Cost Accounting
Mock Exam
Course Introduction
Cost Accounting is a comprehensive course that explores the methods and techniques used to measure, analyze, and control costs within organizations. The course covers key topics such as cost terminology, cost behavior, job-order costing, process costing, activity-based costing, budgeting, variance analysis, and cost-volume-profit analysis. Students will learn how to use cost information for planning, decision-making, performance evaluation, and strategic management, gaining practical skills to support efficient resource allocation and improve organizational profitability. Through real-world examples and problem-solving exercises, the course equips students with essential tools to contribute effectively to financial and operational decision-making processes.
Recommended Textbook Managerial Accounting 4th Edition by Karen W. Braun
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Chapter 1: Introduction to Managerial Accounting
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Sample Questions
Q1) Which of the following is responsible for the ability of foreign companies to compete with domestic companies in the global marketplace?
A)Globalization
B)The Sarbanes-Oxley Act of 2002
C)Decreased barriers to international trade
D)International financial reporting standards
Answer: C
Q2) A company sends an employee to a conference to update the employee's job-related skills.It is a violation of the IMA's Statement of Ethical Professional Practice standards if the employee decides to skip the afternoon session and decides to go sightseeing.
A)True
B)False
Answer: True
Q3) Which statement is true?
A)Management uses financial information to analyze costs.
B)Management uses financial information to plan internal operations.
C)Management uses reports created for internal parties.
D)All of the above are true.
Answer: D
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Chapter 2: Building Blocks of Managerial Accounting
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Q1) Inventoriable product costs for a product are described by which of the following?
A)Inventoriable product costs are narrower in scope than total costs.
B)Inventoriable product costs include all costs along the value chain.
C)Inventoriable product costs consist of direct materials,direct labor and manufacturing overhead.
D)Both A and C are correct.
Answer: B
Q2) The income statements for both a merchandiser and manufacturer would include which of the following?
A)Operating expenses
B)Direct labor incurred
C)Direct materials used
D)Cost of goods manufactured
Answer: A
Q3) Over the long-term,all costs are uncontrollable.
A)True
B)False
Answer: False
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4
Chapter 3: Job Costing
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Sample Questions
Q1) Job 123 requires $12,000 of direct materials,$5,500 of direct labor,500 direct labor hours,and 300 machine hours.It also requires 6 hours of inspection at $40 per hour.Manufacturing overhead is computed at $30 per direct labor hour used and $40 per machine hour used.
The total amount charged for inspection
A)is $40.
B)is $40 × budgeted hours.
C)is $240.
D)does not figure into the total cost of the job.
Answer: C
Q2) When is the predetermined manufacturing overhead rate computed?
A)During the period
B)Before the period starts
C)At the end of the period
D)Can be done at any time
Answer: B
Q3) A purchase order is used to order needed materials from suppliers.
A)True
B)False
Answer: True
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Chapter 4: Activity-Based Costing, lean Operations, and the Costs of Quality
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Sample Questions
Q1) Customer response time is the time that lapses between the receipt of a customer order and delivery of the product or service.
A)True
B)False
Q2) In developing an ABC system,what is the last step?
A)Identify the primary activities and estimate a total cost pool for each.
B)Select an allocation base for each activity.
C)Allocate the costs to the cost object using the activity cost allocation rates.
D)Calculate an activity cost allocation rate for each activity.
Q3) Lean companies typically arrange production activities into self-contained cells.
A)True
B)False
Q4) The cost of installing improved production equipment and production processes is a(n)________ cost.
A)external failure
B)internal failure
C)appraisal
D)prevention
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Chapter 5: Process Costing
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Sample Questions
Q1) The "total physical units accounted for" is the sum of the units completed and transferred out during the period plus the units in ending WIP Inventory.
A)True
B)False
Q2) The number of partially completed units multiplied by the percentage of process completed equals the number of equivalent units.
A)True
B)False
Q3) Color Wheel has 3,500 gallons of paint in WIP Inventory,with 75% of materials already added.What are equivalent units in ending WIP Inventory for materials if the paint is 60% through the process?
