Case Studies in Cost Management Practice Exam
Course Introduction
This course delves into the practical application of cost management principles through an in-depth examination of real-world case studies across various industries. Students explore key topics such as cost allocation, budgeting, variance analysis, activity-based costing, and strategic cost control. Emphasis is placed on understanding the decision-making process, evaluating cost management systems, and identifying best practices for improving efficiency and profitability. By analyzing actual business challenges and solutions, students develop the skills needed to critically assess cost information and implement effective cost management strategies in diverse organizational settings.
Recommended Textbook
Cost Management A Strategic Emphasis 7th Edition by Edward Blocher
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Chapter 9: Short-Term Profit Planning:
CVP Analysis
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79 Verified Questions
79 Flashcards
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Sample Questions
Q1) Cost management information typically is the responsibility of the:
A)Chief Financial Officer.
B)Controller.
C)Treasurer.
D)Chief Information Officer.
Answer: B
Q2) The management accountant's responsibility under the Institute of Management Accountants (IMA) Statement of Ethical Professional Practice includes the responsibility to "mitigate actual conflicts of interest." This responsibility fits within which of the four standards in the IMA Statement?
A)Communication.
B)Integrity.
C)Honesty.
D)Quality.
E)Confidentiality.
Answer: B
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Page 3
Chapter
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Sample Questions
Q1) A final step in the SWOT analysis is to identify quantitative measures for the:
A) Value propositions.
B) Competitor analyses.
C) Critical success factors.
D) Both A and C.
E) Both B and C.
Answer: C
Q2) The main objective of value chain analysis is to identify stages of the value chain where the firm can:
A)Justify increases in the price of the product or service.
B)Increase value to the customer or reduce cost in some way.
C)Outsource production to other producers.
D)Improve efficiency
Answer: B
Q3) Which of the following is not an environmental performance indicator?
A)Fossil fuel use.
B)Carbon emissions.
C)Pollutants production.
D)All of the above.
Answer: D
Page 4
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Chapter 3: Basic Cost Management Concepts
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Sample Questions
Q1) Which of the following is not a product cost?
A)Direct materials costs
B)Selling costs
C)Direct labor costs
D)Factory overhead costs
Answer: B
Q2) Prime cost and conversion cost share what common element of total cost?
A)Direct labor.
B)Direct materials.
C)Variable overhead.
D)Fixed overhead.
Answer: A
Q3) What should be the amount of direct materials purchased?
A)$28,000.
B)$19,000.
C)$15,000.
D)$12,000.
Answer: D
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5
Chapter 4: Job Costing
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Sample Questions
Q1) A normal costing system uses actual costs for direct materials and direct labor, and:
A)Actual costs for factory overhead.
B)Estimated factory overhead costs based on material cost.
C)Estimated factory overhead costs based on labor cost.
D)Estimated costs for factory overhead.
E)Charges actual factory overhead as a lump sum.
Q2) If overhead is applied based on machine hours, the overapplied/underapplied overhead is:
A)$187,298 underapplied.
B)$187,298 overapplied.
C)$176,358 underapplied.
D)$176,358 overapplied.
E)$-0-.
Q3) Standard costs are:
A)Planned costs the firm should attain.
B)Associated with direct materials and factory overhead only.
C)Associated with direct labor and factory overhead only.
D)Targeted low costs the firm should strive for.
E)None of the above.
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Page 6
Chapter 5: Activity-Based Costing and Customer
Profitability Analysis
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Q1) In an organization that makes furniture, which of the following is a high value-added activity?
A)Using direct materials in production.
B)Inspecting production.
C)Storing finished goods inventory.
D)Moving work-in-process inventory between work stations.
E)Reworking the product to repair defects.
Q2) Using the firm's volume- based costing, applied factory overhead per unit for the Great P model is (rounded to the nearest cent):
A)$61.32.
B)$65.43.
C)$43.42.
D)$45.99.
E)$54.04.
