NNDC – ICAN KADUNA STUDY CENTRE

PRACTICE QUESTIONS ON INTRODUCTION TO MANAGEMENT ACCOUNTING

A. MULTIPLE CHOICE QUESTIONS

1. As a company’s management accountant, you would:
a) Be involved in the yearly reporting of financial performance
b) Prepare plans and forecasts for the future activities of the business
c) Be primarily concerned with the reporting of past data
d) Be primarily concerned with providing information to the shareholders on
how management are doing.

2. Which statement regarding management accounts is true?

a) Management accounts are prepared for parties external to the organization
b) Management accounts will be used by shareholders to compare one
company against another
c) Management accounts are governed by standards and conventions
d) Management accounts are used by managers within the organization

3. Which of the following is not classed as a planning or decision making role of

management accounting?
a) Searching for alternative courses of action
b) Responding to divergences from plan
c) Identifying objectives
d) Gathering data about options that are available

4. The value chain represents:

a) The additional price increase put on a product when it is passed from supplier
to retailer
b) The difference between suppliers prices and the prices to customers
c) The set of value creating activities from the purchase of raw materials
through to delivery of the product to the customer
d) The chain of supply from raw materials to finished goods showing the points
in the chain where production problems may arise

5. Which one of the following is not a function of management accounting?

a) To provide information to help in the planning of future operations
b) To aid shareholders in making wise investment decisions
c) To provide control reports that highlight differences between actual and plan
d) To provide information with which management can make better decisions

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6. Strategic decisions are:
a) Short term decisions that will affect the way that the business carry out its
day to day operations
b) Decisions that affect the firm’s long run possibilities and will affect the
choices that the business can make in the future.
c) Decisions about the way that a business will respond to the changes in selling
prices made by competitors
d) Decisions made by supervisors on a monthly basis

7. AMT is an acronym for:

a) Automated Management Transactions
b) Automated Manufacturing Techniques
c) Advanced Manufacturing technology
d) Additional Management Training

8. Which of the following is NOT a current theme of management accounting?

a) Determination of cost of stock
b) Continuous improvement
c) Value Chain Analysis
d) All of the above

9. The value chain include which of the following activities?

a) Designing and developing products and services
b) Producing products and services
c) Marketing and delivering products and services
d) All of the above

10. The process of ensuring that results agree with plans is referred to as:
a) Planning
b) Controlling
c) Decision-making
d) Organising

11. The primary objective of management accounting is:

a) To provide shareholders and potential investors with useful information for
decision-making
b) To provide banks and other creditors with information useful for credit
decisions
c) To provide management with information useful for planning and control of
operations
d) To provide the tax authorities with information about taxable income

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12. ___________ is devoted to providing information for external users.
a) Management accounting
b) Financial accounting
c) Internal accounting
d) Cost accounting

13. What is the system of management technique that involves monitoring output
achieved against desired output with corrective action taken where deviations
occur?
a) Responsibility Accounting
b) Marginal costing
c) Feedback control
d) Quantitative Techniques

14. In a manufacturing company, costs that can be eliminated if a particular division is

discontinued are called?
a) Opportunity costs
b) Incremental costs
c) Variable cost
d) Prime cost
e) Sunk costs
15. The measurable value of an alternative use of resources is referred to as:
a) Imputed cost
b) Differential cost
c) Sunk cost
d) Marginal cost
e) Opportunity cost

16. Management accounting techniques include the following with the exception of:
a) Capital budgeting
b) Cost control
c) Flexible budget
d) Cost centre
e) Cost reduction

17. When all the cost and income information are analysed and the differences between
the various options being evaluated are critically examined, clear comparisons can
be made of all the financial consequences. This is termed:
a) Marginal costing
b) Absorption costing
c) Standard costing
d) Differential costing
e) Batch costing
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18. The planning process involves the following except:
a) Making sound decisions
b) Setting targets and objectives
c) Identifying means of achieving the objectives
d) Communicating objectives and targets to operators
e) Evaluating variances

B. SHORT ANSWER QUESTIONS

1. Planning with long time span in economic and business affairs is known as
_______________
Ans: Corporate planning

2. The application of accounting techniques to the provision of information designed to

assist all levels of management in planning and controlling the activities of an
organization is known as _____________
Ans: Management Accounting

3. Costs that can be eliminated, if a particular division is discontinued is

called_________________
Ans: Avoidable Cost

4. A cost that is irrelevant to future decisions is known as_______________

Ans: Sunk cost

5. A reporting process which enables management to concentrate on significant

deviations from expected results is called________________
Ans: Management by Exception

