Managerial Accounting Practice Questions
Course Introduction
Managerial Accounting focuses on the use of accounting information by managers within organizations to inform decision-making, planning, and control. This course covers fundamental concepts such as cost behavior, budgeting, performance evaluation, and internal reporting practices. Students will learn how to analyze financial data, prepare and interpret management reports, and use various techniques to support strategic and operational decisions. Emphasis is placed on real-world applications, ethical considerations, and the role of managerial accounting in achieving organizational objectives.
Recommended Textbook
Managerial accounting 10th Canadian Edition by Ray Garrison
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Chapter 1: Managerial Accounting and the Business Environment
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Sample Questions
Q1) Corporate governance is the legal framework that allows managers to control and direct lower-level workers on the job.
A)True
B)False
Answer: False
Q2) Both financial and managerial accounting rely on the same underlying financial data but there are major differences.Managerial Accounting: A) emphasizes financial consequences of past activities. B) emphasizes precision.
C) emphasizes relevance.
D) must follow GAAP.
Answer: C
Q3) A customer value proposition is essentially a reason for customers to choose a company's products over its competitors' products.
A)True
B)False
Answer: True
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Chapter 2: Cost Terms, Concepts, and Classifications
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Sample Questions
Q1) How should the cost of the fire insurance for a manufacturing plant be classified?
A) Prime cost.
B) Product cost.
C) Period cost.
D) Variable cost.
Answer: B
Q2) Last month,when 10,000 units of a product were manufactured,the cost per unit was $60.At this level of activity,variable costs were 50% of total unit costs.If 10,500 units are manufactured next month and cost behaviour patterns remain unchanged,how will costs be affected?
A) Total variable costs will remain unchanged.
B) Fixed costs will increase in total.
C) Variable cost per unit will increase.
D) Total cost per unit will decrease.
Answer: D
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Page 4
Chapter 3: Cost Behaviour: Analysis and Use
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Sample Questions
Q1) What does the term "relevant range" mean?
A) The range within which costs may fluctuate.
B) The range within which a particular cost formula is valid.
C) The range within which production may vary.
D) The range within which the relevant costs are incurreD.
Answer: B
Q2) The "goodness of fit" statistic (that is,R-squared)associated with the least-squares regression method indicates the proportion of a mixed cost that is variable.
A)True
B)False
Answer: False
Q3) Modern technology is causing shifts away from variable costs toward more fixed costs in many industries.
A)True
B)False
Answer: True
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Chapter 4: Cost-Volume-Profit Relationships
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Sample Questions
Q1) The break-even point is closest to which of the following?
A) 19,111 units.
B) 10,118 units.
C) 21,500 units.
D) 24,000 units.
Q2) At the break-even point: Sales - Variable expenses = Fixed expenses.
A)True
B)False
Q3) The degree of operating leverage for July is closest to which of the following?
A) 4.48.
B) 3.48.
C) 4.22.
D) 8.70.
Q4) If company A has a higher degree of operating leverage than company B,then which of the following statements is true?
A) Company A has higher variable expenses.
B) Company A's profits are more sensitive to percentage changes in sales.
C) Company A is more profitable.
D) Company A is less risky.
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Chapter 5: Systems Design: Job-Order Costing
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Sample Questions
Q1) What was the cost of goods manufactured during the year?
A) $636,000.
B) $766,000.
C) $736,000.
D) $716,000.
Q2) When completed goods are sold,the transaction is recorded as a debit to Cost of Goods Sold and a credit to Work in Process.
A)True
B)False
Q3) Which of the following companies is most likely to use a job-order costing system rather than a process costing system?
A) Fast food restaurant
B) Shipbuilder
C) Crude oil refinery
D) Candy maker
Q4) In order to improve the accuracy of unit costs,most companies recalculate the predetermined overhead rate each month.
A)True
B)False
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Chapter 6: Systems Design: Process Costing
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Sample Questions
Q1) (Appendix 6A)Under the FIFO process costing method,the equivalent units of production in the production report relate to work done only during the current period.
A)True
B)False
Q2) What are the equivalent units of production for labour and overhead for the month?
A) 70,000 units.
B) 90,000 units.
C) 80,000 units.
D) 82,500 units.
Q3) In process costing,costs are accumulated in processing departments,rather than by job.
A)True
B)False
Q4) In order to use process costing,the output of a processing department must be homogeneous.
A)True
B)False
Q5) $112,000 ÷ 28,000 EUs = $4 per EU
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Chapter 7: Activity-Based Costing: a Tool to Aid Decision Making
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Sample Questions
Q1) How much cost,in total,would be allocated in the first-stage allocation to the Customer Support activity cost pool?
A) $180,000.
B) $255,000.
C) $280,000.
D) $330,000.
Q2) How much cost,in total,should not be allocated to orders and customer support in the second stage of the allocation process if the activity-based costing system is used for internal decision making?
A) $0.
B) $82,000.
C) $104,000.
D) $164,000.
Q3) The predetermined overhead rate (i.e. ,activity rate)for Activity 2 under the activity-based costing system is closest to which of the following?
A) $10.25.
B) $16.77.
C) $24.91.
D) $26.36.
