Strategic Cost Management Review Questions
Course Introduction
Strategic Cost Management explores the role of cost information in managerial decision-making and organizational strategy. The course covers techniques for analyzing cost behavior, allocating costs, and managing resources efficiently to support long-term business goals. Topics include activity-based costing, life cycle costing, target costing, value chain analysis, and performance measurement systems. Students will learn how to integrate cost management with corporate strategy to gain a sustainable competitive advantage, drive innovation, and enhance profitability across diverse business contexts.
Recommended Textbook
Cost Accounting Foundations and Evolutions 9th Edition by Kinney
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Page 2
Chapter 1: Introduction to Cost Accounting
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Sample Questions
Q1) The ___________________________________ restates an organization's strategy into clear and objective performance measures.
Answer: balanced scorecard
Q2) The branch of accounting that is most concerned with addressing the needs of the firm as a whole is __________ accounting
Answer: financial
Q3) Modern management accounting can be characterized by its A)flexibility.
B)standardization.
C)complexity.
D)precision.
Answer: A
Q4) Cost accounting is necessitated by
A)the high degree of conversion found in certain businesses.
B)external reporting requirements for manufacturing companies.
C)management's need to be aware of all production activities.
D)management's need for information to be used for planning and controlling activities.
Answer: A
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Chapter 2: Cost Terminology and Cost Behaviors
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Sample Questions
Q1) Hunnicutt Company is a construction company that builds greenhouses on special request.What is the proper classification of the cost of the cement building slab used? <u>Direct Fi xed</u>
A)no no
B)no yes
C)yes yes
D)yes no
Answer: D
Q2) A cost driver
A)causes fixed costs to rise because of production changes.
B)has a direct cause-effect relationship to a cost.
C)can predict the cost behavior of a variable,but not a fixed,cost.
D)is an overhead cost that causes distribution costs to change in distinct increments with changes in production volume.
Answer: B
Q3) A cost that remains constant on a per unit basis within the relevant range is a ____________________ cost.
Answer: variable
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Page 4
Chapter 3: Predetermined Overhead Rates, Flexible
Budgets, and Absorptionvariable Costing
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Sample Questions
Q1) Discuss underapplied and overapplied overhead and its disposition at the end of the period.
Answer: During the course of the production cycle,actual overhead costs are incurred.When overhead is applied to Work in Process,it is commonly applied using a predetermined rate.Overhead application at a predetermined rate may cause overhead to be under- or overapplied.If actual overhead is greater than applied overhead,then underapplied overhead results and a debit balance exists in the overhead account.If applied overhead is greater than actual overhead,then overapplied overhead results and a credit balance exists in the overhead account.If the amount of under- or overapplied overhead is immaterial,it is closed directly to Cost of Goods Sold.If the amount is material,it must be allocated among Work in Process,Finished Goods,and Cost of Goods Sold.
Q2) A debit to the Factory Overhead account represents actual overhead costs.
A)True
B)False
Answer: True
Q3) A ______________________________ is a planning document that presents expected variable and fixed overhead costs at different activity levels.
Answer: flexible budget
Page 5
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Chapter 4: Activity-Based Management and Activity-Based Costing
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Sample Questions
Q1) Describe the two-step process by which costs are allocated in an ABC system.
Q2) A value chart indicates
A)all steps in a process and the time it takes for them to be completed.
B)the value-added steps in a process and the time it takes for them to be completed.
C)the time and cost of all value-added steps in a process.
D)the time and costs of all value-added and non-value-added steps in a process.
Q3) When a firm redesigns a product to reduce the number of component parts,the firm is
A)increasing consumer value.
B)increasing the value added to the product.
C)decreasing product variety.
D)decreasing non-value-added costs.
