Advanced Cost Accounting Final Exam
Course Introduction
Advanced Cost Accounting delves into the sophisticated techniques and concepts used in the measurement, analysis, and management of costs within organizations. This course builds upon foundational cost accounting principles to explore topics such as activity-based costing, standard costing, cost-volume-profit analysis, budgeting, variance analysis, and the strategic use of cost information for decision-making. Emphasizing both manufacturing and service environments, the course equips students with tools for planning, controlling, and evaluating business operations in order to enhance organizational performance and competitiveness. Through case studies and practical exercises, students develop analytical skills necessary for addressing contemporary cost management challenges.
Recommended Textbook
Cost Accounting A Managerial Emphasis 7th Canadian Edition by Charles T. Horngren
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Page 2
Chapter 1: The Accountants Vital Role in Decision Making
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Sample Questions
Q1) Companies with a strategy of low prices compete on their ability to offer unique new products or services that are priced higher than their competition.
A)True
B)False
Answer: False
Q2) Financial accounting
A)focuses on the future and includes activities such as preparing next year's operating budget.
B)must comply with IFRS/ASPE.
C)reports include detailed information on the various operating segments of the business such as product lines or departments.
D)is prepared for the use of department heads and other employees.
E)is primarily concerned with profitability analysis.
Answer: B
Q3) Control includes the performance evaluation of personnel and operations.
A)True
B)False
Answer: True
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3
Chapter 2: An Introduction to Cost Terms and Purposes
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Sample Questions
Q1) What is Frazer's cost of goods manufactured?
A)$536,000
B)$496,000
C)$480,000
D)$476,000
E)$512,000
Answer: C
Q2) Calculate this year's operating income if the company plans to produce and sell 50,000 units.
A)$50,000
B)$0
C)$<250,000>
D)$<550,000>
E)$250,000
Answer: A
Q3) Products,services,departments,and customers may be cost objects.
A)True
B)False
Answer: True
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Page 4
Chapter 3: Cost-Volume-Profit Analysis
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Sample Questions
Q1) The Franscioso Company contribution margin ratio is
A)1.102:1.
B)1.425:1.
C)0.298:1.
D)0.637:1.
E)0.702:1.
Answer: E
Q2) What is the "operating income" assuming 250 people attend and option two is chosen?
A)$7,000
B)$2,900
C)$2,750
D)$4,620
E)$5,080
Answer: D
Q3) Margin of safety measures the difference between budgeted or actual revenues,and break-even revenues.
A)True
B)False Answer: True
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Chapter 4: Job Costing
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Sample Questions
Q1) What is the total manufacturing cost of Job 892 using actual costing?
A)$9,900
B)$12,300
C)$12,080
D)$12,255
E)$12,075
Q2) Which of the following would be appropriately costed using a process costing system?
A)oil refining
B)a law firm managing individual legal cases
C)assembly of individual aircraft by Bombardier
D)movies produced by Lions Gate Entertainment
E)audit engagements performed by KPMG
Q3) What is the budgeted indirect cost allocation rate per unit of the allocation base for the professional liability insurance?
A)$16.67
B)$25.00
C)$1.67
D)$26.67
E)$12.50
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Chapter 5: Activity-Based Costing and Management
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Sample Questions
Q1) Activity-based costing information
A)should be used when services place similar demands on resources.
B)usually results in peanut butter costing.
C)will yield inaccurate cost numbers when products are similar.
D)helps management reduce costs along the value chain.
E)is best used when overhead costs are minimal.
Q2) Homogeneous cost pools and the choice of cost-allocation bases are not tied to the cost hierarchy.
A)True
B)False
Q3) Which of the following is NOT an activity under an ABC system?
A)an event
B)a task
C)a unit of work
D)a process
E)indirect cost
Q4) One of the aspects of ABM is eliminating activities that do not add value.
A)True
B)False
Q5) List four ways that activity-based management can be effective.
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Chapter 6: Master Budget and Responsibility Accounting
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Sample Questions
Q1) The master budget reports a large amount of nonfinancial data from various value chain functions.
A)True
B)False
Q2) Few costs are clearly under the sole influence of one manager.
A)True
B)False
Q3) On the 2015 budgeted income statement,what amount will be reported for cost of goods sold?
A)$91,500
B)$105,000
C)$90,000
D)$88,500
E)$72,000
Q4) The priority approach to budgeting is an incremental approach.
