Introduction to Management Accounting Practice Questions
Course Introduction
Introduction to Management Accounting provides students with a foundational understanding of how accounting information is used by managers to make informed business decisions. The course explores key concepts such as cost classifications, budgeting, performance evaluation, and cost-volume-profit analysis. Emphasis is placed on internal business processes, planning and control systems, and the use of financial and non-financial information to support strategic objectives. Through case studies and practical exercises, students will develop the skills necessary to analyze financial data, allocate resources efficiently, and contribute to effective organizational decision-making.
Recommended Textbook
Introduction to Management Accounting 15th Edition by Charles T. Horngren
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17 Chapters
2396 Verified Questions
2396 Flashcards
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Page 2
Chapter 1: Managerial Accounting, the Business Organization
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129 Verified Questions
129 Flashcards
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Sample Questions
Q1) One of a controller's responsibilities is risk management.
A)True
B)False
Answer: False
Q2) Advertising is an example of the ________ function of the value chain.
A)distribution
B)selling
C)marketing
D)promotion
Answer: C
Q3) Performance reports ________.
A)are quantitative expressions of plans for action
B)provide feedback by comparing actual results with planned results
C)ignore areas that are presumed to be running smoothly
D)provide information to enable managers to select a value chain function to emphasize
Answer: B
Q4) What is the set of business functions called that are necessary to create the goods or services that an organization sells?
Answer: Value chain
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Chapter 2: Introduction to Cost Behavior and Cost-Volume Relationships
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152 Verified Questions
152 Flashcards
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Sample Questions
Q1) Which of the following costs is a fixed cost?
A)cost of dairy ingredients used to produce ice cream
B)factory supervisory salaries
C)fuel used by delivery trucks
D)labor wages of workers who mix dairy ingredients to make ice cream
Answer: B
Q2) What happens when the cost-driver level increases within the relevant range?
A)total fixed costs remain unchanged
B)fixed costs per unit increases
C)total variable costs decrease
D)variable costs per unit increases
Answer: A
Q3) An industry that has a high contribution-margin percentage is the airlines.
A)True
B)False
Answer: True
Q4) Gross margin is the same as contribution margin for most companies.
A)True
B)False
Answer: False
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Chapter 3: Measurement of Cost Behavior
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141 Verified Questions
141 Flashcards
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Sample Questions
Q1) To estimate or approximate cost functions,managers have a broad selection of methods that do NOT include ________.
A)engineering analysis
B)account analysis
C)sales mix analysis
D)visual fit method
Answer: C
Q2) Knowledge about the relationship between costs and cost drivers helps managers
A)make short run decisions
B)plan the effects of future activities
C)make long-run decisions
D)all of the above
Answer: D
Q3) ________ is the first step in estimating or predicting costs.
A)Cost measurement
B)Cost determination
C)Cost driver identification
D)Cost behavior investigation
Answer: A
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Chapter 4: Cost Management Systems and Activity-Based
Costing
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129 Verified Questions
129 Flashcards
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Sample Questions
Q1) Accountants initially collect costs by some natural classification such as activities performed.
A)True
B)False
Q2) When looking at a manufactured product,an example of an inventoriable cost is
A)depreciation expense on office equipment
B)insurance expense on vehicles used by sales staff
C)wages of plant security guard
D)clerical salaries in corporate office
Q3) An example of a strategic management decision is the decision to outsource a particular value-chain function.
A)True
B)False
Q4) What type of users need aggregate cost information about products or services?
A)managers
B)external users
C)factory supervisors
D)internal users
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Chapter 5: Relevant Information for Decision Making With a Focus
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128 Verified Questions
128 Flashcards
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Sample Questions
Q1) The contribution margin approach to pricing is always the best method.
A)True
B)False
Q2) Discriminatory pricing occurs when a firm sets ________.
A)prices below their competitors' prices
B)prices so low that competitors are driven out of the market
C)different prices for different customers for the same product or service
D)uniform prices
Q3) Wisconsin Company has a current production capacity level of 200,000 units per month.At this level of production,variable costs are $0.90 per unit and fixed costs are $0.50 per unit.Current monthly sales are 164,500 units.Gates Company has contracted Wisconsin Company about purchasing 20,000 units at $2.00 each.Current sales would not be affected by the special order and no additional fixed costs would be incurred on the special order.If the order is accepted,what is Wisconsin Company's increase in costs?
A)$18,000
B)$20,000
C)$24,000
D)$40,000
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Chapter 6: Relevant Information for Decision Making With a Focus
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148 Verified Questions
148 Flashcards
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Sample Questions
Q1) Which cost is relevant to an equipment replacement decision?
