Cost Accounting Practice Questions
Course Introduction
Cost Accounting provides students with an understanding of the principles and practices involved in measuring, analyzing, and managing costs in organizations. The course covers key topics such as cost behavior, cost allocation, job order and process costing, activity-based costing, budgeting, and variance analysis. Emphasis is placed on how cost information supports decision-making, planning, and control in both manufacturing and service environments. Through practical exercises and case studies, students learn to apply cost accounting techniques to real-world business scenarios, preparing them for roles in management accounting and financial analysis.
Recommended Textbook
Cornerstones of Managerial Accounting 2nd Canadian Edition by Maryanne Mowen
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14 Chapters
2059 Verified Questions
2059 Flashcards
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Page 2
Chapter 1: Introduction to Managerial Accounting
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45 Flashcards
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Sample Questions
Q1) Activity-based costing is a more detailed approach to determining the cost of goods and services.
A)True
B)False
Answer: True
Q2) What is customer value?
A) the difference between what a customer receives and what the customer gives up when buying a product or service
B) the establishment of a competitive advantage by creating better customer value for the same cost
C) the efficient performance of necessary activities and elimination of activities that do not create customer value
D) the improvement of costing accuracy by emphasizing the activities and tasks that must be performed
Answer: A
Q3) Financial accounting has its emphasis on the future.
A)True
B)False
Answer: False
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Page 3
Chapter 2: Basic Managerial Accounting Concepts
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Sample Questions
Q1) What is the definition of cost of goods manufactured?
A) the cost of direct materials used in production
B) the product cost of goods completed during the current period
C) the product cost of goods sold during the current period
D) the cost remaining in ending work-in-process inventory
Answer: B
Q2) Indirect costs are costs that are NOT easily and accurately traced to a cost object.
A)True
B)False
Answer: True
Q3) What is the behaviour pattern of a variable cost?
A) It increases in total as output increases.
B) It remains constant in total at all levels of output.
C) It increases per unit as output increases.
D) It decreases per unit as output increases.
Answer: A
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Chapter 3: Cost Behaviour
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Sample Questions
Q1) What is an example of a discretionary cost?
A) executive travel costs
B) the cost of leasing machinery
C) licence fees for fleet of vehicles
D) depreciation on a factory building
Answer: A
Q2) If output decreases,what is the result?
A) Total fixed costs will remain the same.
B) Total variable costs will increase.
C) Total mixed costs will remain the same.
D) Total mixed costs will increase.
Answer: A
Q3) Refer to the Figure.What is the fixed cost of electricity when using the high-low method?
A) $6,400
B) $10,860
C) $13,740
D) $24,000
Answer: C
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Page 5
Chapter 4: Costvolumeprofit Analysis: a Managerial Planning Tool
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160 Flashcards
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Sample Questions
Q1) Refer to the Figure.How many sales in dollars are needed to generate a profit of $30,000?
A) $100,000
B) $150,000
C) $214,286
D) $500,000
Q2) Which of the following can be considered a measure of risk in cost-volume-profit analysis?
A) margin of safety
B) contribution margin ratio
C) contribution margin
D) fixed cost
Q3) The cost-volume-profit graph depicts the relationships among cost,volume,and profits by plotting the total revenue line and the total cost line on the graph.
A)True
B)False
Q4) The linear equation for total cost is (unit variable cost × units)+ fixed cost.
A)True
B)False
6
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Chapter 5: Job-Order Costing
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176 Flashcards
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Sample Questions
Q1) Which of the following is a characteristic of job-order costing?
A) Products produced are identical in nature
B) Unit cost is computed by dividing process costs of the period by the units produced in the period.
C) Unit cost is computed by dividing total job costs by units sold on that job.
D) The cost of one job is typically different from that of another job.
Q2) Refer to Bob's Powerwasher Company.What is the balance in the work-in-process account on April 30?
