Introduction to Managerial Accounting Exam Questions
Course Introduction
Introduction to Managerial Accounting provides students with an overview of the key concepts, techniques, and practices used by managers to plan, control, and evaluate business operations. The course covers topics such as cost behavior, budgeting, performance measurement, and decision-making processes, emphasizing the use of accounting information in internal business management. Through case studies and real-world examples, students learn how to analyze financial data, prepare relevant reports, and apply managerial accounting principles to support strategic and operational decisions. This foundational course equips future professionals with the skills necessary to contribute effectively to organizational goals and resource management.
Recommended Textbook Managerial Accounting 2nd Edition by Charles
E. Davis
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Chapter 1: Accounting As a Tool for Management
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Sample Questions
Q1) Which of the following is not a standard of the IMA statement of ethical professional practice?
A)Competence
B)Integrity
C)Credibility
D)Independence
Answer: D
Q2) Operational planning translates strategic planning into a plan to be completed within
A)Three months.
B)One year.
C)Five years.
D)Ten years.
Answer: B
Q3) Which of the following is least likely to be in a company's code of ethics?
A)Access to information
B)Projected percentage of employees who act unethically
C)Development and fundraising
D)Clarity of information
Answer: B
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Chapter 2: Cost Behavior and Cost Estimation Summary of
Questions by Objectives and Blooms Taxonomy
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Sample Questions
Q1) There is an important relation between contribution margin and profit.Which of the following statements is not true?
A) As the number of units sold increases, total contribution margin increases, but fixed costs remain the same.
B) As the number of units sold rises, profit increases by the additional contribution margin per unit.
C) As the number of units sold decreases, total contribution margin decreases, but fixed costs remain the same.
D)All of these ans choices are correct.
Answer: D
Q2) Which of the following is an example of a variable cost for a bicycle manufacturer?
A)Rent
B)Insurance
C)Tires
D)Depreciation
Answer: C
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Chapter 3: Cost-Volume-Profit Analysis and Pricing
Decisions
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Sample Questions
Q1) Which of the following formulas represents the calculation for markup percentage?
A) Sales price - Cost ÷ Cost
B) Sales price - Cost ÷ Sales price
C) Sales price ÷ Cost
D) Sales price ÷ Contribution margin
Answer: A
Q2) Assume total sales of $600,000,total variable costs of $400,000,total fixed costs of $100,000,product costs of $200,000,and period costs of $300,000.What is the degree of operating leverage?
A) .50
B) .67
C) 1.5
D) 2
Answer: D
Q3) Cost-volume-profit analysis,or CVP,helps managers assess the impact of various business decisions on company profits.
A)True
B)False
Answer: True
Page 5
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Chapter 4: Product Costs and Job Order Costing
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Sample Questions
Q1) If the beginning balance in Raw Materials Inventory is $5,000,the ending balance is $3,500,and $60,000 was purchased,what is the amount of materials transferred to Work in Process Inventory during the period?
A) $58,500
B) $60,000
C) $61,500
D) $68,500
Q2) Which of the following types of cost is \(\textbf{ not }\) related to inventory?
A)Direct material
B)Indirect labor
C)Product costs
D)Period costs
Q3) Which of the following is \(\textbf{ not }\) classified as a period cost?
A)The cost of toner for the sales department laser printer
B)The salary for the president of the company
C)The cost of utilities for the factory building
D)All of the ans choices are classified as period costs.
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Chapter 5: Planning and Forecasting
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Sample Questions
Q1) In setting the direct labor quantity standard,allowances are made for
A)Rest time.
B)Defective
C)Both rest time and defective units.
D)Neither rest time nor defective units.
Q2) Assume you have just been hired by a large manufacturing company and have been assigned to a team that has the responsibility of gathering the data for completing the company's operating budget.Your first assignment is to make the initial contact with the department managers who will be providing data to insure that everyone involved knows the importance of preparing a realistic budget.The first manager you approach does not appear to know what an operating budget is and apparently is not interested in assisting your team in preparing a meaningful budget.Prepare a written memo to the managers explaining what the operating budget is,its components,and its importance.
Q3) To determine the cash payments for direct materials during a period,companies prepare a
A)Cash payment for materials budget.
B)Cash flow from operating activities.
C)Cash disbursements schedule.
D)None of these ans choices are correct.
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Chapter 6: Performance Evaluation: Variance Analysis
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Sample Questions
Q1) Why do variances have little meaning until their causes are identified?
