Introduction to Management Accounting Final Exam Questions
Course Introduction
Introduction to Management Accounting explores the principles and practices involved in providing financial and non-financial information to managers within organizations, enabling informed decision-making, planning, and control. The course covers key topics such as cost classification, cost behavior, budgeting, variance analysis, performance measurement, and relevant costs for decision-making. By applying various analytical tools and techniques, students learn how management accounting supports strategic and operational objectives, enhances organizational efficiency, and contributes to achieving business goals.
Recommended Textbook
Managerial Accounting 3rd Edition by Charles E. Davis
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Page 2
Chapter 1: Accounting As a Tool for Management
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Q1) Operational planning translates strategic planning into a plan to be completed within
A)three months.
B)one year.
C)five years.
D)ten years.
Answer: B
Q2) Managerial accounting information provides feedback about how well the organization is implementing its strategy and achieving its goals.
A)True
B)False
Answer: True
Q3) The IMA Statement of Ethical Professional Practice applies to A)all accountants.
B)all CPAs.
C)all members of the IMA.
D)only accountants and CPAs.
Answer: C
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Chapter 2: Cost Behavior and Cost Estimation
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Q1) A traditional GAAP income statement does not help managers to predict the financial results of their decisions.Which of the following is a reason for this shortcoming?
A)The GAAP statement is based on cost function rather than cost behavior.
B)The GAAP statement is based on classification rather than function.
C)The GAAP statement is based on cost behavior rather than cost function.
D)The GAAP statement is based on function rather than classification.
Answer: A
Q2) To calculate the unit cost of the Neoprene stockingfoot waders he sells, Gary Guinn added up all his costs and divided by the number of waders he sold during the year. He then used this unit cost to estimate total costs for the coming year. Explain why Garys method is not useful in predicting total costs for the coming year.
Answer: Gary did not consider what portion of his total cost is fixed versus variable.Gary should analyze his total cost to estimate the variable cost per unit and total fixed cost and then apply these amounts to his estimated sales for the coming year.
Q3) Assume a selling price of $20 per
Answer: 11ea84e3_90aa_8bef_abcc_e7ef813f4d82_TB3446_00
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Chapter 3: Cost-Volume-Profit Analysis and Pricing
Decisions
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Sample Questions
Q1) Kydell Corporation reported the following results from the sale of 6,000
A)4,800.
B)5,160.
C)5,400.
D)6,000.
Answer: A
Q2) Changing a company's cost structure may affect
A)Operating leverage.
B)Behavioral implications for employees.
C)Both operating leverage and behavioral implications for employees.
D)Neither operating leverage nor behavioral implications for employees.
Answer: C
Q3) Cost-plus pricing adds an amount to
A)The cost of the product or service to cover operating costs and contribute to its profit.
B)Variable and fixed costs to cover overhead.
C)The sales price to cover unexpected costs.
D)Contribution margin to cover fixed costs.
Answer: A
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Chapter 4: Product Costs and Job Order Costing
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Sample Questions
Q1) What items increase the following accounts: Raw Materials Inventory,Work in Process Inventory,Finished Goods Inventory,Manufacturing Overhead,and Cost of Goods Sold?
Q2) At the beginning of the year,managers at King Industries estimated $400,000 in manufacturing overhead,20,000 direct labor hours and 50,000 machine hours.Actual manufacturing costs at the end of the year were $425,000 in manufacturing overhead.During the year 22,000 direct labor hours and 47,000 machine hours were incurred.If overhead is applied based on direct labor hours,how much overhead was applied during the year?
A)$399,960
B)$440,000
C)$467,500
D)$425,040
Q3) Which of the following items would not be classified as direct material for Dole Food Company?
A)Pineapple
B)Sugar
C)Stainless steel pots
D)Glass jars
Q4) Predetermined overhead rates and manufacturing overhead application
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Chapter 5: Planning and Forecasting
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Sample Questions
Q1) Assume your friend is watching you prepare the Master Budget as part of your accounting homework.She notices that The Sales Budget affects both the Budgeted Income Statement and the Cash Budget,but not by the same amount.Explain why the effect is not the same on the two budgets.
Q2) Budgeting will be ineffective unless it is tied to strategy and used to manage an organization's overall performance.
A)True
B)False
Q3) Most organizations have a plan for success.The plan may be formal or informal,but leaders should be able to identify what they want their organizations to achieve.One type of tactical planning is the budgeting process.
Required:
Describe the budget development process and explain how it fits into management's planning process.
