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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