Cost Accounting Practice Questions
Course Introduction
Cost Accounting is an essential course that explores the principles and techniques used to determine, record, analyze, and control the costs of producing goods or providing services. Students will learn about various cost concepts, such as direct and indirect costs, fixed and variable costs, and how to allocate overhead. The course also covers important topics like job costing, process costing, activity-based costing, budgeting, variance analysis, and cost-volume-profit analysis. By understanding these methods, students will be equipped to aid organizations in making informed financial decisions, improving efficiency, and maximizing profitability.
Recommended Textbook
Managerial Accounting 9th Canadian Edition by Ray Garrison
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14 Chapters
1982 Verified Questions
1982 Flashcards
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Page 2
Chapter 1: Managerial Accounting and the Business Environment
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Sample Questions
Q1) Managerial accounting is not governed by generally accepted accounting principles (GAAP).
A)True
B)False
Answer: True
Q2) A customer value proposition is essentially a reason for customers to choose a company's products over its competitors' products.
A)True
B)False
Answer: True
Q3) Both financial and managerial accounting rely on the same underlying financial data but there are major differences.Managerial Accounting:
A) Emphasizes financial consequences of past activities.
B) Emphasizes precision.
C) Emphasizes relevance.
D) Must follow GAAP.
Answer: C
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Page 3
Chapter 2: Cost Terms, Concepts, and Classifications
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Sample Questions
Q1) Some companies classify labour fringe benefits for direct labour workers as part of the direct labour cost and some classify these costs as manufacturing overhead.
A)True
B)False
Answer: True
Q2) The following costs should be considered direct costs of providing delivery room services to a particular mother and her baby: the costs of drugs administered in the operating room,the attending physician's fees,and a portion of the liability insurance carried by the hospital to cover the delivery room.
A)True
B)False
Answer: False
Q3) What does manufacturing overhead cost consist of?
A) All manufacturing costs.
B) All manufacturing costs,EXCEPT direct materials and direct labour.
C) Indirect materials but NOT indirect labour.
D) Indirect labour but NOT indirect materials.
Answer: B
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4
Chapter 3: Systems Design: Job-Order Costing
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Sample Questions
Q1) What was the cost of goods sold for the year (before disposition of any under- or overapplied overhead)?
A) $736,000.
B) $716,000.
C) $691,000.
D) $801,000.
Answer: B
Q2) Which of the following cost elements is generally absent in professional service organizations such as public accounting firms?
A) Direct labour.
B) Overhead.
C) Raw material.
D) Indirect labour.
Answer: C
Q3) What is the cost of raw materials used in production?
A) $26,000.
B) $71,000.
C) $76,000.
D) $66,000.
Answer: D
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Chapter 4: Systems Design: Process Costing
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Sample Questions
Q1) (Appendix 4A)If a company uses two different unit cost figures to cost transfers from one department to another under a process costing system,then which of the following statements is reasonable to assume?
A) There was no beginning work-in-process inventory.
B) Processing centres are arranged in a sequential pattern.
C) The FIFO cost method is being used.
D) The weighted-average cost method is being used.
Q2) Using the weighted-average method,what are the equivalent units of production for material for the month?
A) 48,000 units.
B) 50,000 units.
C) 58,000 units.
D) 52,000 units.
Q3) What was the total cost of the October 31 work-in-process inventory?
A) $41,250.
B) $35,000.
C) $43,750.
D) $78,750.
Q4) $112,000 ÷ 28,000 EUs = $4 per EU
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Chapter 5: Activity-Based Costing: A Tool to Aid Decision Making
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Sample Questions
Q1) The first-stage allocation in activity-based costing is the process by which overhead costs are assigned to products before they are assigned to customers.
A)True
B)False
Q2) The cost per unit of Product S under activity-based costing is closest to which of the following?
A) $1.83.
B) $1.98.
C) $5.00.
D) $10.00.
Q3) What would be the total overhead cost per bouquet according to the activity-based costing system,rounded to the nearest whole cent? In other words,what would be the overall activity rate for the Making Bouquets activity cost pool?
A) $0.90.
B) $1.05.
C) $1.10.
D) $1.20.
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Page 7
Chapter 6: Cost Behaviour: Analysis and Use
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Sample Questions
Q1) What is the contribution margin of Evans Retail Stores,Inc.,for the first quarter?
A) $140,000.
B) $190,000.
C) $210,000.
D) $300,000.
Q2) What is the expected gross margin next month?
A) $11,200.
B) $14,400.
C) $16,400.
D) $17,600.
Q3) What is the best estimate of the company's total fixed operating expense per year?
A) $72,000.
B) $188,000.
C) $200,000.
D) $212,000.
Q4) A mixed cost is partially variable and partially fixed.
A)True
B)False
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Chapter 7: Cost-Volume-Profit Relationships
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Sample Questions
Q1) The degree of operating leverage for July is closest to which of the following?
A) 4.48.
B) 3.48.
C) 4.22.
D) 8.70.
Q2) If sales increase by 100 units,by how much should operating income increase?
A) $400.
B) $4,800.
C) $1,500.
D) $2,500.
Q3) In two companies making the same product and with the same total sales and total expenses,the contribution margin ratio will tend to be lower in the company with a higher proportion of fixed expenses in its cost structure.
