Managerial Accounting Study Guide Questions
Course Introduction
Managerial Accounting focuses on the interpretation and use of accounting information to aid managerial decision-making, planning, and control within organizations. This course covers cost behavior, budgeting, performance evaluation, and various analytical methods that managers use to assess business operations, drive efficiency, and achieve strategic objectives. Emphasis is placed on internal reporting, cost analysis, and the application of accounting data for operational and strategic planning, rather than external financial reporting requirements.
Recommended Textbook
Cost Accounting 15th Edition by Charles
T. Horngren
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2
Chapter 1: The Manager and Management Accounting
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Sample Questions
Q1) Management accountants should have little or no role in deciding on a company's strategy.
A)True
B)False
Answer: False
Q2) The Standards of Ethical Conduct for management accountants include concepts related to ________.
A) competence, performance, diligence, and reporting
B) competence, confidentiality, integrity, and credibility
C) experience, diligence, reporting, and objectivity
D) diligence, objectivity, conflicts of interest, and credibility
Answer: B
Q3) ________ includes providing financial information for reports to managers and shareholders,and overseeing the overall operations of the accounting system.
A) Risk management
B) Treasury management
C) Controllership
D) Strategic planning
Answer: C
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Page 3
Chapter 2: An Introduction to Cost Terms and Purposes
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Sample Questions
Q1) Period costs ________.
A) include only fixed costs
B) seldom influence financial success or failure
C) include the cost of selling, delivering, and after-sales support for customers
D) should be treated as an indirect cost rather than as a direct manufacturing cost
Answer: C
Q2) On the assembly floor,Crystal is paid $20 an hour for straight-time assuming 8 working hours a day and five working days in a week.She is paid $30 an hour for overtime.One week she worked 52 hours.
Required:
a.What is Crystal's total compensation for the week?
b.What amount of compensation would be reported as direct manufacturing labor?
c.What amount of compensation would be reported as manufacturing overhead?
Answer: a.Total compensation = Direct labor (40 hours × $20)+ Overtime premium (12 hrs × $30)= $1,160
b.Direct manufacturing labor (52 hours × $20)= $1,040
c.Manufacturing overhead costs = Overtime premium (12 hrs × $10)= $120
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Chapter 3: Cost-Volume-Profit Analysis
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Sample Questions
Q1) What is the budgeted operating income for the month assuming that Alex sells 175 tables?
A) $45,250
B) $37,000
C) $36,250
D) $36,750
Answer: C
Q2) If a company increases fixed costs,then the breakeven point will be lower.
A)True
B)False Answer: False
Q3) If variable costs per unit increase,then the breakeven point will decrease.
A)True
B)False
Answer: False
Q4) If a company's breakeven revenue is $1,000 and its budgeted revenue is $1,250,then its margin of safety percentage is 20%.
A)True
B)False Answer: True
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Chapter 4: Job Costing
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Sample
Questions
Q1) Schulz Corporation applies overhead based upon machine-hours.Budgeted factory overhead was $266,400 and budgeted machine-hours were 18,500.Actual factory overhead was $287,920 and actual machine-hours were 19,050.Before disposition of under/overapplied overhead,the cost of goods sold was $560,000 and ending inventories were as follows:
\[\begin{array} { l r }
\text { Direct materials } & \$ 60,000 \\
\text { WIP } & 190,000 \\
\text { Finished goods } & 250,000 \\
\text { Total } & \$ 500,000 \\
\hline
\end{array}\] Required:
a.Determine the budgeted factory overhead rate per machine-hour.
b.Compute the over/underapplied overhead.
c.Prepare the journal entry to dispose of the variance using the write-off to cost of goods sold approach.
d.Prepare the journal entry to dispose of the variance using the proration approach.
Q2) What are the direct costs of a job and in which source documents are they recorded?
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Page 6
Chapter 5: Activity-Based Costing and Activity-Based Management
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Sample Questions
Q1) If the facility lease expense of $384,000 is allocated on the basis of vehicles in the fleet,the amount allocated to the Truck Rental Department would be ________.
