Introduction to Management Accounting Exam
Materials
Course Introduction
Introduction to Management Accounting provides students with a foundational understanding of how accounting information supports internal decision-making within organizations. The course covers core concepts such as cost behavior, budgeting, variance analysis, performance measurement, and cost allocation, enabling students to analyze and interpret financial data relevant to planning, controlling, and evaluating business operations. Emphasis is placed on the use of accounting tools to assist managers in strategic decision-making, resource management, and operational efficiency. Through real-world examples and practical exercises, students develop skills necessary to contribute effectively to organizational success.
Recommended Textbook
Fundamental Managerial Accounting Concepts 9th Edition by Thomas P Edmonds
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14 Chapters
2127 Verified Questions
2127 Flashcards
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Page 2
Chapter 1: Management Accounting and Corporate Governance
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146 Verified Questions
146 Flashcards
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Sample Questions
Q1) Managerial accounting focuses primarily on the performance of the company as a whole.
A)True
B)False
Answer: False
Q2) Choose the answer that is not a distinguishing characteristic of financial accounting information.
A) It is global information that reflects the performance of the whole company.
B) It is focused primarily on the future.
C) It is more concerned with financial data than physical or economic data.
D) It is more highly regulated than managerial accounting information.
Answer: B
Q3) Select the incorrect statement regarding costs and expenses.
A) Some costs are initially recorded as expenses while others are initially recorded as assets.
B) Expenses are incurred when assets are used to generate revenue.
C) Manufacturing-related costs are initially recorded as expenses.
D) Non-manufacturing costs should be expensed in the period in which they are incurred.
Answer: C
Page 3
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Chapter 2: Cost Behavior, operating Leverage, and Profitability Analysis
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152 Verified Questions
152 Flashcards
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Sample Questions
Q1) Describe the steps in the high-low method.
Answer: The steps in the high-low method are:
1.Assemble cost and volume information for a given period of time (several months,perhaps)
2.Select the high volume point and the low volume point in the data set
3.Determine the estimated variable cost per unit.Estimated variable cost = difference in total cost divided by difference in volume
4.Use the estimated variable cost per unit and either the high point or the low point to estimate the fixed cost
Q2) Risk refers to the possibility that sacrifices may exceed benefits.
A)True
B)False
Answer: True
Q3) How does variable cost per unit behave when volume decreases?
Answer: Variable cost per unit is constant when volume decreases.
Q4) How does fixed cost per unit behave when volume decreases?
Answer: Fixed cost per unit increases when volume decreases because the same amount of fixed costs is spread over (allocated to)fewer units.
Page 4
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Chapter 3: Analysis of Cost, volume, and Pricing to Increase Profitability
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149 Flashcards
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Sample Questions
Q1) Assuming a company uses a markup equal to 25% of cost,the cost of a product that sells for $100 is $75.
A)True
B)False
Answer: False
Q2) Compare and contrast a cost-plus pricing strategy to a target pricing strategy.
Answer: 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.
Q3) How does an increase in variable costs affect the break-even point in sales dollars?
Answer: If all other factors (total fixed costs and selling price)stay the same,the increase in variable costs will increase the break-even point,so the company would reach break-even at a higher volume of sales.
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Page 5
Chapter 4: Cost Accumulation,tracing,and Allocation
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158 Flashcards
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Sample Questions
Q1) A cost object is anything for which management desires a separate tracking of costs,while a cost driver is the factor that causes the cost object to increase or decrease. A)True
B)False
Q2) Which of the following is not a true statement regarding the pooling of indirect costs?
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.
Q3) Indirect costs should not be pooled unless they share a common cost driver. A)True B)False
Q4) What should a company consider when pooling indirect costs?
Q5) What are cost objects? List examples of cost objects.
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Chapter 5: Cost Management in an Automated Business
Environment: ABC, ABM, and TQM
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153 Verified Questions
153 Flashcards
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Sample Questions
Q1) Miller Company makes two types of chairs.One of the chairs is a rocking chair.The other is a straight-back chair.Both chairs are made by hand.Miller Company uses a companywide overhead rate that is based on direct labor hours to assign overhead costs to the two products.If Miller automates the production of straight-back chairs and continues to use direct labor hours as a companywide allocation basis:
A) rocking chairs will be overcosted.
