Introduction to Management Accounting Final Exam
Course Introduction
Introduction to Management Accounting explores the principles and techniques used by managers to make informed business decisions. This course covers fundamental topics such as cost behavior, budgeting, performance evaluation, and decision-making processes. Students will learn how to analyze financial information, allocate resources efficiently, and support strategic planning within organizations. Emphasis is placed on practical applications of accounting data to internal business processes, preparing learners to understand and apply management accounting tools in real-world scenarios.
Recommended Textbook
Introduction to Management Accounting 16th Edition by Charles T. Horngren
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17 Chapters
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2438 Flashcards
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Chapter 1: Managerial Accounting,the Business
Organization,and Professional Ethics
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137 Verified Questions
137 Flashcards
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Sample Questions
Q1) Problem solving information would NOT be used in which of the following situations?
A) decision to make or buy parts for a manufactured product
B) decision to replace equipment
C) decision to add or drop a division
D) evaluating the operating performance of a segment in the current year
Answer: D
Q2) Generally Accepted Accounting Principles are most closely connected to ________.
A) management accounting
B) financial accounting
C) internal auditing
D) management auditing
Answer: B
Q3) The function of the value chain that provides support activities to the customer is called ________.
A) marketing
B) distribution
C) customer service
D) consumer relations
Answer: C
Page 3
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Chapter 2: Introduction to Cost Behavior and Cost Volume
Profit Relationships
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Sample Questions
Q1) Bruder Company produces one type of product.Total fixed costs are $100,000.Unit variable costs are $6.00.The break-even point is 25,000 units.Planned unit sales are 30,000.
Required:
A) Compute the selling price per unit.
B) Compute the contribution-margin ratio.
C) Compute the break-even point in dollars.
Answer: A) \(\frac{\$ 100,000}{X-\$ 6}\) = 25,000
\[\begin{array} { l }
( x - 6 ) 25,000 = 100,000 \\
x = \$ 10
\end{array}\] B)($10 - $6)/$10 = 0.40
C)25,000 × $10 = $250,000
Q2) A small margin of safety may indicate a risky situation.
A)True
B)False
Answer: True
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Chapter 3: Measurement of Cost Behavior
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Sample Questions
Q1) Managers cannot eliminate discretionary fixed costs.
A)True
B)False
Answer: False
Q2) When referring to a cost function,plausibility refers to whether you can rely upon the cost function for predicting the future.
A)True
B)False
Answer: False
Q3) A cost function with one independent variable is estimated with least squares regression.The coefficient of determination for the equation is 0.50.This statistic indicates that ________.
A) the independent variable does not explain changes in the dependent variable very well
B) the dependent variable does not explain changes in the independent variable very well
C) the cost estimates are correct 50 percent of the time
D) the cost estimates are not correct 50 percent of the time
Answer: A
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Page 5
Chapter 4: Cost Management Systems and Activity-Based
Costing
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Sample Questions
Q1) A manufacturing company has identified several costs.Indicate whether each of the following costs is an Inventoriable cost(I)or a Period cost(P):
_____ 1.Rent Expense on factory equipment
_____ 2.Cost of subassemblies used in producing product
_____ 3.Wages of machine operators in factory
_____ 4.Rent Expense on computers at corporate office
_____ 5.Wage Expense for janitors in factory
_____ 6.Repairs Expense for factory equipment
_____ 7.Office Supplies Expense at corporate office
_____ 8.Wage Expense for janitors at corporate office
_____ 9.Wages of security guards at corporate office
_____ 10.Property taxes on factory building and land
_____ 11.Wages of security guards at factory
_____ 12.Wages of forklift driver in factory
_____ 13.Supplies Expense for factory
_____ 14.Wages of forklift operators in factory
_____ 15.Distribution Expenses
Q2) Costs that can be allocated to a cost object are called direct costs.
A)True
B)False
Page 6
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Chapter 5: Relevant Information for Decision Making With a
Focus on Pricing Decisions
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Sample Questions
Q1) The contribution approach to the income statement offers several benefits to decision makers.Which of the following is NOT a benefit of this approach?
A) This approach makes it easier to understand the impact of changes in sales volume on operating income.
B) This approach stresses the role of fixed costs in operating income.
C) This approach is used with CVP analysis.
D) This approach is accepted by U.S. Generally Accepted Accounting Principles.
Q2) If a small price increase causes large volume declines,demand is highly inelastic.
A)True
B)False
Q3) Product design affects a small amount of costs in the value chain.
A)True
B)False
Q4) Under absorption costing,all ________ costs are product or inventoriable costs.
