Cost Accounting Exam Preparation Guide
Course Introduction
Cost Accounting is an essential course that introduces students to the principles, methods, and techniques used to determine, record, and analyze the costs associated with producing goods or providing services. The course covers topics such as cost behavior, cost allocation, budgeting, standard costing, job and process costing, and activity-based costing. Students will learn how to use cost information for managerial decision-making, planning, and control purposes, enabling organizations to optimize operations and improve profitability. Emphasis is placed on practical applications and problem-solving to prepare students for real-world business challenges.
Recommended Textbook
Introduction to Management Accounting 15th Edition by Charles T. Horngren
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17 Chapters
2396 Verified Questions
2396 Flashcards
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Chapter 1: Managerial Accounting, the Business Organization
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129 Verified Questions
129 Flashcards
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Sample Questions
Q1) Which of the following is a major factor causing changes in management accounting today?
A)decreased global competition
B)advances in technology
C)shift to manufacturing-based economy
D)expansion of the value chain
Answer: B
Q2) The maintenance department provides line support to the welding department in a factory.
A)True
B)False Answer: False
Q3) The value chain refers to the various stages through which a product passes.
A)True
B)False
Answer: False
Q4) Variances are deviations from planned results.
A)True
B)False Answer: True
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Chapter 2: Introduction to Cost Behavior and Cost-Volume Relationships
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152 Verified Questions
152 Flashcards
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Sample Questions
Q1) Walnut Corporation sells desks at $480 per desk.The variable costs associated with each desk are $372.Total fixed costs for the period are $456,840.The contribution margin per desk is ________.
A)$51
B)$108
C)$126
D)$195
Answer: B
Q2) Mercy Hospital has total variable costs of 80% of total revenues and fixed costs of $20 million per year.There are 70,000 estimated patient-days for next year.What is the break-even point expressed in total revenue?
A)$10 million
B)$12.5 million
C)$20 million
D)$100 million
Answer: D
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Chapter 3: Measurement of Cost Behavior
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141 Verified Questions
141 Flashcards
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Sample Questions
Q1) In account analysis,users rely on the ________ for information about cost behavior.
A)management audit
B)performance report
C)value chain
D)accounting system
Answer: D
Q2) Snead currently produces 120,000 units at a cost of $400,000.Of the $400,000 cost,$200,000 is a fixed cost.Next year Snead expects to produce 145,000 units.Snead's relevant range for production activities is 100,000 to 150,000 units.If 145,000 units are produced next year,what is the expected fixed cost for next year?
A)$200,000
B)$241,667
C)$265,833
D)$483,333
Answer: A
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Chapter 4: Cost Management Systems and Activity-Based
Costing
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129 Verified Questions
129 Flashcards
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Sample Questions
Q1) Companies try to maximize non-value-added costs.
A)True
B)False
Q2) Companies must assign all nonproduction costs to cost objects for internal management purposes.
A)True
B)False
Q3) In general,more costs are direct when a department is the cost object than when a product or service is the cost object.
A)True
B)False
Q4) Manufactured goods fully completed but not sold are called ________.
A)merchandise inventory
B)direct materials inventory
C)finished goods inventory
D)work in process inventory
Q5) Period costs become expenses during a future period.
A)True
B)False
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Chapter 5: Relevant Information for Decision Making With a Focus
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128 Verified Questions
128 Flashcards
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Sample Questions
Q1) Which statement is FALSE about information used for decision making?
A)Precise but irrelevant information is worthless for decision making.
B)Imprecise but relevant information can be useful for decision making.
C)Relevant information must be reasonably accurate but not precisely so.
D)Relevant information must be totally accurate or it is useless.
Q2) What are the qualitative aspects of a decision?
A)those for which measurement in dollars and cents is difficult and imprecise
B)those with a definite dollar value
C)those with a cost figure
D)those which are never relevant to a decision
Q3) Which is NOT a popular markup formula for pricing?
A)as a percentage of total manufacturing costs plus total selling and administrative costs
B)as a percentage of total manufacturing costs
C)as a percentage of variable manufacturing costs
D)as a percentage of total selling and administrative costs
Q4) The absorption approach to the income statement emphasizes the distinction between fixed and variable costs.
A)True
B)False
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Chapter 6: Relevant Information for Decision Making With a Focus
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148 Verified Questions
148 Flashcards
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Sample Questions
Q1) Conflicts in the decision-making process can arise when superiors evaluate a manager's performance using a model consistent with the decision model used by the manager.