B) straight-back chairs will be overcosted.
C) rocking chairs will be undercosted.
D) there should be no impact on unit cost.
Q2) Actions or units of work undertaken by an organization to accomplish its mission are referred to as:
A) costs.
B) work in process.
C) activities.
D) cost objects.
Q3) Traditional cost systems usually allocate overhead to products based on direct labor.
A)True
B)False
Page 7
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Chapter 6: Relevant Information for Special Decisions
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Sample Questions
Q1) All of the following are examples of product-level costs except:
A) product inspection costs.
B) product advertising costs.
C) engineering design costs.
D) patent costs.
Q2) The decision to accept a lower than normal selling price may depend on the availability of excess capacity.
A)True
B)False
Q3) Which costs are relevant for equipment replacement decisions?
A) Unit-level costs
B) Batch-level costs
C) Product-level costs
D) All of these answers are correct.
Q4) Natalie purchased a concert ticket recently for $50.She is trying to decide whether to drive,take a taxi,or ride the public transit bus.The cost of driving to the concert is a sunk cost because Natalie purchased her car several years ago.
A)True
B)False
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Chapter 7: Planning for Profit and Cost Control
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150 Flashcards
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Sample Questions
Q1) Expressing plans for a business in financial terms is commonly called:
A) master planning.
B) budgeting.
C) strategic planning.
D) operational planning.
Q2) Select the correct statement about budgeting and human behavior.
A) People are usually very comfortable with budgets.
B) The attitudes of upper managers significantly impact budget effectiveness.
C) Budgets increase individual freedom within an organization.
D) Participative budgeting contributes to fear and resentment.
Q3) Skymont Company wants an ending inventory each month equal to 30% of that month's cost of goods sold.Cost of goods sold for February is projected at $45,000.Ending inventory at the end of January was $12,000.Based on this information,purchases for February would be:
A) $31,500.
B) $46,500.
C) $43,500.
D) $33,000.
Q4) How do budget expectations influence a company's employees?
Q5) How do short-term plans differ from long-term plans?
Page 9
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Chapter 8: Performance Evaluation
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156 Verified Questions
156 Flashcards
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Sample Questions
Q1) Which manager is usually held responsible for materials price variances?
A) Plant manager
B) Purchasing agent
C) Production supervisor
D) Marketing manager
Q2) Jones Company developed the following static budget at the beginning of the company's accounting period: \[\begin{array} { l r }
\text { Revenue } ( 8,000 \text { units } ) & \$ 16,000 \\
\text { Variable costs } & \underline{4,000} \\
\text { Contribution margin } & \$ 12,000 \\
\text { Fixed costs } & \underline{ 4,000 }\\
\text { Net income } & \underline{ \$ 8,000} \\
\end{array}\] If actual production totals 8,200 units,the flexible budget would show total costs of:
A) $8,000.
B) $8,100.
C) $8,200.
D) None of these are correct.
Q3) What should be the organizational purpose for identifying and calculating variances?
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Chapter 9: Responsibility Accounting
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145 Flashcards
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Sample Questions
Q1) The Electronics Division of Anton Company reports the following results for the current year: \[\begin{array} { l c c }
\text { Revenues } & \$ & 800,000 \\
\text { Operating expenses } & \$ & 656,000 \\
\text { Operating income } & \$ & 144,000 \\
\text { Operating assets } & \$ & 1,200,000
\end{array}\] Anton Company has set a target return on investment (ROI)of 11% for the Electronics Division.
The Electronic Division's margin is:
A) 11.25%.
B) 12%.
C) 66.7%.
D) 18%.
Q2) Which of the following statements is incorrect?
A) ROI is calculated as revenue divided by operating assets.
B) Operating assets are assets that are actually used to generate revenue.
C) Nonoperating assets are not included in the calculation of return on investment.
D) Operating assets include both current and long-term assets.
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11
Chapter 10: Planning for Capital Investments
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155 Flashcards
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Sample Questions
Q1) Newton Company is considering the purchase of an asset that will provide a depreciation tax shield of $10,000 per year for 10 years.Assuming the company is subject to a 40% tax rate during the period and a zero salvage value,what is the depreciable cost of the new asset?
