Management Accounting
Final Exam Questions
Course Introduction
Management Accounting focuses on the processes, techniques, and tools used by managers to make informed business decisions. This course covers key concepts such as cost behavior, budgeting, performance measurement, variance analysis, and internal reporting systems. Students learn how to analyze financial information, allocate resources efficiently, and support strategic planning and control within organizations. Emphasis is placed on using accounting data for managerial decision-making, planning future operations, and assessing operational efficiency to achieve organizational goals.
Recommended Textbook
Horngrens Cost Accounting A Managerial Emphasis16th Global Edition by Srikant M. Datar
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Chapter 1: The Manager and Management Accounting
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Q1) Describe the major differences between management accounting and financial accounting for the following:
1.Primary users
2.Focus and emphasis
3.Rules of measurement and reporting
Answer: 1.The primary users of management accounting information are managers of the organization.The primary users of financial accounting are external users such as investors,banks,regulators,and suppliers.
2.Management accounting is future oriented.Financial accounting is past oriented.
3.Management accounting measurement and reporting does not have to follow GAAP but are based on cost-benefit analysis.Financial accounting measurement and reporting must be prepared in accordance with GAAP and be certified by external,independent auditors.
Q2) Performing professional duties in accordance with relevant laws,regulations,and technical standards is a competent responsibility.
A)True
B)False
Answer: True
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Chapter 2: An Introduction to Cost Terms and Purposes
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Q1) Classifying a cost as either direct or indirect depends upon ________.
A)the behavior of the cost in response to volume changes
B)whether the cost is expensed in the period in which it is incurred
C)whether the cost can be traced to a particular cost object in an economically feasible way
D)whether a cost is fixed or variable
Answer: C
Q2) The most likely cost driver of direct labor costs is the ________.
A)number of machine setups for the product
B)number of miles driven
C)number of production hours
D)number of machine hours
Answer: C
Q3) Product costs used for government contracts generally include ________.
A)marketing costs,and customer service costs
B)design costs and production costs
C)all the costs for pricing and product-mix decisions
D)production costs,distribution costs,marketing costs,and customer service costs
Answer: B
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Chapter 3: Cost-Volume-Profit Analysis
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Sample Questions
Q1) Contribution margin per unit equals contribution margin divided by number of units sold.
A)True
B)False
Answer: True
Q2) When a greater proportion of costs are fixed costs,then ________.
A)a small increase in sales results in a small decrease in operating income
B)when demand is low the risk of loss is high
C)a decrease in sales reduces the total fixed cost per unit
D)a decrease in sales reduces the cost per unit
Answer: B
Q3) A firm operating at breakeven point will pay an income tax of 10%.
A)True
B)False
Answer: False
Q4) If planned net income is $30,000 and the tax rate is 30%,then planned operating income would be $39,000.
A)True
B)False
Answer: False
Page 5
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Chapter 4: Job Costing
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Sample Questions
Q1) Purchases of materials are credited to materials control.
A)True
B)False
Q2) The formula for the predetermined indirect cost rate is:
A)Budgeted annual indirect costs divided by actual quantity of cost-allocation base
B)Budgeted annual indirect costs divided by budgeted annual quantity of cost-allocation base
C)Actual annual indirect costs divided by budgeted annual quantity of cost-allocation base
D)Actual annual indirect costs divided by actual annual quantity of cost-allocation base
Q3) A company may use job costing to assign costs to different product lines and then use process costing to calculate unit costs within each product line.
A)True
B)False
Q4) What are the direct costs of a job and in which source documents are they recorded?
Q5) What is the difference between an actual cost system and a normal cost system?
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Chapter 5: Activity-Based Costing and Activity-Based Management
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Q1) What are the four parts of the cost hierarchy.Briefly explain each part,and contrast this cost hierarchy to the fixed-variable dichotomy?
Q2) The cost data produced by an ABC system for either a service or a product are only derived from indirect costs.
A)True
B)False
Q3) Activity-based costing is most likely to yield benefits for companies ________.
A)with complex product design processes that vary significantly from product to product
B)with operations that remain fairly consistent across product lines
C)in a monopolistic market
D)having nominal percentage of indirect costs
Q4) Which of the following reasons explain why ABC concepts may be of great value to service companies?
A)It allows for more accurate cost accounting for inventory
B)It promotes more accurate cost of goods sold reporting
C)It helps make financial reporting more accurate
D)A significant portion of the cost structure of a service firm is composed of indirect costs
Chapter 6: Master Budget and Responsibility Accounting
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Sample Questions
Q1) Kaizen budgeting can be applied to activities such as setups with the goal of reducing setup time and setup costs.
A)True
B)False
Q2) The district director of 5 mortgage origination offices staffed by bank associates who cold call potential customers in an attempt to gain home mortgage and home equity loan business is most likely responsible for a(n)________.
