Financial and Managerial Accounting Exam Bank
Course Introduction
Financial and Managerial Accounting provides students with a comprehensive introduction to the fundamental concepts and techniques of accounting used in business decision-making. The course covers the preparation, interpretation, and analysis of financial statements, focusing on how businesses communicate financial information to external users such as investors and creditors. Additionally, it examines internal accounting methods including budgeting, cost analysis, and performance measurement to equip students with the tools needed for effective planning, control, and decision-making within an organization. Through case studies and practical applications, students learn to evaluate financial data and apply accounting principles to real-world business problems.
Recommended Textbook
Managerial Accounting An Introduction to Concepts Methods and Uses 11th Edition by
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Michael W.
Chapter 1: Fundamental Concepts
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Q1) Which of the following is true of Managerial Accounting?
A)Complies with Securities and Exchange Commission rules and regulations.
B)Uses cost-benefit analysis to determine the amount of detail presented.
C)Prepares general-purpose reports for people outside an organization.
D)Presents summary historical data in compliance with generally accepted accounting principles.
Answer: B
Q2) What is an opportunity cost?
A)The difference in total costs which results from selecting one choice instead of another.
B)The profit forgone by selecting one choice instead of another.
C)A cost that may be saved by not adopting an alternative.
D)A cost that may be shifted to the future with little or no effect on current operations.
Answer: B
Q3) Discuss the concepts of cost,expense,and opportunity cost.
Answer: A cost is a sacrifice of resources.An expense is the historical cost of goods or services used.An opportunity cost is the sacrifice of forgoing the return from the best alternative use of an asset.
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Chapter 2: Measuring Product Costs
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Q1) Describe the three major manufacturing cost categories.
Answer: The three major categories of manufacturing costs are (1)direct materials that can be easily traced to a product, (2)direct labor of workers who transform materials into finished products and whose time can be easily traced to a product,and (3)manufacturing overhead which represents all other manufacturing costs that do not fit into the first two categories.
Q2) Which costing system uses equivalent units in the computation of costs?
A)Job costing
B)Process costing
C)Both a and b
D)Neither a nor b
Answer: B
Q3) Which of the following statements reflects the basic cost flow equation?
A)Beginning Balance plus Transfers In equals Transfers Out plus Ending Balance.
B)Beginning Balance minus Transfers In equals Transfers Out minus Ending Balance.
C)Beginning Balance plus Transfers In equals Transfers Out minus Ending Balance.
D)Beginning Balance minus Transfers In equals Transfers Out plus Ending Balance.
Answer: A
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Chapter 3: Activity-Based Management
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Q1) Which of the following is not a step in activity based costing?
A)Identify the departments that consume resources and assign costs to those departments.
B)Identify the cost drivers associated with each activity.
C)Compute a cost rate per cost driver unit.
D)Assign cost to products by multiplying the cost driver rate times the volume of cost driver consumed by the product.
Answer: A
Q2) Which statement best describes an activity center?
A)An organizational command post from which management controls activity.
B)A unit of the organization that performs a set of tasks.
C)A think-tank where managers select value-added activities.
D)A part of the organization that has been designated for in depth study of specific activities.
Answer: B
Q3) What are the strategic and operational uses of activity-based management?
Answer: Activity-based management can help a company develop strategy,long-range plans,and subsequent cost advantage by focusing attention on activities.
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Chapter 4: Strategic Management of Costs,quality,and Time
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Q1) Break-even time.Hampton Corporation's research and development department is presenting a proposal for new product research.The new product will require research,development,and design investments of $6 million (discounted cash flow).Sales will begin after four years and will generate an annual discounted net cash flow of $1.5 million starting in Year 3.
Required:
a.Calculate the break-even time for the new product.
b.What can Hampton Corporation do to reduce break-even time? (Hampton Company;Breakeven time. )
Q2) Decreasing the order receipt time,order waiting time,order manufacturing time,and order delivery time will reduce the delivery cycle time and the A)throughput time.
B)customer response time.
C)order fulfillment time.
D)delivery time.
Q3) Distinguish between the traditional view of quality and the quality-based view.
Q4) Although the "cost of quality" concept is prevalent among companies throughout the world,a current theme in business today is that "quality is free." Discuss what that statement means.
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Chapter 5: Cost Drivers and Cost Behavior
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Q1) The method of cost estimation where the accountant assigns costs to each of the inputs to estimate the cost of the outputs is known as:
A)regression.
B)account analysis.
C)engineering methods.
D)All of the answers are correct.
Q2) Narrative 5-1
The following question(s)refer to the this equation analyzing the relationship of total cost to changes in machine hours.The following relationship was determined:
TC = $2,200 + $3X
Refer to Narrative 5-1.The dependent variable is which of the following?
A)TC
B)$2,200
C)$3
D)X
Q3) Briefly explain how to use historical data to estimate costs.
Q4) Explain the costs,benefits,and weaknesses of the various cost estimation methods.
Q5) How does one interpret the results of regression analysis?
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Chapter 6: Financial Modeling for Short-Term Decision Making
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Q1) When will the contribution margin ratio increase?
A)when the break-even point increases.
B)when the break-even point decreases.
C)when the variable expenses as a percentage of sales decrease.
D)when the variable expenses as a percentage of sales increase.
Q2) The extent to which an organization's cost structure is made up of fixed costs is called its
A)fixed cost leverage.
B)operating leverage.
C)fixed cost multiple.
D)long-term leverage.
Q3) How is target profit volume calculated?
A)The sum of fixed costs and target profit divided by contribution margin per unit.
B)The sum of fixed costs and target profit divided by variable cost per unit.
C)The sum of fixed costs and target profit divided by sales price per unit.