A)True
B)False
Q5) List and describe the four approaches to budgeting.
Q6) Describe the concept of kaizen budgeting.
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Chapter 7: Flexible Budgets,variances,and Management
Control: I
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Sample Questions
Q1) Al's Boxes manufactures corrugated boxes.The standard materials allowed for each box is 0.5 kilograms of paper,which has a standard cost of $5 per kilogram.During April 10,000 kilograms were used to manufacture 19,500 boxes.The actual materials cost was $5.25 per kilogram.
Required:
a.Determine the materials rate variance.
b.Determine the materials efficiency variance.
Q2) June's direct material rate variance is
A)$980 unfavourable.
B)$1,000 favourable.
C)$680 favourable.
D)$980 favourable.
E)$1,000 unfavourable.
Q3) Management by exception is the practice of concentrating on
A)the master budget variances.
B)on areas where performance fails to meet expectations.
C)favourable variances.
D)unfavourable variances.
E)exceptional results.
Q4) What is benchmarking,and how is it useful to a company?
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Chapter 8: Flexible Budgets,variances,and Management
Control: II
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Sample Questions
Q1) All Clean of Alberta manufactures individual shampoos for hotel/motel clientele.The fixed manufacturing overhead costs for 2016 will total $576,000.The company uses good units finished for fixed overhead allocation and anticipates 300,000 units of production.Good units finished average 92 percent of total units produced.During January,20,000 units were produced.Actual fixed overhead cost per good unit averaged $2.82 in January.
Required:
a.Determine the fixed overhead rate for 2016.
b.Determine the fixed overhead static-budget variance for January.
c.Determine the fixed overhead production-volume variance for January.
d.Determine the fixed overhead rate variance for January.
Q2) Calculate the efficiency variance for variable setup overhead costs.
A)$150 favourable
B)$114 favourable
C)$264 unfavourable
D)$264 favourable
E)$250 favourable
Q3) Explain two concerns when interpreting the production-volume variance as a measure of the economic cost of unused capacity.
Q4) How can a standard costing system be useful in negotiating new sales?
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Chapter 9: Income Effects of Denominator Level on Inventory Valuation
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Sample Questions
Q1) The main difference between variable costing and absorption costing is the way in which fixed manufacturing costs are accounted.
A)True
B)False
Q2) Which of the following is correct concerning variable vs absorption costing?
A)Absorption costing income statement classifies fixed costs as period costs.
B)The absorption costing income statement combines costs by cost behaviour.
C)Absorption costing income statements need to differentiate between variable and fixed costs.
D)The difference in operating income between the two approaches is captured by the difference between fixed manufacturing costs in ending inventory minus fixed manufacturing costs in opening inventory.
E)The difference in operating income between the two approaches is captured by the difference between fixed manufacturing costs in ending inventory minus variable manufacturing costs in ending inventory.
Q3) Unused capacity is considered wasted resources and the result of poor planning.
A)True
B)False
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Chapter 10: Analysis of Cost Behaviour
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Sample Questions
Q1) Discuss how a manufacturer of personal computers such as Dell Computer can benefit from the introduction of a quality improvement program.
Q2) List and briefly describe the five steps in estimating a cost function using quantitative analysis.
Q3) What are the estimated total costs if Penny's expects to sell 3,000 units next year?
A)$896,000
B)$678,000
C)$1,259,000
D)$269,000
E)$542,000
Q4) A factor where the change in the factor causes a change in the speed with which an activity is undertaken is referred to as
A)a bottleneck.
B)value added time.
C)opportunity cost.
D)cycle time.
E)a time driver.
Q5) Describe the two assumptions upon which managers often estimate cost functions.
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Chapter 11: Decision Making and Relevant Information
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Sample Questions
Q1) When making decisions,it is best to use
A)average costs.
B)fixed costs that would be incurred.
C)unit cost,rather than total cost.
D)variable costs that would be incurred.
E)relevant costs.
Q2) The feedback obtained in the decision process cannot affect
A)future predictions.
B)the prediction method.
C)the decision model.
D)implementation.
E)past performance.
Q3) Which of the following is TRUE concerning opportunity costs?
A)They are incorporated into formal financial accounting reports.
B)They entail cash receipts.
C)They entail cash disbursements.
