Overview of Cost – Corporate and Management Accounting MCQ

Going through the Overview of Cost – Corporate and Management Accounting CS Executive MCQ Questions with Answers you can quickly revise the concepts.

Overview of Cost – Corporate and Management Accounting MCQs

Question 1.
Which of these is not an objective of Cost Accounting?
(A) Ascertainment of cost
(B) Determination of selling price
(C) Cost control and cost reduction
(D) Assisting shareholders in decision making
Answer:
(D) Assisting shareholders in decision making

Question 2.
A profit centre is a centre
(A) Where the manager has the responsibility of generating and maximising profits
(B) Which is concerned with earning an adequate Return on Investment
(C) Both of the above
(D) Which manages cost
Answer:
(A) Where the manager has the responsibility of generating and maximising profits

Question 3.
Responsibility centre can be categorised into:
(A) Cost centres only
(B) Profit centres only
(C) Investment centres only
(D) Cost centres, profit centres and investment centres
Answer:
(D) Cost centres, profit centres and investment centres

Question 4.
Cost Unit is defined as:
(A) Unit of quantity of product, service or time in relation to which costs may be ascertained or expressed
(B) A location, person or an item of equipment or a group of these for which costs are ascertained and used for cost control
(C) Centres having the responsibility of generating and maximising profits
(D) Centres concerned with earning an adequate return on investment
Answer:
(A) Unit of quantity of product, service or time in relation to which costs may be ascertained or expressed

Question 5.
Fixed cost is a cost:
(A) Which changes in total in proportion to changes in output
(B) Which is partly fixed and partly variable in relation to output
(C) Which do not change in total during a given period despite changes in output
(D) Which remains same for each unit of output
Answer:
(C) Which do not change in total during a given period despite changes in output

Question 6.
Uncontrollable costs are the costs which be influenced by the action of a specified member of an undertaking
(A) Cannot
(B) Can
(C) May or may not
(D) Must
Answer:
(A) Cannot

Question 7.
Element/s of Cost of a product are:
(A) Material only
(B) Labour only
(C) Expenses only
(D) Material, Labour & Expenses
Answer:
(D) Material, Labour & Expenses

Question 8.
Abnormal cost is the cost:
(A) Cost normally incurred at a given level of output
(B) Cost not normally incurred at a given level of output
(C) Cost which is charged to customer
(D) Cost which is included in the cost of the product
Answer:
(B) Cost not normally incurred at a given level of output

Question 9.
Conversion cost includes cost of converting ………. into …………
(A) Raw material, WIP
(B) Raw material, Finished goods
(C) WIP, Finished goods
(D) Finished goods, Saleable goods
Answer:
(B) Raw material, Finished goods

Question 10.
Sunk costs are ….
(A) Relevant for decision making
(B) Not relevant for decision making
(C) Cost to be incurred in future
(D) Future costs
Answer:
(B) Not relevant for decision making

Question 11.
Describe the method of costing to be applied in case of Nursing Home:
(A) Operating Costing
(B) Process Costing
(C) Contract Costing
(D) Job Costing
Answer:
(A) Operating Costing

Question 12.
Describe the cost unit applicable to the Bicycle industry:
(A) Per part of bicycle
(B) Per bicycle
(C) Per tonne
(D) Per day
Answer:
(B) Per bicycle

Question 13.
Cost accounting
(A) Deals with historic data
(B) Has futuristic in approach
(C) Both (A) & (B)
(D) Neither (A) nor (B)
Answer:
(B) Has futuristic in approach

Question 14.
Which of the following is feature of job costing?
(A) Single order
(B) Single contract
(C) Every job is cost unit itself
(D) All of the above
Answer:
(D) All of the above

Question 15
……….. may be defined as the technique of presenting cost data where in variable costs and fixed costs are shown separately for managerial decision-making.
(A) Direct Costing
(B) Absorption Costing
(C) Marginal Costing
(D) Variance Analysis
Answer:
(C) Marginal Costing

Question 16.
In which of the following cost accounting has do not have any role?
(A) Price fixation
(B) Inventory control
(C) Service sector
(D) Price earning
Answer:
(D) Price earning

Question 17.
……….. is form of specific order costing which applies where work is undertaken as per customer’s specific requirement.
(A) Batch costing
(B) Operation costing
(C) Job costing
(D) Composite costing
Answer:
(C) Job costing

Question 18.
Maintenance department in a factory is a ………..
(A) Profit Center
(B) Investment Centre
(C) Cost Driver
(D) Service Centre
Answer:
(D) Service Centre

Question 19.
Process Costing is generally adopted by:
(A) Chemical industries
(B) Oil refineries
(C) Soap manufacturing
(D) All of the above
Answer:
(D) All of the above

Question 20.
Costs of direct material, direct labour and direct expenses can be directly allocated or identified with a particular cost centres or a cost unit are the examples of …………
(A) Common Costs
(B) Indirect Cost
(C) Differential Costs
(D) Traceable Costs
Answer:
(D) Traceable Costs

Question 21
………….. method of costing is used in large scale contract, as in case of building construction.
(A) Composite Costing
(B) Multiple Costing
(C) Operation Costing
(D) Contract Costing
Answer:
(D) Contract Costing

Question 22.
Indirect costs are also known as …………..
(A) Common Costs
(B) Traceable Costs
(C) Implicit Costs
(D) Sunk Costs
Answer:
(A) Common Costs

Question 23
……..is a specialized system of job costing applied to long-term contracts.
(A) Composite Costing
(B) Batch Costing
(C) Direct Costing
(D) Contract costing
Answer:
(D) Contract costing

Question 24
…….. is the name given to the technique whereby standard costs are pre-determined and subsequently compared with the recorded actual costs.
(A) Direct Costing
(B) Absorption Costing
(C) Marginal Costing
(D) Variance Analysis
Answer:
(D) Variance Analysis

Question 25
…………. represents the resources that have been sacrificed to attain a particular objective.
(A) Expense
(B) Cost
(C) Assets
(D) Liability
Answer:
(B) Cost

Question 26.
Indirect costs are ………… to cost centres or cost units.
(A) Allocated
(B) Apportioned
(C) Aggregated
(D) Allowed
Answer:
(B) Apportioned

Question 27.
Standard costing is not suitable ……..
(A) Where the manufacturing method involves production of standardised goods of repetitive nature
(B) Manufacturing organization producing different types of products
(C) Organizations engaged in service sector
(D) All of the above
Answer:
(C) Organizations engaged in service sector

Question 28
method of costing is used when it is desired to ascertain the cost of carrying out an operation in a department.
(A) Operating Costing
(B) Operation Costing
(C) Composite Costing
(D) Process Costing
Answer:
(B) Operation Costing

Question 29.
Which of the following is not objective of cost accounting?
(A) To arrive at the cost of production of every unit, job, operation, process.
(B) To provide information to enable management to make short-term decisions.
(C) To present true & fair view of overall results of the transactions, and events.
(D) None of the above
Answer:
(C) To present true & fair view of overall results of the transactions, and events.

Question 30.
A company presently does not utilise its available capacity. In case of full capacity utilisation, the cost per unit shall
(A) Increase
(B) Decrease
(C) Remain constant
(D) None of the above
Answer:
(B) Decrease

Question 31.
Service costing is also known as
(A) Operation Costing
(B) Operating Costing
(C) Direct Costing
(D) Uniform Costing
Answer:
(B) Operating Costing

Question 32.
One of the most important technique in cost planning is :
(A) Direct Cost
(B) Budget
(C) Cost Sheet
(D) Marginal Costing
Answer:
(D) Marginal Costing

Question 33.
CIMA, London defines as, “the establishment of budgets, standard costs and actual costs of operations, processes, activities or products; and the analysis of variances, profitability or the social use of funds”
(A) Management Accounting
(B) Standard Costing
(C) Budgetary Control
(D) Cost Accounting
Answer:
(D) Cost Accounting

Question 34.
The variable cost per unit is:
(A) Variable in nature
(B) Fixed in nature
(C) Semi-variable in nature
(D) None of the above
Answer:
(B) Fixed in nature

Question 35.
Which of the following difficulty is not faced at the time installation of costing system in any organization?
(A) Lack of support from top management
(B) Resistance from the existing staff
(C) Keen competition in oversea market
(D) All of the above
Answer:
(C) Keen competition in oversea market

Question 36.
The total cost for producing 10 items is ₹ 15 and that for producing 15 items is ₹ 20. What is the fixed cost?
(A) ₹10
(B) ₹ 15
(C) ₹ 5
(D) None of the above
Answer:
(C) ₹ 5

Question 37.
Cost accounting
(A) Present true & fair view of overall results of the transactions, and events.
(B) Uses monetary information only
(C) Both (A) & (B)
(D) Neither (A) nor (B)
Answer:
(D) Neither (A) nor (B)

Question 38.
The main purpose of cost accounting is to:
(A) Maximise profits
(B) Help in inventory valuation
(C) Provide information to management for decision making
(D) Aid in the fixation of selling price
Answer:
(C) Provide information to management for decision making

Question 39.
Direct costing technique can be applied:
(A) Stock valuation
(B) Determining whether to make or buy the product
(C) Close down decisions – like closing down of a department or shop
(D) All of the above
Answer:
(D) All of the above

Question 40.
The CIMA, London, defines a …………………….. as, “a unit of product or service in relation to which costs are ascertained.”
(A) Cost Unit
(B) Cost Object
(C) Profit Center
(D) Cost Centres
Answer:
(A) Cost Unit

Question 41.
The cost accountant is intimately connected with the …………..
(A) Production
(B) Marketing
(C) Finance
(D) All of the above
Answer:
(D) All of the above

Question 42.
The term ……. is defined as the amount at any given volume of output by which aggregate costs are changed if the volume of output is increased or decreased by one unit.
(A) Differential Cost
(B) Marginal Cost
(C) Relevant Cost
(D) Incremental Cost
Answer:
(B) Marginal Cost

Question 43.
Which of the following cannot be treated as are direct beneficiary of cost accounting?
(A) Management
(B) Debtors
(C) Employees
(D) Shareholders
Answer:
(D) Shareholders

Question 44.
Pre-determined costs may be either:
(A) Standard cost
(B) Estimated cost
(C) Standard cost or estimated cost
(D) Estimated cost but not a standard cost
Answer:
(C) Standard cost or estimated cost

Question 45.
Who may by order direct cost audit of a company, if in its opinion it is necessary to do so?
(A) The Ministry of Corporate Affairs
(B) The Parliament
(C) The Central Government
(D) All of the above
Answer:
(C) The Central Government

Question 46.
Which of the following statement is false?
(A) The use of the term cost without qualification is not misleading.
(B) Fixed Costs are also called ‘traceable costs’
(C) Marginal cost is a predetermined calculation of how much costs should be under specified working conditions.
(D) All of the above
Answer:
(D) All of the above

Question 47.
Which of the following is not method of costing?
(A) Uniform Costing
(B) Operating Costing
(C) Operation Costing
(D) Contract Costing
Answer:
(A) Uniform Costing

Question 48.
If financial records can yield all the necessary costing information, it is not necessary to have a separate costing department.
(A) False
(B) True
(C) Partly correct
(D) Partly incorrect
Answer:
(B) True

Question 49.
A ………. is a planned cost for a unit of product of service rendered.
(A) Standard cost
(B) Marginal Cost
(C) Opportunity Cost
(D) Historical Cost
Answer:
(A) Standard cost

Question 50.
………… is defined as, “the techniques and process of ascertaining costs”.
(A) Cost Accounting
(B) Management Accounting
(C) Costing
(D) Cost Ascertainment
Answer:
(C) Costing

Question 51.
Historical cost is the actual cost, determined
(A) In advance
(B) After the event
(C) Estimated basis
(D) By applying common sense
Answer:
(B) After the event

Question 52.
A power house in a factory is a ………….
(A) Service Centre
(B) Production Centre
(C) Profit Center
(D) Impersonal Cost Centre
Answer:
(A) Service Centre

Question 53.
The management accounting data is derived from the ……….
(A) Cost accounting
(B) Financial accounting
(C) Cost & financial accounting
(D) Financial management
Answer:
(C) Cost & financial accounting

Question 54
………. are those cost, which can be identified easily and indisputably with a unit of operation or costing unit or cost centre.
(A) Traceable Costs
(B) Common Costs
(C) Indirect Costs
(D) Historical Cost
Answer:
(A) Traceable Costs

Question 55.
Service costing is used by
(A) Power generation
(B) Hospitals
(C) Transport companies
(D) All of the above
Answer:
(D) All of the above

Question 56.
If costs are classified “By behaviour”, then which of the following is the correct classification?
(A) FixedCost,VariableCost & Semi-Variable Cost
(B) Historical Cost, Pre-Determined Cost, Standard Cost, Estimated Cost
(C) Production Cost, Administration Cost, Selling Cost, Distribution Cost, Research & Development Cost.
(D) Material, Labour, Overheads
Answer:
(A) FixedCost,VariableCost & Semi-Variable Cost

