MBA Core Accounting Exam
Answer Key
Course Introduction
MBA Core Accounting is designed to equip students with a foundational understanding of accounting principles, concepts, and practices essential for effective business decision-making. This course covers key topics such as financial statement preparation and analysis, managerial accounting techniques, financial reporting, budgeting, and performance measurement. Emphasizing the role of accounting information in planning, controlling, and evaluating organizational operations, the course also highlights ethical considerations and real-world applications. Through case studies and problem-solving exercises, students gain practical insights into how accounting supports strategic business objectives across various industries.
Recommended Textbook Managerial Accounting 3rd Canadian Edition by Karen
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12 Chapters
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W. Braun
Page 2
Chapter 1: Introduction to Managerial Accounting
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Sample Questions
Q1) IFRS stands for "important financial reporting standards."
A)True
B)False
Answer: False
Q2) Which term listed below describes costs incurred when the company detects poor quality goods or services before delivery to the customer?
A) Internal failure costs
B) Value added activity
C) Lean production
D) External failure costs
Answer: A
Q3) Which of the following management responsibilities are being fulfilled when management uses feedback to take corrective action on the budgets?
A) Directing and planning
B) Planning and decision-making
C) Controlling and decision-making
D) Planning and controlling
Answer: C
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3
Chapter 2: Building Blocks of Managerial Accounting
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Sample Questions
Q1) The schedule of cost of goods manufactured is prepared before the income statement for a manufacturing company.
A)True
B)False
Answer: True
Q2) What is the amount of the manufacturing overhead incurred at Ontario Industries Inc.?
A) $41,000
B) $35,000
C) $23,000
D) $29,000
Answer: D
Q3) A technical support hotline for customers would be considered which part of the value chain?
A) Customer service
B) Design
C) Distribution
D) Marketing
Answer: A
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Page 4
Chapter 3: Cost Behaviour
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Sample Questions
Q1) Cute Wheels Cars produces custom wheels. The company's average cost per wheel is $189.50 when it produces 5,000 wheels per month.
Required:
1. What is the total cost of producing 5,000 wheels?
2. If $500,000 of the total cost is fixed, what is the variable cost of producing each wheel?
3. What is Cute Wheels cost equation?
4. What is the expected total cost of producing 7,000 wheels in a month?
Answer: 1. (5,000 × $189.50) = $947,500
2. $947,500 - $500,000 = $447,500
Total cost = $500,000 + (X × $89.50)
Where X is the number of wheels produced and variable cost per unit is $447,500/5,000 = $89.50
3. y = $89.50(x) + $500,000
4. $500,000 + (7,000 × $89.50) = $1,126,500
Q2) Traditional income statements distinguish fixed operating costs from variable operating costs.
A)True
B)False
Answer: False
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Chapter 4: Cost-Volume-Profit Analysis
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Sample Questions
Q1) Break-even point in units is
A) 2,000 units.
B) 3,000 units.
C) 5,000 units.
D) 7,000 units.
Q2) The break-even point on a CVP graph is the point where the fixed expenses line intersects the total expense costs line.
A)True
B)False
Q3) The break-even sales volume in units for The Snack Hut is
A) 4,875.
B) 6,500.
C) 1,625.
D) 3,333.
Q4) What is the contribution margin for the year at Cornell Corporation?
A) $92,000
B) $282,000
C) $480,000
D) $290,000
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Chapter 5: Job Costing
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Sample Questions
Q1) An estimated manufacturing overhead rate computed before the year begins is a(n)
A) cost allocation.
B) cost driver.
C) actual manufacturing overhead rate.
D) estimated amount of the overhead costs.
Q2) What type of product costing system would a manufacturer of plywood use?
A) Job costing
B) Process costing
C) Either job or process
D) Both job and process
Q3) What is the amount of work in process inventory on September 30 at Portend Company?
A) $27,000
B) $33,500
C) $10,000
D) $3,500
Q4) In a job-costing system, explain why it is necessary to apply indirect costs to production through the use of a budgeted indirect-cost rate.
Q5) Briefly explain the difference between job order and process costing and give examples of each.
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Chapter 6: Process Costing
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Sample Questions
Q1) The "total physical units accounted for" is the sum of the units completed and transferred out during the period plus the units in ending WIP inventory.
A)True
B)False
Q2) At Pizza Company the total costs to account for is
A) $82,702.
B) $55,000.
C) $22,126.
D) $27,702.
Q3) At Alexandria Corporation, what are the equivalent units for conversion costs?
A) 7,000
B) 9,000
C) 2,500
D) 11,500
Q4) The number of equivalent units is usually the same for direct materials and conversion costs.
