Managerial Accounting Exam Preparation Guide
Course Introduction
Managerial Accounting focuses on the internal use of accounting information by managers to plan, control, and make decisions within an organization. The course covers topics such as cost behavior, budgeting, variance analysis, performance measurement, and relevant cost analysis for decision-making. Students will learn how to interpret financial data, allocate resources efficiently, and support strategic business objectives through informed financial insights, enhancing their ability to contribute effectively to the management process.
Recommended Textbook
Horngrens Cost Accounting A Managerial Emphasis16th Global Edition by Srikant M. Datar
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Page 2
Chapter 1: The Manager and Management Accounting
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195 Verified Questions
195 Flashcards
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Sample Questions
Q1) That part of the value chain that includes ordering and shipping the product to retail outlets is ________.
A)Customer service
B)Production
C)Marketing
D)Distribution
Answer: D
Q2) Which of the following is true of planning in decision making?
A)It helps an organization to select goals and strategies.
B)It improves the quality of products.
C)It helps in evaluating performance.
D)It helps in the analysis of actual performance.
Answer: A
Q3) Increased global competition is placing pressure on companies to reduce costs.
A)True
B)False
Answer: True
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Chapter 2: An Introduction to Cost Terms and Purposes
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Sample Questions
Q1) A cost driver is a variable,such as the level of activity or volume that causally affects costs over a given time span.
A)True
B)False
Answer: True
Q2) A common classification of costs is by business function.Which of the following classifications is not by business function?
A)cost object
B)research and development
C)distribution
D)production
Answer: A
Q3) Outside the relevant range,variable costs,such as direct material costs ________.
A)will decrease proportionately with changes in sales volumes
B)will remain the same with changes in production volumes
C)will not change proportionately with changes in production volumes
D)will increase proportionately with changes in sales volumes
Answer: C
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4
Chapter 3: Cost-Volume-Profit Analysis
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Sample Questions
Q1) Stephanie's Bridal Shoppe sells wedding dresses.The average selling price of each dress is $1,200,variable costs are $700,and fixed costs are $100,000.How many dresses must the Bridal Shoppe sell to yield after-tax net income of $20,000,assuming the tax rate is 40%?
A)267 dresses
B)240 dresses
C)200 dresses
D)400 dresses
Answer: A
Q2) Contribution margin equals ________.
A)revenues minus period costs
B)revenues minus product costs
C)revenues minus variable costs
D)revenues minus fixed costs
Answer: C
Q3) The difference between total revenues and total variable costs is called contribution margin.
A)True
B)False
Answer: True
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Chapter 4: Job Costing
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Sample Questions
Q1) Differentiate between a cost pool and a cost-allocation base.
Q2) Which account is credited if direct materials of $28,000 and indirect materials of $7,000 are sent to the manufacturing plant floor?
A)Manufacturing Overhead Control for $35,000
B)Work-in-Process Control for $35,000
C)Accounts Payable Control for $21,000
D)Materials Control for $35,000
Q3) An example of a denominator reason for calculating annual indirect-cost rates includes ________.
A)Budgeted annual indirect costs divided by actual quantity of cost-allocation base
B)semi-annual insurance payments in March and September
C)higher levels of output demanded during the fall months
D)prepaid rent in January for the months January through June
Q4) A budgeted indirect-cost rate is computed for each cost pool using budgeted indirect costs and the budgeted quantity of the cost-allocation base.
A)True
B)False
Q5) What is the difference between an actual cost system and a normal cost system?
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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) Product-cost cross-subsidization is very common when costs are uniformly spread across various products.
A)True
B)False
Q2) For a manufacturing firm that produces multiple families of products requiring various combinations of different types of parts,what would be the best allocation base for human resource adminstration costs?
A)direct labor hours
B)electricity costs
C)number of parts purchased
D)machine hours
Q3) If the separate activities of design,process design,and prototyping are combined into one activity called "design" in an ABC system,management is forming one homogeneous cost pool.
A)True
B)False
Q4) ABC costing systems cannot be used in marketing decisions.
A)True
B)False
7
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Chapter 6: Master Budget and Responsibility Accounting
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226 Flashcards
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Sample Questions
Q1) Rolling budgets are constantly updated to reflect the latest cost and revenue information.
A)True
B)False
Q2) In the cash budget,the total cash available for needs is calculated using which of the following formulas?
