Cost Accounting
Pre-Test Questions
Course Introduction
Cost Accounting is a fundamental course that introduces students to the principles, methods, and techniques used to determine, analyze, and control the costs associated with producing goods and services. The course covers key topics such as cost classification, cost behavior, job order costing, process costing, activity-based costing, standard costing, and budgeting. Students will learn how cost information is used for managerial decision-making, planning, and performance evaluation, enabling them to assess efficiency, reduce waste, and optimize resource allocation within organizations. Through practical exercises and case studies, learners will develop the analytical skills necessary to interpret cost data and support strategic business decisions.
Recommended Textbook
Managerial Accounting Decision Making and Motivating Performance 1st Edition by Srikant M. Datar
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1755 Verified Questions
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Chapter 1: The Manager and Management Accounting
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Sample Questions
Q1) Managers use management accounting information to develop,communicate,and implement strategy.
A)True
B)False
Answer: True
Q2) Which of the following is not a true statement about a manager that utilizes the cost-benefit approach?
A)Senior managers could spend resources if the expected benefits to the company exceed the expected costs.
B)Senior managers can compare the expected benefits to the expected costs associated with a project.
C)Senior managers can compare the expected benefits,exercise judgment,and make decisions when they use this approach.
D)Senior managers are unable to compare the expected benefits to the expected costs associated with a project.
E)Senior managers should spend resources if the expected benefits to the company exceed the expected costs.
Answer: D
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Chapter 2: An Introduction to Cost Terms and Purposes
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Sample Questions
Q1) The general term used to identify the tracing and allocation of accumulated costs to a cost object is:
A)cost accumulation.
B)cost assignment.
C)cost tracing.
D)conversion costing.
E)convertible costing.
Answer: B
Q2) A band of normal activity or volume in which specific cost-volume relationships are maintained is referred to as the:
A)average range.
B)cost-allocation range.
C)cost drive range.
D)relevant range.
E)driving range.
Answer: D
Q3) Analyzing relevant information is a key aspect of making appropriate decisions.
A)True
B)False
Answer: True
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Chapter 3: Cost-Volume-Profit Analysis
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Sample Questions
Q1) To determine the margin of safety,managers compute:
A)budgeted revenues / breakeven sales.
B)budgeted sales + breakeven sales.
C)budgeted revenues + breakeven revenues.
D)budgeted sales - breakeven sales.
E)budgeted revenues - breakeven revenues.
Answer: E
Q2) A key step managers utilize is to take the target net income number and convert it into the corresponding target operating income number.
A)True
B)False
Answer: True
Q3) Managers focus on the analysis of target net income instead of target operating income because it changes the breakeven point (BEP).
A)True
B)False
Answer: False
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Chapter 4: Job Costing
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Sample Questions
Q1) Which of the following is not a benefit of the normal-costing system?
A)Managers take corrective actions sooner.
B)Manufacturing costs of jobs are reported later.
C)Manufacturing costs of jobs are reported earlier.
D)Job pricing data is available soon after jobs are completed.
E)Sales managers evaluate profitability and efficiency of jobs faster.
Q2) The ideal cost-allocation base is:
A)the cost driver of indirect costs.
B)the cost driver of direct costs.
C)the cost driver of variable costs.
D)the cost driver of mixed costs.
E)the cost driver of fixed,mixed,and direct costs.
Q3) Modern information technology provides managers with quick and accurate information,making it easier to manage and control jobs.
A)True
B)False
Q4) Is the use of budgeted rates for direct costs different to the methods employed when using budgeted rates for indirect costs in normal costing?
Q5) What is a challenge to managers when they implement job-costing systems?
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Chapter 5: Process Costing and Cost Allocation
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Sample Questions
Q1) A key point in the operation-costing system is that each batch does not move through the same operations as other batches.
A)True
B)False
Q2) A company that implements process costing with zero beginning and zero ending work-in-process inventory has:
A)no units are started and fully completed within the accounting period.
B)all units are started and fully completed within the accounting period.
C)all units are started and partially completed after the accounting period.
D)some units are started and fully completed after the accounting period.
E)all units are started and fully completed before the accounting period.
Q3) Ms.Davidson is the project manager at a local warehouse.She is responsible for the supervision and development of staff and she also prepares and maintains the reports.Recently,she became friends with a coworker,Betty,who is a staff manager that she oversees the business operations division.She discovered that Betty was reporting higher rates of completion on several projects and she overstated the estimations on operating income in her department to inflate profits and make the department look better.What should the project manager,Ms.Davidson,do about this issue?
