SOLUTION MANUAL FOR COST ACCOUNTING WITH
INTEGRATED DATA ANALYTICS, 1ST EDITION BY
KAREN CONGO FARMER, AMY FREDIN -
COMPREHENSIVE PRACTICE EXAMINATION |
STUDY GUIDE | LATEST UPDATE 2026/2027 | ACTUAL
EXAM | PRACTICE QUESTIONS AND ANSWERS |
EXAM REVIEW | 100% CORRECT ANSWERS |
VERIFIED SOLUTIONS
Table of Contents
1. Cost Accounting Has a Purpose
2. Refresher on Cost Terms
3. Cost Behavior and Cost Estimation
4. Cost-Volume-Profit Analysis
5. Relevant Costs for the Decision-Maker
6. Mastering the Master Budget
7. Capital Budgeting Choices and Decisions
8. Job Costing Visualized
9. Activity-Based Costing
10. Variance Analysis and Standard Costing
11. Process Costing
12. Absorption versus Variable Costing
13. Joint Costs and Decision-Making
14. Cost Allocation and Customer Profitability
15. Quality, Time, and the Balanced Scorecard
16. Inventory Management and Just-in-Time
17. Transfer Pricing and Multinational Considerations
18. Performance Measurement and Compensation
,Question 1: A company manufactures a single product. Last year, the company sold 10,000
units, produced 12,000 units, and had no beginning inventory. Variable manufacturing costs
were $30 per unit, fixed manufacturing overhead was $60,000, variable selling and
administrative costs were $10 per unit, and fixed selling and administrative costs were $40,000.
Under absorption costing, what is the value of ending finished goods inventory?
A) $90,000
B) $100,000
C) $120,000
D) $150,000
*Correct Answer: C
Under absorption costing, product cost includes both variable and fixed manufacturing costs.
Total manufacturing cost per unit = Variable cost per unit + (Fixed manufacturing overhead /
Units produced) = $30 + ($60,,000) = $30 + $5 = $35. Ending inventory = 2,000 units
(12,000 produced – 10,000 sold) × $35 = $70,000. Option A is incorrect because it uses only
variable manufacturing costs. Option B incorrectly calculates the fixed overhead per unit.
Option D is incorrect as it uses an erroneous cost per unit.
Question 2: A company uses a predetermined overhead rate based on direct labor hours. At the
beginning of the year, estimated overhead was $500,000 and estimated direct labor hours were
100,000. Actual overhead was $520,000 and actual direct labor hours were 105,000. What is the
amount of overapplied or underapplied overhead?
A) $5,000 overapplied
B) $5,000 underapplied
C) $20,000 overapplied
D) $20,000 underapplied
*Correct Answer: A
Predetermined overhead rate = Estimated overhead / Estimated direct labor hours = $500,000 /
100,000 = $5 per direct labor hour. Applied overhead = Actual direct labor hours × Rate =
105,000 × $5 = $525,000. Actual overhead = $520,000. Overapplied overhead = Applied –
,Actual = $525,000 – $520,000 = $5,000. Option B reverses the calculation. Options C and D
are based on incorrect rate calculations or misapplication of the formula.
Question 3: A company is considering a project that requires an initial investment of $200,000
and is expected to generate cash inflows of $60,000 per year for 5 years. The company's required
rate of return is 10%. What is the net present value (NPV) of the project? (PV of an annuity
factor for 5 years at 10% is 3.7908).
A) $27,448
B) $30,000
C) $100,000
D) –$27,448
*Correct Answer: A
NPV = Present value of cash inflows – Initial investment. PV of inflows = $60,000 × 3.7908 =
$227,448. NPV = $227,448 – $200,000 = $27,448. Option B is the total cash inflow minus the
investment without discounting. Option C is the total cash inflow without discounting. Option D
is the negative of the correct NPV.
Question 4: A company produces two products, A and B, from a joint process. Joint costs are
$100,000. Product A sells for $20 per unit and product B sells for $30 per unit. At the split-off
point, 5,000 units of A and 2,000 units of B are produced. Using the sales value at split-off
method, how much joint cost is allocated to product A?
