Introduction to Management Accounting
Textbook Exam Questions
Course Introduction
Introduction to Management Accounting provides students with a comprehensive overview of the fundamental concepts and techniques used in planning, controlling, and decision-making within organizations. The course explores the role of management accounting in supporting internal business processes, focusing on cost classification and behavior, budgeting, variance analysis, performance measurement, and the use of relevant information for short- and long-term decision-making. Emphasis is placed on real-world applications and ethical considerations, equipping students with the analytical and problem-solving skills essential for effective managerial decision support.
Recommended Textbook Managerial Accounting 5th Edition by
Karen W. Braun
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Page 2
Chapter 1: Introduction to Managerial Accounting
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Sample Questions
Q1) Overseeing the day-to-day operations of a company is an example of which of the following management functions?
A)Directing
B)Planning
C)Analyzing
D)Controlling
Answer: A
Q2) The primary goal of managerial accounting is to provide information to
A)internal decision-makers.
B)shareholders.
C)creditors.
D)both shareholders and creditors.
Answer: A
Q3) Which of the following role is directly responsible for all financial functions in an organization?
A)Treasurer
B)CEO
C)CFO
D)COO
Answer: C
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Chapter 2: Building Blocks of Managerial Accounting
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Sample Questions
Q1) Which of the following is an example of a fixed cost for a manufacturer?
A)Income Taxes
B)Machine Repair Expense
C)Fire Insurance on buildings
D)Delivery Fuel Expense
Answer: C
Q2) Porches, Inc. sells lawn furniture. Selected financial information for the most recent year is as follows: Beginning merchandise inventory on January 1 was $33,300.
Ending merchandise inventory on December 31 was $35,000.
Purchases during the year were $92,300.
Selling and administrative expenses were $75,900. Sales for year were $262,700.
What was operating income for the year?
A)$90,600
B)$96,200
C)$94,500
D)$92,800
Answer: B
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Page 4
Chapter 3: Job Costing
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Sample Questions
Q1) All manufacturers use either a pure process costing system or a pure job costing system.
A)True
B)False
Answer: False
Q2) Underallocated manufacturing overhead results when
A)production is greater than last year.
B)actual overhead is greater than expected.
C)actual overhead is greater than allocated overhead.
D)estimated overhead is greater than actual overhead.
Answer: C
Q3) The two basic types of costing systems are
A)product costing and materials inventory costing.
B)periodic costing and perpetual costing.
C)job costing and process costing.
D)periodic costing and process costing.
Answer: C
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Page 5
Chapter 4: Activity-Based Costing, Lean Operations, and the Costs of Quality
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Q1) Which of the following cost of quality categories represents the cost incurred to "test toasters before a sale"?
A)Appraisal costs
B)Prevention costs
C)Internal failure costs
D)External failure costs
Q2) Lean companies cross train their employees for all of the following reasons except:
A)boosts morale.
B)lowers costs.
C)increases individual workloads.
D)empowers employees.
Q3) Which of the following cost of quality categories represent the cost incurred to provide "warranty repair on a juicer?"
A)Prevention costs
B)Appraisal costs
C)External failure costs
D)Internal failure costs
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Page 6
Chapter 5: Process Costing
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Sample Questions
Q1) Assume that 9200 units were in beginning WIP Inventory, 35,500 were started, 35,000 were completed, and 9700 were in ending WIP Inventory. Direct materials are added at the beginning of the process. What are the total equivalent units for direct materials?
A)44,700
B)45,200
C)44,200
D)35,500
Q2) Assigning costs to units completed and to units in ending WIP Inventory in a second department is a three-step process.
A)True
B)False
Q3) In the process costing method, when multiple production steps are required, the five-step process costing procedure must be completed in each production department.
A)True
B)False
Q4) When the units are sold, Cost of Goods Sold is credited.
A)True
B)False
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Chapter 6: Cost Behavior
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Sample Questions
Q1) The contribution margin income statement presents ________ below the contribution margin line.
A)only variable expenses relating to selling and administrative activities
B)only fixed expenses relating to selling and administrative activities
C)all fixed expenses
D)all variable expenses
Q2) A contribution margin income statement allows managers to see which costs will change with changes in volume and which costs will remain fixed.
A)True
B)False
Q3) The line determined by regression analysis is sometimes referred to as the "line of worst fit."
A)True
B)False
Q4) When graphing total fixed costs, the cost line always begins at the origin.
A)True
B)False
Q5) Describe the scatterplot method. Discuss the advantages and disadvantages of using the scatterplot method.
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Chapter 7: Cost-Volume-Profit Analysis
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Sample Questions
Q1) Sophia's Delivery Service charges a $56 service fee. The variable cost per service run is $19. The company's fixed expenses amount to $6000. If the operating income equals fixed expenses, what is the breakeven point in sales revenue for Sophia's Delivery Service?
A)$18,162
B)$3081
C)$6000
D)$9128
Q2) Dairy Days Ice Cream sells ice cream cones for $5 per customer. Variable costs are $2 per cone. Fixed costs are $2100 per month. What is Dairy Days' contribution margin ratio?
A)262%
B)60%
C)350%
D)57%
Q3) The contribution margin ratio is the unit contribution margin divided by the variable cost per unit.
A)True
B)False
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Page 9
Chapter 8: Relevant Costs for Short-Term Decisions
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Sample Questions
Q1) A company's manager would consider which of the following in deciding whether to discontinue its electronics product line?
