Introduction to Managerial Accounting Pre-Test Questions
Course Introduction
Introduction to Managerial Accounting provides students with a foundational understanding of how accounting information is used within organizations to support managerial decision-making, planning, and control. The course covers key concepts such as cost behavior, cost-volume-profit analysis, budgeting, performance evaluation, and the use of accounting data in strategic planning. Students will learn to prepare and interpret internal financial reports, analyze various costing methods, and apply managerial accounting tools to real-world business scenarios, equipping them with essential skills for effective management and leadership in todays competitive environment.
Recommended Textbook
Fundamental Managerial Accounting Concepts 9th Edition by Thomas P Edmonds
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2127 Verified Questions
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Chapter 1: Management Accounting and Corporate Governance
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Sample Questions
Q1) What is the effect on the balance sheet of recording a $200 cash purchase of raw materials?
A) Assets decrease by $200 and stockholders' equity decreases by $200.
B) Assets and stockholders' equity do not change.
C) Assets increase by $200 and stockholders' equity increases by $200.
D) Assets increase by $200 and stockholders' equity does not change.
Answer: B
Q2) Cash paid to production workers should be recorded as Wages Expense in the income statement for the period incurred.
A)True
B)False
Answer: False
Q3) Which of the following is not one of the four Standards of Ethical Conduct for Management Accountants?
A) Credibility
B) Confidentiality
C) Integrity
D) Independence
Answer: D
Page 3
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Chapter 2: Cost Behavior, operating Leverage, and Profitability Analysis
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Sample Questions
Q1) A company with a completely fixed cost structure will have operating leverage of 1. A)True
B)False
Answer: False
Q2) Variable costs will become fixed outside the relevant range.
A)True
B)False
Answer: False
Q3) How is operating leverage related to cost structure?
Answer: Cost structure refers to the proportion of a company's fixed and variable costs.A company that has a more fixed cost structure will have high operating leverage.That means that for a given change in sales volume,it will have a greater change in net income than a company with a more variable cost structure.
Q4) The activity base selected determines whether a cost behaves as a variable cost or fixed cost.
A)True
B)False
Answer: True
Page 4
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Chapter 3: Analysis of Cost, volume, and Pricing to Increase Profitability
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Sample Questions
Q1) An increase in total fixed costs increases the break-even point.
A)True
B)False
Answer: True
Q2) Bates Company currently produces and sells 4,000 units of a product that has a contribution margin of $5 per unit.The company sells the product for a sales price of $20 per unit.Fixed costs are $20,000.The company has recently invested in new technology and expects the variable cost per unit to fall to $12 per unit.The investment is expected to increase fixed costs by $15,000.After the new investment is made,how many units must be sold to break even?
A) 2,917 units
B) 4,375 units
C) 7,000 units
D) 4,000 units
Answer: B
Q3) 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
Page 5
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Chapter 4: Cost Accumulation,tracing,and Allocation
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Sample Questions
Q1) Managers of a discount store chain are considering whether to add a new auto service department.In reaching this decision,the managers should consider:
A) Direct costs only.
B) Both direct and indirect costs.
C) Neither direct nor indirect costs.
D) Indirect costs but not direct costs.
Q2) Indicate whether each of the following statements is true or false. When a company can identify more than one cost driver for a particular cost, it should use the cost driver with the strongest cause-and-effect relationship to the cost. Availability and cost of information are likely to influence a company's choice of cost drivers.
A company should never use a cost driver unless there is a strong causal relationship between the cost and the cost driver. Different cost drivers almost always give about the same results when a cost is allocated to cost objects.
In allocating costs among departments, a company must consider how department managers are likely to respond.
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Chapter 5: Cost Management in an Automated Business
Environment: ABC, ABM, and TQM
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Sample Questions
Q1) Traditional cost systems usually allocate overhead to products based on direct labor.
A)True
B)False
Q2) Which of the following is an upstream cost?
