Advanced Cost Accounting Practice Test

Advanced Cost Accounting Practice Test

 

1. Which of the following best describes the primary goal of activity-based management (ABM)?
A. To reduce operational costs
B. To enhance customer satisfaction
C. To identify and manage activities that incur costs
D. To forecast financial performance

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2. In process costing, which of the following is the main objective?
A. To allocate costs to specific jobs or projects
B. To allocate costs based on labor hours
C. To assign costs to units produced in continuous production processes
D. To estimate future costs based on past trends

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3. A company uses activity-based costing (ABC) and has identified that one of its activities consumes resources disproportionately. How can the company reduce this cost?
A. Increase the product price
B. Reallocate resources from other activities
C. Implement more stringent controls on the activity
D. Outsource the activity to a third-party provider

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4. Which of the following is a key feature of process costing?
A. Costs are assigned to individual units based on job order
B. The focus is on custom products and their costs
C. Costs are averaged over all units produced during a period
D. It only applies to service industries

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5. In decision-making, relevant costs are those that:
A. Are not influenced by the decision at hand
B. Occur in the future and differ between alternatives
C. Represent sunk costs
D. Are accounted for in previous years

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6. Which of the following is a key advantage of activity-based costing (ABC)?
A. It simplifies cost allocation
B. It provides more accurate cost information for decision-making
C. It focuses solely on direct costs
D. It is less costly to implement compared to traditional costing methods

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7. The allocation of costs to products using the direct labor hours method is most appropriate when:
A. Products are highly complex and require different resources
B. The company produces homogeneous products
C. The company uses a wide range of indirect costs
D. There is a high degree of automation in production

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8. The principal difference between job order costing and process costing is that:
A. Job order costing assigns costs based on individual job orders, while process costing averages costs over large batches of identical products
B. Process costing is used for manufacturing, while job order costing is used for service industries
C. Job order costing only allocates direct materials, while process costing allocates both direct materials and labor
D. Process costing uses a single allocation rate, while job order costing uses multiple rates

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9. Which of the following is considered a non-financial performance measure?
A. Return on assets
B. Customer satisfaction index
C. Return on equity
D. Operating income

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10. When making decisions regarding special orders, a company should focus on:
A. Total fixed costs
B. Contribution margin for the additional units
C. Sunk costs that have already been incurred
D. Past sales data

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11. A company is considering whether to accept a special order at a reduced price. The relevant costs to consider include:
A. All fixed costs
B. Variable manufacturing costs and any additional fixed costs that will be incurred
C. Sunk costs
D. Only the additional fixed costs

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12. In evaluating performance, a key disadvantage of using return on investment (ROI) as a measure is:
A. It does not take into account risk factors
B. It ignores profitability
C. It fails to consider capital invested
D. It can lead to short-term decision-making at the expense of long-term goals

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13. In a highly competitive environment, cost management strategies would likely focus on:
A. Cost minimization and operational efficiency
B. Maximizing the pricing of products
C. R&D investments for long-term growth
D. Increasing advertising and marketing expenses

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14. The formula for calculating the contribution margin is:
A. Sales – Total fixed costs
B. Sales – Variable costs
C. Revenue – Total expenses
D. Gross profit – Operating expenses

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15. Which of the following best defines process costing?
A. A method that assigns costs based on specific jobs or orders
B. A method used primarily in industries with continuous production processes
C. A technique used to allocate overhead costs to different products
D. A cost allocation system that focuses on cost per unit of output

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16. In an organization using activity-based costing, overhead costs are allocated to:
A. Products based on a single overhead rate
B. Products based on the activities that drive costs
C. Sales figures
D. Individual cost centers

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17. A firm employing an activity-based management (ABM) approach might review which of the following to improve efficiency?
A. Direct labor costs
B. The number of activities performed in the production process
C. Fixed asset depreciation
D. Sales commissions

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18. The break-even point is the level of sales at which:
A. Total revenue equals total costs
B. Fixed costs exceed variable costs
C. Profits begin to increase exponentially
D. Revenue equals variable costs

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19. A company using process costing would typically:
A. Track direct costs for each product individually
B. Accumulate costs over multiple production periods
C. Focus on allocating overhead based on direct labor hours
D. Separate costs by department and product line

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20. The key characteristic of a controllable cost is that:
A. It can be influenced by decisions made within a certain time period
B. It remains constant regardless of the volume of production
C. It includes fixed costs
D. It is entirely variable in nature

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21. Which of the following is NOT a method of cost allocation?
A. Direct method
B. Step-down method
C. Activity-based costing
D. Contribution margin method

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22. When analyzing performance using variance analysis, which of the following is typically NOT examined?
A. Sales volume variance
B. Direct materials price variance
C. Employee turnover rate
D. Labor efficiency variance

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23. A company is evaluating its performance by comparing actual costs to budgeted costs. What type of variance is this?
A. Efficiency variance
B. Price variance
C. Spending variance
D. Volume variance

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24. In an activity-based costing system, an overhead rate is calculated by:
A. Dividing total overhead by the number of units produced
B. Dividing total overhead by the total number of activity driver units
C. Allocating overhead to direct labor costs
D. Allocating overhead evenly across all products produced

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25. Which of the following is a disadvantage of activity-based costing?
A. It is too simple for most businesses
B. It ignores indirect costs
C. It can be time-consuming and expensive to implement
D. It cannot be used for service industries

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26. The primary purpose of cost allocation is to:
A. Ensure accurate tax reporting
B. Assign costs to cost centers or products in an accurate manner
C. Maximize profitability in specific departments
D. Estimate future costs

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27. Which of the following is most likely to use job order costing?
A. A law firm providing professional services
B. A furniture manufacturing company
C. A fast-food chain producing large volumes of standard meals
D. A company making custom-made jewelry

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28. A cost that varies in total with the level of activity is called:
A. A fixed cost
B. A variable cost
C. A semi-variable cost
D. A sunk cost

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29. Which of the following is NOT typically considered in the planning stage of the cost management process?
A. Setting cost reduction goals
B. Determining the cost structure
C. Measuring performance against benchmarks
D. Allocating budgets to different departments

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30. What is a key advantage of using a balanced scorecard for performance evaluation?
A. It provides a single financial metric for evaluating performance
B. It focuses solely on financial performance
C. It integrates both financial and non-financial metrics
D. It only measures operational performance

31. Which of the following is an example of a fixed cost in a manufacturing setting?
A. Direct labor costs
B. Rent on factory building
C. Materials used in production
D. Sales commissions

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32. When allocating overhead using the activity-based costing method, which of the following should be the basis for allocation?
A. Direct labor hours
B. Machine hours
C. Activities that drive overhead costs
D. Sales revenue

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33. A company produces two products: Product X and Product Y. The company incurs a total of $10,000 in factory overhead. If Product X consumes 60% of the machine hours and Product Y consumes 40%, how much overhead should be allocated to Product X?
A. $4,000
B. $6,000
C. $10,000
D. $8,000

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34. In cost-volume-profit (CVP) analysis, which of the following assumptions is NOT typically made?
A. Sales prices and costs are linear
B. All products are sold at the same price
C. Fixed costs are variable at different levels of production
D. Variable costs change in direct proportion to sales volume

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35. When using activity-based costing (ABC), a company identifies an activity that consumes a disproportionate amount of resources. The company should:
A. Eliminate the activity altogether
B. Reallocate the activity’s cost to other products
C. Investigate ways to reduce the cost or improve efficiency in that activity
D. Increase product prices to cover the additional cost

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36. A company is using standard costing. If the actual direct labor cost is higher than the standard cost, it is a:
A. Favorable variance
B. Unfavorable variance
C. Zero variance
D. Volume variance

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37. The total cost of production is generally divided into two main components:
A. Direct costs and indirect costs
B. Fixed costs and variable costs
C. Direct materials and indirect labor
D. Direct costs and non-manufacturing costs

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38. Which of the following statements is true about process costing?
A. It is typically used in job-order production settings.
B. It applies to industries that produce homogeneous products.
C. It assigns costs to individual units.
D. It is most applicable to service industries.

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39. What does the term “cost allocation” refer to?
A. Directly assigning costs to specific products or departments
B. Distributing indirect costs to products or departments
C. Estimating future costs for decision-making
D. Classifying costs as fixed or variable

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40. In an activity-based costing (ABC) system, the cost driver is:
A. The product that consumes the most resources
B. The activity that causes the cost to be incurred
C. The fixed cost in the production process
D. The variable cost in the production process

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41. A company that produces a variety of similar products would most likely use:
A. Job order costing
B. Process costing
C. Activity-based costing
D. Direct costing

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42. A company is calculating its contribution margin. Which of the following costs is subtracted from sales to calculate the contribution margin?
A. Fixed costs
B. Variable costs
C. Gross profit
D. Operating expenses

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43. If a company’s actual overhead costs exceed its applied overhead costs, this would result in:
A. A favorable variance
B. An unfavorable variance
C. No variance
D. An underapplied overhead

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44. Which of the following is the primary purpose of budgeting in cost accounting?
A. To determine the company’s tax obligations
B. To set goals for cost control and financial performance
C. To allocate resources between departments
D. To forecast market demand

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45. A company uses a standard cost system. If actual direct material costs are lower than the standard, it indicates a:
A. Favorable variance
B. Unfavorable variance
C. Zero variance
D. Fixed cost variance

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46. In cost accounting, the “just-in-time” (JIT) inventory system aims to:
A. Maximize production time
B. Minimize inventory holding costs
C. Increase product variety
D. Increase the number of suppliers

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47. Which of the following is a limitation of traditional costing systems?
A. It allocates overhead costs based on a single cost driver, which may not accurately reflect the consumption of resources.
B. It overestimates the variable costs for each product.
C. It provides too detailed information for decision-making.
D. It ignores direct labor costs.

