Strategic Cost Management Exam Bank
Course Introduction
Strategic Cost Management explores the principles, tools, and techniques essential for effectively managing costs to achieve organizational goals and maintain competitive advantage. The course delves into cost analysis, cost control, and cost reduction strategies, emphasizing their integration with overall business strategies. Students will examine frameworks such as activity-based costing, value chain analysis, and target costing, and learn how to analyze cost information for strategic decision-making. Real-world case studies and practical exercises provide insights into aligning cost management processes with long-term business objectives, fostering value creation and sustainable growth.
Recommended Textbook
Cost Accounting A Managerial Emphasis 7th Canadian Edition by Charles T. Horngren
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3533 Flashcards
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Chapter 1: The Accountants Vital Role in Decision Making
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141 Flashcards
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Sample Questions
Q1) Management accounting is guided by generally accepted accounting principles.
A)True
B)False
Answer: False
Q2) Key success factors such as quality,time,and the provision of innovative products and services,must be executed well to achieve corporate performance.
A)True
B)False Answer: True
Q3) In the value chain,research and development generates and experiments with new ideas related to new products.
A)True
B)False Answer: True
Q4) Key success factors include time management.
A)True
B)False
Answer: True
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Page 3
Chapter 2: An Introduction to Cost Terms and Purposes
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Sample Questions
Q1) Merchandising companies purchase products and sell them to customers without changing their basic form.
A)True
B)False
Answer: True
Q2) A manufacturing plant produces two product lines: football equipment and hockey equipment.Direct costs for the football equipment line are the A)beverages provided daily in the plant break room.
B)monthly lease payments for a specialized piece of equipment needed to manufacture the football helmet.
C)salaries of the clerical staff that work in the company administrative offices.
D)utilities paid for the manufacturing plant.
E)advertising costs.
Answer: B
Q3) Conversion costs are all manufacturing costs other than direct materials. A)True
B)False
Answer: True
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4
Chapter 3: Cost-Volume-Profit Analysis
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Sample Questions
Q1) Break-even point in units is
A)2,000 units.
B)3,000 units.
C)5,000 units.
D)7,000 units.
E)2,797 units.
Answer: A
Q2) If the tax rate is t,it is possible to calculate planned operating income by
A)dividing net operating income by t.
B)dividing net operating income by 1 - t.
C)multiplying net operating income by t.
D)multiplying net operating income by 1 - t.
E)dividing net operating income by t - 1.
Answer: B
Q3) The degree of operating leverage at a specific level of sales helps the managers calculate the effect that potential changes in sales will have on operating income. A)True
B)False
Answer: True
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Page 5
Chapter 4: Job Costing
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Sample Questions
Q1) What are three possible ways to dispose of underallocated or overallocated overhead costs at the end of a fiscal year? Briefly comment on the theoretical correctness or incorrectness of each method.
Q2) The objective of allocating indirect costs is to measure the underlying usage of indirect resources by jobs.
A)True
B)False
Q3) Raw materials that can be traced to a cost object are an example of an indirect cost.
A)True
B)False
Q4) Which of the following would be appropriately costed using a job costing system?
A)oil refining
B)bank clearing at TD Canada Trust
C)beverage production
D)replacing a homeowner's furnace
E)lumber dealing by Weyerhaeuser
Q5) Actual costing can also be a method of job costing.
A)True
B)False
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Chapter 5: Activity-Based Costing and Management
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Sample Questions
Q1) In the monthly management meeting,each manager was asked to come up with suggestions for controlling costs.Some managers favoured a simple across-the-board cut in expenditures,with every department accepting the same percentage reduction in their budget.This was supported by several managers as the fairest means to save costs.Your assistant attended the meeting in your absence and suggested that the company consider switching to activity-based costing.Unfortunately,the more he explained,the less support he received,particularly when he mentioned that more information would have to be collected,there would be implementation costs,and that what really mattered were nonfinancial variables,called activities.The meeting ended with everyone wondering how such an idea could lead to cost savings.
