Cost Accounting Test Questions
Course Introduction
Cost Accounting is a course designed to introduce students to the principles and methods used to determine, record, and manage costs associated with the production of goods and services. The course covers key topics such as cost terminology, cost behavior, job order and process costing systems, activity-based costing, budgeting, variance analysis, and performance evaluation. Through practical exercises and case studies, students learn how to analyze cost information for planning, control, and decision making, enabling them to contribute to the financial efficiency and strategic objectives of an organization.
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Managerial accounting 10th Canadian Edition by Ray Garrison
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Page 2
Chapter 1: Managerial Accounting and the Business Environment
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Sample Questions
Q1) Both financial and managerial accounting rely on the same underlying financial data but there are major differences.Managerial Accounting:
A) emphasizes financial consequences of past activities.
B) emphasizes precision.
C) emphasizes relevance.
D) must follow GAAP.
Answer: C
Q2) In general,accounting data serve both financial accounting and managerial accounting purposes.
A)True
B)False
Answer: True
Q3) Corporate governance is the legal framework that allows managers to control and direct lower-level workers on the job.
A)True
B)False
Answer: False
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Chapter 2: Cost Terms, Concepts, and Classifications
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Q1) On a per unit basis,a fixed cost varies inversely with the level of activity.
A)True
B)False
Answer: True
Q2) What was the cost of goods sold (in thousands of dollars)for the year?
A) $700.
B) $500.
C) $660.
D) $580.
Answer: B
Q3) Prime cost consists of direct materials and what?
A) Direct labour.
B) Manufacturing overhead.
C) Indirect materials.
D) Cost of goods manufactureD.
Answer: A
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Chapter 3: Cost Behaviour: Analysis and Use
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Q1) A cost formula may not be valid outside the relevant range of activity.
A)True
B)False
Answer: True
Q2) What does the term "relevant range" mean?
A) The range within which costs may fluctuate.
B) The range within which a particular cost formula is valid.
C) The range within which production may vary.
D) The range within which the relevant costs are incurreD.
Answer: B
Q3) In describing the cost formula equation Y = a + bX,which of the following statements is correct?
A) The X term is the dependent variable.
B) The a term is the fixed component.
C) In the high-low method,the b term equals change in activity divided by change in costs.
D) As the X term increases,the Y term decreases.
Answer: B
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Chapter 4: Cost-Volume-Profit Relationships
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Sample Questions
Q1) If sales increase from $80,000 per year to $120,000 per year,and if the degree of operating leverage is 5,then by what percentage should operating income increase?
A) 167%.
B) 250%.
C) 100%.
D) 334%.
Q2) The total volume in sales dollars that would be required to attain a given target operating profit is determined by dividing the sum of the fixed expenses and the target operating profit by the contribution margin ratio.
A)True
B)False
Q3) Which of the following is defined as the amount by which a company's sales can decline before operating losses are incurred?
A) Contribution margin.
B) Degree of operating leverage.
C) Margin of safety.
D) Contribution margin ratio.
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Chapter 5: Systems Design: Job-Order Costing
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Q1) What would be the ending Work in Process account balance?
A) $2,000.
B) $13,000.
C) $50,000.
D) $55,000.
Q2) )Direct labour cost was $110,000.
8. )Overhead is applied to production on the basis of 65% of direct labour cost.
Required:
Prepare a schedule of cost of goods manufactured for the month.
Q3) A credit balance in the Manufacturing Overhead account at the end of the year means that overhead was underapplied.
A)True
B)False
Q4) Kanuck Company applies overhead to completed jobs on the basis of $0.70 per machine hour.If Job 501 shows $28,000 of manufacturing overhead applied,how many machine hours were used for the job?
A) 19,600.
B) 28,000.
C) 30,000.
D) 40,000.
Page 7
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Chapter 6: Systems Design: Process Costing
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Q1) Valley Manufacturing Company's beginning work-in-process inventory consisted of 10,000 units,100% complete with respect to materials cost and 40% complete with respect to conversion costs.The total cost in the beginning inventory was $30,000.During the month,50,000 units were transferred out.The equivalent unit cost was computed to be $2.00 for materials and $3.70 for conversion costs under the weighted-average method.Given this information,what was the total cost of the units completed and transferred out?
A) $255,000.
B) $270,000.
C) $240,000.
D) $285,000.
Q2) (Appendix 6A)Using the FIFO method,what are the equivalent units of production for material for the month?
A) 50,000 units.
B) 58,000 units.
C) 54,000 units.
D) 60,000 units.
Q3) $4 per EU x 5,000 × 80% = $16,000
b)
Q4) $112,000 ÷ 28,000 EUs = $4 per EU
Page 8
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Chapter 7: Activity-Based Costing: a Tool to Aid Decision Making
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Q1) Why may departmental overhead rates NOT correctly assign overhead costs?
A) Because of the use of direct labour hours in allocating overhead costs to products rather than machine time or quantity of materials.
B) Because of the high correlation between direct labour hours and the incurrence of overhead costs.
C) Because of the over-reliance on volume as a basis for allocating overhead costs where products differ regarding the number of units produced,lot size,or complexity of production.
D) Because of the difficulties associated with identifying cost pools for the first stage of the allocation process.
Q2) In activity-based costing,a plant-wide overhead rate is used to apply overhead to products.
A)True
B)False
Q3) In traditional costing systems,all manufacturing costs are assigned to products-even manufacturing costs that are not caused by the products.
