An increase in inventories indicates that?

Less merchandise was purchased then sold to the customer

More merchandise was purchased then the amount sold to customer

Less merchandise was purchased then sold to the customer

Cash payments were more than purchases on account

Which of the following arguments support integrating ABC with the general ledger systemused for GAAP, rather than using a separate stand alone ABC system?

Managers tend to prefer a single accounting system for product costing.

Two separate systems tend to be confusing for management.

Two separate systems tend to create redundant information and staff.

Which of the following is not correct about process costing and job order costing?

Both the system classify materials as direct material and or indirect materials.

Both the system classify labor ans direct labor and or indirect labor

Direct materials under job order costing might be indirect under process costing and vice versa.

Both the systems assigns costs by process.

The process costing system is best suited for

Industries where different types of products are manufactured

Industries where homogenous products are manufactured on continuous basis

While preparing the cost of production report of a processing department, use per unit costfrom producing department needs to be adjusted when the

Normal loss is identified at the end of the process

Normal loss is identified during the process.

Normal loss is identified at the end of the process

Abnormal loss is identified during the process

Abnormal loss is identified at the end of the process.

What is the principal criterion used to distinguish between tangible assets andinventories?

The acquisition cost of the asset

The physical substance of the asset

The acquisition cost of the asset

The nature of the company’s activity, which determines the purpose for which the asset is held

The moment in the accounting period when the asset is acquired

The direct material costing Rs. 4000 has been used in mixing department. The correct journalentry would be

Finished goods DR and Direct materials Cr

Direct materials Dr. and work in process-mixing department CR

Work-in –process-mixing department Dr and Direct materials Cr

Finished goods DR and Direct materials Cr

Mixing department Dr and Direct material Cr

Which of the following characteristics is relevant to process costing but not to job order costing?

Identifiable batches of production

When traditional production volume based overhead allocations are made, rather than activity based allocations,

The unit costs of high volume and large size products tend to be understated, while the unit cost of low volume and small products tend to be overstated.

The unit costs of high volume and large size products tend to be overstated, while the unit cost of low volume and small products tend to be understated.

The unit costs of high volume and large size products tend to be understated, while the unit cost of low volume and small products tend to be overstated.

The unit costs of high volume and small products tend to be overstated, while the unit costs of low volume and large products is understat

Assume that a company produces two products in a manufacturing plant. One is a low volume specialty product that is produced on a demand pull basis, while the other is a high volume product that is produced on a push basis for inventory. A production volume based cost allocation system would tend to

Overstate the product cost of both products.

Accurately reflect the product cost of the two products.

Overstate the product cost of the low volume product.

Understate the product cost of the low volume product.

Overstate the product cost of both products.

The specific cost identification inventory cost flow method has all of the following characteristics except?

It is especially applicable when small and inexpensive items are handled in large quantities

It identifies the cost of each physical item available for sale with either the ending inventory or cost of goods sold

It relates cost flow to the specific flow of physical goods

It is especially applicable when small and inexpensive items are handled in large quantities

It requires individual identification of items some device like tags or serial numbers

A company that uses a traditional two stage cost allocation approach is likely to do the following.

Overhead allocations to high volume products will tend to be understated, while allocations to low volume products will tend to be overstated.

Overhead allocations to high volume products will tend to be overstated while overhead allocations to low volume products will tend to be understated.

Overhead allocations to high volume products will tend to be understated, while allocations to low volume products will tend to be overstated.

Overhead allocations to large products will tend to be understat

Where the normal loss in a department is identified at the end of process, its cost is :-

Charged to work in process ending inventory as well as to units completed and transferred out

Charged to work in progress ending inventory only

Charged to units completed and transferred out only

Charged to work in process ending inventory as well as to units completed and transferred out

The main difference (or differences) between how traditional costing and activity based costingtreat indirect manufacturing costs is (are) that

Traditional cost allocations are usually based on a plant wide overhead rate, while abc systems use departmental overhead rates.

Traditional costing uses only production volume based drivers while activity based costing uses only non production volume based drivers.

