5. For decision making purpose, which is more suitable to the management
Correct : B. Marginal costing
6. Increasing in selling price
Correct : D. None of the above
7. Increase in variable cost
Correct : D. None the above
8. Marginal costing technique helps the management in deciding
Correct : D. All of the above
9. Which of the following is true at breakeven point
Correct : D. All of the above
10. Activity-based costing:
Correct : D. Uses multiple activity rates
11. Assigning overhead using ABC often:
Correct : A. Shifts overhead costs from high-volume products to low-volume products
12. Painting the product would be an example of which activity level groups
Correct : C. Unit-level activity
13. Plant depreciation is an example of which activity-level group?
Correct : B. Facility-level activity
14. Assume that a company produces two products in a manufacturing plant. One is a low volume specialty product that is produced on a demand pull basis, while the other is a high volume product that is produced on a push basis for inventory. A production volume based cost allocation system would tend to
Correct : C. Understate the product cost of the low volume product.
15. In the situation stated in the question above, the company’s net income based on a production
volume based system will tend to be ________ relative to net income based on an activity based costing system.
Correct : D. b and d.
16. Cooper and Kaplan recommend using which of the following as the basis, or denominator, when developing activity cost pool rates for activity based costing.
Correct : B. The practical capacity for each activity.
17. Which of the following is not an argument for using a separate stand alone system for activity based costing, i.e., rather than integrating ABC with the general ledger system used for GAAP?
Correct : A. GAAP product costs may be incorrect relative to ABC product costs
18. Which of the following arguments support integrating ABC with the general ledger system
used for GAAP, rather than using a separate stand alone ABC system?
Correct : D. all of the above.
19. Which of the following types of characteristics tend to cause too little overhead costs to be charged to the product using traditional cost allocations?
Correct : D. a and b.
20. Which audience was activity based costing originally designed to serve?
Correct : C. Managers who make short term strategic decisions such as outsourcing.
21. A company that uses a traditional two stage cost allocation approach is likely to do the following.
Correct : A. Overhead allocations to high volume products will tend to be overstated while overhead allocations to low volume products will tend to be understated.
22. The main difference (or differences) between how traditional costing and activity based costing
treat indirect manufacturing costs is (are) that
Correct : B. Traditional costing treats only unit level costs as variable, while abc systems treat unit level, batch level and product level costs as variable.
23. The Cooper/Kaplan "Rule of One" refers to the following:
Correct : B. If only one item is represented by an activity cost pool, then the cost can be classified as fixed.
24. Activity based cost systems would probably provide the greatest benefits for organizations that use
Correct : A. Job order costing.
25. When traditional production volume based overhead allocations are made, rather than activity based allocations,
Correct : A. The unit costs of high volume and large size products tend to be overstated, while the unit cost of low volume and small products tend to be understated.
26. In order to compute equivalent units of production using the Weighted Average method of
process costing, the following equation should be used:
Correct : C. Units completed and transferred out + equivalent units of ending work in process
27. If beginning work in process is 2,000 units, ending work in process is 1,000 units, and the units
accounted for equals 5,000 units, what are the units completed and transferred out?
Correct : C. 4000
28. One characteristic of products that are mass-produced in a continuous production process
is that
Correct : A. The products are identical or very similar in nature.
29. Conversion costs are the sum of:
Correct : D. Direct labor costs and overhead costs
30. A production cost report
Correct : C. Provides a basis for evaluating the productivity of a department
31. Which is not a similarity between job order costing and process costing?
Correct : A. Methods of assigned costs
32. The journal entry that assigns raw materials costs in a process costing system includes
Correct : B. Credit to raw materials
33. Calculating equivalent units in a weighted average method:
Correct : C. The beginning inventory amount is not accounted for
34. in a process costing system, manufacturing overhead is assigned to work in process by
Correct : B. Department based on predetermined overhead rates
35. Which of the following system applies when standard goods are produced under a series of
inter connected operations?
Correct : B. Process costing
36. The process costing system is best suited for
Correct : B. Industries where homogenous products are manufactured on continuous basis
37. Which of the following business is likely to adopt a process costing system?
Correct : C. Sugar refining
38. Materials labor and overhead costs are traced to processing departments rather than individual products or jobs. This statement is true for
Correct : C. A process costing system
39. In process costing system, the materials can be added in
Correct : D. Any department
40. Which of the following is not relevant to a process costing system?
Correct : A. Heterogeneous products
41. Which of the following is not correct about process costing and job order costing?
Correct : D. Both the systems assigns costs by process.
42. In process costing system, when partially completed units are expressed in terms of fully
completed units they are known as
Correct : B. Equivalent units
43. The direct material costing Rs. 4000 has been used in mixing department. The correct journal
entry would be
Correct : B. Work-in –process-mixing department Dr and Direct materials Cr
44. In a process costing system, the manufacturing overhead (or factory OH) is usually applied
using
Correct : A. Predetermined overhead rate
45. In process costing system, the predetermined overhead rate is computed.
Correct : B. Separately for each processing department
46. Where the normal loss in a department is identified at the end of process, its cost is :-
Correct : C. Charged to units completed and transferred out only
47. While preparing the cost of production report of a processing department, use per unit cost
from producing department needs to be adjusted when the
Correct : A. Normal loss is identified during the process.
