Accounting for Managers
Midterm Exam
Course Introduction
Accounting for Managers is designed to equip students with a foundational understanding of key accounting principles and practices relevant to managerial decision-making. The course introduces concepts such as financial statement analysis, budgeting, cost behavior, performance evaluation, and internal controls. Emphasis is placed on how managers use accounting information to plan, control operations, and make strategic decisions. Through case studies and practical applications, students learn to interpret financial data and utilize accounting tools to drive organizational success and support effective business management.
Recommended Textbook Management Accounting 2nd Edition by Leslie G. Eldenburg
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Page 2
Chapter 1: The Role of Accounting Information in Management Decision Making
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Sample Questions
Q1) Managers can make higher-quality decisions by relying on all of the following except
A) More complete information
B) Better decision-making processes
C) Irrelevant information
D) Information having less uncertainty
Answer: C
Q2) Which of these statements concerning the value chain is correct?
A) the value chain and the supply chain are different names for the same thing
B) the value chain essentially internalised an organisations' thinking
C) the value chain provides a sound foundation for exploring other initiatives such as activity based costing
D) all of the statements are correct
Essay/Matching
Answer: C
Q3) Accounting information is the only thing managers need to make financial decisions.
A)True
B)False
Answer: False
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Chapter 2: Cost Concepts, Behaviour and Estimation
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Sample Questions
Q1) Which statement is false?
A) Information for some costs cannot easily be obtained from the accounting information system.
B) Useful cost information is rarely available from the accounting information system.
C) The accounting system design affects the availability of useful cost information.
D) The nature of cost information affects its usefulness for decision making.
Answer: B
Q2) When estimating future costs, information quality is higher when
A) Costs must be allocated
B) The accounting system can trace relevant costs to a cost object
C) The regression Adjusted R-square is near zero
D) Most costs are fixed, rather than variable
Answer: B
Q3) Steel used in the production of automobiles would generally be classified as a direct cost.
A)True
B)False
Answer: True
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4
Chapter 3: A Costing Framework and Cost Allocation
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Sample Questions
Q1) Indirect costs are
A) costs that it is impossible to trace to a cost object
B) costs that cannot be traced to a cost object in an economic manner
C) the same as fixed costs
D) B and C
Answer: B
Q2) Which of these departments would not be considered a support department for a manufacturer of bathroom fittings?
A) accounts
B) security
C) computing departments
D) none of the above, i.e. all would be considered support departments for a manufacturer
Answer: D
Q3) A cost object cannot be:
A) a geographic region
B) a customer
C) a department
D) none of the above, i.e. all can be cost objects
Answer: D
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Chapter 4: Cost-Volume-Profit Cvp Analysis
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Sample Questions
Q1) Ruben Ltd. is a management consulting firm specialising in pension plans. Its billing rate to clients is $120 per hour, and variable costs average $80 per hour. Fixed costs are $24,000 per month. The income tax rate is 20%. If variable costs increase by 10% and management increases its billing rate by 8%, what is the effect on the breakeven point, in billable hours?
A) It increases the breakeven point
B) The breakeven point will not change
C) It decreases the breakeven point
D) Cannot be determined
Q2) The margin of safety is the excess of a firm's profits above the breakeven point. A)True
B)False
Q3) The margin of safety percentage = margin of safety in units/ actual or estimated units
A)True
B)False
Q4) A linear revenue function is one of the assumptions involved in CVP analysis.
A)True B)False
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Chapter 5: Job Costing Systems
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Sample Questions
Q1) In a job costing system the accounting entry to record the completion of job No 876 is:
A) debit cost of goods sold; credit work in process
B) debit work in process; credit profit and loss summary account
C) debit finished goods inventory; credit work in process
D) none of the above
Q2) Which of these is not an uncertainty in measuring job costs?
