About Cost concept

A company's supply is governed by its costs. The price is now determined by both supply and demand. As a result, uncovering the nature of costs is required to understand the price process and supply factors. Because the cost concept is such an important part of economics, both conventional and current theories play a role in this research.

Features of Cost Concept

  • An asset should be recorded at the cost at which it was obtained, independent of its market worth, according to the cost concept of accounting. For instance, if a structure is acquired for the market price $500,000, it will continue to be recorded in the books at that amount, despite the fact that its current worth may be far higher.
  • With this concept, asset prices remain stable while being recorded. The cost concept of accounting does, however, have significant drawbacks. For instance, the cost concept of accounting would result in an exaggerated overstatement of a company's net profit if used in the context of inflation.

Despite its flaws, the cost accounting concept is thought to be the best option among the alternatives.

Cost Analysis

When it comes to studying the relationship between cost and numerous production variables, such as the scale of operations, the costs of production inputs, the volume of output, and so on, cost analysis is the way to go. It's all about the production's financial elements.

Importance of Cost Concept

The concept of cost is crucial, especially when making financial decisions for your company. Grasp price begins with an understanding of the cost concept in accounting. On a professional level, it assists managers in making sound judgments on concepts such as fixed costs, variable costs, price quotations, and so on.

Following are some of the multiple choice questions on the Cost concept with answers that will help the students in developing their knowledge.

Cost concept MCQ

1. Which of the following is not a manufacturing cost category?

  • Cost of goods sold
  • Direct materials
  • Direct labour
  • Manufacturing overhead

2. A manufacturing company calculates the cost of goods sold as follows: .....(FG = finished goods)

  • Beginning FG inventory + cost of goods purchased – ending FG inventory.
  • Ending FG inventory – cost of goods manufactured + beginning FG inventory.
  • Beginning FG inventory – cost of goods manufactured – ending FG inventory.
  • Beginning FG inventory + cost of goods manufactured – ending FG inventory.

3. Both direct materials and indirect materials are..

  • raw materials.
  • manufacturing overhead.
  • merchandise inventory.
  • sold directly to customers by a manufacturing company.

4. Lake Appliance produces washers and dryers in an assembly-line process. Labor costs incurred during a recent period were: corporate executives, $500,000; assembly-line workers, $180,000; security guards, $45,000; and plant supervisor, $110,000. The total of Lake's direct labor cost was

  • $110,000.
  • $180,000
  • $155,000
  • $235,000

5. Which one of the following is not a direct material?

  • A tire used for a lawnmower.
  • The plastic used in the covered case for a home PC.
  • The steel used in the manufacturing of steel-radial tires.
  • Lubricant for a ball-bearing joint for a large crane.

6. Which one of the following is not a cost element in manufacturing a product?

  • Manufacturing overhead
  • Direct materials
  • Office salaries
  • Direct labour

7. Cotter pins and lubricants used irregularly in a production process are classified as..

  • miscellaneous expense.
  • direct materials.
  • indirect materials.
  • nonmaterial materials.

8. Which of the following are period costs?

  • Raw materials
  • Direct materials and direct labor
  • Direct labor and manufacturing overhead
  • Selling expenses

9. Which cost is also known as inventoriable cost?

  • Product cost
  • Period cost
  • Manufacturing cost
  • Non-manufacturing cost

10. Which of the following employees would not be classified as indirect labor?

  • Plant Custodian
  • Salesperson and assembler of wooden furniture
  • Plant security guard.
  • None of these

11. Which one of the following is not considered as material costs?

  • Partially completed motor engines for a motorcycle plant
  • Bolts used in manufacturing the compressor of an engine
  • Rivets for the wings of a new commercial jet aircraft
  • Lumber used to build tables

12. The wages of a janitor in the factory would be classified as..

  • a period cost
  • direct labour cost
  • indirect labour cost
  • compliance costs.