Traditional costing treats only unit level costs as variable, while abc systems treat unit level, batch level and product level costs as variable.

Traditional cost allocations are usually based on a plant wide overhead rate, while abc systems use departmental overhead rates.

Cooper and Kaplan recommend using which of the following as the basis, or denominator, when developing activity cost pool rates for activity based costing.

The planned or budgeted for each activity.

The maximum capacity for each activity.

The practical capacity for each activity.

The planned or budgeted for each activity.

The normal capacity for each activity.

Which of the following is not an argument for using a separate stand alone system for activity based costing, i.e., rather than integrating ABC with the general ledger system used for GAAP?

GAAP product costs may be incorrect relative to ABC product costs

Subjective information can be used that auditors might question.

TQM stands for _____________________.

Total Quality Misrepresentation

in a process costing system, manufacturing overhead is assigned to work in process by

Job based on actual overhead costs incurred

Department based on actual overhead costs incurred

Department based on predetermined overhead rates

Job based on actual overhead costs incurred

Job based on predetermined overhead rates

In order to compute equivalent units of production using the Weighted Average method ofprocess costing, the following equation should be used:

Units completed and transferred out + equivalent units of beginning work in process

Equivalent units of beginning work in process + units completed and transferred out

Equivalent units of beginning work in process + equivalent units of ending work in process

Units completed and transferred out + equivalent units of ending work in process

Units completed and transferred out + equivalent units of beginning work in process

Calculating equivalent units in a weighted average method:

The beginning inventory amount is used in total

The beginning inventory percentage complete is used only for conversion costs

The beginning inventory percentage complete is used for both material and conversion costs

The beginning inventory amount is not accounted for

The beginning inventory amount is used in total

2081 + Mcqs in Accounting in Finance & Accounting Page 2 McqOptions

51.	Which of the following types of spoilage should not affect the recorded cost of inventories
A.	Normal spoilage
B.	Standard spoilage
C.	Abnormal spoilage
D.	Seasonal spoilage
Answer» D. Seasonal spoilage

53.	Which of the following business is likely to adopt a process costing system?
A.	Plan manufactures
B.	Construction companies
C.	Sugar refining
D.	Printing press
Answer» D. Printing press

54.	In process costing system, the materials can be added in
A.	First department only
B.	Last department only
C.	First and last department only
D.	Any department
Answer» E.

57.	Contribution is known as ………..
A.	Marginal income
B.	Marginal cost
C.	Gross profit
D.	Net income
Answer» B. Marginal cost

58.	Increase in variable cost
A.	Increases in PV ratio
B.	Decreases breakeven point
C.	Increases margin of safety
D.	None the above
Answer» E.

59.	Which one of the following does not describe a type of transfer pricing?
A.	Target based
B.	Cost based
C.	Negotiated
D.	Administered
Answer» B. Cost based

60.	Productivity is the ratio between input and __________.
A.	Product
B.	Output
C.	Value
D.	Cost
Answer» C. Value

62.	_________ is referred to as continuous improvement costing.
A.	Kaizen
B.	JIT
C.	Kanban
D.	Cost sensitivity
Answer» B. JIT

64.	Which of the following system applies when standard goods are produced under a series ofinter connected operations?
A.	Job order costing
B.	Process costing
C.	Standard costing
D.	All of the above
Answer» C. Standard costing

65.	Painting the product would be an example of which activity level groups
A.	Facility-level activity
B.	Product-level activity
C.	Unit-level activity
D.	Batch-level activity
Answer» D. Batch-level activity

66.	____________ describes the activities within and around an organization, and relates them toan analysis of the competitive strength of the organization.
A.	Value Chain Analysis
B.	Value Management
C.	Value Engineering
D.	Strategic Cost
Answer» B. Value Management

68.	The Theory of Constraints is an organizational change method that is focused on ___________improvement.
A.	Profit
B.	Cost
C.	Product
D.	Economics
Answer» B. Cost

82.	A _______ is any factor that limits the organization from getting more of whatever it strives for.
A.	Constraint
B.	Cost
C.	Profit
D.	Revenue
Answer» B. Cost

89.	Systematic evaluation of the trade-offs between product functionality and product cost whilestill satisfying customer needs is the definition of
A.	Activity based management
B.	Theory of constraints
C.	Total quality management
D.	Value engineering
Answer» E.

