Accounting for Managers Practice Exam
Course Introduction
Accounting for Managers is designed to equip future business leaders with an understanding of essential accounting principles and their practical applications in managerial decision-making. The course covers the interpretation and analysis of financial statements, budgeting, cost control, and performance evaluation. Emphasis is placed on how accounting information supports strategic planning, resource allocation, and effective management in various organizational contexts. Through case studies and real-world examples, students learn to translate financial data into actionable insights, ensuring informed decisions that drive organizational success.
Recommended Textbook
Fundamental Managerial Accounting Concepts 8th Edition by Thomas P Edmonds
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14 Chapters
2016 Verified Questions
2016 Flashcards
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Page 2
Chapter 1: Management Accounting and Corporate Governance
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143 Verified Questions
143 Flashcards
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Sample Questions
Q1) Upstream costs are classified as product costs and downstream costs are classified as period costs for financial reporting purposes.
A)True
B)False
Answer: False
Q2) A manufacturing business paid $3,000 to purchase inventory.As a result,assets would increase by $3,000.
A)True
B)False
Answer: False
Q3) What are indirect costs,and how are the indirect costs incurred to make products accounted for?
Answer: Answers will vary
Indirect costs are costs that cannot be traced to products and services in a cost-effective manner.These costs are initially recorded in a Manufacturing Overhead account,then they are allocated to the products that the company has produced.
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Chapter 2: Cost Behavior, Operating Leverage, and Profitability Analysis
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141 Verified Questions
141 Flashcards
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Sample Questions
Q1) The excess of revenue over variable costs is referred to as:
A) gross profit
B) gross margin
C) contribution margin
D) manufacturing margin
Answer: C
Q2) When using least-squares regression to determine variable and fixed costs,the r-square refers to the degree to which the change in the dependent variable can be explained by a change in the independent variable.
A)True
B)False
Answer: True
Q3) Select the correct statement regarding fixed costs.
A) There is a contradiction between the term "fixed cost per unit" and the behavior pattern implied by the term.
B) Fixed cost per unit is not fixed.
C) Total fixed cost remains constant when volume changes.
D) All of these are correct statements.
Answer: D
Page 4
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Chapter 3: Analysis of Cost,Volume,and Pricing to Increase Profitability
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144 Verified Questions
144 Flashcards
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Sample Questions
Q1) Anton Company produces and sells bicycles for $500.The variable costs per unit are $300 plus a sales commission of 15% of the selling price.Total fixed costs consist of $16,000 in fixed overhead and $9,000 in fixed selling and administrative costs.
Required:
1)Compute the contribution margin per unit.
2)Compute the break-even point in units and dollars.
3)How many units must be sold to earn a profit of $20,000?
4)What would be the break-even point in units if the sales commission is reduced to $20 per unit sold?
Answer: 1)Contribution margin per unit = $500 - {$300 + 15%($500)} = $125
2)Break-even point in units = ($16,000 + $9,000)÷ $125 = 200 units;Break-even point in dollars = 200 × $500 = $100,000
3)Units needed to earn $20,000 = ($16,000 + $9,000 + $20,000)÷ $125 = 360 units
4)$25,000 ÷ $180 contribution margin per unit = 138.9 units = 139 units (rounded)
Q2) Sensitivity analysis is performed in order to determine optimal sales mix. A)True
B)False Answer: False
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Chapter 4: Cost Accumulation,Tracing,and Allocation
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156 Flashcards
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Sample Questions
Q1) The step method of allocating service department costs allocates those costs to operating departments only.
A)True
B)False
Q2) A cost pool should be made up of costs with a common cost object.
A)True
B)False
Q3) Indicate whether each of the following statements is
Q4) The process of dividing a total cost into parts and assigning it to cost objects is known as:
A) cost tracing.
B) cost division.
C) cost allocation.
D) None of the answers are correct.
Q5) Both direct and indirect costs can be relevant to a particular decision.
A)True
B)False
Q6) The first step in cost accumulation is to identify cost objects. A)True
B)False
Page 6
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Chapter 5: Cost Management in an Automated Business
Environment: ABC, ABM, and TQM
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153 Verified Questions
153 Flashcards
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Sample Questions
Q1) Upstream costs are relevant for deciding whether to discontinue a product line.
A)True
B)False
Q2) Invoice processing costs would be considered a:
A) unit-level cost.
B) batch-level cost.
C) product-level cost.
D) facility-level cost.
Q3) Implementation of an activity-based costing system requires a company to generate more detailed accounting information than would be required by a traditional product cost system.
A)True
B)False
Q4) The first step in developing an ABC system is to:
A) allocate costs to activity cost pools.
