Management Accounting
Final Test Solutions
Course Introduction
Management Accounting explores the principles and practices used by managers to make informed business decisions based on financial data. This course covers key topics such as cost behavior, budgeting, performance evaluation, variance analysis, and strategic planning. Students will learn how to analyze and interpret financial information to support organizational objectives, allocate resources efficiently, and assess the financial impact of managerial actions. Emphasis is placed on the practical application of accounting techniques to real-world business scenarios, enabling students to contribute to effective management and operational planning within organizations.
Recommended Textbook
Cost Accounting 15th Edition by Charles T. Horngren
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23 Chapters
4112 Verified Questions
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Page 2
Chapter 1: The Manager and Management Accounting
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195 Verified Questions
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Sample Questions
Q1) Which of the following groups would be least likely to receive detailed management accounting reports?
A) stockholders
B) sales managers
C) production supervisors
D) distribution managers
Answer: A
Q2) Integrity is to abstain from engaging in or supporting any activity that might discredit the profession.
A)True
B)False
Answer: True
Q3) Financial accounting information focuses on internal reporting.
A)True
B)False
Answer: False
Q4) A budget is a benchmark against which actual performance can be compared.
A)True
B)False
Answer: True
Page 3
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Chapter 2: An Introduction to Cost Terms and Purposes
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Sample Questions
Q1) Which of the following is a period cost?
A) sales promotion expenses
B) direct material cost
C) direct labor cost
D) indirect manufacturing costs like plant insurance
Answer: A
Q2) A band of normal activity or volume in which specific cost-volume relationships are maintained is referred to as the ________.
A) average range
B) cost-allocation range
C) cost driver range
D) relevant range
Answer: D
Q3) Merchandising companies hold only one type of inventory: direct material.
A)True
B)False
Answer: False
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Chapter 3: Cost-Volume-Profit Analysis
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208 Flashcards
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Sample Questions
Q1) Explain net income and what implications can tax have on it that influences a manager's decision?
Answer: Net income is operating income plus nonoperating revenues such as interest revenue minus nonoperating costs such as interest cost minus income taxes.Some decisions might not result in a large operating income,but their tax consequences make them attractive because they have a positive effect on net income-the measure that drives shareholders' dividends and returns.
Q2) Winnz sells 8,000 units resulting in $100,000 of sales revenue,$35,000 of variable costs,and $45,000 of fixed costs.To achieve $150,000 in operating income,sales must total ________.
A) $440,000
B) $160,000
C) $130,000
D) $300,000
Answer: D
Q3) In CVP analysis,the number of output units is the only revenue driver.
A)True
B)False
Answer: True
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Page 5
Chapter 4: Job Costing
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Sample Questions
Q1) Job costing is ________.
A) used by businesses to price identical products
B) used by businesses to price unique products for different jobs
C) used to calculate equivalent units
D) used to calculate the percentage of work completed
Q2) The spreading of underallocated or overallocated overhead among ending work-in-process,finished goods,and cost of goods sold is called ________.
A) the adjusted allocation rate approach
B) the proration approach
C) the write-off of cost of goods sold approach
D) the weighted-average cost approach
Q3) In a costing system,________.
A) cost tracing allocates indirect costs
B) cost allocation assigns direct costs
C) a cost-allocation base can be either financial or nonfinancial
D) a cost object should be a product and not a department or a geographic territory
Q4) Purchases of materials are credited to materials control.
A)True
B)False
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Chapter 5: Activity-Based Costing and Activity-Based Management
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176 Flashcards
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Sample Questions
Q1) ________ are the costs of activities undertaken to support individual products or services regardless of the number of units or batches in which the units are produced.
A) Unit-level costs
B) Batch-level costs
C) Product-sustaining costs
D) Facility-sustaining costs
Q2) ABC systems and department costing systems use totally different approaches towards indirect cost allocation and can never be used together.
A)True
B)False
Q3) Assume a traditional costing system applies the $40,000 of overhead costs based on direct labor hours.What is the total amount of overhead cost assigned to the deluxe model?
A) $16,000
B) $24,000
C) $25,000
D) $15,000
Q4) Explain how a top-selling product may actually result in losses for the company.
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Chapter 6: Master Budget and Responsibility Accounting
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226 Flashcards
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Sample Questions
Q1) For next year,Roberto,Inc.,has budgeted sales of 15,000 units,targeted ending finished goods inventory of 750 units,and beginning finished goods inventory of 450 units.All other inventories are zero.How many units should be produced next year?
A) 14,700 units
B) 15,000 units
C) 15,300 units
D) 16,200 units
Q2) Should Violet increase the selling price in 2016?