A) $125,000
B) $127,000
C) $129,000
D) $123,000
Q2) ABC and traditional systems are quite similar in ________.
A) the treatment of direct costs
B) the allocation of overheads
C) evaluating performance
D) the identification of cost pools
Q3) When refining a costing system,a company should classify as many costs as possible as indirect costs,thereby minimizing the extent to which costs have to be traced rather than allocated.
A)True
B)False
Q4) What are the four parts of the cost hierarchy.Briefly explain each part,and contrast this cost hierarchy to the fixed-variable dichotomy?
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Chapter 6: Master Budget and Responsibility Accounting
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Sample Questions
Q1) What is budgeted cost of goods sold for 2016?
A) $89,250
B) $98,250
C) $15,750
D) $257,040
Q2) Bob and Dale have just purchased a small honey manufacturing company that was having financial difficulties.After a brief operating period,they decided that the company's main problem was an improper budgeting function.The company made a good product and market potential was great.
Required:
Describe the usual budgeting cycle that well-managed companies adopt?
Q3) A controllable cost is any cost that can be ________ by a responsibility center manager for a period of time.
A) controlled
B) influenced
C) segregated
D) excluded
Q4) Describe the concept of kaizen budgeting.
Q5) Describe some of the drawbacks of using the operating budget as a control device.
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Chapter 7: Flexible Budgets, direct-Cost Variances, and Management Control
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Sample Questions
Q1) What amounts are reported for revenues in the flexible-budget (A)and the static-budget (B),respectively?
A) $164,320; $178,990
B) $180,750; $186,910
C) $185,150; $177,920
D) $178,990; $186,910
Q2) What is the static-budget variance of variable costs?
A) $12,000 favorable
B) $12,000 unfavorable
C) $15,000 favorable
D) $15,000 unfavorable
Q3) The flexible budget will report ________ for variable costs.
A) $245,760
B) $360,000
C) $288,000
D) $384,000
Q4) Variances are used for evaluating performance and for motivating managers.
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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Sample Questions
Q1) What is the actual variable overhead cost?
A) $121,500
B) $151,875
C) $165,000
D) $168,750
Q2) Prorated allocation of production-volume variance has the effect of approximating the allocation of fixed costs based on actual costs and actual output.
A)True
B)False
Q3) Fixed costs for the period are by definition a lump sum of costs that remain unchanged and therefore the fixed overhead spending variance is always zero.
A)True
B)False
Q4) Explain why there is no production-volume variance for variable manufacturing overhead costs.
Q5) Explain how service-sector companies can benefit from variance analysis.
Q6) List the four steps to develop budgeted variable overhead cost-allocation.
Q7) What is a standard costing system?
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Chapter 9: Inventory Costing and Capacity Analysis
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Sample Questions
Q1) ________ is based on the level of capacity utilization that satisfies average customer demand over periods generally longer than one year.
A) Practical capacity
B) Theoretical capacity
C) Master-budget capacity utilization
D) Normal capacity utilization
Q2) ________ is a method of inventory costing in which only variable manufacturing costs are included as inventoriable costs.
A) Fixed costing
B) Variable costing
C) Absorption costing
D) Mixed costing
Q3) Switching production to products that absorb the highest amount of fixed manufacturing costs is also called ________.
A) cost reduction
B) cherry picking
C) producing for sales
D) throughput costing
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) The conference method and the account analysis method use subjective assessments to choose a cost driver and to estimate the fixed and variable components of the cost function.
A)True
B)False
Q2) How many separate cost pools should be formed given the following information?
\(\begin{array}{ll} \text { Cost}& \text { Cost driver}\\
\text { Postage costs } & \text { \# of brochures mailed } \\ \text { Printing and paper costs } & \text { \# of brochures mailed } \\
\text { Quality control costs } & \text { \# of inspections } \\
\text { Customer service costs } & \text { \# of customers served } \end{array}\)
A) 1 cost pool
B) 2 cost pools
C) 3 cost pools
D) 4 cost pools
Q3) To implement ABC systems,managers must identify a cost driver for each activity.
