Cost Accounting Exam Practice Tests
Course Introduction
Cost Accounting is a comprehensive course designed to introduce students to the principles, techniques, and applications of cost measurement and management in organizations. The course covers key topics such as cost terminology, cost behavior, cost-volume-profit analysis, job and process costing systems, activity-based costing, and budgeting. Students will learn how to analyze and interpret cost information to support decision-making, planning, and control within an organization. Real-world case studies and practical exercises are incorporated to enhance understanding of how cost accounting informs strategic business choices, performance evaluation, and resource allocation.
Recommended Textbook
Cost Accounting A Managerial Emphasis 14th Edition by Charles T. Horngren
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23 Chapters
3902 Verified Questions
3902 Flashcards
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Chapter 1: The Accountants Role in the Organization
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195 Verified Questions
195 Flashcards
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Sample Questions
Q1) The controller (also called the chief accounting officer)is the financial executive primarily responsible for both management accounting and financial accounting.
A)True
B)False
Answer: True
Q2) Briefly explain the planning and control activities in management accounting. How are these two activities linked to each other?
Answer: Planning business operations relates to designing, producing, and marketing a product or service. This includes preparing budgets and determining the prices and cost of products and services. A company must know the cost of each product and service to decide which products to offer and whether to expand or discontinue product lines. Controlling business operations includes comparing actual results to the budgeted results and taking corrective action when needed. Feedback links planning and control. The control function provides information to assist in better future planning.
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3
Chapter 2: An Introduction to Cost Terms and Purposes
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224 Verified Questions
224 Flashcards
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Sample Questions
Q1) Which of the following formulas determine cost of goods sold in a manufacturing entity?
A)Beginning work-in-process inventory + Cost of goods manufactured - Ending work-in-process inventory = Cost of goods sold
B)Beginning work-in-process inventory + Cost of goods manufactured + Ending work-in-process inventory = Cost of goods sold
C)Cost of goods manufactured - Beginning finished goods inventory - Ending finished goods inventory = Cost of goods sold
D)Cost of goods manufactured + Beginning finished goods inventory - Ending finished goods inventory = Cost of goods sold
Answer: D
Q2) Wages paid to machine operators on an assembly line are classified as a:
A)direct material cost
B)direct manufacturing labor cost
C)manufacturing overhead cost
D)period cost
Answer: B
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Chapter 3: Cost-Volume-Profit Analysis
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207 Verified Questions
207 Flashcards
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Sample Questions
Q1) What is the current breakeven point in terms of number of units?
A)1,500 units
B)2,250 units
C)3,333 units
D)None of these answers are correct.
Answer: A
Q2) Assume there is an increase in advertising expenditures and all other CVP parameters remain constant. This change will:
A)reduce operating income
B)reduce contribution margin
C)increase variable costs
D)increase selling price
Answer: A
Q3) Operating income calculations use:
A)net income
B)income tax expense
C)cost of goods sold and operating costs
D)nonoperating revenues and nonoperating expenses
Answer: C
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Page 5
Chapter 4: Job Costing
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199 Verified Questions
199 Flashcards
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Sample Questions
Q1) Process costing is used to assign manufacturing costs to unique batches of a product.
A)True
B)False
Q2) Proration is the spreading of underallocated or overallocated overhead among ending work in process, finished goods, and costs of goods sold.
A)True
B)False
Q3) The adjusted allocation approach yields the benefits of:
A)timeliness and convenience of normal costing
B)allocation of of actual manufacturing overhead costs at the end of the year
C)Both a and b are correct.
D)Neither a nor b are correct.
Q4) The cost driver of an indirect cost is often used as the cost-allocation base.
A)True B)False
Q5) Describe job-costing and process-costing systems. Explain when it would be appropriate to use each.
Q6) Explain how a budgeted indirect-cost rate is determined.
Page 6
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Chapter 5: Activity-Based Costing and Activity-Based Management
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175 Verified Questions
175 Flashcards
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Sample Questions
Q1) Using the three cost pools to allocate overhead costs, what is the total manufacturing overhead cost estimate for Money Managers during 2010?
A)$13,700
B)$6,500
C)$6,860
D)$10,192
Q2) A cost-allocation base is a necessary element when using a strategy that will refine a costing system.
A)True
B)False
Q3) If companies increase market share in a given product line because their reported costs are less than their actual costs, they will become more profitable in the long run.
A)True
B)False
Q4) Regarding department wide systems, the benefits of an ABC system must be balanced against its costs and limitations.
