Cost Accounting
Final Test Solutions
Course Introduction
Cost Accounting is a course designed to introduce students to the principles, methods, and practices involved in measuring, analyzing, and reporting financial and non-financial information related to the costs of acquiring or using resources within an organization. The course covers topics such as cost behavior, cost allocation, activity-based costing, budgeting, standard costing, variance analysis, and decision-making processes using cost information. Emphasis is placed on how cost accounting supports managerial planning, control, and performance evaluation, enabling organizations to operate efficiently and make informed financial decisions.
Recommended Textbook
Introduction to Management Accounting 16th Edition by Charles T. Horngren
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17 Chapters
2438 Verified Questions
2438 Flashcards
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Page 2
Chapter 1: Managerial Accounting,the Business
Organization,and Professional Ethics
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137 Verified Questions
137 Flashcards
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Sample Questions
Q1) When comparing management accounting and financial accounting,which of the following statements is FALSE?
A) Management accounting has a future orientation whereas financial accounting has a past orientation.
B) Management accounting prepares detailed reports whereas financial accounting prepares summary reports.
C) Management accountants are constrained by the principles of reporting promulgated by the Institute of Management Accountants whereas financial accountants are constrained by Generally Accepted Accounting Principles.
D) Behavioral considerations are of primary importance in management accounting, but not in financial accounting.
Answer: C
Q2) Which company is NOT a service organization?
A) Affiliated Dermatologists
B) Michael Flynn Dentistry
C) Lowe's Home Improvement Store
D) United Internists
Answer: C
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Chapter 2: Introduction to Cost Behavior and Cost Volume
Profit Relationships
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149 Verified Questions
149 Flashcards
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Sample Questions
Q1) A change in the tax rate will not affect the break-even point.
A)True
B)False
Answer: True
Q2) Christian Corporation sells desks at $480 per desk.The variable costs are $300 per desk.Total fixed costs for the period are $540,000.The break-even point in desks is
A) 1,125
B) 1,800
C) 3,000
D) 4,230
Answer: C
Q3) ________ is the excess of sales over the cost of goods sold.
A) Gross margin
B) Contribution-margin ratio
C) Variable-cost ratio
D) Contribution margin
Answer: A
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Chapter 3: Measurement of Cost Behavior
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Sample Questions
Q1) Biden Company manufactures small jewelry boxes.The company is considering three cost drivers for measuring support costs in the factory.The following cost functions have been estimated using each cost driver: \(\begin{array} { l }\text { Cost Driver }&\text { Cost Function }&R^2\\
\text { 1. } X=\text { gluing time in hours }&Y=\$ 20,000+\$ 5 X&R^2=0.20\\
\text { 2. } X=\text { labor hours }&Y=\$ 13,000+\$ 10 X&R^2=0.55\\
\text { 3. } X=\text { machine hours }&Y=\$ 15,000+\$ 7 X&R^2=0.90\\ \end{array}\)
Which cost driver should be chosen?
A) gluing time in hours
B) labor hours
C) machine hours
D) labor hours x gluing time in hours
Answer: C
Q2) Account analysis is one method of approximating cost functions.
A)True
B)False
Answer: True
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Page 5
Chapter 4: Cost Management Systems and Activity-Based
Costing
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143 Verified Questions
143 Flashcards
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Sample Questions
Q1) The computation for Cost of Goods Manufactured on the income statement is ________.(Assume there are no Work-In-Process Inventories.)
A) direct materials used plus direct production costs
B) direct materials used plus direct labor plus indirect production costs
C) direct materials used plus direct labor
D) direct materials used plus direct labor minus indirect production costs
Q2) Period costs include selling and administrative expenses.
A)True
B)False
Q3) Customers,departments and territories are examples of cost objects.
A)True
B)False
Q4) Activity-based costing systems should be used instead of traditional costing systems if ________.
A) indirect production costs are a large percentage of production costs
B) different products consume resources at different rates
C) only one product is produced
D) A and B
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Q5) List and explain five reasons why more firms are adopting activity-based costing systems.
Chapter 5: Relevant Information for Decision Making With a
Focus on Pricing Decisions
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136 Verified Questions
136 Flashcards
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Sample Questions
Q1) Markup is the amount by which cost exceeds price.
A)True
B)False
Q2) In special order situations,unit costs are useful for predicting total ________.In special order situations,unit costs are not useful for predicting total ________.
A) mixed costs; step costs
B) step costs; mixed costs
C) variable costs; fixed costs
D) fixed costs; variable costs
Q3) Marginal cost is the additional cost resulting from producing and selling one additional unit.
