BEC Cost Accounting and Management Accounting 3

Question 1

Activity-based costing (ABC) differs from traditional costing primarily because ABC:

Accepted Answer

Assigns overhead using multiple cost drivers linked to specific activities

Answer

ABC assigns overhead costs by identifying cost pools for each activity and using specific cost drivers for each pool, providing more accurate product costing than a single-rate method.

Question 2

When making a make-or-buy decision, which costs are most relevant to the analysis?

Accepted Answer

Avoidable costs and opportunity costs

Answer

Avoidable costs (costs eliminated by outsourcing) and opportunity costs (benefits foregone) are the relevant costs in a make-or-buy decision.

Question 3

The Theory of Constraints (TOC) primarily focuses on:

Accepted Answer

Maximizing throughput by identifying and managing bottleneck resources

Answer

TOC focuses on identifying the bottleneck (constraint) that limits throughput and making decisions to maximize output through that constraint.

Question 4

Under variable costing, which of the following is treated as a period cost rather than a product cost?

Accepted Answer

Fixed manufacturing overhead

Answer

Under variable costing, fixed manufacturing overhead is a period cost expensed in the period incurred and is never included in inventory valuation.

Question 5

Process costing is best suited for which type of production environment?

Accepted Answer

Petroleum refining

Answer

Process costing is best suited for continuous mass production of homogeneous products like petroleum refining, where costs are accumulated by process rather than by individual job.

BEC - Business Environment and Concepts Practice Test

BEC - Business Environment and Concepts Practice Test

BEC Cost Accounting and Management Accounting 3