Accounting for Managers
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Course Introduction
Accounting for Managers is designed to introduce non-accounting managers to the principles and practices of accounting within a business context. The course focuses on the interpretation and application of financial and managerial accounting information for effective decision-making, planning, and control. Students will learn how to analyze financial statements, understand cost behavior and allocation, prepare budgets, and assess performance to support strategic objectives. Emphasizing real-world applications, the course equips future managers with the foundational accounting knowledge needed to communicate effectively with financial professionals and make informed business decisions.
Recommended Textbook Management Accounting for Business 6th Edition by Colin Drury
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15 Chapters
1373 Verified Questions
1373 Flashcards
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Page 2
Chapter 1: Introduction to Management Accounting
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Sample Questions
Q1) Why has time become such an important factor in competition?
Answer: Reducing the time that it takes to act means that companies are able to respond to customers and suppliers more quickly. It fosters adaptability and the ability to respond to changing demands. Reducing time is accomplished by reducing waste and nonvalue-added activities. Reducing activities and waste lowers cost and builds competitive advantage.
Q2) Management accounting reports are prepared
A) to meet the needs of decision makers within the firm.
B) whenever shareholders request them.
C) according to guidelines prepared by the shares and Financial Services Authority.
D) according to financial accounting standards.
Answer: A
Q3) The standards of ethical conduct for management accountants include
A) competence and performance.
B) integrity and respect for others.
C) confidentiality, confidence, integrity, and observance.
D) competence, confidentiality, integrity, and objectivity.
Answer: D
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3
Chapter 2: An Introduction to Cost Terms and Concepts
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Sample Questions
Q1) Direct costs
A) are incurred for the benefit of the business as a whole.
B) would continue even if a particular product were discontinued.
C) can be assigned to product only by a process of allocation.
D) are those costs that can be easily and accurately traced to a cost objective.
Answer: D
Q2) A steep slope in the variable cost line indicates a
A) low variable cost per unit.
B) high influence of activity on total variable costs.
C) low influence of activity on total variable costs.
D) large amount of fixed costs.
Answer: B
Q3) Product costs are converted from cost to expense when
A) units are completed.
B) materials are purchased.
C) units are sold.
D) materials are requisitioned.
Answer: C
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4
Chapter 3: Cost-Volume-Profit Analysis
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Sample Questions
Q1) In a cost-volume-profit graph, the slope of the total cost line represents
A) the selling price per unit.
B) the contribution margin per unit.
C) the variable cost per unit.
D) total contribution margin.
Answer: C
Q2) Fixed costs,
A) in total, remain constant within a relevant range
B) in total, increase as activity increases
C) in total, decrease as activity decreases
D) on a per unit basis, are constant as activity increases or decreases
Answer: A
Q3) Which of the following equations is CORRECT?
A) Sales revenues = Variable expenses - (Fixed expenses + Operating income)
B) Sales revenues - Variable expenses - Fixed expenses = Operating income
C) Sales revenues + Variable expenses + Fixed expenses = Operating income
D) Sales revenues - Fixed expenses = Variable expenses - Operating income
Answer: B
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Chapter 4: Measuring Relevant Costs and Revenues for Decision-Making
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Sample Questions
Q1) If there is excess capacity, the minimum acceptable price for a special order must cover
A) variable costs associated with the special order.
B) variable and fixed manufacturing costs associated with the special order.
C) variable and incremental fixed costs associated with the special order.
D) variable costs and incremental fixed costs associated with the special order plus the contribution margin usually earned on regular units.
Q2) Which of the following costs is NOT relevant to a make-or-buy decision?
A) £10,000 of direct labour used to manufacture the parts
B) £30,000 of depreciation on the plant used to manufacture the parts
C) the supervisor's salary of £25,000 that will be avoided if the part is purchased from an outside supplier
D) £15,000 in rent from leasing the production space to another company if the part is purchased from an outside supplier
Q3) Which item is not an example of a sunk cost?
A) materials needed for production
B) purchase cost of machinery
C) depreciation
D) All are sunk costs.
Page 6
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Chapter 5: Pricing Decisions and Profitability Analysis
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Sample Questions
Q1) Which of the following accurately describes the effect target costing has on the manufacturing design function?
A) Target costing allows the design engineer's job to end once the product is designed.