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48. The cost of producing a good or service, including both fixed and variable costs, is known as:
A. Gross margin
B. Total cost
C. Operating income
D. Contribution margin

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49. Which of the following is typically a fixed cost for a company that manufactures electronic components?
A. Materials used in production
B. Salaries of factory workers
C. Depreciation on factory machinery
D. Shipping costs for finished goods

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50. Which of the following is NOT typically considered a relevant cost when making a decision to discontinue a product line?
A. Fixed costs that will remain unchanged
B. Direct variable costs that are specific to the product line
C. Potential contribution margin from the product line
D. Sunk costs that have already been incurred

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51. A company’s break-even point increases when:
A. The selling price per unit increases
B. The variable cost per unit decreases
C. The fixed costs increase
D. The contribution margin ratio improves

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52. In a balanced scorecard, which of the following perspectives would focus on customer satisfaction, loyalty, and market share?
A. Financial perspective
B. Customer perspective
C. Internal business process perspective
D. Learning and growth perspective

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53. When analyzing the financial performance of a company, a favorable variance means:
A. The company’s actual costs were higher than expected
B. The company’s actual revenue was higher than expected
C. The company’s expenses were lower than expected
D. The company’s profit margin was lower than expected

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54. The primary benefit of using the “high-low method” to estimate fixed and variable costs is that:
A. It is highly accurate and requires detailed data
B. It simplifies cost estimation using only two data points
C. It accounts for changes in production volume
D. It adjusts for seasonal fluctuations

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55. A company’s contribution margin ratio is calculated by:
A. Dividing fixed costs by the sales price
B. Subtracting fixed costs from total sales
C. Dividing the contribution margin by sales
D. Adding fixed costs to total sales

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56. Which of the following is an example of a non-financial performance metric?
A. Return on investment
B. Customer retention rate
C. Operating profit margin
D. Economic value added

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57. In a cost-volume-profit (CVP) analysis, the contribution margin ratio is defined as:
A. Contribution margin per unit divided by selling price per unit
B. Sales price per unit divided by variable cost per unit
C. Fixed cost divided by variable cost
D. Contribution margin per unit divided by total sales

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58. In job order costing, when products are completed, which of the following accounts is credited?
A. Work in Process Inventory
B. Finished Goods Inventory
C. Direct Materials Inventory
D. Raw Materials Inventory

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59. In evaluating a company’s performance, which of the following would be considered a “leading” indicator?
A. Customer satisfaction
B. Gross profit margin
C. Return on equity
D. Sales growth rate

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60. The primary difference between financial accounting and managerial accounting is that:
A. Managerial accounting focuses on internal decision-making, while financial accounting focuses on external reporting.
B. Managerial accounting follows generally accepted accounting principles (GAAP), while financial accounting does not.
C. Financial accounting deals with cost allocation, while managerial accounting does not.
D. Managerial accounting is used primarily by government entities, while financial accounting is used by businesses.

61. A company that manufactures bicycles uses activity-based costing (ABC). If the activity driver for assembling bicycles is “assembly hours,” what would be the most appropriate basis for allocating overhead costs?
A. Number of bicycles produced
B. Direct labor hours
C. Machine hours
D. Assembly hours

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62. A company produces two products: Product A and Product B. If Product A uses 70% of the total machine hours, how much overhead should be allocated to Product A if the total overhead is $20,000?
A. $7,000
B. $10,000
C. $14,000
D. $20,000

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63. In an activity-based costing system, the total overhead is allocated based on:
A. Direct materials cost
B. Machine hours
C. Activity drivers
D. Sales revenue

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64. When a company uses the “high-low method,” the variable cost per unit is calculated by:
A. Subtracting the lowest cost from the highest cost and dividing by the change in activity
B. Dividing the total cost by the total activity
C. Adding the fixed cost to the highest cost
D. Subtracting the fixed cost from the total cost and dividing by the highest activity level

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65. The “relevant range” in cost behavior analysis refers to:
A. The range in which fixed costs vary
B. The range in which variable costs remain constant
C. The range in which total fixed and variable costs are linear
D. The range in which a company can achieve maximum profitability

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66. Which of the following costs is most likely to be classified as a semi-variable cost?
A. Salaries of office staff
B. Electric utility cost, which has a fixed monthly charge plus a variable rate based on usage
C. Direct materials cost
D. Rent expense for a factory building

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67. A company is evaluating its cost structure and is considering increasing fixed costs to achieve higher production levels. What is the potential risk of increasing fixed costs?
A. Increased variable costs
B. Potential for lower break-even point
C. Reduced margin of safety
D. Reduced contribution margin

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68. A product’s contribution margin is calculated as:
A. Sales price minus fixed costs
B. Sales price minus variable costs
C. Sales price minus total costs
D. Gross profit minus fixed costs

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69. The break-even point in units is the level of sales at which:
A. Total revenue equals total variable costs
B. Total revenue equals total fixed costs
C. Contribution margin equals total fixed costs
D. Profit equals zero

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70. The main purpose of using the balanced scorecard is to:
A. Measure only financial performance
B. Provide a holistic view of the company’s performance across multiple dimensions
C. Focus only on customer satisfaction metrics
D. Establish a single measure of profitability

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71. Which of the following is an example of a variable cost?
A. Factory rent
B. Insurance premiums
C. Direct materials cost
D. Salaries of employees

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72. A company has fixed costs of $100,000 and a contribution margin of $40 per unit. What is the break-even point in units?
A. 1,000 units
B. 2,500 units
C. 4,000 units
D. 10,000 units

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73. Which of the following best describes the focus of process costing?
A. Assigning costs to specific jobs or orders
B. Allocating indirect costs based on a single cost driver
C. Averaging costs over large volumes of similar products
D. Calculating profit margins for individual products

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74. When using job order costing, what is the first step in the cost allocation process?
A. Allocate manufacturing overhead
B. Assign direct materials to jobs
C. Assign direct labor to jobs
D. Apply overhead rates to jobs

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75. In an activity-based costing (ABC) system, the overhead cost per unit of activity is typically calculated by:
A. Dividing the total overhead costs by the total number of products produced
B. Dividing the total overhead costs by the total number of activity driver units
C. Dividing the total direct materials costs by the total number of units
D. Dividing the total variable costs by the total number of activities

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76. Which of the following is an advantage of using a traditional costing system over an activity-based costing (ABC) system?
A. It provides more accurate cost allocation
B. It is easier to implement and requires fewer resources
C. It helps to identify the specific activities that cause overhead costs
D. It is better for companies that have diverse product lines

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77. A company is deciding whether to discontinue a product. Which of the following should be considered as a relevant cost in this decision?
A. Sunk costs
B. Fixed costs that will remain unchanged
C. Direct costs that are avoidable
D. Historical research and development costs

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78. The contribution margin ratio is defined as:
A. Contribution margin divided by sales revenue
B. Variable costs divided by total costs
C. Contribution margin divided by fixed costs
D. Total sales divided by total variable costs

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79. When using activity-based costing (ABC), the cost driver rate is calculated by:
A. Dividing the total direct costs by the number of units produced
B. Dividing the total overhead by the total number of cost drivers used
C. Dividing the fixed costs by the variable costs
D. Dividing the sales revenue by the contribution margin

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80. The “cost of goods manufactured” represents:
A. The total costs incurred during production
B. The total cost of goods sold during the period
C. The costs of products that are finished and transferred from work in process to finished goods
D. The direct labor costs incurred in the period

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81. A company’s production is affected by both fixed and variable costs. The company is considering outsourcing part of its production. Which cost is most relevant in the decision-making process?
A. Sunk costs
B. Fixed costs that will not change
C. Variable costs that can be eliminated through outsourcing
D. Past investment in machinery

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82. In a flexible budget, the primary purpose of adjusting variable costs is to:
A. Reflect changes in the volume of production or sales
B. Account for changes in fixed costs
C. Include only direct materials costs
D. Ensure that actual performance is compared to the budget

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83. A company is using process costing. If a department has 80,000 units in beginning inventory, 120,000 units started, and 90,000 units completed, how many units are still in process at the end of the period?
A. 50,000
B. 90,000
C. 120,000
D. 110,000

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84. A company’s marginal cost is defined as:
A. The cost of producing one more unit
B. The total cost of producing all units
C. The average cost per unit
D. The fixed cost per unit

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85. The primary purpose of variance analysis in cost accounting is to:
A. Measure the overall profitability of the company
B. Identify and explain deviations from budgeted or standard costs
C. Assess the financial health of the company
D. Predict future cost trends

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86. In an activity-based costing (ABC) system, which of the following would be an example of an activity cost driver?
A. The number of direct labor hours used
B. The number of products produced
C. The number of setups in the production process
D. The total sales revenue

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87. When considering a special order, which of the following costs is most relevant in the decision-making process?
A. Sunk costs
B. Fixed costs that will not change
C. Additional costs that will be incurred for the special order
D. Allocated overhead costs

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88. Which of the following is an example of a discretionary fixed cost?
A. Rent on office building
B. Depreciation on machinery
C. Advertising expenses
D. Salaries of permanent employees

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89. Which of the following statements is true about a cost pool in an activity-based costing (ABC) system?
A. It is used to assign costs to specific products directly
B. It includes costs related to specific activities such as production or marketing
C. It is only relevant for direct costs
D. It is used to allocate costs based on a single cost driver

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90. A company manufactures both regular and premium products. The regular product is produced in large quantities and the premium product is produced in small batches. What method would most accurately allocate overhead costs in this scenario?
A. Traditional costing
B. Job order costing
C. Process costing
D. Activity-based costing

91. A company manufactures two products using the same production process. The company uses process costing. What will be the same for both products?
A. Direct labor costs
B. Production costs per unit
C. Allocation of overhead
D. Total costs incurred

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92. The primary purpose of calculating the cost of goods sold (COGS) is to:
A. Determine the amount of fixed costs
B. Find out how much revenue the company earned
C. Calculate the cost of inventory that was sold during a period
D. Measure profitability based on variable costs

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93. Which of the following statements is true about cost allocation?
A. Costs are allocated based on arbitrary criteria to simplify accounting
B. Cost allocation applies only to direct costs
C. The allocation of costs should reflect the consumption of resources
D. Allocation is irrelevant for fixed costs

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94. Which of the following is an example of a discretionary cost?
A. Direct materials
B. Rent on factory building
C. Research and development expenses
D. Depreciation on factory equipment

