Advanced Managerial Accounting Final Exam Questions
Course Introduction
Advanced Managerial Accounting explores the strategic role of accounting information in organizational decision-making and performance management. The course delves into advanced costing techniques, budgeting processes, variance analysis, and performance evaluation methods, emphasizing their relevance in complex business environments. Students will analyze case studies and real-world scenarios to understand the integration of financial and non-financial data in planning, controlling, and optimizing business operations. Topics also include activity-based costing, strategic cost management, transfer pricing, and the impact of emerging technologies on managerial accounting practices. This course prepares students to apply advanced accounting concepts to support managerial decisions and drive organizational success.
Recommended Textbook
Managerial Accounting 2nd Edition by Ronald Hilton
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Page 2
Chapter 1: The Changing Role of Managerial Accounting
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Sample Questions
Q1) Briefly distinguish between managerial accounting and financial accounting. Be sure to comment on the general focus, users, and regulation related to the two fields:
Answer: Managerial accounting is concerned with providing information to personnel within an organization so that they can plan, make decisions, evaluate performance, and control operations. There are no rules and regulations associated with this field since the information is intended solely for use within the firm. Financial accounting, in contrast, focuses on financial statements and other financial reports. This area deals with reporting to groups outside of an organization (e.g., stockholders, lenders, government agencies) so that some assessment of profitability and overall financial health can be made. Given the large number of firms in our economy and the varying level of user sophistication, the field is heavily regulated (by the Financial Accounting Standards Board and, to a lesser degree, by the Securities and Exchange Commission).
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Chapter 2: Basic Cost Management Concepts
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Sample Questions
Q1) Costs that are expensed when incurred are called:
A)product costs.
B)direct costs.
C)inventoriable costs.
D)period costs.
E)indirect costs.
Answer: D
Q2) If the total cost of alternative A is $600,000 and the total cost of alternative B is $200,000, then $400,000 is termed the:
A)opportunity cost.
B)average cost.
C)sunk cost.
D)out-of-pocket cost.
E)differential cost.
Answer: E
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4
Chapter 3: Product Costing and Cost Accumulation
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Sample Questions
Q1) More Manufacturing Company uses a predetermined overhead rate based on direct labour hours to apply manufacturing overhead to jobs. Last year, More worked 87,000 actual direct labour hours and incurred $300,000 of actual manufacturing overhead cost. More had initially estimated that it would work 85,000 direct labour hours during the year and incur $340,000 of manufacturing overhead cost. Based on the information provided, More's manufacturing overhead cost for the year was:
A)$8,000 overapplied.
B)$40,000 underapplied.
C)$40,000 overapplied.
D)$48,000 overapplied.
E)$48,000 underapplied.
Answer: D
Q2) Which of the following statements is true?
A)Service firms have little need for determining the cost of their services.
B)The concept of product costing is relevant only for manufacturing firms.
C)The cost of year-end inventory appears on the balance sheet as an expense.
D)Service companies use cost information for planning and control purposes.
E)Mining and petroleum companies have no inventoriable costs.
Answer: D
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Page 5
Chapter 4: Process Costing and Hybrid Product-Costing Systems
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Sample Questions
Q1) Which of the following best describes the procedures used in operation costing to assign direct material and conversion costs to production? \(\begin{array} { l l }
{ \text { Direct Material Costs } } & \text { Conversion Costs } \\ \hline 1 \text { Similar to those in job costing } & \text { Similar to those in job costing } \\
2 \text { Similar to those in job costing } & \text { Similar to those in process costing } \\
3 \text { Similar to those in process costing } & \text { Similar to those in job costing } \\
4 \text { Similar to those in process costing } & \text { Similar to those in process costing } \\
5 \text { Similar to those in job costing } & \text { Similar to those in actual costing } \end{array}\)
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Chapter 5: Activity-Based Costing and Management
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Sample Questions
Q1) Factory Oak produces various wooden bookcases, tables, storage units, and chairs. Which of the following would be included in a listing of the company's non-value-added activities?
A)Assembly of tables.
B)Staining of storage units.
C)Gluing of chairs.
D)Transfer of chairs from the assembly line to the gluing department.
E)Assembly of tables, staining of storage units, and gluing of chairs.
Q2) A firm that uses a JIT purchasing philosophy probably:
A)has many suppliers.