A)The costs it could save by discontinuing the product line
B)The revenues it would lose from discontinuing the product line
C)How discontinuing the electronics product line would affect sales of its other products (like CDs)
D)All of the above
Q2) Stoneycreek golf course is planning for the coming season. Investors would like to earn a 12% return on the company's $40 million of assets. The company primarily incurs fixed costs to groom the greens and fairways. Fixed costs are projected to be $20 million for the golfing season. About 500,000 golfers are expected each year. Variable costs are about $12 per golfer. The Stoneycreek course has a favorable reputation in the area and therefore, has some control over the price of a round of golf. Based on these numbers, what are Stoneycreek's total costs?
Q3) Fixed costs that will continue to exist if a product is discontinued are relevant.
A)True B)False
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Chapter 9: The Master Budget
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Sample Questions
Q1) Budgets communicate financial plans to employees at all levels in the company.
A)True
B)False
Q2) Merchandising companies prepare sales, cash, and operating expenses budgets.
A)True
B)False
Q3) A company should ________ when projecting cash receipts for a given month.
A)include only cash collections from sales made in that month
B)only list COD sales made in that month
C)only list credit sales made in that month
D)include cash to be collected in that month regardless of when the sale was made
Q4) A company's plan to purchase property, plant, equipment, and other long-term assets is part of the budgeted balance sheet.
A)True
B)False
Q5) The capital expenditures budget is not a component of the operating budget.
A)True
B)False
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Chapter 10: Performance Evalulation
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Sample Questions
Q1) Potential duplication of costs is a disadvantage of decentralized organizations.
A)True
B)False
Q2) Management by exception would dictate that the manager investigate which of the following variances?
A)Variances which are less than budget and actual dollar amount or percentage
B)Variances which are greater than a budget and actual dollar amount or percentage
C)All unfavorable variances
D)All favorable and unfavorable variances
Q3) The Pasta Division of Whole Grain Corporation had sales of $7,000,000 and operating income of $1,190,000 last year. The total assets of the Pasta Division were $2,000,000, while current liabilities were $300,000. Whole Grain Corporation's target rate of return is 13%, while its weighted average cost of capital is 8%. The effective tax rate for the company is 40%. What is the Pasta Division's capital turnover?
A)5)9
B)6)7
C)23.3
D)3)5
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Chapter 11: Standard Costs and Variances
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Sample Questions
Q1) The ________ is the difference between the actual machine hours run and the standard machine hours allowed for the actual production volume.
A)production volume variance
B)overhead flexible budget variance
C)variable overhead efficiency variance
D)both A and C
Q2) The ________ department may be responsible to incur a "sales volume variance."
A)marketing
B)production
C)purchasing
D)personnel
Q3) Easel Manufacturing budgeted fixed overhead costs of $3.75 per unit at an anticipated production level of 1150 units. In July Easel incurred actual fixed overhead costs of $4500 and actually produced 1100 units. What is Easel's fixed overhead budget variance for July?
A)$187.50 favorable
B)$187.50 unfavorable
C)$375.00 favorable
D)$375.00 unfavorable
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Page 13
Chapter 12: Capital Investment Decisions and the Time
Value of Money
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Sample Questions
Q1) The ________ capital budgeting method uses accrual accounting, rather than net cash flows, as a basis for calculations.
A)ARR
B)Payback
C)NPV
D)IRR
Q2) What would a project's profitability index be if the project has an internal rate of return which is equal to the company's discount rate?
A)It would be 0.5.
B)It would be 0.0.
C)It would be 1.0.
D)It cannot be determined from information provided
Q3) The process of choosing among different alternative investments due to limited resources is referred to as
A)capital investing.
B)capital rationing.
C)resource rationing.
D)resource allocation.
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Chapter 13: Statement of Cash Flows
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Sample Questions
Q1) An outflow of cash from an investing activity would be
A)making loans to third parties.
B)issuing notes payable.
C)paying cash dividends to stockholders.
D)purchasing treasury stock.
Q2) A company uses the indirect method to prepare the statement of cash flows. It sold a piece of equipment at a loss of $8600. The equipment was purchased several years ago for $72,500 and had accumulated depreciation of $57,900. What is reported under the operating activities section on the statement of cash flows?
A)Cash proceeds of $6000 are subtracted from net income.
B)Cash proceeds of $6000 are added to net income.
C)The loss of $8600 is subtracted from net income.
D)The loss of $8600 is added to net income.
Q3) On the statement of cash flows, which of the following items would be reported in the financing activities section?
A)Cash paid for interest
B)Cash received from customers
C)Cash received from a sale of treasury stock
D)Cash paid for operating expenses
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Page 15
Chapter 14: Financial Statement Analysis
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Sample Questions
Q1) Working capital is current assets divided by current liabilities.
A)True
B)False
Q2) Managers use a variety of financial ratios to evaluate a company's performance.
A)True
B)False
Q3) The study of percentage changes in comparative financial statements is an example of
A)vertical analysis.
B)trend analysis.
C)benchmarking.
D)horizontal analysis.
Q4) In performing a vertical analysis of an income statement, which of the following is generally used as the base amount?
A)Net sales
B)Total expenses
C)Gross sales
D)Gross profit
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Chapter 15: Sustainability
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Q1) The costs incurred by a manufacturer of lawn mowers to develop a method to reduce carbon dioxide emissions from its products would be categorized as what type of cost by an environmental management accounting system (EMA)?
A)Research and development (R&D)cost
B)Waste and emission control cost
C)Prevention cost
D)Materials cost of product output
Q2) There are several reasons an organization might pursue sustainable initiatives. "A national hotel chain instituted a paper-saving program that reduced the cost of office paper purchased by 20% annually." This situation is an example of which type of reason to implement sustainable initiatives?
A)Cost reduction
B)Regulatory compliance
C)Stakeholder influence
D)Competitive strategy
Q3) Sustainability is an expense item only. An organization choosing sustainability will see reduced profits.
A)True
B)False
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Page 17