Prepare Strategic Cost Accounting mcq set 1 for your bba mba management program. Then you can try exam quiz of Strategic Cost Accounting for assess your knowledge, so you can get better mark in your exam.
MCQ of Strategic Cost Accounting set 1
1. Marginal costing is a ___
A. Method of costing
B. Technique of costing
C. Process of costing
D. None of the above
Answer
B. Technique of costing
2. Contribution is known as ___
A. Marginal income
B. Marginal cost
C. Gross profit
D. Net income
Answer
A. Marginal income
3. Margin of safety may be improved by
A. Increasing sales volume
B. Lowering variable cost
C. Lowering fixed cost
D. All of the above
Answer
D. All of the above
4. PV ratio may be improved by
A. Increasing the sales price
B. Lowering variable cost
C. Lowering fixed cost
D. None of the above
Answer
A. Increasing the sales price
5. For decision making purpose, which is more suitable to the management
A. Standard costing
B. Marginal costing
C. Absorption costing
D. Traditional costing
Answer
B. Marginal costing
6. Increasing in selling price
A. Increase PV ratio
B. Decrease break even point
C. Increase margin of safety
D. None of the above
Answer
D. None of the above
7. Increase in variable cost
A. Increases in PV ratio
B. Decreases breakeven point
C. Increases margin of safety
D. None the above
Answer
D. None the above
8. Marginal costing technique helps the management in deciding
A. Price of the product
B. Make or buy decision
C. To accepts fresh orders at low price
D. All of the above
Answer
D. All of the above
9. Which of the following is true at breakeven point
A. Contribution = fixed cost
B. Sales = total cost
C. Sales curve cuts total cost line
D. All of the above
Answer
D. All of the above
10. Activity-based costing:
A. Uses a plant-wide overhead rate to assign overhead
B. Is not expensive to implement
C. Typically applies overhead costs using direct labor-hours
D. Uses multiple activity rates
Answer
D. Uses multiple activity rates
11. Assigning overhead using ABC often:
A. Shifts overhead costs from high-volume products to low-volume products
B. Shifts overhead costs from low-volume products to high-volume products
C. Provides the same results as traditional costing
D. Requires one predetermined overhead rate
Answer
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
A. Facility-level activity
B. Product-level activity
C. Unit-level activity
D. Batch-level activity
Answer
C. Unit-level activity
13. Plant depreciation is an example of which activity-level group?
A. Unit-level activity
B. Facility-level activity
C. Batch-level activity
D. Product-level activity
Answer
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
A. Accurately reflect the product cost of the two products.
B. Overstate the product cost of the low volume product.
C. Understate the product cost of the low volume product.
D. Overstate the product cost of both products.
Answer
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 productionvolume based system will tend to be ___ relative to net income based on an activity based costing system.
A. Overstated.
B. Understated.
C. Overstated for the low volume product and understated for the high volume product.
D. b and d.
Answer
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.
A. The maximum capacity for each activity.
B. The practical capacity for each activity.
C. The planned or budgeted for each activity.
D. The normal capacity for each activity.
Answer
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?
A. GAAP product costs may be incorrect relative to ABC product costs
B. It is faster to develop.
C. It is less costly to develop.
D. Subjective information can be used that auditors might question.
Answer
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 systemused for GAAP, rather than using a separate stand alone ABC system?
A. Managers tend to prefer a single accounting system for product costing.
B. Two separate systems tend to be confusing for management.
C. Two separate systems tend to create redundant information and staff.
D. all of the above.
Answer
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?
A. a relatively small product.
B. a relatively low volume product.
C. a relatively simple product.
D. a and b.
Answer
D. a and b.
20. Which audience was activity based costing originally designed to serve?
A. Users of external financial statements.
B. Front line managers who plan & control activities or processes on a daily basis.
C. Managers who make short term strategic decisions such as outsourcing.
D. Managers who make long term strategic decisions concerning investments.
Answer
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.
A. Overhead allocations to high volume products will tend to be overstated while overhead allocations to low volume products will tend to be understated.
B. Overhead allocations to high volume products will tend to be understated, while allocations to low volume products will tend to be overstated.
C. Overhead allocations to large products will tend to be understat
Answer
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 costingtreat indirect manufacturing costs is (are) that
A. Traditional costing uses only production volume based drivers while activity based costing uses only non production volume based drivers.