B)has extensive inspection of purchased items at the receiving point.
C)has relatively few suppliers.
D)has deliveries of purchased items made in small lot sizes immediately before the goods are needed in production.
E)has relatively few suppliers and has deliveries of purchased items made in small lot sizes immediately before the goods are needed in production.
Q3) Define the term "cost driver" and discuss the factors that are important in the selection of appropriate cost drivers.
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Chapter 6: Activity Analysis, Cost Behaviour, and Cost Estimation
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Sample Questions
Q1) A review of Parry Corporation's accounting records found that at a volume of 90,000 units, the variable and fixed cost per unit amounted to $8 and $4, respectively. On the basis of this information, what amount of total cost would Parry anticipate at a volume of 85,000 units?
A)$680,000.
B)$1,020,000.
C)$1,040,000.
D)$1,060,000.
E)$1,080,000.
Q2) Which of the following methods of cost estimation relies on only two data points?
A)The least-squares regression.
B)The high-low method.
C)The visual-fit method.
D)The account analysis.
E)The multiple regression.
Q3) Define the term "relevant range" and explain its importance in understanding cost behaviour.
Q4) Compare and contrast the following types of costs: (1) variable and step-variable and (2) fixed and step-fixed.
Page 8
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Chapter 7: Cost-Volume-Profit Analysis, Absorption and Variable Costing
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Sample Questions
Q1) At a volume of 50,000 units, MGMT Incorporated reported sales revenues of $2,050,000, variable costs of $550,000, and fixed costs of $360,000. The company's contribution margin per unit is:
A)$7.20.
B)$11.00.
C)$18.20.
D)$22.80.
E)$30.00.
Q2) The break-even point is the volume of activity where:
A)total revenue equals total cost.
B)variable cost equals fixed cost.
C)total contribution margin equals the sum of variable cost plus fixed cost.
D)sales revenue equals total variable cost.
E)profit is greater than zero.
Q3) Discuss a company's choice to use either absorption or variable costing is as their costing system for internal decision making. Why do many firms maintain accounting records under both systems?
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Page 9
Chapter 8: Profit Planning and Activity-Based Budgeting
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Q1) Welland Corporation has a highly automated production facility. Which of the following correctly shows the two factors that would likely have the most direct influence on the company's manufacturing overhead budget?
A)Sales volume and labour hours.
B)Contribution margin and cash payments.
C)Production volume and management judgment.
D)Labour hours and management judgment.
E)Management judgment and indirect labour cost.
Q2) When an organization involves its employees in the budgeting process in a meaningful way, the organization is said to be using an approach most commonly known as:
A)budgetary slack.
B)participative budgeting.
C)budget padding.
D)imposed budgeting.
E)employee-based budgeting.
Q3) Discuss the importance of budgeting and identify five purposes of budgeting systems.
Q4) Sushi House has budgeted sales revenues for 2012 as follows:
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Chapter 9: Standard Costing and Flexible Budgeting
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Q1) Which of the following choices correctly notes the use of the standard price per unit of direct material when calculating the direct-material price variance and the direct-material quantity variance? \(\begin{array} { | l | c | l | }
\hline & \text { Price Variance } & \text { Quantity Variance } \\
\hline 1 & \text { Used } & \text { Always used } \\
\hline 2 & \text { Used } & \text { Occasionally used } \\
\hline 3 & \text { Used } & \text { Not used } \\
\hline 4 & \text { Not used } & \text { Always used } \\
\hline 5 & \text { Not used } & \text { Not used } \\ \hline
\end{array}\)
Q2) Briefly explain the nature of the fixed-overhead volume variance. Be sure to address the issue of capacity utilization in your response.
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Chapter 10: Cost Management Tools
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Sample Questions
Q1) Aggregate productivity is defined as total output divided by:
A)total input.
B)sales price.
C)total stock on hand.
D)conversion cost.
E)product cost.
Q2) The manufacturing cycle efficiency for Olsen Inc. when the processing time is five hours and inspection, waiting, and move time are two hours each is (rounded):
A)0.40.
B)0.45.
C)0.83.
D)1.00.
E)2.50.
Q3) Companies are devoting an increased amount of attention to quality costs. Briefly explain the difference between internal failure costs and external failure costs. Which of these two costs will likely be more troublesome for an organization that desires to succeed in an extremely competitive marketplace? Briefly discuss.
