Managerial Accounting Mid-Term Exam Review Questions
Ch. 1
1. The leading professional organization for management accountants is the
a. American Association of Management Accountants.
b. Institute of Management Accountants.
c. National Association of Accountants.
d. Society of Management Accountants.
2. In the context of managerial accounting, relevant information
a. Is information that will make a difference in the decision.
b. Is information that has been provided by the controller.
c. Must be provided in quantitative terms.
d. Must be analyzed by the chief financial officer before being provided to managers.
3. Managerial accounting is used by managers to
a. Assure appropriate use of an organization’s resources.
b. Assure accountability for an organization’s resources.
c. Provide information used in planning, evaluation and controlling functions within an organization.
d. All of these answer choices are correct.
4. The information provided by managerial accountants is not distributed to the general public because
a. To do so could provide competitors with vital information about corporate strategies and capabilities.
b. To do so would be against the Institute of Management Accountants’ code of conduct.
c. To do so would be against generally accepted accounting principles.
d. To do so would violate federal trade laws.
5. All public companies that are traded on a stock exchange and governed by the Securities and Exchange Commission must prepare financial statements following
a. Accounting principles set by the Federal Trade Commission.
b. Generally accepted accounting principles.
c. Generally appropriate accounting standards.
d. Standards set by the Accounting Principles Board.
6. Managerial accounting reports
a. Use historical information.
b. Compare actual results to budged results.
c. Project the results of certain decisions.
d. All of these answer choices are correct.
7. Decision makers sometimes might need to sacrifice precision for timeliness because
a. Receiving highly accurate information after the deadline has passed would be of no help.
b. The nature of many business decisions does not require precision in managerial accounting reports.
c. Both receiving highly accurate information after the deadline has passed would be of no help and the nature of many business decisions does not require precision in managerial accounting reports.
d. Neither receiving highly accurate information after the deadline has passed would be of no help nor the nature of many business decisions does not require precision in managerial accounting reports.
8. Frequent feedback from planning, controlling, evaluating, and decision making activities creates which of the following types of decision-making process?
a. Linear
b. Circular
c. Scattered
d. None these answer choices are correct
9. Short-term planning is often referred to as
a. Strategic planning.
b. Operational planning.
c. Goal-oriented planning.
d. External planning.
10. To help managers with their evaluations, managerial accountants often perform
a. Time tests.
b. Spot checks.
c. Variance analysis.
d. Performance reviews.
11. Which of the following is not an input into the monitoring activities relating to production?
a. Actual production rate and output
b. Checking output against the planned inventory level
c. Anticipated manufacturing capacity
d. All of these answer choices are monitoring activities
12. If a company follows a strategy of product differentiation, it will seek ways to set it products apart in terms of
a. Quality, design or service
b. Price, demand or service
c. Design, price or popularity
d. Quality, demand or life cycle
13. When a company approaches market share growth under a build strategy,
a. The company aims to increase its market share in the industry, even at the expense of short-term earnings and cash flow.
b. The company seeks to maintain its current market share but build its return on investment.
c. The company seeks market share growth by purchasing companies exiting the market.
d. The company focuses on short-term profits and cash.
14. Which of the following might be measures of performance for a balanced scorecard?
a. Stock price
b. Sales revenue
c. Customer satisfaction
d. All of these answer choices are correct
15. The supply chain’s goal is to
a. Avoid carrying too much inventory.
b. To reduce or eliminate defective goods.
c. To measure performance based on financial and non-financial components.
d. To get the right product to the right location, in the right quantities at the right time, and at the right cost.
16. Just-in-time inventory management (JIT) is an inventory strategy that focuses on
a. Performance measures.
b. Reducing waste and inefficiency.
c. Getting the right product to the right location at the right price.
d. None of these answer choices are correct.
17. The goal of an enterprise resource planning (ERP) system is to
a. Reduce waste and inefficiency in the production process.
b. To integrate all data from the company’s many business processes into a single information system.
c. To establish the direction in which an organization wishes to go.
d. To monitor day-to-day operations to ensure that processes are operating as expected.
18. Ethical business behavior
a. Is not mere compliance with the law.
b. Suggests that the spirit of the law is more important than the letter of the law.
c. Suggest that moral values and codes are more important than rules and policies.
d. All of these answer choices are correct.
19. The Sarbanes-Oxley Act requires that all publicly traded companies disclose whether certain executives are subject to a corporate code of ethics. Which of the following executive position need not be disclosed?
a. Principal production officer.
b. Principal financial officer.
c. Principal accounting officer.
d. Principal executive officer.
20. Which of the following is least likely to be in a company’s code of ethics?
a. Profit margin expected
b. Transparency of information
c. Political activity
d. Commitment to the environment
Ch. 2
1. If activity level increases, what happens to the total variable cost?
a. It remains the same.
b. It decreases.
c. It increases.
d. It depends on how much the activity level increases.
2. If activity level decreases, what happens to the total fixed cost?
a. It remains the same.
b. It decreases.
c. It increases.
d. It depends on how much the activity level increases.
3. If activity level increases, what happens to the unit fixed cost?
a. It decreases.
b. It increases.
c. It remains the same.
d. It depends on how much the activity level increases.
4. Which of the following is an example of a variable cost for a bicycle manufacturer?
a. Rent
b. Insurance
c. Tires
d. Depreciation
5. When managers talk about cost behavior, they are referring to
a. Where a cost is reported on the income statement.
b. The way in which total costs change in response to changes in the level of activity.
c. The method used to determine whether a cost is accrued or expensed.
d. None of these answer choice are correct.
