Second Semester Assiut University
2021 Faculty of Commerce
Third Year English Program
"Cost Accounting"
"Test Bank"
Multiple Choice Questions:
1. The term "conversion costs" refers to:
a. Manufacturing costs incurred to produce units of output.
b. All costs associated with manufacturing other than direct
labor costs and raw material costs.
c. Costs which are associated with marketing, shipping,
warehousing, and billing activities.
d. The sum of direct labor costs and all factory overhead costs.
e. The sum of raw material costs and direct labor costs.
2. The term "prime costs" refers to:
a. Manufacturing costs incurred to produce units of output.
b. All costs associated with manufacturing other than direct
labor costs and raw material costs.
c. Costs which are predetermined and should be attained.
d. The sum of direct labor costs and all factory overhead costs.
e. The sum of raw material costs and direct labor costs.
3. Costs which are inventorable are:
a. Manufacturing costs incurred to produce units of output.
b. All costs associated with manufacturing other than direct
labor costs and raw material costs.
c. Costs which are associated with marketing, shipping,
warehousing, and billing activities.
d. The sum of direct labor costs and all factory overhead costs.
e. The sum of raw material costs and direct labor costs.
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4. The term "variable costs" refers to:
a. All costs which are likely to respond to the amount of
attention devoted to them by a specified manager.
b. All costs which are associated with marketing, shipping,
warehousing, and billing activities.
c. All costs which do not change in total for a given period of
time and relevant range but which become progressively
smaller on a per unit basis as volume increases.
d. All manufacturing costs incurred to produce units of output.
e. All costs which fluctuate in total in response to small changes
in the rate of utilization of capacity.
5. The term "committed costs" refers to those:
a. Costs which management decides to incur in the current
period to enable the company to achieve objectives other than
the filling of orders placed by customers.
b. Costs which are likely to respond to the amount of attention
devoted to them by a specified manager.
c. Costs which are governed mainly by past decisions that
established the present levels of operating and organizational
capacity and which only change slowly in response to small
changes in capacity.
d. Costs which fluctuate in total in response to small changes in
the rate of utilization of capacity.
e. Costs amortized which were capitalized in previous periods.
6. The term "discretionary costs" refers to those:
a. Costs which management decides to incur in the current
period to enable the company to achieve objectives other than
the filling of orders placed by customers.
b. Costs which are likely to respond to the amount of attention
devoted to them by a specified manager.
c. Costs which are governed mainly by past decisions that
established the present levels of operating and organizational
capacity and which only change slowly in response to small
changes in capacity.
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d. Costs amortized which were capitalized in previous periods.
e. Costs which will be unaffected by current managerial
decisions.
7. Those costs referred to as "controllable costs" are:
a. Costs which management decides to incur in the current
period to enable the company to achieve objectives other than
the filling of orders placed by customers.
b. Costs which are likely to respond to the amount of attention
devoted to them by a specified manager.
c. Costs which are governed mainly by past decisions that
established the present levels of operating and organizational
capacity and which only change slowly in response to small
changes in capacity.
d. Costs which fluctuate in total in response to small changes in
the rate of utilization of capacity.
e. Costs which will be unaffected by current managerial
decisions.
8. The term "cost" refers to:
a. An asset that has given benefit and is now expired.
b. The price of products sold or services rendered.
c. The value of the sacrifice made to acquire goods or services.
d. An asset that has not given benefit and is now expired.
e. The present value of future benefits.
9. Step costs are classified as a:
a. Variable costs.
b. Fixed cost.
c. Prime cost.
d. Conversion cost.
e. Mixed cost.
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10. The term "sunk costs" refers to:
a. Past costs that are now irrevocable.
b. Costs that are directly influenced by unit managers.
c. Costs that should be incurred in a particular production
process.
d. Costs that may be eliminated if some economic activity is
changed or deleted.
e. Benefits lost from rejecting the next best alternative.
