Strategic Management Accounting
Midterm Exam
Course Introduction
Strategic Management Accounting explores the integration of accounting techniques and strategic decision-making processes essential for achieving organizational objectives in a competitive environment. This course examines the use of management accounting information in setting strategies, formulating plans, and evaluating performance. Key topics include cost analysis, budgeting, performance measurement, balanced scorecards, value chain analysis, and competitor benchmarking. Emphasis is placed on the application of accounting data to inform and support long-term strategic planning, resource allocation, and sustainable value creation. Through case studies and real-world scenarios, students develop the analytical skills required to align accounting practices with broader business strategies.
Recommended Textbook
Managerial accounting 10th Canadian Edition by Ray Garrison
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Page 2
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) The purpose of IFRS is:
A) To encourage Strategic planning.
B) To enhance the comparability and clarity of financial information on a global basis.
C) To encourage disclosure of Non-Financial data.
D) To change how management accountants prepare reports.
Answer: B
Q3) Provide three examples of common business risks faced by companies.
Answer: Some examples of common business risks include:(1)losing market share to competitors; (2)Web site malfunctioning; (3)employees stealing assets or accessing unauthorized information;and (4)inaccurate budget estimates causing operational problems such as excessive inventory levels or inventory shortages.
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Page 3
Chapter 2: Cost Terms, Concepts, and Classifications
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Sample Questions
Q1) The gross margin for Cushing Company for the first quarter of last year was $325,000 when sales were $700,000.The beginning inventory of finished goods was $60,000,and the ending inventory of finished goods was $85,000.What was the cost of goods manufactured for the first quarter?
A) $375,000.
B) $350,000.
C) $400,000.
D) $385,000.= (700,000 - 325,000)+ 85,000 - 60,000 = $400,000.
Answer: C
Q2) For a manufacturing company,which of the following is an example of a period cost rather than a product cost?
A) Depreciation of factory equipment.
B) Wages of salespersons.
C) Wages of machine operators.
D) Insurance on factory equipment.
Answer: B
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4
Chapter 3: Cost Behaviour: Analysis and Use
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Q1) Unified Parcel,Inc.operates a local parcel delivery service.The company keeps detailed records relating to operating costs of trucks,and has found that if a truck is driven 110,000 kilometres per year,the operating cost is 7.5 cents per kilometre.This cost increases to 8.75 cents per kilometre if a truck is driven 60,000 kilometres per year. Required:
Estimate the cost formula for truck operating costs using the high-low method. Answer: 11ea82f6_1e71_9f95_9299_85528262a33b_TB2484_00
11ea82f6_1e71_9f96_9299_3dd812eea8a7_TB2484_00
11ea82f6_1e71_c6a7_9299_cd64601f8e4c_TB2484_00
11ea82f6_1e71_c6a8_9299_6b66dfca3698_TB2484_00 The cost formula is $1,650 per year plus $0.06 per kilometre.
Q2) The concept of the relevant range does not apply to fixed costs. A)True
B)False
Answer: False
Q3) Indirect costs,such as manufacturing overhead,are always fixed costs. A)True
B)False
Answer: False
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Page 5
Chapter 4: Cost-Volume-Profit Relationships
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Sample Questions
Q1) If sales increase from $80,000 per year to $120,000 per year,and if the degree of operating leverage is 5,then by what percentage should operating income increase?
A) 167%.
B) 250%.
C) 100%.
D) 334%.
Q2) The break-even point in sales for Rice Company is $360,000,and the company's contribution margin ratio is 20%.Its income tax rate is 40%.If Rice Company desires an after-tax operating profit of $84,000,what would total sales have to be?
A) $1,050,360.
B) $1,060,000.
C) $780,000.
D) Cannot be determined without additional information.Sales = (360,000 * .20 + 140,000)/.20 = $1,060,000
Q3) The margin of safety percentage is equal to the margin of safety in dollars divided by total sales in dollars.
A)True
B)False
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Chapter 5: Systems Design: Job-Order Costing
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Sample Questions
Q1) 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
Q2) When the predetermined overhead rate is based on direct labour-hours,the amount of overhead applied to a job is proportional to the amount of actual direct labour-hours incurred on the job.
A)True
B)False
Q3) When a job is completed and transferred to the finished goods warehouse the journal entry to record this is debit Cost of Goods Sold and credit Work in Process Inventory.
A)True B)False
Q4) What is the manufacturing overhead applied?
A) $27,000.
B) $28,000.
C) $29,000.
D) $36,000.
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Chapter 6: Systems Design: Process Costing
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Q1) (Appendix 6A)Assuming that Tru-Colour Paint Company uses the FIFO method,what are the equivalent units of production for materials?
A) 42,600 units.
B) 45,000 units.
C) 53,000 units.
D) 46,000 units.
Q2) (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
Q3) When computing the cost per equivalent unit,it is NOT necessary to consider the percentage of completion of the units in beginning inventory under the weighted-average method.
A)True
B)False
Q4) (Appendix 6B)There is only one method of accounting treatment for normal losses.
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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Q1) The overhead cost per unit of Product P under activity-based costing is closest to which of the following?
A) $4.00.
B) $6.88.
C) $10.00.
D) $30.16.
Q2) What is a duration driver?
