Cost Accounting Study Guide
Questions
Course Introduction
Cost Accounting is a specialized field of accounting focused on the recording, analysis, and management of costs associated with manufacturing goods or rendering services. This course covers the methods and techniques used to determine product costs, control expenditures, and aid managerial decision-making through budgeting, standard costing, job and process costing, and cost-volume-profit analysis. Emphasis is placed on the practical application of cost accounting concepts to real-world business scenarios, enabling students to plan, monitor, and optimize organizational performance and profitability.
Recommended Textbook
Horngrens Cost Accounting A Managerial Emphasis 3rd Australian Edition by Charles Horngren
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21 Chapters
3782 Verified Questions
3782 Flashcards
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Page 2
Chapter 1: Management Accounting in Context
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200 Verified Questions
200 Flashcards
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Sample Questions
Q1) One of the steps in planning is identifying and evaluating potential courses of action.
A)True
B)False
Answer: True
Q2) The use of teams to achieve corporate objectives is increasing.
A)True
B)False
Answer: True
Q3) Which of the following is MOST likely to use ONLY financial accounting information?
A)Vice CEO of operations
B)Department manager
C)Current shareholder
D)Factory shift supervisor
Answer: C
Q4) Feedback and learning hinders the future decision-making process.
A)True
B)False
Answer: False
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Page 3
Chapter 2: Different Costs for Different Purposes
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324 Verified Questions
324 Flashcards
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Sample Questions
Q1) What is 'cost of goods sold' using variable costing?
A)$35 000
B)$40 000
C)$47 250
D)$54 000
Answer: A
Q2) Operating profit using variable costing will be ________ than operating profit if using absorption costing.
A)$2400 lower
B)$2400 higher
C)$3600 higher
D)$900 lower
Answer: D
Q3) A manager can increase operating profit by deferring maintenance beyond the current accounting period when absorption costing is used.
A)True
B)False
Answer: True
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4
Chapter 3: Determining How Costs Behave
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182 Flashcards
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Sample Questions
Q1) A linear cost function can only represent fixed cost behaviour.
A)True
B)False
Answer: False
Q2) Time-series data analysis includes:
A)using the highest and lowest observation.
B)comparing information in different cost pools.
C)observing different entities during the same time period.
D)using a variety of time periods to measure the dependent variable.
Answer: D
Q3) What are the estimated total costs if Hewitt expects to sell 3000 units next year?
A)$896 000
B)$1 017 000
C)$678 000
D)$799 000
Answer: A
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Chapter 4: Costvolumeprofit Analysis
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211 Flashcards
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Sample Questions
Q1) Karen Hefner,a florist,operates retail stores in several shopping malls.The average selling price of an arrangement is $30 and the average cost of each sale is $18.A new mall is opening where Karen wants to locate a store,but the location manager is not sure about the rent method to accept.The mall operator offers the following three options for its retail store rentals:
1.paying a fixed rent of $15 000 a month,or
2.paying a base rent of $9000 plus 10% of revenue received,or
3.paying a base rent of $4800 plus 20% of revenue received up to a maximum rent of $25 000.
Required:
a.For each option,calculate the break-even sales and the monthly rent paid at break-even.
b.Beginning at zero sales,show the sales levels at which each option is preferable up to 5000 units.
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Chapter 5: Estimating the Cost of Producing Services
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100 Verified Questions
100 Flashcards
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Sample Questions
Q1) Managers use a(n)___________ system when the cost object is a distinct output called a job.
A)job-costing
B)actual costing
C)hybrid costing
D)process costing
Q2) A _______________ driver is used to allocate costs from a resource-cost pool to activity-cost pools.
A)activity-cost
B)resource-cost
C)target price
D)primary
Q3) In job costing,managers trace costs to a specific job.
A)True
B)False
Q4) An activity-cost driver is used to allocate costs from a resource-cost pool to activity-cost pools.
A)True
B)False
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Chapter 6: Estimating the Costs of Products and Inventory
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356 Flashcards
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Sample Questions
Q1) The two most common methods of costing inventories in manufacturing companies are variable costing and fixed costing.
