Cost Accounting Exam Practice Tests
Course Introduction
Cost Accounting is a course that explores the principles, methods, and techniques used to collect, analyze, and report financial information related to the costs of producing goods or providing services. Students will learn about various costing systems, including job order, process, and activity-based costing, as well as cost-volume-profit analysis, budgeting, and standard costing. The course emphasizes the importance of cost information in planning, controlling, and decision-making within organizations, providing the analytical skills necessary to support effective management and strategic operations.
Recommended Textbook
Managerial Accounting 12th Edition by Carl S. Warren
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14 Chapters
2382 Verified Questions
2382 Flashcards
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Page 2
Chapter 2: Job Order Costing
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176 Verified Questions
176 Flashcards
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Sample Questions
Q1) Each account in the cost ledger in a job order system is called a job cost sheet.
A)True
B)False
Answer: True
Q2) Which of the following products probably would be manufactured using a job order costing system?
A) Number 2 pencils
B) Computer monitors.
C) Wedding invitations.
D) Paper.
Answer: C
Q3) The following are true regarding product costs except
A) product costs are found on the balance sheet until they are sold.
B) product costs consist of direct labor, direct materials, and factory overhead.
C) product costs can be found in three accounts in the balance sheet.
D) product costs include sales and administrative expenses.
Answer: D
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Chapter 3: Process Cost Systems
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178 Flashcards
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Sample Questions
Q1) When a firm adopts a just-in-time operating environment,
A) new, more efficient machinery and equipment must be purchased and installed in the original layout.
B) machinery and equipment are moved into small autonomous production lines called manufacturing cells.
C) new machinery and equipment must be purchased from franchised JIT dealers.
D) employees are retrained on different equipment but the plant layout generally stays unchanged.
Answer: B
Q2) Conversion costs are generally added evenly throughout the process.
A)True
B)False
Answer: True
Q3) Custom-made goods would be accounted for using a process costing system. A)True
B)False
Answer: False
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Page 4
Chapter 4: Cost Behavior and Cost-Volume-Profit Analysis
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215 Flashcards
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Sample Questions
Q1) If the contribution margin ratio for France Company is 45%, sales were $425,000. and fixed costs were $100,000, what was the income from operations?
A) $233,750
B) $91,250
C) $191,250
D) $133,750
Q2) If the volume of sales is $6,000,000 and sales at the break-even point amount to $4,800,000, the margin of safety is 25%.
A)True
B)False
Q3) Direct materials and direct labor costs are examples of variable costs of production.
A)True
B)False
Q4) The Waterfall Company sells a product for $150 per unit. The variable cost is $80 per unit, and fixed costs are $270,000. Determine the (a) break-even point in sales units, and (b) break-even points in sales units if the company desires a target profit of $36,000. Round your answer to the nearest whole number.
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Chapter 5: Variable Costing for Management Analysis
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154 Flashcards
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Sample Questions
Q1) If sales totaled $200,000 for the current year (10,000 units at $20 each) and planned sales totaled $212,500 (12,500 units at $17 each), the effect of the unit price factor on the change in sales is a:
A) $30,000 increase
B) $12,500 increase
C) $7,500 increase
D) $37,500 decrease
Q2) Changes in the quantity of finished goods inventory, caused by differences in the levels of sales and production, directly affects the amount of income from operations reported under absorption costing.
A)True
B)False
Q3) Property taxes on a factory building would be included as part of the cost of products manufactured under the absorption costing concept.
A)True
B)False
Q4) The contribution margin and the manufacturing margin are usually equal.
A)True
B)False
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Chapter 6: Budgeting
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185 Flashcards
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Sample Questions
Q1) Supervisor salaries and indirect factory wages would normally appear in the direct labor cost budget.
A)True
B)False
Q2) The budgeting process does not involve which of the following activities:
A) Specific goals are established
B) Periodic comparison of actual results to goals
C) Execution of plans to achieve goals
D) Increase in sales by increasing marketing efforts.
Q3) Tara Company's budget includes the following credit sales for the current year: September, $25,000; October, $36,000; November, $30,000; December, $32,000. Experience has shown that payment for the credit sales is received as follows: 15% in the month of sale, 60% in the first month after sale, 20% in the second month after sale, and 5% is uncollectible. How much cash can Tara Company expect to collect in November as a result of current and past credit sales?
A) $19,700
B) $28,400
C) $30,000
D) $31,100
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Page 7
Chapter 7: Performance Evaluation Using Variances From
Standard Costs
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158 Verified Questions
158 Flashcards
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Sample Questions
Q1) The direct labor time variance measures the efficiency of the direct labor force. A)True
B)False
Q2) Rosser Company produces a container that requires 4 yds. of material per unit. The standard price of one yard of material is $4.50. During the month, 9,500 chairs were manufactured, using 37,300 yards.
Required: Journalize the entry to record the standard direct materials used in production.
Q3) Cost systems using detailed estimates of each element of manufacturing cost entering into the finished product are called budgeted cost systems.
A)True
B)False
Q4) Financial reporting systems that are guided by the principle of exceptions concept focus attention on variances from standard costs.
A)True B)False
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Chapter 8: Performance Evaluation for Decentralized Operations
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Sample Questions
Q1) Budget performance reports prepared for the vice-president of production would generally contain less detail than reports prepared for the various plant managers.
A)True
B)False
Q2) The manager of the furniture department of a leading retailer does not control the salaries of departmental personnel.
A)True
B)False
Q3) The costs of services charged to a profit center on the basis of its use of those services are called:
A) operating expenses
B) noncontrollable charges
C) service department charges
D) activity charges
Q4) It is beneficial for divisions in a company to negotiate a transfer price when the supplying division has unused capacity in its plant.
