Managerial Accounting Test Questions
Course Introduction
Managerial Accounting focuses on the use of accounting information by managers within organizations to inform business decisions, plan and control operations, and evaluate performance. The course covers key concepts such as cost behavior, budgeting, variance analysis, performance measurement, and strategic decision-making. Emphasis is placed on both quantitative and qualitative techniques for analyzing internal financial data, as well as understanding the ethical implications of managerial practices. Students will develop skills to interpret financial reports, implement cost management strategies, and use accounting information to support long-term organizational goals.
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Cost Management Measuring Monitoring and Motivating Performance 2nd Canadian Edition by
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Chapter 1: The Role of Ethical Accounting Information in Management Decision Making
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Sample Questions
Q1) Accounting information is the only thing managers need to make financial decisions.
A)True
B)False Answer: False
Q2) Rewards for ethical behavior can include:
I. Integrity
II. Reputation
III. Higher profits
A)I, II, and III
B)I and III only
C)I and II only
D)II only
Answer: A
Q3) A vision statement helps employees understand how to deal with various stakeholder groups.
A)True
B)False
Answer: True
Page 3
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Chapter 2: Cost Concepts, Behaviour, and Estimation
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Q1) The first step in estimating a cost function for relevant costs is to select a cost estimation technique.
A)True
B)False
Answer: False
Q2) A cost function estimated using regression analysis is more accurate than a cost function estimated. Using either the high-low method or the two-point method, explain the differences among the three methods. As you discuss these differences, explain why regression analysis provides higher quality information.
Answer: Regression analysis is a mathematical technique that incorporates all of the observations of cost and cost driver. The high low and two-point methods use only two data points for cost with their corresponding data points for volume. Because regression incorporates many more data points, the trend line developed is likely to be a more accurate representation of cost. In addition, regression output allows one to evaluate the goodness of fit for different cost drivers, and that information is lacking with the other two methods. The high-low method is a special case of the two-point method and uses only the highest and lowest points, which may not be representative of ordinary operations, so it is the least accurate of the three methods.
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Chapter 3: Cost-Volume-Profit Analysis
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Sample Questions
Q1) Melissa Manager expects next year's degree of operating leverage to increase. Which of the following statements is consistent with Melissa's expectations?
A)Next year's activity level is budgeted to be lower than this year's
B)Next year's total fixed costs are expected to be lower than this year's
C)Next year's selling price is expected to increase
D)Next year's variable costs per unit are expected to decrease
Answer: A
Q2) RSE Corporation sells its product for $10 per unit. Its variable cost is $3 per unit and total fixed costs are $700. Calculate the following:
a)Breakeven sales in units
b)Margin of safety in units if RSE sells 150 units
c)Margin of safety in revenues if RSE sells 200 units
d)Estimated income or loss if RSE sells 75 units
Answer: a)Breakeven sales = $700 / ($10 - $3)= 100 units
b)Margin of safety = 150 - 100 = 50 units
c)Breakeven revenue = $10 x 100 units = $1,000
Margin of safety = (200 x $10)- $1,000 = $1,000
d)Estimated loss at 75 units = 75x$3 - $700 = $(475)
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Chapter 4: Relevant Information for Decision Making
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Q1) When an organization faces multiple constraints for multiple products, what kind of quantitative analysis needs to be performed?
A)Use the same technique as for a special order
B)No quantitative analysis, because there is no way to use constrained resources optimally
C)A linear programming analysis that optimizes the contribution margin per constrained resource
D)Rank products on contribution margin and pick the product with the highest one
Q2) If financial statement data are used to evaluate a decision to discontinue a business:
A)Average costs are often mistakenly included as relevant information
B)Average costs are often correctly included as relevant information
C)Qualitative factors are irrelevant
D)Financial statement data is useless in this decision-making context
Q3) Emphasizing products with higher contribution margins assumes that fixed costs are unaffected by product mix.
A)True
B)False
Q4) Describe the costs that are usually relevant to a make or buy decision.
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Chapter 5: Job Costing
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Q1) In a job costing system, costs flow out of work-in-process into finished goods inventory.
A)True
B)False
Q2) Units of product that are unacceptable and are either discarded or sold at a reduced price are called:
A)Scrap
B)Rework
C)Spoilage
D)Work in process
Q3) In a normal costing system, an immaterial amount of overapplied overhead is allocated 100% to:
A)Work in process
B)Finished goods
C)Retained earnings
D)Cost of goods sold
Q4) Can overhead be over- or underapplied in an actual job costing system? Explain.
Q5) The first step in overhead allocation is to identify the cost object.
A)True
B)False
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Chapter 6: Process Costing
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Sample Questions
Q1) All spoilage in a process costing system is considered abnormal spoilage.
A)True
B)False
Q2) When an organization uses a long-term procurement contract, direct labour costs are normally stable over long periods of time.
