Management Accounting Test Answers

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1. Which phrase best describes the current role of the managerial accountant? 

a. Managerial accountants prepare the fina
ncial statements for an organization.
b. Managerial accountants facilitate the deci
sion-making process within an organization.
c. Managerial accountants make the ke
y decisions within an organization.
d. Managerial accountants are primarily information collectors.
e. Managerial Accountants are solely
staff advisors in an organization.

2. An example of
qualitative
data is: 

a. product cost
b. customer satisfaction
c. net income
d. inventory cost
e. net worth. 

3. Product and service costing information is prepared for 

a. manufacturing companies with inventory.
b. merchandising companies.
c. service providers.
d. each of the other four answers..
e. manufacturing companies without inventory. 

4. Manufacturing costs typically consist of 

a. direct materials, direct labor, and manufacturing overhead.
b. production and shipping costs.
c. production and marketing costs.
d. direct materials, direct labor, and administrative costs.
e. direct materials, direct labor, marketing and administrative costs. 

5. In comparison to the traditional manuf
acturing environment, overhead costs in a JIT
environment all the following are true except: 

a. are more easily tracked to products.
b. are frequently direct in nature.
c. include rent, insurance and utilities.
d. most of the costs are likely to be indirect in nature.
e. labor need not be tracked to the product. 

6. As production increases within the relevant range, 

a. variable costs will vary on a per unit basis.
b. variable costs will vary in total.
c. fixed costs will vary in total.
d. fixed and variable cost stay the same in total.
e. none of the other four answers is true. 

7. You are given the cost and volume information below:
Volume
Cost
1 unit $ 15
10 units 150
100 units 1500
What type of a cost is given? 

a. fixed cost
b. variable cost
c. step cost
d. mixed cost
e. rent cost. 

8. Which of the following statements regardi
ng graphs of fixed and variable costs is true? 

a. Variable costs can be represented by a st
raight line where costs are the same for each
data point.
b. Fixed costs can be represented by a strai
ght line starting at the or
igin and continuing
through each data point.
c. Fixed costs are zero when production is equal to zero.
d. Variable costs are zero when production is equal to zero.
e. Fixed and Variable costs are curv
ilinear form above zero on the “Y” axis. 

9. All of the following statements regarding budgeting is true except 

a. Budgeting helps managers
determine the resources needed to meet their goals and
objectives.
b. Budgeting is a key ingredient in good decision-making.
c. Budgeting is a bookkeeping task
d. The focus of budgeting is planning.
e. Budgeting is an executive responsibility. 

10. Broihan Corporation has the following purchases budget for the last half of 2002:
July
$100,000
October
$ 90,000
August
80,000
November
100,000
September
110,000
December
94,000
Historically, the company pays one half at th
e time of purchase and the remainder in the month
following purchase.
What are the expected cash disbursements in August? 

a. $ 80,000.
b. $ 90,000.
c. $ 95,000.
d. $100,000
e. $105,000 

11. The Inground Sprinkler Supply sells sprinkler systems suited for large or small yards. The
company has decided to adopt an activity-based
costing system. Last year the company incurred
$1,000,000 in overhead costs related to the following activities:
Activity
Allocation Base
Overhead Cost
Purchasing number of purchase orders
$ 350,000
Material handling number of shipments received
200,000
Quality inspection number of inspections
450,000
The activities for large and small yard systems were as follows:
Large
Small
purchase orders
15,000 20,000
shipments received
7,500 12,500
inspections
11,500 11,000
If a customer requested a bid on a specially designe
d sprinkler that would probably require four
inspections, how much quality inspection overhead would you include in the bid? 

a. $ 0
b. $40
c. $80
d. $120.
e. $160. 

12. Bubblemania has three product lines - A, B, and C.
A
B
C
Total
Sales
$10,000 9,000 12,000 31,000
Variable costs
4,500
7,000
6,000
17,500
Contribution Margin
5,500 2,000 6,000 13,500
Fixed costs
3,500
6,000
3,000
12,500
Net income
2,000 (4,000) 3,000 1,000
Product line B appears unprofitable, and management
is considering discontinuing the line. How
would the discontinuation of Product line B affect net income? 

a. increase by $4,000
b. decrease by $4,000
c. increase by $2,000
d. decrease by $2,000
e. increase by $6,000 

13. Coed Novelties manufactures key chains
for college bookstores. During 2003, the company
had the following costs:
Direct materials used
$ 31,000
Direct labor
18,000
Factory rent
12,000
Equipment deprecation – factory
2,000
Equipment depreciation – office
750
Marketing expense
2,500
Administrative expenses
40,000
35,000 units produced were in 2003.
What is the product cost per unit? 

a. approximately $1.24
b. $1.80
c. approximately $3.04
d. $1.40
e. approximately $1.82 

14. The time value of money focuses on 

a. accounting net income.
b. earnings per share.
c. cash flow.
d. current earnings
e. accrual net income. 

15. The Unique Bookshelf Company is considering the purchase of a custom delivery van
costing approximately $50,000. Using a discount rate of 20%, the present value of future cost
savings is estimated at $51,200. To yield the 20% return, the actual cost of the van should not
exceed the $50,000 estimate by more than: 

a. $50,000
b. $51,200
c. $25,000
d. $ 1,200
e. 20% 

16. The Cape Cod Cotton Candy Company ha
d the following information available regarding
last year's operations:
Sales (100,000 units)
$200,000
Variable costs
100,000
Contribution margin
100,000
Fixed costs
50,000
Net Income
50,000
If sales were to increase by 200 units, what would be the effect on net income? 

a. $400 increase
b. $200 increase
c. $150 increase
d. $100 increase
e. $200 loss