Strategic Management Accounting Practice Exam
Course Introduction
Strategic Management Accounting focuses on the use of accounting information in formulating and implementing organizational strategy. This course explores how management accounting tools and techniques can support long-term decision-making, competitive positioning, and the achievement of business objectives. Key topics include balanced scorecards, value chain analysis, cost management for strategy, performance measurement, and the integration of financial and non-financial data to inform strategic choices. Emphasis is placed on understanding external and internal factors affecting organizations and how accounting information can provide a competitive advantage in dynamic business environments.
Recommended Textbook Managerial Accounting 2nd Edition by Ronald Hilton
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Page 2
Chapter 1: The Changing Role of Managerial Accounting
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Q1) Which of the following employees would be considered as holding a line position within their respective organization?
A)The Vice-President of Sunoco Canada.
B)The Chief Financial Officer of General Motors Canada.
C)A secretary employed by Rogers Communications.
D)The manager of food and beverage services at Canada's Wonderland.
E)The Controller at Roots Canada.
Answer: D
Q2) Which of the following activities involves the running of the organization on a day-to-day basis?
A)Decision making.
B)Planning.
C)Directing operational activities.
D)Controlling.
E)Motivating.
Answer: C
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Chapter 2: Basic Cost Management Concepts
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Q1) Which of the following is a period cost?
A)Direct material.
B)Manufacturing overhead.
C)Depreciation on cars driven by a firm's president and treasurer.
D)Miscellaneous supplies used in production activities.
E)Indirect labour.
Answer: D
Q2) Which of the following is a product cost for external financial reporting purposes?
A)Amortization of office equipment used by the CEO.
B)Advertising costs.
C)The salary paid to the Vice President of Finance.
D)Rent on a factory.
E)Sales commissions.
Answer: D
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Chapter 3: Product Costing and Cost Accumulation
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Q1) The term "normal costing" refers to the use of:
A)job-costing systems.
B)computerized accounting systems.
C)targeted overhead rates.
D)predetermined overhead rates.
E)actual overhead rates.
Answer: D
Q2) Product costing in a manufacturing firm is the process of:
A)accumulating the company's period costs.
B)allocating costs among the firm's departments.
C)placing a value on the company's fixed assets.
D)assigning costs to the firm's inventory.
E)assigning costs to the company's managers.
Answer: D
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Chapter 4: Process Costing and Hybrid Product-Costing Systems
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Q1) Texas Tees Company uses a process-cost accounting system. The company adds direct materials at the start of its production process; conversion cost, on the other hand, is incurred evenly throughout manufacturing. The firm has no beginning work-in-process inventory; its ending work in process is 30% complete. Which of the following sets of percentages would be used to calculate the correct number of equivalent units in the ending work-in-process inventory?
A)Materials, 30%; conversion cost, 30%.
B)Materials, 30%; conversion cost, 100%.
C)Materials, 100%; conversion cost, 30%.
D)Materials, 100%; conversion cost, 70%.
E)Materials, 100%; conversion cost, 100%.
Q2) A considerable portion of the text's process-costing presentation illustrated the proper way to allocate manufacturing costs to the units completed during the period and the ending work-in-process inventory. For companies that have a single manufacturing department, the journal entry to recognize completed production involves a debit to Finished-Goods Inventory and a credit to Work-in-Process Inventory. What journal entry, if any, is needed for these same companies to properly account for ending work in process?
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Chapter 5: Activity-Based Costing and Management
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Q1) When a company adopts a just-in-time inventory system, it would expect:
A)higher inventories and less frequent purchases.
B)higher inventories and more frequent purchases.
C)lower inventories and less frequent purchases.
D)lower inventories and more frequent purchases.
E)lower inventories and more units purchased on a given order.
Q2) Non-value-added costs occur in non-manufacturing organizations as well as in manufacturing firms.
Required:
A. Explain what is meant by a non-value-added cost.
B. Identify two potential non-value-added costs for each of the following service providers: airlines, banks, and hotels.
Q3) Factory Oak produces various wooden bookcases, tables, storage units, and chairs. Which of the following would be included in a listing of the company's non-value-added activities?
A)Assembly of tables.