B) identify the cost driver that has the best "cause and effectcause-and-effect relationship" to the cost pool.
C) identify essential activities and the cost of performing those activities.
D) calculate activity rates.
Q5) Roadmaster Tires produces a variety of auto and
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Chapter 6: Relevant Information for Special Decisions
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139 Verified Questions
139 Flashcards
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Sample Questions
Q1) ServicePro provides two kinds of services.During the most recent accounting period,the two service lines produced the following operating results: \[\begin{array} { | l | r | r | }
\hline & \text { Service 1 } & \text { Service 2 } \\
\hline \text { Service revenue } & \$ 80,000 & \$ 20,000 \\
\hline \text { Unit-level materials } & ( \$ 20,000 ) & ( \$ 2,000 ) \\
\hline \text { Unit-level labor } & ( \$ 30,000 ) & ( \$ 14,000 ) \\
\hline \text { Product-level selling \& administrative costs } & ( \$ 10,000 ) & ( \$ 2,500 ) \\
\hline \text { Company wide facility-level costs } & ( \$ 5,000 ) & ( \$ 5,000 ) \\
\hline \text { Net income } & \$ 15,000 & ( \$ 3,500 ) \\
\hline & & \\
\hline
\end{array}\] If the company stops providing Service 2:
A) The company's income will decrease by $1,500 per year.
B) The company's income will increase by $1,500 per year.
C) The company's income will decrease by $3,500 per year.
D) The company's income will increase by $3,500 per year.
Q2) What are constraints? Provide an example.
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Chapter 7: Planning for Profit and Cost Control
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Sample Questions
Q1) Select the incorrect statement regarding the human factor in the budgeting process.
A) Budgets force employees to follow the organization's plan.
B) The evaluation feature of budget systems is frightening for many people.
C) There is a tendency for people to be uncomfortable with budgets.
D) Proper handling of human relations is essential to the establishment of an effective budget system.
Q2) Which of the following would be prepared first when a merchandising company uses a master budget?
A) Selling and administrative expense budget
B) Budgeted income statement
C) Sales forecast
D) Inventory purchases budget
Q3) The budgeting process that involves adding a month to the end of the budget period at the end of each month,thus maintaining a twelve-month planning horizon,is referred to as:
A) participative budgeting.
B) capital budgeting.
C) continuous budgeting.
D) zero-based budgeting.
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Chapter 8: Performance Evaluation
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150 Verified Questions
150 Flashcards
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Sample Questions
Q1) Indicate whether each of the following statements is
Q2) The Russell Company provides the following standard cost data per unit of product: \(\begin{array}{ll}
\text {Direct material ( 3 gallons @\$ 6 per gallon) } & \text { \$ 18.00 } \\
\text {Direct labor ( 2 hours @ \$ 10 per hour) } & \text { \$ 20.00 } \end{array}\) During the period,the company produced and sold 22,000 units incurring the following costs: \(\begin{array}{ll}
\text {Direct material } & \text { 68,000 gallons@ \$ 5.90 per gallon } \\
\text {Direct labor } & \text {45,500 hours @ \$ 9.75 per hour } \end{array}\) The direct material price variance was:
A) $6,600 unfavorable.
B) $6,600 favorable.
C) $6,800 unfavorable.
D) $6,800 favorable.
Q3) Distinguish between static and flexible budgets.Give an example of how flexible budgets can be used.
Q4) Indicate whether each of the following statements is
Q5) Describe how a flexible budget is useful in planning for an organization.
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Chapter 9: Responsibility Accounting
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Sample Questions
Q1) For Year 1,Division C of Deerfield Company reported operating assets of $8,800,000,revenues of $6,600,000,and operating expenses of $5,760,000.The company has established a target return on investment (ROI)of 10% for the division.
Required:
1)Calculate the Year 1 ROI for the division.Did the division achieve its target ROI for the year?
2)For Year 2,Division C managers expect that its operating assets will stay at about the same level as for Year 1.Variable expenses for Year 1 were $3,960,000,and the remaining expenses were fixed.The managers expect that the contribution margin ratio for Year 2 will be the same as for Year 1 and that the amount of fixed expenses will not change.To what level must sales increase in Year 2 to achieve the target ROI?
Q2) The research and development department of Apple Computers would likely be organized as:
A) A profit center.
B) A cost center.
C) A revenue center.
D) An investment center.
Q3) Indicate whether each of the following statements about transfer pricing is
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11
Chapter 10: Planning for Capital Investments
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Sample Questions
Q1) What is the reinvestment assumption,and how does the assumption affect capital investment analyses?
Q2) Indicate whether each of the following statements is
Q3) Pierce Company is considering the purchase of new equipment that will cost $150,000.The equipment will save the company $48,000 per year in cash operating costs.The equipment has an estimated useful life of five years and no expected salvage value.The company's cost of capital is 12%.
