Strategic Management Accounting Exam Review
Course Introduction
Strategic Management Accounting explores the integration of management accounting information with strategic decision-making processes in organizations. The course examines how accounting tools and techniques are employed to analyze, plan, and control company activities, aligning financial data with long-term business objectives. Topics include cost management, performance measurement, value chain analysis, competitor and industry analysis, and the use of management accounting in formulating and implementing business strategies. Students will gain insights into how accounting information supports managerial decisions that drive competitive advantage and organizational success.
Recommended Textbook Management Accounting for Business 6th Edition by Colin
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15 Chapters
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Page 2
Drury
Chapter 1: Introduction to Management Accounting
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78 Verified Questions
78 Flashcards
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Sample Questions
Q1) Which of the following costing activities is associated with the financial accounting system?
A) determining the cost of a department
B) determining the cost of goods sold for financial statements
C) preparing budgets
D) determining the cost of a customer
Answer: B
Q2) Personal computers significantly increase a manager's capabilities to process and use accounting information. Do you agree? Explain.
Answer: Yes. Personal computers allow managers to access accounting data and to build their own reports and to perform many of their own analyses.
Q3) Automation of the manufacturing environment is associated with increases in A) inventory.
B) capacity.
C) processing time.
D) none of these.
Answer: B
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Chapter 2: An Introduction to Cost Terms and Concepts
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Sample Questions
Q1) As the volume of activity increases within the relevant range, the variable cost per unit
A) decreases.
B) decreases at first, then increases.
C) remains the same.
D) increases.
Answer: C
Q2) Direct costs
A) can be assigned to cost objects in an economically feasible way
B) are typically assigned to cost objects using a cause-and-effect relationship
C) result in more accurate cost assignments
D) do all of the above
Answer: D
Q3) Which of the following is a product cost?
A) advertising expenditures
B) insurance on the office buildings
C) depreciation of the salesmen's cars
D) depreciation of the production facilities
Answer: D
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Page 4
Chapter 3: Cost-Volume-Profit Analysis
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Sample Questions
Q1) In 2004, Angel's Bath and Body Shop had variable costs of £27,000, fixed costs of £18,000, and a net loss of £4,500. The annual sales volume required for Angel's to have a before-tax income of £18,000 is
A) £126,000.
B) £84,000.
C) £73,500.
D) £42,000.
Answer: A
Q2) Which of the following items would NOT be considered in cost-volume-profit analysis?
A) units of production
B) fixed costs
C) product mix
D) gross profit margin
Answer: D
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Chapter 4: Measuring Relevant Costs and Revenues for Decision-Making
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Sample Questions
Q1) If there is excess capacity, the minimum acceptable price for a special order must cover
A) only variable costs associated with the special order
B) variable and fixed manufacturing costs associated with the special order
C) variable and incremental fixed costs associated with the special order
D) variable costs and incremental fixed costs associated with the special order, plus the contribution margin usually earned on regular units
Q2) Which of the following costs is relevant to a make-or-buy decision?
A) original cost of the production equipment
B) annual depreciation of the equipment
C) the amount that would be received if the production equipment were sold
D) the cost of direct materials purchased last month and used to manufacture the component
Q3) If a firm is at full capacity, the minimum special order price must cover
A) variable costs associated with the special order.
B) variable and fixed manufacturing costs associated with the special order.
C) variable and incremental fixed costs associated with the special order.
D) variable costs and incremental fixed costs associated with the special order plus foregone contribution margin on regular units not produced.
Page 6
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Chapter 5: Pricing Decisions and Profitability Analysis
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Sample Questions
Q1) Refer to Figure 1 above, what amount of sales-force costs would be allocated to the five smaller customers if these costs are allocated based on sales volume?
A) £144,000
B) £216,000
C) £150,000
D) £225,000
Q2) List some of the pros and cons of target costing.
Q3) Refer to Figure 1 above, what amount of order-filling costs would be allocated to the five smaller customers if these costs are allocated using an activity-based costing approach?
A) £10,000
B) £350,000
C) £28,800
D) £331,200
Q4) Discuss the limitation of profit measurement.
