Management Accounting Exam Practice Tests
Course Introduction
Management Accounting focuses on the processes, techniques, and tools used by managers to analyze financial information and support organizational decision-making. The course covers key topics such as budgeting, cost behavior, variance analysis, performance measurement, and internal control systems. Emphasis is placed on how accounting information is used in planning, controlling, and evaluating business operations, as well as facilitating strategic decisions. Students will develop skills in interpreting financial data, preparing management reports, and contributing to efficiency and profitability within organizations.
Recommended Textbook
Cornerstones of Cost Management 2nd Edition by Don
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20 Chapters
3210 Verified Questions
3210 Flashcards
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R. Hansen
Page 2
Chapter 1: Introduction to Cost Management
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157 Verified Questions
157 Flashcards
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Sample Questions
Q1) The internal auditor performs a
A) line function.
B) staff function.
C) production function.
D) marketing function.
Answer: B
Q2) Which of the following duties is usually assigned to the controller?
A) receiving, maintaining custody of, and disbursing monies and securities
B) directing the granting of credit to clients
C) investing the organization's funds
D) tax planning
Answer: D
Q3) Which of the following activities is NOT associated with the cost management information system?
A) preparing a cost of quality report
B) preparing a performance report that compares actual costs to budgeted costs
C) determining the cost of a customer
D) using future expected earnings to estimate the price of a share of common stock
Answer: D
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Page 3
Chapter 2: Basic Cost Management Concepts
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Sample Questions
Q1) Cost assignment is one of the key processes of the cost accounting system.
A)True
B)False
Answer: True
Q2) Product costs are converted from cost to expense when A) units are completed.
B) materials are purchased.
C) units are sold.
D) materials are requisitioned.
Answer: C
Q3) The overall objective of accounting information systems is to A) provide information to users.
B) manage the organization.
C) prepare financial reports.
D) report to the government.
Answer: A
Q4) The overall objective of accounting information is to provide information to __________.
Answer: users
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Chapter 3: Cost Behavior
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Sample Questions
Q1) The basis of the learning curve is that as we perform an action over and over, we improve, and each additional performance takes less time than the preceding ones.
A)True
B)False
Answer: True
Q2) Cost behavior analysis focuses on how costs
A) react to changes in profit.
B) react to changes in activity level.
C) change over time.
D) both a and c.
Answer: B
Q3) In the method of least squares, the deviation is the difference between the A) predicted and estimated costs.
B) predicted and average costs.
C) average and actual costs.
D) predicted and actual costs.
Answer: D
Q4) A correlation coefficient near 0 means that two variables are __________ .
Answer: unrelated
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Chapter 4: Activity-Based Costing
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Sample Questions
Q1) If overhead is a significant proportion of the unit manufacturing costs, the distortion caused by using multi-level drivers can be serious.
A)True
B)False
Q2) If activity-based costing is used, set-ups would be classified as a
A) unit-level activity.
B) product-level activity.
C) batch-level activity.
D) facility-level activity.
Q3) Which of the following is NOT a limitation of a plantwide overhead rate?
A) Product diversity may consume overhead activities under differing consumption ratios.
B) Overhead usage is not strictly linked to the units produced because some products are more complex and diverse than others.
C) Predetermined rates using budgeted overhead are usually the best estimate of the amount of overhead.
D) Overhead costs tend to be underallocated to highly complex products.
Q4) The proportion of an overhead activity consumed by a product is the __________ ratio.
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Chapter 5: Product and Service Costing: Job-Order System
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Sample Questions
Q1) The total applied overhead at a given point in time is given by the credit balance in the __________ control account.
Q2) Figure 5 - 6 In the Monroe Company, the following Job cards were totaled at the end of the month:
Job 243 $5,750
Job 244 $4,980
Job 245 $3,675
Job 246 $4,250
Job 247 $5,100
Job 248 $3,800
Jobs 243 and 244 were in Finished Goods Inventory at the beginning of the month. Jobs 245 and 246 were in Work-in-process at the beginning of the month. Jobs 247 and 248 were started during the month. At the end of the month, Jobs 243 and 247 were sent to customers; jobs 245, 247, and 248 were completed and sent to finished goods.
