Advanced Managerial Accounting Study Guide Questions
Course Introduction
Advanced Managerial Accounting explores the techniques and concepts used by managers to make informed financial decisions within an organization. The course covers topics such as cost analysis, budgeting, performance measurement, variance analysis, transfer pricing, and strategic decision-making. Students will learn to interpret accounting information, apply analytical tools to real-world business scenarios, and develop skills for planning, controlling, and improving organizational performance. Emphasis is placed on problem-solving, critical thinking, and the integration of accounting data into broader management strategies.
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) Important changes in the contemporary business environments include all of the following except:
A)Management organizations.
B)Climate change.
C)Information technology.
D)Customer expectations.
E)Global competition.
Answer: B
Q2) Target costing determines the desired cost for a product upon the basis of a given competitive price such that the product will:
A)Earn at least a small profit.
B)Earn a desired profit.
C)Earn the maximum profit.
D)Break even.
E)Sell the highest volume.
Answer: B
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Q1) The World Resources Institute has defined:
A)Types of cost management.
B)Categories for environmental performance indicators.
C)Methods for achieving sustainability.
D)Categories for economic performance indicators.
E)None of the above.
Answer: B
Q2) The decline of the U.S. dollar relative to other currencies has caused firms outside the U.S., such as BMW and Volkswagen to:
A)Experience increasing sales in the U.S.
B)Experience increasing sales worldwide.
C)Locate plants in the U.S. to reduce overall manufacturing costs.
D)Require dealers to make payments in the Euro.
E)None of the above.
Answer: C
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4
Chapter 3: Basic Cost Management Concepts
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Sample Questions
Q1) Variable costs within the relevant range for a firm are assumed:
A)Not to vary per unit.
B)Not to vary in total.
C)To be nonlinear.
D)To be curvilinear.
E)None of the above are correct.
Answer: A
Q2) Any product, service, or organizational unit to which costs are assigned for some management purpose is a (n):
A)Cost object.
B)Direct cost.
C)Indirect cost.
D)Cost driver.
E)Allocation base.
Answer: A
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5
Chapter 4: Job Costing
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Sample Questions
Q1) Cost of goods manufactured for September is:
A)$105,600
B)$157,300
C)$169,400
D)$145,500
E)$210,700
Q2) The ideal criterion for choosing an allocation base for overhead is:
A)Ease of calculation.
B)A cause-and-effect relationship.
C)Ease of use.
D)Its preciseness.
E)Its applicability.
Q3) If overhead is applied based on machine hours, the overapplied/underapplied overhead is:
A)$20,400 underapplied.
B)$20,400 overapplied.
C)$48,374 underapplied.
D)$48,374 overapplied.
E)$-0-.
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Page 6
Chapter 5: Activity-Based Costing and Customer
Profitability Analysis
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Sample Questions
Q1) Using ABC, overhead cost assigned to Job #971 for inspections is:
A)$2,300.
B)$990.
C)$6,500.
D)$690.
E)$1,020.
Q2) Using ABC, how much product-level overhead is assigned to the current order for Men's Razors?
A)$218.00.
B)$250.70.
C)$331.20.
D)$284.00.
E)$288.00.
Q3) Elimination of low-value-added activities in a firm should:
A)Be discouraged because of potential harmful effects.
B)Not affect customer value.
C)Not have priority because low-value-added activities have little effect on a firm's performance.
D)Have priority only when a firm is operating at a loss.
E)Happen naturally if the firm is well-managed.
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Chapter 6: Process Costing
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Sample Questions
Q1) Conversion costs in a process cost system include:
A)Direct materials and direct labor.
B)Direct labor and manufacturing overhead.
C)Direct materials and manufacturing overhead.
D)Manufacturing overhead and selling, general & administrative expenses.
Q2) What are the equivalent units for conversion costs?
A)4,200 units.
B)4,800 units.
C)4,000 units.
D)4,400 units.
Q3) The cost of goods completed and transferred out under the weighted-average method is calculated to be:
A)$96,000.
B)$476,400.
C)$571,200.
D)$484,000.
E)$468,200.
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Chapter 7: Cost Allocation: Departments, Joint Products, and
By-Products
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Sample Questions
Q1) Beth Johnson was recently appointed Vice President of Administration in the Sigma Group, a nationwide personal financial planning services firm. Ann Garber, department manager, has just finished reading the most recent memo from VP Johnson, which reads in part:
In order to more efficiently apportion the costs of hard copy duplication, departments will be charged $0.075 per page for all duplicated materials. This new rate replaces the two-tier rate structures of $0.05 and $0.10 per page, and is effective as of the date of this memo. The two tier system was used to charge a higher rate for the more difficult jobs. "What is she trying to do?" Ann asks. "This new price will drive up my department's duplicating costs so much that we'll have to cut back on how much stuff we have duplicated."
Required:
a. What is the control advantage of any multi-tier pricing (costing) system versus a single price (cost) system?
b. If the new price for duplication reduces total usage of duplicating services, are there any significant disadvantages to such a reduction in usage?