6. Four common cost behavior patterns that serve as the foundation for cost-volume-profit analysis are
a. Variable cost, fixed cost, selling cost, and administrative cost.
b. Variable cost, fixed cost, mixed cost, and step cost.
c. Variable cost, fixed cost, period cost, and other cost.
d. Selling cost, administrative cost, cost of goods sold, and depreciation.
7. Assume you are planning a spring break ski trip to Colorado. You are preparing a budget of your costs. You are staying at a lodge that has a special where the lodge charges you $2 for each ski lift ride. You believe you will ride the ski lift 40 times during the week, so you budget $80. The ski lift charge is an example of a
a. Fixed cost.
b. Variable cost.
c. Mixed cost.
d. Step cost.
8. Assume you are planning a spring break ski trip to Colorado. You are preparing a budget of your costs. You are staying at a lodge that has a special where the lodge charges you $80 per week for the ski lift regardless of how many times you ride. You believe you will ride the ski lift 40 times during the week. The ski lift charge is an example of a
a. Fixed cost.
b. Variable cost.
c. Mixed cost.
d. Step cost.
9. Assume you are planning a spring break ski trip to Colorado. You are preparing a budget of your costs. You are staying at a lodge that has a special where the lodge charges you a flat fee of $25 for up to ten ski lift rides. You believe you will ride the ski lift 40 times during the week, so you budget $100. The ski lift charge is an example of a
a. Fixed cost.
b. Variable cost.
c. Mixed cost.
d. Step cost.
10. Which of the following is a characteristic of a fixed cost?
a. The total cost remains constant, regardless of changes in the level of activity.
b. The cost per unit varies inversely with changes in the level of activity.
c. Both that the total cost remains constant, regardless of changes in the level of activity and that the cost per unit varies inversely with changes in the level of activity.
d. Neither that the total cost remains constant, regardless of changes in the level of activity nor that the cost per unit varies inversely with changes in the level of activity.
11. A discretionary fixed cost
a. Remains the same per unit regardless of the level of activity.
b. Increases as the level of activity increases.
c. Can be changed in the short run.
d. Can be changed over the long run.
12. Suppose your cell phone company offers a plan under which you can buy time in blocks of 100 minutes. Every 100-minute block costs $15. If you use 101 minutes you will pay $30. This is an example of a
a. Variable cost
b. Mixed cost.
c. Fixed cost.
d. Step cost.
13. Which of the following is not a method of estimating costs?
a. Scattergraphs
b. Bar charts
c. The high-low method
d. Regression analysis
14. Assume a scattergraph shows $100 at no activity and $1,500 at an activity level of 1,000 units. The variable cost per unit is:
a. $2.00
b. $1.40
c. $2.50
d. $5.00
15. Determine the fixed cost given the following information:
Lowest level of activity – 200 units at a total cost of $600
Highest level of activity – 800 units at a total cost of $1,800
a. $200
b. $360
c. $480
d. $600
16. An advantage of using regression analysis over the high-low and scattergraph methods is that
a. Regression analysis is less costly to implement than high-low or scattergraph methods.
b. Regression analysis is a more precise approach than the high-low or scattergraph methods.
c. Both A and B are advantages of using regression analysis.
d. Neither A nor B are advantages of using regression analysis.
17. Dana owns her own real estate agency. She has been working hard to increase her client base. She offers the most comprehensive advertising campaign in the city and it has been paying off by the steady increase in the number of listings over the last several months. However, Dana is concerned that her extensive cost for advertising is eating into her profits. It is difficult to determine how much she spends on advertising for each listing because some of her advertising sources are fixed amounts each month and others are more variable in nature. She would like to analyze the following information to determine how her advertising costs behave based on the number of listings.
Month / Number of Listings / Advertising CostMarch / 22 / $15,280
April / 26 / $17,640
May / 35 / $23,145
June / 42 / $27,205
July / 48 / $30,565
August / 51 / $32,485
September / 50 / $31,835
October / 56 / $36,020
November / 54 / $34,920
Using the high-low method, what is Dana’s variable cost per listing for advertising?
a. $610
b. $593
c. $612
d. $598
18. If an organization wants to make a profit, it must generate more sales revenue than the total costs it incurs. This relation can be expressed using which of the following profit equations?
a. Operating income = [Sales price per unit – Fixed cost per unit) x # units produced] – Variable cost
b. Operating income = [Contribution margin per unit x # units sold] – Fixed costs
c. Operating income = Sales revenue – Total variable costs – Committed costs
d. Operating income = Sales revenue – Product costs – Discretionary costs
19. There is an important relation between contribution margin and profit. Which of the following statements is not true?
a. As the number of units sold increases, total contribution margin increases, but fixed costs remain the same.
b. As the number of units sold rises, profit increases by the additional contribution margin per unit.
c. As the number of units sold decreases, total contribution margin decreases, but fixed costs remain the same.
d. All of these answer choices are correct.
20. If selling price is $100 per unit, variable cost is $70 per unit, and fixed cost is $200, calculate the contribution margin ratio.
a. 14%
b. 30%
c. 200%
d. 50%
Ch 3
1. At the breakeven point, which of the following is not true?
a. Sales revenue is equal to total costs.
b. Contribution margin is equal to total variable costs.
c. Contribution margin is equal to total fixed costs.
d. Operating income equals zero.
2. Assume a sales price per unit of $25, variable cost per unit $15, and total fixed costs of $18,000. What is the breakeven point in units?
a. 720 units
b. 1,200 units
c. 1,800 units
d. None of these answer choices is correct.
3. Assume a sales price per unit of $25, variable cost per unit $15, and total fixed costs of $18,000. What is the breakeven point?
a. 45,000 units
b. $45,000
c. 37,500 units
d. $37,500
4. On the breakeven graph, any level of sales to the left of the breakeven point represents
a. Fixed cost.