Accounting for Managers
Practice Questions
Course Introduction
Accounting for Managers is designed to equip students with the essential accounting concepts, tools, and techniques necessary for effective decision-making in a managerial role. The course focuses on the interpretation and analysis of financial statements, budgeting, cost behavior, and performance evaluation, emphasizing how accounting information is used to plan, control, and evaluate business operations. By exploring real-world cases and practical scenarios, students will develop the ability to communicate financial insights, understand the implications of managerial choices, and strategically utilize accounting information to achieve organizational goals.
Recommended Textbook
Managerial Accounting Decision Making and Motivating Performance 1st Edition by Srikant M. Datar
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Chapter 1: The Manager and Management Accounting
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Sample Questions
Q1) What should a managerial accountant do when faced with ethical issues that arise in their organizations?
Answer: Most professional accounting organizations around the globe issue statements about professional ethics.Management accountants must abide by standards,rules,and laws within their country and organizational standards and policies.
Q2) ________ comprises the actions that implement the planning decisions,deciding how to evaluate performance,and providing feedback and learning to help future decision making.
A)Ethics
B)Control
C)Planning
D)Financial accounting
E)Management accounting
Answer: B
Q3) Professional accounting organizations,which represent management accountants in many countries,promote high ethical standards.
A)True
B)False
Answer: True
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Page 3
Chapter 2: An Introduction to Cost Terms and Purposes
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Sample Questions
Q1) Which of the following is correct about indirect costs of a cost object?
A)Cost allocation is not used to describe the assignment of these costs to a particular cost object.
B)Cost tracing is used to describe its assignment of these costs to a particular cost object.
C)Can be traced to a cost object in an economically feasible way.
D)Cannot be traced to a cost object in an economically feasible way.
E)Cost assignment is not used in indirect costing methods.
Answer: C
Q2) Write a brief summary and explain how the impact of a financial crisis impacts how managers at global companies account for fixed costs.Be specific.
Answer: Managers that work at global companies are reluctant to lock in fixed costs.Certain policies could increase the risk of losses during economic downturns.In addition,if there is a decrease in revenues that result from an economic crisis,the fixed costs remain unchanged.If there is a decrease in the revenues,it will prevent problems in the organization.
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4
Chapter 3: Cost-Volume-Profit Analysis
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Sample Questions
Q1) A manager at the Film Shoppe at the mall reported that the company had a contribution margin of $3,000 and total variable costs were $25.00.
Required:
Compute the operating income.
A)$.83
B)$120
C)$2,750
D)$2,780
E)$75,000
Answer: C
Q2) Sensitivity analysis broadens the managers' perspectives to possible outcomes that might occur ________ the company commits to funding a project.
A)after B)during C)before D)when E)parallel
Answer: C
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Chapter 4: Job Costing
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Sample Questions
Q1) Managers implement the step-down method because it allocates support-department costs to other support and operating departments.
A)True
B)False
Q2) Managers utilize the adjusted-allocation rate approach because it restates all overhead entries in the general ledger and subsidiary ledgers using actual cost rates rather than budged cost rates.
A)True
B)False
Q3) The system that managers do not use too much in organizations today because managers cannot compute costs in a timely manner is:
A)direct costing system.
B)actual costing system.
C)annual costing system.
D)diversified costing system.
E)predetermined costing system.
Q4) What is a challenge to managers when they implement job-costing systems?
Q5) How do managers identify the marketing and customer service costs of individual jobs?
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Chapter 5: Process Costing and Cost Allocation
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Sample Questions
Q1) Process-costing systems separate costs into cost categories according to when costs are introduced into the process.
A)True
B)False
Q2) Karen is a managerial accountant at a manufacturing company.She uses manufacturing process costing to assign costs to products and services.Write a short summary and explain how the manufacturing process is different compared to a job-costing system.
Q3) Clothes Manufacturing,Inc.manufactures clothes and distributes them to various buyers.This organization is unique because the managers reported identical costs per unit in the production and manufacturing operations.The managers also reported they use different quality of materials,and in different batches.What type of costing does the managerial accountant use at Clothes Manufacturing,Inc.?
Q4) The incremental method is difficult because every user prefers to be viewed as an incremental party.