A) indirect production
B) direct and indirect production
C) direct production
D) selling and administrative
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Chapter 6: Relevant Information for Decision Making With a
Focus on Operational Decisions
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Sample Questions
Q1) Jorgensen Company is considering the replacement of equipment used in operations.The following data are available:
\(\begin{array}{lll}&\text { Old Machine }&\text { NEW Machine }\\
\text { Original cost } & \$ 210,000 & \$ 40,000 \\
\text { Useful life in years } & 12 & 7 \\
\text { Current age in years } & 5 & 0 \\
\text { Book value } & \$ 65,000 & -\\\text { Disposal value now } & \$ 30,000 & - \\
\text { Disposal value in } 7 \text { years } & 0 & 0 \\
\text { Annual cash operating costs } & \$ 9,000 & \$ 8,000 \end{array}\)
Required:
A) Prepare a cost comparison for replacing the old equipment. Use only relevant items and add the items together for the next 7 years.
B) Should the old equipment be replaced?
Q2) Heating and air conditioning costs are examples of common costs to the different departments in a retail store.
A)True B)False
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Chapter 7: Introduction to Budgets and Preparing the Master Budget
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148 Flashcards
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Sample Questions
Q1) Systematically varying budget data input to determine the effects of each change on the budget is called ________ analysis.
A) operating budget
B) financial budget
C) sensitivity
D) master budget
Q2) The financial budget is used by managers to ________.
A) manage financial affairs
B) manage employee hiring patterns
C) manage the cash balance
D) plan for future stock dividends
Q3) The most effective budget processes facilitate communication from top management to ________ and from lower level managers and employees to ________.
A) the SEC; the audit committee
B) stockholders; creditors
C) lower level managers and employees; top management
D) creditors; stockholders
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Chapter 8: Flexible Budgets and Variance Analysis
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Sample Questions
Q1) The variable overhead efficiency variance indicates to management how much variable overhead cost it may waste by not controlling the use of cost-driver activity.
A)True
B)False
Q2) Which is NOT a reason for a static budget variance?
A) Actual sales volume was higher than projected sales volume.
B) Actual variable costs were higher than static budget variable costs.
C) Actual fixed costs were higher than static budget fixed costs.
D) Actual sales volume in current period was higher than projected sales volume in last period.
Q3) Rate variances are the same as ________ variances.Efficiency variances are the same as ________ variances.
A) spending; effective
B) activity; static
C) usage; quantity
D) price; quantity
Q4) Currently attainable standards do not make allowances for spoilage and waste.
A)True
B)False
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Chapter 9: Management Control Systems and Responsibility Accounting
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Sample Questions
Q1) Good performance measures should only focus on long-term concerns.
A)True
B)False
Q2) Rework costs for manufactured products are a form of ________ costs.
A) prevention
B) appraisal
C) internal failure
D) external failure
Q3) Property taxes on a building used by a segment are not considered when evaluating the performance of the segment manager.
A)True
B)False
Q4) ________ costs involve efforts to improve product design for more efficient production processes.
A) Prevention
B) Appraisal
C) Internal failure
D) External failure
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Chapter 10: Management Control in Decentralized Organizations
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Sample Questions
Q1) Companies must pay managers more if the managers bear more risk,assuming the managers are risk averse.
A)True
B)False
Q2) ________ is the delegation of decision-making power to segment managers of an organization.
A) Goal congruence
B) Segment autonomy
C) Managerial effort
D) Segment contribution
Q3) The time and effort spent negotiating a transfer price between a company's divisions adds nothing directly to the profits of a company.
A)True
B)False
Q4) Managers in decentralized units may waste time negotiating with other units about goods or services one unit transfers to the other.
A)True
B)False
Page 12
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Chapter 11: Capital Budgeting
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Sample Questions
Q1) Ruth Company has a tax rate of 40% and a required rate of return of 12%.The company has new equipment that saves $200,000 per year in labor costs.What is the annual after-tax cash flow from the labor cost savings?
A) $80,000 cash outflow
B) $80,000 cash inflow
C) $120,000 cash outflow
D) $120,000 cash inflow
Q2) Levine Company will purchase a van for $40,000.It will have a depreciable life of 5 years and a terminal salvage value of $10,000.Assume a tax rate of 30% and a required rate of return of 12%.The company uses the straight-line method of depreciation for tax purposes.The annual cash operating savings at the end of each year,exclusive of depreciation,are $10,000 for five years.The present value of an ordinary annuity factor of one for 5 periods at 12% is 3.6048.The present value of one for 5 periods at 12% is 0.5674.What is the net present value of the van?
