Cost Accounting Exam Bank
Course Introduction
Cost Accounting is a critical course that explores the methods and techniques used to capture, analyze, and control costs in organizations. Students learn about various cost concepts, cost behavior, and cost allocation methods, including job order costing, process costing, and activity-based costing. The course also covers budgeting, standard costing, variance analysis, and cost-volume-profit analysis to support management decision-making. Emphasis is placed on using cost information for planning, performance evaluation, and strategic decision-making to enhance operational efficiency and organizational profitability.
Recommended Textbook
Cornerstones of Cost Accounting 1st Canadian Edition by Don Hansen
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Page 2
Chapter 1: A: Basic Cost Management Concepts
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Sample Questions
Q1) Which cost assignment method would likely assign the cost of maintenance for machines in a department that does cutting when the cutting activity is the cost object?
A)driver tracing
B)direct tracing
C)allocation
D)arbitration
Answer: A
Q2) According to the Institute of Management Accountants,which of the following sets of standards is included in the standards of ethical conduct for management accountants?
A)competence,performance,integrity,and credibility
B)competence,confidentiality,respect,and credibility
C)competence,confidentiality,integrity,and observance
D)competence,confidentiality,integrity,and credibility
Answer: D
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3
Chapter 1: B: Basic Cost Management Concepts
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Sample Questions
Q1) Give some examples of reporting feedback that will assist in continuous improvement of a dry cleaning company.
Answer: A dry cleaning company will be interested in monitoring all aspects of performance.It may prepare performance reports on materials and labour usage,as well as on meeting revenue targets.It will want to keep track of things important to customers,turnaround time,customer satisfaction,types of complaints,and requests for auxiliary services (e.g.,delivery and tailoring).It may keep records about the characteristics of customers (e.g.,profession,residence,age)to better understand its market.It will be interested in efficiency and productivity of labour and equipment.It might monitor the usage of capacity.It will be interested in reporting on all aspects of performance.
Q2) Explain the differences between direct tracing,driver tracing,and allocation.
Answer: Direct tracing is the process of identifying and assigning costs to a cost object that are specifically or physically associated with the cost object.Driver tracing is assigning costs using drivers,which are causal factors.The driver approach relies on identification of factors that allegedly capture the causal relationship.Allocation is the assignment of indirect costs to cost objects based on convenience or assumed linkages.
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Chapter 2: Cost Behaviour
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Sample Questions
Q1) Refer to the figure.What do the hypothesis tests of the cost parameters indicate?
A)The slope is significantly different from zero.
B)The intercept is significantly different from zero.
C)Both the slope and intercept are not significant.
D)Both the slope and intercept are significant.
Answer: B
Q2) Under what circumstances might the high-low method give unsatisfactory results?
A)if the data points all fall on a line
B)if volume of activity is heavy
C)if volume of activity is light
D)if the points are unrepresentative
Answer: D
Q3) Refer to the figure.What is the confidence interval for the predicted overhead cost rounded to the nearest whole number for a 90 percent confidence level?
A)predicted value between 75,600 and 125,600
B)predicted value between 100,557 and 100,644
C)predicted value between 100,600 and 175,648
D)predicted value between 175,648 and 200,000
Answer: B
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Page 5
Chapter 3: Cost-Volume-Profit Analysis
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Sample Questions
Q1) Assume the following information: \(\begin{array}{llr}
\text { Selling price per unit} &\$150\\
\text { Contribution margin ratio } &40\%\\
\text { Total fixed costs } &\$225,000
\end{array}\)
How many units must be sold to generate a before-tax profit of $45,000?
A)2,500 units
B)3,000 units
C)3,750 units
D)4,500 units
Q2) What does the term "sales mix" refer to?
A)the different volume of sales achieved during the year
B)the contribution margins achieved on the different products during the year
C)the relative proportions of different products that constitute total sales
D)the mix of variable and fixed costs
Q3) What will the margin of safety in units be (rounded to the nearest whole unit)?