A)True
B)False
Q4) In imperfect competition,a firm must decrease the sales price to generate additional sales.
A)True
B)False
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Chapter 6: Relevant Information for Decision Making With a
Focus on Operational Decisions
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Sample Questions
Q1) The ________ is the juncture in manufacturing where the joint products become individually identifiable.
A) joint processing juncture
B) split-off point
C) common point
D) joint processing point
Q2) Opportunity costs and outlay costs are widely used synonyms.
A)True
B)False
Q3) When considering the replacement of old equipment,which of the following item is relevant?
A) loss on disposal of old equipment
B) book value of old equipment
C) accumulated depreciation on old equipment
D) future maintenance costs of old equipment
Q4) Past costs are irrelevant in equipment replacement decisions.
A)True
B)False
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Chapter 7: Introduction to Budgets and Preparing the Master Budget
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148 Verified Questions
148 Flashcards
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Sample Questions
Q1) The schedule of cash collections from customers has ________.
A) cash sales only
B) collections on credit sales only
C) A and B
D) budgeted purchases
Q2) When preparing the budgeted income statement,which of the following is the source for the amount of Cost of Goods Sold?
A) sales budget
B) operating expense budget
C) schedule of disbursements for operating expense
D) purchases and cost of goods sold budget
Q3) A major benefit of effective budgeting is that ________.
A) it compels managers to think ahead
B) it aids managers in communicating objectives to employees
C) it provides benchmarks to evaluate subsequent performance
D) all of the above
Q4) "Cooking the books" refers to recording fictitious sales or omitting costs.
A)True
B)False
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Chapter 8: Flexible Budgets and Variance Analysis
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Sample Questions
Q1) The variable overhead efficiency variance depends on whether the quantity of the cost driver used is more or less than ________.
A) the standard amount of output for the expected amount of output
B) the quantity allowed for the expected amount of output
C) the quantity allowed for the static budget amount of output
D) the standard quantity allowed for the actual output
Q2) In which of the following scenarios can Eastman Company NOT have favorable flexible budget variance for direct materials?: When direct material price variance is ________,and when direct material quantity variance is ________,
A) favorable; unfavorable
B) unfavorable; favorable
C) unfavorable; unfavorable
D) favorable; favorable
Q3) Ideal standards make no provision for waste,spoilage and machine breakdowns.
A)True
B)False
Q4) Perfection standards and ideal standards are different.
A)True
B)False
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Chapter 9: Management Control Systems and Responsibility Accounting
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148 Verified Questions
148 Flashcards
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Sample Questions
Q1) The contribution controllable by segment managers is used to evaluate the performance of segment managers.
A)True
B)False
Q2) A manager at a local home improvement store is considering the following costs.Which of the following is a cost controllable by the manager?
A) Salaries of public relations staff at corporate headquarters
B) Salaries of attorneys at corporate headquarters
C) Salary of treasurer of company
D) Salary of head cashier
Q3) In the area of quality control,which of the following statement(s)about Six Sigma is(are)TRUE?
A) The focus is on measuring the number of defects in a production process.
B) It is a data-driven approach to eliminate defects.
C) The goal is to eliminate all defects in the production process.
D) All of the above
Q4) Managerial effort does not necessarily have to accompany goal congruence.
A)True
B)False
11
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Chapter 10: Management Control in Decentralized Organizations
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Sample Questions
Q1) Managers' incentives for performance are defined as the ________.
A) relationship between cost and perceived benefit
B) relationship between goal congruence and managerial effort
C) rewards for managerial effort and actions
D) influence of uncontrollable factors on a manager's performance
Q2) Which of the following adjustments to after-tax operating income is used to approximate cash income for EVA?
A) expensing research and development costs
B) using LIFO inventory method
C) deducting after tax interest expense
D) using taxes paid rather than tax expense
Q3) Return on investment can be computed as ________ times ________.
A) residual income; capital turnover
B) return on assets; asset turnover
C) return on sales; capital turnover
D) net income; cost of capital
Q4) Increasing capital turnover is one of the advantages of implementing the JIT philosophy.
A)True
B)False
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Chapter 11: Capital Budgeting
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149 Flashcards
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Sample Questions
Q1) The differential approach to investments can be used to compare any number of projects.
A)True
B)False
Q2) The best way to reconcile any conflict between capital budgeting models and performance evaluation is to use the ________ for both capital budgeting decisions and performance evaluation.
A) payback period model
B) accounting rate of return model
C) real options model
D) discounted cash flow model
Q3) In the NPV method,errors in forecasting terminal disposal values are usually not crucial because the present value of these cash flows is small.
