In class test MCQs

Question 1

Cost of Goods sold

Answer 1

Beginning inventory + purchases - Ending inventory

Question 2

Is it possible for a cost to be a direct cost of one cost object and an indirect cost of another

Answer 2

True

Question 3

Sunk cost

Answer 3

Past resources payments that can’t be changed by any current or future decision

Question 4

Cost of goods manufactured

Answer 4

Direct materials used + Direct Labour + overhead + beg. inv. of work in progress - ending inventory of work in progress

Question 5

Idle time caused by equipment breakdown should be accounted for as

Answer 5

A manufacturing overhead cost

Question 6

What type of cost is rent?

Answer 6

Fixed cost

Question 7

What type of costs are factory heating and A/C

Answer 7

Product cost

Question 8

What type of cost is maintenance on factory equipment?

Answer 8

Indirect product cost

Question 9

What is X in TC =F + VX

Answer 9

x is the cost driver

Question 10

Which method of cost estimation doesnt use the company record as its primary source of cost activity data?

Answer 10

Engineering estimates

Question 11

Account analysis approach to cost estimation

Answer 11

Accounting personal must have adequate experience and good judgement

Question 12

A salesperson with a flat salary and commission on all sales is what type of cost?

Answer 12

Mixed cost

Question 13

Which of the following wouldn’t be a reason that a company would use cost estimation?

Answer 13

Determining how much to pay an employee

Question 14

Traditional cost accounting can be effective if the level of indirect costs is low relative to the level of direct costs and if the accuracy of the cost information isnt critical to the company’s success

Answer 14

True

Question 15

Implementing an activity based costing system is relatively expensive

Answer 15

true

Question 16

A company may benefit from Activity based costing if :

Answer 16

goods and services are complex and require many different processes or inputs

Question 17

A cost driver base should be based on the resources practical capacity to support activities

Answer 17

true

Question 18

What does customer profitability analysis help management do

Answer 18

helps them see the overall financial picture for each customer and management can use this info to establish a strategic plan for coming periods

Question 19

Example of value added activity

Answer 19

Making customer contacts and sales

Question 20

An activity is value added if

Answer 20

an external customer would encourage the organisation to do more of that activity

Question 21

An organisation that performs lots of value added activities will be

Answer 21

more likely to achieve its goal (by performing these activities)

Question 22

Activity based management

Answer 22

evaluates the costs and values of process activities to identify opportunities for improved efficiency

Question 23

Target cost is

Answer 23

the highest cost of good or service that meets both customer needs and company profit goals

Question 24

eliminating non value added activities without redesigning processes

Answer 24

is unlikely to result in long term benefits

Question 25

Contribution margin is

Answer 25

defined as total sales revenue minus total variable costs

Question 26

Break even analysis assumes that

Answer 26

Unit variable cost is constant

Question 27

Contribution margin at breakeven

Answer 27

equals total fixed costs

Question 28

Breakeven formula

Answer 28

Fixed costs / contribution per unit

Question 29

If demand exceeds practical capacity

Answer 29

the process is a bottleneck

Question 30

An increase in building insurance will result in an

Answer 30

increase in the breakeven point

Question 31

Contribution margin per unit

Answer 31

Sales price - variable cost

Question 32

Ending balance =

Answer 32

Beginning balance + Transfers in - Transfers out

Question 33

overhead variance is the

Answer 33

difference between the actual overhead spending and applied overhead

Question 34

cost of goods sold account records the cost of

Answer 34

finished jobs that have been sold during the period

Question 35

throughput product cost of goods sold is

Answer 35

material cost / units produced

Question 36

gross margin ratio

Answer 36

(sales turnover-cost of sales) / sales turnover

Question 37

operating income

Answer 37

gross margin - period expenses

Question 38

return on sales ratio

Answer 38

operating income / sales

Question 39

Basic CVP model

Answer 39

Revenue = Variable costs + Fixed costs + Income

Question 40

target income

Answer 40

fixed expenses + target income / unit contribution margin

Question 41

job costing

Answer 41

distinctive products high value unit costs traced back to units

Question 42

process costing

Answer 42

homogenous products low value unit costs traced back to process

Question 43

POHR

Answer 43

budgeted total manufacturing overhead for coming year -------------------------------------------------- budgeted total units in allocation base for coming year

Question 44

overhead applied

Answer 44

POHR * actual activity

Question 45

under applied overhead

Answer 45

actual > applied

Question 46

over applied overhead

Answer 46

applied > actual

Question 47

absorption costing

Answer 47

direct material, direct labour variable manufacturing overhead fixed manufacturing overhead

Question 48

variable costing

Answer 48

direct material, direct labour | variable manufacturing overhead

Question 49

life cycle costing tracks

Answer 49

costs attributable to each product/service from start to finish

Question 50

High low method VC

Answer 50

change in cost / change in activity

Question 51

Does fixed cost per unit increase as activity increases?

Answer 51

No, fixed cost per unit decreases as activity increases

Question 52

Overtime premium costs are

Answer 52

NOT part of direct labour

Question 53

Does fixed costs affect contribution margin?

Answer 53

NO, the formula is sales price - variable cost

Question 54

when setting prices for products/services

Answer 54

a business DOESN'T have complete freedom

Question 55

When a company has scarce resources

Answer 55

they SHOULDNT allocate it to the product with the highest contribution margin per unit

Question 56

What isn't a step in ABM

Answer 56

calculating a cost driver for each activity

Question 57

Does ABM have a goal to eliminate all non value added activities ?

Answer 57

no

Question 58

what isnt a step in ABC?

Answer 58

classifying costs into fixed and variable cost behaviour

Question 59

What is Acitivity Based Costing?

Answer 59

a method that identifies activities performed in a company and calculates a cost driver rate

Question 60

What is Activity Based Management?

Answer 60

Extension to ABC , identifies activities as VA/NVA and scores each activity

Question 61

ABC steps (4)

Answer 61

1) identify and classify activities 2) estimate cost 3) calculate cost driver rate 4) assign costs to products using cost driver rate

Question 62

ABM steps (3)

Answer 62

5) identify activities as VA/NVA 6) score each activity as high/low 7) identify opportunities to enhance VA and reduce NVA

Question 63

multiple regression

Answer 63

has more than one independent variable

Question 64

if a company changes from selling high margin products to low margin products

Answer 64

break even will increase

Question 65

work in process inventory represents the cost of all incomplete active jobs

Answer 65

true

Question 66

implementing ABC is

Answer 66

expensive

Question 67

can all costs be divided into variable and fixed ?

Answer 67

no

Question 68

is transporting workers to work sites a value added activity?

Answer 68

no

Question 69

cost of setting up molding machines is

Answer 69

batch level activity

Question 70

as volume of production increases what happens to variable and fixed costs?

Answer 70

variable costs per unit stay the same, fixed cost per unit decreases