Management Control Systems
Exam Answer Key
Course Introduction
Management Control Systems explores the frameworks, processes, and tools organizations use to ensure that their strategies and operations are aligned with their objectives. The course examines the design and implementation of control systems covering financial measurement, performance evaluation, budgeting, and incentive structures. Attention is given to issues such as decentralization, behavioral considerations, and the integration of strategy into management practices. Through case studies and real-world examples, students will develop critical skills to analyze, design, and apply effective control mechanisms in various organizational settings.
Recommended Textbook
Cornerstones of Managerial Accounting 2nd Canadian Edition by Maryanne Mowen
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14 Chapters
2059 Verified Questions
2059 Flashcards
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Chapter 1: Introduction to Managerial Accounting
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Sample Questions
Q1) Which of the following are included in the standards of ethical conduct for management accountants?
A) competence,performance,respect for others,and observance
B) integrity,respect for others,performance,and confidence
C) confidence,confidentiality,objectivity,and observance
D) competence,confidentiality,integrity,and objectivity
Answer: D
Q2) What is customer value?
A) the difference between what a customer receives and what the customer gives up when buying a product or service
B) the establishment of a competitive advantage by creating better customer value for the same cost
C) the efficient performance of necessary activities and elimination of activities that do not create customer value
D) the improvement of costing accuracy by emphasizing the activities and tasks that must be performed
Answer: A
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Chapter 2: Basic Managerial Accounting Concepts
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Sample Questions
Q1) What is the behaviour pattern of a variable cost?
A) It increases in total as output increases.
B) It remains constant in total at all levels of output.
C) It increases per unit as output increases.
D) It decreases per unit as output increases.
Answer: A
Q2) Which of the following is characteristic of indirect costs?
A) Indirect costs can be easily and accurately traced to a cost object.
B) Indirect costs are shared between or among more than one cost object.
C) Indirect costs should always be assigned to a cost object.
D) Indirect costs include all labour.
Answer: B
Q3) Prime cost is the sum of direct materials and direct labour.
A)True
B)False
Answer: True
Q4) Price must be greater than cost in order for the firm to generate income.
A)True
B)False
Answer: True
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Chapter 3: Cost Behaviour
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Sample Questions
Q1) Refer to the Figure.What would be the estimate of Banff Company's total lease cost at a level of 500 machine hours?
A) $16,464
B) $18,546
C) $19,556
D) $19,606
Answer: C
Q2) Computing fixed costs per unit may result in misleading information.
A)True
B)False Answer: True
Q3) Real estate taxes
A)Variable
B)Fixed Answer: B
Q4) Using Microsoft Excel,the function REGRESSION returns the parameters of a linear regression.
A)True
B)False
Answer: False
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Chapter 4: Costvolumeprofit Analysis: a Managerial Planning Tool
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Sample Questions
Q1) In a normal month,the Whitewater Company generates total sales of $25,000.To do so they incur variable costs of $15,000 and fixed costs of $10,000.
Required: Determine each of the following values: A. Variable cost ratio
B. Contribution margin ratio
C. Monthly break-even dollar sales volume
D. Monthly margin of safety in doll ars
Q2) What is the equation to calculate contribution margin?
A) contribution margin = sales revenue × variable cost ratio
B) contribution margin ratio = contribution margin / variable costs
C) contribution margin = fixed costs
D) contribution margin ratio = 1 variable cost ratio
Q3) Refer to the Figure.What is the percent change in operating income expected by Woods in the coming year?
A) 8.3%
B) 20.0%
C) 30.0%
D) 48.0%
Q4) What are two concepts useful to management when assessing risk?
Q5) How can a multi-product firm determine its break-even point?
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Chapter 5: Job-Order Costing
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Sample Questions
Q1) Refer to the Figure.What is the ending balance in work in process?
A) $110,383
B) $113,083
C) $166,383
D) $169,083
Q2) When using normal costing,which costs never enter the work-in-process account?
