Cost Accounting Exam Practice Tests
Course Introduction
Cost Accounting is an essential course that introduces students to the principles and practices of cost measurement, analysis, and control within organizations. The course covers foundational topics such as cost classification, cost behavior, job order costing, process costing, activity-based costing, and standard costing. Students learn how to apply various costing methods to assist in budgeting, performance evaluation, and decision-making. Emphasis is placed on the role of cost accounting in strategic planning, operational efficiency, and the overall financial health of businesses. Through practical examples and problem-solving exercises, students gain the skills necessary to analyze costs and contribute to informed management decisions.
Recommended Textbook
Cost Accounting A Managerial Emphasis 6th Canadian Edition by Charles T. Horngren
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24 Chapters
3348 Verified Questions
3348 Flashcards
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Page 2
Chapter 1: The Accountants Vital Role in Decision Making
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140 Verified Questions
140 Flashcards
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Sample Questions
Q1) Professional ethics for a Certified Management Accountant in Canada were established by
A) the CICA.
B) the FASB.
C) the CIMA.
D) the CGAC.
E) the SMAC.
Answer: E
Q2) The control function may include evaluating
A) the difference between current operating costs and last year's operating costs.
B) the difference between budgeted amounts and actual results.
C) the difference between the original budget and the final adjusted budget.
D) the difference allowed in the current production costs.
E) the difference between the historical cost and the current cost.
Answer: B
Q3) Sub-contracting a business function is part of supply chain 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-sector companies
A) purchase materials and convert them to finished goods.
B) buy goods and resell them.
C) provide services or intangible products.
D) have only variable costs.
E) have period and some manufacturing costs.
Answer: B
Q2) Which statement about conversion costs is correct, using the three-part classification of costs?
A) They include only direct manufacturing labour costs.
B) They include only indirect manufacturing costs.
C) They include both direct manufacturing labour costs and manufacturing overhead costs.
D) They include indirect manufacturing labour costs but not manufacturing overhead costs.
E) They include indirect manufacturing costs and direct manufacturing labour costs. Answer: B
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Chapter 3: Cost-Volume-Profit Analysis
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139 Flashcards
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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) Which of the following statements about contribution margin and gross margin in CVP analysis is true?
A) Contribution margin equals total revenue minus cost of goods sold.
B) Contribution margin equals total revenue minus non-variable costs.
C) Gross margin equals total revenue minus cost of goods sold.
D) Service companies can compute a gross margin but not a contribution margin.
E) Gross margin equals total revenue minus non-variable costs.
Answer: C
Q3) Margin of safety measures the difference between budgeted revenues and break-even revenues.
A)True
B)False
Answer: True
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Chapter 4: Job Costing
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Sample Questions
Q1) In a costing system
A) cost tracing allocates indirect costs.
B) cost allocation assigns direct costs.
C) there may never be more than one indirect cost pool.
D) a cost object should be a product and not a department or a geographic territory.
E) a cost allocation base can be either financial or nonfinancial.
Q2) What is the budgeted indirect cost allocation rate for Department 2?
A) $3.45
B) $3.75
C) $4.60
D) $7.50
E) $8.00
Q3) Assigning direct costs to a cost object is called
A) cost allocation.
B) job costing.
C) cost pooling.
D) process costing.
E) cost tracing.
Q4) What is the difference between an actual cost system and a normal cost system?
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Chapter 5: Activity-Based Costing and Management
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Sample Questions
Q1) Activity-based costing is a technique to improve the reliability of cost assignment
A) to work-in-process inventory.
B) from direct cost pools to distinct types of outputs.
C) from both direct and indirect cost pools to distinct types of outputs.
D) to all types of inventory.
E) from indirect cost pools to distinct types of outputs.
Q2) Which of the following is not a feature of costing system refinement?
A) budget costing allocation
B) cost allocation bases
C) direct cost tracing
D) indirect cost pools
E) activity cost drivers
Q3) Using pages printed as the only overhead cost driver, what is the manufacturing overhead cost estimate for Hapless Systems during 2012?
A) $19,000
B) $3,800
C) $1,900
D) $2,520
E) $3,192
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Page 7
Chapter 6: Master Budget and Responsibility Accounting
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Sample Questions
Q1) Long-run planning (strategic plans) involves the preparation of the A) operating budget.
B) cash budget.
C) budget standards.
D) profit plan.
E) capital budget.
Q2) A rolling budget is a budget or plan that
A) rolls several budgets together for forecasting purposes.
B) has one budget category roll into the next category.
C) rolls all budget categories together into a master budget.
D) is always available for a specified future period by replacing time periods as the lapse.
E) is not used to guide operations.
Q3) What is the expected total cash disbursements for expenses in February?
