Cost Analysis and Control Review
Questions
Course Introduction
Cost Analysis and Control provides an in-depth understanding of the methods and techniques used in analyzing, estimating, and managing costs within organizations. The course covers fundamental concepts such as cost behavior, cost allocation, budgeting, standard costing, variance analysis, and the use of cost information for decision making. Students will learn how to identify cost drivers, implement effective cost control systems, and utilize analytical tools to improve organizational efficiency and profitability.
Emphasis is placed on real-world applications and case studies, equipping students with practical skills necessary for effective cost management in various professional settings.
Recommended Textbook
Cornerstones of Cost Accounting 1st Canadian Edition by Don Hansen
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19 Chapters
2309 Verified Questions
2309 Flashcards
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Chapter 1: A: Basic Cost Management Concepts
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239 Flashcards
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Sample Questions
Q1) What is the overall objective of accounting information systems?
A)to provide information to users
B)to manage the organization
C)to prepare financial reports
D)to report to the government
Answer: A
Q2) In a cost management system,what does the cost view NOT include?
A)resources
B)activities
C)driver analysis
D)products and customers
Answer: C
Q3) Which of the following objectives do product value-chain costs assist managers in meeting?
A)merchandise mix decisions
B)tactical profitability analysis
C)external financial reporting
D)strategic design decisions
Answer: A
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Page 3
Chapter 1: B: Basic Cost Management Concepts
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Sample Questions
Q1) Explain what is meant by confidentiality and why it is important.
Answer: Management accountants are entrusted with sensitive information about their companies and their dealings with outside firms.Confidentiality standards require that accountants honour this trust.They cannot disclose confidential information without the permission of the company,unless legally required to do so.They must monitor their subordinates to make sure that they are upholding the confidentiality standard.They may not use or appear to use confidential information acquired in their work for unethical or illegal advantage.
Q2) What are the two major subsystems of the cost management system and why are they important?
Answer: A cost management system consists of two major subsystems: a cost accounting system and an operational control system.The cost accounting system is designed to assign costs to individual products or services.A cost accounting system must assign costs in order to value inventory and determine the cost of goods sold.The operational control system is designed to provide accurate,timely feedback concerning the performance of managers and others.Operational control is also designed to evaluate activities that should be performed and how well they are performed.The operational control system should be designed to provide opportunities for continuous quality improvement.
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Page 4
Chapter 2: Cost Behaviour
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Sample Questions
Q1) English Corporation analyzed the relationship between total factory overhead and changes in direct labour hours.It found the following:
Y = $6,000 + $6X
What is the Y in the equation an estimate of?
A)total variable costs
B)total direct labour hours
C)total factory overhead
D)total fixed costs
Answer: C
Q2) What is the term for the range of activity within which a linear cost function is valid?
A)normal range
B)relevant range
C)activity range
D)fixed range
Answer: B
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Page 5
Chapter 3: Cost-Volume-Profit Analysis
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Sample Questions
Q1) Which of the following assumptions is necessary for cost-volume-profit analysis?
A)Total variable costs are linear.
B)Total revenues increase when total costs increase.
C)Inventories change levels.
D)The product sales mix is change.
Q2) What happens when a company sells more units than the break-even point?
A)The relevant range changes.
B)Profits are positive.
C)There are no new variable costs incurred.
D)Profits are negative.
Q3) The break-even point in units can be calculated using the contribution margin approach in which of the following formulas?
A)Total Costs/Unit Contribution Margin
B)Total Costs/Fixed Costs
C)Fixed Costs/Selling Price per unit
D)Fixed Costs/Unit Contribution Margin
Q4) In the cost-volume-profit analysis,what are two ways management can deal with risk and uncertainty?
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Chapter 4: Job-Order Costing Systems
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Sample Questions
Q1) What source document is used to assign direct labour costs to individual jobs?
A)job-order cost sheet
B)payroll check
C)time sheet
D)requisition form
Q2) What is the purpose of developing a source document?
A)It is only an external document.
B)It provides transaction data that can be recorded in a database.
C)It is only used to record a transaction between an organization and an outside vendor.
D)It is only an internal document.
Q3) Which of the following costing system assigns actual costs of materials to inventory?
A)actual costing system
B)budgeted costing system
C)standard costing system
D)time-based costing system
Q4) Explain why actual costing systems are rarely used in practice.
Q5) Compare and contrast perishability and intangibility in an automobile oil lubrication shop and architectural design firms.
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Chapter 5: Process Costing
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Sample Questions
Q1) Refer to the figure.If a total of $11,050 in production costs were incurred,how much cost would be assigned to the units completed?
A)$3.250
B)$8,287.50
C)$9,750
D)$11,050
Q2) What costing system accumulates production costs by process and uses a work-in-process account for each process?
A)process costing
B)joint costing
C)variable costing
D)job-order costing
Q3) Refer to the figure.What is the cost assigned to the units completed and transferred to finishing?