A) Whether and how to trace direct costs
B) The choice of overhead cost pools
C) The choice of allocation bases
D) None of the above, i.e. all are uncertainties in measuring job costs
Q3) The way spoilage is handled in the accounting records depends on whether the spoilage is considered normal or abnormal.
A)True
B)False
Q4) The cost of normal spoilage arising from the requirements of a specific job:
A) is charged to general overhead
B) is charged to the job
C) is charged to the income statement as a loss
D) none of the above
Page 7
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Chapter 6: Process Costing Systems
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Sample Questions
Q1) Zuniga Ltd uses a process costing system. During May, 1,200 units were transferred into Department 2 at a cost of $38,040. Direct materials are added at the beginning of the process. Additionally: Using the weighted average method, the cost per equivalent unit for materials was
A) $5.00
B) $4.14
C) $6.04
D) $4.44
Q2) Hendrix Ltd employs a process costing system. Direct materials are added at the beginning of the process. Here is information about July's activities: Using the weighted average method, the cost of the goods completed and transferred out was
A) $225,150
B) $225,060
C) $213,300
D) $213,000
Q3) Conversion costs refer to the cost of direct labor and production overhead.
A)True
B)False
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Chapter 7: Absorption, Variable and Throughput Costing
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Sample Questions
Q1) In variable costing
A) Only variable production costs are considered product costs
B) All non-variable production costs are treated as product costs
C) Direct costs are considered to be period costs
D) All variable costs are considered product costs
Q2) General Ltd. budgeted fixed overhead costs of $25,000 per quarter and 1,000 units per quarter in its normal absorption costing system. Any volume variance is carried forward and closed at year end. The company experienced the following activity: The volume variance for the year was
A) -0-
B) Favorable
C) Unfavorable
D) Cannot be determined
Q3) "Cost" and "expense" are two terms for describing the same concept.
A)True
B)False
Q4) Absorption costing systems subtract inventoried costs from revenues at the time of production.
A)True
B)False
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Chapter 8: Activity Analysis: Costing and Management
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Sample Questions
Q1) Compared to a traditional costing system, an activity-based costing system usually involves
A) Fewer cost pools
B) More cost pools
C) bigger cost pools
D) b and c
Q2) Lookin' for a Home is an animal shelter in Parramatta, New South Wales. The shelter relies on government grants and private donations for funding. It takes in homeless dogs and cats and keeps them until they are adopted by qualified individuals. One of the shelter's cost pools is animal recordkeeping, which involves maintaining a database with details about each animal in the shelter. Which of the following is the most appropriate cost driver for the animal recordkeeping cost pool?
A) Number of government grants sought
B) Number of employees who work in the shelter
C) Number of animal intake and adoption transactions
D) Square feet allocated to the recordkeeping operation
Q3) ABC systems measure resource flows in an organisation.
A)True
B)False
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Page 10
Chapter 9: Relevant Costs for Decision Making
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Sample Questions
Q1) A key aspect of special order decisions is being at least as well off after the decision as before it.
A)True
B)False
Q2) If a service organisation is at capacity, it would only accept a special order for service if it was priced at or above the price that regular customers pay for the service.
A)True
B)False
Q3) Mr. Bigletter is employed at an annual salary of $25,000. He plans to start his own business and estimates that he can gross $30,000 annually. If he chooses to open the new business, his foregone salary is a (an)
A) Irrelevant cost
B) Sunk cost
C) Opportunity cost
D) Incremental cost
Q4) Make or buy decisions are sometimes known as outsourcing decisions.
A)True
B)False
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Chapter 10: Standard Costs, Flexible Budgets and Variance Analysis
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Sample Questions
Q1) LST entered into a new contract with one of its raw material suppliers. The new contract required the supplier to deliver raw materials with a 24-hour notice from LST. This reduces LST's material handling costs, but has increased the cost of the raw materials delivered. Which of the following variances is most likely to result?
