Cost Accounting
Mock Exam
Course Introduction
Cost Accounting is a foundational course that explores the methods and techniques used to determine, allocate, and control the costs associated with producing goods and providing services. Students will learn about various costing systems such as job order costing, process costing, and activity-based costing, while also examining the role of cost information in decision making, budgeting, and performance evaluation. The course emphasizes the application of cost accounting concepts to real-world business scenarios, enabling students to analyze cost behaviors, prepare cost reports, and support strategic planning to enhance organizational efficiency and profitability.
Recommended Textbook
Horngrens Cost Accounting A Managerial Emphasis 3rd Australian Edition by Charles Horngren
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Chapter 1: Management Accounting in Context
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Sample Questions
Q1) What does line management include?
A)Information-technology managers
B)Management-accounting managers
C)Human resource managers
D)Manufacturing managers
Answer: D
Q2) Customer response time involves:
A)the time it takes an organisation to develop a Total Quality Management (TQM)program.
B)the time it takes to develop a new product.
C)the speed at which an organisation responds to customer requests.
D)the time it takes a customer to respond to an advertisement and place an order.
Answer: C
Q3) Management accountants have important ethical responsibilities that are related to competence,confidentiality,integrity,and credibility.
A)True
B)False
Answer: True
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Chapter 2: Different Costs for Different Purposes
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Sample Questions
Q1) ________ are subtracted from sales to calculate gross margin.
A)Fixed manufacturing costs
B)Variable marketing costs
C)Variable manufacturing costs
D)Both A and C are correct.
Answer: D
Q2) Classifying a cost as ______ is easier if a company's facility (or some part of it)is used exclusively for a specific cost object,such as a specific product or a particular customer.
A)direct
B)indirect
C)variable
D)fixed
Answer: A
Q3) The MOST likely cost driver of direct material costs is the:
A)number of products manufactured.
B)number of production hours.
C)number of parts within the product.
D)number of miles driven.
Answer: A
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Chapter 3: Determining How Costs Behave
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Sample Questions
Q1) Economic plausibility is an important criterion for choosing a cost driver.
A)True
B)False
Answer: True
Q2) Choosing an economically plausible cost driver for indirect costs is fairly simple and knowledge of operations is generally unnecessary.
A)True
B)False
Answer: False
Q3) One assumption frequently made in cost behaviour estimation is that changes in total costs can be explained by changes in the level of a single activity.
A)True
B)False
Answer: True
Q4) The most common forms of quantitative analysis are the 'conference method' and the 'account analysis method'.
A)True
B)False
Answer: False
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Chapter 4: Costvolumeprofit Analysis
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Sample Questions
Q1) Operating profit calculations DO NOT use:
A)operating costs.
B)income tax expense.
C)cost of goods sold.
D)revenue.
Q2) Assume there is a reduction in the selling price and all other CVP parameters remain constant.This change will:
A)reduce fixed costs.
B)reduce operating profit.
C)increase variable costs.
D)increase contribution margin.
Q3) Which of the following is true about the assumptions underlying basic CVP analysis?
A)Only selling price is known and constant.
B)Only selling price and variable cost per unit are known and constant.
C)Selling price,variable cost per unit,fixed cost per unit,and total fixed costs are known and constant.
D)Only selling price,variable cost per unit,and total fixed costs are known and constant.
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6
Chapter 5: Estimating the Cost of Producing Services
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Sample Questions
Q1) All direct materials are generally added to the process at one time and all __________ costs are generally added to the process evenly through time.
A)conversion
B)labour
C)overhead
D)activity
Q2) What is the amount of productive capacity available over and above that used to meet consumer demand in the current period called?
A)Bonus time
B)Idle time
C)Waste
D)Budgetary slack
Q3) Why might a costing system that has worked reasonably well in the past might no longer do so?
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Chapter 6: Estimating the Costs of Products and Inventory
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Sample Questions
Q1) Cost of using what has been greatly reduced by the widespread adoption of computerised accounting systems?
Variant question
A)Variable costing approach
B)Absorption costing approach
C)Adjusted cost-driver rate approach
D)Normal costing approach
Q2) Operating profit using absorption costing will be ________ operating profit if using variable costing.
A)$450 higher than
B)$1350 lower than
C)the same as
D)$900 higher than
Q3) Using job costing,the 20X5 budgeted manufacturing overhead rate is:
A)$4.00 per machine-hour.
B)$6.00 per machine-hour.
C)$5.00 per machine-hour.
D)$4.80 per machine-hour.
Q4) Maroubra Company has the following balances as of the year ended 31 December 2018.
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Chapter 7: Target Costing, Managing Activities and Managing Capacity
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Sample Questions
Q1) ________ capacity utilisation is the level of capacity that managers expect to be used for the current budget period,which is typically one year.
A)Budgeted
B)Actual
C)Master
D)Theoretical
Q2) Using 'practical capacity' is best for evaluating the marketing manager's performance for a particular year.
A)True
B)False
Q3) What is the target cost if the company wants to maintain its same income level,and marketing is correct (rounded to the nearest cent)?