Refer to Figure 5-6. What is the cost of goods sold for the month?
A) $10,730
B) $10,850
C) $12,575
D) none of these
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Chapter 6: Process Costing
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Sample Questions
Q1) The weighted average costing method picks up __________ inventory costs and outputs and treats them as if they belong in the current period.
Q2) The accounting system which accumulates production costs by process and uses a work-in-process account for each process is called __________ .
Q3) The major benefit of the weighted average method is simplicity. The major disadvantage is that accuracy and performance measurements are impaired.
A)True
B)False
Q4) Operation costing uses a blend of job-order and process-costing procedures whenever batches of dissimilar products are produced.
A)True
B)False
Q5) Equivalent units expresses all activity of the period in terms of A) direct labor hours.
B) partially completed units.
C) fully completed units.
D) units of input.
Q6) A key input to the cost of production report is __________ costs.
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Chapter 7: Allocating Costs of Support Departments and Joint Products
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Sample Questions
Q1) Departmental overhead rate is computed by dividing the budgeted base by the total overhead in a producing department.
A)True
B)False
Q2) The split-off point is the ending point of a joint product process.
A)True
B)False
Q3) A secondary product recovered in the course of manufacturing a primary product during a joint process is called a:
A) main product
B) joint product
C) by-product
D) both a and c
Q4) If the costs of support departments are NOT allocated to producing departments, A) product costs would be understated.
B) GAAP requirements would not be met.
C) managers of producing departments may tend to overconsume services.
D) all of the above.
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Q5) Support department __________ costs are allocated on the basis of original capacity.
Chapter 8: Budgeting for Planning and Control Key
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Sample Questions
Q1) Which of the following is a financial budget?
A) cost of goods sold budget
B) budgeted balance sheet
C) marketing expense budget
D) production budget
Q2) Control can be defined as
A) the process of setting standards, receiving feedback on actual performance, and taking corrective action whenever actual performance deviates significantly from plan.
B) a quantification of plans, stated in either physical or financial terms, or both.
C) identification of corporate objectives.
D) a comprehensive financial plan.
Q3) Which of the following is NOT a key feature of an ideal budgetary system?
A) controllable costs
B) single measure for performance
C) incentives
D) frequent feedback
Q4) Cash disbursements and cash excess or deficiency are components of the __________ budget.
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Chapter 9: Standard Costing: a Functional-Based Control Approach
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Sample Questions
Q1) During September, 12,000 pounds of materials were purchased at a cost of $8 per pound. If there was an unfavorable direct materials price variance of $6,000 for June, the standard cost per pound must be
A) $8.50.
B) $8.00.
C) $7.00.
D) $7.50.
Q2) The standard cost sheet includes all of the following EXCEPT
A) the standard cost per unit.
B) the standard quantity allowed for actual production.
C) the standard price.
D) the standard quantity per unit.
Q3) Quantity price standards
A) are standard price multiplied by standard quantity.
B) specify how much of the quantity of input should be used for the standard price.
C) specify how much should be paid for the quantity of input to be used.
D) specify how much of the quantity of input should be used for the actual price.
Q4) Compare and contrast mix and yield variances.
Page 11
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Chapter 10: Decentralization: Responsibility Accounting,
Performance Evaluation, and Transfer Pricing
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Sample Questions
Q1) Both revenue center and profit center managers are responsible for achieving A) budgeted revenues.
B) budgeted net income.
C) budgeted costs.
D) budgeted contribution margin.
Q2) When there is an outside market for an intermediate product that 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) Which of the following departments would NOT be a cost center?
A) advertising department
B) city police department
C) building and grounds department
D) sales department
Q4) In centralized organizations, lower-level managers are responsible only for implementing decisions.
A)True
B)False
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Chapter 11: Strategic Cost Management
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Sample Questions
Q1) When a computer company increases the internal storage space for the same price, it is following a
A) focusing strategy.
B) low-cost strategy.
C) differentiation strategy.
