Managerial Accounting Practice Exam
Course Introduction
Managerial Accounting focuses on the use of accounting information by managers within organizations to inform decision-making, planning, and control. The course covers fundamental concepts such as cost behavior, budgeting, standard costing, performance evaluation, and financial analysis tools. Students will learn how to analyze and interpret accounting data to support strategic business decisions, manage resources efficiently, and align operational activities with organizational goals. Emphasis is placed on developing practical skills for preparing internal reports, cost analysis, and budgeting processes, equipping students to contribute effectively to management teams in a variety of business environments.
Recommended Textbook
Fundamental Managerial Accounting Concepts 9th Edition by Thomas P Edmonds
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14 Chapters
2127 Verified Questions
2127 Flashcards
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Chapter 1: Management Accounting and Corporate Governance
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146 Verified Questions
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Sample Questions
Q1) Discuss three practical implications of misclassifying product and/or period costs. Answer: The temporary effects on the financial statements can have important implications with respect to the (1)availability of financing,(2)motivations of management,and (3)payment of income taxes.When period costs are misclassified as product costs,net income of the period will be higher than it should be,assuming that production exceeds sales.This might influence a lender's decision to extend credit to the firm.If managers are paid a bonus based on some measure of income,managers may be tempted to misclassify period costs as product costs in those periods when production exceeds sales.Finally,if a firm misclassifies product costs as period costs in a period of increasing inventory levels,net income will be lower than it should be,resulting in lower income taxes than should be the case.
Q2) Which of the following types of labor costs will never flow through the balance sheet?
A) Plant supervision
B) Sales commissions
C) Material handling
D) Assembly labor
Answer: B
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Chapter 2: Cost Behavior, operating Leverage, and Profitability Analysis
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152 Verified Questions
152 Flashcards
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Sample Questions
Q1) The excess of revenue over variable costs is referred to as:
A) gross profit
B) gross margin
C) contribution margin
D) manufacturing margin
Answer: C
Q2) What is the high-low method used for?
Answer: The high-low method is used to estimate the fixed and variable parts of a mixed cost.
Q3) The total variable cost increases in direct proportion to volume.
A)True
B)False
Answer: True
Q4) Within the relevant range,the fixed cost per unit can be expected to decrease with increases in volume.
A)True
B)False
Answer: True
Page 4
Q5) How does variable cost per unit behave when volume decreases?
Answer: Variable cost per unit is constant when volume decreases.
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Chapter 3: Analysis of Cost, volume, and Pricing to Increase Profitability
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Sample Questions
Q1) Sanchez Company makes and sells two models of dog houses,the Puppy Palace and the Canine Castle:
\[\begin{array} { l c r } & \text { Puppy Palace } & \text { Carine Castle } \\
\text { Sales price per unit } & \$ 50 & \$ 75 \\
\text { Variable cost per unit } & 30 & 50 \\
\text { Contribution margin per unit } & \$ 20 & \$ 25
\end{array}\] Sanchez has determined that it would break even at an annual sales volume of 5,000 units,of which 75% would be Puppy Palaces.What is the amount of Sanchez's estimated annual fixed costs?
Answer: If the sales mix is 75% Puppy Palaces and 25% Canine Castles,the number of Palaces and Castles sold would be 3,750 (= 5,000 × 0.75)and 1,250 (= 5,000 × 0.25),respectively.
Sales Variable costs Fixed costs = Profit
Contribution margin Fixed costs = Profit
[(3,750 units × $20 per unit)+ (1,250 units × $25 per unit)] Fixed costs = $0
$106,250 Fixed costs = $0
Fixed costs = $106,250
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Page 5
Chapter 4: Cost Accumulation,tracing,and Allocation
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158 Flashcards
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Sample Questions
Q1) A company may use several different cost drivers to allocate its indirect costs.
A)True
B)False
Q2) Indicate whether each of the following statements is true or false.
Indirect costs cannot be traced to a cost object in a cost-effective manner. For a factory with several departments, each department could be treated as a cost object.
Depreciation on a factory building is a direct cost for the departments in the factory. For a factory with several departments, depreciation on equipment used in one department would be a direct cost to that department.
An individual cost cannot be both fixed and direct with respect to a particular cost object.
Q3) The method used to allocate service department costs can cause overstatement of costs for some cost objects and understatement for others.
A)True
B)False
Q4) What should a company consider when pooling indirect costs?