A)True
B)False
Q2) What is a qualitative factor in a make-or-buy decision?
A)variable manufacturing costs
B)avoidable costs
C)long-term relationship with supplier
D)opportunity costs
Q3) Variable expenses are divided into avoidable and unavoidable costs.
A)True
B)False
Q4) Nestle Company paid $130,000 for a machine used to mill oats.The annual contribution margin from oat sales is $60,000.The machine could be sold for $80,000.The opportunity cost of producing the oats is ________.
A)$20,000
B)$60,000
C)$80,000
D)$130,000
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Chapter 7: Introduction to Budgets and Preparing the Master Budget
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144 Verified Questions
144 Flashcards
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Sample Questions
Q1) The first step in preparing the operating budget is the ________.
A)cash budget
B)capital budget
C)operating expense budget
D)sales budget
Q2) The financial budget includes ________.
A)the capital budget and the sales budget
B)the capital budget and the budgeted income statement
C)the capital budget,the cash budget and the budgeted balance sheet
D)the cash budget and the purchases budget
Q3) The master budget quantifies forecasts for all of the following EXCEPT ________.
A)cash disbursements
B)purchases of merchandise
C)operating expenses
D)cost of Securities and Exchange Commission to a firm
Q4) Which of the following is a component of the financial budget?
A)budgeted balance sheet
B)budgeted income statement
C)sales budget
D)purchases budget
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Chapter 8: Flexible Budgets and Variance Analysis
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143 Verified Questions
143 Flashcards
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Sample Questions
Q1) Stein Company planned to produce 12,000 units.This level of production required 20 setups at a cost of $18,000 plus $500 per setup.Actual production was 10,000 units,requiring 15 setups.Actual setup cost was $26,000.What is the flexible budget variance for setup costs?
A)$500 Favorable
B)$500 Unfavorable
C)$2,000 Favorable
D)$2,000 Unfavorable
Q2) A ________ is most likely to be held accountable for price variances for direct materials.
A)machine operator
B)production supervisor
C)purchasing manager
D)marketing director
Q3) One of the first questions a manager should consider when explaining a large variance is whether expectations are valid.
A)True
B)False
Q4) What are some common causes of unfavorable quantity variances for direct labor?
Q5) What are two possible interpretations of "currently attainable standards"?
Page 10
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Chapter 9: Management Control Systems and Responsibility Accounting
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147 Verified Questions
147 Flashcards
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Sample Questions
Q1) ________ costs include those costs that a manager's decisions and actions can influence to a reasonable degree.
A)uncontrollable
B)controllable
C)third party
D)allocated
Q2) The four categories of quality costs include production costs,appraisal costs,internal failure costs and external failure costs.
A)True
B)False
Q3) What is the first and most basic component in a management control system?
A)the organization's long-range budget
B)the organization's goals
C)the stockholders' goals
D)the manager's personal desires
Q4) A key driver of performance is the culture within the organization that fosters continual learning and growth.
A)True
B)False
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Chapter 10: Management Control in Decentralized Organizations
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160 Verified Questions
160 Flashcards
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Sample Questions
Q1) Top managers who wish to encourage decentralization will often make sure that both buying and selling division managers understand all the facts and then allow the managers to negotiate a transfer price.
A)True
B)False
Q2) For multinational companies,worldwide income taxes do not influence the setting of transfer prices.
A)True
B)False
Q3) Historical cost is widely used for asset valuation because ________.
A)it reports the replacement cost of long-term assets
B)it is more subjective than other approaches
C)it requires additional data collection
D)the cost of obtaining additional data exceeds the benefit
Q4) Multinational companies use transfer pricing to minimize their worldwide income taxes,duties and tariffs.
A)True
B)False
Q5) Define decentralization and identify its expected benefits.
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Chapter 11: Capital Budgeting
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141 Verified Questions
141 Flashcards
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Sample Questions
Q1) The marginal tax rate for a company is the ________.
A)average tax rate for the company
B)highest possible tax rate that may be imposed on the company by IRS
C)lowest tax rate that may be imposed on the company by IRS
D)tax rate paid on additional amounts of pretax income
Q2) Which item below does NOT require an explicit adjustment for inflation?
A)future operating cash flows
B)future disposal value of a long-term asset
C)future tax deductions for depreciation
D)future overhaul cost for equipment
Q3) Because future inflation has no effect on the current purchase price of an asset,inflation can be ignored when capital-budgeting decisions are made.
A)True
B)False
Q4) Regardless of the depreciation method used,a company will experience the same total tax savings over the life of the asset.