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Page 9
Chapter 8: Cost Estimation
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Sample Questions
Q1) Which of the following means that two or more independent variables are highly correlated with each other?
A)Correlation.
B)t-value.
C)R-Squared.
D)Standard error.
E)Multicollinearity.
Q2) An R-squared value that approaches one (1.0) would indicate:
A)An average degree of explanatory power.
B)A low degree of explanatory power.
C)A high degree of explanatory power.
D)The presence of outliers.
E)The absence of outliers.
Q3) How should the cost function be properly stated using the high-low method?
A)Y = $6,025 + $2.00H.
B)Y = $6,520 + $3.00H.
C)Y = $6,085 + $2.00H.
D)Y = $6,250 + $3.00H.
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Chapter
Cvp Analysis
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Sample Questions
Q1) The CVP profit-planning model assumes that over the relevant range of activity:
A)Only revenues are linear.
B)Only revenues and fixed costs are linear.
C)Only revenues and variable costs are linear.
D)Variable cost per unit decreases because of increases in productivity.
E)Both revenues and total costs are linear.
Q2) Cleaning Care's margin of safety (MOS) in units is:
A)1,000.
B)2,000.
C)4,000.
D)8,000.
E)9,000.
Q3) The degree of operating leverage (DOL) at any given sales volume, X, is useful as:
A)An alternative measure of the breakeven volume.
B)A measure of targeted profit, expressed on a pre-tax basis.
C)A way to estimate fixed costs for an upcoming period.
D)A measure of risk in conjunction with a CVP model.
E)An easy way to perform a Monte Carlo Simulation (MCS) analysis.
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Chapter 10: Strategy and the Master Budget
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Sample Questions
Q1) Explain benefits of implementing a master budgeting system.
Q2) A plan that states the units or costs of merchandise to be purchased by a retailer or wholesaler during the budget period is called a:
A)Production budget.
B)Merchandise purchases budget.
C)Accounts payable budget.
D)Cash payments budget.
E)Cost of goods sold budget.
Q3) Zero-base budgeting (ZBB):
A)Involves the review of changes made to an organization's original budget.
B)Does not provide a projection of annual expenditures.
C)Has as the primary objective to reduce budget expenditures to zero.
D)Involves rigorous review of each cost item before inclusion in the budget.
E)Emphasizes zero increase in expenditures.
Q4) Contrast the budgeting unit (or focus) under a traditional budgeting system and under an activity-based budgeting (ABB) system.
Q5) Contrast operating budgets and financial budgets. How do these budgets relate to the master budget for a period? What is the culmination of the master budgeting process?
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Chapter 11: Decision Making With a Strategic Emphasis
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Sample Questions
Q1) The decision to keep or drop products or services involves strategic consideration of all the following except:
A)Potential impact on remaining products or services.
B)Impact on employee morale.
C)Impact on organizational effectiveness.
D)Growth potential of the firm.
E)The desired inventory levels of the product.
Q2) Determination of the optimum short-term product mix needs to include an analysis of:
A)Fully absorbed costs.
B)Production constraints.
C)Sales-mix costs.
D)Revenue forecasts.
E)Joint manufacturing costs.
Q3) The machine-hour constraint for Harrington's linear program is:
A)The same as the labor-hour constraint.
B)A + 2B + 2.5C 100.
C)Indeterminable from the data given.
D)A + B + C 190.
E)100A + 50B + 40C 19,000.
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Chapter 12: Strategy and the Analysis of Capital Investments
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Sample Questions
Q1) Assume that cash inflows occur evenly throughout the year. The estimated payback period in years (rounded to one decimal place) is:
A)3.7 years.
B)4.6 years.
C)5.8 years.
D)6.0 years.
E)7.9 years.
Q2) Income tax effects are associated with all of the following except:
A)Disposition (i.e., sale) of an existing asset.
B)Required increase in net working capital associated with an investment project.
C)Sale of an investment asset at the end of the asset's useful life.
D)Effect of depreciation expense associated with an investment project.
E)Annual net benefits associated with a proposed investment.
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.
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) What is the least amount of monthly capacity you would have to add to the bottleneck(s) to shift the bottleneck to a different process?
A)2,000,001 juicers per month.
B)600,001 juicers per month.
C)1,320,001 juicers per month.
D)50,001 juicers per month
Q2) Generally, firms will price a product more competitively at which stages of the product's sales life cycle?
A)Product introduction and Growth.
B)Maturity and Decline.
C)Throughout the cycle.
D)At the end of the life cycle.
Q3) If Johnson determines price using a 20% markup of life cycle cost, the price is:
A)$262.50
B)$306.00
C)$375.00
D)$364.29
E)$330.00
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Chapter
Direct-Cost Variances, and the Role of Nonfinancial
Performance Measures
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Q1) The column heading identified as B is:
A)Selling price variance.
B)Efficiency variance.
C)Flexible-budget (FB) variances.
D)Sales volume variance.
E)Production volume variance.
Q2) The arrival of new manufacturing techniques such as automation, flexible manufacturing systems, and cluster or cell manufacturing has:
A)Emphasized the importance of direct labor variances.