A) Research and development costs
B) Shipping costs to ship completed goods
C) Sales commissions
D) Sales promotion and advertising costs
Q3) The first step in developing an ABC system is to:
A) allocate costs to activity cost pools.
B) identify the cost driver that has the best "cause-and-effect relationship" to the cost pool.
C) identify essential activities and the cost of performing those activities.
D) calculate activity rates.
Q4) The objective of target pricing is to establish a price that will maximize profits given existing costs.
A)True
B)False
Q5) Discuss how an increase in one or more quality cost(s)can decrease others.
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Chapter 6: Relevant Information for Special Decisions
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Sample Questions
Q1) Special order decisions involve:
A) An offer to sell goods at a price that is higher than normal.
B) Buying goods from other companies rather than making them internally.
C) An offer from a customer to buy goods at a lower-than-normal selling price.
D) None of these answers are correct.
Q2) Pilot Motors Corporation is an automobile manufacturer.The company produces its own motors,tires,and other automobile parts.Pilot has the opportunity to purchase tires from another manufacturer instead of producing the tires in its own facility.This type of decision is typically known as a(n):
A) outsourcing decision.
B) special order decision.
C) segment elimination decision.
D) asset replacement decision.
Q3) An alternative under consideration involves incurring $50 in costs to generate $60 in revenue.The differential revenue for this alternative is $10.
A)True
B)False
Q4) How can managers manage (that is,reduce the impact of)constraints?
Q5) What are constraints? Provide an example.
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Chapter 7: Planning for Profit and Cost Control
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Sample Questions
Q1) The cash budget includes three sections: (1)operating activities,(2)investing activities,and (3)financing activities.
A)True
B)False
Q2) The capital budget does not affect any of a company's operating budgets.
A)True
B)False
Q3) Budgeting that involves the development of a master budget to direct the firm's activities over the short term is referred to as:
A) capital budgeting.
B) operations budgeting.
C) strategic planning.
D) None of these answers is correct.
Q4) Bonnie's Bakery is a relatively small company that makes pies,cakes,and cookies sold in supermarkets.Sales employees' bonuses are determined based on meeting or exceeding the budget.For the coming year,sales employees have set a budget target of 3% for sales growth.The market has been growing at 6%,and the company has averaged 10% growth for the last two years.What is the problem here,and how can it be fixed?
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Chapter 8: Performance Evaluation
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Sample Questions
Q1) Select the incorrect statement.
A) If both the flexible budget and actual results are based on the actual volume of activity, the flexible budget sales variance will be attributable to sales price, not sales volume.
B) Budget slack is the difference between deflated and realistic standards.
C) Gamesmanship is decreased if superiors and subordinates participate sincerely in setting mutually agreeable, attainable standards.
D) For performance evaluation, management should compare actual results to a flexible budget based on the actual volume of activity.
Q2) Which of the following is a difference between a static and a flexible budget?
A) Static budgets use the same fixed cost amounts, whereas flexible budgets change the amount of fixed costs at different levels of activity.
B) Static budgets are based on the same per-unit variable amount, whereas flexible budgets are based on multiple per-unit variable amounts.
C) Static budgets are based on a single estimate of volume, whereas flexible budgets show estimated costs and revenues at a variety of activity levels.
D) None of these answers are correct.
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Chapter 9: Responsibility Accounting
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Sample Questions
Q1) Hu Corporation has two operating divisions,A and B.The following information is provided for Division A: \(\begin{array}{lrr}
\text { Unit selling price } &\$200\\
\text { Unit variable costs} &\$120\\
\text { Unit fixed costs } &\$40\\ \end{array}\)
Division B uses the type of product produced by Division A and has approached Division A about buying the product internally.Division B is currently paying $180 to purchase the product from an outside source.If Division A sells internally,it can save $5 per unit in variable costs.Assuming Division A is operating at capacity,what price should it charge Division B if the transfer is to be made?
A) $115
B) $195
C) $125
D) $200
Q2) Clear lines of authority and responsibility are essential to establishing a responsibility accounting system.
