Managerial Accounting Practice Exam
Course Introduction
Managerial Accounting focuses on the internal use of accounting information by managers within an organization to support decision-making, planning, and control. The course covers topics such as cost behavior, cost-volume-profit analysis, budgeting, performance evaluation, and the use of relevant cost data for short-term and long-term strategic decisions. Students will learn how to develop and interpret key managerial reports, allocate costs, and utilize accounting data to optimize operational efficiency and align business activities with organizational goals. Emphasis is placed on practical applications and ethical considerations in managerial accounting practices.
Recommended Textbook
Cost Management A Strategic Emphasis 8th Edition by Edward Blocher
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Chapter 1: Cost Management and Strategy
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Q1) Which of the following is not a consequence of lack of strategic information?
A)Inability to effectively benchmark competitors.
B)Failure to identify most profitable products.
C)Inability to trace costs to individual products.
D)Incorrect investment decisions.
Answer: C
Q2) Corporate management is required to identify and solve problems from a cross-functional view.Instead of viewing a problem as related to a specific business function, management solves these problems by combining skills from different functions simultaneously.This approach is called:
A)Inclusive approach.
B)Integrative approach.
C)Intra-function approach.
D)Multilateral approach.
Answer: B
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Chapter
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Q1) To increase profitability, technology companies such as IBM have shifted their strategic focus toward:
A)Increasing equipment sales.
B)Improving software applications.
C)Providing new and enhanced customer services.
D)None of the above.
Answer: C
Q2) Which of the following is not a key benefit of the balanced scorecard (BSC)?
A)It provides a means for implementing strategy.
B)It provides an objective basis for determining each manager's compensation and advancement.
C)It provides a framework for the firm to achieve a desired organizational change in strategy.
D)It provides a baseline for how a firm's financial operations compare to competition within the industry.
Answer: D
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Chapter 3: Basic Cost Management Concepts
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Sample Questions
Q1) Assume the following information pertaining to Cub Company:\(\begin{array}{lr}
\text { Prime costs } & \$ 195,000 \\
\text { Conversion costs } & 221,000 \\
\text { Direct materials used } & 85,000 \\
\text { Beginning work in process } & 98,000 \\
\text { Ending work in process } & 81,000
\end{array}\)Total manufacturing cost is calculated to be:
A)$306,000.
B)$26,000.
C)$110,000.
D)$331,000.
E)$111,000.
Answer: A
Q2) The three attributes of cost information include accuracy, timeliness, and A)reliability.
B)relevance.
C)cost-benefit.
D)understandability.
Answer: C
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5
Chapter 4: Job Costing
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Sample Questions
Q1) L & L, CPAs, employs two full-time professional CPAs and five support employees.Budgeted direct salary costs include $160,000 for each CPA.The support employees are considered as indirect costs, and this cost was budgeted for $200,000 though the actual cost was $225,000.Actual salaries were $155,000 for each CPA.Direct and indirect costs are applied on a CPA-labor-hour basis.Total budgeted CPA-labor-hours were 5,000.If a client used 500 labor-hours, what are the budgeted direct-cost rate and the budgeted indirect-cost rate, respectively?
A)$100; $40.
B)$62; $40.
C)$90; $40.
D)$64; $40.
E)$62; $45.
Q2) Which one of the following is the amount that actual factory overhead exceeds the factory overhead applied?
A)Factory overhead applied.
B)Actual factory overhead.
C)Overapplied overhead.
D)Allocated factory overhead.
E)Underapplied overhead.
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Page 6
Chapter 5: Activity-Based Costing and Customer
Profitability Analysis
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Q1) A firm has many products, some produced in an automated production process and some produced in a manual production process.Using direct labor hours to assign manufacturing overhead to a product manufactured with a highly automated process is likely to:
A)Overstate overhead of the product.
B)Understate overhead of the product.
C)Overapply overhead to the period.
D)Underapply overhead to the period.
E)Have no effect on overhead of the product.
Q2) Volume-based rates produce inaccurate product cost when:
A)A large share of factory overhead cost is not volume-based.
B)Firms produce a diverse mix of products.
C)Large volumes of a product are manufactured.
D)Both answer A and answer B are correct.
E)None of the answers above is correct.
Q3) Which of the following would not be considered a facility-level activity?
A)Providing security for the plant.
B)Factory property taxes and insurance.
