Management Control Systems
Chapter Exam Questions
Course Introduction
Management Control Systems explores the frameworks, processes, and tools used by organizations to guide behavior, align goals, and ensure effective achievement of objectives. The course examines the design and implementation of planning, measurement, and incentive systems that influence managerial decision-making and performance. Through case studies and practical applications, students analyze how control systems are adapted to various organizational contexts, address challenges such as decentralization, and balance financial and non-financial measures. The course emphasizes the integration of strategic objectives with operational management, fostering an understanding of how control systems contribute to organizational success in dynamic business environments.
Recommended Textbook
Managerial Accounting 11th Canadian Edition by Ray Garrison
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Page 2
Chapter 1: Managerial Accounting and the Business Environment
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Sample Questions
Q1) The purpose of IFRS is:
A) To encourage Strategic planning.
B) To enhance the comparability and clarity of financial information on a global basis.
C) To encourage disclosure of Non-Financial data.
D) To change how management accountants prepare reports.
Answer: B
Q2) Which of the following is NOT an example of a business risk?
A) Products harming customers.
B) A website malfunctioning.
C) A customer value proposition.
D) An employee accessing unauthorized information.
Answer: C
Q3) Managerial accounting plays a critical role in providing information to management to facilitate implementing and monitoring strategy.
A)True
B)False
Answer: True
Page 3
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Chapter 2: Cost Terms,concepts,and Classifications
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Q1) Which one of the following costs should NOT be considered an indirect cost of serving a particular customer at a Dairy Queen fast food outlet?
A) The cost of the hamburger patty in the burger the customer ordered.
B) The wages of the employee who takes the customer's order.
C) The cost of heating and lighting the kitchen.
D) The salary of the outlet's manager.
Answer: A
Q2) Sally Smith is employed in the production of various electronic products,and she earns $8 per hour.She is paid time-and-a-half for work in excess of 40 hours per week.During a given week,she worked 45 hours and had no idle time.How much of her week's wages would be charged to manufacturing overhead?
A) $60.
B) $20.
C) $40.
D) $0.
Answer: B
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4
Chapter 3: Cost Behaviour: Analysis and Use
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Q1) What is the contribution margin of Evans Retail Stores,Inc.,for the first quarter?
A) $140,000.
B) $190,000.
C) $210,000.
D) $300,000.
Answer: A
Q2) Which of the operating expenses of the company is variable?
A) Rent.
B) Sales commissions.
C) Maintenance expenses.
D) Clerical expenses.
Answer: B
Q3) Indirect costs,such as manufacturing overhead,are always fixed costs.
A)True
B)False
Answer: False
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5
Chapter 4: Cost-Volume-Profit Relationships
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Sample Questions
Q1) The breakeven point in sales dollars is closest to:
A) $137,500.
B) $40,000.
C) $120,000.
D) $60,000.
Q2) The following data pertain to Wistron Company's two products:
\(\begin{array}{|l|r|r|}
\hline & \text { Product X } & \text { Product Y } \\
\hline \text { Sales in dollars } & \$ 100,000 & \$ 80,000 \\
\hline \text { Contribution margin ratio } & 48 \% & 30 \% \\ \hline \end{array}\)
If fixed expenses for the company as a whole are $60,000 and the product mix is constant,what would be the overall break-even point in sales dollar for the company?
A) $150,000.
B) $153,846.
C) $100,000.
D) $132,000.
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Chapter 5: Systems Design: Job-Order Costing
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Sample Questions
Q1) Which entry records the application of overhead?
A) 1.
B) 5.
C) 6.
D) 3.
Q2) In a job-order costing system,when a job remains incomplete at the end of a period,how is the amount of overhead cost that has been applied to that job treated?
A) It is deducted on the Income Statement as overapplied overhead.
B) It is closed out to Cost of Goods Sold.
C) It is transferred to Finished Goods.
D) It is part of the ending balance of the Work in Process inventory account.
Q3) Which entry transfers the cost of goods manufactured for the period?
A) 1.
B) 4.
C) 7.
D) 5.
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Chapter 6: Systems Design: Process Costing
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Sample Questions
Q1) What was the unit cost for conversion included in the beginning work-in-process inventory,rounded to the nearest cent?
A) $2.22.
B) $2.78.
C) $6.00.
D) $11.11.
Q2) Overland,Inc.,uses the weighted-average method in its process costing system.The company's work-in-process inventory on April 30 consists of 25,000 units.The units in the ending inventory are 100% complete with respect to materials and 75% complete with respect to conversion costs.If the cost per equivalent unit is $3.00 for materials and $5.50 for conversion costs,what is the total cost in the April 30 work-in-process inventory?
A) $212,500.
B) $178,125.
C) $159,375.
D) $109,375.
Q3) In process costing,costs are accumulated in processing departments,rather than by job.
A)True
B)False
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Page 8
Chapter 7: Activity-Based Costing: A Tool to Aid Decision Making
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Sample Questions
Q1) The overhead cost per unit of Product T under activity-based costing is closest to which of the following?
A) $4.00.
B) $28.66.
C) $2.81
D) $10.04.
Q2) In general,duration drivers are more accurate measures of the consumption of resources than transaction drivers.
A)True
B)False
Q3) According to the activity-based costing system,what is the total profit margin for this function?
A) $1,365.
B) $540.
C) $1,040.