A)2,100
B)2,625
C)0
D)525
Q4) Each manufacturing process will have a WIP Inventory account. A)True
B)False
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Chapter 6: Cost Behavior
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Sample Questions
Q1) Variable costs are described by which of the following statements?
A)They vary per unit of output.
B)They are fixed in total.
C)They are fixed per unit and vary in total.
D)They decrease per unit as production volume increases.
Q2) Managers often approximate curvilinear costs and step costs as fixed costs.
A)True
B)False
Q3) An R-square value of 0.00 indicates a perfect relationship between the volume of activity and the cost being analyzed.
A)True
B)False
Q4) Best Birdies produces ornate birdcages.The company's average cost per unit is $18.00 when it produces 2,200 birdcages.If $5,500 of the total costs are fixed,what is the variable cost of producing each birdcage?
A)$2.50
B)$34,100
C)$18.00
D)$15.50
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Chapter 7: Cost-Volume-Profit Analysis
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Sample Questions
Q1) Operating leverage refers to the relative amount of fixed and variable costs that make up total costs for a company.
A)True
B)False
Q2) Electric Jet Skis operates a jet ski rental business.Assume the jet skis rent for $55 per 6 hours.The variable costs are $33 per 6 hours rental,and its fixed costs are $80,000 each month.What is the contribution margin ratio?
A)40%
B)60%
C)250%
D)22%
Q3) If the sales price per unit increases while the variable cost per unit and total fixed costs remain constant,which of the following statements is true?
A)The contribution margin decreases and the breakeven point decreases.
B)The contribution margin increases and the breakeven point decreases.
C)The contribution margin increases and the breakeven point increases.
D)The contribution margin decreases and the breakeven point increases.
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Chapter 8: Relevant Costs for Short-Term Decisions
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Sample Questions
Q1) Which of the following could be a constraint for selling a product?
A)Store hours
B)Available labor hours for employees
C)Shelf space
D)All of the above could be constraints.
Q2) Which of the following pairs are characteristics of price-setters?
A)Less competition and target costing
B)Cost-plus pricing and less competition
C)Lack of product uniqueness and heavy competition
D)Less competition and lack of product uniqueness
Q3) Managers should consider ________ when making any sort of decision.
A)only fixed costs
B)sunk costs
C)only variable costs
D)revenues that differ among alternatives
Q4) Fixed costs that are allocated among all departments are known as
A)direct fixed costs.
B)relevant fixed costs.
C)general fixed costs.
D)common fixed costs.
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Chapter 9: The Master Budget
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Sample Questions
Q1) Budgets are helpful because managers can plan the cash inflows and outflows in an organization.
A)True
B)False
Q2) Which of the following is not part of the operating budget?
A)Inventory,purchases and cost of goods sold budget
B)Cash budget
C)Sales budget
D)Budgeted income statement
Q3) The managerial accountant at the Holly and Ivy Tree Store reported that the company anticipates sales of $600,000 in September and October,$625,000 in November,$635,000 in December,and note that the sales figure is $640,000 in January.The August sales revenue was equal to the September sales revenue.The managerial accountant establishes the prices at the Holly and Ivy Tree Store on its merchandise to ensure the company earns 45% gross profit on its sales.The managerial accountant expects the ending inventory at the store to equal 12% of the next month's cost of goods sold.
Compute the COSG,inventory,and purchases budget for October,November,and December.
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Page 11
Chapter 10: Performance Evaluation
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Sample Questions
Q1) The performance reports of cost centers only include those costs incurred within each individual cost center.
A)True
B)False
Q2) The Frito-Lay,a stand-alone division of PepsiCo may be classified as a(n)
A)investment center.
B)cost center.
C)profit center.
D)revenue center.
Q3) Total hours of continuing professional education taken by employees may be an example of measuring which perspective of the balanced scorecard?
A)Financial
B)Customer
C)Internal business
D)Learning and growth
Q4) Decentralization allows top management to concentrate on long-term strategic planning.
