Cost Accounting Review Questions
Course Introduction
Cost Accounting is a university-level course designed to introduce students to the principles, methods, and techniques used in accumulating, analyzing, and reporting cost data for decision making and control. The course covers key topics such as cost terminology, cost behavior, job order costing, process costing, activity-based costing, budgeting, standard costing, variance analysis, and the use of cost data in planning and performance evaluation. By the end of the course, students will have the knowledge and analytical skills to apply cost accounting concepts in real-world business scenarios, supporting managerial decisions that enhance operational efficiency and profitability.
Recommended Textbook
Introduction to Managerial Accounting 4th Canadian Edition by Peter C. Brewer
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14 Chapters
1654 Verified Questions
1654 Flashcards
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Chapter 1: An Introduction to Managerial Accounting and Cost Concepts
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Sample Questions
Q1) Which of the following statements is not true?
A) Financial accounting and managerial accounting are independent of each other.
B) Financial accounting,due to the requirements of regulation,is mandatory for businesses.
C) Managerial accounting has a strong orientation towards the future.
D) Financial accounting presents a historical perspective of business activities.
Answer: A
Q2) Reduction in tariffs,quotas,and other barriers to free trade;improvements in global transportation system;and increasing sophistication in international trade markets,are several factors that have led to an increase in worldwide competition in many industries.
A)True
B)False
Answer: True
Q3) Codes of ethics almost always provide employees with very specific and detailed instructions about what they can do and not do.
A)True
B)False
Answer: False
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Chapter 2: Systems Design: Job-Order Costing
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Sample Questions
Q1) Conversion cost consists of which of the following?
A) Manufacturing overhead cost.
B) Direct materials and direct labour costs.
C) Direct labour cost.
D) Direct labour and manufacturing overhead costs.
Answer: D
Q2) Boardman Company's total conversion cost for January was:
A) $110,000.
B) $130,000.
C) $135,000.
D) $170,000.
Answer: A
Q3) Assume that cost of goods sold for January was $124,000.The net income for January was:
A) $25,000.
B) $26,000.
C) $51,000.
D) $61,000.
Answer: B
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Chapter 3: Systems Design: Activity-Based Costing
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Sample Questions
Q1) The best estimate of the total fixed cost per period for Maxwell Company is?
A) $3,360.
B) $29,190.
C) $32,000.
D) $40,950.
Answer: A
Q2) Which of the statements is correct about using the scattergraph method in analyzing costs?
A) The unusual non-recurring cost behaviours are likely to be apparent.
B) The regression line intersects all plotted cost points.
C) The resulting information is precise,regardless of who performs the analysis.
D) The resulting information will consistently be more accurate than that from other methods.
Answer: A
Q3) The net income using the contribution approach for the first quarter is?
A) $44,000.
B) $128,000.
C) $152,000.
D) $240,000.
Answer: A
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Chapter 4: Systems Design: Process Costing
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Sample Questions
Q1) The cost of raw materials used in production was:
A) $26,000.
B) $66,000.
C) $71,000.
D) $76,000.
Q2) How much direct labour cost was incurred during January?
A) $170,000.
B) $175,000.
C) $180,000.
D) $186,000.
Q3) The cost of goods sold was:
A) $81,000.
B) $91,000.
C) $111,000.
D) $131,000.
Q4) For the month of February,the manufacturing overhead was:
A) $700 overapplied.
B) $1,000 overapplied.
C) $2,000 overapplied.
D) $2,000 underapplied.
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Chapter 5: Cost Behavior: Analysis and Use
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Sample Questions
Q1) The "Cost to account for" section of the production report for October will show a total amount equal to? (Do not round intermediate calculations)
A) $110,000.
B) $350,000.
C) $391,250.
D) $428,750.
Q2) Which of the following costs incurred by a paper manufacturer would be included in the group of costs referred to as conversion costs?
A) machine operator's wages.
B) advertising costs.
C) lumber.
D) sales person salaries.
Q3) Using the first-in-first-out (FIFO)method,the material and conversion costs in opening work in process at the beginning of a period are considered in determining the costs per equivalent unit for that period.
A)True
B)False
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Chapter 6: Cost-Volume-Profit Relationships
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Sample Questions
Q1) Assuming that actual activity turns out to be the same as expected activity,the total amount of overhead cost allocated to Product X would be closest to:
A) $296,100.
B) $298,000.
C) $339,000.
D) $372,600.
Q2) Daston Company manufactures two products,Product F and Product G.The company expects to produce and sell 1,600 units of Product F and 3,000 units of Product G during the current year.The company uses activity-based costing to compute unit product costs for external reports.Data relating to the company's three activity cost pools are given below for the current year:
Q3) The debits to the Manufacturing Overhead control account during the year (prior to closing out the balance)would have totalled:
A) $3,064,400.
B) $3,076,500.
C) $3,097,400.
D) $3,130,400.
Q4) The activity rate for Inspecting is?
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Chapter 7: Profit Planning
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Sample Questions
Q1) The production budget includes detailed information as to the number of units of direct materials and the number of direct labour hours required for each budget period for a manufacturing business.
A)True
B)False
Q2) Which of the following would you not expect to find when the Beyond Budgeting Model is used?
A) Performance targets are set relative to specific competitors.
B) Forecasts are regularly and frequently updated.
C) All corporate resources are managed by senior head office personnel.
D) All personnel are included in reward programs.
Q3) What are some weaknesses of the traditional budget model?
Q4) Which one of the following tasks should be done first,when developing a comprehensive budget for a manufacturing company?
A) Determination of the advertising budget.
B) Development of a sales budget.
C) Development of the capital budget.
