Management Accounting Test Bank
Course Introduction
Management Accounting explores the principles and practices used to provide financial and non-financial information to managers for decision-making, planning, and control. The course covers topics such as cost classification, budgeting, variance analysis, performance measurement, and strategic cost management. Students learn how to analyze data, prepare internal reports, and apply management accounting techniques to support organizational objectives and enhance operational efficiency. Emphasis is placed on the role of management accountants in facilitating informed business decisions and aligning organizational strategies with financial goals.
Recommended Textbook
Horngrens Cost Accounting A Managerial Emphasis 16th Edition by Srikant M. Datar
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23 Chapters
4116 Verified Questions
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Page 2
Chapter 1: The Manager and Management Accounting
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195 Verified Questions
195 Flashcards
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Sample Questions
Q1) The best-designed strategies are valuable, whether or not they are effectively implemented.
A)True
B)False
Answer: False
Q2) Place the five steps in the decision-making process in the correct order:
A = Obtain information
B = Make decisions by choosing among alternatives
C = Identify the problem and uncertainties
D = Implement the decision, evaluate performance, and learn
E = Make predictions about the future
A) C D B E A
B) E D A B C
C) C A E B D
D) A E B D C
Answer: C
Q3) The supply chain always occurs within a single organization.
A)True
B)False
Answer: False
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Chapter 2: An Introduction to Cost Terms and Purposes
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223 Verified Questions
223 Flashcards
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Sample Questions
Q1) Under GAAP, for the purposes of calculating inventory costs, product costs include
A) all costs incurred along the value chain
B) design costs
C) only inventoriable costs
D) only research and development costs
Answer: C
Q2) A direct cost of one cost object cannot be an indirect cost of another cost object.
A)True
B)False
Answer: False
Q3) Inventoriable costs ________.
A) include administrative and marketing costs
B) are expensed in the accounting period in which the products are sold
C) are expensed in the accounting period in which the products are manufactured
D) are also referred to as nonmanufacturing costs
Answer: B
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Chapter 3: Cost-Volume-Profit Analysis
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211 Verified Questions
211 Flashcards
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Sample Questions
Q1) If the sales mix shifts to one unit of Product X and two units of Product Y, then the breakeven point will ________.
A) increase
B) stay the same
C) decrease
D) will be greater than the original breakeven point
Answer: C
Q2) What is sales mix? How do companies choose their sales mix?
Answer: Sales mix is the quantities or proportion of various products or services that constitute a company's total unit sales. Managers adjust their mix to respond to demand changes. Assume there are two Products A and B. If there is a shift in production to Product A due to high demand, then this increases the breakeven point because the sales mix has shifted toward a lower-contribution-margin product and under no circumstances the manager should change the sales mix to lower the breakeven point without taking into account customer preferences and demand.
Q3) If a company increases fixed costs, then the breakeven point will be lower.
A)True
B)False
Answer: False
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Page 5
Chapter 4: Job Costing
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Sample Questions
Q1) The sum of all entries in underlying subsidiary ledgers equals the total amount in the corresponding general ledger control accounts.
A)True
B)False
Q2) Which of the following statements about actual costing is true?
A) Manufacturing costs of a job are available earlier under actual costing.
B) Corrective actions can be implemented sooner under actual costing.
C) Actual costing uses budgeted indirect-cost rates calculated annually.
D) Actual costing uses actual indirect-cost rates calculated annually.
Q3) When a job is complete ________.
A) actual indirect manufacturing labor is excluded from the total cost of the job
B) Finished Goods Control is debited
C) the cost of the job is transferred to Manufacturing Overhead Control
D) it is reduced from Manufacturing Overhead Control account
Q4) The budgeted direct-labor cost rate includes ________.
A) budgeted total costs in indirect cost pool
B) budgeted total direct-labor costs in the denominator
C) budgeted total direct-labor costs in the numerator
D) budgeted total direct-labor hours in the numerator
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Chapter 5: Activity-Based Costing and Activity-Based Management
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176 Verified Questions
176 Flashcards
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Sample Questions
Q1) The fundamental cost objects of ABC are ________.
