Advanced Cost Accounting Study Guide
Questions
Course Introduction
Advanced Cost Accounting delves into the complex methods and analytical techniques used to determine, allocate, and control costs within modern organizations. Building on foundational cost accounting principles, this course covers specialized topics such as activity-based costing, standard costing, process costing, joint and by-product costing, and budgetary control systems. Emphasis is placed on strategic cost management, decision-making tools, performance evaluation, and the application of cost information in planning and managerial control. Through case studies and real-world examples, students gain critical skills needed to support managerial decision-making and enhance organizational efficiency in a competitive business environment.
Recommended Textbook Cornerstones of Cost Accounting 1st Edition by Don R. Hansen
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Chapter 1: Introduction to Cost Management
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Sample Questions
Q1) What are the two major subsystems of the Cost Management System and why are they important?
Answer: A cost management system consists of two major sub-systems: a cost accounting system and an operational control system.The cost accounting system is designed to assign costs to individual products or services.A cost accounting system must assign costs in order to value inventory and determine the cost of goods sold. The operational control system is designed to provide accurate timely feedback concerning performance of managers and others.Operational control is also designed to evaluate activities that should be performed and how well they are performed.The operational control system should be designed to provide opportunities for continuous quality improvement.
Q2) Total quality management emphasizes
A) zero defects.
B) continual improvement.
C) elimination of waste.
D) all of these.
Answer: D
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Page 3
Chapter 2: Basic Cost Management Concepts
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Sample Questions
Q1) In a traditional manufacturing company, product costs include
A) direct materials only.
B) direct materials, direct labor, and factory overhead.
C) direct materials and direct labor only.
D) direct labor only.
Answer: B
Q2) Value-chain product costs include which of the following?
A) customer service costs
B) marketing costs
C) research and development
D) all of these
Answer: D
Q3) The merchandise inventory in a merchandising business corresponds most closely to which of the following items in a manufacturing firm?
A) materials inventory
B) cost of goods available for sale
C) cost of goods manufactured
D) finished goods inventory
Answer: D
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Page 4
Chapter 3: Cost Behavior
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Sample Questions
Q1) Refer to Figure 3-7.Find the t-value for a 90 percent confidence level.
A) 1.740
B) 1.753
C) 6.314
D) 2.920
Answer: B
Q2) Refer to Figure 3-6.Using a computer or calculator, compute the estimate of maintenance costs at 100 units of production using the method of least squares.This value would be
A) $291.
B) $321.
C) $336.
D) $698.
Answer: A
Q3) Refer to Figure 3-8.The degrees of freedom for the model is
A) 157.
B) 158.
C) 159.
D) 160.
Answer: A
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Chapter 4: Activity-Based Costing
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Sample Questions
Q1) Refer to 4-17.What is the cost assigned to the designing tooling activity?
A) $81,250
B) $33,000
C) $25,000
D) $125,000
Q2) In the time-driven ABC systems, managers
A) assign resources to departments, then activities.
B) assign resource costs first to activities, then to products.
C) directly estimate the resource demands imposed by each product.
D) none of these.
Q3) Refer to Figure 4-21.Under this new approach, what is the new pool rate for labor related costs?
A) 0
B) $6
C) $8.225
D) $12.75
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Chapter 5: Product and Service Costing: Job-Order System
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Sample Questions
Q1) Refer to Figure 5-9.If the rework is considered abnormal spoilage, what is the journal entry for overhead control?
A) overhead control $ 140 materials $60
Payroll $80
B) materials $ 60 payroll $80
Overhead control $140
C) no journal entry is needed
D) none of these
Q2) _______________ is the recognition and recording of costs.
A) Cost accumulation
B) Cost measurement
C) Cost assignment
D) Job order costing
Q3) Refer to Figure 5-6.What is the ending work-in-process inventory for the month?
A) $10,730
B) $4,250
C) $12,575
D) none of these
Q4) Why are unit costs important? Why do full-cost unit costs change from accounting period to accounting period.
7
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Chapter 6: Process Costing
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Sample Questions
Q1) Refer to Figure 6-19.Takon's equivalent units for conversion using FIFO would be
A) 9.
B) 93.
C) 105.
D) 114.
Q2) Refer to Figure 6-1.The journal entry to record goods completed and transferred out of the Assembly Department would include a
A) debit to Finished Goods Inventory for $120,000.
B) credit to Materials Inventory for $120,000.
C) debit to Work in Process-Assembly Department for $120,000.
D) debit to Work in Process-Finishing Department for $120,000.
Q3) Refer to Figure 6-3.What is the cost of services sold?
A) $3,000
B) $2,000
C) $100
D) $900
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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 a joint cost such that each product has the same cost of goods sold percentage?
A) constant gross margin percentage method
B) net realizable value method
C) physical units method
D) replacement cost method
Q2) The Zink Company assigns plant administration costs to the production departments based on the number of employees.Which of the following would NOT be a good combination of common costs with an activity driver?
A) personnel department costs based on number of employees
B) purchasing department costs based on machine hours
C) cafeteria costs based on meals served
D) warehouse costs based on the value of materials stored
Q3) What is S2's cost equation?
