Question 1

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

Accepted Answer

A) chemical manufacturer 
B) a food retailer 
C) a building contractor 
D) a motor components retailer A

Question 2

Which of the following best describes a fixed cost ?

Accepted Answer

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 A

Question 3

Indirect costs are also known as

Accepted Answer

A) direct cost 
B) overhead costs 
C) prime costs 
D) marginal costs B

Question 4

Which of the following are basic inventories for a manufacturer?

Accepted Answer

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

Question 5

Which of the following is not true?

Accepted Answer

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

Question 6

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

Accepted Answer

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

Question 7

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

Accepted Answer

A) behaviour 
B) function 
C) controllability 
D) relevance

Question 8

Direct costs are also known as:

Accepted Answer

A) indirect cost 
B) overhead costs 
C) prime costs 
D) marginal costs

Question 9

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

Accepted Answer

A) behaviour 
B) traceability 
C) controllability 
D) relevance

Question 10

Direct labour costs will include……………

Accepted Answer

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

Question 11

Which of the following is a period cost?

Accepted Answer

A) direct materials 
B) indirect materials 
C) factory utilities 
D) administrative expenses

Question 12

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

Accepted Answer

A) fixed cost 
B) controllable cost 
C) variable cost 
D) opportunity cost

Question 13

Management accounting is said to meet:

Accepted Answer

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.

Question 14

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

Accepted Answer

A) time 
B) function 
C) performance 
D) type

Exam 6: Cost Classification and Management Accounting