C)Closing the books each month.
D)Placing purchase orders.
Page 7
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Chapter 6: Process Costing
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Q1) Backflush costing is a costing method that:
A)Charges current production costs directly to finished goods inventory.
B)Charges past production costs directly to finished goods inventory.
C)Charges current production costs using actual costs incurred.
D)Charges current production cost directly to work-in-process inventory.
Q2) If a firm has 1,200 completed and transferred out units, 200 equivalent units of beginning work in process and 500 ending work-in-process equivalent units, what is the total of equivalent units of production using the weighted-average method?
A)1,500 units.
B)1,700 units.
C)1,200 units.
D)Cannot be determined from the above.
Q3) From the industries listed below, which one is most likely to use process costing in accounting for production costs?
A)Printing shop.
B)Accounting firm.
C)Electrical contractor.
D)Steel mill.
E)Automobile repair shop.
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Page 8
Chapter 7: Cost Allocation: Departments, Joint Products, and By-Products
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Sample Questions
Q1) The point in a joint production process at which individual products can be identified for the first time is called the:
A)Separable point.
B)By-pass point.
C)Split-off point.
D)Joint identification point.
Q2) The mathematical technique that underlies the reciprocal cost allocation method is:
A)Regression analysis.
B)Simultaneous equations.
C)Analysis of variances.
D)Complex algebraic functions.
E)Multiple correlation.
Q3) Which of the following is not a phase of the departmental approach?
A)Trace all direct manufacturing costs.
B)Allocate the production department costs to the products.
C)Allocate overhead costs to direct costs.
D)Allocate the service department costs to the production departments.
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Page 9
Chapter 8: Cost Estimation
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Sample Questions
Q1) Which one of the following cost estimation methods is the most accurate?
A) Regression analysis.
B) Visual fit.
C) Subjective forecasting.
D) The high-low method.
Q2) A measure of the statistical reliability of each independent variable is:
A) Correlation.
B) t-value.
C) R-Squared.
D) Standard error.
E) Multicollinearity.
Q3) Which of the following is not usually influenced by learning curve analysis?
A)Make-or-buy decisions.
B)Cost-volume-profit analysis.
C)Capital budgeting.
D)Development of standard product costs.
E)Theory of constraints.
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10
Chapter 9: Short-Term Profit Planning:
CVP Analysis
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Sample Questions
Q1) Calculating the margin of safety (MOS) measure will help a firm answer which of the following questions?
A) Will we break even?
B) Are we using our debt wisely?
C) How much will profits change if sales change?
D) How much profit will we earn?
E) How much revenue can we lose before we drop below the breakeven point?
Q2) Which of the following illustrates how the level of operating profit ( B) changes over different levels of output (that is, sales volume)?
A) Revenue-volume graph.
B) Cost-revenue chart.
C) Revenue-cost graph.
D) Profit-volume graph.
E) Profit-cost graph.
Q3) In measuring the variable cost per unit, CVP analysis includes:
A) Only variable production costs.
B) Only variable distribution and selling costs.
C) Both variable production and variable selling/distribution costs.
D) Only variable and semi-variable production costs.
Page 11
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Chapter 10: Strategy and the Master Budget
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Q1) Enterprise Tax Services (ETS) provides tax planning.The company billed 5,000 hours at $100 per hour for the year just completed.ETS, in planning next year's operations, is focusing on increasing the company's share of the market.It proposes to do that by hiring more tax specialists and by lowering its billing rate by 20% for work done by these new specialists.ETS estimates that revenues generated from existing staff would increase in total by 40% as a result of the new billing policy and that the additional specialists will provide additional billings of 3,000 hours (at the reduced rate) during the coming year.
Required: Compute the budgeted revenue amount for next year based on ETS's plans and projections.
Q2) Budgeting provides all of the following except:
A) A means to communicate the organization's short-term goals to its employees.
B) Support for management functions of planning and coordinating activities of the organization.
C) A means to anticipate problems.
D) An ethical framework for decision-making.
E) A basis for motivating employee behavior.
Q3) Explain benefits of implementing a master budgeting system.
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Chapter 11: Decision Making With a Strategic Emphasis
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Q1) The value-chain analysis used regarding the "make-or-buy decision" often leads a firm to make use of:
A) Activity-based costing (ABC).
B) Cost-volume profit (CVP) analysis.
C) Outsourcing options.