A) $33,400
B) $30,000
C) $30,200
D) $30,400
E) $27,000
Q4) Describe the benefits to an organization of preparing an operating budget.
Page 8
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Chapter 7: Flexible Budgets, Variances, and Management
Control: I
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146 Verified Questions
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Sample Questions
Q1) Variances can be expected to vary within some normal limits, as standards represent a range of possible acceptable outcomes.
A)True
B)False
Q2) A static budget is a budget that can be changed or altered after it is developed.
A)True B)False
Q3) A favourable variance can be automatically interpreted as "good news."
A)True
B)False
Q4) What is the combined total of the flexible budget variances?
A) $102,650 unfavourable
B) $99,000 unfavourable
C) $78,500 unfavourable
D) $75,150 favourable
E) $75,150 unfavourable
Q5) Give at least three good reasons why an unfavourable efficiency variance for direct manufacturing labour might be reported.
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Chapter 8: Flexible Budgets, Variances, and Management
Control: II
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Sample Questions
Q1) Explain two concerns when interpreting the production-volume variance as a measure of the economic cost of unused capacity.
Q2) In flexible budgets, costs that remain the same regardless of the output levels within the relevant range are
A) allocated costs.
B) budgeted costs.
C) fixed costs.
D) variable costs.
E) estimated costs.
Q3) Fixed Manufacturing Overhead Variances that are material should only be written off to Cost of Goods Sold.
A)True
B)False
Q4) The production-volume variance may also be referred to as the
A) flexible-budget variance.
B) static-budget variance.
C) rate variance.
D) efficiency variance.
E) denominator-level variance.
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Chapter 9: Income Effects of Denominator Level on Inventory Valuation
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Sample Questions
Q1) You are the management accountant for the West coast division of a musical instrument manufacturing company. There are three manufacturing plants in your division. Each plant manager was given decision making authority in terms of production, as long as income for their plant kept on pace. The manager at Plant A has consistently been the leader in profit for the division, but the other two managers are complaining that Plant A doesn't seem to be selling any more product than they are. The division manager has noticed higher inventory levels at Plant A, which the plant manager justifies by saying the higher levels are needed to ensure adequate sales. The division manager suspects that there could be other reasons, and she has asked you to provide three proposals for revising performance evaluation.
Q2) Theoretical capacity is based on which of the following assumptions?
A) that absorption costing is used
B) that variable costing is used
C) production will occur at peak efficiency all the time
D) production will occur at peak capacity where feasible (e.g., except for maintenance downtime)
E) production can never occur at peak capacity
Q3) Should a company with high fixed costs and unused capacity raise selling prices to try to fully recoup its costs?
Page 11
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Chapter 10: Quantitative Analyses of Cost Functions
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114 Flashcards
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Sample Questions
Q1) A mixed cost has a fixed element.
A)True
B)False
Q2) The standard error of the estimated coefficient indicates whether a relationship exists between the predictor variable and the outcome variable that cannot be attributed to chance alone.
A)True
B)False
Q3) Cross-sectional data analysis includes
A) using a variety of time periods to measure the dependent variable.
B) using the highest and lowest observation.
C) analyzing different cost drivers.
D) comparing information in different cost pools.
E) observing different entities during the same time period.
Q4) Statistical significance is determined by comparing the t-Stat to a threshold call degrees of freedom.
A)True
B)False
Q5) What were total fixed costs for 2012?
Q6) What was the variable cost per unit sold for 2012?
Page 12
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Chapter 11: Decision Making and Relevant Information
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Sample Questions
Q1) Phil Company has offered to sell 10,000 units of the same part to Schmidt Corporation for $18 per unit. Assuming there is no other use for the facilities, Schmidt should
A) make the part, as this would save $3 per unit.
B) buy the part, as this would save $3 per unit.
C) make the part, as this would save $4 per unit.
D) make the part, as this would save $1 per unit.
E) buy the part, as this would save $4 per unit.
Q2) Business function costs consist of all variable costs associated with a particular business function in the value chain.
A)True
B)False
Q3) All variable costs are relevant in relevant-cost analysis.
A)True
B)False
Q4) The financial measures used to evaluate a manager's performance must be the same as those used to measure the performance of his/her department.
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) Dumping occurs when a company is trying to get rid of out-of-style products and substantially reduces their prices.
A)True
B)False
Q2) Managers have little discretion in setting prices in market situations which are not competitive.
A)True
B)False
Q3) What is the target cost if the company wants to maintain its same income level, and marketing is correct (rounded to the nearest cent)?
A) $112.50
B) $113.64
C) $123.34
D) $140.00
E) $135.00
Q4) Under section 50(1) of the Competition Act companies cannot engage in price discrimination between two customers with the intent to reduce or obstruct competition among customers. Provide the four key elements of the price discrimination laws in Canada.