A)667
B)2,500
C)4,000
D)7,500
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Chapter 4: Job-Order Costing Systems
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Sample Questions
Q1) Refer to the figure.The ending work in process would consist of the costs of what jobs?
A)Job 101 + Job 102 + Job 103
B)Job 101 + Job 102 + Job 103 + Job 104
C)Job 101 + Job 104
D)Job 102 + Job 103
Q2) What are the source documents used in a job-order costing system? How do the source documents relate to the job cost sheet? How do these documents inform work in process?
Q3) When is the cost of spoilage added to a job?
A)when it is considered to be a result of the process,no matter what job is being worked on
B)when it is considered to be a normal consequence of working on that job
C)when it is considered to be abnormal
D)when it is considered to be a cost of doing business
Q4) Which of the following firms would make extensive use of service costing?
A)auto manufacturer
B)furniture manufacturer
C)auto dealer
D)CPA firm
Page 7
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Chapter 5: Process Costing
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Sample Questions
Q1) Refer to the figure.What is the cost per equivalent unit of production for materials using the weighted average method?
A)$2.70
B)$2.88
C)$3.12
D)$3.60
Q2) Refer to the figure.What are the "total bottling costs to account for" in the Assembly Department?
A)$10,000
B)$21,000
C)$32,000
D)$44,500
Q3) Refer to the figure.If materials were added when the units were 80 percent complete,how many equivalent units of production for materials would there be for Irvin using the weighted average costing method?
A)95,000 units
B)105,500 units
C)107,000 units
D)110,000 units
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Chapter 6: Activity-Based Costing
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Sample Questions
Q1) Refer to the figure.Under this new approach using the new rates,what labour cost is assigned to Model X in this approximately relevant ABC system?
A)$60,000
B)$102,000
C)$153,000
D)$225,000
Q2) Refer to the figure.What are the labour-related overhead costs assigned to Model 1?
A)$48,000
B)$54,400
C)$58,000
D)$60,000
Q3) What costing method first traces costs to a department and then to products?
A)direct costing
B)absorption costing
C)unit-based costing
D)indirect costing
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Chapter 7: Allocating Costs of Support Departments and Joint Products
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Sample Questions
Q1) Refer to the figure.Using both a fixed and variable rate with fixed costs allocated on the basis of monthly peak trips,what will the West Sales Territory be charged for the year (rounded to the nearest dollar)?
A)$21,320
B)$29,492
C)$30,638
D)$31,498
Q2) Which of the following would generally be a by-product?
A)canned fish
B)hamburger
C)cow hides
D)pineapples
Q3) According to the rules of financial reporting (GAAP),which costs are assigned to products?
A)Direct materials and direct labour costs are assigned to products.
B)Producing department costs are assigned to products exclusively.
C)Direct costs and a fair share of indirect manufacturing costs are assigned to products.
D)Indirect manufacturing costs be assigned to products.
Q4) Compare and contrast the various methods of accounting for joint product costs.
Page 10
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Chapter 8: Budgeting for Planning and Control
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Q1) Which of the following is a moving 12-month budget?
A)continuous budget
B)flexible budget
C)zero-based budget
D)participative budget
Q2) Which of the following is NOT a potential disadvantage of participative budgeting?
A)pseudo participation
B)performance feedback
C)unrealistic standards
D)budgetary slack
Q3) Compare and contrast static budgets,flexible budgets,and activity-based budgets.
Q4) Refer to the figure.How many lamps should be produced in October?
A)9,500 lamps
B)10,000 lamps
C)10,500 lamps
D)14,000 lamps
Q5) Discuss the features of an ideal budgetary process.
Q6) Define budgeting and control.How are budgets used in planning? How are budgets used to control? What are some of the reasons for budgeting?
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Chapter 9: Standard Costing: a Functional-Based Control Approach
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Q1) What may cause an unfavourable variable overhead spending variance?
A)the use of excessive quantities of variable overhead items
B)the payment of lower prices for variable overhead items used
C)the use of excessive quantities of the variable overhead allocation base
D)the payment of higher direct materials purchases
Q2) A 5 percent wage increase for all factory employees would affect which of the following variances?