D)None of the answers is correct.
Q4) Discuss why cost-volume-profit analysis could be useful to managers.
Q5) Explain what is meant by the margin of safety and how it is used by managers.
Q6) Identify the underlying assumptions of cost-volume-profit analysis.
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Chapter 7: Differential Cost Analysis for Operating Decisions
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Q1) What is the analysis of differences among particular alternative actions called?
A)incremental analysis.
B)marginal analysis.
C)differential analysis.
D)All of the answers are correct.
Q2) A cost or revenue is _________ if the change results in a difference between alternatives.
A)relevant
B)differential
C)effective
D)strategic
Q3) What is the objective of economic order quantity?
A)minimize the sum of carrying costs and order costs for the period.
B)maximize the sum of carrying costs and order costs for the period.
C)minimize carrying costs and maximize order costs for the period.
D)maximize carrying costs and minimize order costs for the period.
Q4) What makes a cost relevant for decision making?
Q5) How is linear programming used to optimize the use of scarce resources?
Q6) Why aren't fixed costs relevant for most short-term decisions?
Q7) Explain why businesses apply differential analysis to product choice decisions. Page 9
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Chapter 8: Capital Expenditure Decisions
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Q1) What would the periodic cash flows associated with an investment project include?
A)receipts from sales.
B)opportunity costs of undertaking this particular project.
C)expenditures for fixed and variable production costs.
D)all of the above.
Q2) Which of the following involves deciding which long-term investments to undertake and how to finance them?
A)Operational planning.
B)Capital budgeting.
C)Investment planning.
D)Continuous budgeting.
Q3) Which term describes the interest rate used in computing the present value of future cash flows?
A)applicable treasury rate
B)discount rate
C)income tax rate
D)borrowing rate.
Q4) Describe the internal rate of return method of assessing investment alternatives.
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Chapter 9: Profit Planning and Budgeting
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Q1) Which of the following is not a component of a comprehensive master budget?
A)budgeted income statement,
B)budgeted balance sheet.
C)budgeted retained earnings statement.
D)budgeted statement of cash flows.
Q2) Which of the following terms describes a method of yielding information for developing budgets that employees know but managers do not?
A)benchmarking.
B)participative budgeting.
C)bottom-up budgeting.
D)motivational budgeting.
Q3) Observers of Japanese industry report that Japanese managers and owners have created team orientation or esprit de corps with considerable
A)goal congruence
B)employee individualism
C)self-actualization
D)all of the above
Q4) Describe a comprehensive master budget.
Q5) Explain the difference between a flexible budget and master budget.
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Chapter 10: Profit and Cost Center Performance Evaluation
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Q1) Which of the following is an example of a major cost component of variable overhead?
A)Direct material.
B)Direct labor.
C)Indirect material.
D)All of the above.
Q2) For external reporting purposes,how are fixed manufacturing costs treated?
A)As period costs.
B)Expensed as incurred.
C)Period costs included in the value of inventory.
D)Product costs included in the value of inventory.
Q3) Which variance measures the efficiency with which the firm uses inputs to produce outputs?
A)Throughput.
B)Efficiency.
C)Economy.
D)Effectiveness.
Q4) How does technology impact variance analyses?
Q5) How do you apply activity-based costing to variance analysis?
Q6) How do you calculate the mix variance portion of the efficiency variance?
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Chapter 11: Investment Center Performance Evaluation
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Q1) Parker Division had revenue of $250,000,operating profit of $10,000,and a division investment of $100,000.The investment turnover is
A)0.04
B)2.50
C)4.00
D)0.25
Q2) Which of the following is(are)the transfer price that would leave the selling division no worse off if the good is sold to an internal division?
A)The negotiated transfer price.
B)The minimum transfer price.
C)The maximum transfer price.
D)Both a.and c.
Q3) Which of the following is a disadvantage of decentralization?
A)Decentralization helps train managers.
B)Decentralization provides a basis for evaluating performance.
C)Decentralization motivates managers.
D)Decentralization may promote non-goal-congruent behavior.
Q4) What is the contribution approach alternative to return on investment for division performance measurement?
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Chapter 12: Incentive Issues
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Q1) Which of the following are components of deferred compensation?
A)cash bonuses.
B)profit sharing plans.
C)special awards.
D)stock options.
Q2) Treadway Commission
The 1987 recommendations of the Treadway Commission focused on publicly held companies.For each area listed below,explain how a company can improve its overall financial reporting process,increase the likelihood of preventing fraudulent financial reporting,and detect it earlier when it occurs.
Refer to the Treadway Commission.Explain why the Treadway Commission believes the internal audit function plays an important role in deterring financial fraud.
Q3) According to the agency view,the objective of a good incentive compensation system is to minimize agency costs by balancing the costs of controls and
A)disincentives against the risks of divergent behavior.
B)incentives against the risks of divergent behavior.
C)incentives against the cost of divergent behavior.
D)disincentives against the cost of divergent behavior.
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Chapter 13: Allocating Costs to Responsibility Centers
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Q1) Why are joint-process costs allocated?
Q2) The stage of processing when two or more products are separated from the processing of a common input in the forest products,oil and gas,chemicals and mining industries is called a
A)point of no return.
B)separation point.
C)splitoff point.
D)breakout point.
Q3) Describe the factors that should be considered in allocating service department costs.
Q4) The products that result from processing a common input in the forest products,oil and gas,chemicals and mining industries are called
A)natural products.
B)common products.
C)joint products.
D)environmentally-sound products.
Q5) What is the nature of common (or indirect)costs?
Q6) Why do companies allocate common costs to departments and products?
Q7) How are joint-process costs allocated?
Q8) Why are service department costs allocated to producing departments?
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