Management Accounting Questions and Answers Homework

This document presents a comprehensive set of multiple-choice questions and their corresponding answers, focusing on key concepts in management accounting. The questions cover a wide range of topics, including cost pools, methods for setting standards, the balanced scorecard approach, budgeting, break-even analysis, contribution margin, time value of money, net present value, characteristics of merchandising organizations, cost drivers, standard costing, accounting rate of return, operating leverage, overhead allocation, cost variances, and goal-seek analysis. The solutions provide clear explanations and calculations where necessary, offering students a valuable resource for understanding and mastering the core principles of management accounting. The questions are drawn from a university-level assignment, and the answers provide a solid foundation for students studying finance and accounting.

Running head: MANAGEMENT ACCOUNTING
Management Accounting
Name of the Student:
Name of the University:
Author’s Note:

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1. A cost pool is:
a. a collection of costs to be assigned.
b. the joint result of several subunit activities.
c. the primary function of a responsibility accounting system.
d. a performance report of the lowest level manager.
Answer: (a) a collection of costs to be assigned.
2. Which of the following are methods for setting standards?
a. Historical data analysis and cost analysis
b. Task analysis and analysis of historical data
c. Budgetary analysis and data analysis
d. Cost analysis and budgetary analysis
Answer: (b) Task analysis and analysis of historical data.
3. On which of the following does a balanced scorecard approach focus on?
a. Strategic objectives
b. Critical success factors
c. Performance measures at all levels of the business
d. All of the given answers
Answer: (d) All of the given answers.
4. The purposes of a budget include:
a. planning.
b. facilitating communication and coordination.
c. controlling profit and operations, and evaluating performance and providing

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incentives.
d. All of the given answers.
Answer: (a) Planning
5. The break-even point is that level of activity where
a. total revenue equals total cost.
b. total revenue equals fixed cost.
c. total revenue equals variable cost.
d. total revenue equals product cost.
Answer: (a) Total revenue equals total costs
6. The contribution margin per unit is calculated as the difference between
a. sales revenue per unit and fixed cost per unit.
b. sales revenue per unit and variable cost per unit.
c. sales revenue per unit and product cost per unit.
d. fixed cost per unit and variable cost per unit.
Answer: (b) Sales revenue per unit and variable cost per unit
7. The main concept of time value of money is:
a. that cash flows received in the distant future are not as valuable as cash flows
received in the near future.
b. the recognition of all relevant costs in absolute dollars.
c. that cash flows received in different years should be treated as equal.
d. that cash payments made in the future have the same value today.

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Answer: (a) that cash flows received in the distant future are not as valuable as cash
flows received in the near future.
8. According to the net present value method, if the present value of cost savings
exceeds the acquisition cost of a new machine:
a. the old machine should be retained.
b. the new machine should be purchased.
c. the old machine should be sold off without adding the new machine.
d. the old machine should be scrapped.
Answer: (b) the new machine should be purchased
9. Which of the following characteristics apply to merchandising organisations?
i. They purchase goods for sale.
ii. Outputs can be stored.
iii. They produce intangible outputs.
iv. Services are consumed as they are produced.
a. i and iii
b. ii and iii
c. i and ii
d. i and iv
Answer: (c) i and ii
10. A cost driver:
a. is a factor that causes a cost.
b. may also be a resource driver.
c. is a unit of work performed within the organisation.

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d. is a factor that causes a cost AND may also be a resource driver.
Answer: (d) is a factor that causes a cost and may also be a resource driver.
11. An increasingly popular approach that integrates financial and customer performance
measures with measures in the areas of internal operations and innovation is known
as:
a. the integrated performance measurement tool.
b. the balanced scorecard.
c. integrated efficiency.
d. benchmarking.
Answer: (b) the balanced scorecard
12. Under a standard costing system
a. standard costs are entered into the work in process and finished goods inventory
account.
b. actual costs are entered into work in process inventory account while standard
costs are entered into the finished goods account.
c. the raw material inventory account is based on standard quantities and standard
cost.
d. actual costs are entered into raw material and work in process inventory account.
Answer: (a) standard costs are entered into the work in process and finished goods
inventory account
13. The simple rate of return, rate of return on assets and the unadjusted rate of return are
synonymous with:

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a. the accounting rate of return.
b. the payback method.
c. the internal rate of return.
d. discounted cash flow.
Answer: (a) the accounting rate of return
14. In a standard costing system all inventories are recorded at
a. actual cost.
b. standard cost.
c. budgeted cost.
d. purchase cost.
Answer: (b) standard cost
15. The extent to which an organisation uses fixed costs in its cost structure is called
a. financial leverage.
b. operating leverage.
c. fixed cost leverage.
d. operating leverage AND fixed cost leverage.
Answer: (b) operating leverage
16. Direct labour hours or direct labour dollars are suitable overhead allocation bases
when:
a. overhead costs are insignificant.
b. direct labour details are readily available.
c. direct material costs are highly correlated with direct labour hours.

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d. they have been used satisfactorily in the past.
Answer: (b) direct labour details are readily available
17. A cost variance is
a. the difference between the cost of a product and its selling price.
b. a measure of risk.
c. the difference between the actual cost and the standard cost.
d. the difference between actual costs in two successive time periods.
Answer: (c) the difference between the actual cost and the standard cost
18. In the concept of Balanced score card, market share may be a lead indicator from:
a. a financial perspective.
b. a customer perspective.
c. internal business processes.
d. learning and growth.
Answer: (b) a customer perspective
19. ‘Goal seek' analysis provides for which of the following?
i. An output for a given set of inputs
ii. Required inputs for a given output
iii. A range of outputs for a range of inputs
a. i
b. ii
c. iiI
d. None of the given answers

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Answer: (b) ii
20. Which of the following statements are true?
a. Professional service entities employ process costing.
b. Mass service entities employ job costing.
c. Service shops generally employ hybrid costing.
d. Merchandising entities employ job costing for customer services.
Answer: (c) Service shops generally employ hybrid costing.