13. Which one of the following is an example of a period cost?

  • Purchases cost of raw materials on account
  • Workers' compensation insurance on factory workers' wages allocated to the factory
  • A box cost associated with computers
  • A manager's salary for work that is done in the corporate head office

14. When classified according to traceability to cost objective, the cost of raw materials is considered a:

  • Discretionary cost
  • Direct cost
  • Product cost
  • Committed cost

15. Which one of the following is an example of a period cost

  • Workers’ compensation insurance on factory workers’ wages allocated to the factory
  • A box cost associated with computers
  • A manager’s salary for work that is done in the corporate head office
  • A change in benefits for the union workers who work in the New York plant of a Fortune 1000 manufacturer

16. The work of factory employees that can be physically and directly associated with converting raw materials into finished goods is..

  • manufacturing overhead.
  • indirect materials.
  • indirect labour.
  • direct labour.

17. The cost associated with the next unit or the next project or incremental cost associated with an additional project as opposed to the next discrete unit.

  • Historical
  • Relevant
  • Marginal
  • Incremental

18. Raw materials that can be conveniently and directly associated with a finished product are called materials overhead.

  • TRUE
  • FALSE

19. 50% is the same as 50100\frac{50}{100}10050​ . What is fifty percent as a decimal?

  • 1.5
  •  12\frac{1}{2}21​  
  • 0.50
  • 0.2

20. Prime Cost diperoleh dari :

  • DM + DL
  • DL + FOH
  • DM + FOH
  • DM + DL + FOH

21. Berapakah Operating Income?Sales $10.000Cost of Good Manufactured $1.000Cost of Good Sold $1.000Product Cost $2.000Period Cost $3.000

  • $4.000
  • $5.000
  • $6.000
  • $7.000

22. Berapakah Cost of Goods Sold?Total product cost $5.000Work in Process 1 Jan $2.000Work in Process 31 Dec $1.000Finished Goods 1 Jan $1.000Finished Goods 31 Dec $3.000

  • $2.000
  • $4.000
  • $8.000
  • $10.000

23. Berikut ini adalah klasifikasi biaya berdasarkan Perilaku

  • Fixed Cost dan Variable Cost
  • Direct Cost dan Indirect Cost
  • Product Cost dan Period Cost
  • Sunk Cost dan Opportunity Cost

24. Berikut ini adalah klasifikasi biaya berdasarkan Fungsi

  • Fixed Cost dan Variable Cost
  • Direct Cost dan Indirect Cost
  • Product Cost dan Period Cost
  • Sunk Cost dan Opportunity Cost

25. Gaji karyawan bagian Perakitan adalah

  • Direct Material (DM)
  • Direct Labor (DL)
  • Factory Overhead (FOH)
  • Administrative Expense

26. Komisi untuk karyawan bagian penjualan adalah

  • Direct Labor (DL)
  • Factory Overhead (FOH)
  • Selling Expense
  • Administrative Expense

27. Biaya pengangkutan saat pembelian Material adalah

  • Direct Material (DM)
  • Direct Labor (DL)
  • Factory Overhead (FOH)
  • Administrative Expense

28. Hitung berapakah DM used?Data mengenai Direct Material selama bulan Januari 2020,saldo 1 Januari = $2.000pembelian selama Januari = $3.000 saldo 31 Desember = $1.000

  • $3.000
  • $4.000
  • $5.000
  • $7.000

29. Hitung berapakah Total Product Cost ?Direct Material beginning $1.000Direct Material ending $500Direct Material used $2.500Direct Labor $500Factory Overhead $2.000

  • $4.500
  • $6.500
  • $3.000
  • $5.000

30. Conversion Cost (Biaya Konversi) diperoleh dari :

  • DM + DL
  • DL + FOH
  • DM + FOH
  • DM + DL + FOH

31. Beban Sewa gedung Pabrik adalah

  • Direct Material (DM)
  • Direct Labor (DL)
  • Factory Overhead (FOH)
  • Selling Expense

32. Beban Sewa gedung toko adalah

  • Direct Material (DM)
  • Direct Labor (DL)
  • Factory Overhead (FOH)
  • Selling Expense

