CUET Entrepreneurship-Chapter-Determination of cost

  • Board
    CBSE
  • Textbook
    NCERT
  • Class
    Class 12
  • Subject
    Entrepreneurship
  • Chapter
    CUET Entrepreneurship-Chapter-Determination of cost
  • Chapter Name
    Determination of cost
  • Category
    CUET (Common University Entrance Test) UG

Important MCQ Questions on CUET Entrepreneurship-Chapter-Determination of cost with Detailed explanation

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MCQ Questions for CUET Entrepreneurship-Chapter-Determination of cost Set-1

Entrepreneurship - MCQ on Determination of cost

Class XII

Q.1. The opportunity cost of any action is the

a. first alternative forgone.

b. best alternative forgone.

c. next alternative forgone.

d. last alternative forgone.

answer:

(b)

Exp: In the process of manufacture and sales, the entrepreneur forgoes certain advantages, which he should have otherwise availed. The value of the best alternative forgone in measurable terms, amounts to the opportunity cost of that action.

Q.2. When an action is chosen, the value of the best alternative forgone is the

a. implicit cost.

b. explicit cost.

c. accounting cost.

d. opportunity cost.

answer:

(d)

Exp: The advantages associated with the best alternative forgone by the entrepreneur in the process of manufacture as well as sales are termed as the opportunity cost.

Q.3. Human capital is the

a. capital owned by individuals.

b. capital owned by corporations.

c. capital owned by government.

d. accumulated skill of workers.

answer:

(d)

Exp: The human input is essential for the conversion of raw materials into finished products, which is possible through the accumulated skill and knowledge of the workers employed, termed as human capital.

Q.4. Fall in the value and utility of fixed assets due to their constant use and expiry of time is termed as

a. appreciation.

b. depreciation.

c. value addition.

d. depletion.

answer:

(b)

Exp: Fixed assets such as building, plant and machinery etc. have a definite span of life after which they lose their usefulness for the business operations. So, the process of allocation of cost of a fixed asset over its useful life is known as depreciation.

Q.5. Expenditure incurred to ensure the production of the material or service is referred to as

a. direct cost.

b) product cost.

c) semi-fixed cost.

d) prime cost.

answer:

(a)

Exp: The raw materials, power, wages of labour etc. are the variables which contribute directly to the product and are called as direct costs.

Q.6. The costs of production which are not related with time or quantity of production are termed as

a. fixed cost.

b. direct cost.

c. semi-variable cost.

d. variable cost.

answer:

(c)

Exp: The expenditure such as electricity bill, telephone bill etc. fall under the category of semi-variable costs as they do not bear any relationship with the time or quantity of production.

Q.7. The most relevant costs that should be used in decision making are

a. current cost.

b. estimated cost.

c. hidden cost.

d. actual cost.

answer:

(b)

Exp: For the efficient functioning of an enterprise, estimation of cost is very crucial. The accurate estimation of cost is very significant for an enterprise in the process of decision making.

Q.8. A business's telephone bill should be classified into

a. fixed cost.

b. variable cost.

c. stepped fixed cost.

d. semi-variable cost.

answer:

(d)

Exp: The telephone bill consists of fixed as well as variable part, thus categorised as semi-variable cost. It has a fixed rental cost part and a variable cost portion depending upon the usage.

Q.9. A fixed cost

a. represents a fixed proportion of total costs.

b. remains at the same level up to a particular level of output.

c. has a direct relationship with output.

d. remains at the same level when output increases.

answer:

(d)

Exp: The costs that remain unchanged and static irrespective of the changes in the output of the product are called fixed costs.

Q.10. An example of a fixed cost is

a. Depreciation

b. General expense

c. Plant overhead

d. Material

answer:

(a)

Exp: The depreciation of plant, machinery and building etc. constitute the fixed cost of an enterprise. This amount is fixed and does not change with respect to quantity of production.

Q.11. Royalty cost can be considered as

a. Variable costs.

b. direct costs.

c. opportunity costs.

d. basic cost.

answer:

(a)

Exp: Variable costs are those which vary with the output, time and other factors. The royalty cost can be categorised as variable cost as it varies with time.

