Management Accounting and Control Practice Exam
Course Introduction
Management Accounting and Control examines the processes, tools, and techniques used by organizations to plan, measure, and control performance. The course covers cost classification and allocation, budgeting, variance analysis, and performance measurement systems. It explores how accounting information supports decision-making, strategic planning, and operational efficiency. Students learn to evaluate management control systems, analyze financial and non-financial data, and understand the ethical considerations in reporting and control. The course equips students with the ability to design and assess systems that align organizational activities with business objectives, ensuring value creation and sustainable competitive advantage.
Recommended Textbook
Managerial Accounting An Introduction to Concepts Methods and Uses 11th Edition by Michael W.
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Page 2
Chapter 1: Fundamental Concepts
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Q1) If an action is legal for a company to pursue,is it necessary ethical? Discuss this in terms of the ethical issues presented in the text.
Answer: Answers may vary.However,just because an action is legal,it does not necessarily follow that it is ethical.Ethical actions involve "what's right" while legal actions involve operating within boundaries of the law or accounting standards.As we saw in several cases in the past,including Enron,companies sifting through accounting standards to look for loopholes and rationalized their legality by pushing these to the limits and beyond.
Q2) Explain the difference between managerial and financial accounting.
Answer: Managerial accounting provides information used by managers inside the organization.To that end,it does not comply with generally accepted accounting principles.Managerial accounting uses cost-benefit analysis to determine the amount of detail presented.Historical data and future estimates are used for planning,decision-making,and performance evaluation.Financial accounting prepares general-purpose reports for individuals and businesses outside an organization and presents summary historical data in compliance with generally accepted accounting principles.
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Chapter 2: Measuring Product Costs
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Q1) Computing product costs with incomplete products (Appendix 2.1).The Assembly Department had 90,000 units 75 percent complete in Work-in-Process Inventory at the beginning of April.During April,the department started and completed 110,000 units.The department started another 46,000 units and completed 20 percent as of the end of April. Assume that the cost assigned to beginning inventory on April 1 was $78,000 and that the department incurred $298,000 of production costs during April.
Required: Prepare a production cost report like the one shown in Exhibit 2.10 in the text.Assume the department incurred production costs evenly throughout processing. Answer: (Computing product costs with incomplete products. )
11ea906f_4ca4_a6c8_aec7_f1c326a20770_TB2144_00_TB2144_00
Q2) An effective cost system has which of the following characteristic(s)?
A)Decision focus
B)Different costs for different purposes
C)Cost benefit test
D)All of the answers are correct.
Answer: D
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Chapter 3: Activity-Based Management
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Q1) Which of the following reflects the simplest allocation method for a factory?
A)The department allocation method.
B)The unit cost allocation method.
C)The plantwide allocation method.
D)The use of activity-based costing.
Answer: C
Q2) Which of the following is an example of a non-value-added cost?
A)Storage
B)Moving items
C)Waiting for work
D)All of the above are non-value-added costs.
Answer: D
Q3) Which of the following would be considered a capacity-sustaining activityin the product cost hierarchy?
A)Plant management,building depreciation,rent,heating and lighting,market research,and customer records.
B)Market research,customer records,and promotion.
C)Machine setups and quality inspections.
D)Energy to run machines and direct materials.
Answer: A
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Chapter 4: Strategic Management of Costs,quality,and Time
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Q1) On a balanced scorecard,the measure of the number of new patents developed through research and development would most likely be an example of a performance measure in the:
A)financial dimension
B)customer dimension
C)internal business process dimension
D)learning and growth dimension
Q2) Concerning cost,which of the following is/are true?
A)Lowering cost results from the organization's ability to use resources more efficiently to obtain its objectives.
B)Reducing costs is important because of the long-run relation between product cost and price.
C)If two products provide the same quality and services,the customer will choose the product with the lower price.
D)All of the answers are correct.
Q3) How can activity-based management reduce customer response time?
Q4) Compare the costs of quality control to the costs of failing to control quality.
Q5) What are the four quality costing categories? Include in your answer at least three examples for each category.
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Chapter 5: Cost Drivers and Cost Behavior
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Q1) Another terms for engineered costs is:
A)fixed costs.
B)variable costs.
C)sunk costs.
D)opportunity costs.
Q2) The method of cost estimation which studies the physical relation between the quantities of inputs and output is known as:
A)regression.
B)account analysis.
C)engineering methods.
D)All of the answers are correct.
Q3) Which of the following is a function that shows how the amount of time required to perform a task goes down per unit as the number of units increases?
A)curvilinear fixed.
B)semi-variable.
C)semi-fixed.
D)learning curve.
Q4) Explain the costs,benefits,and weaknesses of the various cost estimation methods.
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Chapter 6: Financial Modeling for Short-Term Decision Making
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Q1) Financial modeling can be used by managers for which of the following purposes?
A)staff rotation planning purposes.
B)analyzing financial relationships that are useful for decision making.
C)forecasting political unrest.
D)employee cross-training purposes.
Q2) Which of the following are underlying assumptions of cost-volume-profit analysis?
A)Fixed costs will not change over a wide range of activity and variable costs are strictly variable.
B)All costs can be classified either as a fixed or variable cost and behave linearly.
C)Sales prices do not change in the relevant range and the sales mix must remain constant.
D)All of the answers are correct.
Q3) Multiple products make using financial models more complex.To deal with this,managers can do which of the following?
A)assume that all products have the same contribution margin.
B)assume that a particular product mix does not change.
C)treat each product line as a separate entity.
D)All of the answers are correct.
