Deck 13: Introduction to Management Accounting

Question 1

When standard costing is used in conjunction with budgeting,variances can be calculated to show where actual results were not as expected

Answer 1

True

Question 2

Absorption costing is closely linked to financial accounting and the calculation of profit

Answer 2

True

Question 3

Companies are not legally required to produce management accounting information

Answer 3

True

Question 4

Production expenses which become part of the costs of finished goods are charged as an expense in the period in which they are incurred

Question 5

Which of the following statements is false?

A) Manufacturing accounts require adjustments for direct materials
B) Manufacturing accounts require adjustments for standard costs
C) Manufacturing accounts require adjustments for work in progress
D) Manufacturing accounts require adjustments for finished goods

Question 6

A manufacturing account shows the opening inventory of finished goods minus manufacturing costs of the finished goods plus the closing inventory of finished goods

Question 7

In a manufacturing account an inventory adjustment is made to direct materials in respect of how much was purchased (as opposed to how much was consumed)

Question 8

Comparing planned costs with actual costs is associated with:

A) Variance analysis
B) Flexible analysis
C) Break-even analysis
D) Costing analysis

Question 9

Knowing the cost of producing a product helps determine the price to be charged for it

Question 10

Absorption costing requires fixed costs to be separated from variable costs in order to aid decision making

Question 11

Which of the following statements is false?

A) There are no formal requirements for producing and presenting management accounting information
B) Financial accounting information is intended mainly for users outside the organization (such as shareholders and creditors)
C) Companies are not legally required to produce financial accounting information
D) Management accounting information is often private, whereas financial accounting information is public

Question 12

Prime costs include which of the following?

A) Distribution costs
B) Administrative expenses
C) Direct labour
D) Interest payable

Question 13

Cost of sales is calculated by subtracting opening inventory from purchases and adding closing inventory

Question 14

Standard costing is the most appropriate approach where actual costs do not fluctuate much

Question 15

A small or new business can cope without management accounting

Question 16

Operating expenses are period costs,which means they must be charged as an expense during the period in which they are incurred

Question 17

Financial accounting is predominantly forward looking and includes forecast and plans,while management accounting is about recording past events

Question 18

Using "planned" costs as a basis for making decisions rather than actual costs is known as:

A) Absorption costing
B) Marginal costing
C) Variable costing
D) Standard costing

Question 19

The term "prime costs" refers to the operating costs which are charged as an expense during the period in which they are incurred

Question 20

Production overheads are charged as an expense in the income statement as part of costs of sales

Question 21

A company manufactures furniture.Which of the following costs would be included in the production of a piece of furniture as a direct cost,and used to calculate the cost per unit,when making tables?
(i) The wood used to make the table tops
(ii)The varnish and paint used
(iii)The wages of the workers on the assembly line,paid per table manufactured.
(iv)The salary of the supervisor of the assembly line
(v) The salary of the accountant producing the annual accounts for the company.

A) (i) and (ii) only as these are used in the product
B) (i) - (iv) as these are part of production. The accountant is not
C) (i) and (iii) only. The others are indirect costs
D) All of them. The company cannot exist without all of these costs and more

Question 22

The cost per unit for making 100 units is £5.But for 200 units,the cost per unit is £4.
This is an example of:

A) A fixed cost
B) A variable cost
C) A semi-variable cost
D) A stepped cost

Question 23

Which of the following characteristics apply to Financial Accounting,and which apply to Management Accounting?
(i) Required by law
(ii) Historic data
(iii)Information is only available within the organisation

A) (i) applies to Financial Accounting. (ii) and (iii) apply to Management Accounting
B) (i), (ii) and (iii) apply to Financial Accounting only
C) (i) and (ii) apply to Financial Accounting. (iii) applies to Management Accounting
D) (i), (ii) and (iii) apply to Management Accounting only

Question 24

Prime Cost is part of the production cost,also called the manufacturing cost or factory cost.
Prime Cost includes:

A) All costs associated with the production of a product, or the running of a factory
B) Direct material costs only
C) All material costs and all labour costs
D) Direct materials and direct labour costs

Question 25

The cost of Direct Materials in a manufacturing account refers to:

A) The direct materials that were purchased for the production in the period
B) The direct materials that were used for production in the period
C) The direct materials that were issued from stores during the period
D) All the materials used in production - including items such as oil or spare parts for machines

Question 26

Which of the following statements about management accounting is correct?

A) Management Accounting follows strict rules
B) Management Accounting is purely a financial tool
C) Management Accounting cannot be used for qualitative analysis
D) Management Accounting techniques are being developed to meet different needs

Question 27

A company uses "Standard Costing".If the standard variable cost of making one unit is £0.32 and the budgeted production is 10,000 units but company produced 12,000 units,the expected variable cost would be:

A) £3,200
B) £0.32
C) £3,840
D) £640

Question 28

A company rents warehouses for storage.Each warehouse is capable of storing up to 400 units,and costs £500 per month.For 250 units,the cost would be £500.For 500 units,the cost would be £1,000.
This is an example of:

A) A Fixed Cost
B) A variable cost
C) A semi-variable cost
D) A stepped cost

Question 29

A company has the following costs of production for making 1,000 widgets in June:

The "cost per unit" is:

A) £8 per unit under Absorption Costing and £2 per unit under Marginal Costing
B) £8 under Absorption Costing and £7 under Marginal Costing
C) £8 per unit under Marginal Costing and £7 per unit under Absorption Costing
D) £2 per unit under Marginal Costing and £5 per unit under Absorption Costing

Question 30

Which of the following statements are correct?
(i)Financial Accounting is required by law
(ii)Financial Accounting includes budgeting,forecasting and decision making
(iii)Management Accounting must follow a set pattern
(iv)Management Accounting includes budgeting,forecasting and decision making

A) (i) and (iv) are correct
B) (i), (ii) and (iii) are correct
C) (i), (ii) and (iv) are correct
D) All of them are correct