D) Relevant cost-based pricing.
E) Value stream accounting.
Q2) When a firm has surplus capacity (that is, no resource constraints), relevant costs for decision-making (for example, determining short-term product mix) will, relative to the situation where the firm faces one or more resource constraints, be:
A) Lower.
B) The same.
C) Greater.
D) It varies that is, it is impossible to tell without further information.
Q3) What strategic factors/considerations are generally relevant to the special order decision problem (i.e., whether a company should accept a one-time order from a customer with whom the company does not generally do business)?
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Chapter 12: Strategy and the Analysis of Capital Investments
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Q1) All of the following capital budgeting decision models, except for this one, use cash flows as the primary basis for the calculation.
A) Net present value (NPV)
B) Internal rate of return (IRR)
C) Payback period
D) Discounted payback period
E) Accounting (book) rate of return (ARR)
Q2) The net present value (NPV) model of a capital budgeting project is not affected by the
A) Amount of depreciation expense allowed on the project for income tax purposes.
B) Method of funding the cost of the project.
C) Amount of net working capital needed for operations during the life of the project.
D) Estimated salvage value of the project at the end of the project's useful life.
E) Initial cost of the project.
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Chapter 13: Cost Planning for the Product Life Cycle: Target
Costing, Theory of Constraints, and Strategic Pricing
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Q1) Johnson Marine has the following costs and expected sales for the coming year. Johnson is considering a number of different methods to determine the price of its product.\(\begin{array}{lr}&\text { Total Costs }\\
\text { Variable Manufacturing } & \$ 2,350,000 \\
\text { Variable Selling and Administrative } & 750,000 \\
\text { Plant-level Fixed Overhead } & 1,200,000 \\
\text { Fixed Selling and Administrative } & 600,000 \\
\text { Batch-level Fixed Overhead } & 200,000 \\
\text { Total Investment in Product Line } & 10,000,000 \\
\text { Expected Sales (units) } & 20,000
\end{array}\)If Johnson determines price using a desired gross margin percentage of 50%, the price is:
A) $262.50
B) $306.00
C) $375.00
D) $364.29
E) $330.00
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Chapter 14: Operational Performance Measurement:
Direct-Cost Variances, and the Role of Nonfinancial
Performance Measures
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Q1) For operational control, a management accounting system should include:
A) Performance measures associated with basic business processes.
B) Only financial-control measures, such as standard cost variances.
C) High-level financial metrics such as return on investment (ROI) or return on sales (ROS).
D) A combination of short-term and strategic financial-performance metrics.
E) Only flexible-budget cost and revenue variances.
Q2) The direct materials usage ratio for a given period is:
A) Defined as the ratio of quantity purchased to quantity used.
B) Defined as the inverse of the materials quantity variance for the period.
C) Entered into its own variance account at the end of the period.
D) A useful indicator of performance by the manufacturing department.
E) A useful indicator of performance of the purchasing department.
Q3) What is a direct materials usage ratio? For what purpose is this ratio used?
Q4) Discuss some major differences between static and flexible budgets.
Q5) Define what is meant by the term "just in time production" (JIT). As indicated in your text, management accountants can supply relevant information to management as it considers a move to JIT. In this regard, describe some of the principal advantages of using a JIT system, and then describe some of the incremental costs that would likely be associated with a move to such a system. Page 16
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Chapter 15: Operational Performance Measurement:
Indirect-Cost Variances and Resource-Capacity Management
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Q1) In terms of allocating fixed overhead cost to products, generally accepted accounting principles in the U.S.:
A) Require that such allocations be based on normal capacity.
B) Allow for the use of either practical capacity or theoretical capacity.
C) Don't apply since the resulting data are used only internally (for control purposes).
D) Specify only that such costs be "reasonably allocated" to outputs.
E) Require that these costs be expensed in the period incurred.
Q2) The difference between total factory overhead cost incurred during a period and the total standard factory overhead cost assigned to production of the period is the ________:
A) Flexible-budget variance
B) Production-volume variance
C) Total factory overhead variance
D) Overhead efficiency variance
E) Total overhead spending variance
Q3) What are the three steps in establishing the standard application rate for variable factory overhead cost? Does this procedure differ for product-costing versus cost control purposes? Explain.
Page 18
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Chapter 16: Operational Performance Measurement:
Further Analysis of Productivity and Sales
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Q1) Which of the following is not a key determinant of productivity for most organizations?