A)True
B)False
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Chapter 12: Cost Allocation
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125 Flashcards
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Sample Questions
Q1) Under the traditional approach to cost allocation,the costs in each cost pool are allocated to a product in proportion to the product's usage of the ________.
A)available capacity
B)budgeted capacity
C)cost-allocation base
D)step down method
Q2) The ________ method recognizes that some service departments support the activities in other service departments as well as those in production departments.
A)direct
B)indirect
C)step-down
D)cost driver
Q3) Public relations costs and top management salaries are examples of central corporate support costs.
A)True
B)False
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Chapter 13: Accounting for Overhead Costs
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127 Flashcards
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Sample Questions
Q1) Direct labor hours rather than direct labor cost usually drive fringe benefit costs such as pensions and payroll taxes.
A)True
B)False
Q2) Most companies consider production volume variances to be beyond a manager's immediate control.
A)True
B)False
Q3) The proration method of disposing of overhead variances prorates the variance based on the beginning of the reporting period account balances in Cost of Goods Sold,Work-in-Process Inventory and Finished Goods Inventory.
A)True
B)False
Q4) Underapplied and overapplied fixed overhead has two components that include a production-volume variance and a fixed overhead flexible budget variance.
A)True
B)False
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Chapter 14: Job-Order Costing and Process-Costing Systems
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157 Flashcards
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Sample Questions
Q1) Backflush costing applies costs to products only when production is complete.
A)True
B)False
Q2) The construction and printing industries normally use job-order costing.
A)True
B)False
Q3) Assume a company uses process costing.When factory overhead is applied,Finished Goods Inventory is the debit part of the journal entry.
A)True
B)False
Q4) In job-order costing,a debit to Work-in-Process Inventory is used to record
A)a requisition of direct materials
B)the cost of goods completed
C)a sale of merchandise
D)purchase of direct materials
Q5) Each job has its own job-cost record in a job-costing system.
A)True
B)False
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Chapter 15: Basic Accounting: Concepts, techniques, and Conventions
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154 Flashcards
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Sample Questions
Q1) Retained earnings are a general claim against ________.
A)cash
B)a particular asset
C)long-term assets
D)total assets
Q2) Listed below are the transactions for Katherine Company:
1.The owners invest $80,000 in the company.
2.The company purchases equipment costing $16,000.They paid $6,000 cash and settled the remainder with a note payable.
3.The company purchases inventory costing $9,600 by paying $4,200 cash and putting the remainder on account.
4.The company paid $7,200 for four months rent in advance.
5.The company sold inventory for $8,700 cash.The cost of the inventory was $5,000.
6.The company used one month of rent.
7.The company declared a cash dividend of $500.
8.Depreciation expense on the equipment was $400 for the month.
Required:
Prepare journal entries for the above transactions.
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Chapter 16: Understanding Corporate Annual Reports:
Basic Financial Statements
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Sample Questions
Q1) Working capital is equal to current assets plus current liabilities.
A)True
B)False
Q2) When calculating the net cash provided by operating activities,which procedure should NOT be carried out? Assume the indirect method is used.
A)add depreciation expense
B)subtract a decrease in accounts payable
C)subtract a decrease in prepaid expenses
D)add a decrease in inventories
Q3) Which of the following statements about par value is FALSE?
A)The par value per share is used to determine the dividends per share for common stock.
B)The stated value of a stock is conceptually similar to the par value of a stock.
C)It is generally illegal for a corporation to sell an original issue of common stock below the par value.
D)The par value is the maximum legal liability of stockholders if the corporation cannot pay its debts.
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Chapter 17: Understanding and Analyzing Consolidated Financial Statements
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Sample Questions
Q1) Investments acquired with the intent to resell them in the near future are called trading securities.
A)True
B)False
Q2) Company A acquired 100 percent of the outstanding common stock of Company
B.At the date of acquisition,no goodwill was involved and the book value of the assets and liabilities of Company B equal their fair values.Immediately after the acquisition,an elimination entry is prepared in order to prepare consolidated financial statements.What accounts are affected by the elimination entry?
A)Investment in Company B only
B)Stockholders' Equity of Company B only
C)Fixed Assets of Company B only
D)Investment in Company B and Stockholders' Equity of Company B
Q3) In an efficient capital market,the appropriate investment strategy is risk control,________ and ________.
A)low diversification; high turnover of securities
B)low diversification; low turnover of securities
C)high diversification; high turnover of securities
D)high diversification; low turnover of securities
Page 19
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