Unit 4: Introduction to Management Accounting - Practice Quiz

1 Which type of accounting is mainly concerned with determining the cost of producing goods or services?

2 Which accounting system primarily provides information to external users such as investors and creditors?

3 Management accounting mainly helps managers in which activity?

4 Which accounting type is generally required by law for many business organizations?

5 Which accounting branch focuses mainly on internal users of information?

6 Which function of management accounting involves setting future targets?

7 Management accounting helps management compare actual performance with planned performance for:

8 Which of the following is a major use of management accounting?

9 A budget prepared with the help of management accounting is mainly used for:

10 Management accounting information is most useful to:

11 Which tool estimates future income and expenditure?

12 Which technique studies the relationship between cost, volume, and profit?

13 Which management accounting tool compares related financial figures using ratios?

14 Standard costing is mainly used to compare actual costs with:

15 A comparative income statement usually presents information for:

16 The main purpose of a comparative statement is to identify:

17 If sales increase from to , the absolute increase is:

18 In a comparative statement, percentage change is generally calculated using the:

19 In a common-size income statement, each item is usually expressed as a percentage of:

20 In a common-size balance sheet, each asset item is generally expressed as a percentage of:

21 A manufacturing company wants to determine the cost of producing each product, evaluate departmental efficiency, and prepare annual statements for external shareholders. Which combination of accounting branches is most appropriate?

22 Which feature most clearly distinguishes management accounting from financial accounting?

23 A manager receives a report showing material usage variances for each production department. This report is primarily an output of:

24 Which statement best describes the relationship between cost accounting and management accounting?

25 A company is considering whether to accept a special order at a price below its normal selling price. Which management accounting information is most relevant?

26 The primary purpose of a management accounting budget is to:

27 Actual production cost was $126,000, while the budgeted production cost was $120,000 for the same output. What is the cost variance, and how should it generally be interpreted?

28 Which management accounting function is illustrated when a manager compares actual labor hours with standard labor hours and investigates the difference?

29 A divisional manager is evaluated using profit generated relative to the assets employed by the division. Which performance measure is being used?

30 A company has fixed costs of $80,000, a selling price of $50 per unit, and variable cost of $30 per unit. What is the break-even output?

31 If fixed costs are $90,000 and the contribution margin ratio is 30%, what sales revenue is required to earn a target profit of $30,000?

32 A product has actual sales of $500,000 and break-even sales of $375,000. What is the margin of safety as a percentage of actual sales?

33 A company’s current ratio is 2:1, and its current liabilities are $60,000. If inventory is $20,000, what is the quick ratio?

34 Under standard costing, the standard material price is $5 per kilogram, the actual price is $5.50, and actual usage is 10,000 kilograms. What is the material price variance?

35 A company’s sales increased from $240,000 to $300,000. What are the absolute increase and percentage increase, respectively?

36 In a comparative income statement, operating expenses increased by 10%, while sales increased by 20%. What is the most reasonable interpretation?

37 The following information is available: inventory was $80,000 in Year 1 and $100,000 in Year 2; trade receivables were $60,000 in Year 1 and $54,000 in Year 2. Which conclusion is correct?

38 A company reports gross profit of $90,000 on sales of $300,000 in Year 1 and gross profit of $120,000 on sales of $360,000 in Year 2. What happened to the gross profit ratio?

39 In a common-size income statement, cost of goods sold is $420,000 and sales are $600,000. What percentage of sales is represented by cost of goods sold?

40 In a common-size balance sheet, total assets are used as the base. If property, plant, and equipment is $450,000 and total assets are $750,000, what is its common-size percentage?

41 A manufacturing company prepares a report showing material usage variances by production department, a report on product profitability for internal pricing decisions, and audited annual statements for external lenders. Which classification is most appropriate?

42 Which statement best explains the relationship among cost accounting, management accounting, and financial accounting when a business uses integrated accounting records?

43 A manager rejects a project because its reported accounting profit is negative, although the project generates positive incremental cash flows after considering avoidable costs. Which limitation or distinction most directly explains the error?

44 A division is evaluated using return on investment. Its current ROI is 18%, and a proposed investment would earn 15%, exceeding the company-wide required return of 10%. What is the most likely dysfunctional consequence?

45 A budget is prepared using a single activity level, but actual output is 30% higher than planned. Actual costs exceed the original budget. Which management-accounting response is most appropriate?

46 A company is considering discontinuing Product X. Product X reports a loss after absorbing common fixed costs, but discontinuation would eliminate contribution of $80,000 and save only $50,000 of avoidable fixed costs. What should management do, ignoring strategic effects?

47 Which combination most effectively supports a decision to outsource a component when supplier reliability is uncertain?

48 A product has a selling price of $120, variable cost of $72, and fixed costs of $480,000. If the selling price falls by 10% while other amounts remain unchanged, what is the new break-even volume?

49 A product has a selling price of $120, variable cost of $72, and fixed costs of $480,000. If the selling price falls by 10% while other amounts remain unchanged, what is the new break-even volume?

50 A company sells products A and B in a constant mix of 3:2. Contribution per unit is $40 for A and $70 for B, and total fixed costs are $350,000. What is the approximate break-even sales volume for the combined package?

51 A company sells products A and B in a constant mix of 3:2. Contribution per unit is $40 for A and $70 for B, and total fixed costs are $350,000. What is the approximate break-even number of composite packages?

52 A division reports sales of $2,400,000, variable costs of $1,440,000, controllable fixed costs of $420,000, and non-controllable fixed costs of $180,000. Which pair correctly identifies contribution margin and controllable margin?

53 A standard allows 4 kilograms of material per unit at $5 per kilogram. Actual production is 1,000 units, using 4,300 kilograms at $5.50 per kilogram. What are the material price and usage variances?

54 Revenue rises from $800,000 to $920,000, while operating profit rises from $96,000 to $100,000. Which interpretation is most accurate?

55 Current assets increase from $500,000 to $650,000, while current liabilities increase from $250,000 to $390,000. What happens to net working capital and the current ratio?

56 A comparative income statement shows sales increasing by 20%, cost of goods sold increasing by 28%, and operating expenses increasing by 5%. Which conclusion is directly supported?

57 A comparative balance sheet reports inventory increasing by 40%, receivables increasing by 25%, and sales increasing by 10%. Which risk-focused inference is most reasonable, assuming prices and accounting policies are unchanged?

58 In a common-size income statement, Company P reports gross profit at 32% of sales and Company Q at 28%. P also has operating expenses of 25% of sales compared with Q at 18%. Which conclusion is valid?

59 In a common-size income statement, Company P reports gross profit at 32% of sales and Company Q at 28%. P reports operating expenses at 25% of sales, while Q reports 18%. Which conclusion is valid?

60 A common-size balance sheet shows cash declining from 12% to 6% of total assets, receivables increasing from 18% to 27%, and inventory increasing from 20% to 24%. Which interpretation is most defensible?