D) $1,190.
Q4) Unit-level production activities are performed each time a unit is made.
A)True
B)False
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Chapter 8: Variable Costing: A Tool for Management
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Q1) What was the operating income (loss)for the month under absorption costing?
A) ($19,600).
B) $8,400.
C) $9,600.
D) $18,000.
Q2) What was the total gross margin for the month?
A) $39,600.
B) $88,000.
C) $123,200.
D) $171,600.
Q3) What was the carrying value on the balance sheet of the ending finished goods inventory under absorption costing?
A) $10,000.
B) $12,000.
C) $16,000.
D) $21,000.
Q4) Variable costing is sometimes referred to as direct costing or marginal costing. A)True B)False
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Chapter 9: Budgeting
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Sample Questions
Q1) What would be the total cash collected by LaGrange Company during January?
A) $261,500.
B) $331,500.
C) $344,000.
D) $274,000.
Q2) What is the company's master budget operating income (loss)for April?
A) $463,000.
B) $550,000.
C) $719,000.
D) $625,000.
Q3) What is the opening inventory in units for April?
A) 380 units.
B) 460 units.
C) 720 units.
D) 680 units.
Q4) In a budget of cash receipts for March,what would be the total cash receipts?
A) $8,200.
B) $16,000.
C) $17,800.
D) $20,200.
Page 11
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Chapter 10: Standard Costs and Overhead Analysis
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Sample Questions
Q1) To measure controllable production inefficiencies,which of the following is the best basis for a company to use in establishing the standard hours allowed for the output of one unit of product?
A) Average historical performance for the last several years.
B) Engineering estimates based on ideal performance.
C) Engineering estimates based on attainable performance.
D) The hours per unit that would be required for the present workforce to satisfy expected demand over the long run.
Q2) To record the incurrence of direct labour cost and its use in production,the general ledger would include what entry to the Labour Rate Variance account?
A) $240 credit.
B) $240 debit.
C) $340 debit.
D) $340 credit.
Q3) One cause of an unfavourable overhead volume variance would be increase in cost for fixed overhead items.
A)True
B)False
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12
Chapter 11: Reporting for Control
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Sample Questions
Q1) Suppose a manager's performance is to be evaluated by residual income.Which of the following will NOT result in an increase in the residual income figure for this manager,assuming other factors remain constant?
A) An increase in sales.
B) An increase in the minimum required rate of return.
C) A decrease in expenses.
D) A decrease in operating assets.
Q2) Assume that the company uses the step-down method of allocating Service Department costs to Operating Departments,and Building and Grounds costs are allocated first.How much Personnel Department cost would be allocated to Operating Department A?
A) $0.
B) $90,000.
C) $92,880.
D) $205,400.
Q3) What was the margin for the past year?
A) 8.0%.
B) 11.2%.
C) 14.4%.
D) 19.2%.
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Chapter 12: Relevant Costs for Decision Making
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Q1) Ritchie Corporation manufactures a product that has the following costs: \(\begin{array}{|l|r|r|}
\hline & \text { Per unit } & \text { Per year } \\
\hline \text { Direct materials } & \$ 20.70 & \\
\hline \text { Direct labour } & 11.80 & \\
\hline \text { Variable manufacturing overhead } & 3.20 & \\
\hline \text { Fixed manufacturing overhead } & & \$ 817,700 \\
\hline \text { Variable SG\&A expenses } & 4.10 & \\
\hline \text { Fixed SG\&A expenses } & & 691,900 \\
\hline
\end{array}\)
The company uses the absorption costing approach to cost-plus pricing.The pricing calculations are based on budgeted production and sales of 37,000 units per year. The company has invested $160,000 in this product and expects a return on investment of 15%.
Required:
a)Compute the markup on absorption cost.
b)Compute the target selling price of the product using the absorption costing approach.
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14
Chapter 13: Capital Budgeting Decisions
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Sample Questions
Q1) Kipling Company has invested in a project that has an eight-year life.It is expected that the annual cash inflow from the project will be $20,000.Assuming that the project has an internal rate of return of 12%,how much was the initial investment in the project? (Ignore income taxes in this problem.)(Round your PV factor to 5 decimal places and final answer to nearest whole dollar amount.)
A) $64,648.
B) $80,800.
C) $99,353.
D) $160,000.
Q2) Last year,the sales at Jersey Company were $200,000 and were all cash sales.The tax-deductible expenses at Jersey were $125,000 and were all cash expenses.The tax rate was 30%.What was the after-tax net cash inflow at Jersey last year from these operations?
A) $22,500.
B) $37,500.
C) $52,500.
D) $60,000.
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Page 15
Chapter 14: Financial Statement Analysis
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Sample Questions
Q1) Larned Company's price-earnings ratio on December 31,Year 2 was closest to which of the following?
A) 5.88.
B) 8.40.
C) 8.70.
D) 14.50.
Q2) Marcial Company's inventory turnover for Year 2 was closest to which of the following?
A) 8.4 times.
B) 10.4 times.
C) 12.1 times.
D) 14.8 times.
Q3) During the year just ended,James Company purchased $425,000 of inventory.The inventory balance at the beginning of the year was $175,000.If the cost of goods sold for the year was $450,000,what was the inventory turnover for the year?
A) 2.57 times.
B) 2.62 times.
C) 2.77 times.
D) 3.00 times.
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Page 16