Accounting for Management Exam Solutions
Course Introduction
Accounting for Management focuses on the principles and practices of accounting as applied to managerial decision-making. The course introduces students to the use of accounting information for planning, controlling, and evaluating business operations. Topics include cost behavior, budgeting, performance measurement, and the analysis and interpretation of financial data to support strategic decisions. Through case studies and practical exercises, students learn how managers use accounting information to solve business problems, improve efficiency, and achieve organizational objectives.
Recommended Textbook
Cost Accounting A Managerial Emphasis 7th Canadian Edition by Charles T. Horngren
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22 Chapters
3533 Verified Questions
3533 Flashcards
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Page 2
Chapter 1: The Accountants Vital Role in Decision Making
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141 Verified Questions
141 Flashcards
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Sample Questions
Q1) Which of the following is a major benefit of utilizing a budgeting system?
A)It always results in more profitable decisions.
B)It is easier for managers than traditional decision-making models.
C)It saves costs by utilizing historical data to make projections.
D)It facilitates coordination and communication.
E)Once a successful budget is developed,it can be re-used year after year.
Answer: D
Q2) Management accountants are required to follow the generally accepted accounting principles that are used for external financial reporting when preparing reports for internal users.
A)True
B)False
Answer: False
Q3) Which of the following statements refers to management accounting information?
A)There are no regulations governing the reports.
B)The reports are generally delayed and historical.
C)The audience tends to be stockholders,creditors,and tax authorities.
D)It primarily measures and records business transactions.
E)The reports are audited so can be used in confidence by potential investors.
Answer: A
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Chapter 2: An Introduction to Cost Terms and Purposes
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171 Verified Questions
171 Flashcards
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Sample Questions
Q1) What is the amount of direct materials used by Ontario Industries Inc.?
A)$168,000
B)$165,000
C)$173,000
D)$205,000
E)$170,000
Answer: C
Q2) Cost assignment is
A)always arbitrary.
B)linking actual costs to cost objects.
C)the same as cost accumulation.
D)finding the difference between budgeted and actual costs.
E)the same as cost conversion.
Answer: B
Q3) Period costs are never included as part of inventory.
A)True
B)False
Answer: True
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4
Chapter 3: Cost-Volume-Profit Analysis
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156 Flashcards
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Sample Questions
Q1) A hospital receives $1,000,000 monthly in funding from various sources.Annual fixed costs are projected to be $5,000,000 and the variable cost per patient,across all departments is projected to be $534.80.Last year they treated 11,500 patients.The hospital expects a 5% increase in patients this year.A governing bylaw requires that the hospital be run as a non-profit organization. What is the maximum number of patients the hospital can expect to be able to treat assuming the operating income is zero?
A)11,500
B)12,079
C)13,000
D)more than 13,000
E)CVP analysis is not relevant for non-profit organizations.
Answer: D
Q2) Operating margin is the same as gross margin in CVP analysis.
A)True
B)False
Answer: False
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Chapter 4: Job Costing
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145 Flashcards
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Sample Questions
Q1) The cost driver of an indirect cost is often used as the cost allocation base.
A)True
B)False
Q2) What is the budgeted indirect cost allocation rate for Department 2?
A)$3.45
B)$3.75
C)$4.60
D)$7.50
E)$8.00
Q3) Which of the following is NOT possible to use as a cost allocation base for manufacturing overhead?
A)direct labour dollars
B)direct labour hours
C)direct material dollars
D)direct labour hours or dollars
E)indirect labour hours
Q4) Process costing is a useful system for tracking the costs of building a house.
A)True
B)False
Q5) What is the difference between an actual cost system and a normal cost system?
Page 6
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Chapter 5: Activity-Based Costing and Management
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144 Verified Questions
144 Flashcards
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Sample Questions
Q1) How much of the account billing cost will be assigned to Department B?
A)$7,000
B)$14,000
C)$46,667
D)$93,333
E)$140,000
Q2) One of the aspects of ABM is eliminating activities that do not add value.
A)True
B)False
Q3) If manufacturing overhead costs are considered one large cost pool and are assigned based on 10 million pages of production capacity,what is the cost driver rate?
A)$0.25 per page
B)$0.05 per page
C)$0.025 per page
D)$0.042 per page
E)$0.42 per page
Q4) Explain how traditional (simple)cost systems,using a single unit-level cost rate,may distort product costs.
Q5) List four ways that activity-based management can be effective.
