BUS-A 202 Introduction to Managerial Accounting (3 cr.)
BUS-A 202 – INTRODUCTION TO MANAGERIAL ACCOUNTING | EXAM
QUESTIONS AND CORRECT ANSWERS | VERIFIED MANAGERIAL
ACCOUNTING LATEST 2026/2027
BUS-A 202 Introduction to Managerial Accounting (3 cr.)
1. Managerial accounting information is prepared primarily for which group?
A. Managers and other decision makers inside the organization
B. Shareholders and prospective investors
C. The Securities and Exchange Commission
D. Taxing authorities such as the IRS
ANSWER : A. Managers and other decision makers inside the
organization
Managerial accounting serves internal users who plan, direct, and control
operations.
2. Which of the following is NOT a typical feature of managerial accounting?
A. It often focuses on segments such as products, departments, or customers
B. It places relevance and timeliness ahead of precision
C. It emphasizes decisions affecting the future
D. It must follow generally accepted accounting principles
ANSWER : D. It must follow generally accepted accounting principles
GAAP governs external financial reporting; internal reports are not required to
follow it.
Page 1 of 55
, BUS-A 202 Introduction to Managerial Accounting (3 cr.)
3. The controlling function of management is best described as:
A. Establishing goals and specifying how they will be achieved
B. Gathering feedback to ensure that plans are being carried out or modified as
circumstances change
C. Preparing the annual report for shareholders
D. Hiring employees and assigning them to departments
ANSWER : B. Gathering feedback to ensure that plans are being carried
out or modified as circumstances change
Control involves comparing actual results with plans and acting on the
differences.
4. Prime cost consists of:
A. Direct materials plus manufacturing overhead
B. Direct materials plus direct labor
C. Direct labor plus manufacturing overhead
D. Direct materials, direct labor, and manufacturing overhead
ANSWER : B. Direct materials plus direct labor
Prime cost is the sum of the two costs directly traceable to units: direct
materials and direct labor.
5. Conversion cost consists of:
A. Direct labor plus manufacturing overhead
B. Direct materials plus manufacturing overhead
C. Selling and administrative expenses
D. Direct materials plus direct labor
ANSWER : A. Direct labor plus manufacturing overhead
Conversion cost is the cost of converting raw materials into finished products:
direct labor plus overhead.
6. Which of the following would be classified as a period cost for a
manufacturer?
A. Rent on the factory building
B. Wages of assembly line workers
C. Sales commissions paid to the sales staff
D. Depreciation on production equipment
ANSWER : C. Sales commissions paid to the sales staff
Selling costs are expensed in the period incurred; the others are product costs.
Page 2 of 55
, BUS-A 202 Introduction to Managerial Accounting (3 cr.)
7. The salary of a factory production supervisor is classified as:
A. A selling expense
B. Direct labor
C. Manufacturing overhead
D. An administrative expense
ANSWER : C. Manufacturing overhead
Supervisors do not work directly on the product, so their pay is indirect labor
within manufacturing overhead.
8. In a furniture factory, the glue used to assemble chairs is most likely treated
as:
A. A period cost
B. Direct materials
C. Indirect materials included in manufacturing overhead
D. Direct labor
ANSWER : C. Indirect materials included in manufacturing overhead
Glue is part of the product but too insignificant to trace to each unit, so it is
indirect material.
9. Within the relevant range, as the level of activity increases, a variable cost
will:
A. Remain constant in total and decrease per unit
B. Increase both in total and per unit
C. Remain constant both in total and per unit
D. Increase in total but remain constant per unit
ANSWER : D. Increase in total but remain constant per unit
Total variable cost moves in proportion to activity while the cost per unit stays
the same.
Page 3 of 55
, BUS-A 202 Introduction to Managerial Accounting (3 cr.)
10. Within the relevant range, as production volume increases, fixed cost per
unit will:
A. Increase at first and then decrease
B. Remain unchanged
C. Decrease
D. Increase
ANSWER : C. Decrease
A constant total fixed cost is spread over more units, so the per-unit amount
falls.
11. The relevant range is best defined as:
A. The range of prices customers are willing to pay
B. The span of time covered by the master budget
C. The range of activity within which assumptions about cost behavior remain
valid
D. The range of costs that are relevant to a decision
ANSWER : C. The range of activity within which assumptions about cost
behavior remain valid
Cost behavior assumptions such as fixed totals hold only within a normal band
of activity.
12. The potential benefit given up when one alternative is chosen over another
is called:
A. A committed fixed cost
B. A differential cost
C. An opportunity cost
D. A sunk cost
ANSWER : C. An opportunity cost
Opportunity cost is the benefit forgone by not selecting the next best alternative.