A)cost of old equipment
B)cost of new equipment
C)book value of old equipment
D)depreciation expense on old equipment
Q2) Sunk cost is another term for historical cost or past cost.
A)True
B)False
Q3) An opportunity cost is ________.
A)the additional costs generated by a proposed alternative
B)the difference in total cost between two alternatives
C)a cash disbursement in the future
D)the maximum available benefit foregone by using a resource for a particular purpose instead of the best alternative use
Q4) When managers are making a decision regarding adding or dropping a product,ethical considerations may also be influential.
A)True
B)False
Page 8
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Chapter 7: Introduction to Budgets and Preparing the Master Budget
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144 Verified Questions
144 Flashcards
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Sample Questions
Q1) The activity-based budgeting system emphasizes ________.
A)the resources needed by a company
B)the preparation of budgets by function
C)the attainment of long-range goals
D)activities and their consumption of resources
Q2) The master budget quantifies forecasts for all of the following EXCEPT ________.
A)cash disbursements
B)purchases of merchandise
C)operating expenses
D)cost of Securities and Exchange Commission to a firm
Q3) The sales budget should be the responsibility of line management.
A)True
B)False
Q4) When forecasting sales for a company,________ is NOT an important factor to be considered.
A)estimates made by the sales staff
B)changes in product mix
C)advertising plans
D)new production equipment
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Chapter 8: Flexible Budgets and Variance Analysis
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143 Flashcards
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Sample Questions
Q1) A budget prepared for one expected level of activity is called a ________.
A)flexible budget
B)static budget
C)variable budget
D)rolling budget
Q2) If actual expenses are less than expected expenses,the expense variance will be unfavorable.
A)True
B)False
Q3) Unfavorable flexible budget variances for costs do not necessarily mean that costs are mismanaged if ________.
A)actual wage rate increases for labor union workers are not reflected in standard wage rates
B)high quality materials were used to reduce waste
C)high quality materials were used to increase product quality
D)all of the above
Q4) The quantity variance and efficiency variance for direct labor are different types of variances.
A)True
B)False
Page 10
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Chapter 9: Management Control Systems and Responsibility Accounting
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147 Verified Questions
147 Flashcards
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Sample Questions
Q1) Responsibility accounting includes ________.
A)identifying what parts of the organization have primary responsibility for each action
B)developing performance measures and targets
C)designing reports of measures by responsibility center
D)all of the above
Q2) When comparing productivity measures over time,changes in the process or in the rate of inflation may cause the comparison to be misleading.
A)True
B)False
Q3) Rework costs for manufactured products are a form of ________ costs.
A)prevention
B)appraisal
C)internal failure
D)external failure
Q4) What is the first step in designing a management control system?
A)evaluating management's performance
B)establishing organizational goals
C)preparing financial statements
D)differentiating between profit centers and cost centers
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Chapter 10: Management Control in Decentralized Organizations
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160 Verified Questions
160 Flashcards
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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) A transfer price exists when two segments of the same organization sell ________.
A)a product to the same customer
B)a product to each other
C)a product in a foreign country
D)the same service to customers
Q3) From the view of the company as a whole,managers should accept investment projects that earn more than the ________.________ should not be used for investment decisions.
A)return on investment; Return on sales
B)return on sales; Capital turnover
C)cost of capital; Return on investment
D)capital turnover; Return on sales
Q4) Return on sales equals revenue divided by income.
A)True
B)False
12
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Chapter 11: Capital Budgeting
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141 Flashcards
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Sample Questions
Q1) A company is considering the acquisition of new equipment to replace old equipment.When using the net present value method,which item is NOT relevant?
A)cash outflow for the purchase of new equipment
B)cash installation costs associated with the new equipment
C)disposal value of old equipment replaced with new equipment
D)book value of old equipment replaced with new equipment
Q2) The marginal tax rate for a company is the ________.
A)average tax rate for the company
B)highest possible tax rate that may be imposed on the company by IRS
C)lowest tax rate that may be imposed on the company by IRS
D)tax rate paid on additional amounts of pretax income
Q3) The internal rate of return model determines the ________ at which the net present value of an investment project equals ________.
A)cost of capital; a positive number
B)hurdle rate; a positive number
C)interest rate; zero
D)discount rate; a positive number
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Chapter 12: Cost Allocation
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125 Flashcards
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Sample Questions
Q1) By-products normally have significant sales value in comparison with other jointly-produced products emerging at the split-off point.
A)True
B)False
Q2) The direct method of allocating service department costs ignores other service departments when allocating service departments' costs to user departments.
A)True
B)False
Q3) A by-product ________.
