BUS-A 325 Cost Accounting (3 cr.)
BUS-A 325 - COST ACCOUNTING | EXAM QUESTIONS AND CORRECT
ANSWERS | VERIFIED COST AND MANAGERIAL ACCOUNTING LATEST
VERSION 2026//2027
BUS-A 325 Cost Accounting (3 cr.)
1. The sum of direct materials and direct manufacturing labor costs is
referred to as:
A. Conversion costs
B. Manufacturing overhead costs
C. Period costs
D. Prime costs
ANSWER : D. Prime costs
Prime costs combine the two cost categories that can be traced directly to the
product in an economically feasible way.
2. Conversion costs consist of:
A. Direct materials and manufacturing overhead
B. Direct materials and direct manufacturing labor
C. Direct manufacturing labor and manufacturing overhead
D. Manufacturing overhead and selling costs
ANSWER : C. Direct manufacturing labor and manufacturing overhead
Conversion costs are the costs of turning direct materials into finished goods,
which is why labor and overhead are included.
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, BUS-A 325 Cost Accounting (3 cr.)
3. Which of the following is a period cost for a manufacturing company?
A. Direct materials used in production
B. Sales commissions paid to the marketing staff
C. Rent on the factory building
D. Depreciation on factory equipment
ANSWER : B. Sales commissions paid to the marketing staff
Sales commissions are expensed in the period incurred because they relate to
selling, not to making the product.
4. A cost that changes in total in direct proportion to changes in the level of
activity is a:
A. Fixed cost
B. Variable cost
C. Step-fixed cost
D. Committed cost
ANSWER : B. Variable cost
Total variable cost moves proportionally with activity while the cost per unit
stays constant.
5. Within the relevant range, as production volume increases, fixed cost per
unit will:
A. Increase
B. Remain constant
C. Increase at first and then decrease
D. Decrease
ANSWER : D. Decrease
The same total fixed cost is spread over more units, so the per-unit amount falls.
6. The contribution to income forgone by not using a limited resource in its
next-best alternative use is called:
A. Opportunity cost
B. Sunk cost
C. Differential revenue
D. Incremental cost
ANSWER : A. Opportunity cost
Opportunity cost measures the benefit given up when one alternative is chosen
over another.
Page 2 of 54
, BUS-A 325 Cost Accounting (3 cr.)
7. A cost that has already been incurred and cannot be changed by any future
decision is a:
A. Relevant cost
B. Sunk cost
C. Avoidable cost
D. Discretionary cost
ANSWER : B. Sunk cost
Sunk costs are past costs and are irrelevant to decisions about the future.
8. Beginning work-in-process inventory was $20,000, total manufacturing
costs added were $180,000, and ending work-in-process inventory was
$25,000. Cost of goods manufactured is:
A. $180,000
B. $185,000
C. $205,000
D. $175,000
ANSWER : D. $175,000
COGM = $20,000 + $180,000 − $25,000 = $175,000.
9. Beginning finished goods were $30,000, cost of goods manufactured was
$175,000, and ending finished goods were $40,000. Cost of goods sold is:
A. $175,000
B. $165,000
C. $205,000
D. $185,000
ANSWER : B. $165,000
COGS = $30,000 + $175,000 − $40,000 = $165,000.
10. Beginning direct materials inventory was $10,000, purchases were $50,000,
and ending direct materials inventory was $8,000. Direct materials used
equal:
A. $50,000
B. $52,000
C. $48,000
D. $68,000
ANSWER : B. $52,000
Materials used = $10,000 + $50,000 − $8,000 = $52,000.
Section 2: Cost Behavior and Cost Estimation
Page 3 of 54
, BUS-A 325 Cost Accounting (3 cr.)
11. Using the high-low method, the highest activity was 10,000 units at a total
cost of $60,000 and the lowest was 4,000 units at $36,000. The variable cost
per unit is:
A. $3.60
B. $6.00
C. $4.00
D. $9.00
ANSWER : C. $4.00
($60,000 − $36,000) ÷ (10,000 − 4,000) = $24,000 ÷ 6,000 = $4.00 per unit.
12. Using the same high-low data ($60,000 at 10,000 units; $36,000 at 4,000
units), total fixed cost is:
A. $16,000
B. $20,000
C. $24,000
D. $36,000
ANSWER : B. $20,000
Fixed cost = $60,000 − (10,000 × $4) = $20,000.
13. A major limitation of the high-low method is that it:
A. Relies on only two observations that may not be representative
B. Requires complex statistical software
C. Cannot estimate fixed costs
D. Uses every data point equally
ANSWER : A. Relies on only two observations that may not be
representative
Because only the extreme points are used, outliers can badly distort the cost
function.
14. In regression analysis, the coefficient of determination (r²) measures:
A. The slope of the cost line
B. The fixed cost component
C. The standard error of the intercept
D. The proportion of variation in the dependent variable explained by the
independent variable
ANSWER : D. The proportion of variation in the dependent variable
explained by the independent variable
An r² closer to 1 means the cost driver explains more of the change in cost.
