COSTING MCQs

CH - 12 : SERVICE COSTING

Question 1:
In case of goods transport, which of the following is suitable cost unit to be used for cost
ascertainment
(a) Kilometre
(b) Per day.
(c) Ton - kilometre
(d) Per litre
Answer: (c) Ton - kilometre

Question 2:
Which of the following costing method is not appropriate for costing of educational institutes:
(a) Batch Costing
(b) Activity Based Costing
(c) Absorption Costing
(d) Process Costing
Answer: (d) Process Costing

Question 3:
Cost of diesel and lubricant is an example of:
(a) Operating cost
(b) Fixed charges
(c) Semi-variable cost
(d) None of the above
Answer: (a) Operating cost

Question 4:
Which of the following is an example of standing charges in transport costing
(a) Road tax and insurance
(b) Petrol
(c) Repairs and maintenance
(d) Tyres.
Answer: (a) Road tax and insurance

Question 5:
Depreciation is treated as fixed cost if it is related to:
(a) Activity level
(b) Related with machine hours
(c) Efflux of time
(d) None of the above
Answer: (c) Efflux of time
Question 6:
Cost units used in power sector is:
(a) Kilo meter (K.M)
(b) Kilowatt-hour (kWh)
(c) Number of electric points
(d) Number of hours
Answer: (b) Kilowatt-hour (kWh)

Question 7:
Composite cost unit for a hospital is:
(a) Per patient
(b) Per patient-day
(c) Per day
(d) Per bed
Answer: (b) Per patient-day

Question 8:
Absolute Tonne-km. is an example of
(a) Composite units in power sector
(b) Composite unit of transport sector
(c) Composite unit for bus operation
(d) Composite unit for oil and natural gas
Answer: (b) Composite unit of transport sector

Question 9:
BOT approach means
(a) Build, Operate and Transfer
(b) Buy, Operate and Transfer
(c) Build, Operate and Trash
(d) Build, Own and Trash
Answer: (a) Build, Operate and Transfer

Question 10:
In service costing, costs are classified as
(a) Variable cost, fixed cost & marginal cost
(b) Standing charges, running charges & maintenance costs
(c) Fixed cost, normal cost & standard cost
(d) Standard cost, marginal cost & fixed cost
Answer: (b) Standing charges, running charges & maintenance costs

Question 11:
Pre-product development activities in insurance companies, include:
(a) Processing of Claim
(b) Selling of policy
(c) Provision of conditions
(d) Policy application processing
Answer: (c) Provision of conditions

Question 12:
In Toll Road costing, the repetitive costs includes:
(a) Maintenance cost
(b) Annual operating costs
(c) None of the above
(d) Both (a) and (b)
Answer: (a) Maintenance cost

Question 13:
Jobs undertaken by IT & ITES organizations are considered as:
(a) Project
(b) Batch work
(c) Contract
(d) All the above
Answer: (a) Project

Question 14:
Total passenger km run by VRL logistic Ltd. was 43,80,480 for the year between Jodhpur and
Pali. The bus made 3 round trips per day. Seating capacity of the bus was 52
passengers and average daily occupancy was 75% and the bus runs on an average 26 days in
a month. Calculate the distance between Jodhpur and Pali.
(a) 55 km
(b) 720 km
(c) 65 km
(d) 60 km
Answer: (d) 60 km
Description: Let's assume distance between Jodhpur and Pali is 'x'
Therefore: X * 39 * 2 * 3 * 26 * 12 = 4380480 X= 60

Question 15:
A hotel having 200 rooms of which 80% are normally occupied in summer 60% in Autumn and
25% in winter. Period of summer, autumn and winter be taken as 4 months each and normal
days in a month be assumed to be 30. The total occupied room days will be
(a) 39200 Room days
(b) 39600 Room days
(c) 39000 Room days
(d) None of the above
Answer: (b) 39600 Room days
Description: Rooms days Summer 200 * 80% * 30 * 4 =19200 Winter 200*25%*30*4 = 6000
Autumn 200*60%*30*4 = 14400 Total room days: 39600

