1. Types of Costs
1. Which of the following costs is
classified as a product cost for a manufacturing firm?
A) Sales commissions
B) Factory depreciation
C) Administrative salaries
D) Advertising expense
Answer
2. A cost that remains constant in
total within the relevant range of activity is a:
A) Variable cost
B) Mixed cost
C) Fixed cost
D) Step cost
Answer:.
3. Which cost is a sunk cost?
A) Future maintenance cost
B) Cost of equipment already purchased
C) Opportunity cost of a project
D) Incremental cost of a special order
Answer:
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2. Current Assets vs. Non-Current
Assets
4. Which of the following is a
non-current asset?
A) Accounts receivable
B) Inventory
C) Patent
D) Prepaid insurance
Answer:
5. Current assets are expected to be
converted to cash or consumed within:
A) Five years
B) One year or the operating cycle,
whichever is longer
C) Three months
D) The life of the business
Answer
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3. Deferred Tax
6. A deferred tax liability arises
when:
A) Taxable income exceeds accounting
income temporarily
B) Accounting income exceeds taxable
income temporarily
C) A permanent difference exists
D) The company has a tax loss
carryforward
Answer:
7. Which item creates a permanent
difference (not deferred tax)?
A) Warranty expense
B) Municipal bond interest income
C) Bad debt expense
D) Installment sales
Answer:
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4. Equity Dividends
8. An interim dividend is:
A) Declared at the annual general
meeting
B) Declared between annual general
meetings
C) Paid in shares instead of cash
D) A liquidating dividend
Answer:
9. A stock dividend:
A) Reduces total stockholders' equity
B) Increases total stockholders'
equity
C) Has no effect on total
stockholders' equity
D) Is always recorded at market value
Answer:
10. Treasury stock is:
A) Stock never issued
B) Stock repurchased by the company
C) Stock held by the government
D) Authorized but unissued stock
Answer:
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5. Contra Equity & Contra Assets
11. Treasury stock is classified as a:
A) Contra asset
B) Contra equity account
C) Current liability
D) Non-current asset
Answer:
12. Accumulated depreciation is a:
A) Contra equity account
B) Contra asset account
C) Liability account
D) Revenue account
Answer
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6. Predetermined Overhead Rate
13. The predetermined overhead rate is
calculated as:
A) Actual overhead ÷ Actual activity
B) Estimated overhead ÷ Estimated
activity
C) Actual overhead ÷ Estimated
activity
D) Estimated overhead ÷ Actual
activity
Answer
**14. A company estimates $500,000
overhead and 25,000 direct labor hours. The predetermined overhead rate is:**
A) $10 per hour
B) $20 per hour
C) $25 per hour
D) $50 per hour
**Answer
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7. Overcosting & Undercosting
15. Undercosting of a product occurs
when:
A) The product is assigned more cost
than it consumes
B) The product is assigned less cost
than it consumes
C) Actual overhead equals applied
overhead
D) The product is overpriced
Answer:
16. Cross-subsidization (cost
subsidization) results from:
A) Accurate cost allocation
B) Overcosting one product and
undercosting another
C) Using actual costing
D) Eliminating overhead
Answer:
8. Manufacturing Overhead &
Allocation
17. Which of the following is a
manufacturing overhead cost?
A) Direct materials
B) Direct labor
C) Factory supervisor's salary
D) Sales manager's salary
Answer
18. The most accurate method of
allocating service department costs is:
A) Direct method
B) Step-down method
C) Reciprocal method
D) Single-rate method
Answer
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9. High-Low Method
19. Using the high-low method: highest
activity 10,000 units at $50,000 cost; lowest 4,000 units at $26,000. Variable
cost per unit is:
A) $3.00
B) $4.00
C) $5.00
D) $6.00
Answer:
20. Using the data above, total fixed
cost is:
A) $6,000
B) $10,000
C) $14,000
D) $26,000
Answer
10. Normal vs. Standard Costing &
Over/Underapplied Overhead
21. Under normal costing, overhead is
applied using:
A) Actual overhead and actual activity
B) Predetermined rate and actual
activity
C) Predetermined rate and standard
activity
D) Actual overhead and standard
activity
Answer:
22. Overapplied overhead means:
A) Applied overhead < Actual
overhead
B) Applied overhead > Actual
overhead
C) Applied overhead = Actual overhead
D) Actual overhead was zero
Answer:
23. If applied overhead is $120,000
and actual overhead is $110,000, the entry to close the difference includes:
A) Debit Cost of Goods Sold
B) Credit Manufacturing Overhead
C) Debit Manufacturing Overhead
D) Debit Work-in-Process
Answer:
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11. Journal Entries — Materials
24. On purchase of raw materials on
credit, the entry is:
A) Dr. Work-in-Process / Cr. Accounts
Payable
B) Dr. Raw Materials Inventory / Cr.
Accounts Payable
C) Dr. Accounts Payable / Cr. Raw
Materials
D) Dr. COGS / Cr. Raw Materials
Answer:
25. When materials are transferred to
production, the entry is:
A) Dr. Raw Materials / Cr. WIP
B) Dr. WIP / Cr. Raw Materials
Inventory
C) Dr. Finished Goods / Cr. WIP
D) Dr. Manufacturing Overhead / Cr.