B. Traditional costing treats only unit level costs as variable, while abc systems treat unit level, batch level and product level costs as variable.
C. Traditional cost allocations are usually based on a plant wide overhead rate, while abc systems use departmental overhead rates.
D. A and b.
Answer
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:
A. Only one overhead rate should be used to allocate fixed costs.
B. If only one item is represented by an activity cost pool, then the cost can be classified as fixed.
C. If there is more than one activity cost pool, then one of the cost pools must be variable.
D. Traditional cost allocation systems will distort the allocations for at least one cost pool.
Answer
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
A. Job order costing.
B. Process costing.
C. Historical costing
D. Standard costing.
Answer
A. Job order costing.
25. When traditional production volume based overhead allocations are made, rather than activity based allocations,
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.
B. The unit costs of high volume and large size products tend to be understated, while the unit cost of low volume and small products tend to be overstated.
C. The unit costs of high volume and small products tend to be overstated, while the unit costs of low volume and large products is understat
Answer
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 ofprocess costing, the following equation should be used:
A. Equivalent units of beginning work in process + units completed and transferred out
B. Equivalent units of beginning work in process + equivalent units of ending work in process
C. Units completed and transferred out + equivalent units of ending work in process
D. Units completed and transferred out + equivalent units of beginning work in process
Answer
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 unitsaccounted for equals 5,000 units, what are the units completed and transferred out?
A. 7000
B. 6000
C. 4000
D. 2000
Answer
C. 4000
28. One characteristic of products that are mass-produced in a continuous production processis that
A. The products are identical or very similar in nature.
B. They are grouped in batches.
C. They are produced at the time an order is receiv
Answer
A. The products are identical or very similar in nature.
29. Conversion costs are the sum of:
A. Direct materials costs and direct labor costs
B. Indirect materials costs and indirect labor costs
C. Direct materials costs and overhead costs
D. Direct labor costs and overhead costs
Answer
D. Direct labor costs and overhead costs
30. A production cost report
A. Used to record the costs chargeable to a specific job
B. Shows only cost data for a production department
C. Provides a basis for evaluating the productivity of a department
D. Combines process cost and job order costing systems costs
Answer
C. Provides a basis for evaluating the productivity of a department
31. Which is not a similarity between job order costing and process costing?
A. Methods of assigned costs
B. Tracking of direct materials, direct labor and manufacturing overhead
C. Accumulating journal entries
D. Flow of costs
Answer
A. Methods of assigned costs
32. The journal entry that assigns raw materials costs in a process costing system includes
A. Debit to raw materials
B. Credit to raw materials
C. Debit to Accounts Payable
D. Credit to Work in Process
Answer
B. Credit to raw materials
33. Calculating equivalent units in a weighted average method:
A. The beginning inventory percentage complete is used only for conversion costs
B. The beginning inventory percentage complete is used for both material and conversion costs
C. The beginning inventory amount is not accounted for
D. The beginning inventory amount is used in total
Answer
C. The beginning inventory amount is not accounted for
34. in a process costing system, manufacturing overhead is assigned to work in process by
A. Department based on actual overhead costs incurred
B. Department based on predetermined overhead rates
C. Job based on actual overhead costs incurred
D. Job based on predetermined overhead rates
Answer
B. Department based on predetermined overhead rates
35. Which of the following system applies when standard goods are produced under a series ofinter connected operations?
A. Job order costing
B. Process costing
C. Standard costing
D. All of the above
Answer
B. Process costing
36. The process costing system is best suited for
A. Industries where different types of products are manufactured
B. Industries where homogenous products are manufactured on continuous basis
C. Service industry only
D. All of the above
Answer
B. Industries where homogenous products are manufactured on continuous basis
37. Which of the following business is likely to adopt a process costing system?
A. Plan manufactures
B. Construction companies
C. Sugar refining
D. Printing press
Answer
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
A. A job order costing system
B. An activity based costing system
C. A process costing system
D. A variable costing system
Answer
C. A process costing system
39. In process costing system, the materials can be added in
A. First department only
B. Last department only
C. First and last department only
D. Any department
Answer
D. Any department
40. Which of the following is not relevant to a process costing system?
A. Heterogeneous products
B. Recitative production
C. High production volume
D. Low production flexibility
Answer
A. Heterogeneous products
