Advanced Cost Accounting
Mock Exam
Course Introduction
Advanced Cost Accounting delves into the complex methodologies and tools essential for effective cost management and strategic decision-making within modern organizations. The course covers advanced topics such as activity-based costing, standard costing, variance analysis, joint and by-product costing, and process costing systems. Emphasis is placed on the integration of cost data with budgeting, performance evaluation, and control systems. Students will analyze real-world case studies, explore the impact of emerging technologies on cost accounting practices, and develop the skills required to provide insightful financial information that supports organizational strategy, profitability, and efficiency.
Recommended Textbook
Cost Management A Strategic Emphasis 5th Edition by Edward Blocher
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Page 2
Chapter 1: Cost Management and Strategy
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Sample Questions
Q1) With the enactment of the Sarbanes-Oxley Act of 2002,all public companies are now required by the SEC to disclose whether or not the company has:
A)An audit committee.
B)Human resources guidelines.
C)A code of ethics.
D)A management compensation plan.
Answer: C
Q2) The competitive strategy of differentiation requires that a product or service must be:
A)Always readily available.
B)Price competitive.
C)Produced at the lowest possible cost.
D)Unique in some important way,in terms of features,innovation,service or quality.
E)Marketed in different ways to different groups.
Answer: D
Q3) Required: Identify two of the most successful companies or organizations in today's business environment,in your opinion.Explain why they are so successful.
Answer: There are a number of possible answers,including:
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Q1) The declining value of the U.S.dollar relative to other currencies in recent years means that:
A)U.S.exporters will face a greater challenge in exporting U.S.-made products.
B)U.S.firms will be eager to buy foreign products.
C)U.S.firms will be less profitable.
D)U.S.exporters will have a temporary advantage over other countries in foreign trade. Answer: D
Q2) During the strengths and weaknesses portion of a firm's SWOT analysis,which of the following would not be discovered?
A)The firm's method of product distribution was not very efficient.
B)Through continued research and development,the firm's products were state-of-the-art.
C)Due to a lack of barriers to entry into the industry,several new competitors were beginning to enter the market.
D)The production process needed to be reengineered to reduce unnecessary scrap.
E)The firm's employees are trained in new manufacturing methods each month.
Answer: C
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Page 4
Chapter 3: Basic Cost Management Concepts
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Sample Questions
Q1) The additional cost incurred as the cost driver increases by one unit is:
A)Average cost.
B)Controllable cost.
C)Variable cost.
D)Unit cost.
Answer: C
Q2) In order to assure that accounting information is accurate and to avoid potentially costly mistakes in the decision making process,firms should:
A)Design and monitor an effective system of internal accounting controls.
B)Have the internal auditors and controller each check the accounting data before it is released to management.
C)Purchase an accounting system that is designed specifically for the industry in which the firm conducts business.
D)Develop and implement a code of ethics.
Answer: A
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Chapter 4: Job Costing
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Sample Questions
Q1) Chen Textile Company's Job A had normal spoilage with the estimated disposal selling price of $500 in March attributable to this particular job;its job B had normal spoilage with the estimated cost of $300 from the general production process failure and abnormal spoilage of $100.The company also incurred scrap due to a specific job and sold it for $60 cash.It also sold the scrap common to all jobs for $110 cash in March. Required:
(1)Make the necessary journal entries to record normal and abnormal spoilage costs.
(2)Make the necessary journal entries to record both types of scrap sold.
Q2) Factory overhead can be over- or under-applied because:
A)Some actual factory overhead cost varies from year to year.
B)Most actual factory overhead costs are within the budget.
C)Production volume may vary from expected volume.
D)Actual costing is used.
Q3) Ramirez Company uses a predetermined overhead rate.Overhead for the next twelve months is estimated to be $500,000.Emily applies overhead as a percentage of direct labor cost.Direct labor costs are estimated to be $800,000 for the next year.During the year actual direct labor costs amounted to $700,000 and the actual overhead was as follows:
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Chapter 5: Activity-Based Costing and Customer
Profitability Analysis
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Sample Questions
Q1) Service and not-for-profit organizations often:
A)Have ABC systems which are similar to those of manufacturing firms.
B)Do not have changeable outputs.
C)Are unable to benefit from ABC costing.
D)Do not have ABC systems which are similar to those of manufacturing firms.
Q2) Pairing Company has the following cost drivers identified as A through F for determining product manufacturing overhead costs.
(A)Number of pieces of equipment
(B)Number of direct material purchase orders
(C)Number of production runs
(D)Square feet of warehouse space
(E)Number of machine hours
(F)Square feet of factory space
In the space provided next to each of the following activity cost pool,indicate the most appropriate cost driver for the cost pools.
