Managerial Accounting Final Test Solutions
Course Introduction
Managerial Accounting focuses on the generation and use of financial and non-financial information by managers within an organization to inform strategic planning, decision-making, and effective control of operations. This course explores core topics such as cost behavior, budgeting, performance evaluation, variance analysis, and internal reporting systems, while emphasizing their application in real-world business settings. Through analysis of case studies and practical exercises, students learn to interpret and utilize accounting data to support operational efficiency, competitive strategy, and value creation, preparing them to contribute to informed management and organizational success.
Recommended Textbook
Cost Accounting A Managerial Emphasis 14th Edition by Charles T. Horngren
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23 Chapters
3902 Verified Questions
3902 Flashcards
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Chapter 1: The Accountants Role in the Organization
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195 Flashcards
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Sample Questions
Q1) ________ includes banking and short- and long-term financing, investments, and cash management.
A)Risk management
B)Internal audit
C)Controllership
D)Treasury
Answer: D
Q2) How does a controller help "control" a company?
Answer: By reporting and interpreting relevant data, the controller exerts a force or influence that impels management toward making better-informed decisions. The controller of Caterpillar described the job as "a business advisor to ...help the team develop strategy and focus the team all the way through recommendations and implementation."
Q3) An external audit includes reviewing and analyzing financial and other records to attest to the integrity of the organization's financial reports and to adherence to its policies and procedures.
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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224 Verified Questions
224 Flashcards
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Sample Questions
Q1) Fixed costs depend on the resources used, not the resources acquired.
A)True
B)False
Answer: False
Q2) When making decisions:
A)it is best to use average costs
B)it is best to use unit costs
C)it is best to use total costs rather than unit costs
D)All of these types of costs can be used for decision making; it varies depending on the decision required.
Answer: D
Q3) Which one of the following is a variable cost for an insurance company?
A)rent
B)president's salary
C)sales commissions
D)property taxes
Answer: C
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Chapter 3: Cost-Volume-Profit Analysis
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207 Verified Questions
207 Flashcards
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Sample Questions
Q1) The Marietta Company has fixed costs of $40,000 and variable costs are 75% of the selling price. To realize profits of $10,000 from sales of 50,000 units, the selling price per unit:
A)must be $1.00
B)must be $1.33
C)must be $4.00
D)is indeterminable
Answer: C
Q2) In the manufacturing sector:
A)only variable costs are subtracted to determine gross margin
B)fixed overhead costs are subtracted to determine gross margin
C)fixed overhead costs are subtracted to determine contribution margin
D)all operating costs are subtracted to determine contribution margin
Answer: B
Q3) For every $25,000 of ticket packages sold, operating income will increase by:
A)$6,250
B)$12,500
C)$18,750
D)an indeterminable amount
Answer: A
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Chapter 4: Job Costing
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199 Flashcards
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Sample Questions
Q1) Why does the manufacturing overhead control account (debit)need to equal the manufacturing overhead allocated account (credit)?
Q2) In some variations of normal costing, organizations use budgeted rates to assign direct costs as well as indirect costs to jobs.
A)True
B)False
Q3) The ending balance of work-in-process inventory is:
A)$438,500
B)$146,500
C)$130,000
D)$422,000
Q4) The approach often used when dealing with small amounts of underallocated or overallocated overhead is the ________ approach.
A)adjusted allocation-rate
B)proration
C)write-off to cost of goods sold
D)Both A and B are correct.
Q5) Explain how a budgeted indirect-cost rate is determined.
Q6) What is the difference between an actual cost system and a normal cost system?
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Chapter 5: Activity-Based Costing and Activity-Based Management
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175 Flashcards
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Sample Questions
Q1) An activity-based costing system is necessary for costing services that are similar. A)True
B)False
Q2) Using the three cost pools to allocate overhead costs, what is the total manufacturing overhead cost estimate for Money Managers during 2010?
A)$13,700
B)$6,500
C)$6,860
D)$10,192
Q3) Assume a traditional costing system applies the $40,000 of overhead costs based on direct labor hours. What is the total amount of overhead cost assigned to the standard model?
A)$16,000
B)$24,000
C)$25,000
D)$15,000
Q4) What are the four parts of the cost hierarchy. Briefly explain each part, and contrast this cost hierarchy to the fixed-variable dichotomy?
7
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Chapter 6: Master Budget and Responsibility Accounting
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229 Flashcards
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Sample Questions
Q1) Purchases budgeted for February total:
A)$69,120
B)$60,480
C)$115,200
D)$64,800
Q2) In a cost center, a manager is responsible for investments, revenues, and costs.
A)True
B)False
Q3) What is the expected Accounts Payable balance as of May 31?
