Management and Cost Accounting Study Guide Questions
Course Introduction
Management and Cost Accounting explores the principles and techniques used to identify, measure, analyze, and interpret accounting information to support decision-making in organizations. The course covers key topics such as cost behavior, costing methods, budgetary control, variance analysis, and performance measurement. It introduces students to both traditional and contemporary approaches to management accounting, emphasizing their role in planning, controlling, and evaluating business operations. Through real-world examples and practical exercises, students develop the analytical and critical thinking skills necessary to effectively manage costs and enhance organizational value.
Recommended Textbook
Introduction to Management Accounting 16th Edition by Charles T. Horngren
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17 Chapters
2438 Verified Questions
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Page 2
Chapter 1: Managerial Accounting,the Business
Organization,and Professional Ethics
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137 Verified Questions
137 Flashcards
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Sample Questions
Q1) The behavioral implications of an accounting system refer to the system's effects on the firm's customers.
A)True
B)False
Answer: False
Q2) Which of the following is NOT a new direction in business process management?
A) JIT philosophy
B) XBRL
C) Six Sigma
D) TQM
Answer: B
Q3) What type of information is used in making nonroutine decisions,such as the decision to replace a traditional assembly line with fully automated robots?
A) scorekeeping information
B) attention directing information
C) problem solving information
D) auditing information
Answer: C
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Chapter 2: Introduction to Cost Behavior and Cost Volume
Profit Relationships
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Sample Questions
Q1) Janitors clean the factory with scrubbing machines and polishing machines.Scrubbing machines scrub the factory floor and polishing machines polish the floor.The cost associated with cleaning the factory is treated as a product cost.What is a good cost driver for the Depreciation Expense associated with the scrubbing and polishing machines?
A) number of janitors operating machines
B) number of labor hours put in by janitors
C) number of kilowatt hours used
D) number of machine hours used
Answer: D
Q2) In a small construction firm,a crew supervisor is added for every ten workers employed.The salaries of the crew supervisors are a ________.
A) variable cost
B) mixed cost
C) step cost
D) fixed cost
Answer: C
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Chapter 3: Measurement of Cost Behavior
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Sample Questions
Q1) Sandler Company manufactures electronic devices.The company is considering three cost drivers for measuring maintenance costs in the factory.The following cost functions have been estimated using each cost driver: \(\begin{array} { l }\text { Cost Driver }&\text { Cost Function }&R^2\\
\text { 1. } X=\text { number of parts }&Y=\$ 20,000+\$ 5 X&R^2=0.40\\
\text { 2. } X=\text { number of labor hours }&Y=\$ 13,000+\$ 10 X&R^2=0.95\\
\text { 3. } X=\text { number of machine hours }&Y=\$ 15,000+\$ 7 X&R^2=0.30\\ \end{array}\)
Which cost driver should be chosen?
A) number of parts
B) number of labor hours
C) number of machine hours
D) none of the above
Answer: B
Q2) The high-low method uses estimated cost data to approximate the cost function.
A)True
B)False
Answer: False
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Page 5
Chapter 4: Cost Management Systems and Activity-Based
Costing
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Sample Questions
Q1) In a manufacturing company,unsold,fully complete products are called Work-In-Process Inventory.
A)True
B)False
Q2) An allocated cost is a(n)________ assigned to a cost object using a ________.
A) direct cost; cost-allocation base
B) indirect cost; cost-allocation base
C) direct cost; cost pool
D) indirect cost; cost pool
Q3) Which of the following is an example of a value-added cost to a manufactured product?
A) the cost of handling inventory
B) the cost of storing inventory
C) changing the setup of production-line operations
D) the depreciation expense of robots that assemble the product
Q4) Determining the key components of an Activity-Based Costing (ABC)system is the first step in the design of an ABC system.
A)True
B)False
6
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Chapter 5: Relevant Information for Decision Making With a
Focus on Pricing Decisions
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Sample Questions
Q1) Managers may use different markup rates for different categories of costs.
A)True
B)False
Q2) In decision making situations,________ aspects may dominate quantitative aspects in many decisions.
A) relevant
B) precision
C) accuracy
D) qualitative
Q3) On the income statement,the absorption approach separates manufacturing costs from ________.
A) some nonmanufacturing costs
B) all nonmanufacturing costs
C) all variable costs
D) all fixed costs
Q4) With perfect competition,at some point marginal costs begin to rise with increases in production because facilities become inefficient.
