Management Control Systems
Test Bank
Course Introduction
Management Control Systems explores the frameworks, processes, and tools that organizations use to ensure that their goals and objectives are effectively met. The course examines how management designs and implements systems for planning, measurement, evaluation, and corrective action, linking strategy, operations, and performance. Topics include budgeting, performance measurement, responsibility accounting, transfer pricing, and incentive systems, emphasizing their roles in organizational decision-making and behavior. Through case studies and real-world examples, students analyze the interplay between control systems, organizational culture, and strategy, preparing them to design and evaluate control mechanisms in various management contexts.
Recommended Textbook
Cornerstones of Managerial Accounting 2nd Canadian Edition by
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Page 2
Maryanne Mowen
Chapter 1: Introduction to Managerial Accounting
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Sample Questions
Q1) The value chain is the set of activities required to design,develop,produce,market,and deliver products and services to customers.
A)True
B)False
Answer: True
Q2) What is the objective of process value analysis?
A) to include measures of activities not simply related to increasing profits
B) to establish competitive advantage by creating better customer value for the same cost
C) to efficiently perform necessary and eliminate activities that do not create customer value
D) to improve costing accuracy by emphasizing the activities and tasks that must be performed
Answer: C
Q3) Activity-based costing is a more detailed approach to determining the cost of goods and services.
A)True
B)False
Answer: True
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Chapter 2: Basic Managerial Accounting Concepts
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Sample Questions
Q1) Refer to the Figure.What was Quest's total period expense?
A) $24,000
B) $46,000
C) $190,000
D) $250,000
Answer: B
Q2) Screws used in the manufacture of cabinets are an example of a variable cost.
A)True
B)False
Answer: True
Q3) Price must be greater than cost in order for the firm to generate income.
A)True
B)False
Answer: True
Q4) Which of the following is an example of an intangible product?
A) hamburgers
B) computers
C) automobiles
D) dental care
Answer: D
Page 4
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Chapter 3: Cost Behaviour
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Sample Questions
Q1) Using Microsoft Excel,the function INTERCEPT returns the variable rate of the independent variable.
A)True
B)False
Answer: False
Q2) Using linear regression,the value of X Variable 2 equals the slope of the line.
A)True
B)False
Answer: False
Q3) Factory supervisor's salary
A)Variable
B)Fixed
Answer: B
Q4) Which factor causes or leads to a change in a cost or activity?
A) cost formula
B) regression line
C) driver
D) y-intercept
Answer: C
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Chapter 4: Costvolumeprofit Analysis: a Managerial Planning Tool
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Sample Questions
Q1) Operating leverage is the use of fixed cost to extract higher percentage changes in profits as sales activity changes.
A)True
B)False
Q2) Income statements for two different wineries are as follows: \(\begin{array}{lrr}&\text { White Wine } & \text { Red Wine } \\ &\text { Company } & \text { Company }\\\hline
\text { Sales } & \$ 400,000 & \$ 400,000 \\
\text { Less: Variable costs } & 300,000 & 200,000 \\
\text { Contribution margin } & \$ 100,000 & \$ 200,000 \\
\text { Less: Fixed costs } & 50,000 & 150,000 \\
\text { Onerating income } & \$ 50,000 & \$ 50,000 \end{array}\) A. \(\quad\)Calculate the degree of operating leverage for each firm.
B. \(\quad\)Calculate the margin of safety in doll ars for each firm.
C. \(\quad\)Determine the operating income for each firm if sales increase by \(20 \%\).
Q3) How can a multi-product firm determine its break-even point?
Q4) What are the assumptions underlying cost-volume-profit analysis?
Page 6
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Chapter 5: Job-Order Costing
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Sample Questions
Q1) A costing system in which costs are collected and assigned to units of production for each individual job
A)Actual cost system
B)Job-order cost system
C)Normal cost system
D)Process-costing system
Q2) Departmental overheads can be added together to get plantwide overhead.
A)True
B)False
Q3) The cost of completed units is always debited to work in process and credited to finished goods.
A)True
B)False
Q4) Langly Company provided the following data: \[\begin{array} { l r }
\text { Budgeted overhead } & \$ 100,000 \\
\text { Budgeted direct labour hours } & 10,000 \\
\text { Actual overhead } & \$ 99,000 \\
\text { Actual direct labour hours } & 11,000
\end{array}\] A. What is applied overhead?
B. What is the overhead variance? Is it overapplied or underapplied?
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Chapter 6: Process Costing
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Sample Questions
Q1) Refer to Process Department A. A. Calculate the equivalent units of production in ending work-in-process inventory.
B. Calculate total equivalent units of production for Department \(A\) for October.
Q2) Refer to the Figure.What would be Department ABC's cost of goods transferred out when using the FIFO method?
A) $40,250
B) $44,500
C) $45,540
D) $45,775
Q3) Describe the differences between process costing and job-order costing.
Q4) Which account do the costs of completed products move to after work-in-process?
A) sales
B) finished goods
C) completed goods
D) cost of goods sold
Q5) The FIFO method is one of the methods used to calculate equivalent units in process costing.
A)True
B)False
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Chapter 7: Activity-Based Costing and Management
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Sample Questions
Q1) Factors that measure the consumption of activities by products and other cost objects are value-added costs.