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Chapter 6: Activity-Based Costing and Activity-Based Management
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Sample Questions
Q1) Global surveys of company practices suggest that activity-based costing implementation varies among companies.
A)True
B)False
Q2) Allocating costs to products by measuring the cost-allocation bases of different activities used by different products leads to more accurate production costs.
A)True
B)False
Q3) Homogeneous cost pools and the choice of cost-allocation bases,when tied to the cost hierarchy,provide managers with less confidence when they assign the activity and product cost numbers from the activity-based costing system.
A)True
B)False
Q4) Why is it important for managerial accountants to identify the cost-allocation bases?
Q5) Why do some managers in organizations deduct facility-sustaining costs as a separate lump-sum amount from operating income rather than allocate them to products?
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Chapter 7: Pricing Decisions, customer Profitability, and Cost Management
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Sample Questions
Q1) The costs that influence prices a company can charge for its products is:
A)product life-cycle costing.
B)life-cycle budgeting.
C)customer life-cycle costs.
D)life-cycle costing.
E)price discrimination.
Q2) The cost of goods sold equals total manufacturing costs when there is not beginning or ending inventory of a product.
A)True
B)False
Q3) Companies in the United States are fee to charge whatever price they like. A)True
B)False
Q4) A customer cost hierarchy categorizes costs related to customers into different cost pools on the basis of different types of cost drivers,or cost allocation bases,or different degrees of difficulty determining cause-and-effect or benefits-received relationships. A)True
B)False
Page 9
Q5) What are the key steps in value engineering?
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Chapter 8: Determining How Costs Behave
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Sample Questions
Q1) Why do managers plot data on graphs?
Q2) Which of the following estimation methods is used by managers to estimate cost functions on the basis of opinions about costs and their drivers of a company gathered from various departments?
A)Industrial Engineering Method.
B)Conference Method.
C)Account Analysis Method.
D)Quantitative Analysis Method.
E)Work-Measurement Method.
Q3) Missing cost observations occur when:
A)a manager records accurate cost information.
B)the manager fails to record accurate cost information.
C)all costs reflect accurate data about the operations.
D)data on cost drivers originate in the normal accounting system.
E)management accountants design accurate data collection reports.
Q4) The manager at Elegant Rugs used regression analysis and reported the following cost function to predict future indirect manufacturing labor costs: y = $300.98 + ($10.31 per machine hour × 25 machine hours) What is the cost driver?
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Chapter 9: Decision Making and Relevant Information
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Sample Questions
Q1) Depreciation cost is past,or sunk because it represents the cost of equipment that a company has already purchased.
A)True
B)False
Q2) Incremental costs:
A)are not processing costs.
B)are never separable costs.
C)are always separable costs.
D)are additional costs incurred.
E)are not additional costs incurred.
Q3) The theory of constraints is used to emphasize that the management of bottleneck operations as a key to improve the performance of production operations.
A)True
B)False
Q4) The book value of an old machine is irrelevant because it is a past cost.
A)True
B)False
Q5) Why do managers use decision models?
Q6) Do managers use historical data to make informed predictions?
Page 11
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Chapter 10: Quality, inventory Management, and Time
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Sample Questions
Q1) In which step of the five-step decision making process would a manager realize that the primary uncertainty is how the introduction of a second product would affect manufacturing times for the product?
A)Step 1: Identify the Problem and Uncertainties
B)Step 2: Obtain information.
C)Step3: Make predictions about the future.
D)Step 4: Make decisions by choosing among alternatives.
E)Step 5: Implement the decision,evaluate performance,and learn.
Q2) How do some companies evaluate their response time improvement efforts?
Q3) A time driver is any factor that causes a change in the speed of an activity when the factor changes.
A)True
B)False
Q4) ________ are the cost of goods acquired from suppliers,including incoming freight costs.
A)Ordering costs
B)Purchasing costs
C)Carrying costs
D)Stockout costs
E)Costs of quality
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Chapter 11: Capital Investments
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Sample Questions
Q1) The two DCF methods used to describe are the net present value (NPV)method and the internal rate-of-return method (IRR).
A)True
B)False
Q2) A key feature of the discounted cash flow (DCF)method is ________.
A)operating income as determined by accrual accounting
B)investment in working capital
C)the time value of money
D)net after-tax initial investments
E)equity and debt securities
Q3) A manager may reject a project if the AARR of the initial investment is ________ than the minimum accounting rate of return the manager is expected to achieve.
