Cost Accounting
Textbook Exam Questions
Course Introduction
Cost Accounting is a course that focuses on the principles, methods, and techniques used to collect, analyze, and report cost information for management decision-making. Students will learn about various costing systems, including job order costing, process costing, and activity-based costing. The course covers important topics such as cost-volume-profit analysis, budgeting, standard costing, variance analysis, and the allocation of overhead costs. Emphasis is placed on how accurate cost data helps organizations control expenses, set prices, and improve operational efficiency. By the end of the course, students will understand how cost accounting supports strategic planning and financial management within a business context.
Recommended Textbook
Managerial Accounting 13th Edition by Carl Warren
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Chapter 1: Managerial Accounting Concepts and Principles
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Sample Questions
Q1) Salesman commissions
A)Direct materials
B)Direct labor
C)Factory overhead
D)Non-manufacturing cost
Answer: D
Q2) Which of the following is not true in regards to direct materials for a bakery?
A)Flour and sugar would probably be direct materials.
B)Eggs would probably be a direct material
C)Oil to lubricate factory machines would not be a direct material.
D)Paper cupcake liners, that become part of the product, must be accounted for as direct materials.
Answer: D
Q3) Baker's wages
A)Prime costs
B)Conversion costs
C)Both prime and conversion costs
D)Neither prime or conversion costs
Answer: C
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Page 3
Chapter 2: Job Order Costing
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Sample Questions
Q1) Which of the following are the two main types of cost accounting systems for manufacturing operations?
A)process cost and general accounting systems
B)job order cost and process cost systems
C)job order and general accounting systems
D)process cost and replacement cost systems
Answer: B
Q2) A separate account for each material is found in a
A)general ledger
B)materials ledger
C)receiving report
D)job cost sheet
Answer: B
Q3) factory depreciation
A)direct labor
B)direct materials
C)factory overhead
D)not a product cost
Answer: C
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Page 4
Chapter 3: Process Cost Systems
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Sample Questions
Q1) focuses on reducing time, cost, and poor quality within the process
A)cost of production report
B)equivalent units of production
C)manufacturing cells
D)yield
E)just-in-time processing
Answer: E
Q2) If the principal products of a manufacturing process are identical, a process cost system is more appropriate than a job order cost system.
A)True
B)False
Answer: True
Q3) What are the equivalent units of production used to compute unit conversion cost on the cost of production report for Department W? Assume the company uses FIFO.
A)16,100 units
B)13,600 units
C)15,000 units
D)18,500 units
Answer: A
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Page 5
Chapter 4: Cost Behavior and Cost-Volume-Profit Analysis
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Sample Questions
Q1) Mia Enterprises sells a product for $90 per unit.The variable cost is $40 per unit, while fixed costs are $75,000.Determine the a break-even point in sales units, and b break-even point in sales units if the selling price increased to $100 per unit.
Q2) Cost-volume-profit analysis can be presented in both equation form and graphic form.
A)True
B)False
Q3) What was Carter Co.'s sales mix last year?
A)20% Arks, 80% Bins
B)12% Arks, 28% Bins
C)70% Arks, 30% Bins
D)40% Arks, 20% Bins
Q4) What ratio indicates the percentage of each sales dollar that is available to cover fixed costs and to provide a profit?
A)margin of safety ratio
B)contribution margin ratio
C)costs and expenses ratio
D)profit ratio
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Chapter 5: Variable Costing for Management Analysis
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Sample Questions
Q1) The relative distribution of sales among various products sold is referred to as the:
A)by-product mix
B)joint product mix
C)profit mix
D)sales mix
Q2) Fixed costs are $10 per unit and variable costs are $25 per unit.Production was 13,000 units, while sales were 12,000 units.Determine a whether variable costing income from operations is less than or greater than absorption costing income from operations, and b the difference in variable costing and absorption costing income from operations.
Q3) Direct labor cost is an example of a controllable cost for the supervisor of a manufacturing department.
A)True
B)False
Q4) Required by generally accepted accounting principles.
A)Absorption costing only
B)Variable costing only
C)Both absorption and variable costing
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Chapter 6: Budgeting
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Sample Questions
Q1) The budgeting process is used to effectively communicate planned expectations regarding profits and expenses to the entire organization.
A)True
B)False
Q2) Supervisor salaries, maintenance, and indirect factory wages would normally appear in the operating expenses budget.
A)True
B)False
Q3) To meet projected annual sales, Bluegill Manufacturers, Inc.needs to produce 75,000 machines for the year.The estimated January 1 inventory is 7,000 units, and the desired December 31 inventory is 12,000 units.What are projected sales units for the year?
Q4) The cash collections expected in November from accounts receivable are projected to be
A)$280,000
B)$316,400
C)$295,200
D)$296,250
Q5) Why is the sales budget usually prepared first?
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Chapter 7: Performance Evaluation Using Variances From Standard
Costs
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Sample Questions
Q1) If the standard to produce a given amount of product is 2,000 units of direct materials at $12 and the actual was 1,600 units at $13, the direct materials quantity variance was $5,200 favorable.
A)True
B)False
Q2) Calculate the direct materials quantity variance.
