Management Control Systems
Practice Exam
Course Introduction
Management Control Systems explores the frameworks, tools, and processes organizations use to ensure that their strategies and objectives are effectively implemented. This course examines the design and operation of control systems including budgeting, performance measurement, incentive systems, and balanced scorecards. Students will analyze how information and accounting systems are utilized to guide managerial decision-making, align employee behavior with organizational goals, and promote accountability. Emphasis is placed on both financial and non-financial controls, the behavioral aspects of controls, and the challenges of implementing effective control systems in complex and dynamic business environments.
Recommended Textbook
Cost Management A Strategic Emphasis 5th Edition by Edward Blocher
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Page 2
Chapter 1: Cost Management and Strategy
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Sample Questions
Q1) Which of the following aspect of a contemporary management technique is a framework and process that organizations use to manage the occurrence of possible events that could negatively or positively affect the company's competitiveness and success?
A)Total quality management
B)Lean accounting
C)The theory of constraints
D)Enterprise sustainability
E)Enterprise risk management
Answer: E
Q2) A strategy can be best defined as:
A)An effective use of the organization's resources.
B)A plan for using a firm's resources to achieve sustainable goals within a competitive environment.
C)A clear and detailed statement of an organization's mission and vision.
D)A plan for developing a firm's mission and vision statements.
Answer: B
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Page 3
Chapter
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Q1) A strategy map is:
A)A detailed flowchart outlining which firm managers are responsible for each implementation of a firm's strategy and when these implementations are to take place.
B)A cause and effect diagram of the relationships among the balanced scorecard perspectives to show how the achievement of critical success factors in each perspective affects the achievement of goals in other perspectives and the overall financial performance of the firm.
C)A framework for the firm to achieve a desired organizational change in strategy while mapping the successes of other firms within the industry.
D)A comprehensive framework of goals and measurable targets for executing those goals.
Answer: B
Q2) Both cost leadership and differentiated firms can improve on execution through:
A)Improved automation and a higher output of products.
B)Benchmarking and total quality management.
C)Cost cutting and downsizing of personnel.
D)Improvements in product development.
Answer: B
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Chapter 3: Basic Cost Management Concepts
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Sample Questions
Q1) Dave's Lighting Inc.produces lamps.During 2010,the company incurred the following costs:
Answer: 11ea6e70_bc58_ccc3_8f54_257c4f1c9058_TB1699_00
Inventories for the year were: 11ea6e70_bc58_ccc4_8f54_6b174f385b50_TB1699_00
Required:Prepare a statement of cost of goods manufactured and cost of goods sold. Please see Feedback for answers.
Explanation: Feedback: 11ea6e70_bc58_f3d5_8f54_f9df1dd2d4cf_TB1699_00
Q2) Variable costs within the relevant range for a firm are assumed:
A)Not to vary per unit.
B)Not to vary in total.
C)To be nonlinear.
D)To be curvilinear.
Answer: A
Q3) Manufacturing firms use which of the following three inventory accounts?
A)Materials,Work-in-process,Transferred-out.
B)Materials,Work-in-process,Finished goods.
C)Materials,Finished goods,Transferred out.
D)Work-in-process,Finished goods,Transferred-out.
Answer: B
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Page 5
Chapter 4: Job Costing
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Sample Questions
Q1) Powell Company uses a job costing system.During the month of May,Powell spent most of its time on job A50,which was started late in April.Following is cost information for job A50,other May costs,and relevant annual estimates.
Q2) Which one of the following records and summarizes the costs of direct materials,direct labor,and factory overhead for a particular job?
A)Purchase order.
B)Material requisition form.
C)Job product cost document.
D)Bill of materials.
E)Job cost sheet.
Q3) The two main advantages of using predetermined factory overhead rates are to provide more accurate unit cost information and to:
A)Simplify the accounting process.
B)Provide cost information on a timely basis.
C)Insure transmission of correct data.
D)Extend the useful life of the cost data.
E)Adjust for variances in data sources.
Q4) KLM Company listed the following data for 2010:
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Page 6
Chapter 5: Activity-Based Costing and Customer
Profitability Analysis
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Q1) Procurement costs such as costs of placing orders for materials and paying suppliers are usually classified as:
A)Output-unit-level costs.
B)Batch-level costs.
C)Product-level costs.
D)Facility-level costs.
E)Vendor costs.
Q2) The costs of operating a regional warehouse is an example of a:
A)Customer unit-level cost.
B)Customer batch-level cost.
C)Customer-sustaining cost.
D)Distribution-channel cost.
