Cost and Management Analysis
Midterm Exam
Course Introduction
Cost and Management Analysis explores the methods and tools used to collect, analyze, and interpret cost data to support effective planning, control, and decision-making within organizations. The course covers fundamental cost accounting techniques, including job order costing, process costing, activity-based costing, and standard costing, alongside budgeting and variance analysis. Students will examine how cost information guides managerial strategies, resource allocation, and performance evaluation. Through real-world case studies and practical exercises, learners will develop analytical skills to identify cost drivers, optimize operations, and contribute to sustainable business success.
Recommended Textbook
Cost Accounting A Managerial Emphasis 7th Canadian Edition by Charles T. Horngren
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22 Chapters
3533 Verified Questions
3533 Flashcards
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Chapter 1: The Accountants Vital Role in Decision Making
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Sample Questions
Q1) Value chain and supply chain are two terms describing the same set of business functions.
A)True
B)False
Answer: False
Q2) A bonus paid to high performing sales persons is an example of an intrinsic reward.
A)True
B)False
Answer: False
Q3) Sustainability accounting focuses on reporting both financial and nonfinancial information on activities that impact society,the environment,and the financial (or,economic)aspects of an organization's performance to an organization's stakeholders.
A)True
B)False
Answer: True
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Chapter 2: An Introduction to Cost Terms and Purposes
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Sample Questions
Q1) What is the amount of the manufacturing overhead incurred at Ontario Industries Inc.?
A)$16,000
B)$41,000
C)$35,000
D)$23,000
E)$29,000
Answer: E
Q2) Work-in-process consists of partially completed goods not yet ready for sale.
A)True
B)False
Answer: True
Q3) Operating income does not include interest expense and income taxes.
A)True
B)False
Answer: True
Q4) Products,services,departments,and customers may be cost objects.
A)True
B)False Answer: True
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Chapter 3: Cost-Volume-Profit Analysis
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156 Flashcards
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Sample Questions
Q1) The total costs line includes all variable costs and all fixed costs when using the graph method of CVP analysis.
A)True
B)False
Answer: True
Q2) There is no unique break-even point when there are multiple cost drivers.
A)True
B)False
Answer: True
Q3) What is the operating income assuming actual sales are 300,000 units,and the sales mix is one unit of Product A and two units of Product B?
A)$100,000
B)$1,040,000
C)$1,060,000
D)$1,100,000
E)$1,100,100
Answer: C
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5
Chapter 4: Job Costing
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Sample Questions
Q1) The balance in the manufacturing overhead allocated account,is carried over to the balance sheet for the subsequent year,to properly track all costs for job costing.
A)True
B)False
Q2) Direct costs are allocated to the cost object using a cost-allocation method.
A)True
B)False
Q3) Which method for dealing with under/over allocated overhead provides the most accurate individual job cost records?
A)proration approach
B)adjusted allocation-rate approach
C)immediate write-off to cost of goods sold
D)either proration or adjusted allocation-rate approach would give same result
E)either the proration approach or the immediate write-off to cost of goods sold
Q4) Provide examples of three companies that would likely use job costing,and three companies that would likely use process costing.
Q5) Describe job-costing and process-costing systems.Explain when it would be appropriate to use each.
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Page 6
Chapter 5: Activity-Based Costing and Management
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Sample Questions
Q1) Activity-based management describes management decisions that use activity-based costing information to
A)improve product pricing,cost reduction and design.
B)identify potential customers.
C)smooth indirect costs.
D)eliminate activities that add value but are not cost drivers.
E)anticipate changes in the market.
Q2) ABC provides a cost-benefit analysis of the unequally shared benefits of a support activity.The technique also discloses the scope of business functions where cost control will have a positive effect.
Required:
Provide three benefits that the identification of the scope of cost control focused on different activity levels should lead to.
Q3) Activity-based cost systems create
A)one large cost pool.
B)homogeneous activity-related cost pools.
C)activity-cost pools with a broad focus.
D)activity-cost pools containing many direct costs.
E)heterogenous activity-related cost pools.
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Chapter 6: Master Budget and Responsibility Accounting
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170 Flashcards
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Sample Questions
Q1) How much cash will be paid to suppliers in March?
A)$23,200
B)$28,000
C)$44,000
D)$24,800
E)$17,600
Q2) Responsibility accounting is a budgeting system that measures the plans and objectives of managers.