A)$4,512.50 unfavorable
B)$4,512.50 favorable
C)$4,750.00 unfavorable
D)$4,750.00 favorable
Q3) Aquatic Corp.'s standard material requirement to produce one Model 2000 is 15 pounds of material @ $110.00 per pound.Last month, Aquatic purchased 170,000 pounds of material at a total cost of $17,850,000.It used 162,000 pounds to produce 10,000 units of Model 2000.
Calculate the materials price variance and materials quantity variance, and indicate whether each variance is favorable or unfavorable.
Q4) Standard cost variances are usually not reported in reports to stockholders. A)True B)False
Page 9
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Chapter 8: Performance Evaluation for Decentralized Operations
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Sample Questions
Q1) Which of the following would be most effective in a small owner/manager-operated business?
A)profit centers
B)centralization
C)investment centers
D)cost centers
Q2) Number of computers in department
A)Purchasing
B)Payroll accounting
C)Human resources
D)Maintenance
E)Information systems
F)Marketing
G)President's Office
H)Transportation
Q3) What is the profit margin for Division D?
A)42.9%
B)83.4%
C)49.1%
D)65.7%
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Chapter 9: Differential Analysis, Product Pricing, and
Activity-Based Costing
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Sample Questions
Q1) Product J is one of the many products manufactured and sold by Oceanside Company.An income statement by product line for the past year indicated a net loss for Product J of $12,250.This net loss resulted from sales of $275,000, cost of goods sold of $186,500, and operating expenses of $85,750.It is estimated that 30% of the cost of goods sold represents fixed factory overhead costs and that 40% of the operating expense is fixed.If Product J is retained, the revenue, costs, and expenses are not expected to change significantly from those of the current year.Because of the large number of products manufactured, the total fixed costs and expenses are not expected to decline significantly if Product J is discontinued.
Q2) A bottleneck happens when a key piece of manufacturing machinery can produce 1,000 units per hour and demand for the product supports a production rate of 1,200 units per hour.
A)True
B)False
Q3) Differential revenue is the amount of income that would result from the best available alternative proposed use of cash.
A)True
B)False
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Chapter 10: Capital Investment Analysis
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Sample Questions
Q1) The cash payback period for this investment is
A)4 years
B)5 years
C)20 years
D)3 years
Q2) The average rate of return for this investment is
A)5%
B)10%
C)25%
D)15%
Q3) Identify four capital investment evaluation methods discussed in the chapter and discuss the strengths and weaknesses of each method.
Q4) If in evaluating a proposal by use of the net present value method there is an excess of the present value of future cash inflows over the amount to be invested, the rate of return on the proposal exceeds the rate used in the analysis.
A)True
B)False
Q5) What is capital investment analysis? Why are capital investment analysis decisions often difficult and risky?
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Chapter 11: Cost Allocation and Activity-Based Costing
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Sample Questions
Q1) If the activities causing overhead costs are different across different departments and products, use of a plantwide factory overhead rate will cause distorted product costs.
A)True
B)False
Q2) Activity-based costing can be used to allocate period costs to various products that the company sells.
A)True
B)False
Q3) Determine the activity rate for production per machine hour.
A)$62.50
B)$150.00
C)$75.00
D)$176.47
Q4) Determine the activity rate for materials handling per move.
A)$58.82
B)$50.00
C)$20.83
D)$80.65
Q5) Calculate the cost of services for a highlight.
Page 13
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Chapter 12: Lean Principles, Lean Accounting, and Activity Analysis
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Sample Questions
Q1) Large batch sizes increase lead time.
A)True
B)False
Q2) The Bright Lamp Company has budgeted its conversion cost for the small lamp production as $85,000 for 1,300 production hours.Each unit produced by the cell requires 15 minutes of process time.During the month, 3,800 units are manufactured in the cell.The estimated material cost is $18 per unit.Provide the following journal entries.
a Materials are purchased to produce 4,000 units.
b Conversion costs are applied to 3,800 units of production.Please round to nearest cent.
c 3,650 units are placed into finished goods.
Q3) In a lean environment, process problems are less visible than they are in a traditional environment.
A)True
B)False
Q4) In a push manufacturing system, raw materials are released to production based on actual customer orders.
A)True
B)False
14
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Chapter 13: Statement of Cash Flows
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Sample Questions
Q1) Which of the following is a noncash investing and financing activity?
A)payment of a cash dividend
B)payment of a six-month note payable
C)purchase of merchandise inventory on account
D)issuance of common stock to acquire land
Q2) Dividends received on investment
A)Operating activities
B)Financing activities
C)Investing activities
D)Schedule of noncash financing and investing
Q3) Cash paid for preferred stock dividends should be shown on the statement of cash flows under
A)investing activities
B)financing activities
C)noncash investing and financing activities
D)operating activities
Q4) In preparing the statement of cash flows, the correct order of reporting cash activities is financing, operating, and investing.
A)True
B)False
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Chapter 14: Financial Statement Analysis
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Sample Questions
Q1) A company reports the following:
Income before income tax $600,000
Interest expense 150,000
Determine the number of times interest charges are earned.Round your answer to one decimal place.
Q2) The report on internal control required by the Sarbanes-Oxley Act of 2002 may be prepared by either management or the company's auditors.
A)True
B)False
Q3) In computing the rate earned on total assets, interest expense is subtracted from net income before dividing by average total assets.
A)True
B)False
Q4) Unusual items affecting the current period's income statement consist of changes in accounting principles and discontinued operations.
A)True
B)False
Q5) The following data are available for Martin
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