D) strategic positioning strategy.
Q2) Which of the following is a trait of a traditional manufacturing system?
A) push-through system
B) value-chain focus
C) total quality control
D) high employee involvement
Q3) The viewpoint that describes the general sales pattern of a product as it passes through the introduction, growth, maturity, and decline stages is called the:
A) Marketing viewpoint
B) Customer viewpoint
C) Production viewpoint
D) Accounting viewpoint
Q4) The stage during which a product loses market acceptance is called the __________ stage.
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Chapter 12: Activity-Based Management
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Sample Questions
Q1) Which of the following is part of the cost and process dimensions of the activity-based management model?
A) resources
B) driver analysis
C) activities
D) cost objects
Q2) The responsibility accounting system that uses both operational and financial measures is called __________ responsibility. or
Q3) A company has 5 days of finished goods inventory on hand to avoid stockouts. The carrying costs of the inventory average $5,000 per day. The value-added costs are
A) $-0-.
B) $1,000.
C) $5,000.
D) $25,000.
Q4) Driver analysis identifies performance levels.
A)True
B)False
Q5) What is Kaizen costing? How does activity analysis help reduce costs?
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Chapter 13: The Balanced Scorecard: Strategic-Based Control
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Sample Questions
Q1) Which is a major difference between activity-based measures and strategic-based measures?
A) Strategic-based measures are linked to strategy.
B) Strategic-based measures are used to align objectives.
C) Strategic-based measures are balanced measures.
D) all of the above.
Q2) The balanced scorecard becomes a means of communicating the strategy of the organization to its employees and managers. What might be a downside of communicating this information?
A) Employees will need direction about what is to be done.
B) Employees will need to understand where the organization is headed.
C) Sensitive information may end up in the hands of competitors.
D) all of the above.
Q3) What are the two additional perspectives that are added to the activity-based approach to achieve strategic-based responsibility?
A) a customer perspective and a learning and growth perspective
B) an infrastructure perspective and a process perspective
C) a customer perspective and a financial perspective
D) a financial perspective and a process perspective
Q4) Training hours is an example of a(n) __________ measure.
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Chapter 14: Quality and Environmental Cost Management
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Sample Questions
Q1) The measure of how well a product meets its requirements or specifications is called:
A) Service quality
B) Quality of design
C) Quality of conformance
D) Taguchi quality loss function
Q2) Costs which exist because poor quality may or does exits are called __________ .
Q3) Which of the following is an example of a physical measure of quality?
A) billing errors
B) number of defects per unit
C) contract errors
D) all of the above
Q4) The costs of a consumer complaint department are
A) external failure costs.
B) internal failure costs.
C) appraisal costs.
D) prevention costs.
Q5) Environmental costs caused internally but paid by outside parties are called __________ costs.
Q6) Environmental cost redesign would not be a part of an __________ report.
Page 16
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Chapter 15: Lean Accounting and Productivity Measurement
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Sample Questions
Q1) The measure of input and output used by a financial productivity measure is called:
A) revenues
B) dollars
C) costs
D) physical quantities
Q2) Which of the following is a reason traditional costing approaches may NOT work in a lean manufacturing environment?
A) Standard costing variances encourage overproduction.
B) Distorted product costs may conceal the outcome of success of a lean system.
C) Traditional operational controls work against demand-pull systems.
D) all of the above.
Q3) Identification of a "value stream," pursuit of perfection, and making value flow without interruption are examples of
A) total quality management.
B) activity-based costing.
C) principles of lean thinking.
D) Kanban processing.
Q4) Discuss the advantages and disadvantages of partial productivity measures.
Q5) Explain the difference between partial and total measures of productivity.
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Chapter 16: Cost-Volume-Profit Analysis
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Sample Questions
Q1) The Solemn Company has an operating leverage of 2. Sales for 2014 are $100,000 with a contribution margin of $50,000. Sales are expected to be $150,000 in 2015. Operating income for 2015 can be expected to increase by what amount over 2014?
A) $50,000
B) $25,000
C) 200%
D) 40%
Q2) CVP analysis is a short-run decision-making tool since some costs are fixed.
