COST ACCOUNTING EXAM 2026 | COMPLETE TEST BANK |
ACTUAL QUESTIONS A+ (200 Q) | REAL QUESTIONS &
ANSWERS A+
1. Cost accounting is primarily concerned with:
A. External financial reporting
B. Providing cost information for management decisions
C. Tax computation
D. Auditing
Answer: B. Providing cost information for management decisions
Explanation: Cost accounting focuses on internal reporting to support planning, control, and
decision-making.
2. Prime cost consists of:
A. Direct materials and direct labour
B. Direct labour and overhead
C. Indirect materials and direct labour
D. Overhead only
Answer: A. Direct materials and direct labour
Explanation: Prime cost includes all directly traceable production costs.
3. Which of the following is NOT a direct cost?
A. Direct materials
B. Direct labour
C. Factory rent
D. Direct expenses
Answer: C. Factory rent
Explanation: Factory rent is an indirect cost (overhead).
4. Fixed cost remains constant when:
A. Output increases
B. Output decreases
C. Activity level changes within relevant range
D. Selling price changes
,Answer: C. Activity level changes within relevant range
Explanation: Fixed costs do not vary within the relevant activity range.
5. Variable cost per unit:
A. Increases with output
B. Decreases with output
C. Remains constant
D. Becomes fixed
Answer: C. Remains constant
Explanation: Variable cost per unit does not change with production level.
6. Cost sheet is prepared to:
A. Determine profit only
B. Ascertain total cost and cost per unit
C. Prepare balance sheet
D. Record journal entries
Answer: B. Ascertain total cost and cost per unit
Explanation: Cost sheets summarize cost components per unit or period.
7. Inventory valuation under cost accounting includes:
A. Selling price
B. Cost price
C. Market price only
D. Replacement price only
Answer: B. Cost price
Explanation: Inventory is valued at cost unless otherwise stated.
8. Overhead refers to:
A. Direct materials only
B. Direct labour only
C. Indirect costs
D. Prime costs
Answer: C. Indirect costs
Explanation: Overheads include indirect manufacturing costs.
,9. Absorption costing includes:
A. Only variable costs
B. Only fixed costs
C. Both fixed and variable costs
D. Only direct materials
Answer: C. Both fixed and variable costs
Explanation: All production costs are absorbed into unit cost.
10. Marginal costing focuses on:
A. Total cost per unit
B. Variable cost per unit
C. Fixed cost per unit
D. Selling price
Answer: B. Variable cost per unit
Explanation: Marginal costing considers only variable costs for decision-making.
11. Break-even point occurs when:
A. Profit is maximum
B. Total revenue equals total cost
C. Fixed cost is zero
D. Variable cost exceeds revenue
Answer: B. Total revenue equals total cost
Explanation: No profit or loss occurs at break-even.
12. Contribution is:
A. Sales − Fixed cost
B. Sales − Variable cost
C. Fixed cost − Sales
D. Profit − Cost
Answer: B. Sales − Variable cost
Explanation: Contribution covers fixed costs and profit.
, 13. FIFO method stands for:
A. First In First Out
B. Final In Final Out
C. Fixed Input Fixed Output
D. First Input First Output
Answer: A. First In First Out
Explanation: FIFO assumes oldest inventory is used first.
14. LIFO method assumes:
A. Old stock is sold first
B. Latest stock is sold first
C. Average stock is sold
D. No stock movement
Answer: B. Latest stock is sold first
Explanation: LIFO uses recent purchases first.
15. Standard costing is used for:
A. Tax calculation
B. Cost control and variance analysis
C. External audit
D. Dividend calculation
Answer: B. Cost control and variance analysis
Explanation: It compares actual costs with standard costs.
16. Variance analysis helps to:
A. Increase sales
B. Identify deviations from standards
C. Prepare financial statements
D. Reduce tax
Answer: B. Identify deviations from standards
Explanation: It highlights performance differences.