A)ending cash + receipts
B)beginning cash + receipts
C)beginning cash + receipts - disbursements
D)beginning cash + projected depreciation expense
Q3) Research shows that the performance of employees falls when they are asked to adhere to challenging budgets.
A)True
B)False
Q4) Data from the revenues budget is utilized in the production budget.
A)True
B)False
Q5) Administration of budgets is free of emotions as budgets are mechanical tools.
A)True
B)False
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Chapter 7: Flexible Budgets,direct-Cost Variances,and Management Control
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181 Flashcards
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Sample Questions
Q1) The degree to which a predetermined objective or target is met is known as
A)efficiency
B)variance
C)effectiveness
D)marking
Q2) Cost variances should be investigated ________.
A)when they are considered within the "in-control" range as determined by management
B)when the variance is more than a certain percentage of budgeted costs,as determined by management
C)even though the cost of investigation exceeds the benefit as determined by management
D)when the variance is less than a certain percentage of budgeted costs,as determined by management
Q3) An unfavorable sales-volume variance could result from ________.
A)an inappropriate assignment of labor or machines to specific jobs
B)competitors taking market share
C)an inefficiency of a purchasing manager in bargaining with suppliers
Page 9
D)a decrease in actual selling price compared to anticipated selling price
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Chapter 8: Flexible Budgets, overhead Cost Variances, and Management Control
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Sample Questions
Q1) Standard costing is a cost system that allocates overhead costs on the basis of overhead cost rates based on actual overhead costs times the standard quantities of the allocation bases allowed for the actual outputs produced.
A)True
B)False
Q2) Fixed overhead costs include ________.
A)the cost of sales commissions
B)Leasing of machinery used in a factory
C)energy costs
D)indirect materials
Q3) Skytalk Company manufactures weathervanes.The 2015 operating budget is based on the production of 5,300 weathervanes with 1.25 machine-hour allowed per weathervane.Variable manufacturing overhead is anticipated to be $145,750. Actual production for 2015 was 5,250 weathervanes using 6,050 machine-hours.Actual variable costs were $21.75 per machine-hour.
Required:
Calculate the variable overhead spending and the efficiency variances.
Q4) Explain how service-sector companies can benefit from variance analysis.
Page 10
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Chapter 9: Inventory Costing and Capacity Analysis
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Sample Questions
Q1) Throughput is a variation of which of the following systems?
A)absorption costing
B)variable costing
C)job costing
D)standard costing
Q2) Advocates of throughput costing argue that ________.
A)fixed manufacturing costs must be included as inventoriable costs and provide less incentive than absorption costing to build-up inventory to increase profits
B)direct manufacturing labor is relatively fixed and therefore should not be included in inventory costs
C)direct materials costs are a cost of the period and therefore should not be included in inventoriable costs
D)including only direct materials as inventoriable costs provides less incentive than absorption costing to produce a build-up of inventory merely to increase profits
Q3) How does the capacity level chosen to compute the budgeted fixed overhead cost rate affect the production-volume variance?
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11
Chapter 10: Determining How Costs Behave
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Sample Questions
Q1) In multiple regression,when two or more independent variables are highly correlated with one another,the situation is known as ________.
A)heteroscedasticity
B)homoscedasticity
C)multicollinearity
D)autocorrelation
Q2) Which of the following is an example of nonlinear cost function?
A)variable-cost functions
B)fixed-cost functions
C)learning curves
D)mixed cost functions
Q3) Because the cost driver is the same for the fringe benefits of life insurance and pension benefits cost is the same,those costs can be aggregated into one homogeneous cost pool.
A)True
B)False
Q4) A linear cost function can only represent fixed cost behavior.
A)True
B)False
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Chapter 11: Decision Making and Relevant Information
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Sample Questions
Q1) Which of the following is not true about one-time-only special orders?
A)special orders would be accepted if they result in an increase in the contribution margin regardless of capacity and long-term implications
B)along with other criteria,there must be excess capacity to accept an order
C)along with other criteria,there must not be significant long-term negative implications of accepting a special order
D)the impact on operating income of the acceptance of a special-order must be analyzed by management before making a final decision
Q2) A restaurant is deciding whether it wants to update its image or not.It currently has a cozy appeal with an outdated decor that is still in good condition,menus and carpet that need to be replaced anyway,and loyal customers.
Identify for the restaurant management
a.those costs that are relevant to this decision,
b.those costs that are not differential,
c.and qualitative considerations.
