Intermediate Managerial Accounting
Mock Exam
Course Introduction
Intermediate Managerial Accounting focuses on the application and analysis of accounting information for internal decision-making within organizations. The course builds on foundational accounting principles to explore topics such as cost behavior, budgeting, performance evaluation, job order and process costing, activity-based costing, and variance analysis. Students gain practical skills in interpreting financial data, preparing internal reports, and utilizing managerial accounting tools to support strategic planning, control, and operational efficiency. Emphasis is placed on case studies and real-world scenarios to develop problem-solving and critical thinking abilities relevant to management roles.
Recommended Textbook
Fundamental Managerial Accounting Concepts 9th Edition by Thomas P Edmonds
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Chapter 1: Management Accounting and Corporate Governance
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Sample Questions
Q1) According to the Sarbanes-Oxley Act,a company's audit committee is responsible for its system of internal controls.
A)True
B)False
Answer: False
Q2) Certified Management Accountants (CMA)must complete a specified number of continuing professional education credits each reporting period.Which of the four standards of ethical conduct issued by the Institute of Management Accountants likely motivated this requirement?
A) Confidentiality
B) Competence
C) Integrity
D) Objectivity
Answer: B
Q3) Distinguishing between product and period costs is sometimes guided by the value-added principle.
A)True
B)False
Answer: False
Page 3
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Chapter 2: Cost Behavior, operating Leverage, and Profitability Analysis
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Sample Questions
Q1) Mug Shots operates a chain of coffee shops.The company pays rent of $15,000 per year for each shop.Supplies (napkins,bags,and condiments)are purchased as needed.The managers of each shop are paid a salary of $2,500 per month and all other employees are paid on an hourly basis.The cost of rent relative to the number of customers in a particular shop and relative to the number of customers in the entire chain of shops is which kind of cost,respectively?
A) Variable cost and fixed cost
B) Fixed cost and fixed cost
C) Fixed cost and variable cost
D) Variable cost and variable cost
Answer: B
Q2) A low magnitude of operating leverage is best for most companies.
A)True
B)False Answer: False
Q3) The activity base selected determines whether a cost behaves as a variable cost or fixed cost.
A)True
B)False
Answer: True
Page 4
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Chapter 3: Analysis of Cost, volume, and Pricing to Increase Profitability
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Sample Questions
Q1) Company A has break-even sales of 90,000 units and budgeted sales of 99,000 units.What is the margin of safety as expressed as a percentage?
A) 9.00%
B) 10.0%
C) 9.09%
D) None of these answers is correct.
Answer: C
Q2) Can cost-volume-profit analysis be useful for a company that sells more than one product? If so,how? If not,why not?
Answer: Cost-volume-profit analysis can be useful for a company that sells more than one product.The analyst would have to make an assumption about what the sales mix will be because changes in sales mix affect the break-even point or level of profits.The assumed sales mix can be used in calculating a weighted average contribution margin,which can then be used to find the break-even point or sales required to earn a target profit.
Q3) Company A makes and sells a single product,unless otherwise indicated.What happens to the break-even point when the variable cost per unit decreases?
Answer: The break-even point decreases.
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Chapter 4: Cost Accumulation,tracing,and Allocation
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Sample Questions
Q1) A factor having a "cause-and-effect" relationship with a cost object is called a(n):
A) cost driver.
B) allocation base.
C) direct cost.
D) indirect cost.
Q2) Which of the following statements is false?
A) Both direct and indirect costs can be assigned to a cost object.
B) Cost drivers are often selected based on the availability of information.
C) Volume measures are good drivers for fixed overhead costs.
D) Fixed costs that do not have a definitive cost driver are allocated using an allocation base that distributes a rational share of the cost to each product.
Q3) Assume that factory depreciation for the year is $240,000.What problem could result from dividing that amount by 12 and assigning $20,000 in depreciation to the products made each month?
Q4) Services performed by service departments for the benefit of an operating department are called interdepartmental services.
A)True
B)False
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Page 6
Chapter 5: Cost Management in an Automated Business
Environment: ABC, ABM, and TQM
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Sample Questions
Q1) Sales commissions are an example of:
A) unit-level activities.
B) batch-level activities.
