Cost Accounting Study Guide Questions
Course Introduction
Cost Accounting focuses on the methods and techniques used to determine the cost of products, projects, and services. The course explores the collection, classification, analysis, and allocation of costs for internal decision-making and control. Topics include cost behavior, job order costing, process costing, activity-based costing, budgeting, variance analysis, and cost-volume-profit relationships. Emphasis is placed on the role of cost accounting in planning, performance evaluation, and strategic decision-making within organizations, equipping students with practical skills to improve efficiency and profitability.
Recommended Textbook
Cornerstones of Cost Accounting 1st Canadian Edition by Don Hansen
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Page 2
Chapter 1: A: Basic Cost Management Concepts
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Sample Questions
Q1) Which of the following job positions is a line position?
A)financial vice president
B)controller
C)production supervisor
D)treasurer
Answer: C
Q2) Which of the following would NOT be a benefit of a cost management system?
A)increasing speed by ignoring nonfinancial information
B)reducing duplicate data storage and use of data
C)improving timeliness of reports
D)increasing the efficiency of generating reliable and accurate information
Answer: A
Q3) Which of the following is an example of a nonproduction cost?
A)wages paid to assembly-line employees
B)manufacturing supplies
C)insurance on manufacturing facilities
D)the treasurer's salary
Answer: D
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3
Chapter 1: B: Basic Cost Management Concepts
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Sample Questions
Q1) What is customer orientation? Why is it important in a global environment? What role does cost management play in serving customers?
Answer: Organizations are concerned with the importance and value that customers have for their processes,activities,products,and services.Firms want to deliver value to customers in order to keep them and to attract new customers in an increasingly competitive global environment.Managing activities and costs is a critical component of managing the value chain.
Q2) Why has time become such an important factor in competition?
Answer: Reducing the time that it takes to act means that companies are able to respond to customers and suppliers more quickly.It fosters adaptability and the ability to respond to changing demands.Reducing time is accomplished by reducing waste and non-value-added activities.Reducing activities and waste lowers cost and builds competitive advantage.
Q3) How has the nature of accounting systems shifted in response to technology?
Answer: ERP,DSS,and OLAP software have allowed firms to create one database that can be used for many purposes.Information is more accessible and can be used to provide much more effective planning,control,feedback,decision making,and continuous improvement.EDI has allowed the emergence of electronic commerce and supply chain management.
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Page 4
Chapter 2: Cost Behaviour
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Sample Questions
Q1) In a traditional cost management system,what is the only type of driver that cost behaviour is assumed to be driven by?
A)unit-based cost drivers
B)non-unit-level cost drivers
C)activity-based cost drivers
D)variable-based cost drivers
Answer: A
Q2) In the method of least squares,what is the deviation?
A)the difference between the predicted and estimated costs
B)the difference between the predicted and average costs
C)the difference between the predicted and budgeted costs
D)the difference between the predicted and actual costs
Answer: D
Q3) What are salaries paid to shift supervisors an example of?
A)step-variable cost
B)step-fixed cost
C)variable cost
D)mixed cost
Answer: B
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Page 5
Chapter 3: Cost-Volume-Profit Analysis
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Sample Questions
Q1) What sales dollar level is needed to obtain a before-tax profit of $60,000 when the selling price is $6.00 per unit?
A)$72,000
B)$90,000
C)$120,000
D)$360,000
Q2) On a profit-volume graph,what does the intersection of the profit line with the vertical axis represent?
A)a profit of $1,000
B)a profit equal to zero
C)a profit equal to fixed costs
D)a loss equal to fixed costs
Q3) What volume of sales dollars is required to earn an after-tax income of $40,500?
A)$90,000
B)$252,000
C)$360,000
D)$495,000
Q4) In the cost-volume-profit analysis,what are two ways management can deal with risk and uncertainty?
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Chapter 4: Job-Order Costing Systems
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Sample Questions
Q1) Refer to the figure.What is the total amount debited to finished goods inventory?
