Unit 1: Introduction to Cost Accounting and Material Costing - Practice Quiz

1 Unit or output costing is most suitable for an industry producing:

2 Which cost is obtained by adding direct material, direct labour, and direct expenses?

3 A cost that remains constant in total within a relevant range is called:

4 Which of the following is an example of a cost unit in passenger transport?

5 What is a primary objective of Cost Accounting?

6 Which accounting system mainly provides detailed cost information for internal management?

7 When AI is used to prepare a cost sheet, what should a user do before accepting the result?

8 Material costing is mainly concerned with determining and controlling:

9 Which is an important objective of material control?

10 Which document is commonly prepared by a department to request the purchase of materials?

11 Under ABC analysis, category A usually contains materials that have:

12 In VED analysis, the letter V stands for:

13 A perpetual inventory system records inventory movements:

14 The stock level at which a fresh purchase order should normally be placed is called:

15 If maximum usage is 50 units per week and the maximum reorder period is 4 weeks, what is the reorder level?

16 Economic Order Quantity is the order quantity that minimizes:

17 Under the FIFO method, materials are issued from:

18 Under the LIFO method, materials are issued from:

19 Two material batches have prices of and per unit. What is the simple average price?

20 The weighted average price of materials is calculated by dividing:

21 A factory produces 8,000 identical units during a month. The total manufacturing cost is , and 400 units remain in finished goods inventory. If all units are valued at the same production cost, what is the value of closing finished goods inventory?

22 Direct materials are , direct wages are , and direct expenses are . Factory overhead is 60% of direct wages. What is the works cost?

23 A telephone expense consists of a fixed monthly charge of plus for each call made. How should this expense be classified according to cost behaviour?

24 Which combination correctly identifies a cost unit and a cost centre for a passenger transport company?

25 Management finds that the actual material cost of a product is substantially higher than its predetermined standard cost. Which objective of Cost Accounting is most directly served by investigating this difference?

26 Which statement correctly distinguishes Cost Accounting from Financial Accounting?

27 An AI tool classifies the purchase of a new production machine as direct material while preparing a cost sheet. What is the most appropriate action?

28 A manufacturer wants to determine the material cost chargeable to each production job. Which activity is most relevant to this objective of material costing?

29 A company frequently experiences production stoppages despite holding a large total quantity of inventory. Which material-control objective is most likely not being achieved?

30 After receiving quotations from approved suppliers, which document is normally issued to the selected supplier to authorise the supply of materials?

31 An inventory item has a low annual usage quantity but a very high unit price, causing it to account for a large proportion of annual consumption value. Under ABC analysis, how should it generally be classified?

32 A low-cost spare part can stop the entire production process if it is unavailable. Under VED analysis, how should this spare part be classified?

33 A stores ledger shows 520 units of an item, but physical verification finds only 500 units. What does a perpetual inventory system require?

34 Maximum weekly consumption is 150 units and the maximum reorder period is 6 weeks. What is the reorder level?

35 The reorder level is 900 units. Normal weekly consumption is 125 units, and the normal reorder period is 5 weeks. What is the minimum stock level?

36 Annual material demand is 10,000 units, ordering cost is per order, and annual carrying cost is per unit. Using , what is the approximate EOQ?

37 The works cost is , office overhead is 10% of works cost, and selling overhead is per unit for 10,000 units sold. Assuming no inventories, what is the total cost of sales?

38 Inventory consists of 100 units at each and a later receipt of 150 units at each. Under FIFO, what is the value of an issue of 180 units?

39 Inventory consists of 100 units at each and a later receipt of 150 units at each. Under LIFO, what is the value of an issue of 180 units?

40 A store has 100 units at each and 200 units at each. What is the weighted average issue price per unit?

41 A factory introduces 10,000 kg of material into a single-output process. Material, labour and production overhead cost , and , respectively. Normal loss is of input and has a scrap value of per kg. Actual output is 8,800 kg. What cost per kg should be used to value both good output and abnormal loss?

