Course Introduction
Advanced Cost Accounting
Recommended Textbook
Cost Accounting Foundations and Evolutions 9th Edition by Kinney
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Sample Questions
Q1) Data that reflects future financial and non-financial outcomes is referred to as ____________________ indicators.
Answer: lead
Q2) The world has essentially become smaller because of A)improved technology.
B)trade agreements.
C)better communications systems.
D)all of the above.
Answer: D
Q3) The financial perspective of the balanced scorecard focuses on using an organization's intellectual capital to adapt to or influence customer needs and expectations.
A)True
B)False
Answer: False
Q4) Financial accounting is most concerned with addressing the needs of individual departments of the firm.
A)True
B)False
Answer: False
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Sample Questions
Q1) List and explain three types of quality costs.
Answer: Prevention costs--incurred to improve quality by precluding product defects and improper processing from occurring.
Appraisal costs--incurred to find mistakes not eliminated through prevention. Failure costs--can be internal (scrap and rework)or external (costs of returns,warranty costs).
Q2) Variable cost per unit remains constant within the relevant range. A)True
B)False
Answer: True
Q3) A cost that remains constant on a per unit basis within the relevant range is a ____________________ cost.
Answer: variable
Q4) The three stages of production for a manufacturing firm are _________________________,______________________________,and
Answer: raw materials,work in process,finished goods
Q5) Another name for inventoriable costs is ____________________ costs.
Answer: product
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Sample Questions
Q1) A short-run measure of activity that represents a firm's anticipated activity level for an upcoming period based upon expected demand is referred to as:
A)theoretical capacity
B)practical capacity
C)normal capacity
D)expected capacity
Answer: D
Q2) A firm presently has total sales of $100,000.If its sales rise,its
A)net income based on variable costing will go up more than its net income based on absorption costing.
B)net income based on absorption costing will go up more than its net income based on variable costing.
C)fixed costs will also rise.
D)per unit variable costs will rise.
Answer: A
Q3) Absorption costing is commonly used for internal reporting.
A)True
B)False
Answer: False
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Sample Questions
Q1) When a company is labor-intensive,the cost driver that is probably least significant would be
A)direct labor hours.
B)direct labor dollars.
C)machine hours.
D)cost of materials useD.
Q2) For a company that manufactures candy,how would the cost of sugar be classified?
\(\text {\underline{ Direct Costs} }\) \(\text {\underline{ Value-A dded Costs} }\)
A) Yes No
B) No Yes
C) Yes Yes
D) No No
Q3) Lead time minus production time is equal to A)idle time.
B)storage time.
C)non-value-added time.
D)value-added time.
Q4) In activity-based costing,how are cost drivers selected?
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Sample Questions
Q1) Williams Company
Williams Company has a job-order costing system and an overhead application rate of 120 percent of direct labor cost.Job #63 is charged with direct material of $12,000 and overhead of $7,200.Job #64 has direct material of $2,000 and direct labor of $9,000. Refer to Williams Company.What is the total cost of Job #64?
A)$10,800
B)$11,000
C)$21,800
D)$30,200
Q2) The journal entry to record normal spoilage specifically identified with a particular job includes a debit to Work in Process.
A)True
B)False
Q3) Overapplied overhead would result if
A)the plant were operated at less than normal capacity.
B)overhead costs incurred were less than costs charged to production.
C)overhead costs incurred were unreasonably large in relation to units produced.
D)overhead costs incurred were greater than costs charged to production.
Q4) Discuss actual costing,normal costing,and standard costing.
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Q1) A process costing system is used by a company that
A)produces heterogeneous products.
B)produces items by special request of customers.
C)produces homogeneous products.
D)accumulates costs by job.
Q2) Two methods of accounting for cost flows in process costing are ________ and _________.
Q3) Distinguish between discrete and continuous production losses and the method of accounting for these losses.
Q4) The number of completed units that could have been produced from the inputs applied is referred to as ___________.
Q5) When the cost of lost units must be assigned,and those same units must be included in an equivalent unit schedule,these units are considered
A)normal and discrete.
B)normal and continuous.
C)abnormal and discrete.
D)abnormal and continuous.
Q6) Discuss standard costing as used in conjunction with process costing.
Q7) Discuss process costing in a multi-department atmosphere.