A)$11,792
B)$24,912
C)$36,704
D)$2,948
Q4) Responsibility accounting focuses on control, NOT on information and knowledge.
A)True B)False
Q5) A responsibility center is a part, segment, or subunit of an organization, whose manager is accountable for a specified set of activities. A)True B)False
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Chapter 7: Flexible Budgets, Direct-Cost Variances, and Management Control
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180 Verified Questions
180 Flashcards
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Sample Questions
Q1) Ensuring benchmark numbers are comparable can be difficult because differences can exist across companies with:
A)overall company strategy
B)depreciation methods
C)inventory methods
D)All of these answers are correct.
Q2) A favorable price variance for direct materials indicates that:
A)a lower price than planned was paid for materials
B)a higher price than planned was paid for materials
C)less material was used during production than planned for actual output
D)more material was used during production than planned for actual output
Q3) Typically, managers have the LEAST control over:
A)the direct material price variance
B)the direct material efficiency variance
C)machine maintenance
D)the scheduling of production
Q4) A particular variance generally signals one particular problem.
A)True
B)False
Q5) Describe the purpose of variance analysis.
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Chapter 8: Flexible Budgets, Overhead Cost Variances, and Management Control
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171 Verified Questions
171 Flashcards
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Sample Questions
Q1) What is the total variable overhead variance
A)$7,875 unfavorable
B)$3,937.50 f unfavorable
C)$7,875 favorable
D)$3,937.50 f favorable
Q2) Calculate the flexible-budget variance for variable setup overhead costs.
A)$600 favorable
B)$1,300 favorable
C)$600 unfavorable
D)$1,300 unfavorable
Q3) Generally Accepted Accounting Principles require that unitized fixed manufacturing costs be used for:
A)pricing decisions
B)costing decisions
C)external reporting
D)All of these answers are correct.
Q4) Managers should use unitized fixed manufacturing overhead costs for planning and control.
A)True B)False
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Chapter 9: Inventory Costing and Capacity Analysis
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Sample Questions
Q1) The higher the denominator level, the:
A)higher the budgeted fixed manufacturing cost rate
B)lower the amount of fixed manufacturing costs allocated to each unit produced
C)higher the favorable production-volume variance
D)more likely actual output will exceed the denominator level
Q2) Which of the following statements is FALSE?
A)Absorption costing allocates fixed manufacturing overhead to actual units produced during the period.
B)Nonmanufacturing costs are expensed in the future under variable costing.
C)Fixed manufacturing costs in ending inventory are expensed in the future under absorption costing.
D)Operating income under absorption costing is higher than operating income under variable costing when production units exceed sales units.
Q3) What is contribution margin using variable costing?
A)$96,250
B)$91,000
C)$104,000
D)$110,000
Q4) Discuss the three methods to dispose of production volume variance.
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Chapter 10: Determining How Costs Behave
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Sample Questions
Q1) Simple regression differs from multiple regression in that:
A)multiple regression uses all available data to estimate the cost function, whereas simple regression only uses simple data
B)simple regression is limited to the use of only the dependent variables and multiple regression can use both dependent and independent variables
C)simple regression uses only one independent variable and multiple regression uses more than one independent variable
D)simple regression uses only one dependent variable and multiple regression uses more than one dependent variable
Q2) A negative slope of a regression line indicates that total costs are higher for higher values of the cost driver.
A)True
B)False
Q3) Which cost estimation method is being used by Jerry's TV and Appliance Store?
A)the industrial engineering method
B)the conference method
C)the account analysis method
D)the quantitative analysis method
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12
Chapter 11: Decision Making and Relevant Information
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Sample Questions
Q1) Doggie Dinner, Inc., currently manufactures three different types of scientifically balanced dog food. The firm is considering eliminating one of the three products. What factors should be taken into account in making this decision?
Q2) A relevant revenue is a revenue that is a(n):
A)past revenue
B)future revenue
C)in-hand revenue
D)earned revenue
Q3) If Louis Cifer wanted a long-term commitment for supplying this product, this analysis:
A)would definitely be different
B)may be different
C)would not be different
D)does not contain enough information to determine if there would be a difference
Q4) To maximize profits, managers should produce more of the product with the greatest contribution margin per unit of the constraining resource.
A)True
B)False
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Chapter 12: Pricing Decisions and Cost Management
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Sample Questions
Q1) Steven Corporation manufactures fishing poles that have a price of $42.00. It has costs of $32.64 A competitor is introducing a new fishing pole that will sell for $36.00. Management believes it must lower the price to $36.00 to compete in the highly cost-conscious fishing pole market. Marketing believes that the new price will maintain the current sales level. Steven Corporation's sales are currently 200,000 poles per year.