14
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Chapter 13: Strategy, Balanced Scorecard, and Profitability Analysis
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140 Verified Questions
140 Flashcards
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Sample Questions
Q1) ________ translates an organization's mission and strategy into a comprehensive set of performance measures that provides the framework for implementing its strategy.
A) Strategy
B) Product differentiation
C) Cost leadership
D) The balanced scorecard
E) Planning
Q2) The price-recovery component of a change in operating income from one year to the next measures the increase in operating income from selling more units of the product.
A)True
B)False
Q3) Identify and explain Porter's Five Forces model.
Q4) Which of the following is an objective of the learning and growth perspective?
A) increase return on investment
B) increase market share in the high-end appliance market
C) improve order delivery time
D) development of new products or services
E) increase customer satisfaction
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Chapter 14: Period Cost Allocation
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153 Verified Questions
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Sample Questions
Q1) Which of the following illustrates a purpose for allocating costs to cost objects?
A) to provide information for economic decisions
B) to reduce competition
C) to determine employee benefit costs
D) to defer income and reduce taxes payable
E) to motivate employees
Q2) The ability-to-bear criterion is considered superior when the purpose of cost allocation is motivation.
A)True
B)False
Q3) Which method allows for partial recognition of the services rendered by support departments to other support departments?
A) the direct allocation method
B) the interdepartmental method
C) the reciprocal allocation method
D) the step-down method
E) the step-down allocation method
Q4) 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) What is the estimated net realizable value of the skim goat ice cream at the splitoff point?
A) $182,650
B) $252,900
C) $110,200
D) $85,450
E) $194,400
Q2) A byproduct has a minimal sales value.
A)True
B)False
Q3) When using a physical-volume measure, what is the approximate amount of joint costs that will be allocated to Mr. DirtOut and Mr. SinkClean?
A) $231,116 and $148,884
B) $224,200 and $155,800
C) $227,202 and $152,798
D) $155,800 and $224,200
E) $148,884 and $231,116
Q4) The cause-and-effect criterion is not present when joint costing is used.
A)True
B)False
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Chapter 16: Revenue and Customer Profitability Analysis
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Sample Questions
Q1) If the market-size variance is $650 F, the sales-mix variance is $500 F, the flexible budget variance is $9,250 F, and the static budget variance is $8,000 U, which of the following is true?
A) The market share variance is $18,400 U.
B) The sales volume variance is $17,250 F.
C) The sales-quantity variance is $18,400 U.
D) The sales volume variance is $17,750 U.
E) The market share variance is $17,250 U.
Q2) The cost of visiting customers is an example of a customer output unit-level cost. A)True B)False
Q3) Fresh Bread Company sells a special mix of wheat bread. If the expected output equals the actual output, the sales-volume variance
A) will be negative.
B) will be positive.
C) will be favourable.
D) will be unfavourable.
E) will be zero.
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18
Chapter 17: Process Costing
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Sample Questions
Q1) Which of the following is NOT one of the procedures in process costing?
A) summarize the flow of physical units of output
B) assign costs to equivalent units based on their percentage of completion
C) compute equivalent unit costs
D) summarize total costs to account for
E) assign costs to completed units
Q2) Marvin Ltd. uses an automated process in its manufacturing operations. On November 1, the company had 25,000 units in beginning work in process which were 80% complete with respect to conversion. During the month of November, it started 120,000 into production. On November 30, there were 20,000 units in process, which were 40% complete with respect to conversion. Direct materials are added at the beginning of the process, and no units are spoiled in production.
The beginning inventory had direct materials costs of $105,750 and conversion costs of $45,500. During the month, the company issues $510,000 of direct materials and incurred $203,400 of conversion costs.
Required:
Prepare a production cost worksheet using the FIFO method.
Q3) What is meant by the term "prime cost pool"?
Q4) Describe three objectives of a costing system.
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Chapter 18: Spoilage, Rework, and Scrap
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Sample Questions
Q1) What costs would be associated with normal and abnormal spoilage, respectively, using the FIFO method of process costing?
A) $12,571; $30,108
B) $30,108; $12,571
C) $1,257; $3,010
D) $8,000; $4,000
E) $10,627; $25,453
Q2) Spoilage costs allocated to completed units are larger by which method and by how much?
A) when spoiled units are recognized by $2,500
B) when spoiled units are recognized by $4,250
C) when spoiled units are ignored by $4,250
D) when spoiled units are ignored by $7,500
E) when spoiled units are recognized by $7,500
Q3) Process costing is simplified when using standard costs.
A)True
B)False
Q4) There are two alternative points in time for recognizing scrap in the accounting records. What are these two points in time? Explain why a company might choose one over the other.
Page 20
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Chapter 19: Cost Management: Quality, Time, and the Theory of Constraints
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Sample Questions
Q1) Producing more non-bottleneck output
A) creates more inventory but does not increase throughput contribution.