Question 57.
Which of the following report is not generated by cost accounting?
(A) Consumption of material statements
(B) Labour utilization statements
(C) Earnings per share
(D) Cost sheets
Answer:
(C) Earnings per share

Question 58.
Costs of indirect material, indirect labour and indirect expenses in aggregate constitute the ………..
(A) Overhead costs
(B) Historical Costs
(C) Pre-determined Costs
(D) Estimated Costs
Answer:
(A) Overhead costs

Question 59
…….. is a pre-determined cost based on past performance adjusted to anticipated changes.
(A) Te-be Veimme
(B) Estimated Costs
(C) Differential Cost
(D) Historical Costs
Answer:
(B) Estimated Costs

Question 60.
Which of the following is purpose of cost accounting?
(A) It is more attached with reporting the results and position of business.
(B) It aims at classifying and summarizing in significant manner and in terms of money, transaction and events, which are, in part at least, of a monetary in nature and interpreting the result thereof.
(C) Both (A) & (B)
(D) Neither (A) nor (B)
Answer:
(D) Neither (A) nor (B)

Question 61.
Increase in total variable cost is due to:
(A) Increase in fixed cost
(B) Increase in sales
(C) Increase in production
(D) All of the above
Answer:
(C) Increase in production

Question 62.
Indirect costs to cost units or cost centres and have to be absorbed or recovered into cost units are termed as indirect costs.
(A) Cannot be directly allocated
(B) Cannot be directly apportioned
(C) Both (A) & (B)
(D) Either (A) or (B)
Answer:
(A) Cannot be directly allocated

Question 63.
CIMA, London defines as, “the establishment of budgets, standard costs and actual costs of operations, processes, activities or products; and the analysis of variances, probability or the social use of funds”
(A) Management Accounting
(B) Financial Accounting
(C) Cost Accounting
(D) Financial Management
Answer:
(C) Cost Accounting

Question 64.
…………. is the aggregate cost related to a cost unit, which consists of a group of similar articles which maintain its identity throughout one or more stages of production.
(A) Pre-determined Costs
(B) Batch Cost
(C) Process Cost
(D) Operation Cost
Answer:
(B) Batch Cost

Question 65.
Which of the following statement is false?
(A) In most of the cases cost accounting system is installed on grounds of its benefits.
(B) Costing helps in making estimates
(C) Costing helps in determining and enhancing efficiency.
(D) The existing financial accounting staff may not resist to the costing system.
Answer:
(D) The existing financial accounting staff may not resist to the costing system.

Question 66.
Interest paid on own capital not involving any cash outflow is example of:
(A) Product Cost
(B) Opportunity Cost
(C) Imputed Cost
(D) Explicit Cost
Answer:
(C) Imputed Cost

Question 67.
An example of fixed cost is:
(A) Direct material cost
(B) Works manager’s salary
(C) Depreciation of machinery
(D) Chargeable expenses
Answer:
(B) Works manager’s salary

Question 68.
…….. is the name given to a common system of costing followed by number of firms in the same industries.
(A) Common Costing
(B) Absorption Costing
(C) Direct Costing
(D) Uniform Costing
Answer:
(D) Uniform Costing

Question 69.
Differential costs are also known as ………………
(A) Incremental Cost
(B) Opportunity Cost
(C) Period Cost
(D) Controllable Cost
Answer:
(A) Incremental Cost

Question 70.
The cost audit order can be given by the Central Government only in respect of Class of Companies which is required to maintain books of account under the provisions of …….. of the Companies Act, 2013.
(A) Section 148
(B) Section 138
(C) Section 209(1)(d)
(D) Section 128
Answer:
(A) Section 148

Question 71.
“Rent paid for the factory building which is temporarily closed” is example of
(A) Imputed cost
(B) Sunk cost
(C) Shut down cost
(D) Temporary cost
Answer:
(C) Shut down cost

Question 72.
Cost accounting system can be installed without management accounting.
(A) False
(B) True
(C) Partly incorrect
(D) None of the above
Answer:
(B) True

Question 73.
……………. is the cost of selecting one course of action and the loosing of the opportunities to carry out other course of action.
(A) Replacement Cost
(B) Hypothetical Cost
(C) Explicit Cost
(D) Opportunity Cost
Answer:
(D) Opportunity Cost

Question 74.
If costs are classified “by time’’, then which of the following is the correct classification?
(A) Marginal Cost, Differential Cost, Opportunity Cost, Replacement Cost, Relevant Cost, Imputed Cost, Sunk Cost, Normal Cost, Abnormal Cost, Avoidable Cost, Unavoidable Cost etc.
(B) Historical Cost, Pre-Determined Cost, Standard Cost, Estimated Cost
(C) Production Cost, Administration Cost, Selling Cost, Distribution Cost, Research & Development Cost.
(D) Material, Labour, Overheads
Answer:
(B) Historical Cost, Pre-Determined Cost, Standard Cost, Estimated Cost

Question 75.
Cost of goods produced includes:
(A) Production cost and finished goods inventory
(B) Production cost and work-in-progress
(C) Production cost, work-in-progress and finished goods inventory
(D) None of the above
Answer:
(B) Production cost and work-in-progress

Question 76.
Which of the following “cost unit” is suitable for Bicycle industries?
(A) Number
(B) Per kilogram
(C) Per tonne
(D) Per square foot
Answer:
(A) Number

Question 77.
Conversion Cost = …………….
(A) Direct wages + Direct expenses
(B) Direct wages + Direct expenses + Manufacturing overhead
(C) Direct material + Direct wages + Direct expenses + Manufacturing overhead
(D) Direct material + Direct wages + Direct expenses + Manufacturing overhead + Variable administrative overheads
Answer:
(B) Direct wages + Direct expenses + Manufacturing overhead

Question 78.
When a new factory is stared or when a new product is introduced, certain expenses are incurred. There are trial runs. Such costs are termed as ………… and treated as deferred revenue expenditure.
(A) Pre-production costs
(B) Preliminary expenses
(C) Prepaid costs
(D) Capital loss
Answer:
(A) Pre-production costs

Question 79.
Conversion cost is equal to the total of:
(A) Material cost and direct wages
(B) Material cost and indirect wages
(C) Direct wages and factory overhead
(D) Material cost and factory overhead
Answer:
(C) Direct wages and factory overhead

Question 80
………….. are also known as out of pocket costs.
(A) Explicit Costs
(B) Implicit Costs
(C) Notional Costs
(D) Economic Costs
Answer:
(A) Explicit Costs

Question 81.
………….. are the costs, which have been created by a decision that was made in the past and cannot be changed by any decision that will be made in the future.
(A) Sunk Costs
(B) Historical Costs
(C) Past Costs
(D) All of the above
Answer:
(D) All of the above

Question 82.
Which of the following cost is controllable cost?
(A) Fixed Costs
(B) Variable Costs
(C) Fixed Costs & Indirect Costs
(D) Period Costs
Answer:
(B) Variable Costs

Question 83.
Which of the following “cost unit” are suitable for chemical industries?
(A) Per meter, Per square foot, Ream
(B) Per gross, Per gallon, Per dozen bottle
(C) Liter, gallon, kilograms, tonne
(D) None of the above
Answer:
(C) Liter, gallon, kilograms, tonne

Question 84.
………….. is normally incurred at a given level of output in the conditions in which that level of output is achieved.
(A) Normal cost
(B) Abnormal Cost
(C) Process Cost
(D) All of the above
Answer:
(A) Normal cost

Question 85.
A company intends to rearrange production facilities, of future costs are as under:

Item of cost Existing Proposed rearrange­ment
Direct material 10.00 10.00
per unit
Direct labour 5.00 4.00
per unit

With reference to above data which cost is relevant cost for a company?
(A) Direct material cost
(B) Direct labour cost
(C) Both (A) & (B)
(D) Either (A) or (B)
Answer:
(B) Direct labour cost

Question 86.
According to CIMA, A cost which can be influenced by its budget holder is known as
(A) Controllable Costs
(B) Notional Costs
(C) Uncontrollable Costs
(D) Fixed Costs
Answer:
(A) Controllable Costs

Question 87.
…… is any sub-unit of an organization to which both revenues and costs are assigned, so that the responsibility of a sub-unit may be measured.
(A) Profit Centre
(B) Cost Centre
(C) Process Cost Centre
(D) Investment Centre
Answer:
(A) Profit Centre

Question 88.
……………. are not recorded in the books of account.
(A) Implicit Costs
(B) Explicit Costs
(C) Sunk Costs
(D) All of the above
Answer:
(A) Implicit Costs

Question 89.
Which of the following “cost unit” is not used by the organization engaged in providing services?
(A) Tonne km
(B) Passenger km
(C) Kilowatt hour
(D) Per meter
Answer:
(D) Per meter

Question 90.
Product costs are ……………
(A) Fixed in nature.
(B) Related period, hence also known as indirect cost.
(C) Not controllable.
(D) Also known as direct cost.
Answer:
(D) Also known as direct cost.

Question 91.
………. is an unusual or a typical cost
whose occurrence is usually irregular and unexpected.
(A) Normal Cost
(B) Abnormal Cost
(C) Budgeted Cost
(D) All of the above
Answer:
(B) Abnormal Cost

Question 92.
In which of the following industries “contract costing” is used?
(A) Ship building
(B) Nursing home
(C) Textile mills
(D) Bicycle
Answer:
(A) Ship building

Question 93.
………. is a variable cost of one unit of a product or a service ie., a cost which would be avoided if that unit was not produced or provided.
(A) Differential Cost
(B) Incremental Cost
(C) Replacement Cost
(D) Relevant Cost
Answer:
(D) Relevant Cost

Question 94.
………… are the costs incurred in relation to the temporary closing or a department/ division/enterprise.
(A) Start up costs
(B) Shutdown costs
(C) Temporary costs
(D) Relevant costs
Answer:
(B) Shutdown costs

Question 95.
Costs which are ascertained after they have been incurred are known as …………
(A) Imputed costs
(B) Sunk costs
(C) Historical costs
(D) Opportunity costs
Answer:
(C) Historical costs

Question 96.
Prime costs plus variable overhead is known as:………….
(A) Production cost
(B) Marginal costs
(C) Total cost
(D) Cost of sales
Answer:
(A) Production cost

Question 97.
Notional costs are considered in …………..
(A) Financial Accounting
(B) Cost Accounting
(C) Both (A) & (B)
(D) Neither (A) nor (B)
Answer:
(B) Cost Accounting

Question 98.
Costs that change in response to alternative courses of action are called:
(A) Relevant costs
(B) Differential costs
(C) Target costs
(D) Sunk costs
Answer:
(B) Differential costs

Question 99.
Which of the following method of costing is suitable for “Interior decoration”?
(A) Job Costing
(B) Operating Costing
(C) Multiple Costing
(D) Batch Costing
Answer:
(A) Job Costing

Question 100.
…………. are also known as accounting costs.
(A) Explicit Costs
(B) Implicit Costs
(C) Notional Costs
(D) Opportunity costs
Answer:
(A) Explicit Costs

Question 101.
Indirect costs are known as:
(A) Variable costs
(B) Fixed costs
(C) Overheads
(D) None of the above
Answer:
(C) Overheads

Question 102.
If ₹ 10 is spend on producing 10 units and ₹ 15 for producing 15, then the fixed cost per unit is:
(A) ₹ 0
(B) ₹ 1
(C) ₹ 2
(D) ₹ 5
Answer:
(A) ₹ 0

Question 103.
The main difference between the profit centre and investment centre is:
(A) Decision making
(B) Revenue generation
(C) Cost incurrence
(D) Investment
Answer:
(A) Decision making

Question 104.
A division of company, which produces and markets the product, can be called as …….
(A) Profit Centre
(B) Process Centre
(C) Service Centre
(D) Investment Centre
Answer:
(A) Profit Centre

Question 105.
Which of the following is not a relevant cost?
(A) Replacement cost
(B) Sunk cost
(C) Marginal cost
(D) Standard cost
Answer:
(B) Sunk cost

Question 106.
Which of the following cost is linked with the calculation of cost of inventories?
(A) Product Cost
(B) Period Cost
(C) Both Product & Period Cost
(D) Historical Cost
Answer:
(A) Product Cost

Question 107.
All of the following are features of a relevant cost except:
(A) They affect the future cost
(B) They cause an increment in cost
(C) Relevant cost is a sunk cost
(D) They affect the future cash flows
Answer:
(C) Relevant cost is a sunk cost

Question 108.
Which of the following method of costing is suitable for “Airline Company”?
(A) Job Costing
(B) Operating Costing
(C) Multiple Costing
(D) Batch Costing
Answer:
(B) Operating Costing

Question 109.
Which of the following statement is TRUE about the relevant cost?
(A) It is a sunk cost
(B) It is an opportunity cost
(C) It do not affect the decision making process
(D) All costs are relevant
Answer:
(B) It is an opportunity cost

Question 110.
The cost of electricity bill of the factory is treated as:
(A) Fixed cost
(B) Variable cost
(C) Step cost
(D) Semi variable cost
Answer:
(D) Semi variable cost

