Advanced Cost Accounting Practice Exam
Course Introduction
Advanced Cost Accounting is an in-depth exploration of the methods and techniques used to capture, analyze, and interpret cost data for managerial decision-making in complex business environments. The course covers advanced topics such as activity-based costing, standard costing, variance analysis, joint and by-product costing, and cost allocation methods. Students will learn how to apply cost accounting information to budgeting, performance evaluation, pricing decisions, and strategic planning. Emphasis is placed on problem-solving and the use of modern accounting software, preparing students to address the cost-related challenges faced by contemporary organizations.
Recommended Textbook
Horngrens Cost Accounting A Managerial Emphasis 8th Canadian Edition by Srikant M. Datar
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Chapter 1: The Accountants Vital Role in Decision Making
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Q1) Enterprise Resource Planning software (ERP)
A)integrates data and provide managers with reports that highlight the interdependence of different business activities.
B)facilitates "Easy Reporting for Proposals."
C)provides financial reports for each separate enterprise in a conglomerate.
D)is used only by plant managers to create "Exceptional Reports for Production."
E)is free software downloaded over the Internet.
Answer: A
Q2) Quality control activities have been moved from the end of the assembly line to critical points along the assembly line.
Answer: Answers: F
Q3) amortization of the wood used in the manufacturing plant
Answer: Answers: B
Q4) cost of reworking an unsuccessful ad after client complains that ad targeted wrong customers
Answer: Answers: C
Q5) Explaining the variances in Department 23's labour report. Answer: Answers: A
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Chapter 2: An Introduction to Cost Terms and Purposes
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Sample Questions
Q1) depreciation on Bedell Electronics assembly equipment
Answer: Answers: A
Q2) What is the amount of ending finished goods inventory?
A)$42,500.
B)$24,750
C)$25,000
D)$25,425
E)$42,500
Answer: C
Q3) For a manufacturing company, direct material costs may be included in
A)direct materials inventory only.
B)merchandise inventory only.
C)both work-in-process inventory and finished goods inventory.
D)direct materials inventory, work-in-process inventory, and finished goods inventory accounts.
E)period costs.
Answer: D
Q4) depreciation on freezers at Gregory Food Retailing
Answer: Answers: B
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Chapter 3: Cost-Volume-Profit Analysis
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Sample Questions
Q1) What is the margin of safety assuming the procedure is performed 200 times?
A)$80,000
B)$64,000
C)$40,000
D)$32,000
E)$16,000
Answer: B
Q2) The contribution margin method of CVP analysis uses the equation: break-even units = unit contribution margin/fixed costs.
A)True
B)False
Answer: False
Q3) If sales increase by $25,000, operating income will increase by
A)$10,000.
B)$15,000.
C)$22,200.
D)$12,500.
E)$8,000.
Answer: B
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Chapter 4: Job Costing
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Q1) Why does the Manufacturing Overhead Control account (debit)need to equal the Manufacturing Control account (credit)? What will be the effect of having an end of year remaining balance, debit or credit, on the evaluation of profitability?
Q2) Transferring costs from indirect cost pools to cost objects is called
A)cost allocation.
B)cost control.
C)cost pool.
D)cost factoring.
E)cost processing.
Q3) A job costing system assigns costs to a distinct unit or set of units of a product or service.
A)True
B)False
Q4) The balance in the manufacturing overhead allocated account, is carried over to the balance sheet for the subsequent year, to properly track all costs for job costing.
A)True
B)False
Q5) Explain how a budgeted indirect cost allocation rate is determined.
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Chapter 5: Activity-Based Costing and Management
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Q1) A division of a company manufactures two products, which are in high demand in the defence industry.Product A is stamped out in a machine press, at the rate of 10,000 per hour.Product B is identical to product A, with the exception that it is made from thicker steel, and requires the machine press to be recalibrated.Product A is produced on the day shift and product B is produced on the afternoon shift, allowing set up changes to be done between shifts.In this case, set up hours are related to which of the following?