Required:
a. What is the target cost for the new price if target operating income is 20% of sales?
b. What is the change in operating income for the year if $18.00 is the new price and costs remain the same?
c. What is the target cost per unit if the selling price is reduced to $36.00 and the company wants to maintain its same income level?
Q2) ________ starts with estimated product costs and next adds desired operating income.
A)Cost-plus pricing
B)Target costing
C)Kaizen costing
D)Life-cycle budgeting
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Page 14
Chapter 13: Strategy, Balanced Scorecard, and Strategic
Profitability Analysis
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171 Verified Questions
171 Flashcards
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Sample Questions
Q1) What is the cost effect of the price-recovery component?
A)$30,500 F
B)$31,500 U
C)$2,500 F
D)$33,000 U
Q2) Which component of strategy measures the change in operating income attributable solely to changes in a company's profit margins between Year 1 and Year 2?
A)the growth component
B)the price-recovery component
C)the productivity component
D)the cost leadership component
Q3) In for-profit companies, the primary goal of the balanced scorecard is to sustain short-run financial performance.
A)True
B)False
Q4) Engineered costs have no measurable cause-and-effect relationship between output and resources used.
A)True
B)False
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Chapter 14: Cost Allocation, Customer-Profitability Analysis, and Sales-Variance Analysis
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170 Flashcards
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Sample Questions
Q1) What is the total sales-quantity variance in terms of the contribution margin?
A)$220,000 favorable
B)$340,000 favorable
C)$556,000 favorable
D)$896,000 favorable
Q2) Additional insight can be gained by dividing the sales-mix variance into the flexible-budget variance and the sales-volume variance.
A)True
B)False
Q3) Any item for which a separate measurement of cost is desired is known as:
A)cost allocation
B)a cost object
C)a direct cost
D)an indirect cost
Q4) In general, distribution-channel costs are more easily influenced by customer actions than customer batch-level costs.
A)True
B)False
Q5) Should a company allocate its corporate costs to divisions?
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Chapter 15: Allocation of Support-Department Costs, Common
Costs, and Revenues
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Sample Questions
Q1) What is the complete reciprocated cost of the Maintenance Department?
A)$331,267
B)$326,667
C)$300,000
D)$0
Q2) Under the stand-alone method of allocating common costs:
A)a ranking is used to allocate costs among the users
B)disputes can arise over who is the primary user
C)each party bears a proportionate share of the total costs in relation to their individual stand-alone costs
D)an incentive is created to be the first-ranked user
Q3) Which of the following linear equations represents the complete reciprocated cost of the Data Processing Department?
A)DP= $75,000 + (600/4,700)PM
B)DP= $75,000 + (3,500/16,700)PM
C)DP= $75,000 × (600/4,700)+ $350,000 × (3,340/16,700)
D)DP= $350,000 + (600/16,700)DP
Q4) The dual-rate method makes no distinction between fixed and variable costs.
A)True
B)False
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Chapter 16: Cost Allocation: Joint Products and Byproducts
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Sample Questions
Q1) Which method of allocating costs would be used if the selling prices of all products at the splitoff point are UNAVAILABLE?
A)sales value at splitoff method
B)NRV method
C)physical measures method
D)constant gross-margin percentage method
Q2) Joint costs that do NOT differ between alternatives are particularly relevant for decision making.
A)True
B)False
Q3) Which of the following is a reason to allocate joint costs?
A)rate regulation requirements, if applicable
B)cost of goods sold computations
C)insurance settlement cost information requirements
D)All of these answers are correct.
Q4) The production method for recognizing byproducts is conceptually correct in that it is consistent with the matching principle.
A)True
B)False
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Chapter 17: Process Costing
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Sample Questions
Q1) Describe the differences between process costing and job costing. Discuss some typical products which would be more likely to use process costing as compared to some which would be more likely to use job costing.
Q2) The cost of units completed can differ materially between the weighted average and the FIFO methods of process costing.
A)True
B)False
Q3) Equivalent units in beginning work in process PLUS equivalent units of work done in the current period MINUS equivalent units completed and transferred out in the current period EQUALS equivalent units in ending work in process.
A)True
B)False
Q4) Conversion costs:
A)include all the factors of production
B)include direct labor and overhead
C)in process costing are usually considered to be added evenly throughout the production process
D)Both B and C are correct.
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Chapter 18: Spoilage, Rework, and Scrap
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Sample Questions
Q1) Normal spoilage is computed on the basis of the number of:
A)good units that pass inspection during the current period
B)units that pass the inspection point during the current period
C)units that are 100% complete as to materials
D)None of these answers is correct.