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Chapter 6: Master Budget and Responsibility Accounting
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170 Flashcards
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Sample Questions
Q1) The value of budgets to managers in their strategic analysis and planning is enhanced by
A)value based budgeting.
B)conducting sensitivity analysis.
C)the lines of responsibility in the value chain.
D)the current organizational structure.
E)the operating plan.
Q2) In a profit centre the manager is responsible for investments,revenues and expenses.
A)True
B)False
Q3) Describe some of the drawbacks of using the operating budget as a control device.
Q4) The master budget embraces the impact of both operating decisions and financing decisions as related to acquisitions and uses of scarce resources.
A)True B)False
Q5) A rolling budget encourages management to be thinking about the next 12 months. A)True B)False
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Chapter 7: Flexible Budgets,variances,and Management
Control: I
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172 Verified Questions
172 Flashcards
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Sample Questions
Q1) Which of the following is likely to be related to an unfavourable direct materials rate variance?
A)Standard costs were determined correctly.
B)the negotiating skills of the marketing manager
C)unexpected price decreases in direct materials
D)Actual direct material purchases were in larger quantities than normal,resulting in receiving volume discounts.
E)Materials were purchased based on a competitive bid.
Q2) What is the budgeted operating income for Ames Golf Company?
A)$7,000,000
B)$5,970,000
C)$5,550,000
D)$5,200,000
E)$4,750,000
Q3) The direct-material rate variance for January is
A)$420 unfavourable.
B)$420 favourable.
C)$400 favourable.
D)$400 unfavourable.
E)$20 favourable.
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Chapter 8: Flexible Budgets,variances,and Management
Control: II
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148 Verified Questions
148 Flashcards
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Sample Questions
Q1) Fixed overhead costs are a lump sum that does not change in total despite changes in the cost driver.
A)True
B)False
Q2) Cirilla's Weathervane Company manufactures weathervanes.The current year operating budget is based on the production of 10,000 weathervanes with 1.25 machine-hour allowed per weathervane.Variable manufacturing overhead is anticipated to be $300,000.
Actual production was 11,000 weathervanes using 12,100 machine-hours.Actual variable costs were $23.75 per machine-hour.
Required:
Calculate the variable overhead rate and the efficiency variances.
Q3) If a manager views the proration approach as not being cost-effective,then adjusting cost of goods sold is acceptable provide the amount is material.
A)True
B)False
Q4) Explain two concerns when interpreting the production-volume variance as a measure of the economic cost of unused capacity.
Page 10
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Chapter 9: Income Effects of Denominator Level on Inventory Valuation
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171 Verified Questions
171 Flashcards
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Sample Questions
Q1) Which denominator-level concept results in the highest amount of fixed manufacturing overhead costs per unit of ending inventory when seasonal demand is low?
A)theoretical capacity
B)practical capacity
C)normal capacity
D)master-budget capacity
E)supply capacity
Q2) Sutton Hot Dog Stands sells hot dogs at ballparks across Canada for $1.35.Variable costs are $1.05 per unit with fixed production costs of $90,000 per month at a level of 400,000 units.Fixed administrative costs total $30,000.Sales average 400,000 units per month,with planned production of 400,000 hot dogs.
Required:
a.What are break-even unit sales under variable costing?
b.What are break-even unit sales under absorption costing if she sells everything she prepares?
c.What are break-even unit sales under absorption costing if average sales are 498,000 and planned production is changed to 500,000?
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Chapter 10: Analysis of Cost Behaviour
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212 Verified Questions
212 Flashcards
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Sample Questions
Q1) What is the constant for the estimating cost equation?
A)$125,000
B)$225,000
C)$25,000
D)$0
E)$12,500
Q2) Cross-sectional data pertain to the same entity over successive past periods. A)True
B)False
Q3) What is the predicted indirect manufacturing labour cost if 160 machine-hours are budgeted and 170 are actually worked,assuming the estimated cost function is y = $81.04 + 5.32x?
A)$985.44
B)$932.24
C)$904.40
D)$851.20
E)$81.04
Q4) Inventory carrying costs include the opportunity cost of the investment. A)True B)False
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Chapter 11: Decision Making and Relevant Information
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174 Verified Questions
174 Flashcards
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Sample Questions
Q1) Electrical Engineering Equipment Ltd.purchased a machine for $100,000;current accumulated amortization totals $40,000.Management is contemplating the purchase of a new machine for $120,000.Current disposal of the old machine would cost $65,000. What is the correct category for each item?
