Advanced Management Accounting
Midterm Exam
Course Introduction
Advanced Management Accounting explores the application of sophisticated accounting techniques and tools to support strategic decision-making in organizations. The course covers topics such as budgeting, performance measurement, cost management, transfer pricing, activity-based costing, and strategic cost analysis. Students will analyze real-world business scenarios, develop skills in interpreting financial and non-financial data, and understand how management accounting contributes to effective planning, control, and performance evaluation within complex and dynamic business environments. Emphasis is placed on integrating accounting information with broader business strategies to drive organizational success.
Recommended Textbook Cost Management A Strategic Emphasis 7th Edition by Edward Blocher
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Page 2
Chapter 9: Short-Term Profit Planning:
CVP Analysis
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Sample Questions
Q1) Target costing:
A)Determines cost based on an expected market demand for the product.
B)Determines cost based on a budget.
C)Determines cost based on standard cost.
D)Determines cost based upon market price and desired profit.
Answer: D
Q2) The competitive strategy in which the firm succeeds by producing at the lowest cost in the industry is termed:
A)Differentiation.
B)Cost advantage.
C)Price strategy.
D)Cost leadership.
E)Resource-based strategy.
Answer: D
Q3) Cost management information typically is the responsibility of the:
A)Chief Financial Officer.
B)Controller.
C)Treasurer.
D)Chief Information Officer.
Answer: B
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and the Strategy Map
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Q1) SWOT analysis, a valuable analysis tool, stands for:
A)Strengths - Workability - Opportunities - Threats.
B)Strategies - Weaknesses - Opportunities - Threats.
C)Strengths - Weaknesses - Observations - Threats.
D)Strengths - Weaknesses - Opportunities - Threats.
E)Strategies - Weaknesses - Observations - Threats.
Answer: D
Q2) The Global Reporting Initiative is an independent group that partners with other groups to address the measurement of sustainability, including a partnership with:
A)The U.S. government.
B)The U.S. Department of Defense.
C)The United Nations.
D)The European Commission.
Answer: C
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4
Chapter 3: Basic Cost Management Concepts
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Q1) What should be the amount in the finished goods inventory at the beginning of the year?
A)$15,000.
B)$45,000.
C)$55,000.
D)$61,000.
Answer: C
Q2) How will unit (average) cost of manufacturing (materials, labor and overhead) usually change if the production level rises?
A)It will remain constant.
B)It will increase in direct proportion to the production increase.
C)It will increase, but inversely with the production increase.
D)It will decrease inversely and in direct proportion to the production increases.
E)It will decrease, but not in direct proportion to the production increase.
Answer: E
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Chapter 4: Job Costing
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Q1) An good example of a software system(s) that can be used to prepare job cost reports is:
A)Oracle.
B)Microsoft Access.
C)There are a variety of software systems, often designed specifically for a particular industry.
D)Microsoft Excel.
E)None of the above.
Q2) All of the following are examples of companies using job costing systems except:
A)FedEx.
B)Paramount Pictures.
C)Jiffy Lube International.
D)International Paper.
E)A professional service firm.
Q3) Which of the following is not a cost element on the job cost sheet?
A)Materials.
B)Labor.
C)Hours.
D)Overhead.
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Page 6
Chapter 5: Activity-Based Costing and Customer
Profitability Analysis
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Q1) Service and not-for-profit organizations often:
A)Have ABC systems which are similar to those of manufacturing firms.
B)Do not have changeable outputs.
C)Are unable to benefit from ABC costing.
D)Do not have ABC systems which are similar to those of manufacturing firms.
E)None of the above answers is correct.
Q2) What is the activity-based overhead rate per purchase order?
A)$615.
B)$600.
C)$575.
D)$550.
E)$500.
Q3) What is Nerrod's total customer batch-level cost applicable to Ninto?
A)$800.
B)$920.
C)$2,300.
D)$2,420.
E)$6,300.