Q4) Costs that support an overall production or service process are referred to as
Q5) Traditional costing systems tend to misallocate overhead to high-volume standard products
A)True
B)False
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Chapter 5: Job Order Costing
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Sample Questions
Q1) Spears Manufacturing Company
Spears Manufacturing Company produces beach chairs.Chair frames are all the same size,but can be made from plastic,wood,or aluminum.Regardless of frame choice,the same sailcloth is used for the seat on all chairs.Spears has set a standard for sailcloth of $9.90 per square yard and each chair requires 1 square yard of material.Spears produced 500 plastic chairs,100 wooden chairs,and 250 aluminum chairs during June.The total cost for 1,000 square yards of sailcloth during the month was $10,000.At the end of the month,50 square yards of sailcloth remained in inventory. Refer to Spears Manufacturing Company.The unfavorable material price variance for sailcloth purchases for the month was
A)$ 100.
B)$ 495.
C)$1,090.
D)$1,585.
Q2) The trend in job-order costing is to
A)eliminate the data entry function for the accounting system.
B)automate the data collection and data entry functions.
C)use accounting software to change the focal point of the job-order system.
D)create an Intranet to share information between competitors.
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Chapter 6: Process Costing
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Sample Questions
Q1) In a complex production environment,it is more difficult to compute a single EUP rate for conversion costs.
A)True
B)False
Q2) Normal spoilage units resulting from a continuous process
A)are extended to the EUP schedule.
B)result in a higher unit cost for the good units produced.
C)result in a loss being incurred.
D)cause estimated overhead to increase.
Q3) Discrete production losses are assumed to occur throughout the process.
A)True
B)False
Q4) The process costing system that computes equivalent units on beginning work in process inventory as well as work done in the current period is known as a
Q5) A loss that occurs uniformly throughout a production process is referred to as a __________________ loss.
Q6) A ____________________ costing system is appropriate where products manufactured have different direct materials but similar processing techniques.
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Chapter 7: Standard Costing and Variance Analysis
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Sample Questions
Q1) Standards that are attainable with reasonable effort are referred to as ___________________________________.
Q2) When multiple labor categories are used,the financial effect of using a different mix of workers in a production process is referred to as a labor mix variance.
A)True
B)False
Q3) The difference between the standard hours worked for a specific level of production and the actual hours worked is the labor rate variance.
A)True
B)False
Q4) Favorable variances are represented by credit balances in the overhead account.
A)True
B)False
Q5) The effect of substituting a non-standard mix of materials during the production process is referred to as a material mix variance.
A)True
B)False
Q6) List and discuss briefly the three standards of attainability.
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Chapter 8: The Master Budget
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Sample Questions
Q1) Which of the following statements is true?
A)All organizations have the same set of budgets.
B)All organizations are required to budget.
C)Budgets are a quantitative expression of an organization's goals and objectives.
D)Budgets should never be used to evaluate performance.
Q2) Key variables that are identified in strategic planning are
A)normally controllable if they are internal.
B)seldom if ever controllable.
C)normally controllable if they occur in a domestic market.
D)normally uncontrollable if they are internal.
Q3) What role does the budgeting activity play in managerial compensation and performance evaluation?
Q4) Ineffective budgets and/or control systems are characterized by the use of
A)budgets as a planning tool only and disregarding them for control purposes.
B)budgets for motivation.
C)budgets for coordination.
D)the budget for communication.
Q5) What are some of the benefits of a well-prepared budget?
Q6) Explain why managers might want to build slack into a budget.
Page 10
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Chapter 9: Break-Even Point and Cost-Volume-Profit Analysis
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Sample Questions
Q1) If a company's variable costs per unit were to increase but its unit selling price stays constant,the effect on a profit-volume graph would be that the
A)contribution margin line would shift upward parallel to the present line.
B)contribution margin line would shift downward parallel to the present line.
C)slope of the contribution margin line would be pronounced (steeper).
D)slope of the contribution margin line would be less pronounced (flatter).
Q2) ____ focuses only on factors that change from one course of action to another.
A)Incremental analysis
B)Margin of safety
C)Operating leverage
D)A break-even chart
Q3) After the level of volume exceeds the break-even point
A)the contribution margin ratio increases.