A)Irrelevant: $120,000 of new machine,$40,000 accumulated amortization; Relevant: $100,000 cost of old machine,$65,000 of disposal of old machine,$5,000 gain on sale
B)Irrelevant: $100,000 cost of old machine,$40,000 accumulated amortization; Relevant: $120,000 cost of new machine,$5,000 gain on sale,$65,000 disposal of old machine
C)Irrelevant: $120,000 cost of new machine,$65,000 disposal of old machine; Relevant: $100,000 cost of old machine,$60,000 book value of old machine,$5,000 gain on sale
D)Irrelevant: $100,000 cost of old machine,$60,000 book value of old machine; Relevant: $120,000 cost of new machine,$65,000 disposal of old machine,$5,000 gain on sale
E)Irrelevant: $100,000 cost of old machine,$40,000 accumulated amortization,$5,000 gain on sale;Relevant: $120,000 cost of new machine,$65,000 disposal of old machine
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Chapter 12: Pricing Decisions, product Profitability
Decisions, and Cost Management
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150 Verified Questions
150 Flashcards
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Sample Questions
Q1) All costs are relevant in short-run pricing decisions.
A)True
B)False
Q2) A business that engages in predatory pricing violates Canadian law.
A)True
B)False
Q3) Backwoods Incorporated manufactures rustic furniture.The cost accounting system estimates manufacturing costs to be $80 per table,consisting of 70% variable costs and 30% fixed costs.The company has surplus capacity available.It is Backwoods' policy to add a 50% markup to full costs.
Required:
a.Backwoods Incorporated is invited to bid on an order to supply 100 rustic tables.What is the lowest price Backwoods should bid on this one-time-only special order?
b.A large hotel chain is currently expanding and has decided to decorate all new hotels using the rustic style.Backwoods Incorporated is invited to submit a bid to the hotel chain.What is the lowest price per unit Backwoods should bid on this long-term order?
Q4) List three advantages for including unitized fixed costs for pricing decisions.
Q5) Describe the five steps in developing target pricing and target costs.
Page 14
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Chapter 13: Strategy,balanced Scorecard,and Profitability Analysis
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161 Verified Questions
161 Flashcards
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Sample Questions
Q1) To execute the company strategy,measures on the balanced scorecard would most likely include the
A)number of process improvements.
B)price premium earned.
C)market share.
D)the amount invested in new product features.
E)employee satisfaction.
Q2) ________ is the fundamental rethinking and redesign of business processes to achieve improvements in critical measures of performance such as cost,quality,service,speed,and customer satisfaction.
A)Strategy
B)Customer perspective
C)Learning and growth perspective
D)Reengineering
E)Product differentiation
Q3) The growth component of a change in operating income measures the effect of price changes on revenues and costs.
A)True
B)False
Page 15
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Chapter 14: Period Cost Allocation
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163 Flashcards
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Sample Questions
Q1) Which method allows for partial recognition of the services rendered by support departments to other support departments?
A)the direct allocation method
B)the single-step allocation method
C)the reciprocal allocation method
D)the dual-rate method
E)the step-down allocation method
Q2) Benefits of the dual-rate method include
A)variable costs that are transformed into fixed costs for user decision making.
B)the low cost of implementation.
C)avoidance of expensive analysis for categorizing costs as either fixed or variable.
D)information that leads to outsourcing decisions that benefit the organization as a whole.
E)increased costs of implementation.
Q3) The standard cost method uses budgeted cost driver use to determine the overhead allocation rate.
A)True
B)False
Q4) Should a company allocate its corporate costs to divisions?
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Chapter 15: Cost Allocation: Joint Products and Byproducts
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Sample Questions
Q1) Byproduct revenues appear in the income statement as a cost increase to the main product and as a separate item of expense.
A)True
B)False
Q2) If the sales value at splitoff method is used,what are the approximate joint costs assigned to ending inventory for paper?
A)$28.58
B)$100.00
C)$870.00
D)$1,500.00
E)$80.00
Q3) What is the approximate amount of joint costs in Product Y's ending inventory if the physical volume method is used and the company uses the FIFO inventory method?
A)$50,917
B)$53,883
C)$60,145
D)$60,285
E)$67,358
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17
Chapter 16: Revenue and Customer Profitability Analysis
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152 Flashcards
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Sample Questions
Q1) Analyzing whether to add or drop a customer is an application of relevant costing analysis.
A)True
B)False
Q2) The stand-alone method may use selling price or unit costs to allocate revenues.
A)True
B)False
Q3) ________ is a package of two or more products or services,sold for a single price,where the individual components of the package may also be sold as separate items,each with their own stand-alone price.