Question 111.
A firm uses its own capital or uses its owner’s time and/or financial resources both are examples of ……….
(A) Implicit Cost
(B) Explicit Cost
(C) Sunk Cost
(D) Relevant Cost
Answer:
(A) Implicit Cost

Question 112.
Which of the following would be considered to be an investment centre?
(A) Managers have control over marketing
(B) Managers have a sales team
(C) Managers have a sales team and are given a credit control function
(D) Managers can purchase capital assets and are given a credit control function
Answer:
(D) Managers can purchase capital assets and are given a credit control function

Question 113.
The total cost incurred in the operation of a business undertaking other than the cost of manufacturing and production is known as………..
(A) Direct cost
(B) Variable cost
(C) Commercial cost
(D) Conversion cost
Answer:
(C) Commercial cost

Question 114.
If costs are classified by nature, then which of the following is the correct classification?
(A) Marginal Cost, Differential Cost, Opportunity Cost, Replacement Cost, Relevant Cost, Imputed Cost, Sunk Cost, Normal Cost, Abnormal Cost, Avoidable Cost, Unavoidable Cost etc.
(B) Historical Cost, Pre-Determined Cost, Standard Cost, Estimated Cost
(C) Production Cost, Administration Cost, Selling Cost, Distribution Cost, Research & Development Cost.
(D) Material, Labour, Expenses
Answer:
(D) Material, Labour, Expenses

Question 115.
In decision making all costs already incurred in past should always be:
(A) Ignored
(B) Considered
(C) Partially ignored
(D) Partially considered
Answer:
(A) Ignored

Question 116.
Cost accounting concepts include all of the following except:
(A) Planning
(B) Controlling
(C) Sharing
(D) Costing
Answer:
(C) Sharing

Question 117.
Which of the following statement is TRUE about historical cost?
(A) It is always relevant to decision making
(B) It is always irrelevant to decision making
(C) It is always an opportunity cost
(D) It is always realizable value
Answer:
(B) It is always irrelevant to decision making

Question 118.
Colin Drury defined as, “any activity for which a separate measurement of costs is desired”.
(A) Cost Driver
(B) Cost Centre
(C) Cost Object
(D) Profit Center
Answer:
(C) Cost Object

Question 119.
Expenses such as rent and depreciation of a building are shared by several departments these are:
(A) Indirect expenses
(B) Direct expenses
(C) Joint expenses
(D) All of the above
Answer:
(A) Indirect expenses

Question 120.
Period costs are:
(A) Expensed when the product is sold
(B) Included in the cost of goods sold
(C) Related to specific period
(D) Not expensed
Answer:
(C) Related to specific period

Question 121.
All of the following compose cost of goods sold except:
(A) Raw material
(B) Labour
(C) Capital
(D) Factory overhead
Answer:
(C) Capital

Question 122.
…………. can be influenced by the action of the executive heading the responsibility center.
(A) Fixed Costs
(B) Uncontrollable Costs
(C) Controllable Costs
(D) Unavoidable Costs
Answer:
(C) Controllable Costs

Question 123.
CIMA defines as, a production or service, function, activity or item of equipment whose costs may be attributed to cost units.
(A) Cost Driver
(B) Cost Centre
(C) Investment Centre
(D) Profit Center
Answer:
(B) Cost Centre

Question 124.
A segment of the business that generates both revenue and cost is called:
(A) Profit centre
(B) Cost centre
(C) Cost driver
(D) All of these
Answer:
(A) Profit centre

Question 125.
What will be the impact of normal loss on the overall per-unit cost?
(A) Per unit cost will increase
(B) Per unit cost will decrease
(C) Per unit cost remain unchanged
(D) Normal loss has no relation to unit cost|
Answer:
(A) Per unit cost will increase

Question 126.
A fixed cost:
(A) May change in total when such change is not related to changes in production
(B) Will not change in total because it is not related to changes in production
(C) Is constant per unit for each unit of change in production
(D) May change in total, depending on production with the relevant range
Answer:
(B) Will not change in total because it is not related to changes in production

Question 127.
All of the following are the features of fixed costs except:
(A) Although fixed within a relevant range of activity level but are relevant to a decision making when it is avoidable.
(B) Although fixed within a relevant range of activity level but are relevant to a decision making when it is incremental.
(C) Generally it is irrelevant
(D) It is relevant to decision making under any circumstances
Answer:
(D) It is relevant to decision making under any circumstances

Question 128
…………. are constant per unit but change in totality.
(A) Fixed Costs
(B) Semi-variable Costs
(C) Uncontrollable Costs
(D) Variable Costs
Answer:
(D) Variable Costs

Question 129.
The basic assumption made with respect to fixed costs is that
(A) Fixed cost is a controllable cost
(B) Fixed cost is a product cost
(C) Fixed cost is an irrelevant cost
(D) Fixed cost is a period cost
Answer:
(D) Fixed cost is a period cost

Question 130.
Which of the following is NOT a relevant cost to decision making?
(A) Opportunity costs
(B) Relevant benefits
(C) Avoidable costs
(D) Sunk costs
Answer:
(D) Sunk costs

Question 131.
Which of the following product cost is Included in prime cost and conversion cost?
(A) Direct labour
(B) Manufacturing overhead
(C) Direct material
(D) Work in Process
Answer:
(A) Direct labour

Question 132.
Which of the following costs would NOT be a period cost?
(A) Indirect materials
(B) Administrative salaries
(C) Advertising costs
(D) Selling costs
Answer:
(A) Indirect materials

Question 133.
Management Accounting seeks to serve the purpose of management to run a business more efficiently and thus uses the techniques of:
(A) Financial Accounting
(B) Cost Accounting
(C) Mathematics and Statistics
(D) All of the above
Answer:
(D) All of the above

Question 134.
Which of the following is not a method of costing?
(A) Marginal costing
(B) Job costing
(C) Process costing
(D) Operating costing
Answer:
(A) Marginal costing

Question 135.
Which of the following is not a Technique of costing?
(A) Absorption costing
(B) Standard costing
(C) Multiple costing
(D) Marginal costing
Answer:
(C) Multiple costing

Question 136.
A cost centre is:
(A) A unit of production in relation to which costs are ascertained
(B) A location which is responsible for controlling direct costs
(C) Any location or department which incurs cost
(D) None of these
Answer:
(A) A unit of production in relation to which costs are ascertained

Question 137.
A cost centre is:
(A) A unit of product or service in relation to which costs are ascertained
(B) An amount of expenditure attributable to an activity
(C) A production or service location, function, activity or item of equipment for which costs are accumulated
(D) A centre for which an individual budget is drawn up
Answer:
(A) A unit of product or service in relation to which costs are ascertained

Question 138.
Cost centre may be –
(A) Location
(B) Person
(C) Item of equipment
(D) Any of the above
Answer:
(D) Any of the above

Question 139.
A ……….. is a planned cost for a unit of product of service rendered.
(A) Standard cost
(B) Marginal Cost
(C) Opportunity Cost
(D) Historical Cost
Answer:
(A) Standard cost

Question 140.
Raw materials directly identifiable as part of the final product is classified as:
(A) Period costs
(B) Fixed costs
(C) Direct materials
(D) Any of the above
Answer:
(C) Direct materials

Question 141.
Inventory consists of ……….
(A) Intangible property
(B) Tangible property
(C) (A)or(B)
(D) (A) & (B)
Answer:
(B) Tangible property

Question 142.
Which of the following statement is correct in relation to “Need for proper inventory control”?
(A) Inadequate inventory may lead to keep men and machines waiting.
(B) Materials do not constitute a significant part of the total production cost hence proper planning and controlling of inventories is not a big deal.
(C) Funds are not tied up in surplus stores and stocks.
(D) All of the above
Answer:
(A) Inadequate inventory may lead to keep men and machines waiting.

Question 143.
Inventory is valued at ……..
(A) Replacement price
(B) Replacement price or purchase value, whichever is less.
(C) At cost or net realizable value which-ever is less.
(D) Replacement price or net realizable value, whichever is less.
Answer:
(C) At cost or net realizable value which-ever is less.

Question 144.
Inventory held for sale in the ordinary course of business is known as ………….
(A) Finished Goods
(B) Raw Material
(C) Work-in-progress
(D) Miscellaneous inventory
Answer:
(A) Finished Goods

Question 145.
Which of the following method is based on the assumption that, latest consignment of a materials or goods manufactured are exhausted first and the closing stock is valued at the cost of earliest lot in hand?
(A) FIFO Method
(B) Highest-in-first-out method
(C) Average cost method
(D) LIFO Method
Answer:
(D) LIFO Method

Question 146.
………….. are those cost, which can be identified and traceable to particular product or costing unit or cost centre.
(A) Indirect material costs
(B) Period costs
(C) Direct material costs
(D) Fixed costs
Answer:
(C) Direct material costs

Question 147.
Wood used in production of tables and chairs, steel bars used in steel factory etc. are the examples of ………..
(A) Indirect material
(B) Direct material
(C) Fixed material
(D) All of the above
Answer:
(B) Direct material

Question 148.
……….. are those items, which are moving at a slow rate and this may arise due to general depression in demand due to keen competition.
(A) Dormant stocks
(B) Written-off stocks
(C) Slow moving stocks
(D) Any of the above
Answer:
(C) Slow moving stocks

Question 149.
………… are those items which are not moving temporarily but their movement is expected shortly.
(A) Slow moving stock
(B) Dormant stocks
(C) Non-marketable stock
(D) Less efficient stock
Answer:
(B) Dormant stocks

Question 150.
If small quantities of direct material used in the end product like gums and threads are used in binding books then it may be categorized as
(A) Miscellaneous cost
(B) Preliminary cost
(C) Indirect material cost
(D) Fixed cost of production
Answer:
(C) Indirect material cost

Question 151.
Which of the following technique can be used for inventory control?
(A) Standard Costing
(B) ABC Analysis
(C) Integrated Accounting System
(D) Any of the above
Answer:
(B) ABC Analysis

Question 152.
……….. is an optimum quantity of material to be ordered every time an order is placed. EOQ may be defined as that quantity of purchase which minimizes material order cost and material carrying cost.
(A) Quantity in such lot which has maximum discount
(B) Special Order Quantity (SOQ)
(C) Standard Order Quantity (SOQ)
(D) Economic Order Quantity (EOQ)
Answer:
(D) Economic Order Quantity (EOQ)

Question 153.
The model and formula of EOQ was developed by in 1913.
(A) F.W. Taylor
(B) F. Wilson Harris
(C) F. Walter Harris
(D) F.W. Marshall
Answer:
(B) F. Wilson Harris

Question 154.
Under ………… a continuous record of receipt and issue of materials is maintained by the stores department and the information about the stock of material is always available.
(A) Perpetual Inventory System
(B) Continuous Stock Taking
(C) Periodic Inventory System
(D) Just in time
Answer:
(A) Perpetual Inventory System

Question 155.
purchase means the purchase of goods or material such that delivery immediately precedes their use.
(A) Economic order quantity
(B) Reorder point
(C) Re-order Quantity
(D) Just in time (JIT)
Answer:
(D) Just in time (JIT)

Question 156.
Out of the following, what is not the work of purchase department?
(A) Receiving purchase requisition
(B) Exploring the sources of material supply
(C) Preparation and execution of purchase orders
(D) Accounting for material received
Answer:
(D) Accounting for material received

Question 157.
Which one out of the following is not an inventory valuation method?
(A) FIFO
(B) LIFO
(C) Weighted Average
(D) EOQ
Answer:
(D) EOQ

Question 158.
In case of rising prices (inflation), FIFO method will:
(A) Provide lowest value of closing stock and profit
(B) Provide highest value of closing stock and profit
(C) Provide highest value of closing stock but lowest value of profit
(D) Provide highest value of profit but lowest value of closing stock
Answer:
(B) Provide highest value of closing stock and profit

Question 159.
In case of rising prices (inflation), LIFO will:
(A) Provide lowest value of closing stock and profit
(B) Provide highest value of closing stock and profit
(C) Provide highest value of closing stock but lowest value of profit
(D) Provide highest value of profit but lowest value of closing stock
Answer:
(A) Provide lowest value of closing stock and profit

Question 160.
The labour cost which is traceable or identified to particular product or cost centre is known as –
(A) Indirect labour cost
(B) Direct labour cost
(C) Variable labour cost
(D) (B) or (C)
Answer:
(D) (B) or (C)

Question 161.
Rent free accommodation or accommodation provided at concessional rate should be classified as:
(A) Fringe Benefits
(B) Deferred Monetary Benefits
(C) Fixed standard labour cost
(D) Pecuniary Benefits
Answer:
(A) Fringe Benefits

Question 162.
………. is process whereby company make assessment of particular job to know how worth is it.
(A) Merit Rating
(B) Performance appraisal
(C) Induction
(D) Job evaluation
Answer:
(D) Job evaluation

Question 163.
Direct labour cost ……….
(A) Should be treated as production overhead.
(B) Should be charged using supplementary overhead rate
(C) Should be treated as abnormal cost and charged to costing profit & loss account.
(D) Becomes part of prime cost.
Answer:
(D) Becomes part of prime cost.

