Intermediate Managerial Accounting Exam Solutions
Course Introduction
Intermediate Managerial Accounting delves into the principles and techniques used by managers to plan, control, and make decisions within organizations. The course covers key topics such as cost behavior analysis, budgeting, variance analysis, activity-based costing, and performance measurement. Students will learn how to apply managerial accounting tools to real-world business scenarios, enhancing their ability to analyze financial information, allocate resources efficiently, and support strategic decision-making processes. Emphasis is placed on both quantitative skills and the interpretation of accounting data to drive organizational success.
Recommended Textbook
Fundamental Managerial Accounting Concepts 9th Edition by Thomas P Edmonds
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14 Chapters
2127 Verified Questions
2127 Flashcards
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Page 2
Chapter 1: Management Accounting and Corporate Governance
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146 Verified Questions
146 Flashcards
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Sample Questions
Q1) Managerial accounting information is limited or restricted by which of the following authorities or principles?
A) Securities and Exchange Commission
B) Generally Accepted Accounting Principles
C) Managerial Accounting Standards Board
D) Value-Added Principle
Answer: D
Q2) Misclassifying a product cost as a period cost will usually cause the income statement to be incorrect,but the balance sheet will not be affected.
A)True
B)False
Answer: False
Q3) Product costs are immediately recorded in expense accounts when the products are manufactured.
A)True
B)False
Answer: False
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Page 3
Chapter 2: Cost Behavior, operating Leverage, and Profitability Analysis
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152 Verified Questions
152 Flashcards
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Sample Questions
Q1) A disadvantage of the high-low method is that the high point and low point may not be representative of the total data set available.
A)True
B)False
Answer: True
Q2) Wu Company incurred $40,000 of fixed cost and $50,000 of variable cost when 4,000 units of product were made and sold. If the company's volume increases to 5,000 units,the total cost per unit will be:
A) $18.00.
B) $20.00.
C) $20.50.
D) $22.50.
Answer: C
Q3) What is meant by the phrase,"cost structure?"
Answer: "Cost structure" refers to the amount of fixed cost and variable cost a company has.For example,a company's managers may be able to make a change that would increase fixed costs and decrease variable costs.Such a change would increase the company's operating leverage.
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Chapter 3: Analysis of Cost, volume, and Pricing to Increase Profitability
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149 Verified Questions
149 Flashcards
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Sample Questions
Q1) The records of Gemini Company show a contribution margin ratio of 40%.The company desires to earn a profit of $35,000 and has fixed costs of $70,000.What sales revenue would have to be generated in order to earn the desired profit?
A) $87,500
B) $262,500
C) $175,000
D) $42,000
Answer: B
Q2) What happens to the break-even point in sales dollars when the contribution margin ratio increases?
A) Break-even point increases.
B) Break-even point decreases.
C) Break-even point stays the same.
D) Not enough information to answer the question.
Answer: B
Q3) Sensitivity analysis is performed in order to determine optimal sales mix.
A)True
B)False
Answer: False
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Chapter 4: Cost Accumulation,tracing,and Allocation
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158 Verified Questions
158 Flashcards
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Sample Questions
Q1) Alleghany Community College operates four departments.The square footage used by each department is shown below: \[\begin{array} { l r } & \text { Square } \\
\text { Department } & \text { Footage } \\
\text { Accounting } & 3,000 \\
\text { Marketing } & 4,000 \\
\text { Technology } & 6,000 \\
\text { Sciences } &\underline{ 3,000} \\
\text { Total } &\underline{ 16,000} \\
\end{array}\] Alleghany's annual building rental cost is $320,000. What amount of rent expense should be allocated to the Sciences Department?
A) $60,000
B) $80,000
C) $120,000
D) $106,667
Q2) The accuracy of managerial accounting information usually is more important than timeliness.
A)True
B)False
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Page 6
Chapter 5: Cost Management in an Automated Business
Environment: ABC, ABM, and TQM
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153 Verified Questions
153 Flashcards
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Sample Questions
Q1) Playtime Electronics produces two kinds of electronic toys,Wizards and Gizmos.During the current period,8,000 Wizards and 16,000 Gizmos were produced and sold,generating revenues of $500,000 and $2,000,000,respectively.Unit production costs for the two toys are $50 for Wizards and $70 for Gizmos.In calculating the cost of goods sold,Playtime uses activity-based costing to allocate its overhead costs.However,upstream costs of $240,000 are allocated equally to the two products.