Q.12. Those costs that are independent of the system throughput are

a. Variable costs.

b. Fixed costs.

c. Operating costs.

d. semi-variable costs.

answer:

(b)

Exp: The fixed costs are those that remain unchanged as well as static and are not affected by the changes in the output of the product.

Q.13. All substances, which are inputs to the manufacture of the product, are called as

a. resources.

b. supplies.

c. materials.

d. provisions.

answer:

(c)

Exp: materials are the inputs of required in manufacturing of the product. These are of two types, direct materials and indirect materials. Examples of materials are raw materials, components purchased, construction materials etc.

Q.14. An example of direct material is

a. office building.

b. raw materials.

c. office stationary.

d. materials used for marketing.

answer:

(b)

Exp: Raw materials are categorised as the direct material because they are primary input for the production of a product. These are indispensible for production.

Q.15. The cost involved in the employment of human input is called as the

a. cost of materials.

b. cost of overheads.

c. cost of labour.

d. cost of other expenses.

answer:

(c)

Exp: The human input is essential for the conversion of the raw materials into finished products and the cost involved in their employment is termed as cost of labour.

Q.16. All ancillary materials that facilitate the production of the product are called as

a. supplementary materials.

b. subsidiary materials.

c. direct materials.

d. indirect materials.

answer:

(d)

Exp: The materials which indirectly facilitate in the manufacture of a product are called as the ancillary materials such as oils and grease, office stationary etc.

Q.17. The summary of a company's assets, liabilities and capital at a specific date is referred to as

a. profit and loss statement.

b. balance sheet.

c. position statement.

d. statement of financial position.

answer:

(b)

Exp: The balance sheet is usually made for a period of one year and reflects the annual closing status of the enterprise for the year under consideration. It reflects the assets on one side and the liabilities on the other.

Q.18. Preparation of balance sheet is important for the entrepreneur as it is helpful in

a. detection of errors.

b. ascertaining the arithmetical accuracy of the internal accounts.

c. reducing the cost of operations.

d. ascertaining actual profit of the enterprise.

answer:

(d)

Exp: The balance sheet preparation is an important exercise and provides the entrepreneur an understanding of the financial position of the enterprise indicating the actual profit earned as well as total income and expenditure incurred in that specific year.

Q.19. The balance sheet facilitates the market in assessing

a. trade worthiness of the company.

b) future actions of the company.

c) marketing strategy of the company.

d. competitive advantages of the company.

answer:

(a)

Exp: The balance sheet facilitates the market to asses the strengths and weaknesses of the company, its trade worthiness, its efficiency, its sustainability and its economic viability.

Q.20. Determination of cost helps an entrepreneur in

a. decreasing the profit margin.

b. maximizing the inventory.

c. becoming cost-effective.

d. maximizing profit.

answer:

(c)

Exp: An insight into the determination of costs facilitates the entrepreneur to become cost effective and helps in planning and organising the purchases, controlling the inventory as well as minimising the price.

MCQ Questions for CUET Entrepreneurship-Chapter-Determination of cost Set-2

Q.21. An example of the variable cost would be

a. insurance premium for fire insurance on the factory building.

b. the salary of the company president.

c. wood used to make custom tables.

d. depreciation on the factory building.

answer:

(c)

Exp: The insurance premium, depreciation and salary would be categorised under fixed costs, while the cost of wood required to make custom tables would be variable cost as it would vary with the quantity of production.

Q.22 The expenses which are indirectly attributed to the production are known as

a. direct costs.

b. variable costs.

c. indirect costs.

d. opportunity costs.

answer:

(c)

Exp: The enterprise may incur several other expenses which are indirectly attributed to the production such as wages of the time keepers, store personnel, advertising etc. such costs are incurred as a part of the system.

Q.23. An entrepreneur may have several types of income including

a. commission.

b. dividend returns from investment.

c. interest repayable.

d. salaries of employees.

answer:

(b)

Exp: The entrepreneur may have several types of income through the operation of the enterprise. It can be in the form of lease or rent income earned by lending a part of the building, interest income, dividend income etc.

Q.24. The organisation may incur overhead cost on

a. salaries of employees.

b. wages of labourers.

c. wastages.

d. furniture of the office.

answer:

(d)

Exp: An enterprise incurs several overhead costs in due course of operation, such as on office building, telephone, communication network, furniture and equipment etc. These costs are important for the day to day functioning of the enterprise.