17. Labour efficiency variance measures:
A. Wage rate changes
ACTUAL QUESTIONS A+ (200 Q) | REAL QUESTIONS &
ANSWERS A+
1. Cost accounting is primarily concerned with:
A. External financial reporting
B. Providing cost information for management decisions
C. Tax computation
D. Auditing
Answer: B. Providing cost information for management decisions
Explanation: Cost accounting focuses on internal reporting to support planning, control, and
decision-making.
2. Prime cost consists of:
A. Direct materials and direct labour
B. Direct labour and overhead
C. Indirect materials and direct labour
D. Overhead only
Answer: A. Direct materials and direct labour
Explanation: Prime cost includes all directly traceable production costs.
3. Which of the following is NOT a direct cost?
A. Direct materials
B. Direct labour
C. Factory rent
D. Direct expenses
Answer: C. Factory rent
Explanation: Factory rent is an indirect cost (overhead).
4. Fixed cost remains constant when:
A. Output increases
B. Output decreases
C. Activity level changes within relevant range
D. Selling price changes
,Answer: C. Activity level changes within relevant range
Explanation: Fixed costs do not vary within the relevant activity range.
5. Variable cost per unit:
A. Increases with output
B. Decreases with output
C. Remains constant
D. Becomes fixed
Answer: C. Remains constant
Explanation: Variable cost per unit does not change with production level.
6. Cost sheet is prepared to:
A. Determine profit only
B. Ascertain total cost and cost per unit
C. Prepare balance sheet
D. Record journal entries
Answer: B. Ascertain total cost and cost per unit
Explanation: Cost sheets summarize cost components per unit or period.
7. Inventory valuation under cost accounting includes:
A. Selling price
B. Cost price
C. Market price only
D. Replacement price only
Answer: B. Cost price
Explanation: Inventory is valued at cost unless otherwise stated.
8. Overhead refers to:
A. Direct materials only
B. Direct labour only
C. Indirect costs
D. Prime costs
Answer: C. Indirect costs
Explanation: Overheads include indirect manufacturing costs.
,9. Absorption costing includes:
A. Only variable costs
B. Only fixed costs
C. Both fixed and variable costs
D. Only direct materials
Answer: C. Both fixed and variable costs
Explanation: All production costs are absorbed into unit cost.
10. Marginal costing focuses on:
A. Total cost per unit
B. Variable cost per unit
C. Fixed cost per unit
D. Selling price
Answer: B. Variable cost per unit
Explanation: Marginal costing considers only variable costs for decision-making.
11. Break-even point occurs when:
A. Profit is maximum
B. Total revenue equals total cost
C. Fixed cost is zero
D. Variable cost exceeds revenue
Answer: B. Total revenue equals total cost
Explanation: No profit or loss occurs at break-even.
12. Contribution is:
A. Sales − Fixed cost
B. Sales − Variable cost
C. Fixed cost − Sales
D. Profit − Cost
Answer: B. Sales − Variable cost
Explanation: Contribution covers fixed costs and profit.
, 13. FIFO method stands for:
A. First In First Out
B. Final In Final Out
C. Fixed Input Fixed Output
D. First Input First Output
Answer: A. First In First Out
Explanation: FIFO assumes oldest inventory is used first.
14. LIFO method assumes:
A. Old stock is sold first
B. Latest stock is sold first
C. Average stock is sold
D. No stock movement
Answer: B. Latest stock is sold first
Explanation: LIFO uses recent purchases first.
15. Standard costing is used for:
A. Tax calculation
B. Cost control and variance analysis
C. External audit
D. Dividend calculation
Answer: B. Cost control and variance analysis
Explanation: It compares actual costs with standard costs.
16. Variance analysis helps to:
A. Increase sales
B. Identify deviations from standards
C. Prepare financial statements
D. Reduce tax
Answer: B. Identify deviations from standards
Explanation: It highlights performance differences.
17. Labour efficiency variance measures:
A. Wage rate changes