A)units of output
B)batches of output
C)the number of customers
D)machine hours
E)labour hours
Q2) 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
Q3) Purchasing
Q4) Billing
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Chapter 6: Master Budget and Responsibility Accounting
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Q1) The production budget of a manufacturing company is prepared after the revenue budget.
A)True
B)False
Q2) Budgets can play both planning and control roles for management.
A)True
B)False
Q3) Rick Christensen is the new division manager of Fastfood Sales.His division is considered a responsibility centre, and he has control over all costs and revenue of the division.His predecessor had been dismissed from the company because he could not keep the revenues and costs with acceptable variances on a quarterly basis.However, the former manager had relatively good annual reports.Christensen is very concerned about the situation because Fastfood has a somewhat seasonal business and it is very difficult to keep sales up during the winter months.He is considering changing jobs after only a few months but wants some advice as to the likelihood that he will be able to keep revenue and costs under control throughout the year.Required: Distinguish between controllable and uncontrollable aspects of revenue and costs.Can a manager totally control all revenue and costs? Why or why not?
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Chapter 7: Flexible Budgets, Variances, and Management
Control: I
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Sample Questions
Q1) Direct material efficiency variance
Q2) A variance is the difference between the actual result and a budgeted amount.
A)True
B)False
Q3) July's direct manufacturing labour rate variance is
A)$250.00 favourable.
B)$262.50 favourable.
C)$487.50 favourable.
D)$262.50 unfavourable.
E)$250.00 unfavourable.
Q4) What is the direct material yield variance for Strawberry Jam? (3 marks)
A)$9,000 F
B)$9,000 U
C)$38,750 F
D)$5,000 F
E)$5,000 U
Q5) Give at least three good reasons why a favourable rate variance for direct materials might be reported.
Q6) Give at least three good reasons why an unfavourable efficiency variance for direct manufacturing labour might be reported. Page 9
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Chapter 8: Flexible Budgets, Variances, and Management
Control: II
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Sample Questions
Q1) What is the variable overhead rate variance?
A)$11,000 favourable
B)$13,611 unfavourable
C)$13,611 favourable
D)$19,600 favourable
E)$19,600 unfavourable
Q2) All Clean of Alberta manufactures individual shampoos for hotel/motel clientele.The fixed manufacturing overhead costs for 2019 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 2019.
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.
Q3) Fixed overhead costs are a lump sum that does not change in total despite changes in the cost driver.
A)True
B)False
Page 11
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Chapter 9: Income Effects of Denominator Level on Inventory Valuation
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Sample Questions
Q1) What is cost of goods sold per unit using variable costing?
A)$45
B)$30
C)$27
D)$23
E)$20
Q2) What is the inventoriable cost per unit using absorption costing?
A)$32
B)$35
C)$40
D)$60
E)$75
Q3) ________ is the level of capacity based on producing at full capacity all the time.
A)Practical capacity
B)Theoretical capacity
C)Normal capacity
D)Demand capacity
E)Master-budget capacity
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Chapter 10: Analysis of Cost Behaviour
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Q1) The cumulative average-time learning model with a 90% learning curve indicates that if it takes 100 minutes to manufacture the first unit of a new model, then the second unit will take only 90 minutes to manufacture.
A)True
B)False
Q2) The t -value of the b coefficient measures how large the value of the estimated coefficient is relative to its specification.
A)True
B)False
Q3) Munir Hassan, controller, gathered data on overhead costs and direct labour-hours over the past 12 months.List and discuss the different approaches Munir can use to estimate a cost function for overhead costs using direct labour-hours as the cost driver.
Q4) Prevention costs include all of the following EXCEPT
A)quality training.
B)design engineering.
C)product testing.
D)supplier evaluations.
E)testing of new materials.
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Chapter 11: Decision Making and Relevant Information
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Sample Questions
Q1) Which of the following represents a qualitative factor?
A)any nonfinancial factor
B)historical costs
C)relevant costs
D)the timing of variable costs
E)an outcome that cannot be measured in numerical terms
Q2) Which of the following is NOT one of the steps involved in linear programming?