A) $40,000
B) $50,000
C) $60,000
D) $62,500
*Correct Answer: D
Sales value at split-off: A = 5,000 × $20 = $100,000; B = 2,000 × $30 = $60,000. Total sales
value = $160,000. Allocation to A = ($100,000 / $160,000) × $100,000 = $62,500. Options A,
B, and C are based on incorrect proportions or calculations.
, Question 5: A company has a bottleneck operation that limits production. The company
produces three products with the following data: Product X has a contribution margin of $50 per
unit and requires 2 hours of bottleneck time; Product Y has a contribution margin of $60 per unit
and requires 3 hours; Product Z has a contribution margin of $70 per unit and requires 4 hours.
Which product should be prioritized?
A) Product X
B) Product Y
C) Product Z
D) All products equally
*Correct Answer: A
To maximize profit with a bottleneck, prioritize the product with the highest contribution margin
per unit of the bottleneck resource. Contribution per bottleneck hour: X = $ = $25 per
hour; Y = $ = $20 per hour; Z = $ = $17.50 per hour. Product X has the highest
contribution per hour. Options B and C have lower contribution per bottleneck hour. Option D is
incorrect because prioritizing equally would not maximize profit.
Question 6: A company's master budget includes the following data for the next quarter:
Expected sales: 10,000 units; Desired ending inventory: 20% of next quarter's sales; Beginning
inventory: 1,500 units. Next quarter's sales are expected to be 12,000 units. How many units
should be produced?
A) 9,500
B) 10,900
C) 11,500
D) 12,500
*Correct Answer: B
Production = Sales + Desired ending inventory – Beginning inventory. Desired ending inventory
= 20% × 12,000 = 2,400 units. Production = 10,000 + 2,400 – 1,500 = 10,900 units. Option A
incorrectly subtracts desired ending inventory. Option C miscalculates desired ending inventory.
Option D is based on next quarter's sales rather than current sales.
INTEGRATED DATA ANALYTICS, 1ST EDITION BY
KAREN CONGO FARMER, AMY FREDIN -
COMPREHENSIVE PRACTICE EXAMINATION |
STUDY GUIDE | LATEST UPDATE 2026/2027 | ACTUAL
EXAM | PRACTICE QUESTIONS AND ANSWERS |
EXAM REVIEW | 100% CORRECT ANSWERS |
VERIFIED SOLUTIONS
Table of Contents
1. Cost Accounting Has a Purpose
2. Refresher on Cost Terms
3. Cost Behavior and Cost Estimation
4. Cost-Volume-Profit Analysis
5. Relevant Costs for the Decision-Maker
6. Mastering the Master Budget
7. Capital Budgeting Choices and Decisions
8. Job Costing Visualized
9. Activity-Based Costing
10. Variance Analysis and Standard Costing
11. Process Costing
12. Absorption versus Variable Costing
13. Joint Costs and Decision-Making
14. Cost Allocation and Customer Profitability
15. Quality, Time, and the Balanced Scorecard
16. Inventory Management and Just-in-Time
17. Transfer Pricing and Multinational Considerations
18. Performance Measurement and Compensation
,Question 1: A company manufactures a single product. Last year, the company sold 10,000
units, produced 12,000 units, and had no beginning inventory. Variable manufacturing costs
were $30 per unit, fixed manufacturing overhead was $60,000, variable selling and
administrative costs were $10 per unit, and fixed selling and administrative costs were $40,000.
Under absorption costing, what is the value of ending finished goods inventory?
A) $90,000
B) $100,000
C) $120,000
D) $150,000
*Correct Answer: C
Under absorption costing, product cost includes both variable and fixed manufacturing costs.
Total manufacturing cost per unit = Variable cost per unit + (Fixed manufacturing overhead /
Units produced) = $30 + ($60,,000) = $30 + $5 = $35. Ending inventory = 2,000 units
(12,000 produced – 10,000 sold) × $35 = $70,000. Option A is incorrect because it uses only
variable manufacturing costs. Option B incorrectly calculates the fixed overhead per unit.
