MCQ On Standard Costing

1. Using absorption costing, a unit of product includes what costs?

Direct materials and direct labor.

Direct materials, direct labor, and fixed overhead.

Direct materials, direct labor, and variable overhead.

Direct materials, direct labor, variable overhead, and fixed overhead.

The correct answer is D.
Using absorption costing, a unit of product includes direct materials, direct labor, variable overhead, and fixed overhead costs.

Explanation

The correct answer is D.
Using absorption costing, a unit of product includes direct materials, direct labor, variable overhead, and fixed overhead costs.

2. Using variable costing, a unit of product includes which costs?

Only direct materials and direct labor.

Direct materials, direct labor, and fixed overhead.

Direct materials, direct labor, and variable overhead.

Direct materials, direct labor, variable overhead, and fixed overhead

The correct answer is C.
Using variable costing, a unit of product includes direct materials, direct labor, and variable overhead costs.

Explanation

The correct answer is C.
Using variable costing, a unit of product includes direct materials, direct labor, and variable overhead costs.

3. Product cost under absorption costing is characteristically:

Higher than under variable costing.

Lower than under variable costing.

Equal to variable costing.

Higher sometimes and lower sometimes than variable costing.

The correct answer is A.
Product cost under absorption costing is characteristically higher than under variable costing because the fixed overhead costs are included in product costs when absorption costing is used but not when variable costing is used.

Explanation

The correct answer is A.
Product cost under absorption costing is characteristically higher than under variable costing because the fixed overhead costs are included in product costs when absorption costing is used but not when variable costing is used.

4. A segment of a business responsible for both revenues and expenses would be referred to as:

A cost center.

An investment center.

A profit center.

Residual income.

The correct answer is C.
A business segment whose manager has control over cost and revenue but has no control over the use of investment funds is known as a profit center.

Explanation

The correct answer is C.
A business segment whose manager has control over cost and revenue but has no control over the use of investment funds is known as a profit center.

5. Variable costing is also known as:

Direct costing.

Indirect costing.

Marginal costing.

Both (A) and (C).

The correct answer is D.
Variable costing is also known as direct costing and marginal costing.

Explanation

The correct answer is D.
Variable costing is also known as direct costing and marginal costing.

6. Variable costing is attractive to managers as an alternative to absorption costing because:

Absorption costing makes distinctions between fixed and variable product costs.

Absorption costing is well suited to CVP analysis techniques.

Absorption costing provides useful tools to managers for planning and control.

To generate data for CVP analysis, considerable time would have to be invested to rework income statements constructed under absorption costing.

The correct answer is D.
Variable costing is attractive to managers as an alternative to absorption costing because to generate data for CVP analysis, considerable time would have to be invested to rework income statements constructed under absorption costing

Explanation

The correct answer is D.
Variable costing is attractive to managers as an alternative to absorption costing because to generate data for CVP analysis, considerable time would have to be invested to rework income statements constructed under absorption costing

7. When production is equal to sales, which of the following is true?

No change occurs to inventories for either absorption costing or variable costing methods.

The use of absorption costing produces a higher net income than the use of variable costing.

The use of absorption costing produces a lower net income than the use of variable costing.

The use of absorption costing causes inventory value to increase more than they would through the use of variable costing.

The correct answer is A.
When production is equal to sales, there are no inventories on hand at the beginning or end of the period. As a result, the same amount for ending inventories (zero) is reported whether absorption costing or variable costing methods are used. In addition, there would no difference in the amount of net income reported using the two methods.

Explanation

The correct answer is A.
When production is equal to sales, there are no inventories on hand at the beginning or end of the period. As a result, the same amount for ending inventories (zero) is reported whether absorption costing or variable costing methods are used. In addition, there would no difference in the amount of net income reported using the two methods.

8. Using the following data, determine the unit product cost under variable costing.

$22

$24

$28

$30

The correct answer is A.
$6 + $10 + $6 = $22

Explanation

The correct answer is A.
$6 + $10 + $6 = $22

9. Which of the following statements is (are) true?

Net operating income is not affected by changes in production under absorption costing.

Net operating income is not affected by changes in production under variable costing.

Both of the above statements are true.

Neither of the above statements is true.

The correct answer is B.
Net operating income is not affected by changes in production under variable costing. On the other hand, net operating income is affected by changes in production under absorption costing.

Explanation

The correct answer is B.
Net operating income is not affected by changes in production under variable costing. On the other hand, net operating income is affected by changes in production under absorption costing.

10. Using the following data, determine the unit product cost under absorption costing.

$22

$24

$28

$30

The correct answer is C.
$6 + $10+ $6 + ($6000/1000) = $28

Explanation

The correct answer is C.
$6 + $10+ $6 + ($6000/1000) = $28