Introduction to Management Accounting Test Preparation
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 covers core concepts such as cost behavior, budgeting, variance analysis, and performance measurement, emphasizing their application in planning, controlling, and decision-making processes. By exploring topics like job order costing, process costing, and activity-based costing, students gain practical insights into internal financial reporting and resource allocation, preparing them to effectively analyze and support organizational strategies.
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) A systematic problem-solving philosophy that encourages front line workers to achieve zero defects is known as:
A) just-in-time (JIT).
B) total quality management (TQM).
C) activity based management (ABM).
D) None of these Answer: B
Q2) The primary difference between manufacturing companies and service companies is that the products provided by service companies are consumed immediately.
A)True
B)False Answer: True
Q3) The philosophy of encouraging workers to achieve zero defects and high customer satisfaction is known as total quality management.
A)True
B)False Answer: True
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Page 3
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) Select the incorrect statement regarding cost structures.
A) Highly leveraged companies will experience greater profits than companies less leveraged when sales increase.
B) The more variable cost, the higher the fluctuation in income as sales fluctuate.
C) When sales change, the amount of the corresponding change in income is affected by the company's cost structure.
D) Faced with significant uncertainty about future revenues, a low leverage cost structure is preferable to a high leverage cost structure.
Answer: B
Q2) If revenues are expected to decline,management should attempt to convert its variable costs into fixed costs.
A)True
B)False
Answer: False
Q3) How does total variable cost respond when volume increases?
Answer: Total variable cost would increase in direct proportion to volume.A 5% increase in volume would mean a 5% increase in total variable costs.
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Page 4
Chapter 3: Analysis of Cost, volume, and Pricing to Increase Profitability
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149 Verified Questions
149 Flashcards
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Sample Questions
Q1) How is weighted average contribution margin calculated,and how can it be used in cost-volume-profit analysis?
Answer: A company that sells two or more products might calculate weighted average contribution margin.For each product,the contribution margin per unit would be multiplied by the fraction of the company's sales mix represented by that product.The amounts thus calculated for all the products would be added together to arrive at the weighted average contribution margin.This number would be used in cost-volume-profit analysis.For example,a company might calculate sales to achieve a target profit by adding fixed costs and target profit and then dividing the sum by the weighted average contribution margin.
Q2) Sensitivity analysis is performed in order to determine optimal sales mix.
A)True
B)False
Answer: False
Q3) Contribution margin ratio will remain the same at various levels of sales even if total fixed costs are altered.
A)True
B)False
Answer: True
Page 5
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Chapter 4: Cost Accumulation,tracing,and Allocation
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158 Verified Questions
158 Flashcards
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Sample Questions
Q1) Which of the following statements is true regarding the salary of the manager of a fast-food hamburger restaurant?
A) The salary is a fixed cost that is directly traceable to the cost of making hamburgers.
B) The salary is a variable cost that is directly traceable to the cost of operating a specific restaurant.
C) The salary is a variable cost that cannot be traced to the cost of operating a specific restaurant.
D) None of the answers are correct.
Q2) Indirect costs are often pooled,and not allocated individually because:
A) individual allocation would be more timely.
B) individual allocation would be more accurate.
C) individual allocation would be tedious.
D) the benefits of individual allocation of indirect costs are greater than the costs.
Q3) Cost allocation is the process of dividing a total cost into its fixed and variable components.
A)True
B)False
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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) Chastain Company recently implemented an activity-based costing system.As a result of the ABC allocations,the cost of one of the company's products was determined to be above its current selling price.Due to competition,the company is unable to raise the price of this product.Which of the following options is most reasonable,assuming Chastain employs a target pricing strategy?
A) Use less expensive materials to make the product.
B) Raise prices under the assumption that the company's competitors will follow suit.
C) Target advertising to high-income customers.
D) Return to the old allocation method, which produces a lower amount of estimated cost.
Q2) When making a long-term cost plus pricing decision,a company should consider:
A) The upstream research and development cost.
B) The allocated portion of facility-level cost.
C) The direct manufacturing cost.
