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64 Test Bank for Managerial Accounting 5th Edition
by Jiambalvo Multiple Choice Questions - Part 1
Opportunity costs are
1.

A. considered to be fixed costs in the short-term.

2.

B. another term for sunk costs.

3.

C. costs that are controlled by most effective managers.

4.

D. the value of benefits forgone when one decision alternative is selected over
another.

Bagel Time produced and sold 2,500 bagels last month and
incurred fixed costs totaling $8,000. If production and sales are
expected to decrease by 10% next month, which of the following
statements is true?
1.

A. Total fixed costs will increase.

2.

B. Total fixed costs will decrease.

3.

C. Fixed cost per unit will increase.

4.

D. Fixed cost per unit will decrease.

Which of the following is a difference between financial accounting
and managerial accounting?
1.

A. Managerial accounting is primarily concerned with reporting the past, while
financial accounting is more concerned with future decisions that external
users may need to make.

2.

B. Managerial accounting uses monetary and nonmonetary information,
whereas financial accounting reports monetary information.

3.

C. Managerial accounting is primarily concerned with providing information for
external users while financial accounting is concerned with internal users.

4.

D. Financial accounting is rather detailed, while managerial accounting is

more summarized.

A sunk cost is a cost


1.

A. expected to be incurred in the future which is not relevant to present
decisions.

2.

B. incurred in the current period which changes with changes in production
activity.

3.

C. incurred in the current period which remains constant even though activity
changes.

4.

D. incurred in the past that is not relevant for future decisions.

The financial plans prepared by managerial accountants are
referred to as
1.

A. budgets.

2.

B. financial statements.

3.

C. treasurer’s reports.

4.

D. controller’s opinions.

Managerial accounting stresses accounting concepts and
procedures that are relevant to preparing reports for
1.

A. investors and banks.

2.

B. internal users of accounting information.

3.

C. shareholders and creditors.

4.

D. the Securities and Exchange Commission (SEC).

Which one of the following is true as it relates to the management
function of control?
1.
2.

3.
4.

A. It is achieved by evaluating the performance of managers.
B. It is achieved by evaluating the operations for which a manager is
responsible.
C. It is necessary only when performance is less than expected.
D. It is achieved by evaluating the performance of managers and the
operations for which they are responsible.


Kilwin’s Candies produced and sold 600 boxes of chocolate
covered popcorn last month and had total variable costs of $2,100
that reflected the costs of chocolate and popcorn (ingredients).
Each box of popcorn sells for $12.00. If production and sales are
expected to increase by 10% next month, which of the following
statements is true?
1.

A. Total variable costs are expected to be $1,785

2.

B. Variable cost per unit is expected to be $3.50

3.

C. The incremental cost per unit is costs expected to be $0.35

4.

D. Unit variable costs are expected to be $2.10

Which of the following is most likely to be a fixed cost?
1.

A. Cost of wheels for a lawn mower manufacturer

2.

B. Rent on a factory building

3.

C. Cost of labor for cashiers at a retail store

4.

D. Supplies used by the housekeeping staff that cleans hotel rooms

Sunk costs
1.

2.
3.

4.

A. can be incremental or not incremental, depending on the decision to be
made.
B. include all incremental costs to management decisions.
C. are costs that cannot be directly traded to a product, activity, or
department.
D. None of these answer choices are correct.

The fundamental difference between managerial and financial
accounting is that
1.

A. all financial accounting information is audited by Certified Public
Accountants whereas managerial accounting information is audited by the IMA.


2.

B. managerial accounting is concerned principally with budgets, whereas
financial accounting is concerned with a wider range of the organization’s
activities.

3.

C. managerial accounting provides information for decision-makers within the
organization, whereas financial accounting provides information for individuals
and institutions external to the organization.

4.

D. financial accounting information follows U.S. Generally Accepted
Accounting Principles, whereas managerial accounting information generally
follows rules set forth by the Institute of Management Accountants.

The goal of managerial accounting is to provide information that
managers need for
1.

A. planning, control, and financial reporting.

2.

B. control, evaluation, and financial reporting.

3.

C. planning, control, and decision making.

4.

D. preparing reports for external users.

A cost which is directly traceable to a product, activity, or
department is a(n)
1.

A. fixed cost.

2.

B. managerial cost.

3.

C. opportunity cost.

4.

D. direct cost.

A company has a cost that is $3.00 per unit at a volume of 9,000
units and $3.00 per unit at a volume of 11,000 units. What type of
cost is this?
1.

A. Fixed

2.

B. Variable

3.

C. Sunk

4.