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95. The formula for calculating the contribution margin is:
A. Sales price – Variable costs
B. Total sales – Fixed costs
C. Sales revenue – Fixed costs
D. Sales revenue – Direct materials cost

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96. A company that manufactures electronic devices has high direct labor costs but relatively low overhead costs. Which of the following costing methods is likely the most appropriate for this company?
A. Job order costing
B. Process costing
C. Activity-based costing (ABC)
D. Variable costing

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97. In a flexible budget, the variable costs are adjusted based on:
A. Changes in production volume
B. Changes in the price of raw materials
C. Changes in the fixed costs
D. Changes in labor efficiency

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98. When allocating costs to cost objects, which of the following is most important?
A. The accuracy of cost pools
B. The use of cost drivers
C. The amount of overhead costs
D. The classification of costs as fixed or variable

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99. In a break-even analysis, the contribution margin per unit is:
A. Sales price minus variable costs
B. Total sales minus total costs
C. Sales price minus fixed costs
D. Contribution margin divided by total revenue

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100. In an activity-based costing system, indirect costs are typically allocated based on:
A. Labor hours
B. Machine hours
C. The number of activities performed
D. Direct material cost

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101. A company’s fixed costs are $100,000, and its variable cost per unit is $5. If the company sells the product for $15 per unit, how many units must be sold to break even?
A. 10,000 units
B. 5,000 units
C. 25,000 units
D. 15,000 units

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102. When considering the cost of producing a product, which of the following is considered a “relevant cost” for a decision-making process?
A. Sunk costs
B. Past advertising expenses
C. Future avoidable costs
D. Historical labor costs

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103. The cost of goods manufactured (COGM) is calculated by:
A. Adding the opening finished goods to the cost of goods sold
B. Adding total costs incurred during the period to the opening inventory of raw materials
C. Subtracting the opening work in process inventory from the total manufacturing costs
D. Adding the total cost of raw materials to direct labor costs

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104. The cost of indirect materials used in production is classified as:
A. Direct materials
B. Direct labor
C. Manufacturing overhead
D. Selling and administrative expenses

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105. A company uses process costing and has the following information for the month:
• Beginning work in process: 2,000 units (70% complete)
• Units started: 8,000 units
• Units completed: 7,000 units
• Ending work in process: 3,000 units (50% complete)
What is the total number of equivalent units for direct materials?
A. 7,000
B. 8,500
C. 9,000
D. 10,000

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106. In a traditional costing system, overhead costs are allocated based on:
A. Machine hours
B. Direct labor hours or cost
C. The number of products produced
D. Sales revenue

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107. In an activity-based costing system, if a product requires a lot of machine setups, the cost of setup activities will be:
A. Allocated equally to all products
B. Allocated based on machine hours used
C. Allocated based on the number of setups per product
D. Ignored in the costing process

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108. Which of the following is most likely a fixed cost?
A. Commission paid to sales representatives
B. Raw materials cost
C. Salaries of corporate executives
D. Direct labor costs

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109. If a company uses standard costing and its actual costs are lower than the standard costs, the variance is considered:
A. Favorable
B. Unfavorable
C. A zero variance
D. Irrelevant

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110. The term “economies of scale” refers to:
A. The ability of a company to reduce variable costs by increasing the production of a single product
B. The ability of a company to spread fixed costs over an increased production volume
C. The ability to reduce overhead by reducing the number of products produced
D. The process of lowering the sales price of products in order to increase market share

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111. Which of the following is an example of a variable cost?
A. Property taxes
B. Depreciation on machinery
C. Direct labor cost per unit produced
D. Rent on factory building

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112. A company is considering implementing activity-based costing (ABC). What would be the primary advantage of switching to ABC?
A. It simplifies the allocation of indirect costs
B. It allocates overhead more accurately based on actual resource usage
C. It focuses solely on direct labor costs
D. It eliminates the need for cost allocation altogether

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113. A company manufactures a product that has a variable cost of $12 per unit and a selling price of $20 per unit. If the company’s fixed costs are $40,000, how many units must be sold to break even?
A. 2,000 units
B. 5,000 units
C. 6,000 units
D. 4,000 units

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114. The purpose of a flexible budget is to:
A. Estimate the expected costs for different levels of production
B. Provide a summary of the company’s fixed and variable costs
C. Compare actual costs with the original budget
D. Set targets for profit maximization

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115. The contribution margin per unit is calculated by:
A. Sales price per unit minus total fixed costs
B. Sales price per unit minus variable costs per unit
C. Variable costs per unit divided by sales price
D. Fixed costs per unit divided by total units produced

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116. Which of the following is NOT a typical component of a cost pool in an activity-based costing (ABC) system?
A. Machine setup costs
B. Direct materials costs
C. Administrative costs
D. Production equipment costs

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117. A company produces both high-end and low-end products. The company is considering switching to activity-based costing. Which of the following would most likely be a cost driver in this case?
A. Sales price per unit
B. Number of setups
C. Direct materials costs
D. Direct labor hours

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118. A company’s fixed costs are $60,000, and its contribution margin per unit is $15. How many units must be sold to achieve a target profit of $30,000?
A. 6,000 units
B. 4,000 units
C. 2,000 units
D. 8,000 units

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119. Which of the following is the most appropriate method to allocate overhead costs in a job-order costing system?
A. Using direct materials cost as the basis for allocation
B. Using direct labor cost as the basis for allocation
C. Using machine hours as the basis for allocation
D. Using an arbitrary allocation based on total sales

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120. The weighted average method of process costing is used to calculate:
A. The average cost per unit at the start of the period
B. The cost per unit using both current and prior period’s costs
C. The average direct labor cost per unit
D. The cost of goods sold during the period

121. In activity-based costing (ABC), which of the following is an example of an activity driver?
A. Machine hours
B. Direct materials cost
C. Direct labor hours
D. Number of setups

________________________________________
122. A company is using process costing for a product. The number of equivalent units for direct materials is:
A. The number of units completed and transferred out during the period
B. The number of units in the beginning inventory
C. The sum of the units started and the percentage of completion of ending inventory
D. The number of units in process at the beginning of the period

________________________________________
123. Which of the following is a key difference between activity-based costing (ABC) and traditional costing systems?
A. ABC assigns costs to products based on a single volume-based cost driver
B. ABC focuses on the allocation of fixed costs only
C. ABC uses multiple cost drivers to allocate indirect costs
D. ABC assigns costs to products based only on direct labor hours

________________________________________
124. Which of the following best describes the “high-low method” of cost estimation?
A. A method that uses only the highest and lowest cost data points to estimate variable costs
B. A method that averages all costs over a period of time
C. A method that uses the full range of data to calculate fixed costs
D. A method that uses regression analysis to determine cost behavior

________________________________________
125. The fixed cost per unit changes as the level of production changes in which of the following cost structures?
A. Variable cost structure
B. Mixed cost structure
C. Fixed cost structure
D. Semi-variable cost structure

________________________________________
126. A company is considering eliminating a product line. Which of the following costs would NOT be relevant in the decision-making process?
A. Variable costs directly tied to the product line
B. Fixed costs that will remain unchanged regardless of the decision
C. Direct costs that can be avoided by discontinuing the product line
D. Contribution margin of the product line

________________________________________
127. The primary purpose of using an overhead allocation rate in job-order costing is to:
A. Assign direct material costs
B. Allocate manufacturing overhead to specific jobs
C. Calculate the break-even point for each job
D. Estimate the cost of goods sold for the period

________________________________________
128. A company produces 1,000 units of a product with fixed costs of $20,000 and variable costs of $10 per unit. If the company sells each unit for $20, what is the break-even point in units?
A. 1,000 units
B. 2,000 units
C. 1,500 units
D. 4,000 units

________________________________________
129. Which of the following is the primary focus of cost-volume-profit (CVP) analysis?
A. Estimating the profitability of a company based on historical data
B. Identifying the impact of changes in cost and sales volume on profits
C. Allocating fixed costs across products
D. Calculating the return on investment for new products

________________________________________
130. A company has a contribution margin ratio of 40%. If it wants to achieve a target profit of $30,000 and its fixed costs are $50,000, how much sales revenue is required?
A. $125,000
B. $200,000
C. $100,000
D. $75,000

________________________________________
131. The primary difference between process costing and job order costing is that:
A. Process costing accumulates costs by department, while job order costing accumulates costs by individual job
B. Job order costing is used in continuous production systems, while process costing is used in intermittent production systems
C. Process costing uses direct labor as the allocation base, while job order costing uses machine hours
D. Job order costing is only applicable for manufacturing companies, while process costing is used by service companies

________________________________________
132. When using standard costing, if actual direct labor costs exceed the standard direct labor costs, the variance is:
A. Favorable
B. Unfavorable
C. Zero
D. Insignificant

________________________________________
133. In a job-order costing system, how is overhead typically applied to jobs?
A. Based on direct materials used in each job
B. Based on the labor cost of each job
C. Using a predetermined overhead rate applied to the activity base
D. Based on the direct labor hours worked

________________________________________
134. When using the weighted average method in process costing, which of the following is true?
A. Costs are divided by the total number of units produced, including those in beginning inventory
B. Costs are divided by the number of units started and completed during the period
C. The costs in beginning inventory are excluded from the calculation
D. The costs are divided by the number of equivalent units in the ending inventory

________________________________________
135. Which of the following statements is true about fixed costs?
A. Fixed costs per unit decrease as production increases
B. Fixed costs are incurred only when a company is producing goods
C. Fixed costs remain constant in total over a wide range of production levels
D. Fixed costs fluctuate with changes in production volume

________________________________________
136. A company applies overhead using machine hours as the allocation base. If the estimated machine hours for the period are 10,000, and the overhead rate is $4 per machine hour, what is the total estimated overhead for the period?
A. $40,000
B. $4,000
C. $100,000
D. $10,000

________________________________________
137. If a company uses the variable costing method, which of the following is true?
A. Only variable production costs are included in the cost of goods sold
B. Both fixed and variable production costs are included in the cost of goods sold
C. Fixed costs are included in inventory, while variable costs are expensed
D. Fixed costs are treated as period costs and are not included in the product cost

