Strategic Cost Management Exam Bank
Course Introduction
Strategic Cost Management is a course designed to equip students with advanced knowledge and tools for managing costs in alignment with an organizations overall strategy. The course emphasizes the role of cost management in achieving competitive advantage, covering topics such as cost analysis, value chain management, activity-based costing, target costing, and life cycle costing. Students will learn how to use cost information strategically to support decision-making, optimize processes, and drive performance improvement within various business contexts. Through case studies and practical examples, the course bridges the gap between traditional cost accounting and contemporary strategic practices, preparing students to make informed financial decisions in dynamic business environments.
Recommended Textbook
Cornerstones of Cost Management 2nd Edition by Don R. Hansen
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3210 Verified Questions
3210 Flashcards
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Page 2
Chapter 1: Introduction to Cost Management
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Sample Questions
Q1) Any form of commerce that is executed using information and communications technology is called:
A) ERP
B) OLAP
C) electronic commerce
D) DSS
Answer: C
Q2) The cost management information system is concerned with
A) reporting financial information according to GAAP.
B) providing cost information that is used in planning, control, and decision-making.
C) reporting to external users.
D) providing financial information to investors.
Answer: B
Q3) Which of the following does NOT describe cost management system?
A) evaluation of segments or products within the firm
B) emphasis on the future
C) externally focused
D) focus on effective use of resources
Answer: C
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Page 3
Chapter 2: Basic Cost Management Concepts
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Sample Questions
Q1) The overall objective of an activity-based cost management system is to manage activities to reduce costs and improve customer value.
A)True
B)False
Answer: True
Q2) In a functional-based management system, one is NOT likely to find
A) unit- and non-unit-based cost drivers.
B) maximization of individual unit performance.
C) narrow and rigid product costing.
D) allocation intensive cost assignment.
Answer: A
Q3) The sum of direct labor and factory overhead is referred to as
A) period costs.
B) conversion costs.
C) prime costs.
D) direct product costs.
Answer: B
Q4) The least accurate but easiest to apply method of cost assignment is the __________ method.
Answer: allocation
Page 4
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Chapter 3: Cost Behavior
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Sample Questions
Q1) The confidence interval for the predicted value of Y
A) is a measure of the likelihood that the prediction interval will not contain the actual cost.
B) is constructed by multiplying the t-statistic times the standard error.
C) can only be computed with 95 percent confidence.
D) all of the above.
Answer: B
Q2) The type of resources that are acquired from outside sources, where the terms of acquisition do NOT require any long-term commitment for any given amount of the resource are called:
A) Flexible resources
B) Committed resources
C) Discretionary fixed expenses
D) Committed fixed expenses
Answer: A
Q3) An alternative measure of goodness of fit is the coefficient of determination.
A)True
B)False
Answer: False
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Page 5
Chapter 4: Activity-Based Costing
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Sample Questions
Q1) Materials handling would be classified as a __________ activity when using activity-level costing. or
Q2) If unit-based product costing is used, which of the following would be traced directly to the product?
A) setup costs
B) direct labor
C) maintenance of machinery
D) inspection costs
Q3) If activity-based costing is used, security is an example of a
A) unit-level activity.
B) batch-level activity.
C) product-level activity.
D) facility-level activity.
Q4) The use of __________ activity drivers to assign costs tends to __________ high-volume products. or
Q5) Activity-based costing uses only unit-level drivers for costing.
A)True
B)False
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Chapter 5: Product and Service Costing: Job-Order System
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Sample Questions
Q1) An actual overhead rate can be calculated
A) at the beginning of the year.
B) at the end of each month.
C) at the beginning of each month.
D) either at the beginning of the year or at the beginning of the month.
Q2) A __________ service organization does not use raw material or tangible items for the customer.
Q3) Manufacturers producing unique or customized products would employ a(n)
A) process costing system.
B) job-costing system.
C) homogeneous costing system.