D. Noncontrollable

Which of the following is a benefit given up when one decision
alternative is selected over another?
1.

A. Sunk cost

2.

B. Controllable cost

3.

C. Opportunity cost

4.

D. Incremental cost

A retailer purchased some trendy clothes that have gone out of
style and must be marked down to 60% of the original selling price
in order to be sold. Which of the following is a sunk cost in this
situation?
1.

A. The current selling price

2.

B. The original selling price

3.

C. The original purchase price

4.

D. The anticipated profit

Which of the following statements regarding direct and indirect
costs is true?
1.

A. Direct costs are always variable and indirect costs are always fixed.

2.

B. Sunk costs are always direct, and opportunity costs are always fixed.

3.

C. The distinction between a direct and indirect cost depends on the product,
activity, or department to which the cost pertains.

4.

D. If a cost is indirect to a department within a plant, it will also be indirect for
the plant as a whole.

Variable cost per unit
1.

A. increases when the number of units produced increases.

2.

B. does not change when the number of units produced increases.

3.

C. decreases when the number of units produced increases.


4.

D. decreases when the number of units produced decreases.

Which of the following statements regarding fixed costs is true?
1.

A. When production increases, fixed cost per unit increases.

2.

B. When production decreases, total fixed costs decrease.

3.

C. When production increases, fixed cost per unit decreases.

4.

D. When production decreases, total fixed costs increase.

Which one of the following is most likely to make use of Ralston
Enterprises’ managerial accounting information?
1.

A. The IRS

2.

B. An individual contemplating an investment in Ralston Enterprises

3.

C. A company that is one of Ralston’s main suppliers

4.

D. The production manager of Ralston’s plant in Georgia

Which of the following is a direct cost in relation to the cost of
teaching the managerial accounting course in a college?
1.

A. The cost of the paper that is given as handouts in the class

2.

B. The cost of the electricity to light the classroom

3.

C. The cost of the registration system

4.

D. The cost of the financial aid department of the college

Which of the following is not a reason that current period
performance results may differ from the company’s budget for that
period?
1.

A. The plan may not have been followed properly.

2.

B. The plan may not have been well thought-out.

3.

C. Changing circumstances may have made the plan out of date.

4.

D. All of the above are reasons that actual results may differ from the
company’s plan.

Costs incurred in the past that are not incremental to present
decisions are
1.

A. fixed costs.

2.

B. sunk costs.

3.

C. opportunity costs.

4.

D. variable costs.

Which of the following is likely to be a noncontrollable cost of a
department supervisor?
1.

A. Labor in the department

2.

B. Materials used in the department

3.

C. Insurance on the plant

4.

D. Overtime premium pay earned by those working in the department

Managerial accounting
1.

A. is primarily directed at external users of accounting information.

2.

B. is required by taxing authorities such as the IRS.

3.

C. must follow GAAP.

4.

D. focuses on future performance.

On which of the following costs should a manager not be
evaluated?
1.

A. Noncontrollable costs

2.

B. Opportunity costs

3.

C. Fixed costs

4.

D. Variable costs

Which of the following costs will change when the level of business
activity changes?


1.

A. Total fixed costs

2.

B. Variable cost per unit

3.

C. A company’s total costs

4.

D. Sunk cost

Which one of the following is the last step in the planning and
control process?
1.

A. Implement a plan.

2.

B. Construct a plan.

3.

C. Make decisions based on the evaluation of the results.

4.

D. Compare actual results to the planned results.

Wilson Company’s managers investigate departures from the
budget that appear to be significant. What principle is being
followed?
1.

A. Small amounts do not matter

2.

B. Management by exception

3.

C. Incremental analysis

4.

D. You get what you measure

You own a car and are trying to decide whether to trade it in and
buy a new car. Which of the following costs is an opportunity cost in
this situation?
1.

A. The trip to Europe that you will not be able to take if you buy the car

2.

B. The cost of the car you are trading in

3.

C. The cost of toothpaste and soap that you need for the next few months

4.

D. The cost of your meals for the last week

Performance reports often compare current performance with

1.

A. a competing company’s performance.

2.

B. shareholders’ expected level of performance.

3.

C. industry standards.

4.

D. performance in a prior period or budgeted performance.

When using management by exception, a difference between actual
costs and budgeted costs
1.

A. should be investigated if the amount is large.

2.

B. indicates that the planned cost was poorly estimated.

3.

C. indicates that the manager is doing a poor job.

4.

D. should be ignored if it increases profit.

64 Free Test Bank for Managerial Accounting 5th
Edition by Jiambalvo Multiple Choice Questions - Part 2
Which of the following would most likely be a Customer
Relationship Management System component?
1.

