This document provides a sample exam for ACC 561 with 50 multiple choice questions covering various accounting concepts. The questions assess understanding of controllership functions, budgeting, costing methods, performance evaluation, and management control systems.

1. ACC 561 Final Exam
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1) According to the Financial Executives Institute, one function of controllership is
_____.
A. short term financing
B. reporting and interpreting financial information
C. investments
D. provision of capital
2) Performance reports _____.
A. provide feedback by comparing results with plans and by highlighting
deviations from plans
B. ignore areas that are presumed to be running smoothly
C. are quantitative expressions of action plans
D. are deviations from a plan
3) Budgets _____.
A. provide feedback by comparing results with plans and by highlighting
deviations from plans
B. ignore areas that are presumed to be running smoothly
C. are quantitative expressions of action plans
D. are deviations from a plan
4) Ethical accountants are important to society because _____.
A. the information produced is reliable
B. none of these answers is correct
C. they pay their taxes
D. they will not go to prison and waste taxpayers’ money

2. 5) According to the Institute of Management Accountants’ Statement of Ethical
Professional Practice, the standard of competence includes:
A. avoiding actual or apparent conflicts of interest
B. All of these answers are correct
C. the ongoing development of the accountant’s knowledge and skills
D. disclosing all relevant information
6) According to the Institute of Management Accountants’ Statement of Ethical
Professional Practice, the standard of objectivity includes _____.
A. all of these answers are correct
B. disclosing all relevant information
C. avoiding actual or apparent conflicts of interest
D. the ongoing development of the accountant’s knowledge and skills
7) Which scorecard function is associated with making non-routine decisions?
A. None of these answers is correct
B. Problem solving is associated with making non-routine decisions.
C. Attention directing is associated with making non-routine decisions.
D. Scorekeeping is associated with making non-routine decisions.
8) _____ is the field of accounting that develops information for external decision
makers such as stockholders, suppliers, banks, and government regulatory
agencies.
A. Financial accounting
B. Management accounting
C. Tax accounting
D. Auditing
9) Launching a new product line is an example of _____.
A. organization
B. controlling

3. C. planning
D. decision making
10) The _____ is also called the statement of financial position.
A. statement of cash flows
B. statement of retained earnings
C. balance sheet
D. income statement
11) The accrual basis of accounting recognizes the impact of transactions on the
financial statements in the period when _____.
A. the accounting equation is decreased
B. the transaction occurs
C. cash is received or disbursed
D. revenues are earned and expenses are incurred
12) The _____ is not one of the three major financial statements.
A. statement of equity position
B. balance sheet
C. income statement
D. statement of cash flows
13) The use of acquisition cost less depreciation in valuing an asset on the
balance sheet is the logical result of the _____ accounting convention.
A. materiality
B. cost-benefit
C. conservatism
D. continuity
14) The accounting convention of _____ guides the relative sophistication of the
accounting system.

4. A. materiality
B. conservatism
C. cost benefit
D. objectivity
15) The accounting convention of _____ means selecting the method of
measurement that yields the gloomiest immediate results.
A. conservatism
B. materiality
C. objectivity
D. cost benefit
16) The statement of cash flows is used for all of the following except_____.
A. evaluating the creditworthiness of the organization
B. revealing commitments that may restrict future courses of action
C. determining a company’s ability to pay its debts when they are due
D. showing the relationship of net income to changes in cash
17) The difference between a single and multiple step income statement is that a
single step income statement_____.
A. shows only one year's net income, whereas a multiple step income statement
shows multiple years' net income
B. calculates gross profit and operating income, whereas a multiple step income
statement does not
C. calculates net income using one method, whereas a multiple step income
statement calculates net income under two or more methods
D. groups all revenues together and all expenses together, whereas a multiple
step income statement separates certain revenues and expenses from each other
and presents subtotals
18) Sylvester Company requires clients to pay in advance for legal services. One
such client made a $4,000 payment on May 1, and Sylvester Company recorded
this transaction in the appropriate liability account. As of May 20, the legal

