Advanced Managerial Accounting Test Questions
Course Introduction
Advanced Managerial Accounting delves into the strategic use of accounting information for managerial decision-making within organizations. The course covers key topics such as cost allocation, performance measurement, budgeting, variance analysis, and the design of management control systems. Emphasis is placed on how accounting data can influence planning, operational control, and strategic direction. Students will analyze complex case studies and real-world scenarios to develop skills in interpreting and leveraging financial information to support organizational objectives and drive business success.
Recommended Textbook
Managerial Accounting 2nd Edition by Charles E. Davis
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Page 2
Chapter 1: Accounting As a Tool for Management
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Q1) Which of the following is not a type of unethical behavior employees might observe?
A)Abusive or intimidating behavior
B)Lying to employees
C)Misreporting of hours worked
D)Having employees sign an acknowledgement that they understand and will adhere to the corporate code of conduct.
Answer: D
Q2) Since internal users have access to all the underlying data used for managerial accounting reports,
A)They can create reports that suit their particular decision making needs.
B)There is no need to use financial data in making decisions.
C)Both they can create reports that suit their particular decision making needs and there is no need to use financial data in making decisions.
D)Neither they can create reports that suit their particular decision making needs nor there is no need to use financial data in making decisions.
Answer: A
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3
Chapter 2: Cost Behavior and Cost Estimation Summary of
Questions by Objectives and Blooms Taxonomy
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Q1) A scattergraph is a simple graph that shows
A)Total costs in relation to volume.
B)The fixed portion of a total cost.
C)The variable portion of a total cost.
D)The point where revenue equals total costs.
Answer: A
Q2) Contribution margin = Sales revenue - Total variable costs.
A)True
B)False
Answer: True
Q3) Which of the following is not an example of a variable cost for a manufacturer of bicycles?
A)Number of tires.
B)Gallons of paint.
C)Wages for factory workers.
D)President of the company's salary.
Answer: D
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Page 4
Chapter 3: Cost-Volume-Profit Analysis and Pricing
Decisions
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Q1) Which of the following is \(\textbf{ not }\) an assumption about the data when using CVP analysis?
A)All costs can be easily and accurately separated into fixed and variable components.
B)Total fixed costs remain at a constant level and variable costs per
C)More inventory is purchased than sold.
D)A linear relationship exists between variable costs and sales activity over the relevant range of interest.
Answer: C
Q2) Breakeven point can be expressed in terms of A) Units.
B) Unit sales price.
C) Unit contribution margin.
D) Unit fixed costs.
Answer: A
Q3) Net income divided by 1 - tax rate = Operating income
A)True
B)False
Answer: True
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Chapter 4: Product Costs and Job Order Costing
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Q1) Explain the flow of a product through the production process.In your explanation include the events that increase and decrease each inventory account.In addition,discuss the effect of transactions related to the flow of products on the balance sheet and income statements.
Q2) Which of the following is an example of direct labor for Toyota Motor Company?
A)Assembly line worker
B)Fork-lift driver
C)Line foreman
D)Company president
Q3) The following information relates to the 2014 operations of Adler's Company.
Finished goods inventory,beginning $ 90,000
Finished goods inventory,ending $ 83,000
Cost of goods available for sale $230,000
a.What is Adler's cost of goods manufactured for the period?
b.What was Adler's cost of goods sold for the period?
Q4) What items decrease the following accounts: Raw Materials Inventory,Work in Process Inventory,Finished Goods Inventory,Manufacturing Overhead,and Cost of Goods Sold?
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Chapter 5: Planning and Forecasting
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Questions
Q1) Jody Jewelry manufactures jewelry.In October Jody is planning to make 500 rings,400 bracelets,and 210 pendants.The company expects the total manufacturing overhead for the year would be $3,450,000 and that total direct labor hours for the year would be 75,000.Actual overhead incurred for October was $295,920.Each ring requires 6.25 hours of labor to manufacture; each bracelet requires 5.5 hours of labor to manufacture,and each pendant requires 4 hours of labor to manufacture.What is the standard overhead cost per bracelet?
A) $46.00
B) $253.00
C) $264.00
D) $48.00
Q2) A manager estimates that revenues for the coming period will be $85,000 but includes only $80,000 in her budget.This is an example of
A)Pro-forma variance.
B)Revenue slack.
C)Budgetary padding.
D)None of these ans choices are correct.
Q3) Describe the components of the cash budget and discuss why the cash budget is important to managers.
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Page 7
Chapter 6: Performance Evaluation: Variance Analysis
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Q1) If the actual price of direct materials is $10 per unit while the standard price of the direct material is $11,
A)The direct materials quantity variance will be favorable
B)The direct materials quantity variance will be unfavorable
C)The direct materials price variance will be favorable
D)The direct materials price variance will be unfavorable
Q2) Which of the following variances would not be investigated by a manager following the management by exception principle?