A) activities
B) cost drivers
C) products
D) services
Q2) A well-designed, activity-based cost system helps managers make better decisions because information derived from an ABC analysis ________.
A) can be used to eliminate nonvalue-added activities
B) is easy to analyze and interpret
C) takes the choices and judgment challenges away from the managers
D) emphasizes how managers can achieve higher sales
Q3) Activity-based costing (ABC) can eliminate cost distortions because ABC systems
A) establish a cause-and-effect relationship with the activities performed
B) use single cost pool for all overhead costs, thereby enabling simplicity
C) use a broad average to allocate all overhead costs
D) never consider interactions between different departments in assigning support costs
Q4) Explain how a top-selling product may actually result in losses for the company.
Q5) How does ABC costing system help service companies?
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Chapter 6: Master Budget and Responsibility Accounting
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226 Verified Questions
226 Flashcards
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Sample Questions
Q1) Companies implementing kaizen budgeting believe that employees who actually do the job have the best knowledge of how the job can be done better.
A)True
B)False
Q2) Budgeting includes only the financial aspects of the plan and NOT any nonfinancial aspects such as the number of physical units manufactured or the hours that the direct laborers are expected to work.
A)True
B)False
Q3) Activity-based budgeting makes it easier to ________.
A) determine a rolling budget
B) prepare pro forma financial statements
C) determine how to reduce costs
D) execute a financial budget
Q4) To reduce budgetary slack management may ________.
A) incorporate stretch or challenge targets
B) use external benchmark performance measures
C) award bonuses for achieving budgeted amounts
D) reduce projected cost targets by 10% across all areas
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Chapter 7: Flexible Budgets, Direct-Cost Variances, and Management Control
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181 Verified Questions
181 Flashcards
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Sample Questions
Q1) Which variance is calculated using the formula (AQ - BQ) BP is the ________.
A) efficiency variance
B) price variance
C) total flexible-budget variance
D) spending variance
Q2) Variances are used for evaluating performance and for motivating managers.
A)True
B)False
Q3) Fine Lumber Inc. mills and finishes furniture kits. A certain kit requires the following:
Direct materials standard2 square yards at $13.50 per yard
Direct manufacturing labor standard1.5 hours at $20.00 per hour
During the third quarter, the company made 1,500 kits and used 3,150 square yards of wood costing $42,600. Direct labor totaled 2,100 hours for $46,150.
Required:
a.Compute the direct materials price and efficiency variances for the quarter.
b.Compute the direct manufacturing labor price and efficiency variances for the quarter.
Q4) 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) Standard costing is a costing system that allocates overhead costs on the basis of the standard overhead-cost rates times the standard quantities of the allocation bases allowed for the actual outputs produced.
A)True
B)False
Q2) When machine-hours are used as an overhead cost-allocation base, the most likely cause of a favorable variable overhead spending variance is ________.
A) excessive machine breakdowns
B) the production scheduler efficiently scheduled jobs
C) a decline in the cost of energy
D) strengthened demand for the product
Q3) The variable overhead efficiency variance is the difference between actual quantity of the cost-allocation base used and budgeted quantity of the cost-allocation base allowed for actual output, multiplied by the budgeted variable overhead cost per unit of the cost-allocation base.
A)True B)False
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Chapter 9: Inventory Costing and Capacity Analysis
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Sample Questions
Q1) ________ reduces theoretical capacity for unavoidable operating interruptions.
A) Practical capacity
B) Theoretical capacity
C) Master-budget capacity utilization
D) Normal capacity utilization
Q2) Given a constant contribution margin per unit and constant fixed costs, the period-to-period change in operating income under variable costing is driven solely by ________.