A)True
B)False
Page 7
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Chapter 6: Master Budget and Responsibility Accounting
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229 Verified Questions
229 Flashcards
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Sample Questions
Q1) A budget can do all of the following EXCEPT:
A)promote coordination among subunits
B)determine actual profitability
C)motivate managers
D)motivate employees
Q2) Shamokin Manufacturing produces two products, Big and Bigger. Shamokin expects to sell 10,000 units of product Bigger and to have an inventory of 2,000 units of Bigger on hand at the end of the period. Currently, Shamokin has 800 units of Bigger on hand. Bigger requires two labor operations, molding and polishing. Each unit of Bigger requires one hour of molding and two hours of polishing. The direct labor rate for molding is $20 per molding hour and the direct labor rate for polishing is $25 per polishing hour. The expected number of hours of direct labor for Bigger is:
A)8,800 hours of molding; 17,600 hours of polishing
B)11,200 hours of molding; 22,400 hours of polishing
C)17,600 hours of molding; 8,800 hours of polishing
D)22,400 hours of molding; 11,200 hours of polishing
Q3) Budgeting helps management anticipate and adjust for trouble spots in advance.
A)True
B)False
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Page 8
Chapter 7: Flexible Budgets, Direct-Cost Variances, and Management Control
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180 Verified Questions
180 Flashcards
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Sample Questions
Q1) What are the actual variable costs (C)?
A)$72,800
B)$64,240
C)$62,640
D)$54,080
Q2) September's direct labor price variance is:
A)$210.00 unfavorable
B)$210.00 favorable
C)$70.00 unfavorable
D)$70.00 favorable
Q3) The explanation that lower-quality materials were purchased is most likely for:
A)Material A
B)Material B
C)Material C
D)both Material A and C
Q4) A particular variance generally signals one particular problem.
A)True
B)False
Q5) Describe the purpose of variance analysis.
Page 9
Q6) What is benchmarking, and how is it useful to a company?
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Page 10
Chapter 8: Flexible Budgets, Overhead Cost Variances, and Management Control
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171 Verified Questions
171 Flashcards
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Sample Questions
Q1) For calculating the costs of products and services, a standard costing system:
A)only requires a simple recording system
B)uses standard costs to determine the cost of products
C)does not have to keep track of actual costs
D)All of these answers are correct.
Q2) The chapter shows that variance analysis of overhead costs can be presented in 4, 3, 2, and 1-variance analysis. Explain what each of the variances presented under each method shows about overhead costs.
Q3) Which of the following is NOT a step in developing budgeted fixed overhead rates?
A)Choose the period to use for the budget.
B)Select the cost-allocation bases to use in allocating fixed overhead costs to output produced.
C)Identify the fixed overhead costs associated with each cost-allocation base.
D)All of the above are steps in developing budgeted fixed overhead rates.
Q4) An unfavorable variable overhead spending variance indicates that:
A)variable overhead items were not used efficiently
B)the price of variable overhead items was more than budgeted
C)the variable overhead cost-allocation base was not used efficiently
D)the denominator level was not accurately determined
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Chapter 9: Inventory Costing and Capacity Analysis
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208 Verified Questions
208 Flashcards
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Sample Questions
Q1) Practical capacity is the level of capacity that reduces theoretical capacity by considering unavoidable operating interruptions, such as scheduled maintenance time, shutdowns for holidays, and so on.
A)True
B)False
Q2) The gross-margin format of the income statement:
A)distinguishes between manufacturing and nonmanufacturing costs
B)distinguishes variable costs from fixed costs
C)is used with variable costing
D)calculates contribution margin
Q3) What are breakeven sales in units using absorption costing if the production units are actually 25,000?
A)5,625 units
B)6,667 units
C)7,667 units
D)7,931 units
Q4) Explain three methods under absorption costing that managers can use to improve operating income.
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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182 Verified Questions
182 Flashcards
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Sample Questions
Q1) The independent variable:
A)is also referred to as the cost driver
B)may also be called the cost-allocation base if referring to an indirect cost
C)should have an economically plausible relationship with the dependent variable
D)All of these answers are correct.
Q2) What were total fixed costs for 2008?
A)$932,500
B)$325,000
C)$250,000
D)$225,000
Q3) To complete the first setup on a new machine took an employee 200 minutes. Using an 80% incremental unit-time learning model indicates that the second setup on the new machine is expected to take:
A)160 minutes
B)120 minutes
C)80 minutes
D)60 minutes
Q4) A step cost function is an example of a linear cost function.
A)True
B)False
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Chapter 11: Decision Making and Relevant Information
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220 Verified Questions
220 Flashcards
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Sample Questions
Q1) For a particular decision, differential revenues and differential costs are always relevant.
A)True
B)False
Q2) A large hotel chain is currently expanding and has decided to decorate all new hotels using the rustic style. Black Forrest Incorporated is invited to submit a bid to the hotel chain. What is the lowest price per unit Black Forrest should bid on this long-term order?
A)$126
B)$144
C)$180
D)$270
Q3) For short-term pricing decisions, what costs are relevant when there is available surplus capacity? When there is no available surplus capacity?