Q3) Activity-based costing systems:
A)Accumulate overhead costs by departments.
B)Are less complex and therefore less costly than volume-based systems.
C)Can be used in manufacturing firms only.
D)Have separate overhead rates for each activity.
E)Eliminate multiple-stage cost allocation.
Page 7
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Chapter 6: Process Costing
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Sample Questions
Q1) The sum of units transferred out and ending inventory units, assuming no spoilage, determines the:
A)Units completed during the period.
B)Units spoiled.
C)Units transferred in during the period.
D)Units accounted for.
E)Units started during the period.
Q2) The weighted-average method is most appropriate when:
A)Work in process is relatively small.
B)Conversion costs are stable.
C)Direct materials prices are stable.
D)All of the above.
Q3) Conversion costs are the sum of direct labor and:
A)Unit costs.
B)Factory overhead costs.
C)Process costs.
D)Labor costs.
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Chapter 7: Cost Allocation: Departments, Joint Products, and
By-Products
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Q1) Which one of the following methods of cost allocation is completed by taking the service flows to production departments only and determining each production department's share of that service?
A)Direct method.
B)Indirect method.
C)Step method.
D)Reciprocal method.
E)Cross-functional method.
Q2) Which of the following is not one of the objectives of cost allocation?
A)Motivate managers to exert a high-level of effort.
B)Provide useful departmental and product costs.
C)Identify production constraints.
D)Provide the right incentive for managers to make the right decisions.
E)Provide an appropriate basis for performance evaluation.
Q3) An alternative concept of fairness in cost allocation, absent the cause-and-effect basis, includes:
A)Ability-to-bear.
B)Efficiency.
C)Different costs for different purposes.
D)Consistency.
Page 9
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Chapter 8: Cost Estimation
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Sample Questions
Q1) The $2 in the equation is an estimate of:
A)Total fixed costs.
B)Variable overhead costs per direct labor hour.
C)Total overhead costs.
D)Fixed overhead costs per direct labor hour.
Q2) The Lower 95% and Upper 95% shown in the output suggests that:
A)We can be 95% confident that the precision of the regression equation will be within the ranges specified.
B)We can be 95% confident that the statistical reliability of the regression equation will be within the ranges specified.
C)We can be 95% confident that the coefficients of the dependent variable will be within the ranges specified.
D)We can be 95% confident that the coefficients of the independent variables will be within the ranges specified.
E)We can be 95% confident that the regression equation will be within the ranges specified.
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Chapter
Cvp Analysis
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Sample Questions
Q1) If 4,000 bed frames were sold, Premium Bed's operating income would be:
A)$1,240,000.
B)$1,280,000.
C)$1,200,000.
D)$1,340,000.
E)$1,120,000.
Q2) The contribution margin per unit multiplied by the number of units sold is the:
A)Segment margin.
B)Total contribution margin (CM).
C)Contribution margin ratio.
D)Margin of safety (MOS).
E)Breakeven point.
Q3) When using cost-volume-profit (CVP) analysis, the following information helps to show how decisions affect operating income except:
A)Variable costs.
B)Fixed costs.
C)Output level.
D)Gross margin.
E)Sales volume.
11
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Chapter 10: Strategy and the Master Budget
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Sample Questions
Q1) The effect of increasing the targeted (i.e., desired) ending inventory for a given budget period has the following effect on the production budget for the period:
A)Increases the required production for the budget period.
B)Has no effect on the required production for the budget period.
C)Has an indeterminate effect (i.e., additional information is required).
D)None of the above.
Q2) ACEM Hardware purchased 5,000 gallons of paint in March. The store had 1,500 gallons on hand at the beginning of March, and expects to have 1,000 gallons on hand at the end of March. What is the budgeted number of gallons to be sold during March?
A)3,500.
B)4,500.
C)5,000.
D)5,500.
E)7,500.
Q3) Contrast operating budgets and financial budgets. How do these budgets relate to the master budget for a period? What is the culmination of the master budgeting process?