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Q1) The difference between actual variable overhead and budgeted variable overhead based upon actual hours is referred to as the
Q2) A large labor efficiency variance is prorated to which of the following at year-end? WIP \( F G \)
Cost of Goods Sold \(\text {\underline{ Inventory} }\) \(\text {\underline{ Inventory} }\)
A)no no no
B)no yes yes
C)yes no no
D)yes yes yes
Q3) Why are fixed overhead variances considered noncontrollable?
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Sample Questions
Q1) The selling,general,and administrative expense budget is based on the ____ budget.
A)production B)sales
C)cash
D)purchases
Q2) It is least likely that a production budget revision would cause a revision in the A)capital budget.
B)cash budget.
C)purchases budget.
D)pro forma balance sheet.
Q3) A continuous budget is prepared by adding a new budget month as each month expires.
A)True
B)False
Q4) If revenues are intentionally underestimated during the budgeting process,______________________________ has been created.
Q5) Explain why managers might want to build slack into a budget.
Q6) What are some of the benefits of a well-prepared budget?
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Q1) The margin of safety is a key concept of CVP analysis.The margin of safety is the A)contribution margin rate.
B)difference between budgeted contribution margin and actual contribution margin.
C)difference between budgeted contribution margin and break-even contribution margin.
D)difference between budgeted sales and break-even sales.
Q2) ____ focuses only on factors that change from one course of action to another.
A)Incremental analysis
B)Margin of safety
C)Operating leverage
D)A break-even chart
Q3) In a multi-product environment,CVP analysis makes the assumption that a company's sales mix is constant.
A)True
B)False
Q4) A process that focuses only on factors that change from one course of action to another is referred to as _________.
Q5) The formula for margin of safety is _____________.
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Q1) Birmingham Corporation manufactures batons.Birmingham can manufacture 300,000 batons a year at a variable cost of $750,000 and a fixed cost of $450,000.Based on Birmingham's predictions,240,000 batons will be sold at the regular price of $5.00 each.In addition,a special order was placed for 60,000 batons to be sold at a 40 percent discount off the regular price.The unit relevant cost per unit for Birmingham's decision is
A)$1.50.
B)$2.50.
C)$3.00.
D)$4.00.
Q2) In evaluating alternative courses of action,a manager should select the alternative that provides the highest incremental benefit to the company.
A)True
B)False
Q3) An ad hoc sales discount is
A)an allowance for an inferior quality of marketed goods.
B)a discount that an ad hoc committee must decide on.
C)brought about by competitive pressures.
D)none of the above.
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Q1) Monetary allocation measures recognize the revenue generating ability of each product in a joint process.
A)True
B)False
Q2) When allocating joint process cost based on tons of output,all products will
A)be salable at split-off.
B)have the same joint cost per ton.
C)have a sales value greater than their costs.
D)have no disposal costs at the split-off point.
Q3) Joplin Corporation produces three products from a common manufacturing process.The total joint cost of producing 2,000 pounds of Product A;1,000 pounds of Product B;and 1,000 pounds of Product C is $7,500.Selling price per pound of the three products are $15 for Product A;$10 for Product B;and $5 for Product C.Joint cost is allocated using the sales value method.
Required:
a.Compute the unit cost of Prochuct A if all three products are main products
b. Compute the unit cost of Prochict A if Products A and B are main products and Product C is a by-prochuct for which the cost reduction method is used
Q4) Sales revenue at split-off less disposal costs equals ______.
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Sample Questions
Q1) The costs generated by the cost management system are used to A)assess product/service profitability.
B)establish prices for products with significant competition.
C)determine underlying reasons for variations from standards. D)all of the above.
Q2) It is not necessary to be familiar with an organization's mission when designing a cost management system.
A)True
B)False
Q3) Which of the following is a primary element of a cost management system?
\(\text {\underline{ Information}
}\) \(\text {\underline{ Reporting}
}\) \(\text {\underline{ Motivation}
}\) \(\text {\underline{ Evaluation} }\)
A)yes yes yes yes
B)no yes yes no
C)yes no no yes
D)yes yes yes no
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Q1) All of the following objectives are reasons that service department allocations can motivate managers except to
A)instill a consideration of support costs in production managers.
B)encourage production managers to help service departments control costs.
C)encourage the usage of certain services.
D)determine divisional profitability.
