Cost Accounting Exam Materials
Course Introduction
Cost Accounting is a course that explores the principles, methods, and techniques used to determine, record, and analyze the costs associated with producing goods and providing services. Students will learn about various cost concepts, cost allocation methods, budgeting, and cost control, as well as the application of cost data in managerial decision-making. Emphasis is placed on understanding job order costing, process costing, activity-based costing, and standard costing systems. The course aims to equip students with the analytical skills necessary to assess operational efficiency, improve organizational profitability, and support strategic planning in a business environment.
Recommended Textbook
Cost Accounting 15th Edition by Charles T. Horngren
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23 Chapters
4112 Verified Questions
4112 Flashcards
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Chapter 1: The Manager and Management Accounting
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Sample Questions
Q1) Management accountants work closely with managers in various departments to formulate strategies by providing information about the sources of competitive advantage.
A)True
B)False
Answer: True
Q2) In designing strategy,a company must match its opportunities in the marketplace with ________.
A) environment friendly goals
B) its resources and capabilities
C) branding opportunities
D) the requirements of credit rating agencies
Answer: B
Q3) Cost accounting is the process of measuring,analyzing,and reporting financial and nonfinancial information related to the costs of acquiring or using resources in an organization.
A)True
B)False
Answer: True
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Page 3
Chapter 2: An Introduction to Cost Terms and Purposes
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Sample Questions
Q1) Cost accounting and cost management include calculating various costs,obtaining financial and nonfinancial information,and analyzing relevant information for decision making.
A)True
B)False Answer: True
Q2) Indirect costs such as rent,telephone,and depreciation are always costs of the period in which they are incurred and are not associated with inventories.
A)True
B)False Answer: False
Q3) Service-sector companies report ________.
A) work-in-process inventory, and finished goods inventory accounts
B) only finished goods inventory
C) direct materials inventory, work-in-process inventory, and finished goods inventory accounts
D) no inventory accounts
Answer: D
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4
Chapter 3: Cost-Volume-Profit Analysis
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Sample Questions
Q1) A decision table is a summary of the alternative actions,events,outcomes,and probabilities of events.
A)True
B)False
Answer: True
Q2) The contribution margin per unit is ________.
A) $15
B) $20
C) $22
D) $125
Answer: B
Q3) Which option provides the least amount of risk?
A) Option one
B) Option two
C) Both options provide the same amount of risk.
D) Option one is risk-free
Answer: A
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Page 5
Chapter 4: Job Costing
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199 Flashcards
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Sample Questions
Q1) Indirect manufacturing costs should be allocated equally to each job.
A)True
B)False
Q2) Luke employs 20 professional cleaners.Budgeted costs total $1,800,000 of which $1,550,000 is direct costs.Budgeted indirect costs are $750,000 and actual indirect costs were $795,800.Budgeted professional labor-hours are 1,000,000 and actual hours were 1,218,000.What is the budgeted direct cost-allocation rate?
A) $1.80 per hour
B) $1.7857 per hour
C) $0.75 per hour
D) $1.55 per hour
Q3) When a normal costing system is used,clients using proportionately more full-time employees than trainees will ________.
A) be overbilled for actual resources used
B) be underbilled for actual resources used
C) be billed accurately for actual resources used
D) result in an underallocation of direct costs
Q4) Differentiate between a cost pool and a cost-allocation base.
Q5) What is the difference between an actual cost system and a normal cost system?
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Chapter 5: Activity-Based Costing and Activity-Based Management
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Sample Questions
Q1) Implementing activity-based costing system involves use of different cost rates for different activities to compute indirect costs of a product.
A)True
B)False
Q2) Given this change in the cost ________.
A) SR6 will now command a higher sales price
B) SR6 has benefited from the new system
C) SR6 is definitely more accurately costed
D) the costing results for SR6 under the new system depend on the adequacy and quality of the estimated cost drivers and costs used by the system
Q3) The homogeneous cost pools and the choice of cost-allocation bases give managers greater confidence in the activity and product cost numbers from single indirect-cost pool systems.
A)True
B)False
Q4) ABC reveals opportunities to reduce costs on nonvalue added activities.
A)True
B)False
Page 7
Q5) Explain how a top-selling product may actually result in losses for the company.
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Chapter 6: Master Budget and Responsibility Accounting
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226 Flashcards
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Sample Questions
Q1) How much cash will be disbursed in total in March?
A) $42,000
B) $50,000
C) $88,400
D) $96,400
Q2) In which order are the following developed? First to last: \(A =\) Production bud get
\(\mathrm { B } =\) Direct materials costs budget
\(\mathrm { C } =\) Budgeted income statement
\(\mathrm { D } =\) Revenues budget
A) ABDC
B) DABC
C) DCAB
D) CABD
Q3) Financing decisions deal with how to best use the limited resources of an organization.
