Accounting for Business Managers
Test Questions
Course Introduction
Accounting for Business Managers provides students with a comprehensive understanding of the essential accounting principles and practices relevant to effective managerial decision-making. The course covers key topics such as financial statement analysis, budgeting, cost behavior, performance evaluation, internal controls, and the interpretation of accounting information for planning and control. Emphasis is placed on how business managers utilize accounting data to make strategic decisions, allocate resources efficiently, and evaluate organizational performance, equipping students with the foundational skills necessary to succeed in a dynamic business environment.
Recommended Textbook
Managerial Accounting 6th Edition by John J Wild
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Page 2
Chapter 1: Managerial Accounting Concepts and Principles
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Sample Questions
Q1) The Work in Process Inventory account is found only in the ledgers of merchandising companies.
A)True
B)False
Answer: False
Q2) A manufacturing company's beginning finished goods inventory was $29,000; cost of goods manufactured was $316,000; and the ending finished goods inventory was $31,000. What is the cost of goods sold for that year?
Answer: 11ea7438_d352_53da_b7dd_7363c3011656_TB2579_00
Q3) Identify and describe the three categories of manufacturing costs.
Answer: The three basic cost elements in accounting for manufactured goods are direct material costs, direct labor costs, and factory overhead costs. Direct materials are tangible components of a finished product, separately and readily traced through the manufacturing process to finished goods. Direct labor is the efforts of employees who physically convert materials to finished products. Factory overhead consists of all manufacturing costs that are not direct materials or direct labor.
Q4) A manufacturer's inventory that is not completely finished is called ________ .
Answer: work in process
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Page 3
Chapter 2: Job Order Costing and Analysis
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Sample Questions
Q1) The production activities for a customized product represent a(n):
A) Operation.
B) Job.
C) Unit.
D) Pool.
E) Process.
Answer: B
Q2) The B&T Company's production costs for May are: direct labor, $13,000; indirect labor, $6,500; direct materials, $15,000; property taxes on production facility, $800; factory heat, lights and power, $1,000; and insurance on plant and equipment, $200. B&T Company's factory overhead incurred for May is:
A) $2,000.
B) $6,500.
C) $8,500.
D) $21,500.
E) $36,500.
Answer: C
Q3) When factory payroll is assigned to specific jobs, ________ is debited.
Answer: Work in Process Inventory
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Page 4
Chapter 3: Process Costing and Analysis
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Sample Questions
Q1) A process cost summary is a managerial accounting report that describes all but which of the following:
A) The gross profit earned on the sale of products.
B) The equivalent units of production by the department.
C) How the costs were assigned to the output.
D) Physical transfers for a department.
E) The costs charged to a department.
Answer: A
Q2) The cost object in a process costing system is the specific job.
A)True
B)False
Answer: False
Q3) A production department is an organizational unit that has the responsibility for the complete processing of one particular product.
A)True
B)False
Answer: False
Q4) A ________ contains features of both process and job order costing systems. Answer: hybrid costing system
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Chapter 4: Activity Based Costing and Analysis
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Sample Questions
Q1) Identify and explain the four control levels associated with activity-based costing.
Q2) Some companies allocate their overhead cost using a plantwide overhead rate largely because of its simplicity.
A)True
B)False
Q3) What is the reason for pooling costs?
A) To shift costs from low-volume to high-volume products.
B) It is a budgeting technique designed to accurately track fixed costs.
C) Determining a pool rate for all costs incurred by the same activity reduces the number of cost assignments required.
D) This procedure helps to determine which costs are directly related to production volume.
E) It simplifies departmental overhead costing procedures.
Q4) Activities causing overhead cost in an organization are typically separated into four levels: (1) direct activities, (2) indirect activities, (3) batch level activities, and (4) facility level activities.
A)True
B)False
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6
Chapter 5: Cost Behavior Cost-Volume-Profit Analysis
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Sample Questions
Q1) Glover Headgear produces specialty logo baseball caps for a variety of customers. Selected cost data for Glover follows: direct materials cost $8,000; sales commissions, $9,000; depreciation on factory equipment, $21,000; factory labor, $16,000; factory lease, $24,000. If Glover sells 6,100 caps at an average price of $12 for each cap, what is the company's contribution margin in total dollars?
Q2) What is a scatter diagram? How is a scatter diagram used to estimate cost behavior?
Q3) Philadelphia Co. is considering the production and sale of a new product with the following sales and cost data: unit sales price, $300; unit variable costs, $180; total fixed costs, $270,000; and projected sales, $900,000. What is the margin of safety: (a) In dollar sales? And (b) As a percent of sales?
Q4) The dollar amount of sales needed to achieve a target income is computed by dividing the sum of fixed costs plus the target pretax income by the contribution margin ratio.