A)determining the objective
B)determining the technical coefficients
C)computing the optimal solution
D)determining the relevant and irrelevant costs
E)specifying the constraints
Q3) The firm will pay $60 next month for this year's membership in the Canadian Consultants Society for each professional staff member
Q4) A computer system installed last year is an example of a(n)
A)sunk cost.
B)relevant cost.
C)differential cost.
D)avoidable cost.
E)opportunity cost.
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Chapter 12: Pricing Decisions, Product Profitability Decisions, and Cost Management
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Sample Questions
Q1) What are the target sales revenues?
A)$1,380,000
B)$13,800,000
C)$11,316,000
D)$12,000,000
E)$16,284,000
Q2) Which of the following is TRUE of alternative long-run pricing approaches?
A)A market-based approach only considers how customers will react.
B)A cost-based approach only considers how customers will react.
C)A market-based approach only considers costs.
D)A market-based approach is more logical in a competitive market.
E)In cost-plus pricing, selling price ignores market forces when setting the markup.
Q3) When are a product's direct materials cost most likely to be locked in?
A)when the product is designed
B)when purchasing commits to buying the materials
C)when the bill for the materials is paid
D)when the materials are used in production
E)when materials are received from the supplier
Q4) List three advantages for including unitized fixed costs for pricing decisions.
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Chapter 13: Strategy, Balanced Scorecard, and Profitability Analysis
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Q1) Referring to Barry Company, which of the following is a measure of the customer perspective?
A)operating income growth from charging higher margins for XX 300
B)yield
C)production cycle time
D)improving manufacturing processes
E)customer satisfaction rating
Q2) 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.
Q3) Successful implementation of a cost leadership strategy will result in
A)large favorable growth and price-recovery components.
B)large favorable price-recovery and productivity components.
C)large favorable productivity and growth components.
D)only a large favorable growth component.
E)a price-recovery component greater than a growth component.
Q4) 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) If a dual-rate cost allocation method is used, what amount of materials laboratory costs will be budgeted for the Small Plane Department?
A)$1,057,500
B)$763,750
C)$705,000
D)$822,500
E)$897,500
Q2) Which method allocates costs by explicitly including the mutual services rendered among all support departments?
A)the direct allocation method
B)the interdepartmental method
C)the reciprocal allocation method
D)the step-down method
E)the incremental method
Q3) The step-down method allocates support department costs to other support departments and to operating departments in a sequential manner.
A)True
B)False
Q4) To evaluate a make or buy decision
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Chapter 15: Cost Allocation: Joint Products and Byproducts
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Q1) The sales value at splitoff method can be used to value inventory as well as determining cost of goods sold.
A)True
B)False
Q2) If joint products end up with the same gross margin percentage, which of the following is TRUE?
A)The cost allocation method assigned the same cost per unit to each product.
B)The physical measure method must have been used.
C)The gross margin percentage NRV method must have been used.
D)The estimated net realizable method must have been used.
E)If all products are sold at the splitoff point, and there were no opening inventories, the sales value at splitoff method could have been used.
Q3) Fuel oil from petroleum processing
Q4) Recognition of byproducts in the financial statements at the time of sale usually occurs when the dollar amounts of the byproducts are immaterial.
A)True
B)False
Q5) Broth from cooking food
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Chapter 16: Revenue and Customer Profitability Analysis
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Q1) The sales-quantity variance can be unfavourable if both the market-share and market-size variances are favourable.
A)True
B)False
Q2) To more accurately assess customer profitability, corporate-sustaining costs should be allocated.
A)True
B)False
Q3) What is the total sales-quantity variance in terms of the contribution margin?
A)$220,000 favorable
B)$340,000 favorable
C)$556,000 favorable
D)$896,000 favorable
Q4) Give examples of bundled products for each of the following industries:
a.Resort hotel
b.Bank
c.Restaurant
d.Computer store
e.Gasoline service station/convenience store
f.Software manufacturer
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Chapter 17: Process Costing
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Q1) What is the total amount of the work-in-process ending inventory for Department A at the end of February?
