Strategic Management Accounting Exam Preparation Guide
Course Introduction
Strategic Management Accounting focuses on the use of accounting information in the formulation and implementation of business strategy. This course examines how financial and non-financial data can be leveraged to support long-term decision-making, enhance value creation, and maintain competitive advantage. Students will explore topics such as performance measurement, cost analysis, budgeting, and the alignment of management accounting systems with organizational goals. Case studies and real-world applications illustrate how management accountants contribute to strategic planning, foster innovation, and drive organizational success in a dynamic business environment.
Recommended Textbook
Managerial Accounting An Introduction to Concepts Methods and Uses 11th Edition by Michael W.
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Chapter 1: Fundamental Concepts
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Q1) What production methodology strives to eliminate inventory and increase efficiency and quality?
A)Total quality management.
B)Theory of constraints.
C)Benchmarking.
D)Just-in-time.
Answer: D
Q2) All of the following are key developments that have helped reshape the discipline of managerial accounting except:
A)the convergence of U.S.GAAP with IFRS
B)global strategies
C)total quality management
D)integrated information systems
Answer: A
Q3) Costs that donot relate directly to a cost object are its
A)marginal cost.
B)indirect cost.
C)sunk cost.
D)target cost.
Answer: B
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Chapter 2: Measuring Product Costs
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Q1) Which of the following is true regarding waste and spoilage?
A)Accountants typically include the cost of normal waste in the cost of goods manufactured during the period.
B)Accountants typically treat the cost of abnormal waste as an expense during the period.
C)Companies concerned about quality production do not treat waste or spoiled goods as normal and remove all waste and spoilage costs from the product cost.
D)All of the answers are correct.
Answer: D
Q2) Explain how to compute end-of-period inventory book value using equivalent units of production.
Answer: The five steps to compute inventory book value are: (1)summarize the flow of physical units, (2)compute equivalent units, (3)summarize cost to be accounted for, (4)compute unit costs for the current period,and (5)compute the costs of goods completed and transferred out of Work-In-Process Inventory.
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Chapter 3: Activity-Based Management
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Q1) In what way(s)do managers make cost-benefit decisions as to the use of activity analysis or traditional costing methods?
A)They reject activity analysis and stay with the simpler traditional method.
B)They use activity-based costing because they want information that will help them be competitive.
C)They use activity-based costing as a special analysis,but not as an ongoing information system.
D)All of the answers are correct.
Answer: D
Q2) Activity-based costing (ABC)assigns costs first to
A)activities,then to the products based on each product's use of activities.
B)products,then to the activities based on each activity's use of products.
C)services,then to the activities based on each service's use of activities.
D)None of the above answers is correct.
Answer: A
Q3) What are the strategic and operational uses of activity-based management?
Answer: Activity-based management can help a company develop strategy,long-range plans,and subsequent cost advantage by focusing attention on activities.
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Chapter 4: Strategic Management of Costs,quality,and Time
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Q1) Which of the following is a cost incurred to detect individual units of products that do not conform to specifications?
A)internal failure costs.
B)external failure costs.
C)prevention costs
D)appraisal costs.
Q2) When is a company is engaging in total quality management?
A)When the company has instilled a quality culture into the organization.
B)When the company's products are in conformity with quality specifications.
C)When the company's products meet industry standards.
D)When the company can effectively compete for a distinguished quality award.
Q3) Which of the following statements concerning quality is true?
A)Quality can be inspected into a product.
B)Quality should be designed into a product.
C)Quality is continual,once achieved.
D)Quality means meeting management guidelines.
Q4) Managers use several tools to identify quality problems.These tools-control charts,cause and effect analysis,and Pareto charts-provide signals about quality control.Describe each of these tools and discuss how they are used by managers to identify quality problems.
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Chapter 5: Cost Drivers and Cost Behavior
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Q1) Costs that will continue regardless of production level are
A)capacity costs.
B)committed costs.
C)discretionary costs.
D)opportunity costs.
Q2) Which of the following statements best describes costs that increase in steps?
A)curvilinear variable.
B)curvilinear fixed.
C)semi-variable.
D)semi-fixed.
Q3) Which statement is true concerning committed costs?
A)Committed costs continue regardless of production level.
B)Committed costs are the same as discretionary costs.
C)Committed costs are always non-value added.
D)Committed costs are always fixed costs.
Q4) Which of the following statements is correct?
A)Fixed cost per unit increase as activity increases.
B)Fixed cost per unit decrease as activity increases.
C)Fixed cost per unit stay the same as activity increases.
D)Fixed cost per unit first increase,then decrease as activity increases.
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Chapter 6: Financial Modeling for Short-Term Decision Making
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Q1) How does cost-volume-profit analysis allows management to determine the relative profitability of a product?
A)By highlighting potential bottlenecks in the production process.
B)By keeping fixed costs to an absolute minimum.
C)By determining the contribution margin and projected profits at various levels of production.
D)By assigning costs to a product in a manner that maximizes the contribution margin.
Q2) If a company's sales price per unit is $100,variable costs per unit are $60,and fixed costs for the year are $600,000.How many units must the company sell to break even?
A)36,000
B)22,500
C)15,000
D)9,000
Q3) Identify the underlying assumptions of cost-volume-profit analysis.
Q4) Discuss why cost-volume-profit analysis could be useful to managers.
Q5) Explain what is meant by the margin of safety and how it is used by managers.
Q6) Explain the use of financial modeling in a multiple product setting.
Q7) Describe the use of spreadsheets in financial modeling.
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Chapter 7: Differential Cost Analysis for Operating Decisions
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Q1) What does the differential approach to pricing presume?
A)The price must be less than the differential cost of producing and selling the product.
B)The price must at least equal the differential cost of producing and selling the product.