D) all of the above.
Q4) In developing unit costs, overhead costs should be assigned using activity drivers. Which would be the likely activity driver for a production process using a lathe?
A) units produced
B) direct labor hours
C) machine hours
D) direct materials cost
Q5) __________ is the recognition and recording of costs.
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Chapter 6: Process Costing
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Sample Questions
Q1) Abnormal spoilage costs are treated the same as normal spoilage for process costing.
A)True
B)False
Q2) In operation costing, job-order procedures are used to assign direct materials costs and process procedures are used to assign conversion costs.
A)True
B)False
Q3) In operation costing, the process which produces batches of different products which are identical in many ways but differ in others is called __________ process
Q4) The cost assigned to goods from a prior process is termed:
A) Operating costing
B) Transferred-in cost
C) Weighted average method
D) FIFO costing method
Q5) __________ is a costing system that blends job-order and process-costing procedures applied to batches of homogeneous products.
Q6) A key input to the cost of production report is __________ costs.
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Chapter 7: Allocating Costs of Support Departments and Joint Products
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Sample
Questions
Q1) Which of the following methods allocates joint production costs based on their proportionate share of eventual revenue less further processing costs?
A) sales-value-at-split-off method
B) net realizable value method
C) physical units method
D) replacement cost method
Q2) Which of the following would be the most appropriate base for allocating the costs of the maintenance department?
A) machine hours
B) direct labor hours
C) number of employees
D) square feet
Q3) The major objective(s) of allocations are
A) to motivate managers.
B) to compute product line profitability.
C) to value inventory.
D) all of the above.
Q4) The __________ method of allocating costs, allocates costs from support to producing departments.
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Chapter 8: Budgeting for Planning and Control Key
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Sample Questions
Q1) The budget most appropriate for control purposes is the
A) static budget.
B) flexible budget.
C) continuous budget.
D) incremental budget.
Q2) The type of budget that is a moving twelve-month budget is called the:
A) zero-based budget
B) flexible budget
C) continuous budget
D) both a and b
Q3) If production was budgeted at 400 units and the actual production was 420 units, what would be the static budget variance for materials if the actual cost of materials was $4,150 and the budgeted cost per unit is $10?
A) $50 F
B) $200 U
C) $100 F
D) $150 U
Q4) The accounts receivable aging schedule aids in determining the timing of cash
Q5) Discuss the features of an ideal budgetary process.
Page 10
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Chapter 9: Standard Costing: a Functional-Based Control Approach
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Sample Questions
Q1) The standard cost sheet includes all of the following EXCEPT
A) the standard quantity per unit.
B) the standard material costs per unit.
C) the standard cost per unit.
D) the standard labor hours allowed for actual production.
Q2) A materials price variance would NOT be caused by
A) ordering the wrong quality of materials.
B) ordering from the wrong supplier.
C) not taking a quantity discount.
D) requiring laborers to work overtime.
Q3) The __________ variance show the difference between actual output and expected output for a given amount of input.
Q4) A mix variance is created whenever the actual mix of inputs is equal to the standard mix.
A)True
B)False
Q5) All variances accounts are closed out at the end of the year.
A)True
B)False
Q6) Compare and contrast mix and yield variances. Page 11
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Chapter 10: Decentralization: Responsibility Accounting,
Evaluation, and Transfer Pricing
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Sample Questions
Q1) Which of the following changes would NOT change return on investment (ROI)?
A) Decrease sales and expenses by the same percentage.
B) Increase total assets.
C) Increase sales dollars by the same amount as total assets.
D) Decrease sales and expenses by the same dollar amount.
Q2) Which of the following is a disadvantage of both residual income and ROI?
A) They are both absolute measures of return.
B) They are both difficult to calculate.
C) They both do not discourage myopic behavior.
D) All of these are disadvantages of both ROI and residual income.
Q3) Both revenue center and profit center managers are responsible for achieving
A) budgeted revenues.