A)True
B)False
Q4) Discuss the importance of the sales forecast and items that influence its accuracy.
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Page 8
Chapter 7: Flexible Budgets, direct-Cost Variances, and Management Control
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Sample Questions
Q1) An efficiency variance reflects the difference between ________.
A) actual input quantities used last period and current period
B) an actual input quantity and a budgeted input quantity
C) an actual input quantity used in a company and its main competitor's
D) a standard input quantity in a company and its main competitor's
Q2) What is the static-budget variance of variable costs?
A) $25,000 favorable
B) $25,000 unfavorable
C) $215,000 favorable
D) $215,000 unfavorable
Q3) July's direct material flexible-budget variance is ________.
A) $1,000 unfavorable
B) $2,000 favorable
C) $2,500 unfavorable
D) $0
Q4) The flexible budget contains ________.
A) budgeted amounts for actual output
B) budgeted amounts for planned output
C) actual costs for actual output
D) actual costs for planned output
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Chapter 8: Flexible Budgets, overhead Cost Variances, and Management Control
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Sample Questions
Q1) What is the amount for budgeted variable manufacturing overhead cost per unit?
A) $225,000
B) $218,500
C) $213,750
D) $221,750
Q2) What is the fixed overhead spending variance?
A) $560 unfavorable
B) $100 favorable
C) $100 unfavorable
D) $560 favorable
Q3) What is the flexible-budget variance for variable manufacturing overhead?
A) $4,860 favorable
B) $4,860 unfavorable
C) $630 favorable
D) $630 unfavorable
Q4) Fixed overhead has no production-volume variance.
A)True
B)False
Page 10
Q5) Explain how are the fixed manufacturing overhead costs treated under Generally Accepted Accounting Principles?
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Chapter 9: Inventory Costing and Capacity Analysis
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Sample Questions
Q1) Critics of absorption costing suggest evaluating management on its ability to
A) exceed production quotas
B) increase operating income
C) decrease fixed costs
D) decrease variable costs
Q2) What is the total throughput contribution?
A) $1,069,500
B) $897,000
C) $1,173,000
D) $759,000
Q3) What is cost of goods sold using variable costing?
A) $38,675
B) $35,000
C) $44,200
D) $52,000
Q4) Explain the difference between the gross margin format and the contribution margin format for the income statement.What information is highlighted with each?
Q5) Discuss the three methods to dispose of production volume variance.
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Chapter 10: Determining How Costs Behave
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Sample Questions
Q1) One assumption frequently made in cost behavior estimation is that changes in total costs can be explained by changes in the level of a single activity.
A)True
B)False
Q2) Patrick Ross,the president of Corise's Wild Game Company,has asked for information about the cost behavior of manufacturing overhead costs.Specifically,he wants to know how much overhead cost is fixed and how much is variable.The following data are the only records available:
\(\begin{array}{lrr}\text { Month } & \text { Machine-hours } &\text { Qwerhead Costs }\\
\text { February } & 1,870 & \$ 22,500 \\
\text { March } & 3,080 & 24,475 \\
\text { April } & 1,100 & 24,321 \\
\text { May } & 2,750 & 23,650 \\
\text { June } & 3,850 & 31,196
\end{array}\) Required:
Using the high-low method,determine the overhead cost equation.Use machine-hours as your cost driver.
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Chapter 11: Decision Making and Relevant Information
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Sample Questions
Q1) Differential revenue is the difference in total revenue between two alternatives.
A)True
B)False
Q2) Should Rubium make or buy the subassemblies? What is the difference between the two alternatives?
A) Buy; savings = $85,000
B) Buy; savings = $50,000
C) Make; savings = $25,000
D) Make; savings = $120,000
Q3) Which model has the greatest contribution margin per unit?
A) Model X
B) Model Y
C) Model Z
D) Both Model X and Model Y have the highest and same contribution margin per unit
Q4) Sunk costs are irrelevant to decision making.
A)True
B)False
Q5) Explain what revenues and costs are relevant when choosing among alternatives.
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Chapter 12: Strategy, balanced Scorecard, and Strategic
Profitability Analysis
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Sample Questions
Q1) What is the revenue effect of the productivity component (b)?
A) $0
B) $2,400 U
C) $900 F
D) $2,400 F
Q2) 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
Q3) In general,profit potential of an organization decreases with ________.