90.	TOC stands for _____________________.
A.	Theory of Competition
B.	Theory of Cost
C.	Theory of Constraints
D.	Theory of Complexity
Answer» D. Theory of Complexity

69.	A loss in processing departments which can be avoided under normal and efficient working conditions is generally known as
A.	Normal loss
B.	Extra loss
C.	Abnormal loss
D.	Department loss
Answer» D. Department loss

70.	The inventory method that will always produce the same amount for cost of goods sold in a periodic inventory system as in a perpetual inventory system would be?
A.	FIFO
B.	LIFO
C.	Weighted average
D.	None of these
Answer» E.

72.	Which of the following characteristics is relevant to process costing but not to job order costing?
A.	Averaging process
B.	Identifiable batches of production
C.	Equivalent units
D.	Use of standard cost
Answer» D. Use of standard cost

73.	Which of the following is not relevant to a process costing system?
A.	Heterogeneous products
B.	Recitative production
C.	High production volume
D.	Low production flexibility
Answer» B. Recitative production

74.	A section of the cost of production report which shows the physical flow of units through various producing departments is usually labeled as
A.	Schedule of physical flow
B.	Quantity schedule
C.	Equivalent units of production
D.	Cost to be accounted for
Answer» C. Equivalent units of production

75.	PV ratio may be improved by
A.	Increasing the sales price
B.	Lowering variable cost
C.	Lowering fixed cost
D.	None of the above
Answer» B. Lowering variable cost

80.	Where the normal loss in a department is identified at the end of process, its cost is :-
A.	Ignored
B.	Charged to work in progress ending inventory only
C.	Charged to units completed and transferred out only
D.	Charged to work in process ending inventory as well as to units completed and transferred out
Answer» D. Charged to work in process ending inventory as well as to units completed and transferred out

81.	Increasing in selling price
A.	Increase PV ratio
B.	Decrease break even point
C.	Increase margin of safety
D.	None of the above
Answer» E.

83.	If beginning work in process is 2,000 units, ending work in process is 1,000 units, and the unitsaccounted for equals 5,000 units, what are the units completed and transferred out?
A.	7000
B.	6000
C.	4000
D.	2000
Answer» D. 2000

85.	Which type of inventory system requires updating the inventory balance at the endof the accounting period?
A.	Periodic inventory system
B.	LIFO
C.	Perpetual inventory system
D.	FIFO
Answer» B. LIFO

Explore topic-wise MCQs in Finance & Accounting.

Which of the following types of spoilage should not affect the recorded cost of inventories

An increase in inventories indicates that?

Which of the following business is likely to adopt a process costing system?

In process costing system, the materials can be added in

Which of the following arguments support integrating ABC with the general ledger systemused for GAAP, rather than using a separate stand alone ABC system?

Which of the following is not correct about process costing and job order costing?

Contribution is known as ………..

Increase in variable cost

Which one of the following does not describe a type of transfer pricing?

Productivity is the ratio between input and __________.

The process costing system is best suited for

_________ is referred to as continuous improvement costing.

While preparing the cost of production report of a processing department, use per unit costfrom producing department needs to be adjusted when the

Which of the following system applies when standard goods are produced under a series ofinter connected operations?

Painting the product would be an example of which activity level groups

____________ describes the activities within and around an organization, and relates them toan analysis of the competitive strength of the organization.

What is the principal criterion used to distinguish between tangible assets andinventories?

The Theory of Constraints is an organizational change method that is focused on ___________improvement.

A loss in processing departments which can be avoided under normal and efficient working conditions is generally known as

The inventory method that will always produce the same amount for cost of goods sold in a periodic inventory system as in a perpetual inventory system would be?

The direct material costing Rs. 4000 has been used in mixing department. The correct journalentry would be

Which of the following characteristics is relevant to process costing but not to job order costing?