A)A revenue product
B)A byproduct
C)A bundled product
D)A joint product
E)A product package
Q4) Customer-profitability analysis examines how individual customers,or groupings of customers,differ in their profitability.
A)True
B)False
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Chapter 17: Process Costing
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Sample Questions
Q1) What is the difference between a weighted-average method of process costing and a first-in,first-out method of process costing?
Q2) What is the conversion cost per equivalent unit in Department A?
A)$5,400
B)$3,425
C)$3,571
D)$3,699
E)3,857
Q3) List and describe the five steps in process costing.
Q4) Conceptually transferred-in costs from another department are similar to A)direct labour.
B)finished goods inventory.
C)direct labour and materials.
D)manufacturing overhead.
E)materials provided by external suppliers.
Q5) Process-costing systems separate costs into cost categories according to the timing of when costs are introduced into the process. A)True
B)False
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Chapter 18: Spoilage, rework, and Scrap
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Sample Questions
Q1) Deducting the disposal value from the costs of the spoiled goods accumulated to the point of inspection equals
A)the net cost of discarded goods.
B)the net cost of reworked goods.
C)the net cost of spoilage.
D)the net cost of scrap.
E)the net cost of disposals.
Q2) What is the Waldorf Computer Systems Inc.cost transferred out assuming spoilage units are not included in the equivalent unit calculation?
A)$120,000
B)$112,500
C)$90,000
D)$82,500
E)$37,500
Q3) Process costing is simplified when using standard costs.
A)True
B)False
Q4) How can a company account for scrap? Include in your explanation a discussion of the two aspects of accounting for scrap.
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Chapter 19: Inventory Cost Management Strategies
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Sample Questions
Q1) You are the new controller at Ralston Industries and you have noticed that the company seems to carry a lot of inventory,both in direct materials and in finished goods.At a recent management meeting,you raised this observation.The managers agreed with your observation but stated that it was company policy to carry large inventories.
Required:
Provide three reasons these managers might offer in support of carrying large inventories?
Q2) Traditional budgeted and standard costing systems use
A)backflush costing.
B)delayed costing.
C)post-deduct costing.
D)synchronous tracking.
E)variable costing.
Q3) What is the economic order quantity?
A)874 packages
B)652 packages
C)200 packages
D)198 packages
E)188 packages
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Chapter 20: Capital Budgeting: Methods of Investment Analysis
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Sample Questions
Q1) Comparison of the actual results for a project to the costs and benefits expected at the time the project was selected is referred to as
A)the audit trail.
B)management control.
C)a post-investment audit.
D)a cost-benefit analysis.
E)capital budgeting.
Q2) The after-tax cash inflow from the terminal disposal value of the investment is usually a significant factor in capital budgeting decision making.
A)True
B)False
Q3) Which of the following is NOT a major category of cash flows in capital budgeting?
A)initial investment in machines
B)recurring operating cash flows
C)cash flows from dispositions of assets
D)management and labour allocation deductions
E)initial working capital investment
Q4) Explain why the term tax shield is used in conjunction with amortization.
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Chapter 21: Transfer Pricing and Multinational Management
Control
Systems
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Sample Questions
Q1) Informal management control systems include A)incentive plans.
B)codes of conduct.
C)qualitative measures of performance.
D)policies.
E)company culture.
Q2) Briefly describe the conditions that should be met for market-based transfer pricing to lead to optimal decision making among subunits of a large organization.
Q3) A well-designed management control system obtains all of its information from within the company.
A)True
B)False
Q4) An important advantage of decentralized operations is that it improves corporate control.
A)True B)False
Q5) Negotiated transfer prices are always transacted at the top management levels. A)True B)False
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Chapter 22: Multinational Performance Measurement and Compensation
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Sample Questions
Q1) Investment turnover is calculated by dividing investment by revenues.
A)True
B)False
Q2) A company's weighted-average cost of capital [WACC] was 9.6% last year.The company has $6,000,000 of bonds payable (its only debt)with a 9.25% coupon,and has $9,000,000 in equity capital.The tax rate is 35%.What is the company's cost of equity capital?
A)6.00%
B)6.25%
C)6.50%
D)9.25%
E)12.00%
Q3) Novella Ltd.reported a return on investment of 16%,an asset turnover of 6,and income of $190,000.On the basis of this information,the company's invested capital was
A)$1,187,500.
B)$7,125,000.
C)$1,140,000.
D)$197,917.
E)$182,400.
Page 24
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