Accounting for Managers
Exam Answer Key
Course Introduction
Accounting for Managers provides an essential foundation in accounting principles and practices, tailored specifically for managerial decision-making. The course covers fundamental topics such as financial statement analysis, budgeting, cost behavior, performance measurement, and internal controls. Students will learn how to interpret accounting data, apply it to planning and control processes, and use financial information to make informed strategic decisions. Emphasis is placed on real-world business scenarios, enabling managers to effectively utilize accounting insights to improve organizational performance and achieve business objectives.
Recommended Textbook
Cost Accounting A Managerial Emphasis 14th Edition by Charles T. Horngren
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23 Chapters
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Page 2
Chapter 1: The Accountants Role in the Organization
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Sample Questions
Q1) The person(s)directly responsible for attaining of organizational objectives is/are:
A)the treasurer
B)line management
C)the controller
D)the chief financial officer
Answer: B
Q2) Strategic cost management describes cost management that specifically focuses on strategic issues.
A)True
B)False
Answer: True
Q3) To take advantage of changing market opportunities, the annual budget should be strictly enforced.
A)True
B)False
Answer: False
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Page 3
Chapter 2: An Introduction to Cost Terms and Purposes
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Sample Questions
Q1) ________ - sector companies purchase and then sell tangible products without changing their basic form.
A)Merchandising
B)Professional
C)Service
D)Manufacturing
Answer: A
Q2) A mixed cost is:
A)a fixed cost
B)a cost with fixed and variable elements
C)a variable cost
D)always an indirect cost
Answer: B
Q3) Which of the following statements is FALSE?
A)There is a cause-and-effect relationship between the cost driver and the amount of cost.
B)Fixed costs have cost drivers over the short run.
C)Over the long run all costs have cost drivers.
D)Volume of production is a cost driver of direct manufacturing costs.
Answer: B
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Chapter 3: Cost-Volume-Profit Analysis
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Sample Questions
Q1) If the tax rate is t, it is possible to calculate planned operating income by:
A)dividing net income by t
B)dividing net income by 1- t
C)multiplying net income by t
D)multiplying net income by 1- t
Answer: B
Q2) Which of the following items is NOT an assumption of CVP analysis?
A)Costs may be separated into separate fixed and variable components.
B)Total revenues and total costs are linear in relation to output units.
C)Unit selling price, unit variable costs, and unit fixed costs are known and remain constant.
D)Proportion of different products will remain constant when multiple products are sold.
Answer: C
Q3) An expected value is the weighted average of the outcomes, with the probability of each outcome serving as the weight.
A)True
B)False
Answer: True
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Chapter 4: Job Costing
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Sample Questions
Q1) All of the following increase (are debited to)the Work-in-Process Control account
EXCEPT:
A)actual plant insurance costs
B)direct materials
C)allocated manufacturing overhead costs
D)direct manufacturing labor
Q2) In a normal costing system, the Manufacturing Overhead Control account:
A)is increased by allocated manufacturing overhead
B)is credited with amounts transferred to Work-in-Process
C)is decreased by allocated manufacturing overhead
D)is debited with actual overhead costs
Q3) The cost driver of an indirect cost is often used as the cost-allocation base.
A)True
B)False
Q4) Actual costing systems are NOT commonly found in practice because actual costs CANNOT be computed in a timely manner. A)True B)False
Q5) Describe job-costing and process-costing systems. Explain when it would be appropriate to use each.
6
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Chapter 5: Activity-Based Costing and Activity-Based Management
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Sample Questions
Q1) When refining a costing system, a company should classify as many costs as possible as direct costs.
A)True
B)False
Q2) The most likely example of a batch-level cost is:
A)utility costs
B)machine repairs
C)product-designing costs
D)setup costs
Q3) What are the indirect manufacturing costs per remote control assuming an activity-based-costing method is used and a batch of 50 remote controls are produced? The batch requires 100 parts, 6 direct manufacturing labor hours, and 2.5 minutes of inspection time.
A)$4.00 per remote control
B)$6.55 per remote control
C)$24.00 per remote control
D)$327.50 per remote control
Q4) Explain how a top-selling product may actually result in losses for the company.
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Q5) Explain how traditional cost systems, using a single unit-level cost rate, may distort product costs.
Chapter 6: Master Budget and Responsibility Accounting
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Sample Questions
Q1) An organization structure is an arrangement of lines of responsibility within the entity.
A)True
B)False
Q2) What is the amount budgeted for cost of goods sold in 2012?