Required: Explain how an ABC system should be able to save money,even though it focuses on activities,rather than just costs.Compare your assistant's suggestion to an across-the-board cut as a means to save money.
Q2) Product-cost cross-subsidization means that if a company undercosts one of its products,it will gain market share due to a more competitive price.
A)True
B)False
Q3) How are cost drivers selected in activity-based costing systems?
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Chapter 6: Master Budget and Responsibility Accounting
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Sample Questions
Q1) How many flowerpots should Country Heather produce in 2016?
A)48,000 flowerpots
B)44,000 flowerpots
C)41,000 flowerpots
D)39,000 flowerpots
E)18,000 flowerpots
Q2) What will be Berry's Boxes cost of goods sold in 2015?
A)$42,000
B)$24,000
C)$38,000
D)$30,000
E)$34,000
Q3) What is the budgeted net operating income for the first quarter of 2015?
A)$132,640
B)$135,280
C)$172,160
D)$123,640
E)$140,560
Q4) Describe some of the drawbacks of using the operating budget as a control device.
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Chapter 7: Flexible Budgets,variances,and Management
Control: I
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Sample Questions
Q1) In a manufacturing area of an organization;poor product design,problems with the quality of materials,and scheduling conflicts could result in
A)a favourable materials efficiency variance.
B)a favourable labour efficiency variance.
C)a favourable materials effectiveness variance.
D)an unfavourable materials effectiveness variance.
E)an unfavourable materials efficiency variance.
Q2) September's direct labour efficiency variance is
A)$285.00 unfavourable.
B)$285.00 favourable.
C)$290.00 unfavourable.
D)$280.00 unfavourable.
E)$280.00 favourable.
Q3) July's direct material efficiency variance is
A)$4,800 favourable.
B)$2,200 favourable.
C)$5,000 unfavourable.
D)$5,000 favourable.
E)$4,800 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) Batch-level costs are resources sacrificed on activities that are related to individual units of product(s)or service(s).
A)True
B)False
Q2) Non-financial performance measures
A)vary from industry to industry.
B)include variable cost but not fixed cost variances.
C)include both variable and fixed cost variances.
D)are used for performance evaluation,but not for planning and control.
E)deal with personnel matters.
Q3) Using a standard costing system makes it possible to use a simple recording system.
A)True
B)False
Q4) The fixed manufacturing overhead efficiency variance is used to analyze overhead costs.
A)True
B)False
Page 10
Q5) How is a budgeted fixed overhead cost rate calculated?
Q6) Explain the meaning of a favourable production-volume variance.
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Chapter 9: Income Effects of Denominator Level on Inventory Valuation
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Sample Questions
Q1) What are break-even sales in units using variable costing?
A)5,625 units
B)6,250 units
C)11,875 units
D)12,180 units
E)10,556 units
Q2) What is the theoretical capacity for the month of September?
A)1,488,000 shoes
B)1,440,000 shoes
C)1,036,800 shoes
D)1,296,000 shoes
E)1,152,000 shoes
Q3) What is the Car Tune's September cost of goods sold amount if absorption costing is used?
A)$300,000
B)$266,000
C)$270,000
D)$258,600
E)$297,000
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Chapter 10: Analysis of Cost Behaviour
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Sample Questions
Q1) A mixed cost has a fixed element.
A)True
B)False
Q2) A factor where the change in the factor causes a change in the speed with which an activity is undertaken is referred to as
A)a bottleneck.
B)value added time.
C)opportunity cost.
D)cycle time.
E)a time driver.
Q3) Which of the following is an equation of a variable cost function?
A)Y = ax + bx
B)Y = a + bx
C)Y = b
D)Y = a
E)Y = bx
Q4) The advantage of the high-low method when compared to regression analysis is that it considers multiple data points.
A)True
B)False
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Chapter 11: Decision Making and Relevant Information
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Sample Questions
Q1) When opportunity costs exist,they are always relevant.
A)True
B)False
Q2) The variation in total costs between two alternatives is known as
A)differential cost.