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Chapter 6: Process Costing
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Q1) In a process costing system, the cost of abnormal spoilage should be:
A)Prorated between units transferred out and ending inventory.
B)Included in the cost of units transferred out.
C)Treated as a loss in the period incurred.
D)Added to overhead.
Q2) Total equivalent units for conversion under the FIFO method are calculated to be:
A)6,560 equivalent units.
B)8,180 equivalent units.
C)6,420 equivalent units.
D)7,140 equivalent units.
E)7,320 equivalent units.
Q3) The first step in determining process costs is:
A)Assigning cost to completed and uncompleted production.
B)Computing the cost per equivalent unit.
C)Calculating equivalent units of production.
D)Analyzing physical flow of production units.
E)Determining total cost for each manufacturing element.
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8
Chapter 7: Cost Allocation: Departments, Joint Products, and
By-Products
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Q1) The departmental cost allocation approach is preferred when the firm has:
A)Homogeneous processes.
B)Heterogeneous processes.
C)Diverse products.
D)Many production activities.
Q2) Which of the following is an example of a physical measure used in the physical measure method?
A)Pounds.
B)Minutes.
C)Seconds.
D)Dollars.
E)Volume.
Q3) Which one of the following methods uses units of output to allocate joint costs to joint products?
A)Net realizable value method.
B)Physical units method.
C)Net sales value method.
D)Sales value at split-off method.
E)Activity-based costing.
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Chapter 8: Cost Estimation
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Q1) Which of the following is the percentage by which average time (or total time) falls from previous levels as output doubles?
A)Learning speed.
B)Learning curve.
C)Learning analysis.
D)Learning average.
E)Learning rate.
Q2) Patterson Equipment Inc. produced a pilot run of 20 units of a recently developed motor used in the finished products. The pilot run required an average of 12 direct labor hours per motor. Patterson has an eighty percent learning curve on the direct labor hours needed to produce new motors.
Required:
Calculate the average direct labor hours per unit for the first 640 motors (including the pilot run) produced.
Q3) The R-squared in a satisfactory regression should be:
A)less than .3
B)greater than .3
C)less than .7
D)greater than .7
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Page 10
Chapter
Cvp Analysis
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Q1) The sales units required for Kelvin Co. to make an after-tax profit of $15,000, given an income tax rate of 40%, are:
A)47,500 units.
B)56,500 units.
C)65,661 units.
D)60,000 units.
E)57,500 units.
Q2) Staley Co.'s operating income is calculated to be:
A)$19,800.
B)$21,800.
C)$24,800.
D)$23,800.
E)$20,800.
Q3) Cost-volume-profit (CVP) relationships that are curvilinear may be analyzed linearly by considering only:
A)Fixed and semi-variable costs.
B)Relevant fixed costs.
C)Relevant variable costs.
D)A relevant range of volume.
E)The multi-product/multi-service context.
Page 11
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Chapter 10: Strategy and the Master Budget
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Q1) The estimated total cash collections by Fresplanade Co. during November from collection of accounts receivable is:
A)$113,160.
B)$101,400.
C)$143,640.
D)$125,640.
E)$102,420.
Q2) Budgeted cash payments in November for November inventory purchases by Yekstop Corp. are:
A)$76,625.
B)$94,905.
C)$115,200.
D)$161,280.
E)$221,445.
Q3) The focal point in budgeting for a service organization is likely to be:
A)Capital assets acquisition.
B)Raw material utilization.
C)Human resource (i.e., personnel) planning.
D)Cost minimization.
E)The process of mission development and goal specification.
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Chapter 11: Decision Making With a Strategic Emphasis
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Q1) Maxwell Manufacturing is contemplating the purchase of a new machine to replace a machine that has been in use for seven years. The old machine has a net book value of $50,000 and still has five years of useful life remaining. The old machine has a current market value of $5,000, and would have no market value after five years. The variable operating costs and depreciation expenses (straight-line) are $135,000 per year. The new machine will cost $90,000, has an estimated useful life of five years with zero disposal value after five years, and an annual operating expense of $118,000 (including straight-line depreciation). Considering the five years in total and ignoring the time value of money and income taxes, what is the difference in total relevant decision-making costs if the old machine is replaced?