A) S2 = $15,000 + 0.06S1
B) S2 = $8,000 + 0.06S1
C) S2 = $15,000 + 0.10S1
D) S2 = $8,000 + 0.10S1
Q4) Compare and contrast the various methods of accounting for joint product costs.
Page 9
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Chapter 8: Budgeting for Planning and Control
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Sample Questions
Q1) Refer to Figure 8-4.The expected cash collections of CD Productions for June are
A) $48,000.
B) $98,000.
C) $68,000.
D) $89,000.
Q2) The expected cash collections of Freedom Manufacturing Company for March are
A) $90,000.
B) $69,600.
C) $64,500.
D) $114,600.
Q3) Which of the following is NOT an advantage of budgeting?
A) It forces managers to plan.
B) It provides resource information that can be used to improve decision making.
C) It aids in the use of resources and employees by setting a benchmark that can be used for the subsequent evaluation of performance.
D) It provides organizational independence.
Q4) Compare and contrast static budgets, flexible budgets, and activity-based budgets.
Q5) Discuss the features of an ideal budgetary process.
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Page 10
Chapter 9: Standard Costing: a Functional-Based Control Approach
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Sample Questions
Q1) Using the two variance method, what is the total variance?
A) $30,000 (U)
B) $30,000 (F)
C) $70,000 (F)
D) $70,000 (U)
Q2) Compare and contrast mix and yield variances.
Q3) Harry Company's standard variable overhead rate is $6 per direct labor hour, and each unit requires 2 standard direct labor hours.During March, Harry recorded 6,000 actual direct labor hours, $37,000 actual variable overhead costs, and 2,900 units of product manufactured. What is the total variable overhead variance for March for Harry?
A) $1,200 (U)
B) $600 (U)
C) $1,000 (U)
D) $2,200 (U)
Q4) Refer to Figure 9-4.What is the materials usage variance?
A) $10,000 (U)
B) $ 8,000 (U)
C) $ 8,000 (F)
D) $18,000 (U)
Page 11
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Chapter 10: Decentralization: Responsibility Accounting, Performance
Evaluation, and Transfer Pricing
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Sample Questions
Q1) When there is an outside market for an intermediate product that is perfectly competitive, the most equitable method of transfer pricing is
A) market price.
B) production cost pricing.
C) variable cost pricing.
D) cost plus markup pricing.
Q2) The return on investment is computed as
A) operating income divided by sales.
B) operating income divided by average operating assets.
C) sales divided by average operating assets.
D) operating asset turnover divided by the operating income margin.
Q3) Discuss the differences between centralized and decentralized decision making.Why would a firm decentralize its operations?
Q4) If the operating asset turnover increased by 50 percent and the margin increased by 50 percent, the ROI would increase by
A) 50 percent.
B) 25 percent.
C) 100 percent.
D) 125 percent.
Chapter 11: Strategic Cost Management
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Sample Questions
Q1) _______________ describe the relationships of a firm's value chain activities that are performed with its suppliers and customers.
A) External linkages
B) Internal linkages
C) Industrial value chain
D) Both a and b
Q2) The operational activity of assembling parts is an example of a A) unit-level activity.
B) batch-level activity.
C) product-level activity.
D) facility-level activity.
Q3) Structural and executional activities are types of A) organizational activities.
B) operating activities.
C) JIT.
D) both a and b.
Q4) Explain the difference between acceptable quality level and total quality control.
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Chapter 12: Activity-Based Management
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Sample Questions
Q1) An activity output measure is
A) the number of outputs from a process.
B) the cost of the activity measured.
C) the effort expended to identify root causes.
D) the number of times an activity is performed.
Q2) _______________ are awards made when performance is maintained or exceeds a specific measure.
A) Bonuses
B) Stock options
C) Profit sharing
D) Gain sharing
Q3) What are the two dimensions of an activity-based management model?
A) the cost dimension and the project dimension
B) the cost dimension and the process dimension
C) the quality dimension and the process dimension
D) the quality dimension and the activity dimension
Q4) What is responsibility accounting? Compare and contrast financial-based responsibility accounting with activity-based responsibility accounting.
Q5) What is process value analysis?
Q6) What is Kaizen costing? How does activity analysis help reduce costs?
Page 14
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Chapter 13: The Balanced Scorecard: Strategic-Based Control
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Sample Questions
Q1) Activity-based responsibility and strategic-based responsibility incorporate some of the same elements.However, strategic-based responsibility adds some new elements to the common dimensions.What are the elements in common and what new elements are included?
Q2) Activity-based responsibility accounting adds which of the following to the financial-based responsibility accounting perspective?
A) process perspective
B) functional perspective
C) consumer perspective
D) learning perspective
Q3) Why does the Balanced Scorecard differ from company to company? Whose responsibility is the implementation?
Q4) From the customer perspective, which of the following might be an appropriate measure for improving product quality?
A) customer profitability
B) cost per customer
C) percentage of returns
D) number of patents pending
Page 15
Q5) Compare and contrast activity-based measures and strategic-based measures.
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Chapter 14: Quality and Environmental Cost Management
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Sample Questions
Q1) What is the environmental costs as a percentage of sales for 2011?