A) Control of waste.
B) Product and manufacturing process innovation.
C) Control of overhead costs.
D) Fluctuations in demand.
Q2) Dr. Howard Abelson is the director of the Wellness House, a residential center for recovering alcoholics. A typical patient spends 3-4 weeks in an intensive program of rehabilitation. The Wellness House has a staff of 45, including 12 certified therapists, to serve an average patient load of 15. Howard Abelson is attempting to develop some productivity measures for the center, but is not aware of the limitations of productivity measurement in not-for-profit organizations. You have been called in as a consultant to help develop appropriate productivity measures.
Required:
(a) Identify any major differences/limitations you face in developing performance measures for the Wellness House.
(b) Recommend two or three overall measures of productivity that are appropriate for the Wellness House as a not-for-profit organization.
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Chapter 17: The Management and Control of Quality
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Q1) A graphical representation of the variation in a given set of data is a(n):
A) Control chart.
B) Pareto diagram.
C) Histogram.
D) Ishikawa diagram.
E) Cause-and-effect diagram.
Q2) Which of the following is not an expected result of improved quality of operations?
A) Decreased inventory turnover.
B) Higher product/service selling prices.
C) Faster throughput time.
D) Lower total manufacturing cost.
E) Increased sales volume.
Q3) The cost of conformance in a Cost-of-Quality (COQ) reporting system includes:
A) Prevention costs and appraisal costs.
B) Internal failure costs and external failure costs.
C) Prevention costs and internal failure costs.
D) Appraisal costs and internal failure costs.
E) Prevention costs and external failure costs.
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Chapter 18: Strategic Performance Measurement: Cost
Centers, Profit Centers, and the Balanced Scorecard
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Q1) Quick Technology Company is a supplier of high-end research equipment for the pharmaceutical industry. Quick currently has a variety of different firms producing computer chips for increased memory and improved processing speeds which are installed in Quick's equipment. In this case, having another firm provide supplies for Quick's equipment is an example of:
A) Strategic positioning.
B) Opportunity costing.
C) Profitability maximization.
D) Outsourcing.
E) Value chain analysis.
Q2) The process by which managers at all levels in the firm gain information about the performance of tasks within the firm and judge that performance against pre-established criteria is:
A) Performance measurement.
B) Employee inspection.
C) Goal congruence.
D) Managerial evaluation.
E) Management control.
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Chapter 19: Strategic Performance Measurement:
Investment Centers and Transfer Pricing
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Sample Questions
Q1) Selected data from Chering Division's accounting records revealed the following: \(\begin{array}{lcc}
\text { Sales } & \$ 825,000 \\
\text { Average investment } & \$ 440,000 \\
\text { Net operating income } & \$ 66,000 \\
\text { Minimum rate of return (divisional cost of capital) } & 14 \% \end{array}\)Chering Division's residual income (RI) is:
A)$4,400.
B)$8,800.
C)$9,240.
D)$22,380.
E)$49,500.
Q2) 0
Q3) All of the following are true of market-based transfer prices except:
A) They generally motivate the correct economic decision.
B) They can be determined for all goods and services transferred internally.
C) They may lead to goods and services purchased externally by the purchasing unit.
D) To the extent they exist, they are objective.
E) They provide an independent valuation for internal transfers.
Page 22
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Chapter 20: Management Compensation, Business
Analysis, and Business Valuation
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Q1) The commonly used approaches for business valuation include: \(\begin{array}{llll}&&\text { Profitability }\\&\text { Financial }&\text { \&Efficiency }&\text { Discounted }\\& \text { Analysis }&\text { Analysis }&\text { Cash Flow }\\
\text { A) } & \text { Yes } & \text { Yes } & \text { No } \\
\text { B) } & \text { Yes } & \text { No } & \text { No } \\
\text { C) } & \text { No } & \text { Yes } & \text { Yes } \\
\text { D) } & \text { No } & \text { No } & \text { Yes } \\
\text { E) } & \text { Yes } & \text { No } & \text { Yes } \end{array}\)
A)Option A
B)Option B
C)Option C
D)Option D
E)Option E
Q2) EVA is the acronym for:
A)Extra Value Assets.
B)Economic Volume Analysis.
C)Efficiency Volume Analysis.
D)Economic Value Added.
Page 23
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