C)The price must equal the market price.
D)The price must equal full costs plus a profit margin.
Q2) On which of the following factors should the decision to drop a product line should be based?
A)the fact that the product line shows a net loss over several periods.
B)the ability of the firm to eliminate some fixed costs as a result of dropping the product.
C)whether the fixed costs that can be avoided by dropping the product line are less than the contribution margin that will be lost.
D)whether the fixed costs that can be avoided by dropping the product line are greater than the contribution margin lost.
Q3) How is differential analysis used to determine when to add or drop parts of an operation?
Q4) What is the difference between short-run and long-run pricing decisions?
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Chapter 8: Capital Expenditure Decisions
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Q1) In making long-term decisions about investing and financing,a firm should do which of the following?
A)decide whether to make the investment,then decide how to raise the funds required for the investment.
B)decide how to raise the funds required for the investment,then decide whether to make the investment.
C)decide how to raise the funds required for the investment at the same time as deciding whether to make the investment.
D)None of the above.
Q2) Which of the following is a likely errors in the calculation of net present value?
A)the amount of cash flows
B)the timing of cash flows
C)the discount rate.
D)all of the above
Q3) Explain why analysts will need more than cash flow analysis to justify or reject an investment.
Q4) How does depreciation affect investment decisions?
Q5) What behavioral issues are involved in capital budgeting?
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Chapter 9: Profit Planning and Budgeting
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Q1) What is the cultural impact on budgeting?
A)Lower-level managers in Germany,the United Kingdom,the United States,New Zealand,Canada,and Australia are less willing to accept the "fact" that top managers are more powerful than they.
B)Lower-level managers in Germany,the United Kingdom,the United States,New Zealand,Canada,and Australia are more likely to not accept top-down budgets.
C)Lower-level managers in Germany,the United Kingdom,the United States,New Zealand,Canada,and Australia are more likely to want to participate in budgeting, D)all of the above
Q2) In what type of responsibility centers are the managers responsible for revenues,only?
A)Cost
B)Revenue
C)Profit
D)Investment
Q3) Describe an incentive model for accurate reporting.
Q4) How is a budget a tool for planning and performance evaluation?
Q5) Explain the difference between a flexible budget and master budget.
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Chapter 10: Profit and Cost Center Performance Evaluation
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Q1) How do you analyze overhead variances using the variable cost variance model?
Q2) Which statement is true concerning the fixed overhead production efficiency variance?
A)The production efficiency variance exists as fixed costs are assumed to vary inversely with volume.
B)The production efficiency variance exists as fixed costs are assumed to vary along with volume.
C)The production efficiency variance exists as fixed costs are assumed to vary exponentially with volume.
D)The production efficiency variance does not exist as fixed costs are assumed not to vary with volume.
Q3) Which of the following is an example of a major cost component of variable overhead?
A)Direct material.
B)Direct labor.
C)Indirect material.
D)All of the above.
Q4) What tools do managers use to decide when to investigate variances?
Q5) How do you analyze variances using the variable cost variance model?
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Chapter 11: Investment Center Performance Evaluation
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Q1) Which statement is true concerning a dual transfer pricing system?
A)It provides the selling division with a profit but charges the buying division with costs.
B)It provides the buying division with a profit but charges the selling division with costs.
C)It is required by generally accepted accounting principles.
D)None of the answers is correct.
Q2) If the investment turnover ratio increased by 30% and the profit margin percentage increased by 20%,what would happen to the divisional ROI?
A)It would increase by 56%.
B)It would decrease by 60%.
C)It would increase by 20%.
D)The answer cannot be determined.
Q3) What is generally considered the best transfer pricing basis when there is a competitive market for the product and market prices are readily available?
A)Market price-based transfer pricing
B)Variable cost-based transfer pricing
C)Fixed price-based transfer pricing
D)Fixed cost-based transfer pricing
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Chapter 12: Incentive Issues
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Q1) Which of the following are key characteristic(s)of divisional incentive compensation plans?
A)cash bonuses and profit sharing for short-term performance.
B)deferred compensation for long-term incentive.
C)special awards for particular actions or extraordinary performance.
D)All of the answers are correct.
Q2) Which of these is a common fraud in financial reporting?
A)understating revenues.
B)overstating inventory.
C)overstating liabilities.
D)understating assets.
Q3) Rewards that come from outside the individual,such as rewards from a teacher,a parent,an organization,or a spouse that include grades,money,praise,and prizes are called
A)traditional rewards.
B)intrinsic rewards.
C)extrinsic rewards.
D)outside rewards.
Q4) Discuss fraud in financial reporting from a managerial accounting perspective.
Q5) How do environmental conditions influence fraudulent conduct?
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Chapter 13: Allocating Costs to Responsibility Centers
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Q1) Transtech,Inc. ,processes silicon crystals into purified wafers and chips.Silicon crystals cost $60,000 per tank-car load.The process involves heating the crystals for 12 hours,producing 45,000 purified wafers with a market value of $20,000,and 15,000 chips with a market value of $140,000.The joint cost of the heat process is $25,600.
Required:
a.If the crystal costs and the heat process costs are to be allocated on the basis of units of output,what cost is assigned to each product?
b.If the crystal costs and the heat process costs are allocated on the basis of the net realizable value,what cost is assigned to each product?
c.How much profit or loss does the purified wafers product provide using the data in this problem and your analysis in requirement a.? Is it really possible to determine which product is more profitable? Explain why or why not.
Q2) What is the nature of common (or indirect)costs?
Q3) Why are joint-process costs allocated?
Q4) Why are service department costs allocated to producing departments?
Q5) How are joint-process costs allocated?
Q6) Why do companies allocate common costs to departments and products?
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