A) Yes, because sales revenue increases for 2016.
B) Yes, because gross margin increases for 2016.
C) No, because sales volume decreases for 2016.
D) No, because operating income decreases for 2016.
Q3) Cost of goods sold budget takes inputs from both,ending inventories budget and nonmanufacturing costs budget.
A)True
B)False
Q4) Describe the concept of kaizen budgeting.
Q5) Explain what is meant by sensitivity analysis in budgeting,and discuss how managers might use sensitivity analysis in practice.
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Chapter 7: Flexible Budgets, direct-Cost Variances, and Management Control
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Sample Questions
Q1) The direct manufacturing labor efficiency variance during July is ________.
A) $300.00 unfavorable
B) $156.25 favorable
C) $143.75 favorable
D) $131.75 unfavorable
Q2) A flexible-budget variance pertaining to revenues is often called a sales-volume variance.
A)True
B)False
Q3) The flexible-budget variance for materials is $5,000 (U).The sales-volume variance is $13,000 (U).The price variance for material is $31000 (F).The efficiency variance for direct manufacturing labor is $7,000 (F).Calculate the efficiency variance for materials.
A) $36,000 favorable
B) $13,000 unfavorable
C) $6,000 favorable
D) $36,000 unfavorable
Q4) Give at least three good reasons why an unfavorable efficiency variance for direct manufacturing labor might be reported.
Q5) Describe the purpose of variance analysis.
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Chapter 8: Flexible Budgets, overhead Cost Variances, and Management Control
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Sample Questions
Q1) The flexible budget enables to highlight the differences ________.
A) between actual costs and actual quantities versus budgeted costs and budgeted quantities for the actual output level
B) between budgeted costs and budgeted quantities versus actual costs and budgeted quantities for the budgeted output level
C) between budgeted costs and actual quantities versus budgeted costs and budgeted quantities for the actual output level
D) between actual costs and actual quantities versus budgeted costs and budgeted quantities for the budgeted output level
Q2) Compared to variable overhead costs planning,fixed overhead costs planning have an additional strategic issue of ________.
A) eliminating activities that do not add value
B) increasing the linearity between total costs and volume of production
C) choosing the appropriate level of investment
D) identifying essential value-adding activities
Q3) 'Managers should be wary of using the same unitized fixed overhead costs for planning and control purposes'.Do you agree with this argument? Give reasons for your answer.
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Chapter 9: Inventory Costing and Capacity Analysis
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210 Flashcards
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Sample Questions
Q1) What will be the breakeven point in units if absorption costing is used?
A) 1,330 units
B) 1,000 units
C) 887 units
D) 563 units
Q2) Operating income using absorption costing will be ________ than operating income if using variable costing.
A) $9,600 higher
B) $4,800 lower
C) $3,600 higher
D) $14,400 lower
Q3) Throughput costing is also called ________.
A) absorption costing
B) super-variable costing
C) mixed costing
D) direct costing
Q4) Throughput costing considers only direct materials and direct manufacturing labor to be truly variable costs.
A)True
B)False
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Chapter 10: Determining How Costs Behave
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Sample Questions
Q1) An experience curve ________.
A) is a narrower application of the learning curve
B) measures the decline in cost per unit as production decreases for various value-chain functions such as marketing as production increases
C) only measures the decline in labor-hours per unit as units produced increases
D) measures the increase in cost per unit as productivity increases
Q2) Which of the following is a nonlinear cost function?
A) increase in revenues with increase in sales in units
B) total fixed cost of $25,000
C) variable cost of $5 per unit
D) learning curve function
Q3) y = a + bX,y = a,and y = bX are the three basic types of linear cost functions.
A)True
B)False
Q4) With a step fixed-cost function ________.
A) the cost varies with the changes in the activity
B) fixed cost is often approximated with a continuous variable-cost function
C) fixed cost changes proportionally with the level of activity
D) the cost remains the same over wide ranges of the activity in each relevant range
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Chapter 11: Decision Making and Relevant Information
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Sample Questions
Q1) Which of the data provided in the table is a sunk cost?
A) the annual cash operating costs of the old machine
B) the annual cash operating costs of the replacement machine
C) the disposal value of the old machine
D) the original cost of the old machine
Q2) Which model has the greatest contribution margin per unit?
A) Model X
B) Model Y
C) Model Z
D) Both Model X and Model Y have the highest and same contribution margin per unit
Q3) For Contrafic's Kitchens,what is the full cost of the one-time-only special order?