A)direct materials price variance
B)direct labour rate variance
C)direct labour efficiency variance
D)variable manufacturing overhead efficiency variance
Q3) Compare and contrast mix and yield variances.
Q4) Refer to the figure.Using the three variance method,what is the budget variance?
A)$6,000 (F)
B)$6,000 (U)
C)$24,000 (F)
D)$24,000 (U)
Q5) How are standards developed? What is the difference between ideal and currently attainable standards?
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Chapter 10: Responsibility Accounting,performance
Evaluation,and Transfer Pricing
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Sample Questions
Q1) Which department would be classified as a cost centre?
A)hardware department
B)men's shoes department
C)accounting department
D)automotive department
Q2) Which of the following is a political or legal factor affecting performance evaluation in a multinational firm?
A)social attitude toward industry and business
B)literacy rate
C)effect of defence policy
D)currency restrictions
Q3) What is the term for placing an emphasis on short-run results at the expense of the long run?
A)efficient behaviour
B)effective behaviour
C)optimal behaviour
D)myopic behaviour
Q4) Compare and discuss the advantages and disadvantages of the following performance measures: ROI,EVA,and Residual Income.
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Chapter 11: Tactical Decision Making
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Q1) Arcadia,Inc.,uses a joint process to produce Products W,X,Y,Z.Each product may be sold at its split-off point or processed further.Additional processing costs of specific products are entirely variable.Joint processing costs for a single batch of joint products are $200,000.Other relevant data are as follows: \(\begin{array}{cccc}
&&&\text { Sales Value of Final }\\ \underline{\text { Product}}&\underline{\text { Sales Value at Split-off }}&\underline{\text { Additional Processing Costs }}& \underline{\text { Product }}\\
\mathrm{W} & \$ 40,000 & \$ 24,000 & \$ 70,000 \\ \mathrm{X} & 16,000 & 10,000 & 20,000 \\
\mathrm{Y} & 20,000 & 10,000 & 48,000 \\
\mathrm{Z} & \underline{2 4 , 0 0 0} & \underline{16,000} & \underline{36,000} \\ &\underline{\$100,000} & \underline{\$ 60,000} &\underline{ \$ 174,000}
\end{array}\)
a.Determine which products should be processed further. b.How will processing each product further affect profits?
Q2) What are relevant costs? How do they relate to decision making?
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Chapter 12: Pricing and Profitability Analysis
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Q1) On the international market,which of the following is called dumping?
A)price discrimination
B)predatory pricing
C)price skimming
D)penetration pricing
Q2) The following information pertains to Stark Corporation: \(\begin{array}{lr}
\text { Beginning inventory} &0 \text { units }\\
\text { Ending inventory} &5,000 \text { units }\\
\text { Direct labour per unit } &\$20\\
\text { Direct materials per unit} &16\\
\text {Variable overhead per unit } &4\\
\text {Fixed overhead per unit } &10\\
\text { Variable selling costs per unit } &12\\
\text {Fixed selling costs per unit } &16\\
\end{array}\)
What is the value of ending inventory using the variable costing method?
A)$200,000
B)$250,000
C)$310,000
D)$390,000
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Page 15
Chapter 13: Strategic Cost Management
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Sample Questions
Q1) What does life-cycle cost management consist of?
A)actions taken to enable a product to be designed,developed,produced,marketed,distributed,operated,maintained,serviced,and disposed of in order to maximize profits
B)actions to extend the life of a product through design,development,production,and maintenance
C)actions that focus on minimizing the cost of developing,designing,producing,distributing,operating,servicing,and disposal of a product
D)actions taken to design,develop,test,market,distribute,maintain,service,and dispose of a product to maximize revenues
Q2) What stage of the product life cycle is the period of time when sales increase at a decreasing rate?
A)introduction stage
B)growth stage
C)maturity stage
D)decline stage
Q3) Explain the difference between acceptable quality level and total quality control.
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Chapter 14: Activity-Based Management
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Sample Questions
Q1) What is the definition of unused capacity variance?