A)True
B)False
Q2) Direct costs are traced the same way for actual costing and normal costing.
A)True
B)False
Q3) The weighted-average cost is the total of all costs entering the Work-in-Process account (whether they are from beginning work in process or from work started during the current period)divided by total equivalent units of work done to date.
A)True
B)False
Q4) When actual indirect costs exceed allocated indirect costs,indirect costs have been overapplied.
A)True B)False
Q5) When variable costing is used,an income statement will show gross margin. A)True B)False
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Chapter 7: Target Costing, Managing Activities and Managing Capacity
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154 Verified Questions
154 Flashcards
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Sample Questions
Q1) Estimating capacity costs is unique to manufacturing and it is not applicable to non-production entities.
A)True
B)False
Q2) Challenges only result from estimating the denominator level,but not the costs in the numerator of the fixed manufacturing cost rate.
A)True
B)False
Q3) ________ capacity utilisation is the level of capacity that managers expect to be used for the current budget period,which is typically one year.
A)Budgeted
B)Actual
C)Master
D)Theoretical
Q4) Budgeted capacity utilisation can be more reliably estimated than normal capacity utilisation.
A)True
B)False
Page 9
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Chapter 8: Activity-Based Management and Activity-Based Costing
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230 Verified Questions
230 Flashcards
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Sample Questions
Q1) The activity-cost driver for the materials handling activity is:
A)orders.
B)maintenance hours.
C)set-ups.
D)production units.
Q2) The benefits of implementing a more complex cost-allocation system are relatively easy to quantify for application of the cost-benefit approach.
A)True
B)False
Q3) Which of the following is NOT a sign that a 'smoothing out' costing system exists?
A)Products that a company is well suited to make and sell show large profits.
B)Operations managers don't use the data originated by the cost system.
C)New product variations have been added,but the cost system has not been upgraded.
D)The company loses bids they believe were priced competitively.
Q4) Once a cost pool has been established,it should not need to be revisited or revised.
A)True
B)False
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Chapter 9: Pricing and Customer Profitability
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171 Flashcards
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Sample Questions
Q1) Allocating division-sustaining costs to distribution channels exaggerates the potential cost savings from discontinuing a distribution channel.
A)True
B)False
Q2) Managers who utilise customer profitability charts should drop customers that generate a negative customer operating profit,since dropping an unprofitable customer will automatically cause overall income to increase.
A)True
B)False
Q3) What is the target rate of return on investment for Botany Manufacturers?
A)12.9%
B)18.0%
C)14.8%
D)22.0%
Q4) Price discounts must be uniform among all customers.
A)True
B)False
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11
Chapter 10: Decision Making and Relevant Information
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Sample Questions
Q1) Throughput contribution equals revenues minus the direct materials costs of the goods sold.
A)True
B)False
Q2) For machine-replacement decisions,depreciation is a cost that is:
A)incremental.
B)not relevant.
C)differential.
D)variable.
Q3) For Welch Manufacturing,what is the minimum acceptable price of this special order?
A)$110
B)$145
C)$255
D)$170
Q4) Generally,managers use total costs rather than unit costs because total costs are easier to work with and reduce the chance for erroneous conclusions.
A)True
B)False
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Chapter 11: Budgeting, Management Control and Responsibility Accounting
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215 Flashcards
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Sample Questions
Q1) Activity-based budgeting and kaizen budgeting are really equivalent in meaning.
A)True
B)False
Q2) Companies that use ERP systems,and other such budgeting tools,find that these systems simplify budgeting and increase the computational burden and time required to prepare budgets.
A)True
B)False
Q3) The number of units to be produced is the key to computing the usage of direct materials in quantities and in dollars.
A)True
B)False
Q4) Financing decisions PRIMARILY deal with:
A)how to obtain funds to acquire resources.
B)the use of scarce resources.
C)preparing financial statements for shareholders.
D)acquiring equipment and buildings.
Q5) Discuss the importance of the sales forecast and items that influence its accuracy.