________________________________________
138. In an activity-based costing (ABC) system, which of the following is true regarding cost pools?
A. Cost pools are used to allocate costs based on a single cost driver
B. Each cost pool represents a different cost driver, such as machine setups or inspections
C. A single cost pool is used for all types of overhead costs
D. Cost pools are irrelevant in ABC systems

________________________________________
139. The break-even point in units can be calculated using the following formula:
A. Fixed Costs / Contribution Margin per Unit
B. Total Sales / Contribution Margin per Unit
C. Contribution Margin per Unit / Fixed Costs
D. Total Revenue / Variable Costs per Unit

________________________________________
140. If a company’s sales volume is expected to decrease, which of the following is the most likely consequence?
A. A decrease in total fixed costs
B. A decrease in total variable costs
C. A decrease in contribution margin
D. An increase in the break-even point

________________________________________
141. Which of the following is a characteristic of a job-order costing system?
A. Costs are accumulated for large numbers of identical units
B. Each product or job is unique and has its own cost record
C. Only variable costs are allocated to each job
D. Overhead costs are not allocated to specific jobs

________________________________________
142. Under a job-order costing system, the predetermined overhead rate is usually based on:
A. Actual overhead costs incurred during the period
B. The number of jobs completed during the period
C. Estimated overhead costs and estimated activity levels
D. The actual machine hours used

________________________________________
143. The break-even point in sales dollars can be calculated by:
A. Break-even point in units × Sales price per unit
B. Fixed costs / Contribution margin ratio
C. Contribution margin ratio / Fixed costs
D. Contribution margin per unit × Fixed costs

________________________________________
144. When calculating the cost of a product using activity-based costing (ABC), which of the following is most likely to be used as a cost driver for “quality inspection”?
A. Number of machine hours
B. Number of units produced
C. Number of inspections conducted
D. Number of employees

________________________________________
145. A company has the following information:
• Direct materials cost: $25,000
• Direct labor cost: $15,000
• Overhead applied: $10,000
What is the total manufacturing cost for the period?
A. $50,000
B. $40,000
C. $30,000
D. $60,000

________________________________________
146. In a variable costing system, which of the following is included in the calculation of product costs?
A. Direct materials
B. Direct labor
C. Variable manufacturing overhead
D. All of the above

________________________________________
147. The fixed cost per unit will decrease as production volume:
A. Increases
B. Decreases
C. Stays the same
D. Fluctuates

________________________________________
148. Under the weighted average method of process costing, what is included in the cost of equivalent units?
A. Only the costs of the units completed during the period
B. The total cost of the units started during the period
C. The costs of the units in beginning inventory and the units started during the period
D. Only the cost of the ending inventory units

149. A company uses activity-based costing (ABC) and has identified four activity cost pools. If the company has an activity driver for each cost pool, the cost driver is used to:
A. Allocate direct costs
B. Allocate overhead to products based on the consumption of activities
C. Determine fixed costs
D. Calculate the break-even point

________________________________________
150. In process costing, the number of equivalent units for a specific cost is calculated by:
A. Adding the number of units completed and transferred out to the number of units in ending inventory
B. Subtracting the number of units in beginning inventory from the total units produced
C. Adding the number of units started and completed during the period to the number of units in ending inventory
D. Calculating the percentage of completion of work in process units

________________________________________
151. A company manufactures products in batches. The best method to allocate overhead in this situation is:
A. Job order costing
B. Activity-based costing (ABC)
C. Process costing
D. Absorption costing

________________________________________
152. Which of the following is true regarding activity-based costing (ABC)?
A. ABC can only be applied to service industries
B. ABC uses a single cost driver to allocate overhead
C. ABC helps to identify cost drivers that are more accurate than traditional costing systems
D. ABC assigns all costs to products based on direct labor hours

________________________________________
153. In job-order costing, when is the manufacturing overhead applied to jobs?
A. At the end of the accounting period
B. When the direct materials are requisitioned
C. As the costs are incurred
D. Using a predetermined rate applied to actual activity

________________________________________
154. A company has fixed costs of $120,000, a contribution margin of $30 per unit, and a sales price of $50 per unit. How many units must be sold to break even?
A. 2,000 units
B. 4,000 units
C. 6,000 units
D. 8,000 units

________________________________________
155. Which of the following is NOT a cost driver for activity-based costing (ABC)?
A. Number of setups
B. Direct labor hours
C. Number of machine hours
D. Number of inspections

________________________________________
156. Which of the following methods of cost allocation assigns costs based on the volume of production?
A. Activity-based costing (ABC)
B. Direct costing
C. Absorption costing
D. Job order costing

________________________________________
157. In the context of cost-volume-profit (CVP) analysis, the contribution margin ratio is calculated as:
A. Fixed costs / Sales revenue
B. (Sales revenue – Variable costs) / Sales revenue
C. Contribution margin / Fixed costs
D. Contribution margin / Sales revenue

________________________________________
158. A company produces two products, Product X and Product Y. If the total fixed costs for the company are $200,000 and the contribution margin for Product X is $30 per unit, how many units of Product X must be sold to cover the fixed costs?
A. 2,000 units
B. 6,666 units
C. 1,000 units
D. 10,000 units

________________________________________
159. The process costing system is most suitable for which of the following industries?
A. Custom furniture manufacturing
B. Mass production of consumer goods
C. Automobile assembly
D. Professional consulting services

________________________________________
160. A company is analyzing whether to discontinue a product line. Which of the following costs is irrelevant to this decision?
A. Variable costs that are directly tied to the product line
B. Fixed costs that are specific to the product line
C. Fixed costs that will remain even if the product line is discontinued
D. Contribution margin of the product line

________________________________________
161. Which of the following is an example of a direct cost in a job-order costing system?
A. Factory rent
B. Direct materials
C. Depreciation on machinery
D. Administrative salaries

________________________________________
162. Under the variable costing method, which of the following is excluded from the product cost?
A. Direct labor
B. Fixed manufacturing overhead
C. Direct materials
D. Variable manufacturing overhead

________________________________________
163. A company’s fixed costs are $100,000, and its contribution margin per unit is $50. The company expects to sell 4,000 units. What is the company’s expected profit?
A. $50,000
B. $100,000
C. $200,000
D. $250,000

________________________________________
164. The difference between the expected cost and actual cost of a product is known as:
A. A cost variance
B. A direct material price variance
C. An activity variance
D. A fixed cost variance

________________________________________
165. A company produces a product at a variable cost of $5 per unit. The fixed costs are $50,000. If the company sells the product for $10 per unit, how many units must be sold to achieve a target profit of $20,000?
A. 14,000 units
B. 10,000 units
C. 12,000 units
D. 6,000 units

________________________________________
166. Which of the following is NOT an example of a period cost?
A. Advertising expenses
B. Sales commissions
C. Research and development costs
D. Factory equipment depreciation

________________________________________
167. In a job-order costing system, the primary purpose of applying a predetermined overhead rate is to:
A. Ensure that all direct costs are correctly allocated to jobs
B. Determine the actual cost of production
C. Allocate overhead costs to jobs during the accounting period
D. Measure the efficiency of production activities

________________________________________
168. Which of the following is an example of a non-manufacturing cost that should be classified as a period cost?
A. Depreciation on factory machinery
B. Advertising costs
C. Direct labor costs
D. Raw material costs

________________________________________
169. The break-even point in sales dollars is calculated by multiplying the break-even point in units by:
A. Fixed costs
B. Contribution margin per unit
C. Sales price per unit
D. Variable costs per unit

________________________________________
170. The primary purpose of using the flexible budget is to:
A. Allocate overhead based on activity levels
B. Adjust budgeted costs for changes in activity levels
C. Set standards for performance evaluation
D. Determine the actual costs for the period

________________________________________
171. In an absorption costing system, fixed manufacturing overhead is:
A. Included in the cost of goods sold
B. Treated as a period cost
C. Excluded from product costs
D. Expensed immediately

________________________________________
172. A company’s fixed costs are $150,000, and its contribution margin per unit is $25. If the company sells 10,000 units, what is the company’s total contribution margin?
A. $150,000
B. $250,000
C. $100,000
D. $500,000

________________________________________
173. Which of the following is a characteristic of job-order costing?
A. Costs are accumulated by department
B. Products are homogeneous and produced in large quantities
C. Each unit or batch is unique, and costs are traced to each job
D. Only variable costs are assigned to each job

________________________________________
174. A company has a cost of goods sold of $500,000 and an ending inventory of $200,000. What is the inventory turnover ratio?
A. 2.5 times
B. 3.0 times
C. 5.0 times
D. 10.0 times

________________________________________
175. Which of the following is an example of a mixed cost?
A. Rent for office space
B. Direct labor costs
C. Utility costs, which have both a fixed and variable component
D. Depreciation on factory equipment

________________________________________
176. Which of the following is a major advantage of using activity-based costing (ABC)?
A. It simplifies cost allocation by using only one cost driver
B. It more accurately assigns overhead costs to products based on their actual use of activities
C. It eliminates the need for cost drivers
D. It is easier to implement than traditional costing systems

________________________________________
177. Which of the following is NOT an advantage of flexible budgeting?
A. It allows for performance evaluation at different levels of activity
B. It helps managers understand cost behavior
C. It eliminates the need for standard costing
D. It adjusts for changes in activity levels

________________________________________
178. The primary purpose of a cost pool in activity-based costing is to:
A. Allocate direct labor costs to products
B. Identify cost drivers
C. Assign all overhead costs to products based on activity consumption
D. Track fixed costs

________________________________________
179. If a company has a contribution margin of $200,000 and fixed costs of $150,000, what is the company’s operating income?
A. $200,000
B. $150,000
C. $350,000
D. $50,000

180. A company’s fixed costs total $80,000, and its contribution margin per unit is $40. How many units must be sold to break even?
A. 1,000 units
B. 2,000 units
C. 4,000 units
D. 5,000 units

________________________________________
181. The primary purpose of using standard costing is to:
A. Calculate actual costs for a period
B. Compare actual costs with expected costs
C. Calculate fixed costs
D. Determine the break-even point

