MBA Core Accounting Exam Practice Tests
Course Introduction
MBA Core Accounting provides a comprehensive introduction to the fundamental concepts and principles of accounting essential for managerial decision-making. The course covers the preparation and interpretation of financial statements, the use of accounting information in planning and controlling business operations, and an overview of both financial and managerial accounting processes. Students develop an understanding of how accounting systems contribute to the effective allocation of resources within organizations, gain insight into cost behavior and budgeting, and learn to analyze accounting data for strategic business decisions. The course equips aspiring managers with the accounting literacy necessary for communicating with financial professionals and making informed business decisions.
Recommended Textbook
Managerial Accounting 3rd Edition by Charles
E. Davis
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Page 2
Chapter 1: Accounting As a Tool for Management
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Sample Questions
Q1) The IMA Statement of Ethical Professional Practice includes which of the following components?
A)Articles that express members' ethical requirements
B)Standards that guide members' conduct
C)Both articles that express members' ethical requirements and standards that guide members' conduct
D)Neither articles that express members' ethical requirements nor standards that guide members' conduct
Answer: B
Q2) One purpose of controlling activities is to
A)monitor day-to-day operations to ensure that processes are operating as expected.
B)translate long-term strategy into a short-term plan.
C)perform variance analysis and prepare performance reports.
D)translate short-term strategy into a long-term plan.
Answer: A
Q3) Ethical business behavior is compliance with the law.
A)True
B)False
Answer: False
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Page 3
Chapter 2: Cost Behavior and Cost Estimation
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Sample Questions
Q1) Assume you are planning a spring break ski trip to Colorado.You are preparing a budget of your costs.You are staying at a lodge that has a special where the lodge charges you $80 per week for the ski lift regardless of how many times you ride.You believe you will ride the ski lift 40 times during the week.The ski lift charge is an example of a
A)fixed cost.
B)variable cost.
C)mixed cost.
D)step cost.
Answer: B
Q2) Contribution margin is the amount of revenue that remains to cover fixed costs and provide a profit.
A)True
B)False
Answer: False
Q3) The contribution margin is the difference between sales and fixed costs.
A)True
B)False
Answer: True
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Page 4
Chapter 3: Cost-Volume-Profit Analysis and Pricing
Decisions
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Sample Questions
Q1) A company's margin of safety is the difference between current sales and breakeven sales.
A)True
B)False
Answer: True
Q2) Cost-plus pricing implies that the cost of the seller's operational inefficiencies should be borne by the customer.
A)True
B)False
Answer: True
Q3) On the breakeven graph,the point at which the total sales revenue line and the total cost line intersect is called
A)Contribution margin.
B)Breakeven point.
C)Net income.
D)Operating income.
Answer: B
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Page 5
Chapter 4: Product Costs and Job Order Costing
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Sample Questions
Q1) Which of the following would be classified as direct material for a furniture manufacturer?
A)Wood
B)Glue
C)Screws
D)Wood cleaner
Q2) Randy's Garden Supply Manufacturing Company had $105,000 in raw materials inventory at the beginning of the month.During the month Randy used $920,000 and had $120,000 remaining in inventory at the end of the month.How much inventory did Randy purchase during the month?
A)$815,000
B)$905,000
C)$920,000
D)$935,000
Q3) The finished goods inventory account records the costs of all products that have been
A)started but not yet complete.
B)completed.
C)completed and sold.
D)sold.
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Chapter 5: Planning and Forecasting
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Sample Questions
Q1) Which of the following is not a step in preparing the production budget?
A)Add beginning inventory units to required units to determine the budgeted production.
B)Enter budgeted sales units from the sales budget.
C)Calculate budgeted ending inventory units for the period.
D)All of these answer choices are steps in preparing the production budget.
Q2) Custom Design manufactures baby blankets by turning a client's photograph of a new baby into a design printed on the blanket.This is a popular item,selling for $30,for new parents and grandparents.The following information has been provided by various
Q3) A rolling budget always includes 12 months of data and as one month ends,it is removed from the budget and the entire budget rolls forward one month.
A)True
B)False
Q4) Which of the following is not a component of the master budget?
A)Manufacturing overhead budget
B)Horizontal budget
C)Ending inventory and cost of goods sold budget
D)All of these answer choices are components of the master budget.
