Management Accounting
Midterm Exam
Course Introduction
Management Accounting explores the vital role accounting plays in the planning, controlling, and decision-making processes within organizations. The course covers fundamental concepts such as cost behavior, budgeting, performance evaluation, variance analysis, and the use of relevant information for managerial decision-making. Students will learn how to design and interpret internal accounting reports, apply costing techniques, and utilize financial information to support strategic objectives. Emphasis is placed on the integration of accounting data with organizational strategy and operations to enhance business efficiency and effectiveness.
Recommended Textbook
Managerial Accounting An Introduction to Concepts Methods and Uses 11th Edition by Michael W.
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Chapter 1: Fundamental Concepts
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Sample Questions
Q1) Integrated information processing systems that tie together managerial accounting,financial reporting,customer databases,supply chain management and other data bases are
A)not technically feasible.
B)required by the Internal Revenue Service regulations.
C)not in accordance with generally accepted accounting principles.
D)now commercially available.
Answer: D
Q2) Any item for which the manager wishes to measure cost is called a(n)
A)direct cost.
B)indirect cost.
C)cost object.
D)target cost.
Answer: C
Q3) Costs that donot relate directly to a cost object are its
A)marginal cost.
B)indirect cost.
C)sunk cost.
D)target cost.
Answer: B
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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) Explain the need for recording costs by department and assigning costs to products.
Answer: In recording costs by departments,the accounting system has served its function of providing data for departmental performance evaluation.The accounting system also assigns costs to products for managerial decision making,such as evaluating a product's profitability.
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4
Chapter 3: Activity-Based Management
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Sample Questions
Q1) The major cost pool(s)for activity-based costing is/are
A)the "plant."
B)the department.
C)the activity center.
D)the "plant" and the department.
Answer: C
Q2) Activity-based management and costing cannot be applied to marketing in order to
A)identify the marketing activities needed to service each customer or order more appropriately.
B)determine the variability in marketing costs across customer types and distribution.
C)support activity-based management by encouraging the elimination of accounts with high processing costs.
D)eliminate plantwide discretionary fixed costs.
Answer: D
Q3) What are the strategic and operational uses of activity-based management?
Answer: Activity-based management can help a company develop strategy,long-range plans,and subsequent cost advantage by focusing attention on activities.
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Chapter 4: Strategic Management of Costs,quality,and Time
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Sample Questions
Q1) A firm will develop a competitive advantage if it has which of the following traits?
A)longer new-product development time.
B)shorter new-product development time.
C)longer new-product research time.
D)shorter new-product research time.
Q2) At Bingham Dry Goods,the strategy for success requires rapid growth with a limited number of units for each design of product in order to enhance is promise of exclusivity,perfect fit,on-time delivery to customers,retaining good employees with innovative ideas,and control of inventory.
Required:
Based on this,suggest one performance measure for each dimension of a balanced scorecard for Bingham.
Q3) Which is the best stage in the Value Chain to identify quality problems?
A)Research & Development
B)Production
C)Marketing
D)Customer Service
Q4) What tools do firms use to identify quality control problems?
Q5) Why is time important in a competitive environment?
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Chapter 5: Cost Drivers and Cost Behavior
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Q1) If revenues are $20 per unit,variable costs are $10 per unit,and fixed costs are $150,what is the operating profit when 100 units are sold?
A)$ 850
B)$ 1,740
C)($16,000)
D)($ 140)
Q2) Which statement is true concerning capacity costs?
A)Capacity costs are certain fixed costs that provide a firm with the capacity to produce or sell or both.
B)Capacity costs need not be incurred in the short run to conduct business.
C)Capacity costs are uncontrollable in the long run.
D)Capacity costs are always non-value added.
Q3) Which of the following terms describes the range of activity over which the firm expects a set of cost behaviors to be consistent?
A)irrelevant range.
B)relevant range.
C)short-range.
D)long-range.
Q4) Identify capacity costs,committed costs,and discretionary costs.
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Chapter 6: Financial Modeling for Short-Term Decision Making
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Sample Questions
Q1) Explain the use of financial modeling in a multiple product setting.
Q2) The formula used in performing cost-volume-profit (CVP)analysis for the Target Profit in Units,where t is the tax rate,is
A)(Total Fixed Costs + Before-Tax Target Profit)/ Unit Contribution Margin.
B)(Total Fixed Costs + Before-Tax Target Profit)/ Contribution Margin Ratio.
C)(Total Fixed Costs ´ t)/ Unit Contribution Margin.
D)(Total Fixed Costs + (Target Profit ´ t))/ Unit Contribution Margin.
Q3) How can financial modeling be used with multiple cost drivers?
Q4) The profit-volume graph shows one line that represents which of the following?
A)operating profits of the company for a given sales volume.
B)operating revenues of the company for a given sales volume.
C)total costs of the company for a given sales volume.
D)total profits of the company for a given sales volume.
Q5) What is the formula for Target Profit in Sales Dollars?
A)Total Fixed Costs / Unit Contribution Margin.
B)(Total Fixed Costs + Target Profit)/ Unit Contribution Margin.
C)(Total Fixed Costs + Target Profit)/ Contribution Margin Ratio.
D)Total Fixed Costs / Contribution Margin Ratio
Q7) Explain the effect of taxes on financial modeling. Page 8
Q6) Explain how to perform cost-volume-profit (CVP)analysis.
