Cost Accounting - Exam 1: Possible Multiple Choice Concept Questions

The management accountant's responsibility under the Institute of Management Accountants (IMA) Statement of Ethical Professional Practice includes the responsibility to "mitigate actual conflicts of interest." This responsibility fits within which of the four standards in the IMA Statement? Communication. Integrity. Honesty. Quality. Confidentiality.

Integrity.

The emphasis on effective __________ has __________ significantly in response to Securities and Exchange Commission requirements imposed by the Sarbanes-Oxley Act of 2002. Multiple Choice Cost allocation; decreased Internal accounting controls; increased Profitability; increased Cost drivers; decreased None of the answers are correct.

Internal accounting controls; increased

What is not an advantage of standard costing used in conjunction with process costing? Multiple Choice It can provide a means for evaluating performance. It provides a basis with which to measure and analyze the cost changes. It can help management identify and respond promptly to unexpected changes in labor. It is the only method that can be used with process costing. It is helpful when materials or labor costs are changing rapidly.

It is the only method that can be used with process costing.

Theoretically, a decision maker would probably be willing to buy cost management information if: Multiple Choice It is accurate. It is consistent with management objectives. It is timely. Its value is equal to or greater than its cost. It is relevant.

Its value is equal to or greater than its cost.

With regards to a firms product line, a cost leadership strategy would strive for _______ while a differentiation strategy would strive for ________. Wide variety; limited selection Broad cross section of the market; focused section of the market Limited selection; wide variety Focused section of the market; broad cross section of the market None of these answers are correct

Limited selection; wide variety

Which of the following is most likely to be the cost driver for the packaging and shipping activity? Multiple Choice Number of setups. Number of components. Number of orders. Hours of testing. Number of production runs.

Number of orders.

What is a product cost? Multiple Choice Only the costs necessary to complete the product. All nonproduct expenditures for managing the firm and selling the product. The cost of the product transferred to the income statement when inventory is sold. Cost of the supply of materials used in the manufacturing process or to provide the service. The cost of goods that are ready for sale.

Only the costs necessary to complete the product.

Which of the following has the weakest linkage between activity and cost driver? Model Cost Driver A) Machine Setup Number of setups B) Machine maintenance Machine hours C) Lighting on shop floor. Number of kilowatt-hours D) Quality control Square feet of floor space E) Materials handling Weight of materials in process

Option D D) Quality control Square feet of floor space

All indirect manufacturing costs are commonly combined into a single cost pool called: Activity cost pools. Value streams. Resources. Overhead. Other manufacturing costs.

Overhead.

Which of the following would not be considered a facility-level activity? Multiple Choice Providing security for the plant. Factory property taxes and insurance. Closing the books each month. Placing purchase orders.

Placing purchase orders.

The Activity-Based costs assigned to cost objects are based on what? Multiple Choice Activity cost pools. Actual levels of spending. Actual levels of capacity usage. Planned levels of spending and capacity usage. The size of the cost object.

Planned levels of spending and capacity usage.

Which of the following is not used to calculate total manufacturing cost? Multiple Choice Prime cost Materials Labor Indirect Labor Indirect Materials

Prime cost

Cost advantages usually result from: Productivity in customer satisfaction. Productivity in the hiring of new employees. Productivity in distribution. Using cheaper but lower quality materials. A differentiation strategy.

Productivity in distribution.

If a costing system uses a single base to allocate overhead costs that are the result of several production activities: Multiple Choice Products that use relatively more of this base tend to be undercosted. Products that use relatively less of this base tend to be overcosted. Products that use relatively more of this base tend to be overcosted. Products may be over- or under-costed, depending on the overhead rate. None of these answers are correct.

Products that use relatively more of this base tend to be overcosted.

Due in part to increased global competitiveness and changes in management techniques and processes, what has changed about the role of the management accountant? Management accountants have started to place a greater emphasis on financial information, in order to promote continued growth in earnings. Rather than to focus on problems within functions (such as a marketing problem or a production problem), management accountants are using a strategic approach to address problems in a cross-functional manner. Management accountants have developed a variety of new techniques to measure functional area performance. There has been a renewed emphasis on short-term profitability, since product life cycles have started getting shorter. The role of management accountants has grown smaller as companies increase their global competitiveness.

