AS Level Accounting chapter 2: Cost and management accounting MCQs with answers
By Team Megalecture · Updated 4 Nov 2026
61 exam-style questions on Cost and management accounting, each with the answer and a short explanation. Ten of them are below to try. The chapter test draws ten fresh questions each time and is marked the moment you finish, with your score by topic.
Ten Cost and management accounting questions with answers
Try each one, then open the answer. These ten stay the same; the test draws new ones every time.
1. Factory rent of $48,000 is apportioned on the basis of floor area. The floor areas are: Machining 1,200 m2, Assembly 800 m2 and Stores 400 m2. How much rent is apportioned to Machining?
A
$24,000
B
$16,000
C
$28,800
D
$8,000
Show answer
Answer: A. Total floor area = 1,200 + 800 + 400 = 2,400 m2, so Machining’s share = 48,000 × 1,200 ÷ 2,400 = $24,000. The stores is a service cost centre but still occupies space, so it must be included; leaving it out gives 28,800.
2. How is closing inventory of finished goods valued under marginal costing?
A
at selling price less the normal profit margin
B
at full production cost, including fixed production overheads
C
at total cost, including selling and administration costs
D
at variable production cost only
Show answer
Answer: D. Marginal costing treats all fixed costs, including fixed production overheads, as period costs charged in full in the period, so inventory carries only variable production cost. Absorption costing adds a share of fixed production overheads.
3. A company has spare capacity. Its product normally sells for $50 per unit, and has a variable cost of $32 and a fixed cost of $10 per unit. A new customer offers to buy 1,000 units at $38 each. Fixed costs will not change. What will be the effect on profit of accepting the order?
A
an increase of $6,000
B
a decrease of $4,000
C
a decrease of $12,000
D
an increase of $38,000
Show answer
Answer: A. With spare capacity and unchanged fixed costs, the order adds its contribution: 1,000 × (38 − 32) = $6,000. Charging the $10 fixed cost per unit (a full cost of $42) wrongly suggests a loss of 4,000.
4. Which is an advantage of absorption costing compared with marginal costing?
A
it avoids the need to apportion and absorb overheads
B
profit is not affected by changes in the level of inventory
C
it shows clearly the contribution earned by each product
D
inventory includes production overheads, as IAS 2 requires
Show answer
Answer: D. IAS 2 requires inventory in published financial statements to include production overheads, which absorption costing does. It is marginal costing that shows contribution and whose profit does not depend on inventory changes.
5. A department’s budgeted overheads were $108,000 and its budgeted machine hours were 12,000. Overheads are absorbed on a machine hour basis. Actual overheads were $106,000 and actual machine hours were 11,500. What was the under- or over-absorption of overheads?
A
under-absorbed by $4,500
B
over-absorbed by $2,500
C
under-absorbed by $2,500
D
over-absorbed by $2,000
Show answer
Answer: C. Absorption rate = 108,000 ÷ 12,000 = $9 per machine hour. Overheads absorbed = 11,500 × 9 = 103,500, which is less than the actual 106,000, so overheads are under-absorbed by $2,500. Absorbed overheads are compared with actual overheads, not budgeted with actual.
6. A business has budgeted sales of 9,000 units and a break-even point of 6,000 units. What is the margin of safety as a percentage of budgeted sales?
A
150.0%
B
50.0%
C
66.7%
D
33.3%
Show answer
Answer: D. Margin of safety = 9,000 − 6,000 = 3,000 units, and 3,000 ÷ 9,000 × 100 = 33.3% of budgeted sales. Dividing by break-even sales gives 50.0%, and 66.7% is break-even as a share of budgeted sales.
7. After primary apportionment, a factory’s overheads are: Machining $90,000, Assembly $60,000 and Stores (a service department) $30,000. Stores costs are reapportioned on the basis of materials requisitions: Machining 600, Assembly 400. What are the total overheads of Machining after reapportionment?
A
$90,000
B
$105,000
C
$108,000
D
$102,000
Show answer
Answer: C. Machining receives 600 ÷ 1,000 of the stores costs: 30,000 × 0.6 = 18,000, giving 90,000 + 18,000 = $108,000. Service department costs are moved to production departments so that they can be absorbed into products.
8. Which is an advantage of cost–volume–profit analysis to managers?
A
it shows quickly how changes in price, costs or volume affect profit
B
it gives exact results even when prices and costs change with output
C
it takes full account of non-financial factors
D
it values inventory in line with IAS 2
Show answer
Answer: A. CVP analysis is simple and lets managers test 'what if' changes in price, cost or volume and see the effect on profit and the break-even point. Its results are only approximate, it ignores non-financial factors and it is not used for inventory valuation.
9. A factory needs one supervisor for every 12 production workers or part of 12. Each supervisor is paid $3,000 a month. Next month the factory will employ 30 production workers. What will be the total cost of supervisors’ salaries for the month?
A
$9,000
B
$7,500
C
$6,000
D
$3,000
Show answer
Answer: A. Two supervisors cover 24 workers, so the remaining 6 need a third: 3 × 3,000 = $9,000. Supervision is a stepped cost, so it cannot be charged pro rata as 2.5 supervisors.
10. Which would cause production overheads to be over-absorbed?
A
actual overheads and machine hours were both exactly as budgeted
B
actual overheads were higher than budgeted, with activity as budgeted
C
actual machine hours were lower than budgeted, with overhead spending as budgeted
D
actual machine hours were higher than budgeted, with overhead spending as budgeted
Show answer
Answer: D. Overheads absorbed = predetermined rate × actual activity. More hours than budgeted absorb more than was actually spent, giving over-absorption. Higher spending or fewer hours cause under-absorption, and exact budgets give neither.
Cost and management accounting: questions students ask
How many Cost and management accounting MCQs are there?
61, each with the answer and a short explanation, across 2 topics: Costs and cost behaviour, Traditional costing methods. Every chapter test draws ten of them, so you can take it many times.
Is the AS Level Accounting chapter 2 test free?
Yes. The test, the answers and the explanations are free and need no sign-up. Sign in only if you want your scores kept across devices.
How is the chapter test marked?
The moment you press Finish: your score, the right answer and an explanation for every question, and the ones you got wrong saved in My mistakes to retry.