A) changes in the quantity of units actually sold
B) changes in the quantity of units produced
C) changes in ending inventory
D) changes in sales price per unit
Q3) Speedy Supplies sells a product at a price of $150. It's variable manufactured cost is $30 and the variable marketing cost per unit is $17.50 with fixed cost per period of $60,000. What would be the change in operating income under variable costs if sales increase from 10,000 to 10,500 units?
A) $60,000
B) $51,250
C) $66,250
D) Loss of $8,750
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Chapter 10: Determining How Costs Behave
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Sample Questions
Q1) A contractual agreement that specifies a fee per mile driven, such as with a rental of a truck, is not considered a cause-and-effect relationship between an activity and a cost.
A)True
B)False
Q2) It can be inferred that when there is a high correlation between two variables, one is the cause of the other.
A)True
B)False
Q3) The major advantages of quantitative methods are that they are objective, so managers can use them to evaluate different cost drivers.
A)True
B)False
Q4) Simple regression analysis estimates the relationship between the dependent variable and one independent variable.
A)True
B)False
Q5) Discuss the potential use of nonlinear curves in cost functions and cost analysis. Give some examples.
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Chapter 11: Decision Making and Relevant Information
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Sample Questions
Q1) Qualitative factors, as well as relevant revenues and relevant costs need to be considered when selecting among alternatives.
A)True
B)False
Q2) With a constraining resource, managers should choose the product with the
A) lowest contribution margin per unit of the constraining resource
B) highest sales price
C) highest contribution margin per unit of the constraining resource
D) highest gross profit
Q3) Opportunity costs are not recorded in financial accounting systems because historical record keeping is limited to transactions involving alternatives that managers actually selected rather than alternatives that they rejected.
A)True
B)False
Q4) Qualitative factors are important in the decision-making process even though they cannot be measured numerically.
A)True
B)False
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Chapter 12: Strategy, Balanced Scorecard, and Strategic
Profitability Analysis
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172 Flashcards
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Sample Questions
Q1) Total factor productivity (TFP) is easy to compute for a single-product company. When dealing with a multiproduct company, one of two adjustments must be made. What are these potential adjustments?
Q2) Which of the following statements is true of successfully implementing a balanced scorecard?
A) External auditors should design and implement the balanced scorecard.
B) Balanced scorecard should never be communicated to all employees.
C) Balanced scorecard should be formed exclusively by top management.
D) Management accountants should determine the balanced scorecard measures.
Q3) Successful re-engineering efforts generally involve changing the roles and responsibilities of employees.
A)True
B)False
Q4) Total factor productivity will increase if ________.
A) technical productivity occurs
B) the company uses more total inputs per output
C) the company incurs fewer costs per input
D) current technology becomes obsolete
Q6) What are the four key perspectives in the balanced scorecard? Page 14
Q5) Define engineered and discretionary costs and give two examples of each.
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Page 15
Chapter 13: Pricing Decisions and Cost Management
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Sample Questions
Q1) Sales of Granite City Products Inc. have been on a steady decline for the last 12 months. A market research study conducted revealed that the product of Granite City Products Inc. can be sold only for $420 as opposed to the current market price charged of $520 per unit. Granite City Products Inc. has decided to revise its sales price to $420. The annual sales target volume of the product after price revision is 280 units. Granite City Products Inc. wants to earn 30% on its sales amount. What is the target operating income?
A) $82,320
B) $35,280
C) $117,600
D) $152,880
Q2) If U.S dollar strengthens against the Japanese Yen, Japanese producers selling goods in U.S markets will have to increase the prices of products to recover the extra cost arising from currency fluctuation.
A)True
B)False
Q3) Markups tend to be higher in more competitive markets.
A)True
B)False
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Page 16
Chapter 14: Cost Allocation, Customer-Profitability Analysis, and Sales-Variance Analysis
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Sample Questions
Q1) The sales-quantity variance can be decomposed into ________.
