Cost Accounting Practice Exam
Course Introduction
Cost Accounting is a comprehensive course that introduces students to the foundational principles and techniques used to measure, analyze, and control costs within an organization. The course explores topics such as cost terminology, cost behavior, job-order costing, process costing, activity-based costing, budgeting, standard costing, and variance analysis. Students will gain insights into how cost information supports management decision-making, planning, and performance evaluation. Through case studies and practical exercises, participants will develop the skills necessary to collect, interpret, and report cost data, enabling them to contribute effectively to organizational efficiency and strategic planning.
Recommended Textbook
Cost Accounting A Managerial Emphasis 7th Canadian Edition by Charles T. Horngren
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Chapter 1: The Accountants Vital Role in Decision Making
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Sample Questions
Q1) Which of the following would likely constitute a breach of ethics for a management accountant?
A)to omit pertinent information from a report because it is personally unfavourable
B)to consider disclosing confidential information in order to further your own career
C)to consider disclosing confidential information (ie gained from a third party)in order to assist your employer/client
D)to report the unethical actions of another party,with the expectation that this will further your own career
E)to be disruptive in a meeting
Answer: A
Q2) What aspect of business analysis focuses on the sequence of business functions?
A)customer service
B)value chain
C)quality
D)research and development
E)product design
Answer: B
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Chapter 2: An Introduction to Cost Terms and Purposes
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Sample Questions
Q1) The total of the costs assigned to a particular product for a specific purpose is called A)direct cost.
B)inventoriable cost.
C)marketing cost.
D)product cost.
E)prime cost.
Answer: D
Q2) Which of the following is TRUE of period costs?
A)They are also called fixed costs.
B)They are part of the cost of goods sold.
C)They are expected to benefit future periods.
D)They are costs incurred to generate revenue in a specific time period except the cost of manufacturing accumulated as cost of goods sold.
E)For merchandising sector companies they include all costs not related to the cost of goods purchased for resale.
Answer: D
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4
Chapter 3: Cost-Volume-Profit Analysis
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Sample Questions
Q1) Target net income is computed by multiplying operating income by one minus the entity's tax rate,or by multiplying operating income by the tax rate,and subtracting that amount from operating income.
A)True
B)False Answer: True
Q2) The contribution margin is computed by deducting all costs which vary on the basis of an output-related cost driver from revenues.
A)True
B)False Answer: True
Q3) In multi-product situations when sales mix shifts toward the product with the highest contribution margin,operating income will be higher.
A)True
B)False Answer: True
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Chapter 4: Job Costing
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Sample Questions
Q1) The amount of manufacturing overhead allocated to all jobs during June totals
A)$77,000.
B)$105,000.
C)$110,000.
D)$200,000.
E)$557,000.
Q2) Explain how a budgeted indirect cost allocation rate is determined.
Q3) General Hospital uses a job-costing system for all patients.In March the Critical Care and Special Care facilities had cost allocation bases of 4,000 nursing days and 3,000 nursing days,respectively.The nursing care charges for each department for the month were $2,106,000 and $1,500,000,respectively.The General Care area had costs of $2,700,000 and 7,500 nursing days for the month.
Patient Jim Hansen spent 5 days in Critical Care,4 days in Special Care and 21 days in General Care during March.
Required:
a.Determine the cost allocation rate for each department.
b.What are the total charges to Mr.Hansen if he was in the facility the entire month of March?
Q4) What is the difference between an actual cost system and a normal cost system?
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Chapter 5: Activity-Based Costing and Management
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Sample Questions
Q1) Which of the following is a sign that a "smoothing out" costing system exists?
A)Managers rely on data originated by the cost system.
B)The company wins bids they thought had low margins.
C)A batch consumes a relatively high level of input materials and conversion activities and is reported to have a relatively high cost.
D)A batch consumes a relatively low level of input materials and conversion activities and is reported to have a relatively low cost.
E)The company loses bids they thought had low margins.
Q2) List and describe the purposes of the three main guidelines for refining a cost system.
Q3) Assuming activity-cost pools are used,what are the activity-cost driver rates for design changes,setups,and inspections cost pools?
A)$200 per change,$64 per setup,$5 per inspection
B)$180 per change,$76 per setup,$4 per inspection
C)$150 per change,$64 per setup,$4 per inspection
D)$180 per change,$76 per setup,$5 per inspection
E)$200 per change,$5 per setup,$64 per inspection
Q4) List four ways that activity-based management can be effective.