Question 164.
Direct labour cost is in nature.
(A) Variable
(B) Fixed
(C) Semi-variable
(D) Fixed or semi-variable
Answer:
(A) Variable

Question 165.
Which of the following is not objective of time-keeping?
(A) Preparation of payrolls
(B) Ascertaining idle time
(C) Ascertaining and controlling labour cost
(D) Disability, making a worker unfit for work
Answer:
(D) Disability, making a worker unfit for work

Question 166.
In relation to labour cost “Production Bonus” will be classified as
(A) Pecuniary Benefits
(B) Deferred Monetary Benefits
(C) Fringe Benefits
(D) Non-Pecuniary Gains
Answer:
(A) Pecuniary Benefits

Question 167.
When some benefit or allowances are given to employee in addition to normal wages/salary, then such additional benefits are popularly called as
(A) Additional benefits
(B) Deferred benefits
(C) Non-absorbed labour cost
(D) Fringe benefits
Answer:
(D) Fringe benefits

Question 168.
…………. refers to correct recording of the employees’ attendance time.
(A) Time booking
(B) Timekeeping
(C) Time spending
(D) Time pass
Answer:
(B) Timekeeping

Question 169.
Overhead refers to
(A) Direct or prime cost
(B) All indirect costs
(C) Only factory indirect costs
(D) Only indirect expenses
Answer:
(B) All indirect costs

Question 170.
Allotment of whole item of cost to a cost centre or cost unit is known as
(A) Cost Apportionment
(B) Cost Allocation
(C) Cost Absorption
(D) Machine hour rate
Answer:
(B) Cost Allocation

Question 171.
Overhead cost covers
(A) Indirect Materials
(B) Indirect Labour
(C) Indirect Expenses
(D) All of the above
Answer:
(D) All of the above

Question 172.
If an item of overhead expenditure is charged specifically to a single department this would be an example of:
(A) Apportionment
(B) Allocation
(C) Re-apportionment
(D) Absorption
Answer:
(B) Allocation

Question 173.
The arrangement of various items of overhead costs in logical groups having regard to their nature is known as
(A) Absorption of overheads
(B) Apportionment of overheads
(C) Allocation of overheads
(D) Classification of overheads
Answer:
(D) Classification of overheads

Question 174
……….. implies the allotment of whole items of cost to cost centres or cost units whether it may be production cost centres or service cost centres.
(A) Apportionment
(B) Allocation
(C) Absorption
(D) Classification
Answer:
(B) Allocation

Question 175.
The process of distribution of over-heads allotted to a particular department or cost centre over the units produced is called
(A) Allocation
(B) Apportionment
(C) Absorption
(D) Departmentalization
Answer:
(B) Apportionment

Question 176.
If overheads are classified by “element wise” then which of the following classification is correct?
(A) Production overhead, Administrative overheads, Selling overheads, Distribution overhead, Research & development overhead
(B) Variable overhead, Fixed overhead, Semi-variable overhead
(C) Indirect materials, Indirect labour, Indirect expenses
(D) None of the above
Answer:
(C) Indirect materials, Indirect labour, Indirect expenses

Question 177.
Cost of primary packing necessary for protecting the product or for convenient handling, should
(A) Become a part of the prime cost
(B) Become a part of the factory over-heads
(C) Charged to costing profit and loss account using supplementary over-head rate.
(D) Treated as selling and distribution overheads
Answer:
(A) Become a part of the prime cost

Question 178.
If actual overheads are less than pre-determined overheads then it is case of:
(A) Under Absorption
(B) Over Absorption
(C) Low Absorption
(D) None of the above
Answer:
(B) Over Absorption

Question 179.
If actual overheads are more than predetermined overheads then it is case of:
(A) Over Absorption
(B) Under Absorption
(C) (A) or (B)
(D) (A) & (B)
Answer:
(B) Under Absorption

Question 180.
Opening Stock = 25,000 units, Closing Stock = 15,000 units. Purchases = 1,90,000 units. ( Take 1 year = 360 days). Stock Velocity = ?
(A) 30 days
(B) 90 days
(C) 60 days
(D) 36 days
Answer:
(D) 36 days
Overview of Cost – Corporate and Management Accounting MCQ 12

Question 181.
Inventory turnover ratio = 2.5 times, Opening Stock=90,000 units, Closing Stock = 1,10,000 units. Purchases = ?
(A) 2,30,000 units
(B) 2,70,000 units
(C) 2,50,000 units
(D) 2,40,000 units
Answer:
(B) 2,70,000 units
Overview of Cost – Corporate and Management Accounting MCQ 33
Material Consumed = 2,50,000
Opening Stock + Purchases – Closing Stock = Material Consumed
90,000 + Purchases – 1,10,000 = 2,50,000
Purchases = 2,70,000

Question 182.
Stock Velocity =180 days, Material consumed = 1,50,000, Closing Stock = 62,500 units. Opening stock = ?
(A) 2,12,500 units
(B) 3,00,000 units
(C) 87,500 units
(D) 1,62,500 units
Answer:
(C) 87,500 units

Question 183.
The following data relate to two activity levels of production :

No. of units 4,500 5,750
Overheads (₹) 2,69,750 2,89,125

(A) ₹ 15.50
(B) ₹ 44.44
(C) ₹ 59.94
(D) None of the above
Answer:
(A) ₹ 15.50

Question 184.
If you know that with 8 emits of output, average fixed cost is ₹ 12.50 and average variable cost is ₹ 81.25, then total cost at this output level is:
(A) ₹ 93.75
(B) ₹ 97.78
(C) ₹750
(D) ₹ 880
Answer:
(C) ₹750

Question 185.
Following data has been extracted from the records of manufacturing company:
Total overhead for an activity level of 5,00,000 machine hours = ?

Machine Hours 8,00,000 3,00,000
Overheads ₹52,00,000 ₹32,00,000

(A) ₹ 32,00,000
(B) ₹ 52,00,000
(C) ₹ 40,00,000
(D) ₹ 45,00,000
Answer:
(C) ₹ 40,00,000

Question 186.
A management consultancy recovers overheads on chargeable consulting hours. Budgeted overheads were ₹ 6,15,000 and actual consulting hours were 32,150. Over-heads, were under-recovered by ₹ 35,000. If actual overheads, were ₹ 6,94,075, what was the budgeted overhead absorption rate per hour ?
(A) ₹ 19.13
(B) ₹ 20.50
(C) ₹ 21.59
(D) ₹ 22.68
Answer:
(B) ₹ 20.50

Question 187.
Following data are made available by the company for the year ended 31.3.2019:
Administrative overheads = ₹ 1,58,342
Production overheads = ₹ 3,48,482
Factory cost = ₹ 10,57,736
Work-in-progress = ₹ 25,487
Machine hour = 4,188 hours
Absorption rate for absorption of production overhead = ?
(A) ₹ 121.02 per hour
(B) ₹ 252.36 per hour
(C) ₹ 373.58 per hour
(D) ₹ 83.21 per hour
Answer:
(D) ₹ 83.21 per hour

Question 188.
The monthly budget of a department is as under:
Direct material : ₹ 45,000
Direct wages : ₹ 60,000
Overheads : ₹ 90,000
Direct labour hours : Hours 15,000
Machine hours : ₹ Hours 30,000
Find out the overhead recovery rate based on machine hours.
(A) 6 per hour
(B) 3 per hour
(C) 300%
(D) 50%
Answer:
(B) 3 per hour

Question 189.
Following data relate to two output levels of a department:
Machine hours — 17,000 — 18,500
Overheads (₹) — 2,46,500 — 2,51,750
The variable overhead rate per hour = ?
(A) ₹ 5 per hour
(B) ₹ 4.5 per hour
(C) ₹ 4 per hour
(D) ₹ 3.5 per hour
Answer:
(D) ₹ 3.5 per hour

Question 190.
Direct material=₹ 2,100, Direct wages = ₹ 660. Overhead absorption rate for Ma-chining, Assembly, Packing departments was respectively ₹ 4.5, ₹ 1.4, ₹ 2.5 per hour. Requires working of 180, 120 & 40 hours work in Machining, Assembly and Packing department respectively. The factory adds 30% on the factory cost to cover administration & selling overheads and profit. Selling price = ? .
(A) ₹ 3,585
(B) ₹ 4,661
(C) ₹ 4,989
(D) ₹ 5,262
Answer:
(C) ₹ 4,989

Question 191.
B Ltd. estimated that during the year 75,000 machine hours would be used and it has been using an overhead absorption rate of ₹ 6.40 per machine hour in its machining department. During the year the overhead expenditure amounted to ₹ 4,72,560 and 72,600 machine hours were used. Which one of the following statements is correct?
(A) Overhead was under-absorbed by ₹ 7,440
(B) Overhead was under-absorbed by ₹ 7,920
(C) Overhead was over-absorbed by ₹ 7,440
(D) Overhead was over-absorbed by ₹ 7,920
Answer:
(B) Overhead was under-absorbed by ₹ 7,920

Question 192.
A business always absorbs its overheads on labour hours. In the 8th period, 18,000 hours were worked, actual overheads were ₹ 2,79,000 and there was ₹ 36,000 over-absorption. The overhead absorption rate per hours was:
(A) ₹ 15.50
(B) ₹ 17.50
(C) ₹ 18.00
(D) ₹ 13.50
Answer:
(B) ₹ 17.50

Question 193.
A company calculates the prices of jobs by adding overheads to the prime cost and adding 30% to total costs as a profit margin. Job number Y256 was sold for ₹ 1,690 and incurred overheads of ₹ 694. What was the prime cost of the job?
(A) ₹ 489
(B) ₹ 606
(C) ₹ 996
(D) ₹ 1,300
Answer:
(B) ₹ 606

Question 194.
H Ltd. uses pre-determined overhead rates to apply manufacturing overhead to jobs. The pre-determined overhead rate is based on machine hours in the machining department and direct labour cost in the assembly department. At the beginning of the year, the company made the following estimates:
Overview of Cost – Corporate and Management Accounting MCQ 1
Overview of Cost – Corporate and Management Accounting MCQ 2
What predetermined overhead rates would be used in the Machining and Assembly Departments, respectively.
(A) 110% and? 15
(B) ₹ 5.00 and 50%
(C) ₹ 8.00 and 50%
(D) ₹ 5.00 and 200%
Answer:
(D) ₹ 5.00 and 200%

Question 195.
Job 21 was unfinished at the end of the accounting period. The total cost assigned to the job is ? 12,000 of which ₹ 3,000 is direct material. Factory overhead is allocated to goods in process at 150% of direct labour cost. What was the amount of direct labour charged to Job 21?
(A) ₹ 9,000
(B) ₹ 3,600
(C) ₹ 4,000
(D) ₹ 3,000
Answer:
(B) ₹ 3,600

Question 196.
The production cost to produce one unit of finished goods was ₹ 45. Direct materials were 1/3 of the total cost, and direct labour was 40% of the combined total of direct labour and direct materials. The cost for direct materials, direct labour, and factory overhead was:
(A) ₹ 15, ₹ 18, & ₹ 12 respectively
(B) ₹ 15, ₹ 12, & ₹ 18 respectively
(C) ₹ 15, ₹ 16, & ₹ 14 respectively
(D) ₹ 15, ₹ 10, & ₹ 20 respectively
Answer:
(D) ₹ 15, ₹ 10, & ₹ 20 respectively
Overview of Cost – Corporate and Management Accounting MCQ 17
15 + 0.4% = %
15 = 0.6%
% = Prime Cost = 25

Question 197.
Following details are given to you:
Raw materials consumed ₹ 80,000
Direct wages Factory overheads Office overheads Cost of production
(A) ₹ 88,000
(B) ₹ 50,000
(C) ₹ 68,000
(D) ₹ 60,000
Answer:
(B) ₹ 50,000

Question 198.
Dec 2014: The term used for ‘process of ascertaining the cost’ is known as ………..
(A) Cost
(B) Costing
(C) Cost accounting
(D) Cost accountancy
Answer:
(B) Costing

Question 199.
Dec 2014: Which element of total cost is common in prime cost and conversion cost ………..
(A) Variable overheads
(B) Fixed overheads
(C) Direct materials
(D) Direct labour
Answer:
(D) Direct labour

Question 200.
Dec 2014: The cost that increases as the volume of activity decreases within the relevant range, is known as ………..
(A) Average cost per unit
(B) Average variable cost per unit
(C) Total fixed cost
(D) Total variable cost
Answer:
(A) Average cost per unit

Question 201.
Dec 2014: Which of the following is generally used as cost unit of brick works ……..
(A) 1,000 bricks
(B) 100 bricks
(C) 10 bricks
(D) 1 brick
Answer:
(A) 1,000 bricks

Question 202.
Dec 2014: Relevant costs are ……..
(A) Future costs
(B) Standard costs
(C) Controllable costs
(D) Historical costs
Answer:
(A) Future costs

Question 203.
Dec 2014: Which of the following is not considered as a function of management accounting?
(A) Financial planning
(B) Decision making
(C) Reporting
(D) Cost computation
Answer:
(B) Decision making