A) applied overhead
B) actual overhead
C) direct materials
D) direct labour
Q3) Form that asks for the type,quantity,and unit price of direct materials
A)Job-order cost sheet
B)Time ticket
C)Materials requisition form
Q4) Cost of materials is removed from materials account and added to work in process
A)Completion of job
B)End of each accounting period
C)Materials are removed from storage into production
D)Product is sold
E)End of year
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Chapter 6: Process Costing
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Sample Questions
Q1) Refer to Process Department A. A. What is the cost of goods transferred out?
B. What is the cost of ending work-in-process inventory?
Q2) Which of the following methods combines partially completed units in beginning inventory with current period production when computing equivalent units of production?
A) FIFO method
B) LIFO method
C) weighted average method
D) actual cost method
Q3) Beginning inventory for the month contained 3,000 units that were 60% complete with respect to materials.During the month,50,000 units were completed and transferred out.Ending inventory contained 5,000 units that were 30% complete with respect to materials.What would be the weighted average equivalent units of production for materials for the month?
A) 49,500
B) 50,000
C) 50,300
D) 51,500
Q4) Describe the differences between process costing and job-order costing.
Q5) Describe the differences between sequential and parallel processing.
Page 8
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Chapter 7: Activity-Based Costing and Management
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Sample Questions
Q1) Using the original design,a machine requires 24 hours of setup time.By redesigning the machine,the setup time is reduced by 35%.The cost per setup hour is $250.What is the reduction in non-value-added cost per setup?
A) $87.50 per setup
B) $2,000.00 per setup
C) $3,900.00 per setup
D) $6,000.00 per setup
Q2) Refer to the Figure.What is the cost of counting?
A) $50,500
B) $52,000
C) $54,000
D) $56,000
Q3) Activities that are performed each time a unit is produced
A)Activity drivers
B)Activity-based costing system
C)Consumption ratio
D)Unit-level activities
E)Activity attributes
F)Resource drivers
Q4) What is the activity based costing hierarchy? Give an example for each.
Page 9
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Chapter 8: Absorption and Variable Costing,and Inventory Management
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Sample Questions
Q1) What is the relationship between absorption costing net income and variable costing net income?
A) Absorption costing net income exceeds variable costing net income when units produced and sold are equal.
B) Variable costing net income exceeds absorption costing net income when units produced exceed units sold.
C) Absorption costing net income exceeds variable costing net income when units produced are less than units sold.
D) Absorption costing net income exceeds variable costing net income when units produced are greater than units sold.
Q2) LaTiffa Company orders 250 units at a time and places 15 orders per year.Total ordering cost is $1,100,and total carrying cost is $1,100.Which best describes the economic order quantity?
A) The economic order quantity (EOQ)is 250.
B) The economic order quantity (EOQ)is more than 250.
C) The economic order quantity (EOQ)is less than 250.
D) The economic order quantity (EOQ)is 15.
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Page 10
Chapter 9: Budgeting, production, cash, and Master Budget
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Sample Questions
Q1) Refer to the Figure.What are the expected cash receipts for November?
A) $40,000
B) $190,000
C) $114,000
D) $158,700
Q2) Which of the following does traditional organization theory use to motivate workers?
A) bonuses
B) self-esteem
C) the nature of the work itself
D) increased responsibility
Q3) Refer to the Figure.What was the operating income for Bingimton Company last month?
A) $2,400
B) $7,400
C) $9,400
D) $14,600
Q4) Forces managers to plan
A)Advantage
B)Disadvantage
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Chapter 10: Standard Costing: a Managerial Control Tool
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Sample Questions
Q1) Refer to the Figure.At the end of December,Cakers Express found that it had a favourable materials price variance of $1,000.What is the flour's standard cost per kilogram?
A) $0.95
B) $1.00
C) $1.05
D) $1.95
Q2) Which of the following statements is characteristic of control limits?
A) Control limits are the top and bottom measures of the allowable range.
B) The upper control limit is the standard plus the allowable deviation.
C) The lower control limit is the standard minus the allowable deviation.