A)A 10% favorable variance in raw materials price
B)A 10% unfavorable variance in direct labor rates
C)A 10% unfavorable variance in payroll tax expense
D)An unfavorable variance that has increased by 5% in each of the last five months
Q3) Because the production managers are the ones to negotiate the purchase price,they are typically held accountable for the direct materials price variance.
A)True
B)False
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8
Chapter 7: Activity-Based Costing and Activity Based Management
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Q1) Place an "X" in the column that corresponds to the type of activity level referred to in the following hospital setting.
\[\begin{array} { | l | c | c | c | c | c | }
\hline & \textbf { Unit } & \textbf { Batch } & \textbf { Protuct } & \textbf { Customer } &
\textbf { Organizational } \\
\hline \text { Hospital admissions } & & & & & \\
\hline \text { Hospital administrator's salary } & & & & & \\
\hline \text { Cost of advertising new dialysis center } & & & & & \\
\hline \text { Cost of Dialysis Machine } & & & & & \\
\hline \text { Physical therapy for stroke patient } & & & & & \\
\hline
\end{array}\]
Q2) The greatest use of activity-based costing information for managers is for
A)Product costing.
B)Pricing decisions.
C)Channel profitability decisions.
D)Process improvement.
Q3) What is an activity cost pool and how are activity cost pool rates calculated?
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Chapter 8: Using Accounting Information to Make Managerial Decisions
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Q1) The Theory of Constraints was developed to maximize the performance of a value chain.According to the theory,five steps are required to maximize and improve the performance of a value chain.
a.List the five steps.
b.Define the two terms bottleneck process and throughput contribution.Indicate how these terms are related to the theory of constraints.
Q2) The segment margin is the contribution margin of a particular segment less any direct fixed costs.
A)True
B)False
Q3) According to the theory of constraints,which of the following is not a step required to maximize and improve the performance of a value chain?
A)Identify the constraint.
B)Compare the constraints with industry averages.
C)Decide how to exploit the constraint.
D)Elevate the performance of the constraint.
Q4) If a product has a positive segment margin but is not as profitable as other products,what should managers do? What if the segment margin is negative?
Page 10
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Chapter 9: Capital Budgeting
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Q1) Which of the following is \(\textbf{ not }\) a factor that influences the discount rate?
A)Level of risk
B)Inflation
C)Investor's expected rate of return
D)All of these ans choices are factors that influence the discount rate
Q2) Logan,Inc.is considering the purchase of a warehouse directly across the street from its manufacturing plant.Logan currently warehouses its inventory in a public warehouse across town.Rent on the warehouse and delivering and picking up inventory cost Logan $48,000 per year.The building will cost Logan $450,000.Logan will depreciate the building for 20 years.At the end of 20 years,the building will have a $125,000 salvage value.Logan's required rate of return is 10%.The building's net present value is
A) $41,347
B) $22,772
C) $427,228
D) $960,000
Q3) Capital assets are also referred to as long-lived assets.
A)True
B)False
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Page 11
Chapter 10: Decentralizing and Performance Evaluation
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Q1) Martin Company sells two products,Standard and Deluxe.Data for activity during January are as follows: \[\begin{array}{lcc} & \underline{\text { Standard }} & \underline{\text { Deluxe }} \\
\text { Sales } & \$ 100,000 & \$ 120,000 \\
\text { Contribution margin } & 35 \% & 30 \% \\
\text { Traceable fixed costs } & \$ 15,000 & \$ 25,000 \end{array}\]
Required:
Prepare a Segment Margin income statement. Common fixed costs of $25,000 are allocated one-half to Standard and one-half to Deluxe.
Q2) If a company desires to increase ROI,it should consider methods that will decrease A)Sales revenue.
B)Segment margin.
C)Asset turnover.
D)Average operating assets.
Q3) What is a transfer price? List the four ways of determining a transfer price.
Q4) What is EVA and how is it calculated?
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Chapter 11: Performance Evaluation Revisited: a Balanced Approach
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Q1) Which of the following is \(\textbf{ not }\) one of the four balanced scorecard perspectives?
A)Internal business processes
B)Customer
C)Industry
D)Financial
Q2) Barry's Ice Cream Shoppe is interested in improving his performance in the area of quality control and customer service.This interest came about after Barry put a "suggestions box" near the counter.Several suggestions related to employees not being clean in handling their orders,not filling orders properly,and rudeness from employees.Barry has discussed his problems with his neighboring store,a local dry cleaning business.