A) $87,498
B) $88,340
C) $104,262
D) $106,570
Q3) The use of normal costing means that actual overhead costs are NOT assigned directly to jobs.
A)True
B)False
Q4) Form headed by the job order number,or name
A)Job-order cost sheet
B)Time ticket
C)Materials requisition form
7
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Chapter 6: Process Costing
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Sample Questions
Q1) Suppose a one-to-one relationship exists between the output measures.What would the units started in a subsequent department be equal to?
A) the equivalent units plus the materials added
B) the equivalent units of that department
C) the materials added plus conversion costs
D) the units transferred out from the prior department
Q2) Which costing system is most likely to be used by manufacturer that produces unique products?
A) job-order costing
B) process costing
C) sequential costing
D) parallel costing
Q3) The costs transferred from a prior process to a subsequent process
A)Equivalent units of production
B)Transferred-in costs
C)FIFO costing methods
D)Production report
Q4) Describe the differences between process costing and job-order costing.
Q5) List the five steps in preparing a production report.
Q6) Describe the differences between sequential and parallel processing.
Page 8
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Chapter 7: Activity-Based Costing and Management
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Sample Questions
Q1) Which matrix is derived from the interview process (or written survey)?
A) work distribution matrix
B) activity explanation matrix
C) driver consumption matrix
D) value analysis matrix
Q2) Refer to the Figure.What is the activity rate for inspecting components on the basis of sampling hours?
A) $72.00 per hour
B) $76.00 per hour
C) $77.25 per hour
D) $78.00 per hour
Q3) Resources consumed by the activity in producing its output.
A)Activity analysis
B)Value-added costs
C)Velocity
D)Activity inputs
E)Activity output measure
F)Activity output
Q4) What is the activity based costing hierarchy? Give an example for each.
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Chapter 8: Absorption and Variable Costing,and Inventory Management
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Sample Questions
Q1) 2L1S Company orders 250 units at a time and places 15 orders per year.Total ordering cost is $1,100,and total carrying cost is $1,750.What is the economic order quantity?
A) The economic order quantity (EOQ)is 250.
B) The economic order quantity (EOQ)is more than 250.
C) The economic order quantity (EOQ)is less than 250.
D) The economic order quantity (EOQ)is 15.
Q2) Refer to the Figure.Assume that beginning inventory was zero.What is the value of ending inventory under absorption costing?
A) $2,000
B) $3,000
C) $3,720
D) $5,000
Q3) What is the primary difference between variable and absorption costing?
A) inclusion of fixed selling expenses in product costs
B) inclusion of variable factory overhead in period costs
C) inclusion of fixed selling expenses in period costs
D) inclusion of fixed factory overhead in product costs
Q4) What is the difference between absorption-costing income and variable-costing income?
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Chapter 9: Budgeting, production, cash, and Master Budget
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Sample Questions
Q1) The budget director is the person responsible for directing and coordinating the organization's overall budgeting process.
A)True
B)False
Q2) Refer to the Figure.What was the operating income for Bingimton Company last month?
A) $2,400
B) $7,400
C) $9,400
D) $14,600
Q3) Pseudoparticipation is one of the potential problems with participative budgeting.
A)True
B)False
Q4) If the initial cash budget indicates a cash deficiency,the company must go out of business.
A)True
B)False
Q5) Describe some problems with participative budgeting.
Q6) Does a not-for-profit agency need to budget? Why or why not?
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Chapter 10: Standard Costing: a Managerial Control Tool
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Sample Questions
Q1) Sterling Manufacturing has developed the following standards for one of its products. Materials: \( 5 \mathrm{~m} \times \$ 6 \) per metre\(\quad\)\(\quad\)\( \$ 30 \)
Direct labour: 2 hours \( \times \$ 8 \) per hour\(\quad\)16 The company records materials price variances at the time of purchase.