Q4) Explain benefits of implementing a master budgeting system.
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Chapter 11: Decision Making With a Strategic Emphasis
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Sample Questions
Q1) The contribution per foot of front shelf space per day for Limeade is:
A)$165.00.
B)$162.00.
C)$154.00.
D)$134.40.
E)$153.90.
Q2) A special sales order is:
A)Typically expected.
B)A profitable opportunity to sell a specified quantity of a firm's product or service.
C)A one-time opportunity to sell a specified quantity of a product or service.
D)A particularly large customer order.
E)In most cases, a rush order.
Q3) In deciding whether to accept or a reject a special sales order, which of the following costs are likely relevant to the decision?
A)Depreciation expense on manufacturing equipment.
B)A portion of facilities-level costs.
C)A portion of batch-level costs.
D)Total batch-level costs.
E)An allocated share of fixed manufacturing support costs.
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Chapter 12: Strategy and the Analysis of Capital Investments
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Sample Questions
Q1) The present value of the depreciation tax shield for the 2016 MACRS depreciation of the new asset is:
A)$0.
B)$6.112.
C)$6,608.
D)$16,320.
E)$16,800.
Q2) If a company is in the situation of having unlimited capital funds, the best decision rule, considering only financial factors, is for the company to invest in all projects in which:
A)The payback period is short.
B)The book (accounting) rate of return is greater than its current return on invested capital (ROI).
C)The net present value (NPV) is greater than the cost of capital.
D)The internal rate of return (IRR) is greater than zero.
E)The NPV is greater than zero.
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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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Q1) The goals of coordinating manufacturing processes, reducing the amount of inventory, and improving overall productivity is particularly important in a:
A)Standard cost system.
B)Just-in-time system.
C)Normal costing system.
D)Activity based costing system.
E)Total quality management system.
Q2) The current profit per unit is:
A)$503.
B)$674.
C)$616.
D)$524.
E)$694.
Q3) The theory of constraints (TOC) approach is strategically important in dynamic markets because it leads to:
A)A more responsive and flexible manufacturing environment.
B)Better customer relationships.
C)Quicker data accessibility.
D)Faster setup times.
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Chapter 14: Operational Performance Measurement:
Direct-Cost Variances, and the Role of Nonfinancial
Performance Measures
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Sample Questions
Q1) A "standard cost" is a predetermined amount (e.g., cost) that:
A)Should be incurred under relatively efficient operating conditions.
B)Will be incurred for an operation or a specific objective.
C)Must occur for an operation or a specific objective.
D)Cannot be changed once it is established by management.
E)Is useful for planning and control but not inventory valuation purposes.
Q2) The direct labor efficiency variance for October was:
A)$3,000 unfavorable.
B)$20,000 favorable.
C)$23,000 favorable.
D)$30,000 unfavorable.
E)$50,000 unfavorable.
Q3) One important short-term financial goal for a company is to earn the projected operating income for the period. Attainment of this goal is measured by comparing the actual operating income for the period to the:
A)Flexible-budget operating income for the period.
B)Prior period's operating income.
C)Income reflected in the company's balanced scorecard.
D)Master budget operating income.
E)Industry average operating income.
Page 16
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Chapter 15: Operational Performance Measurement:
Indirect-Cost Variances and Resource-Capacity Management
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Q1) What are the steps in determining the standard fixed factory overhead application rate? Does the procedure differ for product-costing versus cost-control purposes?
Q2) An activity-based cost (ABC) driver applies factory overhead to products or services according to the:
A)Activity output as measured by the units produced.
B)Activity level of hours of direct labor.
C)Resource demands/resource consumption of the firm's outputs.
D)Budgeted activity level for the period.
E)Volume of output (i.e., units produced) during the period.
Q3) What is the variable factory overhead spending variance in May, assuming Gerhan uses a four-variance breakdown (decomposition) of the total overhead variance?
A)$180 unfavorable.
B)$300 favorable.
C)$380 unfavorable.
