Question 1

Which of the following best describes a fixed cost ?
A)remains constant irrespective of the level of activity
B)represents a fixed proportion of total costs
C)increases proportionately with output
D)has a direct relationship with output

Accepted Answer

Fixed costs remain constant regardless of the level of activity or output. This means they do not change with the amount of goods or services a company produces in a given period.

Question 2

The weighted average method of stock valuation would be most appropriate for ………….
A)chemical manufacturer
B)a food retailer
C)a building contractor
D)a motor components retailer

Accepted Answer

The weighted average method is suitable for industries like chemical manufacturing where products are indistinguishable and mixed together, making it difficult to track individual costs.

Question 3

Direct labour costs will include……………
A)all labor costs attributable to product
B)direct labor costs plus any bonuses
C)total direct labor hours at the normal hourly rate of pay
D)direct labor costs plus any bonuses and overtime premium

Accepted Answer

Direct labour costs typically refer to the total direct labor hours worked multiplied by the normal hourly rate of pay, without including bonuses or overtime premiums.

Question 4

Management accounting is said to meet:
A)the internal accounting needs of the organization
B)the needs of laws that govern company financial reporting.
C)the regulatory requirements of the organization
D)the external accounting needs of the organisation.

Accepted Answer

Management accounting is primarily focused on meeting the internal accounting needs of the organization, providing information to managers for decision-making, planning, and control purposes.

Question 5

Which one of the following is not a recognised cost classification?
A)time
B)function
C)performance
D)type

Accepted Answer

Performance is not a recognized cost classification in accounting or financial management. Costs are typically classified by time (period costs vs. product costs), function (manufacturing, selling, administrative), and type (direct vs. indirect costs), but not by performance.

Question 6

Direct costs are also known as:
A)indirect cost
B)overhead costs
C)prime costs
D)marginal costs

Accepted Answer

Direct costs are specifically associated with the production of goods or services, such as raw materials and labor, and are therefore also referred to as prime costs.

Question 7

Indirect costs are also known as
A)direct cost
B)overhead costs
C)prime costs
D)marginal costs

Accepted Answer

Indirect costs are costs that cannot be directly attributed to a specific project or activity and are often referred to as overhead costs. These include expenses like rent, utilities, and administrative salaries that support the overall operation of a business but are not tied to any one product or service.

Question 8

Which of the following is not true?
A)managerial accounting information is prepared for internal users
B)managerial accounting information is not required by various laws
C)there are specific standards of acceptability for managerial accounting
D)the structure of managerial accounting practice is relatively flexible

Accepted Answer

Managerial accounting does not have specific standards of acceptability like financial accounting does. It is designed to meet the internal needs of the organization, making its structure flexible and not bound by strict rules or standards.

Question 9

Which of the following are basic inventories for a manufacturer?
A)indirect materials, goods in process, and raw materials
B)finished goods, raw materials, and direct materials
C)raw materials, goods in process, and finished goods
D)raw materials, factory overhead, and direct labour

Accepted Answer

C) Raw materials, goods in process, and finished goods are the three basic types of inventories for a manufacturer. Raw materials are the inputs to production, goods in process are partially completed products, and finished goods are the completed products ready for sale.

Question 10

The three basic elements of the cost of a manufactured product are:
A)indirect materials, indirect labour, and manufacturing overhead
B)merchandise inventory, work in process, and finished goods inventory
C)direct materials, work in process, and finished goods inventory
D)direct materials, direct labour, and manufacturing overhead

Accepted Answer

The three basic elements of the cost of a manufactured product are direct materials (the raw materials directly used in the product), direct labour (the work of employees directly involved in manufacturing the product), and manufacturing overhead (all other costs associated with manufacturing that are not direct materials or direct labour, such as utilities, depreciation on manufacturing equipment, and factory rent).

Question 11

A cost which changes in proportion to changes in volume of activity is called
A)fixed cost
B)controllable cost
C)variable cost
D)opportunity cost

Accepted Answer

Variable costs change in proportion to the volume of activity. These costs vary directly with the level of production or other measures of volume. Examples include materials and labor directly involved in a company's production process. Fixed costs, on the other hand, remain constant regardless of activity levels, while controllable costs are those that can be influenced or controlled by management. Opportunity cost represents the benefits an individual, investor, or business misses out on when choosing one alternative over another.

Question 12

A 'direct' cost is a cost that is classified by:
A)behaviour
B)traceability
C)controllability
D)relevance

Accepted Answer

Direct costs are classified by traceability, meaning they can be directly traced to a specific cost object, such as a product, service, or project.

Question 13

A 'product' cost is a cost that is classified by:
A)behaviour
B)function
C)controllability
D)relevance

Accepted Answer

Product costs are classified by function, meaning they are directly associated with the production of goods, including direct materials, direct labor, and manufacturing overhead.

Question 14

Which of the following is a period cost?
A)direct materials
B)indirect materials
C)factory utilities
D)administrative expenses

Accepted Answer

Administrative expenses are considered period costs because they are not directly tied to the production process and are expensed in the period in which they are incurred.

Quiz 6: Cost Classification and Management Accounting

Which of the following best describes a fixed cost ?

The weighted average method of stock valuation would be most appropriate for ………….

Direct labour costs will include……………

Management accounting is said to meet:

Which one of the following is not a recognised cost classification?

Direct costs are also known as:

Indirect costs are also known as

Which of the following is not true?

Which of the following are basic inventories for a manufacturer?

The three basic elements of the cost of a manufactured product are:

A cost which changes in proportion to changes in volume of activity is called

A 'direct' cost is a cost that is classified by:

A 'product' cost is a cost that is classified by:

Which of the following is a period cost?