A)True
B)False
Page 9
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Chapter 9: Differential Analysis and Product Pricing
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160 Flashcards
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Sample Questions
Q1) The Stewart Cake Factory owns a building for its operations. Stewart uses only half of the building and is considering two options for the unused space. The Candy Store would like to purchase the half of the building that is not being used for $550,000. A 7% commission would have to be paid at the time of purchase. Ice Cream Delight would like to lease the half of the building for the next 5 years at $100,000 each year. Stewart would have to continue paying $9,000 of property taxes each year and $1,000 of yearly insurance on the property, according to the proposed lease agreement. Determine the differential income or loss from the lease alternative.
Q2) In using the variable cost concept of applying the cost-plus approach to product pricing, fixed manufacturing costs and both fixed and variable selling and administrative expenses must be covered by the markup.
A)True
B)False
Q3) Under the total cost concept, manufacturing cost plus desired profit is included in the total cost per unit.
A)True
B)False
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Page 10
Chapter 10: Capital Investment Analysis
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Sample Questions
Q1) The expected period of time that will elapse between the date of a capital investment and the complete recovery in cash of the amount invested is called the cash payback period.
A)True
B)False
Q2) A company is planning to purchase a machine that will cost $24,000, have a six-year life, and have no salvage value. The company expects to sell the machine's output of 3,000 units evenly throughout each year. Total income over the life of the machine is estimated to be $12,000. The machine will generate cash flows per year of $6,000. The accounting rate of return for the machine is 50%.
A)True
B)False
Q3) The accounting rate of return is a measure of profitability computed by dividing the average annual cash flows from an asset by the average amount invested in the asset.
A)True
B)False
Q4) A project has estimated annual net cash flows of $50,000. It is estimated to cost $180,000. Determine the cash payback period.
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Page 11
Chapter 11: Cost Allocation and Activity-Based Costing
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110 Flashcards
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Sample Questions
Q1) The Kaumajet Factory produces two products - table lamps and desk lamps. It has two separate departments - finishing and production. The overhead budget for the finishing department is $550,000, using 500,000 direct labor hours. The overhead budget for the production department is $400,000 using 80,000 direct labor hours. If the budget estimates that a desk lamp will require 1 hours of finishing and 2 hours of production, what is the total amount of factory overhead to be allocated to desk lamps using the multiple production department factory overhead rate method with an allocation base of direct labor hours, if 26,000 units are produced?
A) $540,000
B) $187,200
C) $475,000
D) $288,600
Q2) Which of the following are the two most common allocation bases for factory overhead?
A) Total overhead dollars and machine hours
B) Direct labor hours and machine hours
C) Direct labor hours and factory expenses
D) Machine hours and factory expenses
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Chapter 12: Cost Management for Just-In-Time
Environments
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122 Flashcards
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Sample Questions
Q1) By spending more in costs of controlling quality, the costs of failing to control quality will decrease.
A)True
B)False
Q2) In a push manufacturing system, raw materials are released to production based on forecasted demand.
A)True
B)False
Q3) In a just-in-time (JIT) system, the work in process and raw materials inventory accounts are combined.
A)True
B)False
Q4) Which of the following results in fewer transactions in just-in-time accounting?
A) all manufacturing costs are combined in one account called Raw and In Process Inventory.
B) the distinction between direct and indirect costs is eliminated.
C) there is less movement of inventory between departments.
D) All of the above.
Page 13
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Chapter 13: Statement of Cash Flows
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Sample Questions
Q1) Cash flows from investing activities, as part of the statement of cash flows, include payments for the purchase of treasury stock.
A)True
B)False
Q2) If land costing $145,000 was sold for $205,000, the $60,000 gain on the sale would be added to net income in of the operating activities section of the statement of cash flows (prepared by the indirect method).
A)True
B)False
Q3) Cash flows from investing activities, as part of the statement of cash flows, include receipts from the sale of land.
A)True
B)False
Q4) The net income reported on an income statement for the current year was $63,000. Depreciation recorded on fixed assets for the year was $24,000. Balances of the current asset and current liability accounts at the end and beginning of the year are listed below. Prepare the cash flows from operating activities section of a statement of cash flows using the indirect method.
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Page 14
Chapter 14: Financial Statement Analysis
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Sample Questions
Q1) Unusual items affecting the current period's income statement consist of changes in accounting principles and discontinued operations.
A)True
B)False
Q2) An acceleration in the collection of receivables will tend to cause the accounts receivable turnover to
A) decrease
B) remain the same
C) either increase or decrease
D) increase
Q3) The percent of fixed assets to total assets is an example of
A) vertical analysis
B) solvency analysis
C) profitability analysis
D) horizontal analysis
Q4) The effects of differences in accounting methods are of little importance when analyzing comparable data from competing businesses.
A)True
B)False
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Chapter 15: Managerial Accounting Concepts and Principles
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174 Flashcards
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Sample Questions
Q1) Which of the following is considered a part of factory overhead cost?
A) Sales commissions
B) Depreciation of factory buildings
C) Depreciation of office equipment
D) Direct materials used
Q2) Identify the following costs as (a) prime cost, (b) conversion cost, (c) or both for a cake factory.
1. _____ Frosting
2. _____ Wages of the baker
3. _____ Sprinkles for the topping (considered an indirect material)
4. _____ Depreciation on oven
Q3) Indirect labor would be included in factory overhead.
A)True B)False
Q4) Depreciation on factory plant and equipment is an example of factory overhead cost.
A)True B)False
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Q5) Differentiate between financial and managerial accounting, addressing such issues as what reports are generated, when, and for whom.