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Chapter 6: Performance Evaluation: Variance Analysis
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Sample Questions
Q1) R&N Sports has budgeted $57,000 for fixed overhead for the period.This budget was based on the following items: depreciation of $24,000,rent of $4,000,executive salaries of $27,000 and other fixed costs of $2,000.Actual overhead incurred is $52,000.Production was budgeted at 8,000
Q2) Kevin Jarvis is the controller of Bitterroot Industries.Kevin prepared the following budgeted income statement at various levels of sales.After careful review of the budgeted income statements,and after discussions with the sales and production managers,the CEO determines that the best alternative is to base the budget on a sales volume of 30,000
A)$5,600 favorable
B)$5,600 unfavorable
C)$30,400 favorable
D)$34,000 unfavorable
Q3) When a variable overhead spending variance is identified,managers will want to talk with the purchasing manager about the purchase and/or use of variable overhead items.
A)True
B)False
Q4) Luckett Company's standards call for two feet of direct material for each
Q5) Amos,Inc.uses a standard cost system with the following labor standards for one
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Chapter 7: Activity-Based Costing and Activity Based Management
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Sample Questions
Q1) Dawson Company manufactures two products,Regular and Deluxe.Overhead costs consist of machining,$2,500,000; and assembly,$1,250,000.Recent data are provided below: Regular Deluxe
Direct labor hours 10,000 15,000
Machine hours 10,000 30,000
Number of parts 90,000 160,000
Overhead allocated to Deluxe using a single overhead rate based on number of parts and using activity based costing,respectively,are:
A)$2,400,000 and $2,625,000
B)$937,500 and $2,812,500
C)$1,350,000 and $1,125,000
D)$1,075,000 and $2,675,000
Q2) The key to reducing costs through activity management is
A)eliminating high-cost executive positions.
B)eliminating activities such as inspections.
C)eliminating the resources associated with the reduced activities.
D)eliminating high-cost executive positions,activities such as inspections,and the resources associated with the reduced activities.
Q3) What is an activity cost pool and how are activity cost pool rates calculated?
Page 9
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Chapter 8: Using Accounting Information to Make Managerial Decisions
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Sample Questions
Q1) Harmony Forge manufactures saddles for show horses.The company has received a special order for 290 saddles for an international competition.Each of these saddles would include the specialized logo of the competition.Last year Harmony produced 710 saddles,and the company has the capacity to produce 1,000 saddles per year.Harmony's saddles normally sell for $650 each,but the special offer is for $179,800 $620 per saddle.The controller has provided information to management that estimates the variable cost per saddle is $435; fixed manufacturing overhead is $60/saddle.Of the fixed costs assigned to this special order,$15,950 is for the specialized logos,the remainder is attributable to costs that will be incurred regardless of whether the special order is produced.What is the operating income generated by the special order?
A)$53,650
B)$37,700
C)$36,250
D)$20,300
Q2) The segment margin is the contribution margin of a particular segment less any direct fixed costs.
A)True
B)False
Q3) Paris Manufacturing Company Inc.uses 400
Page 10
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Chapter 9: Capital Budgeting
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Sample Questions
Q1) Which of the following is a cash flow that might occur when new equipment is purchased?
A)Cash outflow in the form of cash payments
B)Cash inflow in the form of cost savings
C)Both a cash outflow in the form of cash payments and a cash inflow in the form of cost savings
D)Neither a cash outflow in the form of cash payments nor a cash inflow in the form of cost savings
Q2) The net initial investment is the
A)Net cash outflow in year 0
B)Net cash outflow for all years combined
C)Net cash outflow as computed at the initial discount rate
D)None of these answer choices are correct
Q3) Which of the following uses interest expense in its computations?
A)Net present value
B)Internal rate of return
C)Both net present value and internal rate of return
D)Neither net present value nor internal rate of return
Q4) What are the three factors needed to determine the present value of any future amount?
Page 11
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Chapter 10: Decentralizing and Performance Evaluation
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Sample Questions
Q1) A manager of a profit center cannot
A)Incur cost to operate the center.
B)Set the selling price of the center's product.
C)Commit funds to invest in assets.
D)None of these answer choices are correct.
Q2) The Assembly Division of Mounds Corporation makes a component part that the Packaging Division needs to purchase.The Assembly Division's variable cost of manufacturing the component is $25 per
a.Calculate the cost-based-transfer price that the Assembly division should charge the Packaging division.
b.Calculate the market-based transfer price that the Assembly division should charge the Packaging division.
Q3) The DuPont model for calculating ROI contains which of the following components?
A)Margin
B)Asset turnover
C)Both margin and asset turnover.
D)Neither margin nor asset turnover.
Q4) In a decentralized organization,upper managers need a way to evaluate the performance of
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Chapter 11: Performance Evaluation Revisited: a Balanced Approach
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Q1) The key to using key performance indicators to drive performance is to understand the cause-and-effect relationships they represent.
A)True
B)False
Q2) Another way of evaluating a company's performance is to compare it to other companies.This is called benchmarking.
Required:
Explain benchmarking,including its definition,goal,and the items that benchmarking focuses on.