A) Unfavorable direct material price variance
B) Favorable direct price variance
C) Unfavorable variable overhead spending variance
D) Unfavorable fixed overhead spending variance
Q2) If a variance is unfavorable, it should be closed directly to cost of goods sold.
A)True
B)False
Q3) For overhead variances, the difference between the flexible budget amounts and actual costs incurred is called the
A) Efficiency variance
B) Budget variance
C) Favorable variance
D) Quantity variance
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Page 12
Chapter 11: Operational Budgets
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Sample Questions
Q1) Planning Systems, has forecast the following unit sales and production for the next year, by quarter: A finished unit requires one unit of material A and two units of material
B. There should be enough material on hand at the end of each quarter to meet 20% of the next quarter's production needs. There are no work-in-process inventories. What is the ending inventory for material B in quarter 1?
A) 28
B) 32
C) 56
D) 64
Q2) Which of the following items is least likely to be included in a cash budget?
A) Accounts receivable collections
B) Depreciation
C) Short-term borrowing
D) Long-term debt repayments
Q3) In a production budget, beginning inventory plus budgeted production equals sales plus targeted ending inventory.
A)True
B)False
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Chapter 12: Strategy and Control
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Sample Questions
Q1) Contemporary management accounting topics include all of these, except:
A) risk management control
B) sustainable accounting
C) central planning versus an unplanned economy
D) none of the above, i.e. all of these topics are covered by contemporary management accounting
Q2) In management accounting, designing and managing global networks, controlling them through techniques such as empowerment and creating value through integration is know as:
A) flat earth theory
B) network orchestration
C) management control
D) inter-globalisation
Q3) Friedman's view of the 'Flat World' involves moving back to embrace the best of the past features of management accounting.
A)True
B)False
Q4) Strategic management accounting is essentially theoretical in nature.
A)True
B)False
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Chapter 13: Planning and Budgeting for Strategic Success
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Sample Questions
Q1) Kaizen budgeting is designed to improve quality and reduce costs over time.
A)True
B)False
Q2) The process of considering the effect of alternative courses of action on profits, assets and cash flow management is known as:
A) strategic budgeting
B) operational budgeting
C) lean budgeting
D) activity based budgeting
Q3) The key to managing successfully without budgets, as proposed by the Beyond Budgeting philosophy, is:
A) radical decentralisation and accountability
B) reward systems based on relative performance evaluation
C) a high level of trust among employees
D) all of the above
Q4) The Kaizen approach to budgeting was developed in:
A) Japan
B) Germany
C) USA
D) Holland
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Chapter 14: Capital Budgeting and Strategic Investment
Decisions
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Sample Questions
Q1) Bailey Pty Ltd is considering modernising its production by purchasing a new machine and selling an old machine. The following data have been collected on this investment: The income tax rate is 40%, and the required rate of return is 16%.
Depreciation is $5,000 per year for the old machine. The new machine would be depreciated $7,600 in 2008, $5,700 in 2009, $3,800 in 2010, and $1,900 in 2011. Assume Bailey would purchase the new machine in December 2007 and dispose of the old machine in January 2008.
The net cash flow associated with selling the old machine in January 2008 (i.e., the value of the sale and any tax consequences) would be
A) $5,000
B) $15,000
C) $20,000
D) $11,000
Q2) The first step in addressing capital budgeting decisions is to identify relevant cash flows.
A)True
B)False
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Page 16
Chapter 15: The Strategic Management of Costs and Revenues
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Sample Questions
Q1) Setting prices low to drive competitors out of the market and then raising prices is called
A) predatory pricing.
B) market-based pricing.
C) price dumping.
D) collusive pricing.
Q2) Give a complete but concise explanation of the target costing cycle. Correct
Q3) Life cycle costing is an alternative to job order and process costing.
