Advanced Management Accounting
Question Bank
Course Introduction
Advanced Management Accounting delves into the strategic application of accounting information to aid managerial decision-making within organizations. The course covers advanced topics such as activity-based costing, performance measurement, budgeting techniques, variance analysis, and strategic cost management. Students learn how to utilize financial and non-financial data to support planning, control, and evaluation of business operations. Emphasis is placed on contemporary issues facing management accountants, including ethical considerations, globalization, and the use of technology in management accounting. The course prepares students to contribute to the formulation and execution of business strategies through the effective analysis and interpretation of accounting data.
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) Whether a given type of information is relevant or irrelevant depends on
A) Its accuracy
B) Its objectivity
C) Its relation to the decision to be made
D) Whether it is cash-basis or accrual-basis
Answer: C
Q2) Which of the following is the best example of an internal report that might come from an organisation's information system?
A) Environmental Protection Agency regulatory report
B) Operating budget
C) Income tax returns
D) Credit rating agency report
Answer: B
Q3) The workforces' commitment to continual improvement is a executional rather than a structural cost driver.
A)True
B)False
Answer: True
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Chapter 2: Cost Concepts, Behaviour and Estimation
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Sample Questions
Q1) Mixed costs
A) Vary with production in direct proportion to volume
B) Vary with production but not in direct proportion to volume
C) Do not vary with production
D) Include only different types of fixed costs
Answer: B
Q2) The best source for determining historical costs is usually
A) The Internet
B) Interviews with managers
C) The company's accounting information system
D) Financial statements
Answer: C
Q3) Cost functions are most useful for estimating costs over short periods such as one year.
A)True
B)False
Answer: True
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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) Indirect costs are traced and direct costs are allocated.
A)True
B)False
Answer: False
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Chapter 4: Cost-Volume-Profit Cvp Analysis
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Sample Questions
Q1) SXF sells its single product for $14 per unit, and its variable cost per unit is $4. Total fixed costs are $800. Its CVP graph is as follows: If SXF increases its sales volume by 10%, what will happen to its breakeven point?
A) It will decrease
B) It will increase
C) It will stay the same
D) Cannot be determined
Q2) Accountants develop CVP analysis to help managers decide which products or services to emphasise.
A)True
B)False
Q3) When an organisation produces and sells a number of different products or services, the weighted average contribution margin per unit is used to determine the breakeven point or target profit in units.
A)True
B)False
Q4) Assumptions and limitations are irrelevant when using CVP analysis.
A)True
B)False
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Chapter 5: Job Costing Systems
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Sample Questions
Q1) Abnormal spoilage costs generally appear in the external financial accounts
A) on the balance sheet as part of work in process
B) on the income statement as part of some other item
C) on the balance sheet as part of finished goods
D) on the income statement as a line item 'loss on abnormal spoilage'
E)g. cost of goods sold
Q2) In job costing the allocation of overhead results in a debit to:
A) the overhead control account
B) the work in process inventory account
C) the finished goods inventory account
D) the cost of goods sold account
Q3) Inventoriable product costs consist of manufacturing and non-manufacturing costs.
A)True
B)False
Q4) The way spoilage is handled in the accounting records depends on whether the spoilage is considered normal or abnormal.
A)True
B)False
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Chapter 6: Process Costing Systems
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Sample Questions
Q1) Miramar Ltd uses a weighted-average process costing system which recognises normal spoilage as 5% of good output. During the current period, 14,000 units were started and 10,000 units completed. Materials are added at the beginning of the process, conversion costs occur uniformly, and the inspection point is at the 70% point. Beginning work in process was 6,000 units, 40% complete, and ending work in process 9,000 units, 80% complete. The cost per equivalent unit for material was $1.00 and for conversion costs $3.00. The number of units in abnormal spoilage was
A) 500
B) 50
C) -0-
D) 550
Q2) In the weighted average method, cost per equivalent unit is often calculated separately for materials costs and conversion costs.
A)True
B)False
Q3) In a process costing system, normal spoilage is allocated to good units produced. A)True B)False
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Chapter 7: Absorption, Variable and Throughput Costing
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Sample Questions
Q1) PFA Ltd uses a throughput costing system and reported the following information for its first month of operations: Units produced ..140 Units sold ..120
Material cost per unit produced .$3.50
Conversion cost per unit produced $6.50
Fixed period costs per unit produced .$6.00
Variable period costs per unit produced $4.00
Selling price per unit $25.00
Under which of the following costing methods would PFA report the highest operating profit?