A) sales-mix variance and sales-volume variance
B) static-budget variance and flexible-budget variance
C) flexible-budget variance and sales-volume variance
D) market-share variance and market-size variance
Q2) Costs in a homogeneous cost pools have the same or a similar cause-and-effect or benefits-received relationship with the cost-allocation base.
A)True B)False
Q3) Sales-mix variance = $300,000 (F), sales-volume variance = $470,000 (U), flexible-budget variance = $230,000 (F), market-size variance = $34,000 (U), calculate the sales-quantity variance.
A) $770,000 (U)
B) $804,000 (U)
C) $136,000 (U)
D) $170,000 (U)
Q4) Costs of displays at customer sites is an example of customer batch-level costs.
A)True B)False
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Chapter 15: Allocation of Support-Department Costs, Common
Costs, and Revenues
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Sample Questions
Q1) Which of the following is not one of the methods used to to allocate the revenues of a bundled product?
A) direct revenue method
B) stand-alone selling prices method
C) Stand-alone physical units method
D) incremental revenue method
Q2) Under the incremental method of allocating common costs ________.
A) the parties are interested in being viewed as primary users
B) each party bears a proportionate share of the total costs in relation to their individual stand-alone costs
C) the first-incremental user bears a higher proportion of the cost in comparison with the primary user
D) the primary user bears the maximum of the total cost
Q3) All contracts with U.S. government agencies must comply with the cost accounting standards issued by the SEC.
A)True
B)False
Q4) Explain three approaches to determining weights for the the stand-alone revenue-allocation. Which method do managers prefer?
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Chapter 16: Cost Allocation: Joint Products and Byproducts
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Sample Questions
Q1) Which of the following formulas would calculate the net realizable value of a product?
A) sales value at the split-off point less cost to produce up to the split-off point
B) sales value x constant gross-margin
C) final sales value minus cost of goods sold
D) final sales value minus separable costs
Q2) Which of the following is a is a market-based approach to allocating joint costs?
A) sales units
B) units of production
C) physical measures
D) net realizable value
Q3) In joint costing, the sales value at split-off method is typically used in preference to the NRV method only when net realizable value for one or more products at split-off do not exist.
A)True
B)False
Q4) Explain why some companies choose not to allocate joint costs to products.
Q5) What are joint costs, separable costs, and a split-off point?
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Chapter 17: Process Costing
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Sample Questions
Q1) Stefan Ceramics is in the business of selling ceramic vases. It has two departmentsmolding and finishing. Molding department purchases tungsten carbide and produces ceramic vases out of it. Ceramic Vases are then transferred to finishing department, which designs it as per the requirement of the customers. During the month of July, molding department purchased 720 kgs of tungsten carbide at $280 per kg. It started manufacture of 4200 vases and completed and transferred 3800 vases during the month. It has 400 vases in the process at the end of the month. It incurred direct labor charges of $1700 and other manufacturing costs of $600, which included electricity costs of $700. Stefan had no inventory of tungsten carbide at the end of the month. It also had no beginning inventory of vases. The ending inventory was 40% complete in respect of conversion costs. What is the total conversion costs for the month of July?
A) $3000
B) $2300
C) $1600
D) $1700
Q2) What is the difference between a weighted-average method of process costing and a first-in, first-out method of process costing?
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Page 20
Chapter 18: Spoilage, Rework, and Scrap
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Sample Questions
Q1) Which of the following best describes scrap?
A) units of production that do not meet the specifications required by customers but that are subsequently repaired and sold as good finished units
B) products of a joint production process that have low total sales values relative to the total sales value of the main product
C) residual material that results from manufacturing a product
D) units of production whether fully or partially completed, that do not meet the specifications required by customers for good units and are discarded or sold at reduced prices
Q2) Firms often conduct multiple inspections to avoid instances of undetected spoiled units at later stages of the process.
A)True
B)False
Q3) Counting spoiled units as part of output units in a process-costing system usually results in a higher cost per unit.
A)True
B)False
Q4) What is the distinction between normal and abnormal spoilage?