A)True
B)False
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Chapter 6: Activity-Based Costing and Activity-Based Management
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Sample Questions
Q1) Manufacturing Mates produces special-order tiles for organizations.The company reported that they produced 250 batches of tile and the setup time per batch was 2 hours.Compute the total setup hours.
A)300 setup hours
B)400 setup hours
C)500 setup hours
D)600 setup hours
E)700 setup hours
Q2) Global surveys of company practices suggest that activity-based costing implementation varies among companies.
A)True
B)False
Q3) Identifying the cost-allocation bases defines the number of activity pools into which costs must be grouped into the ABC system.
A)True
B)False
Q4) What are the three main guidelines that managers use when the refine their costing system?
Q5) Why is it important for managers to allocate all costs of products or services?
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Chapter 7: Pricing Decisions, customer Profitability, and Cost Management
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Sample Questions
Q1) A systematic evaluation of all aspects of the value chain,with the objective of reducing costs and achieving a quality level that satisfies customers is ________.
A)cost engineering
B)price engineering
C)value engineering
D)product engineering
E)promotion engineering
Q2) The higher the price a monopolist sets,the higher the demand for the monopolist's product as customers seek substitute products or forgo buying the product.
A)True
B)False
Q3) Which category of indirect costs in the customer-cost hierarchy is the cost of the salary of a manager in a wholesale distribution channel?
A)Customer output unit-level costs.
B)Customer batch-level costs.
C)Customer-sustaining costs.
D)Distribution-channel costs.
E)Corporate division-sustaining costs.
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Chapter 8: Determining How Costs Behave
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Sample Questions
Q1) There is a better fit between actual cost observations and estimated costs when the ________ is small.
A)residual term
B)fixed costs
C)machine hours
D)regression analysis
E)activity-based costing
Q2) Managers use cost estimation to measure a relationship based on data from past costs.
A)True
B)False
Q3) In a/an ________,the graph of total costs is not a straight line within the relevant range.
A)cost object
B)learning curve
C)experience curve
D)step cost function
E)nonlinear cost function
Q4) Why is the cost hierarchy important to managerial accountants?
Q5) Why do managers plot data on graphs?
10
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Chapter 9: Decision Making and Relevant Information
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Sample Questions
Q1) Overhead costs allocated to a sales office and individual customers are always
A)past
B)future
C)current
D)relevant
E)irrelevant
Q2) Which of the following is not an example of a joint cost?
A)Cost of distillation.
B)Coal is distilled to yield natural gas.
C)Coal is distilled to yield other products.
D)A cost that occurs when a production process yields one product.
E)A cost that arises when a production process yields multiple products.
Q3) Current disposal value of old machine is relevant when it is an expected future benefit that will only occur if the company replaces the machine.
A)True
B)False
Q4) Explain the difference of theory of constraints compared to activity-based costing systems.
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Chapter 10: Quality, inventory Management, and Time
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Sample Questions
Q1) What are costs of qualities (COQ)?
Q2) ________ are the costs incurred to prevent,or the costs arising as a result of,the production of a low-quality product.
A)Costs of quality
B)Shrinkage costs
C)Purchasing costs
D)Ordering costs
E)Carrying costs
Q3) ________ is a "push through" system that manufactures finished goods for inventory on the basis of demand forecasts.
A)Bottle neck
B)Time driver
C)Value stream
D)Carrying costs
E)Materials requirements planning
Q4) How does information-gathering technology with barcoding increase the reliability and timeliness of inventory information?
Q5) What is the economic-order-quantity decision model?
Q6) When are the relevant ordering and carrying costs equal in EOQ models?
Page 12
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Chapter 11: Capital Investments
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Sample Questions
Q1) There is an inconsistency between using the NPV method as best for capital budgeting decisions and then using a different method to evaluate performance.
A)True
B)False
Q2) Quantifying the benefits of computer-integrated manufacturing (CIM)requires managers to understand how quickly consumer demand will change in the future.
A)True
B)False
Q3) The real rate of return for investments in Black Box,a multimedia dissemination company,is 18% per annum.At the current state of the economy,the manager expects a 12% per year inflation rate.
Required
Compute the nominal rate of return on the investment.
