Operations Management Accounting Exam Solutions
Course Introduction
Operations Management Accounting focuses on the application of accounting principles and practices to support effective decision-making in operations management. This course explores the role of management accounting in planning, controlling, and evaluating operational activities within various types of organizations. Topics include cost behavior, budgeting, performance measurement, variance analysis, and the integration of financial and non-financial information to optimize operational processes. Students will learn how to use management accounting tools to enhance efficiency, support strategic initiatives, and drive value creation in operational environments.
Recommended Textbook
Cost Accounting A Managerial Emphasis 6th Canadian Edition by Charles T. Horngren Available Study Resources on Quizplus 24 Chapters
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Page 2
Chapter 1: The Accountants Vital Role in Decision Making
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Sample Questions
Q1) Companies with a strategy of low prices compete on their ability to offer unique new products or services that are priced higher than their competition.
A)True
B)False
Answer: False
Q2) Management accounting
A) measures, analyzes, and reports financial and nonfinancial information to internal managers.
B) provides information about the company as a whole.
C) reports information that has occurred in the past that is verifiable and reliable.
D) provides information that is generally available only on a quarterly or annual basis. E) must follow generally accepted accounting principles.
Answer: A
Q3) TQM is a method for improving quality.
A)True
B)False
Answer: True
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Chapter 2: An Introduction to Cost Terms and Purposes
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Q1) Cost tracing is
A) the assignment of direct costs to the chosen cost object.
B) a function of cost allocation.
C) the process of tracking both direct and indirect costs associated with a cost object.
D) the process of determining the actual cost of the cost object.
E) the assignment of both direct and indirect costs associated with a cost object.
Answer: A
Q2) Overtime premium consists of wages paid to all workers in excess of their straight-time wage rates.
A)True
B)False
Answer: True
Q3) Unit costs and average costs are really the same thing.
A)True
B)False
Answer: True
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Chapter 3: Cost-Volume-Profit Analysis
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Sample Questions
Q1) What is the "operating income" assuming 250 people attend and option two is chosen?
A) $7,000
B) $2,900
C) $2,750
D) $4,620
E) $5,080
Answer: D
Q2) A profit-volume graph shows the impact on operating income from changes in the output level.
A)True
B)False
Answer: True
Q3) Which of the following is an assumption of CVP analysis?
A) Costs must be separated into separate fixed and variable components.
B) Total revenues and total costs are curvilinear in relation to output units.
C) Given revenue mixed of products is dynamic.
D) There will be a change between beginning and ending levels of inventory.
E) The time value of money must be taken into account.
Answer: A
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Chapter 4: Job Costing
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Sample Questions
Q1) Last week Job # WPP 298 was charged: DM of $4,606; DL of $1,579; and, MOH of $3,960 based on machine hours. The materials requisition record for this week showed an additional purchase of 10 brackets at a unit cost of $16; the direct labour costs were the same as the first week; and, the total machine hours for both weeks are now 140 hours at $45 per machine hour. Calculate the revised total job cost. (direct materials + direct labour + manufacturing overhead).
A) $10,145
B) $11,884
C) $12,645
D) $18,184
E) $14,224
Q2) It is not a requirement to identify the indirect costs associated with each job when assigning costs to individual jobs.
A)True
B)False
Q3) Actual costing traces direct costs to a cost object by multiplying the budgeted direct cost rate and the actual quantity.
A)True
B)False
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Page 6
Chapter 5: Activity-Based Costing and Management
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Sample Questions
Q1) Using a broad average to assign costs to products or services may lead to undercosting or overcosting.
A)True
B)False
Q2) Understanding the hierarchy of costs is critical when allocating costs to products.
A)True
B)False
Q3) Traditional cost systems distort product costs because
A) they do not know how to identify the appropriate units.
B) competitive pricing is ignored.
C) they emphasize financial accounting requirements.
D) they apply average support costs to each unit of product.
E) they assign direct costs using direct cost tracing.
Q4) Explain how a top-selling product may actually result in losses for the company.
Q5) Do activity-based costing systems always provide more accurate product costs than conventional cost systems? Why or why not?
Q6) Activity-based costing is not adaptable to merchandising organizations.
A)True
B)False
7
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Chapter 6: Master Budget and Responsibility Accounting
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Sample Questions
Q1) How many boxes should Berry's Boxes produce in 2012?
A) 24,000 boxes
B) 20,000 boxes
C) 19,500 boxes
D) 20,500 boxes
E) 22,500 boxes
Q2) A controllable cost is a cost that is not subject to the influence of a given manager of a given responsibility centre for a given time span.