A)$708,750
B)$777,500
C)$843,750
D)$976,000
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8
Chapter 6: Activity-Based Costing
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164 Flashcards
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Sample Questions
Q1) Refer to the figure.Using functional-based costing,what is the amount of overhead cost to be assigned to Product B using labour hours as the allocation base?
A)$11,600
B)$43,500
C)$46,400
D)$58,000
Q2) Refer to the figure.What is the capacity cost rate?
A)$4
B)$25
C)$35
D)$105
Q3) Refer to the figure.The company uses a predetermined overhead rate to apply overhead.What is the manufacturing overhead applied?
A)$648,000
B)$690,000
C)$700,000
D)$750,000
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Chapter 7: Allocating Costs of Support Departments and Joint Products
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Sample Questions
Q1) Which of the following would be the most appropriate base for allocating the costs of the maintenance department?
A)machine hours
B)direct labour hours
C)number of employees
D)square metres
Q2) What is the gross profit of product Y assuming the physical units method is used?
A)$0
B)$10,000
C)$15,000
D)$25,000
Q3) How much joint cost would be allocated to Product K based on the total sales value method?
A)$13,334
B)$26,666
C)$60,000
D)$80,000
Q4) Describe the differences between support and producing departments.Give three examples of each.
10
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Chapter 8: Budgeting for Planning and Control
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Sample Questions
Q1) What do realistic budgets reflect?
A)actual levels of activity,full capacity usage,efficiencies,and general economic trends
B)actual levels of activity,seasonal variations,efficiencies,and general economic trends
C)ideal levels of activity,full capacity usage,efficiencies,and general economic trends
D)ideal levels of activity,full capacity usage,and efficiencies
Q2) What is the planned production for Ben Company for April?
A)19,200 units
B)20,800 units
C)21,200 units
D)24,800 units
Q3) Refer to the figure.What is the budget variance for inspection in an activity-based performance report?
A)$1,000 F
B)$2,000 F
C)$3,000 F
D)$4,200 F
Q4) Discuss the features of an ideal budgetary process.
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Chapter 9: Standard Costing: a Functional-Based Control Approach
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Sample Questions
Q1) During January,7,000 direct labour hours were worked at a standard cost of $20 per hour.If the direct labour rate variance for January was $17,500 favourable,what would be the actual cost per direct labour hour?
A)$17.50
B)$20.00
C)$22.50
D)$25.00
Q2) In terms of variances,what is the term for the standard plus the allowable deviation?
A)upper control limit
B)standard price
C)standard quantity
D)total budget variance
Q3) When does a mix variance occur?
A)when the actual mix of inputs differs from the standard mix
B)when the actual output differs from the standard output
C)when actual materials used are greater than standard materials
D)when actual labour spending is greater than standard labour spending
Q4) Compare and contrast mix and yield variances.
12
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Chapter 10: Responsibility Accounting,performance
Evaluation,and Transfer Pricing
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110 Flashcards
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Sample Questions
Q1) Correll Company has two divisions,A and B.Information for each division is as follows: \(\begin{array}{lcc} & \underline{\text { A}}& \underline{\text { B}}\\
\text { Net earnings for division } & \$ 40,000 & \$ 260,000 \\
\text { Asset base for division } & \$ 100,000 & \$ 1,200,000 \\
\text { Target rate of return } & 15 \% & 18 \% \\
\text { Margin } & 10 \% & 20 \% \\
\text { Weighted average cost of capital } & 12 \% & 12 \%
\end{array}\) What is the residual income for A?
A)$15,000
B)$25,000
C)$28,000
D)$40,000
Q2) If the operating asset turnover increased by 50 percent and the margin increased by 50 percent,by how much would the ROI increase?
A)25 percent
B)50 percent
C)100 percent
D)125 percent
Q3) How are information,responsibility,and accountability related?
Page 13
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Chapter 11: Tactical Decision Making
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Sample Questions
Q1) Gundy Company manufactures a product with the following costs per unit at the expected production of 30,000 units: \(\begin{array}{llr}
\text { Direct materials} &\$4\\
\text { Direct labour } &12\\
\text { Variable manufacturing overhead } &6\\
\text { Fixed manufacturing overhead } &8\\ \end{array}\)
The company has the capacity to produce 40,000 units.The product regularly sells for $40.A wholesaler has offered to pay $32 a unit for 2,000 units. If the firm is at capacity and the special order is accepted,what would be the effect on operating income?
A)$0
B)$4,000 increase
C)$16,000 decrease
D)$20,000 increase
Q2) Describe the steps in the decision-making process.What is the role of qualitative factors in tactical decision making?
Q3) What are relevant costs? How do they relate to decision making?
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Chapter 12: Pricing and Profitability Analysis
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102 Flashcards
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Sample Questions
Q1) Gage Company had the following information: \[\begin{array} { l r }
\text { Revenues }& \$ 600,000 \\
\text { Cost of goods sold } & 60 \% \\
\text { Selling and adrinistrative expenses } & \$ 130,000
\end{array}\] What is the markup on cost of goods sold?
A)0.1833
B)0.3611
C)0.6667
D)0.7667
Q2) Refer to the figure.What is the February contribution margin for Steele Corporation using the variable costing method?