C) facility-level activities.
D) product-level activities.
Q2) All of the following are external failure costs except:
A) warranty repairs and replacement.
B) reliability testing
C) customer relations.
D) restocking and packaging.
Q3) Voluntary costs refer to internal and external failure costs.
A)True
B)False
Q4) What is the reasoning behind the use of cost pools in an activity-based costing system?
Q5) Which activity is likely to be involved in the acquisition of raw materials?
A) Identifying potential suppliers
B) Getting price quotations
C) Preparing purchase orders
D) All of the other answers are correct.
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Chapter 6: Relevant Information for Special Decisions
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Sample Questions
Q1) Omega Company reported the following information for the company's two products: \[\begin{array} { l c c }
& \text { Product X } & \text { Product } Y \\
\text { Selling price per unit } & \$ 3 5 & \$ 2 5 \\
\text { Variable cost per unit } & 2 0 & 15
\end{array}\] Assume that 75,000 machine hours are available; product X takes four machine hours to produce,and product Y takes two machine hours to produce.The company can sell all it can make of either product.Which of the following statements is true?
A) Product Y should be produced because more of it can be produced.
B) Product Y should be produced because it will produce greater total profit.
C) Product X should be produced because it provides a greater contribution margin.
D) Both products provide the same total profit.
Q2) Discuss the conflict that often occurs between short-run and long-run performance in asset replacement decisions.
Q3) What are constraints? Provide an example.
Q4) How can managers manage (that is,reduce the impact of)constraints?
Q5) How can a manager's time horizon affect his/her decision making?
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Chapter 7: Planning for Profit and Cost Control
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Sample Questions
Q1) The Game Zone sells computer and other electronic games.The store has budgeted sales for January Year 2 as indicated in the following table.The company expects a 4% increase in sales for the month of February and a 3% increase for March.
\[\begin{array} { l c c c }
\text { Sales } & \text { January } & \text { February } & \text { March } \\
\text { Cash sales } & \$ 40,000 & ? & ? \\
\text { Sales on account } & \$ 80,000 & ? & ? \\
\text { Total budgeted sales }& \$ 120,000 & ? & ?
\end{array}\] Required:
(a)Complete the sales budget by filling in the missing amounts.
(b)What is the amount of sales revenue the company will report on its pro forma income statement for the first quarter?
Q2) How do short-term plans differ from long-term plans?
Q3) Expressing plans for a business in financial terms is commonly called:
A) master planning.
B) budgeting.
C) strategic planning.
D) operational planning.
Q4) How do budget expectations influence a company's employees?
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Chapter 8: Performance Evaluation
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Sample Questions
Q1) Which manager is usually held responsible for materials usage variances?
A) Production supervisor
B) Marketing manager
C) Purchasing agent
D) None of these answers are correct.
Q2) Which manager is generally held responsible for the sales volume variance?
A) Purchasing agent
B) Marketing manager
C) Plant manager
D) Production manager
Q3) Which of the following is an incorrect statement regarding variances?
A) A variance is favorable when expected sales are more than actual sales.
B) A variance is a difference between budgeted and actual amounts.
C) A variance can be calculated for both revenues and expenses.
D) A variance can be both favorable and unfavorable.
Q4) The sales volume variance is favorable if actual sales volume is higher than the budgeted volume.
A)True
B)False
Q5) Describe how a flexible budget is useful in planning for an organization.
Page 10
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Chapter 9: Responsibility Accounting
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Sample Questions
Q1) In a responsibility report,a cost center's actual costs should be compared to its flexible budget.
A)True
B)False
Q2) Which of the following is an advantage of using cost-based transfer prices?
A) Such prices are an objective measure and easy to compute.
B) Such prices motivate the buying division to control cost.
C) Such prices provide a sense of fairness.
D) Such prices will usually exceed the market-based or negotiated transfer prices.
Q3) Which of the following is not an advantage of decentralization?
A) Lower-level managers are trained for increased responsibilities.
B) Managers are motivated to improve productivity.
C) Upper-level managers are able to concentrate on routine decisions.
D) All of these are advantages of decentralization.
Q4) Delegating authority and responsibility throughout an organization is known as:
A) centralization.
B) decentralization.