A)Because they cannot be calculated correctly until the causes are known
B)Because identifying their causes allows manages to take correct action
C)Because identifying their causes will immediately increase net income
D)None of these ans choices are correct
Q2) Your friend has accepted a position with a large manufacturing company as production manager.She has found out that she must analyze and report any variances that relate to production.She has been told that managers use a method called "management by exception" and is concerned that any variance will be viewed negatively by her supervisors.
Required:
Explain to your friend the concept of management by exception and put her mind at ease about all variances being viewed as negative and explain what factors may be considered when deciding what variances to investigate.
Q3) All differences between the flexible budget and actual performance must result from operations,rather than from differences in sales volume.
A)True
B)False
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Page 8
Chapter 7: Activity-Based Costing and Activity Based Management
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Sample Questions
Q1) In an activity-based costing system,the benefits of defining more detailed activities will always outweigh the effort needed to monitor activity performance,and the resulting potential for error.
A)True
B)False
Q2) Gooding Company manufactures two models of its skillet,the Kitchen and the Campfire.The Kitchen model requires 10,000 direct labor hours and the Campfire requires 30,000 direct labor hours.The company produces 3,400 units of the Kitchen model and 600 units of the Campfire model each year. The company inspects one Kitchen for every 100 produced, and inspects one Campfire for every 10 produced. The company expects to incur $84,600 of total inspecting costs this year. How much of the inspecting costs should be allocated to the Kitchen model using ABC costing?
A) $21,150
B) $30,600
C) $42,300
D) $71,910
Q3) What is an activity cost pool and how are activity cost pool rates calculated?
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Page 9
Chapter 8: Using Accounting Information to Make Managerial Decisions
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Sample Questions
Q1) In evaluating the relevance of specific information,which of the following must the decision maker know
A)The classification of any relevant costs.
B)The behavior of any relevant costs.
C)The context of the decision.
D)All of these ans choices are correct.
Q2) When a company outsources a product,it is easier to control product quality than if the product is produced internally.
A)True
B)False
Q3) Costs such as rent and the production manager's salary are examples of which type of cost?
A)Non-differential costs
B)Allocated product costs
C)Sunk costs
D)Relevant costs
Q4) Offshoring means moving a company's business processes to a foreign country.
A)True
B)False
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Chapter 9: Capital Budgeting
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Sample Questions
Q1) Mauldin Welding Shop is considering the purchase of new high-tech welding equipment.If the equipment is purchased,Mauldin will incur an additional $8,000 in annual depreciation expense for the next five years.In determining the cash flows associated with the new equipment,the $8,000 of annual depreciation expense will be
A)A cash outflow
B)A cash inflow
C)A sunk cost
D)Ignored in the cash flow analysis
Q2) Logan,Inc.is considering the purchase of a warehouse directly across the street from its manufacturing plant.Logan currently warehouses its inventory in a public warehouse across town.Rent on the warehouse and delivering and picking up inventory cost Logan $48,000 per year.The building will cost Logan $450,000.Logan will depreciate the building for 20 years.At the end of 20 years,the building will have a $125,000 salvage value.Logan's required rate of return is 10%.The building's net present value is
A) $41,347
B) $22,772
C) $427,228
D) $960,000
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Chapter 10: Decentralizing and Performance Evaluation
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Sample Questions
Q1) An investment center manager's performance can be based on
A)The same methods as managers of cost centers.
B)The same methods as managers of profit centers.
C)Residual income.
D)All of these ans choices are correct.
Q2) Which of the following is \(\textbf{ not }\) a measure on which transfer prices can be based?
A)Market-based price
B)Cost-based price
C)Negotiated price
D)All of these ans choices are measures on which transfer prices can be based.
Q3) The return on investment measures
A)Actual costs against budgeted costs.
B)The rate of return generated by an investment in assets.
C)The dollar amount of segment margin over operating income.
D)None of these ans choices are correct.
Q4) In calculating EVA,invested capital is the company's total assets minus its total liabilities.
A)True
B)False
Page 12
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Chapter 11: Performance Evaluation Revisited: a Balanced Approach
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Sample Questions
Q1) Explain the difference between a leading indicator and a lagging indicator and give one example of each relating to your performance in this class.
Q2) Which of the following is \(\textbf{ not }\) one of the four balanced scorecard perspectives?
A)Internal business processes
B)Customer
C)Industry
D)Financial
Q3) Which of the following is \(\textbf{ not }\) one of the four balanced scorecard perspectives?
A)Learning and growth
B)Production
C)Customer
D)Financial
Q4) As a measure of a salesperson's performance,"corporate profit margin" is an example of an actionable measure.
