MCQs on Standard Costing

Standard Costing is an integral part of the costing process within an organisation. It is a process that helps compare the revenues and actual cost of producing a good or service with the actual results to measure the variance and understand its reasons.

Below is a list of multiple-choice questions and answers on Standard Costing to help students understand the importance of this process in a company’s overall decision making.

  1. Which of the following is true about Standard Costing?
    1. It is a technique of implementing cost control within the organisation
    2. It helps in planning out business activities within the organisation
    3. Both a and b are incorrect
    4. Both a and b are correct

    2. Answer: a

  2. Which of the following industries is Standard Costing most suited for?
    1. It is suitable for industries that produce standard products
    2. It is suitable for enterprises that are engaged in service activities
    3. It is suitable for industries that produce non-standard products
    4. None of the above

    3. Answer: a

  3. Which of the following is not a demerit of the Standard Costing System?
    1. The traditional cost variances are not tied to any specific product lines
    2. Standard Costing System is much more expensive than other systems
    3. It is usually less expensive than normal or actual costing
    4. All of the above

    4. Answer: c

  4. Which of the following is an advantage of the Standard Costing System?
    1. It helps in promoting and measuring efficiencies within an organisation
    2. It helps to control and reduce the overall costing within an organisation
    3. It helps to fix the selling price for the products manufactured within an organisation
    4. All of the above

    5. Answer: d

  5. Which of the following activities is the Standard Costing System used for?
    1. It is a basis for implementing cost control and fixing the price of products through variance analysis
    2. It helps to ascertain the cost-volume relationship between products manufactured by the business
    3. It helps to establish the breakeven point for the products manufactured by the company
    4. None of the above

    6. Answer: a

  6. Which of the following activities is true about the cost variance under the Standard Costing System?
    1. Cost variance is the difference between the standard cost and the actual cost
    2. Cost variance is the difference between the standard cost and the budgeted cost
    3. Cost variance is the difference between the standard cost and the marginal cost
    4. Cost variance is the difference between the actual cost and the marginal cost

    7. Answer: a

  7. Which of the following activities is true under the Standard Costing System?
    1. The overhead volume variance is always beneficial
    2. The ideal time variance is never favourable
    3. To calculate the overall costs, a company can either use budgetary control or standard costing but not both of those techniques
    4. The overhead efficiency variance plus overhead expense variance is equal to the overhead budget variance for variable overheads

    8. Answer: b

  8. Which of the following statements is true under the Standard Costing System?
    1. Standard cost is a predetermined or estimated cost to either produce a good/service or perform an activity within the organisation
    2. Standard cost is a control technique that helps to report variances by comparing pre-set standards to actual costs to facilitate action
    3. Both a and b are incorrect
    4. Both a and b are correct

    9. Answer: d

  9. Which of the following statements is not a reason for price variance of unfavourable direct materials?
    1. The actual loss is greater than the estimated loss
    2. The actual rate is lower than the standard rate
    3. Both a and b are correct
    4. Both a and b are incorrect

    10. Answer: c

  10. Which of the following is the audit fees a part of under the Standard Costing System?
    1. Audit fees is a part of the administration overhead in an organisation
    2. Audit fees is a part of the distribution overhead in an organisation
    3. Audit fees is a part of the selling overhead in an organisation
    4. Audit fees is a part of the works on cost in an organisation

    11. Answer: a

  11. Which of the following parties are responsible for material price variances?
    1. Production supervisors
    2. Purchasing managers
    3. Production schedules
    4. None of the above

    12. Answer: b

  12. Which of the following is a part of the Standard Costing process within an organisation?
    1. Comparison of standard and actual costing process
    2. Preparation and usage of the standard costing
    3. Analysis of variances
    4. All of the above

    13. Answer: d

  13. The basic standard within the Standard Costing process is established for __________.
    1. A long period
    2. The current period
    3. The short period
    4. An indefinite period

    14. Answer: d

  14. Which of the following is not a part of the cost accounting concept?
    1. Product costing
    2. Profit sharing
    3. Controlling
    4. Planning

    15. Answer: b

  15. The ascertaining of costs after they are incurred is known as _____.
    1. Historical costing
    2. Notional costing
    3. Marginal costing
    4. Sunk cost

    16. Answer: a

  16. Which of the following is the true meaning of timekeeping?
    1. The time spent by a worker in the factory
    2. The time spent by a worker without work
    3. The time spent by a worker off their job
    4. The time spent by a worker on their job

    17. Answer: a

  17. It is not possible to measure labour productivity by comparing ______.
    1. Standard time with actual time
    2. Total output with total wage
    3. Total person-hours with the total output
    4. None of the above

    18. Answer: b

  18. The loss that arises in manufacturing due to the nature of a product is known as ______.
    1. Abnormal loss
    2. Net loss
    3. Normal loss
    4. None of the above

    19. Answer: c

  19. A company maintains a _____ to avoid stopping production due to the shortage of material.
    1. Minimum stock level
    2. Reorder level
    3. Maximum stock level
    4. None of the above

    20. Answer: a

  20. The discarded materials that have zero value are called _______.
    1. Scrap
    2. Waste
    3. Spoilage
    4. None of the above

    21. Answer: b

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