D) Determination of equipment acquisitions.
Q5) What are some key principles of the Beyond Budgeting Model?
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Chapter 8: Standard Costs
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Sample Questions
Q1) The company's margin of safety as a percentage of sales (rounded to the nearest whole percent)is:
A) 12%.
B) 33%.
C) 50%.
D) 67%.
Q2) Last year,Black Company reported sales of $640,000,a contribution margin of $160,000,and a net loss of $40,000.Based on this information,the break-even point in total sales dollars was:
A) $480,000.
B) $640,000.
C) $800,000.
D) $960,000.
Q3) What is the company's contribution margin ratio?
A) 20%.
B) 62.5%.
C) 160%.
D) 500%.
Q4) The following monthly data are available for the Challenger Company and its only product,Product SW:
Page 10
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Chapter 9: Flexible Budgets and Overhead Analysis
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Sample Questions
Q1) Costs that are always relevant in decision-making are:
A) future costs.
B) avoidable costs.
C) sunk costs.
D) fixed costs.
Q2) Assume that discontinuing Product J would result in a $30,000 increase in the contribution margin of other product lines.If Bingham chooses to discontinue Product J,then the change in net income next year due to this action will be a:
A) $145,000 decrease.
B) $5,000 increase.
C) $120,000 increase.
D) $145,000 increase.
Q3) The sunk cost in this situation is:
A) $0.
B) $10,000.
C) $11,200.
D) $26,800.
Q4) Northern Stores is a retailer in the upper Midwest.The most recent monthly income statement for Northern Stores is given below:
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Chapter 10: Decentralization
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Sample Questions
Q1) A new Xerox copier costing $400,000 has a life of 5 years with no salvage value.The facility will generate the following annual cash flows:
Q2) An increase in the discount rate will result in an increase in the present value of a given cash flow.
A)True
B)False
Q3) Ferris Company has an old machine that is fully depreciated but has a current salvage value of $5,000.The company wants to purchase a new machine that would cost $60,000 and have a 5-year useful life and zero salvage value.Expected changes in annual revenues and expenses if the new machine is purchased are:
Q4) Which one of the following statements about the payback method of capital budgeting is correct?
A) The payback method does not consider the time value of money.
B) The payback method considers cash flows after the payback has been reached.
C) The payback method uses discounted cash flow techniques.
D) The payback method will lead to the same decision as other methods of capital budgeting.
Q5) The following data concern an investment project:
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Chapter 11: Relevant Costs for Decision Making
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Sample Questions
Q1) Which of the following could result in a situation where the use of a standard cost system to control labour costs might not be the most useful?
A) There is a desire to simplify the accounting for costs of items manufactured.
B) The integration of costing with responsibility accounting.
C) Manufacturing is highly automated.
D) Standards are viewed by employees as reasonable.
Q2) Nova Corporation produces a single product and uses a standard cost system to help control costs.Overhead is applied to production on the basis of machine-hours.According to the company's flexible budget,the following overhead costs should be incurred at an activity level of 18,000 machine-hours (the denominator activity level chosen for the current year):
Q3) Purchase of poor quality materials will generally result in a favourable materials price variance and an unfavourable labour rate variance.
A)True
B)False
Q4) The Moore Company produces and sells a single product.A standard cost card for the product follows:
Q5) Determine the materials price variance:
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Chapter 12: Capital Budgeting Decisions
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Sample Questions
Q1) In 2003 the real estate market experienced an all-time high revenue with a net income of $45 billion with investment of $10 billion.What is the ROI for the real estate industry?
A) 4.5.
B) 5.44.
C) 6.22.
D) 14.2.
Q2) Delmar Corporation is considering the use of residual income as a measure of the performance of its divisions.What major disadvantage of this method should the company consider before deciding to institute it?
A) This method does not make allowance for difference in the size of compared divisions.
B) Opportunities may be undertaken which will decrease the overall return on investment.
C) The minimum required rate of return may eliminate desirable opportunities from consideration.
D) Residual income does not measure how effectively the division manager controls costs.
Q3) Financial data for Bingham Company for last year appear below:
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Chapter 13: How Well Am I Doing Statement of Cash Flows
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Sample Questions
Q1) Analysing the changes from the end of 20 × 5 to the end of 20 × 6,which of the following statements is correct about the protection provided to creditors by the company's financial position?
A) Creditors would see no change in the level of protection.
B) Creditors would see increased protection.
C) Creditors would see decreased protection.
D) There is insufficient information to attempt to answer this question.
Q2) The dividend yield ratio on common shares for the current year was closest to:
A) 5.2%
B) 6.6%.
C) 6.8%.
D) 7.4%.
Q3) March Company's working capital (in thousands of dollars)at the end of 20 × 6 was closest to:
A) $180.
B) $520.
C) $80.
D) $1,290.
Q4) Calculate the average collection period for 20 × 4
Q5) Calculate the debt-to-equity ratio for 20 × 4
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Chapter 14: How Well Am I Doing Financial Statement Analysis
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Sample Questions
Q1) Long-term debt on the balance sheet increased by $100,000 and $50,000 in cash dividends were paid.What will be the net result in cash flow?
A) Cash increased by $50,000.
B) Cash decreased by $50,000.
C) Cash increased by $150,000.
D) Cash decreased by $150,000.
Q2) Financial statements for Larned Company appear below:
Q3) A cash flow statement will be divided into separate sections reporting cash flows resulting from operating activities,investing activities,financing activities and shareholder equity activities.
A)True B)False
Q4) The operation activities section of the cash flow statement will exclude changes in all noncurrent balance sheet accounts. A)True B)False
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