Managerial Accounting Exam Preparation Guide
Course Introduction
Managerial Accounting focuses on the use of accounting information by managers to facilitate internal decision-making processes within organizations. The course covers fundamental concepts such as cost behavior, budgeting, performance evaluation, and variance analysis. Students learn how to analyze financial and non-financial data to plan operations, control activities, and support strategic decisions. Through case studies and practical exercises, the course prepares students to apply managerial accounting techniques in real-world business scenarios, equipping them with essential skills for effective management and organizational success.
Recommended Textbook
Cost Accounting A Managerial Emphasis 6th Canadian Edition by Charles T. Horngren
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Page 2
Chapter 1: The Accountants Vital Role in Decision Making
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Sample Questions
Q1) Customer relationship management initiatives use technology to coordinate all A) production activities.
B) research activities.
C) customer-facing activities.
D) inventory management activities.
E) aspects of strategy implementation.
Answer: C
Q2) When a company works with its supplier to reduce material-handling costs, this is an example of
A) the customer-driven approach.
B) a conflict of interest.
C) a key success factor.
D) a strategic marketing focus.
E) total value chain or supply chain analysis.
Answer: E
Q3) Management accounting is guided by generally accepted accounting principles. A)True
B)False
Answer: False
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Page 3
Chapter 2: An Introduction to Cost Terms and Purposes
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Sample Questions
Q1) The variable cost per unit of a product should stay the same throughout the relevant range of production.
A)True
B)False
Answer: True
Q2) Cost tracing assigns indirect costs to the chosen cost object.
A)True
B)False
Answer: False
Q3) Which of the following statements about cost management is true?
A) It requires that managers actively strive to increase revenues.
B) It only focuses on inventoriable costs.
C) It is not affected by the organization's customers.
D) It only applies to period costs.
E) It requires efficient management of the use of the cost drivers in the value-added activities.
Answer: E
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Chapter 3: Cost-Volume-Profit Analysis
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Sample Questions
Q1) Which of the following statements about sensitivity analysis is true?
A) It is a technique which is used to examine past results.
B) It can be used in CVP to show changes in operating income if variable costs per unit change.
C) It examines the relationship between production and service departments.
D) It shows the impact of a manager's behaviour.
E) It is relevant for isolating conversion costs.
Answer: B
Q2) Total revenues less total fixed costs equal the contribution margin.
A)True
B)False
Answer: False
Q3) Explain when a manager would use cost-volume-profit analysis and sensitivity analysis.
Answer: Cost-volume-profit analysis is helpful for evaluating the profit impact of management decisions that affect production and sales volume. Sensitivity analysis is helpful for identifying those estimates most critical for a decision.
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Chapter 4: Job Costing
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Sample Questions
Q1) Actual costing can also be a method of job costing.
A)True
B)False
Q2) The main advantage of using budgeted cost rates rather than actual cost rates is
A) budgeted costs allow managers to have cost information on a timely basis.
B) budgeted costs may be subject to short-run fluctuations.
C) budgeted indirect-cost rates are known prior to the inception of a new job.
D) actual indirect-cost rates are affected by work done on other jobs.
E) budgeted rates are just as accurate and require less effort.
Q3) The manufacturing overhead control account and the manufacturing overhead allocated account both have zero balances at the end of each year after all adjustments are recorded.
A)True
B)False
Q4) Why does the Manufacturing Overhead Control account (debit) need to equal the Manufacturing Control account (credit)? What will be the effect of having an end of year remaining balance, debit or credit, on the evaluation of profitability?
Q5) What is the difference between an actual cost system and a normal cost system?
Q6) Explain how a budgeted indirect cost allocation rate is determined.
Page 6
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Chapter 5: Activity-Based Costing and Management
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133 Flashcards
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Sample Questions
Q1) Using a broad average to allocate costs to products is called
A) activity-based costing.
B) refined costing.
C) cost smoothing.
D) product undercoating.
E) job costing.
Q2) What indirect costs were accumulated for each major client for the month?
A) School Board, $74,730.00; City Gov't, $3,039.50
B) School Board, $7,050.50; City Gov't, $74,730.00
C) School Board, $74,730.00; City Gov't, $7,050.50
D) School Board, $7,050,50; City Gov't, $7,685.00
E) School Board, $6,925.50; City Gov't, $141,420.00
Q3) Cost smoothing involves assigning costs in a non uniform manner to reflect the different utilization of resources by different products or services.
A)True
B)False
Q4) One of the aspects of ABM is eliminating activities that do not add value.
A)True
B)False
Q5) How are cost drivers selected in activity-based costing systems?
Page 7
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Chapter 6: Master Budget and Responsibility Accounting
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Sample Questions
Q1) How much cash will be paid to suppliers in March?
