Cost Accounting Exam Practice Tests
Course Introduction
Cost Accounting focuses on the principles, methods, and techniques used to determine, record, and manage the costs associated with manufacturing products or providing services. This course covers topics such as cost behavior, cost allocation, cost-volume-profit analysis, job order costing, process costing, activity-based costing, and standard costing. Students will learn how cost information is used in planning, budgeting, and decision-making within organizations, gaining practical skills in analyzing costs and developing strategies to improve operational efficiency and profitability.
Recommended Textbook
Fundamental Managerial Accounting Concepts 8th Edition by Thomas P Edmonds
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14 Chapters
2016 Verified Questions
2016 Flashcards
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Page 2
Chapter 1: Management Accounting and Corporate Governance
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143 Verified Questions
143 Flashcards
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Sample Questions
Q1) Which of following practices is not considered an effective means of reengineering business systems?
A) Identifying the best practices used by world-class competitors
B) Improving the accuracy of cost allocations
C) Increasing non-value added activities
D) All of these are effective means of reengineering business systems.
Answer: C
Q2) All of the following are features of managerial accounting except:
A) information is provided primarily to insiders such as managers.
B) information includes economic and non-financial data as well as financial data.
C) information is characterized by objectivity,reliability,consistency,and accuracy.
D) information is reported continuously with a present or future orientation.
Answer: C
Q3) Depreciation on manufacturing equipment is an indirect product cost,while depreciation on office equipment is a period cost.
A)True
B)False
Answer: True
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Chapter 2: Cost Behavior, Operating Leverage, and Profitability Analysis
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141 Verified Questions
141 Flashcards
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Sample Questions
Q1) No contribution margin is provided by selling one unit of a product at a price of $35 if variable production costs are $20,variable general and administrative costs are $5,and fixed costs are $10 per unit.
A)True
B)False
Answer: False
Q2) If a company had a mixed cost s
A)True
B)False
Answer: False
Q3) What are mixed or semivariable costs? Give an example of a mixed cost.
Answer: Answers will vary
A mixed or semivariable cost has a fixed component and a variable component.Examples would be utilities or compensation of sales staff.For example,if sales personnel receive a salary and a commission,their compensation has a variable part (the commission,which varies with sales)and a fixed part (the salary).
Q4) How does variable cost per unit behave when volume decreases?
Answer: Answers will vary Variable cost per unit is constant when volume decreases.
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Chapter 3: Analysis of Cost,Volume,and Pricing to Increase Profitability
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144 Verified Questions
144 Flashcards
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Sample Questions
Q1) If a company changes from a labor-intensive system that incurs significant hourly wage cost to an automated system that increases fixed cost,the total cost line on the company's cost-volume-profit graph will shift up and have a steeper slope.
A)True
B)False
Answer: False
Q2) Ng Company sells one product that has a sales price of $20 per unit,variable costs of $12 per unit,and total fixed costs of $300,000.What is the amount of sales volume in dollars necessary to attain a desired profit of $100,000?
A) $250,000
B) $750,000
C) $1,000,000
D) $666,667
Answer: C
Q3) Company A makes and sells a single product,unless otherwise indicated.What happens to the break-even point when total fixed costs increase?
Answer: Answers will vary The break-even point increases.
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Chapter 4: Cost Accumulation,Tracing,and Allocation
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156 Verified Questions
156 Flashcards
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Sample Questions
Q1) Bank's Department Store has three departments: Men's,Women's and Children's.The store incurred $50,000 of store rental costs during the current year.The departments identified the following cost drivers: \(\begin{array}{|l|r|r|r|}
\hline & \text { Men's } & \text { Women's } & \text { Children's } \\
\hline \text { Labor dollars } & \$ 530,000 & \$ 775,000 & \$ 240,000 \\
\hline \text { Number of employees } & 10 & 20 & 4 \\
\hline \text { Square footage } & 3,000 & 8,000 & 1,000 \\
\hline \text { Number of sales transactions } & 300,000 & 900,000 & 90,000 \\
\hline
\end{array}\) Using the most appropriate cost driver,how much rental cost (rounded to the nearest dollar)should be allocated to the Women's Department? (Do not round your intermediate calculations. )
A) $33,333
B) $29,412
C) $25,081
D) $34,884
Q2) A company may use several different cost drivers to allocate its indirect costs.