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Chapter 7: Differential Cost Analysis for Operating Decisions
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Q1) Which of the following statements regarding joint cost allocation is not true?
A)The sales value of the end products is the most common method used to allocate joint costs.
B)Inventory cost and cost of goods sold computations for internal reporting purposes require joint cost allocation.
C)Inventory cost and cost of goods sold computations for external reporting purposes require joint cost allocation.
D)Joint cost allocation is unnecessary in deciding to sell or process further beyond the split-off point.
Q2) In the short run,__________ limitations require choices among alternatives.
A)capacity
B)joint cost
C)split-off point
D)full cost
Q3) Explain how to identify the costs of producing joint products and the relevant costs for decisions to sell or process further.
Q4) Explain why businesses apply differential analysis to product choice decisions.
Q5) How do the value chain and product life cycle influence long-run pricing decisions?
Page 10
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Chapter 8: Capital Expenditure Decisions
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Q1) What does the term capital budgetingmean in the context of making capital expenditure decisions?
A)the process of choosing assets.
B)the process of allocating the funds among assets.
C)the process of acquiring the funds to finance the business.
D)None of the above.
Q2) What behavioral issues are involved in capital budgeting?
Q3) What would the periodic cash flows associated with an investment project include?
A)savings for fixed and variable production costs
B)selling,general,and administrative expenditures and savings in selling,general,and administrative expenditures
C)income tax effects resulting from other periodic cash flows
D)all of the above.
Q4) 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.
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Chapter 9: Profit Planning and Budgeting
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Q1) Which statement is true concerning direct labor?
A)is work traceable directly to particular units of production.
B)uses estimates which allow for normal,periodic rest periods,yet motivates employees to perform efficiently.
C)could be fixed,if the firm is a high-tech company having only a few workers,or variable D)all of the above.
Q2) What is the continuous process of measuring products,services,or activities against competitors' performance?
A)benchmarking.
B)competitive analysis.
C)performance evaluation
D)none of the above.
Q3) Which of the following statements is true concerning the fixed component of power cost?
A)This would be categorized as a unit level activity.
B)This is a cost that would be incurred regardless of the level of output.
C)This would be categorized as a facility-related cost.
D)both "b" and "c"
Q4) How is the budget used for performance evaluation?
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Chapter 10: Profit and Cost Center Performance Evaluation
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Q1) 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.
Q2) Which of the following does the cost variance model use to analyze differences between actual and budgeted profits?
A)Flexible production budget.
B)Fixed production budget.
C)Prior period's production budget.
D)Generally accepted accounting principles.
Q3) For managerial accounting purposes,how are fixed manufacturing costs treated?
A)As product costs.
B)As period costs.
C)As opportunity costs.
D)As variable costs.
Q4) How do you calculate the mix variance portion of the efficiency variance?
Q5) What tools do managers use to decide when to investigate variances?
Q6) How does technology impact variance analyses?
Page 13
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Chapter 11: Investment Center Performance Evaluation
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Q1) What transfer pricing mechanism generally applies a normal markup to costs as a surrogate for market prices when intermediate market prices are not available?
A)Fixed price-based transfer pricing
B)Full-absorption costing
C)Activity-based costing
D)Cost-plus transfer pricing
Q2) The following is a measure for assessing how effectively management used the funds invested and is the ratio of divisional sales to the investment in divisional assets.
A)profit margin percentage.
B)return on investment.
C)investment turnover ratio.
D)investment realization ratio.
Q3) Compare and discuss the advantages and disadvantages of the following performance measures: ROI and EVA.
Q4) What are the issues in measuring the investment base for calculating return on investment?
Q5) What issues must be addressed when using return on investment (ROI)as a divisional performance measure?
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Chapter 12: Incentive Issues
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Q1) Which of these is the perspective of the balanced scorecard that is measured by employee satisfaction,employee retention,and employee productivity?
A)financial perspective.
B)internal business and production process perspective.
C)learning and growth perspective.
D)customer perspective.
Q2) Which of these is a disadvantage for compensating on future performance?
A)a short-term orientation.
B)a disincentive to invest in new technology.
C)a focus of attention on the long-run.
D)rewards that come too far in the future to be motivational.
Q3) Which of the following are components of deferred compensation?
A)cash bonuses.
B)profit sharing plans.
C)special awards.
D)stock options.
Q4) Discuss the steps that an internal auditor should take when fraud is suspected.
Q5) Compare and contrast expectancy and agency approaches to motivation.
Q6) How do incentive plans affect the development phase of the product life cycle?
Q7) Explain the linkages among the four balanced scorecard perspectives.
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Chapter 13: Allocating Costs to Responsibility Centers
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Q1) The costing process that (1)measures each service department's resource spending by unit,batch,product,customer,or facility,then (2)identifies and measures the activities demanded by other departments that require support-service spending,then (3)identifies appropriate cost-driver bases and calculates cost-driver rates,and finally allocates service department costs based on other departments' usage of cost-driver bases,is called the A)usage method.
B)activity-based method.
C)step method.
D)cost driver method.
Q2) Why is activity-based costing used to allocate service department costs?
A)To improve allocations of production department costs to production departments.
B)To improve allocations of production department costs to service departments.
C)To improve allocations of service department costs to production departments.
D)None of the answers is correct.
Q3) Why are joint-process costs allocated?
Q4) How are joint-process costs allocated?
Q5) Describe the factors that should be considered in allocating service department costs.
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