B) Target costing forces design engineers to explicitly consider the costs of manufacturing and other aspects of business that traditionally fall outside the engineering department.
C) Target costing defines clear lines of responsibility among departments allowing for design engineers to be evaluated purely on meeting the customer's functional requirements.
D) Target costing has no implications for design engineering.
Q2) World-class organizations operating in competitive markets are more likely to take which one of the following approaches toward pricing?
A) Begin with cost data as given and determine price by adding a reasonable mark-up.
B) Determine price based on the amount management believes customers are willing to pay.
C) Employ a cost-based approach to pricing.
D) Determine the price that keeps the facilities fully utilized.
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Chapter 6: Capital Investment Decisions
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Sample Questions
Q1) A firm is considering a project with an annual cash flow of £240,000. The project would have an 8-year life, and the company uses a discount rate of 12 percent. Ignoring income taxes, what is the maximum amount the company could invest in the project and have the project still be acceptable (rounded)?
A) £977,480
B) £1,125,228
C) £1,160,582
D) £1,192,320
Q2) Describe capital investment in the advanced manufacturing environment.
Q3) Projects that, if accepted or rejected, will not affect the cash flows of another project are
A) priority projects
B) mutually exclusive projects
C) independent projects
D) equity projects
Q4) What is a weakness of the payback method?
A) It emphasizes projects with possible liquidity problems.
B) It ignores the profitability of investments beyond the payback period.
C) It can be used in conjunction with discounted cash flow methods.
D) both a and b above
Page 8
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Chapter 7: Cost Assignment
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Sample Questions
Q1) Service departments:
A) are responsible for manufacturing the products sold to customers.
B) work directly on the firm's products.
C) provide services directly to customers.
D) provide support services to the producing departments.
Q2) Which of the following is a reason to accumulate and separately assign costs by departments?
A) The company wants to reduce the complexity of its cost accounting system.
B) The company is comprised of multiple departments, each of which exhibit unique cost behaviour patterns.
C) The company wishes to implement an activity based costing system.
D) The company has a large amount of capital invested in human resource training.
Q3) Refer to Figure 1 above. How much of Harrison Company's overhead was applied to product AB?
A) £130,000
B) £195,000
C) £120,000
D) £187,500
Q4) Why is it important to have an accurate and reliable product costing system?
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Chapter 8: Activity-Based Costing
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Sample Questions
Q1) Which of the following items would be classified as flexible resources?
A) salaried employees
B) depreciation on building
C) fuel to generate electricity internally
D) lease on machinery
Q2) Refer to Figure 4. If Wheat Manufacturing used activity-based cost drivers to assign overhead and the company's bid is full cost plus 15 percent, the company's bid would be
A) £12,696.00
B) £13,965.60
C) £10,120.00
D) £9,936.00
Q3) Which of the following quantities is an example of an activity cost driver in activity-based costing?
A) number of direct labour hours
B) number of labour transactions
C) number of machine hours
D) all of the above
Q4) Identify Cooper and Kaplan's four categories of activities and provide a brief description of each category.
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Chapter 9: The Budgeting Process
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Sample Questions
Q1) Refer to Figure 2 above. Total cash collected in June will be
A) £180,000
B) £191,000
C) £90,000
D) £140,000
Q2) If the company's cash budget for the month shows a significant amount of cash in excess of their needs, the company should consider doing which of the following?
A) making short-term or long-term investments
B) paying dividends
C) doing nothing
D) both a and b
Q3) _____ are the quantitative expressions of plans stated in either physical or financial terms or both.
A) Budgets
B) Financial statements
C) Cost of goods sold statements
D) Cost of goods manufactured statements
Q4) Discuss the role of budgeting in planning, control, and decision making.
Q5) Describe zero-based budgeting.
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Chapter 10: Management Control Systems
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Sample Questions
Q1) When top management assumes total control of the budgeting process and seeks only superficial participation from lower-level managers, this practice is called
A) pseudoparticipation
B) false participation
C) participative budgeting
D) none of the above
Q2) When budgets are used for control,
A) budgeted amounts from different years are compared.
B) actual amounts from different years are compared.
C) budgeted amounts are compared to actual amounts.
D) None of these is correct.
Q3) Define responsibility accounting and describe four types of responsibility centres.