Q3) Differential revenue is the additional total revenue from an activity.
A)True
B)False
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Chapter 12: Strategy,balanced Scorecard,and Strategic
Profitability Analysis
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Sample Questions
Q1) When analyzing the change in operating income,the strategy component of productivity will increase when ________.
A)capacity is reduced
B)quality is enhanced
C)selling prices are increased
D)more units are produced and sold
Q2) 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
Q3) When analyzing the change in operating income,the strategy component of growth will increase when more units are sold.
A)True
B)False
Q4) Define engineered and discretionary costs and give two examples of each.
Q5) It is relatively easy to identify unused capacity for discretionary costs.
A)True
B)False
Q6) What are the four key perspectives in the balanced scorecard?
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Chapter 13: Pricing Decisions and Cost Management
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Sample Questions
Q1) Value engineering seeks to reduce value-added costs as well as nonvalue-added costs.
A)True
B)False
Q2) Which of the following statements is true of the cost of producing a product?
A)It controls pricing in highly competitive markets.
B)It affects the willingness of a company to supply a product.
C)It includes manufacturing costs,but not product design costs for pricing decisions.
D)It is not a factor to be taken into account while pricing a product.
Q3) Which of the following is an example of value added cost?
A)cost of machine breakdown
B)cost of defective products
C)rework costs
D)direct machining costs
Q4) Which of the following is true of locked-in costs?
A)Locked-in costs are the same as sunk costs.
B)Locked-in costs are always fixed costs.
C)Locked-in costs are incurred costs.
D)Locked-in costs are also called designed-in costs.
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Chapter 14: Cost Allocation, customer-Profitability Analysis, and Sales-Variance Analysis
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Sample Questions
Q1) Which of the following classifications would the cost of visiting customers would most likely fit into?
A)customer output unit-level cost
B)customer batch-level cost
C)customer-sustaining cost
D)corporate-sustaining cost
Q2) Managers use a customer-profitability analysis report to ensure that ________.
A)unpaid invoices are categorized according to age by due date
B)costs related to customers are segmented into different cost pools on the basis of different types of cost drivers or cost-allocation bases
C)customers making large contributions to the operating income of a company receive a high level of attention from the company
D)cost allocation of indirect cost is in place
Q3) Allocation of corporate-sustaining costs is useful for which of the following?
A)evaluating the performance of salespersons with individual customer accounts
B)motivating distribution-channel management
C)focusing on the cause-and-effect relationships with the cost-allocation bases
D)motivating division managers to examine how corporate costs are planned and controlled
Page 16
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Chapter 15: Allocation of Support-Department Costs,
common Costs, and Revenues
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Sample Questions
Q1) In costs-plus-fixed-fee contracts the allocation of a specific cost may be difficult to defend on the basis of any cause-and-effect reasoning.
A)True
B)False
Q2) Allocating variable costs on the basis of budgeted usage would provide the user departments with no incentive to control their consumption of support services.
A)True
B)False
Q3) When allocating the revenues between a bundled product offering,management judgement can be used in issuing revenue-allocation weights.
A)True
B)False
Q4) The stand-alone method uses the product in the bundle with the most sale and then uses this ranking to allocate bundled revenues to individual products.
A)True
B)False
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Chapter 16: Cost Allocation: Joint Products and Byproducts
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Sample Questions
Q1) List three reasons why we allocate joint costs to individual products or services.Give an example of when the particular cost allocation reason would come into use.
Q2) Which of the following statements is true of the methods for allocating joint costs?
A)Under the cause-and-effect criterion,the physical-measure method is highly desirable.
B)Byproducts are never excluded from the denominator used in the physical-measure method.
C)The NRV method is never used when the selling prices of joint products vary frequently.
D)The sales value at split-off method follows the benefits-received criterion of cost allocation.
Q3) 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
Q4) Define the terms main product,joint product,and byproduct.Give at least one example of each type of product.
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18
Chapter 17: Process Costing
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Sample Questions
Q1) If two different direct materials-such as the circuit board and microphone-are added to the process at different times,a company will need two different direct-materials categories to assign direct materials cost.
A)True
B)False
Q2) Which of the following is the costing system used for mass produced like or similar units of products?
A)inventory-costing systems
B)job-costing systems
C)process-costing systems
D)weighted-average costing systems
Q3) Underestimating the degree of completion of ending work in process leads to increase in operating income.
