Management Accounting MCQs

Here is the list of multiple-choice questions for the management accounting course. The MCQs are collected and compiled from different online and offline sources.

What is management accounting?

  • The process of preparing financial statements for external users
  • The process of recording and summarizing financial transactions
  • The process of providing financial and non-financial information to internal users
  • The process of auditing financial statements

What is the main objective of management accounting?

  • To provide information for external users
  • To prepare financial statements
  • To help managers make informed decisions
  • To ensure compliance with tax laws

Which of the following is NOT a tool used in management accounting?

  • Cost-volume-profit analysis
  • Auditing
  • Budgeting
  • Ratio analysis

The function of management accounting that involves monitoring performance and taking corrective action is called:

  • Planning
  • Reporting
  • Controlling
  • Decision-making

_______________ is an example of the decision-making function of management accounting.

  • Developing a budget
  • Determining product pricing
  • Analyzing financial statements
  • Calculating cost of goods sold

Which of the following is a limitation of activity-based costing (ABC)?

  • High implementation costs
  • Inability to aid decision-making
  • Difficulty in capturing all costs
  • Limited scope

The limitation of cost-volume-profit analysis (CVP) that results from its assumption of constant unit costs is:

  • Limited scope
  • Inability to consider changes in unit costs
  • Lack of accuracy
  • Difficulty in capturing all costs

Management accounting is focused on:

  • Compliance with accounting standards
  • Forecasting future financial performance
  • Historical financial data
  • Providing information for internal decision-making

Which of the following is a method of measuring variable costs?

  • Marginal costing
  • Activity-based costing
  • B. Absorption costing
  • Standard costing

Management accounting provides information that is:

  • Forward-looking
  • Based on historical financial data
  • Relevant to external stakeholders
  • Audited for accuracy

Management accounting reports are prepared:

  • Quarterly
  • Monthly
  • Annually
  • As needed

The direct labor cost of a product is:

  • The cost of the raw materials used to manufacture the product
  • The cost of the finished product
  • The cost of the labor used to manufacture the product
  • The cost of the overhead used to manufacture the product

Management accounting is governed by:

  • International Financial Reporting Standards (IFRS)
  • Both GAAP and IFRS
  • Management’s discretion
  • Generally Accepted Accounting Principles (GAAP)

Management accounting is used to prepare:

  • Performance reports
  • None of the above
  • Budgets
  • Financial statements

What is the primary purpose of cost accounting?

  • To measure the profitability of different product lines
  • To determine the cost of goods sold
  • To allocate indirect costs to products or services
  • All of the above

The purpose of cost accounting is to:

  • Improve efficiency
  • Reduce costs
  • Increase profits
  • All of the above

Cost accounting is primarily concerned with:

  • The management of cash flows
  • The accumulation and analysis of costs
  • The preparation of financial statements
  • None of the above

What is the relationship between marginal cost and average cost?

  • Marginal cost can be greater than or less than average cost, depending on the level of output
  • Marginal cost is always greater than average cost
  • Marginal cost is always less than average cost
  • None of the above

The direct materials cost of a product is:

  • The cost of the overhead used to manufacture the product
  • The cost of the raw materials used to manufacture the product
  • The cost of the labor used to manufacture the product
  • The cost of the finished product

Which of the following methods involves dividing total costs by the number of units produced to determine the cost per unit?

  • Marginal costing
  • Activity-based costing
  • Absorption costing
  • Process costing

What is the marginal cost?

  • The cost of producing the first unit of output
  • The total cost of producing a certain quantity of output
  • The cost of producing an additional unit of output
  • None of the above

The direct labor cost of a product is:

  • The cost of the overhead used to manufacture the product
  • The cost of the finished product
  • The cost of the raw materials used to manufacture the product
  • The cost of the labor used to manufacture the product

The cost of raw materials that are used to manufacture a product is an example of:

  • Manufacturing overhead cost
  • Indirect materials cost
  • Direct materials cost
  • Direct labor cost

Which of the following elements of cost is also known as “factory overhead”?