A)32%
B)28%
C)12%
D)25%
E)33%
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13
Chapter 12: Master Budget and Responsibility Accounting
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Sample Questions
Q1) Describe the advantages of budgets.
Q2) Why are rolling budgets always available for a specified future period?
Q3) Which of the following is true about the budgeting process?
A)Managers do not use budgets to compel strategic analysis.
B)Managers do not use budgets to promote communication in the workplace.
C)Managers do not use budgets to promote communication across subunits in the workplace.
D)To be useful,managers must support the budget and be flexible if economic conditions change.
E)To be useful,managers do not support the budget and be flexible if economic conditions change.
Q4) List some benefits and drawbacks of international presence of multinational companies.
Q5) Budgeting is a cross-functional activity.
A)True
B)False
Q6) As they prepare operating budgets,managers only focus on what they can achieve.
A)True
B)False
Q7) How do managers treat fixed overhead costs in the budget process?
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Chapter 13: Flexible Budgets, cost Variances, and Management Control
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Sample Questions
Q1) The measure of the actual result deducted from the flexible budget amount is the: A)static budget.
B)price variance.
C)rate variance.
D)sales-budget variance.
E)flexible-budget variance.
Q2) The managerial accountant at Rainy Day Umbrella Company needs to calculate the direct material cost per umbrella that is manufactured.The company produced 35,000 umbrellas in the fiscal year with a direct material total cost of $760,000.
Required
Compute the direct material cost per umbrella.
A)$35.46 per umbrella
B)$23.60 per umbrella
C)$32.50 per umbrella
D)$21.71 per umbrella
E)$18.50 per umbrella
Q3) Variable overhead has a production-volume variance.
A)True
B)False
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Chapter 14: Strategy, Balanced Scorecard, and Strategic Profitability Analysis
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Sample Questions
Q1) Wilderness Travels Bicycle Company's had a change in management.The new managerial accountant reviews the variance in units sold in 2011 compared to 2012 to assess the revenue effect of growth that occurred in sales volume.In 2011,2,460,000 units were sold;and,2,632,000 were sold in 2012,while the price per unit is set at $69.99.
Required
Compute the revenue effect of growth in 2011 and 2012.Indicate whether the difference is a favorable,or unfavorable,U,variance.
A)$12,038,280 F
B)$9,045,254 U
C)$3,695,250 F
D)$14,982,000 U
E)$2,358,000 F
Q2) What is the purpose of the x-axis and the y-axis on the customer preference map?
Q3) Managers reduce defect rates and improve manufacturing yields to improve product quality.
A)True
B)False
Q4) Why is it important for managers to further analyze the changes in operating income?
Page 16
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Chapter 15: Transfer Pricing
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Sample Questions
Q1) It is important to understand that U.S.companies always pay taxes to the IRS before profits are repatriated back to the United States.
A)True
B)False
Q2) The managerial accountant at Story Petroleum reported incremental cost per barrel $76.The opportunity cost per barrel was recorded at $28.
Required
Compute the minimum transfer price per barrel at Story Petroleum.
A)$48
B)$104
C)$2.71
D)$2,128
E)$6,000
Q3) The cost used in cost-based transfer prices can only be the actual cost.
A)True
B)False
Q4) Is there a risk of suboptimal decisions when transfer prices are based on full cost plus a markup? Why?
Q5) Why do managers distinguish incremental cost from opportunity cost?
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Chapter 16: Performance Measurement and Compensation
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Sample Questions
Q1) Why should managers evaluate subunits over multiple years?
Q2) ________ give executives the right to buy company stock at a specified price within a specified period.
A)Benchmarks
B)Stock Options
C)Motivational Plans
D)Sensitive Performance
E)Preferred Performance
Q3) Why may current-cost estimates be difficult to obtain for some assets?
Q4) Because subsequent inflation does not affect the cost of assets in JIMC's financial accounting records,managers should use the prevailing exchange rate when the assets were acquired to convert the assets into ________.
A)pesos
B)francs
C)dollars
D)foreign currency
E)non-cash assets
Q5) Should operating income or net income be used as the numerator to calculate ROI?
Q6) What are the advantages of the net book value?
Page 18
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