Question 204.
Dec 2014: The cost of selecting one course of action and forgoing the other is known as ………
(A) Sunk cost
(B) Differential cost
(C) Opportunity cost
(D) Joint cost
Answer:
(C) Opportunity cost

Question 205.
Dec 2014: Expenditure on labour and materials that cannot be economically identified with a specific saleable cost unit is known as …….
(A) Prime cost
(B) Overheads
(C) Direct cost
(D) Abnormal loss
Answer:
(B) Overheads

Question 206.
Dec 2014: For a manufacturing company, which of the following is an example of period cost rather than a product cost……..
(A) Depreciation on factory equipment
(B) Commission to salesman
(C) Wages of machine operator
(D) Insurance on factory equipment
Answer:
(D) Insurance on factory equipment

Question 207.
Dec 2014: Which of the following is known as full costing ………….
(A) Variable costing
(B) Differential costing
(C) Marginal costing
(D) Absorption costing
Answer:
(D) Absorption costing

Question 208.
Dec 2014: Which of the following is not true? Fixed costs remain fixed …………
(A) Over a short period
(B) Over a long period and within relevant range
(C) Over a short period and within a relevant range
(D) Over a long period
Answer:
(D) Over a long period

Question 209.
Dec 2014: According to Section 2( 13) of the Companies Act, 2013, ‘books of account’ does not require maintenance of which of the following records …………
(A) All sums of money received and expended by a company and matters in relation to which the receipts and expenditure take place
(B) All sales and purchases of goods and sendees by the company
(C) The assets and liabilities of the company
(D) Cash flow statement
Answer:
(D) Cash flow statement

Question 210.
June 2015: Which of the following is generally used as cost unit in cement industry —
(A) Per tone
(B) Per kilolitre
(C) Per kilogram
(D) Per gallon
Answer:
(A) Per tone

Question 211.
June 2015: Which of the following is not an objective of management accounting —
(A) Formulation of plans and policy
(B) Assisting in decision making
(C) Preparation of financial statements
(D) Interpretation of financial documents
Answer:
(C) Preparation of financial statements

Question 212.
June 2015: The establishment of budgets, standard costs and actual costs of operations, processes, activities or products and the analysis of variances, profitability or the social use of funds is known as ………
(A) Costing
(B) Cost Accounting
(C) Cost Accountancy
(D) Financial Accounting
Answer:
(B) Cost Accounting

Question 213.
June 2015: Costs which are constant for a given level of output and then increase by a fixed amount at a higher level of output are called
(A) Step costs
(B) Differential costs
(C) Committed costs
(D) Opportunity costs
Answer:
(A) Step costs

Question 214.
June 2015: Interest on internally generated funds is an example of ………..
(A) Differential cost
(B) Joint cost
(C) Common cost
(D) Imputed cost
Answer:
(D) Imputed cost

Question 215.
June 2015: Cost unit applicable to bicycle industry is …………
(A) Per part of bicycle
(B) Per bicycle
(C) Per thousand bicycles
(D) Per day
Answer:
(B) Per bicycle

Question 216.
June 2015: Sunk costs are …………
(A) Opportunity costs
(B) Costs to be incurred in future
(C) Not relevant for decision making
(D) Controllable costs
Answer:
(C) Not relevant for decision making

Question 217.
June 2015: Fixed cost is a cost ……….
(A) Which remains fixed for each unit of output
(B) Which remains fixed in total during a given period despite changes in output
(C) Which is partly fixed and partly variable in relation to the output
(D) Which changes in total in proportion to the changes in output
Answer:
(B) Which remains fixed in total during a given period despite changes in output

Question 218.
June 2015: Which of the following is the social purpose of cost audit …………
(A) Detection and correction of abnormal losses
(B) Detection of errors and frauds
(C) Determination of inventory valuation
(D) Pinpointing areas of inefficiency and mismanagement for the benefit of shareholders and consumers
Answer:
(D) Pinpointing areas of inefficiency and mismanagement for the benefit of shareholders and consumers

Question 219.
June 2015: Rent, rates and insurance of factory and office are examples of …………
(A) Direct expenses
(B) Indirect expenses
(C) Notional expenses
(D) Miscellaneous expenses
Answer:
(B) Indirect expenses

Question 220.
Dec 2015: Management accounting is basically concerned with …………
(A) The problem of choice
(B) Causative relationship
(C) Recording of transaction
(D) Both (A) and (B) above
Answer:
(D) Both (A) and (B) above

Question 221.
Dec 2015: Cost accounting is ………..
(A) Nothing more than a detailed analysis of expenditure
(B) An instrument of management control
(C) Useful only in such organization which has profit as the aim
(D) Not needed if prices are beyond the control of the firm.
Answer:
(B) An instrument of management control

Question 222.
Dec 2015: Conversion cost is the summation of …………
(A) Direct material and direct wages
(B) Direct wages and office overheads
(C) Direct wages, direct charges and works overheads
(D) None of the above
Answer:
(C) Direct wages, direct charges and works overheads

Question 223.
Dec 2015: A cost centre which is engaged in production activity by conversion of raw material into finished product is called ……..
(A) Production cost centre
(B) Impersonal cost centre
(C) Process cost centre
(D) Production unit
Answer:
(A) Production cost centre

Question 224.
Dec 2015: A business unit is known to be a profit centre ……..
(A) If its operations or departments are not directly involved in revenue gen crating activities, but instead focus on elements of cost control
(B) If its management is evaluated not only on revenues and expenses, but also on asset investment
(C) If its management is compensated based on the level of profitability
(D) If its management is held accountable for both revenues and expenses and has the authority to make decision regarding its products, markets and source of supply
Answer:
(D) If its management is held accountable for both revenues and expenses and has the authority to make decision regarding its products, markets and source of supply

Question 225.
Dec 2015:
Statement-I
The activities or operations of every cost centre should be homogeneous so as to ensure uniform basis of charging expenses within the centre.
Statement-II
The activities or operation of each cost centre must he well defined and clearly identifiable.
Select the correct answer from the following —
(A) Both statements are correct
(B) Both statements are incorrect
(C) Statement-I is correct, but Statement – II is incorrect
(D) Statement-I is incorrect, but Statement – II is correct
Answer:
(A) Both statements are correct

Question 226.
Dec 2015: Match the following
Overview of Cost – Corporate and Management Accounting MCQ 10
Select the correct answer from the options given below ………..
Overview of Cost – Corporate and Management Accounting MCQ 3
Answer:
(B)

Question 227.
June 2016: A process in which management is looking outward to examine how others achieve their performance
levels and to understand the process they use is called —
(A) Balanced score card
(B) Target costing
(C) Bench marking process
(D) Performance analysis
Answer:
(C) Bench marking process

Question 228.
June 2016: Match the following industry/product with appropriate cost unit:
Overview of Cost – Corporate and Management Accounting MCQ 11
Select the correct answer using the codes given below —
Overview of Cost – Corporate and Management Accounting MCQ 4
Answer:
(A)

Question 229.
June 2016: Which one of the following statements is false —
(A) Management accountant uses cost accounting tools and techniques for planning and decision making
(B) Management accounting is mostly historical in its approach and ill projects the past
(C) Cost accounting system can be installed without management accounting
(D) Management accounting focuses on wealth maximization
Answer:
(B) Management accounting is mostly historical in its approach and ill projects the past

Question 230.
June 2016: Identify the cost which is not relevant or useful for decision making —
(A) Shut down cost
(B) Marginal cost
(C) Imputed cost and replacement cost
(D) Sunk cost
Answer:
(D) Sunk cost

Question 231.
June 2016: Cost Accounting Standard is related to bringing uniformity and consistency in the principles and methods of determining the selling and distribution overheads with reasonable accuracy.
(A) 10
(B) 12
(C) 15
(D) 4
Answer:
(C) 15

Question 232.
June 2016: Section of the Companies Act, 2013 gives the cost auditor same power as the financial auditor has under section of the Companies Act, 2013.
(A) 148, 143
(B) 143, 148
(C) 147, 148
(D) 143, 144
Answer:
(A) 148, 143

Question 233.
June 2016: Those fixed costs which continue to be incurred even when there is no production are called —
(A) Period costs
(B) Discretionary costs
(C) Committed costs
(D) Output costs
Answer:
(C) Committed costs

Question 234.
June 2016: A direct cost is a cost which can be classified on the basis of—
(A) Behaviour
(B) Traceability
(C) Controllability
(D) Relevance
Answer:
(B) Traceability

Question 235.
June 2016: Management accounting does not include the function of —
(A) Planning and control
(B) Product costing
(C) Preparation of financial statements
(D) Decision-making
Answer:
(D) Decision-making

Question 236.
Dec 2016: Which of the following is/ are tool(s) and technique(s) of management accounting?
(A) Ratio analysis
(B) Linear programming
(C) Trend analysis
(D) All of the above
Answer:
(D) All of the above

Question 237.
Dec 2016: Match the following:
Overview of Cost – Corporate and Management Accounting MCQ 5
Select the correct answer from the options given below —
Overview of Cost – Corporate and Management Accounting MCQ 6
Answer:
(B)

Question 238.
Dec 2016: Statement -1
Sunk cost is one that has already been in-curred and cannot be avoided by decisions in the future.
Statement – II
For decision making, it is required that such cost should be incurred.
Select the correct answer from the options given below ………….
(A) Both statements are correct
(B) Both statements are incorrect
(C) Statement-I is incorrect, but Statement – I is correct
(D) Statement-I is correct, but Statement-II is incorrect
Answer:
(D) Statement-I is correct, but Statement-II is incorrect

Question 239.
Dec 2016: The prime function of management accounting is to ………….
(A) Record business transactions
(B) Interpret financial data
(C) Assist the management in performing its functions effectively
(D) Assist tax authorities.
Answer:
(C) Assist the management in performing its functions effectively

Question 240.
Dec 2016: Multiple costing is followed in………….
(A) Biscuit factory
(B) Steel industry
(C) Brick making
(D) Cycle manufacturing
Answer:
(D) Cycle manufacturing

Question 241.
Dec 2016: The ascertainment of costs after they have been incurred is called ………….
(A) Marginal costing
(B) Historical costing
(C) Differential costing
(D) None of the above
Answer:
(B) Historical costing

Question 242.
Dec 2016: A technique where standardized principles and methods of cost accounting are employed by a number of different companies is termed as —
(A) Uniform costing
(B) Absorption costing
(C) Standard costing
(D) ABC costing
Answer:
(A) Uniform costing

Question 243.
Dec 2016: A cost centre is —
(A) A production or service location, function, activity or item of equipment whose costs may be attributed to cost units
(B) A centre for which an individual budget is drawn-up
(C) A centre where cost is classified on the basis of variability
(D) An amount of expenditure attributable to an activity-
Answer:
(A) A production or service location, function, activity or item of equipment whose costs may be attributed to cost units

Question 244.
Dec 2016: In the management information system (MIS), top level management uses
(A) Operational information
(B) Tactical information
(C) Transactional information
(D) Strategic information
Answer:
(D) Strategic information

Question 245.
Dec 2016: Which of the following is an irrelevant cost —
(A) Sunk cost
(B) Replacement cost
(C) Opportunity cost
(D) All of the above
Answer:
(A) Sunk cost

Question 246.
Dec 2016: Match the following:
List -I List – II
(A) Advertising — (1) Operating costing
(B) Sugar company — (2) Job costing
(C) Readymade — (3) Process costing garments
(D) Transport — (4) Batch costing
Select the correct answer from the options given below —
Overview of Cost – Corporate and Management Accounting MCQ 7
Answer:
(A)

Question 247.
Dec 2014: In inflationary situation, which system of inventory valuation shows higher profits —
(A) LIFO
(B) FIFO
(C) HIFO
(D) Weighted average
Answer:
(B) FIFO

Question 248.
June 2015: Which of the following method is based on the assumption that costliest materials are issued first and inventory is valued at the lowest possible price ……….
(A) FIFO method
(B) UFO method
(C) Highest-in-first-out method
(D) Weighted average method
Answer:
(C) Highest-in-first-out method

Question 249.
June 2015: Following information is available regarding a product-X:
1st January, 2015:
Opening balance: 50 units @ 14 Receipts:
5th January, 2015: 100 units @ ₹ 5 12th January, 2015: 200 units @ ₹ 5.50 Issues: ‘
2nd January, 2015: 30 units 18th January, 2015:170 units
The value of closing stock according to FIFO method is —
(A) ₹ 660
(B) ₹ 770
(C) ₹ 825
(D) ₹ 860
Answer:
(C) ₹ 825
Overview of Cost – Corporate and Management Accounting MCQ 19

Question 250.
June 2015: In case of rising prices, FIFO method will provide—
(A) Lowest value of closing stock and profit
(B) Highest value of closing stock and profit
(C) Highest value of closing stock but lowest value of profit
(D) Lowest value of closing stock but highest value of profit
Answer:
(B) Highest value of closing stock and profit

