ICAN KNOWLEDGE MANAGEMENT INFORMATION
WEEK 2 QUESTIONS
TOPIC: Cost and Cost Behavior
MULTIPLE CHOICE QUESTIONS
1. Semi fixed costs contain
A. Product and period costs
B. Avoidable and unavoidable costs
C. Controllable and uncontrollable costs
D. Fixed and variable costs
E. Direct and avoidable costs
2. Odeku Ltd manufactures a product known as ARB. The total cost of making 8,000 units is N40,000. The total cost of making 40,000
units is N80,000. Fixed cost remains unchanged
What is variable cost per unit
A. N0.80
B. N 1.20
C. N 1.25
D. N 1.80
E. N 2.00
3. Which ONE of the following is used for differentiating cost behaviors?
A. Budgeting and Standard Costing
B. Job costing
C. Standard Marginal Costing
D. Process costing
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E. Marginal costing
4. Which of the following is NOT a functional classification of cost?
A. Selling and distribution cost
B. Semi-fixed cost
C. Research and development cost
D. Production cost
E. Administration cost
5. In a cost accounting system, prime cost is
A. Indirect costs in operating a product
B. Production overhead cost
C. All costs incurred in the production of an item
D. Material cost of a product
E. Total of direct costs
6. A supervisor‟s salary of N200,000 per month in a factory in Akwa Ibom is an example of a
A. Mixed cost
B. Free trade zone cost
C. Step cost
D. Variable cost
E. Fixed cost
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7. An equipment lease that specifies a payment of N100,000 per month plus N100 per machine hour used is an example of a
A. Current cost
B. Mixed cost
C. Total cost
D. Fixed cost
E. Direct cost
8. Classification of costs can be made on the following bases EXCEPT
A. Business function
B. Assignment to a cost object
C. Behavior pattern
D. Assets or expenses
E. Organization.
9. The amount of expenditure incurred on, or attributable to, a special thing or activity is termed
A. Price
B. Value
C. Expenses
D. Cost
E. Costing
10. A production or service location, function or activity for which cost and revenue can be ascertained is
termed…………………… Centre.
A. Investment
B. Revenue
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C. Profit
D. Business
E. Cost
11. Which of the following is NOT a functional classification of overhead?
A. Variable overhead
B. Production overhead
C. Administration overhead
D. Distribution overhead
E. Selling overhead
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STRUCTURED
QUESTION 1
a. Costs are classified variously depending on the objectives, State FOUR classification of costs, according to behavior. (2 Marks)
b. ANDROID Limited records in its books an amount of Le504,750 with the heading “GENERAL”. However, this actually includes the following
expenses:
N
1 Trade Fair Exhibition
78,500
2 Directors‟ Fees
65,000
3 Office Personnel Overtime
35,250
4 Salesmen Commission
13,800
5 Delivery Van Repairs
8,350
6 Store Rent
90,000
7 Donations to Boys Scout
11,000
8 Commission on Turnover
2,850
9 Sales Promotion
15,130
10 Carriage Outwards
5,060
11 Discount Allowed
4,550
12 Doubtful Debts
15,000
13 Business Journal
7,250
14 Computer Ink
3,200
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15 Penalties and Fines
1,850
16 Lighting of Store
3,140
17 Directors‟ Drawings
18 Directors‟ Foreign Trips
15,000
100,000
19 Interest on Loan
10,220
20 Fuelling of Staff Bus
19,600
You are required to: Prepare from the data above a statement showing, in separate totals:
i. Administration expenses (4½ Marks)
ii. Distribution expenses (1½ Marks)
iii. Selling expenses (2½ Marks)
iv. Expenses not considered for Cost Account. (2 Marks)
(Total 12½ Marks)
QUESTION 2
In which of the following types of company would fuel costs be treated as a direct material cost?
1 Manufacturing Company
2 Road haulage (road transport) company
3 Construction company
4 Motorway fuel station
QUESTION 3
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A company uses three categories of functional cost in its cost accounting system. These are manufacturing costs, administration
costs and sales and distribution costs.
Identify the functional cost category for each of the following costs:
1 Salary of the chief accountant
2 Telephone charges
3 Cost of office cleaning services
4 Cost of warehouse staff
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