C) management by exception.
D) suboptimization.
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Chapter 10: Planning for Capital Investments
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Sample Questions
Q1) Benson Corporation is considering an investment in equipment that would cost $50,000 and provide annual cash inflows of $14,000.The company's required rate of return is 12%; the internal rate of return for the investment is 10.5%.Should the company make this investment?
A) No, since the internal rate of return is more than the company's required rate of return.
B) Yes, since the internal rate of return is less than the company's required rate of return.
C) No, since the internal rate of return is less than the company's required rate of return.
D) The answer cannot be determined.
Q2) Select the incorrect statement concerning the internal rate of return (IRR)method of evaluating capital projects.
A) The higher the IRR the better.
B) The internal rate of return is that rate that makes the present value of the initial outlay equal to zero.
C) If a project has a positive net present value then its IRR will exceed the hurdle rate.
D) A project whose IRR is less than the cost of capital should be rejected.
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Page 12
Chapter 11: Product Costing in Service and Manufacturing
Entities
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Sample Questions
Q1) Warren Company applies overhead based on direct labor cost.Warren Company estimated that it would incur $180,000 in manufacturing overhead costs and $120,000 of direct labor costs during the current year.Actual manufacturing overhead cost totaled $150,000 and actual direct labor costs totaled $110,000 during the current year.If total manufacturing costs were $320,000,what amount of direct materials was used during the year?
A) $60,000
B) $30,000
C) $45,000
D) None of these answers are correct.
Q2) Travis Company had no beginning work in process or finished goods.Its total manufacturing costs for the year were $427,000.If cost of goods manufactured was $332,000 and cost of goods sold was $250,000,the amount of ending work in process would have been:
A) $82,000.
B) $105,000.
C) $95,000.
D) $127,000.
Q3) Describe the schedule of cost of goods manufactured and sold.What information does it include,and how is it used?
Page 13
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Chapter 12: Job-Order, process, and Hybrid Costing Systems
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Sample Questions
Q1) The purchase of raw materials for cash is:
A) An asset source transaction.
B) An asset exchange transaction.
C) An asset use transaction.
D) A claims exchange transaction.
Q2) Factory insurance is an indirect product cost and part of overhead.
A)True
B)False
Q3) The two most common types of costing systems are:
A) Process and transfer costing systems.
B) Job-order and process costing systems.
C) Job-order and direct costing systems.
D) Process and standard costing systems.
Q4) Company N manufactures machines to customer order.Why would the use of a process costing system not be appropriate for N?
Q5) Process costing is used for products produced in mass quantities through a continuous process that provides similar inputs to each unit produced.
A)True
B)False
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Chapter 13: Financial Statement Analysis
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Sample Questions
Q1) Indicate whether each of the following statements about financial statement analysis is true or false.
Meaningful comparisons between two companies generally should be made using percentage analysis or ratio analysis,not absolute amounts.______
The materiality of accounting information refers to whether it is viewed as favorable (good news)or unfavorable (bad news).______
Companies must account for immaterial items in compliance with generally accepted accounting principles.______
To judge the materiality of an absolute financial statement amount,one must consider the size of the company reporting it.______
Comparing percentages derived from financial statement analysis has the drawback of varying materiality levels.______
Q2) The accounts receivable turnover ratio can be used to asses a firm's solvency. A)True B)False
Q3) For Perez Corporation,return on equity is substantially higher than return on investment.What does that tell you about the company?
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Chapter 14: Statement of Cash Flows
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Sample Questions
Q1) The following beginning and ending balances were drawn from the records of Grimes Company: \[\begin{array} { l r r } & \text { Begirning } & \text { Ending } \\
\text { Equipment } & \$ 1,400 & \$ 1,100 \\
\text { Accurnulated Depreciation } & \$ 700 & \$ 400 \end{array}\]
If Grimes Company sold equipment that had an original cost of $600 and accumulated depreciation of $300 for $250,how much did Grimes pay for new equipment?
A) $255
B) $300
C) $200
D) $550
Q2) What kinds of cash flows are reported as financing activities on the statement of cash flows?
Q3) The amount of revenue a company recognizes on the income statement normally differs from the amount of cash collected from customers.
A)True
B)False
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