Question 251.
Dec 2015: FIFO method of valuing material issues is suitable in times of —
(A) Rising prices
(B) Falling prices
(C) Price fluctuation
(D) Boom period
Answer:
(B) Falling prices

Question 252.
June 2016: XYZ Ltd. had 4,000 units of inventory in hand on 1st March, 2016, costing ₹ 4 per unit. Purchases and issues of material during the month were as follows:
Overview of Cost – Corporate and Management Accounting MCQ 8
The cost of inventory as on 31st March, 2016 under FIFO and weighted average cost method will be
(A) ₹ 27,000 and ₹ 24,498
(B) ₹ 27,000 and ₹ 23,625
(C) ₹ 22,000 and ₹ 23,625
(D) ₹ 22,000 and ₹ 24,498
Answer:
(A) ₹ 27,000 and ₹ 24,498
Overview of Cost – Corporate and Management Accounting MCQ 34
Overview of Cost – Corporate and Management Accounting MCQ 21

Question 253.
Question June 2016: In a situation of rising prices, profit and tax liability would be lower under method than under method of material issue pricing.
(A) FIFO; LIFO
(B) LIFO; FIFO
(C) LIFO; Average
(D) FIFO; Average
Answer:
(B) LIFO; FIFO

Question 254.
June 2016: The technique of economic order quantity is losing significance since the development of —
(A) Perpetual inventory
(B) Just-in-time
(C) First-in-first-out
(D) ABC analysis
Answer:
(B) Just-in-time

Question 255.
June2016: Which one of the following is the correct sequence of the purchase procedure of inventory —
(A) Indenting for material, issuing tenders, receiving quotations, and placing order
(B) Issuing tenders and receiving quotations, indenting for material, and placing order
(C) Placing order, issuing tenders and receiving quotations, and indenting for material
(D) Indenting for material and placing order
Answer:
(A) Indenting for material, issuing tenders, receiving quotations, and placing order

Question 256.
Dec 2016: Amaze Ltd. had an opening inventory of 5,000 units costing ₹ 5 per unit on 1st April, 2016. Following receipts and issues took place in April, 2016:
5th April, 2016: Purchased 800 units @ ₹ 8 per unit
12th April, 2016: Purchased 200 units @ ₹ 8 per unit
15th April, 2016: Issued 3,000 units 25th April, 2016: Purchased 1,000 units @ ₹ 9 per unit .
Cost of inventory as on 30th April, 2016 under weighted average basis will be —
(A) ₹ 25,500
(B) ₹ 27,000
(C) ₹ 20,000
(D) ₹ 23,500
Answer:
(A) ₹ 25,500
Overview of Cost – Corporate and Management Accounting MCQ 22

Question 257.
Dec 2014: Which of the following is not a method used for time booking —
(A) Daily time sheets
(B) Weekly time sheets
(C) Job cards
(D) Pay roll
Answer:
(D) Pay roll

Question 258.
June 2015: Which of the following is not an objective of time-booking —
(A) Apportionment of overheads against jobs
(B) Preparation of payrolls
(C) Ascertaining idle time for the purpose of control
(D) Calculation of labour cost of jobs done
Answer:
(A) Apportionment of overheads against jobs

Question 259.
June 2016: Which of the following is/ are not a purpose of time keeping —
(i) Ascertaining labour cost of a job/ product/ activity
(ii) Evaluating labour performance by comparing actual and budgeted time
(iii) Providing internal check against dummy workers.
Select the correct answer from the options given below —
(A) (i) and (ii)
(B) (ii) and (iii)
(C) (i) and (iii)
(D) (ii) only
Answer:
(A) (i) and (ii)

Question 260.
June 2016: Direct labour cost will include —
(A) All labour cost attributable to a production department
(B) Labour cost of production and production support services
(C) Cost of direct labour engaged in converting raw materials into manufactured articles
(D) Cost of labour recruited directly by the management and through contractors
Answer:
(C) Cost of direct labour engaged in converting raw materials into manufactured articles

Question 261.
Dec 2016:
Statement -1
Low time wages do not necessarily mean low cost of production and high wages mean high cost of product.
Statement – II
Time and motion study, which is a function of engineering department, is useless for the determination of wages.
Select the correct answer from the options given below ………..
(A) Both statements are correct
(B) Both statements are incorrect
(C) Statement-I is incorrect, but Statement-I is correct
(D) Statement-I is correct, but Statement-II is incorrect
Answer:
(D) Statement-I is correct, but Statement-II is incorrect

Question 262.
Dec 2014: Rent, rates and taxes paid for the building are apportioned on the basis of ………..
(A) Floor area
(B) Capital value
(C) No. of employees
(D) Direct labour hours
Answer:
(A) Floor area

Question 263.
Dec 2014: If the actual expenses fall short of the amount absorbed, it is known as ………..
(A) Under absorption
(B) Over absorption
(C) Allocation
(D) Apportionment
Answer:
(B) Over absorption

Question 264.
Dec 2014: The budgeted fixed over-heads amounted to ₹ 84,000. The budgeted and actual production amounted to 20,000 units and 24,000 units respectively. This means that there will be an —
(A) Under-absorption of ₹ 16,800
(B) Under-absorption of ₹ 14,000
(C) Over-absorption of ₹ 16,800
(D) Over-absorption of ₹ 14,000
Answer:
(A) Under-absorption of ₹ 16,800
Actual overheads based on budgeted rate = \(\frac{84,000}{20,000} \times 24,000\)
20,000
Since budgeted overheads are less than actual overheads there is under absorption.
1,00,800- 84,000= 16,800.

Question 265.
June 2015: The following data is available for Akhil Ltd. for the year ended 31st March 2015:
Administrative overheads: ₹ 2,50,000 Production overheads: ₹ 2,74,200 Factory cost: ₹ 3,42,800 Work-in-progress: ₹ 74,000 Machine hour: 4,000 hours. The absorption rate for production over-heads is —
(A) ₹ 68.55
(B) ₹ 216.75
(C) ₹ 235.25
(D) ₹ 198.25
Answer:
(A) ₹ 68.55
Overview of Cost – Corporate and Management Accounting MCQ 35

Question 266.
June 2015: The budgeted fixed over-heads amounted to ₹ 75,000. The budgeted and Actual production amounted to 15,000 units and 20,000 units respectively. This means that there will be an —
(A) Under-absorption of ₹ 25,000
(B) Under-absorption of ₹ 18,750
(C) Over-absorption of ₹ 25,000
(D) Over-absorption of ₹ 18,750
Answer:
(C) Over-absorption of ₹ 25,000
Absorption Rate = \(\frac{\text { Budgeted Overheads }}{\text { Budgeted Units }}=\frac{75,000}{15,000}=5 \text { per units }\)
Overhead absorbed = 20,000 units × 5 = 1,00,000. If it is assumed that actual overheads are same to that of budgeted figure then 1,00,000 – 75,000 = 25,000. Since absorbed overhead are more than actual overheads this is case of over absorption.

Question 267.
June 2015: The following data relates to two activity levels of production:
Level I Level II
No. of units 4,000 5,500
Overheads (₹) 2,80,000 3,50,000
Variable cost per unit would be —
(A) ₹ 46.67
(B) ₹ 133.33
(C) ₹ 70
(D) ₹ 64
Answer:
(A) ₹ 46.67
Variable Overhead Rate = \(\frac{\text { Change in Overheads }}{\text { Change in unit }}=\frac{70,000}{1,500}=46.67 \text { per unit }\)

Question 268.
June 2015: A product whose direct material costs and direct labour costs are ₹ 200 and ₹ 100 would consume 3 hours, 4 hours and 5 hours in department A, B & C respectively. Overheads absorption rate is – A: ₹ 4.5 per hour, B: ₹ 5 per hour and C: ₹ 10.5 per hour. The total cost of the product is —
(A) ₹ 486
(B) ₹ 386
(C) ₹ 214
(D) ₹ 500
Answer:
(B) ₹ 386
Overview of Cost – Corporate and Management Accounting MCQ 23
Overview of Cost – Corporate and Management Accounting MCQ 24

Question 269.
Dec 2015: The following particulars relate to production department of a factory:
Material used : ₹ 20,000
Direct labour : ₹ 10,000
Overheads : ₹ 7,500
On an order carried out in the department, material consumed was ₹ 4,000 and direct wages paid amounted to ₹ 2,000. The amount of overheads chargeable to this order on the basis of prime cost would be –
(A) ₹ 1,500
(B) ₹ 1,510
(C) ₹ 1,700
(D) ₹ 1,710
Answer:
(A) ₹ 1,500

Question 270.
Dec 2015: Allotment of the entire costs to a cost centre or unit is known as —
(A) Cost apportionment
(B) Cost allocation
(C) Cost absorption
(D) Machine hour rate
Answer:
(B) Cost allocation

Question 271.
June 2016: Following information is given for an order:
Materials (direct) : ₹ 25,000
Wages (direct) : ₹ 20,000
Factory : 75% of wages (direct)
overheads
Sales : ₹ 85,800
Profit : 10% on cost of production
Office overheads are charged as a percentage of factory cost. The amount of office overheads and its percentage to factory cost will be —
(A) ₹ 78,000 and 30%
(B) ₹ 18,000 and 30%
(C) ₹ 25,800 and 43%
(D) ₹ 33,000 and 55%
Answer:
(B) ₹ 18,000 and 30%
Overview of Cost – Corporate and Management Accounting MCQ 25
60,000 + x + 6,000 + 0.1 = 85,800
66,000+ 1.1x = 85,800
1.1x = 19,800
x =18,000
%  of factory overheads to factory cost = \(=\frac{18,000}{60,000} \times 100=30 \%\)

Question 272.
June 2016: Which of the following statements are true —
(i) Conversion costs and overheads are interchangeable terms
(ii) Notional cost and imputed cost means the same thing
(iii) Cost accounting is not needed by a non-profit organization
(iv) Rent on owned building is included in cost accounts.
Select the correct answer from the options given below —
(A) (i) and (ii)
(B) (iii) and (iv)
(C) (ii) and (iv)
(D) All of the above
Answer:
(A) (i) and (ii)

Question 273.
June 2016: Classify the following expenses as direct (D) and indirect (I) —
(i) Royalties charged as a rate per unit
(ii) Cost of making a design, pattern for a specific job
(iii) Salesman’s commission
(iv) Power, fuel, lighting of factory and office.
Select the correct answer using the codes given below —
Overview of Cost – Corporate and Management Accounting MCQ 9
Answer:
(D)

Question 274.
Dec 2016: When the amount of overheads absorbed is less than the amount of overheads incurred, it is called —
(A) Under-absorption of overheads
(B) Over-absorption of overheads
(C) Proper absorption of overheads
(D) None of the above
Answer:
(A) Under-absorption of overheads

Question 275.
Dec 2016:
Statement -1
Production departments and service departments are equally important for manufacturing industry.
Statement – II
To calculate cost of a product, service department cost should be redistributed among production department on a reasonable basis.
Select the correct answer from the options given below —
(A) Both statements are correct
(B) Both statements are incorrect
(C) Statement-I is incorrect, but Statement-II is correct
(D) Statement-I is correct, but Statement-II is incorrect
Answer:
(A) Both statements are correct

Question 276.
Dec 2016: Following information has been collected from cost records of Bright Ltd.:
Direct material: ₹ 5,00,000 Direct labour: ₹ 3,00,000
Factory overheads: 20% of factory cost The amount of factory overheads will be:
(A) ₹ 1,60,000
(B) ₹ 2,00,000
(C) ₹ 1,80,000
(D) ₹ 1,96,000
Answer:
(B) ₹ 2,00,000
20% of factory cost means 2596 of prime cost (5,00,000 + 3,00,000) × 2596 = 2,00,000.