A)True
B)False
Q3) On the 2016 budgeted income statement,what amount will be reported for gross margin?
A)$124,000
B)$104,000
C)$312,000
D)$160,000
E)$400,000
Q4) The priority approach to budgeting is an incremental approach. A)True
B)False
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Chapter 7: Flexible Budgets,variances,and Management
Control: I
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Sample Questions
Q1) In a journal entry for a standard costing system that records favourable variances,to increase the relevant variance account
A)causes a credit to Cost of Goods Sold.
B)decreases the Operating Income Account.
C)the variance account must be debited.
D)the variance account must be credited.
E)reduces the contra account.
Q2) September's direct labour rate variance is
A)$75.00 unfavourable.
B)$75.00 favourable.
C)$70.00 unfavourable.
D)$70.00 favourable.
E)$90.00 unfavourable.
Q3) What is the static-budget variance of revenues?
A)$20,000 favourable
B)$20,000 unfavourable
C)$2,000 favourable
D)$2,000 unfavourable
E)$25,000 unfavourable
Q4) What is benchmarking,and how is it useful to a company?
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Chapter 8: Flexible Budgets,variances,and Management
Control: II
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148 Flashcards
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Sample Questions
Q1) What is the variable manufacturing overhead flexible-budget variance?
A)$387 favourable
B)$2,363 unfavourable
C)$2,363 favourable
D)$2,750 favourable
E)$2,750 unfavourable
Q2) Capacity refers to the quantity of outputs that can be produced from long-term resources available to the company.
A)True
B)False
Q3) In the journal entry that records overhead variances,the manufacturing overhead allocated accounts are closed.
A)True
B)False
Q4) What is Regal Company's budgeted fixed overhead rate per machine hour?
A)$28.17 per machine hour
B)$39.44 per machine hour
C)$40.40 per machine hour
D)$56.56 per machine hour
E)$65.17 per machine hour
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Chapter 9: Income Effects of Denominator Level on Inventory Valuation
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Sample Questions
Q1) How does the capacity level chosen to compute the budgeted fixed overhead cost rate affect the production-volume variance?
Q2) What is the cost per statue if throughput costing is used?
A)$22.00
B)$19.00
C)$15.00
D)$10.00
E)$13.00
Q3) Changes in inventory levels do not affect income amounts between variable and absorption costing because the difference in accounting for fixed manufacturing overhead offsets the affect.
A)True
B)False
Q4) The break-even points are the same under both variable costing and absorption costing.
A)True
B)False
Q5) Explain three methods under absorption costing that managers can use to improve operating income.
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Chapter 10: Analysis of Cost Behaviour
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Sample Questions
Q1) Cari and Jereme just bought a bed and breakfast inn at a very attractive price.The business had been doing poorly.Before they reopened the inn for business,they attended a seminar on operating a high quality business.Now that they are ready to open the inn,they need some advice on quality costs and management.
Required:
Identify four categories of quality costs.In addition,identify three items that would be classified in each of the categories.
Q2) When estimating a cost function,cost behavior can be approximated by a linear cost function within the relevant range.
A)True
B)False
Q3) Wimmer's Storage ran its freezer in February,a slow month,for 360 hours for a total cost of $57,600.In July,a peak month,the freezer ran for 720 hours for a total cost of $82,080.
Required:
a.Using the high-low method,determine the overhead cost equation for the department if hours of freezer use are used as the cost driver?
b.What is the estimated total cost at an operating level of 500 hours?
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Page 12
Chapter 11: Decision Making and Relevant Information
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Sample Questions
Q1) Which of the following factors would be considered irrelevant when evaluating equipment replacement decisions?
A)the book value of the old machine
B)manufacturing costs
C)overhead costs
D)product production costs
E)useful life of new equipment
Q2) Which of the following is NOT a key step in managing bottleneck resources?
A)Recognize that the bottleneck resource determines throughput contribution of the plant as a whole.
B)Search and find the bottleneck resource by identifying resources with large quantities of inventory waiting to be worked on.
C)Keep the bottleneck operation busy and subordinate all nonbottleneck resources to the bottleneck resource.
D)Reduce the number of employees who work in the bottleneck area.
E)Take action to increase bottleneck efficiency and capacity.
Q3) When opportunity costs exist,they are always relevant.