Q5) What cost driver would you use to allocate indirect materials to products?
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Page 6
Chapter 5: Cost Management in an Automated Business
Environment: ABC, ABM, and TQM
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153 Verified Questions
153 Flashcards
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Sample Questions
Q1) Which of the following statements regarding activity-based cost drivers is correct?
A) Activity-based cost drivers are measures of activity that are directly associated with production.
B) Activity-based cost drivers are directly related to the volume of production.
C) Activity-based cost drivers improve the accuracy of direct cost allocations.
D) None of these answers are correct.
Q2) List and discuss changes in business practices adopted in recent years by world-class companies.
Q3) The first step in implementing an activity-based costing system is to trace overhead costs to one or more departments.
A)True
B)False
Q4) Anderson Company produces a variety of products,some in labor-intensive departments and some in heavily automated departments.Using a companywide overhead allocation rate based on direct labor will result in overcosting some products and undercosting others.
A)True
B)False
Page 7
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Chapter 6: Relevant Information for Special Decisions
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Sample Questions
Q1) Sherman Manufacturing Company currently manufactures a component used in one of its products.The annual production costs for 10,000 components are as follows: \(\begin{array}{lrr}
\text { Material cost} &\$5\text { per unit }\\
\text { Labor cost} &\$4 \text { per unit }\\
\text {Overhead } &\$1 \text { per unit }\\
\text {Batch-level set-up costs for year } &\$ 5,000\\
\text { Product-level manager's salary } & \$ 18,000\\
\text { Allocated facility-level costs } & \$12,000\\ \end{array}\)
An outside company has offered to supply 10,000 units of the component for $12.50 each.If the company outsources the component,it will be able to rent out the idle factory space for $1,000 per month but will not terminate the product manager.
Required:
1)Which items are not relevant to this outsourcing decision?
2)Identify any opportunity costs associated with this decision.
3)Prepare a quantitative analysis that indicates whether the component should be outsourced.
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Page 8
Chapter 7: Planning for Profit and Cost Control
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150 Flashcards
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Sample Questions
Q1) Cheyenne Company has budgeted the following information for June: \[\begin{array} { l r }
\text { Cash receipts } & \$ 271,000 \\
\text { Begnning cash balance } & 5,000 \\
\text { Cash payments } & 280,000 \\
\text { Desired ending cash balance } & 25,000 \end{array}\] If there is a cash shortage,the company borrows money from the bank.All cash is borrowed at the beginning of the month in $1,000 increments,and interest is paid monthly at 1% on the first day of the following month.The company had no debt before June 1.The amount of interest paid on July 1 would be:
A) $250.
B) $400.
C) $221.
D) $290.
Q2) Depreciation expense will appear on the schedule of cash payments for selling and administrative expenses.
A)True
B)False
Q3) How do short-term plans differ from long-term plans?
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Page 9
Chapter 8: Performance Evaluation
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156 Flashcards
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Sample Questions
Q1) If the master budget prepared at a volume level of 10,000 units includes direct materials of $40,000,a flexible budget based on a volume of 12,000 units would include direct materials of $48,000.
A)True
B)False
Q2) Select the correct statement regarding general,selling,and administrative (GS&A)costs.
A) Variable general, selling, and administrative costs can have price variances.
B) Variable general, selling, and administrative costs cannot have usage variances.
C) Cost variances are not generally computed for fixed general, selling, and administrative costs.
D) All of these answers are correct.
Q3) The two factors that determine the costs of manufacturing inputs (materials,labor,and overhead)are price and quantity.
A)True
B)False
Q4) What steps or activities are involved in developing standards for the materials that are used in making a product?
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Chapter 9: Responsibility Accounting
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Sample Questions
Q1) Which of the following statements regarding cost centers is incorrect?
A) Cost centers are units within a business that incur expense but do not have responsibility for generating revenue.
B) Cost centers tend to be found at upper levels on a company's organization chart.
C) A manager of a cost center has less responsibility than a manager in an investment center.
D) Cost center managers are evaluated on their ability to control costs and keep within budget.
Q2) How might return on investment be used in making resource allocation decisions within an organization?
Q3) Which of the following may be used to establish transfer prices?
A) Standard cost of a product
B) A negotiated price
C) Market price
D) All of these are correct answers.
Q4) What are the advantages of using a market-based transfer price? Why is it not always used?
