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Cost Accounting 101 Practice Test: Inventory Costing and Capacity Analysis
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Inventory costing and capacity analysis can help companies determine how much profit they can make on inventory, how to reduce costs, and where to make changes.  Inventory control, also called stock control, is the process of ensuring the right amount of supply is available in an organization. Here are some basics of inventory costing and capacity analysis: ABC analysis: Helps identify items that significantly impact overall inventory cost. It also identifies different stock categories that require different management and controls. Storage costs: Refers to the cost of maintaining... Show more
Cost Accounting 101 Practice Test: Inventory Costing and Capacity Analysis
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25 Questions

1. ________ method(s) expense(s) variable marketing costs in the period incurred.
2. ________ reduces theoretical capacity for unavoidable operating interruptions.
3. Under both variable and absorption costing, all variable manufacturing costs are inventoriable costs.
4. The production-volume variance is affected by the choice of capacity concept used to determine the denominator level.
5. Budgeted fixed manufacturing costs of a product using practical capacity:
6. Determining the right" level of capacity is one of the most strategic and difficult decisions managers face."
7. Differences between absorption costing and variable costing are much smaller when a:
8. Which of the following inventory costing methods shown below is required by GAAP (Generally Accepted Accounting Principles) for external financial reporting?
9. The marketing manager's performance evaluation is most fair when based on a denominator level using:
10. ________ method(s) is required for tax reporting purposes.
11. The difference in operating income under absorption costing and variable costing is due solely to the timing difference of expensing fixed manufacturing costs.
12. ________ is a method of inventory costing in which all variable manufacturing costs (direct and indirect) are included as inventoriable costs and all fixed manufacturing costs are excluded.
13. Under absorption costing, managers can increase operating income by producing more inventory at the end of the accounting period.
14. Variable costing regards fixed manufacturing overhead as a(n):
15. Practical capacity is the level of capacity that reduces theoretical capacity by considering unavoidable operating interruptions, such as scheduled maintenance time, shutdowns for holidays, and so on.
16. The higher the denominator level, the:
17. The gross-margin format of the income statement:
18. Using master-budget capacity for pricing purposes can lead to a downward demand spiral.
19. ________ is (are) based on the demand for the output of the plant.
20. When production deviates from the denominator level, a production-volume variance always exists under absorption costing.
21. From the perspective of long-run product costing it is best to use:
22. The contribution-margin format of the income statement:
23. Advocates of throughput costing argue that:
24. It is most difficult to estimate ________ because of the need to predict demand for the next few years.
25. If managers report inventories of zero at the start and end of each accounting period, operating incomes under absorption costing and variable costing will be the same.

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