Cost Accounting Trivia Questions

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  • 1/10 Questions

    In cost terminology, conversion costs consist of

    • Direct and indirect labor.
    • Direct labor and direct materials.
    • Direct labor and factory overhead.
    • Indirect labor and variable factory overhead.
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About This Quiz

This 'Cost Accounting Trivia Questions' quiz assesses knowledge on key cost accounting concepts, including direct labor, contribution margins, conversion costs, and inventory costs. It's designed for learners to understand practical applications in cost accounting, enhancing their skills in financial decision-making.

Cost Accounting Trivia Questions - Quiz

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  • 2. 

    The difference between the sales price and total variable costs is

    • Gross operating profit.

    • Net profit.

    • The breakeven point.

    • The contribution margin

    Correct Answer
    A. The contribution margin
    Explanation
    The contribution margin is the difference between the sales price and total variable costs. It represents the amount of revenue that is available to cover fixed costs and contribute towards profit. By subtracting variable costs from sales price, the contribution margin helps to determine the profitability of each unit sold. It is an important metric for businesses to analyze their cost structure and make informed decisions about pricing, cost control, and overall profitability.

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  • 3. 

    Which one of the following best describes direct labor?

    • A prime cost.

    • A period cost.

    • A product cost.

    • Both a product cost and a prime cost.

    Correct Answer
    A. Both a product cost and a prime cost.
    Explanation
    Direct labor refers to the cost of labor directly involved in the production of goods or services. It includes the wages, benefits, and other expenses associated with the employees who work directly on the production line or provide direct services. Direct labor is considered both a product cost because it is directly attributable to the production of goods or services, and a prime cost because it is a fundamental component of the total cost of production.

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  • 4. 

    Which one of the following categories of cost is most likely not considered a component of fixed factory overhead?

    • Rent.

    • Property taxes.

    • Depreciation.

    • Power.

    Correct Answer
    A. Power.
    Explanation
    Power is most likely not considered a component of fixed factory overhead because it is a variable cost that can fluctuate based on the level of production. Fixed factory overhead costs, on the other hand, remain constant regardless of the production level. Rent, property taxes, and depreciation are examples of fixed factory overhead costs as they do not change with the level of production.

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  • 5. 

    If the begining balance for May of the materials inventory account was $27,500, the ending balance for May is $28,750, and $128,900 of materials were used during the month, the material purchased during the month cost

    • $101,400

    • $127,650

    • $130,150

    • $157,650

    Correct Answer
    A. $130,150
    Explanation
    The beginning balance of the materials inventory account in May was $27,500. The ending balance for May is $28,750. This means that $1,250 worth of materials were added to the inventory during the month. Additionally, $128,900 worth of materials were used during the month. To find the cost of materials purchased during the month, we need to subtract the materials used from the total increase in inventory. Therefore, the cost of materials purchased during the month is $130,150 ($1,250 + $128,900).

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  • 6. 

    The cost of goods manufactured for X company for the year 2005 was $860,000. Begining work - in - process inventory was $50,000. Ending work - in - process was $60,000. if the begining finished goods inventory was $500,000 and the ending finished goods inventory was $990,000, what was the cost of goods sold for the year?

    • $360,000

    • $370,000

    • $490,000

    • $1,350,000

    Correct Answer
    A. $370,000
    Explanation
    The cost of goods sold can be calculated by adding the beginning finished goods inventory to the cost of goods manufactured and subtracting the ending finished goods inventory. In this case, the beginning finished goods inventory was $500,000, the cost of goods manufactured was $860,000, and the ending finished goods inventory was $990,000. Therefore, the cost of goods sold for the year was $370,000.

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  • 7. 

    The breakeven point in units increases when unit costs

    • Increase and sales price remains unchanged.

    • Decrease and sales price remain unchanged.

    • Remain unchanged and sales price increase.

    Correct Answer
    A. Increase and sales price remains unchanged.
    Explanation
    When the unit costs increase and the sales price remains unchanged, the breakeven point in units will increase. This is because the higher costs per unit will require more units to be sold in order to cover the expenses and reach the breakeven point. If the sales price remains the same, each unit sold will generate the same revenue, but the higher costs will eat into the profits, resulting in a larger number of units needed to break even.

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  • 8. 

    Inventoriable costs

    • Include only the prime costs of manufacturing a product.

    • Include only the conversion costs of manufacturing a product.

    • Are expensed when products become part of finished goods inventory.

    • Are regarded as assets before the products are sold

    Correct Answer
    A. Are regarded as assets before the products are sold
    Explanation
    Inventoriable costs are costs that are regarded as assets before the products are sold. This means that these costs are capitalized and recorded as an asset on the balance sheet until the products are sold. Once the products are sold, the costs are then expensed as cost of goods sold. This is in contrast to period costs, which are expensed in the period they are incurred.

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  • 9. 

    A  favorable materials price variance coupled with an unfavorable materials usage variance most likely results from

    • Machine efficiency problem

    • Product mix production changes.

    • The purchase and use of higher - than - standard quality materials

    • The purchase and use of lower - than - standard quality materials

    Correct Answer
    A. The purchase and use of lower - than - standard quality materials
    Explanation
    A favorable materials price variance suggests that the actual cost of materials purchased is lower than the standard cost. On the other hand, an unfavorable materials usage variance indicates that more materials were used than expected. Therefore, if both variances occur simultaneously, it suggests that lower quality materials were purchased and used, resulting in a lower cost but higher usage. Lower quality materials may require more quantity to achieve the desired output, leading to higher usage variance.

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  • 10. 

    X Company produced 600 units of one of its products last year. The standard for labor hours allowed was 2 hours per unit at a standard rate of $6 per hour. Actual hours worked amounted to 1,230 hours. The labor rate variance was $246 unfavorable, and labor efficiency variance was $180 unfavorable. What was the actual direct labor cost for the period?

    • $7,134

    • $7,200

    • $7,380

    • 7,626

    Correct Answer
    A. 7,626
    Explanation
    The actual direct labor cost for the period can be calculated by multiplying the actual hours worked (1,230 hours) by the standard rate ($6 per hour). This gives us a total of $7,380. However, since the labor rate variance was unfavorable by $246, the actual direct labor cost would be higher by that amount. Therefore, the correct answer is $7,626.

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  • Current Version
  • Sep 15, 2023
    Quiz Edited by
    ProProfs Editorial Team
  • Nov 01, 2009
    Quiz Created by
    Khalid312
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