A) $23,200
B) $28,000
C) $44,000
D) $24,800
E) $17,600
Q2) Kaizen budgeting is a budgetary approach that explicitly incorporates continuous improvement during the budget period into the resultant budget numbers.
A)True
B)False
Q3) A limitation of comparing a company's performance against actual results of last year is that
A) it includes adjustments for future conditions.
B) feedback is no longer a possibility.
C) the benchmark may be unrealistic.
D) past results can contain inefficiencies of the past year.
E) the budgeting time period is set at one year.
Q4) Describe the concept of kaizen budgeting.
Q5) Describe the benefits to an organization of preparing an operating budget.
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Chapter 7: Flexible Budgets, Variances, and Management
Control: I
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Sample Questions
Q1) The static-budget variance can be subdivided into the flexible-budget variance and the sales-volume variance.
A)True
B)False
Q2) The direct materials mix variance will be favourable when
A) the flexible-budget contribution margin is greater than the actual contribution margin.
B) the actual direct materials input mix is less expensive than the budgeted direct materials input mix.
C) the actual quantity of total inputs used is greater than the flexible budget for total inputs.
D) actual unit sales are less than budgeted unit sales.
E) the input-efficiency variance is favourable.
Q3) A favourable direct materials yield variance results when less direct materials are used than planned.
A)True
B)False
Q4) Describe the purpose of variance analysis.
Page 9
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Chapter 8: Flexible Budgets, Variances, and Management
Control: II
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Sample Questions
Q1) Calculate the production-volume variance for fixed setup overhead costs.
A) $4,666.67 unfavourable
B) $400 unfavourable
C) $1,600 unfavourable
D) $4,666.67 favourable
E) $400 favourable
Q2) The fixed manufacturing overhead efficiency variance is used to analyze overhead costs.
A)True
B)False
Q3) The variable overhead flexible-budget variance can be further subdivided into the A) price variance and the efficiency variance.
B) static-budget variance and sales-volume variance.
C) rate variance and production-volume variance.
D) sales-volume variance and the rate variance.
E) rate variance and the efficiency variance.
Q4) Capacity cost is a variable overhead cost.
A)True
B)False
10
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Chapter 9: Income Effects of Denominator Level on Inventory Valuation
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Sample Questions
Q1) Theoretical capacity is rarely used to calculate the budgeted fixed manufacturing cost per case because it departs significantly from the real capacity available to a company.
A)True
B)False
Q2) The denominator-level concept based on capacity utilization for the anticipated level of output that will satisfy customer demand for a single operating cycle, and complies with the Canada Revenue Agency for tax purposes, is the
A) theoretical budget capacity.
B) practical budget capacity.
C) normal capacity.
D) master-budget capacity.
E) supply capacity.
Q3) What is Honda Heaven's inventorial cost per box using absorption costing?
A) $9.50
B) $10.00
C) $12.50
D) $13.40
E) $15.40
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Chapter 10: Quantitative Analyses of Cost Functions
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Sample Questions
Q1) What are the estimated total costs if Miller's expects to sell 6,500 units next year?
Q2) Which of the following is TRUE concerning the collection of data to be used in estimating a cost function?
A) Data should contain observations for periods both before and after a major economic or technological change.
B) The time periods used to measure the outcome variable and the cost driver(s) should not be concurrent.
C) Both time series data and cross-sectional data are relevant, although both are not required.
D) All data should be viewed as being representative of the normal relationship between the outcome variable and the cost driver.
E) Data should contain observations for periods both before and after a major economic or technological change, and, both time series data and cross-sectional data are required.
Q3) What are two of the assumptions against which data should be evaluated when used to develop a linear cost function? Briefly explain the three ways that a linear cost function may behave?
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Chapter 11: Decision Making and Relevant Information
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Sample Questions
Q1) What is the opportunity cost associated with the adaptation of the equipment to another line of testing equipment assuming Central accepts Tripac's offer?
A) $72,000
B) $88,000
C) $63,000
D) $240,000
E) none of the above
Q2) The cost NOT relevant for this decision is the
A) acquisition cost of the Geo Prizm.
B) acquisition cost of the Honda Civic.
C) repairs to the Geo Prizm.
D) annual operating costs of the Honda Civic.
E) annual operating costs of the Geo Prizm.
Q3) Which of the following represents a qualitative factor?
A) any nonfinancial factor
B) historical costs
C) relevant costs
D) the timing of variable costs
E) an outcome that cannot be measured in numerical terms
Q4) Explain what revenues and costs are relevant when choosing among alternatives.
Page 13
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Chapter 12: Pricing Decisions, Product Profitability Decisions, and Cost Management
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Sample Questions
Q1) What are the Satellite Inc. life cycle budgeted costs?