Question 16:
A transport company is running 5 buses between two towns, which are 30 km apart. Seating
capacity of each bus is 50 passengers. Normal occupancy in onwards journey
is 90% and in return journey is 80% of its seating capacity. All the buses ran on 30 days of the
month. Each bus made 3 round trip per day. Passenger km per month will
be:
(a) 10,51,00
(b) 9,56,250
(c) 11,47,500
(d) None of the above
Answer: (c) 11,47,500
Description: Calculation of Passenger Km (30km * (50 passenger * 90%) +30km * (50
passenger * 80%)}*
3trips * 30days * 5buses = 11,47,500

Question 17:
Ayush transport service company incurred a total operating cost of Rs. 4,86,000 in June 2023 to
operate six buses between two places which are 50 kms apart. Each bus is having a seating
capacity of 50 passengers and all buses run on all days with two round trips in a day. If the
operating cost per passenger km, is Rs. 0.30, then the capacity occupied in each bus is:
(a) 90%
(b) 80%
(c) 75%
(d) 100%
Your Answer: (a) 90%
Description: Lets assume the capacity occupied be 'y' 486000/(50*50y*2*2*6*30) = 0.3
Therefore y = 0.9 Or 90%

Question 18:
Sharma Ferry services Pvt Ltd. provide ferry services between two towns. Distance one way is
18.52 nautical miles. Seating capacity of a ferry is 125 passengers. Actual passengers carried in
each trip is 80% of seating capacity. Ferry run on all days of month (30 days). Ferry makes a
round trips in a day. company is expecting a monthly revenue of 55,56,000. Calculate fare to be
charged from a passenger for round trip.
(a) 100
(b) 926
(c) 1852
(d) 50.95
Answer: (c) 1852
Description:
Calculation of fare per passenger nautical mile: 5556660 18.52 * 100 * 2 * 30 = 50 per
passenger nautical mile Fare for round trip = 50 * 18.52 * 2 = 1852

Question 19:
The hospital is opened for 365 days and consist of 40 beds and 10 more beds can be hired if
required. It was estimated that for 165 days in a year 30 beds were occupied; for 120 days 38
beds were occupied. The hospital hired extra 800 beds @ 200 per bed. Calculate the number of
patient beds.
(a) 9,510
(b) 10,310
(c) 10,130
(d) 13,510
Answer: (d) 13,510
Description: Calculation of patient beds: 165 days x 30 beds + 120 days x 38 beds + 80 days x
40 beds + 800 extra beds = 13510 patient beds

1. Composite Cost Unit for a Hospital is:

(a) Per Patient
(b) Per Patient-Day
(c) Per Day
(d) Per Bed

2. Cost Unit of Cargo Transport Industry is

(a) Kilometers
(b) Passenger Kilometres
(c) Tonne Kilometers
(d) Number of Vehicles

3. In Passenger Transport Sector, Cost of Diesel and Lubricants is an example of:

(a) Operating Cost
(b) Fixed Charges
(c) Semi-Variable Cost
(d) Running Charges

4. Absolute Tonne-Km is an example of Composite Cost Units in -

(a) Power Sector
(b) Cargo Transport
(c) Bus Operation
(d) Oil and Natural Gas

5. Operating Costing is NOT applicable to -

(a) Hospitals
(b) Cinemas
(c) Transport Undertaking
(d) Oil Refinery

6. Depreciation is treated as Fixed Cost if it is related to

(a) Activity Level
(b) Related with Machine Hours
(c) Efflux of time
(d) Notional Value of Asset

7. Generally, Depreciation on Assets is an example of-

(a) Fixed Cost
(b) Variable Cost
(c) Semi Variable Cost
(d) Non-Cost Expenditure

8. Jobs undertaken by IT & ITES organizations are considered as:

(a) Project
(b) Batch Work
(c) Contract
(d) Multiple Cost Unit

9. In Toll Road Costing, the repetitive costs includes -

(a) Maintenance Cost
(b) Annual Operating Costs
(c) Neither (a) nor (b)
(d) Both (a) and (b).