A) lesser competition and stronger potential entrants
B) greater competition and stronger potential entrants
C) lesser competition and weaker potential entrants
D) greater competition and weaker potential entrants
Q4) The revenue effect of growth is calculated by multiplying the difference in units sold (current year minus the previous year)by selling price in the current year.
A)True
B)False
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Chapter 13: Pricing Decisions and Cost Management
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Sample Questions
Q1) ________ describes when a resource is consumed or benefit forgone to meet a specific objective.
A) Cost incurrence
B) Locked-in cost
C) Resource utilization
D) Designed-in cost
Q2) Which of the following costs can be classified into both value-added and non-value-added costs?
A) production control costs
B) machine breakdown costs
C) rework costs
D) direct material costs
Q3) The markup percentage for setting prices as a percentage of the full cost of the product is ________.
A) 328.9%
B) 36.6%
C) 228.5%
D) 21.3%
Q4) What are the undesirable effects of value engineering and target costing? How can these be reduced?
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Chapter 14: Cost Allocation, customer-Profitability Analysis, and
Sales-Variance Analysis
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Sample Questions
Q1) Costs in a homogeneous cost pools have the same or a similar cause-and-effect or benefits-received relationship with the cost-allocation base.
A)True
B)False
Q2) Gevorg's Electronics manufactures TVs and DVDRs.During April,the following activities occurred:
\[\begin{array} { l r r }
& \text { TVs } & \text { DVDRs } \\
\hline \text { Budgeted units sold } & 19,404 & 72,996 \\
\text { Budgeted contribution margin per unit } & \$ 40 & \$ 75 \\
\text { Actual units sold } & 22,000 & 80,000 \\
\text { Actual contribution margin per unit } & \$ 45 & \$ 76
\end{array}\] Required:
Compute the following variances in terms of the contribution margin.
a.Determine the total sales-mix variance.
b.Determine the total sales-quantity variance.
c.Determine the total sales-volume variance.
Q3) What are the two components of the sales-quantity variance?
Q4) Should a company allocate its corporate costs to divisions?
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Q5) Why do managers prepare cost-hierarchy-based operating incomes statements?
Chapter 15: Allocation of Support-Department Costs, common
Costs, and Revenues
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Sample Questions
Q1) The costs of unused capacity are highlighted when ________.
A) actual usage based allocations are used
B) budgeted usage allocations are used
C) practical capacity-based allocations are used
D) the dual-rate cost-allocation method allocates fixed costs based on actual usage
Q2) The stand-alone revenue-allocation method ________.
A) uses product-specific information on the products in the bundle as weights for allocating the bundled revenues to the individual products
B) ranks individual products in a bundle according to criteria determined by management
C) ranks individual products in a bundle according to costs allocated to the products
D) survey customers about the importance of each of the individual products in their purchase decision
Q3) The issue of "allowable costs" is applicable in government cost-plus contracts.
A)True
B)False
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Chapter 16: Cost Allocation: Joint Products and Byproducts
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Sample Questions
Q1) If separable costs of Butter Cream was 16,000 and constant gross margin was 25%,what would have been the allocated joint costs of Condensed Milk?
A) $7,438
B) $7,538
C) $30,238
D) $30,338
Q2) Using estimated net realizable value,what amount of the joint costs would be allocated Xyla and the skim goat ice cream?
A) $672,000 and $271,000
B) $131,464 and $53,016
C) $92,240 and $92,240
D) $144,480 and $72,140
Q3) Classification of main products,joint products,and byproducts can always be done with ease.
A)True
B)False
Q4) What are the four methods of allocating joint costs to individual products? Which of these methods is preferred,and what are two advantages of this method?
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Chapter 17: Process Costing
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Sample Questions
Q1) Transferred-in costs are always 100 percent complete at the beginning of the process in the new department.
A)True
B)False
Q2) What are the equivalent units for direct materials and conversion costs,respectively,for June?
A) 1,250 units; 1,210.64 units
B) 1,250 units; 1,212.5 units
C) 1,100 units; 1,100 units
D) 1012 units; 1040 units
Q3) What were the equivalent units for conversion costs during October?
A) 10,125
B) 11,375
C) 11,125
D) 9,000
Q4) List and describe the five steps in process costing.
Q5) Why do we need to accumulate and calculate unit costs in process costing (and also job costing)?
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Chapter 18: Spoilage, rework, and Scrap
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Sample Questions
Q1) Under the weighted-average method,the costs of normal spoilage are added to the costs of their related good units.Hence,the cost per good unit completed and transferred out equals the total costs transferred out divided by the number of good units produced.
A)True
B)False
Q2) Abnormal spoilage totals ________.