B) budgeted net income.
C) budgeted costs.
D) budgeted contribution margin.
Q4) The manager of a profit center is responsible for
A) delivering a quality product or service at reasonable but minimal cost.
B) decisions to invest in capital equipment.
C) decisions regarding revenue generation.
D) both a and c.
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Chapter 11: Strategic Cost Management
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Sample Questions
Q1) Accounting for the cost accounting cycle in a JIT environment is simplified by using __________ costing.
Q2) The difference between the sales price needed to capture a predetermined market share and the desired profit per unit is called:
A) Gross profit
B) Target market
C) Target price
D) Target cost
Q3) Which of the following is NOT a trait of a JIT system?
A) acceptable quality level
B) long-term contracts
C) multi-skilled labor
D) high employee involvement
Q4) Exploiting internal linkages involves the assessment of management reliability.
A)True
B)False
Q5) There are two general cost management strategies: cost leadership and focusing. A)True
B)False
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Chapter 12: Activity-Based Management
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Sample Questions
Q1) Which of the following is NOT a reason for ABM implementation failure?
A) lack of support from higher-level managers
B) expected results do not materialize
C) implementation is performed in a timely fashion
D) resistance to change
Q2) The continuous improvement subcycle of Kaizen costing is defined by what sequence?
A) check-do-plan-act
B) do-check-plan-act
C) plan-do-check-act
D) None of these is the correct sequence.
Q3) The process which refers to incremental or continual increases in the efficiency of an existing product is called:
A) Process elimination
B) Process innovation
C) Process creation
D) Process improvement
Q4) What is process value analysis?
Q5) A well accepted approach for reducing costs by eliminating waste is called __________ costing.
15
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Chapter 13: The Balanced Scorecard: Strategic-Based Control
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Sample Questions
Q1) How does the Balanced Scorecard communicate strategy to the organization? How is strategy translated into performance measures?
Q2) Articulation of the balanced scorecard should not be made to individuals within the organization.
A)True
B)False
Q3) Outcome measures that are expressed in monetary terms are called __________ measures.
Q4) Delivery performance can be improved by
A) decreasing cycle time.
B) increasing cycle time.
C) decreasing velocity.
D) increasing turnover.
Q5) Strategic-based performance measures are balanced measures. Give examples of four types of balanced measures.
Q6) A testable strategy is a set of linked objectives aimed at an overall goal.
A)True
B)False
Page 16
Q7) Dissatisfied customers are an example of a __________ measure.
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Chapter 14: Quality and Environmental Cost Management
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Sample Questions
Q1) Multiple methods of estimating hidden quality costs do NOT include the A) multiplier method.
B) market research method.
C) process acceptance sampling.
D) Taguchi quality loss function.
Q2) Activity-based costing is used to calculate the quality cost per unit of a company's products.
A)True
B)False
Q3) The costs of a consumer complaint department are
A) external failure costs.
B) internal failure costs.
C) appraisal costs.
D) prevention costs.
Q4) As preventive and appraisal costs increase, internal and external failure costs are expected to A) decrease.
B) increase.
C) remain the same.
D) vary with no relation to preventive and appraisal costs.
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Chapter 15: Lean Accounting and Productivity Measurement
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Sample Questions
Q1) Lean manufacturing adds value by reducing labor costs.
A)True
B)False
Q2) The process of producing output efficiently using the least amount of inputs is called __________ .
Q3) Discuss the advantages and disadvantages of partial productivity measures.
Q4) Identification of a "value stream," pursuit of perfection, and making value flow without interruption are examples of
A) total quality management.
B) activity-based costing.
C) principles of lean thinking.
D) Kanban processing.
Q5) Changes in product-costing and operational control approaches are crucial to a value-stream based lean manufacturing system.
A)True
B)False
Q6) The value stream focuses on just value-added activities.