Option D is incorrect as it uses an erroneous cost per unit.
Question 2: A company uses a predetermined overhead rate based on direct labor hours. At the
beginning of the year, estimated overhead was $500,000 and estimated direct labor hours were
100,000. Actual overhead was $520,000 and actual direct labor hours were 105,000. What is the
amount of overapplied or underapplied overhead?
A) $5,000 overapplied
B) $5,000 underapplied
C) $20,000 overapplied
D) $20,000 underapplied
*Correct Answer: A
Predetermined overhead rate = Estimated overhead / Estimated direct labor hours = $500,000 /
100,000 = $5 per direct labor hour. Applied overhead = Actual direct labor hours × Rate =
105,000 × $5 = $525,000. Actual overhead = $520,000. Overapplied overhead = Applied –
,Actual = $525,000 – $520,000 = $5,000. Option B reverses the calculation. Options C and D
are based on incorrect rate calculations or misapplication of the formula.
Question 3: A company is considering a project that requires an initial investment of $200,000
and is expected to generate cash inflows of $60,000 per year for 5 years. The company's required
rate of return is 10%. What is the net present value (NPV) of the project? (PV of an annuity
factor for 5 years at 10% is 3.7908).
A) $27,448
B) $30,000
C) $100,000
D) –$27,448
*Correct Answer: A
NPV = Present value of cash inflows – Initial investment. PV of inflows = $60,000 × 3.7908 =
$227,448. NPV = $227,448 – $200,000 = $27,448. Option B is the total cash inflow minus the
investment without discounting. Option C is the total cash inflow without discounting. Option D
is the negative of the correct NPV.
Question 4: A company produces two products, A and B, from a joint process. Joint costs are
$100,000. Product A sells for $20 per unit and product B sells for $30 per unit. At the split-off
point, 5,000 units of A and 2,000 units of B are produced. Using the sales value at split-off
method, how much joint cost is allocated to product A?
A) $40,000
B) $50,000
C) $60,000
D) $62,500
*Correct Answer: D
Sales value at split-off: A = 5,000 × $20 = $100,000; B = 2,000 × $30 = $60,000. Total sales
value = $160,000. Allocation to A = ($100,000 / $160,000) × $100,000 = $62,500. Options A,
B, and C are based on incorrect proportions or calculations.
, Question 5: A company has a bottleneck operation that limits production. The company
produces three products with the following data: Product X has a contribution margin of $50 per
unit and requires 2 hours of bottleneck time; Product Y has a contribution margin of $60 per unit
and requires 3 hours; Product Z has a contribution margin of $70 per unit and requires 4 hours.
Which product should be prioritized?
A) Product X
B) Product Y
C) Product Z
D) All products equally
*Correct Answer: A
To maximize profit with a bottleneck, prioritize the product with the highest contribution margin
per unit of the bottleneck resource. Contribution per bottleneck hour: X = $ = $25 per
hour; Y = $ = $20 per hour; Z = $ = $17.50 per hour. Product X has the highest
contribution per hour. Options B and C have lower contribution per bottleneck hour. Option D is
incorrect because prioritizing equally would not maximize profit.
Question 6: A company's master budget includes the following data for the next quarter:
Expected sales: 10,000 units; Desired ending inventory: 20% of next quarter's sales; Beginning
inventory: 1,500 units. Next quarter's sales are expected to be 12,000 units. How many units
should be produced?
A) 9,500
B) 10,900
C) 11,500
D) 12,500
*Correct Answer: B
Production = Sales + Desired ending inventory – Beginning inventory. Desired ending inventory
= 20% × 12,000 = 2,400 units. Production = 10,000 + 2,400 – 1,500 = 10,900 units. Option A
incorrectly subtracts desired ending inventory. Option C miscalculates desired ending inventory.
Option D is based on next quarter's sales rather than current sales.