A)$0.
B)$25,000.
C)$35,000.
D)$40,000.
E)$50,000.
Q2) What strategic factors/considerations are generally relevant to the special order decision problem (i.e., whether a company should accept a one-time order from a customer with whom the company does not generally do business)?
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Page 13
Chapter 12: Strategy and the Analysis of Capital Investments
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Q1) All of the following capital budgeting models incorporate the time value of money except:
A)The payback method.
B)The modified internal rate of return (MIRR) method.
C)The profitability index (PI) method.
D)The discounted payback method.
E)The internal rate of return (IRR) method.
Q2) The term "breakeven after-tax cash flow" represents:
A)A pessimistic estimate in a typical scenario analysis.
B)An optimistic estimate in a typical scenario analysis.
C)The amount of after-tax cash flow needed to generate a return equal to a project's IRR.
D)The cash flow needed to generate an IRR of zero.
E)The minimum annual after-tax cash inflows needed for an investment project to be deemed acceptable.
Q3) Conceptually, a firm's capital structure is its:
A)Mix of debt and equity capital, expressed in book-value terms.
B)Mix of debt and equity capital, expressed in market-value terms.
C)Equity capital only, expressed in book-value terms.
Page 14
D)Equity capital only, expressed in market-value terms.
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Chapter 13: Cost Planning for the Product Life Cycle: Target
Costing, Theory of Constraints, and Strategic Pricing
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Q1) Which of the following is a method of reducing cost by identifying parts in different products that are common and interchangeable?
A)Target costing.
B)Value chain analysis.
C)Concurrent engineering.
D)Group technology.
E)Theory of constraints.
Q2) What price will the company charge if the firm uses cost-plus pricing based on total variable cost and a markup percentage of 150%?
A)$405.00.
B)$540.00.
C)$675.
D)$900.00.
E)Some other amount.
Q3) What cost management technique does this case illustrate?
A)Target costing.
B)Theory of constraints.
C)Life-cycle costing.
D)ABC analysis.
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Chapter
Direct-Cost Variances, and the Role of Nonfinancial
Performance Measures
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Q1) The flexible-budget operating income in October is:
A)$27,000.
B)$70,400.
C)$72,000.
D)$83,520.
E)$86,400.
Q2) A favorable cost variance of significant magnitude:
A)Is likely the result of exceptional planning.
B)May lead to future improvements in production methods if the variance is investigated to determine its underlying cause(s).
C)Is strong evidence of excellent operating performance.
D)Is strong evidence of tight financial control.
E)Does not need to be investigated as to its underlying cause (because it is "favorable").
Q3) The actual direct materials purchase price (AP) per kilogram is:
A)$11.80.
B)$11.96.
C)$12.04.
D)$12.20.
E)$12.50.
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Chapter 15: Operational Performance Measurement:
Indirect-Cost Variances and Resource-Capacity Management
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Q1) Which one of the following journal entries in a standard cost system is needed to record the completion of production for the period?
A)A debit to Work-in-Process Inventory, at standard cost.
B)A debit to Work-in-Process Inventory, at actual cost.
C)A credit to Cost of Goods Sold, at standard cost.
D)A debit to Finished Goods Inventory, at standard cost.
E)A debit to Finished Goods Inventory, at actual cost.
Q2) McAllister Company's master budget for the year just completed was based on 100% capacity and included 40,000 machine hours and $240,000 total factory overhead. The budgeted fixed overhead at 75% of factory capacity would be $160,000 (and 30,000 machine hours). The company actually operated at 90% capacity for the year, and incurred $252,000 total factory overhead.