B)analyzed cost.
C)irrelevant cost.
D)predictable cost.
E)expected cost.
Q3) What is the full cost of the product per unit?
A)$110
B)$170
C)$255
D)$95
E)$140
Q4) Book value of equipment is irrelevant in equipment-replacement decisions.
A)True
B)False
Q5) Explain why sunk costs are not considered relevant when choosing among alternatives.
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Chapter 12: Pricing Decisions, product Profitability
Decisions, and Cost Management
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Sample Questions
Q1) Managers have little discretion in setting prices in market situations which are not competitive.
A)True
B)False
Q2) The three major influences on pricing decisions are
A)competition,costs,and customers.
B)competition,demand,and production efficiency.
C)continuous improvement,customer satisfaction,and a dual internal/external focus.
D)variable costs,fixed costs,and mixed costs.
E)economic,qualitative,and costs.
Q3) What is the target cost if target profit is 25 percent of the competitor's selling price?
A)$75
B)$90
C)$225
D)$270
E)$280
Q4) In target costing,what are at least two techniques used to achieve target costing goals?
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Chapter 13: Strategy,balanced Scorecard,and Profitability Analysis
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Sample Questions
Q1) Strategies have been classified in many different ways,but what is common is to set the business within its external environment.
A)True
B)False
Q2) The price-recovery component measures the increase in operating income from selling more units of a product.
A)True
B)False
Q3) ________ is an organization's ability to achieve low costs relative to competitors through productivity and efficiency improvements,elimination of waste,and tight cost control.
A)Strategy
B)Product differentiation
C)Cost leadership
D)The balanced scorecard
E)Product leadership
Q4) What is the primary purpose of the balanced scorecard?
Q5) What are the four key perspectives in the balanced scorecard?
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Q6) Describe three key components in doing a strategic analysis of operating income.
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)$20,000
B)$100,000
C)$80,000
D)$84,000
E)$21,000
Q2) If the government wants to contract a very large scale project with significant uncertainty about what the final cost will be,often a cost-plus contract is awarded to attract qualified contractors who may otherwise not be willing to accept the risks inherent in a guaranteed bid price.
A)True
B)False
Q3) Benefits of the single-rate method include
A)the low cost of implementation.
B)fixed costs that are transformed into variable costs for user decision making.
C)signals regarding how variable and fixed costs behave differently.
D)information that leads to outsourcing decisions that benefit the organization as a whole.
E)there is a stronger cause and effect relationship.
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Chapter 15: Cost Allocation: Joint Products and Byproducts
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Sample Questions
Q1) Using the sales value at splitoff method,what is the gross margin percentage for condensed goat milk at the splitoff point?
A)21.1%
B)55.1%
C)58.1%
D)38.2%
E)41.9%
Q2) Using estimated net realizable value,what amount of the $72,240 of joint costs would be allocated Xyla and the skim goat ice cream?
A)$41,971 and $30,269
B)$44,471 and $27,769
C)$32,796 and $39,444
D)$36,120 and $36,120
E)$39,444 and $32,796
Q3) Explain the difference between a joint product and a byproduct.Can a byproduct ever become a joint product?
Q4) Separable costs include manufacturing costs only.
A)True
B)False
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Chapter 16: Revenue and Customer Profitability Analysis
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Sample Questions
Q1) Customer specific costs are costs that
A)are traceable to or allocated to individual customers.
B)are not traceable to individual customers.
C)are the same as customer support costs.
D)would not include cost of goods sold.
E)would not include selling-related costs.
Q2) ________ categorizes costs related to customers into different cost pools on the basis of either different classes of cost drivers or different degrees of difficulty in determining the cause-and-effect (or benefits-received)relationships.
A)Customer profitability analysis
B)Customer revenues
C)Customer cost hierarchy
D)Price discounting
E)Customer allocation
Q3) A bundled product is a package of two or more products or services,sold for a single price,where the individual components of the bundle may also be sold as separate items,each with their own stand-alone prices.
