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Quizzes > Quizzes for Business > Finance

Master the Cost Accounting Methods Quiz

Evaluate Cost Accounting Approaches in This Quiz

Difficulty: Moderate
Questions: 20
Learning OutcomesStudy Material
Colorful paper art depicting a quiz on cost accounting methods

This cost accounting methods quiz helps you practice job order, process, and activity-based costing in 12 quick multiple-choice questions. Use it to find weak spots before an exam and learn from clear, instant feedback. For more practice, try the cost accounting knowledge check or the management accounting assessment .

What costing method is best suited for unique, custom jobs with distinct cost accumulation?
Activity-based costing
Standard costing
Process costing
Job order costing
Job order costing tracks costs for each unique job separately, making it ideal for custom projects. Process costing accumulates costs by department for homogeneous products.
Which costing method accumulates costs by department for continuous, homogeneous production?
Activity-based costing
Standard costing
Job order costing
Process costing
Process costing assigns costs to each production department for similar units produced continuously. Job order costing is for distinct batches or jobs.
What is the primary purpose of a standard costing system?
To determine selling price directly
To track costs of individual jobs
To allocate overhead using actual rates
To control costs through variance analysis
Standard costing compares actual costs to predetermined standards to highlight variances. These variances help managers control operations.
How is a predetermined overhead rate typically calculated?
Estimated overhead ÷ Estimated activity base
Budgeted sales ÷ Overhead cost
Total costs ÷ Units produced
Actual overhead ÷ Actual activity base
A predetermined overhead rate uses estimated overhead and an estimated activity base before the period begins. It smooths overhead application over the period.
What distinguishes activity-based costing from traditional overhead allocation?
Overhead is allocated based on multiple activities and cost drivers
All overhead is applied equally to every product
Indirect costs are ignored
Overhead is allocated solely on direct labor hours
Activity-based costing uses multiple cost pools and cost drivers to allocate overhead more accurately. Traditional methods often rely on a single volume-based driver.
Under absorption costing, how is fixed manufacturing overhead treated?
Expensed immediately as incurred
Included in product cost
Allocated to selling and administrative
Ignored until year-end
Absorption costing assigns all manufacturing costs, including fixed overhead, to product costs. This differs from variable costing, which expenses fixed overhead in the period incurred.
Which formula represents the materials price variance?
(Standard Price - Actual Price) - Standard Quantity Used
(Actual Price - Standard Price) - Actual Quantity Purchased
(Actual Quantity - Standard Quantity) - Standard Price
(Standard Quantity - Actual Quantity) - Actual Price
Materials price variance measures the difference between actual and standard price for the quantity purchased. It isolates price effects from quantity effects.
Which formula represents the labor efficiency variance?
(Actual Hours - Standard Hours Allowed) - Standard Rate
(Actual Rate - Standard Rate) - Standard Hours
(Actual Rate - Standard Rate) - Actual Hours
(Standard Hours - Actual Hours) - Actual Rate
The labor efficiency variance compares actual labor hours to the standard allowed hours at the standard rate. It highlights variances in labor usage.
Which costing method is most appropriate for a custom furniture maker producing distinct orders?
Process costing
Job order costing
Target costing
Throughput costing
Custom furniture orders vary by design and cost, so job order costing tracks each order separately. Process costing is used for uniform, continuous production.
Which costing method would a bottling plant producing millions of identical cans use?
Direct costing
Job order costing
Activity-based costing
Process costing
A bottling plant has homogeneous output in continuous flow, so process costing accumulates costs by department or process.
What is the first step in implementing an activity-based costing system?
Identify activities and cost pools
Calculate product margins
Assign costs to products
Select cost drivers
ABC begins by identifying the major activities that consume resources and setting up cost pools around them. Later steps select drivers and assign costs.
A company estimates $500,000 in manufacturing overhead and 50,000 machine”hours. What is its predetermined overhead rate?
$10 per machine”hour
$20 per machine”hour
$5 per machine”hour
$15 per machine”hour
The rate is calculated by dividing estimated overhead ($500,000) by estimated machine”hours (50,000), yielding $10 per machine”hour.
If overhead is under”applied by $8,000, which entry correctly closes the balance?
Debit Finished Goods $8,000; Credit Work in Process $8,000
Debit Manufacturing Overhead $8,000; Credit COGS $8,000
Debit Cost of Goods Sold $8,000; Credit Manufacturing Overhead $8,000
Debit COGS $8,000; Credit Finished Goods $8,000
Under”applied overhead has a debit balance that must be closed by debiting COGS and crediting Manufacturing Overhead.
In activity-based costing, what is a cost pool?
Total direct labor costs
A finished goods inventory account
A batch of raw materials
A grouping of overhead costs related to a single activity
A cost pool collects all overhead costs associated with a particular activity. Costs are then allocated to products based on driver usage.
What does a favorable spending variance in overhead signify?
Standard hours exceeded actual hours
Budgeted overhead costs were lower than standard
Actual overhead costs were less than budgeted overhead
Actual overhead costs were more than budgeted overhead
A favorable spending variance means the actual costs incurred were lower than the budgeted or standard overhead costs.
How are joint production costs allocated if using the sales value at split-off method?
Allocate equally between products
Allocate based on direct labor hours
Allocate costs based on each product's sales value at split-off divided by total sales value
Allocate based on production volume only
Under the sales value at split-off method, joint costs are allocated in proportion to the relative sales values of each product at the split-off point.
If materials price variance is $200 F and materials usage variance is $150 U, what is the net materials variance?
$50 Unfavorable
$350 Favorable
$50 Favorable
$350 Unfavorable
Net materials variance combines price and usage variances: $200 Favorable minus $150 Unfavorable equals $50 Favorable overall.
In ABC, if a cost pool has $120,000 and 6,000 activity driver units, what is the activity rate?
$22 per driver unit
$18 per driver unit
$20 per driver unit
$15 per driver unit
The activity rate is calculated by dividing the total cost pool ($120,000) by the total driver units (6,000), yielding $20 per driver unit.
What is an advantage of using a dual-rate departmental overhead allocation system?
It always reduces product costs
It allocates all overhead based on a single driver
It ignores fixed costs entirely
It separates fixed and variable overhead for more accurate cost behavior analysis
Dual-rate systems distinguish between fixed and variable overhead rates, improving accuracy in cost allocation and cost behavior understanding.
Under the FIFO method of process costing, which units are included in equivalent units of production?
Only units started and completed during the current period plus work needed to finish beginning inventory
Only beginning inventory units
All units worked on, regardless of beginning inventory
Only units in ending inventory
FIFO counts only the work done in the current period: units completed beyond beginning inventory and work to finish beginning inventory. It excludes prior-period work.
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Learning Outcomes