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Page 7
Chapter 6: Master Budget and Responsibility Accounting
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Sample Questions
Q1) What will be the Fair Score Company budgeted amount of cost of goods sold?
A)$8,160,000
B)$6,800,000
C)$6,460,000
D)$6,120,000
E)$5,975,000
Q2) What is the ending balance of accounts receivable at the end of September assuming uncollectible balance is written off in the third month after the sale?
A)$199,000
B)$97,000
C)$89,800
D)$93,000
E)$88,000
Q3) How many pool cues need to be produced in 2016?
A)22,500 cues
B)18,000 cues
C)20,000 cues
D)19,500 cues
E)20,500 cues
Q4) Describe the benefits to an organization of preparing an operating budget.
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Chapter 7: Flexible Budgets,variances,and Management
Control: I
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Sample Questions
Q1) A variance is the difference between the actual result and a budgeted amount.
A)True
B)False
Q2) Decreasing demand for a product may create a favourable sales-volume variance.
A)True
B)False
Q3) An input-price variance is the difference between actual quantity of input used and the budgeted quantity of input that should have been used,multiplied by the budgeted price.
A)True
B)False
Q4) An unfavourable variance is conclusive evidence of poor performance.
A)True
B)False
Q5) What is the rate variance of the direct materials?
A)$10,000 favourable
B)$11,500 unfavourable
C)$11,500 favourable
D)$10,000 unfavourable
E)$11,000 favourable
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Chapter 8: Flexible Budgets,variances,and Management
Control: II
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148 Flashcards
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Sample Questions
Q1) Calculate the rate variance for fixed setup overhead costs.
A)$114 unfavourable
B)$150 unfavourable
C)$250 unfavourable
D)$150 favourable
E)$250 favourable
Q2) When machine-hours are used as a cost allocation base,the item MOST likely to contribute to a favourable production-volume variance is
A)an increase in the selling price of the product.
B)the purchase of a new manufacturing machine costing considerably less than expected.
C)a decline in the cost of energy.
D)strengthened demand for the product.
E)a competitor lowering the price of a similar product.
Q3) If a manager views the proration approach as not being cost-effective,then adjusting cost of goods sold is acceptable provide the amount is material.
A)True
B)False
Q4) How can a standard costing system be useful in negotiating new sales?
Page 10
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Chapter 9: Income Effects of Denominator Level on Inventory Valuation
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Sample Questions
Q1) Evaluate the statement,"The breakeven points are generally different under both variable costing and absorption costing." Include in your discussion the factors that can cause the breakeven in absorption costing to vary.
Q2) Briefly discuss two methods of reducing the undesirable incentives associated with the use of absorption costing to evaluate the performance of a plant manager.
Q3) What would Beauty Supply Company's operating income (loss)be for January and February,respectively,using the variable costing approach?
A)$18,000 and $24,200
B)$(45,000)and $(35,500)
C)$(44,000)and $(33,809)
D)$(42,000)and $(35,800)
E)$(22,000)and $(15,800)
Q4) Absorption costing prevents managers from increasing production to levels above customer demand,as a means of inflating operating income.
A)True
B)False
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Chapter 10: Analysis of Cost Behaviour
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Sample Questions
Q1) How much do external failure costs change if all the changes are as the new prevention procedures anticipated? Assume all units produced are sold and there are no ending inventories.
A)$126,000 decrease
B)$156,400 decrease
C)$100,800 decrease
D)$158,900 decrease
E)$151,200 decrease
Q2) On-time performance is
A)the time it takes distribution to pick up an order and deliver it to the customer.
B)within 2 standard deviations of customer response time.
C)within 2 standard deviations of manufacturing time.
D)equal to customer response time,divided by the number of orders from a specific customer.
E)when the product is delivered at the time scheduled to be delivered.
Q3) An "economy of scale" function is an example of a linear cost function.
A)True
B)False
Q4) Describe the two assumptions upon which managers often estimate cost functions.
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Chapter 11: Decision Making and Relevant Information
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Sample Questions
Q1) A florist produces table settings for weddings.Based on an annual volume of 10,000 units it incurs $100,000 in fixed manufacturing costs.Variable costs per unit are $16 for direct materials,$3 for direct manufacturing labour,and $14 for variable factory overhead.
