a cost sheet?
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A.
Direct materials cost
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B.
Direct labor cost
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C.
Selling and administrative expenses
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D.
Manufacturing overhead
Solution
Selling and administrative expenses are not included in the cost sheet, which focuses on production costs.
Correct Answer:
C
— Selling and administrative expenses
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