Absorption Costing - MCQs with answer

Absorption Costing - MCQs with answer


1. Which of the following is a conventional method of ascertaining cost?

a) Absorption costing
b) Full Costing
c) Both a & b
d) None of the above

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ANSWER: c) Both a & b



2. Under absorption costing, profit is ascertained

a) On the basis of difference between sales and total cost.
b) By computation as per desired rate of profit on sales or cost
c) Both a and b
d) None of the above.

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ANSWER: c) Both a and b




3. All costs are classified under ______ segments under absorption costing.

a) Five
b) Six
c) Four
d) Three

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ANSWER: d) Three



4. All factory costs are treated as _________ while all administration costs are treated as ___________.

a) Product costs, Period costs
b) Period Costs, Product costs
c) Fixed costs, Period costs
d) Period costs, fixed costs

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ANSWER: a) Product costs, Period costs



5. While ascertaining gross profit under absorption costing, only that portion of manufacturing overheads is deducted from sales revenue which is associated with the goods sold.

a) True
b) False

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ANSWER: a) True



6. Under absorption costing among fixed expenses

a) Fixed manufacturing expenses are included in unit cost
b) Fixed non-manufacturing expenses are included in unit cost
c) Both a and b
d) None of the above

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ANSWER: a) Fixed manufacturing expenses are included in unit cost



7. Absorption costing is used for

a) Price determination on basis of full cost
b) Solution of separation of costs
c) Calculation of gross and net profit
d) All of the above

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ANSWER: a) Price determination on basis of full cost



8. Absorption costs helps in

a) Difference between product cost and period cost
b) Charged of fixed factory overheads on inventory
c) Both a and b
d) None of the above

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ANSWER: c) Both a and b



9. Which of the following statements are true?

A) Absorption costing helps in preparation of fixed budget.

B) Absorption costing is dependent on level of level of output.

C) Absorption costing is very helpful in taking managerial decisions.

D) Absorption costing helps to conform with accrual and matching concept.

a) A and B
b) B and C
c) A and D
d) B and D

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ANSWER: d) B and D


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