A)$450,000
B)$490,000
C)$510,000
D)$550,000
Q2) Refer to the figure.What the total cost assigned to Job XY5?
A)$4,200
B)$4,400
C)$4,950
D)$5,150
Q3) What is the principal difficulty with normal costing?
A)The unit cost information is not received on a timely basis.
B)It can result in fluctuating per-unit overhead costs.
C)It often results in underapplied or overapplied overhead.
D)The tracing of the direct materials is complex.
Q4) What is the most important factor that causes service firms to generally rank lower in customer satisfaction than manufacturing firms?
Q5) Why are firms reluctant to use actual costing? How does normal costing solve the problems?
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Chapter 5: Process Costing
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Sample Questions
Q1) Refer to the figure.What would be the equivalent units for conversion using FIFO?
A)10,000 units
B)12,000 units
C)22,000 units
D)26,000 units
Q2) Refer to the figure.What are the "total bottling costs to account for" in the Assembly Department?
A)$10,000
B)$21,000
C)$32,000
D)$44,500
Q3) Refer to the figure.What is the cost per unit for materials?
A)$2.75
B)$3.90
C)$4.00
D)$4.96
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Chapter 6: Activity-Based Costing
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Sample Questions
Q1) Refer to the figure.What are the global consumption ratios of X and Y,respectively (rounded to two decimal places)?
A)0.20; 0.80
B)0.42; 0.58
C)0.56; 0.44
D)0.84; 0.16
Q2) Refer to the figure.If the number of inspections is used to assign inspection costs,what would be the amount of inspection costs allocated to the proposed job?
A)$540
B)$900
C)$990
D)$2,700
Q3) Refer to the figure.How much was overhead overapplied or underapplied?
A)$17,500
B)$25,000
C)$42,500
D)$50,000
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9
Chapter 7: Allocating Costs of Support Departments and Joint Products
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Sample Questions
Q1) Why are joint costs allocated?
A)because of GAAP financial reporting requirements
B)because of local tax requirements
C)because of IMA requirements
D)because of CMA requirements
Q2) What is the overhead rate for Department Y assuming the direct method is used?
A)$109.00
B)$120.00
C)$218.00
D)$250.00
Q3) Which of the following would generally be a by-product?
A)canned fish
B)hamburger
C)cow hides
D)pineapples
Q4) Refer to the figure.What are the total costs to be allocated from Department S2?
A)$900
B)$8,000
C)$9,557
D)$15,573
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Chapter 8: Budgeting for Planning and Control
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Sample Questions
Q1) If the static budget variance for materials is $200 F and the budgeted cost for materials is $52,000,what is the actual cost of materials?
A)$51,200
B)$51,800
C)$52,000
D)$52,200
Q2) What differences do volume variances examine?
A)the differences between static budget and actual costs
B)the differences between flexible budget and static budget
C)the differences between static budget and the rolling budget
D)the differences between flexible budget and rolling budget
Q3) Refer to the figure.In going from the sales budget to the production budget,what should adjustments to the sales budget be made for?
A)finished goods inventories
B)cash receipts
C)factory overhead costs
D)selling expenses
Q4) Discuss the features of an ideal budgetary process.
Q5) Compare and contrast static budgets,flexible budgets,and activity-based budgets.
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Chapter 9: Standard Costing: a Functional-Based Control Approach
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Q1) Refer to the figure.What is the fixed overhead spending variance for Reynolds?
A)$0
B)$4,000 (F)
C)$6,000 (U)
D)$10,000 (U)
Q2) During October,10,000 direct labour hours were worked at a standard cost of $10 per hour.If the direct labour rate variance for October was $4,000 unfavourable,what would be the actual cost per direct labour hour?
A)$9.20
B)$9.60
C)$10.00
D)$10.40
Q3) What may cause an unfavourable variable overhead spending variance?