42 A company plans to produce and sell 20,000 units. Prime cost is , including direct wages of . Factory overhead is absorbed at of direct wages, administration overhead is of works cost, variable selling overhead is per unit and fixed selling overhead is . If profit is of sales, what should be the selling price per unit?

43 A component can be made internally for variable cost of per unit, avoidable fixed cost of and allocated unavoidable fixed cost of . Buying it would cost per unit and release capacity that could earn contribution of per unit. Which decision and relevant-cost comparison is correct?

44 A hospital accumulates costs separately for its maintenance department and measures ward activity by occupied bed-days. How should these two elements be classified?

45 A firm has spare capacity and is evaluating a one-time export order priced below full cost but above incremental cost. Which use of cost accounting best supports the decision?

46 Financial accounts report profit of . In the cost accounts, factory overhead is over-absorbed by , closing inventory is valued higher than in financial accounts, and financial accounts include investment income of that is excluded from cost accounts. What profit is reported by the cost accounts?

47 An AI-generated cost sheet classifies several ledger balances automatically. Which validation control most directly detects both omitted cost items and internal arithmetic inconsistencies?

48 A company purchases 1,000 units at a list price of each, subject to a trade discount. Recoverable GST is and freight is . Normal transit loss is of units, with no scrap value. What material cost per usable unit should be recorded?

49 A purchasing manager reduces ordering costs by placing very large orders, but storage losses, obsolescence and capital carrying costs rise sharply. Which material-control objective has primarily been violated?

50 Which sequence provides the strongest normal control trail for a routine material purchase?

51 Five inventory items have annual usage values of: P , Q , R , S and T . The company defines A-items as items included up to the point where cumulative annual usage value first reaches or exceeds of total value. Which items are A-items?

52 A low-value hospital spare is rarely used, but failure to have it available would immediately stop a life-support system. Under VED analysis, how should it be classified?

53 A perpetual inventory record shows 1,250 units, but physical verification finds 1,218 units. Normal handling loss of 20 units has occurred but has not yet been entered in the records. How should the total shortage be analysed?

54 Weekly consumption ranges from 400 to 600 units, lead time ranges from 3 to 5 weeks, normal consumption is 500 units and normal lead time is 4 weeks. Reorder quantity is 2,400 units. Using conventional stock-level formulas, what are the reorder, minimum and maximum levels, respectively?

55 Historical evidence shows that maximum consumption of 600 units per week occurs only when lead time is 3 weeks, while maximum lead time of 5 weeks occurs only when consumption is 400 units per week. If these are the only worst-case scenarios and no additional safety stock is required, what reorder level covers the greatest feasible lead-time demand?

56 Annual demand is 10,000 units and ordering cost is per order. Holding cost is of unit purchase price per year. Prices are for orders below 1,000 units, for orders from 1,000 to 1,999 units, and for orders of at least 2,000 units. Assuming instantaneous replenishment, which order quantity minimizes annual purchase, ordering and holding costs?

57 A manufacturer uses 12,000 units annually and produces replenishment internally at 48,000 units per year. Setup cost is per run and annual holding cost is per unit. Assuming uniform production and demand, what is the economic production quantity?

58 Under perpetual FIFO, inventory begins with 100 units at . The firm purchases 150 units at , issues 180 units, purchases 80 units at , returns 20 units from that latest purchase to the supplier, and then issues 100 units. What are the cost of the second issue and the ending inventory value?

59 Inventory transactions are: opening 100 units at ; purchase 100 units at ; issue 150 units; purchase 100 units at ; issue 50 units. What are the total issue costs under perpetual LIFO and periodic LIFO, respectively?

60 Before any issue, a store receives 100 units at and 200 units at . It then issues 150 units. Using the periodic simple average price method and the periodic weighted average price method, what issue values result, respectively?