48. The normal or standard loss in processing department is generally considered
Correct : B. Un avoidable loss
49. A loss in processing departments which can be avoided under normal and efficient working conditions is generally known as
Correct : C. Abnormal loss
50. In process costing the abnormal loss occurred in a production department is
Correct : C. Charged to factory overhead
51. Which of the following characteristics is relevant to process costing but not to job order costing?
Correct : C. Equivalent units
52. Which of the following types of spoilage should not affect the recorded cost of inventories
Correct : C. Abnormal spoilage
53. A section of the cost of production report which shows the physical flow of units through various producing departments is usually labeled as
Correct : B. Quantity schedule
54. What does FIFO mean?
Correct : D. First In First Out
55. Regardless of how long it takes to produce and sell inventory, inventory is always
considered to be a?
Correct : A. Current asset
56. The latest cost of inventories is changed to production but the old prices are changed to inventories on hand?
Correct : B. LIFO
57. An increase in inventories indicates that?
Correct : A. More merchandise was purchased then the amount sold to customer
58. Which type of inventory system is updated inventory system?
Correct : D. Perpetual inventory system
59. What is the principal criterion used to distinguish between tangible assets and
inventories?
Correct : A. The physical substance of the asset
60. Which of the following method is suitable for calculating the cost of inventory
when actual costs of individual units of merchandise can be determined from the accounting records?
Correct : C. Specific Identification Method
61. The inventories are recorded at the latest price but the production cost is changed
old cost price?
Correct : A. FIFO
62. Which one of the following methods for inventory valuation may be misleading when the units are identical?
Correct : A. FIFO Method
63. During September, Khan had sales of 148,000, which made a gross profit of 40,000. Purchases amounted to 100,000 and opening inventory was 34,000. The value of closing inventory was?
Correct : B. Rs. 26,000
64. Which type of inventory system requires updating the inventory balance at the end
of the accounting period?
Correct : A. Periodic inventory system
65. In LIFO method of inventory valuation?
Correct : A. Issue of stocks to production is at latest price
66. The inventory method that will always produce the same amount for cost of goods sold in a periodic inventory system as in a perpetual inventory system would be?
Correct : D. None of these
67. Inventory does not include?
Correct : C. Equipment used in the manufacturing are sold
68. Net Purchases equal the invoice amount and?
Correct : C. Plus freight-in, less purchase discounts
69. In FIFO method of inventory valuation?
Correct : A. Closing stock is at latest price
70. The average inventory costing method which results in a changed unit inventory
cost after each successive purchase?
Correct : A. Weighted average
71. The specific cost identification inventory cost flow method has all of the following characteristics except?
Correct : B. It relates cost flow to the specific flow of physical goods
72. Sales revenues are usually considered earned when?
Correct : C. Goods have been transferred from the seller to the buyer
73. A retail firm would normally use an inventory account titled?
Correct : B. Merchandise Inventory
74. Which one of the following does not describe a type of transfer pricing?
Correct : A. Target based
75. Systematic evaluation of the trade-offs between product functionality and product cost while
still satisfying customer needs is the definition of
Correct : D. Value engineering
76. Productivity is the ratio between input and __________.
Correct : B. Output
77. Labour productivity measures the growth in value added _____ per unit of labour used.
Correct : B. Output
78. Pareto Principle is ______ rule.
Correct : A. 80/20
79. The Theory of Constraints is an organizational change method that is focused on ___________
improvement.
Correct : A. Profit
80. The essential concept of TOC is that every organization must have at least one ____________.
Correct : C. Constraint
81. A _______ is any factor that limits the organization from getting more of whatever it strives for.
Correct : A. Constraint
82. Lean management has been developed with the intention of reducing ________________ and
maximizing the value of the product or the service to the customer.
Correct : C. Process Waste
83. ________________ is an important part of lean thinking.
Correct : A. Lean Management
84. A ______________ is the sequence of phases that a project goes through from its initiation to its
closure.
Correct : D. ProjectLife Cycle
85. ____________ describes the activities within and around an organization, and relates them to
an analysis of the competitive strength of the organization.
Correct : A. Value Chain Analysis
86. Porter argues that the ability to perform particularactivities and to manage the linkages between
these activities is a source of _______________ advantage.
Correct : B. Competitive
87. _________ is referred to as continuous improvement costing.
Correct : A. Kaizen
88. Kaizen is a method aimed at ______ reduction below standard level, but without negative effects
on quality, staff, safety, etc.
Correct : A. Cost
89. ______________ is introduced as a technique that aims to manage product costs throughout the
design stage.
Correct : C. Target Costing
90. Target costing is a ___________ costing methodology, in which the selling price and the
required profit margin are used to determine the allowable cost for manufacturing a new/existing product.
Correct : B. Reverse
91. _________ Costing Also known as delayed costing,
Correct : A. Backflush
92. Backflush costing is an accounting method that records costs after a good is sold or a service is ___________.