The following activity occurred during the month of December: \[\begin{array} { l l }
\text { Materials purchased: } & 5,200 \mathrm {~m} \text { costing } \$ 29,900 \\
\text { Materials used: } & 4,750 \mathrm {~m} \\
\text { Units produced: } & 1,000 \text { units } \\
\text { Direct labour: } & 2,100 \text { hours costing } \$ 17,850 \end{array}\] Required: A. Calculate the direct materials price variance.
B. Calculate the direct materials usage variance.
C. Calculate the direct labour rate variance.
D. Calculate the direct labour efficiency variance.
Q2) Actual price of inputs is greater than the standard price.
A)Favourable variance
B)Unfavourable variance
Q3) How are standards developed?
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Chapter 11: Flexible Budgets and Overhead Analysis
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Sample Questions
Q1) Refer to the Figure.What is the fixed overhead spending variance for Hyphen?
A) $2,000 (U)
B) $4,000 (U)
C) $8,000 (U)
D) $20,000 (U)
Q2) Which of the following is NOT one of the three steps in building an activity-based budget?
A) identifying activities
B) classifying activities as value-added or non-value-added
C) estimating the demand for each activity's output
D) estimating the cost of producing the output demanded by each activity
Q3) The difference between which two amounts is measured by the variable overhead spending variance?
A) the total variable overhead and the applied variable overhead
B) the total variable overhead and total budgeted overhead costs
C) the total variable overhead and the budgeted overhead for the expected activity
D) the actual variable overhead rate and the standard variable overhead rate
Q4) Discuss why activity-based flexible budgeting provide a more accurate prediction of costs than a traditional flexible budget.
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Chapter 12: Performance Evaluation and Decentralization
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Sample Questions
Q1) Refer to the Figure.Assume that Giga-Stuff allows negotiated transfer pricing.What is the ceiling of the bargaining range,and which division sets it?
A) $2.15; Sophistosand
B) $2.15; Videostuff
C) $2.50; Sophistosand
D) $2.50; Videostuff
Q2) How is residual income calculated?
A) operating income (ROI × average operating assets)
B) operating income / (ROI × average operating assets)
C) operating income / (minimum rate of return × average operating assets)
D) operating income (minimum rate of return × average operating assets)
Q3) A transfer price is the price charged for a component by the selling division to the buying division of the same company.
A)True
B)False
Q4) Decreasing inventories leads to a reduction in return on investment (ROI).
A)True
B)False
Q5) What is Strategy?
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Chapter 13: Short-Run Decision Making: Relevant Costing
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Sample Questions
Q1) Atlantic Industries manufactures 40,000 components per year.The manufacturing cost of the components was determined as follows: \[\begin{array} { l r }
\text { Direct materials } & \$ 75,000 \\
\text { Direct labour } & 120,000 \\
\text { Variable manufacturing overhead } & 45,000 \\
\text { Fixed manufacturing overhead } & 60,000 \\
\text { Total } & \$ 300,000
\end{array}\] An outside supplier has offered to sell the component for $12.75. What is the effect on income if Atlantic Industries purchases the component from the outside supplier?
A) a $30,000 increase
B) a $30,000 decrease
C) a $270,000 increase
D) a $270,000 decrease
Q2) Which of the following costs is the depreciation of equipment an example of?
A) a relevant cost
B) an opportunity cost
C) a sunk cost
D) a variable cost
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Page 15
Chapter 14: Capital Investment Decisions
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Sample Questions
Q1) What is a postaudit? What are the advantages and disadvantages of the postaudit?
Q2) Kendra Van Cleve has just invested $200,000 in a coffee shop.She expects to receive cash income of $50,000 a year.What is the payback period?
A) 2.5 years
B) 3 years
C) 3.5 years
D) 4 years
Q3) The internal rate of return model does NOT consistently result in choices that maximize firm wealth.
A)True
B)False
Q4) Companies that perform postaudits of capital projects do NOT experience any benefits.
A)True
B)False
Q5) The accounting rate of return is used more often than the internal rate of return.
A)True B)False
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