Financial and Managerial Accounting Test Questions
Course Introduction
Financial and Managerial Accounting introduces students to the foundational principles and practices of accounting essential for decision-making in organizations. The course covers the preparation, interpretation, and analysis of financial statements, exploring how accounting information is used to communicate a company's financial position to external stakeholders. In addition, students learn managerial accounting techniques, such as budgeting, costing, and performance evaluation, which support effective planning and control within organizations. Emphasis is placed on applying accounting information to solve real-world business problems, ensuring students develop practical skills for both financial and internal management contexts.
Recommended Textbook
Managerial Accounting 12th Edition by
Carl S. Warren
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Page 2
Chapter 2: Job Order Costing
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Sample Questions
Q1) The direct labor and overhead costs of providing services to clients are accumulated in a work-in-process account.
A)True
B)False
Answer: True
Q2) The recording of the application of factory overhead costs to jobs would include a credit to:
A) Factory Overhead
B) Wages Payable
C) Work in Process
D) Cost of Goods Sold
Answer: A
Q3) The basis for recording direct and indirect labor costs incurred is a summary of the period's:
A) job order cost sheets
B) time tickets
C) employees' earnings records
D) clock cards
Answer: B
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Page 3
Chapter 3: Process Cost Systems
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Sample Questions
Q1) The cost of direct materials transferred into the Bottling Department of the Mountain Springs Water Company is $28,072. The conversion cost for the period in the Bottling Department is $10,275. The total equivalent units for direct materials and conversion are 63,800 and 68,500 respectively. Determine the direct materials and conversion cost per equivalent unit.
Answer: Round s to nearest cent. 11ea8e07_029f_224c_b636_49515b6c26ad_TB2143_00
Q2) If a company uses a process costing system to account for the costs in its four production departments, how many Work-in-Process will it use?
A) 3
B) 4
C) 1
D) 2
Answer: B
Q3) The FIFO method of process costing is simpler than the Average cost method.
A)True
B)False
Answer: False
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4
Chapter 4: Cost Behavior and Cost-Volume-Profit Analysis
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Sample Questions
Q1) Which of the following is NOT an example of a cost that varies in total as the number of units produced changes?
A) Electricity per KWH to operate factory equipment
B) Direct materials cost
C) Straight-line depreciation on factory equipment
D) Wages of assembly worker
Q2) Which of the following statements is true regarding fixed and variable costs?
A) Both costs are constant when considered on a per unit basis.
B) Both costs are constant when considered on a total basis.
C) Fixed costs are constant in total, and variable costs are constant per unit.
D) Variable costs are constant in total, and fixed costs vary in total.
Q3) Cost-volume-profit analysis cannot be used if which of the following occurs?
A) Costs cannot be properly classified into fixed and variable costs
B) The total fixed costs change
C) The per unit variable costs change
D) Per unit sales prices change
Q4) Define operating leverage. Explain the relationship between a company's operating leverage and how a change in sales is expected to impact profits.
Q5) The cost graphs in the illustration below shows various types of cost behaviors.
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Chapter 5: Variable Costing for Management Analysis
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Sample Questions
Q1) Changes in the quantity of finished goods inventory, caused by differences in the levels of sales and production, directly affects the amount of income from operations reported under absorption costing.
A)True
B)False
Q2) Management may use both absorption and variable costing methods for analyzing a particular product.
A)True
B)False
Q3) For a period during which the quantity of inventory at the end was larger than that at the beginning, income from operations reported under variable costing will be larger than income from operations reported under absorption costing.
A)True
B)False
Q4) The absorption costing income statement does distinguish between variable and fixed costs.
A)True
B)False
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Chapter 6: Budgeting
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Sample Questions
Q1) The Cardinal Company had a finished goods inventory of 55,000 units on January 1. Its projected sales for the next four months were: January - 200,000 units; February180,000 units; March - 210,000 units; and April - 230,000 units. The Cardinal Company wishes to maintain a desired ending finished goods inventory of 20% of the following months sales. What would be the budgeted production for February?
A) 186,000
B) 181,000
C) 222,000
D) 174,000
Q2) Consulting the persons affected by a budget when it is prepared can provide an effective means of motivation and cooperation.
A)True
B)False
Q3) The task of preparing a budget should be the sole task of the most important department in an organization.
A)True
B)False
Q4) What is a cash budget? How does management use a cash budget?
Q5) Describe at least five benefits of budgeting.
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Chapter 7: Performance Evaluation Using Variances From
Standard Costs
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Sample Questions
Q1) If the standard to produce a given amount of product is 1,000 units of direct materials at $11 and the actual was 800 units at $12, the direct materials price variance was $800 favorable.
A)True
B)False
Q2) Standards are more widely used for nonmanufacturing expenses than for manufacturing costs.
A)True
B)False
Q3) The use of standards for nonmanufacturing expenses is:
A) not as common as it is for manufacturing costs
B) as common as it is for manufacturing costs
C) not useful
D) impossible
Q4) A variable cost system is an accounting system where standards are set for each manufacturing cost element.
A)True
B)False
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Q5) Define ideal and currently attainable standards. Which type of standard should be used and why?
Chapter 8: Performance Evaluation for Decentralized Operations
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Sample Questions
Q1) If income from operations for a division is $120,000, sales are $975,000, and invested assets are $750,000, the investment turnover is 1.3.
A)True
B)False
Q2) Operating expenses directly traceable to or incurred for the sole benefit of a specific department and usually subject to the control of the department manager are termed direct expenses.
A)True
B)False
Q3) The DuPont formula uses financial and nonfinancial information to measure the performance of a business.
A)True
B)False
Q4) The DuPont formula uses financial information to measure the performance of a business.