Q5) Provide a short critique of cost-based pricing. What are the four major drawbacks to this pricing approach?
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Chapter 6: Capital Investment Decisions
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Sample Questions
Q1) When the discount rate is decreased,
A) the present value of future cash flows increases
B) the present value of future cash flows decreases
C) there is no change in the present value
D) net present value would equal zero
Q2) Tax savings from tax allowable depreciation (i.e. writing down allowances) is calculated as
A) Depreciation deduction x Tax rate
B) Depreciation deduction x (1 - Tax rate)
C) Asset cost x MACRS percentage
D) Depreciation is not a cash flow; therefore, there is no tax savings from depreciation.
Q3) A firm is considering a project with annual cash flows of £75,000. The project would have a 7-year life, and the company uses a discount rate of 10 percent. What is the maximum amount the company could invest in the project and the project still be acceptable?
A) £525,000
B) £365,100
C) £269,325
D) none of the above
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Page 8
Chapter 7: Cost Assignment
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Sample Questions
Q1) Support department costs are accounted for in which one of the following ways?
A) They are allocated directly to units of product.
B) They are allocated to producing departments and then allocated to units of product.
C) They are allocated to units of product and then allocated to the producing departments.
D) They are expensed as incurred.
Q2) Examples of producing departments include all of the following EXCEPT A) mixing.
B) molding.
C) packaging.
D) accounting.
Q3) Refer to Figure 1 above. What was Harrison Company's unit manufacturing cost for product AB?
A) £15.00
B) £2.40
C) ££17.40
D) £17.80
Q4) Discuss how managerial product costing differs from product costing for financial reporting.
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Chapter 8: Activity-Based Costing
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Sample Questions
Q1) Activity-based costing assigns costs to cost object by first
A) tracing costs to products and then tracing costs to cost objects.
B) tracing costs to departments and then tracing costs to products.
C) tracing costs to activities and then tracing costs to cost objects.
D) tracing costs to customers and then tracing costs to products.
Q2) If activity-based costing is used, insurance on the plant would be classified as a
A) unit-level activity.
B) batch-level activity.
C) product-level activity.
D) facility-level activity.
Q3) What is the initial step in implementing an activity-based costing system?
A) assigning costs to activities
B) assigning costs to products
C) identifying activities and attributes
D) dividing activity costs by activity drivers
Q4) Briefly discuss the problem with the unit-level approach to cost estimation and discuss some of the errors that may occur.
Q5) Identify Cooper and Kaplan's four categories of activities and provide a brief description of each category.
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Chapter 9: The Budgeting Process
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Sample Questions
Q1) The budget that is a comprehensive financial plan for the organization as a whole is called a
A) capital budget
B) master budget
C) comprehensive budget
D) continuous budget
Q2) Which of the following is true about budgets?
A) Budgets are financial plans for the future.
B) Budgets identify objectives and the actions needed to achieve them.
C) Budgets should be tightly linked to the strategic plan.
D) all of the above
Q3) Traditional budgeting has been used successfully for many years because A) it was simple and not time consuming.
B) departments decide what they want to do.
C) there is focus on results, not processes.
D) the environment was stable and product mix was simple.
Q4) Describe activity-based budgeting.
Q5) Explain how budgets provide a basis for performance evaluation.
Q6) Discuss the role of budgeting in planning, control, and decision making.
Q7) Describe an activity-based budget.
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Chapter 10: Management Control Systems
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Sample Questions
Q1) When budgets are used for control,
A) budgeted amounts from different years are compared.
B) actual amounts from different years are compared.
C) budgeted amounts are compared to actual amounts.
D) None of these is correct.
Q2) A flexible-based budgeting system
A) uses functional-based line items.
B) splits costs into variable and fixed components.
C) prepares budgets for a range of activity levels.
D) All of the above are correct.
Q3) Goal congruence means
A) there is alignment of organizational and managerial goals.
B) the organization is aligned to the needs of the environment.
C) the organization is aligned to shareholder goals.
D) there is no divergence between organization and stockholder goals.
Q4) A budget developed for a single level of activity is called a(n)
A) continuous budget.