A. A system allowing customers to do online banking.

2.

B. A system that prepares a master production schedule.

3.

C. A system that links the company’s suppliers electronically to its databases.

4.

D. A system that manages human resources.

Which of the following statements regarding incremental analysis is
true? Assume that there are no opportunity costs and that the
capacity exists to complete any of the alternatives.
1.

A. The preferred alternative will have revenues that are greater than the
revenues of the other alternatives.

2.

B. The preferred alternative will have expenses that are greater than the
expenses of the other alternatives.

3.

C. The preferred alternative will have fixed expenses that are less than the
fixed expenses of the other alternatives.


4.

D. The preferred alternative will have profits that are greater than the profits of
the other alternatives.

Flash Eyes sells mascara. In June, it produced and sold 10,000
tubes of mascara. Total variable costs were $21,000 and fixed
costs totaled $24,000. Which of the following statements is correct
if, Flash Eyes produced and sold 9,000 units in July?
1.

A. Fixed cost per unit will be $2.67

2.

B. Total fixed costs will be $21,600

3.

C. Variable costs in total will be $40,500

4.

D. Variable costs per unit will be $2.33

Which of the following is not usually a responsibility of the
controller?
1.

A. Preparing budgets and performance reports

2.

B. Filing tax returns

3.

C. Managing cash and marketable securities

4.

D. Providing information for management decisions

“You get what you measure!” refers to the relationship between
1.

A. managerial accounting and financial accounting.

2.

B. ethical and unethical behavior.

3.

C. duties of the CEO and duties of the controller.

4.

D. performance measures and actions of managers.

Sweet Time Candies projects its factory rent to be $8,000 in August
when 4,000 pounds of candy are expected to be produced. If rent is
a fixed cost, and if production is expected to increase to 6,000 units
in September, what is the expected cost of rent in September?
1.

A. $12,000

2.

B. $8,000


3.

C. $7,000

4.

D. Not enough information is provided to determine the answer.

Which one of the following will most likely influence the actions of
managers?
1.

A. Sunk costs

2.

B. Performance measures

3.

C. Noncontrollable costs

4.

D. GAAP

For which one of the following is a company’s treasurer typically
held responsible?
1.

A. Reporting information to the IRS

2.

B. Maintaining relationships with investors and creditors

3.

C. Preparing audited financial statements

4.

D. Preparing and analyzing budgets

Rincon Gifts had the following costs in May when 400 ceramic pots
were produced: materials, $4,200; hourly labor, $1,600;
depreciation, $800; rent, $700; and other fixed costs, $500. If the
production level changes to 500 units, how much will the total costs
be?
1.

A. $9,750

2.

B. $7,800

3.

C. $9,250

4.

D. $1,950

Vita Boost Pets produces a line of cat food. In August, it produced
and sold 1,000 bags of food. Total fixed costs were $19,000. In
September, it produced 2,000 bags of food. Which of the following
statements is true for September?


1.

A. Total fixed costs will be $38,000.

2.

B. Total fixed costs will be $9,500

3.

C. Fixed cost per unit will be $19.00.

4.

D. Fixed costs per unit will be $9.50.

Triatt Resort has 200 rooms. Each room rents at $130 per night and
variable costs total $42 per room per night of occupancy. The fixed
costs total $18,700 per month. If 70% of the rooms are occupied
each of the 30 nights in June, how much will total variable costs be
for June?

1.

A. $546,000

2.

B. $369,600

3.

C. $176,400

4.

D. $252,000

The Institute of Management Accountants (IMA)
1.

A. is the professional organization of managerial accountants.

2.

B. administers the comprehensive examination which must be passed before
a person can become a CMA.

3.

C. has developed a set of standards of ethical conduct and maintains an
ethics hotline.

4.

D. All of these answer choices are correct.

The organization which administers the Certificate in Management
Accounting program is the
1.

A. GAAP.

2.

B. SCM.

3.

C. CRM.

4.

D. IMA.


In a period when anticipated production is 20,000 units, budgeted
variable costs are $85,000 and budgeted fixed costs are $45,000. If
15,000 units are actually produced, what is the expected total cost?
1.

A. $130,000

2.

B. $97,500

3.

C. $108,750

4.

D. $118,750

Many companies have a chief financial officer (CFO). Which of
these positions is most likely to report directly to the CFO?
1.

A. Controller

2.

B. Chief executive officer

3.

C. Janitor

4.

D. Production supervisor

Which of the following is one of the questions you should ask when
faced with an ethical dilemma?
1.

A. Will I get caught?

2.

B. What decisions alternatives are available?

3.

