CA Inter P4 · Chapter 8
Unit, Batch and Job Costing MCQs with Answers
9 multiple-choice questions on Unit, Batch and Job Costing for CA Inter P4 Cost and Management Accounting. Try each one before revealing the answer and explanation.
Practise this chapter interactivelyQuestion 1
Job costing is the appropriate method of costing where:
- A) Production is continuous and output is homogeneous
- B) Services are rendered to the public at a standard rate
- C) Work is done against specific customer orders and each order differs from the others
- D) A product passes through several stages before completion
Show answer & explanation
Answer: C) Work is done against specific customer orders and each order differs from the others
Job costing accumulates costs for each job separately because each order is undertaken to the customer's specification and is distinct, as in printing presses, repair workshops and furniture made to order. Continuous homogeneous output suits unit or process costing.
Question 2
Unit (single or output) costing is most suitable for:
- A) A cement factory producing a single homogeneous product
- B) A ship-builder working on customer orders
- C) A printing press executing separate orders
- D) A city bus service
Show answer & explanation
Answer: A) A cement factory producing a single homogeneous product
Unit costing is used where production is continuous and units are identical, such as cement, bricks, mining or a brewery, so cost per unit = total cost / units produced. Ship-building and printing orders use job or contract-type costing, and a bus service uses service (operating) costing.
Question 3
Annual demand for a part is 36,000 units. Set-up cost per production batch is ₹1,500 and the cost of carrying one unit in stock for a year is ₹12. The economic batch quantity is:
- A) 2,121 units
- B) 4,243 units
- C) 1,500 units
- D) 3,000 units
Show answer & explanation
Answer: D) 3,000 units
EBQ = sqrt(2DS/C) = sqrt(2 x 36,000 x 1,500 / 12) = sqrt(90,00,000) = 3,000 units, where D is annual demand, S set-up cost per batch and C carrying cost per unit per annum.
Question 4
For the same part (annual demand 36,000 units, set-up cost ₹1,500 per batch, carrying cost ₹12 per unit per annum), the total annual set-up and carrying cost when production is in batches of 3,000 units is:
- A) ₹18,000
- B) ₹36,000
- C) ₹54,000
- D) ₹19,500
Show answer & explanation
Answer: B) ₹36,000
Number of batches = 36,000 / 3,000 = 12; set-up cost = 12 x ₹1,500 = ₹18,000. Average stock = 3,000 / 2 = 1,500 units; carrying cost = 1,500 x ₹12 = ₹18,000. Total = ₹36,000. Using the full batch rather than average stock overstates carrying cost.
Question 5
Batch costing is most commonly used in which of the following industries?
- A) Electricity generation and distribution
- B) Pharmaceuticals and ready-made garments
- C) Oil refining and chemicals in continuous process
- D) Bridge and road construction
Show answer & explanation
Answer: B) Pharmaceuticals and ready-made garments
Batch costing is a form of job costing where a lot of identical units is treated as one job, as in pharmaceuticals, garments, toys and components. Electricity uses service costing, continuous refining uses process costing, and construction uses contract-type job costing.
Question 6
Job No. 47 requires direct material of ₹18,500 and 120 direct labour hours at ₹150 per hour. Factory overheads are absorbed at ₹90 per direct labour hour and administration overheads at 10% of works cost. The company prices jobs to earn a profit of 20% on the selling price. The price to be quoted is:
- A) ₹62,436.00
- B) ₹59,125.00
- C) ₹56,760.00
- D) ₹65,037.50
Show answer & explanation
Answer: D) ₹65,037.50
Direct labour = 120 x ₹150 = ₹18,000. Factory overheads = 120 x ₹90 = ₹10,800. Works cost = ₹18,500 + ₹18,000 + ₹10,800 = ₹47,300. Administration overheads 10% = ₹4,730; total cost = ₹52,030. Profit is 20% of price, so price = ₹52,030 / 0.80 = ₹65,037.50. A 20% mark-up on cost would give only ₹62,436.00.
Question 7
In job costing, the cost of spoiled work that is normal and arises because of the exacting specifications of a particular job should be:
- A) Treated as general factory overhead shared by all jobs
- B) Written off to the Costing Profit and Loss Account
- C) Charged to that particular job
- D) Ignored if the spoiled units are sold as scrap
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Answer: C) Charged to that particular job
Where spoilage is caused by the special requirements of a specific job, it is part of the cost of that job and is charged to it (net of any scrap value). Normal spoilage common to all jobs is included in production overheads, while abnormal spoilage is written off to the Costing Profit and Loss Account.
Question 8
A batch of 500 units incurred direct material ₹42,000, direct labour ₹28,000 and set-up cost ₹6,000. Production overheads are absorbed at 40% of direct labour. The cost per unit of the batch is:
- A) ₹162.40
- B) ₹174.40
- C) ₹208.00
- D) ₹152.00
Show answer & explanation
Answer: B) ₹174.40
Overheads = 40% x ₹28,000 = ₹11,200. Total batch cost = ₹42,000 + ₹28,000 + ₹6,000 + ₹11,200 = ₹87,200. Cost per unit = ₹87,200 / 500 = ₹174.40. Set-up cost is a batch cost and must be included.
Question 9
The cost of rectifying normal defective work which cannot be identified with any particular job should be treated as:
- A) A charge to the job in which the defect was detected
- B) Production overhead
- C) A charge to the Costing Profit and Loss Account
- D) A reduction in the selling price of the job
Show answer & explanation
Answer: B) Production overhead
If defectives are normal and cannot be traced to a specific job, the rectification cost is treated as production overhead and absorbed by all jobs. If traceable to a specific job, it is charged to that job; abnormal defectives are charged to the Costing Profit and Loss Account.