5. services that the client requested had been completed. The May 20 accounting
entry will:
A. decrease liabilities and increase revenues
B. increase revenues and increase liabilities
C. decrease assets and decrease liabilities
D. decrease assets and increase revenues
19) Output measures of both resources and activities are _____.
A. variable activities
B. fixed activities
C. stages of production
D. cost drivers
20) Which of the following is not a cost driver of customer services costs?
A. Travel costs are not a cost driver of customer services costs.
B. All of these answers are correct
C. Number of service calls is not a cost driver of customer services costs.
D. Hours spent servicing products are not a cost driver of customer services
costs.
21) Which value chain function would include the cost of computer-aided design
equipment and cost to develop the prototype of a product?
A. The design of product, services, and processes function would include these
costs.
B. The marketing function would include these costs
C. The production function would include these costs.
D. The distribution function would include these costs.
22) Walnut Corporation sells desks at $480 per desk. The costs associated with
each desk are as follows:
Direct materials $195

6. Direct labor 126
Variable factory overhead 51
Total fixed costs for the period are $456,840. The contribution margin per desk is
_____.
A. $108
B. $126
C. $51
D. $195
23) Hug Me Company produces dolls. Each doll sells for $20.00. Variable costs
per unit total $14.00, of which $6.25 is for direct materials and $5.25 is for direct
labor. If total fixed costs are $435,000, then the break even volume in dollars is
_____.
A. $1,023,529
B. $435,000
C. $621,429
D. $1,450,000
24) If the sales price per unit is $100, the unit variable cost is $75, and total fixed
costs are $150,000, then the break even volume in dollar sales rounded to the
nearest whole dollar is _____.
A. $600,000
B. $150,000
C. $200,000
D. $1,500
25) _____ of approximating cost functions does not involve the analysis of past
costs.
A. Visual fit analysis
B. least-squares regression
C. Engineering analysis

7. D. High low analysis
26) In relation to a cost function, the term reliability means_____.
A. whether the cost function conforms to a given mathematical model
B. how well the cost function explains past cost behavior
C. how well the cost function predicts future costs
D. whether the costs and activities can be easily observed
27) The _____ method of measuring cost functions is the least reliable.
A. visual fit
B. multiple least squares regression
C. simple least squares regression
D. high low
28) _____ is a name for a system that first accumulates overhead costs for each
of the activities of an organization, and then assigns the costs of activities to the
products, services, or other cost objects that caused that activity.
A. Cost driver accounting
B. Transaction costing
C. Transaction based accounting
D. Activity based costing
29) The change from traditional costing to activity-based costing may reveal that
_____.
A. low volume products are overcosted
B. both high and low volume products are undercosted
C. both high and low volume products are overcosted
D. high volume products are overcosted
30) _____ is an example of the external financial reporting purpose of the cost
management systems.
A. The product mix to optimize profitability

8. B. All of these answers are correct
C. the amount of inventory that should appear on the balance sheet
D. The cost of a manufacturing process
31) _____ models are mathematical models of the master budget that can react
to any set of assumption about sales, costs, and product mix.
A. Financial planning
B. Futuring
C. Accounting
D. Budgeting analysis
32) Budgets generate negative feelings if they are _____.
A. used primarily to limit spending
B. used to point out managers’ failings and used primarily to limit spending
C. congruent with rewards
D. used to point out managers’ failings
33) _____ budgeting is when budgets are formulated with the active participation
of all affected employees
A. Team
B. Shared
C. Participative
D. Financial
34) Important factors considered by sales forecasters include all of the following
except _____.
A. marketing research studies
B. the desired level of sales
C. competitors’ activities
D. past patterns of sales

9. 35) A _____ gives the expected sales under a given set of conditions.
A. sales budget
B. sales forecast
C. budget forecast
D. sales prediction
36) The master budget includes forecasts for all of the following except _____.
A. cash disbursements
B. balance sheets
C. sales
D. number of employees
37) _____ are components of a master budget.
A. A cash budget and an activity budget
B. A continuous budget and a static budget
C. A strategic plan and an operating budget
D. An operating budget and a financial budget
38) The master budget quantifies targets for all of the following except _____.
A. cost driver activity
B. markets
C. sales
D. production
39) Differences between the static budget and the flexible budget are due to
_____.
A. actual activity differing from expected activity levels
B. a combination of price and material variances
C. problems of cost control