11. The management of Whopper Dorfman's Pickle Factory budgeted
production of 700,000 units at a cost of $1,450,000. If actual
production was 700,000 units at a cost of $1,490,000, then
Whopper Dorfman's production supervisor was:
a. Effective.
b. Efficient.
c. Both effective and efficient.
d. Neither effective nor efficient.
12. Goal congruence:
a. Occurs when the goals of upper-level management positively
coincide with the goals of lower - and middle-level
management.
b. Is a simple concept that can be applied easily in practice for
positive results.
c. involves the alignment of an organization's overall goals with
the individual manager's personal goals.
d. Includes all of the above.
13. Which statement is incorrect?
a. Within the relevant range, variable costs change on a per unit
basis.
b. Middle-level management is primarily responsible for fixed
costs.
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c. Direct labor is an element of both prime costs and conversion
costs.
d. The work of a plant supervisor would be considered direct
labor.
14. Captain Ahab's shipbuilding company constructs huge sailing
vessels. Captain Ahab's accountant would consider the
inexpensive stain used only on the wood of the captain's wheel of a
vessel to be:
a. A direct material.
b. A direct material as well as a prime cost.
c. A prime cost.
d. A conversion cost.
15. Ready Corporation purchased a factory that has fixed costs of
$180,000 per year. The factory has the capacity to produce
70.000 units of product 1 per year. (Left-over capacity can be used
for the production of another product). However, for every unit
produced, variable costs increase by $8, Assuming that Ready
Corporation can sell all its production for $3.50 over variable cost,
at what level should Ready Corporation produce?
a. Ready Corporation should not produce because it will be
unprofitable; it should sell the factory.
b. Ready corporation should produce product 1 at an
approximate level of 35,000 units because this will keep
variable costs down and another product can be produced
with the left-over capacity.
c. Ready Corporation should produce at a level of 70,000 units
because this will reduce the fixed cost per unit to its lowest
amount.
d. Ready Corporation should produce at any level it desires
because it will, within the relevant range, be able to make a
$3.50 profit over variable costs.
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16. Which one of the following costs would be most representative of
a semivariable cost?
a. Equipment rentals.
b. Electricity for machinery.
c. Supervisor salaries.
d. Plant insurance.
17. Which type of cost is not recorded in the accounting records?
a. Irrelevant costs.
b. Opportunity costs.
c. Sunk costs.
d. Noncontrollable costs.
18. A step cost:
a. Contains only fixed characteristics, whereas a semivariable
cost contains both fixed and variable characteristics over
various relevant ranges of operation.
b. Has a fixed portion which changes abruptly at various
activity levels.
c. Is similar to a mixed cost within a very small relevant range.
d. Will usually be converted into a semivariable cost sound
bookkeeping purposes.
19. The cost of goods manufactured, under a periodic cost
accumulation system, is equal to the:
a. Beginning finished goods inventory plus purchases.
b. Beginning work-in-process plus cost of goods in process
during the year.
c. Cost of goods put into production plus beginning work-in-
process less ending work-in-process.
d. Cost of goods sold less beginning work-in-process.
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20. The cost of goods sold under a periodic cost accumulation system
is equal to the:
a. Cost of goods available for sale less ending finished goods
inventory.
b. Cost of goods available for sale plus beginning finished goods
inventory.
c. Cost of goods manufactured plus beginning finished goods
inventory.
d. Cost of goods manufactured less beginning finished goods
inventory.
21. Under a perpetual cost accumulation system, the cost of direct
materials, direct labor, and factory overhead must first flow
through the:
a. Finished goods account.
b. Cost of goods sold account.
c. Work-in-process account.
d. Cost of goods manufactured account.
22. A job order cost accumulation system is most suitable where:
a. Mass production techniques are used.
b. Continuous processing is performed.
c. Homogeneous products are produced.
d. Customized products are produced.
