CCA CCA Cost Accounting & Management 2 — Questions and Answers
Question 1: Which cost behavior pattern remains constant in total regardless of changes in activity level within the relevant range?
- Variable cost
- Fixed cost (Correct answer)
- Mixed cost
- Step cost
Correct answer: Fixed cost
Fixed costs do not change in total with activity level within the relevant range, though per-unit fixed costs decrease as volume increases.
Question 2: The contribution margin ratio is calculated as:
- Net income ÷ Sales
- (Sales – Fixed Costs) ÷ Sales
- Contribution Margin ÷ Sales (Correct answer)
- Gross Profit ÷ Sales
Correct answer: Contribution Margin ÷ Sales
The contribution margin ratio equals contribution margin (Sales minus variable costs) divided by sales, showing what percentage of each dollar contributes to covering fixed costs and profit.
Question 3: A manufacturer uses process costing. What does the concept of 'equivalent units' represent?
- The number of defective units in a period
- The conversion of partially completed units into a whole-unit equivalent (Correct answer)
- The total units transferred to finished goods
- The standard hours allowed for actual production
Correct answer: The conversion of partially completed units into a whole-unit equivalent
Equivalent units convert partially completed units into their equivalent in fully completed units to allocate costs accurately in process costing.
Question 4: Which of the following best describes a sunk cost?
- A cost that can be avoided by choosing a different alternative
- A future cost that varies with each decision
- A cost already incurred that cannot be recovered (Correct answer)
- A cost that is fixed per unit
Correct answer: A cost already incurred that cannot be recovered
Sunk costs are historical costs that have already been incurred and are irrelevant for future decision-making.
Question 5: In a standard costing system, the labor efficiency variance is calculated as:
- (Actual hours – Standard hours) × Standard rate (Correct answer)
- (Actual rate – Standard rate) × Actual hours
- (Actual hours – Standard hours) × Actual rate
- Standard hours × (Actual rate – Standard rate)
Correct answer: (Actual hours – Standard hours) × Standard rate
Labor efficiency variance measures the difference between actual hours worked and standard hours allowed, multiplied by the standard labor rate.
Question 6: Which of the following is an example of an indirect manufacturing cost?
- Raw materials used in production
- Direct labor wages
- Factory supervisor salary (Correct answer)
- Sales commissions
Correct answer: Factory supervisor salary
A factory supervisor's salary is overhead — it supports production but cannot be directly traced to individual units and is therefore an indirect manufacturing cost.
CCA CCA Cost Accounting & Management 2
Which cost behavior pattern remains constant in total regardless of changes in activity level within the relevant range?