A)True
B)False
Q3) Abnormal spoilage is:
A)The units that exceed the predetermined normal spoilage
B)A cost of production allocated to the units surviving inspection
C)Uncontrollable spoilage
D)Spoilage attributable to efficient operations
Q4) In FIFO costing, the costs of units in beginning work in process are merged with current period costs to calculate the cost per equivalent unit.
A)True
B)False
Q5) Explain how normal spoilage costs are treated when goods are transferred to another department in a process costing system.
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Chapter 7: Activity-Based Costing and Management
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Sample Questions
Q1) In an ABC system, flexible costs:
A)Vary with activity levels
B)Remain fixed regardless of activity levels
C)Should not be included in ABC cost pools
D)Are related to capacity
Q2) The costs of designing and implementing an ABC system include employee time and training.
A)True
B)False
Q3) To provide better decision making information about products, ABC systems can be set up with separate activity pools and cost rates for:
I. Different levels of the ABC cost hierarchy
II. Committed and flexible costs within each cost pool
III. Different customers based on profitability levels
A)I and III only
B)II and III only
C)I and II only
D)I, II, and III
Q4) Explain why ABM might be helpful in determining environmental costs.
Q5) List the four types of quality-related activities and give one example of each.
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Chapter 8: Measuring and Assigning Support Department
Costs
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Sample Questions
Q1) Typical support departments include accounting and human resources.
A)True
B)False
Q2) Following are reasons to allocate support department costs:
I. To motivate managers to provide and use support services efficiently
II. For external reporting such as cost reports for government contracts
III. For economic planning and decision-making
A)I only
B)II only
C)III only
D)I, II, and III
Q3) When one user is viewed as being more responsible for common costs than other users, managers can allocate support department costs more fairly with the:
A)Stand-alone method
B)Reciprocal method
C)Step-down method
D)Incremental cost allocation method
Q4) Single-rate allocations are unlikely to reflect actual resource usage.
A)True
B)False
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Chapter 9: Joint Product and By-Product Costing
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Sample Questions
Q1) Managers should choose a joint cost allocation method to:
A)Justify dropping an unprofitable product
B)Minimize the total joint cost allocated to all products
C)Maximize the organization's overall profitability
D)Avoid giving the mistaken impression that one or more products are sold at a loss
Q2) J-M Company uses a joint process costing $15,000 to produce three main products. The company had no beginning inventory. Its current period operation data follow: Units Sales Value Separable Sales Value After Units
Product Produced at Split-Off Costs Further Processing Sold
S 500 $5,000 $500 $ 7,000 400
T 450 6,000 650 9,000 300
R 300 9,000 700 10,000 250
If J-M uses the sales value at split-off point method and sells products at the split-off point, what is the gross profit for product T?
A)$1,000
B)$(500)
C)$1,500
D)$3,000
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Chapter 10: Static and Flexible Budgets
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Q1) When managers intentionally set budgeted costs too low and budgeted revenues too high, they are creating budgetary slack.
A)True
B)False
Q2) The direct manufacturing labour budget:
I. Is stated in direct labour hours and cost
II. Is only stated in direct labour cost
III. Includes hours and costs of supervisors
A)I only
B)II only
C)III only
D)I and III only
Q3) A flexible budget reflects a range of operations.
A)True
B)False
Q4) The main advantage of using a rolling budget is:
A)The role of information technology in its preparation
B)Its incorporation of more current information than static or flexible budgets
C)The reduced need for lower-level input
D)The ease of calculating variances compared to static or flexible budgets
Page 12
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Chapter 11: Standard Costs and Variance Analysis
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Sample Questions
Q1) Here is information about standard costs for Rusth Manufacturing: Standard Cost per Unit
Direct materials (4 metres @ $6 per metre)$24
Direct labour (? hours @ $? per hour)?
During the current period 3,500 units were produced. Rusth purchased 12,000 metre of material at a cost of $81,000. The direct materials inventory decreased by 1,500 metres during the period. 5,000 hours were used at a cost of $41,250. The direct labour efficiency variance was $2,000 favourable and the combined price and efficiency variances for direct labour were $750 favourable.
a)Determine direct materials price and efficiency variances.
b)Determine the standard cost of direct materials for units produced.
c)Determine the direct labour price variance.
d)Determine the standard price per direct labour hour and the standard number of direct labour hours per unit.
Q2) The total standard cost for a unit of output is the sum of the standard costs for the resources used in production.
A)True
B)False
Q3) Why would favourable variances be investigated?
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Chapter 12: Strategic Investment Decisions
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Sample Questions
Q1) Benjamin Company invested in a 3-year project and expects a 15% rate of return. Annual cash inflows from the project are: year 1 $8,000; year 2 $8,500; and year 3 $9,500. The net present value is $4,000. What was the amount of the original investment? Ignore income taxes.