A) Absorption costing
B) Variable costing
C) Throughput costing
D) Profit will be equal under all three methods
Q2) In absorption costing systems, costs on the income statement are classified by their behavior.
A)True
B)False
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9
Chapter 8: Activity Analysis: Costing and Management
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Sample Questions
Q1) In general, the risk of measurement error in an ABC system increases when A) Costs are traced rather than allocated
B) Managers are uncertain about the relationship between costs and cost pools
C) The number of cost pools decreases
D) A company uses a team approach to systems design
Q2) Quick Start Engines has two departments, Assembly and Testing. You are given the following information about the costs of 4 activities that occur at the manufacturing plant monthly: The above activities are used by the two departments as follows: How much of the maintenance and cleaning costs will be allocated to Testing?
A) $25,000
B) $75,000
C) $100,000
D) $50,000
Q3) One of the uncertainties associated with ABC and ABM systems is employee response to design and implementation of the system.
A)True
B)False
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10
Chapter 9: Relevant Costs for Decision Making
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Sample Questions
Q1) Average costs are appropriate to use when deciding whether to keep a product or product line.
A)True
B)False
Q2) In the decision to drop a product line, fixed costs are often classified as
A) Avoidable or sunk
B) Sunk or opportunity
C) Product or period
D) Incremental or avoidable
Q3) The general rule is to discontinue a segment of the business when its total contribution margin does not cover avoidable fixed costs.
A)True
B)False
Q4) The general rule for special orders is
A) Profit should be greater after the special order than before it
B) Only take special orders when excess capacity exists
C) The organisation should be as well off after taking the order as it was before taking it
D) Ignore all fixed costs associated with the special order
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Chapter 10: Standard Costs, Flexible Budgets and Variance Analysis
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Sample Questions
Q1) During the period Richeleau produced 1,000 units of product. The flexible budget for standard costs is: The variable overhead allocated was
A) $29,600
B) $30,000
C) $29,900
D) $30,400
Q2) Calculating variances is a necessary, but not sufficient, step for completing a variance analysis.
A)True
B)False
Q3) During the period Richeleau produced 1,000 units of product. The flexible budget for standard costs is: The budgeted fixed overhead was
A) $25,000
B) $24,000
C) $24,500
D) $23,000
Q4) Identifying the reasons for variances is usually a quick and easy process. A)True B)False
12
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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 A for quarter 2?
A) 24
B) 28
C) 30
D) 100
Q2) In a production budget, beginning inventory plus budgeted production equals sales plus targeted ending inventory.
A)True
B)False
Q3) Which of the following is based on forecasts of specific volumes of products or services?
A) Variance analysis
B) Flexible budgets
C) Static budgets
D) Financial statements
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Page 13
Chapter 12: Strategy and Control
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Sample Questions
Q1) Friedman's 'flattners' involve accelerating the connecting of the unconnected.
A)True
B)False
Q2) Which of these is not a financial performance measure?
A) return on investment
B) share price
C) economic value added
D) none of the above, i.e. all are financial performance measures
Q3) In Porter's competitive forces model which of the following is a decision influencing control tool rather than a decision facilitating control tool?
A) budget targets
B) cost data for pricing purposes
C) discounted cash flow analysis
D) all are decision influencing control tools
Q4) Overproduction is a non-value added activity.
A)True
B)False
Q5) 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) Planning this year's expenditure based solely on last year's expenditure is generally an efficient form of budgeting.
A)True
B)False
Q2) The longer cash remains tied up in inventory and/or accounts receivable the greater the strain on the cash resources and liquidity of the company.
A)True
B)False
Q3) Kaizen costing is a system used for products that tend to have decreasing prices or increasing quality across time.
A)True
B)False
Q4) To achieve the best results for the organisation, budgets should be geared to promote competition amongst employees rather than cooperation.
A)True
B)False
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Page 15
Chapter 14: Capital Budgeting and Strategic Investment
Decisions
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Sample Questions
Q1) In general, the initial project investment does not require discounting in a net present value analysis.
