COST ACCOUNTING EXAMINATION QUESTIONS AND
CORRECT ANSWER WITH EXPLANATION|GRADED A+
STUDY GUIDE SOUTHERN NEW HAMPSHIRE UNIVERSITY
1. Cost accounting is primarily concerned with:
A. Government taxation only
B. Measuring, analyzing, and controlling costs
C. Auditing financial statements only
D. Stock market investments only
Answer: B
Rationale: Cost accounting supports planning, control, and decision-making.
2. A cost is best defined as:
A. Revenue generated from operations
B. Resource sacrificed to achieve an objective
C. Shareholder investment only
D. Market value of inventory only
Answer: B
Rationale: Costs represent economic sacrifices.
3. Direct materials are:
A. Costs not traceable to products
B. Materials physically traceable to products
C. Administrative expenses only
D. Selling expenses only
Answer: B
Rationale: Direct materials become part of finished products.
4. Direct labor refers to:
,A. Executive salaries only
B. Labor directly involved in production
C. Marketing wages only
D. Office salaries only
Answer: B
Rationale: Direct labor can be traced to production.
5. Manufacturing overhead includes:
A. Direct materials only
B. Indirect production costs
C. Sales commissions only
D. Administrative salaries only
Answer: B
Rationale: Overhead consists of indirect manufacturing costs.
6. Prime costs equal:
Prime\ Cost = Direct\ Materials + Direct\ Labor
A. Direct Materials + Direct Labor
B. Overhead + Selling Expenses
C. Administrative Costs + Taxes
D. Revenue − Expenses
Answer: A
Rationale: Prime costs are directly traceable production costs.
7. Conversion costs are calculated as:
Conversion\ Cost = Direct\ Labor + Manufacturing\ Overhead
A. Direct Materials + Labor
B. Direct Labor + Manufacturing Overhead
C. Sales − Expenses
D. Assets − Liabilities
Answer: B
Rationale: Conversion costs convert materials into finished goods.
, 8. Fixed costs generally:
A. Change directly with production volume
B. Remain constant within relevant range
C. Increase proportionally with sales
D. Disappear during low production
Answer: B
Rationale: Fixed costs remain stable in total.
9. Variable costs:
A. Remain constant regardless of activity
B. Change in total with activity level
C. Never affect production
D. Are always indirect costs
Answer: B
Rationale: Variable costs fluctuate with output.
10. Mixed costs contain:
A. Only fixed elements
B. Both fixed and variable components
C. Only direct materials
D. Only administrative expenses
Answer: B
Rationale: Mixed costs combine cost behaviors.
11. Relevant range refers to:
A. Inventory valuation only
B. Activity range where cost assumptions remain valid
C. Tax reporting period only
D. Sales territory only
Answer: B
Rationale: Cost behavior assumptions apply within certain limits.
CORRECT ANSWER WITH EXPLANATION|GRADED A+
STUDY GUIDE SOUTHERN NEW HAMPSHIRE UNIVERSITY
1. Cost accounting is primarily concerned with:
A. Government taxation only
B. Measuring, analyzing, and controlling costs
C. Auditing financial statements only
D. Stock market investments only
Answer: B
Rationale: Cost accounting supports planning, control, and decision-making.
2. A cost is best defined as:
A. Revenue generated from operations
B. Resource sacrificed to achieve an objective
C. Shareholder investment only
D. Market value of inventory only
Answer: B
Rationale: Costs represent economic sacrifices.
3. Direct materials are:
A. Costs not traceable to products
B. Materials physically traceable to products
C. Administrative expenses only
D. Selling expenses only
Answer: B
Rationale: Direct materials become part of finished products.
4. Direct labor refers to:
,A. Executive salaries only
B. Labor directly involved in production
C. Marketing wages only
D. Office salaries only
Answer: B
Rationale: Direct labor can be traced to production.
5. Manufacturing overhead includes:
A. Direct materials only
B. Indirect production costs
C. Sales commissions only
D. Administrative salaries only
Answer: B
Rationale: Overhead consists of indirect manufacturing costs.
6. Prime costs equal:
Prime\ Cost = Direct\ Materials + Direct\ Labor
A. Direct Materials + Direct Labor
B. Overhead + Selling Expenses
C. Administrative Costs + Taxes
D. Revenue − Expenses
Answer: A
Rationale: Prime costs are directly traceable production costs.
7. Conversion costs are calculated as:
Conversion\ Cost = Direct\ Labor + Manufacturing\ Overhead
A. Direct Materials + Labor
B. Direct Labor + Manufacturing Overhead
C. Sales − Expenses
D. Assets − Liabilities
Answer: B
Rationale: Conversion costs convert materials into finished goods.
, 8. Fixed costs generally:
A. Change directly with production volume
B. Remain constant within relevant range
C. Increase proportionally with sales
D. Disappear during low production
Answer: B
Rationale: Fixed costs remain stable in total.
9. Variable costs:
A. Remain constant regardless of activity
B. Change in total with activity level
C. Never affect production
D. Are always indirect costs
Answer: B
Rationale: Variable costs fluctuate with output.
10. Mixed costs contain:
A. Only fixed elements
B. Both fixed and variable components
C. Only direct materials
D. Only administrative expenses
Answer: B
Rationale: Mixed costs combine cost behaviors.
11. Relevant range refers to:
A. Inventory valuation only
B. Activity range where cost assumptions remain valid
C. Tax reporting period only
D. Sales territory only
Answer: B
Rationale: Cost behavior assumptions apply within certain limits.