A) $(441)
B) $(2,604)
C) $1,722
D) $5,420
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Chapter 12: Cost Allocation
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Sample Questions
Q1) Customers with a high cost to serve have ________.
A) large order quantity
B) few order changes
C) standard delivery requirements
D) frequent returns
Q2) Companies must assign all value chain costs to products for internal financial reports.
A)True
B)False
Q3) In practice,companies often inappropriately allocate fixed cost pools for service departments to producing departments on the basis of ________ instead of
A) budgeted costs; actual costs
B) actual costs; budgeted costs
C) capacity used; capacity available
D) capacity available; capacity used
Q4) The preferred cost driver for allocating central corporate support costs to products is either actual or estimated usage.
A)True
B)False
Page 14
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Chapter 13: Accounting for Overhead Costs
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Sample Questions
Q1) In practice,companies generally prorate overhead variances when it would materially affect ________ and ________.
A) inventory valuations; stock dividends
B) inventory valuations; cash dividends
C) inventory valuations; net income
D) stock option plans; manager bonuses
Q2) An unfavorable production volume variance ________ a company's operating income.
A) increases
B) decreases
C) does not affect
D) it depends on the size of the variance
Q3) If a company uses the variable-costing approach,a manager may be tempted to produce unneeded units to increase operating income.
A)True
B)False
Q4) Accountants use actual overhead rates when applying overhead costs to jobs as they are completed.
A)True
B)False
Page 15
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Chapter 14: Job-Order Costing and Process-Costing Systems
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Sample Questions
Q1) Assume a company uses process costing.When factory overhead is applied to the units in production,Finished Goods Inventory is the Debit part of the journal entry.
A)True
B)False
Q2) In process costing,the journal entry to transfer completed units from Department A to Department B would include a ________.
A) Credit to Direct Materials Inventory
B) Debit to Work-In-Process Inventory-Department A
C) Credit to Work-In-Process Inventory-Department B
D) Debit to Work-In-Process Inventory-Department B
Q3) In job-order costing,a Debit to Work-In-Process Inventory is used to record
A) a sale of merchandise
B) a purchase of direct materials
C) the cost of goods completed
D) a requisition of direct materials for production area
Q4) Backflush costing has no Work-In-Process Inventory account.
A)True
B)False
Page 16
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Chapter 15: Basic Accounting: Concepts, techniques, and Conventions
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Sample Questions
Q1) Revenue and expense accounts are permanent stockholders' equity accounts.
A)True
B)False
Q2) Journal entries for the expiration of unexpired assets are usually made before the related cash flows.
A)True
B)False
Q3) The acquisition of inventory for cash will ________.
A) increase liabilities and decrease stockholders' equity
B) decrease assets and decrease liabilities
C) increase assets and decrease liabilities
D) increase assets and decrease assets
Q4) The ________ assumption implies that a company will continue to use existing resources and pay existing liabilities at maturity in an orderly manner.
A) conservatism
B) relevance
C) going concern
D) materiality
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Chapter 16: Understanding Corporate Annual Reports:
Basic Financial Statements
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Sample Questions
Q1) Johnson Company's capital stock is currently trading for $22 per share.The following accounts appear on the balance sheet:
\(\begin{array} { l }
\text { Common stock, } \$ 6.00 \text { par value per share, } 10,000 \text { shares issued }&\$60,000 \\
\text { Paid in capital in excess of par value }&\$200,000 \\ \end{array}\)
The only transaction affecting the accounts was one issue of the company's common stock.What was the original selling price of the common stock?
A) $6.00 per share
B) $20.00 per share
C) $22.00 per share
D) $26.00 per share
Q2) An example of an operating activity on the statement of cash flows is federal taxes paid.Assume the direct method is used.
A)True
B)False
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Chapter 17: Understanding and Analyzing Consolidated Financial Statements
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Q1) Investments acquired with the intent to resell them in the near future are called trading securities.
A)True B)False
Q2) Van Dover Company purchased common stock in Sanchez Company.During the current year,Sanchez Company earned $4,000,000 and paid dividends of $1,000,000.Assume that Van Dover Company owns 30% of the outstanding shares of Sanchez Company.Sanchez Company's dividend will affect Van Dover Company by
A) increasing cash and stockholders' equity by $300,000
B) increasing investments and stockholders' equity by $300,000
C) increasing cash and decreasing investments by $300,000
D) increasing cash and increasing investments by $300,000
Q3) If the fair value of a subsidiary's assets exceeds their book value when the subsidiary is acquired,the assets of the subsidiary are written up at the time consolidated financial statements are prepared.
A)True B)False
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