Q3) The controller for Ocean Sailboats Inc. ,a company which uses an automated process to make sailboats,established the following overhead cost pools and cost drivers:
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Chapter 6: Process Costing
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Sample Questions
Q1) The fifth and final step in determining process costs is:
A)Analyzing physical flow of production units.
B)Calculating equivalent units of production.
C)Determining total cost for each manufacturing element.
D)Computing the cost per equivalent unit.
E)Assigning cost to completed and uncompleted production.
Q2) Conversion costs in a process cost system include:
A)Direct materials and direct labor.
B)Direct labor and manufacturing overhead.
C)Direct materials and manufacturing overhead.
D)Manufacturing overhead and selling,general & administrative expenses.
Q3) Which of the following is not one of the key steps in determining process costs?
A)Assigning the total manufacturing costs to the units completed and transferred out and the units of work in process at the end of the period.
B)Analyzing the physical flow of production units.
C)Computing the cost per equivalent unit for each manufacturing cost element.
D)Calculating equivalent units of production for all manufacturing cost elements.
E)Determining the cost pools and cost objects.
Q4) Each of the following cases is independent.Use the FIFO method.
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Chapter 7: Cost
Allocation: Departments, Joint Products, and By-Products
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Sample Questions
Q1) Taylor Inc.produces joint products A,B,and C from a joint process.Information concerning a batch produced in May at a joint cost of $110,000 was as follows:
Q2) "What's the big fuss about learning three different methods of cost allocation for joint products? The total cost doesn't change,and the real question that needs answering is whether to further process joint products or sell right away.Besides,our firm uses JIT inventory,so there aren't any ending inventories to cost."
Required: Comment on these ideas.
Q3) The most effective basis for cost allocation exists when which one of the following can be determined?
A)Cost shifting.
B)Benefit received.
C)Equity share.
D)Cause and effect relationship.
E)Ability to bear.
Q4) The Chapman Manufacturing Company has two service departmentsmanufacturing support and facilities management,and two production departmentsassembly and packing/shipping.The distribution of each service department's efforts to the other departments is shown below:
Page 9
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Chapter 8: Cost Estimation
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Sample Questions
Q1) Which of the following five steps (out of six)of cost estimation is out of order?
A)Step 1: Define the cost object to be estimated.
B)Step 2: Determine the cost driver(s).
C)Step 3: Collect relevant data on the cost of the cost object and the cost driver.
D)Step 4: Evaluate the accuracy of the cost estimate.
E)Step 5: Graph the data.
Q2) Nellibell's Café bakes croissants that are sold to local restaurants and grocery stores in the Columbia,South Carolina area.When 600 croissants are baked,the average cost is $0.70.When 720 croissants are baked,the average cost is $0.65.What is the total cost when 670 croissants are baked?
A)$568.
B)$588.
C)$448.
D)$532.
E)$500.
Q3) Learning Curves Moss Point Manufacturing recently completed and sold an order of 50 units that had the following costs:
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Chapter 9: Profit Planning: Cost-Volume-Profit Analysis
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Sample Questions
Q1) The CVP model assumes that over the relevant range of activity:
A)Only revenues are linear.
B)Only revenues and fixed costs are linear.
C)Only revenues and variable costs are linear.
D)Revenues and total costs are linear.
Q2) CVP analysis using activity-based costs will tend to shift cost from fixed to variable classifications,resulting in:
A)Lower breakeven sales.
B)Higher breakeven sales.
C)Breakeven sales can be higher or lower,depending on batch size.
D)A higher contribution margin per unit.
E)A lower contribution margin per unit.
Q3) Label Corp.recorded sales of $2,235,245.The company's breakeven is $1,650,000 and margin of safety is 27%.What sales are needed to increase Label Corp.'s margin of safety ratio to 38%?
A)$2,277,000.
B)$2,661,290.
C)$2,932,640.
D)$3,024,050.
Solve: (X-$1,650,000)/X = .38;X = $2,661,290
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Chapter 10: Strategy and the Master Budget
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Sample Questions
Q1) List some external factors that need to be considered by a budget unit in preparing an initial budget proposal.
Q2) Which of the following best describes the process of sales forecasting?
A)Multiple sales forecasting tools are available.
B)Trend analysis cannot be used for sales forecasting.
C)Econometric models cannot be used for sales forecasting because of their inherent complexity.
D)Sales forecasting works best with a simple visual plotting of past data on a graph.
Q3) A plan of dollar amounts to be spent on long-term projects is called a:
A)Cash budget.
B)Capital budget.
C)Rolling budget.
D)Sales budget.