23. In a process cost system, the unit cost is computed for a:
a. Job.
b. Department.
c. Batch of goods.
d. Category of goods.
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24. The process of charging factory overhead to work-in-process on
the basis of a predetermined application rate multiplied by actual
input is known as:
a. Normal costing.
b. Actual costing.
c. Standard costing.
d. Product costing.
25. Which of the following is a cost behavior-oriented approach to
product costing?
a. Absorption costing.
b. Direct costing.
c. Process costing.
d. Job order costing.
26. Because the unit cost of a product cannot be determined until the
end of the period, periodic cost accumulation systems generally
record only:
a. Standard costs.
b. Normal costs.
c. Process costs.
d. Actual costs.
27. Which of the following is not an example of a normally issued
external financial statement?
a. Statement of financial position.
b. Statement of results of operations.
c. Statement of performance evaluation.
d. Statement of retained earnings.
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28. The amount of cost of goods manufactured appearing on the
bottom of the cost of goods manufactured statement also appears
on the:
a. Statement of financial position.
b. Statement of results of operations.
c. Statement of performance evaluation.
d. Statement of retained earnings.
29. Internal reports:
a. May as a basis of valuation use any monetary or physical
measurement basis.
b. Must adhere to generally accepted accounting principles.
c. Usually adopt a company-wide perspective.
d. Are directly regulated.
30. A written order sent to inform the purchasing department of a
need for materials is called a:
a. Purchase order.
b. Purchase requisition.
c. Receiving report.
d. Materials requisition form.
31. Written request to a supplier for specified goods at an agreed-
upon price is called a:
a. Purchase order.
b. Purchase requisition.
c. Receiving report.
d. Materials requisition form.
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32. Which of the following forms must be filed out when inventory is
to be removed from the materials inventory to be placed into
production?
a. Purchase order.
b. Purchase requisition.
c. Receiving report.
d. Materials requisition form.
33. Under a periodic inventory system, the purchase of materials is
recorded in an account entitled:
a. Cost of Goods Sold.
b. Purchases of Raw Materials.
c. Materials Inventory.
d. Work-in-Process Inventory.
34. Under a perpetual inventory system, the purchase of materials is
recorded in an account entitled:
a. Cost of Goods Sold.
b. Purchases of Raw Materials.
c. Materials Inventory.
d. Work-in-Process Inventory.
35. The total of the materials ledger inventory cards must be equal to
the amount in the following account:
a. Cost of Goods Sold.
b. Purchases of Raw Materials.
c. Materials Inventory.
d. Work-in-Process Inventory.
36. Which of the following is usually prepared daily by employees for
each job worked on?
a. Labor job ticket.
b. Time card.
c. Punch card.
d. Cost Control Card.
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37. The cost of idle time incurred by employees that is considered
normal for the production process should be charged to:
a. Work-in-process inventory.
b. Direct labor.
c. Administrative expense.
d. Factory overhead.
38. Depreciation based on the number of units produced would be
classified as what type of cost?
a. Out-of-pocket.
b. Marginal.
c. Variable.
d. Fixed.
39. The variable factory overhead application rate under the normal,
practical, and expected activity levels would be the same:
a. Except for normal volume.
b. Except for practical capacity.
c. Except for expected activity.
d. For all three activity levels.
40. Factory overhead application rates best reflect anticipated
fluctuations in sales over several years when the rates are
computed using figures based on:
a. Maximum capacity.
b. Normal capacity.
c. Practical capacity.
d. Expected capacity.
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Solution
1 D 21 C
2 E 22 D
3 A 23 B
4 E 24 A
5 C 25 B
6 A 26 D
7 B 27 C
8 C 28 B
9 E 29 A
10 A 30 B
11 A 31 A
12 C 32 D
13 D 33 B
14 D 34 C
15 C 35 C
16 A 36 A
17 B 37 D
18 B 38 C
19 C 39 D
20 A 40 B
