Managerial Accounting Practice Questions

Management by Exception

The concept that focuses on important variances and ignores trivial ones is…

Profitability Index

Which method should be used when ranking competing projects with different initial investments?

Least-Cost Decisions

In situations where no revenues are involved, what is the most desirable alternative?

Internal Rate of Return

What is the term used to describe the discount rate at which the present value of a project’s cash inflows will equal the present value of its cash outflows?

less than the minimum required rate of return.

A negative net present value indicates that the project’s return is…

Payback Period

What ignores the time value of money?

1. Screening Decisions

2. Preference Decisions

What are the two broad categories of capital budgeting decisions?

Discount Rate.

The rate of return that is used to find the present value of a future cash flow is called the…

Volume Trade-Off Decisions.

When a company does not have enough capacity to produce all of the products and sales volume demanded by their customers, this leads to…

Special Order

What type of decisions involves deciding whether to accept or reject an order that is outside the scope of normal sales?

Whether the differential benefits exceed the differential costs.

What term forms the basis for a financial advantage when making a business decision?

Fixed Selling and Administrative Expenses.

What is added to the variable selling and administrative expensis to get the total selling and administrative expenses?

Total Cash Disbursements

On the cash budget, what is subtracted from the total cash available to find the cash excess or deficiency?

Non-Cash Expenses

What is subtracted from total budgeted selling and administrative expenses to determine the cash disbursements for selling and administrative expenses?

Cost Budget Cycle

What do companies use to evaluate and improve performance?

Planning Budget

A budget that is prepared at the beginning of the period for a specific level of activity is called?

Direct Labor

What is sometimes called “touch labor”?

Direct Labor

What is common to both prime cost and conversion cost?

Non-Manufacturing Costs

Property taxes associated with a company’s administrative facility are considered…

Product Cost

How should the wages of a sheet metal worker in a fabrication plant be classified?

Matching Principle

What requires that the costs incurred to generate a particular revenue should be recognized as expenses in the same period that the revenue is recognized?

bill of materials

The direct materials required to manufacture each unit of product are listed on a…

total fixed manufacturing overhead cost

In the cost formula (Y=a+bX) that is used to estimate the total manufacturing overhead cost for a given period, the letter “a” refers to the estimated…

multiple predetermined overhead rates

Companies can improve cost accuracy by using…

Subsidiary Ledger

When all of a company’s job cost sheets are viewed collectively they form what is known as a…

Underapplied

What is the term used when a company applies less overhead to production that is actually incurs?

Credit to Manufacturing Overhead

What occurs when Manufacturing Overhead is applied to Work in Process?

do not flow through the three inventory accounts

When companies incur selling and administrative costs, those costs…

Credit to Work in Process

What occurs when a job has been completed and transferred to the finished goods warehouse?

Debit to Cost of Goods Sold

What happens when finished goods are shipped to customers?

Simplicity

What is a reason for the popularity of plant-wide overhead rates to allocate overhead costs?

high-volume to low-volume products

Implementing an activity-based costing system often results in a shift of overhead costs from…

Eliminate waste, decrease processing time, and reduce defects

Activity-based management involves focusing on activities to…

using multiple-activity pools to accumulate overhead costs

Activity-based costing improves accuracy of product costs by…

Split - Off

The point in the manufacturing process at which joint products can be recognized as separate products is called?

increase the capacity of the bottleneck

When there is a constrained resource, the best way to increase profits is to…

sell or process further decision

Deciding what to do with a joint product at the split - off point is a…

Intermediate Product

As it applies to sell or process further decisions, which term refers to a product that is in the process of being made?

simple rate of return

The capital budgeting method that focus on incremental operating income rather than cash flows is…

Screening Decision

Which of the two broad categories of capital budgeting decisions, relates to whether a project is acceptable, that is whether it passes a preset hurdle?

Equipment Replacement Decisions, Expansion Decisions

Identify capital budgeting decisions.

Net Present Value, Internal Rate of Return, Payback

The capital budgeting methods that focus on cash flows rather than incremental operating income are…

working capital invested

Typical capital budgeting cash inflows do not include…

Working Capital

Current Assets - Current Liabilities is called…

Hurdle Rate

To determine if a project is acceptable compare the internal rate of return to the company’s…

leash total cost from a present value perspective

When a capital budget decision does not involve any revenues, the most desirable alternative is the one with the…

Total-Cost Approach

All cash flows are included, and a net present value is computed for each alternative when using the…