A) $1,020
B) $1,140
C) $1,080
D) $1,320
Q4) How can conflicts arise between the decision model and the performance evaluation model used to evaluate managers? Provide an example of this type of conflict.
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Chapter 12: Strategy, balanced Scorecard, and Strategic
Profitability Analysis
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Sample Questions
Q1) Engineered costs contain a higher level of uncertainty than discretionary costs. A)True
B)False
Q2) What is the cost effect of the growth component (a)?
A) $15,500 F
B) $4,500 U
C) $15,500 U
D) $4,500 F
Q3) The balanced scorecard uses financial and nonfinancial performance measures to evaluate short-run and long-run performance in a single report.
A)True
B)False
Q4) An effective balanced scorecard helps to communicate the strategy to all members of the organization by translating the strategy into a coherent and linked set of understandable and measurable operational targets.
A)True
B)False
Q5) What is reengineering.Can you contrast a reengineering approach to change with a kaizen approach to change?
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Chapter 13: Pricing Decisions and Cost Management
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Sample Questions
Q1) Price dumping occurs when a domestic company is trying to get rid of out-of-style products at a substantially reduced price.
A)True
B)False
Q2) Value engineering entails improvements in product designs,and changes in materials specifications.
A)True
B)False
Q3) If Golden Generator Supply accepts the order at $2,350,what is the amount contributed towards fixed costs and profit on a sales order of 1,000 units?
A) $200,000
B) $350,000
C) $795,000
D) $1,000,000
Q4) Rework is an example of a value-added cost.
A)True
B)False
Q5) Explain the differences between short-run pricing decisions and long-run pricing decisions.
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Chapter 14: Cost Allocation, customer-Profitability Analysis, and Sales-Variance Analysis
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Sample Questions
Q1) The market-share variance is the difference in budgeted contribution margin for actual market size in units caused solely by actual market share being different from budgeted market share.
A)True
B)False
Q2) Once a cost pool has been established,it should NOT need to be revisited or revised.
A)True
B)False
Q3) The sales-quantity variance will be favorable when ________.
A) sales-volume variance and flexible-budget variance are favorable
B) actual units of all products sold exceed budgeted units of all products sold
C) the actual sales mix shifts towards the more profitable units
D) static-budget variance and flexible-budget variance are favorable
Q4) To analyze customer profitability,corporate-sustaining costs should be allocated to customers.
A)True
B)False
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Chapter 15: Allocation of Support-Department Costs, common
Costs, and Revenues
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Sample Questions
Q1) If the incremental method were used,what amount of cost would be allocated to the start-up business?
A) $40,000
B) $50,000
C) $46,000
D) $42,000
Q2) The stand-alone cost allocation method ranks the individual users of a cost object in order of users most responsible for a common cost and then uses these rankings to allocate the costs among the users.
A)True
B)False
Q3) Using the stand-alone method with stand-alone product revenues as the weight for revenue allocation,what amount will be allocated to the refrigerator?
A) $628.50
B) $600.00
C) $627.00
D) $625.00
Q4) What is an operating department and how is it different from a support department? Give examples of each.
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Chapter 16: Cost Allocation: Joint Products and Byproducts
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Sample Questions
Q1) If the value of a byproduct drops significantly,it could also be viewed as a joint product.
A)True
B)False
Q2) The sales-value at splitoff method of joint cost allocation involves computation of the relative amounts of the sales value of the amount of each joint product sold during the period.
A)True
B)False
Q3) One of the reasons to allocate joint costs to individual products is to aid in the preparation of tax returns.
A)True
B)False
Q4) The constant gross-margin percentage NRV method makes the simplifying assumption of treating the joint products as though they comprise a single product.
A)True
B)False
Q5) List the reasons that the sales value at splitoff method of joint cost allocation should be used.
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Chapter 17: Process Costing
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Sample Questions
Q1) Which of the following entries is correct to record depreciation expense of Assembly Department?
A)\(\text { Work in Process - Assembly }\) finished goods
B)Work in Process - Assembly
Accumulated Depreciation
C)Finished Goods
Work in Process - Assembly
D)Accumulated Depreciation
Work in Process - Assembly
Q2) What were the equivalent units for conversion costs during October?
A) 10,125
B) 11,375
C) 11,125
D) 9,000
Q3) Why do we need to accumulate and calculate unit costs in process costing (and also job costing)?
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Chapter 18: Spoilage, rework, and Scrap
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Sample Questions
Q1) The inspection point is the ________.