D)They require accounting journal entries.
E)They are relevant for the make/buy decision.
Q4) Explain why sunk costs are not considered relevant when choosing among alternatives.
Page 13
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Chapter 12: Pricing Decisions, product Profitability
Decisions, and Cost Management
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Sample Questions
Q1) What is the target operating income?
A)$240,000
B)$360,000
C)$200,000
D)$192,000
E)$400,000
Q2) Target pricing includes: (1)developing a needed product, (2)choosing a target price, (3)deriving a target cost per unit,and (4)performing cost analysis.
A)True
B)False
Q3) The strategy in which companies systematically evaluate all aspects of the value-chain business functions with the objective of reducing costs to meet customers' needs is referred to as
A)full costing.
B)value engineering.
C)designed-in costs.
D)value analysis.
E)cost incurrence.
Q4) What is the primary reason a firm would adopt target costing?
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Chapter 13: Strategy,balanced Scorecard,and Profitability Analysis
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Sample Questions
Q1) Describe three key components in doing a strategic analysis of operating income.
Q2) What is the direct manufacturing labour partial productivity,assuming 20,000 units were produced during the year and 80,000 direct manufacturing labour-hours were used?
A)0.25 unit per direct manufacturing labour-hour
B)0.50 unit per direct manufacturing labour-hour
C)0.75 unit per direct manufacturing labour-hour
D)4.00 unit per direct manufacturing labour-hour
E)1.25 unit per direct manufacturing labour-hour
Q3) Successful reengineering involves all of the following EXCEPT
A)cutting across functional lines to focus on the entire business process.
B)redefining the roles and responsibilities of employees.
C)using information technology.
D)entering new geographic markets.
E)improving customer satisfaction.
Q4) Partial productivity equals quantity of output produced divided by quantity of individual input used.
A)True
B)False
Q5) What is the primary purpose of the balanced scorecard?
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Chapter 14: Period Cost Allocation
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Sample Questions
Q1) Assuming that fixed and variable costs are allocated according to capacity used then the fixed and variable costs allocated to the Barbell Department will be
A)$30,000 and $50,000,respectively.
B)$30,000 and $60,000,respectively.
C)$30,000 and $75,000 respectively.
D)$40,000 and $60,000,respectively.
E)$60,000 and $40,000,respectively.
Q2) Which of the following departments is least likely to be a support department for a boat manufacturing company?
A)personnel
B)moulding and assembly
C)data processing
D)accounting
E)purchasing
Q3) The single-rate method makes a distinction between fixed and variable costs.
A)True
B)False
Q4) What is a "common cost"? What are two methods that a manager can use to allocate common costs to two or more users?
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Chapter 15: Cost Allocation: Joint Products and Byproducts
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Q1) The estimated net realizable method allocates joint costs on the basis of A)expected final sales value less separable costs of production and marketing.
B)value added after the splitoff point.
C)sales value less value added after the splitoff point.
D)revenue less all direct manufacturing costs after splitoff point.
E)relative numbers of physical units of each product.
Q2) What are the physical volume proportions to allocate joint costs for Mr.DirtOut and Mr.SinkClean,respectively?
A)59.00% and 41.00%
B)60.82% and 39.18%
C)39.18% and 60.82%
D)59.79% and 40.21%
E)41.00% and 59.00%
Q3) What will be the total incremental benefit or (loss)from all potential sales of processing the paper beyond the splitoff point?
A)$251,000
B)$281,000
C)$513,000
D)$311,000
E)$232,000
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Chapter 16: Revenue and Customer Profitability Analysis
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Sample Questions
Q1) Which item is NOT a category in the customer cost hierarchy?
A)customer output unit-level costs
B)customer batch-level costs
C)distribution-channel costs
D)corporate-sustaining costs
E)product-sustaining cost
Q2) Which of the following statements is TRUE?
A)Joint product allocation results in more accurate assignment of revenues to products than does revenue allocation.
B)Revenue allocation results in more accurate assignment of revenues to products than does revenue tracing.
C)Revenue tracing results in more accurate assignment of revenues to products than does revenue allocation.
D)Revenue allocation results in more accurate assignment of revenues to products than does joint product allocation.
E)Joint product allocation results in more accurate assignment of revenues to products than does revenue tracing.
Q3) Why would a manager perform customer-profitability analysis?