Q4) Custom Design manufactures t-shirts for new parents and grandparents by turning a client's newborn baby's picture into a design on the shirt.The following information has been provided by various
Q5) What is budgetary slack and why is it an issue in budget preparation?
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Page 7
Chapter 6: Performance Evaluation: Variance Analysis
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Sample Questions
Q1) Sterling Industries manufactures saddles for show horses.Sterling's actual fixed overhead for the year was $123,400.During the year Sterling produced 12,300 saddles using 129,150 direct labor hours.Sterling had budgeted to produce 13,000 saddles and had budgeted to use 130,000 direct labor hours.Sterling's fixed overhead spending variance was $4,200 favorable for the year.What was Sterling's budgeted fixed overhead for the year if necessary,round your answer to the nearest dollar?
A)$140,257
B)$127,600
C)$120,955
D)$128,412
Q2) The variable overhead spending variance
A)is the difference between the actual cost of variable overhead items and the amount of variable overhead cost that is expected to be incurred at the actual level of activity base experienced.
B)has to do with the efficient use of the activity base rather than the efficient use of the variable overhead item.
C)captures whether the company has paid more or less for variable overhead items.
D)All of these answer choices are correct.
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Chapter 7: Activity-Based Costing and Activity Based Management
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Q1) In an activity-based costing system,the benefits of defining more detailed activities will always outweigh the effort needed to monitor activity performance,and the resulting potential for error.
A)True
B)False
Q2) Mounce Catering Service uses an activity-based costing system.What would be the most appropriate cost driver for the activity of preparing meals?
A)Number of meals prepared
B)Number of orders taken
C)Number of rolls used
D)Rent on building
Q3) Which of the following is not a product- or service-related activity?
A)Unit-level
B)Product-level
C)Batch-level
D)Customer-level
Q4) Delivery of goods to customer job sites
Required:
Identify at least one possible cost driver for each activity cost pool.
9
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Chapter 8: Using Accounting Information to Make Managerial Decisions
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Sample Questions
Q1) Information overload can lead to
A)information fatigue syndrome
B)data overload condition.
C)data volume disease.
D)chronic Information syndrome.
Q2) Throughput contribution equals ss.sales revenue less direct materials cost.
A)sales revenue less product costs.
B)direct material plus direct labor.
C)direct material plus traceable manufacturing overhead.
Q3) Because of rising salaries and cost of healthcare and other employee benefits,TJ Manufacturing has decided to outsource one of its non-value added processes.As leader of the team responsible for determining the best process to be outsourced,you must write the memo to the CEO,Jon Duncan,explaining why your team chose to outsource the payroll function.Explain to the CEO the qualitative and quantitative impacts of your team's decision on the business.
Q4) The Sarbanes Act of 1936 prohibits companies from engaging in price discrimination - that is,offering the same item to different customers at different prices.
A)True
B)False
Page 10
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Chapter 9: Capital Budgeting
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Sample Questions
Q1) Capital budgeting differs from cash budgeting in that
A)Cash budgeting focuses on short-term results while capital budgeting focuses on five,ten,or even twenty years in the future.
B)Cash budgeting focuses on the balance sheet while capital budgeting focuses on the income statement.
C)A cash budget does not contain cash outflows for capital assets while capital budgeting does.
D)All of these answer choices are correct.
Q2) Which of the following is not a factor that influences the discount rate?
A)Level of risk
B)Accounting rate of return
C)Investor's expected rate of return
D)All of these answer choices are factors that influence the discount rate
Q3) Which of the following items is not included in the decision to purchase a new capital asset to replace an old one?
A)The price of the new machine
B)Shipping
C)The original purchase price of the old machine
D)Installation costs
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Page 11
Chapter 10: Decentralizing and Performance Evaluation
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Sample Questions
Q1) ABC Corporation's North Division generates operating income of $100,000 on $900,000 in sales.The company had $400,000 in assets at the beginning of the year and $450,000 at the end of the year.What is the company's return on investment for the year?
A)11.1%
B)23.5%
C)42.5%
D)100%
Q2) A segment of an organization is any part of the organization that management wishes to evaluate.Segment margin income statements highlight the elements under the segment manager's control.
Required:
a.What is "segment margin" and how is it calculated?
b.What is the difference between "segment margin" and a segment's "net operating income?"
c.Why are common allocated fixed costs an issue in evaluating the performance of a segment manager?
Q3) What is a transfer price? List the four ways of determining a transfer price.
Q4) In a decentralized organization,upper managers need a way to evaluate the performance of
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Chapter 11: Performance Evaluation Revisited: a Balanced Approach
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Sample Questions
Q1) A performance measure is measurable if it
A)measures only one activity.