B) creates more inventory and increases throughput contribution.
C) creates less pressure for the bottleneck workstations.
D) allows for the maximization of overall contribution.
E) allows for the maximization of overall shop effectiveness.
Q2) Preventive equipment maintenance is an example of
A) prevention costs.
B) appraisal costs.
C) internal failure costs.
D) external failure costs.
E) rework costs.
Q3) On-time performance is
A) the time it takes distribution to pick up an order and deliver it to the customer.
B) within 2 standard deviations of customer response time.
C) within 2 standard deviations of manufacturing time.
D) equal to customer response time, divided by the number of orders from a specific customer.
E) when the product is delivered at the time scheduled to be delivered.
Page 21
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Chapter 20: Inventory Cost Management Strategies
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Sample Questions
Q1) The annual demand for red, medium polo shirts, for Clothes, Inc. is 25,000 units. The cost of placing an order is $80, and the cost of carrying one unit in inventory for one year is $25.
Required:
a. Use the economic order quantity model to determine the optimal order size.
b. Determine the reorder point assuming a lead time of 10 days, and a work year of 250 days.
c. Assuming the maximum lead time is 20 days and the maximum daily demand is 125 units, determine the safety stock required to prevent stockouts.
Q2) The "flush" in backflush refers to the fact that there are no variances in a backflush costing system using standard costs.
A)True
B)False
Q3) Purchasing at the EOQ recommended level, what are the relevant total costs?
A) $1,500.00
B) $2,085.67
C) $2,225.00
D) $3,000.00
E) $680.00
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Page 22
Chapter 21: Capital Budgeting: Methods of Investment Analysis
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Sample Questions
Q1) A company is considering purchasing new equipment. The equipment will allow the company to expand into a new product line. The equipment will be installed in the company's existing facility. Which of the following cash flows would NOT be relevant to the decision to acquire the new equipment?
A) factory rent allocated to the new product line
B) labour costs to operate the equipment
C) revenues from expanded production
D) annual maintenance cost on the new equipment
E) the salary of the manager hired to oversee the new product line
Q2) Identify capital expenditures relevant to accomplishing strategic goals is the first step in the capital budgeting decision process model.
A)True
B)False
Q3) Life cycle costing is the accounting system that corresponds to
A) the non-financial dimension of costs analysis.
B) the project dimension of costs analysis.
C) the cost dimension of costs analysis.
D) the financial dimension of costs analysis.
E) the time dimension of costs analysis.
Page 23
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Chapter 22: Capital Budgeting: a Closer Look
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Sample Questions
Q1) What is the annual expense deduction for CCA?
A) $16,000
B) $24,000
C) $36,000
D) $40,000
E) $42,500
Q2) The Income Tax Act classifies every amortizable asset into one of several classes.
A)True
B)False
Q3) The income tax depreciation method referred to as CCA
A) allows a corporation some flexibility in choosing the class an asset is assigned to.
B) ignores estimated salvage value.
C) only applies to businesses organized as corporations.
D) provides an organization some flexibility in choosing a method of amortization.
E) allows amortization over the asset's useful life as determined by management.
Q4) Discuss the ways a company can account for risk in its capital budgeting projects.
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Chapter 23: Transfer Pricing and Multinational Management Control Systems
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Sample Questions
Q1) A Canadian company has subsidiaries in France, England, Canada, and in the USA. The company is somewhat vertically-integrated in that the Canadian subsidiary sells some of its output to the USA subsidiary which further processes the material. If the market is fully-competitive, which price is best for goal congruence?
A) market-based price
B) full cost no markup
C) negotiated price
D) distress price
E) either market-based or full cost
Q2) What is the transfer price per pair of soles from the Sole Division to the Assembly Division if the method used to place a value on each pair of soles is 180% of variable costs?
A) $14.40
B) $12.60
C) $16.20
D) $28.80
E) $32.40
Q3) Discuss some of the recent legislation and frameworks relating to assurance and internal controls.
25
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Chapter 24: Multinational Performance Measurement and Compensation
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Sample Questions
Q1) Which of the following approaches include investment in a performance measure?
A) ROI and RI
B) ROI and ROS
C) ROS and RI
D) EVA and ROI
E) ROI, EVA, and RI
Q2) What is the Gamma Division's return on investment?
A) 0.25
B) 0.42
C) 0.60
D) 0.75
E) 0.80
Q3) Which two ratios are used in the DuPont system to create return on assets?
A) Profit margin and asset turnover
B) Asset turnover and return on investment
C) Profit margin and operating leverage
D) Profit margin and return on sales
E) Return on sales and return on assets
Q4) Outline and discuss the steps involved in making decisions on performance measures.
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