Costing MCQ Questions and Solutions with Explanations | Commerce

Direct labour means labour which can be conveniently associated with aparticular cost unit. Direct Labour cost consists of wages paid to workers directly engaged in manufacturing or handling a product, job or process.

The type of process loss that should not affect the cost of inventory value is abnormal loss. Generally, an abnormal loss occurs because of negligence, carelessness, theft, mischief, fraud of employees, or inefficiency.

If the actual loss is more than the estimated normal loss, then it is abnormal loss. Abnormal loss is the extra loss resulting when actual loss is greater than normal or expected loss, and it is given a cost.

Calculation of factory cost = (Direct material + Wages + Direct expenses) + Factory overhead rate
= (25000 + 15000 + 5000) + 20%
= 45000 + (20/100 × 45000)
= 45000 + 9000 = Rs. 54000.

Overvaluation of opening stock in financial accounting results decreases financial accounts profit. Overvalued opening inventory means understated profit and and undervalued opening inventory means high profit.

Under absorption of overhead expenses in cost accounting refers to the allocation of overhead costs to the cost of production. When overhead expenses are absorbed into the cost of production, it results in a higher portion of overhead being included in the cost of goods sold.

This leads to a higher total cost of production, which in turn decreases the per unit cost of production. When the cost of production decreases, the profit margin per unit increases, resulting in an increase in costing profit.

Therefore, the correct option is increase in costing profit.

Cost Audit refers to the verification of cost accounts and check on the adherence to the cost accounting plan. Cost Audit represents the verification of cost accounts and check on the adherence to cost accounting plan.

Direct material is a manufacturing cost. Direct material cost is the cost of the raw materials and components used to create a product.

Cost control is a preventive function because it ascertains the cost before its occurrence.

Operating costing is more suitable for Services industries. Operating costs are expenses associated with the maintenance and administration of a business on a day-to-day basis.