Advanced Costing Techniques in Chartered Management Accounting
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School
Addis Ababa University**We aren't endorsed by this school
Course
ACC 209
Subject
Accounting
Date
Dec 22, 2024
Pages
7
Uploaded by BarristerBoulder15755
Advanced Costing Techniques in Chartered Management Accounting1.Which of the following is the primary purpose of activity-based costing (ABC)?oA. To assign overhead costs based on direct labor hoursoB. To allocate overhead costs based on the activities that drive themoC. To ignore fixed costs in product cost calculationsoD. To compute contribution margin for pricing decisions Answer: B. To allocate overheadcosts based on the activities that drive them2.What is the primary advantage of using process costing?oA. It simplifies cost allocation when production involves identical or similar itemsoB. It is best for businesses with complex products and low-volume productionoC. It focuses primarily on direct labor costsoD. It uses job orders to track costs for each specific product Answer: A. It simplifies cost allocation when production involves identical or similar items3.Which of the following costs would NOT be classified as a product cost under absorption costing?oA. Direct materialsoB. Direct laboroC. Marketing expensesoD. Factory overhead Answer: C. Marketing expenses4.What does the "predetermined overhead rate" refer to in job order costing?oA. The actual overhead cost rate calculated at the end of the periodoB. The estimated overhead rate used to apply overhead during the periodoC. The rate used to determine selling prices for productsoD. The rate used to calculate employee compensation Answer: B. The estimated overhead rate used to apply overhead during the period5.Which of the following best describes the concept of "direct costing" or "variable costing"?oA. Only fixed costs are assigned to productsoB. Variable manufacturing costs are treated as period costsoC. Both fixed and variable manufacturing costs are included in product costoD. Fixed costs are allocated to products based on production volume Answer: B. Variable manufacturing costs are treated as period costs6.The primary difference between job order costing and process costing is:oA. Job order costing is used for homogeneous products, while process costing is used for customized ordersoB. Job order costing accumulates costs for each batch or job, whereas process costing accumulates costs by process or departmentoC. Process costing uses predetermined overhead rates, while job order costing does not
oD. Job order costing uses a job sheet, while process costing uses a cost sheet Answer: B. Job order costing accumulates costs for each batch or job, whereas process costing accumulates costs by process or department7.Under activity-based costing (ABC), which of the following would most likely be considered an "activity driver"?oA. Direct labor costoB. Machine hoursoC. Advertising expensesoD. Product weight Answer: B. Machine hours8.What is the main disadvantage of using absorption costing for external financial reporting?oA. It ignores the impact of variable costs on pricing decisionsoB. It can distort product costs by allocating fixed costs to units of productionoC. It is not acceptable for tax purposesoD. It does not consider the contribution margin Answer: B. It can distort product costs by allocating fixed costs to units of production9.The term "cost of goods manufactured" refers to:oA. The total costs incurred to produce a product, including raw materials and laboroB. The direct costs of producing a product before including fixed costsoC. The cost of finished goods that have been soldoD. The total overhead costs assigned to a product Answer: A. The total costs incurred to produce a product, including raw materials and labor10.Which of the following is NOT typically considered an element of factory overhead in job order costing?oA. Indirect labor costsoB. Depreciation on factory equipmentoC. Direct labor costsoD. Utilities for the factory building Answer: C. Direct labor costs11.Which of the following is a key feature of "just-in-time" (JIT) inventory management?oA. Inventory is held in large quantities to minimize order costsoB. Products are manufactured and delivered only when needed for customer ordersoC. High levels of work-in-progress are maintained to meet unexpected demandoD. A fixed inventory level is maintained throughout the year Answer: B. Products are manufactured and delivered only when needed for customer orders12.In process costing, when a unit is completed, which account is debited?oA. Work in processoB. Finished goodsoC. Cost of goods sold