Q.25. The human input employed is called as

a. skill.

b. technical knowhow.

c. labour.

d. man power.

answer:

(c)

Exp: Thehuman input is essential for the conversion of the raw materials into finished products and is called as labour.

Q.26 Bad debts are

a. expense of an enterprise.

b. overhead cost of an enterprise.

c. direct cost of an enterprise.

d. estimated cost of an enterprise.

answer:

(a)

Exp: Bad debts forms the expenditure of an enterprise as it may be incurred by the entrepreneur while running the enterprise.

Q.27. An enterprise can become cost effective through appropriate

a. determination of cost.

b. marketing strategy.

c. pricing of products .

d. competition.

answer:

(a)

Exp: An insight into the determination of costs facilitates the entrepreneur to make the enterprise cost effective as it helps in controlling as well as estimating cost of manufacturing and marketing the product.

Q.28. An enterprise can reduce its cost of operations through

a. increasing profit margin.

b. determination of cost.

c. minimising price.

d. decentralizing control.

answer:

(b)

Exp: An effective an appropriate determination of cost helps an enterprise to reduce its cost of operations and thus become cost effective.

Q.29. Planning and organising of purchases is facilitated by determination of

a. price.

b. wages.

c. cost.

d. expenditure.

answer:

(c)

Exp: An effective an appropriate determination of cost helps an enterprise to plan as well organise its purchases. This in turn helps in reducing wastages and overall expenditure.

Q.30. An enterprise can control its inventory through

a. effective cost determination.

b. appropriate pricing.

c. effective marketing.

d. increasing sales.

answer:

(a)

Exp: An entrepreneur can control the inventory levels of the enterprise through the effective cost determination process. Keeping an appropriate level of inventory helps an enterprise to reduce cost.

Q.31. An insight into the determination of cost facilitates the entrepreneur in

a. increasing sales.

b. making marketing strategy.

c. planning.

d. minimising the price.

answer:

(d)

Exp: an entrepreneur can minimise the price of its products through an appropriate determination of cost. Effective cost determination helps in reducing cost of operation, making the product cheaper and providing the entrepreneur a competitive edge over others.

Q.32. An entrepreneur can maximise the output of the resources with the help of effective

a. purchase mechanism.

b. sales.

c. pricing.

d. determination of cost.

answer:

(d)

Exp: The output of the enterprise’s resources can be maximised by the entrepreneur through the process of effective cost determination.

Q.33. Condition in which a company's expense exceeds its revenues is termed as

a. profit.

b. net profit.

c. loss.

d. excess expenditure.

answer:

(c)

Exp: An enterprise is said to be incurring losses if the total amount of its expenditure is greater than the total revenue earned.

Q.34. Surplus remaining after total costs are deducted from total revenues is an enterprise’s

a. net revenue.

b. profit.

c. loss.

d. net expenditure.

answer:

(b)

Exp: Anenterprise is said to be earning profit if its total revenue exceeds its total cost thus providing surplus.

Q.35. For observing the various aspects of cost management and control, an entrepreneur needs to employ

a. manager.

b. risk analyst.

c. business analyst.

d. cost accountant.

answer:

(a)

Exp: Anentrepreneur needs to engage the services of an expert or a cost accountant to closely look at various aspects of cost management and cost control.

Q.36. The wages paid to the employees come under

a. indirect cost.

b. direct cost.

c. fixed cost.

d. overhead cost.

answer:

(b)

Exp: The costs involved in the employment of human input who are essential for the conversion of the raw materials into finished products are categorised under direct costs.

Q.37. The type of labour employed for carrying out tasks that are incidental to the production process are called as

a. human input.

b. direct labour.

c. direct support.

d. indirect labour.

answer:

(a)

Exp: An organisation employs several employees such as time keepers, stores assistants, foreman, and salesmen etc. who are not directly involved in the production process but are working as indirect support and thus referred as indirect labour.

Q.38. The amount of actual expenditure incurred on, or attributable to a given thing is termed as

a. estimated cost.

b. revenue.

c. cost.

d. expense.

answer:

(c)

Exp: According to the terminology adopted by C.I.M.A, England, the term cost refers to the amount of expenditure actual or notional incurred on, or attributable to a given thing.