B)the total contribution margin exceeds the total fixed costs.
C)total fixed costs per unit will remain constant.
D)the total contribution margin will turn from negative to positive.
Q4) On a CVP graph,the total variable cost line intersects the y-axis at zero.
A)True
B)False
Q5) What are the major assumptions of CVP analysis?
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Chapter 10: Relevant Information for Decision Making
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Sample Questions
Q1) Collins Company uses 12,000 units of a part in its production process.The costs to make a part are: direct material,$15;direct labor,$27;variable overhead,$15;and applied fixed overhead,$32.Eichholtz has received a quote of $60 from a potential supplier for this part.If Collins buys the part,75 percent of the applied fixed overhead would continue.Collins Company would be better off by
A)$30,000 to manufacture the part.
B)$348,000 to buy the part.
C)$60,000 to buy the part.
D)$216,000 to manufacture the part.
Q2) Under what circumstances is the sum of variable production and selling costs the appropriate minimum price for special orders?
Q3) If a cost is irrelevant to a decision,the cost could not be
A)a sunk cost.
B)a future cost.
C)a variable cost.
D)an incremental cost.
Q4) The benefits foregone when one course of action is chosen over another are referred to as ______.
Q5) What are three characteristics of relevant information?
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Chapter 11: Allocation of Joint Costs and Accounting for
By-Products
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Sample Questions
Q1) The method of pricing by-products/scrap where no value is assigned to these items until they are sold is known as the A)net realizable value at split-off point method.
B)sales value at split-off method.
C)realized value approach.
D)approximated net realizable value at split-off methoD.
Q2) Which of the following is a commonly used joint cost allocation method?
A)high-low method
B)regression analysis
C)approximated sales value at split-off method
D)weighted average quantity technique
Q3) Two methods of allocating joint costs to products are physical measure allocation and monetary allocation.
A)True
B)False
Q4) Joint costs may be allocated to by-products as well as primary products.
A)True
B)False
Page 13
Q5) Briefly discuss the four decisions that management must make concerning joint processes.
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Chapter 12: Introduction to Cost Management Systems
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Sample Questions
Q1) Information about the life-cycle performance of a product or service should be provided in the \(\text {\underline{ Financial ac counting system} }\) \(\text {\underline{ Cost managenent system} }\)
A)yes yes
B)yes no
C)no yes
D)no no
Q2) Name five items that would be considered critical success factors by most world-class companies.Why is each of these factors so important to organizational longevity?
Q3) Feedback is another name for an effector.
A)True
B)False
Q4) Feedback is reflected in which component of a management control system?
A)sensor
B)assessor
C)effector
D)detector
Page 14
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Chapter 13: Responsibility Accounting,support Department
Allocations,and Transfer Pricing
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Sample Questions
Q1) Which service department cost allocation method assigns indirect costs to cost objects after considering interrelationships of the cost objects? \(\text {\underline{Algebraic method. } }\) &nb sp; \(\text {\underline{ Step method} }\)
A)no no
B)no yes
C)yes yes
D)yes no
Q2) Decentralization reduces the need for effective communication among an organization's departments.
A)True
B)False
Q3) The cost object under the control of a manager is called a(n)____ center.
A)cost
B)revenue
C)responsibility
D)investment
Page 15
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Chapter 14: Performance Measurement, balanced
Scorecards, and Performance Rewards
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Sample Questions
Q1) Cultural differences between countries may make performance evaluation in multinational settings more difficult.
A)True
B)False
Q2) Performance measures that provide a focus on the efficiency and effectiveness of production processes are referred to as ____________________ measures.
Q3) In order to assure achievement of an organizational goal,performance measures must be established for that goal.
A)True
B)False
Q4) What items affect comparability of different divisions within the same company on the basis of EVA,ROI and RI?
Q5) The segment margin of a profit or investment center includes allocated common costs.
A)True B)False
Q6) What distinct advantage does a return on investment measure have over a residual income measure? Explain.