A)True
B)False
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Chapter 5: Cost Management in an Automated Business
Environment: ABC, ABM, and TQM
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153 Verified Questions
153 Flashcards
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Sample Questions
Q1) How would a company determine the optimal number of activity centers in an activity-based costing system?
Q2) Performance Bicycle Company makes steel and titanium handle bars for bicycles.It requires approximately 1 hour of labor to make one handle bar of either type.During the most recent accounting period,Barr Company made 7,000 steel bars and 3,000 titanium bars.Setup costs amounted to $84,000.One batch of each type of bar was run each month.If a single company-wide overhead rate based on direct labor hours is used to allocate overhead costs to the two products,the amount of setup cost assigned to the steel bars will be:
A) $8,400.
B) $84,000.
C) $49,000.
D) $58,800.
Q3) What is the reasoning behind the use of cost pools in an activity-based costing system?
Q4) The first step in implementing an activity-based costing system is to trace overhead costs to one or more departments.
A)True
B)False
Page 7
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Chapter 6: Relevant Information for Special Decisions
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139 Verified Questions
139 Flashcards
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Sample Questions
Q1) Outsourcing reduces the extent of a company's vertical integration.
A)True
B)False
Q2) Qualitative information is only relevant for decision making if it can be quantified.
A)True
B)False
Q3) Lindsay purchased a raffle ticket for $5.Just before the grand prize drawing two people tried to buy her ticket.The first person offered $30,and another offered $65.What is Lindsay's opportunity cost of keeping the raffle ticket?
A) $60
B) $65
C) $90
D) $95
Q4) Grady Corporation is evaluating two decision alternatives.Alternative One has costs of $2,000 and revenues of $3,000 while Alternative Two has costs of $3,200 and revenues of $4,000.The amount of differential revenue is $1,000.
A)True
B)False
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8
Chapter 7: Planning for Profit and Cost Control
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142 Verified Questions
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Sample Questions
Q1) Which of the following budgets or schedules uses data contained in the selling and administrative expense budget?
A) Cash receipts schedule
B) Cash payments schedule
C) Inventory purchases budget
D) Sales budget
Q2) Which of the following items typically found on the selling and administrative expense budget will also impact the cash budget?
A) Depreciation expense
B) Administrative salaries
C) Advertising expense
D) Both administrative salaries and advertising expense are correct.
Q3) What is the total amount of S&A expenses for the fourth quarter that the company will report on its pro forma income statement?
A) $64,400
B) $68,900
C) $23,700
D) $63,900
Q4) How do short-term plans differ from long-term plans?
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Chapter 8: Performance Evaluation
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Sample Questions
Q1) The total sales variance includes both price and volume variances.
A)True
B)False
Q2) Which of the following is not an advantage of using a standard cost system?
A) Promotes the efficient use of management talent to control costs
B) Provides immediate feedback that permits rapid response to problems
C) The easiest cost system to develop and maintain
D) Can boost morale and motivate employees
Q3) Select the incorrect statement regarding flexible budgets.
A) Flexible budgets often show the estimated revenues and costs at multiple volume levels.
B) A flexible budget is used to compare actual to budgeted amounts.
C) A flexible budget is also known as a master budget.
D) Standard prices and costs are used in preparing a flexible budget.
Q4) When would a sales variance be listed as favorable?
A) When actual sales exceed budgeted or expected sales
B) When actual sales are less than budgeted or expected sales
C) When actual sales are equal to budgeted or expected sales
D) None of these answers is correct.
Q5) Indicate whether each of the following statements is
Page 10
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Chapter 9: Responsibility Accounting
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118 Flashcards
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Sample Questions
Q1) Which of the following formats is typically used in year-to-date income statements prepared for internal use under a responsibility accounting system?
A) Sales - Cost of Goods Sold = Gross Margin;Gross Margin - Operating Expenses = Net Income
B) Sales - Manufacturing Costs = Manufacturing Margin;Manufacturing Margin - Selling and Administrative Costs = Net Income
C) Sales - Variable Costs = Contribution Margin;Contribution Margin - Fixed Costs = Net Income
D) None of these.
Q2) How should a responsibility report be prepared to support the practice of management by exception?
Q3) Describe the concept of decentralization as applied to large business organizations.Why do large organizations practice decentralization?
Q4) What are the advantages of using a market-based transfer price? Why is it not always used?
