Managerial Accounting Chapter Exam Questions
Course Introduction
Managerial Accounting focuses on the preparation, interpretation, and use of accounting information by managers within organizations for decision-making, planning, and control purposes. The course covers key topics such as cost behavior analysis, budgeting, performance evaluation, cost-volume-profit analysis, and relevant costing for decision-making. Emphasis is placed on the application of accounting data to solve real-world business problems and on the use of accounting tools to support strategic management objectives. Students will develop analytical skills to interpret financial and non-financial information and make informed managerial decisions that drive organizational success.
Recommended Textbook
Accounting An Introduction 6th Edition by Peter Atrill
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Chapter 1: Introduction to Accounting
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Q1) The business most likely to operate as a sole proprietorship is:
A) private hospital.
B) medical specialist.
C) bank.
D) airline.
Answer: B
Q2) How many of these are differences between management and financial accounting?
Nature of reports produced. Frequency of reports.
Level of detail in the reports. Degree of regulation.
A) One.
B) Two.
C) Three.
D) Four.
Answer: D
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Chapter 2: Measuring and Reporting Financial Position
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Q1) Assets are classified as either current or non-current.Current assets are:
A) goodwill.
B) expected to be turned into cash within 12 months.
C) the infrastructure assets.
D) all of the above.
Answer: B
Q2) An example of where the prudence assumption leads to a reduction in the valuation of an asset is:
A) development expenditure capitalised as an asset rather than written off as an expense.
B) taking an upward revaluation of an asset to a reserve rather than including it in the profit calculation.
C) valuing inventory at the lower of cost and net realisable value.
D) All are examples.
Answer: C
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Chapter 3: Measuring and Reporting Financial Performance
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Sample Questions
Q1) If doubtful debts are overestimated:
A) profit for the current year will be overstated.
B) profit for following years will be overstated.
C) profit for the following years will be understated.
D) profit over the total life of the business will be understated.
Answer: B
Q2) Choose the statement which is correct.Assume that inventory prices are rising.
A) The LIFO method gives the highest closing inventory figure in the statement of financial position.
B) The FIFO method gives the highest closing inventory figure in the statement of financial position.
C) The FIFO method gives the lowest closing inventory figure in the statement of financial position.
D) The LIFO method gives the lowest figure for cost of sales.
Answer: B
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Chapter 4: Introduction to Limited Companies
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Q1) Jane and Jarrod have been employed by two different firms of photographers.They decide they should get together and establish their own business,called JJ Photographers.Each has decided to contribute $20,000 in cash to buy equipment,and they will rent premises in the local shopping centre.Both will work full time in the business and share profits and losses equally.They are not sure whether they should set up as a partnership or as a private company and have come to you for advice.
REQUIRED:
Explain to Jane and Jarrod the advantages and disadvantages of a partnership versus a private company structure for their new venture.
Q2) A company needs $1,500,000 for expansion.They decide to raise the capital by issuing new shares.How many shares does the company need to sell to raise the amount,if the last share issue was at a price of $1 each and the current market price for the company's shares is $1.50 per share?
A) 500,000 shares
B) 100,000 shares.
C) 1 million shares.
D) 1.5 million shares.
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Page 6
Chapter 5: Regulatory Framework for Companies
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Sample Questions
Q1) The organisation that is currently the sole standard-setting body in Australia is the:
A) Institute of Chartered Accountants in Australia.
B) Australian Accounting Standards Board.
C) CPA Australia.
D) Australian Securities Exchange.
Q2) Which of the following is not included in an audit report?
A) An audit opinion on whether or not the financial statements are 'true and fair.'
B) Identification of the financial reports audited.
C) A statement on the sustainable strategies of the reporting entity.
D) A statement that the financial reports were prepared in accordance with accounting standards.
Q3) Organised stock exchanges provide which of the following benefits?
A) Facility for companies to raise new capital.
B) Allows shareholders to easily sell their shares.
C) Increases the amount of regulation for the listed company.
D) Both A and B.
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Chapter 6: Measuring and Reporting Cash Flows
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Q1) Which item would not be included in the operating section of a statement of cash flows?
A) Cash interest received.
B) Cash received from the sale of surplus machinery.
C) Cash received from sales.
D) Cash payment of expenses.
Q2) Cash inflows and outflows associated with changes in non-current liabilities and equity,not arising from profit,are included in which section of the statement of cash flows?
A) Non-current.
B) Operating.
C) Financing.
D) Investing.
Q3) The cash transaction is:
A) declaration of a divided from a general reserve.
B) payment of a dividend to shareholders.
C) transfer from retained earnings to a general reserve.
D) all of the above.
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Chapter 7: Corporate Social Responsibility and Sustainability Accounting
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Q1) Meeting society's need for goods and services without destroying natural or social capital is known as:
A) the greening of Australia.
B) ethical living.
C) sustainable value creation.
D) none of the above.
Q2) The specific standards classifications used by the GRI for disclosure does not include:
A) economic.
B) environmental.
C) governance.
D) social.
Q3) In recent world studies on voluntary social responsibility reporting,it has been found that:
A) reporting was done principally by the largest companies.
B) disclosure was greatest in Australia.
C) reporting was mainly of a quantitative nature.
D) companies tended to provide 'bad news' as well as 'good news.'
Q4) Briefly outline the essence of the balance scorecard approach.