A)True
B)False
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Page 12
Chapter 11: Decision Making and Relevant Information
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Sample Questions
Q1) The difference between keeping the old machine and replacing the old machine is
A) $518,000 in favor of keeping the old machine
B) $168,000 in favor of keeping the old machine
C) $518,000 in favor of replacing the old machine
D) $168,000 in favor of replacing the old machine
Q2) Should Rubium make or buy the subassemblies? What is the difference between the two alternatives?
A) Buy; savings = $85,000
B) Buy; savings = $50,000
C) Make; savings = $25,000
D) Make; savings = $120,000
Q3) Which of the following is an example of outsourcing?
A) a smartphone manufacturing company factoring its receivables as a source of capital
B) a large conglomerate company selling a business wing to its competitor
C) an automobile company merging with a manufacturing firm to create economic synergies
D) a petrochemical company assigning a vendor to make software for its supply chain management
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Chapter 12: Strategy, balanced Scorecard, and Strategic
Profitability Analysis
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Sample Questions
Q1) The partial productivity of overhead resources can be measured by considering the cost driver as ________.
A) budgeted input
B) the denominator
C) the fixed input
D) the numerator
Q2) Fairytale Weddings manufactures wedding dresses.The following information relates to the manufacture of gowns in its Perth plant: \(\begin{array}{lrr}&20X1&20X2\\
\text { Units produced and sold } & 43,000 & 52,600 \\
\text { Direct manufacture labor-hours } & 22,000 & 26,000 \\
\text { Direct materials used (square yards) } & 130,000 & 152,000 \\
\text { Direct manufacture cost per hour } & \$ 16 & \$ 17 \\
\text { Direct materials cost per yard } & \$ 10 & \$ 11
\end{array}\) Required:
Prepare an analysis of change in annual costs from 20X1 to 20X2 including direct materials,direct manufacturing labor,and total inputs.
Q3) What are the four key perspectives in the balanced scorecard?
Q4) Define engineered and discretionary costs and give two examples of each.
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Chapter 13: Pricing Decisions and Cost Management
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Sample Questions
Q1) Too high a price may ________.
A) deter a customer from purchasing a product
B) increase demand for the product
C) indicate supply is too plentiful
D) decrease a competitor's market share
Q2) In cost-plus pricing,the markup is a rigid number that determines the actual selling price.
A)True
B)False
Q3) The markup percentage for setting prices as a percentage of variable manufacturing costs is ________.
A) 51.40%
B) 87.04%
C) 65.30%
D) 21.30%
Q4) Which of the following is regarded as a purpose of cost allocation?
A) It helps in identifying the potential customers for a product.
B) It provides the profit margin earned.
C) It helps in maintaining decorum among managers.
D) It provides information for economic decisions.
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Chapter 14: Cost Allocation, customer-Profitability Analysis, and Sales-Variance Analysis
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Sample Questions
Q1) The sales-mix variance will be favorable when ________.
A) the actual contribution margin is greater than the static-budget contribution margin
B) actual unit sales are more than budgeted unit sales
C) the actual sales mix shifts toward the less profitable units
D) the budgeted contribution margin for actual sales mix is greater than for the budgeted mix
Q2) Advances in information-gathering technology make it more likely that multiple cost-pool systems will pass the cost-benefit test.
A)True
B)False
Q3) More insight into the static-budget variance can be gained by subdividing it into
A) the sales-mix variance and the sales-quantity variance
B) the market-share variance and the market-size variance
C) the flexible-budget variance and the sales-volume variance
D) the flexible-budget variance and the sales-mix variance
Q4) Explain the importance of customer-profitability analysis.
Q5) What are the two components of the sales-volume variance?
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Chapter 15: Allocation of Support-Department Costs, common
Costs, and Revenues
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Sample Questions
Q1) Which of the following is an advantage of the single-rate method?