________________________________________
182. Which of the following is true about direct labor in job-order costing?
A. Direct labor is treated as a period cost
B. Direct labor costs are allocated to individual jobs
C. Direct labor is included in the overhead costs
D. Direct labor costs are ignored in job-order costing

________________________________________
183. Which of the following is an example of a non-manufacturing cost that is considered a period cost?
A. Factory rent
B. Administrative salaries
C. Direct materials
D. Depreciation on machinery

________________________________________
184. A company uses job-order costing. The beginning work in process inventory has costs of $12,000. During the period, the company incurred $50,000 in direct materials and $20,000 in direct labor costs. What is the total cost of work in process at the end of the period if $25,000 of overhead was applied?
A. $100,000
B. $107,000
C. $95,000
D. $107,000

________________________________________
185. Under the absorption costing method, fixed manufacturing overhead is:
A. Treated as a product cost and included in the cost of goods sold
B. Treated as a period cost and expensed as incurred
C. Allocated to the administrative expenses
D. Not included in the cost of goods sold

________________________________________
186. In a variable costing system, which of the following is included in the product cost?
A. Fixed manufacturing overhead
B. Direct materials
C. Direct labor
D. Both B and C

________________________________________
187. When calculating the cost of goods manufactured under a job-order costing system, which of the following is subtracted from total manufacturing costs?
A. Beginning work in process inventory
B. Ending work in process inventory
C. Direct materials used
D. Direct labor costs

________________________________________
188. Which of the following would NOT be considered a fixed cost?
A. Rent
B. Insurance
C. Direct materials
D. Salaries of permanent employees

________________________________________
189. What is the primary characteristic of a variable cost?
A. It remains constant in total regardless of changes in activity level
B. It increases in total as activity level increases
C. It is not relevant to the cost of goods sold
D. It is allocated to a product based on machine hours

________________________________________
190. In job-order costing, which of the following is used to allocate overhead costs to individual jobs?
A. Predetermined overhead rate
B. Actual machine hours
C. Actual labor costs
D. Actual sales revenue

________________________________________
191. In cost-volume-profit (CVP) analysis, which of the following would cause an increase in the break-even point?
A. An increase in fixed costs
B. A decrease in variable costs per unit
C. A decrease in sales price per unit
D. Both A and C

________________________________________
192. If a company has a contribution margin ratio of 0.4 and fixed costs of $100,000, how much in sales revenue is required to break even?
A. $250,000
B. $200,000
C. $100,000
D. $400,000

________________________________________
193. Which of the following statements about activity-based costing (ABC) is true?
A. ABC allocates overhead based on a single cost driver
B. ABC focuses only on variable costs
C. ABC is most effective when a company produces a large variety of products
D. ABC is not applicable to service organizations

________________________________________
194. In job-order costing, when is overhead applied to jobs?
A. When the direct materials are requisitioned for a job
B. When the job is completed
C. When actual overhead costs are incurred
D. Using a predetermined overhead rate applied to the actual activity base

________________________________________
195. In a process costing system, the cost of goods transferred out consists of:
A. The costs of units completed and transferred to the next department
B. The total of direct materials, direct labor, and overhead incurred for the period
C. The total cost of beginning inventory plus the costs incurred during the period
D. Only the direct materials cost of the units completed

________________________________________
196. What is the contribution margin per unit?
A. Sales revenue minus fixed costs
B. Sales revenue minus variable costs
C. Selling price per unit minus variable costs per unit
D. Selling price per unit minus fixed costs per unit

________________________________________
197. A company produces and sells a product for $50. The variable cost per unit is $30, and fixed costs total $200,000. What is the contribution margin ratio?
A. 40%
B. 60%
C. 20%
D. 50%

________________________________________
198. A company is using the high-low method to estimate variable costs. If the highest level of activity corresponds to 6,000 units and $120,000 in costs, and the lowest level of activity corresponds to 2,000 units and $80,000 in costs, what is the estimated variable cost per unit?
A. $5
B. $10
C. $15
D. $20

________________________________________
199. Which of the following is the primary benefit of using the flexible budget?
A. It helps to determine the break-even point for a company
B. It adjusts for changes in activity levels and provides a more accurate comparison with actual results
C. It allows companies to ignore fixed costs when evaluating performance
D. It provides a better estimate of product costs

________________________________________
200. If actual overhead costs are greater than applied overhead, which of the following would be true?
A. The company is underapplied and needs to adjust for the difference
B. The company is overapplied and needs to adjust for the difference
C. The company’s cost of goods sold will decrease
D. The company’s inventory value will increase

________________________________________
201. In the context of cost-volume-profit analysis, what is the contribution margin ratio?
A. Contribution margin / Sales price
B. Sales price / Contribution margin
C. Fixed costs / Sales price
D. Variable costs / Sales price

________________________________________
202. If a company has a contribution margin of $50,000 and fixed costs of $40,000, what is the company’s break-even point in dollars?
A. $50,000
B. $40,000
C. $90,000
D. $200,000

________________________________________
203. A company uses a predetermined overhead rate based on machine hours. If the company estimates 5,000 machine hours for the period and $100,000 in overhead costs, what is the predetermined overhead rate?
A. $50 per machine hour
B. $100 per machine hour
C. $20 per machine hour
D. $200 per machine hour

________________________________________
204. In activity-based costing (ABC), what is the purpose of creating cost pools?
A. To accumulate costs associated with specific activities
B. To allocate fixed costs evenly across all products
C. To determine the total cost of direct materials
D. To simplify the cost allocation process

________________________________________
205. Which of the following would most likely be classified as a variable cost?
A. Rent on a factory building
B. Depreciation on factory machinery
C. Direct labor costs
D. Insurance costs

________________________________________
206. In job-order costing, how is overhead applied to individual jobs?
A. By multiplying the actual overhead incurred by the job’s percentage of completion
B. By using a predetermined overhead rate based on an activity base such as labor hours or machine hours
C. By directly tracing overhead to each job
D. By allocating overhead equally across all jobs

________________________________________
207. If a company has an operating income of $150,000, fixed costs of $200,000, and a contribution margin ratio of 0.3, what are the company’s total sales revenue?
A. $500,000
B. $600,000
C. $650,000
D. $700,000

________________________________________
208. Under variable costing, what happens to fixed manufacturing overhead costs?
A. They are included in the cost of goods sold
B. They are allocated to products and treated as part of inventory
C. They are treated as period costs and expensed as incurred
D. They are treated as a product cost but only for the first year

________________________________________
209. What does the margin of safety measure in cost-volume-profit (CVP) analysis?
A. The amount by which sales can drop before the company reaches its break-even point
B. The amount of fixed costs that must be covered by sales
C. The degree to which a company can increase its fixed costs
D. The contribution margin divided by fixed costs

________________________________________
210. The process of allocating overhead costs to products is known as:
A. Absorption costing
B. Cost assignment
C. Cost allocation
D. Job-order costing

211. In job-order costing, which of the following best describes a “job”?
A. A unit of production
B. A batch of products produced in a process costing system
C. A specific order or batch of products that can be traced to a particular customer or production run
D. A service performed for a customer

________________________________________
212. If the actual costs incurred in production are less than the applied overhead, the company has:
A. An underapplied overhead
B. An overapplied overhead
C. No impact on overhead
D. A neutral overhead

________________________________________
213. A company sells a product for $80 per unit. The variable cost is $50 per unit, and the fixed costs are $90,000. How many units must be sold to achieve a target profit of $30,000?
A. 1,500 units
B. 2,000 units
C. 3,000 units
D. 4,500 units

________________________________________
214. A company has an operating income of $50,000, fixed costs of $70,000, and a contribution margin ratio of 0.4. What is the company’s sales revenue?
A. $500,000
B. $600,000
C. $650,000
D. $700,000

________________________________________
215. The process costing system is most appropriate when:
A. Each product is unique
B. Production is continuous and products are identical
C. A company produces large batches of a single product
D. A company produces custom-made goods

________________________________________
216. Under which of the following costing methods are fixed manufacturing overhead costs treated as period costs?
A. Absorption costing
B. Job-order costing
C. Variable costing
D. Process costing

________________________________________
217. The break-even point is the sales level at which:
A. Total revenue equals total variable costs
B. Total revenue equals total fixed costs
C. Total revenue equals total costs (fixed and variable)
D. Total costs equal total expenses

________________________________________
218. Which of the following is a key feature of the high-low method?
A. It uses both the highest and lowest levels of activity to estimate costs
B. It uses only the highest level of activity to estimate costs
C. It is primarily used for job-order costing
D. It requires a detailed analysis of all cost drivers

________________________________________
219. In absorption costing, which of the following costs are included in the product cost?
A. Only direct materials and direct labor
B. Only variable manufacturing costs
C. Direct materials, direct labor, and both variable and fixed manufacturing overhead
D. Only direct materials and variable manufacturing overhead

________________________________________
220. The contribution margin per unit is defined as:
A. Sales price minus fixed costs
B. Sales price minus variable costs
C. Sales price minus direct labor costs
D. Fixed costs minus sales revenue

________________________________________
221. Which of the following is NOT an advantage of activity-based costing (ABC)?
A. It provides more accurate product cost allocation
B. It identifies and eliminates non-value-added activities
C. It simplifies the cost allocation process by using one cost driver
D. It helps managers make more informed pricing decisions

________________________________________
222. If a company uses a predetermined overhead rate, which of the following is true?
A. Overhead is applied based on the actual amount of overhead incurred
B. Overhead is applied at the end of the period
C. Overhead is applied using an estimate of the rate at the beginning of the period
D. The overhead rate is adjusted every month based on actual costs

________________________________________
223. A company’s sales revenue is $500,000, its variable costs are $300,000, and its fixed costs are $100,000. What is the contribution margin?
A. $200,000
B. $300,000
C. $400,000
D. $100,000

________________________________________
224. The difference between actual and applied overhead is referred to as:
A. A cost variance
B. A volume variance
C. An overhead variance
D. An efficiency variance

________________________________________
225. Which of the following is a disadvantage of process costing?
A. It is difficult to trace costs to individual products
B. It requires extensive use of activity-based costing techniques
C. It is only applicable to job-order costing
D. It is time-consuming and difficult to implement