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Chapter 19: Balanced Scorecard: Quality and Time
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Sample Questions
Q1) Product testing is an example of ________.
A) prevention costs
B) appraisal costs
C) internal failure costs
D) external failure costs
Q2) A machine has been identified as a bottleneck and the source of the constraint for a manufacturing company that has multiple products and multiple machines. Discuss ways the company can overcome the bottleneck.
Q3) 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
Q4) Discuss the methods used to identify quality problems.
Q5) Discuss the means by which a company goes about evaluating and installing a new quality improvement program.
Q6) What are control charts and how can inferences be drawn from them?
Page 22
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Chapter 20: Inventory Management, Just-in-Time, and Simplified Costing Methods
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Sample Questions
Q1) The costs that result from theft of inventory are ________.
A) shrinkage costs
B) external failure costs
C) stockout costs
D) costs of quality
Q2) A company's inventory levels are dependent on a number of variables including the demand for the product, supplier relationships, and supplier relationships with their manufacturers.
A)True
B)False
Q3) Under backflush costing approach where three trigger points are used (stage A, stage C, and stage D), the purchase of materials is:
A) credited to the Materials and In-Process Inventory Control account
B) debited to the Materials and In-Process Inventory Control account
C) debited to the Materials Inventory Control account
D) ignored because the manufacturing process moves so quickly from acquisition of materials to the sale of the finished good
Q4) What is a supply chain, and what are the benefits of a supply chain analysis? Provide an example of these benefits.
Page 23
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Chapter 21: Capital Budgeting and Cost Analysis
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Sample Questions
Q1) What are the relevant cash inflows and outflows for capital budgeting decisions?
Q2) Discuss a range of factors that managers may have to consider when making capital budgeting decisions that are strategic in nature.
Q3) Depreciation is usually NOT considered an operating cash flow in capital budgeting because ________.
A) depreciation is usually a constant amount each year over the life of the capital investment
B) deducting depreciation from operating cash flows would be counting the lump-sum amount twice
C) depreciation usually does not result in an increase in working capital
D) depreciation usually has no effect on the disposal price of the machine
Q4) Locil Corporation recently purchased a new machine for $307,890 with a eight-year life. The old equipment has a remaining life of eight years and no disposal value at the time of replacement. Net cash flows will be $90,000 per year. What is the internal rate of return?
A) 24%
B) 29%
C) 33%
D) 37%
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Chapter 22: Management Control Systems, Transfer
Pricing, and Multinational
Considerations
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Sample Questions
Q1) 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.
Q2) Which of the following denotes minimum transfer price?
A) Minimum transfer price = Incremental cost per unit incurred up to the point of transfer + Opportunity cost per unit to the selling subunit
B) Minimum transfer price = Total cost per unit incurred up to the point of transfer + Sunk cost per unit to the selling subunit
C) Minimum transfer price = Current cost per unit incurred up to the point of transfer + Historical cost per unit to the selling subunit
D) Minimum transfer price = Variable cost per unit incurred up to the point of transfer + Fixed cost per unit to the selling subunit
Q3) The cost used in cost-based transfer prices can be actual cost or budgeted cost. A)True B)False
Q4) Briefly explain each of the three methods used to determine a transfer price.
Page 25
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Chapter 23: Performance Measurement, Compensation, and Multinational Considerations
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Sample Questions
Q1) The ________ method of profitability analysis recognizes the two basic ingredients in profit-making: increasing income per dollar of revenues and using assets to generate more revenues.
A) Balanced Scorecard
B) Residual-Income
C) DuPont
D) Economic Value Added
Q2) Measures which monitor critical performance variables that help managers track progress toward achieving a company's strategic goals are collectively called diagnostic control systems.
A)True
B)False
Q3) Executive compensation plans are based on both financial and nonfinancial performance measures. Discuss
Q4) The more owners have access to sensitive performance measures, the more they can rely on incentive compensation for their managers.
A)True
B)False
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