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Cost Accounting MCQs for CMA Inter
Chapter-wise Cost Accounting MCQs with answers and explanations. Try the sample questions below, then practise a set of 10 with instant right/wrong.
Practise 10 Costing MCQsSample Cost Accounting MCQs with answers
Q1 · Introduction to Cost Accounting
Which of the following is the primary objective of Cost Accounting?
- (a) Preparing statutory financial statements for shareholders
- (b) Ascertainment of cost and cost control
- (c) Computing income tax liability
- (d) Determining the legal capital of a company
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Answer: (b) Ascertainment of cost and cost control
(b) is correct: cost accounting aims at ascertainment of cost and its control, along with decision making. (a) is the purpose of financial accounting, and (c) and (d) are unrelated to cost accounting.
Q2 · Cost sheet format
Which of the following is the correct formula for Prime Cost?
- (a) Direct Material + Direct Labour + Factory Overheads
- (b) Direct Material + Direct Labour + Direct Expenses
- (c) Factory Cost + Office Overheads
- (d) Direct Labour + Factory Overheads
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Answer: (b) Direct Material + Direct Labour + Direct Expenses
(b) is correct: Prime Cost equals direct material, direct labour and direct expenses. Adding factory overheads gives Works/Factory Cost, so option (a) is the closest wrong answer.
Q3 · Cost Ascertainment – Elements of Cost
Which of the following is an example of a direct expense as per ICMAI cost ascertainment principles?
- (a) Factory rent
- (b) Royalty paid on each unit produced
- (c) Salary of the office manager
- (d) Depreciation on office furniture
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Answer: (b) Royalty paid on each unit produced
(b) is correct: a royalty paid per unit produced can be identified with and charged directly to a specific product, so it is a direct expense. Factory rent is an indirect overhead, and office salaries and office depreciation are administration overheads.
Q4 · Cost Ascertainment – Elements of Cost
Prime cost is the sum of which of the following?
- (a) Direct material and direct labour only
- (b) Direct material, direct labour and factory overheads
- (c) Direct material, direct labour and direct expenses
- (d) Factory overheads and administration overheads
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Answer: (c) Direct material, direct labour and direct expenses
(c) is correct: prime cost comprises direct material, direct labour and direct expenses. Option (a) omits direct expenses, while option (b) wrongly adds factory overheads, which are indirect and form part of works cost.
Q5 · Cost Ascertainment – Elements of Cost
Which of the following statements about the elements of cost is/are correct?
- (a) Direct labour is a variable cost in most manufacturing situations.
- (b) Depreciation on factory machinery is a direct expense.
- (c) Both (a) and (b) are correct.
- (d) None of the above is correct.
Show answer ↓
Answer: (a) Direct labour is a variable cost in most manufacturing situations.
(a) is correct: direct labour is generally treated as a variable cost since it rises with output. Depreciation on factory machinery is a factory overhead (indirect), not a direct expense, so (b) is wrong and (c) and (d) are also wrong.
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