E)Sales-level cost.
Q3) The controller for Ocean Sailboats Inc. ,a company which uses an automated process to make sailboats,established the following overhead cost pools and cost drivers:
Q4) Blackwelder Co.manufactures a variety of electric razors used by both men and women.The company's plant is partially automated.The company uses an activity-based cost system.Listed below is cost driver information used in the product-costing system:
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Chapter 6: Process Costing
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Sample Questions
Q1) Which of the following is not one of the key steps in determining process costs?
A)Assigning the total manufacturing costs to the units completed and transferred out and the units of work in process at the end of the period.
B)Analyzing the physical flow of production units.
C)Computing the cost per equivalent unit for each manufacturing cost element.
D)Calculating equivalent units of production for all manufacturing cost elements.
E)Determining the cost pools and cost objects.
Q2) In a production cost report using process costing,transferred-in costs are similar to:
A)Materials costs added at the end of the process.
B)Materials costs added at the beginning of the process.
C)Conversion costs added during the process.
D)Conversion costs transferred to the next process.
E)Conversion costs included in beginning inventory.
Q3) Hartmann Company uses the process costing method with the following data for the month of July.
Q4) Williams Corporation's Department A has the following information:
Q5) Each of the following cases is independent.Use the FIFO method.
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Page 8
Chapter 7: Cost Allocation: Departments, Joint Products, and
By-Products
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Q1) Dual allocation is a cost allocation approach that separates direct and indirect costs,tracing the direct costs directly to the department that:
A)Can bear the cost.
B)Relates best to the cost.
C)Is first identified with the cost.
D)Caused the cost.
E)Is most impacted by the cost.
Q2) The cost allocation method most widely used because of its accuracy and ability to provide a detailed level of analysis is:
A)Departmental approach.
B)Activity-based approach.
C)Direct approach.
D)Accounting approach.
E)Joint product costing.
Q3) Taylor Inc.produces joint products A,B,and C from a joint process.Information concerning a batch produced in May at a joint cost of $110,000 was as follows:
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9
Chapter 8: Cost Estimation
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Q1) Which of the four types of cost drivers - activity-based,volume-based,structural and executional - are often best related to linear cost estimation methods?
A)Activity-based only.
B)Activity-based and volume-based.
C)Structural and volume-based.
D)Executional and volume-based.
E)Structural and executional.
Q2) Regression analysis is better than the high-low method of cost estimation because regression analysis:
A)Is mathematical.
B)Can provide greater precision and reliability.
C)Fits its data into a mathematical equation.
D)Takes less time.
E)Is a statistical method.
Q3) Accurate cost estimates are required by strategic management for all except:
A)To facilitate strategic positioning analysis.
B)To facilitate target costing and life-cycle costing.
C)To facilitate value-chain analysis.
D)Accounting internal control.
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Page 10
Chapter 9: Profit Planning: Cost-Volume-Profit Analysis
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Sample Questions
Q1) The difference between sales price and unit variable cost is the:
A)Unit contribution margin.
B)Total contribution margin.
C)Contribution margin ratio.
D)Margin of safety.
E)Breakeven point.
Q2) CVP analysis for revenue and cost planning has the primary objective of:
A)Maximizing revenue.
B)Minimizing costs.
C)Both revenue maximization and cost minimization.
D)Achieving the desired level of sales and profits.
E)Consistently producing sales above the breakeven level.
Q3) Firms A and B both produce and sell computer cables.The sales price is $5 per cable.Data for both firms at 100 units are as follows:
Q4) TexFab manufactures two products,GT450 and GT600 that have the following sales and cost information.
Q5) Daley Co.manufactures computer monitors.Following is a summary of its basic cost and revenue data:
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Chapter 10: Strategy and the Master Budget
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Q1) Olde Corporation is preparing a cash budget for the first two months of the coming year.The following data have been forecasted:
Q2) All of the following are ways of setting the budget,except:
A)Negotiation-based budgeting.
B)Two-stage budgeting.
C)Participative budgeting.
D)Authoritative budgeting.
E)All of the above are ways of setting the budget.
Q3) A plan that shows the cash balance on hand at the beginning of a budget period,expected cash flow from operations,cash flows from investing activities,cash flows from financing activities,and an ending cash balance is called a(n):
A)Capital budget.
B)Operating budget.
C)Financial flows budget.
D)Cash budget.
E)Cash receipts budget.
Q4) Information pertaining to Yeks Company's budgeted sales revenue for the first quarter of the year is presented below.
Q5) List factors that should be considered in sales forecasting.
