Q.1 Which of the following is NOT an element of cost?
Material
Labour
Overheads
Profit
Explanation - The three main elements of cost are Material, Labour, and Overheads. Profit is not an element of cost but a result after costs are deducted from revenue.
Correct answer is: Profit
Q.2 Direct material cost is classified under which element of cost?
Material
Labour
Overheads
Administrative Expenses
Explanation - Direct material cost is part of the Material element, which includes all raw materials directly identified with production.
Correct answer is: Material
Q.3 Which of the following is an example of direct labour?
Wages of machine operators
Salary of factory manager
Depreciation on office building
Audit fees
Explanation - Direct labour refers to wages paid to workers directly engaged in production, such as machine operators.
Correct answer is: Wages of machine operators
Q.4 Factory rent is classified under which element of cost?
Direct Material
Direct Labour
Overheads
Prime Cost
Explanation - Factory rent is an indirect expense that cannot be traced directly to a product, so it is classified as overhead.
Correct answer is: Overheads
Q.5 The sum of direct material, direct labour, and direct expenses is known as:
Prime Cost
Factory Cost
Total Cost
Overhead Cost
Explanation - Prime cost consists of direct materials, direct labour, and direct expenses directly attributable to production.
Correct answer is: Prime Cost
Q.6 Indirect labour is included in which element of cost?
Material
Labour
Overheads
Prime Cost
Explanation - Indirect labour, such as salaries of supervisors, is part of overheads, not direct labour.
Correct answer is: Overheads
Q.7 Power consumed in running machines is classified as:
Direct Labour
Factory Overhead
Direct Material
Administrative Overhead
Explanation - Power cost cannot be traced directly to a specific product and is therefore classified as a factory overhead.
Correct answer is: Factory Overhead
Q.8 Which of the following is NOT part of prime cost?
Direct Material
Direct Labour
Direct Expenses
Factory Overheads
Explanation - Factory overheads are indirect costs, while prime cost includes only direct materials, direct labour, and direct expenses.
Correct answer is: Factory Overheads
Q.9 Which cost element includes depreciation on factory equipment?
Direct Material
Direct Labour
Overheads
Direct Expenses
Explanation - Depreciation on factory equipment is an indirect expense, so it falls under overheads.
Correct answer is: Overheads
Q.10 The wages of a security guard in a factory are considered as:
Direct Labour
Indirect Labour
Direct Expenses
Prime Cost
Explanation - A security guard does not directly contribute to production, so their wages are classified as indirect labour.
Correct answer is: Indirect Labour
Q.11 Carriage inward is part of which element of cost?
Direct Material
Direct Labour
Overheads
Selling Expenses
Explanation - Carriage inward is included in the cost of materials and forms part of direct material cost.
Correct answer is: Direct Material
Q.12 Which one of the following is NOT a direct expense?
Hire of special machinery for a job
Cost of patents used for production
Factory supervisor salary
Royalty paid on units produced
Explanation - Supervisor salary is an overhead, not a direct expense. Direct expenses are directly traceable to a product.
Correct answer is: Factory supervisor salary
Q.13 Which element of cost does the salary of a sales manager fall under?
Overheads
Direct Labour
Selling and Distribution Overheads
Administrative Overheads
Explanation - The sales manager’s salary is related to selling activities and classified as selling and distribution overheads.
Correct answer is: Selling and Distribution Overheads
Q.14 The cost of screws used in assembling furniture is classified as:
Direct Material
Indirect Material
Direct Labour
Prime Cost
Explanation - Screws are minor items that cannot be traced economically to a specific product, hence classified as indirect material.
Correct answer is: Indirect Material
Q.15 Which of the following best defines 'Overheads'?
Costs directly identified with a product
Indirect costs not directly traceable to a product
Only administrative expenses
Only selling and distribution expenses
Explanation - Overheads consist of indirect costs, including indirect material, labour, and expenses.
Correct answer is: Indirect costs not directly traceable to a product
Q.16 The salary of a production supervisor is classified as:
Direct Labour
Indirect Labour
Administrative Overhead
Selling Overhead
Explanation - Supervisors do not directly produce goods but oversee production, so their salary is indirect labour under overheads.
Correct answer is: Indirect Labour
Q.17 Which of the following is an example of administrative overhead?
Office rent
Factory lighting
Sales commission
Direct material cost
Explanation - Administrative overhead includes expenses related to general management, such as office rent.
Correct answer is: Office rent
Q.18 Royalty paid based on production is classified as:
Direct Expense
Indirect Expense
Overhead
Selling Expense
Explanation - Royalty based on units produced is directly attributable to production, so it is a direct expense.
Correct answer is: Direct Expense
Q.19 Lighting expenses of the factory are classified as:
Direct Expense
Factory Overhead
Administrative Overhead
Selling Overhead
Explanation - Factory lighting cannot be traced directly to a unit of production and is included in factory overheads.
Correct answer is: Factory Overhead
Q.20 Which element of cost includes consumable stores used in the factory?
Direct Material
Indirect Material
Direct Labour
Direct Expense
Explanation - Consumable stores are not easily traceable to a product, so they are treated as indirect material.
Correct answer is: Indirect Material
Q.21 Wages paid to cleaners in the factory are classified as:
Direct Labour
Indirect Labour
Direct Expense
Prime Cost
Explanation - Cleaners do not contribute directly to production, so their wages are considered indirect labour.
Correct answer is: Indirect Labour
Q.22 Selling commission is classified as:
Administrative Overhead
Selling and Distribution Overhead
Factory Overhead
Direct Expense
Explanation - Selling commission is directly related to sales and is included in selling and distribution overheads.
Correct answer is: Selling and Distribution Overhead
Q.23 Which element of cost includes packing materials used for delivery?
Factory Overhead
Selling and Distribution Overhead
Direct Material
Administrative Overhead
Explanation - Packing materials for delivery are part of selling and distribution costs, not production costs.
Correct answer is: Selling and Distribution Overhead
Q.24 The cost of oil used for machine maintenance is classified as:
Direct Material
Indirect Material
Direct Expense
Prime Cost
Explanation - Lubricating oil is a consumable item not traced directly to a product, so it is classified as indirect material.
Correct answer is: Indirect Material
Q.25 Which one of the following is part of the 'Labour' element of cost?
Wages of machine operators
Office rent
Depreciation of machinery
Carriage inward
Explanation - Labour element includes both direct and indirect wages; machine operators’ wages are direct labour.
Correct answer is: Wages of machine operators