Required:
1)Assuming the company is subject to a 40% tax rate,compute the net present value.
2)Compute the amount of the annual depreciation tax shield provided by the new equipment.
3)Should the equipment be purchased? Why or why not?
Q4) Investment projects A and B offer equal cash inflows over their lives,but the cash inflows for project A occur sooner than those for project B.B.The two projects are otherwise identical (the cost is the same,for example)Based on this information,the internal rate of return for A is lower than for A)True B)False
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Page 12
Chapter 11: Product Costing in Service and Manufacturing
Entities
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139 Verified Questions
139 Flashcards
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Sample Questions
Q1) If manufacturing overhead is underapplied,the entry to close the overhead account at the end of the accounting period will:
A) decrease net income.
B) not effect total assets.
C) increase net income.
D) decrease cash flow from operating activities.
Q2) The cost of direct materials purchased on account is expensed at the time the:
A) goods made in the manufacturing process are sold.
B) cash is paid to settle the associated accounts payable.
C) manufacturing process is complete.
D) materials are purchased.
Q3) Describe the conflict between the need for cost information to make managerial decisions and the timing of the availability of actual cost data.How do companies resolve this conflict?
Q4) Which of the following costs would not increase the Work in Process Inventory account?
A) Cost of direct labor
B) Cost of allocated overhead
C) Cost of direct materials
D) Cost of selling supplies
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Chapter 12: Job-Order, Process, and Hybrid Costing Systems
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Sample Questions
Q1) A process cost system is used when:
A) Homogenous items are produced in a continuous flow production process.
B) Batches of identical inventory items are produced.
C) A company produces unique,one-of-a-kind inventory items.
D) All of these.
Q2) Bruce Company experienced an event that affected its financial statements as indicated below: \(\begin{array}{|c|c|c|c|c|c|c|c|c|c|c|c|}
\hline & \text { Assets }&&= & \text { Liab. } & + & \text { Equity } & \text { Rev. } & - &
\text { Exp. } & = & \text { Net Inc. } \\
\hline \text { Mfg. } & + & \text { WIP } & & & & & & & & \\
\text { Mixing }& &\text { Packing }\\
\hline (10,500)& + & (10,500) &= & \text { NA } & +&\text { NA } &\text { NA } & -&\text { NA }& = & \text { NA }\\
\hline
\end{array}\) What type of product costing system is being used by this company?
A) Job-order cost system
B) Hybrid cost system
C) Process cost system
D) None of these.
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Chapter 13: Financial Statement Analysis
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Sample Questions
Q1) Describe the differences between the liquidity ratios,solvency ratios and profitability ratios.Identify examples of each type of ratio as well.
Q2) Selected financial information for Martin Company for Year 2 follows: \(\begin{array}{|l|r|}
\hline \text {Sales } &\$ 498,000 \\
\hline \text {Cost of goods sold} &320,000 \\
\hline \text { Merchandise inventory } \\
\hline \text { Beginning of year } &72,000 \\
\hline \text {End of year } &80,000 \\
\hline
\end{array}\) Required: How many times did Martin's merchandise inventory turnover during Year 2? Round your answer to one decimal place.
Q3) Working capital is current assets minus current liabilities.
A)True
B)False
Q4) Indicate whether each of the following statements about financial statement analysis is
Q5) The following information applies to Acorn Cons
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Chapter 14: Statement of Cash Flows
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Sample Questions
Q1) The following is a partial list of accounts and balances for the Spencer Corporation.Prepare the operating activities section of the statement of cash flows for 2014 using the indirect method. \(\begin{array}{|l|r|r|}
\hline & \text {Beginning } & \text {Ending} \\
\hline \text { Land } & \$ \quad 48,000 & \$ \quad 131,800 \\
\hline \text { Accounts receivable } & 20,800 & 20,000 \\
\hline \text { Prepaid rent } & 4,200 & 2,800 \\
\hline \text { Prepaid insurance } & 1,800 & 5,600 \\
\hline \text { Equipment } & 24,000 & 29,000 \\
\hline \text { Accounts payable } & 3,600 & 2,800 \\
\hline \text { Dividends payable } & 2,000 & 2,400 \\
\hline \text { Utilities payable } & 1,000 & 1,600 \\
\hline \text { Cash } & 16,000 & 14,400 \\
\hline \text { Buildings } & 188,000 & 224,000 \\
\hline \text { Salaries payable } & 5,800 & 4,400 \\
\hline \text { Unearned revenue } & 1,600 & 1,800\\
\hline
\end{array}\) Additional Information:
y
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