Page 4 of 55
BUS-A 202 – INTRODUCTION TO MANAGERIAL ACCOUNTING | EXAM
QUESTIONS AND CORRECT ANSWERS | VERIFIED MANAGERIAL
ACCOUNTING LATEST 2026/2027
BUS-A 202 Introduction to Managerial Accounting (3 cr.)
1. Managerial accounting information is prepared primarily for which group?
A. Managers and other decision makers inside the organization
B. Shareholders and prospective investors
C. The Securities and Exchange Commission
D. Taxing authorities such as the IRS
ANSWER : A. Managers and other decision makers inside the
organization
Managerial accounting serves internal users who plan, direct, and control
operations.
2. Which of the following is NOT a typical feature of managerial accounting?
A. It often focuses on segments such as products, departments, or customers
B. It places relevance and timeliness ahead of precision
C. It emphasizes decisions affecting the future
D. It must follow generally accepted accounting principles
ANSWER : D. It must follow generally accepted accounting principles
GAAP governs external financial reporting; internal reports are not required to
follow it.
Page 1 of 55
, BUS-A 202 Introduction to Managerial Accounting (3 cr.)
3. The controlling function of management is best described as:
A. Establishing goals and specifying how they will be achieved
B. Gathering feedback to ensure that plans are being carried out or modified as
circumstances change
C. Preparing the annual report for shareholders
D. Hiring employees and assigning them to departments
ANSWER : B. Gathering feedback to ensure that plans are being carried
out or modified as circumstances change
Control involves comparing actual results with plans and acting on the
differences.
4. Prime cost consists of:
A. Direct materials plus manufacturing overhead
B. Direct materials plus direct labor
C. Direct labor plus manufacturing overhead
D. Direct materials, direct labor, and manufacturing overhead
ANSWER : B. Direct materials plus direct labor
Prime cost is the sum of the two costs directly traceable to units: direct
materials and direct labor.
5. Conversion cost consists of:
A. Direct labor plus manufacturing overhead
B. Direct materials plus manufacturing overhead
C. Selling and administrative expenses
D. Direct materials plus direct labor
ANSWER : A. Direct labor plus manufacturing overhead
Conversion cost is the cost of converting raw materials into finished products:
direct labor plus overhead.
6. Which of the following would be classified as a period cost for a
manufacturer?
A. Rent on the factory building
B. Wages of assembly line workers
C. Sales commissions paid to the sales staff
D. Depreciation on production equipment
ANSWER : C. Sales commissions paid to the sales staff
Selling costs are expensed in the period incurred; the others are product costs.
Page 2 of 55
, BUS-A 202 Introduction to Managerial Accounting (3 cr.)
7. The salary of a factory production supervisor is classified as:
A. A selling expense
B. Direct labor
C. Manufacturing overhead
D. An administrative expense
ANSWER : C. Manufacturing overhead
Supervisors do not work directly on the product, so their pay is indirect labor
within manufacturing overhead.
8. In a furniture factory, the glue used to assemble chairs is most likely treated
as:
A. A period cost
B. Direct materials
C. Indirect materials included in manufacturing overhead
D. Direct labor
ANSWER : C. Indirect materials included in manufacturing overhead
Glue is part of the product but too insignificant to trace to each unit, so it is
indirect material.
9. Within the relevant range, as the level of activity increases, a variable cost
will:
A. Remain constant in total and decrease per unit
B. Increase both in total and per unit
C. Remain constant both in total and per unit
D. Increase in total but remain constant per unit
ANSWER : D. Increase in total but remain constant per unit
Total variable cost moves in proportion to activity while the cost per unit stays
the same.
Page 3 of 55
, BUS-A 202 Introduction to Managerial Accounting (3 cr.)
10. Within the relevant range, as production volume increases, fixed cost per
unit will:
A. Increase at first and then decrease
B. Remain unchanged
C. Decrease
D. Increase
ANSWER : C. Decrease
A constant total fixed cost is spread over more units, so the per-unit amount
falls.
11. The relevant range is best defined as:
A. The range of prices customers are willing to pay
B. The span of time covered by the master budget
C. The range of activity within which assumptions about cost behavior remain
valid
D. The range of costs that are relevant to a decision
ANSWER : C. The range of activity within which assumptions about cost
behavior remain valid
Cost behavior assumptions such as fixed totals hold only within a normal band
of activity.
12. The potential benefit given up when one alternative is chosen over another
is called:
A. A committed fixed cost
B. A differential cost
C. An opportunity cost
D. A sunk cost
ANSWER : C. An opportunity cost
Opportunity cost is the benefit forgone by not selecting the next best alternative.
Page 4 of 55