A)True
B)False
Q2) Robustness means hitting the target value every time.
A)True
B)False
Q3) A plant produces 92 different electronic products.Each product requires an average of seven components that are purchased externally.By redesigning the products,it is possible to produce the 92 products that have five components in common.This redesign will reduce the demand for purchasing,receiving,and paying bills.Estimated savings from the reduced demand are $1,500,000 per year.What is the non-value-added cost of purchasing,receiving,and paying bills?
A) $600,000
B) $900,000
C) $1,000,000
D) $1,500,000
Q4) What is the activity based costing hierarchy? Give an example for each.
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Chapter 8: Absorption and Variable Costing,and Inventory Management
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Sample Questions
Q1) What is the primary difference between variable and absorption costing?
A) inclusion of fixed selling expenses in product costs
B) inclusion of variable factory overhead in period costs
C) inclusion of fixed selling expenses in period costs
D) inclusion of fixed factory overhead in product costs
Q2) Stimpson Company sells 900 units of its deluxe product each year.The cost of setting up for one production run is $150; the cost of carrying one unit in inventory for a year is
$3. A. What is the economic order quantity?
B. What is the annual setup cost of the EOQ policy?
C. What is the annual carrying cost of the EOQ policy?
D. What is the total inventory-related cost of the EOQ policy?
Q3) Which of the following costs is NOT included in inventory under absorption costing?
A) direct materials
B) direct labour
C) fixed selling expenses
D) fixed factory overhead
Q4) JIT relies on a push system to control finished goods inventory.
A)True
B)False
Page 10
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Chapter 9: Budgeting, production, cash, and Master Budget
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Sample Questions
Q1) A company has provided a sales budget for the next four months (January,February,March,and April).It bases its production budget on the sales budget.According to company policy,each month's ending inventory of finished product must be equal to 25% of the following month's sales needs.The direct materials purchases budget is based on the production budget.Company policy states that each month's ending inventory of raw materials must be equal to 10% of the following month's production needs for raw materials.For how many months can the company prepare direct materials purchases budgets?
A) one month
B) two months
C) three months
D) four months
Q2) Individual behaviour that is in basic conflict with the goals of the organization is called dysfunctional behaviour.
A)True
B)False
Q3) Ideally,managers are held accountable for controllable costs.
A)True
B)False
Q4) Describe some problems with participative budgeting.
Page 11
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Chapter 10: Standard Costing: a Managerial Control Tool
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Sample Questions
Q1) Refer to the Figure.What are the costs of leather and direct labour incurred for the production of 150 saddles?
A) $36,000 and $36,000
B) $37,200 and $40,000
C) $45,000 and $33,750
D) $46,500 and $37,500
Q2) Which of the following is characteristic of variances?
A) An unfavourable labour efficiency variance could result from using higher quality materials that result in fewer inspections.
B) A favourable labour rate variance could result from lower wage workers quitting.
C) A favourable materials price variance could result from purchasing identical materials from another supplier at a lower price.
D) A favourable materials usage variance could result from not efficiently utilizing raw materials,thus causing waste.
Q3) Operating personnel can easily achieve standards set by engineering studies.
A)True
B)False
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Chapter 11: Flexible Budgets and Overhead Analysis
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Sample Questions
Q1) Refer to the Figure.What is Cannon's fixed overhead spending variance for the current year?
A) $24,000 (F)
B) $30,000 (U)
C) $50,000 (U)
D) $60,000 (F)
Q2) Refer to the Figure.What is the variable overhead efficiency variance?
A) $8,300 U
B) $32,000 U
C) $38,300 U
D) $80,000 U
Q3) Showcase Inc's standard variable overhead rate is $7 per direct labour hour,and each unit requires three standard direct labour hours.During April,Showcase recorded 7,000 actual direct labour hours,$65,000 actual variable overhead costs,and 2,950 units of product manufactured. What is Showcase's total variable overhead variance for April?
A) $490 (U)
B) $1,000 (U)
C) $2,950 (U)
D) $3,050 (U)
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Chapter 13: Short-Run Decision Making: Relevant Costing
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Sample Questions
Q1) The following information pertains to Erickson Company's three products: \(\begin{array}{rrrr} & \text { A } & \text { B } & C \\
\text { Unit sales per year } & 250 & 400 & 250\\
\text { Selling price per unit } & \$ 9.00 & \$ 12.00 & \$ 9.00 \\
\text { Variable costs per unit } & 3.60 & 9.00 & 9.90\\
\text { Unit contribution margin } &\$ 5.40&\$ 3.00&\$(0.90)\\
\text { Contribution margin ratio }&60\%&25\%&(10)\% \end{array}\) Assume that product C is discontinued and the extra space is rented for $300 per month.All other information remains the same as the original data.What would be the effect on annual profits?
A) Annual profits would decrease by $75.
B) Annual profits would remain the same.
C) Annual profits would increase by $75.
D) Annual profits would increase by $525.
Q2) A major disadvantage of markup pricing is that standard markups are easy to apply.
A)True
B)False
Q3) Why does a special-order decision frequently ignore fixed factory overhead?
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