A)True
B)False
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Chapter 11: Standard Costs and Variances
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Sample Questions
Q1) Sandy's Sauces,which produces stir-fry sauces,is developing direct material standards.Each bottle of sauce requires 0.70 kilograms of base.The allowance for waste is 0.05 kilograms per bottle,while the allowance for rejects is 0.09 kilograms per bottle.What is the standard quantity of base per bottle?
A)0.70 kilograms
B)0.79 kilograms
C)0.75 kilograms
D)0.84 kilograms
Q2) The unemployment rate is high in the city in which a company has a factory.The company finds that they are able to pay new employees a lower wage per hour than when the unemployment rate was lower a year ago.Which of the following variances may be directly impacted?
A)Direct materials price variance
B)Direct materials quantity variance
C)Direct labor efficiency variance
D)Direct labor rate variance
Q3) Ideal standards allow for a normal amount of waste and inefficiency.
A)True
B)False
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Page 13
Chapter 12: Capital Investment Decisions and the Time
Value of Money
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Sample Questions
Q1) On a whim you purchased a scratch-off lottery ticket at the gas station.It must have been your lucky day because you won $1,000,000.Being logical and rational you decide to invest the money at 3% for 10 years until you are ready to start a family.At the end of 10 years,how much will your investment be worth?
A)$11,464,000
B)$1,344,000
C)$744,000
D)$1,384,000
Q2) The accounting rate of return uses non-cash flow factors including depreciation in calculating the operating income of the asset.
A)True
B)False
Q3) The ________ capital budgeting model is generally the simplest to compute.
A)accounting rate of return
B)net present value
C)internal rate of return
D)payback
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Page 14
Chapter 13: Statement of Cash Flows
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Q1) Which of the following would be considered an investing activity on the statement of cash flows?
A)An issuance of stock
B)A sale of equipment
C)Payment of dividends
D)Purchase of inventory
Q2) For an investment to be considered as a "cash equivalent," the investment must be
A)convertible to a known amount of cash.
B)convertible to cash within 5 years.
C)convertible to cash without loss of value.
D)convertible to cash within 1 year.
Q3) The managerial accountant at the Health Club is required to determine the amount of cash purchases inventory.The managerial accountant reported a beginning inventory balance of $900,000 and $8,400,000 in cost of goods sold during the year.The ending inventory balance during the year was $850,000.Calculate the amount of cash purchases of inventory during the year.Next,discuss what occurs when there is an increase in the inventory account.What occurs when there is a decrease in the inventory account.
Q4) Identify and describe the three sections of the statement of cash flows.
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Chapter 14: Financial Statement Analysis
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Q1) Vertical analysis would rarely be performed on which of the following?
A)Income statement
B)Schedule of depreciation
C)Balance sheet
D)All of the above are common targets of vertical analysis.
Q2) Common size statements allow the comparison of two or more companies with different amounts of net sales and net assets.
A)True
B)False
Q3) The managerial accountant at Managerial Funding Resources reported in 2014 its earnings per share were $6.20 and the market price per share of its common stock is $75.In 2013,the managerial accountant reported $3.10 earnings per share and the market price was $40 per share.
Compute the price/earnings ratio at Managerial Funding Resources and discuss why the managerial accountant is interested in the price/earnings ratio.
Q4) In a horizontal analysis,the earlier period is the base period.
A)True
B)False
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Chapter 15: Sustainability
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Sample Questions
Q1) Traditional performance management systems can be adapted to include measures of environmental costs,savings,and liabilities.The amount of electricity used by an oil refinery is an example of a key performance indicator (KPI)classified under which perspective of the balanced scorecard?
A)Financial perspective
B)Customer perspective
C)Internal business perspective
D)Community perspective
Q2) Environmental management accounting (EMA)utilizes three types of information for internal decision making.
A)True
B)False
Q3) Which of the following items does not represent physical information in an environmental management accounting system?
A)Pounds of cardboard recycled
B)Energy costs incurred to cool production equipment
C)Tons of garbage recycled
D)Gallons of waste water generated
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