Introduction to Management Accounting Exam Practice Tests
Course
Introduction
Introduction to Management Accounting provides students with a foundational understanding of how accounting information is used by managers for decision-making, planning, and control within organizations. The course covers essential concepts such as cost behavior, budgeting, performance evaluation, variance analysis, and the use of accounting data in strategic planning. Through case studies and real-world examples, students learn to analyze financial information, prepare internal reports, and support effective management processes to enhance organizational performance.
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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Chapter 1: Managerial Accounting, the Business Organization
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129 Verified Questions
129 Flashcards
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Sample Questions
Q1) What is the time period called through which a product passes,from conception to the end of its life?
Answer: Product life cycle
Q2) You are a management accountant in a large company.You have observed unethical behavior by your immediate supervisor.In accordance with the guidelines offered by the IMA,which of the following courses of action should NOT be taken?
A)Follow the organization's established policies on the resolution of ethical conflict.
B)Discuss the issue with your immediate supervisor.
C)Consult your own attorney.
D)Initiate a confidential discussion with an IMA Ethics Counselor.
Answer: B
Q3) Explain the cost-benefit balance in designing an accounting system.
Answer: When designing an accounting system,the cost-benefit balance is of primary importance.The estimated costs must always be weighed against probable benefits.Accounting systems can be very simple or very complicated.An elaborate system should be chosen when the expected benefits from the system exceed the costs of the system.
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Page 3
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) A good example of a cost driver for production labor wages is the number of engineering hours worked.
A)True
B)False
Answer: False
Q2) Costs may behave in a linear or a nonlinear manner.
A)True
B)False
Answer: True
Q3) The ________ is the change in total results under a new condition,in comparison with some given or known condition.
A)incremental effect
B)detrimental effect
C)conditional effect
D)exclusive effect
Answer: A
Q4) The benefits of using a computer model in CVP analysis always exceed the costs.
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) 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
Q2) In regression analysis,a lower coefficient of determination is better than a higher one.
A)True
B)False
Answer: False
Q3) A compensation plan where the sales force is paid salary plus commission is a
A)purely variable cost
B)mixed cost
C)step cost
D)fixed cost
Answer: B
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Page 5
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) Cost allocation is used to assign direct costs to cost objects.
A)True
B)False
Q2) ________ use(s)the output of an activity-based costing system to improve the operational control of an organization.
A)Cost accounting
B)Cost-volume-profit models
C)Activity-based management
D)Traditional costing system
Q3) List and explain five reasons why more firms are adopting activity-based costing systems.
Q4) 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
Q5) Value-added costs are not necessary for most products. A)True
B)False
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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) Marginal cost is the additional cost resulting from producing and selling one additional unit.
A)True
B)False
Q2) Factors that are usually important in determining the feasibility of earning the desired target profit margin include inflation and interest rates.
A)True
B)False
Q3) What are the qualitative aspects of a decision?
A)those for which measurement in dollars and cents is difficult and imprecise
B)those with a definite dollar value
C)those with a cost figure
D)those which are never relevant to a decision
Q4) The difference between the gross margin and the market price is the target cost for a new product.
A)True
B)False
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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) ________ costs will not continue if an ongoing operation is changed or deleted.
A)Avoidable
B)Common
C)Differential
D)Incremental
Q2) The key reasons that companies outsource are to improve the company's focus and reduce operating costs.
A)True
B)False
Q3) In practice,sunk costs often influence important decisions,especially when a decision maker does not want to admit that a previous decision was a bad decision.
A)True
B)False
Q4) The key to determining the financial difference between two alternative courses of action is to identify the ________.
A)opportunity cost of one alternative
B)joint cost of both alternatives
C)differential costs and revenues
D)joint cost of one alternative
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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) Managers may lie to increase the resources allocated to their departments.
A)True
B)False
Q2) The financial budget process ends with the ________.
A)budgeted balance sheet
B)budgeted income statement
C)budgeted cash flow statement
D)budgeted statement of stockholders' equity
Q3) ________ usually prepare and use the operating budget.________ focus on the financial budget.
A)Sales managers; The board of directors
B)Financial managers; Line operating managers
C)Line operating managers; Financial managers
D)The audit committee; The board of directors
Q4) A budget is an example of an informal business plan.
A)True
B)False
Q5) A good budget process communicates from the top down,but not from the bottom up.
A)True
B)False Page 9
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Page 10
Chapter 8: Flexible Budgets and Variance Analysis
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143 Verified Questions
143 Flashcards
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Sample Questions
Q1) A flexible budget adjusts for changes in sales volume and other cost-driver activities.
A)True
B)False
Q2) Efficiency is indicated by the ________ variances.
A)sales activity
B)static budget
C)flexible budget
D)strategic budget
Q3) The static budget is based on the ________ level of output and the flexible budget is based on the ________ level of output.
A)actual; expected
B)expected; actual
C)expected; planned
D)actual; projected
Q4) A budget prepared for one expected level of activity is called a ________.
A)flexible budget
B)static budget
C)variable budget
D)rolling budget
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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) The ________ report is a report that displays the financial impact of quality.
A)Performance
B)Cost of quality
C)Cycle time
D)Production control
Q2) Productivity is a measure of inputs divided by outputs.
A)True
B)False
Q3) The term "cost center" may be used to describe responsibility centers that are assigned responsibility for capital investment.
A)True
B)False
Q4) A set of machines may be a responsibility center for a production supervisor.
A)True
B)False
Q5) Goal congruence exists when individuals aim at short-term goals and groups aim at long-term organizational goals.
A)True
B)False
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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) The most popular systems for transfer pricing in practice are ________.