A)True
B)False
Q4) The cost of units completed can differ materially between the weighted average and the FIFO methods of process costing.
A)True
B)False
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Chapter 18: Spoilage, rework, and Scrap
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Sample Questions
Q1) Scrap and rework are considered to be the same thing by managerial accountants.
A)True
B)False
Q2) 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
Q3) Costs of abnormal spoilage are considered inventoriable and are written off as a period expense.
A)True
B)False
Q4) What is the distinction between normal and abnormal spoilage?
Q5) There is a tradeoff between the speed of production and the normal spoilage rate.
A)True
B)False
Q6) What is the advantage and disadvantage of early inspections?
Page 20
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Chapter 19: Balanced Scorecard: Quality and Time
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Sample Questions
Q1) The average waiting time is the average amount of time an order will wait at the company's shipping office before it is sent to the customer.
A)True
B)False
Q2) A quality improvement program is very costly to implement across a large corporation.Why do they do it? Explain.
Q3) Which of the following is not true regarding balanced scorecard measures?
A)Both financial and nonfinancial measures help managers manage performance along the time dimension
B)Nonfinancial measures help managers evaluate goal achievement regarding manufacturing cycle time
C)the balanced scorecard does not help highlight linkages across the financial and nonfinancial perspectives of the balance scorecard
D)revenue and cost measures help managers evaluate the financial effects of increases and decreases in nonfinancial measures
Q4) Manufacturing cycle times affect both revenues and costs.
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 lean accounting?
A)It is much complex than traditional product costing but produces more accurate product unit costs.
B)It does not always compute costs for individual products but does emphasize product costs by value stream.
C)It omits recording some of the journal entries relating to the stages from the purchase of direct materials to the sale of finished goods.
D)It is acceptable under GAAP.
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) Stockout costs arise when an organization experiences an ability to deliver its goods to its customers.
A)True
B)False
Q4) What are five features of a just-in-time manufacturing system?
Q5) Lean accounting is much simpler than traditional product costing.Why?
Page 22
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Chapter 21: Capital Budgeting and Cost Analysis
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Sample Questions
Q1) Which of the following best describes the internal rate-of-return (IRR)method?
A)it calculates the discount rate at which an investment's present value of the total of all expected cash inflows equals the present value of its expected cash outflows.
B)it calculates the discount rate at which an investment's future value of all expected cash inflows equals the present value of its expected cash outflows.
C)it calculates the discount rate at which an investment's total of all expected cash inflows equals the present value of its expected cash outflows.
D)it calculates the discount rate at which sum of an investment's present value of all expected cash inflows equals the present value of its expected cash outflows.
Q2) A commitment to a new capital project will always result in an increase in net working capital.
A)True
B)False
Q3) A capital budget spans only a one-year period.
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) A benefit of using a market-based transfer price is that the ________.
A)profits of the transferring division are sacrificed for the overall good of the corporation
B)profits of the division receiving the products are sacrificed for the overall good of the corporation
C)economic viability and profitability of each division can be evaluated individually
D)transferring division can be assured of recovering its full costs in all scenarios
Q2) A product may be passed from one subunit to another subunit in the same organization.The product is known as a(n)________.
A)interdepartmental product
B)intermediate product
C)subunit product
D)transfer product
Q3) Briefly explain each of the three methods used to determine a transfer price.
Q4) What are transfer prices and what are its criteria?
Q5) What is decentralization and what are its benefits?
Q6) Why is decentralization costly?
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Chapter 23: Performance Measurement, compensation, and Multinational Considerations
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Q1) Companies are increasingly using nonfinancial measures to evaluate performance.Why? Since these numbers do not come from the company's financial records,why are they used?
Q2) Which of the following is a difference between a diagnostic control system and an interactive control system?
A)A diagnostic control system focuses on meeting expectations,while an interactive control system focuses on standards of ethical behavior.
B)A diagnostic control system focuses on standards of ethical behavior while an interactive control system focuses on meeting expectations.
C)A diagnostic control system focuses on meeting expectations,while an interactive control system focuses on organizational attention and learning on key strategic issues.
D)A diagnostic control system focuses on organizational attention and learning on key strategic issues,while an interactive control system focuses on meeting expectations.
Q3) Discuss the issues and complications that may arise when multinational corporations conduct performance measurement and comparisons among divisions located in different countries.
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