A) It is less costly to implement.
B) It classifies costs as fixed and variable costs.
C) It gives signals regarding how variable and fixed costs behave differently.
D) It helps the managers on short-run and long-run planning due to fixed cost allocation as per budgeted usage.
Q2) Explain three approaches to determining weights for the the stand-alone revenue-allocation.Which method do managers prefer?
Q3) If the stand-alone method were used,what amount of cost would be allocated to the start-up business?
A) $70,000
B) $66,000
C) $60,000
D) $74,000
Q4) The stand-alone cost allocation method ranks the individual users of a cost object in order of users most responsible for a common cost and then uses these rankings to allocate the costs among the users.
A)True
B)False
Page 17
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Chapter 16: Cost Allocation: Joint Products and Byproducts
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Sample Questions
Q1) The drawback of the constant gross-margin percentage NRV method in joint costing is that ________.
A) it recognizes that profits are derived from the costs incurred after splitoff
B) it assumes the profit margin to be identical across all products
C) it attempts to approximate the sales values at splitoff by subtracting from final selling prices the separable costs incurred after the splitoff point
D) it ignores the separable costs of further processing
Q2) Which of the following statements is true in regard to the cause-and-effect relationship between allocated joint costs and individual products?
A) A high individual product value results in a high level of joint costs.
B) A low individual product value results in a low level of joint costs.
C) A high individual product value results in a low level of joint costs.
D) There is no cause-and-effect relationship.
Q3) In joint costing,the constant gross-margin percentage NRV method is an example of allocating costs using physical measures.
A)True
B)False
Q4) What are joint costs,separable costs,and a splitoff point?
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Chapter 17: Process Costing
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Sample Questions
Q1) What is the cost of tungsten carbide that will be assigned to vases finished and transferred to the finishing department for the month of July?
A) $30,000
B) $28,000
C) $26,000
D) $24,000
Q2) On occasion,the FIFO and the weighted-average methods of process costing will result in the same dollar amount of costs being transferred to the next department.Which of the following scenarios would have that result?
A) when the beginning and ending inventories are equal in terms of unit numbers
B) when the beginning and ending inventories are equal in terms of the percentage of completion for both direct materials, and conversion costs
C) when there is no ending inventory
D) when there is no beginning inventory
Q3) The cost of units completed can differ materially between the weighted average and the FIFO methods of process costing.
A)True
B)False
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Chapter 18: Spoilage, rework, and Scrap
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Sample Questions
Q1) What are the normal and abnormal spoilage units,respectively,for March when using FIFO?
A) 3,200 units; 800 units
B) 1,950 units; 1,390 units
C) 3,690 units; 1,850 units
D) 1,420 units; 2,000 units
Q2) Robolane Incorporated manufactures and distributes small robotic toys.Because most of its orders are via telephone or fax,numerous orders have to be reworked.The average cost of the reworked orders is $12.45: $5 for labor,$5.15 for more materials,and $2.30 for overhead.This ratio of costs holds for the average original order.On a recent day,the shop reworked 80 orders out of 800.The original cost of the 80 orders totaled $2,000.The average cost of all orders is $26.245,including rework,with an average selling price of $35.
Required:
Prepare the necessary journal entry to record the rework for the day if the shop charges such activities to Robo Department Overhead Control.Prepare journal entries to record all relevant rework charges as well as to transfer the reworked items finished goods to Finished Goods Inventory.
Q3) Distinguish among spoilage,reworked units,and scrap.Give an example of each.
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Page 20
Chapter 19: Balanced Scorecard: Quality and Time
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Sample Questions
Q1) How much do external failure costs change if all the changes are as the new prevention procedures anticipated? Assume all units produced are sold and there are no ending inventories.
A) $126,000 decrease
B) $150,000 decrease
C) $100,000 decrease
D) $122,400 decrease
Q2) Process engineering is an example of ________.
