Cost Accounting
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Course Introduction
Cost Accounting is a specialized area of accounting that focuses on capturing, analyzing, and reporting the costs associated with producing goods or providing services. This course equips students with the knowledge and skills to classify, allocate, and control costs in a business environment, enabling better management decision-making. Topics covered include cost behavior, job order costing, process costing, activity-based costing, budgeting, variance analysis, and cost-volume-profit relationships. Through practical examples and case studies, students learn how cost accounting information aids in planning, performance evaluation, and strategic financial decisions within various organizational contexts.
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Managerial Accounting An Introduction to Concepts Methods and Uses 11th Edition by Michael W.
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Chapter 1: Fundamental Concepts
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Q1) Describe what is meant by just-in-time inventory management and explain how it can benefit an organization.
Answer: Just-in-time (JIT)inventory management is part of a "lean production" philosophy that has been credited for the success of many Japanese companies and some large U.S.companies.It eliminates inventory between production departments,making the quality and efficiency of production the highest priority.JIT has also affected cost-accounting systems.Firms using JIT will have minimum inventory levels.
Q2) Benefit(s)of the income statements for managerial use include(s)
A)demonstrating which costs are variable and which are fixed.
B)breaking down revenues and costs in a number of ways to meet managers' needs. C)breaking down revenues and expenses in a number of ways to meet managers' needs.
D)demonstrating which costs are variable and which are fixed,and breaking down revenues and costs in a number of ways to meet managers' needs.
Answer: D
Q3) List the six business functions in the value chain and describe how they contribute to the final product's service,quality,and cost.
Answer: 11ea906f_4cfb_793f_aec7_39fad535bf26_TB2144_00_TB2144_00
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Chapter 2: Measuring Product Costs
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Q1) How does the Work-in-Process account both describe the transformation of inputs into outputs in a company and account for the costs incurred in the process?
Answer: A key factor in a company's success is how well it controls the conversion costs (direct labor and overhead).Companies closely monitor those costs in the Work-in-Process Inventory account.The key equation in words is Beginning Balance plus Transfers In equals Transfers Out plus Ending Balance.In symbols,we write BB + TI = TO + EB.
Q2) Which of the following costing system is appropriate for a company that mass-produces homogeneous products (continuous flow processing)?
A)job costing.
B)process costing.
C)operation costing.
D)dynamic costing.
Answer: B
Q3) Explain the importance of product cost information for managers.
Answer: Product cost information is helpful in pricing decisions,planning and evaluation.Product cost information is usually involved in most managerial decisions about the product line.
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Chapter 3: Activity-Based Management
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Q1) How does activity-based management treats fixed costs?
A)As costs which vary directly with volume.
B)As costs which cannot be controlled over the long-run.
C)As costs which may vary for reasons other than volume.
D)As sunk costs which have no future economic benefit.
Answer: C
Q2) What provides a systematic way for organizations to evaluate the processes that they use to produce goods and services for their customers?
A)Cost-benefit analysis
B)Activity analysis
C)Process evaluation and review technique
D)Flow charting
Answer: B
Q3) Which of the following are not examples of non-value-added costs?
A)Storage
B)Moving items
C)Waiting for work
D)Production
Answer: D
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Chapter 4: Strategic Management of Costs,quality,and Time
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Q1) Describe in detail the three critical success factors that relate to meeting customer quality requirements.
Q2) Break-even time.Weldon Company's research and development department is presenting a proposal for new-product research.The new product will require research,development,and design investments of $800,000 (discounted cash flow).Sales will begin after three years and will generate an annual discounted net cash flow of $200,000 starting in Year 3.
(Weldon Company;Breakeven time. )
Q3) The quality based view
A)holds that high quality pays for itself.
B)emphasizes constantly improving systems and processes.
C)focuses on long-run profits
D)All of the answers are correct.
Q4) Which of the following is not an example of appraisal costs?
