Q.1 Which of the following is considered a factory overhead?
Direct material
Direct labor
Indirect labor
Finished goods
Explanation - Factory overhead includes all indirect costs of production, such as indirect labor, indirect materials, and other manufacturing expenses.
Correct answer is: Indirect labor
Q.2 Which overhead is associated with administrative functions?
Selling overhead
Administrative overhead
Production overhead
Distribution overhead
Explanation - Administrative overhead includes costs incurred in the general administration of the business, not directly linked to production or sales.
Correct answer is: Administrative overhead
Q.3 Depreciation on factory machinery is classified under:
Direct costs
Indirect costs
Selling expenses
Administrative expenses
Explanation - Depreciation on machinery is an indirect cost because it cannot be traced to a specific product and is part of factory overhead.
Correct answer is: Indirect costs
Q.4 Which of the following is NOT included in production overhead?
Rent of factory building
Direct wages
Indirect materials
Power and fuel for factory
Explanation - Direct wages are considered direct labor, not overhead. Overheads are indirect production costs.
Correct answer is: Direct wages
Q.5 Overheads are allocated to products based on:
Direct material cost
Direct labor cost
Prime cost
All of the above
Explanation - Overheads can be absorbed using various bases such as direct material cost, direct labor cost, or prime cost, depending on the nature of the production process.
Correct answer is: All of the above
Q.6 Indirect material used in production is treated as:
Direct cost
Overhead
Selling expense
Capital expenditure
Explanation - Indirect materials, such as lubricants and small tools, cannot be traced to a specific product and are considered part of factory overhead.
Correct answer is: Overhead
Q.7 Which of the following is an example of selling overhead?
Sales commission
Factory rent
Indirect labor
Office salaries
Explanation - Selling overhead includes expenses related to selling products, like sales commission, advertising, and delivery charges.
Correct answer is: Sales commission
Q.8 What is the main purpose of classifying overheads?
To determine direct costs
To allocate costs accurately
To calculate selling price
All of the above
Explanation - Classifying overheads helps in proper allocation and absorption of indirect costs to products, ensuring accurate cost calculation.
Correct answer is: To allocate costs accurately
Q.9 Indirect wages of factory staff are considered as:
Direct labor
Overhead
Administrative expense
Selling expense
Explanation - Indirect wages are part of factory overhead as they are not directly traceable to a particular product.
Correct answer is: Overhead
Q.10 Which of the following is a period cost rather than product cost?
Factory rent
Direct materials
Administrative salaries
Indirect labor
Explanation - Period costs, like administrative salaries, are incurred during a time period and are not part of the product cost.
Correct answer is: Administrative salaries
Q.11 Which overhead is charged based on machine hours rather than labor hours?
Labor overhead
Machine-related overhead
Administrative overhead
Selling overhead
Explanation - Machine-related overheads, such as depreciation and electricity for machinery, are allocated based on machine hours used.
Correct answer is: Machine-related overhead
Q.12 Insurance of factory building is classified under:
Direct cost
Production overhead
Selling expense
Administrative expense
Explanation - Insurance of factory premises is an indirect production cost and is included in factory overhead.
Correct answer is: Production overhead
Q.13 Which of the following is NOT a basis for overhead absorption?
Direct labor hours
Machine hours
Prime cost
Sales revenue
Explanation - Overheads are absorbed based on production-related bases like labor or machine hours, not sales revenue.
Correct answer is: Sales revenue
Q.14 Indirect expenses related to selling are classified as:
Production overhead
Selling overhead
Administrative overhead
Direct costs
Explanation - Expenses such as advertising, sales commission, and delivery costs are considered selling overheads.
Correct answer is: Selling overhead
Q.15 Which of the following would be classified under factory overhead?
Direct labor wages
Electricity for production
Sales commission
Office salaries
Explanation - Electricity consumed in the production process is an indirect cost and forms part of factory overhead.
Correct answer is: Electricity for production
Q.16 What is the main difference between direct and indirect costs?
Direct costs are controllable, indirect are not
Direct costs can be traced to products, indirect cannot
Indirect costs are fixed, direct are variable
Direct costs include overheads
Explanation - Direct costs can be specifically traced to a product, whereas indirect costs (overheads) cannot.
Correct answer is: Direct costs can be traced to products, indirect cannot
Q.17 Factory repairs and maintenance costs are treated as:
Direct cost
Overhead
Selling expense
Administrative expense
Explanation - Repairs and maintenance of factory equipment are indirect production costs, included under factory overhead.
Correct answer is: Overhead
Q.18 Which of the following overheads can vary with production volume?
Fixed overhead
Variable overhead
Administrative overhead
Salaries of permanent staff
Explanation - Variable overheads change with production volume, e.g., indirect materials or power costs.
Correct answer is: Variable overhead
Q.19 Cost of factory lighting is an example of:
Direct material
Direct labor
Indirect material
Indirect expenses
Explanation - Factory lighting is an indirect expense because it cannot be directly traced to any specific product.
Correct answer is: Indirect expenses
Q.20 Administrative overheads are usually charged to:
Production cost
Selling cost
Period cost
Prime cost
Explanation - Administrative overheads are treated as period costs and are charged to the income statement for the period incurred.
Correct answer is: Period cost
Q.21 Which of the following is a fixed overhead?
Indirect labor
Power for production
Factory rent
Indirect materials
Explanation - Fixed overheads remain constant regardless of production levels, such as rent of the factory building.
Correct answer is: Factory rent
Q.22 Depreciation on office furniture is classified as:
Production overhead
Administrative overhead
Selling overhead
Direct cost
Explanation - Depreciation of office assets is part of administrative overhead as it relates to office management, not production.
Correct answer is: Administrative overhead
Q.23 Overheads which remain constant regardless of production levels are called:
Variable overheads
Fixed overheads
Semi-variable overheads
Controllable overheads
Explanation - Fixed overheads do not change with production volume, such as rent, salaries of permanent staff, and depreciation.
Correct answer is: Fixed overheads
Q.24 Indirect expenses are apportioned to different departments to:
Increase profits
Allocate costs fairly
Reduce production cost
None of the above
Explanation - Apportioning indirect expenses ensures that each department bears a fair share of overheads based on usage or benefit.
Correct answer is: Allocate costs fairly