Management Accounting and Control
Textbook Exam Questions
Course Introduction
Management Accounting and Control focuses on the role of accounting information in planning, decision-making, and performance evaluation within organizations. The course explores the design and use of internal accounting systems to support strategic management, including budgeting, forecasting, cost analysis, and variance analysis. Students learn how management accounting techniques facilitate effective communication, resource allocation, and goal congruence, while also addressing ethical considerations and the challenges posed by decentralized operations. Through case studies and practical exercises, the course develops analytical skills necessary to interpret financial data and implement control systems that drive organizational success.
Recommended Textbook
Introduction to Management Accounting 16th Edition by Charles T. Horngren
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Chapter 1: Managerial Accounting,the Business
Organization,and Professional Ethics
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Sample Questions
Q1) Which stage of the product life cycle has a stable sales level?
A) product development stage
B) introduction to market stage
C) mature market stage
D) phase-out of product stage
Answer: C
Q2) The primary users of management accounting information are ________.
A) bankers
B) governmental regulatory bodies
C) managers in organizations
D) managerial accountants
Answer: C
Q3) An example of a staff department at a clothing manufacturer is the ________.
A) pressing department
B) cutting department
C) sewing department
D) maintenance department
Answer: D
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Chapter 2: Introduction to Cost Behavior and Cost Volume
Profit Relationships
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Sample Questions
Q1) The Todd Dolhun Company has the following information available: \(\begin{array}{ll}\text { Targeted after-tax net income }&\$120,000\\
\text { Total fixed costs } & \$ 300,000 \\
\text { Contribution margin per unit } & \$ 2 \\
\text { Taxrate } & 40 \%
\end{array}\)
How many units should be sold to achieve the targeted after-tax net income?
A) 180,000
B) 210,000
C) 250,000
D) 300,000
Answer: C
Q2) A cost-volume-profit graph has a line for ________ and a line for ________.
A) revenues; variable costs only
B) revenues; fixed costs only
C) revenues; total costs
D) net profit; net loss
Answer: C
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Chapter 3: Measurement of Cost Behavior
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Sample Questions
Q1) Presented below is the production data for six months of the year showing the mixed costs incurred by Kennedy Company.
\(\begin{array}{lll}\text { Month }&\text { Cost }&\text { Units }\\
\text { July } & \$ 6,000 & 4,000 \\
\text { August } & \$ 10,250 & 6,500 \\
\text { September } & \$ 10,500 & 8,000 \\
\text { October } & \$ 12,700 & 10,500 \\
\text { November } & \$ 14,000 & 12,000 \\
\text { December } & \$ 10,850 & 9,000 \end{array}\)
Kennedy Company uses the high-low method to analyze mixed costs.The total fixed cost is ________.
A) $2,000
B) $4,500
C) $10,417
D) $10,500
Answer: A
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Chapter 4: Cost Management Systems and Activity-Based
Costing
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Sample Questions
Q1) List and explain five reasons why more firms are adopting activity-based costing systems.
Q2) Accountants initially collect costs by some natural classification such as activities performed.
A)True
B)False
Q3) Costs that can be allocated to a cost object are called direct costs.
A)True
B)False
Q4) Which of the following is NOT a valid step when designing an activity-based cost accounting system?
A) Determine the key components of the system.
B) Determine the relationships between cost objects, activities, and resources.
C) Collect relevant data concerning costs and cost drivers.
D) Use a process map to identify areas for operational improvement.
Q5) Due to the decline in indirect costs in most companies,allocating indirect costs is no longer necessary to determine accurate product costs.
A)True
B)False
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Chapter 5: Relevant Information for Decision Making With a
Focus on Pricing Decisions
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Sample Questions
Q1) Michigan Company has budgeted the following costs for the production of its only product:
\(\begin{array}{ll}
\text { Direct Materials } & \$ 35,000 \\
\text { Direct Labor } & 25,000 \\
\text { Variable indirect production costs } & 30,000 \\
\text { Fixed indirect production costs } & 15,000 \\
\text { Variable selling and administrative costs } & 7,500 \\
\text { Fixed selling and administrative costs } & 12,500\\
\text { Total Costs }&\$125,000
\end{array}\)
Michigan Company wants a profit of $50,000,and expects to produce 1,000 units.The market price is $150 per unit.What is the target cost per unit of the product?
A) $100 per unit
B) $125 per unit
C) $150 per unit
D) $175 per unit
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Chapter 6: Relevant Information for Decision Making With a
Focus on Operational Decisions
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Sample Questions
Q1) Sunk cost is used to describe a historical cost or past cost.
