Differential Costing - Part 1 - MCQs with answers

Differential Costing - Part 1 - MCQs with answers


1. __________ refers to changes in total costs that occur due to changes in volume of production or sales, product system, product mix or from the adoption of an alternative course of action.

a) Differential costs
b) Marginal costs
c) Absorption costs
d) None of the above

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ANSWER: a) Differential costs



2. As per J.M. Clark, when a decision has to be made involving ___________ , the difference in cost between two policies may be considered to be the cost really incurred on account of these n-units of business.

a) An increase of n-units of output
b) A decrease of n-units of output
c) An increase or decrease of n-units of output
d) None of the above.

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ANSWER: c) An increase or decrease of n-units of output



3. Pertaining to the differential cost systems, which of the following statements are true?

A) Differential cost plus differential income shows net loss or net income

B) Differential cost is ascertained by comparing total costs of each alternative

C) Differential cost related to differential investments is calculated every time.

a) Only A
b) Only B
c) Only C
d) A, B, C

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ANSWER: b) Only B



4. Which of the following statements are true?

a) Differential cost is also known as relevant cost.

b) Differential costs are estimated future costs.

c) Differential costs include only those costs which change as a result of the decision making being considered.

d) All of the above

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ANSWER: d) All of the above



5. If direct labor is not affected by the change in the type of material, it will form a part of differential cost.

a) True
b) False

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ANSWER: b) False



6. The basic data used for differential cost analysis are

a) Cost
b) Revenue
c) Investment data
d) All of the above

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ANSWER: d) All of the above



7. The alternative which shows ____ difference between the incremental revenue and the differential cost is the one considered to be the best choice for selection.

a) Maximum
b) Minimum
c) No
d) None of the above

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ANSWER: a) Maximum


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