Cost Accounting Quizzes: Test Your Understanding

Question 1

Which primary objective of cost accounting is to provide information?

Accepted Answer

For decision-making

Answer

For statutory compliance

Answer

For inventory valuation

Answer

For wage calculation

Question 2

Which of these is not a cost classification by variability?

Accepted Answer

Replacement cost

Answer

Fixed cost

Answer

Variable cost

Answer

Semi-variable cost

Question 3

What fundamentally differentiates direct costs from indirect costs?

Accepted Answer

Direct costs are uniquely incurred for producing goods or services, while indirect costs are not.

Answer

Indirect costs are uniquely incurred for producing goods or services, while direct costs are not.

Answer

Direct costs are only applicable to manufacturing businesses.

Answer

Indirect costs are only applicable to manufacturing businesses.

Question 4

What is the key difference between actual cost and standard cost?

Accepted Answer

Actual cost is incurred, while standard cost is predetermined.

Answer

Standard cost is incurred, while actual cost is predetermined.

Answer

Actual cost is only used in manufacturing.

Answer

Standard cost is only used in manufacturing.

Question 5

What is management accounting's primary focus?

Accepted Answer

Providing information for internal decision-making

Answer

Providing information to external parties

Answer

Preparing financial statements for regulations

Answer

Auditing financial records

Question 6

What is the primary purpose of a cost-volume-profit analysis?

Accepted Answer

To determine the break-even point and target profit volume

Answer

To forecast financial performance

Answer

To identify areas for cost reduction

Answer

To evaluate the impact of changes in cost structure

Question 7

What is the key difference between direct and indirect costs?

Accepted Answer

Direct costs can be easily traced to a specific cost object, while indirect costs cannot

Answer

Indirect costs can be easily traced to a specific cost object, while direct costs cannot

Answer

Direct costs are incurred in the production process, while indirect costs are incurred in administrative and support functions

Answer

Indirect costs are incurred in the production process, while direct costs are incurred in administrative and support functions

Question 8

What is the primary difference between a cost center and a profit center?

Accepted Answer

A cost center incurs costs, whereas a profit center generates revenue.

Answer

A cost center generates revenue, whereas a profit center incurs costs.

Answer

Cost centers are only found in manufacturing businesses, while profit centers are only found in service businesses.

Answer

Profit centers are only found in manufacturing businesses, while cost centers are only found in service businesses.

Question 9

Which costing method is most appropriate for industries that mass-produce identical items?

Accepted Answer

Process costing

Answer

Job costing

Answer

Activity-based costing

Answer

Standard costing

Question 10

What is the primary purpose of cost accounting?

Accepted Answer

To assist managers in making informed decisions

Answer

To support external financial reporting

Answer

To ensure accurate cost allocation

Answer

To comply with legal regulations

Question 11

How are direct costs distinguished from indirect costs?

Accepted Answer

Direct costs are directly traceable to specific cost objects, unlike indirect costs.

Answer

Indirect costs are directly traceable to specific cost objects, unlike direct costs.

Answer

Direct costs vary with the level of production, whereas indirect costs remain constant.

Answer

Direct costs are incurred solely in production, while indirect costs span different business areas.

Question 12

What is the primary function of an activity-based costing (ABC) system?

Accepted Answer

To assign costs to products/services based on their consumption of activities

Answer

To eliminate non-value-added activities, reducing overhead costs

Answer

To support budgeting and planning processes

Answer

To enhance customer satisfaction by identifying areas for improvement

Question 13

What is the purpose of a variance analysis?

Accepted Answer

To identify reasons for discrepancies between actual and budgeted costs

Answer

To distribute costs to products and services

Answer

To control costs

Answer

To enhance efficiency

Question 14

How are fixed costs different from variable costs?

Accepted Answer

Fixed costs remain constant irrespective of activity levels, while variable costs fluctuate.

Answer

Variable costs remain constant irrespective of activity levels, while fixed costs fluctuate.

Answer

Fixed costs are incurred in production, while variable costs are incurred in administration.

Answer

Variable costs are incurred once, while fixed costs are incurred over multiple periods.

Question 15

Which of the following is NOT an objective of cost accounting?

Accepted Answer

Preparing financial statements for external reporting

Answer

Providing information for decision-making

Answer

Calculating the cost of products or services

Answer

Controlling costs

Question 16

What is the primary purpose of a cost centre?

Accepted Answer

To accumulate costs incurred by a specific function or department

Answer

To track the cost of specific products or services

Answer

To allocate costs to different departments

Answer

To prepare financial statements

Question 17

Which of the following is a popular method of allocating indirect costs to cost centres?

Accepted Answer

Activity-based costing

Answer

Direct costing

Answer

Absorption costing

Answer

Marginal costing

Question 18

What is the main objective of a cost-volume-profit (CVP) analysis?

Accepted Answer

To determine the relationship between costs, volume, and profit

Answer

To calculate the breakeven point

Answer

To allocate costs to different departments

Answer

To prepare financial statements

Question 19

What is the key difference between actual costing and standard costing?

Accepted Answer

Actual costing uses actual costs, while standard costing uses estimated costs

Answer

Standard costing uses actual costs, while actual costing uses estimated costs

Answer

Both actual costing and standard costing use actual costs

Answer

Both actual costing and standard costing use estimated costs

Question 20

Which of the following is NOT a main purpose of cost accounting?

Accepted Answer

Calculating depreciation expense

Answer

Providing data for planning and control

Answer

Determining product costs

Answer

Evaluating financial performance

Question 21

What is the primary purpose of reconciling cost and financial accounts?

Accepted Answer

To identify and correct errors between the two sets of accounts

Answer

To adjust the cost accounts to match the financial accounts

Answer

To adjust the financial accounts to match the cost accounts

Answer

To create a separate set of accounts for cost accounting purposes

Question 22

Which cost classification method assigns costs based on the type of expense incurred?

Accepted Answer

Functional costing

Answer

Process costing

Answer

Job order costing

Answer

Activity-based costing

Question 23

What is the ultimate goal of cost control?

Accepted Answer

To ensure that costs are incurred efficiently and effectively

Answer

To reduce costs to the bare minimum

Answer

To identify areas for cost reduction

Answer

To prevent costs from exceeding budgeted amounts