A)True
B)False
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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) The weighted average method of process costing assigns the cost of equivalent units worked on during the current period first to complete beginning inventory,next to start and complete new units,and finally to units in ending work-in-process inventory.
A)True
B)False
Q3) What is meant by the term "prime cost pool"?
Q4) The first-in,first-out (FIFO)process costing method assigns the cost of the previous accounting period's equivalent units in beginning work-in-process inventory to the first units completed and transferred out of the process.
A)True
B)False
Q5) Discuss some typical products which would likely use process costing.
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Page 20
Chapter 18: Spoilage, rework, and Scrap
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Sample Questions
Q1) Spoilage issues arise in accounting for process costing but not in accounting for job costing.
A)True
B)False
Q2) Accounting for rework in process-costing requires that abnormal rework be distinguished from normal rework.
A)True
B)False
Q3) What are the objectives in accounting for spoilage?
Q4) The costs of normal spoilage are usually assigned to individual jobs in job costing.
A)True
B)False
Q5) A company whose goal is zero defects would usually treat all spoilage as abnormal.
A)True
B)False
Q6) Spoilage can be a significant cost for many organizations.Discuss when spoilage might happen and how the costs of normal spoilage get allocated.
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Chapter 19: Inventory Cost Management Strategies
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Sample Questions
Q1) Financial performance measures are the predominant measures of control in a Just-in-Time system.
A)True B)False
Q2) What are the total relevant costs assuming the quantity ordered equals 80 reams?
A)$3,913.65
B)$3,948.50
C)$4,075.25
D)$4,165.00
E)$5,326.49
Q3) The economic order quantity decision model
A)calculates the amount of inventory that may be purchased with the monetary constraint.
B)determines the minimum amount of inventory to purchase.
C)determines the maximum amount of inventory to keep on hand.
D)determines the optimal amount of inventory to order.
E)calculates the numbers of employees needed.
Q4) Backflush costing is an example of sequential tracking.
A)True B)False
22
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Chapter 20: Capital Budgeting: Methods of Investment Analysis
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Sample Questions
Q1) Capital cost allowance tax deductions result in tax savings that partially offset the cost of acquiring the capital asset.
A)True
B)False
Q2) A company is considering purchasing a new machine,at a cost of $50,000.This amount will be written off over 5 years at $10,000 per year.In the first year the company will have to increase its accounts receivable by $4,000,and inventory by $8,000.The disposal value of the machine being replaced is $1,500 and will be used to offset the amount borrowed for the new machine.What is the initial working capital investment required for the purpose of capital budgeting?
A)$8,000
B)$60,500
C)$10,500
D)$12,000
E)$4,000
Q3) What conflicts can arise between using discounted cash flow methods for capital budgeting decisions and accrual accounting for performance
Q4) 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) The Canada Revenue Agency has adopted International Financial Reporting Standards as the framework for transfer pricing regulations.
A)True
B)False
Q2) All of the following are benefits of decentralization EXCEPT
A)it creates greater responsiveness to local needs.
B)it decreases management and worker morale.
C)it leads to quicker decision making.
D)it sharpens the focus of managers.
E)it leads to better supplier relationships.
Q3) Subunits X and Y determined the price for interdepartmental services during the last monthly meeting,using the selling prices charged to outside parties.This is an example of A)subunit transfer prices.
B)negotiated transfer prices.
C)market-based transfer prices.
D)cost-based transfer prices.
E)multinational transfer pricing.
Q4) Provide a complete definition of a management control system.
Q5) What is the purpose of the internal control system within an organization?
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Chapter 22: Multinational Performance Measurement and Compensation
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Sample Questions
Q1) Keeping all other factors constant,which of the following would NOT cause an increase in the return on investment?
A)actions that increase revenues
B)actions that increase liabilities
C)actions that decrease investments
D)actions that decrease expense
E)actions that increase sales
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 Gamma Division's return on investment?
A)0.25
B)0.42
C)0.60
D)0.75
E)0.80
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