CCA CCA Cost Accounting & Management 1 — Questions and Answers
Question 1: Which costing method assigns manufacturing overhead to products based on the activities that drive costs?
- Job-order costing
- Activity-based costing (ABC) (Correct answer)
- Process costing
- Standard costing
Correct answer: Activity-based costing (ABC)
Activity-based costing assigns overhead using multiple cost drivers tied to specific activities, giving a more accurate picture of product costs.
Question 2: A company has fixed costs of $120,000, a selling price of $40 per unit, and variable costs of $25 per unit. What is the break-even point in units?
- 4,800 units
- 8,000 units (Correct answer)
- 3,000 units
- 6,000 units
Correct answer: 8,000 units
Break-even = Fixed Costs ÷ Contribution Margin per unit = $120,000 ÷ ($40 – $25) = 8,000 units.
Question 3: Under absorption costing, which of the following is treated as a product cost?
- Selling expenses
- Administrative salaries
- Fixed manufacturing overhead (Correct answer)
- Marketing costs
Correct answer: Fixed manufacturing overhead
Absorption costing includes both variable and fixed manufacturing overhead as product costs, unlike variable costing.
Question 4: What does a favorable materials price variance indicate?
- More material was used than expected
- Material was purchased at less than standard price (Correct answer)
- Labor efficiency improved
- Overhead was overapplied
Correct answer: Material was purchased at less than standard price
A favorable materials price variance means the actual price paid for materials was lower than the standard price.
Question 5: Which of the following is a characteristic of a joint cost?
- It can be directly traced to a single product
- It is incurred before the split-off point in producing multiple products (Correct answer)
- It is always allocated using the physical units method
- It is only relevant to service industries
Correct answer: It is incurred before the split-off point in producing multiple products
Joint costs arise from a single production process that simultaneously produces two or more products before the split-off point.
Question 6: Which inventory valuation method results in the highest net income during a period of rising prices?
- LIFO
- FIFO (Correct answer)
- Weighted-average
- Specific identification
Correct answer: FIFO
FIFO assigns the oldest (lowest) costs to cost of goods sold, leaving the highest-cost items in ending inventory, resulting in higher net income when prices rise.
CCA CCA Cost Accounting & Management 1
Which costing method assigns manufacturing overhead to products based on the activities that drive costs?