A)True
B)False
Q4) What is the company's break-even sales in dollars?
A) $0.
B) $640,000.
C) $700,000.
D) $400,000.
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Chapter 8: Variable Costing: A Tool for Management
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Sample Questions
Q1) What is the costing method that can be used most easily with break-even analysis and other cost-volume-profit techniques?
A) Variable costing.
B) Absorption costing.
C) Process costing.
D) Job-order costing.
Q2) Operating income determined using absorption costing can be reconciled to operating income determined using variable costing by computing the difference between which of the following?
A) Fixed manufacturing overhead costs deferred in or released from inventories.
B) Discretionary costs included in the beginning and ending inventories.
C) Gross margin (absorption costing method)and contribution margin (variable costing method).
D) Sales as recorded under the variable costing method and sales as recorded under the absorption costing method.
Q3) The unit product cost under absorption costing contains no element of fixed manufacturing overhead cost.
A)True
B)False
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Page 10
Chapter 9: Budgeting
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Sample Questions
Q1) What is the cash disbursed for purchases during the second quarter (item c),in thousands of dollars?
A) $9.
B) $13.
C) $21.
D) $55.
Q2) If the budgeted cash disbursements for selling and administrative expenses for November total $123,250,then how much was the total selling and administrative budget for November?
A) $123,250.
B) $134,250.
C) $168,250.
D) $187,250.
Q3) The total overhead cost at an activity level of 5,200 guest-days per month should be:
A) $208,020
B) $230,880
C) $209,940
D) $190,920
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Chapter 10: Standard Costs and Overhead Analysis
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Sample Questions
Q1) What was the labour efficiency variance?
A) $800 favourable.
B) $800 unfavourable.
C) $840 favourable.
D) $840 unfavourable.
Q2) Which of the following is NOT true for fixed manufacturing overhead costs in a standard costing system?
A) No efficiency variance is ever reported.
B) Any volume variance is the result of applying fixed manufacturing overhead to products,not the result of poor cost control.
C) Any underapplied or overapplied fixed manufacturing overhead is the same as the volume variance.
D) The budget variance can arise under either a variable product costing system or an absorption product costing system.
Q3) What was the variable overhead efficiency variance for March?
A) $6,160 favourable.
B) $6,160 unfavourable.
C) $6,240 favourable.
D) $6,240 unfavourable.
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Page 12
Chapter 11: Reporting for Control
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Sample Questions
Q1) Which of the following would be classified as a prevention cost on a quality cost report?
A) Lost sales arising from a reputation for poor quality.
B) Final product testing and inspection.
C) Net cost of spoilage.
D) Quality data gathering,analysis,and reporting.
Q2) If Axle sells 16,000 units per year,what would be the return on investment?
A) 12%.
B) 15%.
C) 16%.
D) 18%.
Q3) The salary paid to a store manager is a traceable fixed expense of the store.
A)True
B)False
Q4) What is Company A's residual income?
A) $9,000.
B) $21,000.
C) $24,000.
D) $45,000.
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Chapter 12: Relevant Costs for Decision Making
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Sample Questions
Q1) (Appendix 12A)Straus Company,a manufacturer of electronic products,wants to introduce a new calculator.To compete effectively,the calculator could not be priced at more than $40.The company requires a 20% rate of return on investment on all new products.In order to produce and sell 30,000 calculators each year,the company would have to make an investment of $850,000.What would be the target cost per calculator?
A) $16.50.
B) $23.50.
C) $28.33.
D) $34.33.
Q2) How much will the company's operating income be increased or (decreased)if it prices the 1,000 units in the special order at $6 each?
A) ($500).
B) $400.
C) $1,000.
D) $2,500.
Q3) Opportunity costs are recorded in the accounts of an organization.
A)True
B)False
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Chapter 13: Capital Budgeting Decisions
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Sample Questions
Q1) Monson Company is considering three investment opportunities with cash flows as described below: (Ignore income taxes in this problem.)
Q2) The net present value method of capital budgeting assumes that cash flows are reinvested at what rate?
A) The internal rate of return on the project.
B) The rate of return on the company's debt.
C) The discount rate used in the analysis.
D) A zero rate of return.
Q3) Not all cash inflows are taxable.
A)True
B)False
Q4) What is the net present value of project X?
A) ($11,708).
B) $2,915.
C) $5,283.
D) $6,317.
Q5) The present value of a cash flow decreases as it moves further into the future.
A)True
B)False
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Chapter 14: Financial Statement Analysis
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Sample Questions
Q1) Marcell Company's average collection period (age of receivables)for Year 2 was closest to which of the following?
A) 15.7 days.
B) 22.6 days.
C) 25.8 days.
D) 36.9 days.
Q2) Narlock Company's times interest earned for Year 2 was closest to which of the following?
A) 5.0 times.
B) 7.2 times.
C) 8.2 times.
D) 13.6 times.
Q3) Larned Company's dividend payout ratio for Year 2 was closest to which of the following?
A) 28.5%.
B) 47.4%.
C) 75.8%.
D) 76.7%.
Q4) Financial statements for Rarig Company appear below:
Q5) Financial statements for Raridan Company appear below:
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