A)revenue center
B)investment center
C)cost center
D)profit center
Q3) Explain what is meant by sensitivity analysis in budgeting,and discuss how managers might use sensitivity analysis in practice.
Q4) Even in the face of changing conditions,attaining the original budget is critical and is the only true measure of success.
A)True
B)False
Q5) Describe the benefits of preparing an operating budget to an organization.
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Chapter 7: Flexible Budgets,direct-Cost Variances,and Management Control
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Sample Questions
Q1) A flexible budget ________.
A)is another name for management by exception
B)is developed at the end of the period
C)is based on the budgeted level of output
D)provides favorable operating results
Q2) Direct material price variance is likely to be unfavorable if the purchasing manager switched to a lower-price supplier.
A)True
B)False
Q3) To prepare budgets based on actual data from past periods is preferred since past inefficiencies are EXCLUDED.
A)True
B)False
Q4) A favorable efficiency variance for direct materials might indicate that ________.
A)lower-quality materials were purchased
B)work is scheduled efficiently
C)there is an unexpected increase in direct labor rates
D)management hired underskilled workers
Q5) What is benchmarking,and how is it useful to a company?
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Chapter 8: Flexible Budgets, overhead Cost Variances, and Management Control
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Sample Questions
Q1) Russo Corporation manufactured 17,000 air conditioners during November.The overhead cost-allocation base is $34.75 per machine-hour.The following variable overhead data pertain to November: \(\begin{array}{lll}&\text { Actual }&\text { Budgeted } \\ \text { Production } & 17,000 \text { units } & 20,000 \text { units } \\ \text { Machine-hours } & 12,925 \text { hours } & 14,000 \text { hours } \\ \text { Variable overhead cost per machine-hour: } & \$ 34,00 & \$ 34.75 \end{array}\)
What is the actual variable overhead cost?
A)$439,450
B)$476,000
C)$449,144
D)$486,500
Q2) If the company's fixed overhead spending variance was unfavorable it could be attributed to higher plant-leasing costs.
A)True
B)False
Q3) 'Managers should be wary of using the same unitized fixed overhead costs for planning and control purposes'.Do you agree with this argument? Give reasons for your answer.
Page 10
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Chapter 9: Inventory Costing and Capacity Analysis
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Sample Questions
Q1) Francis Corporation is having trouble selling its inventory because of its ongoing dispute with its logistical partner.The company was not able to sell any inventory in the month of January because of the dispute.It manufactured 8,000 units in January.Francis had no other fixed costs commitment other than fixed manufacturing costs of $100,000.It follows absorption costing.If actual production in January was equal to the denominator level,what is the amount of sales required to attain breakeven point?
A)1250 units
B)125 units
C)10 units
D)0 units
Q2) Which of the following costs will be treated as period costs under absorption costing?
A)raw materials used in the production
B)sales commission paid on sale of product
C)depreciation on factory equipment
D)rent for factory building
Q3) Throughput margin equals revenues minus all product costs.
A)True
B)False
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Chapter 10: Determining How Costs Behave
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Sample Questions
Q1) If cost accountants decide to use production of prior periods as a cost driver for repair cost of the current period they understand that
A)there is no correlation between repair costs and levels of production
B)repair costs tend to lag periods of high production
C)cost accountants do not need to understand operations
D)there is no cause-and-effect between production and repair costs
Q2) A cost function is a ________.
A)process of calculating present value of projected cash flows
B)process of allocating costs to cost centers or cost objects
C)mathematical description of how a cost changes with changes in the level of an activity relating to that cost
D)is a very thorough and detailed way to identifying a cost object when there is a physical relationship between inputs and outputs
Q3) In the estimation of a cost function using quantitative analysis,the independent variable ________.
A)is the cost to be predicted
B)is the product of fixed costs and slope coefficient
C)is the factor used to predict the dependent variable
D)is the product of total costs and slope coefficient
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Chapter 11: Decision Making and Relevant Information
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Sample Questions
Q1) Activity based costing (ABC)systems are less useful than the theory of constraints (TOC)for long-run pricing,cost control,and capacity management.
A)True
B)False
Q2) Variable cost per unit is the best product cost to use for one-time-only special order decisions.
A)True
B)False
Q3) Sunk costs ________.
A)are future costs for decision making
B)are avoidable costs
C)are irrelevant for decision making
D)are foregone contribution by not using a limited resource in its next-best alternative use
Q4) Linear programming is a tool that maximizes total contribution margin of a mix of products with multiple constraints.
A)True
B)False
Q5) Explain what revenues and costs are relevant when choosing among alternatives.