A)True
B)False
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Chapter 12: Financial Statement Analysis
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Sample Questions
Q1) Foreman Outfitters,a retail store of camping supplies,has total assets of $170,000 and total liabilities of $70,000.What is Foreman's debt-to-equity ratio?
Q2) Walker Company had net income of $30,000.The company has 10,000 shares of common stock and 3,000 shares of preferred stock outstanding.There was no change in the number of shares of stock from the previous year.The company declared and paid dividends of $2.00 per share on the common stock and $1.70 per share on the preferred stock.What is Walker's earning per common share?
Q3) The calculation of working capital is
A)Current assets plus current liabilities.
B)Current assets less current liabilities.
C)Current assets times current liabilities.
D)Current assets divided by current liabilities.
Q4) In a horizontal analysis balance sheet,the percentage change columns do not add up in the same way as the dollar amounts because each of the percentages was calculated using a different denominator.
A)True
B)False
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Chapter 13: Statement of Cash Flows
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Sample Questions
Q1) Using the direct method of preparing the statement of cash flows,which of the following is not an activity generating operating cash flows?
A)Issuance of debt
B)Payments to suppliers
C)Payments for income taxes
D)Payments for operating expenses
Q2) When preparing the statement of cash flows using the indirect method,losses from investing activities are deducted from net income to arrive at cash flows from operating activities.
A)True
B)False
Q3) Using the direct method of preparing the statement of cash flows,which of the following is not an activity generating operating cash flows?
A)Collections from customers
B)Collection of notes receivable
C)Payments for income taxes
D)Payments to employees
Q4) What is the basic form of the statement of cash flows?
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Chapter 14: Topic Focus: Process Costing
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Sample Questions
Q1) When using a process costing system,the formula for reconciling the costs of production is
A)Beginning WIP balance + Costs transferred out during the period + Ending WIP = Total costs accounted for
B)Beginning WIP balance + Cost added during the period = Cost transferred out during the period + Ending WIP balance
C)Cost added during the period - Beginning WIP balance = Cost transferred out during the period + Ending WIP balance
D)Beginning WIP balance + Cost transferred out - Ending inventory = Total costs to accounted for
Q2) The accounting firm PriceWaterhouseCoopers is an example of a company that would use a process costing system.
A)True
B)False
Q3) Equivalent units EU of production is based on the percentage of completion for work in process inventory at the end of the period.
A)True
B)False
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Chapter 15: Topic Focus Variable and Absorption Costing
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Sample Questions
Q1) Variable costing is acceptable for which of the following purposes?
A)GAAP reporting
B)Internal reporting
C)Reporting to the IRS
D)All of these ans choices are correct
Q2) Mixed costs are divided into their direct and indirect components.
A)True
B)False
Q3) The only difference between variable and absorption costing is the treatment of variable overhead costs.
A)True
B)False
Q4) When production volume equals sales volume,fixed overhead expensed is higher using absorption costing than with variable costing.
A)True
B)False
Q5) What managerial behavior does variable costing render ineffective?
Q6) Absorption costing is also referred to as variable costing.
A)True
B)False
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Chapter 16: Topic Focus Standard Costing Systems
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Sample Questions
Q1) Manufacturing Overhead is a temporary account that must have a zero balance at the end of the accounting period.
A)True
B)False
Q2) When using a normal costing system
A)Direct material and direct labor are recorded at standard cost and overhead is applied to products using a predetermined overhead rate.
B)Direct material and direct labor are recorded at actual cost and overhead is treated as a period cost.
C)Direct material and direct labor are recorded at actual cost and overhead is applied to products using a predetermined overhead rate.
D)Direct material and direct labor are recorded at standard cost and overhead is treated as a period cost.
Q3) When using a standard costing system,the direct materials quantity variance is recorded at the time direct materials are transferred to the production floor.
A)True
B)False
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Chapter 17: Topic Focus Customer Profitability
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Sample Questions
Q1) Customer profit margin is calculated as customer net profit divided by customer gross profit.
A)True
B)False
Q2) If unprofitable customers \(\textbf{ cannot }\) be turned to profitable ones,the company should \(\textbf{ never }\) drop them.
A)True
B)False
Q3) Measuring customer profitability only by looking at whether the sales revenue a customer generates exceeds the cost of goods sold ignores
A)All the selling and administrative costs incurred to provide customer service and support.
B)Manufacturing costs incurred as overhead.
C)All fixed costs.
D)None of these ans choices are correct.
Q4) Customer net profit divides customer net profit by customer revenues.
A)True
B)False
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