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 #11 : Operations Management: Cost Accounting
Which of the following is not a basic approach to allocating costs for costing inventory in joint cost situations?
Flexible budget amounts
Sales value at split off
Physical measures such as weights or volume
Flexible budget amounts
Flexible budget amounts are not a basic approach to allocating costs for costing inventory in joint cost situations.
Example Question #6 : Activity Based Costing
Which of the following parts of a manufacturing facility would be a cost center?
Engineering department
Neither
Both
Engineering manager
Both
A cost center is where costs are grouped, assigned, or collected.
Example Question #17 : Operations Management: Cost Accounting
Which of the following costs are included in product or inventoriable costs in an absorption costing system? Direct material, direct labor, and:
all overhead and selling expenses
all overhead and all period expenses
variable overhead
all overhead
all overhead
All overhead costs are included in product or inventoriable costs in an absorption system along with direct material and labor costs.
Example Question #1 : Absorption Costing
Many companies have made significant strides in reducing their inventories. Which of the following would be least likely to encourage managers to reduce inventory?
Using variable costing
Instituting a charge against the budget for managers based on the size of the inventory
Using absorption costing
Using throughput costing
Using absorption costing
By using absorption costing managers have the least incentive to reduce the current amount of inventory.
Example Question #1 : Absorption Costing
In situations when management must decide on accepting or rejecting one time only special orders, where there is sufficient idle capacity, which one of the following is not relevant to the decision?
Absorption costs
Incremental costs
Variable costs
Direct costs
Incremental costs
Incremental costs are the only costs not relevant to the make or buy special order decision.
Example Question #2 : Absorption Costing
A cost that bears an observable and known relationship to a quantifiable activity base is a:
Fixed cost
Engineered cost
Target cost
Indirect cost
Engineered cost
An engineered cost bears an observable and known relationship to a quantifiable activity base.
Example Question #3 : Absorption Costing
Costs are allocated to cost objectives in many ways and for many reason. Which of the following is a purpose of cost allocation?
Evaluating revenue center performance
Implementing ABC
Aiding in variable costing for internal reporting
Measuring income and assets for external reporting
Measuring income and assets for external reporting
Cost allocation is essential for measuring income and assets for external reporting.
Example Question #6 : Absorption Costing
Which of the following is another name for Activity Based Costing?
Cost driver costing
Absorption costing
Cost center costing
Transaction based costing
Transaction based costing
When the cost driver is the number of transactions involved in a particular activity, ABC is referred to as transaction-based costing.
Example Question #1 : Lifo, Fifo, & Weighted Average Inventory Methods
Which inventory costing method would a company that wishes to maximize profits in a period of rising prices use?
Weighted average
LIFO
FIFO
Moving average
FIFO
In a period of rising prices, the oldest inventory, or the inventory used in FIFO would be the least expensive. Thus, the profit margin would be the largest here.
Example Question #2 : Lifo, Fifo, & Weighted Average Inventory Methods
Assuming constant inventory quantities, which of the following inventory costing methods will produce a lower inventory turnover ratio in an inflationary economy?
Moving average
LIFO
FIFO
Weighted average
FIFO
In a period of rising prices, the oldest inventory, or the inventory used in FIFO would be the least expensive. Thus, the profit margin would be the largest here.
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