A)True
B)False
Q4) The statement concerning the product mix variance that is true is:
A) It provides an indication of changes in contribution margin caused by selling in a different product mix from the planned mix
B) This variance is only relevant when the products involved are substitute products
C) It is calculated as change in Average standard contribution margin x Actual unit volume
D) All of the statements are true
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Chapter 16: Strategic Management Control: a Lean Perspective
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Sample Questions
Q1) Under a value chain approach to quality management, product inspections are an example of which category of quality costs?
A) Appraisal activities
B) Internal activities
C) Prevention activities
D) External activities
Q2) The philosophy of TQM is to cut costs while increasing quality.
A)True
B)False
Q3) Which of these is not a benefit of the just-in-time system?
A) it guarantees that inventory will always be available from the supplier
B) it reduces inventory obsolescence
C) it reduces raw material handling costs
D) none of the above is not a benefit, i.e. all are benefits of the just-in-time system
Q4) A just-in-time system reduces costs in all of these ways, except:
A) maximising the use of space
B) reducing defect rates
C) reducing the range of products produced
D) enhancing manufacturing flexibility
18
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Chapter 17: Responsibility Accounting, Performance
Evaluation and Transfer Pricing
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Sample Questions
Q1) Teresa's Taco Ltd had the following results during the most recent year: Sales $500,000; Residual income $5,000; investment turnover 2.5; and a required rate of return of 15%. The return on sales was
A) 7%
B) 6.1%
C) 38.5%
D) 3.25%
Q2) If manufacturing departments are only responsible for production decisions, they are considered cost centres.
A)True
B)False
Q3) Technical details about complex manufacturing processes are examples of specific knowledge.
A)True
B)False
Q4) Problems with market-based transfer prices include
A) Lack of knowledge about underlying costs
B) Lack of objectivity
C) Their impact on corporate profitability
D) Their lack of reliance on supply-and-demand relationships
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Chapter 18: The Balanced Scorecard and Strategy Maps
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Sample Questions
Q1) The steps for implementing a balanced scorecard
A) Are different in for-profit and not-for-profit organisations.
B) Should be customised for individual organisations.
C) Should not vary if the implementation is to be effective.
D) Begin with developing measures in each perspective.
Q2) Which of the following measures would be most likely to be found in the internal business process perspective of the balanced scorecard?
A) Change in market share
B) Training days per employee
C) Residual income
D) Percent capacity utilisation
Q3) The perspectives in a balanced scorecard
A) Can be adapted to an individual organisation's priorities
B) Cannot be changed because of copyright restrictions
C) Include qualitative and quantitative
D) Are externally focused only in for-profit organisations
Q4) Once balanced scorecard measures have been chosen, they should not be changed for at least five years.
A)True
B)False
20
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Chapter 19: Rewards, Incentives and Risk Management
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Q1) Management accountants now need to integrate the impact of external reporting rules on their risk management and internal control policies.
A)True
B)False
Q2) It is not possible to overcome the problem of remuneration bonuses having an upside bias.
A)True B)False
Q3) Successful companies need to carefully balance management control and risk taking.
A)True
B)False
Q4) According to agency theory, under what circumstances could companies eliminate agency costs?
A) If their shares are not traded on the stock exchange
B) If bonuses are based on financial performance
C) If they publish audited financial statements
D) Organisations cannot eliminate agency costs
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Chapter 20: Sustainability Management Accounting
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Q1) Which of these is a behavioural issue as opposed to a technical issue when implementing sustainability change processes within an organisation?
A) Arriving at suitable objectives in line with sustainability strategies
B) Identifying suitable social and environmental measures for performance evaluation
C) Creating ownership of projects by participants
D) All are behavioural issues
Q2) The fundamental reason for making an organisation sustainable is:
A) to meet the needs of the present without compromising the ability of future generations to meet their own needs
B) to preempt government legislation
C) to ensure that the organisation grows
D) all of the above
Q3) To best highlight sustainable costs and benefits sustainability costs should be:
A) allocated to their own cost pools
B) treated as period costs
C) traced directly to cost objects
D) a and c
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