A)Inspecting a sample of finished goods to ensure quality
B)Testing products in use at the external site
C)Inspecting production materials upon delivery
D)All of the answers are appraisal costs.
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Q5) How do traditional managerial accounting systems need to be modified to support total quality management?
Chapter 5: Cost Drivers and Cost Behavior
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Q1) J-Mobile provides cellular phone and Internet services with a plan that provides up to 1,000 minutes of airtime usage for a flat rate of $99.99 per month plus a charge for any minutes used over this amount at the rate of $0.10 per minute in excess of the minimum 1,000 airtime minutes.Which of the following describes the cost of the J-Mobile service?
A)fixed cost,only.
B)variable cost,only.
C)semi-variable cost.
D)semi-fixed cost.
Q2) The impact of learning curves on time and cost behavior is as follows:
A)Average labor hours per unit doesn't change,total labor hours decreases,and total labor costs decreases.
B)Average labor hours per unit increases,total labor hours increases,and total labor costs decreases.
C)Average labor hours per unit increases,total labor hours increases,and total labor costs increases.
D)Average labor hours per unit decreases,total labor hours increases,and total labor costs increases.
Q3) How does one interpret the results of regression analysis?
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Chapter 6: Financial Modeling for Short-Term Decision Making
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Q1) Identify the underlying assumptions of cost-volume-profit analysis.
Q2) The profit-volume graph shows one line that represents which of the following?
A)operating profits of the company for a given sales volume.
B)operating revenues of the company for a given sales volume.
C)total costs of the company for a given sales volume.
D)total profits of the company for a given sales volume.
Q3) Which of the following is the correct formula to use to calculate the contribution margin per unit?
A)Selling price per unit less fixed costs and variable costs per unit.
B)Selling price per unit less fixed costs per unit.
C)Selling price per unit less variable costs per unit.
D)None of the answers is correct.
Q4) A company's selling price is $12 per unit,variable cost is $3 per unit,and fixed costs are $25,000.What is the break-even point in sales dollars?
A)$53,333
B)$44,444
C)$33,333
D)$ 1,333
Q5) How can financial modeling be used for profit planning purposes?
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Chapter 7: Differential Cost Analysis for Operating Decisions
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Q1) The theory of constraints focuses on which of the following?
A)throughput contribution.
B)investments.
C)other operating costs.
D)All of the answers are correct.
Q2) In considering a special order that will enable a company to make use of presently idle capacity,which of the following costs would be irrelevant?
A)Materials
B)Depreciation
C)Direct Labor
D)Variable Overhead
Q3) The economic order quantity model derives the optimal number of which of the following costs?
A)fixed and variable costs.
B)orders or production runs.
C)direct materials and direct labor.
D)direct materials and conversion costs.
Q4) What are the costs of producing joint products and the relevant costs for decisions to sell or process further?
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Chapter 8: Capital Expenditure Decisions
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Q1) Describe the steps of the net present value method for making long-term decisions using discounted cash flows.Analyze the effect of income taxes on cash flows.
Q2) In making capital budgeting decisions,the discounted cash flow method aids in evaluating investments involving cash flows over time where there is a significant time difference between cash payment and receipt.Analysts use which two discounted cash flow methods?
A)the future value method and the internal rate of return method.
B)the net present value method and the external rate of return method.
C)the net present value method and the internal rate of return method.
D)the future value method and the external rate of return method.
Q3) Which statement is true concerning environmental investments such as installing pollution control devices?
A)These investments may provide many social benefits,not leading to quantifiable cash flows for the company.
B)These investments may provide cash flow benefits by eliminating fines,legal costs,and cleanups.
C)These investments are never undertaken unless required by Federal regulations.
D)Both "a" and "b".
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Chapter 9: Profit Planning and Budgeting
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Q1) What is often the most difficult aspect of budgeting?
A)forecasting sales because it involves considerable subjectivity.
B)forecasting sales because it involves considerable objectivity.