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11
Chapter 10: Planning for Capital Investments
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Sample Questions
Q1) Chichester Company is considering investing in the following two mutually exclusive projects:
\(\quad \) \(\quad \) \(\quad \) \(\quad \)\(\text { Annual Cash Inflows }\) \(\begin{array}{|c|c|c|}
\hline \text{ Year} & \text{ Project A } & \text{ Project B } \\
\hline 1 & \$ 5,000 & \$ 3,500 \\
\hline 2 & 4,000 & 3,500 \\
\hline 3 & 3,000 & 3,500 \\
\hline 4 & 2,000 & 3,500 \\
\hline \text{ Total} & \$ 14,000 & \$ 14,000 \\ \hline \end{array}\)
(PV of $1 and PVA of $1)(Use appropriate factor(s)from the tables provided.)
Required:
1)Which project is more desirable strictly in terms of cash inflows? Why?
2)Compute the present value of each project's cash inflows assuming the company's required rate of return is 10%.
3)What is the maximum amount Chichester should be willing to pay for each project?
4)Suppose each project costs $10,000.Which project(s)should be accepted?
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Chapter 11: Product Costing in Service and Manufacturing
Entities
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Sample Questions
Q1) Guest Corporation estimated that total overhead cost would be $23,000 for the current year,but actual overhead costs were $25,500; as a result,Guest spent $2,500 more than expected for overhead cost.This type of variance is known as a(n):
A) material variance.
B) activity variance.
C) volume variance.
D) spending variance.
Q2) In a manufacturing business,the cost of direct materials being used is recorded in the:
A) Supplies Inventory account.
B) Work in Process Inventory account.
C) Raw Materials Inventory account.
D) Manufacturing Overhead account.
Q3) Service companies do not transform raw materials into finished goods.
A)True
B)False
Q4) Which is required for preparation of a company's external financial statements: absorption costing or variable costing? Which is frequently used for internal decision making?
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Chapter 12: Job-Order, process, and Hybrid Costing Systems
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Sample Questions
Q1) Select the incorrect statement regarding cost flows through a job-order costing system.
A) Product costs are accumulated separately by job.
B) The job-order costing system is patterned after the physical flow of products as they move through the production process.
C) The three inventory accounts used are maintained on a perpetual basis.
D) Costs are averaged for all jobs produced within a department.
Q2) Marion Company uses process costing and the weighted average method.The following information was available for April: \[\begin{array} { l r r } & \text { units } & \text { Costs } \\
\text { Wark in Process, April 1 } & 100 & \$ 3,000 \\ \text { Work in Process, April } 30 & 200 & \text { (A) } \end{array}\] During April,1,000 units were started,and costs incurred during the month were $37,000.Ending inventory was 50% complete.Based on the information given,(A)above would equal what amount?
A) $8,000
B) $3,000
C) $4,000
D) $3,300
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Chapter 13: Financial Statement Analysis
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Sample Questions
Q1) The following balance sheet information was provided by Western Company: \[\begin{array} { l r r }
\text { Assets } & \text { Year 2 } & \text { Year } 1 \\
\text { Cash } & \$ 4,000 & \$ 2,000 \\
\text { Accounts receivable } &15,000 & 12,000\\
\text { Inventory } & \$ 35,000 & \$ 38,000 \end{array}\]
Assuming Year 2 net credit sales totaled $270,000,what was the company's average days to collect receivables? (Use 365 days in a year.Do not round your intermediate calculations.)
A) 18.25 days
B) 47.31 days
C) 16.22 days
D) 20.28 days
Q2) Discuss the limitations that affect financial statement analysis.
Q3) The most frequently quoted measure of earnings performance is the stockholders' equity ratio.
A)True
B)False
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Chapter 14: Statement of Cash Flows
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Sample Questions
Q1) Bertram,Inc.had beginning and ending accounts payable balances of $400 and $450,respectively.Inventory had beginning and ending balances of $450 and $425,respectively.All inventory purchases are made on account.If cost of goods sold equaled $350,how much cash was spent to purchase inventory?
A) $275
B) $250
C) $400
D) $350
Q2) In preparing the statement of cash flows by the indirect method,noncash revenues and gains are added to net income.
A)True
B)False
Q3) The difference between the direct and the indirect methods applies only to cash from what type of activity?
A) Operating
B) Investing
C) Financing
D) All of these answers are correct.
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