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Chapter 11: Responsibility Accounting, Investment Centres, and Transfer Pricing
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Sample Questions
Q1) Return on investment (ROI) is a very popular tool to evaluate performance. The measurement of ROI is dependent, in part, on whether fixed assets are valued at acquisition cost or net book value.
List several advantages of acquisition cost and net book value as ways to value long-lived assets.
Q2) Which of the following describes the goal that should be pursued when setting transfer prices?
A)Maximize profits of the buying division.
B)Maximize profits of the selling division.
C)Allow top management to become actively involved when calculating the proper dollar amounts.
D)Establish incentives for autonomous division managers to make decisions that are in the overall organization's best interests (i.e., goal congruence).
E)Minimize opportunity costs.
Q3) One element of the general transfer-pricing rule is opportunity cost. Briefly define the term "opportunity cost" and then explain how it is computed for (1) companies that have excess capacity and (2) companies that have no excess capacity.
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Page 13
Chapter 12: Decision Making: Relevant Costs and Benefits
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Q1) At which step or steps in the decision-making process do qualitative considerations generally have the greatest impact?
A)Specifying the criterion and identifying the alternatives.
B)Developing a decision model.
C)Collecting the data.
D)Select an alternative.
E)Identifying the alternatives.
Q2) An opportunity cost may be described as a(n): A)forgone benefit.
B)historical cost.
C)specialized type of variable cost.
D)specialized type of fixed cost.
E)specialized type of semi-variable cost.
Q3) Capacity restrictions often change the way that managers make decisions. For example, consider a retailer that has limited square footage in its store. What guideline should be used in deciding which new products to carry? How would this differ, say, from a concert promoter that desires to bring a rock group to an arena-type facility?
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14
Chapter 13: Target Costing and Cost Analysis for Pricing Decisions
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Q1) Prices are said to be inelastic under which of the following conditions?
A)Increase in price, and little impact on sales volume.
B)Increase in price, and a sizable increase in sales volume.
C)Increase in price, and a sizeable decrease in sales volume.
D)Decrease in price, and a sizeable increase in sales volume.
E)Decrease in price, and a sizeable decrease in sales volume.
Q2) If a company uses a cost-plus approach to pricing, it will find:
A)there are several different definitions of cost and the higher the cost, the higher the markup percentage.
B)there are several different definitions of cost and the higher the cost, the lower the markup percentage.
C)there is one definition of cost, and no relationship between cost and the markup percentage used.
D)there is one definition of cost, and there is no markup percentage involved.
E)it is in violation of generally accepted accounting principles (GAAP).
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Page 15
Chapter 14: Capital Expenditure Decisions
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Sample Questions
Q1) Capital budgeting tends to focus primarily on:
A)revenues.
B)costs.
C)cost centres.
D)programs or projects.
E)allocation tools.
Q2) A depreciation tax shield is a(n):
A)after-tax cash outflow.
B)increase in income tax.
C)non-cash factor.
D)reduction in income tax.
E)sporadic fluctuation in income tax.
Q3) Hunter Corporation will evaluate a potential investment in an advanced manufacturing system by use of the net-present-value (NPV) method. Which of the following system benefits is least likely to be omitted from the NPV analysis?
A)Savings in operating costs.
B)Greater flexibility in the production process.
C)Improved product quality.
D)Shorter manufacturing cycle time.
E)Ability to fill customer orders more quickly.
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Chapter 15: Allocation of Support Activity Costs and Joint Costs
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Q1) The Cassidy Clinic has two service departments (Human Resources and Information Resources) and two "production" departments (In-patient Treatment and Out-patient Treatment). The service departments service the "production" departments as well as each other, and studies have shown that Information Resources provides the greater amount of service. Which of the following allocations would occur if Cassidy uses the direct method of cost allocation?
A)Information Resources cost would be allocated to In-patient Treatment and Out-patient Treatment.
B)Information Resources cost would be allocated to Human Resources.
C)Human Resources cost would be allocated to Information Resources.
D)In-patient Treatment cost would be allocated to Out-patient Treatment.
E)Out-patient Treatment cost would be allocated to Information Resources.
Q2) Which of the following methods would be of little use when allocating service department costs to production departments?
A)The direct method.
B)The reciprocal method.
C)The step-down method.
D)The net-realizable-value method.
E)The dual-cost allocation method.
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