Required:
1)Compute the total net profit for each product and for the firm as a whole.
2)Would you advise eliminating either toy? Why or why not?
Q2) Which of the following statements regarding unit-level activities is (are)true?
I.Unit-level activities occur each time a batch of units is produced.
II)Unit-level costs follow a variable cost behavior pattern.
III)Unit-level activities benefit the production as a whole and are not related to any specific product.
A) I only
B) I and II
C) II and III
D) II only
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Chapter 6: Relevant Information for Special Decisions
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151 Flashcards
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Sample Questions
Q1) All of the following are examples of product-level costs except:
A) product inspection costs.
B) product advertising costs.
C) engineering design costs.
D) patent costs.
Q2) A company's compensation system for its managers should provide incentives for the managers to maximize the company's long-term profitability.
A)True
B)False
Q3) Relevant costs are often referred to as:
A) Unavoidable costs.
B) Differential costs.
C) Sunk costs.
D) All of these answers are correct.
Q4) The market value of equipment owned by a company is a sunk cost and should not be taken into account in deciding whether or not to replace the equipment.
A)True
B)False
Q5) What are constraints? Provide an example.
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Chapter 7: Planning for Profit and Cost Control
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150 Verified Questions
150 Flashcards
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Sample
Questions
Q1) Markham Company has completed its sales budget for the first quarter of Year 2.Projected credit sales for the first four months of the year are shown below: \(\begin{array}{lll}
\text { January } & \$ 30,000 \\
\text { February } & \$ 36,000 \\
\text { March } & \$ 45,000 \\
\text { April } & \$ 48,000
\end{array}\) The company's past records show collection of credit sales as follows: 40% in the month of sale and the balance in the following month.The total cash collection from receivables in March is expected to be:
A) $18,000.
B) $45,000.
C) $41,400.
D) $39,600.
Q2) The master budget includes several individual budgets,which are interdependent.Provide at least two examples of connections (relationships)among budgets.
Q3) How might a company develop sales estimates to be used in preparing a sales budget?
Q4) Why is cash management important to a business?
Page 9
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Chapter 8: Performance Evaluation
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156 Flashcards
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Sample Questions
Q1) Select the incorrect statement regarding flexible budgets.
A) Flexible budgets often show the estimated revenues and costs at multiple volume levels.
B) A flexible budget is used to compare actual to budgeted amounts.
C) A flexible budget is also known as a master budget.
D) Standard prices and costs are used in preparing a flexible budget.
Q2) Marks Company makes one product,for which it has established the following standards for materials:
Average quantity of material per unit of product: 4.5 pounds
Price per pound of materials: $16
During March,Marks made 10,000 units of the product,using 50,000 pounds at a total purchase price of $825,000.
Required:
(a)Determine the total flexible budget materials variance and indicate whether it is favorable or unfavorable.
(b)Calculate the materials price variance and indicate whether it is favorable or unfavorable.
(c)Determine the materials usage variance and indicate whether it is favorable or unfavorable.
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Page 10
Chapter 9: Responsibility Accounting
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Sample Questions
Q1) Mitchell Company has two divisions,Division A and Division B.Division A makes a product that Division B could use in making one of its products.Why do the managers of both divisions care about the amount of the transfer price?
Q2) Which of the following is an advantage of using cost-based transfer prices?
A) Such prices are an objective measure and easy to compute.
B) Such prices motivate the buying division to control cost.
C) Such prices provide a sense of fairness.
D) Such prices will usually exceed the market-based or negotiated transfer prices.
Q3) What are the advantages of using a market-based transfer price? Why is it not always used?
Q4) A responsibility report provided to a manager typically includes:
A) A list of all the items under the manager's control.
B) The budgeted amount for each item on the report.
C) The differences between the budgeted and actual amounts for each item on the report.
D) All of these are correct answers.
Q5) What methods are used to measure operating assets for calculating return on investment? Which of these approaches would you recommend? Explain your choice.