A) $100,000
B) $250,000
C) $400,000
D) Can't be determined from the information provided
Q2) The process by which management evaluates long-term investment decisions involving long-term operational assets is called:
A) capital investment analysis.
B) activity based-management.
C) strategic business analysis.
D) fixed cost analysis.
Q3) The present value of an annuity of $1 table could be constructed using the factors contained in the present value of $1 table.
A)True
B)False
Q4) Describe what is meant by the time value of money.
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Chapter 11: Product Costing in Service and Manufacturing
Entities
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148 Verified Questions
148 Flashcards
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Sample Questions
Q1) Indicate whether each of the following statements is true or false. Overapplied overhead means the amount of estimated overhead cost applied to products exceeded the actual overhead cost incurred.______
If the amount of overapplied or underapplied overhead is significant,it must be assigned to work in process.______
If the amount of overapplied or underapplied overhead is fairly small,it should be assigned to work in process.______
Using estimated overhead costs during an accounting period reduces the distortions that would occur if actual monthly costs were used.______
Actual overhead costs are recorded as debits to the manufacturing overhead account.______
Q2) Indicate whether each of the following statements is true or false. Wages paid to production workers are classified as wages expense.______
Wages paid to production workers represent an asset exchange transaction.______
Supplies used in production are considered an indirect input and are accounted for as part of manufacturing overhead.______
Raw materials are indirect inputs to the production process.______
Q3) Why does a service company need cost information about the services it provides?
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Chapter 12: Job-Order, process, and Hybrid Costing Systems
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Sample Questions
Q1) Pepperdine Company paid factory rent of $10,000.At the time this transaction occurred,it did not affect total assets or net income.
A)True
B)False
Q2) Which of the following statements regarding a process costing system is false?
A) Use of a process costing system would be appropriate for a company that manufactures luxury yachts.
B) Unit costs are computed for each department.
C) The number of equivalent units for a period takes into account the stage of completion of ending work in process inventory.
D) Unit cost is determined for a designated period of time.
Q3) Beta Company determined that its manufacturing overhead for the current accounting period was overapplied by $1,400.It closed the amount to cost of goods sold.The recognition of this transaction will:
A) Decrease cost of goods sold.
B) Increase cost of goods sold.
C) Have no impact on cost of goods sold.
D) None of these answers are correct.
Q4) What source documents would be used in preparing a job cost sheet?
Page 14
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Chapter 13: Financial Statement Analysis
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Sample Questions
Q1) The following balance sheet information was provided by Western Company: \[\begin{array} { l r r }
\text { Assets } & \text { Year 2 } & \text { Year } 1 \\
\text { Cash } & \$ 4,000 & \$ 2,000 \\
\text { Accounts receivable } &15,000 & 12,000\\
\text { Inventory } & \$ 35,000 & \$ 38,000 \end{array}\]
Assuming Year 2 net credit sales totaled $270,000,what was the company's average days to collect receivables? (Use 365 days in a year.Do not round your intermediate calculations.)
A) 18.25 days
B) 47.31 days
C) 16.22 days
D) 20.28 days
Q2) The only requirement involved in communicating useful information is that the information be accurate.
A)True
B)False
Q3) Discuss the limitations that affect financial statement analysis.
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Chapter 14: Statement of Cash Flows
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Sample Questions
Q1) Phibbs Company prepared the following data for the year. \[\begin{array} { l r }
\text { Outflow to purchase treasury stock } & 30,000 \\
\text { Inflow from sale of machinery } & 7,500 \\
\text { Inflow from sale of marketable securities } & 3,750 \\
\text { Outflow to purchase building } & 87,500 \\
\text { Outflow to purchase land } & 12,500 \\
\text { Outflow to pay dividends } & 7,500 \\
\text { Outflow to pay interest } & 37,500
\end{array}\] What is the net cash flow from investing activities?
A) $88,750 outflow
B) $141,250 outflow
C) $152,500 outflow
D) $41,250 outflow
Q2) What is the major advantage of using the direct method of preparing 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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Page 16