Another company has offered to supply empty baskets for the settings for $8,with a minimum annual order of 5,000 units.If the florist accepts the offer,it will be able to reduce variable labour and overhead costs by 50 percent.The materials for the empty baskets will cost $4 if the florist assembles them.
Required:
a.Determine if they should make or assemble the empty baskets.
b.Should they make or assemble the empty baskets if they could rent the space that the basket assembly requires for $16,000 per year to another company?
Q2) When opportunity costs exist,they are always relevant.
A)True
B)False
Q3) Doggie Dinner,Inc. ,currently manufactures three different types of scientifically balanced dog food.The firm is considering eliminating one of the three products.What factors should be taken into account in making this decision?
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Chapter 12: Pricing Decisions, product Profitability
Decisions, and Cost Management
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Sample Questions
Q1) 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)$112.50
B)$113.64
C)$123.34
D)$140.00
E)$135.00
Q2) In target costing,what are at least two techniques used to achieve target costing goals?
Q3) What is the target operating income?
A)$240,000
B)$360,000
C)$200,000
D)$192,000
E)$400,000
Q4) Relevant costs for pricing decisions include manufacturing costs,but not costs from other value-chain functions.
A)True
B)False
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Chapter 13: Strategy,balanced Scorecard,and Profitability Analysis
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Sample Questions
Q1) Describe three key components in doing a strategic analysis of operating income.
Q2) To evaluate the success of its strategy,a company can subdivide the change in costs into growth,price-recovery and productivity components.
A)True
B)False
Q3) Measures of the balanced scorecard's financial perspective include all of the following EXCEPT
A)operating income.
B)customer satisfaction.
C)gross profit percentage.
D)cost reductions.
E)return on investment.
Q4) Unused capacity is the amount of productive capacity available over and above the productive capacity employed to meet customer demand in the current period.
A)True
B)False
Q5) Identify and explain Porter's Five Forces model.
Q6) Required: What is the amount of the productivity component?
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Chapter 14: Period Cost Allocation
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Sample Questions
Q1) Which purpose of cost allocation is used to encourage sales representatives to push high-margin products or services?
A)to provide information for economic decisions
B)to motivate managers and other employees
C)to justify costs
D)to measure income and assets for reporting to external parties
E)to compute reimbursement
Q2) Benefits of the dual-rate method include
A)variable costs that are transformed into fixed costs for user decision making.
B)the low cost of implementation.
C)avoidance of expensive analysis for categorizing costs as either fixed or variable.
D)information that leads to outsourcing decisions that benefit the organization as a whole.
E)increased costs of implementation.
Q3) The user department is responsible for any unfavourable cost variances during the budgeting period if budgeted prices and quantities are used for cost allocation.
A)True
B)False
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Chapter 15: Cost Allocation: Joint Products and Byproducts
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Sample Questions
Q1) The sales value at splitoff method can be used to value inventory as well as determining cost of goods sold.
A)True
B)False
Q2) What are the two methods to account for byproducts.Which is the more appropriate method to use and why?
Q3) The incremental benefit or (loss)of processing Jarlon into Jaxton is
A)$480,000.
B)($128,000).
C)$64,000.
D)($96,000).
E)($32,000).
Q4) What type of cost is the result of an event that results in multiple products simultaneously?
A)byproduct cost
B)joint cost
C)main cost
D)separable cost
E)splitoff cost
Q5) What are a joint cost and a splitoff point?
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Chapter 16: Revenue and Customer Profitability Analysis
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Sample Questions
Q1) ________ examine(s)how customers differ in their profitability.
A)Customer-profitability analysis
B)Customer revenue analysis
C)Customer-cost hierarchy
D)Price discounting
E)Customer-price hierarchy
Q2) The measures used to compute market size and share are debated intensely in the television industry,but generally,a TV station's ability to charge premium prices for airtime increases as its audience size increases.Explain how the sales and market variances might be relevant in this situation.
Q3) Using the incremental method,what amount of revenue will be allocated to Math Fun in the package that contains all three products?
A)$24.12
B)$30.00
C)$22.80
D)$25.33
Q4) Describe and discuss the two methods of allocating the revenues of a bundled package to the individual products in that package.Describe any special problems associated with the method.
