Intermediate Managerial Accounting
Textbook Exam Questions
Course Introduction
Intermediate Managerial Accounting delves deeper into the concepts, techniques, and tools used by managers to make informed business decisions. Building on foundational accounting principles, this course explores topics such as cost behavior analysis, budgeting, performance measurement, variance analysis, and decision-making relevant to planning and control. Students will learn to apply cost accounting systems, interpret managerial reports, and assess the financial impact of strategic business choices. Emphasis is placed on real-world applications, ethical considerations, and the integration of accounting information within broader organizational contexts.
Recommended Textbook
Fundamental Managerial Accounting Concepts 8th Edition by Thomas P Edmonds
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14 Chapters
2016 Verified Questions
2016 Flashcards
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Page 2
Chapter 1: Management Accounting and Corporate Governance
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Sample Questions
Q1) A company uses sandpaper to prepare its product for finishing.Most manufacturers would classify the sandpaper as direct material because it is physically consumed in the production process.
A)True
B)False
Answer: False
Q2) During its first year of operations,a company that incurred $1,000 in production costs reported cost of goods sold of $800 and selling costs of $100.Its ending finished goods inventory was $300.
A)True
B)False
Answer: False
Q3) Which of the following best represents a characteristic of managerial accounting?
A) Information is historically based and reported annually.
B) Information is based on estimates and is bounded by relevance and timeliness.
C) Information is regulated by the Securities and Exchange Commission.
D) Information is characterized by reliability and objectivity.
Answer: B
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Chapter 2: Cost Behavior, Operating Leverage, and Profitability Analysis
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Sample Questions
Q1) The contribution margin format income statement is not widely used for external financial reporting,but is allowed by GAAP.
A)True
B)False
Answer: False
Q2) Taste of the Town,Inc.operates a gourmet sandwich shop.The company orders bread,cold cuts,and produce several times a week.If the cost of these items remains constant per customer served,the cost is said to be:
A) Variable
B) Fixed
C) Opportunity
D) Mixed Answer: A
Q3) For a mixed cost,total cost increases in direct proportion to volume.
A)True
B)False
Answer: False
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Page 4
Chapter 3: Analysis of Cost,Volume,and Pricing to Increase Profitability
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Sample Questions
Q1) Jensen Company has a contribution margin ratio of 45%.This means that its variable costs are 55% of sales.
A)True
B)False
Answer: True
Q2) A margin of safety of 30% means that every dollar in revenue generates thirty cents in profit.
A)True
B)False
Answer: False
Q3) Compare and contrast a cost-plus pricing strategy to a target pricing strategy.
Answer: Answers will vary
A cost-plus pricing strategy starts with some measure of cost and adds a markup to achieve a specified profit margin.Cost drives the selling price.If the market doesn't support the selling price as computed,profit suffers.A target pricing strategy starts with the price that the market will support and subtracts out the desired profit.The difference is the target cost.This is the cost at which the company must produce the product.If the company cannot produce the product at the target cost,profit suffers.
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Chapter 4: Cost Accumulation,Tracing,and Allocation
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Sample Questions
Q1) Indirect costs should not be pooled unless they share a common cost driver.
A)True B)False
Q2) A manager believes that the number of units sold drives the company's selling costs.The number of units sold would be referred to as the cost driver.
A)True
B)False
Q3) Which of the following is not a
A) Costs that have been pooled for one purpose may require disaggregation for a different purpose.
B) Pooling costs that have different cost drivers may result in unreliable cost allocation.
C) A single cost pool will have more than one cost driver for different cost objects.
D) Pooled costs may require disaggregation when allocating costs for different purposes.
Q4) What are cost objects? List examples of cost objects.
Q5) Indicate whether each of the following statements is
Q6) What is the object of allocating fixed overhead costs to products?
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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) What is the principal reason that direct labor hours is no longer an effective base for allocating indirect costs in many modern manufacturing companies?
A) Automation
B) Workers are not as productive as they were in the past
C) Movement from full-time to part-time workers
D) Changes in generally accepted accounting principles
Q2) Which of the following statements is incorrect?
