IVY SOFTWARE MBA PREPWORKS
MANAGERIAL ACCOUNTING EXAM SCRIPT
2026 QUESTIONS WITH ANSWERS
◉ A business should shut down if production at the profit
maximizing quantity generates total revenues that are less than total
fixed costs. (t/f). Answer: false. a business should shut down when
the losses from operating are greater than the total fixed costs.
◉ short run shutdown rule.. Answer: a business should shut down if
production at the profit maximizing quantity
◉ The accountants hired by Costa law firm have calculated that at
the profit maximizing quantity, total fixed costs equal $56,791, total
variable costs equal $113,555 and total revenue equals $112,000.
Because of this info, Costa Law firm decides:
A) to exit the industry
B) to shut down
C) decides to stay open because shutting down would be more
expensive
D) decides to stay open because they are making an economic profit.
Answer: B. to shut down. the shutdown rule states that a business
should shut down in the short run only if total revenue is less than
total variable costs. In this case, total revenue is $112,000 and total
,variable cost is $113,555. Because total variable cost exceeds total
revenue, CLF should shut down.
◉ How can you tell if a business is operating in a perfectly
competitive market?. Answer: the marginal revenue from selling an
additional unit does not change as output increases. They are also
known as a price taker. You will notice the Marginal revenue column
stays constant as output increases.
◉ What is the per unit price in a perfectly competitive market? The
market equilibrium price is equal to. Answer: marginal revenue
◉ total cost equals. Answer: total revenue minus profit
◉ if marginal revenues and marginal costs do not equal in a chart
choose the closest option to determine marginal cost (t/f). Answer:
true
◉ In the WSJ article it was reported that Mitsubishi is seeking a
buyer for its U.S> operations, a move that may well signal the
company's intent to exit the world's largest car market. The
potential move by Mitsubishi is a matter of economies of scale or
economies of scope?. Answer: Economies of scale. it is trying to sell
its U.S> operations because they have been losing money for some
time in the U.S. market. By contracting its scale of operation,
Mitsubishi believes that it can turn its financial situation around.
,◉ Consider the following decision made by Old Century Power
Company. In electricity production, once electricity has been
generated at a power plant, distribution networks are needed to
bring electricity to the customer. Suppose Old Century Power
Company has decided to build its own electricity generating plants
and its own electricity distribution network. In making this decision,
OCPC has calculated that economies of scale or economies of scope
exist when electricity generation and electricity distribution are
integrated under unified ownership?. Answer: economies of scope.
OCPC must observe an advantage to having unified ownership of
electricity generation and electricity distribution. If two activities in
the production of a good are integrated under unified ownership for
a cost advantage, then economies of scope are present.
◉ Consider the following decision made by New Century Power
Company. In electricity production, once electricity has been
generated at a power plant, distribution networks are needed to
bring the electricity to the customer. Suppose NCPC has decided to
build its own electricity distribution network, but it has also decided
to purchase electricity from many different independent electric
power producers. In making this decision, NCPC has calculated that
diseconomies of scale or diseconomies of scope exist when
electricity generation and electricity distribution are integrated
under unified ownership?. Answer: diseconomies of scope. NCPC
must observe an advantage to NOT having unified ownership of
electricity generation and electricity distribution. If two activities in
the production of a good are integrated under unified ownership
, and there is a cost DISadvantage, then diseconomies of scope exist.
By purchasing electricity generation from the market, then it must
be less costly. Otherwise, we would observe unified ownership of the
distribution network and the generation of electricity.
◉ The profit maximizing rule states that a business maximizes
profits when it produces where total revenue equals total cost (t/f).
Answer: False.
◉ The accountants hired BBB law firm have calculated that at the
profit maximizing quantity total fixed costs equal $56,272,000 total
variable costs equal $213,235,000 and total revenue equals
$213,236,000. Because of this information BBB law firm decides
A. to exit the industry
B. to shut down
C. decides to stay open because shutting down would be more
expensive
D. decides to stay open because they are making an economic profit.
Answer: C. decides to stay open because shutting down would be
more expensive. Because total variable cost is less than total
revenue, BBB Law Firm should stay open.