A)$119,000
B)$170,000
C)$204,000
D)$240,000
Q3) Refer to the figure.What is the profit or loss from Option Two?
A)$40,000
B)($100,000)
C)$100,000
D)$600,000
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Chapter 13: Strategic Cost Management
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Sample Questions
Q1) Which stage of the marketing life cycle has slow sales growth with peak sales?
A)introduction
B)growth
C)maturity
D)decline
Q2) A firm that has implemented JIT had the following transactions: 1. Materals were purchased an account for $60,000
2. Materials were placed inta production.
3. Actual direct labour costs were $14,000.
4. Actual averhead costs were $50,000.
5. Conversion costs applied were $54,000.
6. All work was completed for the month.
7. All completed work was sald.
8. The variance is recoprized.
A)Provide the journal entries for the above transactions assuming the traditional approach was used.
B)Provide the journal entries for a back flush system assuming the second trigger point is the point when goods are sold.
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Chapter 14: Activity-Based Management
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Sample Questions
Q1) What is multiplied by standard quantity to equal value-added costs?
A)non-value-added costs
B)currently attainable standards
C)standard price
D)actual price
Q2) What is the term for increasing the efficiency of necessary activities by using economies of scale?
A)activity sharing
B)activity elimination
C)activity selection
D)activity reduction
Q3) Which of the following is a necessary essential element of activity-based responsibility accounting?
A)Process management requires significant group activity.
B)Performance evaluation employs static standards.
C)Performance evaluation uses only financial measures.
D)Performance evaluation is based on practical standards.
Q4) Describe how activity-based management and activity-based costing systems differ.
Q5) What is kaizen costing? How does activity analysis help reduce costs?
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Chapter 15: The Balanced Scorecard: Strategic-Based Control
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Sample Questions
Q1) Activity-based evaluation and strategic-based evaluation incorporate some of the same elements.However,strategic-based responsibility adds some new elements to the common dimensions.What are the elements in common and what new elements are included?
Q2) Roberts,Inc.,manufactures a product that experiences the following activities:
\[\begin{array} { l l }
\text { Proces5ing (three depariments) } & 18 \text { hours } \\
\text { Moving (fau moves) } & 2 \text { hours } \\
\text { Waiting time } & 14 \text { hours } \\
\text { Storage time (before delivery) } & 26 \text { hours }
\end{array}\] What is the MCE for the product?
A)0.30
B)0.42
C)0.45
D)0.48
Q3) How can a testable strategy be constructed?
A)by prioritizing objectives
B)by sequencing if-then statements
C)by creating alternative scenarios
D)by creating lead measures
Page 18
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Chapter 16: Quality and Environmental Cost Management
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Sample Questions
Q1) Refer to the figure.What is the change in environmental costs from 20X1 to 20X2?
A)$12,000
B)$37,000
C)$41,000
D)$750,000
Q2) Refer to the figure.For the current year,what percentage of operating costs are external failure costs?
A)1.50%
B)2.50%
C)2.75%
D)4.25%
Q3) What type of activity is developing environmental performance measures?
A)prevention activity
B)detection activity
C)internal failure activity
D)external failure activity
Q4) What does quality mean and how has improving quality increased firm value?
Q5) Within the robust view of strategy,describe the management strategy to reduce quality costs recommended by the American Society for Quality Control.
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Chapter 17: Lean Accounting and Productivity Measurement
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Sample Questions
Q1) Refer to the figure.What is the product cost based on total average conversion cost? (Round to nearest cent.)
A)$36.04
B)$45.86
C)$49.14
D)$95.00
Q2) In calculating product costs for a value stream with multiple products,when would average product costs be a good estimate of individual product costs?
A)when the products are similar and consume resources in approximately the same proportion
B)when the product mix is relatively unstable
C)when the products are very different in size,style,and production
D)when the products consume labour at different rates
Q3) Which of the following conditions is NOT an example of technical efficiencies?
A)more output; fewer inputs
B)same output; fewer inputs
C)more output; same inputs
D)less output; less inputs
Q4) Describe the objectives and characteristics of a lean manufacturing system.
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Chapter 18: Inventory Management: Economic Order
Quantity,jit,and the Theory of Constraints
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Sample Questions
Q1) Heft Company produces A and B with contribution margins per unit of $40 and $30,respectively.Only 500 labour hours and 300 machine hours are available for production. Time requirements to produce one unit of A and B are as follows: \(\begin{array}{lcc}
&\text {Product A }&\text {Product E}\\
\text { Labour hours per unit } &5&2\\
\text { Machine hours per unit } &1&4\\ \end{array}\)
What is the constraint on machine hours for Heft Company?
A)1A + 4B \(\le\) 300
B)1A + 4B \(\le\) 500
C)5A + 2B \(\le\) 500
D)40A + 30B \(\le\) 500
Q2) One of the traditional reasons for holding inventory is to minimize total carrying costs and setup costs.What is the JIT solution meant to do?
A)reduce setup costs
B)reduce lead time
C)use total preventive maintenance
D)use total quality control
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