A) A simple count of the number of times an activity occurs.
B) An activity measure that is used for the life of the company.
C) A measure of the amount of time required to perform an activity.
D) An activity measure that is used for the life of an activity-based costing system.
Q3) Activity-based costing uses a number of activity cost pools,each of which is allocated to products on the basis of direct labour hours.
A)True
B)False
Q4) Unit-level production activities are performed each time a unit is made.
A)True
B)False
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Chapter 8: Variable Costing: a Tool for Management
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Q1) What was the unit product cost for the month under variable costing?
A) $74.
B) $81.
C) $83.
D) $90.
Q2) Which of the following statements is true about the difference in operating income between variable costing and absorption costing if the number of units in work-in-process and finished goods inventories increase?
A) There will be no difference in net income.
B) Operating income computed using variable costing will be higher.
C) The difference in operating income cannot be determined from the information given.
D) Operating income computed using variable costing will be lower.
Q3) What is the total period cost for the month under the absorption costing approach?
A) $24,000.
B) $60,000.
C) $170,100.
D) $230,100.
Q4) The following information pertains to Malcolm Corporation for a period:
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Chapter 9: Budgeting
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Q1) In a budgeted balance sheet,what would be the merchandise inventory on February 28?
A) $3,200.
B) $4,800.
C) $7,500.
D) $9,600.
Q2) Which of the following variances in a comprehensive performance report using the flexible budget concept is the most appropriate for measuring efficiency of operations?
A) Sales volume variance.
B) Contribution margin variance.
C) Flexible budget variance.
D) Total static budget variance.
Q3) What amount would the flexible budget estimate for total variable overhead cost per direct labour hour?
A) $0.60.
B) $0.90.
C) $1.50.
D) $1.80.
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11
Chapter 10: Standard Costs and Overhead Analysis
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Q1) (Appendix 10C)What was the market volume variance for last year?
A) $18,375.00 favourable.
B) $19,687.50 favourable.
C) $21,875.00 favourable.
D) $21,875.00 unfavourable.
Q2) Tracton Corporation uses a standard costing system in which manufacturing overhead costs are applied to products on the basis of machine time.
Required:
a)Several numbers and labels have been omitted from the analysis of fixed overhead below.Supply the missing numbers and labels.
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) The overhead spending variance contains price but not quantity elements.
A)True
B)False
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12
Chapter 11: Reporting for Control
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Q1) Many firms tend to adopt a focus or a niche strategy instead of either a cost leadership or a differentiation strategy.
A)True
B)False
Q2) (Appendix 11A)Quality of conformance is the degree to which an actual product meets its design specifications and is free of defects or other problems that may affect appearance or performance.
A)True
B)False
Q3) What was the residual income for the Northern Division last year?
A) $48,000.
B) $90,000.
C) $125,000.
D) $135,000.
Q4) What was Division A's residual income?
A) $20,000.
B) $30,000.
C) $35,000.
D) $45,000.
Q5) Describe the balanced scorecard concept and explain the reasoning behind it.
Page 13
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Chapter 12: Relevant Costs for Decision Making
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Q1) Lusk Company produces and sells 15,000 units of Product A each month.The selling price of Product A is $20 per unit,and variable expenses are $14 per unit.A study has been conducted concerning whether Product A should be discontinued.The study shows that $70,000 of the $100,000 in fixed expenses charged to Product A would continue even if the product were discontinued.These data indicate that if Product A were discontinued,the company's overall monthly operating income would change by how much?
A) An increase of $10,000.
B) An increase of $20,000.
C) A decrease of $20,000.
D) A decrease of $60,000.
Q2) If Austin produced and sold 4,000 afghans and zero spindles of yarn the total contribution margin would be closest to:
A) $24,000.
B) $40,000.
C) $60,000.
D) $8,000.
Q3) Opportunity costs are recorded in the accounts of an organization.
A)True
B)False
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Chapter 13: Capital Budgeting Decisions
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Q1) The Jason Company is considering the purchase of a machine that will increase revenues by $32,000 each year.Cash outflows for operating this machine will be $6,000 each year.The cost of the machine is $65,000.It is expected to have a useful life of five years with no salvage value.For this machine,what is the simple rate of return? (Ignore income taxes in this problem. )
A) 9.2%.
B) 20.0%.
C) 40.0%.
D) 49.2%.
Q2) (Appendix 13A)The internal rate of return of the project is closest to which of the following?
A) 12%.
B) 16%.
C) 18%.
D) 20%.
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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Q1) Irally Company,a retailer,had cost of goods sold of $150,000 last year.The beginning inventory balance was $26,000,and the ending inventory balance was $24,000.The company's average sale period (turnover in days)was closest to which of the following?
A) 58.40 days.
B) 60.83 days.
C) 63.27 days.
D) 121.67 days.
Q2) Harton Company,a retailer,had cost of goods sold of $250,000 last year.The beginning inventory balance was $20,000,and the ending inventory balance was $22,000.The company's inventory turnover was closest to which of the following?
A) 5.95 times.
B) 11.36 times.
C) 11.90 times.
D) 12.50 times.
Q3) Only credit sales (i.e. ,sales on account)are included in the computation of the accounts receivable turnover.
A)True
B)False
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