  1. Analyse different cost accounting methods and their applications
  2. Apply standard costing to calculate variances
  3. Identify appropriate costing techniques for diverse scenarios
  4. Demonstrate understanding of job order and process costing
  5. Evaluate activity-based costing to allocate overhead

Cheat Sheet

  1. Fundamentals of Cost Accounting - Get to know the ABCs of cost accounting by classifying costs as fixed, variable, direct, or indirect. This solid foundation helps you break down production expenses and make savvy financial calls. Read more
  2. Job Costing - Dive into job costing, where you allocate costs to individual jobs or batches, perfect for custom projects. You'll track exact expenses and see how each unique order impacts your bottom line. Read more
  3. Process Costing - Explore process costing to accumulate costs in continuous, homogeneous production - think chemicals or textiles. It's the go-to method when your output flows uninterrupted. Read more
  4. Activity-Based Costing (ABC) - ABC allocates overhead based on real activities, giving you a crystal-clear view of where money really goes. It's like shining a spotlight on each step of production! Read more
  5. Standard Costing - Set up expected costs for materials, labor, and overhead, then compare against real numbers to spot variances. This superpower helps you tweak operations and boost efficiency. Read more
  6. Total Absorption Costing - Want the full picture? Total absorption costing folds in all manufacturing costs - fixed and variable - into unit costs, ensuring nothing slips through the cracks. Read more
  7. Comparing Job vs. Process Costing - Uncover when to pick job costing or process costing based on your production style. Understanding both methods sharpens your decision-making toolkit. Read more
  8. Identifying Cost Drivers - In ABC, cost drivers are the secret sauce that triggers costs - like machine hours or number of setups. Pinpoint them to allocate overhead more accurately and reduce waste. Read more
  9. Variance Analysis - Use variance analysis to compare actual versus standard costs and decode the "why" behind any differences. This detective work helps keep budgets on track. Read more
  10. Overhead Allocation Techniques - Master different ways to spread overhead costs - like plantwide rates or department rates - to refine your product pricing. Accurate allocation means healthier profit margins. Read more
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