A)lower
B)similar
C)higher
D)reduced
E)decreased
Q4) Why do managers use the net present value (NPV)method?
Q5) What is the impact on taxes when the manager sells an asset at a loss?
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Chapter 12: Master Budget and Responsibility Accounting
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Sample Questions
Q1) Which of the following is not true about budgeting in multinational companies?
A)Managers reduce the possible negative impact on performance caused by unfavorable exchange rate movements.
B)Managers need to understand the political,legal,and economic movements in the different countries that engage in corporate operations.
C)Countries that have high annual inflation rates have sharp declines in the value of the currency.
D)The purpose of budgeting in multinational companies is E)Managers do not need to consider differences in tax regimes because the company transfers goods and services across the many countries in which it operates.
Q2) What is the impact of budgeting on employee performance?
Q3) A manager that works at a company that is evaluated as a profit center will more likely consider rush orders important because they impact sales.
A)True
B)False
Q4) How can managers use the ongoing-budget process to anticipate economy recovery from a recession?
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Chapter 13: Flexible Budgets, cost Variances, and Management Control
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Sample Questions
Q1) Variance analysis is not subject to the same cost-benefit test as all other phases of a management control system.
A)True
B)False
Q2) Variances are also used in performance evaluation and to motivate managers.
A)True
B)False
Q3) Unfavorable variances are also referred to as ________.
A)favorable variances
B)adverse variances
C)bottom-out variances
D)substandard variances
E)dissatisfactory variances
Q4) Effective planning for fixed overhead costs is similar to effective planning for ________.
A)variable overhead costs
B)production operations
C)product differentiation
D)performance improvement
E)acquiring new customers
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Chapter 14: Strategy, Balanced Scorecard, and Strategic Profitability Analysis
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Sample Questions
Q1) The managers at Continental Classics,a women's specialty clothing store,lost customers because the quality of their products and the cycle time for orders became less predictable.Consumers received late orders,and damaged packages,and some orders were not received by the consumers.What should the manager do to improve the business process?
Q2) Andes Ski Company management is considering the cost effect of growth for conversion costs if they produce the same amount of products in 2013 as they did in 2012.In 2012,the company produced 580,000 pairs of skis at a cost of $180 per pair. Required
Compute the cost effect of growth for conversion costs at Andes Ski Company for an identical output between 2012 and 2013.
A)$0
B)$40,630
C)$980,250
D)$630,000
E)$2,566,300
Q3) Why are more companies in the manufacturing,merchandising,and service sectors giving greater weight to nonfinancial measures when employees are promoted?
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Chapter 15: Transfer Pricing
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Sample Questions
Q1) Which of the cost scenarios listed below would managers choose to use when they do not consider full costs in cost-based transfer methods?
A)R&D.
B)Payroll.
C)Distribution.
D)Design marketing.
E)Customer service.
Q2) ________ ease the subunit managers' information-processing and decision-making tasks.
A)Unit costs
B)Turn prices
C)Trade prices
D)Transfer prices
E)Recording prices
Q3) When a market for the intermediate goods is imperfectly competitive,how does a manager set the transfer price?
Q4) How can managers informally adjust transfer prices to satisfy the tradeoff between tax minimization and incentive provision?
Q5) How can the employee or manager's effort go beyond physical exertion?
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Chapter 16: Performance Measurement and Compensation
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Sample Questions
Q1) The Hobby Shop Company has outlets in Olympia,WA,Boise,ID,and Boston,MA.The gross book value of long-term assets at historical costs that the Olympia outlet holds is $1,600,000,the Boise outlets holds $2,400,000 and the Boston outlet holds $3,200,000.The construction cost index for all three outlets in 2012 was 190.The construction cost index the year that the Olympia outlet was built was 120,the year that the Boise outlet was built it was 160 and the year that the Boston outlet was built it was 170. Required
Compute the gross book assets at current cost at the end of 2012 for the Olympia outlet,the Boise outlet,and the Boston outlet.
A)$2,360,363;$1,650,022;$688,520
B)$1,866,352;$2,148,633;$1,225,333
C)$2,533,333;$2,850,000;$3,576,471
D)$1,955,000;$2,225,036;$4,020,333
E)$3,148,523;$3,963,000;$455,630
Q2) How do managers determine if assets are measured at historic costs,or current costs?
Q3) Discuss the decline in value of the peso compared to the U.S.dollar in 2012.How did this impact the Mexican economy?
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