Cost Accounting – 50 MCQs for Competitive Exams (JKSSB, SSC, Banking, UGC NET)
These questions are prepared by Home Academy, focusing on concepts frequently asked in JKSSB Accounts Assistant, Junior Assistant (Accounts), Cost Accountant, SSC, and other competitive exams. Each question includes the correct answer and explanation for conceptual clarity.
1.
Cost accounting mainly deals with the determination and control of:
A. Profit
B. Cost of production
C. Sales revenue
D. Capital
Answer: B
Explanation: Cost accounting focuses on identifying and controlling the cost involved in producing goods and services.
2.
Which of the following is the main objective of cost accounting?
A. Profit distribution
B. Cost control
C. Dividend payment
D. Tax calculation
Answer: B
Explanation: One of the primary purposes of cost accounting is to control costs and improve efficiency in production.
3.
Prime cost consists of:
A. Direct material + Direct labour + Direct expenses
B. Indirect expenses
C. Factory overheads
D. Administrative expenses
Answer: A
Explanation: Prime cost represents the basic manufacturing cost and includes direct material, direct labour, and direct expenses.
4.
Factory cost is calculated as:
A. Prime cost + Factory overheads
B. Prime cost + Selling expenses
C. Direct cost + Office expenses
D. Material cost + Selling expenses
Answer: A
Explanation: Factory cost includes prime cost plus manufacturing or factory overhead expenses.
5.
A cost that remains constant irrespective of the level of production is known as:
A. Variable cost
B. Fixed cost
C. Marginal cost
D. Opportunity cost
Answer: B
Explanation: Fixed costs remain unchanged within a certain range of production, such as rent or salaries.
6.
Which of the following costs varies with production?
A. Rent
B. Insurance
C. Raw material
D. Salary of manager
Answer: C
Explanation: Raw materials increase or decrease depending on the number of units produced.
7.
A cost that has already been incurred and cannot be recovered is called:
A. Marginal cost
B. Sunk cost
C. Opportunity cost
D. Relevant cost
Answer: B
Explanation: Sunk cost refers to past expenditures that cannot be changed by future decisions.
8.
The cost of the next best alternative foregone is called:
A. Marginal cost
B. Opportunity cost
C. Prime cost
D. Conversion cost
Answer: B
Explanation: Opportunity cost represents the value of the benefit sacrificed when choosing one alternative over another.
9.
Direct material, direct labour, and direct expenses together form:
A. Factory cost
B. Prime cost
C. Conversion cost
D. Production cost
Answer: B
Explanation: These three components represent the direct costs involved in production.
10.
Indirect costs are also known as:
A. Direct expenses
B. Overheads
C. Prime cost
D. Marginal cost
Answer: B
Explanation: Indirect costs cannot be directly traced to a single product and are therefore called overheads.
11.
The cost of producing one additional unit is called:
A. Average cost
B. Marginal cost
C. Prime cost
D. Fixed cost
Answer: B
Explanation: Marginal cost measures the increase in total cost when one extra unit is produced.
12.
Which of the following is an example of direct material?
A. Lubricating oil
B. Wood used to make furniture
C. Supervisor salary
D. Factory electricity
Answer: B
Explanation: Direct materials are raw materials that become part of the finished product.
13.
Supervisor salary is classified as:
A. Direct labour
B. Indirect labour
C. Direct expense
D. Direct material
Answer: B
Explanation: Supervisors oversee workers but do not directly produce goods.
14.
Conversion cost includes:
A. Direct material + labour
B. Labour + factory overhead
C. Material + selling expenses
D. Factory overhead only
Answer: B
Explanation: Conversion cost represents the cost of converting raw materials into finished goods.
15.
Cost accounting records are mainly used by:
A. Government
B. Management
C. Customers
D. Shareholders
Answer: B
Explanation: Cost accounting provides information to management for decision-making.
16.
Which cost does not involve actual cash payment?
A. Imputed cost
B. Variable cost
C. Direct cost
D. Marginal cost
Answer: A
Explanation: Imputed cost is a notional cost considered for decision-making.
