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Cost Accounting Part 2
Finals Exam Part 1
1. Under the three-variance method for analyzing factory overhead, which of the following
is used in the computation of the spending variance?

Budget Allowance Budget Allowance

based on actual hours based on standard hours
a. Yes No
b. Yes Yes
c. No Yes
d. No No

2. Under the three-variance method for analyzing factory overhead, the difference between
the actual factory overhead and the budget allowance based on actual hours is the
a. Efficiency variance
b. Spending variance
c. Volume variance
d. Idle Capacity variance
3. Under the three-variance method for analyzing factory overhead, the difference between
the actual factory overhead and the factory overhead applied to production is the
a. Net Overhead variance
b. Controllable variance
c. Efficiency variance
d. Spending variance
4. Under the three-variance method for analyzing factory overhead, which of the following
is used in the computation of the spending variance?

Budget Allowance Factory Overhead

based on standard hours applied to production
a. Yes Yes
b. Yes No
c. No Yes
d. No No
5. Under the two-variance method for analyzing factory overhead, the difference between
the actual factory overhead and the budget allowance based on standard hours allowed
is the
a. Net Overhead variance
b. Efficiency variance
c. Volume variance
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d. Controllable variance
6. The difference between the actual amounts and the flexible budget amounts for the
actual output achieved is the
a. Production volume variance
b. Flexible budget variance
c. Sales volume variance
d. Standard cost variance
7. Under a standard cost system, the materials efficiency variances are the
responsibility of
a. Production and industrial engineering
b. Purchasing and industrial engineering
c. Purchasing and sales
d. Sales and industrial engineering
8. A favorable material price variance coupled with an unfavorable materials usage
variance would most likely result from
a. Machine efficiency problems
b. Product mix production changes
c. The purchase and use of higher than standard quality of materials
d. The purchase of lower than standard quality of materials
9. Which of the following variances is most controllable by the production control
supervisor?
a. Material price variance
b. Material usage variance
c. Overhead spending variance
d. Overhead budget variance
10. In a standard cost system, the investigation of an unfavorable material usage variance
should begin with the
a. Production manager only
b. Plant controller only
c. Purchasing manager only
d. Production manager or the purchasing manager
11. The efficiency variance for either labor or materials can be divided into
a. Volume and yield variance
b. Yield variance and price variance
c. Volume and mix variance
d. Yield variance and mix variance
12. The labor mix and labor yield variances together equal the
a. Total labor variance
b. Labor rate variance
c. Labor efficiency variance
d. Sum of the labor efficiency and overhead efficiency variance
13. Which one of the following is least likely to be involved in establishing costs for
evaluation purposes?
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a. Budgetary accountants
b. Industrial engineers
c. Top management
d. Quality control personnel
14. A standard costing system is most likely used by a firm in conjunction with
a. Management by objective
b. Target rates of return
c. Participative management programs
d. Flexible budgets
15. Which one of the following statements about ideal standards is incorrect?
a. Ideal standards are also called theoretical or maximum efficiency standards
b. Ideal standards do not make provisions for workers with different degrees of
experience and skill levels
c. Ideal standards make no allowance for waste, spoilage and machine breakdowns
d. Ideal standards can be used for cash budgeting or product costing
16. The estimated cost to manufacture a single unit of product or perform a service is the
a. Material yield
b. Standard cost
c. Normal cost
d. Expected cost
17. In setting the labor rate standard, what wage rate should a company use when it pays
different wages to employees who perform the same tasks?
a. The highest wage rate of those employees
b. Te lowest wage rate of those employees
c. A simple average of the wage rates of those employees
d. A weighted average of the wage rates of those employees
18. What document summarizes the standard quantities and standard cost needed to make one
unit of a product?
a. Flexible budget
b. Bill of materials
c. Standard cost card
d. Operations flow statement
19. The difference between budgeted and applied fixed overhead is the
a. Volume variance
b. Budget variance
c. Efficiency variance
d. Total variance
20. The difference between budgeted and applied fixed overhead is the
a. Variable overhead spending variance
b. Variable overhead efficiency variance
c. Fixed overhead volume variance
d. Fixed overhead budget variance
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21. Which management principle emphasizes the investigation of only significant
differences between actual results and standards?
a. Management by objectives
b. Management by exception
c. Management by walking around
d. Span o control
22. Conversion cost consists of
a. Direct materials and direct labor
b. Direct labor and manufacturing overhead
c. Direct materials and manufacturing overhead
d. Direct materials and indirect labor
23. What lists all operations necessary to make one unit of product?
a. Operations flow management
b. Flexible budget
c. Standard cost card
d. Bill of materials
24. What is a planning document that presents expected overhead costs at different
activity levels?
a. Operations flow statement
b. Flexible budget
c. Standard cost card
d. Bill of materials
25. At the end of the period, if the balances in the variance accounts are not