Page 9
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Chapter 8: Variable Costing: a Tool for Management
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Sample Questions
Q1) Last year,Stephen Company had 20,000 units in its ending inventory.During the year,Stephen Company's variable production costs were $12 per unit.The fixed manufacturing overhead cost was $8 per unit in the beginning inventory.The company's operating income for the year was $9,600 higher under variable costing than it was under absorption costing.Given these facts,what must have been the number of units of product in the beginning inventory last year?
A) 18,800 units.
B) 19,200 units.
C) 19,520 units.
D) 21,200 units.
Q2) Absorption costing treats fixed manufacturing overhead as a period cost,rather than as a product cost.
A)True
B)False
Q3) What was the operating income under variable costing?
A) $114,000.
B) $210,000.
C) $234,000.
D) $330,000.
Q4) The following information pertains to Malcolm Corporation for a period:
Page 10
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Chapter 9: Budgeting
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Sample Questions
Q1) The company has budgeted to produce 25,000 units of Product T in June.The finished goods inventories on June 1 and June 30 were budgeted at 500 and 700 units,respectively.What would be the budgeted direct labour costs incurred in June?
A) $227,500.
B) $293,384.
C) $295,750.
D) $304,031.
Q2) When using the participative budget approach,it is generally best for top management to accept all budget estimates without question in order to minimize adverse behavioural responses from employees.
A)True
B)False
Q3) Which of the following best describes the direct materials purchase budget?
A) It is the beginning point in the budget process.
B) It must provide for the desired ending inventory as well as for production.
C) It is accompanied by a schedule of cash collections.
D) It is completed after the cash budget.
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Chapter 10: Standard Costs and Overhead Analysis
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Sample Questions
Q1) (Appendix 10C)A favourable sales volume variance for a single-product firm necessarily implies a favourable market share variance.
A)True
B)False
Q2) (Appendix 10C)If two products are good substitutes,the sales quantity variance for each product can be analyzed further into a market volume variance and a market share variance.
A)True
B)False
Q3) What was the fixed overhead volume variance for March?
A) $1,550 favourable.
B) $3,900 unfavourable.
C) $7,750 favourable.
D) $7,750 unfavourable.
Q4) What was the labour rate variance?
A) $480 favourable.
B) $480 unfavourable.
C) $440 favourable.
D) $440 unfavourable.
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Chapter 11: Reporting for Control
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Sample Questions
Q1) (Appendix 11A)What will be the total prevention cost appearing on the quality cost report?
A) $103,000.
B) $145,000.
C) $151,000.
D) $155,000.
Q2) (Appendix 11A)Which of the following would be classified as a prevention cost on a quality cost report?
A) Cost of field servicing and handling complaints.
B) Warranty repairs and replacements.
C) Systems development.
D) Rework labour and overheaD.
Q3) What was the residual income?
A) $10,000.
B) $40,000.
C) $50,000.
D) $80,000.
Q4) Describe the balanced scorecard concept and explain the reasoning behind it.
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Chapter 12: Relevant Costs for Decision Making
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Sample Questions
Q1) (Appendix 12A)In target costing,the anticipated competitive market price of a product determines its maximum allowable product cost.
A)True
B)False
Q2) (Appendix 12A)If a company sells a product for less than its budgeted unit product cost under absorption costing,then the company will lose money.
A)True
B)False
Q3) If Immanuel accepts this special order,what will be the increase in the monthly operating income?
A) $1,800.
B) $3,600.
C) $12,600.
D) $14,400.
Q4) The book value of old equipment is NOT a relevant cost in an equipment replacement decision.
A)True
B)False
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Chapter 13: Capital Budgeting Decisions
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Q1) (Appendix 13B)The capital cost allowance (CCA)tax shield of a Class 7 asset with a maximum 15% CCA rate was $12,000 for Year 2.The income tax rate was 40%.What was the total CCA deduction for the asset for Year 2?
A) $12,000.
B) $20,000.
C) $30,000.
D) $80,000.
Q2) Which of the following is a weakness of the internal rate of return method for screening investment projects?
A) It does NOT consider the time value of money.
B) It implicitly assumes that the company is able to reinvest cash flows from the project at the company's discount rate.
C) It implicitly assumes that the company is able to reinvest cash flows from the project at the internal rate of return.
D) It does NOT take into account all of the cash flows from a project.
Q3) (Appendix 13B)Not all cash inflows are taxable.
A)True
B)False
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Chapter 14: Financial Statement Analysis Online
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Sample Questions
Q1) Rahner Company has a current ratio of 1.75 to 1.This ratio will decrease if Rahner Company engages in which of the following transactions?
A) Borrows cash using a six-month note.
B) Pays the taxes payable that have been a current liability.
C) Pays the following month's rent on the last day of the year.
D) Sells inventory for more than its cost.
Q2) Narita Company's debt-to-equity ratio at the end of Year 2 was closest to which of the following?
A) 0.17 to 1.
B) 0.25 to 1.
C) 0.42 to 1.
D) 0.58 to 1.
Q3) Orantes Company's accounts receivable turnover for Year 2 was closest to which of the following?
A) 10.3 times.
B) 13.5 times.
C) 14.8 times.
D) 19.3 times.
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