Cost Management Final Exam Questions
& Answers 2024/2025
Product Cost - ANSWERSonly costs necessary to complete product (DM, DL, OH)
Period Cost - ANSWERSnon-product expenditures for managing the firm and selling the product
Direct Cost - ANSWERScan be traced directly to the product
Indirect Cost - ANSWERScan't be traced to the product
Prime Cost - ANSWERSDM + DL
Conversion Cost - ANSWERSDL + OH
Fixed Costs - ANSWERSthe total cost does not change with a change in the quantity
Variable Costs - ANSWERSchange in total cost associated with each change in the quantity of the cost
driver
Variable costs _______ when there is an increase in activity - ANSWERSincrease
Variable cost per unit is ___________ by activity level changes - ANSWERSunaffected
Fixed costs are the ______ in total as activity level changes with relevant range - ANSWERSsame
Fixed costs per unit ___________ as the activity level increases - ANSWERSdecreases
, Predetermined OH Rate - ANSWERS$estimated OH/ cost driver
Applied OH Rate - ANSWERSPred. OH Rate x actual activity level
T/F The traditional system of allocating overhead to products tends to overcost specialized, complex
products - ANSWERSFalse
T/F The main reason to adopt an ABC system is to reduce the total amount of overhead incurred within
your company - ANSWERSFalse
T/F As overhead costs are broken down into additional cost pools, product costs should become more
accurate - ANSWERSTrue
T/F Product complexity refers to how many different products a firm makes - ANSWERSFalse - variety
T/F ABC costing is appropriate in service industries but began in the manufacturing environment -
ANSWERSTrue
T/F All non-value added activities should be eliminated - ANSWERSFalse - You can't get rid of them all
T/F An activity-based system will enable a company to better understand its operations and processes -
ANSWERSTrue
T/F The ABC approach applies to direct labor, direct materials, and overhead equally - ANSWERSFalse -
OH
T/F An ABC system is costly to implement and costly to utilize because of the level of detail required -
ANSWERSTrue
T/F Traditional accounting systems are still appropriate for companies with very low product variety and
complexity. - ANSWERSTrue
& Answers 2024/2025
Product Cost - ANSWERSonly costs necessary to complete product (DM, DL, OH)
Period Cost - ANSWERSnon-product expenditures for managing the firm and selling the product
Direct Cost - ANSWERScan be traced directly to the product
Indirect Cost - ANSWERScan't be traced to the product
Prime Cost - ANSWERSDM + DL
Conversion Cost - ANSWERSDL + OH
Fixed Costs - ANSWERSthe total cost does not change with a change in the quantity
Variable Costs - ANSWERSchange in total cost associated with each change in the quantity of the cost
driver
Variable costs _______ when there is an increase in activity - ANSWERSincrease
Variable cost per unit is ___________ by activity level changes - ANSWERSunaffected
Fixed costs are the ______ in total as activity level changes with relevant range - ANSWERSsame
Fixed costs per unit ___________ as the activity level increases - ANSWERSdecreases
, Predetermined OH Rate - ANSWERS$estimated OH/ cost driver
Applied OH Rate - ANSWERSPred. OH Rate x actual activity level
T/F The traditional system of allocating overhead to products tends to overcost specialized, complex
products - ANSWERSFalse
T/F The main reason to adopt an ABC system is to reduce the total amount of overhead incurred within
your company - ANSWERSFalse
T/F As overhead costs are broken down into additional cost pools, product costs should become more
accurate - ANSWERSTrue
T/F Product complexity refers to how many different products a firm makes - ANSWERSFalse - variety
T/F ABC costing is appropriate in service industries but began in the manufacturing environment -
ANSWERSTrue
T/F All non-value added activities should be eliminated - ANSWERSFalse - You can't get rid of them all
T/F An activity-based system will enable a company to better understand its operations and processes -
ANSWERSTrue
T/F The ABC approach applies to direct labor, direct materials, and overhead equally - ANSWERSFalse -
OH
T/F An ABC system is costly to implement and costly to utilize because of the level of detail required -
ANSWERSTrue
T/F Traditional accounting systems are still appropriate for companies with very low product variety and
complexity. - ANSWERSTrue