________________________________________
226. Which of the following is NOT a common cost driver in activity-based costing (ABC)?
A. Machine hours
B. Number of inspections
C. Direct labor hours
D. Number of customer orders

________________________________________
227. Which of the following would likely be classified as a fixed cost?
A. Materials cost
B. Direct labor cost
C. Salaries of administrative staff
D. Variable overhead

________________________________________
228. The contribution margin ratio is calculated by:
A. Contribution margin divided by sales price
B. Contribution margin divided by fixed costs
C. Sales price divided by contribution margin
D. Sales revenue divided by fixed costs

________________________________________
229. A company has fixed costs of $150,000, a contribution margin of $50 per unit, and a selling price of $100 per unit. What is the break-even point in units?
A. 2,000 units
B. 3,000 units
C. 4,000 units
D. 5,000 units

________________________________________
230. Which of the following would be classified as a period cost under both absorption costing and variable costing?
A. Direct materials
B. Factory rent
C. Administrative salaries
D. Direct labor

________________________________________
231. What is the primary purpose of a flexible budget?
A. To adjust the budgeted costs for changes in the level of activity
B. To evaluate a company’s performance at a fixed level of activity
C. To compare actual costs with the fixed budget
D. To calculate the break-even point at different levels of activity

________________________________________
232. If a company has a contribution margin of $80,000 and fixed costs of $50,000, what is the company’s operating income?
A. $130,000
B. $30,000
C. $50,000
D. $80,000

________________________________________
233. Which of the following is true of a cost that is described as “committed”?
A. It can be easily reduced or eliminated in the short term
B. It is a cost that will be incurred regardless of the level of production
C. It varies with the level of production
D. It is a discretionary cost that can be eliminated without significant impact

________________________________________
234. If a company’s contribution margin ratio is 0.5 and its fixed costs are $200,000, how much in sales revenue is required to break even?
A. $100,000
B. $200,000
C. $400,000
D. $500,000

________________________________________
235. Which of the following would be considered a sunk cost in decision-making?
A. A new piece of equipment purchased last year
B. The future cost of hiring additional workers
C. The future cost of raw materials needed for production
D. A potential increase in rent for next year

________________________________________
236. A company is considering switching from absorption costing to variable costing. Which of the following is NOT an advantage of using variable costing?
A. It provides better insight into cost behavior
B. It simplifies decision-making regarding product pricing
C. It can provide more accurate inventory values
D. It highlights the contribution margin per unit

________________________________________
237. The total cost of a product includes:
A. Only variable costs associated with production
B. Both fixed and variable costs associated with production
C. Only direct materials and direct labor costs
D. Only the costs incurred during the production process

________________________________________
238. A company estimates that its fixed costs will be $500,000, and its variable costs per unit will be $30. The company’s sales price per unit is $60. What is the break-even point in units?
A. 10,000 units
B. 12,000 units
C. 15,000 units
D. 20,000 units

________________________________________
239. If a company has overapplied overhead, this means that:
A. The applied overhead is greater than the actual overhead incurred
B. The actual overhead is greater than the applied overhead
C. The company is underperforming in cost control
D. The company has spent less on overhead than expected

________________________________________
240. In a job-order costing system, overhead costs are applied based on:
A. The actual overhead incurred
B. A predetermined overhead rate
C. A cost driver based on total production
D. The number of units produced

241. In activity-based costing (ABC), the first step is to:
A. Assign costs to products
B. Identify the activities that consume resources
C. Determine the appropriate cost drivers
D. Calculate the contribution margin

________________________________________
242. A company has a contribution margin of $250,000, fixed costs of $200,000, and net income of $50,000. What is the degree of operating leverage?
A. 1.25
B. 2.5
C. 3.5
D. 5.0

________________________________________
243. In a process costing system, when a company has multiple departments, which of the following is true regarding the transfer of costs?
A. Costs are transferred from one department to another at the market price
B. Costs are transferred at the cost of production incurred in the previous department
C. Each department applies overhead costs based on the final sales value
D. Only direct materials costs are transferred between departments

________________________________________
244. Which of the following would be considered a direct cost in a job-order costing system?
A. Factory rent
B. Direct labor costs
C. Depreciation on factory machinery
D. Administrative salaries

________________________________________
245. A company’s total fixed costs are $60,000, and the variable cost per unit is $20. The company expects to sell 15,000 units. What is the break-even point in sales dollars?
A. $300,000
B. $600,000
C. $500,000
D. $900,000

________________________________________
246. A company’s fixed costs total $200,000. If the contribution margin per unit is $40, how many units must the company sell to achieve an operating income of $100,000?
A. 5,000 units
B. 7,500 units
C. 10,000 units
D. 12,500 units

________________________________________
247. In a flexible budget, the cost behavior pattern for a variable cost is:
A. The same as for fixed costs
B. A straight line, increasing with production
C. A straight line, decreasing with production
D. Irrelevant to budget preparation

________________________________________
248. Which of the following is a characteristic of a variable cost?
A. It remains the same regardless of changes in the level of activity
B. It varies in total but remains constant per unit
C. It decreases as production increases
D. It increases at a constant rate per unit

________________________________________
249. The term “absorption costing” refers to the method of:
A. Allocating fixed costs to units of production
B. Expensing fixed costs as incurred
C. Assigning variable costs to finished goods only
D. Only allocating direct costs to units of production

________________________________________
250. A company is considering an investment in a new machine. The machine costs $120,000 and will save $30,000 in annual operating costs. What is the payback period for the machine?
A. 3 years
B. 4 years
C. 5 years
D. 6 years

________________________________________
251. What type of costing system is most commonly used for standardized, mass-produced items?
A. Job-order costing
B. Process costing
C. Activity-based costing
D. Variable costing

________________________________________
252. In an absorption costing system, which of the following would be included in the cost of goods sold?
A. Only direct materials
B. Direct materials, direct labor, and fixed manufacturing overhead
C. Direct materials, direct labor, and variable manufacturing overhead
D. Only direct labor and variable manufacturing overhead

________________________________________
253. The contribution margin ratio is calculated as:
A. (Sales – Variable Costs) / Sales
B. (Sales – Fixed Costs) / Sales
C. Variable Costs / Sales
D. Fixed Costs / Sales

________________________________________
254. In the context of cost-volume-profit (CVP) analysis, the margin of safety is:
A. The excess of budgeted sales over break-even sales
B. The excess of actual sales over fixed costs
C. The amount by which sales must increase to achieve the desired profit
D. The fixed costs required to break even

________________________________________
255. A company incurs a fixed cost of $50,000, and the contribution margin per unit is $25. If the company wants to achieve a profit of $150,000, how many units must it sell?
A. 4,000 units
B. 6,000 units
C. 8,000 units
D. 10,000 units

________________________________________
256. Which of the following is true about absorption costing?
A. It treats fixed manufacturing overhead as a period cost
B. It includes both variable and fixed manufacturing costs in the cost of goods sold
C. It assigns all costs to units sold and treats variable costs as period costs
D. It assigns only direct costs to units produced

________________________________________
257. Which of the following is NOT a typical characteristic of a cost driver?
A. It is the factor that causes changes in the cost of an activity
B. It can be either quantitative or qualitative
C. It is used to allocate costs in activity-based costing
D. It must remain constant for accurate cost allocation

________________________________________
258. In a process costing system, when are costs assigned to units?
A. Only when units are sold
B. At the end of the accounting period
C. As units pass through each department
D. When all work on a unit is completed

________________________________________
259. The main purpose of an activity-based costing (ABC) system is to:
A. Allocate fixed costs based on machine hours
B. Assign overhead costs to products based on their consumption of activities
C. Use a single cost driver for all types of overhead costs
D. Simplify the process of allocating direct costs

________________________________________
260. The cost of goods manufactured in a job-order costing system is:
A. Equal to the sum of direct materials and direct labor used in the period
B. The sum of the direct costs plus the applied overhead
C. The sum of the direct costs and the actual overhead
D. The total sales minus the cost of goods sold

________________________________________
261. Under absorption costing, what is included in the cost of inventory?
A. Direct materials, direct labor, and variable manufacturing overhead only
B. Direct materials, direct labor, and both fixed and variable manufacturing overhead
C. Only direct labor and direct materials
D. Only variable manufacturing overhead

________________________________________
262. If a company experiences a change in sales volume, which of the following will NOT change in total?
A. Variable costs
B. Fixed costs
C. Contribution margin
D. Net income

________________________________________
263. If a company has an operating income of $120,000 and fixed costs of $150,000, what is the company’s break-even point in dollars?
A. $200,000
B. $150,000
C. $270,000
D. $180,000

________________________________________
264. What is the formula for calculating the degree of operating leverage?
A. Contribution margin / Operating income
B. Operating income / Sales revenue
C. Contribution margin / Sales revenue
D. Fixed costs / Contribution margin

________________________________________
265. Which of the following is true about variable costing?
A. It treats fixed manufacturing overhead as a product cost
B. It assigns fixed manufacturing overhead to inventory
C. It assigns fixed manufacturing overhead to the period as an expense
D. It includes only variable manufacturing costs in the cost of goods sold

________________________________________
266. When using a predetermined overhead rate, which of the following will NOT affect the rate?
A. Actual activity levels
B. Estimated total overhead costs
C. Estimated total activity levels
D. Estimated direct labor hours

________________________________________
267. Which of the following is NOT a feature of a flexible budget?
A. It adjusts for changes in the level of activity
B. It allows for more accurate performance evaluations
C. It is prepared at the beginning of the accounting period
D. It reflects the variable and fixed cost behavior at different levels of activity

________________________________________
268. In a job-order costing system, what happens when overhead is overapplied?
A. The company has charged too much overhead to the jobs during the period
B. The company needs to adjust the cost of goods sold to reflect the overapplied overhead
C. The company will reduce its inventory value
D. The company will increase its net income

________________________________________
269. A company has fixed costs of $120,000, and its contribution margin ratio is 40%. What is the company’s break-even sales revenue?
A. $100,000
B. $120,000
C. $200,000
D. $300,000

________________________________________
270. If the cost of goods manufactured exceeds the cost of goods sold, what is the effect on income?
A. The company’s income is understated
B. The company’s income is overstated
C. The company’s income remains unchanged
D. There is no direct effect on income

