Cost Management
Final Exam Questions
Course Introduction
Cost Management is a vital course that explores the methodologies, tools, and techniques used to control and reduce costs within organizations. Through the study of cost behavior, budgeting, standard costing, variance analysis, and cost allocation, students learn how to analyze and interpret cost information for effective decision-making. The course emphasizes strategic cost management, including activity-based costing and life-cycle costing, to help future managers improve operational efficiency and achieve financial objectives. Case studies and real-world scenarios are utilized to prepare students for practical challenges in managing costs across various industries.
Recommended Textbook Managerial Accounting 3rd Edition by
Karen W. Braun Wendy M Tietz
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2
Chapter 1: Introduction to Managerial Accounting
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Q1) The ability to meet the needs of the present without compromising the needs of the future is often referred to as
A)the bottom line.
B)total quality management.
C)sustainability.
D)just-in-time.
Answer: C
Q2) Which of the following persons or groups would be least likely to receive detailed managerial accounting reports?
A)CEO
B)Plant managers
C)Current shareholders
D)Sales territory managers
Answer: C
Q3) How often should managerial accounting reports be prepared?
A)Annually
B)Quarterly
C)Monthly
D)As often as necessary
Answer: D
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Chapter 2: Building Blocks of Managerial Accounting
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Q1) Delivery expenses are charged to which of the following areas?
A)Distribution
B)Customer service
C)Production or purchases
D)Marketing
Answer: A
Q2) What type of company resells products it purchases ready-made from suppliers?
A)Merchandiser
B)Retailer
C)Wholesaler
D)All of the above
Answer: D
Q3) Costs that remain the same among alternatives are A)sunk costs.
B)irrelevant costs.
C)controllable costs.
D)uncontrollable costs.
Answer: B
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4
Chapter 3: Job Costing
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Sample Questions
Q1) The work in process account is debited for the cost of direct labor in a job cost system.
A)True
B)False
Answer: True
Q2) Sales revenue is $750,000; actual manufacturing overhead is $120,000; allocated manufacturing overhead is $95,000; and cost of goods sold before adjustment is $380,000. What is the actual gross profit?
A)$395,000
B)$370,000
C)$345,000
D)$250,000
Answer: C
Q3) A service firm's costs are comprised of direct materials, direct labor and manufacturing overhead.
A)True
B)False
Answer: False
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Chapter 4: Activity-Based Costing, Lean Operations, and the Costs of Quality
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Q1) On a cost of quality report, which of the following cost items should be classified as a prevention cost?
A)Technical support provided to suppliers
B)Warranty expenses on defective products
C)Supervision of quality inspections
D)Net cost of spoiled units
Q2) If a company were to increase its appraisal costs by inspecting more units as the units are completed, the company's external failure costs would most likely A)decrease.
B)increase.
C)remain the same.
D)Unable to predict
Q3) Quality-related costs generally fall into four different categories, which include all of the following except
A)prevention costs.
B)appraisal costs.
C)internal failure costs.
D)transportation costs.
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Chapter 5: Process Costing
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Sample Questions
Q1) If a company has no ending work in process inventory, it does not need to use the 5-step process costing procedure to determine the cost of making one unit.
A)True
B)False
Q2) Process costing would likely be used by which of the following?
A)Clear Channel Advertising
B)PIP Printing
C)DBA Management Consultants
D)PepsiCo
Q3) The weighted average and FIFO methods differ only in how they treat beginning inventory.
A)True
B)False
Q4) The first step of the 5-step process costing procedure is to summarize total costs to account for.
A)True
B)False
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Chapter 6: Cost Behavior
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Sample Questions
Q1) Under absorption costing, fixed manufacturing costs are not expensed until the units are sold.
A)True
B)False
Q2) Under absorption costing, all nonmanufacturing costs are treated as period costs.
A)True
B)False
Q3) Maryland Incorporated produces toys. Total manufacturing costs are $350,000 when 50,000 toys are produced. Of this amount, total variable costs are $100,000. What are the total production costs when 75,000 toys are produced? (Assume the same relevant range for both production levels.)
A)$150,000
B)$400,000
C)$500,000
D)$525,000
Q4) Contribution margin income statements organize costs by behavior.
A)True
B)False
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Chapter 7: Cost-Volume-Profit Analysis
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Sample Questions
Q1) A hotel would be an example of a company with high operating leverage.
A)True
B)False
Q2) If a unit sells for $12.50 and has a variable cost of $3.25, its contribution margin per unit is $9.25.
A)True
B)False
Q3) Franklin Producers sells its core product for $8 per unit and has variable costs of $6 per unit. Total fixed costs are $28,000. Suppose variable costs increase by 20% due to an increase in the cost of direct materials. What will be the effect on the breakeven point in units?
A)Decrease from 2,000 units to 1,842 units
B)Decrease from 14,000 units to 4,118 units
C)Increase from 14,000 units to 35,000 units
D)Decrease from 4,667 units to 3,889 units
Q4) The breakeven point is the sales level where operating income is positive.
A)True
B)False
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Chapter 8: Relevant Costs for Short-Term Decisions
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Sample Questions
Q1) Target total cost is described by which of the following?
A)Total cost plus desired profit
B)Revenue at market price plus desired profit
C)Revenue at market price minus desired profit
D)Total cost minus actual cost
Q2) If the cost savings from discontinuing a product exceed the lost revenues from discontinuing the product, it should be retained.
A)True
B)False
Q3) In a sell or process further decision, the company should process further if
A)the extra cost of processing further is the same as the extra revenue.
B)the extra revenue from processing further is less than the extra cost.
C)the extra cost of processing further is greater than the extra revenue.
D)the extra cost of processing further is less than the extra revenue.