Q4) If there is a machine breakdown, which model is the most profitable to produce?
A)Model X
B)Model Y
C)Model Z
D)Models Y and Z
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Chapter 12: Pricing Decisions and Cost Management
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Sample Questions
Q1) In some industries, such as legal and consulting, most costs are locked in:
A)when they are incurred
B)during the design stage
C)during the customer-service stage
D)during the marketing stage
Q2) Graphic analysis of incurred and locked-in costs provides several insights as to how the different concepts influence decisions. Which of the following statements is FALSE?
A)Costs are generally locked in before they are incurred.
B)After a product's design has been approved, costs are difficult to influence.
C)When and how costs are locked in are more important than when and how costs are incurred.
D)Most costs are locked in during the manufacturing process.
Q3) A hotel in Orlando, Florida, experiences peak periods and slower times. How should prices be adjusted during peak periods? During slow times? Why?
Q4) Short-run pricing decisions include adjusting product mix in a competitive environment.
A)True
B)False
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Page 15
Chapter 13: Strategy, Balanced Scorecard, and Strategic Profitability Analysis
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171 Verified Questions
171 Flashcards
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Sample Questions
Q1) Discretionary costs arise from periodic (usually yearly)decisions regarding the maximum amount to be incurred.
A)True
B)False
Q2) Engineered costs have no measurable cause-and-effect relationship between output and resources used.
A)True
B)False
Q3) What is the cost effect of the price-recovery component?
A)$30,500 F
B)$31,500 U
C)$2,500 F
D)$33,000 U
Q4) Describe three key components in performing a strategic analysis of operating income.
Q5) Productivity measures the relationship between actual inputs used (both quantities and costs)and standard outputs produced.
A)True B)False
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Chapter 14: Cost Allocation,
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Sample Questions
Q1) The most likely reason for NOT allocating corporate costs to divisions include that:
A)these costs are not controllable by division managers
B)these costs are incurred to support division activities, not corporate activities
C)division resources are already used to attain corporate goals
D)divisions receive no benefits from corporate costs
Q2) ABC systems use the concept of a ________ to identify the cost drivers that best demonstrate the cause-and-effect relationship between each activity and the costs in the related cost pool.
A)cost hierarchy
B)cost pool
C)cost allocation
D)cost driver
Q3) Which cost-allocation criterion is most likely to subsidize poor performers at the expense of the best performers?
A)the fairness or equity criterion
B)the benefits-received criterion
C)the ability to bear criterion
D)the cause-and-effect criterion
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Chapter 15: Allocation of Support-Department Costs,
Common Costs, and Revenues
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Sample Questions
Q1) The cost-allocation method that allocates support department costs only to production departments is the:
A)direct method
B)sequential method
C)step-down method
D)reciprocal method
Q2) Which of the following departments is NOT a support department for a boat manufacturing company?
A)Personnel
B)Molding and assembly
C)Data processing
D)Accounting
Q3) Contract disputes regarding cost allocation can be reduced by defining:
A)the cost items allowed
B)the terms used, such as what constitutes direct labor
C)permissible cost-allocation bases
D)All of these answers are correct.
Q4) The dual-rate method makes no distinction between fixed and variable costs.
A)True
B)False
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Chapter 16: Cost Allocation: Joint Products and Byproducts
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Sample Questions
Q1) When a joint production process yields two or more products with high total sales values, these products are called:
A)main products
B)joint products
C)byproducts
D)scrap
Q2) For each of the following methods of allocating joint costs, give a positive or a negative aspect of selecting each one to allocate joint costs.
a. sales value at splitoff
b. estimated net realizable value method
c. the constant gross margin method
d. a physical measure such as volume
Q3) What revenue or expense amounts are necessary to make a sell-or-process-further decision and why? What items are irrelevant to the decision and why?
Q4) Distinguish between the two principal methods of accounting for byproducts, the production byproduct method and the sale byproduct method. Briefly discuss the relative merits (or lack thereof)of each.
Q5) What are a joint cost and a splitoff point?
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Chapter 17: Process Costing
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Sample Questions
Q1) The principal difference between process costing and job costing is that in job costing an averaging process is used to compute the unit costs of products or services.
A)True
B)False
Q2) The weighted average method of process costing assigns the cost of equivalent units worked on during the current period first to complete beginning inventory, next to start and complete new units, and finally to units in ending work-in-process inventory.
A)True
B)False
Q3) Managers find operation costing useful in cost management because it:
A)often results in profit maximization
B)results in cost minimization
C)captures the financial impact of the control of physical processes
D)All of these answers are correct.
Q4) There are basically two distinct methods of calculating product costs.
Required:
Compare and contrast the two methods.
Q5) List and describe the five steps in process costing.
