Welcome to the series of ACCA exam questions, In this article, we will discuss the classification of cost questions. Let’s start with our first question.

Classification of cost questions

1. Which costs are the prime cost?

  1. All variable cost
  2. Direct material and labor only
  3. Direct labor, direct material, and direct expense.
  4. Production overhead and direct material.

2. Which of the following statement best describe the semi-variable cost?

  1. A cost that increases in direct proportion to output
  2. A cost that remains constant irrespective of the level of output
  3. A cost that contains an element of both fixed and variable cost
  4. A cost that increases throughout the year

3. Which of the following is not a fixed cost?

  1. Insurance
  2. Business rate
  3. Depreciation based on the straight-line method
  4. The material used in production

4. Which costs are included within production overhead?

  1. Variable overhead only
  2. Indirect material, labor, and expense related to production activity
  3. Direct expense only
  4. Indirect material and labor related to production activity

5. Which of the following statement best describes the direct cost?

  1. A cost that can not be influenced by its budget holder
  2. Expenditure that can be economically identified with a specific cost unit
  3. A cost that needs to be apportioned to the cost center
  4. The highest proportion of the total cost of a product.

6. A factory makes wooden chairs.

Which of the following items would be most likely to behave as stepped costs?

  1. Wood that is used for making chairs
  2. Factory supervisor salary
  3. Heating and light
  4. Staples to fix the fabric to the seat of the chairs.

7. Which types of cost does the following graph represent?

Classification Of Cost Questions
Classification Of Cost Questions
  1. Fixed cost
  2. Variable cost
  3. Semi variable cost
  4. stepped cost

8. For operational purposes, for a company operating a fleet of delivery vehicles, which of the following method of calculating cost would be most useful?

  1. Cost per mile run
  2. Per driver hour
  3. cost per tonne mile
  4. Cost per kilogram carried

9. Which of the following is a direct expense?

  1. Material use in production
  2. Special tools for the job
  3. Power
  4. Depreciation

10. Which of the following is a service cost center in a manufacturing company?

  1. Finishing
  2. Machining
  3. Despatch
  4. Assembly

11. Which of the following is the classification of overhead?

  1. Production overhead
  2. Factory Overhead
  3. Selling expense
  4. Production expense

12. Which of the following is the use of cash receipt reports?

  1. It shows the payment received
  2. Loan received
  3. Shows the cash in the bank
  4. Shows the liability

13. What is cash receipt mean in accounting?

  1. Cash received or cash sales
  2. Cash purchase
  3. Payables
  4. Receivable

14. Which of them are not part of the accounting cycle?

  1. Recording transactions
  2. Posting journal entries to the general ledger
  3. Prepare the adjustments and make of trial balance
  4. Sale the products

15. Which of the following is not the type of cost classification?

  1. Variable cost
  2. Fixed cost
  3. Step fixed cost
  4. Equilibrium cost

16. What are the main classifications of cost in cost accounting?

  1. Labor, Material, and expense
  2. Labor and material
  3. Labor and expense
  4. Material and expense

17. Which of the following cost classification term is used when making a decision?

  1. Differential and sunk cost
  2. Differential and opportunity cost
  3. Differential, opportunity, and sunk cost
  4. Sunk cost only

18. Advertising expense is classified as,

  1. Non-cash expense
  2. Cash expense
  3. Operation expense
  4. Production expense

19. Choose the right option for the classification of cost on the bases of the element

  1. Land, labor, and material
  2. Material and labor
  3. Expense and labor only
  4. Material, labor, and expense

20. What kind of classification is the cost of goods sold?

  1. Expense of overhead
  2. Production expense
  3. Marketing expense
  4. Activity expense


  1. (3)
  2. (3)
  3. (4)
  4. (2)
  5. The cost specified on units (2)
  6. (2)
  7. It is variable (2)
  8. (3)
  9. (2)
  10. (3)
  11. (2)
  12. (1)
  13. (1)
  14. (4)
  15. (4)
  16. (1)
  17. (3)
  18. (3)
  19. (4)
  20. (2)

General Classification Of Cost Questions

What do you mean by the classification of cost by element?

Material, labor, and expense are classified as elements in the classification of cost.

What is the classification of cost by function?

Functions such as research, development, and finance. Cost can be classified according to business operations.

What are the 4 types of cost?

  1. Fixed cost
  2. Variable cost
  3. Stepped fixed cost
  4. Sunk cost

What is the controllable cost?

Controllable costs are those costs that can be controlled when making a decision such as variable cost that changes with the level of activity.

What is business costing and what is a cost in business?

Business costing means how much expense a product can take during its conversion into a finished good and cost means the amount for a specific product or unit.

How cost classification is used for decision-making?

Classification of cost is very useful when making a decision as it can help a business to control its cost, make a budget, and decide how much makeup should be on a unit.

What is the importance of cost classification for decision-making?

When a business makes its decision it should consider some important factors such as the sales volume, price of a unit, percentage of profit on a unit, etc. This can be done by using the classification cost method.

What do you mean by cost classification by production process?

It is the process of allocating the cost of a product during its conversion that includes labor, material, and expenses such as overhead.

Hope you like the Classification of cost questions and get some new ideas about the MA1 exam, do not forget to read the other practice question given on the site.