B)Not had an effect on the importance of direct labor variances.
C)De-emphasized the importance of direct labor cost variances.
D)Made direct labor variances obsolete.
E)Eliminated the need to calculate and report direct materials variances.
Q3) The total standard direct labor cost for the units manufactured in February is:
A)$458,640.
B)$470,400.
C)$477,750.
D)$478,240.
E)$490,000.
Q4) What is a direct materials usage ratio? For what purpose is this ratio used? Page 16
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Page 17
Chapter 15: Operational Performance Measurement:
Indirect-Cost Variances and Resource-Capacity Management
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Q1) Which of the following statements about the standard variable factory overhead application rate is true?
A)The rate is a function of the denominator volume chosen.
B)The rate is used for cost-control, but not product-costing purposes.
C)The rate is used for product-costing, but not cost-control purposes.
D)The same rate is used for both product-costing and cost-control purposes.
E)Generally speaking, the rate will be independent of the allocation base chosen to apply overhead.
Q2) Which of the following statements about variable overhead costs is true?
A)The underlying model for control and product-costing purposes is the same for variable overhead.
B)The amount of variable overhead applied to production is a function of the denominator output volume and the actual quantity of the cost-allocation base (cost driver) used to apply overhead.
C)The total variable overhead cost variance can be decomposed into a production-volume variance and a flexible-budget variance.
D)For control purposes, the actual quantity of the cost-allocation base (cost driver) is used.
E)Standard costs can be used for control, but not product-costing, purposes.
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Chapter 16: Operational Performance Measurement:
Further Analysis of Productivity and Sales
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Q1) What is ET's sales mix variance?
A)$7,680 favorable.
B)$8,640 favorable.
C)$11,520 favorable.
D)$12,960 favorable.
E)$24,960 favorablE.Total
=
+ 5,040 = 9,000
Q2) What is ET's sales quantity variance?
A)$8,000 favorable.
B)$8,960 favorable.
C)$12,000 favorable.
D)$13,440 favorable.
E)$24,960 favorablE.Total units: budget = 4,000 + 4,000 = 8,000; actual units = 3,960 + 5,040 = 9,000
Q3) The sales mix variance for a firm is ultimately expressed in terms of:
A)Units.
B)Ratios.
C)Percentages.
D)Mixes.
E)Dollars.
Page 19
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Chapter 17: The Management and Control of Quality
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Q1) Cycle time efficiency is:
A)Defined as the ratio of time spent on value-added activities to the sum of time spent on value-added plus non-value-added activities.
B)Also referred to as process efficiency.
C)Defined as the ratio of throughput to resources used.
D)The ratio of throughput to the amount of product in backlog status.
E)Typically not part of a comprehensive framework for managing and controlling quality since it is a nonfinancial performance indicator.
Q2) Oslo Company's target quality characteristic, T, for one of its key components is set at 82. Using the Taguchi Loss Function the company has determined the cost coefficient, k, to be $6,000. What is the estimated loss, L(x), if the value of the quality characteristic, x, is 85?
A)$1,500.
B)$4,500.
C)$18,000.
D)$42,500.
E)$54,000.
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Page 20
Chapter 18: Strategic Performance Measurement: Cost
Centers, Profit Centers, and the Balanced Scorecard
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Sample Questions
Q1) Full costing operating income for 2013 is calculated to be:
A)$850.
B)$1,150.
C)$1,295.
D)$1,654.
E)$1,740.
Q2) Using the information regarding the allocation of the $4 million to the four cost drivers, determine the amount of cost to be allocated to the Harborview Resort.
A)$1,050,000.
B)$895,000.
C)$1,500,000.
D)$715,000.
E)$1,680,000.
Q3) In the principal-agent model, the manager is modeled as having all of the following elements except:
A)Risk aversion.
B)Outcomes of actions.
C)Provides effort.
D)Decision-making.
21
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Chapter 19: Strategic Performance Measurement:
Investment Centers and Transfer Pricing
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Sample Questions
Q1) The asset turnover (AT) for Division Z is:
A)1.43.
B)1.60.
C)1.67.
D)2.86.
E)3.33.
Q2) Division A's return on sales (ROS) is:
A)1.8%.
B)7.5%.
C)12.0%.
D)20.0%.
E)48.0%.
Q3) Since residual income (RI) is not a percentage, it is not useful for:
A)Comparing business units of significantly different size.
B)Evaluating the performance of subunits with high ROIs.
C)Motivating goal-congruent behavior on the part of divisional managers.
D)Evaluating the short-term financial performance of small divisions.
E)Evaluating the short-term financial performance of larger divisions.
Q4) 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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Sample Questions
Q1) The gross margin percentage for 2013 is (rounded):
A)11.2%
B)12.7%
C)13.7%
D)14.9%
Q2) The inventory turnover ratio for 2013 is (rounded):
A)11.2
B)12.7
C)13.7
D)14.9
Q3) The value of the company, calculated using the sales multiple for 2013 is:
A)$1,072,000
B)$1,347,000
C)$1,620,000
D)$2,520,000
E)$8,437,500
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