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Chapter 7: Differential Cost Analysis for Operating Decisions
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Q1) Which focuses on increasing the excess of differential revenue over differential costs when the firm faces bottlenecks?
A)Differential income analysis
B)Throughput analysis
C)Theory of bottlenecks
D)Theory of constraints
Q2) Explain the use of differential analysis to determine when to add or drop parts of operations.
Q3) In estimating order costs and carrying costs,only __________ costs matter.
A)controllable
B)differential
C)fixed
D)variable
Q4) The total of all the costs incurred by the activities in the value chain are
A)variable costs.
B)fixed costs.
C)total costs.
D)full costs.
Q5) Explain how to base target costs on target prices.
Q6) Explain why businesses apply differential analysis to product choice decisions. Page 9
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Chapter 8: Capital Expenditure Decisions
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Q1) Discuss the advantages of using spreadsheets including sensitivity analysis.
Q2) What behavioral issues are involved in capital budgeting?
Q3) Which of the following would not be included as part of the periodic cash outflows associated with an investment project?
A)savings for fixed and variable production costs
B)selling,general,and administrative expenditures
C)opportunity costs of undertaking this particular project.
D)expenditures for fixed and variable production costs.
Q4) Which interest rate is used by analysts when computing the present value of future cash flows?
A)prime interest rate
B)Federal funds rate
C)discount rate
D)real rate
Q5) Which term describes the interest rate used in computing the present value of future cash flows?
A)applicable treasury rate
B)discount rate
C)income tax rate
D)borrowing rate.
11
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Chapter 9: Profit Planning and Budgeting
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Q1) A chemical company manufactures an ointment.Sales for the next year are estimated at 100,000 units.The beginning finished goods inventory contains 20,000 units.The target for each year's ending inventory is 15,000 units.How many units will be scheduled for production this year?
Q2) Compare the four types of responsibility centers.
Q3) For an organizational unit to be considered a responsibility center,what must be true?
A)The unit must be separable and identifiable.
B)The unit must lack financial measures of performance.
C)The unit must lack control over an activity.
D)all of the above.
Q4) Which of the following terms describes a method of yielding information for developing budgets that employees know but managers do not?
A)benchmarking.
B)participative budgeting.
C)bottom-up budgeting.
D)motivational budgeting.
Q5) Describe a comprehensive master budget.
Q6) Describe the master budget.
Page 12
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Chapter 10: Profit and Cost Center Performance Evaluation
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Q1) How are fixed production cost variances calculated and why do they occur?
Q2) Which of the following is not a major group responsible for variances in organizations?
A)Marketing
B)Consulting
C)Administration
D)Production
Q3) Which of the following might cause a materials variance?
A)Failing to take purchase discounts.
B)Using a better grade of raw material.
C)Changes in the market supply for the raw materials.
D)All of the above.
Q4) The production volume variance is the difference between which of the following two costs?
A)Budgeted and applied fixed costs.
B)Actual costs and the budgeted costs.
C)Budgeted and actual fixed costs.
D)Variable costs and the budgeted costs.
Q5) How does technology impact variance analyses?
Q6) How do you analyze overhead variances using the variable cost variance model?
Page 13
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Chapter 11: Investment Center Performance Evaluation
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Q1) What is a disadvantage of top management intervention in setting transfer prices between divisions?
A)Top management may become swamped with pricing disputes.
B)Division managers will lose the flexibility and other advantages of autonomous decision making.
C)The approach reduces the benefits of decentralization.
D)All of the answers are correct.
Q2) When there is an outside market for an intermediate product which is perfectly competitive,the most equitable method of transfer pricing is
A)market price.
B)production cost pricing.
C)variable cost pricing.
D)cost plus markup pricing.
Q3) When measuring a division's operating costs,thecost of the company president's salary is
A)direct,controllable.
B)indirect,controllable.
C)direct,noncontrollable.
D)indirect,noncontrollable.
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Chapter 12: Incentive Issues
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Q1) Fraudulent financial reporting that results in higher reported earnings sometimes
A)also overstates taxable income.
B)shifts income from a future period to the present period,and then overstates taxable income in the present period that might be offset by lower taxable income in a future period
C)sometimes overstates taxable income in early periods that likely increases the present value of a company's tax payments.
D)All of the answers are correct.
Q2) Which statement best describes the balanced scorecard?
A)A causal model for lead and lag indicators of performance.
B)A replacement for zero-based budgeting.
C)A product of zero-sum game theory.
D)A tool to evaluate customer profitability.
Q3) Which of these is a common type of fraud on financial statements?
A)improper revenue recognition.
B)improper expense recognition.
C)understating inventory.
D)miscounting cash
Q4) Describe two types of common financial fraud.
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Chapter 13: Allocating Costs to Responsibility Centers
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Q1) Why are joint-process costs are allocated?
A)Due to the need to assign joint-process costs to two or more products manufactured from a common input.
B)Due to the need to assign joint-process costs to two or more products manufactured from different inputs.
C)Due to the need to assign joint-process costs to two or more products manufactured from a common output.
D)Due to the need to assign joint-process costs to two or more products manufactured from different outputs.
Q2) Which of the following is a reason for using activity-based costing to allocate service department costs?
A)It can lead to improved allocation of service department costs to production departments.
B)It is required by generally accepted accounting principles.
C)It is required by the tax authorities.
D)All of the answers are correct.
Q3) Why do companies allocate common costs to departments and products?
Q4) Why are service department costs allocated to producing departments?
Q5) How are joint-process costs allocated?
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