10. BOT approach means:

(a) Build, Operate and Transfer
(b) Buy, Operate and Transfer
(c) Build, Operate and Trash
(d) Build, Own and Trash.

11. Pre-Product Development activities in Insurance Companies, include:

(a) Processing of Claim
(b) Selling of Policy
(c) Provision of Conditions
(d) Policy Application Processing.

12. Which of the following costing method is not appropriate for costing of Educational
Institutes:
(a) Batch Costing
(b) Activity Based Costing
(c) Absorption Costing
(d) Process Costing
13. Cost of Services under Operating Costing is ascertained by preparing -
(a) Cost Sheet
(b) Process Account
(c) Job Cost Sheet
(d) Production Account

14. A Hotel has 100 rooms of which 80% are normally occupied in summer and 25% in winter.
Summer and Winter to be taken as 6 months each and normal days in a month be assumed
to be 30. The Total Occupied Room Days per annum will be -
(a) 4500 Room Days
(b) 18900 Room Days
(c) 36000 Room Days
(d) 14400 Room Days

ANSWERS

1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14.

(b) (c) (d) (b) (d) (c) (a) (a) (d) (a) (c) (d) (a) (b)

1. State which of the following are the characteristics of service costing.

1. High levels of indirect costs as a proportion of total costs
2. Use of composite cost units
3. Use of equivalent units
(a) (1) only
(b) (1) & (2) only
(c) (2) only
(d) (2) & (3) only

2. Which of the following organizations should not be advised to use service costing?
(a) Distribution service
(b) Hospital
(c) Maintenance department of a manufacturing company
(d) A light engineering company

3. _______is the most suitable method in a transport industry.

(a) Operation Costing
(b) Service Costing
(c) Process Costing
(d) Job Costing

4. Room/day is the cost unit used in _________.

(a) Hotels
(b) Hospitals
(c) Schools
(d) None of these

5. In electricity supply company uses ___________ as cost unit.

(a) Kilo watt hour
(b) Per household
(c) Voltage
(d) None of these

6. In transportation costing a composite unit such as ___________ is used.

(a) Passenger km
(b) Per km
(c) Per passenger ton
(d) Per passenger

7. Boiler house costing is an example of ___________ costing.

(a) Operation
(b) Service
(c) Process
(d) Job

8. Service costing is not used in one of the following:

(a) Electricity
(b) Hospitals
(c) Transport
(d) Electronics

9. Operating Costing is used in __________ concerns.

(a) Manufacturing
(b) Trading
(c) Service providing
(d) All of the above

10. An example of a simple cost unit in transport costing is ______.

(a) Per Mile
(b) Per passenger mile
(c) Per km
(d) Both (a) & (c)

11. The per unit cost of a powerhouse is calculated by machine hour rate.
(a) True
(b) False
(c) Either of (a) or (b)
(d) None of the above
12. The unit under operating costing is selected according to nature of business.
(a) True
(b) False
(c) Either of (a) or (b)
(d) None of the above

13. For finding expenses a daily log book is maintained of each vehicle.
(a) True
(b) False
(c) Either of (a) or (b)
(d) None of the above

14. Absolute tonne kilometer and commercial tonne kilometer are synonyms.
(a) True
(b) False
(c) Either of (a) or (b)
(d) None of the above

15. Which of the following pair is not correct with regard to Operating Costing:
(a) Passenger Transport — per passenger km
(b) Electricity Generation — per KWh
(c) Hotel — per person hour
(d) Medical Service —per patient day

16. Composite cost unit for a hospital is:

(a) per patient
(b) per patient-day
(c) per day
(d) per bed

17. Cost of diesel and lubricant is an example of:

(a) operating cost
(b) fixed charges
(c) semi-variable cost
(d) none of the above