  • Direct materials
  • Selling expenses
  • Direct labor
  • Manufacturing overhead

Wages paid to workers who are involved in the production process are an example of:

  • Manufacturing overhead cost
  • Indirect labor cost
  • Direct materials cost
  • Direct labor cost

Depreciation on production equipment is an example of a:

  • Variable cost
  • Indirect cost
  • Fixed cost
  • Direct cost

Which of the following elements of cost includes the cost of indirect materials and indirect labor?

  • Manufacturing overhead
  • Administrative expenses
  • Direct materials
  • Direct labor

What is the Break-Even Point (BEP)?

  • The point where total revenue equals total cost
  • The point where variable costs equal fixed costs
  • The point where total revenue is greater than total cost
  • The point where total revenue is less than total cost

Which of the following is NOT a type of cost?

  • Fixed cost
  • Administrative cost
  • Variable cost
  • Period cost

Which of the following costs vary in total, in direct proportion to changes in the level of production?

  • Fixed cost
  • Step cost
  • Variable cost
  • Mixed cost

What is the formula for calculating the Break-Even Point in units?

  • BEP (units) = Total fixed costs / Contribution margin per unit
  • BEP (units) = Total cost / Contribution margin per unit
  • BEP (units) = Total variable costs / Contribution margin per unit
  • BEP (units) = Total revenue / Contribution margin per unit

Which of the following methods of cost variability assumes that the relationship between costs and activity levels is linear?

  • High-low method
  • None of the above
  • Scattergraph method
  • Regression analysis

Which of the following is an assumption of Break-Even Analysis?

  • The selling price per unit is constant
  • The total cost is constant
  • The variable cost per unit is constant
  • The fixed cost is variable

What is the Margin of Safety?

  • The amount by which actual sales exceed the Break-Even Point
  • The amount of fixed costs covered by the Break-Even Point
  • The amount by which actual sales fall short of the Break-Even Point
  • The amount of profit earned after reaching the Break-Even Point

The break-even point can be graphed on a:

  • Scatter plot
  • Pie chart
  • Bar chart
  • Line graph

Which of the following is an advantage of using a pie chart?

  • It is easy to compare different values
  • It can show changes over time
  • It can show the percentage breakdown of different categories
  • None of the above

What is a scatter plot used for in managerial costing?

  • Displaying the relationship between two variables
  • Showing changes over time
  • Comparing different values
  • None of the above

Which of the following is an example of an opportunity cost?

  • The cost of raw materials
  • The revenue foregone by choosing one alternative over another
  • The cost of labor
  • The cost of machinery

What is a histogram used for in managerial costing?

  • Showing changes over time
  • Comparing different values
  • Displaying the frequency distribution of a variable
  • None of the above

Which of the following is an example of a fixed cost?

  • Direct labor
  • Raw materials
  • Utilities
  • Rent

The primary use of break-even analysis for managers is __________.

  • To determine the amount of profit a company can make
  • To determine the market share of a company 
  • To determine the level of sales required to cover costs
  • None of the above

WHAT IS MANAGEMENT ACCOUNTING?

Which of the following is true about marginal cost?

  • It includes only variable costs
  • It includes only fixed costs
  • It includes both variable and fixed costs
  • None of the above

What is incremental analysis?

  • Analysis of total costs and revenues
  • Analysis of only variable costs and revenues
  • Analysis of the changes in costs and revenues resulting from a specific decision
  • None of the above

Which of the following is an example of an incremental cost?

  • Fixed overhead
  • Raw materials
  • Direct labor
  • None of the above

What is activity-based accounting?

  • A system for tracking the cost of producing a product
  • A system for identifying and assigning costs to specific activities
  • A system for tracking the financial performance of a business as a whole
  • A system for determining the price of a product

____________, is an example of a sunk cost.

  • The cost of raw materials
  • The cost of labor
  • The cost of machinery
  • The cost of research and development

Which of the following is an example of a variable cost?