D) All of these answers are correct.
Q3) Inspection of products may sometimes be considered a batch-level activity.
A)True
B)False
Q4) What is the purpose of target pricing? What are the steps in target pricing?
Page 7
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Chapter 6: Relevant Information for Special Decisions
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151 Verified Questions
151 Flashcards
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Sample Questions
Q1) To be relevant in decision making,cost or revenue information must be future-oriented and must not differ among the alternatives.
A)True
B)False
Q2) The book value of equipment generally is one of the most important factors to consider in deciding to replace the equipment.
A)True
B)False
Q3) For purposes of decision making,avoidable costs are costs that:
A) were incurred in the past.
B) will not be incurred in the future, regardless of the alternative chosen.
C) differ among alternatives.
D) None of these answers are correct.
Q4) Select the correct statement regarding relevant costs and revenues.
A) Sunk costs are relevant for decision-making purposes.
B) Relevant costs are frequently called unavoidable costs.
C) Direct labor is an example of a unit-level cost.
D) Only variable costs are relevant for decision making.
Q5) What are constraints? Provide an example.
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Chapter 7: Planning for Profit and Cost Control
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150 Verified Questions
150 Flashcards
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Sample Questions
Q1) Select the incorrect statement regarding the cash budget.
A) The cash budget helps managers to anticipate cash shortages and excess cash balances.
B) Cash inflows and outflows indicated on the cash budget are reported on a company's pro forma statement of cash flows.
C) Cash payments may include outflows for inventory, selling and administrative expenses, and equipment purchases.
D) The total cash available is calculated by adding cash receipts and the ending cash balance.
Q2) The marketing department is primarily responsible for establishing the sales forecast.
A)True
B)False
Q3) The master budget normally covers:
A) 3 months.
B) 1 year.
C) 1-5 years.
D) 5-10 years.
Q4) Why is cash management important to a business?
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Chapter 8: Performance Evaluation
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156 Verified Questions
156 Flashcards
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Sample Questions
Q1) Select the correct statement regarding flexible budgets.
A) A flexible budget can only be prepared for a single level of activity.
B) A flexible budget is not used for planning.
C) A flexible budget shows expected revenues and costs at a variety of activity levels.
D) A flexible budget is also known as the master budget.
Q2) How does the use of standard costs fit with the philosophy of management by exception?
Q3) When would a variance be labeled as favorable?
A) When actual costs are less than standard costs
B) When standard costs are equal to actual costs
C) When standard costs are less than actual costs
D) When estimated costs are greater than actual costs
Q4) White Company budgeted for $200,000 of fixed overhead cost and volume of 40,000 units.During the year,the company produced and sold 39,000 units and spent $210,000 on fixed overhead. The fixed overhead cost volume variance is:
A) $10,000 favorable.
B) $10,000 unfavorable.
C) $5,000 favorable.
D) $5,000 unfavorable.
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Chapter 9: Responsibility Accounting
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145 Verified Questions
145 Flashcards
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Sample Questions
Q1) A disadvantage of decentralization is that it fails to motivate managers to improve the productivity of their division.
A)True
B)False
Q2) The Electronics Division of Anton Company reports the following results for the current year: \[\begin{array} { l c c }
\text { Reveruses } & \$ & 800,000 \\
\text { Operating expenses } & \$ & 656,000 \\
\text { Operating income } & \$ & 144,000 \\
\text { Operating assets } & \$ & 1,200,000
\end{array}\] Anton Company has set a target return on investment (ROI)of 11% for the Electronics Division.
The Electronic Division's return on investment is:
A) 11.25%.
B) 12%.
C) 66.7%.
D) 18%.
Q3) How should a responsibility report be prepared to support the practice of management by exception?
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Page 11
Chapter 10: Planning for Capital Investments
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155 Verified Questions
155 Flashcards
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Sample Questions
Q1) Harvey wants to determine the net present value for a proposed capital investment.He has determined the desired rate of return,the expected investment time period,a series of cash inflows of equal amount,the salvage value of the investment,and the required cash outflows.Which of the following tables would most likely be used to calculate the net present value of the investment?