10. D. poor usage of material and labor
40) Costs are allocated for all the following purposes except to _____.
A. compute income and asset valuation
B. determine inventory levels
C. predict the economic effects of planning and control decisions
D. obtain reimbursement
41) The use of budgeted service department cost rates protects using
departments from _____.
A. all of these answers are correct
B. service outages
C. service department efficiencies
D. price fluctuations
42) Cost allocation base refers to the _____.
A. cost objectives
B. total allocated costs
C. cost driver
D. total costs to be allocated
43) Murphy Company has two service departments, Maintenance and Personnel,
as well as two production departments, Mixing and Finishing. Maintenance costs
are allocated based on square footage while personnel costs are allocated based
on number of employees. The following information has been gathered for the
current year:
Maintenance Personnel Mixing Finishing
Direct dept. costs $126,000 $84,000 $105,000 $175,000
Square footage 800 400 1,600 1,200
Number of employees 8 12 24 32

11. If the step-down method of allocating costs is used and the Personnel
Department is allocated first, then the amount of overhead that would be
allocated from Personnel to Mixing is _____.
A. $78,000
B. $63,000
C. $31,500
D. $58,500
44) Serena Company has two service departments, Maintenance and Personnel,
as well as two production departments, Mixing and Finishing. Maintenance costs
are allocated based on square footage while personnel costs are allocated based
on number of employees. The following information has been gathered for the
current year:
Maintenance Personnel Mixing Finishing
Direct dept. costs $126,000 $84,000 $105,000 $175,000
Square footage 800 400 1,600 1,200
Number of employees 8 12 24 32
If the step-down method is used to allocate costs and the Maintenance
Department is allocated first, then the amount of overhead that would be
allocated from Maintenance to Finishing is _____.
A. $47,250
B. $57,000
C. $42,750
D. $31,500
45) Gomez Company has two service departments, Maintenance and Personnel,
as well as two production departments, Mixing and Finishing. Maintenance costs
are allocated based on square footage while personnel costs are allocated based
on number of employees. The following information has been gathered for the
current year _____.
Maintenance Personnel Mixing Finishing
Direct dept. costs $126,000 $84,000 $105,000 $175,000

12. Square footage 800 400 1,600 1,200
Number of employees 8 12 24 32
If the step-down method is used to allocate costs and the Maintenance
Department is allocated first, the amount of overhead that would be allocated
from Maintenance to Mixing is:
A. $36,000
B. $42,750
C. $42,000
D. $63,000
46) In absorption costing, costs are separated into the major categories of_____.
A. variable and nonmanufacturing
B. fixed and variable
C. manufacturing and nonmanufacturing
D. manufacturing and fixed
47) _____ is another term for variable costing.
A. Absorption costing
B. Traditional costing
C. Full costing
D. Direct costing
48) When the variable costing method is used, fixed factory overhead appears on
the income statement as a_____.
A. component of cost of goods sold and as a production-volume variance
B. production-volume variance
C. component of cost of goods sold
D. fixed expense
49) Identify which of the following is not a characteristic of a management control
system.

13. A. A management control system motivates individuals throughout the
organization to act in concert.
B. A management control system encourages short term profitability.
C. A management control system coordinates forecasting sales and cost driver
activities, budgeting, and measuring and evaluating performance.
D. A management control system aids and coordinates the process of making
decisions.
50) _____ is the first step in designing a management control system.
A. Preparing financial statements
B. Establishing organizational goals
C. Distinguishing between profit centers and cost centers
D. Evaluating management's performance
51) _____ is (are) the most basic component of a management control system.
A. The stockholder's preferences
B. The organization's goals
C. Top management's preferences
D. The organization's long-range budget
52) The following information is available for the Peter Company:
Sales $500,000
Invested Capital 312,500
ROI 10%
The return on sales is _____.
A. 1.000%
B. 6.250%
C. none of these answers is correct
D. 10.000%

14. 53) _____ is a measure of income or profit divided by the investment required to
obtain that income or profit.
A. Return on investment
B. Capital turnover
C. Residual income
D. Return on sales
54) The following information is available for the Peter Company:
Sales $150,000
Invested Capital 156,250
ROI 10%
The return on sales is _____.
A. 10.00%
B. none of these answers is correct
C. 62.50%
D. 10.42%