  • Rent
  • Salaries
  • Raw materials
  • Property taxes

Which of the following is an example of an activity cost pool?

  • Rent for a factory building
  • Salaries for managers
  • Depreciation on production equipment
  • Quality control inspections

What is activity-based accounting?

  • A system for tracking the total cost of producing a product
  • A system for tracking the cost of individual activities in the production process
  • A system for tracking the cost of goods sold
  • A system for tracking the cost of materials used in production

Zero-based budgeting requires __________.

  • That all budgets start from zero
  • That budgets are only prepared once a year
  • That budgets are based on historical data
  • That budgets are prepared for a specific time period

What is an activity cost pool?

  • The total cost of producing a product
  • The cost of materials used in production
  • The cost of individual activities in the production process
  • The cost of goods sold

What is an activity driver?

  • The cost of individual activities in the production process
  • The basis for assigning overhead costs to products or services
  • The total cost of producing a product
  • None of the above

Which of the following is an example of an indirect cost in ABC?

  • Direct labor
  • Direct materials
  • Factory rent
  • Utilities

The primary purpose of budgeting in managerial accounting is __________.

  • To track historical financial performance
  • To predict future financial performance
  • To calculate taxes owed
  • To evaluate employee performance

What is a budget?

  • A plan for how to spend money
  • A summary of past financial transactions
  • A list of expenses
  • A forecast of future financial performance

Budget variances occur when:

  • Actual results differ from budgeted results
  • Actual results match budgeted results
  • Budgeted results are more accurate than actual results
  • Actual results are more accurate than budgeted results

What is a variance in budgeting?

  • The difference between actual results and budgeted results
  • The difference between fixed costs and variable costs
  • The difference between direct costs and indirect costs
  • The difference between revenue and expenses

What is a master budget in budgeting?

  • A budget that includes only direct costs
  • A budget that includes only indirect costs
  • A budget that includes all expenses and revenues for a given period
  • A budget that is only used for tax purposes

Which of the following is not a type of budget?

  • Master budget
  • Flexible budget
  • Static budget
  • Historical budget

The purpose of a cash budget in budgeting is _________.

  • To track historical financial performance
  • To predict future financial performance
  • To calculate taxes owed
  • To evaluate employee performance

What is a flexible budget?

  • A budget that is created for a specific department within a business
  • A budget that includes only the revenue and expenses of a business
  • A budget that is adjusted to reflect actual production levels or sales volumes
  • A budget that is created for a specific project within a business

A flexible budget is usually prepared for ____________ .

  • A single level of activity
  • A range of activity levels
  • A fixed level of activity
  • A specific time period

A flexible budget can be used to:

  • Evaluate performance at different levels of activity
  • Determine the optimal level of activity
  • Eliminate the need for variance analysis
  • None of the above

What is standard costing?

  • A costing method that involves assigning a standard cost to each unit of production.
  • A costing method that involves assigning actual cost to each unit of production.
  • A costing method that involves assigning a predetermined cost to each unit of production.
  • A costing method that involves assigning the highest possible cost to each unit of production.

Which of the following is true about standard costs?

  • They are always based on historical costs.
  • They are always based on future costs.
  • They are always based on current costs.
  • They can be based on historical, current or future costs.

Which of the following is a benefit of standard costing?

  • It helps to reduce costs by identifying areas where costs can be reduced.
  • It provides an accurate picture of actual costs.
  • It helps to identify areas where production can be increased.
  • It does not provide any benefits.

What is a variance in standard costing?

  • The difference between actual and standard cost.
  • The difference between current and standard cost.
  • The difference between historical and standard cost.
  • The difference between future and standard cost.

Which of the following is not a cost associated with standard costing?

  • Preparation cost
  • Training cost
  • Maintenance cost
  • Marketing cost

_________ is not a type of responsibility center.

  • Cost center
  • Profit center
  • Revenue center
  • Capital center

Which of the following is a characteristic of a cost center?

  • It is responsible for generating revenue.
  • It is responsible for managing costs.
  • It is responsible for managing profits.
  • It is responsible for managing capital.