E)Rolling financial forecast.
Q4) Ardan Company's sales budget showed the following projections for the coming year:
Q5) Explain benefits of implementing a master budgeting system.
Q6) List factors that should be considered in sales forecasting.
Q7) What is zero-base budgeting (ZBB)? How is ZBB implemented in practice?
Page 12
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Chapter 11: Decision Making With a Strategic Emphasis
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Sample Questions
Q1) In deciding whether to manufacture a part or buy it from an outside vendor,a cost that is irrelevant to the short-run decision is:
A)Direct labor.
B)Variable overhead.
C)Fixed overhead that will be avoided if the part is bought from an outside vendor.
D)Fixed overhead that will continue even if the part is bought from an outside vendor.
Q2) Which one of the following is most descriptive of strategic analysis?
A)Quantitative.
B)Customer focus.
C)Short-term focus.
D)Individual product focus.
E)Not linked to the firm's strategy.
Q3) Lester-Smith Company manufactures three wood construction components: wood trusses,wood floor joists,and beams.The plant is operating at full capacity.It can produce 200 trusses,1,000 joists,and 600 beams per month and sells everything it produces.The monthly revenues and expenses for the three products are
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Chapter 12: Strategy and the Analysis of Capital Investments
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Q1) A composite of the cost of various sources of funds comprising a firm's capital structure is its:
A)Internal rate of return.
B)Weighted-average cost of capital.
C)Book rate of return.
D)Modified internal rate of return (MIRR).
E)Accounting rate of return,after tax.
Q2) The Analytic Hierarchy Process (AHP)is:
A)A single-criterion decision technique that can combine qualitative and quantitative factors in the overall evaluation of decision alternatives.
B)A multi-criteria decision technique that can combine qualitative and quantitative factors in the overall evaluation of decision alternatives.
C)A technique that does not use qualitative factors in the evaluation of decision alternatives.
D)A technique that only uses qualitative factors in the evaluation of decision alternatives.
E)Not useful in choosing between two mutually exclusive capital budgeting projects.
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Chapter 13: Cost Planning for the Product Life Cycle: Target
Costing,Theory of Constraints,and Strategic Pricing
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Sample Questions
Q1) Target cost can be defined as:
A)Manufacturing cost - sales price.
B)Competitive price - desired profit.
C)Desired profit - market price.
D)Target price - manufacturing cost.
Q2) To achieve the target cost,Lens Care plans to reduce materials handling costs.How many parts must be removed from B-13 in order to achieve the target cost for B-13(round up to whole units)?
A)11
B)46
C)34
D)28
E)53
Q3) Excel Manufacturing has received an order for 5,000 units of its only product,Excel-A.Excel is considering a variety of methods to determine the price of the order.Some key information about Excel follows:
Q4) Bell Company produces and sells three products (A,B,C).The following data relate to the three products.
Q5) Life Cycle Costing Income Statements
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Chapter 14: Operational Performance Measurement: Sales
and Direct-Cost Variances, and the Role of Nonfinancial
Performance Measures
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Sample Questions
Q1) A favorable price variance for direct materials indicates that:
A)Lower-quality materials were purchased.
B)The materials standard is likely out of date.
C)A lower price than expected was paid for the materials.
D)Less material was used in production this period than should have been used.
E)There will most likely be an unfavorable materials efficiency (quantity)variance.
Q2) Joe Malay received the following report on the Division's operation for the month of August:
Direct labor rate variance = $25,000 unfavorable.Direct labor efficiency variance = $70,000 (?)The standard calls for 3 direct labor hours per unit of output at $28 per labor hour.The standard direct labor hours for the units manufactured is 20 percent more than the total direct labor hours actually worked in August.What was the average direct labor hourly rate the Division paid in August?
A)$24.00.
B)$26.00.
C)$28.00.
D)$30.00.
E)$31.25.
Page 16
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Chapter 15: Operational Performance Measurement:
Indirect-Cost Variances and Resource- Capacity Management
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Q1) A deviation from standard because of the failure to include one or more relevant variables,or the inclusion of the wrong or irrelevant variables in the standard-setting process is an example of a(n):
A)Random error.
B)Prediction error.
C)Implementation error.
D)Modeling error.
E)Measurement error.
Q2) The difference between actual overhead costs incurred during the period and the overhead in the flexible budget based on the output for the period is called the:
A)Total overhead spending variance.
B)Total overhead efficiency variance.
C)Production-volume variance.
D)Overhead flexible-budget variance.
E)Total overhead variance.