A)True
B)False
Page 7
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Chapter 6: Relevant Information for Decision Making With a
Focus on Operational Decisions
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Sample Questions
Q1) Sunbury Company is considering the replacement of a machine that is presently used in production.The following data are available:
\(\begin{array}{lll}&\text { Old Machine }&\text { NEW Machine }\\
\text { Original cost } & \$ 60,000 & \$ 35,000 \\
\text { Useful life in years } & 10 & 5 \\
\text { Current age in years } & 5 & 0 \\
\text { Book value } & \$ 25,000 & -\\\text { Disposal value now } & \$ 8,000 & - \\
\text { Disposal value in } 5 \text { years } & 0 & 0 \\
\text { Annual cash operating costs } & \$ 12,000 & \$ 4,000 \end{array}\)
Adding all five years together,the total relevant costs to consider if the old machine is kept are ________.
A) $30,000
B) $50,000
C) $52,000
D) $60,000
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Page 8
Chapter 7: Introduction to Budgets and Preparing the Master Budget
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Sample Questions
Q1) Decisions made during long-range planning include ________.
A) addition or deletion of product line
B) location of new plant
C) purchase of equipment
D) all of the above
Q2) The schedule of cash collections from customers has ________.
A) cash sales only
B) collections on credit sales only
C) A and B
D) budgeted purchases
Q3) A company identifies the following goals and objectives:
Increase sales 10 percent each year.
Increase profits 5 percent each year.
Increase total plant assets 5 percent each year.
Which of the following budgets identifies the overall goals and objectives of an organization?
A) sales budget
B) master budget
C) strategic plan
D) financial planning model
Page 9
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Chapter 8: Flexible Budgets and Variance Analysis
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Sample Questions
Q1) Which of the following is used to develop flexible budgets?
A) fixed overhead variances
B) static budget variances
C) flexible budget variances
D) cost functions
Q2) Huntsman Company's variable selling and administrative expenses are $48,000 at a production level of 6,000 units.If the production level is 8,000 units,what are the variable selling administrative expenses?
A) $48,000
B) $56,000
C) $64,000
D) $80,000
Q3) The unfavorable variances resulting from ideal standards are intended to constantly remind personnel of the continuous need for improvement.
A)True
B)False
Q4) A favorable materials price variance may lead to an unfavorable materials usage variance.
Q5) What are some common causes of unfavorable quantity variances for direct labor?
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Chapter 9: Management Control Systems and Responsibility Accounting
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Sample Questions
Q1) ________ is the logical integration of techniques to gather and use data for planning and control decisions and to evaluate performance.
A) An internal control system
B) A quality control system
C) A financial reporting system
D) A management control system
Q2) Management control systems in nonprofit organizations will probably never be as highly developed as those in profit-seeking firms.Which of the following is NOT a reason for this to occur?
A) Organizational goals are less clear in nonprofit organizations.
B) Employees in nonprofit organizations have different motivation drivers and incentive drivers than their counterparts in profit-seeking firms.
C) There is less competitive pressure to improve management control systems in nonprofit organizations.
D) There are low levels of discretionary fixed costs in nonprofit organizations.
Q3) A profit center can exist in a nonprofit organization.
A)True B)False
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Chapter 10: Management Control in Decentralized Organizations
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Sample Questions
Q1) Gokey Company reports the following information: \(\begin{array} { l }
\text {Net operating profit after taxes }&\$400,000 \\
\text {Adjusted net operating profit after taxes }&\$570,000 \\
\text {Average invested capital }&\$ 600,000\\
\text {Adjusted average invested capital }&\$700,000 \\
\text { After-taxcost of capital}&10\%\\ \end{array}\)
The adjusted figures reflect adjustments used by Stern Stewart & Company.What is the EVA for Gokey Company?
A) $330,000
B) $340,000
C) $500,000
D) $510,000
Q2) Decentralization is most successful when an organization's segments are relatively independent of one another.
A)True
B)False
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Chapter 11: Capital Budgeting
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Sample Questions
Q1) Which of the following statements is FALSE?
A) Discounted cash flow models focus on future cash inflows and outflows.
B) Discounted cash flow models consider the time value of money.
C) Discounted cash flow models focus on net income.
D) Discounted cash flow models compare cash outflows today to the present value of future cash flows.
Q2) If the internal rate of return on a project is ________ the required rate of return,then the project should be accepted.
A) higher than
B) lower than
C) the same as
D) none of the above
Q3) When using the net present value method,if the net present value of a project is negative,then the ________.