What is a responsibility center?

  • A unit of an organization that is responsible for a specific task or activity.
  • A department within an organization that is responsible for managing the finances.
  • A team of employees that is responsible for developing new products.
  • A division of an organization that is responsible for the overall strategy.

Which of the following is a characteristic of a profit center?

  • It is responsible for generating revenue.
  • It is responsible for managing costs.
  • It is responsible for managing profits.
  • It is responsible for managing capital.

Which of the following is a characteristic of a revenue center?

  • It is responsible for generating revenue.
  • It is responsible for managing costs.
  • It is responsible for managing profits.
  • It is responsible for managing capital.

What are the types of responsibility centers?

  • Cost centers, revenue centers, profit centers, and investment centers.
  • Sales centers, marketing centers, manufacturing centers, and research centers.
  • Financial centers, operational centers, administrative centers, and strategic centers.
  • Customer centers, supplier centers, employee centers, and shareholder centers.

Which type of responsibility center has the most autonomy?

  • Cost center
  • Profit center
  • Revenue center
  • Investment center

Which type of responsibility center is evaluated based on revenue variances?

  • Cost center
  • Profit center
  • Revenue center
  • Investment center

What is a cost center?

  • A responsibility center that is responsible for generating revenue.
  • A responsibility center that is responsible for controlling costs.
  • A responsibility center that is responsible for generating profits.
  • A responsibility center that is responsible for making investments.

The key performance indicator (KPI) for a cost center is a ________________

  • Revenue.
  • Profit margin.
  • Cost efficiency.
  • Return on investment.

What is Transfer Pricing?

  • A pricing technique to determine the selling price of a product
  • A pricing technique to determine the cost of a product
  • A pricing technique to determine the cost of a service
  • A pricing technique to determine the cost of production

What is the purpose of transfer pricing?

  • To minimize the tax liabilities of a company
  • To maximize the profits of a company
  • To facilitate the transfer of goods and services within a company
  • To provide a fair price for goods and services within a company

The key performance indicator (KPI) for a profit center is a__________________.

  • Revenue.
  • Profit margin.
  • Cost efficiency.
  • Return on investment.

What is market-based transfer pricing?

  • The transfer price is based on the actual cost of production
  • The transfer price is based on the market price of the product or service
  • The transfer price is determined through negotiations between the buying and selling divisions
  • The transfer price is based on a predetermined cost-plus markup

What is cost-based transfer pricing?

  • The transfer price is based on the market price of the product or service
  • The transfer price is based on the actual cost of production
  • The transfer price is determined through negotiations between the buying and selling divisions
  • The transfer price is based on a predetermined cost-plus markup

Cost accounting is used to:

  • Determine the profitability of a company
  • Measure and control costs
  • Help with tax planning
  • All of the above

What is a transfer pricing policy?

  • A set of guidelines that outlines how transfer pricing should be done within a company
  • A set of guidelines that outlines how a company should determine its selling price
  • A set of guidelines that outlines how a company should determine its cost of production
  • A set of guidelines that outlines how a company should pay its employees

What is the primary purpose of a budgetary control system?

  • To allocate resources among various departments
  • To control and monitor performance against predetermined objectives
  • To track changes in market conditions
  • To forecast future revenues

Which of the following is not a component of the budgetary control system?

  • Budget execution
  • Budget preparation
  • Budget approval
  • Budget revision

What is a rolling budget?

  • A budget that is updated continuously throughout the year
  • A budget that is adjusted for inflation each year
  • A budget that is prepared annually and remains unchanged
  • A budget that is based on historical data only

What is a budget manual?

  • A report on budget variances
  • A summary of financial performance metrics
  • A guide for preparing a budget
  • A tool for monitoring budget execution

Which of the following is NOT a type of lease?

  • Financial Lease
  • Operating Lease
  • Capital Lease
  • Equity Lease

The main advantage of leasing is that __________.

  • It allows for greater control over the asset.
  • It allows for greater flexibility in changing business needs.
  • It provides greater tax benefits than purchasing.
  • It requires less initial cash outlay than purchasing.

