Cost Accounting Exam Solutions
Course Introduction
Cost Accounting is a course that introduces students to the fundamental principles and techniques used in measuring, analyzing, and managing costs within organizations. The course covers various cost concepts, cost behavior, and cost allocation methods, including job costing, process costing, activity-based costing, and standard costing. Students will learn how to use cost information for budgeting, planning, and decision-making, as well as for evaluating operational performance and controlling resources. Emphasis is placed on the practical application of cost accounting techniques to assist managers in improving the efficiency and profitability of business 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) The Thomlin Company forecasts that total overhead for the current year will be $15,000,000 and that total machine hours will be 300,000 hours. Year to date, the actual overhead is $16,000,000 and the actual machine hours are 330,000 hours. If the Thomlin Company uses a predetermined overhead rate based on machine hours for applying overhead, what is that overhead rate?
A) $48 per machine hour
B) $53 per machine hour
C) $45 per machine hour
D) $50 per machine hour
Answer: D
Q2) The process cost system is appropriate where few products are manufactured and each product is made to customers' specifications.
A)True
B)False
Answer: False
Q3) The job order costing system is not used by service organizations.
A)True
B)False
Answer: False
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Page 3
Chapter 3: Process Cost Systems
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Sample Questions
Q1) If Department K had 2,500 units, 45% completed, in process at the beginning of the period, 15,000 units were completed during the period, and 1,200 units were 40% completed at the end of the period, what was the number of equivalent units of production for the period for conversion if the first-in, first-out method is used to cost inventories? Assume the completion percentage applies to both direct materials and conversion cost.
A) 16,855
B) 16,605
C) 13,460
D) 14,355
Answer: D
Q2) Just-in-time operations attempt to significantly reduce
A) profits.
B) inventory needed to produce products.
C) inspection time and moving time.
D) processing time.
Answer: C
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Page 4
Chapter 4: Cost Behavior and Cost-Volume-Profit Analysis
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Sample Questions
Q1) For the past year, Hornbostel Company had fixed costs of $6,552,000, a unit variable cost of $444, and a unit selling price of $600. For the coming year, no changes are expected in revenues and costs, except that a new wage contract will increase variable costs by $6 per unit. Determine the break-even sales (units) for (a) the past year and (b) the coming year.
Q2) If direct materials cost per unit increases, the break-even point will decrease.
A)True
B)False
Q3) Assume that Corn Co. sold 8,000 units of Product A and 2,000 units of Product B during the past year. The unit contribution margins for Products A and B are $30 and $60 respectively. Corn has fixed costs of $378,000. The break-even point in units is:
A) 8,000 units
B) 6,300 units
C) 12,600 units
D) 10,500 units
Q4) The Dean Company has sales of $500,000, and the break-even point in sales dollars of $300,000. Determine the company's margin of safety percentage.
Q5) The cost graphs in the illustration below shows various types of cost behaviors.
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Chapter 5: Variable Costing for Management Analysis
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154 Flashcards
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Sample Questions
Q1) The amount of income under absorption costing will equal the amount of income under variable costing when units manufactured:
A) exceed units sold
B) equal units sold
C) are less than units sold
D) are equal to or greater than units sold
Q2) The beginning inventory is 10,000 units. All of the units manufactured during the period and 8,000 units of the beginning inventory were sold. The beginning inventory fixed costs are $50 per unit, and variable costs are $300 per unit. Determine (a) whether variable costing income from operations is less than or greater than absorption costing income from operations, and (b) the difference in variable costing and absorption income from operations.
Q3) On what effects does contribution margin analysis focus?
A) the quantity factor
B) the unit cost factor
C) the unit sales price factor
D) all of the above
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6
Chapter 6: Budgeting
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Sample Questions
Q1) Budgets are normally used only by profit-making businesses.
A)True
B)False
Q2) The budgeted finished goods inventory and cost of goods sold for a manufacturing company for the year 2012 are as follows: January 1 finished goods, $765,000; December 31 finished goods, $640,000; cost of goods sold for the year, $2,560,000. The budgeted costs of goods manufactured for the year is?
A) $1,405,000
B) $2,560,000
C) $2,435,000
D) $3,965,000
Q3) The master budget of a small manufacturer would normally include all necessary component budgets except the budgeted balance sheet.
A)True
B)False
Q4) Supervisor salaries, maintenance, and indirect factory wages would normally appear in the operating expenses budget.
A)True
B)False
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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) If a company records inventory purchases at standard cost and also records purchase price variances, prepare the journal entry for a purchase of 6,000 widgets that were bought at $8.00 and have a standard cost of $8.15.
Q2) Periodic comparisons between planned objectives and actual performance are reported in:
A) zero-base reports
B) budget performance reports
C) master budgets
D) budgets
Q3) Using the following information, prepare a factory overhead flexible budget for Andover Company where the total factory overhead cost is $75,500 at normal capacity (100%). Include capacity at 75%, 90%, 100%, and 110%. Total variable cost is $6.25 per unit and total fixed costs are $38,000. The information is for month ended August 31, 2012. (Hint: Determine units produced at normal capacity.)
Q4) The Trumpet Company produced 8,700 units of a product that required 3.25 standard hours per unit. The standard fixed overhead cost per unit is $1.20 per hour at 29,000 hours, which is 100% of normal capacity. Determine the fixed factory overhead volume variance.
Page 8
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Chapter 8: Performance Evaluation for Decentralized Operations
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Sample Questions
Q1) Investment turnover (as used in determining the rate of return on investment) focuses on the rate of profit earned on each sales dollar.
A)True
B)False
Q2) In rate of return on investment analysis, the investment turnover component focuses on efficiency in the use of assets and indicates the rate at which sales are being generated for each dollar of invested assets.