A)True
B)False
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Chapter 16: Cost-Volume-Profit Analysis
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Sample Questions
Q1) Uncertainty regarding costs, prices, and sales mix affect the break-even point.
A)True
B)False
Q2) The cost-volume-profit graph portrays the relationship between profits and sales volume.
A)True
B)False
Q3) In a profit-volume graph, the slope of the profit line represents A) the selling price per unit.
B) the contribution margin per unit.
C) the variable cost per unit.
D) total contribution margin.
Q4) Income taxes are generally calculated as a percentage of income.
A)True
B)False
Q5) The term net income is used to mean operating income before income taxes.
A)True B)False
Q6) On a profit-volume graph, the __________ line intersects the horizontal axis at the break-even point.
Page 19
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Chapter 17: Activity Resource Usage Model and Tactical Decision Making
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Sample Questions
Q1) Sound tactical decision making is limited to achieve small objectives.
A)True
B)False
Q2) For flexible resources, if the demand for an activity changes across alternatives, then resource spending will remain the same and costs are relevant.
A)True
B)False
Q3) Changes in cost of an activity can occur if the demand for the resource exceeds the supply or if the demand for the resource drops.
A)True
B)False
Q4) Tactical decision making includes decisions to make or buy a component.
A)True
B)False
Q5) The first of the six steps of the tactical decision model is to recognize and define the problem.
A)True
B)False
Page 20
Q6) Future costs which differ across alternatives are called __________ costs.
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Chapter 18: Pricing and Profitability Analysis
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Sample Questions
Q1) The market size variance is favorable when the budgeted industry sales in units is:
A) more than the actual units sold
B) less than the actual units sold
C) more than the actual market share percentage
D) less than the budgeted market share percentage
Q2) Which of the following is NOT a limitation of profit management?
A) the emphasis on quantifiable measures
B) emphasis on volume variances
C) the focus on past performance
D) a higher emphasis on short-run optimization
Q3) Which of the following markets is characterized by the following: only a few firms in the industry, a fairly unique product, difficult entry into the industry, and spending for differentiation of the product?
A) perfectly competitive market
B) monopolistic competition
C) monopoly
D) oligopoly
Q4) The income measurement required for external financial reporting is called __________ costing.
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Chapter 19: Capital Investment
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Sample Questions
Q1) Heckrwee Industries is considering a project that would require an initial investment of $101,000. The project would result in cost savings of $62,000 in year 1 and $70,000 in year 2. The internal rate of return is
A) under 15%.
B) between 16% and 17%.
C) between 18% and 20%.
D) none of the above.
Q2) A firm is considering a project requiring an investment of $27,000. The project would generate an annual cash flow of $6,296 for the next seven years. The company uses the straight-line method of depreciation with no mid-year convention. Ignore income taxes. The approximate internal rate of return for the project is
A) 6%.
B) 8%.
C) 12%.
D) 14%.
Q3) Independent projects directly affect the cash flows of other projects once accepted or rejected.
A)True
B)False
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Page 22
Chapter 20: Inventory Management: Economic Order
Quantity, Jit, and the Theory of Constraints
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Sample Questions
Q1) Figure 20 - 1 Moriah's Candle Company manufactures candles. The company buys wax in 45-Kilogram containers that cost $17 each. The company uses 25,000 containers per year, and usage occurs evenly throughout the year. The average cost to carry a 45-Kilogram container in inventory per year is $3, and the cost to place an order is $9. The company works 250 days per year.
Refer to Figure 20-1. The lead time is 4 working days and the average rate of usage is 60 containers per day. What is the reorder point?
A) 240 containers
B) 260 containers
C) 220 containers
D) 200 containers
Q2) Which of the following is NOT an opportunity cost associated with inventory management?
A) lost sales to customers
B) use of capital tied up in inventory investment
C) cost of expediting
D) all are opportunity costs
Q3) The costs of holding inventory are called __________ costs.
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