Strategic Cost Accounting Set 1

On This Page

This set of Strategic Cost Accounting Multiple Choice Questions & Answers (MCQs) focuses on Strategic Cost Accounting Set 1

Q1 | Marginal costing is a …………….
  • Method of costing
  • Technique of costing
  • Process of costing
  • None of the above
Q2 | Contribution is known as ………..
  • Marginal income
  • Marginal cost
  • Gross profit
  • Net income
Q3 | Margin of safety may be improved by
  • Increasing sales volume
  • Lowering variable cost
  • Lowering fixed cost
  • All of the above
Q4 | PV ratio may be improved by
  • Increasing the sales price
  • Lowering variable cost
  • Lowering fixed cost
  • None of the above
Q5 | For decision making purpose, which is more suitable to the management
  • Standard costing
  • Marginal costing
  • Absorption costing
  • Traditional costing
Q6 | Increasing in selling price
  • Increase PV ratio
  • Decrease break even point
  • Increase margin of safety
  • None of the above
Q7 | Increase in variable cost
  • Increases in PV ratio
  • Decreases breakeven point
  • Increases margin of safety
  • None the above
Q8 | Marginal costing technique helps the management in deciding
  • Price of the product
  • Make or buy decision
  • To accepts fresh orders at low price
  • All of the above
Q9 | Which of the following is true at breakeven point
  • Contribution = fixed cost
  • Sales = total cost
  • Sales curve cuts total cost line
  • All of the above
Q10 | Activity-based costing:
  • Uses a plant-wide overhead rate to assign overhead
  • Is not expensive to implement
  • Typically applies overhead costs using direct labor-hours
  • Uses multiple activity rates
Q11 | Assigning overhead using ABC often:
  • Shifts overhead costs from high-volume products to low-volume products
  • Shifts overhead costs from low-volume products to high-volume products
  • Provides the same results as traditional costing
  • Requires one predetermined overhead rate
Q12 | Painting the product would be an example of which activity level groups
  • Facility-level activity
  • Product-level activity
  • Unit-level activity
  • Batch-level activity
Q13 | Plant depreciation is an example of which activity-level group?
  • Unit-level activity
  • Facility-level activity
  • Batch-level activity
  • Product-level activity
Q14 | 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
  • Accurately reflect the product cost of the two products.
  • Overstate the product cost of the low volume product.
  • Understate the product cost of the low volume product.
  • Overstate the product cost of both products.
Q15 | 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.
  • Overstated.
  • Understated.
  • Overstated for the low volume product and understated for the high volume product.
  • b and d.
Q16 | Cooper and Kaplan recommend using which of the following as the basis, or denominator, when developing activity cost pool rates for activity based costing.
  • The maximum capacity for each activity.
  • The practical capacity for each activity.
  • The planned or budgeted for each activity.
  • The normal capacity for each activity.
Q17 | 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?
  • GAAP product costs may be incorrect relative to ABC product costs
  • It is faster to develop.
  • It is less costly to develop.
  • Subjective information can be used that auditors might question.
Q18 | Which of the following arguments support integrating ABC with the general ledger systemused for GAAP, rather than using a separate stand alone ABC system?
  • Managers tend to prefer a single accounting system for product costing.
  • Two separate systems tend to be confusing for management.
  • Two separate systems tend to create redundant information and staff.
  • all of the above.
Q19 | 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 relatively small product.
  • a relatively low volume product.
  • a relatively simple product.
  • a and b.
Q20 | Which audience was activity based costing originally designed to serve?
  • Users of external financial statements.
  • Front line managers who plan & control activities or processes on a daily basis.
  • Managers who make short term strategic decisions such as outsourcing.
  • Managers who make long term strategic decisions concerning investments.
Q21 | A company that uses a traditional two stage cost allocation approach is likely to do the following.
  • Overhead allocations to high volume products will tend to be overstated while overhead allocations to low volume products will tend to be understated.
  • Overhead allocations to high volume products will tend to be understated, while allocations to low volume products will tend to be overstated.
  • Overhead allocations to large products will tend to be understat
Q22 | The main difference (or differences) between how traditional costing and activity based costingtreat indirect manufacturing costs is (are) that
  • Traditional costing uses only production volume based drivers while activity based costing uses only non production volume based drivers.
  • Traditional costing treats only unit level costs as variable, while abc systems treat unit level, batch level and product level costs as variable.
  • Traditional cost allocations are usually based on a plant wide overhead rate, while abc systems use departmental overhead rates.
  • A and b.
Q23 | The Cooper/Kaplan "Rule of One" refers to the following:
  • Only one overhead rate should be used to allocate fixed costs.
  • If only one item is represented by an activity cost pool, then the cost can be classified as fixed.
  • If there is more than one activity cost pool, then one of the cost pools must be variable.
  • Traditional cost allocation systems will distort the allocations for at least one cost pool.
Q24 | Activity based cost systems would probably provide the greatest benefits for organizations that use
  • Job order costing.
  • Process costing.
  • Historical costing
  • Standard costing.
Q25 | When traditional production volume based overhead allocations are made, rather than activity based allocations,
  • 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.
  • 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.
  • 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