A)$140.00
B)$113.64
C)$123.34
D)$112.50
Q4) Costing systems recognise uncertainty the same way managers recognise it.
A)True
B)False
9
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Chapter 8:
Activity-Based Management and Activity-Based Costing
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Sample Questions
Q1) What are the indirect manufacturing costs per remote control assuming the traditional method is used and a batch of 500 remote controls is produced? The batch requires 1000 parts,10 direct manufacturing labour hours and 15 minutes of inspection time.
A)$2.00 per remote control
B)$2000.00 per remote control
C)$0.25 per remote control
D)$4.00 per remote control
Q2) How much of the total cost will be assigned to the Ploughing Department?
A)$1 912 000
B)$101 100
C)$89 000
D)$67 300
Q3) Some well-known companies have achieved significant benefits from ABC systems with relatively few cost drivers.
A)True
B)False
Q4) Corporate costs do not belong to a particular production centre.
A)True
B)False
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Chapter 9: Pricing and Customer Profitability
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Sample Questions
Q1) Cost bases that include fewer costs also have lower mark-ups.
A)True
B)False
Q2) For Alice Water Coolers,what is the minimum acceptable price of this one-time-only special order?
A)$380
B)$330
C)$624
D)$480
Q3) In markets with little or no competition,the key factor affecting price is costs,not customers' willingness to pay or competitors.
A)True
B)False
Q4) Managers who want to calculate the full costs of serving customers must allocate all corporate,division and distribution-channel costs to customers.
A)True
B)False
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11
Chapter 10: Decision Making and Relevant Information
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Sample Questions
Q1) Revenues and costs that are not relevant are said to be:
A)sunk.
B)qualitative.
C)quantitative.
D)irrelevant.
Q2) One-time-only special orders should only be accepted if:
A)differential revenues exceed variable costs.
B)incremental revenues exceed incremental costs.
C)incremental revenues exceed fixed costs.
D)total revenues exceed total costs.
Q3) The three steps involved in linear programming include all of the following EXCEPT:
A)determining the objective.
B)determining the relevant and irrelevant costs.
C)computing the optimal solution.
D)determining the basic relationship.
Q4) Because TOC regards operating costs as difficult to change in the short run,it does not identify individual activities and cost drivers.
A)True
B)False
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Chapter 11: Budgeting, Management Control and Responsibility Accounting
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Sample Questions
Q1) How is budgeting for a multinational corporation different than budgeting for a corporation that is strictly domestic?
Q2) The direct materials usage budget is based on:
A)the predetermined factory overhead rate.
B)budgeted sales dollars.
C)the units to be produced during a period.
D)the amount of labour-hours worked.
Q3) The cash flow statement does NOT include:
A)cash outflows paid toward raw material purchases.
B)cash inflows from the collection of receivables.
C)all sales revenues.
D)interest paid and received.
Q4) For January,budgeted gross margin is:
A)$100 000.
B)$50 000.
C)$90 000.
D)$140 000.
Q5) What is budgetary slack? What are the pros and cons of building slack into the budget from the point of view of (a)an employee and (b)a senior manager?
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Chapter 12: Flexible Budgets, Direct Cost Variances and Management Control
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Sample Questions
Q1) The textbook,in a summary diagram,Figure 11-7,discusses four levels of variances.Briefly explain the meaning of levels 1,2 and 3 and provide an example of a variance at each of those levels.
Q2) What is the total sales-mix variance in terms of the contribution margin?
A)$278 000 favourable
B)$170 000 favourable
C)$448 000 favourable
D)$110 000 favourable
Q3) What is the static-budget variance of revenues?
A)$50 000 favourable
B)$50 000 unfavourable
C)$5000 unfavourable
D)$5000 favourable
Q4) An unfavourable variance is conclusive evidence of poor performance.
A)True
B)False
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Chapter 13: Flexible Budgets, Overhead Cost Variances and Management Control
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Sample Questions
Q1) Fixed overhead is:
A)under-allocated by $3000.
B)over-allocated by $3000.
C)over-allocated by $28 000.
D)under-allocated by $28 000.
Q2) For calculating the costs of products and services,a standard costing system: A)does not have to keep track of actual costs.
B)uses standard costs to determine the cost of products. C)only requires a simple recording system.
D)All of these answers are correct.
Q3) The efficiency variance for variable overhead cost is based on the efficiency with which the cost-allocation base is used.
A)True
B)False
Q4) The flexible-budget amount for a fixed-cost item is also the amount included in the static budget prepared at the start of the period.
A)True
B)False
Q5) Explain why sales-volume variance could be helpful to managers.
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Chapter 14: Allocation of Support-Department Costs,
Common Costs and Revenues
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Sample Questions
Q1) What is the name of the method that allocates costs in each cost pool using the same rate per unit?
A)Dual-rate cost-allocation method
B)Reciprocal cost-allocation method
C)Incremental cost-allocation method
D)Single-rate cost allocation method
Q2) If a dual-rate cost-allocation method is used,what amount of copying facility costs will be budgeted for the Operations Department?