A)$ 385,970
B)$619,900
C)$ 315,571
D)$ 276,157
E)$315,571
Q2) When identical or similar units of products or services are mass produced, job-costing is used to calculate an average production cost for all units produced.
A)True
B)False
Q3) An operation-costing system is a hybrid costing system, applied to batches of similar products.
A)True
B)False
Q4) Compare and contrast process costing and job order costing.
Q5) Discuss some typical products which would likely use process costing.
Q6) List and describe the five steps in process costing.
Q7) What is meant by the term "prime cost pool"?
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Chapter 18: Spoilage, Rework, and Scrap
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Q1) Costs of normal spoilage are usually accounted for as
A)part of the cost of goods sold.
B)part of the cost of goods manufactured.
C)a separate line item in the income statement.
D)an asset in the balance sheet.
E)a liability in the balance sheet.
Q2) At Waldorf Computer Systems Inc.what amounts are allocated to ending work-in-process inventory assuming spoilage units are recognized in the equivalent unit calculation, and that they are ignored, respectively?
A)$27,500; $30,000
B)$30,000; $34,250
C)$30,000; $37,500
D)$37,500; $40,000
E)$30,000; $40,000
Q3) Reworked goods are unacceptable units of production usually not capable of being repaired or converted into a salable product.
A)True
B)False
Q4) Edges from plastic moldings
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Chapter 19: Inventory Cost Management Strategies
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Q1) The economic order quantity decision model
A)calculates the amount of inventory that may be purchased with the monetary constraint.
B)determines the minimum amount of inventory to purchase.
C)determines the maximum amount of inventory to keep on hand.
D)determines the optimal amount of inventory to order.
E)calculates the numbers of employees needed.
Q2) Just-in-time purchasing is the purchase of goods or materials such that delivery immediately precedes demand or use.
A)True
B)False
Q3) What is the economic order quantity for Product A?
A)9 units
B)10 units
C)20 units
D)40 units
E)46 units
Q4) Just-in-time purchasing is guided solely by the economic order quantity.
A)True
B)False
Page 22
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Chapter 20: Capital Budgeting: Methods of Investment Analysis
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Q1) If the internal rate of return is less than the hurdle rate, the net present value of the project will be negative.
A)True
B)False
Q2) Projects with shorter paybacks always generate more cash flows.
A)True
B)False
Q3) What is present value of the after-tax savings that Albernie Ltd.expects during the useful life of the equipment?
A)$65,814
B)$101,252
C)$81,257
D)$50,370
E)$42,188
Q4) Net present value can be used to examine the effects of alternative ways of increasing customer loyalty.
A)True
B)False
Page 23
Q5) Explain why the term tax shield is used in conjunction with amortization.
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Chapter 21: Transfer Pricing and Multinational Management
Control
Systems
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Q1) Transfer prices among divisions within Canada are irrelevant.Do you agree with this statement? Explain.
Q2) When companies are unable to choose a transfer-pricing method which meets the requirements of the divisions concerned, they may use
A)cost pricing.
B)dual pricing.
C)situational pricing.
D)market pricing.
E)pro-rating pricing.
Q3) Market-based transfer prices are ideal in perfectly competitive markets when there is idle capacity in the selling division.
A)True
B)False
Q4) Suboptimal decision making is also called congruent decision making.
A)True
B)False
Q5) Budgeted costs
Q6) Minimum of sub optimal decision making.
Q7) What is the purpose of the internal control system within an organization?
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Chapter 22: Multinational Performance Measurement and Compensation
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Q1) The benefits of tying performance measures more closely to a manager's efforts encourage the use of
A)financial measures.
B)nonfinancial measures.
C)nonfinancial and financial measures.
D)performance input measures.
E)moral measures.
Q2) A control system that focuses on meeting expectations is known as a(n)
A)diagnostic control system.
B)boundary system.
C)belief system.
D)interactive control system.
E)isolated system.
Q3) The most popular approach to incorporating the investment base into a performance measure is
A)income on return.
B)opportunity cost.
C)return on investment.
D)residual income.
E)economic value added.
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