A)True
B)False
Q5) What is the high-low method? Briefly describe how it is applied.
Q6) Define variable cost, fixed cost, and mixed cost.
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Chapter 6: Variable Costing and Analysis
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Sample Questions
Q1) Digby Company manufactured and sold 37,000 units of its product at a price of $93 per unit. Total variable cost per unit is $60, consisting of $58 in variable production cost and $2 in variable selling and administrative cost. Fixed costs of manufacturing are $350,000.
a. Compute the manufacturing margin for the company under variable costing.
b. Compute the contribution margin based on this data.
c. Compute the gross margin under absorption costing.
Q2) When setting long-term sales prices for products, the sales price must cover all costs, including fixed costs.
A)True
B)False
Q3) Information presented in a variable costing format can assist management when making short-term pricing decisions.
A)True
B)False
Q4) Under absorption costing, the product unit cost consists of direct labor, direct materials, variable overhead, and ________.
Q5) ________ is equal to Sales minus Variable manufacturing costs.
Q6) ________ costing treats fixed overhead as a period cost.
Page 8
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Chapter 7: Master Budgets and Performance Planning
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Sample Questions
Q1) In a company that employs continuous budgeting on a quarterly basis and has an accounting period that ends December 31 of each year, what period would the first revision and update to the January through December 2017 budget cover?
A) February 2017-January 2018
B) March 2017-February 2018
C) December 2017-November 2018
D) April 2017-March 2018
E) January 2018-December 2018
Q2) The ________ shows the budgeted costs for factory overhead that will be needed to complete the estimated production for the period, often separated into variable and fixed costs.
Q3) Budgets that are periodically revised and have new periods added to replace those that have lapsed are called:
A) Production budgets.
B) Sales budgets.
C) Cash budgets.
D) Rolling budgets.
E) Capital expenditures budgets.
Q4) Briefly describe the process by which budgets are developed and administered.
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Chapter 8: Flexible Budgets and Standard Costs
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Sample Questions
Q1) Variable budget is another name for:
A) Cash budget.
B) Flexible budget.
C) Fixed budget.
D) Manufacturing budget.
E) Rolling budget.
Q2) One possible explanation for direct labor rate and efficiency variances is the use of workers with different skill levels.
A)True
B)False
Q3) The usefulness of a flexible budget depends on the valid classification of variable and fixed costs.
A)True
B)False
Q4) A direct labor cost variance can be divided into price and quantity variances, which are almost always called controllable and volume variances.
A)True
B)False
Q5) Explain variance analysis. Describe how variance analysis assists managers.
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Chapter 9: Performance Measurement and Responsibility Accounting
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Sample Questions
Q1) Jarrett Department Store operates three departments (A, B and C). If total costs of $4,500 are to be allocated on the basis of square feet of space (Dept. A = 1,500 Sq. Ft.; Dept. B = 900 Sq. Ft.; Dept. C = 600 Sq. Ft.) then Dept. A's share (in percent) of the $4,500 cost would be ________%; Dept. B would be ________%, and Dept. C would be ________%. The amount of cost allocated to Dept. C would be $________.
Q2) The amount by which a department's sales exceed its direct expenses is:
A) Net sales.
B) Gross profit.
C) Departmental profit.
D) Contribution margin.
E) Departmental contribution to overhead.
Q3) A ________ helps control costs and expenses and evaluates managers' performance by assigning costs and expenses to the managers responsible for controlling them.
Q4) A useful measure used to evaluate the performance of an investment center is investment center residual income.
A)True
B)False
Q5) What is the purpose of a responsibility accounting system?
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Chapter 10: Relevant Costing for Managerial Decisions
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Sample Questions
Q1) Sales mix refers to the combination of products sold by a company.
A)True
B)False
Q2) Bluebird Mfg. has received a special one-time order for 15,000 bird feeders at $3 per unit. Bluebird currently produces and sells 75,000 units at $7.00 each. This level represents 80% of its capacity. These bird feeders would be marketed under the wholesaler's name and would not affect Bluebird's sales through its normal channels. Production costs for these units are $3.50 per unit, which includes $2.25 variable cost and $1.25 fixed cost. If Bluebird accepts this additional business, the incremental cost will be:
A) $45,000.
B) $11,250.
C) $38,750.
D) $7,500.
E) $33,750.
Q3) To maximize profit when a constrained resource exists, management should produce the sales mix that has the highest contribution margin per unit of scarce resource.
A)True
B)False
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Page 12
Chapter 11: Capital Budgeting and Investment Analysis
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Q1) The time value of money is considered when calculating the payback period of an investment.
A)True
B)False
Q2) The internal rate of return equals the rate that yields a net present value of zero for an investment.
A)True B)False
Q3) The internal rate of return method of evaluating capital investments cannot be used with uneven cash flows.
