COST ACCOUNTING FINAL EXAM REVIEW QUESTIONS
AND ANSWERS 2026-2027
Chapters 10, 16, 18, 20
# Term Definition
1 Responsibility Accounting
What is a system that measures the
results of each responsibility center
and compares those results with some
measure of expected or budgeted
outcome?
2 Revenue Center
What is only responsible for revenues?
3 Cost Center
What is only responsible for costs?
4 Profit Center
What is responsible for both revenues
and costs?
5 Investment Center
What is responsible for revenues, costs,
and investments?
6 What are the reasons for
Better access to local information, cognitive limitations,
decentralization?
more timely response, focusing of central management,
training and evaluation of segment managers,
motivation of segment managers, and enhanced
competition
7 Efficiency
What is how well activities are
performed?
8 Effectiveness
What is whether the manager has
performed the right activities?
, 9 Return on Investment (ROI)
What is the most common measure of
performance for an investment center?
10 Margin
What is the portion of sales available
for interest, taxes and profit?
11 Turnover
What is how productively assets are
being used to generate sales?
# Term Definition
12 Operating Income
What refers to earnings before interest
and income taxes?
13 Operating Assets
What includes all assets used to
generate operating income?
14 What are the advantages of the ROI
measure? Helps managers focus on the relationship between sales,
expenses and investment, Encourages cost efficiency and
Discourages excessive investment in operating assets
15 What are the disadvantages of the ROI
measure? Discourages managers from investing in projects
decreasing divisional ROI but increasing profitability of
the company overall and Encourages managers to focus
on the short-term at the expense of the long-term
16 Residual income
What is the difference between
operating income and the minimum
dollar return required on a company's
operating assets?
AND ANSWERS 2026-2027
Chapters 10, 16, 18, 20
# Term Definition
1 Responsibility Accounting
What is a system that measures the
results of each responsibility center
and compares those results with some
measure of expected or budgeted
outcome?
2 Revenue Center
What is only responsible for revenues?
3 Cost Center
What is only responsible for costs?
4 Profit Center
What is responsible for both revenues
and costs?
5 Investment Center
What is responsible for revenues, costs,
and investments?
6 What are the reasons for
Better access to local information, cognitive limitations,
decentralization?
more timely response, focusing of central management,
training and evaluation of segment managers,
motivation of segment managers, and enhanced
competition
7 Efficiency
What is how well activities are
performed?
8 Effectiveness
What is whether the manager has
performed the right activities?
, 9 Return on Investment (ROI)
What is the most common measure of
performance for an investment center?
10 Margin
What is the portion of sales available
for interest, taxes and profit?
11 Turnover
What is how productively assets are
being used to generate sales?
# Term Definition
12 Operating Income
What refers to earnings before interest
and income taxes?
13 Operating Assets
What includes all assets used to
generate operating income?
14 What are the advantages of the ROI
measure? Helps managers focus on the relationship between sales,
expenses and investment, Encourages cost efficiency and
Discourages excessive investment in operating assets
15 What are the disadvantages of the ROI
measure? Discourages managers from investing in projects
decreasing divisional ROI but increasing profitability of
the company overall and Encourages managers to focus
on the short-term at the expense of the long-term
16 Residual income
What is the difference between
operating income and the minimum
dollar return required on a company's
operating assets?