A)$35 774
B)$28 200
C)$29 945
D)$30 245
Q3) Which of the following is the method that allocates costs by explicitly including all the services rendered among all support departments?
A)Step-down method
B)Reciprocal method
C)Sequential method
D)Direct method
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Chapter 15: Strategy Formation, Strategic Control and the Balanced Scorecard
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Sample Questions
Q1) Organisations with a long-run orientation emphasise environmental and social performance.
A)True
B)False
Q2) Total factor productivity (TFP)is easy to calculate for a single-product company.When dealing with a multi-product company,one of two adjustments must be made.What are these adjustments?
Q3) A strategic objective that has a hub-and-spoke quality with multiple ties flowing into or out of it is referred to as a 'focal point'.
A)True
B)False
Q4) Engineered costs may be variable or fixed in the short-run.
A)True
B)False
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Chapter 16: Quality, Time and the Balanced Scorecard
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Sample Questions
Q1) COQ measures assist in problem solving by comparing costs and benefits of different quality-improvement programs and setting priorities for cost reduction.
A)True
B)False
Q2) Without financial quality measures,companies could be spending more money on improving non-financial quality measures than it is worth.
A)True
B)False
Q3) How much will internal failure costs change if the internal product failures are reduced by 50% with the new procedures?
A)$38 250 decrease
B)$750 000 decrease
C)$76 500 decrease
D)$500 000 decrease
Q4) Costs of Quality (COQ)are classified into four categories: prevention costs,appraisal costs,inspection costs and warranty costs.
A)True
B)False
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Chapter 17: Inventory Management, Just-In-Time and Simplified Costing Methods
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Sample Questions
Q1) The economic order quantity (EOQ)(EOQ)ignores:
A)purchasing costs.
B)relevant ordering costs.
C)stockout costs.
D)Both A and C are correct.
Q2) A firm using a backflush costing system will always use actual costs rather than standard costs.
A)True
B)False
Q3) What are the costs that result from the theft of inventory known as in the managing of inventory?
Variant question
A)Costs of quality
B)Stockout costs
C)External failure costs
D)Shrinkage costs
Q4) Costs of setting up a production run are analogous to ordering costs in the Economic Order Quantity (EOQ)model.
A)True
B)False
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Chapter 18: Capital Budgeting and Cost Analysis
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Sample Questions
Q1) During which stage of the capital budgeting process does marketing query the potential revenue numbers?
A)Implement the decision stage
B)Make decisions by choosing among alternatives stage
C)Identify the problem stage
D)Collect information stage
Q2) The accrual accounting rate-of-return method has a significant weakness for use in making capital budgeting decisions because it does not track cash flows and it ignores the time value of money.
A)True
B)False
Q3) The net present value method can indicate erroneous decisions as it implicitly assumes that project cash flows can be reinvested at the project's rate-of-return.
A)True
B)False
Q4) The payback method allows for managers to highlight liquidity.
A)True
B)False
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Page 20
Chapter 19: Management Control Systems, Transfer Pricing and
Multinational Considerations
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Sample Questions
Q1) The prices negotiated by two divisions of the same company usually have no specific relationship to either costs or market price.
A)True
B)False
Q2) '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
Q3) An advantage of using budgeted costs for transfer pricing among divisions is that:
A)it promotes subunit autonomy.
B)it usually provides a basis for optimal decision making.
C)overall corporate profitability is usually higher.
D)the divisions know the transfer price in advance.
Q4) Goal congruence exists when individuals work toward achieving one goal,and groups work toward achieving a different goal.
A)True
B)False
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Chapter 20: Performance Measurement, Compensation
and Multinational Considerations
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Sample Questions
Q1) What were the sales for the Boat Division?
A)$7 200 000
B)$9 000 000
C)$11 750 000
D)$7 500 000
Q2) Some companies present financial and non-financial performance measures for their subunits in a single report called the 'balanced scorecard'.
A)True
B)False
Q3) Using residual income as a measure of performance rather than return on investment promotes goal congruence because residual income:
A)places importance on the reduction of underperforming assets.
B)concentrates on maximising an absolute amount of dollars.
C)calculates a percentage return rather than an absolute return.
D)concentrates on maximising the return on sales.
Q4) 'Return on investment' is also called the 'accrual accounting rate of return'.
A)True
B)False
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Chapter 21: Measuring and Reporting Sustainability
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Sample Questions
Q1) One of the consequences of the existence of externalised costs is that the market place,as it currently operates,does not achieve the optimal outcomes for society as a whole.
A)True
B)False
Q2) 'Learning for sustainability' is the term used to describe the ongoing learning that must go on within an organisation to achieve sustainability.
A)True
B)False
Q3) How does Professor Dexter Dunphy's research describe businesses that want to create a sustainable world by changing the very way they operate?
A)Compliance Reactive Minimalists
B)Bunker Wombats
C)Proactive Strategists
D)Transforming Futurists
Q4) Traditional profits measures can measure sustainability;the information just has to be rearranged.
A)True
B)False
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