Which of the following is not relevant to a process costing system?

A section of the cost of production report which shows the physical flow of units through various producing departments is usually labeled as

PV ratio may be improved by

When traditional production volume based overhead allocations are made, rather than activity based allocations,

The specific cost identification inventory cost flow method has all of the following characteristics except?

A company that uses a traditional two stage cost allocation approach is likely to do the following.

Where the normal loss in a department is identified at the end of process, its cost is :-

Increasing in selling price

A _______ is any factor that limits the organization from getting more of whatever it strives for.

If beginning work in process is 2,000 units, ending work in process is 1,000 units, and the unitsaccounted for equals 5,000 units, what are the units completed and transferred out?

The main difference (or differences) between how traditional costing and activity based costingtreat indirect manufacturing costs is (are) that

Which type of inventory system requires updating the inventory balance at the endof the accounting period?

Cooper and Kaplan recommend using which of the following as the basis, or denominator, when developing activity cost pool rates for activity based costing.

Which of the following is not an argument for using a separate stand alone system for activity based costing, i.e., rather than integrating ABC with the general ledger system used for GAAP?

The average inventory costing method which results in a changed unit inventorycost after each successive purchase?

Systematic evaluation of the trade-offs between product functionality and product cost whilestill satisfying customer needs is the definition of

TOC stands for _____________________.

TQM stands for _____________________.

in a process costing system, manufacturing overhead is assigned to work in process by

In order to compute equivalent units of production using the Weighted Average method ofprocess costing, the following equation should be used:

The essential concept of TOC is that every organization must have at least one ____________.

Calculating equivalent units in a weighted average method:

Cost of machine=1,90,000 Installation=10,000 Scrap=50,000 Life=6 yrs Calculate depreciation as perSLM method

The respective normal account balances of Sales, SalesReturns , and Discounts allowed are?

Business enterprise is separate from its owneraccording to concept.

What is the formula for calculating depreciation in SLMMethod?

In the books of account if a transaction is completelydeleted, will it affect the trial balance?

87.	Which of the following is not an argument for using a separate stand alone system for activity based costing, i.e., rather than integrating ABC with the general ledger system used for GAAP?
A.	GAAP product costs may be incorrect relative to ABC product costs
B.	It is faster to develop.
C.	It is less costly to develop.
D.	Subjective information can be used that auditors might question.
Answer» B. It is faster to develop.

88.	The average inventory costing method which results in a changed unit inventorycost after each successive purchase?
A.	Weighted average
B.	Moving average
C.	Specific cost
D.	Simple average
Answer» B. Moving average

91.	TQM stands for _____________________.
A.	Total Quality Misrepresentation
B.	Team Quality Manager
C.	Total Quality Management
D.	Theoretical Quality Management
Answer» D. Theoretical Quality Management

94.	The essential concept of TOC is that every organization must have at least one ____________.
A.	Process
B.	Function
C.	Constraint
D.	Cost
Answer» D. Cost

96.	Cost of machine=1,90,000 Installation=10,000 Scrap=50,000 Life=6 yrs Calculate depreciation as perSLM method
A.	25,000
B.	23,333
C.	33,333
D.	21,666
Answer» B. 23,333

97.	The respective normal account balances of Sales, SalesReturns , and Discounts allowed are?
A.	Credit, Credit, Credit
B.	Debit, credit,debit
C.	Credit, Debit,Debit
D.	Credit, Debit,Credit
Answer» D. Credit, Debit,Credit

98.	Business enterprise is separate from its owneraccording to concept.
A.	Money measurement
B.	Cost
C.	business entityconcept
D.	Dual aspect
Answer» D. Dual aspect

99.	What is the formula for calculating depreciation in SLMMethod?
A.	Cost+Scrap/No of Yrs
B.	Scrap-Cost/No ofyrs
C.	Cost -Scrap/Useful Life
D.	None ofthese
Answer» D. None ofthese

100.	In the books of account if a transaction is completelydeleted, will it affect the trial balance?
A.	No
B.	Yes
C.	A transactioncannot be omitted
D.	May be
Answer» B. Yes