SEBI GRADE A 2022 IMP MCQS SUBJECT:- COSTING

SEBI GRADE A 2022 IMP MCQS SUBJECT:- COSTING answer key with explanation

Q.1. Which of these is not an objective of Cost Accounting?

(a) Ascertainment of Cost

(b) Determination of Selling Price

(c) Cost Control and Cost reduction

(d) Assisting Shareholders in decision making

The following are the major objectives of cost accounting:

1. Ascertainment of Cost

2. Control of Cost

3. Reduction in Cost

4. Determination of Selling Price

Q.2. A profit centre is a centre

(a) Where the manager has the responsibility of generating and maximizing profits

(b) Which is concerned with earning an adequate Return on Investment

(c) Both of the above

(d) Which manages cost

A profit centre is a centre where the manager has the responsibility of generating and maximising profits. In a profit centre, the manager has the responsibility and the authority to make decisions that affect both costs and revenues (and thus profits) for the department or division.

Q.3. Responsibility Centre can be categorised into:

(a) Cost Centres only

(b) Profit Centres only

(c) Investment Centres only

(d) Cost Centres, Profit Centres and Investment Centres

Responsibility Centre can be categorised into Cost Centres, Profit Centres and Investment Centres. Responsibility centers are often categorized by the degree of authority and responsibility given to the manager.

Q.4. Cost Unit is defined as:

(a) Unit of quantity of product, service or time in relation to which costs may be ascertained or expressed

(b) A location, person or an item of equipment or a group of these for which costs are ascertained and used for cost control.

(c) Centres having the responsibility of generating and maximizing profits

(d) Centres concerned with earning an adequate return on investment

Cost unit, also known as the cost per unit, the cost of goods sold or the cost of sales, is the amount of money that a company invests in manufacturing a single unit of a saleable product

Q.5. Fixed cost is a cost:

(a) Which changes in total in proportion to changes in output

(b) which is partly fixed and partly variable in relation to output

(c) Which do not change in total during a given period despise changes in output

(d) which remains same for each unit of output

The term fixed cost refers to a cost that does not change with an increase or decrease in the number of goods or services produced or sold. Fixed costs are expenses that have to be paid by a company, independent of any specific business activities.

Q.6. Uncontrollable costs are the costs which be influenced by the action of a specified member of an undertaking.

(a) can not

(b) can

(c) may or may not

(d) must

Q.7. Element/s of Cost of a product are:

(a) Material only

(b) Labour only

(c) Expenses only

(d) Material, Labour and expenses

Elements of cost of a product are Material, Labour and Overhead expenses.

1. Materials refer to the cost of the materials which becomes a major part of the finished product.

2. Labour is defined as the labour of those workers who are engaged in the production process.

3. Overhead expenses include any expenditure other than direct material and direct labour directly incurred on a specific cost unit (product or job).

Q.8. Abnormal cost is the cost:

(a) Cost normally incurred at a given level of output

(b) Cost not normally incurred at a given level of output

(c) Cost which is charged to customer

(d) Cost which is included in the cost of the product

Abnormal cost is the cost not normally incurred at a given level of output. These costs are not normally incurred at a given level of output in conditions in which normal levels of output occur.

Q.9. Conversion cost includes cost of converting……….into……..

(a) Raw material, WIP

(b) Raw material, Finished goods

(c) WIP, Finished goods

(d) Finished goods, Saleable goods

Conversion cost includes cost of converting Raw material into Finished goods. There are two main components of conversion costs: direct labor and manufacturing overheads.

Q.10. Sunk costs are:

(a) relevant for decision making

(b) Not relevant for decision making

(c) cost to be incurred in future

(d) future costs

sunk cost, in economics and finance, a cost that has already been incurred and that cannot be recovered. In economic decision making, sunk costs are treated as bygone and are not taken into consideration when deciding whether to continue an investment project.

Q.11. Describe the method of costing to be applied in case of Nursing Home:

(a) Operating Costing

(b) Process Costing

(c) Contract Costing

(d) Job Costing

Operating Costing to be applied in case of Nursing Home. Operating costing is an extension and refined form of process costing. It is also more or less very similar to single or output costing.

Q.12. Describe the cost unit applicable to the Bicycle industry:

(a) per part of bicycle

(b) per bicycle

(c) per tone

(d) per day

The cost unit applicable to the Bicycle industry is per bicycle

Q.13. Calculate the prime cost from the following information:

Direct material purchased: Rs. 1,00,000

Direct material consumed: Rs. 90,000

Direct labour: Rs. 60,000

Direct expenses: Rs. 20,000

Manufacturing overheads: Rs. 30,000

(a) Rs. 1,80,000

(b) Rs. 2,00,000

(c) Rs. 1,70,000

(d) Rs. 2,10,000

Prime cost = Raw material consumed + Direct labour + Direct expenses = 90000 + 60000 + 20000 = Rs. 170000.