A) Present value of annuity.
B) Future value of a lump sum.
C) Present value of annuity and present value of a lump sum.
D) Future value of annuity and future value of a lump sum.
Q2) Describe how the unadjusted rate of return for a capital investment is calculated.Should it be based on the net cost of the investment or the average investment?
Q3) Investment projects A and B offer equal cash inflows over their lives,but the cash inflows for project A occur sooner than those for project B.The two projects are otherwise identical (the cost is the same,for example).Based on this information,the internal rate of return for A is lower than for B.
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) Service companies generally do not have Work in Process and Finished Goods inventory accounts.
A)True
B)False
Q2) The credit to the Finished Goods Inventory account represents the cost of goods manufactured.
A)True
B)False
Q3) The work in process inventory account increases when raw materials are placed into production.
A)True
B)False
Q4) Lexington Company's predetermined overhead rate is $4.00 per direct labor hour.Which of the following equations correctly computes the amount of overhead cost that should be applied to work in process assuming a job required 100 hours but was estimated to require 90 hours?
A) 100 hours × $4 = $400
B) 90 hours × $4 = $360
C) 1 job × $4 = $4
D) None of these answers are correct.
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Chapter 12: Job-Order, process, and Hybrid Costing Systems
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147 Flashcards
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Sample Questions
Q1) Why is calculating the cost of services provided to customers important for a service business?
Q2) Preston Manufacturing is working on two housing projects.Overhead is applied on the basis of direct labor hours.At the beginning of the year,the company estimated that overhead would be $64,000 and 10,000 direct labor hours would be worked.Both projects were started and completed in the current accounting period.The following transactions were completed during the period: (a)Used $10,000 of direct material on Project I and $6,800 of direct material on Project II.
(b)Labor costs for the two jobs amounted to the following: Project I,$24,000 (2,000 hours); Project II,$44,000 (6,000 hours).
(c)Project II was sold during the period for $120,000.
The amount of estimated overhead applied to Work in Process Inventory for the period equals: (Do not round intermediate calculation.)
A) $51,200.
B) $64,000.
C) $54,400.
D) $44,000.
Q3) What source documents would be used in preparing a job cost sheet?
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Chapter 13: Financial Statement Analysis
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153 Flashcards
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Sample Questions
Q1) Indicate whether each of the following statements about financial statement analysis is true or false.
The ratio of plant assets to long-term liabilities is a measure of a company's ability to obtain additional long-term financing.______
Generally,a company's current assets should be purchased using long-term financing such as bonds payable.______
Ratios that measure a company's profitability provide some measure of the effectiveness of the company's management.______
Net margin indicates the amount remaining from each sales dollar after cost of goods sold has been subtracted out.______
Net margin is also sometimes called the return on assets ratio.______
Q2) Assume that you are considering purchasing some of a company's long-term bonds as an investment.Which of the company's financial statement ratios would you probably be most interested in?
A) Debt to assets ratio
B) Debt to equity
C) Plant assets to long-term liabilities
D) All of these answers are correct.
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Chapter 14: Statement of Cash Flows
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Sample Questions
Q1) The Good Corporation provided the following for the current year: \[\begin{array} { l r r } & \text { Begirning } & \text { Ending } \\
\text { Land } & \$ 48,000 & \$ 100,000 \\
\text { Equipment } & 36,800 & 44,000 \\
\text { Marketable securities } & 200,000 & 160,000 \end{array}\] Good's income statement reported an $8,000 gain on sale of land as well as a $10,000 loss on the sale of marketable securities.A parcel of land costing $16,000 was sold for a gain of $8,000.No additional securities were purchased during the year.The company also sold equipment originally costing $6,000 with accumulated depreciation of $4,000 for a gain of $1,600.Purchases of additional land and equipment were cash transactions.
Required:
Prepare the investing activities section of the statement of cash flows.Use the reconciliation approach.
Q2) Under the indirect method,losses are added and gains are subtracted when computing net cash flow from operating activities.
A)True
B)False
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