A)True
B)False
Q2) The gain or loss on the disposal of equipment is determined by ________.
A) subtracting the book value of the old equipment to the cost of the new equipment
B) subtracting the disposal value of the old equipment to the book value of the old equipment
C) subtracting the book value of the old equipment from the cash received for the old equipment
D) subtracting the book value of the old equipment from the cost of the new equipment
Q3) If a department in a grocery store is under consideration to be eliminated,which of the following cost(s)is(are)NOT relevant to the decision?
A) avoidable fixed expenses
B) unavoidable costs
C) common costs
D) B and C
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Chapter 7: Introduction to Budgets and Preparing the Master Budget
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Sample Questions
Q1) Which of the following is NOT a component of the operating budget?
A) capital budget
B) purchases and cost of goods sold budget
C) budgeted income statement
D) operating expense budget
Q2) Paul Company's expected sales for April are $27,600.Other information follows: \(\begin{array}{ll}\text { Budgeted Operating Expenses }&\text { Amount }\\
\text { Wages } & \$ 2,000 \\
\text { Advertising } & 1,680 \\
\text { Patent amortization } & 1,440 \\
\text { Rent } & 2,560 \\
\text { Marketing } & 5 \% \text { of sales } \end{array}\)
Which of the following operating expenses is a noncash expense?
A) Advertising
B) Rent
C) Patent amortization
D) Wages
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Chapter 8: Flexible Budgets and Variance Analysis
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Sample Questions
Q1) A quantity variance for direct materials measures the deviation between the quantity of inputs that should have been used to achieve the actual output and the actual quantity of inputs used to achieve the actual output.
A)True
B)False
Q2) The following information is available for Munter Manufacturing Company.
-- Direct materials price standard is $3.25 per pound.
-- Direct materials quantity standard is six pounds per finished unit.
-- Budgeted production is 25,000 finished units.
-- 175,000 pounds of direct materials were purchased for $525,000.
-- 175,000 pounds of direct materials were used in production.
-- 25,600 finished units of product were produced.
What is the direct materials price variance?
A) $43,750 Unfavorable
B) $43,750 Favorable
C) $350,000 Unfavorable
D) $350,000 Favorable
Q3) Efficiency is the degree to which a goal or objective is met.
A)True
B)False
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Chapter 9: Management Control Systems and Responsibility Accounting
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Sample Questions
Q1) Wingate Company has the following information available for three divisions of the company:
\(\begin{array}{llll}&\text { Division A }&\text { Division B }&\text { Division C }\\
\text { Sales } & \$ 250,000 & \$ 400,000 & \$ 350,000 \\
\text { Variable expenses } & 52 \% & 30 \% & 40 \% \\
\text { Fixed expenses controllable by division manager } & \$ 60,000 & \$ 200,000 & \$ 175,000 \\
\text { Fixed expenses controllable by others } & \$ 10,000 & \$ 5,000 & \$ 7,500 \end{array}\)
Unallocated expenses for all three divisions are $22,000.What is the contribution by Division A?
A) $28,000
B) $50,000
C) $60,000
D) $120,000
Q2) A set of machines may be a responsibility center for a production supervisor.
A)True
B)False
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Chapter 10: Management Control in Decentralized Organizations
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Sample Questions
Q1) The rate of return on net book value for equipment decreases as the equipment ages.
A)True
B)False
Q2) The following information is available for the Paul Ryan Company: \(\begin{array}{ll}
\text { Sales for year } & \$ 150,000 \\
\text { Average invested capital for year } & \$ 156,250 \\
\text { Returnon investment } & 10 \% \end{array}\)
What is the return on sales?
A) 10.00%
B) 10.42%
C) 62.50%
D) 100.00%
Q3) Return on investment equals return on sales divided by capital turnover. A)True
B)False
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Chapter 11: Capital Budgeting
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Sample Questions
Q1) Brown Company is considering the following investment: \(\begin{array}{ll}
\text { Estimated capital investment } & \$ 220,000 \\
\text { Estimated useful life } & 3 \text { years } \\
\text { Estimated disposal value in } 3 \text { years } & \$ 5,000 \\
\text { Estimated annual savings in cash operating costs(end of year) } & \$ 120,000 \\
\text { Minimum desired rate of return } & 12 \% \\
\text { Present value of ordinary annuity of one, } 3 \text { periods at } 12 \% & 2.4018 \\
\text { Present value of one, } 3 \text { periods at } 12 \% & 0.7118 \end{array}\)
Assume straight-line depreciation is used.Ignore income taxes.The net present value of the investment is ________.
