Managerial Accounting Study Guide Questions
Course Introduction
Managerial Accounting focuses on the internal use of accounting information by managers to inform business decision-making, planning, and control. The course covers topics such as cost behavior, budgeting, performance evaluation, variance analysis, and the use of relevant cost data for short-term and long-term decisions. Emphasis is placed on interpreting financial data, developing strategic plans, and utilizing various tools and techniques to optimize organizational efficiency and effectiveness. This course equips students with practical skills to analyze financial information and support managerial functions in a dynamic business environment.
Recommended Textbook
ACCT Managerial Asia Pacific Edition 1st Edition by Prabhu Sivabalan
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Chapter 1: Introduction to Managerial Accounting
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Sample Questions
Q1) A company's decision on where to locate a new factory is most likely a result of:
A) operating activities.
B) operational planning.
C) strategic planning.
D) controlling activities.
Answer: C
Q2) Select one of the following functional managers and provide an example of the type of accounting information that they might request from the managerial accountant: marketing manager,operations/production manager,human resource manager,or finance manager.
Answer: Marketing manager - product costs,advertising costs,costs of product enhancements,sales commissions,shipping costs
Operations/Production manager - product costs,labour costs,overhead costs
Human resource manager - production projections,labour needs
Finance manager - cash needs,capital needs
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Chapter 2: Product Costing: Manufacturing Processes, cost
Terminology and Cost Flows
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Sample Questions
Q1) Cost of goods manufactured for July is:
A) $153 000
B) $103 000
C) $130 000
D) $133 000
Answer: D
Q2) Which of the following types of companies would be the least likely to have the following cost pattern?
Raw materials \(\rarr\)Work-in-Process \(\rarr\) Finished Goods\(\rarr\) Cost of goods sold
A) Tyre manufacturer
B) Computer software manufacturer
C) Retailer/merchandiser
D) Construction company
Answer: C
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Chapter 3: Cost Behaviour
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Sample Questions
Q1) The number of occupied rooms during the month of January is expected to be between 41 and 55 at all times.For the month of January,what type of cost does housekeeping effectively become?
A) Fixed
B) Variable
C) Step
D) Mixed
Answer: A
Q2) After-tax net income can be calculated as follows:
A) After-tax income = Pretax income * Tax rate
B) After-tax income = Pretax income / (1 - Tax rate)
C) After-tax income = Pretax income * (1 + Tax rate)
D) After-tax income = Pretax income * (1 - Tax rate)
Answer: D
Q3) The after-tax benefit of a taxable cash receipt can be calculated as follows:
A) After-tax benefit = Pretax receipt * Tax rate
B) After-tax benefit = Pretax receipt *(1 - Tax rate)
C) After-tax benefit = Pretax receipt * (1 + Tax rate)
D) After-tax benefit = Pretax receipt / Tax rate
Answer: B
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Chapter 4: Job Costing and Overhead Costing Systems
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Sample Questions
Q1) What is the over/under application for the year,if direct labour hours is the overhead cost driver?
A) $16 000 under applied
B) $22 000 over applied
C) $16 000 over applied
D) $22 000 under applied
Q2) What is the purpose of a job cost report and what are some of the items that should be found on one?
Q3) The key to allocating overhead costs is the determination of the:
A) overhead.
B) cost driver.
C) direct labour.
D) product cost.
Q4) If James Ingram is a labour intensive company,and more overhead costs are caused by increasingly complex products that require more senior labour staff,what overhead driver would you suggest?
A) Floor space
B) Direct labour hours
C) Direct labour cost
D) Machine hours
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Chapter 5: Process Costing Systems
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Sample Questions
Q1) Which of the following companies would be the most likely to adopt a process costing system?
A) Law firm
B) Toy manufacturer
C) Motion picture producer
D) Cement manufacturer
Q2) If Nunez uses the weighted-average method of computing equivalent units and assigning product costs,what is the cost per equivalent unit? (round to nearest cent)
A) $7.43
B) $7.47
C) $7.96
D) $8.00
Q3) Define the term 'equivalent unit' as it relates to process costing along with a simple numerical example of its calculation.