Rather than to focus on problems within functions (such as a marketing problem or a production problem), management accountants are using a strategic approach to address problems in a cross-functional manner.

What is the final step in the process costing procedure for weighted average? Multiple Choice Compute Cost per Equivalent Unit. Calculate Equivalent Units for Each Manufacturing Cost Element. Determine Total Costs for Each Manufacturing Cost Element. Analyze the Physical Flow of Production Units. Assign Total Manufacturing Costs to Units Completed and Ending WIP.

Assign Total Manufacturing Costs to Units Completed and Ending WIP.

Cost management information typically is the responsibility of the: Chief Financial Officer. Controller. Treasurer. Chief Information Officer. None of these answers are correct.

Controller.

What is the assignment of indirect costs to cost pools and cost objects called? Cost allocation. Allocation bases. Overhead costs. Cost separation. Cost integration.

Cost allocation.

The competitive strategy in which the firm succeeds by producing at the lowest cost in the industry is termed: Differentiation. Cost advantage. Price strategy. Cost leadership. Resource-based strategy.

Cost leadership.

What inventory account is used for both manufacturing and merchandising companies? Multiple Choice Materials Inventory. Work-in-Process Inventory. Finished Goods Inventory. Cost of Goods Sold. Labor.

Cost of Goods Sold.

Which of the following is an example of an indirect cost? Multiple Choice Cost of downtime Cost of labor Cost of materials Cost of packaging materials None of the answer choices are correct.

Cost of downtime

If finished goods inventory has increased during the period, which of the following is always true? Multiple Choice Cost of goods sold is less than cost of goods manufactured. Cost of goods sold is more than cost of goods manufactured. Cost of goods manufactured is more than total manufacturing costs. Cost of goods manufactured is less than total manufacturing costs. None of these answers are correct.

Cost of goods sold is less than cost of goods manufactured.

The term relevant range as used in cost accounting means the range over which: Multiple Choice Costs may fluctuate. Cost relationships are approximately linear. Production may vary. Relevant costs are incurred. Relevant costs are avoided.

Cost relationships are approximately linear.

The cost of sales visits is a: Multiple Choice Customer unit-level cost. Customer batch-level cost. Customer-sustaining cost. Distribution-channel cost. Sales-sustaining cost.

Customer-sustaining cost.

Which of the following is not an example of a product cost? Multiple Choice Salary of manufacturing supervisor Power for equipment Depreciation on company-owned sales outlets Depreciation on company-owned manufacturing plant Materials used in the product.

Depreciation on company-owned sales outlets

Target costing: Determines cost based on an expected market demand for the product. Determines cost based on a budget. Determines cost based on standard cost. Determines cost based upon market price and desired profit. Determines cost based on a break-even formula.

Determines cost based upon market price and desired profit.

Which one of the following is not a type of cost driver? Multiple Choice Structural cost driver. Executional cost driver. Volume-Based cost driver. Differential cost driver. Activity-Based cost driver.

Differential cost driver.

The national sales manager for your company has pulled you aside and asked you to prepare a sales document (bill) for one of the company's largest clients before the end of the fiscal year which ends this month. This sales document will include items that have not yet been shipped and are not planned for shipment until the next fiscal year. What should you do in this situation? Bill the client as asked by the national sales manager. Bill the client since this is consistent with past transactions near fiscal year-end. Contact the client and notify them that credit terms are being extended on this invoice since the goods have not been shipped. Discuss this situation with your supervisor since the transaction cannot be recognized as a sale until the items are shipped. Bring up the matter with the external auditor.

Discuss this situation with your supervisor since the transaction cannot be recognized as a sale until the items are shipped.

Which of the following tend to be non-differential in the short term since they cannot be changed, but are more likely to be differential in the long term? Multiple Choice Fixed costs. Variable costs. Mixed costs. Semivariable costs. None of the answers are correct.