A)True
B)False
Q3) What are the expected total cash receipts for February?
A) $118,500
B) $89,000
C) $88,500
D) $85,000
E) $80,500
Q4) Describe the benefits to an organization of preparing an operating budget.
Q5) Describe some of the drawbacks of using the operating budget as a control device.
Q6) Describe the concept of kaizen budgeting.
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Chapter 7: Flexible Budgets, Variances, and Management
Control: I
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Sample Questions
Q1) What is the All Good Things Ltd. static-budget variance?
A) $400 F
B) $400 U
C) $600 F
D) $200 F
E) $200 U
Q2) Companies use both internal and external benchmarks.
A)True
B)False
Q3) A company uses a static budget approach and the previous management accountant calculated the following information: Fixed costs variance $10,000 U; revenues variance $400,000 F; contribution margin variance $60,000 F Required: What is the total static-budget variance?
A) $50,000 F
B) $50,000 U
C) $230,000 F
D) $230,000 U
E) $390,000 F
Q4) Give at least three good reasons why an unfavourable efficiency variance for direct manufacturing labour might be reported.
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Chapter 8: Flexible Budgets, Variances, and Management
Control: II
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Sample Questions
Q1) Effective planning of variable overhead costs means that a company performs those variable overhead costs that primarily add value
A) for the current shareholders.
B) for the customer using the products or services.
C) for plant employees.
D) for major suppliers of component parts.
E) for management.
Q2) Calculate the rate variance for fixed setup overhead costs.
A) $114 unfavourable
B) $150 unfavourable
C) $250 unfavourable
D) $150 favourable
E) $250 favourable
Q3) What is the variable overhead flexible-budget variance?
A) $1,200 favourable
B) $360 unfavourable
C) $840 favourable
D) $1,200 unfavourable
E) $1,560 unfavourable
Q4) Explain the meaning of a favourable production-volume variance.
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Chapter 9: Income Effects of Denominator Level on Inventory Valuation
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Q1) Briefly discuss two methods of reducing the undesirable incentives associated with the use of absorption costing to evaluate the performance of a plant manager.
Q2) What is Honda Heaven's inventory cost per box using variable costing?
A) $9.50
B) $10.00
C) $12.50
D) $13.40
E) $15.40
Q3) What is the per unit variable cost?
A) $22.00
B) $18.00
C) $14.00
D) $12.00
E) $11.00
Q4) Normal capacity utilization is not the same as master-budget capacity utilization. A)True B)False
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Chapter 10: Quantitative Analyses of Cost Functions
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Sample Questions
Q1) What were total fixed costs for 2012?
A) $242,000
B) $436,000
C) $678,000
D) $227,000
E) $278,000
Q2) What is the estimate of Monroe's cost function when 200 machine hours are used?
A) $1,840.00
B) $1,997.50
C) $2,280.00
D) $3,333.33
E) $3,680.00
Q3) The cost function would be stated as
A) Y = $13,386 + $0.46X.
B) Y = $10,680 + $0.38X.
C) Y = $5,056 + $2.16X.
D) Y = $1,800 + $2.16X.
E) Y = $1,800 + $2.60X.
Q4) List and briefly describe the five steps in estimating a cost function under quantitative analysis.
Page 12
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Chapter 11: Decision Making and Relevant Information
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Sample Questions
Q1) All variable costs are relevant in relevant-cost analysis.
A)True
B)False
Q2) When replacing an old machine with a new machine, the purchase price of the old machine is a relevant cost.
A)True
B)False
Q3) Each item included in the relevant-cost analysis should differ according to the alternative being considered and be an expected future revenue or cost.
A)True
B)False
Q4) Anchor Sign Company manufactures signs from direct materials to the finished product. This is an example of which of the following?
A) insourcing
B) outsourcing
C) product needs analysis
D) product specialization
E) utilization of idle facilities
Q5) Explain what revenues and costs are relevant when choosing among alternatives.
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Chapter 12: Pricing Decisions, Product Profitability Decisions, and Cost Management
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Sample Questions
Q1) Locked-in costs are costs that have been incurred.
A)True
B)False
Q2) What is the target cost if target operating income is 25% of sales?
A) $105.00
B) $145.00
C) $140.00
D) $135.00
E) $112.50
Q3) The life-cycle reporting process
A) is the same as traditional accounting reporting.
B) matches the company's normal fiscal year reporting.
C) usually includes several accounting reporting periods.
D) tracks costs, but not revenues, from the beginning to the end of a product's or service's life.
E) is used only when yearly costs are not definable.
