CFC Cost Accounting & Management 2

Question 1

A company uses activity-based costing. Which cost driver would be most appropriate for a machine setup activity?

Accepted Answer

Number of production runs

Answer

Setup costs vary with the number of production runs (batches), not individual units or machine hours.

Question 2

Under absorption costing, when production exceeds sales, operating income will be:

Accepted Answer

Higher than variable costing income

Answer

Under absorption costing, fixed overhead is deferred in ending inventory, making income higher than variable costing when production > sales.

Question 3

Which of the following is a characteristic of a process costing system?

Accepted Answer

Products are homogeneous and mass-produced

Answer

Process costing suits homogeneous, mass-produced goods where costs are averaged over all units in a period.

Question 4

A company's contribution margin ratio is 40% and fixed costs are $200,000. What sales level is needed to achieve a target profit of $60,000?

Accepted Answer

$650,000

Answer

Required sales = (Fixed costs + Target profit) / CM ratio = ($200,000 + $60,000) / 0.40 = $650,000.

Question 5

The joint cost allocation method that assigns costs based on each product's ability to absorb costs is the:

Accepted Answer

Net realizable value method

Answer

The net realizable value method allocates joint costs in proportion to each product's NRV, reflecting its relative market value.

(CFC) Certified Financial Controller Practice Test