Q4) When the reaction to a budget is negative, resulting in managerial behaviour that is negative for the organization, the resulting behaviour is known as
A) dysfunctional behaviour.
B) psychopathic behaviour.
C) congruent behaviour.
D) sociopathic behaviour.
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Page 12
Chapter 11: Standard Costing and Variance Analysis
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Sample Questions
Q1) Refer to Figure 8. Noelle's variable overhead efficiency variance would be
A) £7,000 favorable
B) £8,000 unfavorable
C) £15,000 favorable
D) £23,000 unfavorable
Q2) Refer to Figure 4. If Shannon's actual labour cost was £136,500, Shannon's labour rate variance was
A) £32,500 unfavorable
B) £32,500 favorable
C) £6,500 unfavorable
D) £6,500 favorable
Q3) A 5 percent wage increase for all factory employees would affect which of the following variances?
A) materials price variance
B) labour rate variance
C) labour efficiency variance
D) variable manufacturing overhead efficiency variance
Q4) How are standards developed? What is the difference between ideal and currently attainable standards?
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Chapter 12: Divisional Financial Performance Measurement
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Sample Questions
Q1) Evaluating performance using ROI encourages managers to focus on
A) income and investment
B) cost efficiency and operating asset efficiency
C) both a and b
D) neither a nor b
Q2) Return on investment (ROI) is calculated as
A) Operating income/Average operating assets
B) (Operating income/Sales) x (Sales/Average operating assets)
C) Operating income margin x Operating asset turnover
D) all of the above
Q3) Compare and contrast return on investment (ROI) and economic value added (EVA).
Q4) Refer to Figure 3 above. If you were the president of the firm, which projects would you want the division manager to accept?
A) Projects A, B, and C
B) Projects B and C
C) Project A only
D) Project B only
Q5) Discuss how firms can evaluate manager performance in such a way as to discourage myopic behaviour.
Q6) Compare and contrast decentralization and centralization.
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Chapter 13: Transfer Pricing in Divisionalized Companies
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Sample Questions
Q1) The output of one division that can be used as input in another division is called a
A) work-in-process product
B) transferred (good) product
C) final product
D) finished goods product
Q2) A transfer pricing system should satisfy which of the following objectives?
A) accurate performance evaluation
B) goal congruence
C) preservation of divisional autonomy
D) all of the above
Q3) Discuss the advantages of decentralization in a multinational company.
Q4) A transfer pricing system should satisfy which of the following objectives?
A) accurate performance evaluation
B) goal congruence
C) preservation of divisional autonomy
D) all of the above
Q5) What is the role of transfer pricing in a decentralized firm?
Q6) Explain why it is important for the multinational company to separate the evaluation of the manager of the division from the evaluation of the division.
Page 15
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Chapter 14: Cost Management
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Sample Questions
Q1) A company keeps 15 days of materials inventory on hand to avoid shutdowns due to materials shortages. Carrying costs average £5,000 per day. A competitor keeps 12 days of inventory on hand, and the competitor's carrying costs average £3,000 per day. The value-added costs are
A) £5,000.
B) £-0-.
C) £30,000.
D) £75,000.
Q2) JIT reduces lead times to meet delivery dates by
A) reducing setup times
B) expediting delivery to customers
C) having more inventory available
D) working overtime to fill orders
Q3) Costs incurred because products or services fail to meet requirements after delivery to customers are called
A) external failure costs.
B) internal failure costs.
C) appraisal costs.
D) prevention costs.
Q4) Explain process value analysis.
Page 16
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Chapter 15: Strategic Performance Management
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Sample Questions
Q1) Which of the following is not a step in developing the Balanced Scorecard?
A) setting balanced objectives
B) outlining control procedures
C) setting target values
D) rewards
Q2) Describe the basic features of the Balanced Scorecard.
Q3) How does the Balanced Scorecard communicate strategy to the organization? How is strategy translated into performance measures?
Q4) In the customer perspective, objectives and measures that drive the creation of customer value are
A) customer survey ratings.
B) postpurchase cost.
C) on-time deliveries.
D) all of the above.
Q5) When a computer company targets customers in the South, it is following a A) focusing strategy.
B) low-cost strategy.
C) differentiation strategy.
D) strategic positioning strategy.
Q6) List three benefits of a value chain perspective.
Page 17
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