A) An activity-based costing system uses more cause-and-effect relationships in tracing costs than does a traditional cost allocation system.
B) An activity-based costing system first assigns or traces costs to the departments in which products are made.
C) The hierarchical categories into which activities are grouped are unit-level,batch-level,product-level and facility-level activities.
D) The total amount of unit-level costs changes in proportion to the number of units of product made.
Q3) Indicate whether each of the following statements is
Q4) Indicate whether each of the following statements is
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Chapter 6: Relevant Information for Special Decisions
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Sample Questions
Q1) For an equipment replacement decision,what costs are relevant,and what costs are not relevant?
Q2) Discuss why qualitative characteristics must be considered when making decisions such as special orders,outsourcing,elimination and replacement decisions and scarce resource allocation decisions.Give examples.
Q3) The costs and revenues associated with two alternatives are listed below:
\[\begin{array} { | l | r | r | }
\hline & \text { Altemative 1 } & \text { Alternative 2 } \\
\hline \text { Projected revenue } & \$ 100,000 & \$ 125,000 \\
\hline \text { Unit-level costs } & 20,000 & 30,000 \\
\hline \text { Batch-level costs } & 20,000 & 25,000 \\
\hline \text { Product-level costs } & 15,000 & 15,000 \\
\hline \text { Facility-level costs } & 10,000 & 10,000 \\
\hline
\end{array}\] Which alternative should be selected based on this information?
A) Alternative 2 because it has a higher profit.
B) Alternative 2 because it has the same product- & facility-level costs.
C) Alternative 1 because it has fewer unit-level costs.
D) Alternative 1 because it has a higher profit.
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Page 8
Chapter 7: Planning for Profit and Cost Control
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Sample Questions
Q1) The selling and administrative expense budget is prepared prior to the cash budget.
A)True
B)False
Q2) The first budget prepared in a master budget is the cash receipts budget.
A)True
B)False
Q3) The pro forma income statement gives managers an advance estimate of a company's profitability.
A)True
B)False
Q4) The responsibility for the coordination of a company's budgeting activities normally rests with the Chief Financial Officer (CFO).
A)True
B)False
Q5) The three major components of the master budget are the financial budgets,the capital budgets,and the pro forma financial statements.
A)True
B)False
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Chapter 8: Performance Evaluation
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Sample Questions
Q1) Two budgeting games sometimes played by employees are building in budget slack and making the numbers.
A)True
B)False
Q2) Marks Company makes one product,for which it has established the following standards for materials:
Average quantity of material per unit of product: 4.5 pounds
Price per pound of materials,$16
During March,Marks made 10,000 units of the product,using 50,000 pounds at a total purchase price of $825,000.
Required:
(a)Determine the total flexible budget materials variance and indicate whether it is favorable or unfavorable.
(b)Calculate the materials price variance and indicate whether it is favorable or unfavorable.
(c)Determine the materials usage variance and indicate whether it is favorable or unfavorable.
Q3) Distinguish between static and flexible budgets.Give an example of how flexible budgets can be used.
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Page 10
Chapter 9: Responsibility Accounting
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Sample Questions
Q1) Mitchell Company has two divisions,Division A and Division B.Division A makes a product that Division B could use in making one of its products.Why do the managers of both divisions care about the amount of the transfer price?
Q2) An organizational unit of a business that incurs costs and generates revenues is known as a(n):
A) Cost center.
B) Sales center.
C) Profit center.
D) Investment center.
Q3) Which of the following statements about return on investment (ROI)is
A) ROI equals margin divided by investment turnover.
B) ROI is used to measure the performance of investment centers.
C) Seeking to maximize ROI can result in a conflict between the interest of a particular manager and the interest of the business as a whole.
D) Companies may minimize motivational problems by using original cost instead of book value in the denominator of the ROI formula.
Q4) What are the advantages of using a market-based transfer price? Why is it not always used?
