Introduction to Management Accounting Exam Preparation Guide
Course Introduction
Introduction to Management Accounting provides students with an essential foundation in the principles and techniques used by managers to plan, control, and make informed decisions within organizations. The course covers key topics such as cost classifications, budgeting, variance analysis, performance evaluation, and the use of accounting information in strategic planning. Through case studies and practical examples, students learn how management accounting supports organizational objectives by providing relevant data for internal decision-making and improving operational efficiency. This course is ideal for those seeking to understand the vital role of accounting in business management and strategy.
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) All service organizations are similar in that ________.
A)there is very little labor
B)output is difficult to measure
C)major inputs and outputs can be stored
D)they are capital intensive
Answer: B
Q2) ________ is the field that produces information for managers within an organization.
A)Financial accounting
B)Management accounting
C)Financial auditing
D)External auditing
Answer: B
Q3) The majority of accountants work for government entities and nonprofit firms.
A)True
B)False
Answer: False
Q4) What are the four standards of ethical conduct covered by the IMA's Statement of Ethical Professional Practice?
Answer: Competence,Confidentiality,Integrity and Credibility
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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) ________ is the relative proportions or combinations of quantities of different products that comprise total sales.
A)Sales mix
B)Constant mix
C)Fluctuating mix
D)Variable cost ratio
Answer: A
Q2) Last year,XYZ Company sold 10,000 units that cost $40,000 to produce.This cost included $4,000 in fixed computer resource costs,$6,000 in fixed labor cost and $3.00 per unit for communications resource costs.XYZ Company expects to sell 20,000 units next year.Resource costs are expected to be in the same relevant range next year.What are the total estimated costs for next year?
A)$70,000
B)$75,000
C)$80,000
D)$84,000
Answer: A
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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) Committed fixed costs usually arise from the possession of facilities,equipment and a basic organizational structure.
A)True
B)False
Answer: True
Q2) In a corporate setting,property taxes are an example of a(n)________.
A)mixed cost
B)committed fixed cost
C)discretionary fixed cost
D)engineering cost
Answer: B
Q3) The use of high-technology methods rather than labor in manufacturing products usually creates less risk for companies with wide variations in demand.
A)True
B)False
Answer: False
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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 can specifically and exclusively identify indirect costs with a given cost object in an economically feasible way.
A)True
B)False
Q2) In a manufacturing firm,the computation of Cost of Goods Manufactured does NOT use ________.
A)finished goods inventory,ending balance
B)indirect production costs
C)direct labor costs
D)direct materials used
Q3) Storing inventories and transporting incomplete products in a plant are examples of value-added activities.
A)True
B)False
Q4) In a merchandising company,________.
A)selling and administrative costs are period costs
B)insurance expense on the corporate building is a product cost
C)work in process inventory may be present
D)finished goods inventory may be present
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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 approach 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 demand 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) Under absorption costing,all ________ costs are product or inventoriable costs.
A)direct and indirect manufacturing
B)direct manufacturing
C)indirect manufacturing
D)selling and administrative
Q3) Product design affects a small amount of costs in the value chain.
A)True
B)False
Q4) In imperfect competition,marginal revenue usually increases as volume increases. 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) Variable expenses are divided into avoidable and unavoidable costs.
A)True
B)False
Q2) Heating and air conditioning costs are examples of common costs to the different departments in a retail store.
A)True
B)False
Q3) Opportunity cost ________.
A)is the contribution margin of the best alternative that is included in the analysis
B)is the contribution margin of the worst alternative that is included in the analysis
C)is the cost of resources owned by the company
D)applies to resources owned by a company
Q4) When making a make-or-buy decision for a part,what items are relevant to the decision?
A)variable costs of making the part
B)fixed costs that the company can avoid by not making the part
C)rental income from idle plant when not making the part
D)all of the above
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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) Participative budgeting is the active participation of all affected employees in the formulation of the budget.
A)True
B)False
Q2) The sales budget should be the responsibility of line management.
A)True
B)False
Q3) 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
Q4) Which of the following is a component of the financial budget?
A)budgeted balance sheet
B)budgeted income statement
C)sales budget
D)purchases budget
Q5) Line operating managers usually prepare and use the operating budget.
A)True
B)False
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Chapter 8: Flexible Budgets and Variance Analysis
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143 Verified Questions
143 Flashcards
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Sample Questions
Q1) 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
Q2) An activity-based flexible budget is based on budgeted costs for every activity using the related cost driver.
A)True
B)False
Q3) Black Company planned to produce and sell 900 units at a total cost of $180,000.Actual production and sales were 900 units at a cost of $170,000.Black Company was ________.
A)efficient and ineffective
B)inefficient and ineffective
C)inefficient and effective
D)efficient and effective
Q4) What are two possible interpretations of "currently attainable standards"?
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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) A profit center can exist in a nonprofit organization.
A)True
B)False
Q2) Managerial effort does not necessarily have to accompany goal congruence.
A)True
B)False
Q3) When evaluating a segment manager,unallocated costs usually include central corporate costs.
A)True
B)False
Q4) In most organizational settings,superior ________ performance usually follows from superior ________ performance.
A)financial; nonfinancial
B)nonfinancial; financial
C)financial; strategic
D)nonfinancial; strategic
Q5) Increased productivity can be shown by maintaining the number of inputs but increasing the number of outputs.
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 rate of return on net book value decreases as equipment ages.