A)True
B)False
Q5) Compare and contrast process costing and job order costing.
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Chapter 7: Activity Based Costing
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Sample Questions
Q1) Activity-based costing considers ________ to be the fundamental cost object. A) activities
B) direct labour hours
C) direct materials
D) finished goods
Q2) Machine set-up would be considered a batch-level cost.
A)True
B)False
Q3) In ABC it is assumed that it is activities that drive costs, rather than cost objects such as inventory.
A)True
B)False
Q4) At Cooper's Bags the plantwide manufacturing overhead rate would be closest to A) $55.25 per machine hour.
B) $170.00 per machine hour.
C) $222.00 per machine hour.
D) $202.20 per machine hour.
Q5) ABC costing is generally more accurate than traditional cost systems.
A)True
B)False
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Chapter 8: Short-Term Business Decisions
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Sample Questions
Q1) What is the difference between relevant and irrelevant information for making decisions? Provide examples of each.
Q2) Roger Parts Company has offered to sell 8,000 units of Part 92F to Star Appliance for $22.00 per unit. What should Star Appliance do?
A) Make the part and save $4 per unit.
B) Make the part and save $1 per unit.
C) Buy from Roger Parts Company and lose $1 per unit.
D) Make the part and save $3 per unit.
Q3) When using a target costing approach, the company starts with revenue at market price, and then subtracts its desired profit, to yield the target total cost.
A)True
B)False
Q4) Product differentiation allows companies to become more of a price-taker, and less of a price setter.
A)True
B)False
Q5) What the reasons a firm would adopt target costing?
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Page 10
Chapter 9: The Master Budget and Responsibility Accounting
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Sample Questions
Q1) How many mattresses need to be produced in January 2016?
A) 4,400 mattresses
B) 6,500 mattresses
C) 7,100 mattresses
D) 5,600 mattresses
Q2) Coiffure Inc. owns a chain of hair stylist shops. Management expected to serve 25,000 customers at an average fee of $200. Variable expenses were budgeted to be 60% of sales revenue, and the total fixed expense was budgeted to be $150,000. The actual results for the year showed 28,000 customers were served at an average fee of $165. The actual variable expenses percentage was 60% of sales revenue and the total fixed expenses were $180,000. Management has asked you to prepare a performance report for the year.
Q3) What are the total purchases budgeted for April at Peabody Enterprises?
A) $7,680
B) $7,440
C) $9,360
D) $7,920
Q4) The first component of the operating budget is the production budget.
A)True
B)False
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Chapter 10: Flexible Budgets and Standard Costs
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Sample Questions
Q1) Which department listed below would most likely be responsible for a "direct material price variance"?
A) Production department
B) Marketing department
C) Purchasing department
D) Personnel department
Q2) What is the production volume variance at Bolt Industries? (Assume the allocation base for fixed overhead costs is machine hours.)
A) $41,250 unfavourable
B) $41,250 favourable
C) $33,000 unfavourable
D) $33,000 favourable
Q3) Tucker Supply sells a unit of its product for $10.00, resulting in a contribution margin of $8.00 per unit. Fixed costs are budgeted at $52,000 per quarter for volumes up to 15,000 units and $78,000 for volumes exceeding 15,000 units.
Prepare the flexible budget for the next quarter for volume levels of 12,000, 18,000, and 25,000 units.
Q4) Identify five benefits of standard costs.
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Chapter 11: Performance Evaluation and the Balanced Scorecard
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Sample Questions
Q1) What is The Plastic Lumber Company's Outdoor Furniture Division return on investment?
A) 9.52%
B) 20.00%
C) 40.00%
D) 2000.00%
Q2) Performance evaluation systems are a way for management to control the organization.
A)True
B)False
Q3) Which of the following perspectives from the balanced scorecard focuses on determining the company's "climate for action"?
A) Learning and growth perspective
B) Internal business perspective
C) Customer perspective
D) Financial perspective
Q4) Cost centre performance reports typically focus on the flexible budget variance.
A)True
B)False
Q5) Discuss two potential problems associated with decentralization.
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Chapter 12: Capital Investment Decisions and the Time
Value
of Money
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Sample Questions
Q1) Which term below is best described as the "decision model that computes the difference between the present value of the investment's net cash inflows, using a desired rate of return, and the cost of the initial investment"?
A) Accounting rate of return
B) Discount rate
C) Internal rate of return
D) Net present value
Q2) The internal rate of return is used as the discount rate when calculating the net present value of a project.
A)True
B)False
Q3) Assuming an interest rate of 10%, the present value of $40,000 to be received 8 years from now would be closest to
A) $15,440.
B) $16,960.
C) $18,660.
D) $85,760.
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Page 14