Page 4 of 54
BUS-A 325 - COST ACCOUNTING | EXAM QUESTIONS AND CORRECT
ANSWERS | VERIFIED COST AND MANAGERIAL ACCOUNTING LATEST
VERSION 2026//2027
BUS-A 325 Cost Accounting (3 cr.)
1. The sum of direct materials and direct manufacturing labor costs is
referred to as:
A. Conversion costs
B. Manufacturing overhead costs
C. Period costs
D. Prime costs
ANSWER : D. Prime costs
Prime costs combine the two cost categories that can be traced directly to the
product in an economically feasible way.
2. Conversion costs consist of:
A. Direct materials and manufacturing overhead
B. Direct materials and direct manufacturing labor
C. Direct manufacturing labor and manufacturing overhead
D. Manufacturing overhead and selling costs
ANSWER : C. Direct manufacturing labor and manufacturing overhead
Conversion costs are the costs of turning direct materials into finished goods,
which is why labor and overhead are included.
Page 1 of 54
, BUS-A 325 Cost Accounting (3 cr.)
3. Which of the following is a period cost for a manufacturing company?
A. Direct materials used in production
B. Sales commissions paid to the marketing staff
C. Rent on the factory building
D. Depreciation on factory equipment
ANSWER : B. Sales commissions paid to the marketing staff
Sales commissions are expensed in the period incurred because they relate to
selling, not to making the product.
4. A cost that changes in total in direct proportion to changes in the level of
activity is a:
A. Fixed cost
B. Variable cost
C. Step-fixed cost
D. Committed cost
ANSWER : B. Variable cost
Total variable cost moves proportionally with activity while the cost per unit
stays constant.
5. Within the relevant range, as production volume increases, fixed cost per
unit will:
A. Increase
B. Remain constant
C. Increase at first and then decrease
D. Decrease
ANSWER : D. Decrease
The same total fixed cost is spread over more units, so the per-unit amount falls.
6. The contribution to income forgone by not using a limited resource in its
next-best alternative use is called:
A. Opportunity cost
B. Sunk cost
C. Differential revenue
D. Incremental cost
ANSWER : A. Opportunity cost
Opportunity cost measures the benefit given up when one alternative is chosen
over another.
Page 2 of 54
, BUS-A 325 Cost Accounting (3 cr.)
7. A cost that has already been incurred and cannot be changed by any future
decision is a:
A. Relevant cost
B. Sunk cost
C. Avoidable cost
D. Discretionary cost
ANSWER : B. Sunk cost
Sunk costs are past costs and are irrelevant to decisions about the future.
8. Beginning work-in-process inventory was $20,000, total manufacturing
costs added were $180,000, and ending work-in-process inventory was
$25,000. Cost of goods manufactured is:
A. $180,000
B. $185,000
C. $205,000
D. $175,000
ANSWER : D. $175,000
COGM = $20,000 + $180,000 − $25,000 = $175,000.
9. Beginning finished goods were $30,000, cost of goods manufactured was
$175,000, and ending finished goods were $40,000. Cost of goods sold is:
A. $175,000
B. $165,000
C. $205,000
D. $185,000
ANSWER : B. $165,000
COGS = $30,000 + $175,000 − $40,000 = $165,000.
10. Beginning direct materials inventory was $10,000, purchases were $50,000,
and ending direct materials inventory was $8,000. Direct materials used
equal:
A. $50,000
B. $52,000
C. $48,000
D. $68,000
ANSWER : B. $52,000
Materials used = $10,000 + $50,000 − $8,000 = $52,000.
Section 2: Cost Behavior and Cost Estimation
Page 3 of 54
, BUS-A 325 Cost Accounting (3 cr.)
11. Using the high-low method, the highest activity was 10,000 units at a total
cost of $60,000 and the lowest was 4,000 units at $36,000. The variable cost
per unit is:
A. $3.60
B. $6.00
C. $4.00
D. $9.00
ANSWER : C. $4.00
($60,000 − $36,000) ÷ (10,000 − 4,000) = $24,000 ÷ 6,000 = $4.00 per unit.
12. Using the same high-low data ($60,000 at 10,000 units; $36,000 at 4,000
units), total fixed cost is:
A. $16,000
B. $20,000
C. $24,000
D. $36,000
ANSWER : B. $20,000
Fixed cost = $60,000 − (10,000 × $4) = $20,000.
13. A major limitation of the high-low method is that it:
A. Relies on only two observations that may not be representative
B. Requires complex statistical software
C. Cannot estimate fixed costs
D. Uses every data point equally
ANSWER : A. Relies on only two observations that may not be
representative
Because only the extreme points are used, outliers can badly distort the cost
function.
14. In regression analysis, the coefficient of determination (r²) measures:
A. The slope of the cost line
B. The fixed cost component
C. The standard error of the intercept
D. The proportion of variation in the dependent variable explained by the
independent variable
ANSWER : D. The proportion of variation in the dependent variable
explained by the independent variable
An r² closer to 1 means the cost driver explains more of the change in cost.
Page 4 of 54