Question 277.
Dec 2016: Labour hour rate Administrative overheads are absorbed on the basis of —
(A) Direct materials
(B) Direct wages
(C) Prime cost
(D) Works cost
Answer:
(D) Works cost

Question 278.
Dec 2016: Following information relates to the production department of a factory:
Materials used : ₹ 80,000
Direct labour : ₹ 60,000
Overheads : ₹ 40,000
On an order carried out in the department, materials consumed amounted to ₹ 16,000. The overheads chargeable to this order on the basis of direct materials will be —
(A) ₹ 8,000
(B) ₹ 9,000
(C) ₹ 8,500
(D) ₹ 9,800
Answer:
(A) ₹ 8,000
Overhead absorption rate = \(\frac{\text { Overheads }}{\text { Material }} \times 100=\frac{40,000}{80,000} \times 100=50 \%\)
Overheads to be absorbed for given order = 16,000 × 5096 = 8,000

Question 279.
Dec 2014: If selling price of a product is ₹ 85,800 and the profit margin on cost is 10%, the amount of profit will be —
(A) ₹ 7,800
(B) ₹ 8,580
(C) ₹ 7,200
(D) ₹ 9,533
Answer:
(A) ₹ 7,800
Profit is 1096 on cost means 1 /11th of sale price.
Cost + Profit = Sales
100+10= 110
Profit = 85,800 \(\frac{10}{110}\) = 7,800

Question 280.
Dec 2014: Which of the following is to be included while preparing a cost sheet —
(A) Interest paid
(B) Goodwill written-off
(C) Income-tax paid
(D) Salesman commission
Answer:
(D) Salesman commission

Question 281.
Dec 2014: Cost of production plus opening stock of finished goods minus closing stock of finished goods is equal to—
(A) Cost of goods sold
(B) Cost of sales
(C) Sales
(D) Prime cost
Answer:
(A) Cost of goods sold

Question 282.
Dec 2014: Which of the following is not a type of job costing —
(A) Terminal costing
(B) Contract costing
(C) Batch costing
(D) Operation costing
Answer:
(D) Operation costing

Question 283.
June 2015:
Net works cost: ₹ 3,00,000 Administrative overheads: ₹ 1,00,000 Opening stock of finished goods: Nil Closing stock of finished goods: ₹ 20,000 Selling overheads: ₹ 10,000. From the above information, the cost of sales will be —
(A) 4,30,000
(B) 3,90,000
(C) 3,70,000
(D) 4,10,000
Answer:
(B) 3,90,000
Overview of Cost – Corporate and Management Accounting MCQ 26

Question 284.
June 2015: Following information is available regarding an organization:
Direct material purchased: ₹ 1,50,000 Direct material consumed: ₹ 80,000 Direct labour: ₹ 50,000 Direct expenses: ₹ 30,000 Manufacturing overheads: ₹ 20,000 The prime cost for the organization is—
(A) 1,60,000
(B) 2,90,000
(C) 2,30,000
(D) 1,80,000
Answer:
(A) 1,60,000

Question 285.
June 2015: If the sales of a product is ₹ 94,080 and the profit margin on cost 12%, the amount of profit will be ………………
(A) ₹ 7,800
(B) ₹ 11,290
(C) ₹ 8,580
(D) ₹ 10,080
Answer:
(D) ₹ 10,080
Cost + Profit = Sales
100 +12 = 112
Profit = 94,080 × \(\frac{12}{112}\) = 10,080

Question 286.
Dec 2015: Item(s) excluded from cost sheet are —
(A) Direct material
(B) Administrative overheads
(C) Provision for taxation
(D) All of the above
Answer:
(C) Provision for taxation

Question 287.
Dec 2015: The following information is extracted from the job ledger in respect of Job No. 404:
Material: ₹ 3,400
Wages: 80 hours @ ₹ 2.50 per hour
Variable overheads incurred for all jobs: ₹ 5,000 for 4,000 labour hours
If the job is billed for ₹ 4,200 the profit will be —
(A) ₹ 600
(B) ₹ 500
(C) ₹ 700
(D) ₹ 650
Answer:
(B) ₹ 500
Overview of Cost – Corporate and Management Accounting MCQ 27

Question 288.
June 2016: From the following particulars relating to Job No. 555, ascertain the total cost:
Direct materials 16,000
Direct labour 8,000
Direct expenses 1,600
Works overheads are recovered on the basis of 50% on prime cost and administrative overheads at 10% of works cost. Choose the correct option —
(A) 45,000
(B) 45,240
(C) 42,240
(D) 43,000
Answer:
(C) 42,240
Overview of Cost – Corporate and Management Accounting MCQ 28

Question 289.
June 2016: Direct material cost ₹ 45,000; Direct labour cost is 40% of direct material cost; Royalties on production ₹ 4,000; Other direct expenses are 20% of prime cost. Prime cost will be —
(A) ₹ 78,750
(B) ₹ 83,750
(C) ₹ 80,400
(D) None of the above-
Answer:
(B) ₹ 83,750
Overview of Cost – Corporate and Management Accounting MCQ 29
45,000 + 18,000 + 4,000 + 0.2
67,000+ 0.2x=x
67,000 = 0.8x
x = 83,750

Question 290.
June 2016:
Cost of production for 10,000 units: ₹ 1,60,000
Opening stock of finished goods (1,000 units) : ₹ 18,000
Closing stock of finished goods (FIFO) : 2,000 units
Selling & distribution overheads : ₹ 2 per unit sold
Profit mark-up on selling : 20% price
The amount of profit will be —
(A) ₹ 39,800
(B) ₹ 40,500
(C) ₹ 41,000
(D) ₹ 40,800
Answer:
(C) ₹ 41,000
Overview of Cost – Corporate and Management Accounting MCQ 30

Question 291.
Dec 2016: Following information is given:
Direct material purchased : 6,00,000
Direct material consumed : 7,00,000
Direct labour : 3,00,000
Direct expenses : 2,50,000
Manufacturing overheads : 3,00,000
Prime cost will be —
(A) ₹ 14,50,000
(B) ₹ 11,50,000
(C) ₹ 12,50,000
(D) ₹ 15,50,000
Answer:
(C) ₹ 12,50,000
Overview of Cost – Corporate and Management Accounting MCQ 31

Question 292.
Dec 2016: Which of the following is not a part of job order cost sheet —
(A) Direct material
(B) Direct labour
(C) Actual factory overheads
(D) Applied factory overheads
Answer:
(C) Actual factory overheads

Phrases, Clauses and Sentence Structure: Definition, Concepts, Examples

Phrases, Clauses, and Sentences are the most important structural units of language. They provide structure and meaning to almost all the languages. The phrases and clauses provide a sense to a sentence. Here we will discuss this and learn about the constituents of a sentence structure with the help of interesting example sentence for each.

Phrases, Clauses, and Sentences

A complete understanding of the structural parameters is crucial to the understanding of the meaning of sentences. Here we will study all of the three components of a sentence structure, one by one. Let us begin with phrases.

Phrase

sentence structure

Any group of meaningful words that don’t make complete sense is a phrase. If taken alone i.e. without other words, it will not be meaningful at all.preposition and a However, a phrase occurs inside a sentence as its structural part.

Some of the examples of phrases are: in ten steps, the great man, a pink flower, the thick canopy, expansion term, etc. Phrases are of several types as follows:

  • Prepositional Phrase: This group of words begin with a preposition. The preposition precedes a noun or a pronoun or something which acts as a noun or a pronoun. Let us see some examples. Eid is a wonderful occasion. She was lost at sea. I am writing this essay for the entire class. The entire prepositional phrase acts as an adverb or an adjective most of the times.
  • Noun Phrase: This is a phrase that acts as a noun in a sentence. A noun or a pronoun and its modifiers make up a noun phrase. For example, The man takes a bus every day to work. Arif has a very beautiful bag with him.
  • Verb Phrase: This phrase will contain a main verb and one or more helping verb. These two will have a link that connects them together. This phrase will define the various times of the action in a sentence. For example, The car is moving in a circle. Will he be eating the entire buffet? How are you doing? These are some of the common examples and the structure is auxiliary/modal verb + auxiliary verb + auxiliary verb + main verb (as in the sentence above).

Clause

A clause is also a group of words but this group must contain the subject and a predicate. Hence, a clause can make complete sense even when present outside the sentence. A clause is that part of a sentence that contains the subject and the predicate. For example, I have a dog. The snow is falling since yesterday. Clauses are of following types:

  • Main or Independent Clause: The main clause is that part of a sentence that not only contains the subject and the predicate but also makes perfect sense if we take it out of the sentence. in other words we can say that this clause does not need a context to make sense. For example, China is growing at a very fast rate and this has surprised many economists. The clauses in bold are independent clauses.
  • Subordinate or Dependent Clause: A subordinate or a dependent clause must also contain the subject and the predicate. The only condition is that these kinds of clauses won’t make proper sense without another clause. The dependent clause depends on the main clause for deriving a proper meaning. Let us see some examples: The country is going from bad to worse. Asif has a dog who can stand on two legs. That is the umbrella which I bought online. Iran has a very beautiful culture which is also one of the oldest cultures in the world. The words in bold are the subordinate clauses.

Sentence and Sentence Structure

We define a sentence as a collection of words that make a certain intended sense. The definition is also sometimes put as a collection or group of words that make sense to a reader. Grammatically, we say that a sentence must have a predefined structure. A sentence may contain a subject, a predicate, verbs and auxiliary verbs etc.

A sentence could be a command, a statement, an exclamation, a question. It has a main clause and sometimes many clauses with at least one main clause. The sentence has to end with a full stop and must have a finite verb in it. For example: Wait here. Put it on. I am a very strong person but I also need to know more. The sentence structure has the following basic parts:

  • Subject: About which something is being said.
  • Predicate: Tells us something about the subject.
  • Direct object: A person or thing that is affected by the verb.
  • Indirect object: Usually followed by direct objects.
  • The object of the preposition: Functions as a noun or pronoun and comes right after the preposition.
  • Verbs: Indicates action, the occurrence of something or state of being.
  • Phrases: Makes sense but not complete sense, thus can’t stand alone.
  • Complements: It provides complete meaning to a subject, an object or a verb.

Solved Examples for You

Q: A sentence has only one clause. What type of clause is it and why?

Ans: The clause has to be the main clause or an independent clause. An independent clause is a clause that makes complete sense. Since a sentence also has to make sense to its reader, every sentence that has a single clause must have a main clause. The main clause makes a sentence in itself.

Sentence Types and Word Power: Phrases, Clauses & English Sentences

Can we pinpoint when exactly did we speak a proper sentence for the first time? Not really! The reason is we acquire our first (and sometimes even our second language) and start speaking without any conscious effort. So, we are usually unaware of the technicalities or the appropriate structure that governs our speech. But, to make our mark in a formal or official environment both- speaking and writing efficiently and effectively is crucial. So, let’s begin to learn the details of English sentences.

Barriers of Communication: Types of Barriers to Effective Communication

Barriers of Communication: This far we have seen what we mean by the process of communication. But, at times even after taking care of every other detail some misunderstandings arise. So, to eliminate these misunderstandings, we have to understand the most common barriers to effective communication. Let us see what these Barriers of Communication are!

Barriers To Effective Communication

The process of communication has multiple barriers. The intended communique will often be disturbed and distorted leading to a condition of misunderstanding and failure of communication. The Barriers to effective communication could be of many types like linguistic, psychological, emotional, physical, and cultural etc. We will see all of these types in detail below.

Linguistic Barriers

The language barrier is one of the main barriers that limit effective communication. Language is the most commonly employed tool of communication. The fact that each major region has its own language is one of the Barriers to effective communication. Sometimes even a thick dialect may render the communication ineffective.

As per some estimates, the dialects of every two regions changes within a few kilometers. Even in the same workplace, different employees will have different linguistic skills. As a result, the communication channels that span across the organization would be affected by this.

Thus keeping this barrier in mind, different considerations have to be made for different employees. Some of them are very proficient in a certain language and others will be ok with these languages.
Psychological Barriers
There are various mental and psychological issues that may be barriers to effective communication. Some people have stage fear, speech disorders, phobia, depression etc. All of these conditions are very difficult to manage sometimes and will most certainly limit the ease of communication.

Emotional Barriers

The emotional IQ of a person determines the ease and comfort with which they can communicate. A person who is emotionally mature will be able to communicate effectively. On the other hand, people who let their emotions take over will face certain difficulties.

A perfect mixture of emotions and facts is necessary for effective communication. Emotions like anger, frustration, humour, can blur the decision-making capacities of a person and thus limit the effectiveness of their communication.

Physical Barriers to Communication

They are the most obvious barriers to effective communication. These barriers are mostly easily removable in principle at least. They include barriers like noise, closed doors, faulty equipment used for communication, closed cabins, etc. Sometimes, in a large office, the physical separation between various employees combined with faulty equipment may result in severe barriers to effective communication.

Cultural Barriers of Communication

As the world is getting more and more globalized, any large office may have people from several parts of the world. Different cultures have a different meaning for several basic values of society. Dressing, Religions or lack of them, food, drinks, pets, and the general behaviour will change drastically from one culture to another.

Hence it is a must that we must take these different cultures into account while communication. This is what we call being culturally appropriate. In many multinational companies, special courses are offered at the orientation stages that let people know about other cultures and how to be courteous and tolerant of others.

Organisational Structure Barriers

As we saw there are many methods of communication at an organizational level. Each of these methods has its own problems and constraints that may become barriers to effective communication. Most of these barriers arise because of misinformation or lack of appropriate transparency available to the employees.

Attitude Barriers

Certain people like to be left alone. They are the introverts or just people who are not very social. Others like to be social or sometimes extra clingy! Both these cases could become a barrier to communication. Some people have attitude issues, like huge ego and inconsiderate behaviours.

These employees can cause severe strains in the communication channels that they are present in. Certain personality traits like shyness, anger, social anxiety may be removable through courses and proper training. However, problems like egocentric behaviour and selfishness may not be correctable.

Perception Barriers

Different people perceive the same things differently. This is a fact which we must consider during the communication process. Knowledge of the perception levels of the audience is crucial to effective communication. All the messages or communique must be easy and clear. There shouldn’t be any room for a diversified interpretational set.

Physiological Barriers

Certain disorders or diseases or other limitations could also prevent effective communication between the various channels of an organization. The shrillness of voice, dyslexia, etc are some examples of physiological barriers to effective communication. However, these are not crucial because they can easily be compensated and removed.