C)forecasting production requirements because it involves considerable subjectivity.
D)forecasting production requirements because it involves considerable objectivity.
Q2) When is the master budget prepared?
A)before the budget period begins.
B)after the budget period begins,but before it ends.
C)about half way through the budget period begins.
D)at the end or after the budget period ends.
Q3) Charles Company had 14,000 units of switch plates on hand at the end of its previous year.The company has a policy of maintaining 10 percent of the current year's requirements in ending inventory.During the current year,Charles used 150,000 units of switch plates.How many units did Charles purchase during the current year?
Q4) Incentive compatible compensation schemes often create many opportunities as well as problems.Identify two negative outcomes of incentive compensation systems,and suggest how companies can overcome them.
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Chapter 10: Profit and Cost Center Performance Evaluation
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Q1) Most companies report which of the following variances?
A)Each type of material.
B)Each category of labor.
C)Major cost components of variable overhead.
D)All of the above.
Q2) How does technology impact variance analyses?
Q3) The yield variance is the portion of the efficiency variance that is not a
A)match variance.
B)mix variance.
C)quantity variance.
D)price variance.
Q4) How are fixed production cost variances calculated and why do they occur?
Q5) How are fixed manufacturing costs treated for managerial and external reporting purposes?
Q6) Tool(s)that managers can use to decide when to investigate variances include which of the following?
A)Use of both tolerance limits and decision models.
B)Use of tolerance limits only.
C)Decision models only.
D)None of the above.
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Chapter 11: Investment Center Performance Evaluation
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Q1) Transfer pricing systems based on costs include which of the following?
A)activity-based costing.
B)cost-plus.
C)standard costs.
D)All of the answers are correct.
Q2) When measuring a division's operating costs,direct noncontrollable operating costs include
A)labor used in the division's production.
B)salary of the division manager (controlled by top management).
C)costs of providing centralized services,such as data processing and employee training.
D)company president's salary.
Q3) Surveys of global corporate transfer pricing practices indicate that nearly half use
A)cost,about one-third use market price,and the rest use negotiations.
B)market price,about one-third use cost,and the rest use negotiations.
C)negotiations,about one-third use cost,and the rest use market price.
D)negotiations,about one-third use market price,and the rest use cost.
Q4) How do you calculate economic value added (EVA)and how is it used?
Q5) What are the transfer pricing issues and methods?
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Chapter 12: Incentive Issues
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Q1) Which of the following is not usually one of the perspectives used in the balanced scorecard?
A)Learning and growth
B)Congeniality
C)Customer
D)Financial
Q2) The theory of motivation which deals with relationships between supervisors and workers where the principals assign responsibility to the workers and the workers work on behalf of the supervisors is called
A)agency theory.
B)principal theory.
C)expectancy theory.
D)traditional theory.
Q3) Which of these is a disadvantage for compensating on future performance?
A)a short-term orientation.
B)a disincentive to invest in new technology.
C)a focus of attention on the long-run.
D)rewards that come too far in the future to be motivational.
Q4) Describe two types of common financial fraud.
Q5) How do incentive plans affect the development phase of the product life cycle?
14
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Chapter 13: Allocating Costs to Responsibility Centers
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Q1) Why are joint-process costs allocated?
Q2) What is the final step for allocating service department costs to production departments?
A)Assign overhead costs that are directly attributable to a service or production department.
B)Allocate other overhead costs (that are not directly attributable to a service or production department)based on some cost driver.
C)Allocate service department costs to production departments
D)Service department costs cannot be allocated to production departments.
Q3) What is the third,or final,step in allocating service department costs to production departments?
A)Assign overhead costs that are directly attributable to a service or production department.
B)Allocate other overhead costs based on appropriate cost drivers.
C)Allocate service department costs to production departments.
D)None of the answers is correct.
Q4) Describe the factors that should be considered in allocating service department costs.
Q5) How are service department costs allocated to production departments?
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