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Chapter 18: Spoilage, Rework, and Scrap
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Sample Questions
Q1) The accounting for scrap under process costing is similar to the accounting under:
A)job costing when scrap is different for each job
B)job costing when scrap is common to all jobs
C)process costing when scrap is different for each job
D)process costing when scrap is a common to all jobs
Q2) A company might consider all spoilage to be abnormal if it wants to pay serious attention to the problem.
A)True
B)False
Q3) A production process which involves spoilage and rework occurs in:
A)the manufacture of high precision tools
B)semiconductor units
C)the manufacture of clothing
D)All of these answers are correct.
Q4) Accounting for scrap is very similar to accounting for byproducts. A)True
B)False
Q5) What are the objectives in accounting for spoilage?
Q6) Distinguish among spoilage, reworked units, and scrap. Give an example of each.
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Chapter 19: Balanced Scorecard: Quality, Time, and the Theory of Constraints
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Sample Questions
Q1) The Alpha Beta Corporation experiences numerous instances of constraints hindering the effective operation of their manufacturing process. Identify the methods that might be used to maximize operating income, and minimize the effect of the constraints.
Q2) Discuss the means by which a company goes about evaluating and installing a new quality improvement program.
Q3) Wilson's Language School manufactures CDs and DVDs to teach English as a Second Language. Wilson has just prepared a Cost of Quality Report, and the staff has noticed a decline in prevention costs as a percentage of total sales over a three-year period. What changes might Wilson expect to see in appraisal costs as a percentage of sales, internal failure costs as a percentage of sales, and external failure costs as a percentage of sales given this trend?
Q4) Costs incurred in precluding the production of products that do NOT conform to specifications are:
A)prevention costs
B)appraisal costs
C)internal failure costs
D)external failure costs
Page 22
Q5) Discuss the methods used to identify quality problems.
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Chapter 20: Inventory Management, Just-In-Time, and Simplified Costing Methods
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Sample Questions
Q1) The costs that result from theft of inventory are:
A)shrinkage costs
B)external failure costs
C)stockout costs
D)costs of quality
Q2) Which of the following is an assumption of the economic-order-quantity decision model?
A)The quantity ordered can vary at each reorder point.
B)Demand ordering costs and carrying costs fluctuate.
C)There will be timely labor costs.
D)No stockouts occur.
Q3) What is the economic order quantity?
A)2,000,000 units
B)1,414.21 units
C)150,000 units
D)3,464.00 units
Q4) Shrinkage costs result from theft by outsiders, embezzlement by employees, misclassifications, and clerical errors.
A)True
B)False
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Chapter 21: Capital Budgeting and Cost Analysis
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Sample Questions
Q1) All of the following are methods that aid management in analyzing the expected results of capital budgeting decisions EXCEPT:
A)accrual accounting rate-of-return method
B)discounted cash-flow method
C)future-value cash-flow method
D)payback method
Q2) Net present value is calculated using the:
A)internal rate of return
B)required rate of return
C)rate of return required by the investment bankers
D)None of these answers is correct.
Q3) The make decisions by choosing among alternatives stage of the capital budgeting process consists of determining which investment yields the greatest benefit and the least cost to the organization.
A)True
B)False
Q4) Discounted cash flow methods focus on operating income.
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) Effort in terms of management control systems is defined in terms of physical exertion such as a worker producing at a faster rate.
A)True
B)False
Q2) A transfer-pricing method leads to goal congruence when managers:
A)always act in their own best interest
B)act in their own best interest and the decision is in the long-term best interest of the manager's subunit
C)act in their own best interest and the decision is in the long-term best interest of the company
D)act in their own best interest and the decision is in the short-term best interest of the company
Q3) Which of the following transfer-pricing methods preserves sub-unit autonomy?
A)market-based transfer pricing
B)cost-based transfer pricing
C)negotiated transfer pricing
D)Both A and C are correct.
Q4) Briefly explain each of the three methods used to determine a transfer price.
Page 25
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Chapter 23: Performance Measurement, Compensation, and Multinational Considerations
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Sample Questions
Q1) What are Wheels's and Assembly's return on investment based on book values, respectively?
A)0.21; 0.25
B)0.25; 0.21
C)0.14; 0.25
D)0.25; 0.14
Q2) Evaluating an executive's performance using the annual return on investment would sharpen an executive's long-run focus.
A)True
B)False
Q3) If a company is a multinational company with operations in several different countries, one way to achieve comparability of historical-cost based ROIs for facilities in different countries is to:
A)restate the results of operations using the cash basis method of accounting
B)use GAAP for all reporting and calculations
C)restate the results of all operations in dollars
D)All of these answers are correct.
Q4) Briefly explain each of the four levels of control. Why does a company need to implement more than a diagnostic control system?
Page 26
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