A)True
B)False
Q4) Projects that recoup their investment quickly may be less risky than those that require a longer time.
A)True
B)False
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Chapter 12: Cost Allocation
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Sample Questions
Q1) Companies must assign all production costs and only production costs to products for external financial reporting purposes.
A)True
B)False
Q2) When allocating service department costs to producing departments,which of the following guidelines is NOT followed?
A) Allocate variable- and fixed-cost pools separately.
B) Establish the cost-allocation procedure before rendering the service.
C) Evaluate performance using flexible budgets for each service department.
D) Establish the cost-allocation procedure after rendering the service.
Q3) When allocating fixed costs from service departments to production departments,managers should use ________ instead of ________.
A) capacity used; capacity available
B) capacity available; budgeted capacity
C) capacity used; budgeted capacity
D) capacity available; capacity used
Q4) Joint costs are not allocated to a by-product.
A)True
B)False
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Chapter 13: Accounting for Overhead Costs
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152 Flashcards
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Sample Questions
Q1) To compute contribution margin under variable costing,we deduct ________ and ________ from sales.
A) variable manufacturing costs; fixed manufacturing costs
B) variable selling costs; fixed manufacturing costs
C) variable administrative costs; fixed manufacturing overhead costs
D) variable manufacturing costs; variable selling and administrative costs
Q2) If the actual volume of production differs from the expected volume of production,the fixed overhead costs used for budgeting and product costing are ________.
A) the same
B) different
C) indeterminate
D) changing over the accounting period
Q3) If the actual volume of production differs from the expected volume of production,the same variable overhead costs per unit are used for ________ and ________ purposes.
A) budgeting; employee motivation
B) budgeting; product costing
C) flexible budgets; employee hiring
D) planning; employee hiring
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Chapter 14: Job-Order Costing and Process-Costing Systems
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154 Verified Questions
154 Flashcards
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Sample Questions
Q1) Under weighted-average process costing,the unit costs used for applying costs to products are based on the total costs incurred to date,regardless of whether those costs were incurred during or before the current period.
A)True
B)False
Q2) In backflush costing,any remaining balance in the Conversion Costs account at the end of the accounting period is charged to ________.
A) Cost of Goods Sold
B) Work-in-Process Inventory
C) Finished Goods Inventory
D) Direct Materials Inventory
Q3) Source documents used in job-order costing include material requisition forms and time cards.
A)True B)False
Q4) In job-order costing,time cards record the materials used in particular jobs.
A)True B)False
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Chapter 15: Basic Accounting: Concepts, techniques, and Conventions
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Sample Questions
Q1) The statement of financial position is also called the ________.
A) income statement
B) statement of cash flows
C) statement of retained earnings
D) balance sheet
Q2) Retained earnings indicate the amount of cash available for distribution to shareholders.
A)True
B)False
Q3) On May 1,Gomez Company paid $36,000 for rent.The rent covers the period May 1 through August 31.Gomez Company recorded Prepaid Rent of $36,000.What is the balance in the Prepaid Rent account on June 1?
A) $0
B) $9,000
C) $18,000
D) $27,000
Q4) Gross profit is the excess of sales over all expenses.
A)True
B)False
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Chapter 16: Understanding Corporate Annual Reports:
Basic Financial Statements
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140 Verified Questions
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Sample Questions
Q1) A payment on bonds payable will be reported in the ________ section of the statement of cash flows.
A) operating activities only
B) investing activities
C) financing activities
D) noncash investing and financing activities
Q2) Which of the following assets is NOT classified as a short-term investment?
A) corporate stocks
B) corporate bonds
C) debt securities issued by governments
D) checking account balance
Q3) Accrued interest payable is a long-term liability because it relates to a long-term bond payable.
A)True
B)False
Q4) The account Unearned Revenue is a revenue account.
A)True
B)False
Page 18
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Chapter 17: Understanding and Analyzing Consolidated Financial Statements
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Sample Questions
Q1) In accordance with Generally Accepted Accounting Principles in the United States,the ________ must be reported on the financial statements.
A) price-earnings ratio
B) dividend payout ratio
C) earnings per share
D) dividend yield ratio
Q2) When preparing consolidated financial statements,eliminating entries are made to avoid double-counting ________.
A) assets only
B) liabilities only
C) assets, liabilities and stockholders' equity
D) none of the above
Q3) Accountants require investors without significant influence over the decisions of an investee firm to use the ________ method.
A) equity
B) cost
C) market value
D) lower of cost or market
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