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Chapter 12: Strategy,balanced Scorecard,and Strategic Profitability Analysis
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Q1) The cost leadership strategy is best for a company if the engineering staff is more skilled at creatively designing new products than at making process improvements.
A)True
B)False
Q2) ________ is an example of a total factor productivity measure.
A)The number of units produced per month
B)The number of units produced per machine hour
C)The number of units produced per labor hour
D)The number of units produced per dollar of input cost
Q3) Which of the following is NOT a discretionary cost?
A)the cost of social networking activities to promote a product
B)the cost of total quality management training for executives
C)legal costs
D)the cost to train factory general managers to use a new activity based management system
Q4) Can a company identify unused capacity and,if so,how can unused capacity be managed?
Q5) What is re-engineering.Can you contrast a re-engineering approach to change with a kaizen approach to change?
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Chapter 13: Pricing Decisions and Cost Management
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Q1) Customer life-cycle costs focus on the total costs incurred by a customer to acquire,use,maintain,and dispose of a product or service.
A)True
B)False
Q2) Which of the following identifies an estimated price customers are willing to pay and then computes the cost to be achieved to earn the desired profit.
A)Cost-plus pricing
B)Target costing
C)Kaizen costing
D)Peak-load costing
Q3) Environmental costs that are incurred over several years of the product's life cycle are often locked in at the product- and process-design stage.
A)True
B)False
Q4) All costs are locked in at the design stage itself.
A)True
B)False
Q5) What is the primary reason a firm would adopt target costing?
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Chapter 14: Cost Allocation, customer-Profitability Analysis, and Sales-Variance Analysis
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Q1) The benefits of implementing a more-complex cost allocation system are relatively easy to quantify for application of the cost-benefit approach.
A)True
B)False
Q2) Which of the following is true of corporate-sustaining costs?
A)are common to all individual customers
B)have a clear cause-and-effect relationship with several cost-allocation bases
C)should be allocated for decisions regarding reducing customer costs
D)evaluates the effectiveness of sales personnel
Q3) Under the cause and effect criterion,reasonableness is a matter of judgment rather than an operational criterion.
A)True
B)False
Q4) Price discounts must be uniform among all customers.
A)True
B)False
Q5) Briefly describe the four criteria used to guide cost-allocation decisions.
Q6) Should a company allocate its corporate costs to divisions?
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Chapter 15: Allocation of Support-Department Costs, common
Costs, and Revenues
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Sample Questions
Q1) Jonathan has managed a downtown store in a major metropolitan city for several years.The firm has ten stores in varying locations.In the past,senior management noticed Jonathan's work and he has received very good annual evaluations for his management of the store.
This year his store has generated steady growth in sales,but earnings have been deteriorating.After examining the monthly performance report generated by the company budgeting department,he noticed that increasing fixed costs is causing the decrease in earnings.
Administrative corporate costs,primarily fixed costs,are allocated to individual stores each month based on actual sales for that month.Two of these stores are currently growing at a rapid pace,while four other stores are having operating difficulties.
Required:
From the information presented,what do you think is the cause of Jonathan's reported decrease in earnings? How can this be corrected?
Q2) What is an operating department and how is it different from a support department? Give examples of each.
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Chapter 16: Cost Allocation: Joint Products and Byproducts
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Q1) When the selling prices at the split-off are unavailable,the NRV method is the best alternative.
A)True
B)False
Q2) In joint costing,the constant gross-margin percentage method recognizes that the profit margin is not just attributable to the joint process but is also derived from the costs incurred after split-off.
A)True
B)False
Q3) All products yielded from joint product processing have some positive value to the firm.
A)True
B)False
Q4) Explain why some companies carry their inventories at NRV minus an estimated operating income margin instead of the NRV itself.
Q5) Firms should be wary of using the full cost of a joint product as the basis for making pricing decisions.Why?
Q6) Explain why some companies choose not to allocate joint costs to products.
Q7) What are joint costs,separable costs,and a split-off point?
Page 18
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Chapter 17: Process Costing
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Q1) Under the weighted-average method,how would you calculate the cost per equivalent units with regards to conversion costs?
A)conversion costs for work done in the current period/units completed and transferred out in the current period
B)(total conversion costs in beginning work in process)/(units completed and transferred out during the period + equivalent units in ending inventory)
C)(total conversion costs in beginning work in process + conversion cost for work done in the current period)/(units completed and transferred out during the period + equivalent units in ending inventory)
D)(total direct labor costs in beginning work in process + conversion cost for work done in the current period)/(units completed and transferred out during the period + equivalent units in ending inventory)
Q2) An operation is a standardized method or technique performed repetitively,often on different materials,resulting in different finished goods.
A)True
B)False
Q3) List and describe the five steps in process costing.