B)Staining of storage units.
C)Gluing of chairs.
D)Transfer of chairs from the assembly line to the gluing department.
E)Assembly of tables, staining of storage units, and gluing of chairs.
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Chapter 6: Activity Analysis, Cost Behaviour, and Cost
Estimation
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Q1) A high R<sup>2</sup>measure in regression analysis is preferred because:
A)it indicates a good fit of the regression line through the data points.
B)it shows that a great deal of the change in the dependent variable is explained by change in the coefficient of determination.
C)it means that the independent variable is a good predictor of the outliers.
D)it means that the cost analyst can be relatively confident in his or her identification of the outliers.
E)it means that the dependent variable is based on mismatched time periods.
Q2) In regression analysis, the variable -cost component that is being predicted is known as the:
A)independent variable.
B)dependent variable.
C)explanatory variable.
D)interdependent variable.
E)functional variable.
Q3) Distinguish between least-squares regression and multiple regression as cost estimation methods.
Q4) Define the term "relevant range" and explain its importance in understanding cost behaviour.
Page 8
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Chapter 7: Cost-Volume-Profit Analysis, Absorption and Variable Costing
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Q1) If a company desires to increase its safety margin, it should:
A)increase fixed costs.
B)decrease the contribution margin.
C)decrease selling prices, assuming the price change will have no effect on demand.
D)stimulate sales volume.
E)attempt to raise the break-even point.
Q2) Skinner Manufacturing reported sales revenue of $3,800,000, variable costs of $800,000, and fixed costs of $300,000. If these data are based on the sale of 20,000 units, the break-even point in units would be:
A)1,714 units.
B)2,000 units.
C)2,222 units.
D)4,571 units.
E)5,333 units.
Q3) Maddox Corporation's Product No. H647 has a negative contribution margin. How can such a situation arise? Should the company continue to stock and sell Product No. H647?Explain.
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Chapter 8: Profit Planning and Activity-Based Budgeting
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Q1) James Corporation, headquartered in Toronto, has a manufacturing plant in Edmonton. Plant managers desire to participate in the company's budget efforts, which, for the past 10 years, have been handled solely by top executives in Toronto. Edmonton managers feel that by becoming involved, they can make great strides in terms of improving operating performance of their aging facility.
Required:
Briefly discuss this situation, focusing on the benefits and problems of letting Edmonton managers participate in the company's budgetary efforts.
Q2) A company's plan for the acquisition of long-lived assets, such as buildings and equipment, is commonly called a:
A)pro-forma budget.
B)master budget.
C)financial budget.
D)profit plan.
E)capital budget.
Q3) Sushi House has budgeted sales revenues for 2012 as follows:
Q4) List several factors that an organization might consider when developing a sales forecast.
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Chapter 9: Standard Costing and Flexible Budgeting
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Q1) Silver Manufacturing Company has a standard variable overhead rate of $4 per machine hour, with each completed unit expected to take three machine hours to produce. A review of Silver's accounting records found the following: Actual variable overhead: $210,000
Variable-overhead efficiency variance: $18,000U
Variable-overhead spending variance: $30,000F
How many units did Silver actually produce during the period?
A)13,500.
B)16,500.
C)18,500.
D)21,500.
E)52,500.
Q2) When considering whether to investigate a variance, managers should consider all of the following except:
A)the size of the variance.
B)the pattern of recurrence of the variance.
C)a variance's trends over time.
D)nature of the variance, namely, whether it is favourable or unfavourable.
E)controllability of the variance.
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Chapter 10: Cost Management Tools
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Q1) Which of the following is not a typical quality-cost classification?
A)External failure cost.
B)Internal failure cost.
C)Production inefficiency cost.
D)Prevention cost.
E)Appraisal cost.
Q2) Which of the following business models considers financial, customer satisfaction, internal operations, and learning and growth in the evaluation of performance?
A)Deterministic simulation.
B)Balanced scorecard.
C)Payoff matrix.
D)Decision tree.
E)Chart of operating performance (COP).
Q3) Kaizen costing is consistent with:
A)cost reduction.
B)poor product quality.
C)financial accounting and income statements.
D)just-in-time production.
E)cost reduction and product quality.
