Q. If the amount of work certified is less than………of the contract price,then no profit should be taken to Profit & Loss Account.
✅ Correct Answer: (B)
25%
Cost and Works Accounting 2 MCQs and Notes
Q. Variable overhead is overhead that increases as more production work is done. Total variable overhead expenditure therefore depends on the volume of production. Variable overhead is usually calculated as an amount for each direct labour hour worked.
✅ Correct Answer: (A)
The above statement is correct
Q. Identify the circumstances where under- or over-recovery of overhead will occur:
✅ Correct Answer: (C)
Actual overhead costs and actual activity level differ from the budgeted costs and level
Q. Under or over absorption is caused by the actual fixed overhead and production volume being different from those figures used to calculate the predetermined rate.
✅ Correct Answer: (B)
True
Q. The over-absorbed overhead is accounted for as an adjustment to the profit in the period, and is added to profit in the cost accounting income statement.
✅ Correct Answer: (A)
Correct
Q. If the amount of production overheads absorbed into product costs is more than the actual production overhead expenditure, there is:
✅ Correct Answer: (A)
Over-absorbed overhead
Q. Allocation is where overheads are allocated to cost centres. If a cost centre is responsible for the entire cost of an item of expenditure, the entire cost is charged directly to the cost centre.
✅ Correct Answer: (A)
Correct
Q. . The total amount of factory overhead represents:
✅ Correct Answer: (D)
All of the above
Q. Which of the following procedure is incorrect for attributing overhead costs to cost units? I. Collecting production overhead costs by item II. Establishing cost centres III. Allocating and apportioning overhead costs to cost centres IV. Apportioning service cost centre costs to production cost centres V. Absorbing production cost centre costs into cost units
✅ Correct Answer: (A)
All of the above are correct
Q. Indirect production costs are incurred in three main ways: • Production activities: costs arising in production departments such as fuel, depreciation, supervision • Service activities: the cost of operating non-producing departments such as materials handling, canteen • Establishment costs: general production overheads such as factory rent/rates, heating and lighting
✅ Correct Answer: (A)
True