MCQ on Cost Concept

Cost concept demands all assets to be recorded in the books of accounts at the price at which they were bought. This involves the cost incurred for transportation, installation, and acquisition. The cost concept is a traditional method concerning the asset is paid on the date of purchase and does not change year after year.

The word ‘cost’ is also known as ‘money cost’ which is linked with the capital expenditure of a company. Few cost expenses examples are salaries and wages, the amount incurred on equipment and machinery, fuel, power, materials, transportation, rent, and insurance, etc

Given below are essential MCQs on the Cost concept to analyze your understanding of the topic. The answers are also given for your reference.

Cost concept MCQs

1. What is the basic concept of cost concept?

A) Cost ascertainment.

B) Tax compliance.

C) Financial audit

D) Profit analysis

Answer: A

2. Process costing is appropriate for which firm?

A) Bricklaying firms

B) Transport firms

C) Hospitals

D) Oil refining firms

Answer: D

3. In how many ways cost classification can be done?

A) Three ways

B) Two ways

C) Four ways

D) Many ways

Answer: D

4. Which cost is incurred even if the company is closed?

A) Sunk cost

B) Historical cost

C) Shutdown cost

D) Imputed cost

Answer: C

5. Direct expenses are also known as

A) Overhead expenses

B) Sundry expenses

C) Chargeable expenses

D) Major expenses

Answer: C

6. Warehouse rent is a part of which cost?

A) Production cost

B) Distribution cost

C) Prime cost

D) Factory cost

Answer: B

7. What is tender?

A) Estimation of cost

B) Estimation of profit

C) Estimation of units

D) Estimation of the selling price

Answer: D

8. A total of all the direct costs is known as

A) Cost of production

B) Cost of sales

C) Prime cost

D) Works cost

Answer: C

9. What item is not included in cost accounting?

A) Product costing

B) Profit-sharing

C) Planning

D) Controlling

Answer: B

10. Toy manufacturing companies use what type of costing?

A) Multiple costing

B) Process costing

C) Unit costing

D) Batch costing

Answer: D

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