C. Are the actions illegal?

4.

D. How big is the effect on the company’s profit?

In a period when anticipated production is 5,000 units, budgeted
variable costs are $75,000 and budgeted fixed costs are $24,000. If
5,600 units are actually produced, what is the expected total cost?
1.

A. $110,600

2.

B. $84,000

3.

C. $108,000

4.

D. $88,394


Rincon Gifts had the following costs in May when 400 ceramic pots
were produced: materials, $4,200; labor cost, $1,600; depreciation,
$800; rent, $700; and other fixed costs, $500. If production changes
to 500 units, which of the following costs will stay the same?
1.

A. Variable cost per unit

2.

B. Fixed cost per unit

3.

C. Total variable cost

4.

D. Total cost per unit

Sleep Time produces mattresses. Each mattress has a variable

cost of $260, fixed costs of $56,000 per month, and a unit selling
price of $500. If the company produces and sells 400 mattresses in
February, how much is the unit cost per mattress?
1.

A. $260

2.

B. $400

3.

C. $240

4.

D. $100

Variable cost per unit is budgeted to be $8.00 and fixed cost per
unit is budgeted to be $5.00 in a period when 4,000 units are
produced. If production is actually 5,100 units, what is the expected
total cost of the units produced?
1.

A. $52,000

2.

B. $60,800

3.

C. $66,300

4.

D. $40,800

If management informs employees that bonuses will depend solely
on improving the gross profit ratio (gross profit/sales), which of the
following behaviors would most likely be observed?


1.

A. Sales people would quit trying to sell high volume, low margin core
products

2.

B. Overall sales would fall

3.

C. Overall gross profit would fall

4.

D. All of these answer choices are correct

Which of the following terms involves calculating the difference in
revenue and the difference in cost between decision alternatives?
1.

A. Budgeting production

2.

B. Incremental analysis

3.

C. Profit planning

4.

D. Systems development

Rincon Gifts had the following costs in May when 400 ceramic pots
were produced: materials, $4,200; labor cost, $1,600; depreciation,
$800; rent, $700; and other fixed costs, $500. Which one of the
following is the correct cost for Rincon?
1.

A. The fixed cost per unit is $3.75

2.

B. The variable cost per unit is $14.50

3.

C. The fixed cost per unit is $19.50

4.

D. The total cost per unit is $14.50

Which of the following is true concerning Enterprise Resource
Planning (ERP) systems?
1.

A. They grew out of the material requirements planning systems that
preceded them.

2.

B. They will allow customers to track their orders.

3.

C. They are considered sunk costs.

4.

D. All of these answer choices are correct.


Supply Chain Management (SCM) systems

1.

A. computerize inventory control and production planning.

2.

B. organize activities between a company and its suppliers.

3.

C. automate customer service and support.

4.

D. allow customers to track their purchase as it is being produced.

In most companies, the top management accountant is called the
1.

A. financial analyst.

2.

B. taxation specialist.

3.

C. treasurer.

4.

D. controller.

Which of the following skills are needed by those who desire a highlevel career in management accounting?
1.

A. Written and oral communication skills

2.

B. Interpersonal skills

3.

C. Knowledge of the industry in which their firm competes

4.

D. All of these answer choices are correct.

Dent Lab Car Repair projects variable labor costs of $21,500 in July
when 8,600 units are produced. If production is expected to drop to
8,000 units in August, what is the expected labor cost in August?
1.

A. $21,500

2.

B. $20,000

3.

C. $23,113

4.

D. $20,900

Which of the following statements regarding performance measures
is true?


1.

A. GAAP requires performance measures for all employees.

2.

B. Companies must select from performance measures published by its own
industry when deciding how they want to assess performance.

3.

C. Employees tend to direct their attention to what is measured and may
neglect what is not measured.

4.

D. Companies need to place emphasis on a single performance measure so

employees know what to expect.

Which of the following is not a reasonable measure of a plant
manager’s performance?
1.

A. Net income

2.

B. Cost of insurance for the plant

3.

C. Number of orders delivered on time

4.

D. Change in market share

Which of the following should be considered when making ethical
decisions?
1.

A. What is right?

2.

B. What is standard practice?

3.

C. Is the company’s control system is able to detect an irregularity?

4.

D. All of these answer choices are correct.

Triatt Resort has 200 rooms. Each room rents at $130 per night and
variable costs total $42 per room per night of occupancy. The fixed
costs total $18,700 per month. If Triatt is able to increase
occupancy from 70% to 80%, by how much will total costs increase
per day during June?
1.

A. $840

2.

B. $2,710

3.

C. $1,870


4.

D. $1,760