D)$480 unfavorable.
E)N/A-this variance is not defined under the four-way breakdown of the total OVH variance.
Page 18
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Chapter 16: Operational Performance Measurement:
Further Analysis of Productivity and Sales
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Q1) What is the firm's market size variance?
A)$6,000 unfavorable.
B)$750 unfavorable.
C)$4,000 unfavorable.
D)$17,500 unfavorable.
E)$0.
Q2) What is MT's contribution margin sales volume variance?
A)$800 unfavorable.
B)$1,040 unfavorable.
C)$22,960 favorable.
D)$23,760 favorable.
E)$24,000 favorablE.Budgeted CM = $40 - 20 = $20
Q3) The contribution margin sales volume variance for Product X is:
A)$26,000 unfavorable.
B)$26,000 favorable.
C)$30,000 unfavorable.
D)$40,000 unfavorable.
E)$65,000 favorablE.Budgeted units: $260,000/$130 = 2,000
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Chapter 17: The Management and Control of Quality
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Q1) What is the reasoning behind the misconception that quality improvements decrease productivity?
Q2) For Cost of Quality (COQ) reporting purposes, materials inspection costs would be classified as:
A)Prevention costs.
B)Retention costs.
C)Appraisal costs.
D)Internal failure costs.
E)External failure costs.
Q3) Cari and Jeremy just bought a bed and breakfast inn at a very attractive price. The business had been doing poorly. Before they reopened the inn for business, they attended a seminar on operating a high-quality business. Now that they are ready to open the inn, they need some advice on quality costs and the management and control of quality.
Required:
1. Identify and define each of the four categories in a typical Cost-of-Quality (COQ) reporting system.
2. For the identified business (bed and breakfast) provide three examples of costs within each of the four COQ categories.
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Page 20
Chapter 18: Strategic Performance Measurement: Cost
Centers, Profit Centers, and the Balanced Scorecard
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Sample Questions
Q1) Order-filling costs:
A)Include samples.
B)Cannot often be effectively managed as an engineered-cost center.
C)Usually have a relatively clear relationship to sales volume.
D)Include commissions.
Q2) Variable costing operating income for 2013 is calculated to be:
A)$1,525,000.
B)$1,850,000.
C)$1,935,000.
D)$2,260,000.
E)$2,750,000.
Q3) Variable costing operating income for 2013 is calculated to be:
A)$4,000,000.
B)$4,200,000.
C)$5,100,000.
D)$5,220,000.
E)$5,300,000.
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Page 21
Chapter 19: Strategic Performance Measurement:
Investment Centers and Transfer Pricing
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Sample Questions
Q1) Decentralized firms can delegate authority and yet retain control and monitor managers' performances by structuring the organization into so-called "responsibility centers." Which one of the following business segments/responsibility centers is most like an independent business?
A)Revenue center.
B)Profit center
C)Cost center.
D)Profit center.
E)Investment center.
Q2) The difference between the historical cost and the net book value (NBV) of a plant asset is the:
A)Residual value of the asset.
B)Depreciation expense for the current period.
C)An estimate of the remaining useful life of the asset.
D)Accumulated depreciation expense of the asset.
E)Estimated replacement cost of the asset.
Q3) What are the principal advantages and disadvantages of using cost-based transfer prices? (Give a short explanation of each item you list.)
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Chapter 20: Management Compensation, Business
Analysis, and Business
Valuation
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Q1) The market value of the company's equity for 2013 is:
A)$1,220,000
B)$1,620,000
C)$2,520,000
D)$8,400,000
E)$7,125,000
Q2) Which one of the following forms of compensation is a based upon the achievement of performance goals for current the period?
A)Perk.
B)Stock option.
C)Performance shares.
D)Bonus.
E)Salary.
Q3) The value of the company, calculated using the earnings multiple for 2013 is:
A)$1,072,000
B)$1,347,000
C)$2,616,000
D)$2,520,000
E)$8,437,500
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