A) $424,000
B) $1,272,000
C) $639,000
D) $1,392,000
E) $298,000
Q2) The current selling price for the Pluto, a mid-sized car, is $19,000. For next year it is anticipated that Pluto will have a $12,000 cost base. What is its prospective selling price, using cost-plus pricing, if the company desires a markup component of 15 percent?
A) $10,200
B) $13,800
C) $19,000
D) $30,000
E) $31,000
Q3) Including unit fixed costs for pricing is often used because of its simplicity.
A)True
B)False
Q4) Explain the differences between short-run pricing decisions and long-run pricing decisions.
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Chapter 13: Strategy, Balanced Scorecard, and Profitability Analysis
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Sample Questions
Q1) What is reengineering? Can you contrast a reengineering approach to change with a kaizen approach to change?
Q2) Which of the following is a measure of the internal business perspective?
A) return on investment
B) market share in the high-end appliance market
C) timely delivery
D) production cycle time
E) number of employees trained in quality management
Q3) Required:
a. What amount is the revenue effect of growth component?
b. What amount is the cost effect of growth component?
c. What is the change in operating income as a result of the growth component?
Q4) Required:
a. What amount is the revenue effect of the growth component?
b. What amount is the cost effect of the growth component?
c. What is the net effect on operating income as a result of the growth component?
Q5) Downsizing is also called rightsizing.
A)True
B)False
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Chapter 14: Period Cost Allocation
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Sample Questions
Q1) What is the cost of the Maintenance Department allocated to Department A using the step-down method if the Personnel Department is allocated first?
A) $8,000
B) $4,706
C) $5,000
D) $12,000
E) $14,118
Q2) Which method allows for partial recognition of the services rendered by support departments to other support departments?
A) the direct allocation method
B) the interdepartmental method
C) the reciprocal allocation method
D) the step-down method
E) the step-down allocation method
Q3) One of the purposes of allocating indirect costs is to justify costs or compute reimbursement amounts.
A)True
B)False
Q4) Should a company allocate its corporate costs to divisions?
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Chapter 15: Cost Allocation: Joint Products and Byproducts
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Sample Questions
Q1) The constant gross-margin percentage NRV method of joint cost allocation
A) involves allocating costs in such a way that maintaining the same gross margin percentage for each product that was obtained in prior years.
B) involves allocating costs in such a way that the overall gross margin percentage is identical for the individual products.
C) is the same as the estimated NRV method.
D) is the same as the sales-value at splitoff method.
E) will result in different gross margins for each product.
Q2) What is the paper's sales value at the split off point?
A) $120
B) $1,160
C) $1,200
D) $1,950
E) $3,000
Q3) A byproduct is one or more products of a joint production process that have low total sales value compared to the total sales value of the main product or joint products.
A)True
B)False
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Chapter 16: Revenue and Customer Profitability Analysis
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Sample Questions
Q1) A difficulty with the market share and market size variances is that accurate measures of market share and market size often do not exist.
A)True
B)False
Q2) The static-budget variance for revenues is the difference between the actual revenues and the budgeted revenues from the static budget.
A)True B)False
Q3) Managers find customer-profitability analysis useful because it frequently highlights how vital a small set of customers is to total profitability.
A)True
B)False
Q4) Revenue allocation occurs where revenues can be identified with an individual product (service, customer, and so on) in an economically feasible (cost-effective) way.
A)True B)False
Q5) What actions might be taken with an unprofitable customer?
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Page 18
Chapter 17: Process Costing
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Sample Questions
Q1) The first-in, first-out process-costing method computes unit costs by confining equivalent units to work only done during the current period.
A)True
B)False
Q2) The Parson Valve Corporation was recently formed to produce a brass valve that forms an essential part of a compressor manufactured by a major corporation. The direct materials are added at the start of the production process while conversion costs are added uniformly throughout the production process. September is Parson's first month of operations, and therefore, there was no beginning inventory. Direct materials cost for the month totaled $1,400,000, while conversion costs equaled $1,800,000. Accounting records indicate that 800,000 valves were started in September and 700,000 valves were completed.
Ending inventory was 20% complete as to conversion costs.
Required:
a. What is the total manufacturing cost per valve for September?
b. Allocate the total costs between the completed valves and the valves in ending inventory.
Q3) List and describe the five steps in process costing.
Q4) What is meant by the term "prime cost pool"?
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Chapter 18: Spoilage, Rework, and Scrap
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Sample Questions
Q1) Abnormal spoilage is spoilage that should arise under efficient operating conditions.
A)True
B)False
Q2) Deducting the disposal value from the costs of the spoiled goods accumulated to the point of inspection equals
A) the net cost of discarded goods.
B) the net cost of reworked goods.
C) the net cost of spoilage.
D) the net cost of scrap.
E) the net cost of disposals.
Q3) Normal spoilage is usually computed on the basis of
A) the number of good units that pass inspection during the current period.