A)True
B)False
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Chapter 12: Pricing Decisions, product Profitability
Decisions, and Cost Management
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Sample Questions
Q1) List three advantages for including unitized fixed costs for pricing decisions.
Q2) The target profit percentage for setting prices as a percentage of total variable costs would be
A)47%.
B)33%.
C)29%.
D)38%.
E)61%.
Q3) Developing life-cycle reports for each product requires tracking both costs and revenues on a product-by-product basis over a number of accounting periods.
A)True
B)False
Q4) The target rate of return on investment is the target operating income that an organization must earn divided by invested capital.
A)True
B)False
Q5) Including unit fixed costs for pricing is often used because of its simplicity. A)True B)False
Page 14
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Chapter 13: Strategy,balanced Scorecard,and Profitability Analysis
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Sample Questions
Q1) Required:
a.What is the operating income for Year 1?
b.What is the operating income in Year 2?
c.What is the change in operating income from Year 1 to Year 2?
Q2) What is the Luke Company's net increase in operating income as a result of the price-recovery component?
A)$179,000 favourable
B)$179,000 unfavourable
C)$182,000 unfavourable
D)$20,000 favourable
E)$20,000 unfavourable
Q3) The accounting scorecard translates an organization's mission and strategy into a comprehensive set of performance measures that provides the framework for implementing its strategy.
A)True
B)False
Q4) What is the primary purpose of the balanced scorecard?
Q5) Identify and explain Porter's Five Forces model.
Page 15
Q6) What is reengineering? Can you contrast a reengineering approach to change with a Kaizen approach to change?
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Chapter 14: Period Cost Allocation
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Sample Questions
Q1) If the incremental method were used,what amount of cost would be allocated to the start-up business?
A)$10,000
B)$50,000
C)$40,000
D)$42,000
Q2) Indirect costs typically constitute a large percentage of the costs assigned to cost objects.
A)True
B)False
Q3) If a dual-rate cost-allocation method is used,what amount of copying facility costs will be budgeted for the Operations Department?
A)$57,000
B)$56,400
C)$60,490
D)$59,890
Q4) What is a "common cost"? What are two methods that a manager can use to allocate common costs to two or more users?
Q5) Should a company allocate its corporate costs to divisions?
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Chapter 15: Cost Allocation: Joint Products and Byproducts
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Sample Questions
Q1) The incremental benefit or (loss)of processing Jarlon into Jaxton is
A)$480,000.
B)($128,000).
C)$64,000.
D)($96,000).
E)($32,000).
Q2) Using the physical measures method,the joint costs allocated to Kharton would be
A)$320,000.
B)$112,000.
C)$154,672.
D)$448,000.
E)$110,480.
Q3) All of the following methods may be used to allocate joint costs EXCEPT the A)constant gross margin percentage NRV method.
B)estimated net realizable value method.
C)present value allocation method.
D)sales value at splitoff method.
E)physical measure method.
Q4) List the reasons that the sales value at splitoff method of joint cost allocation should be used.
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Chapter 16: Revenue and Customer Profitability Analysis
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Sample Questions
Q1) The ranking of products with regard to the incremental revenue allocation method can only be done by top management.
A)True
B)False
Q2) What is the Teddy Bear Company total sales-volume variance?
A)$9,250 favourable
B)$9,250 unfavourable
C)$26,100 favourable
D)$7,850 unfavourable
E)$7,850 favourable
Q3) A customer cost hierarchy may include distribution-channel costs.
A)True
B)False
Q4) The incremental revenue-allocation method uses product specific information pertaining to products in the bundle to determine the weights used to allocate the bundled revenues to those individual products.
A)True
B)False
Q5) What actions might be taken with an unprofitable customer?
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Chapter 17: Process Costing
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Sample Questions
Q1) What is the conversion cost per equivalent unit in June at Father Time Clock Shop?
A)$1,254.32
B)$1,430.99
C)$987.65
D)$1,282.83
E)$1,320.17
Q2) Beginning inventory contained 5,000 units of goods that were 40 percent complete as to direct material,and 50 percent complete as to conversion.What is the equivalent units completed for materials and conversion at the beginning of the year,respectively?
Assume that both types of costs are incurred evenly throughout the process.
A)5,000 and 5,000
B)1,000 and 5,000
C)3,000 and 2,500
D)2,000 and 2,500
E)0 and 5,000
Q3) What is the difference between a weighted-average method of process costing and a first-in,first-out method of process costing?
