BEC Cost Accounting and Management Accounting 1 — Questions and Answers
Question 1: Which of the following is an example of a variable cost?
- Rent expense
- Depreciation on equipment
- Direct materials (Correct answer)
- Insurance premiums
Correct answer: Direct materials
Direct materials are variable costs because they increase or decrease proportionally with the level of production.
Question 2: Under absorption costing, which of the following costs is included in product cost?
- Selling expenses
- Administrative salaries
- Fixed manufacturing overhead (Correct answer)
- Interest expense
Correct answer: Fixed manufacturing overhead
Under absorption costing, fixed manufacturing overhead is included in product cost, unlike variable costing where it is treated as a period cost.
Question 3: Contribution margin is best defined as:
- Total revenue minus total costs
- Sales revenue minus variable costs (Correct answer)
- Gross profit minus operating expenses
- Operating income plus depreciation
Correct answer: Sales revenue minus variable costs
Contribution margin is sales revenue minus variable costs, representing the amount available to cover fixed costs and generate profit.
Question 4: Which costing method assigns manufacturing overhead using a single plant-wide rate?
- Activity-based costing
- Process costing
- Traditional costing (Correct answer)
- Job order costing
Correct answer: Traditional costing
Traditional costing assigns overhead using a single plant-wide rate, while activity-based costing uses multiple cost drivers to allocate overhead more accurately.
Question 5: In a job order costing system, which document accumulates all costs for a specific customer order?
- Production report
- Cost of production summary
- Job cost sheet (Correct answer)
- Materials requisition form
Correct answer: Job cost sheet
A job cost sheet accumulates direct materials, direct labor, and applied overhead costs for a specific job or customer order.
Question 6: A company has fixed costs of $100,000, a variable cost ratio of 60%, and sales of $300,000. What is the operating income?
- $20,000 (Correct answer)
- $80,000
- $120,000
- $200,000
Correct answer: $20,000
Contribution margin = $300,000 × (1 - 0.60) = $120,000; Operating income = $120,000 - $100,000 fixed costs = $20,000.
Question 7: Which of the following best describes a sunk cost?
- A cost that will be incurred in the future
- A cost that varies with production volume
- A cost that has already been incurred and cannot be recovered (Correct answer)
- A cost that can be avoided if a specific action is taken
Correct answer: A cost that has already been incurred and cannot be recovered
A sunk cost is one that has already been incurred and cannot be recovered regardless of future decisions, making it irrelevant for decision-making purposes.
BEC Cost Accounting and Management Accounting 1
Which of the following is an example of a variable cost?