#1
1. What is the primary objective of cost accounting?
Cost control and cost reduction
ExplanationFocuses on managing and lowering expenses.
#2
2. Which cost is also known as direct cost?
Prime cost
ExplanationCost directly attributable to production.
#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.
ExplanationStability vs. activity-dependence of costs.
#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.
ExplanationTraceability to specific cost objects.
#5
3. What does the term 'cost center' refer to in cost accounting?
A department or unit within an organization where costs are incurred
ExplanationSpecific organizational units incurring costs.
#6
4. Which method allocates overhead based on the actual hours worked by each department?
Direct costing
ExplanationAssigns overhead directly based on departmental hours.
#7
6. What is the formula for calculating the contribution margin ratio?
Total Revenue / Total Variable Costs
ExplanationRatio indicating revenue available to cover fixed costs.
#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.
ExplanationTreatment of fixed overhead in product costing.
#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.
ExplanationAnalyzing costs at extreme production levels.
#10
5. What is the concept of 'relevant range' in cost accounting?
The range of production where variable costs remain constant per unit
ExplanationProduction range with consistent variable costs per unit.
#11
8. What is the purpose of the break-even point analysis?
To identify the level of sales at which the company neither makes a profit nor incurs a loss.
ExplanationDetermining sales volume for zero profit or loss.
#12
9. What is the concept of 'cost of goods manufactured' (COGM)?
The cost of producing finished goods during a specific accounting period.
ExplanationCosts incurred in making finished goods.
#13
10. In activity-based costing (ABC), what is the purpose of assigning costs to activity cost pools?
To link overhead costs to specific activities that consume resources.
ExplanationConnecting overhead costs to consuming activities.
#14
14. What is the concept of 'cost driver' in activity-based costing?
A measure that causes the cost of a specific activity to change.
ExplanationFactor influencing costs of a particular activity.