A) 5,800 units
B) 0 units
C) 7,200 units
D) 13,000 units
Q3) How can a company account for scrap? Include in your explanation a discussion of the two aspects of accounting for scrap.
Q4) Normal spoilage totals ________.
A) 3,200 units
B) 8,000 units
C) 2,880 units
D) 5,120 units
Q5) Distinguish among spoilage,reworked units,and scrap.Give an example of each.
Q6) What are the advantages of costing rework?
Page 20
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Chapter 19: Balanced Scorecard: Quality and Time
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Sample Questions
Q1) What is the cycle time for an order?
A) 1 minutes per tool
B) 1.5 minutes per tool
C) 2.5 minutes per tool
D) 3.5 minutes per tool
Q2) Ventaz Corp manufactures keyboards.The manufacturing cycle efficiency is 40%.What is its manufacturing time for value added if the manufacturing lead time is 120 minutes per keyboard?
A) 38.50 minutes
B) 60.00 minutes
C) 48.00 minutes
D) 54.00 minutes
Q3) Managers identify the relevant costs and benefits for each solution by focusing on
A) the alternative solution that will derive maximum customer satisfaction
B) how total costs and total revenues will change under each alternative solution
C) how the employees of a company would be able to implement a change
D) how long it will take for the improved program to be fully functional
Q4) What are ISO 9000 and ISO 14000?
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Chapter 20: Inventory Management, just-In-Time, and Simplified Costing Methods
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Sample Questions
Q1) What are the annual relevant carrying costs?
A) $7,122
B) $8,265
C) $9,057
D) $7,157
Q2) Clothes,Inc.,has an average annual demand for red,medium polo shirts of 25,000 units.The cost of placing an order is $80 and the cost of carrying one unit in inventory for one year is $25.
Required:
a.Use the economic-order-quantity model to determine the optimal order size.
b.Determine the reorder point assuming a lead time of 10 days and a work year of 250 days.
c.Determine the safety stock required to prevent stockouts assuming the maximum lead time is 20 days and the maximum daily demand is 125 units.
Q3) JIT production system always uses a master production schedule to organize the production.
A)True
B)False
Q4) Lean accounting is much simpler than traditional product costing.Why?
Page 22
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Chapter 21: Capital Budgeting and Cost Analysis
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Sample Questions
Q1) Assume your goal in life is to retire with two million dollars.How much would you need to save at the end of each year if interest rates average 6% and you have a 25-year work life?
A) $43,118
B) $55,596
C) $36,453
D) $75,503
Q2) Which of the following is an advantage of internal rate of return method?
A) Sum of IRRs of individual projects gives an IRR of a combination or portfolio of projects. B) The percentage returns computed under the IRR method are easy to understand and compare.
C) It can be expressed as a unique number.
D) It can be used when the required rate of return varies over the life of a project.
Q3) If there are uniform cash flows,payback period is calculated by dividing net initial investment by uniform increase in annual future cash flows.
A)True
B)False
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Chapter 22: Management Control Systems, transfer Pricing, and
Multinational Considerations
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Sample Questions
Q1) Cornerstone Company has two divisions.The Bottle Division produces products that have variable costs of $3 per unit.Its 20X5 sales were 140,000 to outsiders at $5 per unit and 40,000 units to the Mixing Division at 140% of variable costs.Under a dual transfer-pricing system,the Mixing Division pays only the variable cost per unit.The fixed costs of the Bottle Division are $125,000 per year. Mixing sells its finished products to outside customers for $11.50 per unit.Mixing has variable costs of $2.50 per unit in addition to the costs from the Bottle Division.The annual fixed costs of Mixing were $85,000.There were no beginning or ending inventories during the year.
Required:
What are the operating incomes of the two divisions and the company as a whole for the year? Explain why the company's operating income is less than the sum of the two divisions' total income.
Q2) The formal management control system includes shared values,loyalties,and mutual commitments among members of the company,company culture,and norms about acceptable behavior for managers and other employees.
A)True B)False
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Chapter 23: Performance Measurement, compensation, and Multinational Considerations
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Sample Questions
Q1) Megatron Corp.earned net income of 13,000 Euros in its overseas branch at France.Its headquarters is located in the U.S.The rate of conversion during set up was $1.306 / Euro.What is the value of its income in its home currency if the rate is $1.508 / Euro at the end of a financial year and the average rate being $1.407 / Euro?
A) $16,060
B) $18,291
C) $14,070
D) $19,768
Q2) What is the Cyclotron Division's return on investment?
A) 35%
B) 75%
C) 50%
D) 80%
Q3) Economic value added,unlike residual income,charges managers for the costs of their investments in long-term assets and working capital.
A)True
B)False
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