Q6) Describe the concept of kaizen budgeting.
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Chapter 12: Flexible Budgets, Direct Cost Variances and Management Control
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246 Verified Questions
246 Flashcards
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Sample Questions
Q1) Activity-based costing systems focus on individual ____________ as the fundamental cost objects.
A)costs
B)products
C)product lines
D)activities
Q2) Sunshine Coast Corporation currently produces sun hats in an automated process.Expected production per month is 20 000 units,direct material costs are $3.00 per unit,and manufacturing overhead costs are $46 000 per month.Manufacturing overhead is allocated based on units of production.What is the flexible budget for 10 000 and 20 000 units,respectively?
A)$53 000;$83 000
B)$53 000;$106 000
C)$76 000;$106 000
D)None of these answers are correct.
Q3) The flexible-budget variance is:
A)$6000 favourable.
B)$2400 unfavourable.
C)$4800 favourable.
D)$5000 unfavourable.
Page 14
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Chapter 13: Flexible Budgets, Overhead Cost Variances and Management Control
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170 Verified Questions
170 Flashcards
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Sample Questions
Q1) Calculate the spending variance for fixed set-up overhead costs.
A)$3600 unfavourable
B)$400 unfavourable
C)$400 favourable
D)$3200 unfavourable
Q2) Fixed costs for the period are by definition a lump sum of costs that remain unchanged and therefore the fixed overhead spending variance is always zero.
A)True
B)False
Q3) Caution is appropriate before interpreting the production-volume variance as a measure of the economic cost of unused capacity.
A)True
B)False
Q4) Causes of a favourable variable overhead efficiency variance might include using lower-skilled workers than expected.
A)True
B)False
Q5) Explain why sales-volume variance could be helpful to managers.
Page 15
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Chapter 14: Allocation of Support-Department Costs,
Common Costs and Revenues
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137 Flashcards
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Sample Questions
Q1) The areas of dispute between the contracting parties regarding cost allocation can be reduced by making the 'rules of the game' explicit and in writing at the time the contract is signed.
A)True
B)False
Q2) The choice between actual usage and budgeted usage for allocating fixed costs can affect a manager's decisions.
A)True
B)False
Q3) When do special cost-allocation problems arise?
A)Practical capacity is used as the allocation base
B)There is more than one operating department
C)Support department costs exceed budgetary estimates
D)Support departments provide reciprocal services to other support departments
Q4) What is the biggest advantage of using practical capacity to allocate costs?
A)It is a value that is readily available
B)It focuses management's attention on unused capacity
C)It burdens the user divisions with the costs of unused capacity
D)It never causes over- or under-allocated overhead
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Chapter 15: Strategy Formation, Strategic Control and the Balanced Scorecard
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157 Flashcards
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Sample Questions
Q1) What is the cost effect of the growth component for conversion costs?
A)$10 000 U
B)Zero
C)$10 000 F
D)$12 500 U
Q2) Re-engineering benefits are most significant when they focus on one business function rather than crossing functional lines of the business process.
A)True
B)False
Q3) Explain the product differentiation and the cost leadership strategies.
Q4) What is the change in operating profit from 2017 to 2018?
A)$1 804 500 F
B)$1 440 000 F
C)$364 500 F
D)$200 000 F
Page 17
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Chapter 16: Quality, Time and the Balanced Scorecard
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120 Verified Questions
120 Flashcards
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Sample Questions
Q1) The Custom Shirt House is concerned about its declining sales,especially the reduction in the number of customers despite that its shirts have won industry awards for high quality and trend-setting styles.At the latest executive managers' meeting,everyone was blaming everyone else for the decline.After much discussion and presenting some fact-finding information,it was determined that sales relationships were the cause of most of the problems.
Required: What may be some of the causes and how can the causes be detected if product quality is not an issue?
Q2) Allocated cost amounts are an important determinant of the costs of a quality improvement program.
A)True
B)False
Q3) The two basic aspects of quality are quality of design and conformance quality.Define and give an example of each.