A) 12%
B) 15%
C) 80%
D) 8.33%
Q2) Refer to Figure 14-9.What is the environmental costs as a percentage of sales for 2011?
A) 12%
B) 15%
C) 80%
D) 8.33%
Q3) An example of a prevention cost is
A) field testing.
B) quality audits.
C) reinspection.
D) repair costs.
Q4) Define environmental costs and identify the four categories of environmental costs.Give an example of each category.
Q5) What does quality mean and how has improving quality increased firm value?
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Chapter 15: Lean Accounting and Productivity Measurement
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Sample Questions
Q1) What is the materials productivity ratio for 2012?
A) 28
B) 25
C) 20
D) 16
Q2) Discuss the linkage between quality and productivity.
Q3) What is the labor productivity ratio for 2011?
A) 25.00
B) 24.80
C) 24.00
D) 22.84
Q4) What is the partial operational productivity measure for materials for 2011?
A) 0.3125
B) 0.6250
C) 3.2000
D) 3.2500
Q5) Describe the objectives and characteristics of a Lean Manufacturing system.
Q6) Explain the difference between partial and total measures of productivity.
Q7) Define what constitutes total productive efficiency, including a definition of technical efficiency and allocative efficiency. Page 17
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Chapter 16: Cost-Volume-Profit Analysis
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Sample Questions
Q1) Total contribution margin is calculated by subtracting A) cost of goods sold from total revenues.
B) fixed costs from total revenues.
C) total manufacturing costs from total revenues.
D) total variable costs from total revenues.
Q2) Which of the following assumptions does NOT pertain to cost-volume-profit analysis?
A) The units produced will equal the units sold.
B) Inventories are constant.
C) All costs are classified as fixed or variable.
D) Sales mix may vary during the related period.
Q3) How many units need to be sold to produce a before-tax profit of $80,000 using ABC?
A) 13,250 units
B) 11,500 units
C) 14,000 units
D) 7,500 units
Q4) In the Cost-Volume-Profit analysis, what are two ways management can deal with risk and uncertainty?
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Chapter 17: Activity Resource Usage Model and Tactical Decision Making
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Sample Questions
Q1) Which of the following is NOT a way that companies might reduce tariffs?
A) Alter materials to increase the domestic content.
B) Restrict the amount of imported materials.
C) Increase the amount of imported materials.
D) Utilize foreign trade zones.
Q2) How much will income change if the special order is accepted?
A) increase by $398,400
B) decrease by $180,000
C) increase by $111,600
D) no change
Q3) What are relevant costs? How do they relate to decision making?
Q4) Assume that the selling price of product F is increased to $8.25 with a reduction in monthly sales to 400 units.Monthly profits will
A) increase by $2,070.
B) increase by $420.
C) increase by $180.
D) decrease by $60.
Q5) Describe the steps in the decision-making process.What is the role of qualitative factors in tactical decision-making?
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Chapter 18: Pricing and Profitability Analysis
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Sample Questions
Q1) ___________ refers to charging different prices to different customers for essentially the same product.
A) Gouging
B) Price discrimination
C) Skimming
D) Penetration pricing
Q2) What is the segment margin for Division B?
A) $155,000
B) $105,000
C) $55,000
D) $20,000
Q3) An alternative to the limitation of focusing on profits would be
A) communicating other measures are important but continue to base rewards on profits.
B) overstate the value of ending inventory in order to reduce cost of goods sold and improve operating income performance.
C) focus on long-term objectives and appropriate emphasis on profit.
D) analyze the product mix.
Q4) Discuss the limitation of profit measurement.
Q5) Compare and contrast the various pricing policies used by companies.
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Chapter 19: Capital Investment
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Sample Questions
Q1) The accounting rate of return on original investment is calculated as A) original investment/net income.
B) net income/debt.
C) average income/original investment.
D) assets/debt.
Q2) _______________ are projects that, if accepted, preclude the acceptance of all other competing projects.
A) Independent projects
B) Mutually exclusive projects
C) Dependent projects
D) Both b and c
Q3) The present value of $10,000 to be received ten years from now and earning a 12 percent return (rounded) is
A) $2,200.
B) $2,484.
C) $3,160.
D) $3,220.
Q4) Explain what a capital investment decision is.In your answer, distinguish between independent and mutually exclusive capital investment decisions.
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Chapter 20: Inventory Management: Economic Order
Quantity, Jit, and the Theory of Constraints
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Q1) Margaret Company has an economic order quantity for item B of 100 units.The annual demand for the product is 1,400 units, and the unit carrying cost per year is $7.The company operates 200 days a year, the lead time for the item is ten days, and the safety stock is 100 units. What is the reorder point?
A) 70 units
B) 170 units
C) 1000 units
D) 100 units
Q2) What is the objective function for maximizing profits?
A) Minimize $4X + $5Y
B) Maximize $4X + $5Y
C) Maximize $1X + $2Y
D) Maximize $4X + $2Y
Q3) The drum-buffer-rope system is another name for
A) a traditional inventory system.
B) a JIT inventory system.
C) a TOC inventory system.
D) both a and b.
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