B)relates clearly and directly to the process it measures.
C)relates to a corporate strategic objective.
D)is complete and accurate.
Q2) Before deciding whether a measure is a leading or lagging indicator,a manager should be sure to know
A)what event the measure is related to.
B)whether the measure is used by other companies in the industry.
C)both what event the measure is related to and whether the measure is used by other companies in the industry.
D)neither what event the measure is related to nor whether the measure is used by other companies in the industry.
Q3) Indicators that measure successful progression toward the organization's goals are referred to as
A)key performance indicators.
B)specific indicators.
C)lagging indicators.
D)dashboard indicators.
13
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Chapter 12: Financial Statement Analysis
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Q1) While the current and acid-test ratios provide information about liquidity,they do not indicate the underlying quality of current assets.
A)True
B)False
Q2) The quality of assets is assessed through the profitability ratios.
A)True
B)False
Q3) Walker Company had net income of $30,000.The company has 10,000 shares of common stock and 3,000 shares of preferred stock outstanding.There was no change in the number of shares of stock from the previous year.The company declared and paid dividends of $2.00 per share on the common stock and $1.70 per share on the preferred stock.What is Walker's earning per common share?
Q4) In preparing a common-size income statement,you express all revenue and expense account as a percentage of
A)Net income.
B)Operating income.
C)Gross profit.
D)Net sales revenue.
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14
Chapter 13: Statement of Cash Flows
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Sample Questions
Q1) One would expect a company's primary source of cash is from borrowing and investor contributions.
A)True
B)False
Q2) Which of the following cash flows results from an operating activity?
A)Purchasing an investment in another company
B)Issuing common stock
C)Receiving dividends on investment in another company
D)Repaying long-term debt
Q3) Activities that affect a company's investments in assets other than current operating assets are called financing activities.
A)True
B)False
Q4) 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)Collection of accounts receivable balances
B)Purchase of stock in another company
C)Issuance of bonds payable
D)Payment of cash dividends to stockholders
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Chapter 14: Topic Focus: Process Costing
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Sample Questions
Q1) Bemis Corporation's Assembly Department had 2,000
A)54,800
B)57,200
C)64,800
D)72,000
Q2) Companies that mass-produce similar products or employ a continuous production process typically use which of the following costing systems?
A)Job order
B)Process
C)Accumulation
D)Variable
Q3) All of the following types of inventory accounts are used in a process costing system except
A)raw materials.
B)work in process.
C)finished goods.
D)cost of goods sold.
Q4) List three goods or services likely to use a process costing system and three that are likely to use a job order costing system.
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Chapter 15: Topic Focus Variable and Absorption Costing
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Q1) 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
Q2) Absorption costing is also referred to as full costing.
A)True
B)False
Q3) The only difference between absorption costing and variable costing is the treatment of
A)all variable costs.
B)variable overhead costs.
C)all fixed costs.
D)fixed overhead costs.
Q4) What managerial behavior does variable costing render ineffective?
Q5) Under variable costing,subtract variable costs from sales to arrive at
A)gross profit.
B)gross margin.
C)contribution margin.
D)net income.
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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) When using a normal costing system
A)Direct material and direct labor are recorded at standard cost and overhead is applied to products using a predetermined overhead rate.
B)Direct material and direct labor are recorded at actual cost and overhead is treated as a period cost.
C)Direct material and direct labor are recorded at actual cost and overhead is applied to products using a predetermined overhead rate.
D)Direct material and direct labor are recorded at standard cost and overhead is treated as a period cost.
Q3) When using a standard costing system,when materials are purchased,the transaction is recorded in the inventory account at the standard price and accounts payable is charged for the full amount owed to the supplier.
A)True
B)False
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Chapter 17: Topic Focus Customer Profitability
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Sample Questions
Q1) Which of the following is not an administrative expense?
A)Controller's salary
B)Depreciation on office equipment
C)Fixed overhead
D)Controller's salary,Depreciation on office equipment ,and fixed overhead.
Q2) Selling expenses are expenses that are associated with only the delivery of products to the customer.
A)True
B)False
Q3) Two calculations that can be made to measure customer profitability are
A)Customer net profit and customer earnings per share.
B)Times revenue earned per customer and customer revenue margin.
C)Customer net profit and customer profit margin.
D)Customer revenue margin and customer profit margin.
Q4) Customer profit margin is calculated as customer net profit divided by customer gross profit.
A)True
B)False
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