A)market-based transfer prices
B)cost-based transfer prices based on variable costs
C)cost-based transfer prices based on full costs
D)all of the above
Q2) According to agency theory,employment contracts will balance three factors that include ________.
A)cost-benefit,risk and uncontrollable factors
B)goal congruence,incentive and risk
C)cost of measuring performance,cost-benefit and risk
D)incentive,risk and cost of measuring performance
Q3) In designing accounting control systems,top managers should consider the system's impact on the behavior of employees.
A)True
B)False
Q4) Capital turnover can be increased by decreasing investment.
A)True
B)False
Q5) Identify the disadvantages of decentralization.
Q6) Define decentralization and identify its expected benefits. Page 13
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Page 14
Chapter 11: Capital Budgeting
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141 Verified Questions
141 Flashcards
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Sample Questions
Q1) When considering the cash operating inflows resulting from an investment,taxes will
A)reduce the amount of the cash inflows by the tax rate
B)reduce the amount of the cash inflows by (1 minus the tax rate)
C)increase the amount of the cash inflows by the tax rate
D)increase the amount of the cash inflows by (1 minus the tax rate)
Q2) Which of the following statements about the payback model is FALSE?
A)The payback model measures how quickly investment dollars may be recouped.
B)The payback model provides a rough estimate of the riskiness of a project.
C)The payback model does not consider cash flows after the payback period.
D)The payback model measures profitability.
Q3) Under the NPV method,the higher the risk of a project,the lower the desired rate of return.
A)True
B)False
Q4) In net present value method,the only relevant operating cash flows are the ones that differ among alternatives.
A)True
B)False
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Chapter 12: Cost Allocation
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Sample Questions
Q1) When allocating fixed costs from service departments to user departments,a predetermined lump-sum allocation based on the long-range capacity available to the user should be used.
A)True
B)False
Q2) Variable costs of service departments are allocated to user departments using ________ cost rates instead of ________ cost rates.
A)actual; budgeted
B)budgeted; actual
C)long-range; short-range
D)short-range; long-range
Q3) The two methods for allocating service department costs to other departments are
A)step-down and indirect
B)direct and step-up
C)step-down and direct
D)step-up and indirect
Q4) Joint costs are allocated to main products but not to by-products.
A)True
B)False
Page 16
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Chapter 13: Accounting for Overhead Costs
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Sample Questions
Q1) 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
Q2) 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
Q3) In the immediate write-off approach to overhead variances,overapplied overhead is regarded as a(n)________.
A)addition to the cost of inventory
B)reduction to the cost of inventory
C)increase in cost of goods sold
D)decrease in cost of goods sold
Q4) Variable overhead costs may have a production volume variance.
A)True
B)False
Page 17
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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) In process costing,units that are started but NOT completed by the end of the accounting period are called ________.
A)sold units
B)units in ending direct materials inventory
C)units in ending work-in-process inventory
D)units in ending finished goods inventory
Q2) Process costing averages costs over large numbers of nearly identical products.
A)True
B)False
Q3) Which of the following is NOT a step in carrying out process costing?
A)calculate output in terms of equivalent units
B)calculate cost per equivalent unit
C)summarize the total costs to account for
D)summarize the total costs of a job
Q4) Which industry does NOT use job-order costing?
A)construction
B)aircraft
C)printing
D)lumber
Chapter 15: Basic Accounting: Concepts, techniques, and Conventions
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154 Flashcards
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Sample Questions
Q1) Generally Accepted Accounting Principles in the United States are developed by the International Accounting Standards Committee.
A)True
B)False
Q2) This transaction will increase net income under the accrual basis,but will not increase net income under the cash basis.
A)recording depreciation expense for the month
B)cash sale of inventory at a sales price in excess of cost
C)sale of inventory on account at a sales price in excess of cost
D)cash payment for rent
Q3) The distinction between paid-in capital and retained earnings is not made for ________.
A)corporations
B)corporations and partnerships
C)corporations and sole proprietorships
D)partnerships and sole proprietorships
Q4) Companies must write-off research and development costs as expenses immediately.
A)True
B)False
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Chapter 16: Understanding Corporate Annual Reports:
Basic Financial Statements
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149 Flashcards
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Sample Questions
Q1) Goodwill is amortized for financial statement purposes.
A)True
B)False
Q2) Unsecured debt consists of ________.
A)debentures
B)mortgage bonds
C)preferred stock
D)common stock
Q3) Analysts focus on free cash flow from the statement of cash flows.
A)True
B)False
Q4) Which of the following is NOT a current liability?
A)accounts payable
B)income taxes payable
C)accrued wages payable
D)bonds payable due in ten years
Q5) A company's treasury stock is outstanding but not issued.
A)True
B)False
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Chapter 17: Understanding and Analyzing Consolidated Financial Statements
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Sample Questions
Q1) Goodwill can only be recognized when one company acquires another company.
A)True
B)False
Q2) Company A acquired 100 percent of the outstanding common stock of Company
B.At the date of acquisition,no goodwill was involved and the book value of the assets and liabilities of Company B equal their fair values.Immediately after the acquisition,an elimination entry is prepared in order to prepare consolidated financial statements.What accounts are affected by the elimination entry?
A)Investment in Company B only
B)Stockholders' Equity of Company B only
C)Fixed Assets of Company B only
D)Investment in Company B and Stockholders' Equity of Company B
Q3) All other things equal,a higher current ratio indicates that ________.
A)a company has excess cash to pay liabilities
B)a short-term creditor is likely to be paid in full and on time
C)a company's long-term debt is coming due within the next year
D)a company's short-term debt is coming due within the next year
Q4) The Investment in Subsidiary account appears on a consolidated balance sheet.
A)True
B)False
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