A)$2,312,000
B)$1,972,000
C)$2,040,000
D)$4,800,000
Q3) A budget generally includes both financial and nonfinancial aspects of the plan.
A)True
B)False
Q4) In a cost center, a manager is responsible for investments, revenues, and costs.
A)True
B)False
Q5) If we increase the selling price of our product, we should probably expect an increase in the number of these products sold.
A)True
B)False
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Chapter 7: Flexible Budgets, Direct-Cost Variances, and Management Control
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Sample Questions
Q1) What is the static-budget variance of variable costs?
A)$1,200 favorable
B)$9,400 unfavorable
C)$20,000 favorable
D)$1,200 unfavorable
Q2) An unfavorable variance:
A)may suggest investigation is needed
B)is conclusive evidence of poor performance
C)demands that standards be recomputed
D)indicates continuous improvement is needed
Q3) The following items are the same for the flexible budget and the master budget EXCEPT for:
A)variable cost per unit
B)total fixed costs
C)units sold
D)sales price per unit
Q4) Improvement opportunities are easier to identify when products have been on the market for a considerable period of time.
A)True
B)False
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Chapter 8: Flexible Budgets, Overhead Cost Variances, and Management Control
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Sample Questions
Q1) If the production planners set the budgeted machine hours standards too tight, one could anticipate there would be a favorable variable overhead efficiency variance.
A)True
B)False
Q2) Fixed overhead costs must be unitized for:
A)financial reporting purposes
B)planning purposes
C)calculating the production-volume variance
D)Both A and C are correct.
Q3) Overhead costs are a major part of costs for most companiesmore than 50% of all costs for some companies.
A)True
B)False
Q4) Briefly explain the meaning of the variable overhead efficiency variance and the variable overhead spending variance.
Q5) All unfavorable overhead variances decrease operating income compared to the budget.
A)True B)False
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Chapter 9: Inventory Costing and Capacity Analysis
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Sample Questions
Q1) Which of the following inventory costing methods shown below is most likely to cause undesirable incentives for managers to build up finished goods inventory?
A)absorption costing
B)variable costing
C)throughput costing
D)direct costing
Q2) What is the cost per statue if throughput costing is used?
A)$11.00
B)$9.50
C)$7.50
D)$5.00
Q3) What is the practical capacity for the month of April?
A)2,000,000 units
B)1,440,000 units
C)1,036,800 units
D)480,000 units
Q4) Throughput margin equals revenues minus all product costs.
A)True
B)False
Q5) Discuss the three methods to dispose of production volume variance.
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Chapter 10: Determining How Costs Behave
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Sample Questions
Q1) Plotting learning curve observations is helpful in selecting the appropriate learning curve model.
A)True
B)False
Q2) Cross-sectional data pertain to the same entity (organization, plant, activity, and so on)
over successive past periods.
A)True
B)False
Q3) Roger Moon has just purchased the film studio of a movie company that specializes in comedies. He found that the company did not try to estimate the cost of making a movie. Instead, it just gave the producer a budget and told him/her to make a movie within budget. Mr. Moon does not like the former movie-budget concept and desires to establish a formal cost estimation system.
Required:
What are some of the potential problems that may be encountered in changing from a budget to a cost estimation movie making system?
Q4) List and briefly describe the six steps in estimating a cost function under quantitative analysis.
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Chapter 11: Decision Making and Relevant Information
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Sample Questions
Q1) Direct materials are $20, direct labor is $5, variable overhead costs are $15, and fixed overhead costs are $10. In the short term, the incremental cost of one unit is:
A)$15
B)$25
C)$40
D)$50
Q2) Relevant costs for this decision include:
A)the original cost of the existing van
B)accumulated depreciation
C)the current salvage value
D)the salvage value in 10 years
Q3) What are the relevant costs for Stephans?
A)$140,000
B)$125,000
C)$105,000
D)$80,000
Q4) Product-mix decisions are typically short-run decisions.
A)True
B)False
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Chapter 12: Pricing Decisions and Cost Management
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Sample Questions
Q1) For Rogers' Heaters, what is the minimum acceptable price of this one-time-only special order?
A)$580
B)$780
C)$520
D)$1,014
Q2) What is the target cost?
A)$1,800,000
B)$1,920,000
C)$2,520,000
D)$2,016,000
Q3) Relevant costs for pricing decisions include manufacturing costs, but NOT costs from other value-chain functions.
A)True
B)False
Q4) What is price discrimination, and when is it illegal?