Q3) You are provided with the following summary of overhead-related costs for the most recent accounting period for a company that uses a single overhead account,Factory Overhead,into which it records both actual and standard overhead costs during the period:
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Chapter 16: Operational Performance Measurement:
Further Analysis of Productivity and Sales
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Q1) Broha Company manufactured 1,500 units of its only product during 2011.The inputs for this production are as follows:
450 pounds of Material A at a cost of $1.50 per pound
300 pounds of Material H at a cost of $2.75 per pound
300 direct labor hours at $20 per hour
The firm manufactured 1,800 units of the same product in 2010 with the following inputs:
500 pounds of Material A at a cost of $1.20 per pound
360 pounds of Material H at a cost of $2.50 per pound
400 direct labor hours at $18 per hour
In 2010,the partial financial productivity of Material H is: (round all calculations to two significant digits)
A)0.20.
B)0.50.
C)2.00.
D)5.00.
E)6.00.
Q2) HQ Company had two products code named Q and R.The firm had the following budget for the period just ended:
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Chapter 17: The Management and Control of Quality
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Q1) In a lean accounting system,costs are assigned to products by:
A)Tracing costs to product value streams as much as possible.
B)Allocating common costs to various individual products.
C)Directly tracing costs to a single product as much as possible.
D)Assigning the appropriate standard costs to individual value streams.
Q2) All of the following approaches can be used to set quality-related performance expectations except:
A)Taguchi quality loss function (QLF)analysis.
B)Six sigma.
C)Goalpost conformance.
D)Absolute conformance.
E)Ideal Performance.
Q3) Six Sigma is one approach for setting quality expectations for a given process or output.As pointed out in your text,the term "Six Sigma" comes from statistics: in a normal distribution,the area (probability)outside of +/- six standard deviations from the mean value is exceedingly small.You are provided the following values from a standardized normal distribution .
Q4) List three examples of quality improvement in a manufacturing facility that would lead to increased sales productivity.
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Chapter 18: Strategic Performance Measurement: Cost
Centers, Profit Centers, and the Balanced Scorecard
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Q1) A model that has been used to better understand the key elements that contracts must have in order to achieve the desired objectives is the:
A)Performance evaluation.
B)Operational control.
C)Goal congruence.
D)Principal-agent model.
E)Management control.
Q2) Tokless Inc.planned and manufactured 400,000 units of its single product in 2010,its first year of operations.Variable manufacturing costs were $50 per unit of production.Planned and fixed manufacturing costs were $800,000.Marketing and administrative costs (all fixed)were $600,000 in 2010.Tokless Inc.sold 195,000 units of product in 2010 at $65 per unit.Sales for 2010 are calculated to be:
A)$9,750,000.
B)$12,675,000.
C)$13,000,000.
D)$13,900,000.
E)$20,000,000.
Q3) Tyler Company had the following manufacturing information for the current year.
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Chapter 19: Strategic Performance Measurement: Investment Centers
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Q1) In the context of transfer pricing,dual pricing is:
A)Never used when numerous conflicts exist between two units.
B)The simultaneous use of two or more transfer pricing methods.
C)The use of two or more transfer pricing methods by the buyer only.
D)Not recommended because of negative behavioral consequences.
E)Not recommended because it conflicts with current income tax requirements.
Q2) All of the following are listed as possible transfer pricing methods except:
A)Market price.
B)Variable cost.
C)Fixed cost.
D)Full cost.
E)Negotiated price.
Q3) A primary goal of transfer pricing is to:
A)Agree on a price for external sales.
B)Evade income taxes.
C)Obtain a high transfer price for the selling unit.
D)Motivate decision-makers to act in the best interests of the organization.
E)Minimize recordkeeping costs.
Q4) Selected data from an investment center's accounting records reveal the following:
Page 21
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Chapter 20: Management Compensation, Business
Analysis, and Business Valuation
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Q1) EVA is the acronym for:
A)Extra Value Assets.
B)Economic Volume Analysis.
C)Efficiency Volume Analysis.
D)Economic Value Added.
Q2) In management compensation,the use of the balanced scorecard achieves:
A)Fairness.
B)Alignment of manager's incentives and the organization's strategy.
C)The desired ethical environment.
D)Revenue generation and cost control.
E)A specific non-financial measurement.
Q3) Analysts prefer the following three valuation methods over all others:
A)EVA,cash flow multiplier and sales multiplier
B)Enterprise value,discounted cash flow,and sales multiple
C)Sales multiple,earnings multiple,and discounted cash flow
D)EVA,return on equity and discounted cash flow
E)Enterprise value,earnings multiple,and sales multiple
Q4) Ginyard Company has the following financial statements for the year ended December 31,2010.
Q5) Jackson Manufacturing has the following operating results for 2010.
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