A) prevention costs
B) appraisal costs
C) internal failure costs
D) external failure costs
Q3) Wilson's Language School manufactures CDs and DVDs to teach English as a Second Language.Wilson has just prepared a Cost of Quality Report,and the staff has noticed a decline in prevention costs as a percentage of total sales over a three-year period.What changes might Wilson expect to see in appraisal costs as a percentage of sales,internal failure costs as a percentage of sales,and external failure costs as a percentage of sales given this trend?
Q4) What are control charts and how can inferences be drawn from them?
Q5) What are ISO 9000 and ISO 14000?
Page 21
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Chapter 20: Inventory Management, just-In-Time, and Simplified Costing Methods
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Sample Questions
Q1) What are the annual relevant ordering costs?
A) $9,057
B) $7,157
C) $8,266
D) $7,121
Q2) Miniature Company sells stuffed tigers.Birtal Inc.manufactures many different stuffed animals.Miniature orders 20,800 tigers per year,400 per week,at $15 per tiger.The manufacturer covers all shipping costs.Miniature earns 15% on its cash investments.The purchase-order lead time is 3 weeks.Miniature sells 310 tigers per week.The following data are available (based on management's estimates): \(\begin{array}{cr}\text { Estimated ordering costs per purchase order }&\$22\\
\text { Estimated insurance, materials handling, breakage, }\\ \text { and so on, per year } & \$ 7 \\
\text { Actual ordering costs per order } & \$ 25
\end{array}\) What is the economic order quantity using the estimated amounts?
A) 637.7 stuffed tigers
B) 314.5 stuffed tigers
C) 191 stuffed tigers
D) 325 stuffed tigers
Q3) Lean accounting is much simpler than traditional product costing.Why?
Page 22
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Chapter 21: Capital Budgeting and Cost Analysis
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Sample Questions
Q1) Capital budgeting is the process of making long-run planning decisions for investments in projects.
A)True
B)False
Q2) A capital budgeting project is accepted if the required rate of return equals or exceeds the internal rate of return.
A)True
B)False
Q3) Which of the following methods of capital budgeting divides the average annual accrual accounting income of a project by a measure of the investment in it?
A) net present value
B) internal rate of return
C) payback method
D) accrual accounting rate of return
Q4) The final activity in the capital budgeting process is to obtain funding and make the investments identified in the make decisions by choosing among alternatives stage of the process.
A)True B)False
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Chapter 22: Management Control Systems, transfer Pricing, and
Multinational Considerations
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Sample Questions
Q1) The tariffs and customs duties governments levy on imports of products into a country also affect the transfer pricing practices of multinationals.
A)True
B)False
Q2) What is Division A's operating income per burger,assuming the transfer price of the ground veal is set at $2.00 per burger?
A) $0.75
B) $1.50
C) $2.25
D) $3.00
Q3) The seller of Product A has no idle capacity and can sell all it can produce at $50 per unit.Outlay cost is $12.What is the opportunity cost,assuming the seller sells internally?
A) $12
B) $38
C) $50
D) $62
Q4) Why is decentralization costly?
Q5) What is goal congruence?
24
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Chapter 23: Performance Measurement, compensation,
and Multinational Considerations
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Sample Questions
Q1) Craylon Corp.is planning the 2015 operating budget.Average operating assets of $1,800,000 will be used during the year and unit selling prices are expected to average $100 each.Variable costs of the division are budgeted at $500,000,while fixed costs are set at $300,000.The company's required rate of return is 18%.
Required:
a.Compute the sales volume necessary to achieve a 20% ROI.
b.The division manager receives a bonus of 50% of residual income.What is his anticipated bonus for 2015,assuming he achieves the 20% ROI from part (a)?
Q2) ROI,RI,or EVA measures are more appropriate than ROS to measure the performance of a company.Why?
Q3) Customer-satisfaction measures are an example of the ________.
A) goal-congruence approach
B) balanced scorecard approach
C) financial report scorecard approach
D) investment success approach
Q4) What targets should companies use,and when should they give feedback to managers regarding their performance relative to the targets?
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