Q5) Indicate whether each of the following statements about responsibility centers is
Q6) Indicate whether each of the following statements is
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Page 11
Chapter 10: Planning for Capital Investments
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155 Flashcards
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Sample Questions
Q1) Which of the following does not represent an advantage of the unadjusted rate of return over the payback method for evaluating capital projects?
A) The unadjusted rate of return method considers the investment's profitability.
B) The unadjusted rate of return method considers the time value of money.
C) The unadjusted rate of return is a percentage that can be compared to a stated hurdle rate.
D) None of these represents an advantage.
Q2) A customary assumption in capital budgeting analysis is that:
A) the desired rate of return includes the effects of compounding.
B) the cash inflows generated by the investment are not reinvested.
C) annual cash flows occur at the beginning of each period.
D) the time value of money is ignored.
Q3) Indicate whether each of the following statements is
Q4) Capital investment decisions involve investments in current assets.
A)True
B)False
Q5) Indicate whether each of the following statements is
Q6) Indicate whether each of the following statements is
Q7) Indicate whether each of the following statements is
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Chapter 11: Product Costing in Service and Manufacturing
Entities
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139 Verified Questions
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Sample Questions
Q1) Tisdale Company started the year with the following beginning account balances: Raw Materials Inventory,$42,000;Work in Process Inventory,$90,000;and Finished Goods Inventory,$20,000.During the year,the company purchased $60,000 of raw materials and ended the year with $16,000 of raw materials.Direct labor costs for the year were $120,000 and a total of $36,000 of manufacturing overhead costs was allocated to work in process.There was no over- or underapplied overhead.Ending work in process was $82,000 and ending finished goods was $35,000.Goods were sold to customers during the year for $360,000.How much gross margin would be reported for the year?
A) $110,000
B) $145,000
C) $125,000
D) $171,000
Q2) Cost of goods sold must be determined prior to computing cost of goods manufactured.
A)True
B)False
Q3) The work in process account is debited when production workers are paid.
A)True
B)False
Page 13
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Chapter 12: Job-Order, Process, and Hybrid Costing Systems
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Sample Questions
Q1) In which of the following industries would a job-order cost system most likely be used?
A) Oil refinery
B) Small appliances manufacturer
C) Construction of cell towers
D) Beverage manufacturer
Q2) Which event results in the transfer of product costs from the balance sheet to the income statement?
A) Purchase of materials
B) Sale of goods
C) Production of goods
D) Application of estimated manufacturing overhead to job
Q3) O'Hare Company,is a manufacturing firm that uses a job-order cost system to determine the costs of its products.During 2014the current accounting period,O'Hare paid $700 for equipment rental and other indirect costs.The recognition of this event would:
A) Decrease total assets.
B) Increase total assets.
C) Reduce net income.
D) Have no impact on total assets.
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Chapter 13: Financial Statement Analysis
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Sample Questions
Q1) Indicate whether each of the following statements is
Q2) The accounting concept or principle that is perhaps the greatest single culprit in distorting the results of financial statement analysis is the:
A) Matching principle.
B) Conservatism concept.
C) Historic cost principle.
D) Time value of money concept.
Q3) Common methods of financial statement analysis include all of the following except:
A) Incremental analysis.
B) Horizontal analysis.
C) Vertical analysis.
D) Ratio analysis.
Q4) Jenkins Company's current ratio is higher than the average for its industry,while its quick ratio is below the industry average.One possible interpretation for these results is that Jenkins carries less inventory than most companies in its industry.
A)True
B)False
Q5) Discuss the limitations that affect financial statement analysis.
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Chapter 14: Statement of Cash Flows
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Sample Questions
Q1) In 2014,Pingry Company's accounts receivableAccounts Receivable balance increased by $14,000 during the year.The company's income statement reports sales revenue of $437,500,all on account.How much cash did Pingrywas collected from customers on accounts receivable during the year?
A) $437,500
B) $451,500
C) $423,500
D) None of these answers is correct.
Q2) Which of the following is not an adjustment when arriving at net cash provided byflow from operating activities under the indirect method?
A) Noncash expenses such as depreciation expense
B) Gains and losses on the sale of long-term assets
C) Changes in a company's long-term assets
D) Changes in noncash current asset and current liability accounts
Q3) What can cause cash flow from operating activities to be greater than net income from operationsoperating activities?
Q4) Can a company have a negative cash flow from operationsoperating activities for the year on the statement of cash flows but still have a net income on the income statement? Explain.
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