Page 9
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Chapter 8: Analysis and Interpretation of Financial Statements
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Q1) The current market price of Fixit Ltd's ordinary shares is $5.00 each.If the latest earnings per share is $0.50,the company's price-earnings ratio is:
A) 10 times.
B) 2.0 times.
C) 2.5 times.
D) 20 times.
Q2) Which of these is not an advantage of using borrowed funds to finance a business?
A) Interest on borrowings is tax deductible.
B) Borrowing can be used to boost returns to owners, as long as the return on the funds exceeds the cost of interest.
C) Lenders do not dilute ownership interest in the business.
D) Interest on borrowing is a legal commitment that must be met.
Q3) If Line Ltd has a current ratio of 2.5:1 and current assets are $600,000,how much are the company's current liabilities?
A) $240,000.
B) $300,000.
C) $360,000.
D) $200,000.
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Chapter 9: Costvolumeprofit Analysis and Relevant Costing
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Sample Questions
Q1) Pretty Dolls Pty Ltd usually sell 30,000 dolls per annum.This year,they have excess stock of 10,000 dolls; they usually retail the dolls at $35 per unit.Their variable cost per unit is $20 and their annual fixed costs are $30,000.They have received 'a one time only expression of interest' from an overseas retail chain to purchase 7,500 units at $29 per unit.What would be the best advice you could provide to Pretty Dolls?
A) Do not accept the order, as it is not worthwhile pursuing 'a one time only expression of interest.'
B) Do not accept the offer, as a loss will be incurred.
C) Do not accept the order, as the variable cost plus the fixed costs per unit amount to $30 per unit.
D) Accept the offer, as it will lead to a $9 per unit contribution to fixed costs.
Q2) Variable costs are represented graphically as:
A) starting at zero and increasing as a straight line as activity increases.
B) starting at a given point and increasing as a straight line as activity increases.
C) a horizontal line, staying the same irrespective of the level of activity.
D) the intersection of total costs and total revenue lines.
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Chapter 10: Full Costing
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Sample Questions
Q1) A printing firm that produces newsletters,advertising brochures and other small documents for individual clients is operating what type of costing system?
A) Process costing.
B) Job costing.
C) Periodic costing.
D) None of the above.
Q2) Anything for which a separate measurement of cost is desired is called a: A) cost unit.
B) job.
C) article.
D) fixed cost object.
Q3) Refer to the table above.The overhead recovery rate for framing based on machine hours is:
A) $4.
B) $5.
C) $2.
D) $20.
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Chapter 11: Budgeting
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Sample Questions
Q1) Flexing the budget means:
A) revising the budget sales figure to match actual sales.
B) ignoring previously set targets.
C) revising the budget to reflect changes in management behaviour.
D) revising the original budget estimates to produce a budget based on the actual volume of activity.
Q2) Which statement about the uses of budgets is not true?
A) They can assist in identifying short-term problems.
B) They can provide a system of authorisation for managers to spend up to a particular limit.
C) They are mainly used to set prices.
D) None of the above, i.e., all are true statements.
Q3) If the principal objective of a firm is to enhance wealth,the most important budget target to meet is:
A) bank balance.
B) sales.
C) profit.
D) production.
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Chapter 12: Capital Investment Decisions
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Q1) The time value of money is an important concept in investment decisions as it takes into account that:
A) a dollar received today is more valuable than a dollar received tomorrow.
B) a dollar received today is equal to a dollar received tomorrow.
C) a dollar received tomorrow is more valuable than a dollar received today.
D) it takes time to earn profits.
Q2) Refer to the table above.Using the Net Present Value approach the management of Han Ltd will make which of the following decisions?
A) Accept the investment proposal and purchase the new processor.
B) Retain the current processor and buy the new processor.
C) Retain the current processor.
D) Increase the residual value of the processor.
Q3) The potential benefits forgone by rejecting one alternative while accepting another is known as a/an:
A) past cost.
B) cost/benefit cost.
C) opportunity cost.
D) deprivation cost.
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Chapter 13: The Management of Working Capital
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Q1) Items which comprise inventory are:
A) work-in-process.
B) finished goods.
C) raw materials.
D) all of the above.
Q2) Wonderland has a plant that manufactures computer chips.Expected demand for these chips in March 2015 is 52,000 units.Wonderland estimates the cost per purchase order to be $25.The monthly holding cost for one chip is 5c.
REQUIRED:
A)i)Compute the economic order quantity for the chips.
ii.Compute the number of orders in March 2015.
B)List the motives for holding cash in a business.
C)Name at least four factors that influence the length of the credit period in a business.
Q3) Credit policy is composed of:
A) credit terms.
B) collection policies.
C) vetting of customers before offering credit.
D) all of the above.
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Chapter 14: Financing the Business
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Q1) Which of the following is not an illiquid asset used as backing for bonds?
A) Inventory.
B) Music royalties.
C) Ticket sales to sporting events.
D) Credit card receipts.
Q2) For an investor investing in ordinary shares,it is normally considered riskier than investing in:
A) debentures.
B) unsecured notes.
C) preference shares.
D) all of the above.
Q3) The statement concerning invoice discounting that is not true is:
A) the responsibility for collecting the trade debts outstanding remains with the business.
B) it is currently a more important source of funds to businesses than factoring.
C) it is more expensive than factoring.
D) it is a more confidential form of finance than factoring.
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