Q4) Explain the differences between short-run pricing decisions and long-run pricing decisions.
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Q5) What advice would you give a company to avoid the appearance of predatory pricing?
Chapter 13: Strategy, Balanced Scorecard, and Profitability Analysis
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Sample Questions
Q1) Which of the following statements is true concerning productivity?
A) The lower the partial productivity ratio, the greater the productivity.
B) Productivity has increased when the partial productivity is high.
C) Prices of inputs are incorporated in the partial productivity ratio.
D) The partial productivity ratio measures the number of outputs produced per multiple input.
E) The partial productivity ratio measures the amount of a single output produced with multiple inputs.
Q2) In general, profit potential increases with greater competition, stronger potential entrants, products that are similar, and tougher customers and suppliers.
A)True
B)False
Q3) Required:
a. What amount is the revenue effect of the growth component?
b. What amount is the cost effect of the growth component?
c. What is the net effect on operating income as a result of the growth component?
Q4) Required:
What is the amount of the productivity component?
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Chapter 14: Period Cost Allocation
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Sample Questions
Q1) An electronics manufacturer is trying to encourage its engineers to design simpler products so that overall costs are reduced.
Required:
Which of the value-chain function costs (R&D, design, production, marketing, distribution, customer service) should be included in product-cost estimates to achieve the above purpose? Why?
Q2) The method that allocates costs in each cost pool using the same rate per unit is known as the
A) incremental cost allocation method.
B) reciprocal cost allocation method.
C) single-rate cost allocation method.
D) dual-rate cost allocation method.
E) homogeneous cost allocation method.
Q3) What is the complete reciprocated cost of the Personnel Department?
A) $92,500
B) $93,803
C) $80,000
D) $105,000
E) $165,634
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Page 16
Chapter 15: Cost Allocation: Joint Products and Byproducts
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Q1) How much (if any) extra income would Morton earn if it produced and sold skim milk ice cream from goats rather than goat skim milk? Allocate joint processing costs based upon the relative sales value at the splitoff point.
A) $47,047
B) $117,297
C) $101,650
D) $70,250
E) $171,900
Q2) Using the sales value at split off method, the joint costs allocated to Jarlon would be:
A) $289,520
B) $115,808
C) $405,328
D) $110,480
E) $154,672
Q3) Different joint cost allocation methods will result in different product margin percentages for the individual products.
A)True
B)False
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17
Chapter 16: Revenue and Customer Profitability Analysis
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Q1) ________ uses product-specific information pertaining to products in the bundle to determine the weights used to allocate the bundled revenues to those individual products.
A) The stand-alone revenue allocation method
B) The averaging approach
C) The incremental revenue-allocation method
D) The joint production costing method
E) The weighted averaging approach
Q2) What is the company's market-size variance?
A) $4,800 favourable
B) $3,200 favourable
C) $2,400 favourable
D) $2,400 unfavourable
E) $3,200 unfavourable
Q3) What is the total sales-mix variance?
A) $21,600 favourable
B) $13,750 favourable
C) $13,750 unfavourable
D) $4,500 unfavourable
E) $4,500 favourable
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Chapter 17: Process Costing
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Sample Questions
Q1) Universal Industries operates a division in Brazil, a country with very high inflation rates. Traditionally, the company has used the same costing techniques in all countries so as to facilitate reporting to corporate headquarters. However, the financial accounting reports from Brazil never seem to match the actual unit results of the division. Management has studied the problem and it appears that beginning inventories may be the cause of the unmatched information. The reason is that the inventories have a different financial base because of the severe inflation.
Required: How can process costing assist in addressing the problem facing Universal Industries?
Q2) What is meant by the term "prime cost pool"?
Q3) Process-costing systems separate costs into cost categories according to the timing of when costs are introduced into the process. A)True B)False
Q4) What is the difference between a weighted-average method of process costing and a first-in, first-out method of process costing?
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Chapter 18: Spoilage, Rework, and Scrap
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Q1) Assuming Hawk uses the FIFO method of process costing, the equivalent units for direct materials and conversion costs respectively for October are:
A) 87,000 units; 93,300 units
B) 87,000 units; 94,200 units
C) 80,000 units; 86,300 units
D) 87,000 units; 90,900 units
E) 99,000 units; 94,200 units
Q2) The costs of normal spoilage are assigned to individual jobs in process costing, and in job costing.
A)True
B)False
Q3) The goal of separately identifying abnormal spoilage is to
A) properly cost units in the system.
B) assist in performance measurement.
C) ensure that such units do not reach finished goods inventory.