Technological Barriers & Socio-religious Barriers

Other barriers include the technological barriers. The technology is developing fast and as a result, it becomes difficult to keep up with the newest developments. Hence sometimes the technological advance may become a barrier. In addition to this, the cost of technology is sometimes very high.

Most of the organizations will not be able to afford a decent tech for the purpose of communication. Hence, this becomes a very crucial barrier. Other barriers are socio-religious barriers. In a patriarchal society, a woman or a transgender may face many difficulties and barriers while communicating.

Solved Examples on Barriers of Communication

Q1: What do you mean by a barrier to communication? List all the important Barriers to effective communication?

Answer: Any parameter that limits the purpose or channel of communication between the transmitter and the receiver is a barrier to communication. A communication barrier may limit or reduce the ease at which we communicate and hence the name barrier. Although the barriers to effective communication may be different for different situations, the following are some of the main barriers:

  • Linguistic Barriers
  • Psychological Barriers
  • Emotional Barriers
  • Physical Barriers
  • Cultural Barriers
  • Organisational Structure Barriers
  • Attitude Barriers
  • Perception Barriers
  • Physiological Barriers
  • Technological barriers
  • Socio-religious barriers

This concludes our discussion on the topic – barriers of communication.

Characteristics of Effective Communication: Emotions, Focus and Control

Effective Communication is the bloodline of any business. A slight misunderstanding can lead to a financial disaster. An organization relies on effective communication to sustain and maintain itself. Here we will see the various characteristics of effective communication.

The Characteristics of Effective Communication

Several researchers have stressed the importance of communicating one’s feelings effectively. This is as important to a social structure as breathing is to life. Hence we have to understand the various properties or characteristics that must qualify our communicating activities and processes. A varied set of skills are thus essential. Here we will list them.

Clear

The primary character of any spoken or written form of transmission of information should be to state the message clearly. There are several ways to do it. For example, the sentences should be short and simple. We should prefer the active voice over the passive voice. If we have to convey several messages then it is convenient to state it in separate bulleted points.

Concise

Time is an essential parameter in communications. The normal attention span is just a few minutes long. If you present your message in a clear and beautiful manner which is very long, the crux of the report or the message may be lost altogether. Long and lengthy communique is boring and avoided by most. So to summarize this point, effective communication has to be concise.

Concrete

Whatever message or information or data is present in your communique, it should be well-footed. Your arguments should have data that suitably backs it up. A tangible argument is always easy to understand.

Coherent

Suppose you are telling a story. What if you start from the middle part? Or what if you state the end in the beginning? Of course, the whole point of narrating a story would become vain. Similarly, when you are presenting your communique, you need to be coherent. You need to understand what goes where and what comes when.

The key to a coherent write-up is a well-planned, logical and sequential presentation of the information. The main ideas should be differentiable and they should follow each other in a way that is derivative of some rules.

Courteous

We know that all business communications should have some degree of formal flavor. The presenter should try his best to be honest, respectful, considerate, open and polite with the receiver of the information. The message when supplemented with proper care and kindness will definitely find an audience.

A rude presenter will have no audience even if the message he delivers is perfectly effective and important. Offensive words can put off certain factions of people. You should take ample care to not be racist or misogynist or any other bad influence on the audience. Even while using humor you should be very careful that you are not being inconsiderate or cruel to anyone.

Listening For Understanding

Communication doesn’t only mean presenting or generating information. It also means to receive it. In fact, an effective communication channel must have a transducer and a receiver. Half of the faculty for the process is thus a receiver. For the purpose of effective communication, a receiver should have certain qualifiers.

He should be able to detect the message which may be hidden deep within the chatter or gibberish. The good listener observes not only what a person speaks of but also the non-verbal cues. This is what helps in the complete and full understanding of the transmission.

A good listener will have some qualities. He would be emotionally intelligent and mature, objective in approach and practical. His understanding of the message should not be influenced by his own personal judgments of either the topic or the presenter. A good listener should be able to filter through all of these limitations and reach the actual message that the presenter is relaying before them.

Focus And Attention

Multitasking is the name of the game these days. However, while receiving or transmitting information, a certain level of focus is essential. Suppose you are in a star communication channel and are relaying information to multiple sources. You are replying to emails, sending emails, and answering phones.

Any misplaced communication could be disastrous. Also, while receiving information, if you lose focus, you may miss the important parts of the message altogether. Hence we say that focus and attention are very crucial for effective communication.

Emotional Awareness And Control

This is the last but certainly the most important aspect of effective communication. Emotions will guide you through any situation of life. Whether you accept a message with the intention it is relaying with or not, depends on the emotional maturity and your emotional intelligence. Both while relaying information or while receiving it, you have to take extreme care in keeping yourself in an emotionally stable state.

Solved Examples for You

Q1: What are the various characteristics of effective communication?

Answer: The following is a summary of all the characteristics of effective communication:

  • Clear
  • Concise
  • Concrete
  • Coherent
  • Complete
  • Courteous
  • Listening for Understanding
  • Focus and Attention
  • Emotional Awareness and Control

Communication Network: Patterns of Communication Flow with Examples

A communication Network is a collection of methods that users employ to pass on valuable information. The communication network is the sum of all the means and methods that an organization employs to communicate. Let us learn more about the Communication Network below.

Communication Network

By this, we mean the patterns and methods that the members of an organization employ to pass on information to the desired nodes in the organization. Networks are ergonomic. They help managers to track and create different types of communication flow as per the requirement.

Different ventures will require a specific structure for their communication networks. As a result, there may exist several different patterns as we shall discuss below.

Communication Network

Networks in Communication

Following are the most common networks in various organizations:

Vertical Network

This is a kind of a formal network. So consequently it is suitable for communications between different levels of employees. For example a higher ranking manager and a lower-ranking official.

This network thus enables two-way communication wherein immediate feedback is a common practice. This is a direct link between the employees and their subordinates and thus the chance of miscommunication is very low.

Circuit Network

In this type of network, two people or nodes will communicate with each other continuously. One of the nodes will produce messages and the other a feedback to the messages. The communication is thus two people communicating with each other, sending messages and feedbacks and thus forming a loop or a circuit.

This circuit or loop is what we call the circuit network. Usually, the two people that are interacting via this form of networks are of the same hierarchical level. This is different from the Vertical Network where the feedback and the messages are two-way communication.

Chain Network

A company or the organization is like a platoon. It has its leader at the front and the troop following right behind. For communications that are for the more than two nodes or more than two levels of employees, we can employ this method of communication.

Here the network traces a chain of command. This may start with a senior or a high ranking employee or a manager, who hands it over to the next level and so on. For example, the communication starts from a C E O and trickles down to the employees of a lower level.

The C E O may pass the information on to the managers who will pass it to the lower levels without alteration. Notice that the message which generates at the higher level has to trickle down to the lowest level without any alteration.

Since in this communication, a large number of nodes or repetition points may be involved, there is a great chance of error and miscommunication.

In addition to this, the chain network is very time consuming and often results in messages that are not understood by at least some people in the chain.

Wheel and Spoke Network

This is like the vertical communication but with the difference that there are several people communicating with a central figure or person. Here a single controlling authority is involved in a vertical type communication and radiates instructions and orders to several of his employees who are working under him.

This is an improvement over the chain communication and provides a direct link between the top command and the employees. However, due to the nature of this communication, it constitutes a form of the micro-management and will thus be very taxing.

An advantage of the wheel and spoke network is that it relays instructions and orders directly from the highest level to any subordinate levels. There are no middle parties or disruptions to the communication channel.

Due to the micromanaging nature of this type of communication is only suitable for small organizations. Larger businesses will not have the resources to deploy this mechanism.

It should also be kept in mind that this way of communication is very effective and the miscommunication is the least.

Star Network

The star communication network has several participants. Each of these participants enables two-way communication between each of the nodes or people that are participating in the network.

Consider this as a wheel and spoke network that does not have a central focus point. The members of this network are free to communicate. They can exchange data and information with each other without any hurdles or restrictions.

Which type of networks to be used and which type of networks are suitable, depends on the size of the organization and the nature of the projects.

The basis of good communication is a loyal and sincere transmission and reception of information. This will also require a well-defined set of processes and policies in the organization.

What are the different types of Communication? Learn here in detail.

Solved Examples on Communication Network

Q1: Which of the network communication(s) is (are) a natural means of communication for a large organization? Give reasons.

Answer: As we have seen that in a large organization, the constraint is that of the micromanagement and miscommunication. We can avoid both in the star network. Thus a larger organization will naturally tend to optimize communication through the star network.

Types of Communication: Basics of Communication Skills with Examples

Types of Communication

In Business, clear communication is very essential. Improper communication skills may lead to confusing or incomplete instructions, data or other information to pass to the intended audience. Hence it is very essential to develop strong communication skills. Let us learn more.

Communication Skills

A deep understanding of the process of communication and communication skills is essential. It is vital to the success of any individual in any business. Here we shall see some of the many types of communication.

Communication styles change from person to person. During the process of communication, a person may invoke several channels or modes or methods to convey a message. But, the process of communication doesn’t only depend on the source producing or relaying information.

It also equally depends on the communication method and the manner in which the receiver understands the message. Let us first understand the method by which we communicate.

Communication Skills

Communication begins at a given point. The first step is the generation of information. The second step is to put this information or data into a medium for transmission towards the intended audience.

During this process, the initiator of the communication must pay extra attention to the nature of the information. The communication skills will determine the effectiveness of their communication. Let us now see what are the different types of communication below.

The Broad Categories of Communication

On the basis of the communication channels, types of communications are:

  • Verbal
  • Non-Verbal
  • Visual

Verbal

This involves the use of language and words for the purpose of passing on the intended message. In general terms, Verbal Communication means communication in the form of spoken words only. But, in the context of types of communication, verbal communication can be in the spoken or the written form. Thus, the verbal form may be oral or written as discussed below.

  • Written Communication: This kind of communication involves any kind of exchange of information in the written form. For example, e-mails, texts, letters, reports, SMS, posts on social media platforms, documents, handbooks, posters, flyers, etc.
  • Oral Communication: This is the communication which employs the spoken word, either direct or indirect as a communication channel. This verbal communication could be made on a channel that passes information in only one form i.e. sound.
    You could converse either face to face, or over the phone, or via voice notes or chat rooms, etc. It all comes under the oral communication. This form of communication is an effective form.

Non-Verbal Communication

In this type of communication, messages are relayed without the transmission of words. The messages here are wordless messages. This form of communication mainly aides verbal communication. It supplements it with gestures, body language, symbols, and expressions.

Through these, one may communicate one’s mood, or opinion or even show a reaction to the messages that are relaying. One’s non-verbal actions often set the tone for the dialogue. You can control and guide the communication if you control and guide the non-verbal communication. Some of the modes of non-verbal communication are:

Physical Non-verbal Communication

This is the sum total of the physically observable. For instance, hand gestures, body language, facial expressions, the tone of one’s voice, posture, stance, touch, gaze, and others. Several researchers have revealed that physical nonverbal communication constitutes about 55% of our daily communications.

These are subtle signals that are picked up as part of our biological wiring. For example, if you rest your head on your palms, it will mean that you are very disappointed or angry. Similarly, other subtle hints will convey your reaction to the presenter or your audience’s reaction to you.

Paralanguage

This is the art of reading between the lines. The main kind of such communication is done with the tone of one’s voice. This kind of communication amounts to almost 38% of all the communication that we do every day. Along with the tone of voice, the style of speaking, voice quality, stress, emotions, or intonation serves the purpose of communication. And, these aspects are not verbal.

Aesthetic Communication

Art is an important means of communication. Through the paintings or other forms of art, an artist can covey the strongest messages. Several times in the history of the world, art has been used as an effective form of nonverbal communication.

Appearance

The first impression sets the tone. People will react to your appearance and this is a fact of life. Your clothes, the color of the fabrics, etc. all determine the reaction of your audience.

Visual Communication

This is communication through visual aids like drawings, placards, presentations, and illustrations, etc.

Formal & Informal Communication

Apart from the above types, we have formal & informal types of communication. Formal communication is of following types:

Vertical: The information or data flows up and down the organizational structure.
Horizontal: This is the communication between two similar levels of the organization.
Diagonal: This is the communication across the cross-functional levels of employees from various departments of the organization.
The other form is the informal or casual communication which is the general communication between random people of the organizations.

Solved Examples For You

Q: Of the two forms of communication, i.e. verbal and nonverbal, which constitutes for the larger flow of information?

Answer: One might think that verbal communication is the dominant form of communication. But as per researchers, 55% of the communication is nonverbal. So, the nonverbal form of communication contributes more to the flow of information.

Communication: Types, Networks, Characteristics, Barriers and Skills

Communication for the survival of a society is as vital as oxygen for a living being’s survival. Furthermore, communication is a part of any process that’s carried out in a community for example business. Any business organization consists of people. And these people need to communicate either among themselves or with the people from outside of their organization. Thus, it becomes extremely important to learn all the fundamentals of a communication process.