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Page 11
Chapter 10: Planning for Capital Investments
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Sample Questions
Q1) Cash outflows from a capital investment project include:
A) increases in operating expenses.
B) the reduction in the amount of working capital.
C) terminal salvage value.
D) all of these answers are correct.
Q2) Which of the following statements about postaudits is correct?
A) A postaudit should be conducted at the time a capital investment is purchased.
B) The postaudit of a capital investment project should be made using the same analytical technique that was used in deciding to make the investment.
C) The purpose of postaudits is to improve a company's cost-volume-profit analysis.
D) The postaudit process uses expected cash flows and the company's cost of capital.
Q3) In performing capital budgeting analysis that takes time value of money into account,cash flows generated by a capital project are assumed to be reinvested at the project's rate of return.
A)True
B)False
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Chapter 11: Product Costing in Service and Manufacturing
Entities
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Sample Questions
Q1) What is a volume variance,and what is its cause? Under what circumstances is the volume variance unfavorable?
Q2) For a manufacturer,direct costs include direct materials,direct labor,and manufacturing overhead.
A)True
B)False
Q3) In which account is the actual amount of costs such as factory utilities and maintenance initially recorded?
A) Work in Process Inventory
B) Manufacturing Overhead
C) Raw Materials Inventory
D) Supplies Inventory
Q4) Kelly Company's manufacturing overhead costs totaled $2,871,400 during the year.At the end of the year,manufacturing overhead had been underapplied by $5,310.As a result:
A) cost of goods sold increases.
B) manufacturing overhead increases.
C) cost of goods sold decreases.
D) none of these.
To
13
and
Chapter 12: Job-Order, Process, and Hybrid Costing Systems
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Sample Questions
Q1) Brown Company engaged in the following transactions during May 2014.Indicate whether each is an asset source (AS),asset use (AU),or asset exchange (AE)transaction.
Purchased raw materials for cash,$42,000
Used raw materials to begin jobs,$28,400
Paid wages of production employees,$18,000
Applied overhead at rate of $1.25 per direct labor dollar
Completed job that had cost $32,000
Sold goods for $44,000 cash
The goods referred to in the transaction above had cost $29,500 to complete
Q2) A materials requisition is sent to the purchasing agent by the materials storeroom clerk to request that additional materials be purchased.
A)True
B)False
Q3) The Purina Company would use a job-order costing system to account for the costs of making its premium dog food.
A)True
B)False
Q4) Why is the concept of equivalent units important for process costing?
Page 14
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Chapter 13: Financial Statement Analysis
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Sample Questions
Q1) Financial ratios can be used to assess which of the following aspects of a firm's performance?
A) Liquidity
B) Solvency
This term does not even appear in chapter until LO 3 so had to include the LO and topics below
Agree.JMF
C) Profitability
D) All of these answers are correct.
This term does not even appear in chapter until LO 3 so had to include the LO and topics below
Agree.JMF
Q2) Indicate whether each of the following statements about financial statement analysis is
Q3) All of the following are considered to be measures of a company's short-term debt-paying ability except:
A) Current ratio.
B) Earnings per share.
C) Inventory turnover.
D) Average collection period.
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Chapter 14: Statement of Cash Flows
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Sample Questions
Q1) When the indirect method is used to prepare the statement of cash flows,what is the starting point of the operating activities section?
A) Net income as reported on the income statement
B) Total assets as reported on the balance sheet
C) Sales as reported on the income statement
D) Cash collections from customers
Q2) In preparing the statement of cash flows by the indirect method,an increase in inventory would be added to net income.
A)True
B)False
Q3) In preparing the statement of cash flows by the indirect method,which of the following is a correct statement of one of the general rules to convert net income to a cash-basis equivalent?
A) Losses on the sale of long term assets are subtracted from net income.
B) All non-cashnoncash expenses and losses are subtracted from net income.
C) Increases in current assets are subtracted from net income.
D) Decreases in current liabilities are added to net income.
Q4) What types of accounts are reconciled to determine cash flows from operating activities?
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