Q.39. Cost determination is vital for an enterprise’s decision regarding

a. market strategies.

b. risk management.

c. human resource management.

d. enterprise management.

answer:

(a)

Exp: It is very important for an entrepreneur to be sensitive towards various inputs that determine the cost of products, because they are crucial for the formulation of the market strategies of the enterprise.

Q.40. The cost of the product at the factory is referred to as

a. notional cost.

b. fixed cost.

c. total cost.

d. site cost.

answer:

(a)

Exp: The cost of the product at the production stage, excluding the marketing as well as selling expenditure is referred to as the site cost.

Q.41. Depreciable assets are those assets which

a. are expected to be used for one accounting period.

b. have an unlimited useful life.

c. are held for use in production of goods and services.

d. are frequently replaced in course of production.

answer:

(c)

Exp: The value offixedassets like plant and machinery etc. used in the due course of production decrease with passage of time and because of wear and tear, thus referred to as depreciable assets.

Q.42. The portion of cost of fixed asset allocated to a particular accounting year is called as

a. depreciation.

b. internal depreciation.

c. opportunity cost.

d. indirect cost.

answer:

(a)

Exp: In order to ascertain the true income during a particular accounting year, an entrepreneur has to estimate the value of the portion of fixed asset utilised for generating revenue, referred as depreciation.

Q.43. An entrepreneur incurs fixed cost on

a. repair of machinery.

b. wages paid for installation of machinery.

c. purchase of a truck.

d. road tax.

answer:

(c)

Exp: The expenditure made on purchasing a truck, which is a fixed asset, by the entrepreneur would amount to the fixed cost of the enterprise. Expenditure on such assets is made for availing useful services in the course of production.

Q.44. The expenditure made by an enterprise on the purchase of fixed assets are called as

a. revenue expenditure.

b. overhead expenditure.

c. deferred revenue expenditure.

d. capital expenditure.

answer:

(a)

Exp: Capital expenditure is the amount spent by an enterprise on purchase of fixed assets that are used in the business to earn income and not intended for resale.

Q.45. Expenses incurred on the repairs and whitewashing for the first time on purchase of an old building by the entrepreneur would be categorised under

a. fixed cost.

b. variable cost.

c. semi-variable cost.

d. indirect cost.

answer:

(a)

Exp: Since this expenditure on building repair and whitewashing are necessary to make the building usableso they would be added to the cost of the building, which is the fixed asset.

Q.46. Expenses incurred in connection with the purchase of land or buildings, such as fees paid to the lawyer or registration expenses fall under

a. overhead cost.

b. other expenses.

c. fixed cost.

d. semi-variable cost.

answer:

(c)

Exp: As the expenditure incurred on the fees of lawyer or registration fees are being done in association with the purchase of fixed assets so they are categorised as fixed cost.

Q.47. Profit and loss account reveals

a. net profit or net loss.

b. gross profit.

c. gross loss.

d. total expenditure.

answer:

(a)

Exp: A profit and loss account is prepared to calculate the net profit or net loss of the enterprise for a given accounting period. For the proper administration of an enterprise, the entrepreneur should have a fair idea of profit and loss accounts of his enterprise.

Q.48. The purpose of preparing the balance sheet is to ascertain the

a. gross profit.

b. net profit.

c. financial position of a business.

d. total revenue.

answer:

(c)

Exp: Abalance sheet is prepared with a view to measure the true financial position of a business at a particular point of time. It is a screen picture of the financial position of the business.

Q.49. Fixed assets such as land and building etc are also termed as

a. current assets.

b. tangible fixed assets.

c. permanent fixed assets.

d. intangible fixed assets.

answer:

(b)

Exp: Tangible fixed assets refers to those fixed assets which can be seen and touched such as land and building, plant and machinery, furniture etc.

Q.50. The capital expenditure made by an enterprise for purchasing shares, debentures, bonds etc. are called as

a. revenue.

b. fixed cost.

c. expenditure.

d. investments.

answer:

(a)

Exp: Investments of an enterprise represents capital expenditure on purchase of shares, debentures, bonds etc. to earn interest, dividend, and other benefits.