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Management accounting :Muliple choice questions

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ROI in its generic form is defined as:

a. Income divided by Sales
b. Income divided by Total Costs
c. Income divided by Investment
d. Sales divided by Total Assets
e. None of the Above are correct

Which of the following is a capital budgeting technique used by organizations:

a. ROA
b. ROI
c. NPV
d. ROE
e. All of the above are capital budgeting techniques

You calculate both the net present value and payback for investment alternatives A and B. Alternative A has a payback of 4.0 years and a NPV of $40,000. Alternative B has a payback of 3.0 years and a NPV of $25,000. Both alternatives have five year expected lives. Considering the decision making value of each method, from a financial perspective the most attractive alternative is:

a. Alternative A is the more attractive
b. Alternative B is the more attractive
c. Neither A or B are attractive investments
d. Both A and B are equally attractive


You have the opportunity to acquire an investment with the following cash flow streams. The initial investment will be $7,000 and there is no salvage value. You require a rate of return of 13 percent. Net cash inflows for the next four years are estimated at 2003 = $1,500; 2004 = $2,500; 2005 = $2,800; 2006 = $2,900. Using the above cash flow data, calculate the NPV of this investment. The NPV to the closest $100 is:

a. $1,180
b. $9,600
c. $000
d. $1,000
e. The NPV cannot be calculated without additional information

Which of the following was not set forth in the text as an aspect of the development of a master budget:

a. Budgeted Income Statement
b. Budgeted Balance Sheet
c. Capital Budget
d. Sales Budget
e. All of the above are considered as components of a master budget


Which of the following is NOT a benefit derived from the preparation fo an annual budget:

a. Communication is enhanced throughout the organization
b. Provides a means for the allocation of scarce resources
c. Managers are more able to control activities throughout an organization
d. Each of the above are important aspects of budgeting
e. Only choices 1 and 2 are important aspects of budgeting


Top sales executives normally direct the preparation of sales forecasts. Each of the following are considered by sales forecasters in this effort except for:

a. Changes in product mix
b. Competitors' actions in the marketplace
c. Accounting department ideas
d. Past sales patterns for product lines, geographic regions, and/or customer type
e. General economic conditions


Suppose a GAP store has the following data: Accounts receivable, May 31: (.30 x May sales of $350,000) = $105,000....... Monthly forecasted sales are: June, $400,000; July, $450,000; August, $500,000; September $550,000......... Sales consist of 70% cash and 30% credit. All credit accounts are colleted in the month following the sales. Uncollectible accounts are negligible and may be ignored........ Cash collections for July will amount to?

a. $435,000
b. $392,000
c. $287,000
d. $515,000


Stang Sports Equipment Company made 44,000 basketballs in a given year. Its manufacturing costs were $316,800 variable and $95,000 fixed. Assume that no price changes will occur in the following year and that no changes in production methods are applicable. Compute the budgeted cost for producing 50,000 basketballs in the following year....Total budgeted costs are:

a. $411,800
b. $421,500
c. $455,000
d. $467,955


The superintendent of police of the city of Rollag is attempting to predict the costs of operating a fleet of police cars. Among the items of concern are fuel, $.20 per mile, and depreciation, $6,000 per car per year. The manager is preparing a flexible budget for the coming year for 30,000, 40,000, and 50,000 miles. Prepare the flexible-budget total cost amounts for fuel and depreciation for one car for the 50,000 mile alternative.

a. $12,000
b. $6,000
c. $12,300
d. $16,000


Bangkok Custom Shirt Company uses a special fabric in the production of dress shirts. During August, Bangkok purchased 106,000 square yards of material and paid $2.60 per square yard. The standard quantity is 104,000 square yards at $2.50 per square yard. The price variance experienced by Bangkok is:

a. $6,500 unfavorable
b. $10,600 unfavorable
c. $10,400 unfavorable
d. $10,400 favorable


A management group sets standards that include key actions and activities that reflect the goals of an organization, that are affected by actions of managers and employees, can be readily understood by employees, and balances long- and short-term concerns in their performance measurement system. This management group can be considered to have developed:

a. Effective Performance Measures
b. Ineffective Performance Measures
c. Activity Based Performance Measures
d. Traditional Based Performance Measures


You are the manager of a community bank. For management control system purposes, which of the following would be considered a controllable cost for managment evaluation purposes:

a. The market interest rate
b. The depreciation on the bank building for the period under review
c. The amount of labor expense for tellers for the period under review
d. All of the above are considered controllable costs
e. None of the above are considered controllable costs


Look at Exhibit 9-4 on page 392 of the text. If you were the manager of the West Division, you would prefer that your performace evaluation and bonus was measured based on the:

a. Contribution margin
b. Contribution margin controllable by segment managers
c. Contribution margin by segments
d. Income before income taxes


Tootsie Roll sets financial, customer, internal processes, and employee growth and learning performance indicators. This is an example of:

a. Kaplan and Norton's Management By Objectives
b. Kaplan and Norton's Balanced Scorecard
c. Drucker's Concept of Responsibility Center Reporting
d. Dean Pohlman's Value Driven Management Idea
e. None of the above are correct

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Word document contains answers and explanation of multiple choice question.