17.
Rent of factory building is an example of:
A. Variable cost
B. Fixed cost
C. Marginal cost
D. Direct cost
Answer: B
Explanation: Rent remains constant regardless of production level.
18.
The difference between total cost of two alternatives is known as:
A. Marginal cost
B. Differential cost
C. Fixed cost
D. Average cost
Answer: B
Explanation: Differential cost helps management choose between alternatives.
19.
Cost that can be controlled by a manager is called:
A. Controllable cost
B. Fixed cost
C. Opportunity cost
D. Imputed cost
Answer: A
Explanation: These costs can be influenced by managerial decisions.
20.
Which of the following is a period cost?
A. Raw material
B. Direct labour
C. Administrative expenses
D. Direct expenses
Answer: C
Explanation: Period costs are not related to production and are charged to the accounting period.
21.
Direct labour refers to:
A. Workers producing goods
B. Office staff
C. Supervisor
D. Manager
Answer: A
Explanation: Direct labour is directly involved in manufacturing the product.
22.
Depreciation of factory machinery is classified as:
A. Direct cost
B. Factory overhead
C. Selling expense
D. Administrative cost
Answer: B
Explanation: Depreciation is an indirect manufacturing expense.
23.
Cost sheet is prepared to determine:
A. Profit
B. Cost per unit
C. Capital
D. Revenue
Answer: B
Explanation: A cost sheet provides a detailed breakdown of cost per unit.
24.
Indirect material example is:
A. Steel for car manufacturing
B. Oil used in machines
C. Wood for furniture
D. Cloth for garments
Answer: B
Explanation: Oil used in machines assists production but does not form part of the product.
25.
Opportunity cost is considered in:
A. Financial accounting
B. Cost accounting decisions
C. Tax accounting
D. Bookkeeping
Answer: B
Explanation: It helps management evaluate alternative decisions.
26.
Which cost is partly fixed and partly variable?
A. Semi-variable cost
B. Fixed cost
C. Marginal cost
D. Differential cost
Answer: A
Explanation: Electricity bills often include both fixed and variable components.
27.
Cost incurred even when production stops is:
A. Shutdown cost
B. Marginal cost
C. Variable cost
D. Direct cost
Answer: A
Explanation: Security and maintenance expenses continue even during shutdown.
28.
The main element of cost are:
A. Material, labour, expenses
B. Capital, labour, profit
C. Sales, production, profit
D. Revenue, cost, profit
Answer: A
Explanation: These three elements make up the total production cost.
29.
Historical cost refers to:
A. Current cost
B. Past cost
C. Future cost
D. Opportunity cost
Answer: B
Explanation: Historical cost represents past expenditures.
30.
Which cost is not affected by production volume?
A. Fixed cost
B. Variable cost
C. Direct material
D. Direct labour
Answer: A
Explanation: Fixed costs remain constant within a certain production range.
31–50 (Short Format with Answers)
Direct expenses are also called chargeable expenses – Answer: Chargeable expenses
Cost that changes with activity level is variable cost
Benefit sacrificed when choosing one option is opportunity cost
Cost incurred in past and irrecoverable is sunk cost
Labour cost directly related to production is direct labour
Office rent is administrative expense
Selling commission is selling expense
Factory lighting is factory overhead
Cost of materials used in production is direct material
Cost accounting assists in cost control
Break-even analysis studies relationship between cost, volume, profit
Overheads are indirect costs
Labour not directly engaged in production is indirect labour
Power used for machines is factory overhead
Advertising expense is selling expense
Material returned to supplier reduces material cost
Idle time wages are treated as overhead
Loss due to abnormal waste is abnormal cost
Standard cost is a predetermined cost
Cost accounting mainly helps management in decision making
Quick Revision for JKSSB Exams
Most repeated concepts:
Prime cost
Factory cost
Marginal cost
Sunk cost
Opportunity cost
Differential cost
Conversion cost
Fixed cost vs Variable cost
Direct cost vs Indirect cost