Q2) In an internal transfer,the selling division records the event by crediting
A)Accounts Receivable and Cost of Goods Sold.
B)Cost of Goods Sold and Finished Goods.
C)Finished Goods and Accounts Receivable.
D)Finished Goods and Intracompany Sales.
Q3) A rational and systematic allocation base for service department costs should reflect the cost accountant's consideration of all of the following except
A)the ability of revenue-producing departments to bear the allocated costs.
B)the benefits received by the revenue-producing department from the service department.
C)a causal relationship between factors in the revenue-producing department and costs incurred in the service department.
D)all of the above are considerations.
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Sample Questions
Q1) Thunder Sports Enterprises
The Basketball Division of Thunder Sports Enterprises reported the following financial data for the year: \(\begin{array}{ll}
\text { Assets available for use } & \$ 1,200,000 \text { Book Value } \\ & \$ 1,500,000 \text { Market } V \text { alu } \\
\text { Residual income } & \$ 108,000\\
\text { Return on innvestment } & 14\% \end{array}\)
Refer to Thunder Sports Enterprises.What was the target rate of return for Thunder Sports Enterprises?
A)4%
B)5%
C)7%
D)9%
Q2) What distinct advantage does a return on investment measure have over a residual income measure? Explain.
Q3) Define residual income.Evaluate residual income as a measure of performance.
Q4) What are some common problems encountered in determining ROI?
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Sample Questions
Q1) The payback method typically assumes that all cash inflows are reinvested to yield a return equal to
A)the discount rate.
B)the hurdle rate.
C)the internal rate of return.
D)zero.
Q2) Postinvestment audits can provide feedback of the accuracy of original cash flow estimates.
A)True
B)False
Q3) For an annuity due,the first cash flow occurs at the end of the period.
A)True
B)False
Q4) Depreciation expense provides a tax shield against the payment of taxes.
A)True
B)False
Q5) When using the risk-adjusted discount rate method,a manager increases the rate used for discounting future cash outflows.
A)True
B)False
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Sample Questions
Q1) The maximum allowable expenditure is the A)appropriation.
B)allowance.
C)allocation.
D)committed fixed cost.
Q2) What are the usual sources for cash in an organization?
Q3) Careful analysis of the capital budget is an important control activity for A)variable costs.
B)discretionary costs.
C)committed costs.
D)period costs.
Q4) What are the differences between committed fixed costs and discretionary fixed costs?
Q5) Which of the following strategies is used to deal with uncertainty related to price risk?
A)Statistical analysis
B)Cost restructuring
C)Hedging
D)Insurance
Q6) Discuss the various elements of the cost control process.
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Q1) Grade refers to one of many quality levels that a product or service has relative to the inclusion or exclusion of certain characteristics to satisfy customer needs.
A)True
B)False
Q2) The balanced scorecard can be used to provide information on quality in an organization.
A)True B)False
Q3) Grade refers to a product meeting the highest number of a customer's needs at the lowest possible cost.
A)True
B)False
Q4) The addition or removal of product or service characteristics to satisfy additional needs,especially price,reflect the ____ of a product or service.
A)value
B)grade
C)quality
D)durability
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Q1) A decrease in the lead time would reduce the A)order point.
B)safety stock.
C)economic order quantity.
D)ordering costs.
Q2) A company annually consumes 10,000 units of Part C.The carrying cost of this part is $2 per year and the ordering costs are $100.The company uses an order quantity of 500 units.By how much could the company reduce its total costs if it purchased the economic order quantity instead of 500 units?
A)$500
B)$2,000
C)$2,500
D)$0
Q3) An investment in inventory yields a return when it is sold to a third party.
A)True
B)False
Q4) Backflush costing requires fewer allocations than traditional accounting methods.
A)True
B)False
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Q1) If a strategic alliance is to function effectively,all parties involved must feel that they are being fairly treated.
A)True
B)False
Q2) In a pollution prevention system,managers produce the pollutant,and then clean it up.
A)True
B)False
Q3) In an open-book management setting,financial information is often shared with employees who have little knowledge of accounting concepts.
A)True
B)False
Q4) ____ is a way of teaching accounting concepts to financially unsophisticated employees.
A)Data mining
B)Open-book management
C)Game playing
D)BPR
Q5) Define a strategic alliance.
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