A) stage of the production cycle where products are checked to determine whether they are acceptable or unacceptable units
B) point at which costs are allocated between normal and abnormal spoilage
C) point at which the calculation of equivalent units is made
D) stage of allocating total costs transferred out to good units completed and transferred
Q2) There is a tradeoff between the speed of production and the normal spoilage rate.
A)True
B)False
Q3) Scrap and rework are considered to be the same thing by managerial accountants.
A)True
B)False
Q4) The downside to conducting inspections at too early a stage is that units spoiled at later stages of the process may go undetected.
A)True
B)False
Q5) How do job-costing systems account for spoilage?
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Chapter 19: Balanced Scorecard: Quality and Time
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Sample Questions
Q1) Costs of quality (COQ)reports usually consider opportunity costs.
A)True
B)False
Q2) How much will appraisal costs change assuming the new prevention methods reduce material failures by 40% in the appraisal phase?
A) $140,000 decrease
B) $60,000 increase
C) $50,000 decrease
D) $22,500 decrease
Q3) ISO 9000 are standards designed to encourage organizations to develop environmental management systems to reduce environmental costs.
A)True
B)False
Q4) Distribution of questionnaires to customers regarding product quality and improving the product on certain key areas based on the inferences drawn from the questionnaires is an example of a nonfinancial measure of quality.
A)True
B)False
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Chapter 20: Inventory Management, just-In-Time, and Simplified Costing Methods
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Sample Questions
Q1) Which of the following statements is true of costs associated with goods for sale?
A) Appraisal costs is a subcategory of shrinkage costs.
B) Special processing costs are always part of purchasing costs.
C) All inventory costs are not available in financial accounting systems.
D) Stockout costs are costs that arise when a company runs out of a particular item for which there is no customer demand.
Q2) The EOQ model is solved using calculus but the key intuition is that relevant total costs are minimized when relevant ordering costs equal relevant carrying costs.
A)True
B)False
Q3) If Premium Company has a safety stock of 480 units and the average daily demand is 60 units,how many days can be covered if the shipment from the supplier is delayed by 4 days?
A) 8 days
B) 4 days
C) 12 days
D) 7 days
Q4) What are the principles of lean accounting? Are there any limitations? Discuss.
Page 22
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Chapter 21: Capital Budgeting and Cost Analysis
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Sample Questions
Q1) The reason to have a post-investment audit is ________.
A) they encourage mid-level managers to make overly optimistic estimates during the early stages of the capital budgeting process
B) they help alert senior management to problems in the implementation of projects
C) they analyze by calculating contribution-margin
D) they help in calculating present value
Q2) Comparison of the actual results for a project to the costs and benefits expected at the time the project was selected is referred to as ________.
A) the audit trail
B) management control
C) a post-investment audit
D) a cost-benefit analysis
Q3) The three common discounted cash flow methods are net present value,internal rate of return,and payback.
A)True
B)False
Q4) What are the relevant cash inflows and outflows for capital budgeting decisions?
Q5) List the capital budgeting methods used to analyze financial information.
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Chapter 22: Management Control Systems, transfer Pricing, and
Multinational Considerations
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Sample Questions
Q1) Bedtime Bedding Company manufactures pillows.The Cover Division makes covers and the Assembly Division makes the finished products.The covers can be sold separately for $5.00.The pillows sell for $6.00.The information related to manufacturing for the most recent year is as follows: \[\begin{array} { | l | r | }
\hline \text { Cover Division manufacturing costs } & \$ 6,000,000 \\
\hline \text { Sales of covers by Cover Division } & 4,000,000 \\
\hline \text { Market value of covers transferred to Assembly } & 6,000,000 \\
\hline \text { Sales of pillows by Assembly Division } & 7,200,000 \\
\hline \text { Additional manufacturing costs of Assembly Division } & 1,500,000 \\
\hline
\end{array}\] Required:
Compute the operating income for each division and the company as a whole.Use market value as the transfer price.Are all managers happy with this concept? Explain.
Q2) Negotiated transfer prices are often employed when market prices are stable. A)True
B)False
Q3) Dual pricing is not widely used.Explain its disadvantages.
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Chapter 23: Performance Measurement, compensation, and Multinational Considerations
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Sample Questions
Q1) Intrinsic motivation comes from being given greater responsibility,doing interesting and creative work,and having pride in doing that work.
A)True
B)False
Q2) What is the Tiller Division's investment turnover?
A) .50
B) .833
C) 1.2
D) 1.5
Q3) A major weakness of comparing two companies using only operating incomes as the basis of comparison is that it ignores the differences in the size of the investment.
A)True
B)False
Q4) The more owners have access to sensitive performance measures,the more they can rely on incentive compensation for their managers.
A)True
B)False
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