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Page 18
Chapter 17: Inventory Management, Just-In-Time and Simplified Costing Methods
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126 Flashcards
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Sample Questions
Q1) Just-in-time purchasing describes the flow of goods,services,and information from the initial sources of materials and services to the delivery of products to consumers,regardless of whether those activities occur in the same organisation or in other organisations.
A)True
B)False
Q2) The costs of expediting an order from a supplier in response to a stockout include the additional ordering costs,plus any associated transportation costs.
A)True
B)False
Q3) Placing smaller purchase orders with suppliers is a principle defining a Just-in-time inventory system: .
Variant question
A)True
B)False
Q4) In inventory management a trigger point refers to the inventory level at which a reorder is generated.
A)True
B)False
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Chapter 18: Capital Budgeting and Cost Analysis
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Sample Questions
Q1) ______________________ involves significant financial investments in projects to develop new products,expand production capacity or remodel current production facilities.
A)Capital budgeting
B)Working capital
C)Project-cost budgeting
D)Master budgeting
Q2) Nullabor Park Department is considering buying a new grass mowing machine.The cost of the machine will be $150 000 and will provide annual cost savings of $40 000.The machine will have a five-year life,at which time the terminal disposal value is expected to be $20 000.Nullabor Park Department is assuming no tax consequences.If Nullabor Park Department has a required rate of return of 10%,which of the following is closest to the present value of the project?
A)$1632
B)$150 000
C)$14 060
D)$12 418
Q3) A capital budget spans only a one-year period.
A)True
B)False
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Chapter 19: Management Control Systems, Transfer Pricing and
Multinational Considerations
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Sample Questions
Q1) The Fruit Drink Company makes internal transfers at 180% of full cost.The Soda Refining Division purchases 30 000 containers of carbonated water per day,on average,from a local supplier who delivers the water for $30 per container via an external shipper.To reduce costs,the company located an independent supplier in Tasmania who is willing to sell 30 000 containers at $20 each,delivered to The Fruit Drink Company's Shipping Division in Tasmania.The company's Shipping Division in Tasmania has excess capacity and can ship the 30 000 containers at a variable cost of $2.50 per container.What is the total cost to The Fruit Drink Company if the carbonated water is purchased from the local supplier?
A)$900 000
B)$1 501 000
C)$1 200 000
D)$1 620 000
Q2) The minimum transfer price equals:
A)opportunity costs times 125% plus the additional outlay costs.
B)opportunity costs less the additional outlay costs.
C)incremental costs plus opportunity costs.
D)opportunity costs divided by the additional outlay costs.
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Chapter 20: Performance Measurement, Compensation and
Multinational Considerations
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140 Flashcards
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Sample Questions
Q1) A problem with using residual income as a performance measure is that a corporation with a:
A)high investment turnover ratio always has a higher residual income than a corporation with a smaller investment turnover ratio.
B)larger dollar amount of assets is likely to have a higher residual income than a corporation with a smaller dollar amount of assets.
C)high return on sales always has a higher residual income than a corporation with a smaller return on sales.
D)None of these answers are correct.
Q2) The situation in which an employee prefers to exert less effort compared with the effort desired by the owner because the employee's effort cannot accurately be monitored and enforced is known as a(n):
A)objective.
B)imputed cost.
C)incentive.
D)moral hazard.
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Chapter 21: Measuring and Reporting Sustainability
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Sample Questions
Q1) What is the most important factor in addressing social and environmental challenges?
A)The difficulty in collecting relevant information
B)Recognising and understanding the problem
C)Including all stakeholders
D)The interconnectedness of the causes and outcomes
Q2) The statements concerning life-cycle analysis (LCA)are true EXCEPT for:
A)The definition of life-cycle always begins with the extraction of the raw materials and ends with the disposal of the product.
B)The broadest view of LCA recognises some of social or environmental impacts that are difficult to cost.
C)Life-cycle analysis may include costs incurred by the customer and the supplier.
D)No statement is incorrect;i.e.all are correct statements.
Q3) Traditional profits measures can measure sustainability;the information just has to be rearranged.
A)True
B)False
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