A)True
B)False
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Chapter 10: Planning for Capital Investments
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Sample Questions
Q1) Generally,the unadjusted rate of return should be calculated based on the average investment rather than the amount of the original investment in a depreciable asset such as equipment.
A)True
B)False
Q2) Because of the expense of applying multiple techniques,managers should use a single capital budgeting technique to analyze potential capital investments.
A)True
B)False
Q3) Which of the following is not a factor in explaining why the present value of a future dollar is less than one dollar?
A) Inflation
B) Interest
C) Risk of failure to receive expected cash inflows
D) Historic cost
Q4) The assumption regarding ordinary annuities is that cash flows occur at the end of each period.
A)True
B)False
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Chapter 11: Product Costing in Service and Manufacturing
Entities
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Sample Questions
Q1) Johnson Company estimates that its production workers will work 88,000 direct labor hours to produce 8,800 units during the upcoming period and that overhead costs will amount to $880,000.During the year,its manufacturing employees actually worked 100,000 direct labor hours to produce 10,000 units and incurred $1,100,000 of overhead costs.Because the goods made by Johnson are homogeneous (that is,they are identical),the company has decided it makes sense to use number of units as the allocation base for overhead.Based on this information the predetermined overhead rate is:
A) $110.00 per unit.
B) $10.00 per direct labor hour.
C) $100.00 per unit.
D) $11.00 per direct labor hour.
Q2) Actual overhead costs are charged to the Work in Process account as they occur.
A)True
B)False
Q3) A credit to the Raw Materials Inventory account represents:
A) raw materials added to production.
B) raw materials purchased.
C) raw materials available for use.
D) none of these answers are correct.
Page 13
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Chapter 12: Job-Order, process, and Hybrid Costing Systems
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Sample Questions
Q1) Steele Manufacturing Company reported the following Work in Process Inventory account activity measured in units.The ending inventory was estimated to be 70% complete. Beginning inventory 20,000
Started 90,000
Ending inventory 15,000
What is the number of equivalent units in Steele's ending work in process inventory?
A) 14,000
B) 15,000
C) 10,500
D) None of these answers are correct.
Q2) Oregon Company started the month of August with 4,000 units in beginning work in process; these units were 60% complete on August 1.During the month,16,000 units were completed and transferred to finished goods.The ending work in process was 2,000 units that were 20% complete.
Required:
Calculate Oregon's equivalent units for the month of August using the weighted average method.
Q3) Why is the concept of equivalent units important for process costing?
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Chapter 13: Financial Statement Analysis
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Sample Questions
Q1) The Miller Company reported gross sales of $850,000,sales returns and allowances of $15,000,and sales discounts of $5,000.The company has average total assets of $500,000,of which $250,000 is property,plant,and equipment.What is the company's asset turnover ratio? (Round your answer to 2 decimal places.)
A) 3.32 times
B) 1.67 times
C) 1.66 times
D) 1.70 times
Q2) As of December 31,Year 1,Gant Corporation had a current ratio of 1.29,quick ratio of 1.05,and working capital of $18,000.The company uses a perpetual inventory system and sells merchandise for more than it cost.On January 1,Year 2,Gant purchased merchandise on account for $4,000.Which of the following statements is correct?
A) Gant's current ratio will decrease.
B) Gant's quick ratio will increase.
C) Gant's working capital will increase.
D) Gant's quick ratio will increase and its current ratio will decrease.
Q3) The quick ratio,although similar to the current ratio,is more conservative.
A)True
B)False
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Chapter 14: Statement of Cash Flows
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Sample Questions
Q1) Under the direct method,depreciation expense is added back to net income when computing net cash flow from operating activities.
A)True
B)False
Q2) Under the indirect method,an increase in wages payable would be added back to net income when calculating net cash flow from operating activities.
A)True
B)False
Q3) Under the indirect method,losses would be added to net income when determining the net cash flow from operating activities.
A)True
B)False
Q4) Which method is used by the majority of U.S.companies to report cash flows from operating activities?
A) Accrual method
B) Direct method
C) Indirect method
D) Computational method
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