Cost Accounting Concepts and Principles Quiz
Test your knowledge of cost accounting with 14 questions covering key concepts, methods, and principles.
#1
1. What is the primary objective of cost accounting?
Maximizing profits
Ensuring legal compliance
Cost control and cost reduction
Market expansion
#2
2. Which cost is also known as direct cost?
Variable cost
Fixed cost
Prime cost
Overhead cost
#3
11. What is the difference between fixed costs and variable costs?
Fixed costs remain constant per unit, while variable costs vary proportionally with the level of activity.
Variable costs remain constant per unit, while fixed costs vary proportionally with the level of activity.
Both fixed and variable costs vary proportionally with the level of activity.
Both fixed and variable costs remain constant per unit.
#4
16. What is the difference between direct costs and indirect costs?
Direct costs can be easily traced to a specific cost object, while indirect costs cannot.
Indirect costs can be easily traced to a specific cost object, while direct costs cannot.
Both direct and indirect costs can be easily traced to a specific cost object.
Both direct and indirect costs cannot be easily traced to a specific cost object.
#5
3. What does the term 'cost center' refer to in cost accounting?
A department or unit within an organization where costs are incurred
The total expenses of a company
The selling price of a product
The total revenue generated
#6
4. Which method allocates overhead based on the actual hours worked by each department?
Activity-based costing
Direct costing
Normal costing
Absorption costing
#7
6. What is the formula for calculating the contribution margin ratio?
Total Revenue / Total Variable Costs
Total Revenue - Total Fixed Costs
Total Variable Costs / Total Revenue
Total Contribution Margin / Total Revenue
#8
7. What is the difference between absorption costing and variable costing?
Absorption costing includes fixed manufacturing overhead in product costs, while variable costing does not.
Variable costing includes fixed manufacturing overhead in product costs, while absorption costing does not.
Both methods treat fixed manufacturing overhead the same way.
Neither method considers fixed manufacturing overhead.
#9
12. How does the high-low method determine the variable cost per unit?
By comparing the highest and lowest production levels and their corresponding total costs.
By calculating the average of all production levels and their corresponding total costs.
By using the actual variable cost per unit provided by the accounting department.
By assuming that the variable cost per unit remains constant at all production levels.
#10
5. What is the concept of 'relevant range' in cost accounting?
The range of production where all costs are fixed
The range of production where variable costs remain constant per unit
The range of production where both fixed and variable costs vary
The range of production where only variable costs are incurred
#11
8. What is the purpose of the break-even point analysis?
To determine the point where total revenue equals total variable costs.
To identify the level of sales at which the company neither makes a profit nor incurs a loss.
To calculate the profit margin of a company.
To analyze the contribution margin of a product.
#12
9. What is the concept of 'cost of goods manufactured' (COGM)?
The cost of producing finished goods during a specific accounting period.
The cost of raw materials used in production.
The cost of goods sold during a specific accounting period.
The cost of goods available for sale in inventory.
#13
10. In activity-based costing (ABC), what is the purpose of assigning costs to activity cost pools?
To simplify the allocation process.
To allocate costs based on a single cost driver.
To link overhead costs to specific activities that consume resources.
To allocate costs based on direct labor hours only.
#14
14. What is the concept of 'cost driver' in activity-based costing?
A factor that causes the total cost to increase.
A variable that remains constant regardless of the level of activity.
A measure that causes the cost of a specific activity to change.
A factor that determines the total fixed costs.
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