33. Depresiasi untuk bangunan kantor administrasi adalah

  • Direct Labor (DL)
  • Factory Overhead (FOH)
  • Selling Expense
  • Administrative Expense

34. Beban Gaji untuk Manager Keuangan adalah

  • Direct Labor (DL)
  • Factory Overhead (FOH)
  • Selling Expense
  • Administrative Expense

35. Which of the following statements about direct and indirect cost classification is not true?

  • Indirect costs are always traceable
  • The direct and indirect classification depends on the choice of the cost object
  • Indirect costs are always allocated
  • The design of operations affects the direct and indirect classification

36. Cost of goods sold..

  • only appears on merchandising companies' Statements of Comprehensive Income
  • only appears on manufacturing companies' Statements of Comprehensive Income
  • appears on both manufacturing and merchandising companies' Statements of Comprehensive Income
  • is calculated exactly the same for merchandising and manufacturing companies.

37. The cost of goods manufactured is calculated as follows:(WIP = work in process)

  • Beginning WIP + direct materials used + direct labor + manufacturing overhead + ending WIP.
  • Direct materials used + direct labor + manufacturing overhead – beginning WIP + ending WIP.
  • Beginning WIP + direct materials used + direct labor + manufacturing overhead – ending WIP.
  • Direct materials used + direct labor + manufacturing overhead – ending WIP – beginning WIP.

38. Which one of the following represents a period cost?

  • The VP of Sales' salary and benefits
  • Overhead allocated to the manufacturing operations
  • Labour costs associated with quality control
  • Fringe benefits associated with factory workers

39. Which of the following are manufacturing costs?

  • Overhead and marketing costs
  • Direct raw material costs and direct labour costs
  • Administrative and direct labour costs
  • Marketing and administrative costs

40. The costs that are reported as expenses in the Statement of Comprehensive Income when they are incurred.

  • Product costs
  • Operating expenses
  • Period costs
  • Manufacturing costs

41. When classified according to traceability to cost object, the cost of raw materials is considered a:

  • Discretionary cost
  • Direct cost
  • Product cost
  • Committed cost

42. Fixed costs ..-

  • Increase in total with the increase in production
  • Decrease per unit with the increase in production
  • Increase per unit with the increase in production
  • Decrease in total with the decrease in production

43. We talked about finding the best deal. If you have two of the exact same products do people typically want to pay MORE or LESS for that same product?

  • More
  • Less

44. Variable costs ..-

  • Increase in total with the increase in production
  • Increase per unit with the increase in production
  • Include prime costs and all factory overheads
  • Include all manufacturing, administrative and selling and distribution costs

45. The formula for calculating the cost of goods sold for manufacturing company is ..-

  • Finished goods at beginning of the year + cost of finished goods produced - finished goods at end of the year
  • Total manufacturing costs + work-in-progress at beginning of the year - work-in-progress at end of the year
  • Finished goods at beginning of the year + cost of sales - finished goods at end of the year
  • Finished goods at beginning of the year - cost of finished goods produced - finished goods at end of the year

46. The subtotal, "Cost of goods manufactured" appears on..

  • a merchandising companies' Statements of Comprehensive Income
  • both manufacturing and a merchandising companies' Statements of Comprehensive Income
  • neither manufacturing nor a merchandising companies' Statements of Comprehensive Income
  • a manufacturing companies' Statements of Comprehensive Income

47. Factory insurance is considered to be a (an).. -

  • Overhead costs
  • Prime costs
  • Administrative costs
  • Operating income

48. Depreciation on office furniture is considered to be a (an).. -

  • Overhead costs
  • Selling and distribution costs
  • Administrative costs
  • Negative asset

49. Prime costs are made up of ..-

  • Raw materials costs + direct labour costs
  • Direct labour costs + Indirect labour costs
  • Factory overheads + administrative costs
  • Selling and distribution costs + administrative costs

50. As current technology changes manufacturing processes, it is likely that direct..

  • labour will increase.
  • labour will decrease.
  • materials will increase.
  • materials will decrease.

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