A) $68,216
B) $71,775
C) $73,216
D) $145,090
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Chapter 12: Cost Allocation
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Sample Questions
Q1) The logical cost driver for building rent cost of $10,000 is square feet.The cost object is the assembly department in a factory.
A)True
B)False
Q2) The relative-sales-value method of allocating joint costs requires a common physical unit for measuring the output of each product.
A)True
B)False
Q3) When allocating fixed costs from service departments to production departments,managers should use ________ instead of ________.
A) capacity used; capacity available
B) capacity available; budgeted capacity
C) capacity used; budgeted capacity
D) capacity available; capacity used
Q4) The preferred cost driver for allocating central corporate support costs to products is either actual or estimated usage.
A)True
B)False
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Chapter 13: Accounting for Overhead Costs
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Q1) When the actual overhead costs exceed the amount of applied overhead costs,the overhead costs are ________.At the end of the accounting period,accountants dispose of the underapplied or overapplied overhead using ________ or ________.
A) overapplied; proration; immediate write-off
B) underapplied; proration; immediate write-off
C) overapplied; flexible budget variance; proration
D) underapplied; flexible budget variance; immediate write-off
Q2) The production volume variance appears when ________.
A) the actual production volume equals the expected production volume used in computing the fixed overhead rate
B) the actual production volume deviates from the expected production volume used in computing the fixed overhead rate
C) the actual production volume deviates from the expected production volume used in computing the variable overhead rate
D) the actual production volume equals the expected production volume used in computing the variable overhead rate
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Chapter 14: Job-Order Costing and Process-Costing Systems
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Sample Questions
Q1) Backflush costing has no Work-In-Process Inventory account.
A)True
B)False
Q2) In job-order costing,the journal entry to record the application of factory overhead costs to jobs includes a Debit to ________.
A) Factory Department Overhead Control
B) Factory Department Overhead Applied
C) Finished Goods Inventory
D) Work-In-Process Inventory
Q3) Equivalent units are determined by multiplying the number of physical units by the percentage of noncompletion.
A)True
B)False
Q4) One of the primary purposes of an activity-based costing system is to ________.
A) focus on quality improvements in the production process
B) focus on cost reduction in the production process
C) eliminate all overhead costs for manufactured products
D) increase the accuracy of product costs so managers can make better decisions
Page 16
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Chapter 15: Basic Accounting: Concepts, techniques, and Conventions
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Sample Questions
Q1) Amounts due from customers are called accounts payable.
A)True
B)False
Q2) The main sections of the balance sheet include ________.
A) revenues, assets and liabilities
B) assets, liabilities and expenses
C) expenses, revenues and stockholders' equity
D) assets, liabilities and stockholders' equity
Q3) For nonprofit organizations,the income statement is ________.
A) used
B) replaced with the statement of stockholders' equity
C) replaced with the statement of activities
D) replaced with the statement of cash flows
Q4) The acquisition of inventory for cash will ________.
A) increase liabilities and decrease stockholders' equity
B) decrease assets and decrease liabilities
C) increase assets and decrease liabilities
D) increase assets and decrease assets
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Chapter 16: Understanding Corporate Annual Reports: Basic Financial Statements
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Sample Questions
Q1) Current liabilities are debts due within the ________ year or within the normal operating cycle if ________.
A) past; longer than a year
B) next; longer than a year
C) past; shorter than a year
D) next; shorter than a year
Q2) Old equipment having a book value of $12,000 was sold for $20,000 cash.New equipment was purchased for $25,000 cash.Additional equipment was acquired in exchange for a $17,000 long-term note payable.The net cash flow from investing activities was ________.
A) $5,000 cash outflow
B) $22,000 cash outflow
C) $25,000 cash outflow
D) $42,000 cash outflow
Q3) Which of the following events do NOT affect cash flows from operating activities?
Assume the direct method is used.
A) cash sale of merchandise inventory
B) cash purchase of equipment
C) cash purchase of inventory
D) cash paid for employees' wages
Page 18
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Chapter 17: Understanding and Analyzing Consolidated Financial Statements
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Sample Questions
Q1) Accountants require investors with significant influence,but not control,over the decisions of an investee firm to use the ________ method.
A) equity
B) cost
C) market value
D) lower of cost or market
Q2) The income statement for Rozman Company for the year ended December 31,2013 is given below:
\(\begin{array}{ll}
\text { Sales }&\$1,600\\
\text { Cost of goods sold }&872\\
\text { Gross profit } & 728 \\
\text { Operating expenses } & 436\\
\text { Operating income }&292\\
\text { Income taxexpense }&66\\
\text { Net income }&\$226
\end{array}\)
Required:
Prepare a common-size income statement.
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