D) Control limits are set objectively using standard formulas.
Q3) If a process-costing system uses standard costing to assign product costs,there is no need to compute a unit cost for each equivalent unit cost category since a standard unit cost would exist for each category.
A)True B)False
Q4) Ideal standards allow for machine breakdowns,slack,or momentary lack of skill.
A)True B)False
Page 12
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Chapter 11: Flexible Budgets and Overhead Analysis
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Sample Questions
Q1) Why does activity flexible budgeting provide a more accurate prediction of costs than a traditional flexible budgeting approach?
A) Costs often vary with more than one driver,and direct labour hours are not correct.
B) Unit-level drivers are often not highly correlated with direct labour hours.
C) Direct labour hours are often not measured correctly.
D) Costs often vary with more than one driver,and non-unit-level drivers are often not highly correlated with direct labour hours.
Q2) Suppose a company had actual fixed manufacturing overhead of $60,000,a $1,500 unfavourable spending variance,and a $1,000 unfavourable volume variance.What would be the budgeted fixed manufacturing overhead?
A) $50,300
B) $52,700
C) $53,000
D) $58,500
Q3) The volume variance is often interpreted as a measure of capacity utilization.
A)True B)False
Q4) Define static budget and flexible budget.What is each type used for?
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Page 13
Chapter 12: Performance Evaluation and Decentralization
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Sample Questions
Q1) Refer to the Figure.Assume that Corrugated,Inc.mandates that any transfers take place at full manufacturing cost.What would be the transfer price if the Box Division transferred boxes to the Candy Division?
A) $0.90
B) $1.00
C) $1.23
D) $1.40
Q2) How is turnover calculated?
A) operating income / average operating assets
B) average operating assets / operating income
C) operating income / sales
D) sales / average operating assets
Q3) The Seasonal Division of The Hudson Bay Department Store had a net income of $660,000,a net asset base of $5,000,000,and a required rate of return of 10%.Sales for the period totalled $4,00,000.What was the residual income for the period?
A) $80,000
B) $160,000
C) $360,000
D) $480,000
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Page 14
Chapter 13: Short-Run Decision Making: Relevant Costing
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Sample Questions
Q1) Gibb,Inc.has just designed a new product with a target cost of $54.Gibb requires new products to have a profit of 25%.What is the target price for the new product?
A) $13.50
B) $54.00
C) $64.00
D) $72.00
Q2) Refer to the Figure.What is the contribution margin per hour of machine time for Test B?
A) $10
B) $20
C) $40
D) $100
Q3) Refer to the Figure.What is the amount of machine time for model K-3 in terms of percentage of a machine hour?
A) 0.10
B) 0.20
C) 0.25
D) 0.40
Q4) Why does a special-order decision frequently ignore fixed factory overhead?
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Chapter 14: Capital Investment Decisions
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Sample Questions
Q1) Fill in the lettered blanks in the following table: \[\begin{array} { l r r r }
& \text { Investment } A & \text { Investment B } & \text { Investment C } \\
\text { Amount of investment } & \$ 40,000 & ( \mathrm {~A} ) & \$ 20,000 \\
\text { Economic life in years } & 10 & 5 & 8 \\
\text { Annual cash flow } & \$ 5,000 & ( \mathrm {~B} ) & \$ 2,500 \\
\text { Payback period in years } & ( \mathrm { C } ) & 4 & ( \mathrm { D } ) \\
\text { Present value of cash flows } & ( \mathrm { E } ) & \$ 33,000 & ( \mathrm {~F} )
\\
\text { Net present value } & \$ 5,500 & \$ 3,000 & ( \$ 1,000 ) \end{array}\]
Q2) Suppose that the actual cost of capital is 10%,but the firm chooses a discount rate of 18%.Managers of that company will be more likely to choose relatively short-term investments.
A)True
B)False
Q3) Net present value analysis and internal rate of return analysis can sometimes produce erroneous choices because they ignore the time value of money.
A)True
B)False
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