# Industrial Engineering Questions and Answers – Cost Accounting Elements

This set of Industrial Engineering Multiple Choice Questions & Answers (MCQs) focuses on “Cost Accounting Elements”.

1. What is the another name for works cost?
a) Prime cost
b) Office cost
c) Factory cost
d) Material cost

Explanation: Works cost is another name of factory cost. Factory cost is the sum of prime cost and factory expenses. Prime cost which is also known as direct cost is the sum of all direct expenses, the direct material cost and the direct labour cost. The office cost is also called as manufacturing cost or the cost of production.

2. What is also called as market price?
a) The total price of the product
b) Cost of production
c) Manufacturing price
d) Catalogue price

Explanation: Market price is the sum of the selling price of the product and the discount allowed to the distributors on the selling price i.e., the discount amount is added to the selling price to get the market price which printed as labelled price i.e., MRP. This market price is also called as label price or catalogue price.

3. Match the following.

p) Prime cost                             i) Selling cost
q) Factory cost                          ii) Manufacturing cost
r) Office cost                             iii) Works cost
s) Total cost                              iv) Direct cost

a) p – iv, q – iii, r – ii, s – i
b) p – ii, q – i, r – iii, s – iv
c) p – i, q – ii, r – iv, s – iii
d) p – i, q – iii, r – ii, s – iv

Explanation: The criterion for matching is the synonyms of the cost.
The prime cost is also known as the direct cost. Similarly, the factory cost, the office cost, the total cost is also known as the works cost, the manufacturing cost and the selling cost respectively.

4. Match the following.

p) Cost of production               i) Office cost
q) Ultimate cost                        ii) Total cost
r) Label price                            iii) Market price

a) p – i, q – ii, r – iii
b) p – ii, q – i, r – iii
c) p – i, q – iii, r –ii
d) p – iii, q – i, r – ii

Explanation: The cost of production is also known as the office cost. The ultimate cost is also known as the total cost. The label price is also called as the market price.

5. The total direct labour cost and the direct expenses incurred in the production of a centrifugal pump is Rs.500/- and Rs.60/- respectively. The average prime cost of the pump is calculated as Rs.800. Calculate the direct material cost (in Rs.).
a) 240
b) 402
c) 420
d) 204

Explanation: Given,
Prime cost = Rs.800/-
= Rs.500/-
Direct expenses = Rs.60/-
Direct material cost = ?
We know that,
Prime cost or total direct cost = Direct material cost + Direct labour cost + Direct expenses
Rs.800 = DMC + Rs.500/- + Rs.60/-
DMC = 800 – 500 – 60 = Rs.240/-

6. Find the factory cost (in Rs.) of 1000 studs if the prime cost is Rs.625 and total labour cost is Rs.200. Take factory on cost as 150% of the total labour cost.
a) 925
b) 952
c) 922
d) 955

Explanation: Given, 1000 studs
Prime cost = Rs.625
Total labour cost = Rs.200
Factory on cost = 150% of total labour cost
We know that,
Factory cost = Prime cost + Factory on cost = Rs.625 + 1.5 × 200 = 625 +300 = Rs.925

7. Find the office cost (in Rs.) of 250 bolts and nuts if the factory cost is Rs.200 and total labour cost is Rs.200. Consider office overheads as 30% of the total labour cost.
a) 602
b) 206
c) 620
d) 260

Explanation: Given, 250 bolts and nuts
Factory cost = Rs.200
Total labour cost = Rs.200
Office overheads = 30% of total labour cost
Office cost = Factory cost + office on cost = 200 + 0.3 × 200 = Rs.260/-

8. Which of the following mathematical expression is/are not wrong?
i) Total cost = Office cost + Selling and distribution expenses
ii) Selling price = Ultimate cost + Discount
iii) Selling price = Label price – Discount
a) i only
b) i and iii only
c) i, ii and iii
d) iii only

Explanation: Selling price is the sum of total cost and profit. The market price is the sum of the selling price and discount.

9. Which of the following mathematical expression is/are not correct?
i) Prime cost = Direct material cost + Direct labour cost + Direct expenses
ii) Factory cost = Prime cost + Factory expenses
iii) Office cost = Factory cost – Administrative expenses
a) i only
b) i and ii only
c) i, ii and iii
d) iii only

Explanation: We know that office cost is the sum of factory cost and administrative expenses.
Mathematically,
Office cost = Factory cost + Administrative expenses

10. Which of the following is/are not examples of administrative expenses?
(i) Depreciation of office building and its equipment
(ii) Interests on loans
(iii) Auditing expenses
a) i only
b) iv only
c) Both i and ii
d) Neither i nor ii

Explanation: Depreciation of office building and its equipment, interests on loans, auditing expenses are examples of administrative expenses. Advertising and publicity expenses is an example of selling expenses.

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