Q5) One market-based pricing method is called the time and materials method. A)True
B)False
Q6) What is the primary reason a firm would adopt target costing?
Page 14
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Chapter 13: Strategy, Balanced Scorecard, and Strategic Profitability Analysis
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Sample Questions
Q1) Measures of the balanced scorecard's learning-and-growth perspective include:
A)employee satisfaction ratings
B)economic value added
C)time taken to deliver product to customers
D)customer-retention percentage
Q2) Unused capacity is difficult to determine for:
A)engineered costs
B)discretionary costs
C)both engineered and discretionary costs
D)neither engineered nor discretionary costs
Q3) What is the direct manufacturing labor partial productivity for Dangerfield Company, assuming 40,000 big and tall sport jackets were produced during 2011 and 160,000 direct manufacturing labor-hours were used?
A)0.25 unit per direct manufacturing labor-hour
B)0.50 unit per direct manufacturing labor-hour
C)0.75 unit per direct manufacturing labor-hour
D)1.00 unit per direct manufacturing labor-hour
Q4) Employee training and development cost is an example of an discretionary cost.
A)True
B)False
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Chapter 14: Cost Allocation, Customer-Profitability Analysis, and Sales-Variance Analysis
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Sample Questions
Q1) To motivate engineers to design simpler products, costs for production, distribution, and customer service may be included in product-cost estimates.
A)True
B)False
Q2) If a cost pool is homogeneous, the cost allocations using that pool will be the same as they would be if costs of each individual activity in that pool were allocated separately.
A)True
B)False
Q3) Price discounts should NEVER be viewed as:
A)price discrimination
B)predatory pricing
C)unethical
D)All of the above are correct.
Q4) Price discounts are influenced by:
A)the volume of product purchased
B)a desire to sell to a customer in an area with high-growth potential
C)negotiating skills of the sales person
D)All of these answers are correct.
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Chapter 15: Allocation of Support-Department Costs, Common
Costs, and Revenues
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Sample Questions
Q1) The stand-alone method may use selling price or unit costs to allocate revenues. A)True B)False
Q2) John Peters is drafting the provisions of a cost-plus contract and is concerned with ironing out any possible misunderstandings during the life of the contract. What advice can you provide to reduce contract disputes over reimbursement amounts based on costs?
Q3) The Pitt Corporation has been outsourcing data processing in the belief that such outsourcing would reduce costs and increase corporate profitability. In spite of this, there has been no meaningful increase in corporate profitability. Previously, Pitt used a single-rate method to allocate data processing costs. A per unit cost for data processing was computed and compared to the price of the outside supplier. The price of the outside supplier was lower, so the outside bid was accepted. Required:
Formulate a possible reason why Pitt's profitability has not shown improvement in terms of the cost allocation method used.
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Chapter 16: Cost Allocation: Joint Products and Byproducts
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Sample Questions
Q1) Which of the following is NOT a reason to use the sales value at splitoff method:
A)simplicity
B)no anticipation of subsequent management decisions
C)measurement of the value of the joint products at the splitoff point
D)All of the above are reasons to use the sales value at splitoff method.
Q2) Which of the following statements is true in regard to the cause-and-effect relationship between allocated joint costs and individual products?
A)A high individual product value results in a high level of joint costs.
B)A low individual product value results in a low level of joint costs.
C)A high individual product value results in a low level of joint costs.
D)There is no cause-and-effect relationship.
Q3) How much is the ending inventory reduction for the byproduct if byproducts are recognized in the general ledger at the point of sale?
A)$0
B)$563
C)$1,500
D)$17,500
Q4) What are a joint cost and a splitoff point?
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Page 18
Chapter 17: Process Costing
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Sample Questions
Q1) In the computation of the cost per equivalent unit, the weighted-average method of process costing considers all the costs:
A)entering work in process from the units in beginning inventory plus the costs for the work completed during the current accounting period
B)costs that have entered work in process from the units started or transferred in during the current accounting period
C)that have entered work in process during the current accounting period from the units started or transferred in minus the costs associated with ending inventory
D)that have entered work in process during the current accounting period from the units started or transferred in plus the costs associated with ending inventory
Q2) There are basically two distinct methods of calculating product costs. Required:
Compare and contrast the two methods.
Q3) Ford Motor Company is said to use a hybrid costing system. What is a hybrid costing system, and what would be the advantage to Ford of such a system?
Q4) List and describe the five steps in process costing.
