The cost concept demands all assets to be recorded in the books of accounts of the prices at which they were bought. This involves the cost incurred for transportation, installation, and acquisition. The cost concept is a traditional method concerning that the asset is paid on the date of purchase and is not changed year after year.
The word ‘cost’ is also known as ‘money cost’, which is linked with the capital expenditure of a company. Few examples of cost expenses are salaries and wages, the amount incurred on equipment and machinery, fuel, power, materials, transportation, rent, insurance, etc.
Given are some essential MCQs on the cost concept to analyse your understanding of the topic. The answers are also given for your reference.
MCQs on Cost concept
Q.1 What is the basic premise of cost concept?
A) Cost ascertainment
B) Tax compliance
C) Financial audit
D) Profit analysis
Answer: A
Q.2 For which kind of firm is process costing appropriate?
A) Bricklaying firms
B) Transport firms
C) Hospitals
D) Oil refining firms
Answer: D
Q.3 In how many ways can cost classification be done?
A) Three ways
B) Two ways
C) Four ways
D) Many ways
Answer: D
Q.4 Which cost is incurred even if the company is closed?
A) Sunk cost
B) Historical cost
C) Shut-down cost
D) Imputed cost
Answer: C
Q.5 What are direct expenses also known as?
A) Overhead expenses
B) Sundry expenses
C) Chargeable expenses
D) Major expenses
Answer: C
Q.6 Warehouse rent is a part of which cost?
A) Production cost
B) Distribution cost
C) Prime cost
D) Factory cost
Answer: B
Q.7 What is tender?
A) Estimation of cost
B) Estimation of profit
C) Estimation of units
D) Estimation of the selling price
Answer: D
Q.8 What is the total of all direct costs known as?
A) Cost of production
B) Cost of sales
C) Prime cost
D) Works cost
Answer: C
Q.9 What item is not included in cost accounting?
A) Product costing
B) Profit sharing
C) Planning
D) Controlling
Answer: B
Q.10 Which type of costing do toy-manufacturing companies use?
A) Multiple costing
B) Process costing
C) Unit costing
D) Batch costing
Answer: D
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Nice questions and answers