oD. Raw materials Answer: B. Finished goods13.Under absorption costing, which of the following costs would be included in the valuation of inventory?oA. Direct materials and direct laboroB. Variable manufacturing costs onlyoC. Direct materials, direct labor, and fixed manufacturing overheadoD. Selling expenses Answer: C. Direct materials, direct labor, and fixed manufacturing overhead14.Which of the following is the most appropriate method for allocating costs when production is continuous, and units are homogeneous?oA. Job order costingoB. Process costingoC. Activity-based costingoD. Direct costing Answer: B. Process costing15.What is the main objective of cost-volume-profit (CVP) analysis?oA. To determine the most profitable sales mixoB. To calculate the break-even point and understand how changes in costs and volume affect profitoC. To allocate indirect costs to specific departmentsoD. To calculate the price elasticity of demand for a product Answer: B. To calculate the break-even point and understand how changes in costs and volume affect profit16.The "allocation base" used in job order costing is:oA. A factor such as direct labor hours or machine hours used to allocate overhead costsoB. The total overhead cost incurred by the companyoC. The cost of raw materials purchased for productionoD. The fixed costs associated with production Answer: A. A factor such as direct labor hours or machine hours used to allocate overhead costs17.What is the primary purpose of using standard costing?oA. To estimate future cost increases and adjust prices accordinglyoB. To set benchmarks for cost control and evaluate performanceoC. To track actual expenses in real timeoD. To allocate costs based on activity drivers Answer: B. To set benchmarks for cost control and evaluate performance18.When using process costing, costs are accumulated by:oA. Job or batchoB. Production department or processoC. Each individual product
oD. Sales region Answer: B. Production department or process19.Which of the following would most likely be an activity-based costing cost driver for customer support?oA. Number of customer ordersoB. Sales revenueoC. Number of employees in the customer service departmentoD. Direct materials used Answer: A. Number of customer orders20.A company uses an "order-based" costing system. In which scenario would this system be most useful?oA. A company that manufactures high volumes of standardized productsoB. A service-based company with unique client requirementsoC. A company that produces products in a continuous processoD. A company that only sells finished goods Answer: B. A service-based company with unique client requirementsInternational Management Accounting and Globalization1.Which of the following best describes "transfer pricing" in international business?oA. Setting uniform pricing for products across all international marketsoB. Pricing goods and services between divisions of the same company operating in different countriesoC. Applying global pricing strategies to local marketsoD. Setting different prices for different customer segments Answer: B. Pricing goods and services between divisions of the same company operating in different countries2.A major challenge in international financial reporting is:oA. The consistency in revenue recognition policiesoB. Accounting for depreciation in a global contextoC. Managing local taxes in multinational operationsoD. Standardizing financial reports across different regulatory environments Answer: D. Standardizing financial reports across different regulatory environments3.The primary advantage of adopting International Financial Reporting Standards (IFRS) is:oA. Reduced taxation on multinational companiesoB. Simplified financial consolidation across bordersoC. Uniformity in accounting standards across all countriesoD. Easier integration of acquisitions Answer: C. Uniformity in accounting standards across all countries4.In international management accounting, which of the following is a common method for managing currency exchange rate risks?oA. HedgingoB. Centralized pricing
oC. Diversified investmentsoD. Profit margin analysis Answer: A. Hedging5.Which of the following is a key challenge faced by global organizations in terms of cost management?oA. Standardizing production methods across diverse marketsoB. Ensuring compliance with local labor lawsoC. Managing exchange rate fluctuationsoD. Aligning company objectives across multiple regions Answer: C. Managing exchange rate fluctuations6.When a company operates in multiple countries, it often faces challenges in transferring profits across borders due to:oA. Regulatory restrictions and taxationoB. High production costs in foreign marketsoC. Differences in labor costsoD. Varying consumer preferences Answer: A. Regulatory restrictions and taxation7.A "multinational enterprise" (MNE) refers to a company that:oA. Operates in only one country but has global suppliersoB. Is registered in multiple countries but has no foreign operationsoC. Has operations in more than one countryoD. Outsources all operations