271. What is the primary purpose of activity-based management (ABM)?
A. To reduce direct labor costs
B. To improve operational efficiency by analyzing activities
C. To apply activity-based costing
D. To reduce fixed costs

________________________________________
272. A company has a product that sells for $50 per unit. The variable costs are $30 per unit, and the fixed costs are $100,000. How many units must the company sell to achieve a target profit of $50,000?
A. 5,000 units
B. 7,500 units
C. 8,000 units
D. 10,000 units

________________________________________
273. Which of the following is the most appropriate cost driver for allocating factory overhead in a job-order costing system?
A. Direct labor hours
B. Number of units produced
C. Machine hours
D. Direct materials costs

________________________________________
274. Which of the following statements is true about process costing?
A. It accumulates costs by individual jobs
B. It is primarily used for homogeneous products
C. It is used in industries where products are custom made
D. It calculates costs for specific batches of goods

________________________________________
275. What is the primary distinction between variable costing and absorption costing?
A. Variable costing includes only direct labor in the product cost
B. Absorption costing includes fixed manufacturing overhead in the product cost
C. Variable costing assigns fixed costs to the period
D. Absorption costing assigns all costs to the period

________________________________________
276. Which of the following is NOT an example of a period cost?
A. Office salaries
B. Advertising expense
C. Factory rent
D. Sales commission

________________________________________
277. A company sells a product for $100, with a variable cost of $60 per unit and fixed costs of $200,000. How many units must be sold to break even?
A. 1,000 units
B. 2,000 units
C. 3,000 units
D. 4,000 units

________________________________________
278. In cost-volume-profit (CVP) analysis, the break-even point occurs when:
A. Total revenue equals total variable costs
B. Total revenue equals total fixed costs
C. Total revenue equals total costs (fixed + variable)
D. Total revenue exceeds total costs

________________________________________
279. Which of the following is NOT typically a fixed cost in a manufacturing company?
A. Depreciation of factory equipment
B. Salaries of administrative employees
C. Factory supervisor’s salary
D. Raw materials used in production

________________________________________
280. What is the purpose of a cost-volume-profit (CVP) analysis?
A. To determine the cost of capital
B. To identify the relationship between cost, volume, and profit
C. To allocate fixed costs to products
D. To estimate future sales revenue

________________________________________
281. A company uses process costing. In the production of 10,000 units, the total manufacturing costs amount to $500,000. If 2,000 units were in the beginning inventory, what is the cost per unit of the units completed during the period?
A. $40
B. $45
C. $50
D. $60

________________________________________
282. If a company has an overapplied overhead situation, what should be done at the end of the period?
A. Adjust the cost of goods sold to reflect the overapplied overhead
B. Increase the applied overhead to account for the overapplied amount
C. Allocate the overapplied overhead to various cost centers
D. Ignore the overapplied overhead, as it is insignificant

________________________________________
283. A company’s sales are $500,000, its variable costs are $300,000, and its fixed costs are $120,000. What is the contribution margin?
A. $180,000
B. $200,000
C. $220,000
D. $250,000

________________________________________
284. Which of the following is an advantage of using activity-based costing (ABC)?
A. It is easy to implement
B. It accurately assigns overhead costs based on activities rather than volume
C. It uses a single cost driver for all activities
D. It only requires minimal data

________________________________________
285. In a job-order costing system, which of the following costs are assigned directly to individual jobs?
A. Direct labor costs
B. Factory overhead costs
C. Depreciation of manufacturing equipment
D. Indirect labor costs

________________________________________
286. The primary difference between job-order costing and process costing is that:
A. Job-order costing is used for mass-produced items, while process costing is used for customized jobs
B. Job-order costing accumulates costs by individual jobs, while process costing accumulates costs by departments or processes
C. Job-order costing applies overhead costs based on machine hours, while process costing does not
D. Job-order costing is used only for service industries, while process costing is used for manufacturing

________________________________________
287. A company has fixed costs of $100,000 and a contribution margin ratio of 40%. How much in sales revenue is needed to achieve a target profit of $50,000?
A. $375,000
B. $375,000 (sales revenue)
C. $250,000
D. $375,000

________________________________________
288. A company has a predetermined overhead rate based on machine hours. If a job uses 10 machine hours, and the rate is $25 per machine hour, what is the applied overhead for the job?
A. $250
B. $500
C. $750
D. $1,000

________________________________________
289. If a company experiences a change in sales volume, which of the following will NOT change in total?
A. Fixed costs
B. Variable costs
C. Contribution margin
D. Sales revenue

________________________________________
290. The formula for the contribution margin per unit is:
A. Sales price minus total variable costs
B. Sales price minus fixed costs
C. Sales price minus variable costs per unit
D. Sales price minus direct materials cost

________________________________________
291. What does a favorable variance for direct materials suggest?
A. The company used fewer materials than expected
B. The company paid higher material costs than expected
C. The company used more materials than expected
D. The company paid lower material costs than expected

________________________________________
292. What is the first step in preparing a flexible budget?
A. Calculate fixed costs
B. Estimate the activity level
C. Determine the cost drivers
D. Identify variable costs

________________________________________
293. Under absorption costing, which of the following would be treated as a product cost?
A. Administrative salaries
B. Advertising expense
C. Direct labor
D. Sales commissions

________________________________________
294. A company produces 100,000 units of a product and incurs total costs of $1,000,000. If fixed costs are $200,000, what are the variable costs?
A. $1,000,000
B. $800,000
C. $200,000
D. $400,000

________________________________________
295. The cost of inventory under variable costing excludes:
A. Direct materials
B. Direct labor
C. Fixed manufacturing overhead
D. Variable manufacturing overhead

________________________________________
296. In a job-order costing system, which of the following is an example of a direct cost?
A. Factory supervisor salary
B. Machine depreciation
C. Direct materials
D. Utilities cost

________________________________________
297. Which of the following is NOT part of the cost of goods manufactured in a job-order costing system?
A. Direct labor
B. Direct materials
C. Indirect materials
D. Fixed selling expenses

________________________________________
298. In activity-based costing, what does the cost driver represent?
A. The total cost of an activity
B. The cost of direct materials used in the production process
C. The factor that causes the cost of an activity to change
D. The total fixed cost of the business

________________________________________
299. The primary purpose of a cost pool in activity-based costing is to:
A. Allocate fixed costs to different departments
B. Group similar activities for cost allocation
C. Distribute variable costs to products
D. Allocate costs based on machine hours

________________________________________
300. If a company has fixed costs of $250,000, and its contribution margin ratio is 30%, what is the break-even point in sales revenue?
A. $500,000
B. $700,000
C. $750,000
D. $833,333

301. In a job-order costing system, how are indirect materials typically treated?
A. As a direct cost
B. As a period expense
C. As a part of factory overhead
D. As an addition to direct labor

________________________________________
302. Which of the following is the primary advantage of using activity-based costing (ABC) over traditional costing methods?
A. ABC simplifies the allocation of direct costs
B. ABC assigns overhead costs more accurately to products based on activities
C. ABC does not require any estimates of cost drivers
D. ABC is easier and less expensive to implement

________________________________________
303. In absorption costing, which of the following is treated as a product cost?
A. Direct labor
B. Advertising expenses
C. Administrative salaries
D. Selling expenses

________________________________________
304. The primary difference between job-order costing and process costing is that:
A. Job-order costing assigns all costs to products, while process costing does not
B. Process costing is used when products are unique or custom-made
C. Job-order costing accumulates costs by individual jobs, while process costing accumulates costs by departments or processes
D. Job-order costing requires the use of a predetermined overhead rate, while process costing does not

________________________________________
305. Which of the following would be considered a fixed cost in a manufacturing environment?
A. Direct materials used in production
B. Variable selling expenses
C. Factory rent
D. Direct labor costs

________________________________________
306. The break-even point is the sales level at which:
A. The contribution margin equals fixed costs
B. Variable costs equal fixed costs
C. Revenue equals costs, resulting in no profit or loss
D. The contribution margin equals total sales

________________________________________
307. The formula for the contribution margin ratio is:
A. Contribution margin / Fixed costs
B. (Sales – Variable costs) / Sales
C. Variable costs / Sales
D. Fixed costs / Sales

________________________________________
308. A company has a contribution margin ratio of 40%. What is the dollar sales needed to achieve a target profit of $120,000, given fixed costs of $200,000?
A. $300,000
B. $800,000
C. $850,000
D. $1,000,000

________________________________________
309. Under absorption costing, how is fixed manufacturing overhead treated?
A. As a period expense
B. As a product cost, allocated to units produced
C. As a direct cost of production
D. It is excluded from the cost of goods sold

________________________________________
310. In process costing, the cost per unit is determined by:
A. The total costs divided by the number of units produced
B. The total sales revenue divided by the number of units produced
C. Direct materials costs only divided by the units produced
D. Total labor costs divided by the number of units produced

________________________________________
311. A company produces 500,000 units of a product, and the total cost is $4,000,000. If fixed costs are $1,000,000, what are the variable costs?
A. $1,000,000
B. $2,500,000
C. $3,000,000
D. $3,500,000

________________________________________
312. A company’s break-even point in units is calculated as:
A. Fixed costs / Contribution margin per unit
B. Variable costs / Contribution margin per unit
C. Fixed costs / Variable cost per unit
D. Contribution margin per unit / Fixed costs

________________________________________
313. What is the primary purpose of cost-volume-profit (CVP) analysis?
A. To calculate the fixed cost of production
B. To determine the impact of changes in cost and volume on profit
C. To determine the break-even point for a company’s products
D. To allocate fixed costs to products

________________________________________
314. In absorption costing, which of the following is treated as a period cost?
A. Variable manufacturing overhead
B. Fixed manufacturing overhead
C. Selling and administrative expenses
D. Direct materials costs

________________________________________
315. A company is considering discontinuing a product line. If the contribution margin for the product line is $60,000, fixed costs allocated to the product line are $50,000, and no other expenses are affected, what would be the impact on net income?
A. Increase by $60,000
B. Decrease by $60,000
C. Increase by $10,000
D. Decrease by $10,000