Q2) Valentine Florists operate a flower shop. Because most of their orders are via telephone or fax, numerous orders have to be reworked. The average cost of the reworked orders is $6: $3.75 for labor, $1.50 for more flowers, and $0.75 for overhead. This ratio of costs holds for the average original order. On a recent day, the shop reworked 48 orders out of 249. The original cost of the 48 orders totaled $720. The average cost of all orders is $16.16, including rework, with an average selling price of $30
Required:
Prepare the necessary journal entry to record the rework for the day if the shop charges such activities to Arrangement Department Overhead Control. Prepare a journal entry to transfer the finished goods to Finished Goods Inventory.
Q3) Spoilage and rework costs are thoroughly captured in the accounting system.
A)True
B)False
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Chapter 19: Balanced Scorecard: Quality, Time, and the
Theory of Constraints
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Sample Questions
Q1) A graph of a series of successive observations of a particular step, procedure, or operation taken at regular intervals of time is a:
A)control chart
B)Pareto diagram
C)cause-and-effect diagram
D)fishbone diagrams
Q2) Two important drivers of time are limited capacity and bottlenecks.
A)True
B)False
Q3) A tool which identifies potential causes of failures or defects is a:
A)control chart
B)Pareto diagram
C)cause-and-effect diagram
D)None of these answers is correct.
Q4) Three tools used to detect quality problems include control charts, Pareto charts, and cause and effect diagrams. Briefly explain each of these tools.
Q5) Costs of quality (COQ)reports usually do NOT consider opportunity costs.
A)True
B)False
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Chapter 20: Inventory Management, Just-In-Time, and Simplified Costing Methods
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Sample Questions
Q1) What is the economic order quantity for Owen-King Company?
A)325 lenses
B)297 lenses
C)210 lenses
D)161 lenses
Q2) A demand-pull system in which each component in a production line is produced immediately as needed by the next step in the production line is referred to as:
A)just-in-time purchasing
B)materials requirements planning
C)relevant total costs
D)economic order quantity
Q3) In a backflush-costing system, no record of work in process appears in the accounting records.
A)True
B)False
Q4) A trigger point refers to the inventory level at which a reorder is generated.
A)True
B)False
Q5) What are five features of a just-in-time manufacturing system?
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Chapter 21: Capital Budgeting and Cost Analysis
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Sample Questions
Q1) Depreciation is usually NOT considered an operating cash flow in capital budgeting because:
A)depreciation is usually a constant amount each year over the life of the capital investment
B)deducting depreciation from operating cash flows would be counting the lump-sum amount twice
C)depreciation usually does not result in an increase in working capital
D)depreciation usually has no effect on the disposal price of the machine
Q2) The definition of an annuity is:
A)similar to the definition of a life insurance policy
B)a series of equal cash flows at intervals
C)an investment product whose funds are invested in the stock market
D)Both A and B are correct.
Q3) The relevant terminal disposal price of a machine equals the:
A)difference between the salvage value of the old machine and the ultimate salvage value of the new machine
B)total of the salvage values of the old machine and the new machine
C)salvage value of the old machine
D)salvage value of the new machine
Q4) Explain why a corporation's customer base is considered an intangible asset.
Page 23
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Chapter 22: Management Control Systems, Transfer
Pricing, and Multinational
Considerations
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Sample Questions
Q1) What is the transfer price per barrel from the Production Division to the Distribution Division, assuming the method used to place a value on each pound of fertilizer is 120% of full costs?
A)$0.60
B)$0.72
C)$0.90
D)$1.10
Q2) The seller of a product has no idle capacity and can sell all it can produce at $33 per unit. Outlay cost is $9. What is the opportunity cost, assuming the seller sells internally?
A)$6
B)$12
C)$24
D)$33
Q3) An advantage of a negotiated transfer price is the:
A)close relationship between the negotiated price and the market price
B)negotiated transfer price preserves divisional autonomy
C)negotiations usually do not require much time and energy
D)Both B and C are correct.
Q4) Briefly explain each of the three methods used to determine a transfer price.
Page 24
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Chapter 23: Performance Measurement, Compensation, and Multinational Considerations
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Sample Questions
Q1) Required rate of return multiplied by the investment is the imputed cost of the investment.
A)True
B)False
Q2) In an Economic Value Added calculation, the appropriate measure of a division's profit would be that division's pre-tax operating income.
A)True
B)False
Q3) The executive vice president of Wicker Pen Company wants to establish an accounting-based performance measurement system for the company's new plant. The company has an accounting information system sufficient to support a fairly sophisticated performance measurement system. The new plant is going to be considered an investment center since its products will be markedly different from others the company currently sells. The new plant will have no internal dealings with other plants within the company.
Required:
What are some of the key steps that should be undertaken in the establishment of an accounting-based performance measurement system?
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