Q3) A balanced scorecard should include five to seven measures in each of four perspectives: Learning and growth,internal business processes,customer,and financial.
Required:
List five measures that relate to the customer perspective.
Q4) Nonfinancial measures,which are not based on accounting results,can be either qualitative or quantitative.
A)True
B)False
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Chapter 12: Financial Statement Analysis
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Sample Questions
Q1) The inventory turnover measures
A)How many days,on average,it takes between when an order is placed until the inventory is shipped.
B)How many times,on average,a company's inventory is sold during the year.
C)How many times,on average,the company takes to replace inventory during the year.
D)How many days,on average,it takes between when inventory is received to its sale to customers.
Q2) Which of the following is not a leverage ratio?
A)Debt-to-equity ratio
B)Times interest earned ratio
C)Price earnings ratio
D)Debt ratio
Q3) Working capital is the difference between a firm's total assets and total liabilities.
A)True
B)False
Q4) Land is the ultimate liquid asset.
A)True
B)False
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Chapter 13: Statement of Cash Flows
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Q1) When a company purchases and retires its bonds,which of the following is the correct reporting on the statement of cash flows?
A)Gain or loss in operating section,amount of cash paid in investing section
B)Gain or loss in financing section,amount of cash received in operating section
C)Gain or loss in operating section,amount of cash paid in financing section
D)Gain or loss in investing section,amount of cash received in operating section
Q2) During the current year,Maddox Industries sold a delivery truck with a book value of $5,000 for $15,000,declared and paid cash dividends of $6,000 and borrowed $40,000 from First National Bank.Maddox's net cash flows provided by financing activities is
A)$15,000
B)$44,000
C)$34,000
D)$46,000
Q3) Which of the following cash flows results from an operating activity?
A)Purchasing an investment in another company
B)Issuing common stock
C)Receiving dividends on investment in another company
D)Repaying long-term debt
Q4) What is the basic form of the statement of cash flows?
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Chapter 14: Topic Focus: Process Costing
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Q1) Both the process costing and job order costing systems accumulate product costs throughout the production process and assign those costs to individual
A)True
B)False
Q2) The inventories used in a process costing system are the same as those used in a job order costing system.
A)True
B)False
Q3) Companies that mass-produce similar products or employ a continuous production process typically use which of the following costing systems?
A)Job order
B)Process
C)Accumulation
D)Variable
Q4) When using a process costing system,explain the steps you use in assigning costs to
Q5) List three goods or services likely to use a process costing system and three that are likely to use a job order costing system.
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Chapter 15: Topic Focus Variable and Absorption Costing
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Q1) The only difference between variable and absorption costing is the treatment of variable overhead costs.
A)True
B)False
Q2) When production volume exceeds sales volume,net income will be higher when using absorption costing than when using variable costing.
A)True
B)False
Q3) Monroe Corporation produced 20,000
a.Under the absorption costing method,what is the average unit product cost?
b.Under the variable costing method,what is the average unit product cost?
Q4) The costing method in which only variable product costs are accumulated in inventory is called
A)absorption costing.
B)normal costing.
C)direct costing.
D)full costing.
Q5) The following table shows Jackson Company's inventory balances,in
Q6) What managerial behavior does variable costing render ineffective?
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Chapter 16: Topic Focus Standard Costing Systems
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Q1) The easiest approach to close variances accounts is to the Raw Materials Inventory account.
A)True B)False
Q2) When using a standard costing system,the direct materials quantity variance is recorded at the time direct materials are transferred to the production floor.
A)True B)False
Q3) The easiest way to dispose of variances at the end of the period is to A)Ignore the variances as they will cancel out during the following period.
B)Close the variances to raw materials inventory.
C)Close the variances to the appropriate raw materials inventory,work in process inventory,and finished goods inventory accounts.
D)Close the variances to the cost of goods sold account.
Q4) Haven Industries purchased 1,000
Q5) What is the difference between a normal costing system and a standard costing system?
Q6) The following information is available for Haven Industries: Actual production 14,000
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Chapter 17: Topic Focus Customer Profitability
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Q1) As long as the sales revenue a customer generates exceeds the cost of goods sold,the customer is profitable.
A)True
B)False
Q2) Two calculations can be made to measure customer profitability: customer net profit and customer profit margin.
Required:
a.What is the formula for customer net profit?
b.What is the formula for customer profit margin?
Q3) In their book Killer Customers,Larry Selden and Geoffrey Colvin estimate what percentage of a company's customers generates approximately 120% of a company's profits?
A)20%
B)40%
C)60%
D)80%
Q4) Customer profit margin is calculated as customer net profit divided by customer gross profit.
A)True
B)False
19
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