Q4) What are the total equivalent units worked on this period?
A) 9800
B) 10 200
C) 11 000
D) 9500
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Chapter 6: Service and Operations Costing
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Sample Questions
Q1) What is the volume-variety framework? How does it help us to better understand service organisation types?
Q2) Which of the following costs is the most likely to be traced to a customer in a service costing environment?
A) Rent costs
B) Labour costs
C) Administrative costs
D) Equipment depreciation costs
Q3) Which of the following would probably not be a cost driver in a service environment?
A) Machine hours
B) Units produced
C) Floor space
D) Inspection hours
Q4) A professional service firm is characterised by:
A) low contact time.
B) medium contact time.
C) high contact time.
D) low customisation.
Q5) How might retail organisations utilise service costing principles?
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Chapter 7: Departmental Overhead Costing
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Q1) Assuming that Sharon Manufacturing Company uses the direct method of allocating service costs,the amount of service department 2 costs allocated to producing 2 would be:
A) $4000
B) $4364
C) $4800
D) $5600
Q2) All of the following statements about service department costs are true except:
A) Service department costs include the costs of providing services to other departments within an organisation.
B) Service department costs are only allocated to producing departments.
C) Service department costs should be allocated using an allocation base or cost driver related to the costs incurred.
D) Service department costs do not include the costs of providing services to external customers.
Q3) What are indirect departmental overhead costs? Please give two examples in your explanation.
Q4) What are direct departmental overhead costs? Please give two examples in your explanation.
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Chapter 8: Activity-Based Costing
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Sample Questions
Q1) Troxler Inc.produces various types of floor rugs with many different designs.They typically produce at least 200 rugs with a single machine setup.A cost incurred each time a machine is set up is called a(n):
A) product-level cost.
B) batch-level cost.
C) unit-level cost.
D) facility-level cost.
Q2) How much overhead should be applied to the above customer order?
A) $4050
B) $ 285
C) $3360
D) $ 975
Q3) As companies experience a shift from labour-intensive operations to machine-automated operations,which of the following costs becomes more difficult to trace to products?
A) Administrative costs
B) Direct labour costs
C) Direct material costs
D) Overhead costs
Q4) What are the benefits and limitations of activity-based costing (ABC)systems?
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Chapter 9: Cost-Volume-Profit Analysis
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Sample Questions
Q1) Last year,Brown Manufacturing had a contribution margin ratio of 40%.This year,fixed expenses are expected to remain at $50 000 and sales are expected to increase by $90 000.What should the contribution margin ratio be this year if the company wishes to increase net income by $31 500?
A) 78.75%
B) 40.00%
C) 35.00%
D) 55.56%
Q2) How many units need to be sold in order to earn a target profit of $249 000?
A) 8143
B) 14 200
C) 16 600
D) 19 000
Q3) When and why should income taxes be considered in profit planning? What is the impact on target profit when income taxes are taken into account?
Q4) What does operating leverage reveal about a company?
Q5) How is contribution margin ratio computed?
Q6) What is meant by the term 'break-even point' and how is it computed in a single versus a multiproduct environment?
Page 11
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Chapter 10: Relevant Costs and Product Planning Decisions
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Sample Questions
Q1) List at least two factors that should be considered in a make or buy decision.
Q2) What is the maximum amount that net income could increase each month with further processing?
A) $14 400
B) $ 1850
C) $ 4100
D) $ 6350
Q3) Which of the following would not be a factor in the consideration of whether or not a special order should be accepted?
A) Excess capacity
B) Variable costs
C) Sunk costs
D) Qualitative factors
Q4) Which of the following is most likely to represent a bottleneck?
A) A production machine that is underutilised
B) A workstation that requires significant supervision
C) A production machine that has limited capacity
D) An employee who has one hour of idle time each day
Q5) When are fixed costs relevant in a make or buy decision? Give one example of a relevant fixed cost.
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Chapter 11: Long-Term Capital Investmentdecisions
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Sample Questions
Q1) Vinson Manufacturing requires all capital investment projects to have a payback period of 5 years or less.Vinson is currently considering an equipment purchase that has an initial cost of $90 000.The equipment is expected to have a 10-year life and a salvage value of $5000.Assuming cash flows are equal,what does the annual cash flow generated by the equipment need to be in order to meet the payback period requirements?