18. Cost units used in power sector is:

(a) Kilo meter (KM)
(b) Kilowatt-hour (kWh)
(c) Number of electric points
(d) Number of hours

19. Absolute Tonne-km is an example of:

(a) Composite unit in power sector
(b) Composite unit of transport sector
(c) Composite unit for bus operation
(d) Composite unit for oil and natural gas

20. Depreciation is treated as fixed cost if it is related to:

(a) Activity level
(b) Related with machine hours
(c) Efflux of time
(d) None of the above

21. Jobs undertaken b IT & ITES organizations are considered as:

(a) project
(b) batch work
(c) contract
(d) all of the above

22. In toll Road costing, the repetitive costs include:

(a) Maintenance cost
(b) Annual operating costs
(c) None of the above
(d) Both (a) and (b)

23. BOT approach means:

(a) Build, operate and Transfer
(b) Buy, Operate and Transfer
(c) Build, operate and Trash
(d) Build, Own and Trash

24. Pre-product development activities in insurance companies, include:

(a) Processing of claim
(b) Selling of policy
(c) Provisions of conditions
(d) policy application processing

25. Which of the following costing method is not appropriate for costing of educational institutes:
(a) Batch costing
(b) Activity based costing
(c) Absorption costing
(d) Process costing

26. A hotel has a capacity of 100 single and 20 double rooms .The average occupancy of both
single and double rooms is expected to be 80% throughout the year of 365 days . The rent of
double room has been fixed at 125% of the rent of a single room. The total notional single
rooms/day are _________.
(a) 36,000
(b) 35,040
(c) 36,500
(d) 35,500

27. The hospital is opened for 365 days ,but bed occupancy is 25 patients per day in 120 days
and 20 bed occupied in another 80 days. Extra beds occupied during the year is 400. The
patient days of the hospital are ______.
(a) 3,500
(b) 4,000
(c) 4,500
(d) 5,000

28. The seating capacity of a school bus is 60 students one way. The seating capacity is fully
occupied during the whole year. The school follows differential bus fee based on distance
travelled as under :Distance to and from school Buss fee Students availing the facility
4 kms 25% of Full 15%
8 kms 50% of Full 30%
16 kms Full 55%
The total students, equivalent to 25% fare students per tripe are:
(a) 177
(b) 264
(c) 354
(d) 424

29. Calculate the most appropriate unit cost for a distribution division of a multinational company
using the following information.
• Miles travelled 636,500
• Tonnes carried 2,479
• Number of drivers 20
• Hours worked by drivers 35,520
• Tonnes miles carried 375,200
• Cost incurred 562,800
(a) ₹0.88
(b) ₹1.50
(c) ₹15.84
(d) ₹28,140

30. The following information is available for the W hotel for the latest thirty day period.
• Number of rooms available per night 40
• Percentage occupancy achieved 65%
• Room servicing cost incurred ₹3,900
• The room servicing cost per occupied room-night last period, to the nearest ₹was:
(a) ₹3.25
(b) ₹5.00
(c) ₹97.50
(d) ₹150.00

31. A transport company is running five buses between two towns, which are 80 kms apart.
Seating capacity of each bus is 80 passengers. Actually passengers carried by each bus were
78% of seating capacity. All buses ran on all days of the month. Each bus made one round trip
per day. Passenger
kms are:
(a) 2,81,250
(b) 1,87,500
(c) 5,62,500
(d) none of the above

Answer Key

1. (c) 2. (c) 3. (b) 4. (a) 5. (a) 6. (a) 7. (b) 8. (d) 9. (c) 10. (d)
11. (b) 12. (a) 13. (a) 14. (b) 15. (c) 16. (b) 17. (a) 18. (b) 19. (b) 20. (c)
21. (a) 22. (a) 23. (a) 24. (c) 25. (d) 26. (c) 27. (d) 28. (c) 29. (b) 30. (b)
31.