CPA Business Environment and Concepts (BEC) : CPA Business Environment and Concepts (BEC)
Study concepts, example questions & explanations for CPA Business Environment and Concepts (BEC)
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Example Questions
Example Question #1 : Operations Management: Cost Accounting
A company would most benefit from using an activity-based costing system as opposed to a traditional costing system under which of the following conditions?
When indirect costs are a high percentage of total costs
When batch level and product sustaining costs are immaterial
When different products use the different activities of the department in the same proportions
When each department within the company has a single activity
When indirect costs are a high percentage of total costs
When indirect costs are a high percentage of total costs, a company would benefit from an ABC system where costs can be broken out for further analysis.
Example Question #2 : Operations Management: Cost Accounting
In joint product costing and analysis, which one of the following costs is relevant when deciding the point at which a product should be sold in order to maximize profits?
Separable costs after the split off point
Join costs to the split off point
The company president's salary
Purchase costs of the materials required for the joint product
Separable costs after the split off point
In order to maximize profits, separable costs after the split-off point are relevant under a joint product costing system.
Example Question #3 : Job Costing
Which of the following is not an external failure cost?
Warranty costs
Liability claims
Tooling changes
Lost customers
Tooling changes
All of these costs except for tooling changes would be included as external failure costs.
Example Question #3 : Operations Management: Cost Accounting
Conversion cost pricing:
Places minimal emphasis on the cost of materials used in manufacturing a product.
Could be used when the customer furnishes the material used in manufacturing a product.
Places heavy emphasis on indirect costs and disregards consideration of direct costs.
Places heavy emphasis on direct costs and disregards consideration of indirect costs.
Could be used when the customer furnishes the material used in manufacturing a product.
Conversion cost pricing could be used when the customer furnishes the material used in manufacturing a product.
Example Question #11 : Operations Management: Cost Accounting
Which of the following costing methods provides the added benefit of usefulness for external reporting purposes?
A: Variable B: Absorption
A
Neither
Both
B
B
Absorption costing methods represent GAAP generally used for the presentation of extenuation financial statements and are therefore for the benefit of external users.
Example Question #1 : Job Costing
Which of the following methods is the most commonly used and simplest method to allocate service costs?
Direct method
Step up method
Step down method
Indirect method
Direct method
The direct method is the most commonly used and simplest method of allocating service costs. The step-down method is a more complex approach and the step up is a distractor.
Example Question #1 : Activity Based Costing
Which of the following is true about activity-based costing?
It should not be used with process or job costing
It can be used on with process costing
It can be used only with job costing
It can be used with either process or job costing
It can be used with either process or job costing
ABC assumes that the resource-consuming activities that generate costs are activities and not outputs. ABC is appropriate for all types of cost accumulation systems, including both job order and process costing.
Example Question #2 : Activity Based Costing
Limitations of an activity-based costing system include which of the following?
Activity based costing systems are less reliable
Control of overhead costs is enhanced
It eliminates arbitrary assignment of overhead costs
The expense of obtaining cost data is relatively high
The expense of obtaining cost data is relatively high
Activity-based costs anticipate increased cost pools and increased allocation bases. The determination of the amounts that go in these pools and their related cost drivers will likely be more costly than in traditional systems.
Example Question #3 : Activity Based Costing
The basic assumption of activity-based costing is that:
Products or services require the performance of activities and activities consume resources
Only costs that respond the unit level drivers are product costs
All manufacturing costs vary directly with units of production
Only variable costs are included in activity cost pools
Products or services require the performance of activities and activities consume resources
ABC divides the production processes into activities where costs are accumulated. The production process assumes activities consume resources and that the outcome of the production process requires performance of the activities.
Example Question #4 : Activity Based Costing
For purposes of allocating joint costs to joint products, the sales price at point of sale, reduced by cost to complete after split-off, is assumed to be equal to the:
Joint costs
Total costs
Sales price less a normal profit margin at point of sale
Net sales value at split off
Net sales value at split off
Sales price less the cost to complete is defined as the net sales value at split-off. In other words, this is the additional contribution to income generated by completing the product.
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