Q4) All of the following are outsourcing considerations, except
A)Are any fixed costs avoidable if we outsource?
B)How do our fixed costs compare to the outsourcing cost?
C)What could we do with the freed capacity?
D)How do our variable costs compare to the outsourcing cost?
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Chapter 9: The Master Budget
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Sample Questions
Q1) The ________ budget is part of the operating budgets.
A)capital expenditure
B)budgeted balance sheet
C)production
D)cash
Q2) Terrific Toys Company manufactures and sells children's skateboards. Each skateboard requires four bearings. For September, Terrific Toys Company has budgeted skateboard sales of 530 skateboards, while 570 skateboards are scheduled to be produced. Terrific Toys Company will begin September with 220 bearings in its beginning inventory. How many bearings should Terrific Toys Company purchase for September?
A)310
B)2,280
C)2,500
D)2,060
Q3) Budgeting includes planning for ending inventory.
A)True
B)False
Q4) List and describe three reasons why a company and its managers could benefit from the use of budgeting.
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Chapter 10: Performance Evaluation
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Q1) Lewis Company has operating income of $336,000. Its return on investment (ROI)is 48%, while its target rate of return is 10%. The total assets of Lewis Company would be closest to
A)$33,600.
B)$3,360,000.
C)$161,280.
D)$700,000.
Q2) Davis Corporation manufactures and sells portable radios. The radio sells for $35 per unit and its variable costs per unit are $30. Fixed costs are $64,000 per month for sales volumes up to 32,000 radios. If more than 32,000 radios are sold, the fixed costs will be $83,000. The flexible budget would reflect what monthly operating income for a sales volume of 41,000 radios?
A)$141,000
B)$122,000
C)$1,435,000
D)$205,000
Q3) KPI in the Balanced Scorecard stands for Knowledge Profitability Index.
A)True
B)False
Q4) Discuss potential problems associated with decentralization.
Page 12
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Chapter 11: Standard Costs and Variances
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Sample Questions
Q1) If a company produces many different products, it will develop a standard cost for each type of product.
A)True
B)False
Q2) Sandy's Sauces, which produces stir-fry sauces, is developing direct material standards. Each bottle of sauce requires 0.70 kilograms of base. The allowance for waste is 0.05 kilograms per bottle, while the allowance for rejects is 0.09 kilograms per bottle. What is the standard quantity of base per bottle?
A)0.70 kilograms
B)0.79 kilograms
C)0.75 kilograms
D)0.84 kilograms
Q3) Which of the following examples would lead directly to a favorable fixed overhead volume variance?
A)A decrease in county property taxes for the factory
B)Producing more units than anticipated
C)A decrease in wages paid to factory maintenance workers
D)Receiving a volume discount on indirect materials purchased
Q4) Identify five benefits of standard costs.
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Chapter 12: Capital Investment Decisions and the Time Value of Money
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Q1) Capital budgeting methods will not work with unequal cash flows during the capital asset's life. Other methods must be utilized in those cases.
A)True
B)False
Q2) When the profitability index is less than 1.00 for a project, that project has a positive net present value.
A)True
B)False
Q3) Which of the following is used as the equation's numerator when computing the payback period for a capital asset with equal annual net cash inflows?
A)Expected annual cash inflow
B)Total cash inflows
C)Amount invested
D)Net cash outflow
Q4) The three factors that affect the time value of money are principal, number of periods, and the interest rate.
A)True
B)False
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Chapter 13: Statement of Cash Flows
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Q1) Where are noncash investing and financing activities reported?
A)The financing activities section of the statement of cash flows
B)A schedule accompanying the statement of cash flows
C)The investing activities section of the statement of cash flows
D)In both A and B
Q2) On the statement of cash flows, which of the following sections includes the purchase and sale of treasury stock?
A)Investing section
B)Operating section
C)Financing section
D)None of the above
Q3) A company uses the indirect method to prepare the statement of cash flows. It sold a piece of equipment at a loss of $3,600. The equipment was purchased several years ago for $70,500 and had accumulated depreciation of $56,900. What is reported under the operating activities section on the statement of cash flows?
A)Cash proceeds of $10,000 are subtracted from net income.
B)Cash proceeds of $10,000 are added to net income.
C)The loss of $3,600 is subtracted from net income.
D)The loss of $3,600 is added to net income.
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Chapter 14: Financial Statement Analysis
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Q1) Benchmarking is the comparison of year-to-year results of the company.
A)True
B)False
Q2) Vertical analysis is the analysis of a financial statement that reveals the relationship of each statement item to a specified base.
A)True
B)False
Q3) Which of the following is the formula to compute inventory turnover?
A)Net credit sales/average inventory
B)Average net accounts receivable/one day's sales
C)Net credit sales/average net accounts receivable
D)Cost of goods sold/average inventory
Q4) Comparing the horizontal analysis of McDonald's financial statements to the horizontal analysis of Burger King's financial statements in percentages of increase or decrease from 2010 to 2011 would be
A)vertical analysis.
B)benchmarking.
C)ratio analysis.
D)horizontal analysis.
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Chapter 15: Sustainability
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Q1) The "triple bottom line" reports on three factors: profits, people, and planet.
A)True
B)False
Q2) An organization faces many challenges when implementing an environmental accounting (EMA)system. Which of the following inherent challenges is an accountant facing when he is having difficulty finding literature regarding "best practices" for environmental accounting?
A)Hidden Cost
B)Communication issue
C)Newness of EMA
D)Historical orientation of accounting
Q3) Implementing sustainable business practices may help an organization to grow its market share.
A)True
B)False
Q4) Materials costs of product outputs category is similar to indirect materials since it becomes part of the final product.
A)True
B)False
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