B) the number of units that pass the inspection point during the current period.
C) the number of units that are 100% complete as to materials.
D) the number of spoiled units that pass inspection during the current period.
E) the percentage of good units that passed inspection in the previous period.
Q4) Spoilage can be attributed to a particular job in a process costing system.
A)True
B)False
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Chapter 19: Cost Management: Quality, Time, and the Theory of Constraints
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Sample Questions
Q1) The costs relating to product testing are classified as prevention costs.
A)True
B)False
Q2) Lost contribution margin can result from either internal or external failure.
A)True
B)False
Q3) What is the change in the daily contribution margin if the change is made?
A) $(608)
B) $(634)
C) $(672)
D) $800
E) $960
Q4) Define cost of quality (COQ), list the four categories, and provide an example of each.
Q5) Producing more non-bottleneck output
A) creates more inventory but does not increase throughput contribution.
B) creates more inventory and increases throughput contribution.
C) creates less pressure for the bottleneck workstations.
D) allows for the maximization of overall contribution.
E) allows for the maximization of overall shop effectiveness.
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Chapter 20: Inventory Cost Management Strategies
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Sample Questions
Q1) The simplest version of the economic-order-quantity decision model assumes all of the following EXCEPT
A) the same fixed quantity is ordered at each reorder point.
B) demand ordering costs and carrying costs are certain.
C) purchase order lead time is certain.
D) no stockouts occur.
E) purchasing costs per unit depend on the quantity ordered.
Q2) A firm using a backflush costing system will always use actual costs rather than standard costs.
A)True
B)False
Q3) The EOQ model is designed to emphasize the tradeoff between which of the following factors?
A) carrying costs and ordering costs
B) purchasing costs and carrying costs
C) stockout costs and carrying costs
D) purchasing costs and ordering costs
E) stockout costs and ordering costs
Q4) The costs associated with storage are an example of which cost category?
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Chapter 21: Capital Budgeting: Methods of Investment Analysis
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Sample Questions
Q1) Which of the following is not a major category of cash flows in capital budgeting?
A) initial investment in machines
B) recurring operating cash flows
C) cash flows from dispositions of assets
D) management and labour allocation deductions
E) initial working capital investment
Q2) The required rate of return is the minimum acceptable percentage return on an investment before taking into account the risk of the investment.
A)True
B)False
Q3) Return on investment (ROI) is also known as
A) internal rate of return.
B) accrual accounting rate of return.
C) payback.
D) net present value.
E) time-adjusted rate of return.
Q4) The payback method discounts cash flows prior to the payback date.
A)True
B)False
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Chapter 22: Capital Budgeting: a Closer Look
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Q1) The required rate of return is the rate of return that the firm forgoes by investing in a particular project rather than investing in an alternative project of comparable risk.
A)True
B)False
Q2) A Canadian corporation can deduct a full year's worth of CCA on any asset acquired in the year.
A)True
B)False
Q3) What is the annual expense deduction for CCA?
A) $16,000
B) $24,000
C) $36,000
D) $40,000
E) $42,500
Q4) Capital Cost Allowance (CCA) is a cash flow.
A)True
B)False
Q5) Explain how the profitability index can be used to rank investments and how it might be used in conjunction with NPV analysis.
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Chapter 23: Transfer Pricing and Multinational Management Control Systems
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Q1) A Canadian company has subsidiaries in France, England, Canada, and in the USA. The company is somewhat vertically-integrated in that the Canadian subsidiary sells some of its output to the USA subsidiary. Which further processes the material. If the market is fully-competitive, which transfer price would likely be used, given Canada Revenue Agency's published policy on transfer pricing?
A) market-based price
B) full cost plus a markup
C) negotiated price
D) distress price
E) either market-based or full cost
Q2) A company has a plant in a high tax jurisdiction that produces products for a facility in a low tax jurisdiction. Suggest a strategy, including transfer prices, which will result in the lowest tax for the overall corporation.
Q3) Briefly explain each of the three general methods used to determine a transfer price.
Q4) The costs used in cost-based transfer prices can only be actual costs.
A)True
B)False
Q5) What is the purpose of the internal control system within an organization?
Page 25
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Chapter 24: Multinational Performance Measurement and Compensation
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Q1) The only criticism of team-based compensation is that the incentives for individual employees to excel are diminished, harming overall performance.
A)True
B)False
Q2) What are Bleach's and Bleach-2's residual incomes, based on current values, respectively?
A) $116,250; $37,500
B) $110,000; $67,500
C) $67,500; $110,000
D) $37,500; $116,250
E) $115,340; $80,000
Q3) Return on investment is also called the accrual accounting rate of return.
A)True
B)False
Q4) One way to achieve greater comparability of historical-cost based ROIs is to restate performance in dollars.
A)True
B)False
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