Q. 14. Total cost of a product: Rs. 10,000 Profit: 25% on Selling Price Profit is:

(a) Rs. 2,500

(b) Rs. 3,000

(c) Rs. 3,333

(d) Rs. 2,000

Profit on S.P = 2500/(10000-2500) × 10000 = Rs. 3,333.

Q.15. Calculate cost of sales from the following:

Net Works cost: Rs. 2,00,000

Office & Administration Overheads: Rs. 1,00,000

Opening stock of WIP: Rs. 10,000

Closing Stock of WIP: Rs. 20,000

Closing stock of finished goods: Rs. 30,000

There was no opening stock of finished goods.

Selling overheads: Rs. 10,000

(a) Rs. 2,70,000

(b) Rs. 2,80,000

(c) Rs. 3,00,000

(d) Rs. 3,20,000

Q.16. Calculate value of closing stock from the following:

Opening stock of finished goods (500 units) : Rs. 2,000

Cost of production (10000 units) : Rs. 50,000

Closing stock (1000 units):?

(a) Rs. 4,000

(b) Rs. 4,500

(c) Rs. 5,000

(d) Rs. 6,000

50000*1000/10000

hence inr 5000

Q. 17. Which of these is not a Material control technique:

(a) ABC Analysis

(b) Fixation of raw material levels

(c) Maintaining stores ledger

(d) Control over slow moving and non moving items

Maintaining stores ledger is not a Material control technique. A stores ledger is a manual or computer record of the raw materials and production supplies stored in a production facility. It is maintained by the person responsible for these assets, such as the warehouse manager.

Q.18. Out of the following, what is not the work of purchase department:

(a) Receiving purchase requisition

(b) Exploring the sources of material supply

(c) Preparation and execution of purchase orders

(d) Accounting for material received

Accounting for material received is not the work of purchase department. Most major companies and even some government organizations have a purchasing or procurement department as part of everyday operations.

Q.19. Bin Card is a

(a) Quantitative as well as value wise records of material received, issued and balance;

(b) Quantitative record of material received, issued and balance

(c) Value wise records of material received, issued and balance

(d) a record of labour attendance

Bin Card is a quantitative record of material received, issued and balance. A BIN Card is a table that records the status of a good held in stock.

Q.20. Stores Ledger is a:

(a) Quantitative as well as value wise records of material received, issued and balance;

(b) Quantitative record of material received, issued and balance

(c) Value wise records of material received, issued and balance

(d) a record of labour attendance

Stores Ledger is a quantitative as well as value wise records of material received, issued and balance. A stores ledger is a manual or computer record of the raw materials and production supplies stored in a production facility. It is maintained by the person responsible for these assets, such as the warehouse manager.

Q.21. Re-order level is calculated as:

(a) Maximum consumption x Maximum re-order period

(b) Minimum consumption x Minimum re-order period

(c) 1/2 of (Minimum + Maximum consumption)

(d) Maximum level - Minimum level

Re-order level is calculated as Maximum consumption x Maximum re-order period. To calculate the reorder level, multiply the average daily usage rate by the lead time in days for an inventory item.

Q.22. Economic order quantity is that quantity at which cost of holding and carrying inventory is:

(a) Maximum and equal

(b) Minimum and equal

(c) It can be maximum or minimum depending upon case to case.

(d) Minimum and unequal

Economic order quantity is that quantity at which cost of holding and carrying inventory is minimum and equal. Economic order quantity (EOQ) is the ideal order quantity a company should purchase for its inventory given a set cost of production, a certain demand rate, and other variables.

Q.23. ABC analysis is an inventory control technique in which:

(a) Inventory levels are maintained

(b) Inventory is classified into A, B and C category with A being the highest quantity, lowest value.

(c) Inventory is classified into A, B and C Category with A being the lowest quantity, highest value

(d) Either b or c.

ABC analysis is a method in which inventory is divided into three categories, i.e. A, B, and C in descending value. The items in the A category have the highest value, B category items are of lower value than A, and C category items have the lowest value

Q.24. Which one out of the following is not an inventory valuation method?

(a) FIFO

(b) LIFO

(c) Weighted Average

(d) EOQ

EOQ is not an inventory valuation method. Economic order quantity (EOQ) is the ideal order quantity a company should purchase for its inventory given a set cost of production, a certain demand rate, and other variables.