A)the use of excessive quantities of variable overhead items
B)the payment of lower prices for variable overhead items used
C)the use of excessive quantities of the variable overhead allocation base
D)the payment of higher direct materials purchases
Q4) Compare and contrast mix and yield variances.
Page 12
Q5) How are standards developed? What is the difference between ideal and currently attainable standards?
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Chapter 10: Responsibility Accounting,performance
Evaluation,and
Transfer Pricing
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Sample Questions
Q1) If the turnover increased by 30 percent and the margin decreased by 30 percent,how would the ROI respond?
A)decrease by 9 percent
B)increase by 69 percent
C)increase by 90 percent
D)decrease by 91 percent
Q2) Hasslehoff Inc.is a multinational company with divisions around the world.Division A in the United States purchases a part from Division G in Canada.The part can be purchased externally for $7 each.Transportation costs amount to $1,and the commission of $.50 will not need to be paid. What is the transfer price using the comparable uncontrolled price method?
A)$7.00
B)$7.50
C)$8.00
D)$8.50
Q3) Under what conditions are multiple measures of performance beneficial?
A)if they are all financial measures
B)if they include nonfinancial operating measures
C)if they focus only on short-run factors
D)if they focus only on continuous improvement
Page 13
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Chapter 11: Tactical Decision Making
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Sample Questions
Q1) What are relevant costs? How do they relate to decision making?
Q2) Which of the following is an important qualitative factor to consider regarding a special order?
A)variable costs associated with the special order
B)avoidable fixed costs associated with the special order
C)effect the sale of special-order units will have on the sale of regularly priced units
D)incremental revenue from the special order
Q3) What is the term for future costs that differ across alternatives?
A)relevant costs
B)target cost
C)full costs
D)activity-based costs
Q4) Which of the following costs is irrelevant for special decisions?
A)incremental costs
B)sunk costs
C)avoidable costs
D)differing costs
Q5) Describe the steps in the decision-making process.What is the role of qualitative factors in tactical decision making?
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Chapter 12: Pricing and Profitability Analysis
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Sample Questions
Q1) On the international market,which of the following is called dumping?
A)price discrimination
B)predatory pricing
C)price skimming
D)penetration pricing
Q2) Which of the following is NOT an example of a market structure?
A)barrier market and oligopoly
B)perfectly competitively and monopoly
C)barrier market and monopoly
D)perfectly competitive and supply
Q3) What is the segment margin for Division Y?
A)$40,000
B)$210,000
C)$240,000
D)$310,000
Q4) Refer to the figure.What is Taylor's price volume variance?
A)$8,000 (U)
B)$68,000 (U)
C)$160,000 (U)
D)$168,000 (U)
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Chapter 13: Strategic Cost Management
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Sample Questions
Q1) Which of the following is a trait of a traditional manufacturing system?
A)pull-through system
B)long-term supplier contracts
C)value-added focus
D)total quality control
Q2) What is total quality management?
A)an approach to production that focuses on decreasing overall production costs
B)an approach to product placement that allows for the product to be marketed to high quality customers
C)an approach where quality goals are set once and strictly adhered to D)an approach to managing quality that demands the production of defect-free products
Q3) What is the last link of the internal value chain?
A)design
B)service
C)market
D)distribute
Q4) Explain the difference between acceptable quality level and total quality control.
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Chapter 14: Activity-Based Management
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Sample Questions
Q1) Which of the following is a value-added activity?
A)moving
B)inspecting
C)processing
D)waiting
Q2) When different units that perform the same types of activities within the same organization are compared to the unit with the best performance,what is the practice called?
A)variance benchmarking
B)competitive benchmarking
C)external benchmarking
D)internal benchmarking
Q3) What are non-value-added activities?
A)unnecessary inputs
B)valued outputs to internal users
C)valued outputs to external users
D)activities that meet the organization's needs,not the product needs
Q4) What is process value analysis?
Q5) What is responsibility accounting? Compare and contrast financial-based responsibility accounting with activity-based responsibility accounting.