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Chapter 11: Responsibility Accounting, Investment Centres, and Transfer Pricing
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Q1) Return on investment (ROI) and residual income (RI) are popular measures of divisional performance. Like any measure, there are disadvantages or weaknesses that are an inherent part of these tools. Briefly discuss a major weakness associated with each tool.
Q2) Richmond Corporation has no excess capacity. If the firm desires to implement the general transfer-pricing rule, opportunity cost would be equal to: A)zero.
B)the direct expenses incurred in producing the goods.
C)the total difference in the cost of production between two divisions.
D)the contribution margin forgone from lost external sales.
E)the summation of variable cost plus fixed cost.
Q3) The following data pertain to Mason's Creek Winery:
\(\begin{array} { l r }
\text { Income } & \$ 10,500,000 \\
\text { Sales Revenue } & 50,000,000 \\
\text { Average invested capital } & 60,000,000
\end{array}\) Required:
Calculate Mason's Creek Winery's sales margin, capital turnover, and ROI
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Chapter 12: Decision Making: Relevant Costs and Benefits
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Q1) Lido Company manufactures A and B from a joint process (cost = $80,000). Five thousand pounds of A can be sold at split-off for $20 per pound or processed further at an additional cost of $20,000 and then sold for $25. Ten thousand pounds of B can be sold at split-off for $15 per pound or processed further at an additional cost of $20,000 and later sold for $16. If Lido decides to process B beyond the split-off point, operating income will:
A)increase by $10,000.
B)increase by $20,000.
C)decrease by $10,000.
D)decrease by $20,000.
E)decrease by $58,000.
Q2) A company that is operating at full capacity should emphasize those products and services that have the:
A)lowest total per-unit costs.
B)highest contribution margin per unit.
C)highest contribution margin per unit of scarce resource.
D)highest operating income.
E)highest sales volume.
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Chapter 13: Target Costing and Cost Analysis for Pricing Decisions
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Q1) If the volume sold reacts strongly to changes in price, demand:
A)has no elasticity.
B)has negative elasticity.
C)is inelastic.
D)is elastic.
E)is unrealistic.
Q2) Montana produces bicycles in a highly competitive market. During the past year, the company has added a 30% markup on the $250 manufacturing cost for one of its most popular models. A new competitor manufactures a similar model, has established a $300 selling price, and is seriously eroding Montana's market share. Management now desires to use a target-costing approach to remain competitive and is willing to accept a 20% return on sales. If target costing is used, which of the following choices correctly denotes (1) the price that Montana will charge and (2) company's target cost respectively?
A)300, 210
B)300, 240
C)300, 250
D)325, 240
E)325, 250
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Chapter 14: Capital Expenditure Decisions
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Q1) Hunter Corporation will evaluate a potential investment in an advanced manufacturing system by use of the net-present-value (NPV) method. Which of the following system benefits is least likely to be omitted from the NPV analysis?
A)Savings in operating costs.
B)Greater flexibility in the production process.
C)Improved product quality.
D)Shorter manufacturing cycle time.
E)Ability to fill customer orders more quickly.
Q2) The true economic yield produced by an asset is summarized by the asset's:
A)non-discounted cash flows.
B)net present value.
C)future value.
D)annuity discount factor.
E)internal rate of return.
Q3) The accounting rate of return focuses on the:
A)total accounting income over a project's life.
B)incremental accounting income over a project's life.
C)average cash flows over a project's life.
D)cash inflows from a project.
E)tax savings from a project.
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Chapter 15: Allocation of Support Activity Costs and Joint Costs
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Q1) When allocating service department costs, companies should use:
A)actual costs rather than budgeted costs, and separate rates for variable and fixed costs.
B)budgeted costs rather than actual costs, and separate rates for variable and fixed costs.
C)budgeted costs rather than actual costs, and a rate that combines variable and fixed costs.
D)actual costs rather than budgeted costs, and a rate that combines variable and fixed costs.
E)a rate that is based on matrix theory.
Q2) Which of the following would not be considered a service department for an airline?
A)Maintenance.
B)Information Systems.
C)Purchasing.
D)Flight Catering.
E)Plant Maintenance.
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