Sample Quizzes For Preparation: Costing Applications

AS Level Accounting – 2.2.1 Costing Applications: Quiz

1. Which of the following is a feature of job costing?
A. Costs are calculated for large identical units
B. Overheads are ignored
C. Costs are assigned to specific individual orders
D. Profit is not considered

2. Which costing method is most appropriate for car repair services?
A. Unit costing
B. Job costing
C. Batch costing
D. Absorption costing

3. In unit costing, the cost per unit is calculated by:
A. Dividing direct labour by number of units
B. Multiplying total cost by number of units
C. Dividing total cost of production by number of units
D. Adding fixed costs only

4. In batch costing, what is the cost per unit if a batch of 400 units costs $3200?
A. $8
B. $80
C. $4
D. $12

5. Which of the following is included in both absorption and marginal costing?
A. Fixed overheads
B. Sales overheads
C. Direct materials
D. Interest on loans

6. In marginal costing, which costs are not included in inventory valuation?
A. Variable costs
B. Direct labour
C. Fixed production overheads
D. Selling expenses

7. Which formula represents the contribution per unit?
A. Sales – Total Costs
B. Sales – Fixed Costs
C. Sales – Variable Costs
D. Profit – Fixed Costs

8. Which method treats fixed overheads as period costs?
A. Absorption costing
B. Marginal costing
C. Job costing
D. Unit costing

9. A batch of 50 units costs $5000. What is the cost per unit?
A. $100
B. $50
C. $250
D. $10

10. In absorption costing, fixed overheads are:
A. Ignored completely
B. Charged only in profit statement
C. Included in unit cost
D. Treated as direct expenses

11. Which costing method provides the most accurate reflection of total cost per unit for external financial reporting?
A. Marginal costing
B. Absorption costing
C. Contribution costing
D. Cash costing

12. Which of the following is NOT typically a direct cost?
A. Raw material
B. Wages for factory workers
C. Electricity in the factory
D. Paint used in manufacturing

13. What does the term ‘prime cost’ include?
A. Fixed and variable overheads
B. Direct materials, direct labour, direct expenses
C. Selling and administrative costs
D. Only direct materials

14. Which is a key advantage of marginal costing?
A. It simplifies inventory valuation
B. It hides contribution margin
C. It is used in published accounts
D. It includes all costs

15. What is the main limitation of absorption costing?
A. It excludes fixed costs
B. It requires less data
C. It does not show contribution margin
D. It is unsuitable for external reporting

16. In job costing, each job is treated as:
A. A variable cost
B. An indirect cost
C. A cost unit
D. A contribution margin

17. Which method is best for costing identical units produced in mass quantity?
A. Job costing
B. Batch costing
C. Unit costing
D. Marginal costing

18. A batch of 200 units is made at a total cost of $600. What is the cost per unit?
A. $3
B. $1.5
C. $30
D. $2

19. In marginal costing, how is profit calculated?
A. Contribution – Fixed Costs
B. Revenue – Direct Costs
C. Total Cost – Variable Cost
D. Sales – Total Cost

20. Why is absorption costing accepted under financial reporting standards?
A. It excludes overheads
B. It values stock at full cost
C. It is simpler
D. It uses only direct labour

21. Which document is central in job costing?
A. Invoice
B. Bank statement
C. Job cost sheet
D. Sales ledger

22. Fixed overhead absorption rate (OAR) is calculated as:
A. Fixed overheads / Actual activity level
B. Fixed overheads / Budgeted activity level
C. Fixed overheads / Direct costs
D. Fixed overheads / Number of jobs

23. Which of the following affects contribution margin?
A. Fixed overheads
B. Selling price
C. Depreciation
D. Opening stock

24. Marginal costing is most useful for:
A. Historical reporting
B. Inventory valuation
C. Short-term decision-making
D. Legal compliance

25. In service businesses, the cost unit could be:
A. Per machine
B. Per sale
C. Per consultation
D. Per invoice

26. Which of the following is a limitation of job costing?
A. Unsuitable for mass production
B. Doesn’t allow profitability tracking
C. Cannot include labour
D. Fixed overheads are not absorbed

27. What does a costing statement under absorption costing include?
A. Contribution margin
B. Fixed costs only
C. Prime cost, factory overheads, admin cost
D. Only job-specific costs

28. Which of the following will appear in both job costing and batch costing?
A. Cost per machine hour
B. Labour rate variance
C. Material usage rate
D. Overhead allocation

29. Which principle is used to allocate fixed overheads in absorption costing?
A. Historical cost
B. Matching principle
C. Prudence
D. FIFO

30. Which of the following would be least likely found in a service business’s cost unit?
A. Consultation
B. Surgery
C. Invoice
D. Tonnes produced

Marking Key and Explanations

C – Job costing assigns costs to specific individual jobs.
B – Car repair services are unique per client – ideal for job costing.
C – Total cost / units = cost per unit.
A – $3200 ÷ 400 = $8 per unit.
C – Direct materials are always included in both costing methods.
C – Marginal costing excludes fixed production overheads from inventory.
C – Contribution = Sales – Variable Costs.
B – Marginal costing treats fixed overheads as period cost.
A – $5000 ÷ 50 = $100 per unit.
C – In absorption costing, fixed overheads are included in cost per unit.
B – Absorption costing complies with GAAP/IFRS for external reporting.
C – Electricity is often an indirect cost unless traceable.
B – Prime cost = direct materials + direct labour + direct expenses.
A – Marginal costing simplifies inventory and focuses on contribution.
C – Absorption costing hides contribution, affecting analysis.
C – A job is treated as a separate cost unit.
C – Unit costing is used for identical units.
A – $600 ÷ 200 = $3 per unit.
A – Profit = Contribution – Fixed Costs.
B – It provides a full-cost valuation, including fixed costs.
C – Job cost sheet tracks all expenses for the job.
B – OAR uses budgeted values, not actual.
B – Selling price affects how much contribution is generated per unit.
C – Marginal costing is valuable in short-run decisions.
C – Services like consultations are costed per client.
A – Job costing isn’t suitable for mass identical production.
C – Absorption costing includes multiple cost categories.
D – Overhead allocation is done in both methods.
B – Matching principle justifies including fixed costs in production.
D – ‘Tonnes produced’ is a manufacturing metric, not service.

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