Required:
1. Determine the factory overhead flexible-budget variance for the year. Show calculations.
2. Calculate the factory overhead production volume variance for the year. Show calculations.
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Chapter 16: Operational Performance Measurement:
Further Analysis of Productivity and Sales
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Q1) Which of the following is not a key determinant of productivity for most organizations?
A)Control of waste.
B)Product and manufacturing process innovation.
C)Control of overhead costs.
D)Fluctuations in demand.
Q2) A measure of productivity can be either:
A)Operational or financial.
B)Total or segmented.
C)Short-term or long-term.
D)Activity-based or TOC based.
Q3) Total sales quantity variance is:
A)$36,400 favorable.
B)$84,500 favorable.
C)$95,190 favorable.
D)$97,280 favorable.
E)$107,920 favorablE.Market share variance + Market Size Variance = Total Quantity variance - $277,184 + $385,104 = $107,920 favorable
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Chapter 17: The Management and Control of Quality
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Q1) This question deals with the general topic of nonfinancial performance indicators. Required: Chapter 17 of the text discusses both financial and nonfinancial performance indicators that can be used to manage and control quality. Provide a description of each of the following two nonfinancial quality indicators:
1. Customer response time (CRT)
2. Cycle time efficiency
3. Into what three components can CRT be broken down?
Q2) Which of the following items represents a quadratic loss function associated with deviation of actual quality from target quality?
A)ISO 9000.
B)Absolute conformance quality function.
C)Cost of Quality (COQ) loss function.
D)Taguchi quality loss function.
E)Conformance quality loss function.
Q3) List three examples of quality improvement in a manufacturing facility that would lead to increased sales productivity.
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19
Chapter 18: Strategic Performance Measurement: Cost
Centers, Profit Centers, and the Balanced Scorecard
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Q1) For production and support departments, a method of implementing cost centers that is output-oriented is the:
A)Budget slack method.
B)Cost shifting method.
C)Outsourcing method.
D)Discretionary-cost method.
E)Engineered-cost method.
Q2) Full costing operating income for 2012 is calculated to be:
A)$935.
B)$1,150.
C)$1,200.
D)$1,352.
E)$1,395.
Q3) The amount of the joint cost that should have been allocated to the Chicken Hut in April is calculated to be:
A)$8,000.
B)$14,300.
C)$15,700.
D)$18,000.
E)$22,000.
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Chapter 19: Strategic Performance Measurement:
Investment Centers and Transfer Pricing
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Sample Questions
Q1) One advantage of the return on investment (ROI) metric is that it:
A)Can use the minimum rate of return to adjust for differences in risk.
B)Can use a different minimum rate of return for different types of assets.
C)Eliminates goal congruency problems, particularly for better-performing divisions.
D)Requires disclosure under current international financial reporting standards.
E)Can be compared to interest rates and to rates of return on alternative investments.
Q2) All of the following are true of cost-based transfer prices except:
A)They generally promote optimal decision-making from the standpoint of the organization as a whole.
B)They may be based either on actual costs or standard (i.e., budgeted) costs.
C)Their use may not provide proper motivation for cost control on the part of the producing division.
D)They may not provide proper guidance when opportunity costs exist.
E)Generally speaking, such cost data are readily available.
Q3) What are the principal advantages and disadvantages of using cost-based transfer prices? (Give a short explanation of each item you list.)
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Chapter 20: Management Compensation, Business
Analysis, and Business
Valuation
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Q1) There is a current tax for the manager when which of the following types of compensation is received?
A)Qualified stock options.
B)Nonqualified stock options.
C)Deferred bonus.
D)Current bonus.
E)Performance shares.
Q2) Which one of the following develops the value of the firm as the present value of the firm's net free cash flows?
A)Discounted cash flow method.
B)Cash flow liquidity method.
C)Multiples-based method.
D)Profitability method.
E)Purchasing power method.
Q3) The gross margin percentage for 2013 is (rounded):
A)11.2%
B)12.7%
C)13.7%
D)14.9%
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