A)the difference in costs between activity availability and activity usage
B)the difference in costs between actual activity level acquired and the value-added standard quantity of activity that should have been used
C)the difference in costs between practical capacity of activity and the standard capacity of the activity
D)the difference in costs between practical capacity and actual capacity
Q2) What are the two dimensions of an activity-based management model?
A)the cost dimension and the project dimension
B)the cost dimension and the process dimension
C)the quality dimension and the process dimension
D)the quality dimension and the activity dimension
Q3) Which of the following focuses on the relationship of activity outputs to activity inputs?
A)activity reduction
B)quality
C)time
D)efficiency
Q4) What is process value analysis?
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Chapter 15: The Balanced Scorecard: Strategic-Based Control
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Q1) Which of the following would be a lead measure?
A)customer profitability
B)cost per employee
C)return on investment
D)employee training hours
Q2) Which of the following is limitation of activity-based responsibility accounting?
A)The continuous improvement were fragmented.
B)The emphasis includes financial results as well as how things are done.
C)Responsibility moves from one dimension to two dimensions.
D)It moves from a control system to a performance management system.
Q3) Which perspective defines the capabilities needed by the organization to create long-term improvement?
A)the financial perspective
B)the customer perspective
C)the process perspective
D)the learning and growth perspective
Q4) Why does the Balanced Scorecard differ from company to company? Whose responsibility is the implementation?
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Q5) Compare and contrast activity-based measures and strategic-based measures.
Chapter 16: Quality and Environmental Cost Management
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Sample Questions
Q1) As preventive and appraisal costs increase,how will internal and external failure costs likely respond?
A)They will decrease.
B)They will increase.
C)They will remain the same.
D)They will vary with no relation to preventive and appraisal costs.
Q2) What is the term for a goal that is based on short-run quality goals?
A)interim quality performance report
B)one-year quality performance report
C)multiple-period quality trend report
D)interim quality standard
Q3) As quality improves,how might savings be realized?
A)by eliminating prevention costs as a result of less total costs
B)by eliminating appraisal costs
C)by reducing labour costs as a result of less rework and warranty costs
D)by reducing quality costs as a result of increased quality costs
Q4) Define environmental costs and identify the four categories of environmental costs.Give an example of each category.
Q5) What does quality mean and how has improving quality increased firm value?
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Chapter 17: Lean Accounting and Productivity Measurement
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Sample Questions
Q1) Refer to the figure.What is the materials productivity ratio for 20X1?
A)28
B)25
C)20
D)16
Q2) Refer to the figure.
a.What are the cycle times for each model?
b.What is the bottleneck department and why?
c.Under traditional costing,which model would be allocated more overhead expenses? Does this change under the features and characteristics approach?
d.What are the production rates of Model 1 and Model 2?
e.Assuming materials costs of $60 per unit for both Model 1 and Model 2 and conversion costs of $200 per hour,what is the unit cost of each model?
Q3) Which of the following is considered a major source of waste?
A)costs spent on defect detection
B)necessary movement of goods
C)necessary transport of goods
D)design of goods and services that don't meet the needs of the customer
Q4) Explain the difference between partial and total measures of productivity.
Page 20
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Chapter 18: Inventory Management: Economic Order
Quantity,jit,and the Theory of Constraints
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Q1) Refer to the figure.Which statement best describes the relationship between these products?
A)The materials constraint favours Trailer B over Trailer A.
B)The time constraint favours Trailer B over Trailer A.
C)The material constraint favours Trailer A over Trailer B.
D)The objective function favours Trailer A over Trailer B.
Q2) What does a withdrawal Kanban specify?
A)how much should be produced to replace inventory
B)the quantity that a subsequent process should withdraw from the preceding process
C)when customers should be notified to pick up orders
D)when suppliers should be notified to deliver more parts
Q3) One of the traditional reasons for holding inventory is to avoid a shutdown due to machine failure.What is the JIT solution meant to do?
A)reduce setup costs.
B)reduce lead time.
C)use total preventive maintenance.
D)use total quality control.
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Page 21