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Chapter 18: Spoilage, rework, and Scrap
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Q1) How do job-costing systems account for spoilage?
Q2) The inspection point is the ________.
A)stage of the production cycle where products are checked to determine whether they are acceptable or unacceptable units
B)point at which costs are allocated between normal and abnormal spoilage
C)point at which the calculation of equivalent units is made
D)stage of allocating total costs transferred out to good units completed and transferred
Q3) In accounting for scrap,which of the following statements is true?
A)Normal scrap is accounted for separately from abnormal scrap.
B)In accounting for scrap,there is no distinction between the scrap attributable to a specific job and scrap common to all jobs.
C)Initial entries to scrap accounting records are most often made in dollar terms.
D)Scrap records not only help measure efficiency,but also help keep track of scrap,and so reduce the chances of theft.
Q4) Explain the meaning of the terms spoilage,scrap,and rework.Provide an example of each.Is it possible for a single firm to have all three from a single productive process?
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Chapter 19: Balanced Scorecard: Quality and Time
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Q1) Tony placed an order for a customized watch.The customer response time is 43 hours,its receipt time is 9 hours,and manufacturing cycle time is 25 hours.Calculate the delivery time of the product.
A)18 hours
B)9 hours
C)16 hours
D)4)5 hours
Q2) If Six Sigma's goal is to get defect rates down to 3.4 defects per every 100,000 units produced.
A)True
B)False
Q3) Process engineering is an example of ________.
A)prevention costs
B)appraisal costs
C)internal failure costs
D)external failure costs
Q4) Manufacturing lead time is the sum of waiting time and manufacturing time for an order.
A)True
B)False
Page 21
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Chapter 20: Inventory Management, just-In-Time, and Simplified Costing Methods
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Q1) The optimal safety-stock level is the quantity of safety stock that minimizes the sum of annual relevant stockout and ordering costs.
A)True
B)False
Q2) If Kenton Inc.has a safety stock of 215 units and the average weekly demand is 35 units,how many days can be covered if the shipment from the supplier is delayed by 16 days?
A)16 days
B)43 days
C)59 days
D)27 days
Q3) The EOQ model factors in the probability of stockouts.
A)True
B)False
Q4) All inventory costs are available in financial accounting systems.
A)True
B)False
Q5) Backflush costing does not strictly adhere to generally accepted accounting principles.Explain why.Also,describe the types of businesses that might use backflush costing.
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Chapter 21: Capital Budgeting and Cost Analysis
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Q1) The capital budgeting method that calculates the discount rate at which the present value of expected cash inflows from a project equals the present value of expected cash outflows is the ________.
A)net present value method
B)accrual accounting rate-of-return method
C)payback method
D)internal rate of return method
Q2) The accrual accounting rate-of-return method has a significant weakness for use in making capital budgeting decisions because it does NOT track cash flows and it ignores the time value of money.
A)True
B)False
Q3) What are the relevant cash inflows and outflows for capital budgeting decisions?
Q4) AARR indicates the average rate at which ________.
A)a dollar of investment generates after-tax operating income
B)a dollar of after-tax cash flow generates net income
C)a dollar of investment generates a positive cash flow
D)a dollar of after-tax non-operating income generates net income
Q5) List the capital budgeting methods used to analyze financial information.
Q6) How is inflation related to capital budgeting? Discuss.
Page 23
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Chapter 22: Management Control Systems, transfer Pricing, and Multinational Considerations
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Q1) Why is decentralization costly?
Q2) Negotiated transfer prices are often employed when ________.
A)market prices are stable
B)market prices are volatile
C)market prices change by a regular percentage each year
D)goal congruence is not a major objective
Q3) An organization should design its management control system independently of its strategies,so that the system is not affected by change of strategies in future.
A)True
B)False
Q4) Which of the following is true of hybrid transfer prices?
A)The cost used in hybrid transfer prices is always the actual cost.
B)The cost used in hybrid transfer prices is always the budgeted cost.
C)They take into account both cost and market information.
D)They are less popular in manufacturing industry.
Q5) What is goal congruence?
Q6) An investment center is always a decentralized subunit.
A)True
B)False
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Chapter 23: Performance Measurement, compensation, and Multinational Considerations
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Q1) Inflation and fluctuations in foreign-currency exchange rates affect performance measurement.
A)True
B)False
Q2) A report that measures financial and nonfinancial performance measures for various organization units in a single report is called a(n)________.
A)balanced scorecard
B)financial report scorecard
C)goal-congruence report
D)investment success report
Q3) An example of a performance measure with a long time horizon is ________.
A)direct materials efficiency variances
B)overhead spending variances
C)number of new patents developed
D)quality of room service
Q4) Some companies,make environmental performance a line item on every employee's salary appraisal report.
A)True
B)False
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