A) $18 000
B) $19 000
C) $17 000
D) $ 9000
Q2) Mayberry Textiles Inc.is considering the purchase of a new machine which has an initial cost of $400 000.Annual operating cash inflows are expected to be $100 000 each year for eight years.No salvage value is expected at the end of the asset's life.Mayberry's cost of capital is 14 per cent.
Required: Compute the net present value of the machine.(Ignore income taxes)
Q3) Answer the following questions with respect to the payback method:
A. What is the payback method used to determine?
B. List one advantage and one disadvantage of this method.
Q4) What is the difference between a screening decision and a preference decision?
Page 13
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Chapter 12: Fixed and Rolling Budgets for Planning and Decision Making
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Q1) The alignment of the personal goals of an organisation's managers with the goals of the overall organisation is called:
A) a bottleneck.
B) benchmarks.
C) goal congruence.
D) static budgeting.
Q2) For a manufacturing company,which two budgets should be prepared before the direct materials purchases budget is prepared?
Q3) On a production budget,what is the basic formula for computing the required production for a certain period of time?
Q4) In order to prepare a sales budget,a _______________ is required.
A) production budget
B) sales forecast
C) static budget
D) flexible budget
Q5) Managers use budgets for three types of activities.Describe and give a brief example of each of these three activities.
Page 14
Q6) There are many advantages of budgeting.List four of these advantages.
Q7) What is the difference between a static budget and a flexible budget?
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Chapter 13: Management Accounting for Cost Control and Performance Evaluation Flexible
Budgets and Variance Analysis
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Q1) The company's direct labour rate variance for the current year was:
A) $ 200 F
B) $ 200 U
C) $3200 F
D) $3200 U
Q2) What is the difference between a static and a flexible budget? Which one is most often used in variance analysis and why?
Q3) The flexible budget variance:
A) directs management's attention to specific reasons for why budgeted income differed from actual income.
B) compares the static budget to the flexible budget.
C) removes any differences between budgeted operating income and actual income that are attributable to differences in budgeted and actual volume.
D) is most often used to determine whether or not there is sufficient demand for a company's product.
Q4) What is 'management by exception'? Do you think it represents an efficient use of management time? Why or why not?
Q5) What is 'task analysis' and how is it used in the context of variance analysis?
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Chapter 14: Decentralisation and Modern Performance
Management Systems the Balanced Scorecard
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Sample Questions
Q1) When defining net operating income for return on investment (ROI)purposes,which of the following items should not be included?
A) Sales revenue
B) Cost of goods sold
C) Interest expense
D) Salaries expense
Q2) Duncan Ltd.has the following information available for one of its divisions in the current year:
\(\begin{array}{lr}
\text { Sales revenue } & \$ 6000000 \\
\text { Operating expenses } & 3800000 \\
\text { Average operating assets } & 2000000 \end{array}\)
Duncan requires each of its divisions to generate a minimum return of 25 per cent.What is this division's residual income?
A) $ 200 000
B) $1 450 000
C) $1 700 000
D) $5 500 000
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Chapter 15: Accounting for Sustainability Social
Reporting,environmental Reporting and Management
Accounting
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Q1) What are prevention environmental costs? Please explain with an example.
Q2) Sustainability is referred to as being:
A) organisations that can last longer than others.
B) the pursuit of endeavours which prolongs the use of resources.
C) any activity that is of a higher than average standard.
D) the pursuit of green policies at all cost.
Q3) If BHP Billiton is concerned about the cost of fines for excessive GHG emissions,what type of environmental cost are they concerned with?
A) Prevention costs
B) Appraisal costs
C) Internal failure costs
D) External failure costs
Q4) Which of the following decisions most involves the consideration of environmental sustainability practices,from an accounting perspective?
A) Spending on a product to increase its quality for customers
B) Spending on social projects around the building of communities surrounding mining operations
Page 17
C) Spending to increase efficiency of machine output
D) Spending on technologies to reduce the impact of machine use on plant life
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