Cost Accounting MCQ Questions

Cost accounting is a process of recording, classifying, analyzing, summarizing, and interpreting the cost information for management decision making, cost control, and cost reduction. Cost accounting is a vital tool for every organization that helps in identifying the cost of production and pricing of the product or service. Here are some MCQs related to cost accounting:

1. What is the primary objective of cost accounting?
a. To determine the selling price of the product or service
b. To determine the cost of production
c. To maintain financial accounts
d. To prepare tax returns

Answer: b. To determine the cost of production

2. What is the difference between cost accounting and financial accounting?
a. Cost accounting is concerned with the recording of financial transactions, whereas financial accounting is not.
b. Cost accounting is concerned with the cost of production, whereas financial accounting is concerned with the profitability of the organization.
c. Cost accounting is concerned with the preparation of financial statements, whereas financial accounting is not.
d. Cost accounting is concerned with the recording, classification, and analysis of cost data, whereas financial accounting is concerned with the recording of financial transactions.

Answer: d. Cost accounting is concerned with the recording, classification, and analysis of cost data, whereas financial accounting is concerned with the recording of financial transactions.

3. What is the difference between direct cost and indirect cost?
a. Direct cost is the cost that can be easily traced to a particular product or service, whereas indirect cost cannot be easily traced.
b. Direct cost is the cost that cannot be easily traced to a particular product or service, whereas indirect cost can be easily traced.
c. Direct cost is the cost that includes both direct and indirect expenses, whereas indirect cost includes only indirect expenses.
d. Direct cost is the cost that includes only direct expenses, whereas indirect cost includes both direct and indirect expenses.

Answer: a. Direct cost is the cost that can be easily traced to a particular product or service, whereas indirect cost cannot be easily traced.

4. What is meant by cost behavior?
a. The way in which costs change in relation to changes in the level of activity
b. The way in which costs are classified in the cost accounting system
c. The way in which costs are allocated to different products or services
d. The way in which costs are controlled and reduced

Answer: a. The way in which costs change in relation to changes in the level of activity

5. What is the formula for calculating the break-even point?
a. Fixed cost / Contribution margin ratio
b. Variable cost / Contribution margin ratio
c. Total cost / Contribution margin ratio
d. Sales revenue / Variable cost

Answer: a. Fixed cost / Contribution margin ratio

Cost accounting is an essential part of every organization that helps in controlling and reducing costs, pricing products or services, and making informed management decisions. By understanding the concepts of cost accounting, individuals can make informed decisions that can help in the growth and success of the organization.