A)True B)False
Q5) The sales, income from operations, and invested assets for each division of Marcus Company are as follows:
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Chapter 9: Differential Analysis and Product Pricing
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Sample Questions
Q1) Carillion Company is considering the disposal of equipment that is no longer needed for operations. The equipment originally cost $600,000 and accumulated depreciation to date totals $460,000. An offer has been received to lease the machine for its remaining useful life for a total of $310,000, after which the equipment will have no salvage value. The repair, insurance, and property tax expenses that would be incurred by Carillion Company on the machine during the period of the lease are estimated at $75,800. Alternatively, the equipment can be sold through a broker for $230,000 less a 10% commission.
Prepare a differential analysis report, dated June 15 of the current year, on whether the equipment should be leased or sold.
Q2) In addition to the differential costs in an equipment replacement decision, the remaining useful life of the old equipment and the estimated life of the new equipment are important considerations.
A)True
B)False
Q3) Activity-based costing provides more accurate and useful cost data than traditional systems.
A)True
B)False
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Page 10
Chapter 10: Capital Investment Analysis
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Sample Questions
Q1) A project is estimated to cost $273,840 and provide annual cash flows of $60,000 for seven years. Determine the internal rate of return for this project, using the following table.
Q2) The computations involved in the net present value method of analyzing capital investment proposals are less involved than those for the average rate of return method.
A)True
B)False
Q3) Methods that ignore present value in capital investment analysis include the average rate of return method.
A)True
B)False
Q4) The anticipated purchase of a fixed asset for $400,000, with a useful life of 5 years and no residual value, is expected to yield total net income of $300,000 for the 5 years. The expected average rate of return is 37.5%.
A)True
B)False
Q5) Briefly describe the time value of money. Why is the time value of money important in capital investment analysis?
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Chapter 11: Cost Allocation and Activity-Based Costing
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Sample Questions
Q1) Activity cost pools are cost accumulations associated with a given activity.
A)True
B)False
Q2) The Camper's Edge Factory produces two products - canopies and tents. It has two separate departments - cutting and sewing. The budget is $350,000 for the cutting department and $400,000 for the sewing department. Each canopy requires 2 hours of cutting and 1 hour of sewing. Each tent requires 1 hour of cutting and 6 hours of sewing. The budget estimates that 20,000 canopies and 10,000 tents will be manufactured during the year. Determine (a) the total number of budgeted direct labor hours for the year in each department, (b) the departmental factory overhead rates for both departments, and (c) the factory overhead allocated per unit each product using the department factory overhead allocation rates using direct labor hours as the base.
Q3) Determine the activity-based cost for each tape drive unit.
A) $97.73
B) $232.69
C) $394.12
D) $103.84
Q4) Explain why it is imperative that proper factory overhead be allocated in factories that produce multiple products.
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Chapter 12: Cost Management for Just-In-Time
Environments
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Sample Questions
Q1) Which of the following is (are) objective(s) of just-in-time (JIT) manufacturing?
A) eliminating waste
B) increasing inventory levels
C) increased number of inspections
D) all of the above
Q2) Non-financial accounting information is used more often for long-term operating decisions than is financial information.
A)True
B)False
Q3) In a just-in-time (JIT) environment, operations only respond to customer orders.
A)True
B)False
Q4) In a just-in-time (JIT) environment, the journal entry to record raw materials purchases would include a credit to the raw materials inventory account.
A)True
B)False
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Chapter 13: Statement of Cash Flows
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Sample Questions
Q1) The acquisition of land in exchange for common stock is an example of noncash investing and financing activity.
A)True
B)False
Q2) On the statement of cash flows, the cash flows from financing activities section would include
A) receipts from the sale of investments
B) payments for the acquisition of investments
C) receipts from a note receivable
D) receipts from the issuance of capital stock
Q3) Which of the following does not represent an outflow of cash and therefore would not be reported on the statement of cash flows as a use of cash?
A) purchase of noncurrent assets
B) purchase of treasury stock
C) discarding an asset that had been fully depreciated
D) payment of cash dividends
Q4) The statement of cash flows is one of the basic financial statements.
A)True
B)False
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Chapter 14: Financial Statement Analysis
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Q1) A decrease in the ratio of liabilities to stockholders' equity indicates an improvement in the margin of safety for creditors.
A)True
B)False
Q2) Which of the following items appear on the corporate income statement before income from continuing operations?
A) cumulative effect of a change in accounting principle
B) income tax expense
C) extraordinary gain
D) loss on discontinued operations
Q3) The percentage analysis of increases and decreases in corresponding items in comparative financial statements is referred to as horizontal analysis.
A)True
B)False
Q4) The numerator of the rate earned on total assets ratio is equal to A) net income
B) net income plus tax expense
C) net income plus interest expense
D) net income minus preferred dividends
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Chapter 15: Managerial Accounting Concepts and Principles
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Sample Questions
Q1) Which of the following would be least likely to be considered a managerial accounting report?
A) a report to analyze potential efficiencies and savings for the purchase of new production equipment.
B) a schedule of total manufacturing costs incurred
C) a statement of cost of goods manufactured
D) a statement of stockholders' equity
Q2) The cost of a manufactured product generally consists of direct materials cost, direct labor cost, and factory overhead cost.
A)True
B)False
Q3) Cost of goods sold for a manufacturer equals cost of goods manufactured plus:
A) beginning work in process inventory less ending work in process inventory
B) ending work in process inventory less beginning work in process inventory
C) beginning finished goods inventory less ending finished goods inventory
D) ending finished goods inventory less beginning finished goods inventory
Q4) Product costs are also referred to as inventoriable costs.
A)True
B)False
16
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