A)$17,637
B)$15,637
C)$19,637
D)$23,637
Q2) An investment of $60,000 will return $18,000 per year. What is its payback period?
A)2 years
B)3 years
C)3)33 years
D)4 years
Q3) (Appendix 12A)Cash flows for a capital budgeting analysis are often affected by inflation, but not by deflation.
A)True
B)False
Q4) (Appendix 12A)The real discount rate can be decomposed into two pieces. Describe each one.
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Chapter 13: Pricing Decisions
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Q1) If a product has an external market and divisions are treated as profit centres, cost-based transfer prices can often lead to suboptimal decisions.
A)True
B)False
Q2) In Canada, illegal pricing practices include:
I. Dumping
II. Market-based pricing
III. Predatory pricing
A)I and II
B)II and III
C)I and III
D)I, II, and III
Q3) A transfer pricing policy based on market price:
A)Maximizes total organizational profit
B)Is best because the market price is always objective and easily obtainable
C)May result in suboptimal decision-making for the company as a whole
D)Is the only alternative accepted by the Canada Revenue Agency
Q4) Other than cost-based prices, list and discuss three options managers have for setting transfer prices and suggest a setting that might be appropriate for each.
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Chapter 14: Strategic Management of Costs
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Sample Questions
Q1) Which of the following activities is not typically considered to be part of a manufacturing organization's value chain?
A)Making journal entries
B)Handling customer complaints
C)Designing and engineering new products
D)Manufacturing products
Q2) A value chain is the sequence of business processes in which value is added to a product or service.
A)True
B)False
Q3) Which of the following steps occurs last in a target costing design cycle?
A)Determine product target price, quality, and functionality
B)Evaluate feasibility using a pilot project
C)Determine the target cost
D)Make product design choices to achieve the target cost
Q4) Target costing involves not only cost, but also product quality and functionality.
A)True
B)False
Q5) Compare and contrast target costing with kaizen costing.
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Chapter 15: Measuring and Assigning Costs for Income Statements
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Sample Questions
Q1) Philpott's operating income using absorption costing is $100. Its inventories using both absorption and variable costing are as follows: Beginning of Year End of Year
Absorption costing $98 $86
Variable costing $76 $60
Under variable costing, operating income would be:
A)$102
B)$94
C)$100
D)$96
Q2) Variable costing data can often be used for making nonroutine operating decisions.
A)True
B)False
Q3) Distinguish between variable costing and throughput costing.
Q4) When units produced are equal to units sold, operating income under absorption costing will equal operating income under variable costing.
A)True
B)False
Q5) Compare and contrast actual costing and normal costing.
Page 17
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Chapter 16: Performance Evaluation and Compensation
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Sample Questions
Q1) Return on investment cannot be used effectively to evaluate profit centres because it motivates managers to make suboptimal decisions from the viewpoint of the organizations' owners.
A)True
B)False
Q2) THN Corporation reported operating income of $30,000, revenue of $50,000, and average operating assets of $40,000 for a recent year. Which of the following is true?
A)THN has an adequate return on investment
B)THN's return on sales was 1.67
C)THN's return on investment was 75%
D)THN's return on sales was 80%
Q3) The location of decision authority in an organization depends on:
A)The size of the organization
B)Whether specific or general knowledge is most important in successful decision-making
C)Whether the organization is for-profit or not-for-profit
D)Whether the organization uses a lot of technology
Q4) Why might some organizations use both ROI and EVA in their performance measures for bonus-based compensation?
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Chapter 17: Strategic Performance Measurement
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Sample Questions
Q1) Steps in the operations cycle of the value chain include:
A)Identifying customer preferences
B)Designing products and services
C)Building products and services
D)Providing customer service
Q2) Identify one general way in which cost accounting is likely to change in the next ten years. Explain why you believe this change will occur.
Q3) An organization's core competencies are related to its strengths relative to competitors. Those strengths can include:
I. Productivity and skills
II. Reputation and legal rights
III. Mission and core purpose
A)I and II only
B)II and III only
C)I and III only
D)I, II, and III
Q4) List two strengths and two weaknesses of the balanced scorecard approach.
Q5) What are operating plans, and how are they linked to organizational strategies?
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Chapter 18: Sustainability Management
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Sample Questions
Q1) How can companies reduce accusations of greenwashing?
Q2) Why were the GRI core indicators designed?
I. To provide information to stakeholders
II. To improve profitability
III. To encourage improved sustainability
A)I and II only
B)II and III only
C)I and III only
D)I, II, and III
Q3) International Organization for Standardization (ISO)is the world's largest developer of international standards.
A)True
B)False
Q4) Which of the following statements regarding material flow accounting is false?
A)It is also called input-output analysis
B)It is the process of analyzing the movement of all physical materials through an organization's operations
C)It assumes that total inputs exceed total outputs
D)It can be used to demonstrate compliance with laws and regulations
Q5) Differentiate between internal impacts and external impacts.
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