A) the project should be rejected
B) the project should be accepted
C) the project should be recalculated for missing cash inflows
D) none of the above
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13
Chapter 12: Cost Allocation
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Sample Questions
Q1) Denise Company manufactures three products from a joint process.Joint costs for the year amounted to $250,000.The following data was available:
\[\begin{array} { l l l }
\text { Product } & \text { Units Produced } & \text { sales Value at Split-off } \\
\hline X& 5,000 & \$ 70,000 \\
Y & 3,000 & \$ 30,000 \\
Z & 2,000 & \$ 100,000 \end{array}\]
Assume the relative-sales-value method of allocating joint costs is used.What amount of joint costs is allocated to Product X?
A) $70,000
B) $87,500
C) $125,000
D) $250,000
Q2) The preferred cost driver for allocating central corporate support costs to products is either actual or estimated usage.
A)True
B)False
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Page 14
Chapter 13: Accounting for Overhead Costs
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Sample Questions
Q1) The most widely used approach in disposing of an overhead variance is proration to the affected accounts.
A)True
B)False
Q2) Why is absorption costing more widely used than variable costing?
A) Variable costing is not allowed for tax purposes, but absorption costing is allowed.
B) Variable costing is not allowed for external reports, but absorption costing is allowed.
C) Absorption costing removes the impact of changing inventory levels from the financial results.
D) A and B
Q3) ________ is used for external reporting.
A) Absorption costing
B) Variable costing
C) Direct costing
D) The contribution margin approach
Q4) Variable overhead costs may have a production volume variance.
A)True
B)False
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Chapter 14: Job-Order Costing and Process-Costing Systems
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Sample Questions
Q1) Two extremes of product-costing are job-order costing and normal-order costing.
A)True
B)False
Q2) Healthy Connection Company uses a backflush-costing system to account for bicycles.Bicycles are scheduled for production only after orders are received and products are shipped to customers immediately upon completion.No Finished Goods Inventory is maintained and product costs are applied directly to Cost of Goods Sold.The standard cost for materials is $150 per bicycle.The standard cost for conversion costs is $75 per bicycle.
During the current month,Healthy Connection Company purchased $6,000 of direct materials and incurred $3,000 in conversion costs to produce 40 bicycles.When production is complete,the journal entry has a Debit to ________.
A) Finished Goods Inventory for $9,000
B) Conversion Costs for $9,000
C) Cost of Goods Sold for $9,000
D) No entry is needed
Q3) Some backflush costing systems eliminate the Finished Goods Inventory account.
A)True
B)False
Page 16
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Chapter 15: Basic Accounting: Concepts, techniques, and Conventions
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Sample Questions
Q1) For nonprofit organizations,the stockholders' equity section of the balance sheet is replaced with ________.
A) retained earnings
B) partners' capital
C) partners' withdrawals
D) net assets
Q2) Liabilities are the entity's economic obligations to owners.
A)True
B)False
Q3) The adjusting entry for wages earned but unpaid results in a(n)________.
A) increase in expenses and an increase in liabilities
B) increase in expenses and a decrease in liabilities
C) decrease in expenses and a decrease in liabilities
D) decrease in expenses and an increase in liabilities
Q4) A cash payment of accounts payable does not affect stockholders' equity.
A)True B)False
Q5) Revenue and expense accounts are permanent stockholders' equity accounts. A)True
B)False
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Chapter 16: Understanding Corporate Annual Reports:
Basic Financial Statements
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Sample Questions
Q1) Assume you are preparing a balance sheet dated December 31,2014.Which of the following is NOT a long-term liability?
A) bonds payable due June 30, 2016
B) bonds payable due June 30, 2015
C) bonds payable due December 31, 2016
D) bonds payable due December 31, 2020
Q2) An example of an operating activity on the statement of cash flows is federal taxes paid.Assume the direct method is used.
A)True
B)False
Q3) The indirect method of preparing the statement of cash flows is the most popular method in the United States.
A)True B)False
Q4) During a period of inflation,the LIFO method reports a larger cost of goods sold amount than FIFO.
A)True
B)False
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Chapter 17: Understanding and Analyzing Consolidated Financial Statements
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Sample Questions
Q1) The financial ratios for a company can be evaluated using ________.
A) time-series comparisons
B) benchmark comparisons
C) cross-sectional comparisons
D) all of the above
Q2) Research suggests that investors are not fooled by companies that choose the least conservative accounting policies to increase net income.
A)True
B)False
Q3) John Company purchased common stock in Garcia Company.John Company treats the investment as available-for-sale securities.During the current year,Garcia Company earned $4,000,000 and paid dividends of $1,000,000.Assume that John Company owns 10% of the outstanding shares of Garcia Company.Garcia Company's net income will affect John Company in which of the following ways?
A) increasing cash and investments by $400,000
B) increasing stockholders' equity and investments by $400,000
C) increasing cash and stockholders' equity by $400,000
D) no effect
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