A)True
B)False
Q3) On a profit-volume graph, the intersection of the profit line with the vertical axis provides a
A) profit of $1,000.
B) profit equal to zero.
C) profit equal to fixed costs.
D) loss equal to fixed costs.
Q4) In multiple-product analysis, direct fixed costs can be __________ to each segment.
Q5) The __________ ratio expresses variable costs in terms of sales dollars.
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Chapter 17: Activity Resource Usage Model and Tactical
Decision Making
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Sample Questions
Q1) Qualitative factors that should be considered when evaluating a make-or-buy decision are
A) the quality of the outside supplier's product.
B) whether the outside supplier can provide the needed quantities.
C) whether the outside supplier can provide the product when it is needed.
D) all of the above.
Q2) Which of the following costs is NOT relevant to a make-or-buy decision?
A) $20,000 of direct labor used to manufacture the parts
B) $25,000 in rent from leasing the production space to another company if the part is purchased from an outside supplier
C) the supervisor's salary of $35,000 that will be avoided if the part is purchased from an outside supplier
D) $40,000 of depreciation on the plant used to manufacture the parts
Q3) Which of the following costs is relevant to a make-or-buy decision?
A) original cost of the production equipment
B) annual depreciation of the equipment
C) the amount that would be received if the production equipment were sold
D) the cost of direct materials purchased last month and used to manufacture the component
Page 19
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Chapter 18: Pricing and Profitability Analysis
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Sample Questions
Q1) Scottish Company manufactures a variety of toys and games. John Chisholm, president, is disappointed in the sales of a new board game. The game sold only 10,000 units in 2014 when 30,000 were projected. Sales for 2015 look no better. At $100 per game, it is not a hot seller. Direct costs of the board game are $56 variable cost and $100,000 fixed. John is considering several options. Option One: Cut the price to $70 and perhaps sell 15,000 units. Option Two: Cut the price to $60, reduce material costs by $10, and cut advertising by $60,000. Anticipated volume for this option is 10,000 units. Option Three: Cut the price to $80 and include a $10 mail-in rebate offer. It is anticipated that 15,000 units could be sold and only 30 percent of the rebate coupons would be redeemed. Which option is preferred?
A) Options One and Three are equally preferred.
B) Option Three
C) Option Two
D) Option One
Q2) The overall sales variance is the sum of the contribution margin and the sales price variance.
A)True
B)False
Q3) Discuss the limitation of profit measurement.
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Page 20
Chapter 19: Capital Investment
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Sample Questions
Q1) A firm is considering a project requiring an investment of $200,000. The project would generate an annual cash flow of $55,478 for the next five years. The company uses the straight-line method of depreciation with no mid-year convention. Ignore income taxes. The approximate internal rate of return for the project is
A) 9%.
B) 10%.
C) 12%.
D) 16%.
Q2) A firm is evaluating a project that has a net present value of $0 when a discount rate of 9 percent is used. A discount rate of 7 percent will result in a
A) negative net present value.
B) positive net present value.
C) net present value of $0.
D) the question cannot be answered based upon the information provided.
Q3) Net present value (NPV) is the difference between the present value of cash inflows and outflows associated with a project.
A)True
B)False
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21
Chapter 20: Inventory Management: Economic Order
Quantity, Jit, and the Theory of Constraints
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Sample Questions
Q1) In the graphic method of solving a linear programming problem, which of the following is depicted on the graph?
A) coefficient of correlation
B) constraint
C) least-squares line of best fit
D) break-even point
Q2) One of the traditional reasons for holding inventory is to minimize total carrying costs and setup costs. The JIT solution is to
A) reduce setup costs.
B) reduce lead time.
C) use total preventive maintenance.
D) use total quality control.
Q3) If the objective is to maximize profits in a linear programming problem, the coefficients of the variables in the objective function should be the
A) selling price per unit.
B) variable costs per unit.
C) contribution margin per unit.
D) fixed costs per unit.
Q4) The costs of holding inventory are called __________ costs.
22
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