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Chapter 11: Decision Making With a Strategic Emphasis
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Q1) When using relevant cost analysis,it is a common mistake for untrained managers to include in their analysis all the following except:
A)Sunk costs.
B)Allocated fixed costs.
C)Average fixed costs.
D)Unit variable costs.
Q2) To make a special order decision,managers need critical information about all the following except:
A)Relevant costs.
B)Prior period operating costs.
C)Any opportunity costs.
D)The strategic,competitive environment of the firm.
Q3) The Crown Company must decide whether to make or buy part 128PC.Although Crown's idle equipment could be used to produce up to 10,000 units of the part,the company presently needs only 7,000 units.The following shows the estimated cost of making part 128PC.
Q4) The following unit cost information pertained to the trumpet division of WGN Music Co.and was based on monthly demand and sales of 100 units:
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Chapter 12: Strategy and the Analysis of Capital Investments
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Q1) Conceptually,a firm's capital structure is its:
A)Mix of debt and equity capital,expressed in book-value terms.
B)Mix of debt and equity capital,expressed in market-value terms.
C)Equity capital only,expressed in book-value terms.
D)Equity capital only,expressed in market-value terms.
Q2) For dealing with uncertainty in the capital budgeting process,all of the following techniques can be used except which one?
A)What-if analysis.
B)Monte Carlo simulation.
C)Scenario analysis.
D)Linear programming.
Q3) All of the following capital budgeting models incorporate the time value of money except:
A)The payback method.
B)The modified internal rate of return (MIRR)method.
C)The profitability index (PI)method.
D)The discounted payback method.
E)The internal rate of return (IRR)method.
Q4) Harris Corporation provides the following data on a proposed capital project:
Page 14
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Chapter 13: Cost Planning for the Product Life Cycle: Target
Costing,Theory of Constraints,and Strategic Pricing
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Q1) Activity-based costing (ABC)and the theory of constraints (TOC)are viewed as methods that are:
A)Substitutions for one another.
B)Complementary.
C)Auxiliary.
D)Responsive.
E)Parallel.
Q2) During the sales life cycle,which is an example of what happens during the growth phase?
A)Sales and price decline,as do the number of competitors.
B)Sales continue to increase but at a decreasing rate.The number of competitors and product variety decline.
C)Sales increase rapidly along with an increase in product variety.
D)Sales rise slowly as customers become aware of the new product or service.Product variety is limited.
Q3) The theory of constraints (TOC)emphasizes which of the following?
A)Developing competitive constraints.
B)Finding and eliminating design constraints.
C)Removing bottlenecks from the production process.
D)Improving overall production efficiency.
Page 15
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Chapter 14: Operational Performance Measurement: Sales
and Direct-Cost Variances, and the Role of Nonfinancial
Performance Measures
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Q1) A firm uses a JIT inventory system and has an unfavorable selling price variance for the period just ended.If the proportion of the total variable manufacturing costs to total sales in both the flexible budget and the actual operating results is 70%:
A)The firm has an unfavorable total variable manufacturing cost variance.
B)The firm has a favorable total variable manufacturing cost variance.
C)The firm has an unfavorable total flexible-budget variance.
D)The firm has a favorable contribution margin variance.
E)The firm has a favorable total flexible-budget variance.
Q2) Ally Mfg.uses a standard cost system and its July production of 1,800 units involved actual direct labor costs of $242,000 for 5,500 hours worked.The budget for July called for production of 2,000 units with 6,000 direct labor hours at $40.00 per hour.
Ally's direct labor rate variance for July is:
A)$2,000 unfavorable.
B)$4,000 unfavorable.
C)$20,000 favorable.
D)$22,000 unfavorable.
E)$26,000 unfavorable.
Q3) Discuss some major differences between static and flexible budgets.
Page 16
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Chapter 15: Operational Performance Measurement:
Indirect-Cost Variances and Resource- Capacity Management
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Q1) Cost behavior for variable overhead is more difficult to predict than for direct material or direct labor cost for all the following reasons except:
A)Multiple cost drivers are involved with variable overhead.
B)Direct material and direct labor contain no semi-variable component.
C)The variable portion of overhead must first be separated from the fixed portion.
D)Variable overhead is a relatively small part of total overhead.
Q2) Random variances are:
A)Often considered as uncontrollable from the standpoint of management.
B)Likely to recur until corrected.
C)The result of failing to include all relevant variables in the analysis.
D)The result of including wrong or irrelevant variables in the variance-investigation model.