significant, the company should close the variance accounts to
a. work in process inventory
b. cost of goods sold
c. manufacturing overhead
d. the inventories and to cost of goods sold
26. In process cost system, costs are assigned only:
a. To one work in process inventory account
b. To work in process and finished goods inventories
c. To work in process, finished goods and cost of goods sold
d. To work in process inventory accounts
27. Indicate which of the following statement is NOT correct:
a. Both job order and process cost system track the same three manufacturing cost
elements- Direct materials, direct labor and manufacturing overhead
b. In a job order system, only one work in process is used, while in process cost
system, multiple work in process inventory accounts are used.
c. Manufacturing costs are assigned the same way in a job order and in a process cost
system
d. Manufacturing costs are accumulated the same way in a job order and in a process
cost system
28. In making the journal entry to record raw materials costs:
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a. The debit is to Finished Goods inventory
b. The debit is often to two or more work in process inventory accounts
c. The credit is generally to two or more work in process accounts
d. The credit is to Finished Goods inventory
29. The analysis of the activity in a department or cost center for a period is called a:
a. Quantity report
b. Cost of production report
c. Cost of goods manufactured
d. Equivalent production
30. A cost of production report:
a. Is an external report
b. Shows costs charged to department and costs accounted for
c. Shows equivalent units of production but not physical flow of units
d. Contains six sections
31. The restatement of incomplete units in terms of completed units is called:
a. Quantities produced
b. Total production
c. Equivalent production
d. Approximate production
32. Purchased materials are added in the second department of a three-department process;
this increases the number of units produced in the second department and would always:
a. Change Direct labor costs percentage in the ending work in process inventory
b. Cause no adjustment to unit cost transferred in from the first department
c. Increase in total units
d. Decrease total ending work in process inventory
33. Purchased materials are added in the second department of a three-department process;
this does not increases the number of units produced in the second department and
would always:
a. Not change the peso amount transferred to the next department
b. Decrease total work in process inventory
c. Increase the factory overhead portion of the ending work in process inventory
d. Increase total unit costs
34. Activity based-costing
a. Requires the identification of cost drivers
b. Is only used in JIT operations.
c. Applies only to discretionary fixed costs.
d. Does not help to identify activities as value-adding or non-value adding.
35. Machine set-up is an example of what activity in ABC System?
a. Batch
b. Facility Sustaining
c. Product Sustaining
d. Unit
36. Landscaping is an example of what activity in ABC System?
a. Batch
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b. Facility Sustaining
c. Product Sustaining
d. Unit
37. The number of income shipments is an example of what activity in ABC System?
a. Batch
b. Facility Sustaining
c. Product Sustaining
d. Unit
38. The activities that drive resource-equipments are called the
a. Activity drivers
b. Cost objects
c. Resource drivers
d. Sustaining activities
39. The segment for which you are estimating the cost is called the
a. Activity drivers
b. Cost objects
c. Resource drivers
d. Sustaining activities
40. A tool that compares how tasks are performed internally with the best practices of
industry leaders is
a. Process value analysis
b. Re-engineering
c. Caveat analysis
d. Benchmarking
41. Which of the following statements is true?
a. The traditional approach to costing uses many different cost drivers
b. Costs that are indirect to products are by definition traceable directly to products.
c. Costs that are indirect to products are traceable to some activity.
d. All of the above statements are true.
42. Which of the following is a sign of poor cost data?
a. Competitors prices for high-volume products appear much too low.
b. The company seems to have a highly profitable niche all to itself.
c. Customers dont balk at price increases for low-volume products.
d. All of the above statements are true.
43. A direct labor hour is an example of what activity in ABC System?
a. Batch
b. Facility Sustaining
c. Product Sustaining
d. Unit
44. In activity based costing, after a company records costs, it then charges the costs
to
a. Products
b. Customers
c. Costs of goods sold
d. Activity center cost pools
45. In the second stage of cost allocation in activity based costing, a company charges
costs to
a. Products and services
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b. Activity center cost pools
c. Cost of goods sold
d. Expense
46. Activity based costing after allows managers to recognize ___________ flow of
products and services through an organization.
a. Horizontal
b. Diagonal
c. Upward
d. Downward
47. Companies used activity based costing primarily for
a. Preparing the financial statements for external users.
b. Preparing the tax return.
c. Product profitability analysis by management.
d. All of the above.
48. Which of the following is a unit-level cost?
a. Direct material
b. Machine set-up
c. Plant depreciation
d. Product design
49. Which of the following is a batch-level cost?
a. Engineering change orders
b. Setup of production equipment
c. Plant managers salary
d. Direct material
50. What highlights value added and non-value-added activities and the time spent in
those activities from the beginning of a process to its end?
a. Value chart
b. Process map
c. Simultaneous engineering report
d. Attribute based costing