D) reduce abnormal spoilage to an acceptable level.
E) reduce abnormal spoilage to nil.
Q4) What are the objectives in accounting for spoilage?
Q5) Distinguish among spoilage, reworked units, and scrap. Give an example of each.
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Chapter 19: Cost Management: Quality, Time, and the Theory of Constraints
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Q1) Customer-response time is a measure of how long it takes for the customer to return a call.
A)True
B)False
Q2) Preventive equipment maintenance is an example of A) prevention costs.
B) appraisal costs.
C) internal failure costs.
D) external failure costs.
E) rework costs.
Q3) Uncertainty about when customers will demand a product or service is generally credited as being the primary cause of bottlenecks.
A)True
B)False
Q4) An example of a nonfinancial Balanced Scorecard measure concerning internal business processes would be the percentage of products that fail soon after delivery.
A)True
B)False
Page 21
Q5) Discuss the methods used to identify quality problems.
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Chapter 20: Inventory Cost Management Strategies
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Q1) Just-in-time purchasing is the purchase of goods or materials such that delivery immediately precedes demand or use.
A)True
B)False
Q2) The management accountant must design performance measures to evaluate and control JIT production. One of the dominant sources of information that the management accountant might use for this would be the personal observations of production line workers and team leaders. Another dominant source of information would be
A) inventory turnover ratio.
B) nonfinancial measures of time, inventory and quality.
C) material cost variances.
D) number of units sent to scrap / total scrap costs.
E) total setup time for machines / total number of units started and completed.
Q3) What is the economic order quantity?
A) 200 cartons
B) 288 cartons
C) 300 cartons
D) 883 cartons
E) 218 cartons
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Chapter 21: Capital Budgeting: Methods of Investment Analysis
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Q1) Net present value can be used to examine the effects of alternative ways of increasing customer loyalty.
A)True B)False
Q2) Which of the following is False concerning the Payback method of capital budgeting?
A) It uses the accrual accounting rate of return.
B) The payback method highlights liquidity.
C) Its major strength is that it that it is easy to use.
D) It does not project cash flows after the recovery of the initial investment.
E) Shorter payback periods give an organization more flexibility.
Q3) The net present value method can on occasion indicate erroneous decisions as it implicitly assumes that project cash flows can be reinvested at the project's rate of return.
A)True B)False
Q4) The net present value method is a discounted cash flow method that concentrates only on cash flows.
A)True B)False
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Chapter 22: Capital Budgeting: a Closer Look
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Q1) A company is considering the purchase of some equipment that in the second year of operation should cause an increase in sales of $200,000, an increase in cash expenses of $120,000, and CCA of $60,000. If the appropriate tax rate is 40%, what will be the after-tax effect on net income in year two?
A) no effect
B) net after-tax inflows of $72,000
C) net after-tax inflows of $12,000
D) net after-tax inflows of $20,000
E) net after-tax inflows of $50,000
Q2) What is the balance in the Class 8 pool after the addition of the new equipment?
A) $350,000
B) $410,000
C) $450,000
D) $430,000
E) $460,000
Q3) In the net present value (NPV) method, after-tax cash flows should be used instead of pre-tax cash flows when taxes are a consideration.
A)True
B)False
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Chapter 23: Transfer Pricing and Multinational Management Control Systems
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Q1) Products transferred between subunits within an organization are considered intermediate products.
A)True
B)False
Q2) One benefit of centralization is an increase in development of an experienced pool of management talent to fill higher-level management positions.
A)True
B)False
Q3) Market-based transfer prices are ideal in perfectly competitive markets when there is idle capacity in the selling division.
A)True
B)False
Q4) Exertion towards a goal is
A) motivation.
B) effort.
C) goal congruence.
D) incentive.
E) loyalty.
Q5) What is the purpose of the internal control system within an organization?
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Chapter 24: Multinational Performance Measurement and Compensation
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Q1) An interactive control system is a formal information system that managers use to focus organization attention and learning on key strategic issues.
A)True
B)False
Q2) An automotive dealership, with a book value of $3,000,000, and total assets of $5,000,000, has a long history of earning 18%. Last year, the company earned $900,000. The owner is considering acquiring another dealership in a nearby town. If the expansion increases income by 50%, what is the maximum amount of investment the owner can make in the new dealership in order to maintain his desired 18% return?
A) $1,350,000
B) $9,000,000
C) $5,000,000
D) $3,000,000
E) $2,500,000
Q3) The only criticism of team-based compensation is that the incentives for individual employees to excel are diminished, harming overall performance.
A)True
B)False
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