Raw Materials
Answer
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12. Investments
26. Under the equity method
(investment in associates, typically 20%–50% ownership), the investor:
A) Records dividends as income
B) Records its share of investee
profit as income and reduces the investment for dividends received
C) Carries the investment at fair
value
D) Never adjusts the investment
account
Answer
27. Held-to-maturity (HTM) investments
are:
A) Debt securities the company intends
and is able to hold to maturity, measured at amortized cost
B) Equity securities measured at fair
value
C) Trading securities measured at fair
value through profit or loss
D) Always classified as current assets
Answer:
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13. Impairment
28. Under the impairment test for a
long-lived asset (held for use), an impairment loss is recognized when:
A) Fair value exceeds carrying amount
B) Undiscounted future cash flows are
less than carrying amount
C) The asset is fully depreciated
D) Book value equals fair value
Answer
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14. ROI & Residual Income
29. A division has operating income of
$80,000 and operating assets of $400,000. ROI is:
A) 10%
B) 20%
C) 25%
D) 80%
Answer
30. Residual income equals:
A) Operating income − (Required rate ×
Operating assets)
B) Operating income ÷ Operating assets
C) Sales − Variable costs
D) Net income + Depreciation
Answer:
31. A disadvantage of ROI compared to
RI is that ROI:
A) Cannot be calculated
B) May cause managers to reject
profitable projects that lower the division's overall ROI
C) Ignores invested capital
D) Is not expressed as a percentage
Answer:
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15. Transfer Pricing
32. The minimum transfer price from
the selling division's perspective (with idle capacity) is:
A) Full cost plus profit
B) Variable cost
C) Market price
D) Total cost
Answer
33. Which transfer pricing method is
most likely to lead to goal congruence?
A) Cost-based only
B) Negotiated or market-based pricing
C) Arbitrary pricing
D) Variable cost only
Answer:
---
16. Balanced Scorecard & Strategy
Map
34. The four perspectives of the
balanced scorecard are:
A) Financial, Customer, Internal
Process, Learning & Growth
B) Financial, Marketing, Operations,
HR
C) Cost, Quality, Time, Flexibility
D) Planning, Organizing, Leading,
Controlling
Answer:
35. A strategy map primarily shows:
A) The organizational chart
B) Cause-and-effect linkages among
balanced scorecard objectives
C) The budget variance report
D) The cash flow statement
Answer:
36. A leading indicator is:
A) A lagging measure of past
performance
B) A predictive measure of future
performance
C) Always a financial measure
D) A variance
Answer:
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17. Cash Flow Categories
37. Payment of cash dividends is
classified as:
A) Operating activity
B) Investing activity
C) Financing activity
D) Non-cash activity
Answer:
38. Purchase of equipment is
classified as:
A) Operating
B) Investing
C) Financing
D) Non-cash
Answer:
39. Cash received from customers is
classified as:
A) Operating
B) Investing
C) Financing
D) Non-cash
Answer:
---
18. Cash Budget Limitations &
Flexible Budget Variances
40. A limitation of the cash budget is
that it:
A) Shows accrual-based income
B) Ignores timing of cash flows
C) Is a forecast and may be inaccurate
if assumptions change
D) Cannot be prepared monthly
Answer:
41. A flexible budget variance is the
difference between:
A) Static budget and actual results
B) Flexible budget and actual results
C) Master budget and flexible budget
D) Actual and standard costs only
Answer:
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19. Performance Measurement &
Responsibility Centers
42. A cost center manager is
responsible for:
A) Revenues only
B) Costs only
C) Revenues and costs
D) Investments
Answer:
43. An investment center manager is
evaluated on:
A) Costs only
B) Profits only
C) Profits relative to invested
capital (ROI/RI)
D) Sales only
Answer:
44. Segment reporting requires
disclosure of:
A) Only consolidated totals
B) Information by reportable segments
(e.g., revenue, profit, assets)
C) Only geographic data
D) Only customer data
Answer:
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20. Strategic Analysis Tools
45. Which is a limitation of SWOT
analysis?
A) It is quantitative
B) It can be subjective and static
C) It ignores internal factors
D) It replaces financial analysis
Answer:
46. PESTEL analysis examines:
A) Political, Economic, Social,
Technological, Environmental, Legal factors
B) Profit, Equity, Sales, Tax,
Expenses, Liabilities
C) Product, Price, Place, Promotion
D) Planning, Execution, Staffing,
Training
Answer:
47. In the BCG matrix, a "cash
cow" has:
A) High growth, high market share
B) Low growth, high market share
C) High growth, low market share
D) Low growth, low market share
Answer:
48. A "question mark" in the
BCG matrix is characterized by:
A) High market share, low growth
B) Low market share, high growth
C) High market share, high growth
D) Low market share, low growth
Answer:
49. A "dog" in the BCG
matrix:
A) Should always be divested
immediately
B) Has low market share and low growth
C) Generates large cash flows
D) Requires heavy investment
Answer:
50. A "star" in the BCG
matrix:
A) Has high market share in a
high-growth market
B) Has low market share in a
low-growth market
C) Is always a cash cow
D) Should be harvested immediately
Answer:
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21. Labour & Variable Overhead
Efficiency Variances
51. Labour efficiency variance =
A) (Actual hours − Standard hours) ×
Standard rate
B) (Actual rate − Standard rate) ×
Actual hours
C) (Actual hours × Actual rate) −
(Standard hours × Standard rate)
D) Standard hours × Standard rate
Answer:
**52. Actual hours 2,100; standard
hours for output 2,000; standard rate $10. Labour efficiency variance is:**
A) $1,000 favorable
B) $1,000 unfavorable
C) $2,000 favorable
D) $2,000 unfavorable
**Answer:
53. Variable overhead efficiency
variance is calculated using:
A) (Actual hours − Standard hours) ×
Standard variable overhead rate
B) Actual variable overhead − Budgeted
variable overhead
C) Standard hours × Actual rate
D) Actual hours × Actual rate
Answer:
54. If actual hours exceed standard
hours, the variable overhead efficiency variance is:
A) Favorable
B) Unfavorable
C) Zero
D) Cannot be determined
Answer:
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