Required:
List five processes that Barry and the dry cleaning business have in common.
Q3) Benchmarking is about trying to achieve another company's metrics.
A)True
B)False
Page 13
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Chapter 12: Financial Statement Analysis
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Q1) Most companies use a combination of debt and equity to obtain the assets needed to fund operations.
Required:
Discuss the advantages and disadvantages of using debt versus equity financing.
Q2) Turbo Company's accounts receivable account balance was $100,000 at the beginning of the year and $120,000 at the end of the year.Turbo's percentage change calculation at the end of the current year is
A)16.7% decrease.
B)16.7% increase.
C) 20% decrease.
D) 20% increase.
Q3) In a trend analysis of cost of goods sold over the last three months,all cost of goods sold accounts are shown as a percentage of the current quarter.
A)True
B)False
Q4) Probably the most common measure of short-term liquidity is the quick ratio.
A)True
B)False
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Chapter 13: Statement of Cash Flows
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Q1) During the current year,Maddox Industries sold a delivery truck with a book value of $5,000 for $15,000,declared and paid cash dividends of $8,000 and borrowed $50,000 from First National Bank.Maddox's net cash flows provided by financing activities is A) $0
B) $27,000
C) $42,000
D) $50,000
Q2) For the past two years,Monroe Corporation's statement of cash flows has shown net cash used by financing activities.Which of the following choices could explain this result?
A)Repayment of debt
B)Purchase of land
C)Receipt of cash dividends from investments in other company's stock
D)Issuance of long-term debt
Q3) On the cash flow statement,paying a cash dividend to stockholders is a financing activity.
A)True
B)False
Q4) What is the basic form of the statement of cash flows?
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Page 15
Chapter 14: Topic Focus: Process Costing
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Q1) On December 31,Berry Company recorded the following information in the Mixing Department's Work in Process account: \(\begin{array}{lll} & \underline{\text { Units }} & \underline{\text { Cost }} \\
\text { Beginning balance } 80 \% \text { complete } & 5,000 & \$ 50,000 \\ \text { Started into production } & 100,000 & \$ 500,000 \\ \text { Completed and transferred to Packaging } & 95,000 & \\ \text { Ending balance } 60 \% \text { complete } & 10,000 & \end{array}\)
Assume that the unfinished units in ending inventory are 60% complete for both materials and conversion. What is balance in the ending Work in Process on December 31?
A) $32,640
B) $33,300
C) $51,800
D) $52,300
Q2) The accounting firm PriceWaterhouseCoopers is an example of a company that would use a process costing system.
A)True
B)False
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Page 16
Chapter 15: Topic Focus Variable and Absorption Costing
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Q1) When the units produced equals the units sold
A)Operating income is higher under absorption costing than under variable costing.
B)Operating income is lower under absorption costing than under variable costing.
C)Operating is the same under absorption costing and variable costing.
D)Cannot be determined with the information given.
Q2) Mixed costs must be divided into which of the following components?
A)Period and product
B)Fixed and variable
C)Direct and indirect
D)Cost and profit
Q3) When production volume equals sales volume,fixed overhead expensed is higher using absorption costing than with variable costing.
A)True
B)False
Q4) In variable costing,fixed manufacturing overhead is treated as a product cost.
A)True
B)False
Q5) Describe the format for a variable costing income statement.
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Chapter 16: Topic Focus Standard Costing Systems
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Q1) The easiest approach to close variances accounts is to the Raw Materials Inventory account.
A)True B)False
Q2) The standard cost of labor consists of two components: standard quantity of direct labor hours allowed for actual production and standard direct labor rate per hour.
A)True B)False
Q3) An advantage of standard costing is that it gives visibility to the variances that arise in the production process.
A)True
B)False
Q4) Suggest one reason for each of the following variances.
a.Unfavorable direct material quantity variance
b.Favorable direct labor rate variance
c.Favorable variable overhead spending variance
d.Unfavorable fixed overhead volume variance
Q5) What is the difference between a normal costing system and a standard costing system?
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Chapter 17: Topic Focus Customer Profitability
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Q1) One way for managers to get an estimate of customer profitability is to allocate expenses to customers through activity-based costing.
A)True
B)False
Q2) The measure that divides customer net profit by customer revenues is referred to as
A)Customer revenue margin
B)Times revenue earned per customer
C)Customer profit margin
D)Customer net profit
Q3) The customer profit margin allows managers to compare customers based on A)Absolute sales volume.
B)How much each dollar of revenue they generate goes to the bottom line,regardless of the customers' absolute sales volume.
C)How many dollars a customer contributes to the bottom line.
D)None of these ans choices are correct.
Q4) Customer net profit divides customer net profit by customer revenues.
A)True
B)False
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