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Questions and Answers
The selling price per unit less the variable cost per unit is
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Profit - Volume ratio is improved by reducing
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If standard cost is lower than the actual cost , the difference is known as
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Which of the following is not a component of prime cost?
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A cost per unit which increases or decreases when volume of output increases or decreases is known as
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Opening stock of finished goods ₹50,000; Closing stock of finished goods is ₹1,00,000 and cost of goods manufactured is ₹2,00,000. What is cost of goods sold
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The difference between the actual quantity and the standard quantity, multiplied by the standard price is the
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The contribution to sales ratio of a company is 20% and profit is ₹64,500. If the total sales of the company are ₹7,80,000, the fixed cost is
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Margin of safety is expressed as
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A company has to pay ₹10,000 per unit royalty to the designer of a product which it manufactures and sells. The royalty charge would be classified as a
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Study Notes
Cost and Profit Concepts
- The selling price per unit minus the variable cost per unit equals the contribution per unit.
Improving Profit-Volume Ratio
- Reducing variable costs improves the profit-volume ratio.
Cost Variances
- When the standard cost is lower than the actual cost, the difference is known as a favorable variance.
Prime Cost Components
- Selling and administrative expenses are not components of prime cost.
Cost Behavior
- A cost per unit that increases or decreases when the volume of output increases or decreases is known as a variable cost.
Cost of Goods Sold
- Cost of goods sold = Opening stock of finished goods + Cost of goods manufactured - Closing stock of finished goods
- Cost of goods sold = ₹50,000 + ₹2,00,000 - ₹1,00,000 = ₹1,50,000
Standard Costing
- The difference between the actual quantity and the standard quantity, multiplied by the standard price, is the material cost variance.
Break-Even Analysis
- Contribution to sales ratio = (Profit / Total Sales) × 100
- Fixed cost = Total sales - (Contribution to sales ratio × Total sales)
- Fixed cost = ₹7,80,000 - (20% × ₹7,80,000) = ₹6,24,000
Margin of Safety
- Margin of safety is expressed as a percentage or an absolute value.
Royalty Payments
- A royalty payment of ₹10,000 per unit is a variable cost.
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Description
Test your knowledge of cost accounting concepts, including profit-volume ratio, cost variances, and cost behavior.