________________________________________
316. In a flexible budget, what is the main purpose of adjusting for the actual level of activity?
A. To allocate overhead costs to products
B. To determine how much variance occurred between the budgeted and actual figures
C. To simplify the budgeting process
D. To calculate the contribution margin per unit

________________________________________
317. Which of the following is a key characteristic of fixed costs?
A. They vary directly with production levels
B. They remain constant in total regardless of activity level
C. They vary per unit of production
D. They are only incurred at high levels of production

________________________________________
318. In activity-based costing (ABC), a company allocates overhead costs based on:
A. The direct labor costs associated with the activity
B. The sales volume of the product
C. The activities that consume overhead resources
D. The number of units produced

________________________________________
319. Which of the following is an example of a committed fixed cost?
A. Rent on a factory building
B. Sales commissions
C. Direct labor
D. Utilities

________________________________________
320. What is the effect of underapplied overhead on the financial statements?
A. It increases net income
B. It decreases net income
C. It has no impact on net income
D. It affects the cost of goods sold only

________________________________________
321. In a job-order costing system, the cost of goods manufactured is calculated by:
A. Adding direct labor and direct materials to total sales
B. Subtracting beginning inventory from ending inventory
C. Adding direct materials, direct labor, and factory overhead for the period
D. Subtracting direct labor from factory overhead

________________________________________
322. If a company’s total fixed costs are $120,000, and it has a contribution margin ratio of 60%, what is the break-even point in sales dollars?
A. $180,000
B. $200,000
C. $300,000
D. $500,000

________________________________________
323. In process costing, when units are in the beginning inventory and are partially completed, how are costs handled?
A. All costs are assigned to the units in the beginning inventory
B. Only direct materials costs are assigned to the beginning inventory
C. The costs are prorated based on the percentage of completion
D. No costs are assigned to the beginning inventory

________________________________________
324. In an activity-based costing system, which of the following would be a likely cost driver for a machine setup activity?
A. Direct labor hours
B. Number of machine setups
C. Number of units produced
D. Machine hours

________________________________________
325. Which of the following is the most important characteristic of a relevant cost in decision-making?
A. It is incurred in the past
B. It will differ between alternatives
C. It is a sunk cost
D. It does not affect future cash flows

________________________________________
326. A company has fixed costs of $300,000, and the contribution margin per unit is $20. How many units must the company sell to cover its fixed costs?
A. 10,000 units
B. 12,500 units
C. 15,000 units
D. 20,000 units

________________________________________
327. In absorption costing, which of the following is treated as a product cost?
A. Direct labor
B. Sales commissions
C. Office supplies
D. Advertising expenses

________________________________________
328. When calculating the break-even point using a contribution margin income statement, which of the following is divided by the contribution margin per unit?
A. Total fixed costs
B. Variable costs
C. Sales revenue
D. Variable costs per unit

________________________________________
329. In a job-order costing system, overhead is typically applied to jobs based on:
A. The direct labor hours worked on each job
B. The actual overhead incurred
C. The number of units produced
D. The materials cost assigned to the job

________________________________________
330. If a company has a contribution margin ratio of 40%, fixed costs of $250,000, and a target profit of $100,000, what is the required sales revenue to achieve the target profit?
A. $375,000
B. $500,000
C. $625,000
D. $750,000

331. Which of the following is an example of a discretionary fixed cost?
A. Rent for factory space
B. Salaries of permanent employees
C. Advertising costs
D. Depreciation on machinery

________________________________________
332. Which of the following is NOT a typical use of activity-based costing (ABC)?
A. To allocate overhead costs based on activities
B. To assign direct costs to products
C. To improve decision-making by identifying inefficient activities
D. To analyze the impact of cost drivers on the business

________________________________________
333. Which of the following describes the behavior of variable costs?
A. They remain constant in total, regardless of the level of production.
B. They change in total with changes in the level of production.
C. They decrease as production increases.
D. They do not vary with production volume, but vary with sales volume.

________________________________________
334. Under variable costing, fixed manufacturing overhead is treated as:
A. A product cost
B. A period cost
C. An inventory cost
D. A cost of goods sold

________________________________________
335. A company has a contribution margin ratio of 50%. If the company needs to earn a profit of $200,000 and its fixed costs are $300,000, what is the required sales revenue?
A. $600,000
B. $1,000,000
C. $1,200,000
D. $1,400,000

________________________________________
336. What is the effect on income if a company experiences an overapplied overhead?
A. Income is understated.
B. Income is overstated.
C. Income remains unchanged.
D. There is no effect on income.

________________________________________
337. In process costing, how are costs assigned to units in ending inventory?
A. Based on their percentage of completion
B. By averaging the total cost of production
C. By applying a predetermined rate to the units
D. By prorating total costs based on the number of units

________________________________________
338. Which of the following is true about a contribution margin income statement?
A. It classifies costs as either fixed or variable.
B. It categorizes costs into direct and indirect costs.
C. It separates the costs of goods sold into variable and fixed components.
D. It includes all costs as period costs.

________________________________________
339. Which of the following types of costs does activity-based costing (ABC) allocate to products?
A. Only direct materials and direct labor costs
B. All costs, including direct and indirect costs
C. Only fixed manufacturing overhead
D. Only variable manufacturing overhead

________________________________________
340. In cost-volume-profit (CVP) analysis, if the selling price per unit increases, what happens to the break-even point?
A. The break-even point decreases.
B. The break-even point increases.
C. The break-even point remains unchanged.
D. The effect on the break-even point depends on fixed costs.

________________________________________
341. Which of the following is a characteristic of variable costing?
A. It includes all costs in the cost of goods sold.
B. It treats fixed manufacturing overhead as a period cost.
C. It is primarily used for external reporting.
D. It allocates fixed manufacturing overhead to inventory.

________________________________________
342. In job-order costing, which of the following would be considered a direct cost for a construction project?
A. Equipment depreciation
B. Project manager’s salary
C. Direct labor for the construction workers
D. General administrative expenses

________________________________________
343. Which of the following is true about absorption costing?
A. It allocates fixed costs as period costs.
B. It includes both fixed and variable manufacturing costs in the cost of goods sold.
C. It is used primarily for internal reporting.
D. It is typically not accepted for external financial reporting.

________________________________________
344. Which of the following is NOT typically included in a flexible budget?
A. Estimated fixed costs
B. Estimated variable costs
C. Actual costs incurred
D. Expected revenue based on activity level

________________________________________
345. The primary purpose of cost-volume-profit (CVP) analysis is to:
A. Determine the appropriate allocation of fixed costs
B. Analyze the relationship between costs, sales, and profits
C. Allocate activity costs to various departments
D. Set target sales prices based on cost data

________________________________________
346. A company’s fixed costs are $500,000, and its contribution margin per unit is $50. How many units must the company sell to achieve a target profit of $200,000?
A. 10,000 units
B. 12,000 units
C. 14,000 units
D. 20,000 units

________________________________________
347. In process costing, the total cost of production is divided by the:
A. Number of units in the beginning inventory.
B. Number of units produced in the period.
C. Number of units completed.
D. Total sales revenue for the period.

________________________________________
348. Job-order costing is best suited for:
A. Industries that produce homogeneous products in large volumes.
B. Custom-made products or specialized services.
C. Mass production of a standard product.
D. Service industries that offer standard packages.

________________________________________
349. A company applies overhead based on machine hours. If the predetermined overhead rate is $20 per machine hour and a job used 100 machine hours, what is the applied overhead?
A. $1,000
B. $2,000
C. $2,500
D. $4,000

________________________________________
350. If a company experiences underapplied overhead, which of the following is true at the end of the period?
A. The company has applied more overhead than it actually incurred.
B. The company needs to decrease its total expenses.
C. The company will need to increase its overhead rate for the next period.
D. The company has applied less overhead than it actually incurred.

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351. In activity-based costing (ABC), what is the first step in assigning overhead costs to products?
A. Identifying the activities that consume resources
B. Determining the total fixed costs for the period
C. Calculating the contribution margin ratio
D. Estimating the future sales volume

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352. In variable costing, how is fixed manufacturing overhead treated when a company produces more units than it sells?
A. It is included in the cost of goods sold.
B. It is prorated and allocated to each unit produced.
C. It is treated as a period cost and expensed immediately.
D. It is treated as an inventory cost and carried forward.

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353. When using absorption costing, if inventory increases during a period, which of the following is true?
A. The cost of goods sold will be higher.
B. The income reported will be lower compared to variable costing.
C. The net income will be unaffected.
D. The cost of goods sold will be unaffected.

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354. Variable costing would generally be most useful for:
A. External financial reporting.
B. Setting sales prices.
C. Preparing income statements for tax purposes.
D. Internal decision-making regarding pricing and product lines.

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355. Which of the following best describes activity-based management (ABM)?
A. A cost allocation method used to distribute costs based on activities
B. A system to allocate direct costs to departments
C. A method to analyze the costs of activities and improve efficiency
D. A system to manage fixed costs

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356. If a company has fixed costs of $300,000 and a contribution margin ratio of 40%, what is the break-even sales revenue?
A. $400,000
B. $500,000
C. $600,000
D. $750,000

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357. In job-order costing, which of the following is the most appropriate method for applying overhead to a specific job?
A. Based on total direct labor costs
B. Based on a predetermined overhead rate
C. Based on direct materials used
D. Based on direct labor hours worked

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358. If a company’s sales are $1,000,000 and the contribution margin ratio is 60%, what is the contribution margin in dollars?
A. $200,000
B. $400,000
C. $600,000
D. $1,600,000

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359. In a flexible budget, how are costs treated?
A. Fixed costs are adjusted based on changes in activity levels, while variable costs remain constant.
B. Both fixed and variable costs are adjusted based on changes in activity levels.
C. Only variable costs are adjusted based on changes in activity levels.
D. Fixed costs are ignored entirely.

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360. In activity-based costing (ABC), a cost driver is used to:
A. Allocate all direct costs to products.
B. Assign overhead costs to products based on the activities that cause the costs.
C. Determine the fixed costs for the period.
D. Set the sales prices for the product.

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