A)True
B)False
Q4) The rate that yields a net present value of zero for an investment is the:
A) Internal rate of return.
B) Accounting rate of return.
C) Net present value rate of return.
D) Zero rate of return.
E) Payback rate of return.
Q5) What is capital budgeting? Why are capital budgeting decisions often difficult and risky?
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Chapter 12: Reporting Cash Flows
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Sample Questions
Q1) The accountant for Crusoe Company is preparing the company's statement of cash flows for the fiscal year just ended. The following information is available:
\[\begin{array} { | l | r | }
\hline \text { Retained earnings balance at the beginning of the year } & \$ 126,000 \\
\hline \text { Cash dividends declared for the year } & 46,000 \\
\hline \text { Proceeds from the sale of equipment } & 81,000 \\
\hline \text { Gain on the sale of equipment } & 7,000 \\
\hline \text { Cash dividends payable at the beginning of the year } & 18,000 \\
\hline \text { Cash dividends payable at the end of the year } & 20,000 \\
\hline \text { Net income for the year } & 92,000 \\
\hline
\end{array}\] What is the ending balance for retained earnings?
A) $218,000.
B) $170,000.
C) $352,000.
D) $172,000.
E) $179,000.
Q2) The statement of cash flows is divided into three sections called the ________, ________, and ________ sections.
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Page 14
Chapter 13: Analysis of Financial Statements
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Sample Questions
Q1) Intra-company analysis is based on comparisons with competitors.
A)True
B)False
Q2) A company paid cash dividends on its preferred stock of $40,000 in the current year when its net income was $120,000 and its average common stockholders' equity was $640,000. What is the company's return on common stockholders' equity?
Q3) One purpose of financial statement analysis for internal users is to provide strategic information to improve company efficiency and effectiveness in providing products and services.
A)True
B)False
Q4) The gross margin ratio, return on total assets, and basic earnings per share are all ________ ratios.
Q5) Gains and losses that are neither unusual nor infrequent are reported as:
A) Part of continuing operations in after-tax dollars.
B) A prior period adjustment on the statement of retained earnings.
C) A gain or loss from disposing of the discontinued segment's net assets.
D) A gain or loss from operation of a discontinued segment.
E) Part of continuing operations in before tax dollars.
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Chapter 14: Time Value of Money
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Sample Questions
Q1) Which column (i) and row (n) would you use from a present value or future value table for 8% interest compounded quarterly for 6 years?
A) (i) = 2%, (n) = 8
B) (i) = 8%, (n) = 6
C) (i) = 2%, (n) = 24
D) (i) = 4%, (n) = 12
E) (i) = 4%, (n) = 24
Q2) Molly borrows money by promising to make a single payment of $100,000 at the end of 5 years. How much money is Molly able to borrow if the interest rate is 10%, compounded semiannually? (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.)
A) $38,550
B) $78,350
C) $62,090
D) $74,850
E) $61,390
Q3) A company borrows money from the bank by promising to make 8 semiannual payments of $9,000 each. How much is the company able to borrow if the interest rate is 10% compounded semiannually?
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Page 16
Chapter 15: Analyzing for Business Transactions
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Sample Questions
Q1) Explain the difference between a general ledger and a chart of accounts.
Q2) At the end of the current year, Leer Company reported total liabilities of $300,000 and total equity of $100,000. The company's debt ratio on the last year-end was:
A) 300%.
B) 33.3%.
C) 75.0%.
D) 66.67%.
E) $400,000.
Q3) Gi Gi's Bakery has total assets of $425 million. Its total liabilities are $110 million. Its equity is $315 million. Calculate the debt ratio.
A) 38.6%.
B) 13.4%.
C) 34.9%.
D) 25.9%.
E) 14.9%.
Q4) Preparation of a trial balance is the first step in processing a financial transaction.
A)True
B)False
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Chapter 16: Partnership Accounting
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Q1) Glade, Marker, and Walters are partners with beginning-year capital balances of $100,000, $50,000, and $50,000, respectively. Partnership net income for the year is $84,000. Make the necessary journal entry to close Income Summary to the capital accounts if:
a. Partners agree to divide income based on their beginning-year capital balances. b. Partners agree to divide income based on the ratio of 5:3:2 (Glade:Marker:Walters), respectively.
c. Partnership agreement is silent as to division of income and less.
Q2) A Limited Liability Partnership (LLP) is designed to protect innocent partners from malpractice or negligence claims resulting from the acts of another partner. A)True B)False
Q3) Lemon and Parks are partners. On October 1, Lemon's capital balance is $75,000, and Parks' capital balance is $125,000. With the partnership's approval, Parks sells ½ of his partnership interest to Tambling for $70,000. Prepare the journal entry to record this transaction in the partnership records.
Q4) How are partners' investments in a partnership recorded?
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