A)True
B)False
Q3) The Everest Company has income from operations of $80,000, invested assets of $500,000, and sales of $1,050,000. What is the profit margin?
A) 47.6%
B) 7.6%
C) 55.2%
D) 4.8%
Q4) Piano Company's costs were over budget by $47,000. The Piano Company is divided in two regions. The first region's costs were over budget by $5,000. Determine the amount that the second region's cost was over or under budget.
Page 9
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Chapter 9: Differential Analysis and Product Pricing
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Sample Questions
Q1) When using the variable cost concept of applying the cost-plus approach to product pricing, what is included in the markup?
A) Total costs plus desired profit
B) Desired profit
C) Total selling and administrative expenses plus desired profit
D) Total fixed manufacturing costs, total fixed selling and administrative expenses, and desired profit
Q2) When using the product cost concept of applying the cost-plus approach to product pricing, what is included in the markup?
A) Desired profit
B) Total fixed manufacturing costs, total fixed selling and administrative expenses, and desired profit
C) Total costs plus desired profit
D) Total selling and administrative expenses plus desired profit
Q3) The theory of constraints is a manufacturing strategy that focuses on reducing the influence of bottlenecks on a process.
A)True
B)False
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Chapter 10: Capital Investment Analysis
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Sample Questions
Q1) The expected average rate of return for a proposed investment of $8,000,000 in a fixed asset, using straight line depreciation, with a useful life of 20 years, no residual value, and an expected total net income of $12,000,000 is:
A) 15%
B) 12%
C) 40%
D) 7.5%
Q2) The payback method can be used only when net cash inflows are the same for each period.
A)True
B)False
Q3) Hazard Company is considering the acquisition of a machine that costs $525,000. The machine is expected to have a useful life of 6 years, a negligible residual value, an annual cash flow of $150,000, and annual operating income of $87,500. What is the estimated cash payback period for the machine?
A) 3 years
B) 4.3 years
C) 3.5 years
D) 5 years
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Page 11
Chapter 11: Cost Allocation and Activity-Based Costing
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Sample Questions
Q1) Challenger Factory produces two similar products - regular widgets and deluxe widgets. The total plant overhead budget is $675,000 with 300,000 estimated direct labor hours. It is further estimated that deluxe widget production will need 3 direct labor hours for each unit and regular widget production will require 2 direct labor hours for each unit. Using the single plantwide factory overhead rate with an allocation base of direct labor hours, how much factory overhead will be allocated to the deluxe widget production if the budgeted production for the period is 50,000 units and actual production for the period is 58,000 units?
A) $391,500
B) $225,000
C) $261,000
D) $337,500
Q2) A single plantwide overhead rate method is very expensive to apply.
A)True
B)False
Q3) When a plantwide factory overhead rate is used, overhead costs are applied to all products by a single rate.
A)True
B)False
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Page 12
Chapter 12: Cost Management for Just-In-Time
Environments
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122 Flashcards
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Sample Questions
Q1) Which of the following is not an external failure cost?
A) warranty work
B) processing returned merchandise
C) rework
D) correcting invoice errors
Q2) The local college is aggressively working in reducing the time that a student needs to enroll for each semester. Which of the following changes would not help achieve this goal?
A) Counselors are specializing in common degree plans
B) One application is good at the community college and at the transferring university
C) A one stop area includes admissions, advising, registration and student ID's
D) Having more number of counters to facilitate admission process
Q3) Just-in-Time (JIT) manufacturing focuses on reducing time, cost, and poor quality in processes.
A)True
B)False
Q4) Just-in-Time (JIT) manufacturing is also called make-to-order manufacturing.
A)True
B)False
13
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Chapter 13: Statement of Cash Flows
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Sample Questions
Q1) Cash flows from operating activities, as part of the statement of cash flows, include cash transactions that enter into the determination of net income.
A)True
B)False
Q2) A cash flow per share amount should be reported on the statement of cash flows.
A)True
B)False
Q3) Land costing $140,000 was sold for $173,000 cash. The gain on the sale was reported on the income statement as other income. On the statement of cash flows, what amount should be reported as an investing activity from the sale of land?
A) $173,000
B) $140,000
C) $313,000
D) $33,000
Q4) To arrive at cash flows from operations, it is necessary to convert the income statement from an accrual basis to the cash basis of accounting.
A)True
B)False
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Chapter 14: Financial Statement Analysis
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Sample Questions
Q1) Which of the following items should be classified as an extraordinary item on a corporate income statement?
A) gain on the retirement of a bond payable
B) loss from land condemned for public use
C) loss due to an discontinued operation
D) selling treasury stock for more than the company paid for it
Q2) A common measure of liquidity is
A) ratio of net sales to assets.
B) dividends per share of common stock.
C) receivable turnover.
D) profit margin.
Q3) In the vertical analysis of an income statement, each item is generally stated as a percentage of total assets.
A)True
B)False
Q4) In horizontal analysis, the current year is the base year.
A)True
B)False
Q5) Define solvency and profitability. How are they alike?
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Chapter 15: Managerial Accounting Concepts and Principles
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Sample Questions
Q1) Differentiate between:
a) direct materials versus indirect materials
b) direct labor versus indirect labor
Q2) Indirect costs incurred in a manufacturing environment that cannot be traced directly to a product are treated as:
A) period costs and expensed when incurred
B) product costs and expensed when the goods are sold
C) product costs and expenses when incurred
D) period costs and expensed when the goods are sold
Q3) The cost of wages paid to employees directly involved in converting materials to finished product is classified as direct labor cost.
A)True
B)False
Q4) Managers use managerial information to evaluate performance of a company's operation.
A)True
B)False
Q5) Differentiate between financial and managerial accounting, addressing such issues as what reports are generated, when, and for whom.
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