B) incremental budget.
C) static budget.
D) flexible budget.
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Chapter 11: Standard Costing and Variance Analysis
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Sample Questions
Q1) A favorable materials usage variance may be caused by A) excessive rework
B) a special price offered by suppliers
C) use of experienced workers
D) none of the above
Q2) The labour efficiency variance is calculated as
A) (Actual direct labour hours used - Standard direct labour hours that should have been used) x Actual direct labour hours used
B) (Actual hourly wage rate - Standard hourly wage rate) x Standard direct labour hours that should have been used
C) (Actual direct labour hours used - Standard direct labour hours that should have been used) x Actual hourly wage rate
D) (Actual direct labour hours used - Standard direct labour hours that should have been used) x Standard hourly wage rate
Q3) Discuss the advantages and disadvantages of both ideal or currently attainable standards.
Q4) How are standards developed? What is the difference between ideal and currently attainable standards?
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13
Chapter 12: Divisional Financial Performance Measurement
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Sample Questions
Q1) The Production Department is most likely considered to be a(n)
A) profit centre
B) contribution centre
C) investment centre
D) cost centre
Q2) Discuss how firms can evaluate manager performance in such a way as to discourage myopic behaviour.
Q3) Refer to Figure 1. Asset turnover for the Clark Division is
A) 66.7%
B) 50.0%
C) 40.0%
D) 20.0%
Q4) What is an advantage of using economic value added (EVA) in performance measurement over return on investment (ROI)?
A) It is easier to calculate.
B) It encourages investments that are profitable to the company.
C) both a and b
D) none of the above
Q5) a. Identify advantages of a decentralized approach to management.
b. In comparison, identify advantages of a centralized approach to management.
Page 14
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Chapter 13: Transfer Pricing in Divisionalized Companies
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Sample Questions
Q1) A selling division produces components for a buying division that is considering accepting a special order for the products it produces. The selling division has excess capacity. The minimum price the selling division would be willing to accept is
A) the selling division's variable costs
B) the buying division's outside purchase price
C) the price that would allow the buying division to cover its incremental cost of the special order
D) the price that would allow the selling division to maintain its current ROI
Q2) Refer to Figure 3 above. The maximum transfer price that the West Division would be willing to pay is
A) £90
B) £60
C) £48
D) £38
Q3) In a negotiated transfer price,
A) market prices may not be suitable
B) opportunity costs could be used to set boundaries
C) buyers and sellers influence the transfer price set
D) all of the above are true
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Page 15
Chapter 14: Cost Management
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Sample Questions
Q1) The Kanban system is used to
A) ensure parts or materials are available when needed
B) signal when preventive maintenance is needed
C) signal when a defective unit has been produced
D) ensure idle time of workers is not wasted
Q2) Each unit of product requires 16 pounds of material. Due to scrap and rework, each unit has been averaging 18 pounds of material. The material costs £6 per pound. If the company wants to reduce nonvalue-added costs by 25 percent next year, the currently attainable standard for material would be
A) 16.00 pounds.
B) 16.80 pounds.
C) 17.50 pounds.
D) 18.00 pounds.
Q3) Value-added costs are standard costs based on
A) currently attainable standards.
B) ideal usage standards.
C) cycle time.
D) the value added.
Q4) What is kaizen costing? How does activity analysis help reduce costs?
Q5) Discuss cycle time (and its components) and its importance in JIT.
Page 16
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Chapter 15: Strategic Performance Management
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Sample Questions
Q1) Which of the following anticipates the emerging and potential needs of customers and creates new products and services to satisfy those needs?
A) the innovation process
B) the operations process
C) the postsales process
D) none of the above
Q2) When a computer company targets customers in the South, it is following a
A) focusing strategy.
B) low-cost strategy.
C) differentiation strategy.
D) strategic positioning strategy.
Q3) Strategic-based performance measures are balanced measures. Give examples of four types of balanced measures.
Q4) _____ are outcome measures that are a result of past efforts.
A) Objective measures
B) External measures
C) Financial measures
D) Lag measures
Q5) Describe the basic features of the Balanced Scorecard.
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