6. Expenditure that has already been incurred and is not relevant to decision making is
called____________
Ans: Sunk costs or Historical cost

7. The information used by senior managers to plan the objectives of their organization
and to assess whether the objectives are being met in practice is
called___________________
Ans: Strategic Information

8. In decision-making, sunk costs are____________

Ans: Irrelevant

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9. The set of business functions that add value to the products or services of an
organization is known as____________________
Ans: Value Chain

C. THEORY

1. In the broadest sense, all accounting is management accounting. All financial and
cost information generated by accountants is of some interest to management. But
in practice, where management accounting differs from financial accounting ... (from
An Insight into Management Accounting by John Sizer)

Required:
a) A brief definition of management accounting
b) A discussion of the major differences between management and financial
accounting.

2. “To manage” wrote a well-known authority is to forecasted and plan, to organize, to

commend, to co-ordinate and to control.
Discuss the role of management accountancy in its services to management, dealing
especially with its contribution to planning and controlling element referred to in the
quotation.

3. (a) Describe, and outline the operation of the principal techniques used in Management
Accounting, to assist management in its control function.

(b) Briefly specify the conditions under which each of the techniques mentioned is
suitable.

ICAN NOV, 1994

4. Briefly but concisely discuss the role of the Management Accountant in the
management process. Pay particular attention to the managerial function of
planning, control, organizing, communication and motivation.

ICAN MAY, 1997

5. One of the fundamental innovations in the Accountancy profession has been the
introduction of Management Accounting techniques into the presentation of
accounting information.
You are required to briefly mention three respects in which this new field of
accounting differs from the traditional financial accounting procedures.
ICAN NOV, 1997
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6. The Management Accountant must inform management and supervisors about vital
facts known to him which affect the running of a business using suitably drafted
reports and statements which are sometimes supported by charts, diagrams and
statistical aids.
(a) Explain briefly the following basic form of reports
i. Routine report
ii. Special report

(b) State briefly at least four fundamental principles of report preparation and
presentations.
ICAN MAY, 2000

7. (a) What are the desirable characteristics of effective management information

statements or reports?
(b) Explain how the increasing use of information technology can assist the practice of
management accounting.

ICAN NOV,2000

Hint to 7(b)
- They ensure accuracy of processing data
- They provide rapid retrieval of information
- They enable individual managers to obtain access to information at the time they
need it
- They carry out calculations that would be time-consuming or practically
impossible by other means e.g. linear programming.

8. As a management accountant, list at least six items you will bear in mind to ensure
effective communication and maximum motivation of the recipient of management
reports.

ICAN MAY, 2001

9. “Management Accounting is an instrument of management control”. “Management

Accounting is nothing but a decision-making tool”. Reconcile these two statements by giving
three examples to illustrate the truth of each.
ICAN NOV, 2001

10. (a) What is Management Accounting?

(b) Outline Principal Management Accounting techniques used in producing qualitative
management information report.
ICAN MAY, 2002
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 Hint 10(b)
i. Planning techniques:
- Capital budgets
- Operating budgets
- Cash budget
- Flexible budgets
- Incremental or zero based budget
- Departmental budget

ii. Control techniques:

- Standard costing
- Variance analysis
- Stock control technique
- Credit control
- Cost control

iii. Decision making techniques:

- Marginal costing
- Cost Volume Profit (CVP) analysis
- Linear programming
- Decision tree analysis
- Probability Theory
- Sensitivity Analysis
- Investment decisions

11. (a) Define the following decision accounting concepts:

(i) Sunk Costs
(ii) Incremental Costs
(iii) Opportunity Costs
(iv) Avoidable Costs
(v) Variable Costs

(b) In relation to management accounting, distinguish between information and data.

(c) Briefly discuss the characteristics of good management information.

ICAN NOV 2002

Hint to 11(c)
- Concise
- Relevant
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 - Objective
- Timely
- Understandable
- Comparable
- Clarity
- Completeness
- Cost Effective

12. Management Accounting has an important role to play in decision making. Discuss
this statement, explaining the concepts which may be relevant and enumerate types
of decisions to which they may be applied.

ICAN MAY 2003

Hints
Concepts
- Marginal Costing concept
- Relevant Costs concept
- Opportunity Costs concept

13. (a) “Management Accounting should assist in planning, control and decision-making
process in an organization.”
Discuss the ways in which the above statement is relevant in the design of an
effective management accounting system.
(b) Define Management Information System. List five qualities of a good Information
System.
ICAN NOV 2003

PREPARED BY: ABDULKADIR, K. I. MBA, ACTI, ACA