What is the difference between an operating lease and a capital lease?

  • The lease term is longer in a capital lease.
  • The lessee bears the risks and rewards of ownership in a capital lease.
  • The lease payments are treated as interest expense in a capital lease.
  • The lease transfers ownership to the lessee at the end of the term in a capital lease.

_____________ is not a principle of Total Quality Management.

  • Customer focus
  • Continuous improvement
  • Employee involvement
  • Maximize profits

The primary objective of Total Quality Management is to ____________.

  • Maximize profits
  • Minimize costs
  • Improve product quality
  • Increase production speed

Which of the following is not a tool used in Total Quality Management?

  • Pareto chart
  • Fishbone diagram
  • SWOT analysis
  • Control chart

The role of management in Total Quality Management is ___________ .

  • To delegate responsibilities to employees
  • To monitor employee performance
  • To enforce rules and regulations
  • To empower employees to improve processes

What is the aim of Total Quality Management?

  • To eliminate all defects
  • To reduce defects to an acceptable level
  • To increase profits
  • To decrease production time

Which of the following is a benefit of Total Quality Management?

  • Increased employee turnover
  • Lowered product quality
  • Improved customer satisfaction
  • Reduced customer loyalty

_____________ is not a key element of Total Quality Management.

  • Continuous improvement
  • Cost reduction
  • Customer focus
  • Employee involvement

Management accounting is primarily concerned with providing information to __________.

  • External stakeholders
  • Government regulators
  • Internal decision-makers
  • Customers

Which of the following is a common challenge in implementing Total Quality Management?

  • Lack of employee involvement
  • Too much focus on profits
  • Overemphasis on product quality
  • Resistance to change

Which of the following is an example of a Total Quality Management technique?

  • Employee training
  • Employee layoffs
  • Employee discipline
  • Employee monitoring

The ultimate goal of Total Quality Management is __________ .

  • To increase profits
  • To reduce costs
  • To improve product quality
  • To increase production speed

What is the primary focus of responsibility accounting?

  • Maximizing profits
  • Managing costs
  • Holding managers accountable for their performance
  • Increasing market share

__________ is not a responsibility center in responsibility accounting.

  • Cost center
  • Profit center
  • Investment center
  • Capital center

An example of a cost center is ___________________ 

  • A sales department
  • A manufacturing department
  • A research and development department
  • A marketing department

The main objective of a cost center is ___________.

  • To generate profits
  • To minimize costs
  • To increase market share
  • To maximize production

Which of the following is an example of an investment center?

  • A sales department
  • A research and development department
  • A manufacturing department
  • A human resources department

A key factor in Make or Buy Decision is ___________ .

  • Availability of materials
  • Cost of production
  • Competitors’ pricing
  • None of the above

Make or Buy Decision involves the comparison of:

  • Total cost of buying with the cost of making
  • Total revenue of buying with the cost of making
  • Total revenue of buying with the revenue of making
  • None of the above

Which of the following is an advantage of making a product in-house?

  • Greater control over the production process
  • Lower fixed costs
  • Access to specialized expertise
  • None of the above

What is a shutdown decision in management accounting?

  • A decision to permanently stop production of a product or service
  • A decision to temporarily halt production due to maintenance issues
  • A decision to outsource production to a third-party supplier
  • A decision to increase production capacity

Which of the following is not a characteristic of management accounting?

  • Future-oriented
  • Internal focus
  • Historical perspective
  • Decision-making oriented

What factors should be considered in a shutdown decision?

  • Fixed costs and variable costs
  • Direct costs and indirect costs
  • Relevant costs and sunk costs
  • Historical costs and projected costs

What are sunk costs in a shutdown decision?

  • Costs that will be incurred in the future if the product or service is not shut down
  • Costs that have already been incurred and cannot be recovered
  • Costs that will not change whether the product or service is shut down or not
  • Costs that are not directly related to the product or service being considered for shutdown

Leave a Comment