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Chapter 15: Capital Budgeting
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Sample Questions
Q1) Merrill Productions is considering the purchase of a new movie camera,which will be used for major motion pictures.The new camera will cost $30,000,have an eight-year life,and create cost savings of $5,000 per year.The new camera will require $700 of maintenance each year.Merrill Productions uses a discount rate of 9 percent. Present value tables or a financial calculator are required.
a. Compute the net present value of the new camera
b. Determine the payback period.
Q2) Which of the following statements is trueregarding capital budgeting methods?
A)The Fisher rate can never exceed a company's cost of capital.
B)The internal rate of return measure used for capital project evaluation has more conservative assumptions than the net present value method,especially for projects that generate a positive net present value.
C)The net present value method of project evaluation will always provide the same ranking of projects as the profitability index method.
D)The net present value method assumes that all cash inflows can be reinvested at the project's cost of capital.
Q3) Why is it important for managers to be able to rank projects?
Q4) What are the limitations of the payback period as a capital budgeting technique?
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Chapter 16: Managing Costs and Uncertainty
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Sample Questions
Q1) Most discretionary costs relate to
A)plant and equipment acquisitions.
B)long-term investments.
C)basic personnel costs.
D)service activities.
Q2) Finding acceptable alternatives to higher cost items or not spending money for goods and services is referred to as ________________________________.
Q3) A cost that is found to bear an observable and known relationship to a quantifiable activity base is a(n)
A)discretionary cost.
B)product cost.
C)period cost.
D)engineered cost.
Q4) An effective control system functions before,during,and after an event.However,little control is possible during the event for most
A)variable manufacturing costs.
B)variable period costs.
C)discretionary fixed costs.
D)committed fixed costs.
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Chapter 17: Implementing Quality Concepts
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Sample Questions
Q1) Reverse engineering is used in
A)statistical process control.
B)process benchmarking.
C)results benchmarking.
D)price fixing.
Q2) Value reflects the ability of a product to
A)provide the best quality at any price.
B)have all possible product and service characteristics.
C)meet the majority of a customer's needs at the lowest possible price.
D)have the longest technical or service life and the best warranty.
Q3) A total quality system should be designed to promote a reorientation of thinking from an emphasis on
A)internal quality improvements to an emphasis on external benchmarking.
B)the planning process to an emphasis on the performance evaluation process.
C)inspection to an emphasis on prevention.
D)process benchmarking to an emphasis on results benchmarking.
Q4) The balanced scorecard can be used to provide information on quality in an organization.
A)True
B)False
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Chapter 18: Inventory and Production Management
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Sample Questions
Q1) Which of the following attributes is a characteristic of the Internet business model?
A)many physical assets
B)complex interrelationships among members of management
C)a direct pipeline to customers
D)one-to-one relationships between a company and its principal vendors.
Q2) The term "cell" is used to describe
A)a grouping of one or more automated machines within a company.
B)a storage bin for "C" type inventory in an ABC inventory system.
C)files in a CAD/CAM system.
D)a factory's area of conversion activity.
Q3) Approximately what percentage of future product costs is determined in the development stage of the product life cycle?
A)30%
B)50%
C)70%
D)90%
Q4) An investment in inventory yields a return when it is sold to a third party.
A)True
B)False
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Chapter 19: Emerging Management Practices
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Sample Questions
Q1) To what does workforce diversity refer?
Q2) Define a strategic alliance.
Q3) What are the principles of open-book management?
Q4) ____ is a philosophy of increasing a firm's performance by involving all workers.
A)Open-book management
B)Data mining
C)Diversity
D)Strategic alliance
Q5) Management talent is increased in a diverse group of employees.
A)True
B)False
Q6) EMS stands for
A)environmental manufacturing system.
B)employee management system.
C)emergency medical services.
D)environmental management system.
Q7) What are the risks and dangers of downsizing?
Q8) What are the characteristics of firms best-suited to open-book management?
Q9) What are enterprise resource planning systems (ERPs)?
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