A)True
B)False
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Chapter 8: Variable Costing: a Tool for Management
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Q1) At the end of last year,Lee Company had 30,000 units in its ending inventory.Every year,Lee Company's variable production costs are $10 per unit,and its fixed manufacturing overhead costs are $5 per unit.The company's operating income for the year was $12,000 higher under variable costing than under absorption costing.Given these facts,what must have been the number of units of product in inventory at the beginning of the year?
A) 27,600 units.
B) 28,800 units.
C) 32,400 units.
D) 42,000 units.
Q2) Under variable costing,what was the company's operating income for the year,as compared with under absorption costing?
A) $60,000 higher than under absorption costing.
B) $108,000 higher than under absorption costing.
C) $108,000 lower than under absorption costing.
D) $60,000 lower than under absorption costing.
Q3) Variable costing is sometimes referred to as direct costing or marginal costing.
A)True
B)False
Q4) The following information pertains to Malcolm Corporation for a period:
Page 10
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Chapter 9: Budgeting
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Sample Questions
Q1) In a budget of cash receipts for March,what would be the total cash receipts?
A) $8,200.
B) $16,000.
C) $17,800.
D) $20,200.
Q2) What was the flexible budget operating income (loss)for Winnipeg Company for January?
A) $83,750.
B) $54,000.
C) $63,000.
D) $59,500.
Q3) What is the expected total fixed overhead cost at an activity level of 5,500 guest-days per month?
A) $139,700
B) $190,920
C) $244,200
D) $109,220
Q4) Budgets are used for planning rather than for control of operations. A)True B)False
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Chapter 10: Standard Costs and Overhead Analysis
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Q1) One cause of an unfavourable overhead volume variance would be increase in cost for fixed overhead items.
A)True B)False
Q2) The fixed overhead budget variance is NOT controllable by managers because fixed costs are NOT controllable.
A)True B)False
Q3) What was the fixed overhead volume variance for the period,rounded to the nearest dollar?
A) $2,256 favourable.
B) $2,331 favourable.
C) $3,089 unfavourable.
D) $5,420 favourable.
Q4) If the standard hours allowed for the actual output of the period is greater than the denominator level of activity (in hours),then the overhead budget variance will be unfavourable.
A)True B)False
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Chapter 11: Reporting for Control
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Q1) (Appendix 11A)Appraisal costs are incurred to identify defective products before they are shipped to customers.
A)True
B)False
Q2) What were Division A's sales?
A) $125,000.
B) $200,000.
C) $400,000.
D) $625,000.
Q3) (Appendix 11A)What will be the total appraisal cost appearing on the quality cost report?
A) $74,000.
B) $78,000.
C) $81,000.
D) $181,000.
Q4) (Appendix 11A)An increase in appraisal costs will usually result in an increase in internal failure costs.
A)True B)False
Q5) Describe the balanced scorecard concept and explain the reasoning behind it.
Page 13
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Chapter 12: Relevant Costs for Decision Making
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Q1) (Appendix 12A)The markup over cost under the absorption costing approach would increase if the unit product cost increases,holding everything else constant.
A)True
B)False
Q2) What should a firm faced with a production constraint do to maximize total contribution margin?
A) Promote those products having the highest unit contribution margins.
B) Promote those products having the highest contribution margin ratios.
C) Promote those products having the highest contribution margin per unit of constrained resource.
D) Promote those products having the highest contribution margins and contribution margin ratios.
Q3) Given the current capacity what is the greatest total contribution margin Brown Company can earn?
A) $124,500.
B) $329,325.
C) $336,300.
D) $570,903.
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14
Chapter 13: Capital Budgeting Decisions
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Q1) (Appendix 13A)In order to receive $12,000 at the end of three years and $10,000 at the end of five years,how much must be invested now if you can earn 14% rate of return? (Ignore income taxes in this problem. )(Round your PV factor to 5 decimal places and final answer to nearest whole dollar amount. )
A) $8,100.
B) $12,978.
C) $13,293.
D) $32,054.
Q2) (Appendix 13A)AB Company is considering the purchase of a machine that promises to reduce operating costs by the same amount for every year of its six-year useful life.The machine will cost $83,150 and has no salvage value.The machine has a 20% internal rate of return.(Ignore income taxes in this problem. )
Required:
What is the annual cost savings promised by the machine?
Q3) The payback period on the new machine is closest to which of the following?
A) 1.4 years.
B) 2.7 years.
C) 3.6 years.
D) 5.0 years.
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Page 15
Chapter 14: Financial Statement Analysis Online
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Q1) Krakov Company has total assets of $170,000 and total liabilities of $80,000.The company's debt-to-equity ratio is closest to which of the following?
A) 0.32 to 1.
B) 0.47 to 1.
C) 0.53 to 1.
D) 0.89 to 1.
Q2) Starrs Company has current assets of $300,000 and current liabilities of $200,000.Which of the following transactions would increase its working capital?
A) Prepayment of $50,000 of next year's rent.
B) Refinancing $50,000 of short-term debt with long-term debt.
C) Acquisition of land valued at $50,000 by issuing new common shares.
D) Purchase of $50,000 of marketable securities for cash.
Q3) Oratz Company's return on total assets for Year 2 was closest to which of the following? Do not round intermediate calculations.
A) 8.9%.
B) 10.0%.
C) 10.5%.
D) 11.1%.
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