A)True
B)False
Q2) Green Ltd has invested in a project with a cost of $36,504, annual net cash flows of $12,000, a terminal value of $4,000, and a 5-year useful life. The firm uses a 16% discount rate. Compute the internal rate of return to the nearest tenth of a percent. Ignore income taxes.
A) 19.2%
B) 20.8%
C) 19.8%
D) 18.8%
Q3) Under the general quantitative rule, a project with a net present value less than zero should not be accepted.
A)True
B)False
Q4) The time value of money is important in completing a net present value analysis.
A)True
B)False
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Chapter 15: The Strategic Management of Costs and Revenues
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Sample Questions
Q1) Target costing is a technique to improve long-term profitability by considering product costs at the design phase.
A)True
B)False
Q2) Which of the following activities is unique to a manufacturing organisation's value chain?
A) Distribution management
B) Customer service
C) Product manufacture
D) Marketing and sales
Q3) Explain how value chain analysis helps managers identify value-added and non-value-added activities.
Correct
Q4) Kaizen costing is
A) Another name for target costing
B) Focused only on cost reduction
C) Continuous improvement in cost, quality, and functionality
D) A method for budgeting
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Q5) List one advantage and one disadvantage for using target and kaizen costing. Correct
Chapter 16: Strategic Management Control: a Lean Perspective
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Sample Questions
Q1) Under TOC a constraint that is a demand side rather an a supply side constraint is:
A) insufficient processing time available
B) lack of the necessary knowledge or skills
C) a shortage of raw materials
D) none of the above are demand side constraints, all are supply side constraints
Q2) In throughput costing the throughput of a product refers to its:
A) selling price minus its fixed and variable costs
B) selling price minus its total fixed costs
C) selling price minus its totally variable costs
D) variable costs
Q3) Under a traditional accounting system any build up of inventory will increase profit as it will include deferred fixed overheads.
A)True
B)False
Q4) The originator of the total quality management (TQM) approach was an American, W. Edwards Deming.
A)True
B)False
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Chapter 17: Responsibility Accounting, Performance
Evaluation and Transfer Pricing
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Sample Questions
Q1) Investment centre managers are held responsible only for their costs.
A)True
B)False
Q2) Efficiency measures, such as number of new products developed, may be more useful than financial measures in
A) Profit centres.
B) Discretionary cost centres.
C) Revenue centres.
D) Investment centres.
Q3) Choices about decision-making authority and about organisational structure are often related.
A)True
B)False
Q4) A transfer price is required only when goods or services are transferred between cost centres in the same organisation.
A)True
B)False
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Chapter 18: The Balanced Scorecard and Strategy Maps
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Sample Questions
Q1) Stakeholders in the strategic decision making process include suppliers, customers, and the community.
A)True
B)False
Q2) How is organisational learning related to the balanced scorecard?
A) Organisational learning is only important in the learning and growth perspective
B) Only learning organisations can be successful in scorecard implementation
C) The balanced scorecard can improve organisational learning
D) Both are important, but they are unrelated
Q3) A representation that provides a visual view of an organisation's strategy with a single-page view of how objectives in the four balanced scorecard perspectives integrate and combine to guide strategy is known as a:
A) Core compentencies
B) Strategy map
C) Mission statement
D) Value chain
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Chapter 19: Rewards, Incentives and Risk Management
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Sample Questions
Q1) Costs for producing and analysing internal performance reports are an example of which type of agency costs?
A) Goal alignment costs
B) Losses from poor decisions
C) Monitoring costs
D) Contracting costs
Q2) Reward systems at top management level are most commonly fixed payment packages.
A)True
B)False
Q3) 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
Q4) An organisation's chief executive officer can be both a principal and an agent.
A)True
B)False
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Chapter 20: Sustainability Management Accounting
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Sample Questions
Q1) An organisation can reduce its carbon footprint by outsourcing some of its operations.
A)True
B)False
Q2) The balanced scorecard is seen more as a strategy communication tool rather than a tool useful for sustainability performance evaluation.
A)True
B)False
Q3) The statement concerning the ASX Corporate governance principles and recommendations that is not correct is:
A) Its focus is on the society and the environment as risk management concerns
B) If a listed company does not follow the principles it must explain why in its annual report
C) It requires companies to prepare separate annual reports on their sustainability
D) It contains eight principles
Q4) Ethical behavior is required of every employee within an organisation.
A)True
B)False
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Page 22