to foreign markets Answer: C. Has operations in more than one country8.Which of the following accounting principles is most important for global financial consolidation?oA. ConsistencyoB. MaterialityoC. Revenue recognitionoD. Going concern Answer: A. Consistency9.In the context of globalization, "offshoring" refers to:oA. Moving production processes to low-cost countriesoB. Expanding sales in foreign marketsoC. Outsourcing specific business functions to local vendorsoD. Acquiring foreign competitors Answer: A. Moving production processes to low-cost countries10."Globalization" in international management accounting refers to:oA. Expanding the number of subsidiaries within a local marketoB. The increasing interconnectedness of businesses across national bordersoC. Establishing uniform pricing strategies for international markets
oD. Focusing on profitability from domestic operations Answer: B. The increasing interconnectedness of businesses across national borders11.Which of the following is a primary reason why multinational companies use transfer pricing?oA. To reduce costs in foreign subsidiariesoB. To reduce the overall tax burden by shifting profits to low-tax jurisdictionsoC. To control employee salaries across divisionsoD. To increase sales volume in foreign markets Answer: B. To reduce the overall tax burden by shifting profits to low-tax jurisdictions12.A major challenge of implementing IFRS in countries with local standards is:oA. Differences in tax reporting requirementsoB. Non-compliance by multinational companiesoC. The potential cost of transitioning to a new systemoD. The difficulty in consolidating local subsidiaries’ reports Answer: C. The potential costof transitioning to a new system13.In the context of global supply chain management, a key strategy to manage cost is:oA. Centralized inventory managementoB. Using standardized materials across all countriesoC. Efficient logistics and transportation managementoD. Minimizing production costs in domestic markets Answer: C. Efficient logistics and transportation management14.A "localization" strategy in international business involves:oA. Customizing products and services to meet the unique needs of each marketoB. Standardizing products to reduce costs across all marketsoC. Outsourcing all non-essential activities to foreign contractorsoD. Acquiring foreign companies to increase market share Answer: A. Customizing products and services to meet the unique needs of each market15.In international cost management, the term "transfer pricing" is used to describe:oA. The price at which goods and services are sold across different divisions within a multinational companyoB. The cost of shipping products from one country to anotheroC. The cost of currency exchange in international marketsoD. The total overhead costs of an international operation Answer: A. The price at which goods and services are sold across different divisions within a multinational company16.Which of the following is a key challenge in global financial consolidation?oA. Standardizing inventory systems across subsidiariesoB. Balancing corporate profits and local market demandsoC. Coordinating financial reporting across different currencies and time zones
oD. Ensuring consistent production schedules Answer: C. Coordinating financial reportingacross different currencies and time zones17.An advantage of a "centralized" management structure in a multinational organization is:oA. Greater control over international operations and financial decisionsoB. The ability to make local decisions that better align with regional preferencesoC. Increased autonomy for regional officesoD. A more flexible organizational culture Answer: A. Greater control over international operations and financial decisions18.Which of the following strategies is used by multinational firms to manage foreign exchange risk?oA. HedgingoB. StandardizationoC. Market diversificationoD. Outsourcing Answer: A. Hedging19.A "multinational company" often uses international management accounting systems to:oA. Centralize all decision-making processes across its global operationsoB. Ensure consistent and transparent financial reporting across all subsidiariesoC. Minimize costs by focusing only on domestic marketsoD. Implement standardized pricing strategies for every market Answer: B. Ensure consistent and transparent financial reporting across all subsidiaries20.The term "globalization" in the context of management accounting means:oA. Expanding into emerging markets and focusing on international salesoB. Implementing international accounting standards across multiple jurisdictionsoC. Increasing global competition by offering identical products worldwideoD. Focusing solely on expanding production facilities in low-cost countries Answer: B. Implementing international accounting standards across multiple jurisdictions