◉ The accountants hired by Truscott and Associates have calculated
that at the company's current production level, total fixed costs to
equal $21,000, total variable costs to equal $42,000 and total
MANAGERIAL ACCOUNTING EXAM SCRIPT
2026 QUESTIONS WITH ANSWERS
◉ A business should shut down if production at the profit
maximizing quantity generates total revenues that are less than total
fixed costs. (t/f). Answer: false. a business should shut down when
the losses from operating are greater than the total fixed costs.
◉ short run shutdown rule.. Answer: a business should shut down if
production at the profit maximizing quantity
◉ The accountants hired by Costa law firm have calculated that at
the profit maximizing quantity, total fixed costs equal $56,791, total
variable costs equal $113,555 and total revenue equals $112,000.
Because of this info, Costa Law firm decides:
A) to exit the industry
B) to shut down
C) decides to stay open because shutting down would be more
expensive
D) decides to stay open because they are making an economic profit.
Answer: B. to shut down. the shutdown rule states that a business
should shut down in the short run only if total revenue is less than
total variable costs. In this case, total revenue is $112,000 and total
,variable cost is $113,555. Because total variable cost exceeds total
revenue, CLF should shut down.
◉ How can you tell if a business is operating in a perfectly
competitive market?. Answer: the marginal revenue from selling an
additional unit does not change as output increases. They are also
known as a price taker. You will notice the Marginal revenue column
stays constant as output increases.
◉ What is the per unit price in a perfectly competitive market? The
market equilibrium price is equal to. Answer: marginal revenue
◉ total cost equals. Answer: total revenue minus profit
◉ if marginal revenues and marginal costs do not equal in a chart
choose the closest option to determine marginal cost (t/f). Answer:
true
◉ In the WSJ article it was reported that Mitsubishi is seeking a
buyer for its U.S> operations, a move that may well signal the
company's intent to exit the world's largest car market. The
potential move by Mitsubishi is a matter of economies of scale or
economies of scope?. Answer: Economies of scale. it is trying to sell
its U.S> operations because they have been losing money for some
time in the U.S. market. By contracting its scale of operation,
Mitsubishi believes that it can turn its financial situation around.
,◉ Consider the following decision made by Old Century Power
Company. In electricity production, once electricity has been
generated at a power plant, distribution networks are needed to
bring electricity to the customer. Suppose Old Century Power
Company has decided to build its own electricity generating plants
and its own electricity distribution network. In making this decision,
OCPC has calculated that economies of scale or economies of scope
exist when electricity generation and electricity distribution are
integrated under unified ownership?. Answer: economies of scope.
OCPC must observe an advantage to having unified ownership of
electricity generation and electricity distribution. If two activities in
the production of a good are integrated under unified ownership for
a cost advantage, then economies of scope are present.
◉ Consider the following decision made by New Century Power
Company. In electricity production, once electricity has been
generated at a power plant, distribution networks are needed to
bring the electricity to the customer. Suppose NCPC has decided to
build its own electricity distribution network, but it has also decided
to purchase electricity from many different independent electric
power producers. In making this decision, NCPC has calculated that
diseconomies of scale or diseconomies of scope exist when
electricity generation and electricity distribution are integrated
under unified ownership?. Answer: diseconomies of scope. NCPC
must observe an advantage to NOT having unified ownership of
electricity generation and electricity distribution. If two activities in
the production of a good are integrated under unified ownership
, and there is a cost DISadvantage, then diseconomies of scope exist.
By purchasing electricity generation from the market, then it must
be less costly. Otherwise, we would observe unified ownership of the
distribution network and the generation of electricity.
◉ The profit maximizing rule states that a business maximizes
profits when it produces where total revenue equals total cost (t/f).
Answer: False.
◉ The accountants hired BBB law firm have calculated that at the
profit maximizing quantity total fixed costs equal $56,272,000 total
variable costs equal $213,235,000 and total revenue equals
$213,236,000. Because of this information BBB law firm decides
A. to exit the industry
B. to shut down
C. decides to stay open because shutting down would be more
expensive
D. decides to stay open because they are making an economic profit.
Answer: C. decides to stay open because shutting down would be
more expensive. Because total variable cost is less than total
revenue, BBB Law Firm should stay open.
◉ The accountants hired by Truscott and Associates have calculated
that at the company's current production level, total fixed costs to
equal $21,000, total variable costs to equal $42,000 and total