A)is individually identifiable before the split-off point
B)is treated like a joint product
C)receives a portion of joint costs
D)has relatively insignificant total sales value in comparison to other jointly- produced products at the split-off point
Q4) When using the step-down method,once a service department's costs are allocated to other departments,nothing is ever allocated back to it.
A)True
B)False
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Chapter 13: Accounting for Overhead Costs
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127 Flashcards
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Sample Questions
Q1) The production volume variance is the difference between ________.
A)expected fixed overhead costs and actual fixed overhead costs
B)expected fixed overhead costs and budgeted fixed overhead costs
C)budgeted fixed overhead costs and actual fixed overhead costs
D)budgeted fixed overhead costs and applied fixed overhead costs
Q2) The production volume variance measures the difference between applied and budgeted fixed overhead.
A)True
B)False
Q3) Underapplied fixed factory overhead can be explained by ________ variance and ________ variance.
A)production volume; fixed overhead efficiency
B)fixed overhead spending; fixed overhead efficiency
C)fixed overhead spending; fixed overhead flexible budget
D)fixed overhead spending; production volume
Q4) The production volume variance is a line item on the ________ income statement.
A)direct costing
B)variable costing
C)absorption costing
D)absorption costing and variable costing
Page 15
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Chapter 14: Job-Order Costing and Process-Costing Systems
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157 Verified Questions
157 Flashcards
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Sample Questions
Q1) Unlike job-order costing,process costing requires only one work-in-process inventory account.
A)True
B)False
Q2) Hybrid-costing systems use a combination of ________.
A)job-order costing and process costing ideas
B)value-added and nonvalue-added ideas
C)job-order costing and job-cost sheets
D)job orders and program orders
Q3) Organizations using JIT production systems always have no inventories.
A)True
B)False
Q4) Regardless of the nature of a company's production system,there will always be resources that are shared among different products.
A)True
B)False
Q5) In job-order costing,time cards record the materials used in particular jobs.
A)True
B)False
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Chapter 15: Basic Accounting: Concepts, techniques, and Conventions
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Sample Questions
Q1) An example of an implicit transaction is cash received on account.
A)True
B)False
Q2) In a corporation,stockholders' equity has two parts called ________ and ________.
A)dividends; net profit
B)paid in capital; dividends
C)net profit; retained earnings
D)paid-in capital; retained earnings
Q3) Economic resources that a company owns and expects to provide future benefits are called ________.
A)stockholders' equity
B)assets
C)liabilities
D)retained earnings
Q4) Cash collected from customers before goods are delivered will increase ________.
A)assets and increase revenues
B)revenues and decrease liabilities
C)liabilities and increase assets
D)liabilities and decrease revenues
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Chapter 16: Understanding Corporate Annual Reports:
Basic Financial Statements
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149 Verified Questions
149 Flashcards
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Sample Questions
Q1) Which of the following statements about the cash flow statement is FALSE?
A)The cash flow statement shows the relationship between net income and changes in the cash balance.
B)The cash flow statement determines a company's ability to pay its debts when they are due.
C)The cash flow statement is an aid to predicting future cash flows.
D)The cash flow statement can be used to evaluate the honesty of management in carrying out daily activities.
Q2) Wild Bill Company recently issued 10,000 shares of $1.00 par value common stock for $35,500.This transaction will increase the ________.
A)Common stock account by $10,000
B)Common stock account by $35,500
C)Paid in capital in excess of par account by $35,500
D)Retained earnings account by $35,500
Q3) FIFO uses the ________ costs to measure the ending inventory.
A)latest
B)earliest
C)average
D)weighted-average
Page 18
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Chapter 17: Understanding and Analyzing Consolidated Financial Statements
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Sample Questions
Q1) Rocky Company acquired 40% of the voting stock of Boulder Company for $40 million.At the end of Year 1,Boulder Company reports net income of $15 million and pays cash dividends of $5 million.At the end of Year 1,the market value of Rocky Company's investment in Boulder Company is $44 million.The ________ method should be used by Rocky Company to account for the investment.
A)market-value
B)consolidated
C)cost
D)equity
Q2) Rocky Company acquired 40% of the voting stock of Boulder Company for $40 million.At the end of Year 1,Boulder Company reports net income of $15 million and pays cash dividends of $5 million.At the end of Year 1,the market value of Rocky Company's investment in Boulder Company is $44 million.What accounts on Rocky Company's books would be affected by the net income of Boulder Company?
A)none
B)Investments increase $15 million and Stockholders' equity increases $15 million
C)Cash increases $15 million and Stockholders' equity increases $15 million
D)Investments increase $6 million and Stockholders' equity increases $6 million
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