MI Quick Revision Quiz

Which of the following best describes a "cost object"?

• A factor which causes a change in the cost of an activity.

• Any item or activity for which costs are accumulated and measured.

• The total of all direct costs.

• A cost that remains constant irrespective of the level of activity.

A stepped fixed cost:

• Increases proportionally with the level of activity.

• Remains constant per unit of activity.

• Is fixed within certain activity levels, but increases to a new higher fixed level when activity exceeds a certain point.

• Is a cost that has both fixed and variable components.

Prime cost is calculated as:

• Direct materials + Direct labour

• Direct materials + Direct labour + Direct expenses

• Direct materials + Direct labour + Production overheads

• Total variable costs + Fixed costs

Which of the following inventory valuation methods would typically result in the highest profit during a period of rising prices?

• LIFO (Last-In, First-Out)

• FIFO (First-In, First-Out)

• Weighted Average Cost (AVCO) - Periodic

• Standard Cost

Idle time for direct workers is normally treated as:

• A direct labour cost.

• A production overhead.

• An administrative overhead.

• A selling and distribution overhead.

A small engineering company makes bespoke tools for customers. The cost of a special cutting tool purchased specifically for one customer's job, which will have no further use, would be classified as:

• Indirect material.

• Production overhead.

• Direct expense.

• Administrative expense.

The process of charging whole items of cost to cost centres or cost units is known as:

• Cost apportionment.

• Cost allocation.

• Overhead absorption.

• Cost analysis.

If actual overheads incurred are less than the overheads absorbed, this results in:

• Under-absorption of overheads.

• Over-absorption of overheads.

• A correct absorption of overheads.

• An increase in actual overheads.

A company uses a machine hour basis for absorbing production overheads. Budgeted production overheads are £100,000 and budgeted machine hours are 20,000. Actual machine hours worked were 19,000 and actual overheads were £98,000. The predetermined overhead absorption rate is:

• £5.00 per machine hour

• £5.16 per machine hour

• £5.26 per machine hour

• £4.90 per machine hour

Under marginal costing, fixed production overheads are:

• Included in the cost of inventory.

• Treated as a period cost and written off in the income statement.

• Absorbed into units of production using a predetermined rate.

• Ignored for decision-making purposes.