A)True
B)False
Q2) SS Company's revenues are $300 on invested capital of $240.Expenses are currently 70% of sales.If SS Company can reduce its invested capital by 25%,return on investment will be ________.
A)18.75%
B)50.00%
C)75.00%
D)93.75%
Q3) When compared to a decentralized organization,there are really no advantages to a centralized organization.
A)True
B)False
Q4) Return on investment can be computed as ________ times ________.
A)residual income; capital turnover
B)cost of capital; EVA
C)return on sales; capital turnover
D)net income; cost of capital
Q5) Define decentralization and identify its expected benefits.
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Chapter 11: Capital Budgeting
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141 Verified Questions
141 Flashcards
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Sample Questions
Q1) If the IRR on a project is greater than the required rate of return,then the net present value of the project is ________.
A)less than zero
B)greater than zero
C)equal to zero
D)none of the above
Q2) The best way to reconcile any conflict between capital budgeting models and performance evaluation is to use the ________ for both capital budgeting decisions and performance evaluation.
A)payback period model
B)accounting rate of return model
C)real options model
D)discounted cash flow model
Q3) In the absence of taxes,depreciation expense on a long-term asset is a relevant cash flow for the NPV model.
A)True
B)False
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Chapter 12: Cost Allocation
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125 Verified Questions
125 Flashcards
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Sample Questions
Q1) Allocating fixed costs based on long-range plans may inadvertently result in a tendency of mangers to ________.
A)underutilize available capacity
B)overestimate planned usage
C)underestimate planned usage
D)overestimate planned costs
Q2) When determining product cost,the last step in the traditional approach to cost allocation is ________.
A)divide costs in each producing department into direct costs and indirect costs
B)trace direct costs to products
C)select cost pools and cost allocation bases in each production department and assign indirect department costs to the appropriate cost pool
D)allocate the costs in each cost pool to the product in proportion to the usage of the related cost-allocation base
Q3) Typical cost drivers in a traditional approach to costing products are direct labor hours and machine hours.
A)True
B)False
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14
Chapter 13: Accounting for Overhead Costs
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127 Verified Questions
127 Flashcards
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Sample Questions
Q1) ________ is used for external reporting.
A)Absorption costing
B)Variable costing
C)Direct costing
D)Activity-based costing
Q2) Variable costing considers fixed manufacturing overhead costs as a(n)________.
A)inventoriable cost
B)product cost
C)future cost
D)immediate expense
Q3) The budgeted factory overhead rate is computed as ________.
A)actual factory overhead divided by actual production in units
B)actual factory overhead divided by actual cost driver activity
C)budgeted factory overhead divided by actual cost driver activity
D)budgeted factory overhead divided by budgeted cost driver activity
Q4) Differences between variable-costing and absorption-costing operating income can be explained by the change in units in beginning and ending inventory of finished goods.
A)True
B)False
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) Each job has its own job-cost record in a job-costing system.
A)True
B)False
Q2) In process costing,goods are moved from the Assembly Department to the Packaging Department.Costs incurred in the Assembly Department for the goods received by the Packaging Department are called ________ by the Packaging Department.
A)equivalent units
B)finished goods
C)transferred-in costs
D)factory overhead applied
Q3) The centerpiece of a job-order costing system is the balanced scorecard.
A)True
B)False
Q4) Assume a company uses process costing.When factory overhead is applied,Finished Goods Inventory is the debit part of the journal entry.
A)True
B)False
Page 16
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Chapter 15: Basic Accounting: Concepts, techniques, and Conventions
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154 Verified Questions
154 Flashcards
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Sample Questions
Q1) A transaction is any event that affects the financial position of an organization and requires recording.
A)True
B)False
Q2) The ________ has ultimate responsibility for specifying Generally Accepted Accounting Principles for companies with publicly traded stock in the United States.
A)Financial Accounting Standards Board
B)International Accounting Standards Board
C)Securities and Exchange Commission
D)European Union Accounting Federation
Q3) Retained earnings are a general claim against ________.
A)cash
B)a particular asset
C)long-term assets
D)total assets
Q4) Dividends paid are considered an expense on the income statement.
A)True
B)False
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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) A company's operating cycle can be longer than one year.
A)True
B)False
Q2) The indirect method of preparing the statement of cash flows is the most popular method in the United States.
A)True
B)False
Q3) Which of the following statements about depreciation is FALSE?
A)Depreciation does not generate cash.
B)Depreciation is an allocation of the original cost of an asset to the periods in which the asset is used.
C)Depreciation does not entail an outflow of cash.
D)Depreciation is a means of setting aside cash for the replacement of an asset.
Q4) Dividends paid are reported on the Retained Earnings Statement.
A)True
B)False
Q5) The deferred tax account can only be a liability.
A)True
B)False
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Chapter 17: Understanding and Analyzing Consolidated Financial Statements
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Sample Questions
Q1) Marketable securities that the investor company buys only with the intent to resell them shortly are called ________.
A)available-for-sale securities
B)underpriced securities
C)trading securities
D)options
Q2) Goodwill is recognized when one company purchases another company and ________.
A)the purchase price of the acquired company exceeds the book value of the acquired company's assets
B)the purchase price of the acquired company exceeds the book value of the acquired company's assets less liabilities
C)the purchase price of the acquired company exceeds the fair value of the acquired company's assets
D)the purchase price of the acquired company exceeds the fair value of the acquired company's assets less liabilities
Q3) Return on sales equals gross profit divided by sales.
A)True
B)False
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