Q4) What actions might be taken with an unprofitable customer?
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Chapter 17: Process Costing
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Sample Questions
Q1) How many cushions were started during May at Carnival Furniture?
A)60,000 cushions
B)120,000 cushions
C)140,000 cushions
D)180,000 cushions
E)223,000 cushions
Q2) In process costing only the weighted average and FIFO methods are IFRS/ASPE compliant.
A)True
B)False
Q3) Which of the following is NOT one of the procedures in process costing?
A)summarize the flow of physical units of output
B)assign costs to equivalent units based on their percentage of completion
C)compute equivalent unit costs
D)summarize total costs to account for
E)assign costs to completed units
Q4) Operating personnel must be able to estimate the percentage of work-in-process completed in process costing.
A)True
B)False
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Chapter 18: Spoilage, rework, and Scrap
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Q1) Assuming Hawk uses the weighted-average method for process costing,the equivalent units for direct materials and conversion for October are
A)89,000 units;88,100 units.
B)87,000 units;93,300 units.
C)82.000 units;91.100 units.
D)99,000 units;98,100 units.
E)92,000 units;90,200 units.
Q2) When rework is normal and NOT attributable to a specific job,the costs of rework are charged to manufacturing overhead and are spread,through overhead allocation,over all jobs.
A)True
B)False
Q3) One of the major aspects of accounting for scrap is inventory costing,which includes when and how scrap affects operating income.
A)True
B)False
Q4) There are two alternative points in time for recognizing scrap in the accounting records.What are these two points in time? Explain why a company might choose one over the other.
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Chapter 19: Inventory Cost Management Strategies
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Sample Questions
Q1) Primary components that manufacturers would use to evaluate suppliers under a just-in-time system would include all of the following EXCEPT
A)on-time delivery.
B)production lead time.
C)purchase price.
D)quality costs.
E)long-term partnerships.
Q2) Companies implementing just-in-time production systems manage inventories by minimizing or eliminating them.
A)True
B)False
Q3) You are the new controller at Ralston Industries and you have noticed that the company seems to carry a lot of inventory,both in direct materials and in finished goods.At a recent management meeting,you raised this observation.The managers agreed with your observation but stated that it was company policy to carry large inventories.
Required:
Provide three reasons these managers might offer in support of carrying large inventories?
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Page 21
Chapter 20: Capital Budgeting: Methods of Investment Analysis
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Sample Questions
Q1) Opportunity cost is a cost of capital for which of the following sources of funds?
A)common shares
B)short-term debt sold at a discount
C)long-term debt
D)internally generated cash flow
E)preferred shares
Q2) In NPV analysis,if the IRR exceeds the RRR
A)the project should be rejected.
B)the NPV will be negative (when discounted at the IRR).
C)the NPV is positive when project cash flows are discounted at the IRR.
D)the NPV is positive when project cash flows are discounted at the RRR.
E)the NPV is negative when project cash flows are discounted at the RRR.
Q3) Cost systems with an exclusive period-by-period focus are more likely to identify project costs over multiple periods.
A)True
B)False
Q4) The payback method allows for managers to highlight liquidity.
A)True
B)False
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Chapter 21: Transfer Pricing and Multinational Management
Control
Systems
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Q1) The general guideline for setting a minimum transfer price adds the full cost plus the opportunity cost to arrive at the minimum transfer price.
A)True
B)False
Q2) What is the Production Division's operating income per 200 litres of oil reported under the 175% of variable costs method?
A)$1,500
B)$880
C)$100
D)$(100)
E)$1,200
Q3) If the product sold between divisions has no intermediate market,the opportunity cost of supplying the product internally is the variable cost of the product.
A)True B)False
Q4) Suboptimal decision making is also called congruent decision making. A)True B)False
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Chapter 22: Multinational Performance Measurement and Compensation
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Q1) An important consideration in designing compensation arrangements is the tradeoff between creating incentives,and reducing risk.
A)True
B)False
Q2) Using net book value when calculating return on investment encourages managers whose performance is measured by this metric to replace assets.
A)True
B)False
Q3) The first step in designing accounting based performance measures is to choose performance measures that align with top management's financial goals.
A)True
B)False
Q4) What is the Tractor Division's return on sales?
A)0.10
B)0.12
C)0.15
D)0.20
E)0.25
Page 24
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