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Managerial Accounting - Multiple Choice Questions

Question 1:
What is the biggest disadvantage of ABC?

a. It does not provide costing information needed for GAAP purposes.
b. It causes management to make frivolous decisions.
c. It often causes managers to argue about the best activity measure.
d. It is expensive.

Question 2:
In performing a vertical analysis, the base for sales revenues on the income statement is

a. net sales.
b. sales.
c. net income.
d. cost of goods available for sale.

Question 3:
Rigsby Company had no beginning work in process. During the period, 5,000 units were completed, and there were 500 units of ending work in process. How many units were started in production?

a. 5,500
b. 5,000
c. 4,500
d. 500

Question 4:
Kaiser Inc. uses job order costing for its brand new line of homework machines. The cost incurred for production during 2006 totaled $6,000 of materials and $5,000 of conversion costs. The company ships all goods as soon as they are completed which results in no finished goods inventory on hand at the end of any year. Beginning work in process totaled $5,000, and the ending balance is $3,000. During the year, the company completed 40 machines. How much is the cost per machine?

a. $275
b. $400
c. $225
d. $325

Question 5:
Which of the following is a limitation of activity-based costing?

a. Can only be used with process costing
b. Managers realize that the nature of each product determines its profitability
c. Some arbitrary allocations continue
d. It increases product costs

Question 6:
A process with no beginning work in process, completed and transferred out 10,000 units during a period and had 5,000 units in the ending work in process that were 50% complete. How much is equivalent units of production for the period for conversion costs?

a. 12,500 equivalent units
b. 15,000 equivalent units
c. 17,500 equivalent units
d. 7,500 equivalent units

Question 7:
SO-3 The master budget is a set of interrelated budgets that constitutes a plan of action for a specified time period.

a. True
b. False

Question 8:
Crater Go-carts produces two models: Model 24 has sales of 500 units with a contribution margin of $40 each; Model 26 has sales of 350 units with a contribution margin of $50 each. If sales of Model 26 increase by 100 units, how much will profit change?

a. $5,000 increase
b. $17,500 increase
c. $22,500 increase
d. $35,000 increase

Question 9:
Which one of the following is true of the CVP income statement?

a. It is part of accounting information provided to all financial statement users.
b. It is used by internally by management.
c. It provides users the amount of gross profit of a company.
d. It will reflect the same net income as that reported on the traditional income statement.

Question 10:
Faucet Company reported the following information for 2006:

budgeted sales sept oct nov dec
$240,000 $310,000 $290,000 360,000

All sales are on credit
Costumers amonts on account are collected 50% in the month of sale and 50% the following month.

How much is the November 30, 2006 budgeted Accounts Receivable?

a. $300,000
b. $180,000
c. $155,000
d. $145,000

Question 11:
What sources of information does a manufacturing company use to determine cost of goods sold?

a. Only the sales budget
b. Only the cost of purchases budget
c. The materials budget, the labor budgets and the overhead budgets
d. The sales and the cost of purchases budget

Question 12:
What might an unfavorable price variance for direct materials indicate?

a. That the purchasing manager purchased too much inventory
b. That production scheduling problems were a problem
c. That the purchasing manager was unable to negotiate better prices during the period
d. That the supply in the market exceeded the demand of the materials

Question 13:
What does the controllable variance measure?

a. Whether a company incurred more or less fixed overhead costs compared to the amount of overhead applied
b. Whether a company incurred more or less overhead costs than allowed
c. The efficiency of using variable overhead resources
d. Whether the production manager is able to control the production facility

Question 14:
Choco Latte Shop can sell all the units it can produce of either Product A or Product B but not both. Product A has a unit contribution margin of $45 and takes three machine hours to make and Product B has a unit contribution margin of $32 and takes two machine hours to make. There are 1,200 machine hours available to manufacture a product. What should Choco Latte Shop do?

a. Make Product A which creates $13 more profit per unit than Product B does
b. Make Product B which creates $1 more profit per constraint than Product A does
c. Make Product B because more units can be made and sold than product A
d. The same total profits exists regardless of which product is made.

Question 15:
Project A has a higher rate of return than Project B. Which statement is true about Project A?

a. It is more attractive than Project B.
b. It is less attractive than Project B.
c. It is less than the cost of capital.
d. It is higher than the hurdle rate.

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