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Chapter 17: Process Costing
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Sample Questions
Q1) Operation-costing differs from pure process-costing in that operation-costing charges each work order separately for direct material cost.
A)True
B)False
Q2) When identical or similar units of products or services are mass produced,job-costing is used to calculate an average production cost for all units produced.
A)True
B)False
Q3) The weighted-average process costing method distinguishes between units started in the previous period but completed during the current period and units started and completed during the current period.
A)True
B)False
Q4) In process costing the end of period journal entry to record $10,000 of ending inventory requires a debit to the ending inventory account and a credit to work-in-process inventory.
A)True B)False
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Chapter 18: Spoilage, rework, and Scrap
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Sample Questions
Q1) You are the chief financial officer of a lumber mill,and you are becoming quite concerned about the spoilage,scrap,and reworked items associated with your production processes.Your firm produces mainly products for the building industry.
Required:
Discuss the problems associated with these items and the methods your company can use to reduce spoilage,scrap,and reworked items.
Q2) Abnormal spoilage totalled
A)1,600 units.
B)2,000 units.
C)1,680 units.
D)1,920 units.
E)1,700 units.
Q3) The costs of normal spoilage are usually assigned to individual jobs in job costing. A)True
B)False
Q4) When a unit has to be reworked,the rework may be classified in three ways.What are those ways,and how does the accounting for each differ?
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Chapter 19: Inventory Cost Management Strategies
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Sample Questions
Q1) The EOQ quantity for Sandrington is:
A)418 units
B)506 units
C)2,449 units
D)707 units
E)24 units
Q2) An inventory item of XYZ Manufacturing has an average daily demand of 10 units with a maximum daily demand of 12 units.The economic order quantity is 200 units.The reorder point is 50 units.Safety stocks are set at 94 units.
Required:
a.Determine the inventory level at the time of reordering.
b.Determine the purchase order lead time.
d.Determine the maximum purchase order lead time that the company can experience before it has a stockout.
Q3) Just-in-Time (JIT)Production is a system in which each component on a production line is produced immediately as needed by the next step in the production line.
A)True
B)False
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Chapter 20: Capital Budgeting: Methods of Investment Analysis
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Sample Questions
Q1) Both financial and nonfinancial factors associated with proposed capital budgeting opportunities need to be considered as part of the capital budgeting decision process.
A)True
B)False
Q2) What is the internal rate of return of the Neptune Ltd.investment?
A)13.62%
B)12.75%
C)10.00%
D)6.86%
E)18.00%
Q3) 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)after tax cost of debt.
E)coupon interest rate on the firm's debt.
Q4) The payback method discounts cash flows prior to the payback date.
A)True
B)False
22
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Chapter 21: Transfer Pricing and Multinational Management
Control
Systems
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Sample Questions
Q1) Full-cost transfer prices will maximize overall corporate income when transferring products from divisions operating
A)in a low tax area to a high tax area.
B)in a high tax area to a low tax area.
C)between high tax areas.
D)between low tax areas.
E)in a high tax area to a tax exempt area.
Q2) What is the daily operating advantage (disadvantage)of purchasing the water from the independent producer and using the company's Manitoba shipping department,assuming the shipping department is currently shipping 50,000 containers per day for external customers?
A)$0
B)$45,000
C)$225,000
D)$120,000
E)$165,000
Q3) Discuss some of the recent legislation and frameworks relating to assurance and internal controls.
Q4) What is the purpose of the internal control system within an organization?
Q5) Provide a complete definition of a management control system.
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Chapter 22: Multinational Performance Measurement and Compensation
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Sample Questions
Q1) A part of a control system that articulates the mission,purpose,and core values of a company is known as a(n)
A)diagnostic control system.
B)boundary system.
C)belief system.
D)interactive control system.
E)isolated system.
Q2) What are the respective residual incomes for the Toronto and Vancouver divisions?
A)$975,000;$1,125,000
B)$1,025,000;$1,125,000
C)$1,025,000;$2,375,000
D)$2,375,000;$1,025,000
E)$1,075,000;$1,125,000
Q3) Team incentives encourage cooperation by
A)forcing people to work together on difficult tasks.
B)changing management style.
C)letting individuals help one another as they strive toward a common goal.
D)rewarding based on team performance.
E)rewarding team members individually.
Page 24
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