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Chapter 18: Spoilage, rework, and Scrap
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Sample Questions
Q1) Using the FIFO method of process costing,what are the total costs of all the units that were initially in the beginning work-in-process inventory and were subsequently shipped?
A)$194,000
B)$16,500
C)$210,500
D)$97,000
E)$274,500
Q2) Distinguish among spoilage,reworked units,and scrap.Give an example of each.
Q3) Busy Hands Craft Company is a small manufacturing company that specialized in arts and crafts items.It recently bought an old textile mill that it has refurbished to manufacture and dye special cloth to be sold in its craft shops.However,it discovered something new for its accounting system.The company had never before had finished goods that did not meet standard,leftover materials from processing runs,or unacceptable outputs.
Required:
As the business consultant for the company,explain how it can handle the items mentioned.Include any potential problems with the accounting procedures.
Q4) What are the objectives in accounting for spoilage?
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Chapter 19: Inventory Cost Management Strategies
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Sample Questions
Q1) Expediting costs of a stockout include the additional ordering costs,plus any associated transportation costs.
A)True
B)False
Q2) Disc Company sells 400 discs per week.Purchase order lead time is 3 weeks and the economic order quantity is 900 units.What is the reorder point?
A)950 units
B)1,200 units
C)3,500 units
D)4,500 units
E)5,600 units
Q3) The annual relevant total costs are at a minimum where relevant ordering costs and their relevant carrying costs are equal.
A)True
B)False
Q4) Just-in-time purchasing requires organizations to place smaller purchase orders with their suppliers.
A)True B)False
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Chapter 20: Capital Budgeting: Methods of Investment Analysis
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Sample Questions
Q1) Easton Ltd.is considering investing in a new piece of machinery for its factory.The machine costs $340,000 and is expected to last 7 years.It estimates that annual cash flows would be $82,000 and the equipment would have a salvage value of $13,000.The company's hurdle rate is 11%.What is the net present value of this investment? (Ignore income taxes. )
A)$87,625
B)$46,400
C)$52,662
D)$234,000
E)$247,000
Q2) Which of the following is TRUE concerning capital budgeting analysis?
A)The IRR and AARR consider the time value of money.
B)The payback method and the AARR both consider profitability.
C)NPV and IRR consider accruals.
D)The payback method and the AARR both consider profitability,and NPV and IRR do not consider accruals.
E)NPV and IRR do not consider accruals,and the IRR considers the time value,but AARR does not.
Q3) Explain why the term tax shield is used in conjunction with amortization.
Page 23
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Chapter 21: Transfer Pricing and Multinational Management
Control
Systems
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Sample Questions
Q1) Stavanger Ltd.is a Canadian company with a fully owned subsidiary in Ireland.The Irish subsidiary produces a component for off shore gas compressors that are sold in Canada.The components have a variable cost of 1,700 Euros and a full cost of 2,100 Euros.The 2,000 components required can be purchased in Canada for $3,500.Assume the minimum transfer price allowed by the Canadian tax authorities is the variable cost and the maximum is the market value.Also assume operating income in each country is equal to taxable income.One Euro is worth $1.45 Canadian.The marginal tax rate in Canada is 25% and in Ireland 12.5%.
Required:
a.What transfer price should be set for Stavanger Ltd.to minimize its total income taxes? Show your calculations.
b.If Stavanger Ltd.desires to minimize its total income taxes,calculate the amount of tax liability in each country in Canadian dollars.
Q2) One benefit of centralization is an increase in development of an experienced pool of management talent to fill higher-level management positions.
A)True
B)False
Q3) Provide a complete definition of a management control system.
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Chapter 22: Multinational Performance Measurement and Compensation
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Sample Questions
Q1) Most Canadian and U.S.companies use the Sarbanes-Oxley Act (SOX)as a framework for evaluating their internal control.
A)True
B)False
Q2) Which type of compensation is most prevalent when a satisfactory performance measure cannot be designed?
A)dividends
B)stock options
C)salary
D)bonus based on ROI
E)bonus based on ROI and/or RI
Q3) What is the value of the total assets belonging to the Beta Division?
A)$4,333,333
B)$5,952,380
C)$6,500,000
D)$7,151,800
E)$4,654,252
Q4) Return on investment is also called the accrual accounting rate of return.
A)True B)False
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