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Chapter 10: Planning for Capital Investments
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155 Flashcards
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Sample Questions
Q1) The length of time required to recover the initial investment in a capital asset is known as the:
A) rate of return.
B) investment period.
C) present value period.
D) payback period.
Q2) Seth Morrison is considering alternative proposals that involve different amounts of investments.To compare different sizes of investment proposals,it may be helpful for Seth to prepare a relative ranking of the proposals by using a(n):
A) present value index.
B) net present value.
C) internal rate of return.
D) None of these answers are correct.
Q3) Describe what is meant by the time value of money.
Q4) Capital investments differ from stock and bond investments in that stock and bond investments can be sold in organized markets.
A)True
B)False
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Chapter 11: Product Costing in Service and Manufacturing
Entities
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148 Flashcards
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Sample Questions
Q1) Paying for factory utilities used during the current month is a(n):
A) asset exchange transaction.
B) asset use transaction.
C) asset source transaction.
D) claims exchange transaction.
Q2) Recording depreciation on manufacturing equipment will:
A) decrease total assets, total equity, and net income.
B) not affect total assets or net income.
C) decrease total assets, decrease net income, and increase total equity.
D) not affect total assets, and decrease net income.
Q3) Actual overhead costs are added to the Manufacturing Overhead account,while estimated overhead costs are added to the Work in Process account.
A)True
B)False
Q4) For a manufacturing business,cost of indirect materials is first recorded in the:
A) Raw Materials Inventory account.
B) Supplies Inventory account.
C) Work in Process Inventory account.
D) Manufacturing Overhead account.
13
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Chapter 12: Job-Order, process, and Hybrid Costing Systems
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147 Verified Questions
147 Flashcards
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Sample Questions
Q1) The source document used to record the amount of time worked by an employee on a job is called the:
A) Requisition sheet.
B) Pay stub.
C) Job cost sheet.
D) Work ticket.
Q2) Payment of cash for production workers' wages is:
A) An asset exchange transaction.
B) An asset source transaction.
C) An asset use transaction.
D) A claims exchange transaction.
Q3) All of the following are source documents used in job-order costing systems except:
A) Time card.
B) Standard cost card.
C) Work ticket.
D) Materials requisition.
Q4) Company N manufactures machines to customer order.Why would the use of a process costing system not be appropriate for N?
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Q5) What are job cost sheets,and how are they used in a job-order costing system?
Chapter 13: Financial Statement Analysis
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153 Flashcards
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Sample Questions
Q1) The Poole Company reported the following income for Year 2: \(\begin{array}{lr}
\text { Sales } & \$ 30,000 \\
\text { Cost of goods sold } & \underline{8,000} \\
\text { Gross margin } &\$ 22,000 \\
\text { Selling and administrative expense } & \underline{10,000} \\
\text { Operating income } & \$ 12,000\\
\text { Interest expense } & \underline{ 4,000 }\\
\text { Income before taxes } & \$ 8,000 \\
\text { income tax expense } & \underline{2,500} \\
\text { Net income } & \underline{ \$ 5,500}
\end{array}\)
What is the company's net margin? (Rounded to the nearest whole percent.)
A) 73%
B) 40%
C) 18%
D) 27%
Q2) Explain the difference between horizontal analysis and vertical analysis of a company's financial statements.
Q3) Describe the factors involved in communicating useful financial information.
Q4) Discuss the limitations that affect financial statement analysis.
Page 15
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Chapter 14: Statement of Cash Flows
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149 Flashcards
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Sample Questions
Q1) Cash payments for interest expense on a bond payable would be classified as a financing activity.
A)True
B)False
Q2) Which of the following would be reported as a financing activity on the statement of cash flows?
A) Dividends collected from an investment in marketable securities.
B) Note payable issued to purchase equipment.
C) Purchase of investment securities.
D) Cash paid for the purchase of treasury stock.
Q3) Income tax expense was $137,500 for the year.The balance of the Income Tax Payable account was $7,500 at the beginning of the year and $10,000 at the end of the year.Cash payments for income tax reported on the cash flow statement using the direct method equal:
A) $130,000.
B) $137,500.
C) $147,500.
D) $135,000.
Q4) What kinds of cash flows are reported as investing activities on the statement of cash flows?
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