E)Controlled through the use of six sigma and other techniques from operations management.
Q3) Dillard,Inc. ,has developed the following standard cost data based on a denominator volume of 60,000 direct labor hours (DLHs),which is 75% of the firm's capacity.Budgeted fixed overhead is $360,000 and budgeted variable overhead is $180,000 at this level of activity.
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Chapter 16: Operational Performance Measurement:
Further Analysis of Productivity and Sales
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Q1) A measure of productivity can be either:
A)Operational or financial.
B)Total or segmented.
C)Short-term or long-term.
D)Activity-based or TOC based.
Q2) Taylor,Inc.has the following information for the two most recent years of operations.
Q3) A firm with a declining market share percentage may still earn a higher operating income if the:
A)Market as a whole is also declining.
B)Market as a whole is stable.
C)Market as a whole is shifting.
D)Market as a whole is growing.
E)Firm reduces operating costs.
Q4) HQ Company had two products code named Q and R.The firm had the following budget for the period just ended:
Q5) Paquindo Co.has two products: X and Y.The firm had the following budget and operating results for the period just ended.The budgeted total industry sales for both products was 324,800 units and the actual industry sales was 350,000.
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Chapter 17: The Management and Control of Quality
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Q1) Cycle time efficiency is:
A)Defined as the ratio of time spent on value-added activities to the sum of time spent on value-added plus non-value-added activities.
B)Also referred to as process efficiency.
C)Defined as the ratio of throughput to resources used.
D)The ratio of throughput to the amount of product in backlog status.
Q2) Costs incurred in conjunction with the measurement and analysis of data to ascertain conformity of products and services to specification are properly classified as:
A)External failure costs.
B)Appraisal costs.
C)Internal failure costs.
D)Prevention costs.
E)Value-added costs.
Q3) The "cost of conformance" includes:
A)Prevention costs and appraisal costs.
B)Internal failure costs and external failure costs.
C)Prevention costs and internal failure costs.
D)Appraisal costs and internal failure costs.
E)Prevention costs and external failure costs.
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Chapter 18: Strategic Performance Measurement: Cost
Centers, Profit Centers, and the Balanced Scorecard
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Q1) Operating income reported under full costing will exceed operating income reported under variable costing for a given period if:
A)Production equals sales for that period.
B)Production exceeds sales for that period.
C)Sales exceed production for that period.
D)The variable overhead exceeds the fixed overhead.
Q2) Which one of the following is not an order-filling cost?
A)Freight.
B)Warehousing.
C)Inspection.
D)Collections.
Q3) The value stream income statement can be compared to:
A)Value chain analysis.
B)The contribution income statement.
C)A streamlined production process.
D)A streamlined accounting system.
Q4) Tyler Company had the following manufacturing information for the current year.
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Chapter 19: Strategic Performance Measurement: Investment
Centers
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Q1) What are the principal advantages and disadvantages of using cost-based transfer prices? (Give a short explanation of each item you list. )
Q2) Residual income (RI)may be a better measure for financial performance evaluation of an investment center than return on investment (ROI)because:
A)Problems associated with measuring the investment base are eliminated.
B)Desirable investment opportunities will not be neglected by high-return divisions.
C)Only the gross book value of assets needs to be calculated.
D)Returns do not increase as assets are depreciated.
E)The arguments over the implicit cost of interest are largely eliminated.
Q3) The company as a whole will benefit if Division C purchases from external suppliers:
Q4) The use of replacement cost of assets for purposes of calculating ROI has the advantage(s)of:
A)Historical accuracy.
B)Being a sound measure of the level of investment in a continuing business.
C)Objectivity.
D)Consistency with generally accepted accounting principles (GAAP).
E)Avoiding the need for developing estimates of current cost.
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Chapter 20: Management Compensation, Business
Analysis,
and Business Valuation
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Q1) In management compensation,the use of the balanced scorecard achieves:
A)Fairness.
B)Alignment of manager's incentives and the organization's strategy.
C)The desired ethical environment.
D)Revenue generation and cost control.
E)A specific non-financial measurement.
Q2) Risk aversion by managers should be recognized when revising compensation plans because:
A)Compensation mix (salary,bonus)can influence a manager's risk aversion.
B)Most companies want risk averse managers.
C)Most companies want risk taking managers.
D)It costs less to pay risk averse managers.
Q3) Which one of the following has been the most common payment option for bonus compensation in recent years?
A)Vacation time.
B)Stock options.
C)Increased benefits.
D)Salary increase.
Q4) Jackson Manufacturing has the following operating results for 2010.
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