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Chapter 15: The Balanced Scorecard: Strategic-Based Control
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Sample Questions
Q1) What is the definition of double-loop feedback?
A)feedback that deals with both the effectiveness of strategy implementation and the validity of the assumptions underlying the strategy
B)feedback that emphasizes the effectiveness of strategy implementation and the costs of implementation
C)feedback that emphasizes the validity and assumptions underlying the strategy and the costs of the strategy
D)feedback on lead indicators and lag indicators
Q2) Activity-based responsibility and strategic-based responsibility incorporate some of the same elements.However,strategic-based responsibility adds some new elements to the common dimensions.What are the elements in common and what new elements are included?
Q3) Which of the following would be a lead measure?
A)customer profitability
B)cost per employee
C)return on investment
D)employee training hours
Q4) Strategic-based performance measures are balanced measures.Give examples of four types of balanced measures.
18
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Chapter 16: Quality and Environmental Cost Management
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Sample Questions
Q1) Carlson Chemical produces a number of chemical products,two of which are Product A and Product B.The controller and environmental manager have identified the following environmental activities and costs associated with the two products: \(\begin{array}{lr}
&\text { Product A }&\text { Product B }\\
\text { Kilograms produced } & 1,000,000 & 2,500,000 \\
\text { Packaging materials (kilograms) } & 300,000 & 150,000 \\
\text { Energy usage (kilowatt hours) } & 100,000 & 50,000 \\
\text { Toxic releases (kilograms into air) } & 250,000 & 50,000 \\
\text { Pollution control (machine hours) } & 40,000 & 10,000\\
\\
\text { Costs of activities: }\\
\text { Using packaging materials } & \$ 450,000 \\
\text { Using energy } & 120,000 \\
\text { Releasing toxins (fines) } & 60,000 \\
\text { Operating pollution control equipment } & 140,000 \end{array}\)
a.Calculate the environmental cost per kilogram for each product.
b.Which of the two appears to cause the most degradation to the environment?
Q2) What does quality mean and how has improving quality increased firm value?
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Page 19
Chapter 17: Lean Accounting and Productivity Measurement
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Sample Questions
Q1) Refer to the figure.What is the partial operational measure for power for 20X2?
A)4.00
B)3.69
C)1.15
D)1.00
Q2) What is the usual formula for calculating product costs for value streams with multiple products?
A)Total value stream cost of period/Units shipped for period
B)Budgeted value stream cost of period/Units shipped for period
C)Total value stream cost of period/Units sold for period
D)Budgeted value stream cost of period/Forecasted units shipped for period
Q3) What is the term for the point at which technical and allocative efficiency are achieved?
A)input trade-off efficiency
B)productivity
C)total productive efficiency
D)financial productivity efficiency
Q4) Discuss the linkage between quality and productivity.
Q5) Explain the difference between partial and total measures of productivity.
Q6) Discuss the advantages and disadvantages of partial productivity measures. Page 20
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Chapter 18: Inventory Management: Economic Order
Quantity,jit,and the Theory of Constraints
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Sample Questions
Q1) Evans Company has the following information: \(\begin{array}{ll}
\text { Annual demand } & 4,000 \text { units } \\
\text { Order size } & 1,000 \text { units } \\
\text { Ordering cost per order } & \$ 500 \\
\text { Carrying costs per unit for one year } & \$ 50 \\
\text { Lead time (maximum 20 days) } & 10 \text { days } \\
\text { Maximum daily use } & 25 \text { units } \\
\text { Work year } & 250 \text { days } \end{array}\)
a.Determine the economic order quantity for Evans.
b.What is the annual savings to Evans Company if it is to change from an order size of 1,000 to the economic order quantity?
c.What is the reorder point?
d.What is the safety stock needed to prevent stockouts?
Q2) Refer to the figure.What is the reorder point for the inventory item?
A)250 units
B)350 units
C)600 units
D)1,500 units
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