Fixed costs.

Which of the following is not a level that a firm classifies its activities at? Multiple Choice Unit-level corporate-level batch level product-level facility-level

corporate-level

If the usage of project activities is not proportional to the number of units produced, then some managers will be overcharged and others undercharged under: Multiple Choice Activity-based costing. Volume-based costing. Overhead costing. Process costing. Materials costing.

Volume-based costing.

Which of the following aspects of a company would not be considered a critical success factor, for a company that competes on differentiation? Cutting edge research and development. Excellent customer service. Award-winning product quality. Continually beating competitors to the market with new, innovative products. A high level of production efficiency.

A high level of production efficiency.

The journal entry to record incurred direct labor would include a credit to: Multiple Choice Work-in-Process Inventory. Accrued Payroll. Factory Overhead. Materials Inventory. Finished Goods Inventory.

Accrued Payroll.

The U.S. Department of Agriculture urges the use of process costing together with: Multiple Choice Normal costing. Volume-based costing. Activity-based costing. Standard costing. None of these answers are correct.

Activity-based costing.

A manager of a large retail firm is interested in knowing what the company's product costs are. Which of the following would be considered a period cost for the manager's company? Multiple Choice Direct materials. Direct labor. Factory overhead. Advertising. Purchase Costs.

Advertising.

Important changes in the contemporary business environment include all of the following except: Management organizations. Climate change. Information technology. Customer expectations. Global competition.

Climate change.

Strategic management can be defined as the development of a sustainable: Chain of command. Competitive position. Cash flow. Business entity. Company image.

Competitive position.

General corporate sales expenditures are: Multiple Choice Customer unit-level costs. Customer batch-level costs. Customer-sustaining costs. Distribution-channel costs. Sales-sustaining costs.

Sales-sustaining costs.

A company's management accountant is trying to improve the way costs are allocated within the company. Currently, several corporate expenses are grouped together and labeled "overhead." If the accountant wanted to use activity-based costing (ABC) to help solve the problem, what should she do? She should try to trace the departments' costs to their cost objects, and then charge each department based on those cost relationships. She should research how the company's competitors are allocating their costs, and then implement one of those strategies. She should look for bottlenecks within the production process, and try to eliminate them, thus reducing costs. She should examine the firm's value chain and apply target costing before adopting activity-based costing (ABC) She should identify and monitor the costs of a product throughout its life cycle to see where the costs mostly come from.

She should try to trace the departments' costs to their cost objects, and then charge each department based on those cost relationships.

The competitive strategy of differentiation is implemented by a firm's targeted, careful attention to a(n): Specific feature of the product or service. High efficiency level of production. Broad possible market. Aggressive competitive pricing plan. Financial goal decided upon by management.

Specific feature of the product or service.

Nonfinancial measures of operations include all the following except: Stock price. Product quality. Customer satisfaction. Market share. Growth opportunities.

Stock price.

Effective implementation of activity-based costing (ABC) requires: Multiple Choice Normally the assistance of a consultant. A sophisticated and expensive computer system. Support of top management and key employees. Capturing properly the complexity of the data. Activity-Based Costing has no significant implementation issues.

Support of top management and key employees.

The first-in, first-out method assumes that: Multiple Choice Costs of production are relatively small. The company only has one department. The first units completed are among the first units sold. The first units to enter a production process are the first units to be completed and transferred out. The company has already calculated the weighted average method.

The first units to enter a production process are the first units to be completed and transferred out.

A firm has many products, some produced in an automated production process and some produced in a manual production process. Using direct labor hours to assign manufacturing overhead to a product manufactured with a highly automated process is likely to: Multiple Choice Overstate overhead of the product. Understate overhead of the product. Overapply overhead to the period. Underapply overhead to the period. Have no effect on overhead of the product.

Understate overhead of the product.

The competitive strategy of differentiation requires that a product or service must be: Always readily available. Price competitive. Produced at the lowest possible cost. Unique in some important way in terms of features, innovation, service or quality. Marketed in different ways to different groups.

Unique in some important way in terms of features, innovation, service or quality.