What is Cost Analysis?

Cost Analysis is the process of modeling costs to support strategic planning, decision making, and cost reduction.

What is the purpose of Cost Analysis for the business?

It is used for cost-evaluation purposes when there is a lack of competition or comparable offers in the marketplace.

What is the term cost refers to?

The term cost refers to the value of the sacrifice made to acquire goods or services. For example, the price of the product sold or services rendered.

What are the Cost Analysis methods?

Cost allocation, cost-effectiveness analysis, and cost-benefit analysis represent a continuum of types of Cost Analysis that can have a place in program evaluation. They range from relatively simple program-level methods to highly technical and specialized techniques.

What are the cost classifications?

In managerial accounting, costs are classified into fixed costs, variable costs or mixed costs (based on behavior); product costs or period costs (for external reporting); direct costs or indirect costs (based on traceability); and sunk costs, opportunity costs or incremental costs (for decision-making).

Cost Concept, Analysis, and Classification MCQ Quiz With Answers

This multiple choice question (MCQs) test contains 14 questions. You need to choose the correct answer from 4 or 5 responses to move onto the next question.

If you read our article on cost accounting, this will help you to prepare for your exams, clarify the main concepts, and toget ready to appear in interviews.

1. Which cost system description applies to the manufacturing of 20 engraved doors for a new clubhouse at a golf course?

Contract
Process
Batch
Service

2. An important feature of a cost center is that:

It uses only monetary information
It has clearly defined boundaries
It must be one specific location only
It must be an area of a business through which products pass

3. Prime cost is:

The sum of direct materials and direct labor cost excluding all other costs
The total of all cost items that can be directly charged to product units
The total cost incurred in producing a finished unit
The sum of the large cost items in a product cost

4. Which of the following is a cost behavior-oriented approach to production costing?

Absorption costing
Marginal costing
Process costing
Job order costing

5. In a process costing system, the unit cost is computed for a:

Job
Department
Batch of goods
Category of goods

6. The cost of goods sold under a periodic cost accumulation system is equal to the:

Cost of goods available less ending finished goods inventory
Cost of goods available for sale plus beginning finished goods inventory
Cost of goods manufactured plus beginning finished goods inventory
Cost of goods sold manufactured less beginning finished goods inventory

7. The cost of goods manufactured under a periodic cost accumulation system is equal to the:

Beginning finished goods inventory plus purchase
Beginning work-in-process plus cost of goods in process during the year
Cost of goods put into production plus beginning work-in-process less ending work-in-process
Cost of goods sold less beginning work-in-process

8. For external financial statements, inventories must be reported at:

Standard cost
Actual cost
Period cost
Direct cost

9. The term "conversion costs\" refers to:

Manufacturing costs incurred to produce units of output
All costs associated with manufacturing other than direct labor costs and raw material costs
Costs associated with marketing, shipping, warehousing, and billing activities
The sum of direct labor costs and all factory overhead costs
The sum of raw material costs and direct labor costs

10. The term "prime costs\" refers to:

Manufacturing costs incurred to produce units of output
All costs associated with manufacturing other than direct labor costs and raw material costs
Costs that are predetermined and should be attained
The sum of direct labor costs and all factory overhead costs
The sum of direct material costs and direct labor costs

11. The term "variable costs\" refers to:

All costs that are likely to respond to the amount of attention devoted to them by a specific manager
All costs associated with marketing, shipping, warehousing, and billing activities
All costs that do not change in total for a given period of time and relevant range but become progressively smaller on a per unit basis as volume increases
All manufacturing costs incurred to produce units of output
All costs that fluctuate in total in response to small changes in the rate of utilization of capacity