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Page 19
Chapter 18: Spoilage, Rework, and Scrap
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Sample Questions
Q1) What is the number of total spoiled units?
A)13,200 units
B)4,000 units
C)5,400 units
D)7,200 units
Q2) Reworked goods are unacceptable units of production usually NOT capable of being repaired or converted into a salable product.
A)True
B)False
Q3) Some amounts of spoilage, rework, or scrap are inherent in many production processes.
A)True
B)False
Q4) The loss from abnormal spoilage account would appear:
A)on the balance sheet
B)as a detailed item in the retained earnings schedule of the balance sheet
C)as a detailed item on the income statement
D)Either A or B is correct.
Q5) What are the objectives in accounting for spoilage?
Q6) Distinguish among spoilage, reworked units, and scrap. Give an example of each.
Page 20
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Chapter 19: Balanced Scorecard: Quality, Time, and the Theory of Constraints
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Sample Questions
Q1) Norton's Convenience store has a variable demand. The daily demand ranges from 270 to 330 customers a day who average purchasing 5 items each. The average daily demand is 300 customers. The convenience store currently operates 12 hours a day. Each order takes approximately 2 minutes.
Required:
a. What is the average customer waiting time, in minutes?
b. What is the cycle time for an order?
c. Norton has decided that the waiting time is too long and has increased the hours the store is open to 15 hours. What is the waiting time now?
Q2) An example of a nonfinancial measure for customer satisfaction is:
A)delivery delay
B)employee turnover
C)number of defects on the production line
D)process yield
Q3) Throughput contribution is equal to revenues minus direct material and direct labor costs.
A)True
B)False
Q4) Discuss the methods used to identify quality problems.
Page 21
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Chapter 20: Inventory Management, Just-In-Time, and Simplified Costing Methods
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Sample Questions
Q1) Inventory management is the planning, organizing, and controlling activities that focus on the flow of materials into, through, and from the organization.
A)True
B)False
Q2) The time from when an order is received by manufacturing until it becomes a finished good is referred to as:
A)work-in-process time
B)manufacturing lead time
C)pass-through time
D)None of these answers is correct.
Q3) What is the reorder point?
A)1,040 units
B)857 units
C)1,560 units
D)2,080 units
Q4) A firm using a backflush costing system will always use actual costs rather than standard costs.
A)True
B)False
22
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Chapter 21: Capital Budgeting and Cost Analysis
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Sample Questions
Q1) Investment A requires a net investment of $1,600,000. The required rate of return is 12% for the four-year annuity. What are the annual cash inflows if the net present value equals 0? (rounded)
A)$378,966
B)$526,836
C)$549,696
D)$591,466
Q2) All of the following are methods that aid management in analyzing the expected results of capital budgeting decisions EXCEPT:
A)accrual accounting rate-of-return method
B)discounted cash-flow method
C)future-value cash-flow method
D)payback method
Q3) What conflicts can arise between using discounted cash flow methods for capital budgeting decisions and accrual accounting for performance evaluation? How can these conflicts be reduced?
Q4) An example of an intangible asset would be a corporation's customer base.
A)True
B)False
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Chapter 22: Management Control Systems, Transfer
Pricing, and Multinational
Considerations
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Sample Questions
Q1) Decentralizaion can sometimes lead to suboptimal decisions.
A)True
B)False
Q2) Which of the following transfer-pricing methods always achieves goal congruence?
A)a market-based transfer price
B)a cost-based transfer price
C)a negotiated transfer price
D)full-cost plus a standard profit margin
Q3) A DISADVANTAGE of a negotiated transfer price is that:
A)each division manager must put forth effort to increase division operating income
B)negotiated transfer price preserves divisional autonomy
C)negotiations usually require much time and energy
D)Both B and C are correct.
Q4) Motivation is the desire to attain a selected goal combined with the resulting drive or pursuit toward that goal.
A)True
B)False
Q5) Discuss the possible problems a corporation might have if its operations are totally decentralized.
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Chapter 23: Performance Measurement, Compensation, and
Multinational Considerations
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Sample Questions
Q1) The after-tax average cost of all the long-term funds used by a corporation equals:
A)economic value added
B)return on investment
C)return on equity
D)weighted-average cost of capital
Q2) Examples of "cooking the books" are understated assets and overstated liabilities.
A)True
B)False
Q3) What is the Cyclotron Division's return on sales?
A)0.20
B)0.40
C)0.50
D)0.60
Q4) The first step in designing accounting based performance measures is to choose a target level of performance and feedback mechanism.
A)True
B)False
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