Accounting for Decision Makers
Chapter Exam Questions
Course Introduction
Accounting for Decision Makers introduces students to the fundamental concepts and practices of financial and managerial accounting with an emphasis on how this information is used by internal and external stakeholders to make informed business decisions. The course covers key topics such as analyzing financial statements, understanding cost behavior, budgeting, performance evaluation, and using accounting data to plan and control operations. By exploring real-world case studies and decision-making scenarios, students learn how accountants contribute to strategy formulation and organizational success, developing critical thinking and problem-solving skills essential for future managers and business leaders.
Recommended Textbook Management Accounting 6th Canadian Edition by Charles T. Horngren
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Chapter 1: Management Accounting and Management Decisions
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Sample Questions
Q1) Identify current trends in management accounting.
Answer: Many factors have caused changes in accounting systems in recent years. Most significant are globalization, technology, and a shift from a manufacturing-based to a service-based economy. Without continuous adaptation and improvement, accounting systems would be obsolete.
Q2) The Society of Management Accountants has adopted a set of standards of professional ethics which includes codes of conduct regarding all of the following EXCEPT
A) competence.
B) independence.
C) integrity.
D) confidentiality.
Answer: B
Q3) Weighing known costs against probable benefits, the primary consideration in choosing among accounting systems and methods.
Answer: Cost-benefit balance
Q4) A quantitative expression of a plan of action, and an aid to coordinating and implementing the plan.
Answer: Budget
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Chapter 2: Cost Behaviour and Cost-Volume Relationships
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Q1) The relative proportions or combinations of quantities of products that comprise total sales is called
A) sales mix.
B) gross margin.
C) proportional sales.
D) product ratio.
Answer: A
Q2) A cost that changes in direct proportion to changes in the cost driver is a
A) fixed cost.
B) joint cost.
C) mixed cost.
D) variable cost.
Answer: D
Q3) If the firm wants to earn $70,000 in before-tax profit, sales revenue must equal A) $60,500.
B) $110,000.
C) $200,000.
D) $244,444.
Answer: C
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Chapter 3: Measurement of Cost Behaviour
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Q1) The cost function would be stated as
A) Y = $13,386 + $0.46X.
B) Y = $10,680 + $0.38X.
C) Y = $ 5,056 + $2.16X.
D) Y = $ 1,800 + $2.60X.
Answer: D
Q2) The high-low method is a reliable method of cost estimation.
A)True
B)False
Answer: False
Q3) Strategic decisions about the scale and scope of an organization's activities generally result in fixed levels of A) capacity costs.
B) discretionary costs.
C) mixed costs.
D) engineered costs.
Answer: A
Q4) Measuring a cost function objectively by using statistics to fit a cost function to all the data.
Answer: Regression analysis
Page 5
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Chapter 4: Cost Management Systems
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Q1) There is no difference between variable-costing and absorption-costing income if the inventory level does not change.
A)True
B)False
Q2) The fixed-overhead rate is determined by dividing the budgeted fixed manufacturing overhead by
A) expected volume of the cost driver.
B) actual volume of production.
C) budgeted variable manufacturing overhead.
D) the number of units sold.
Q3) Sales revenue less cost of goods sold.
Q4) An activity for which a separate measurement of costs is desired is called a A) cost objective.
B) period cost.
C) product cost.
D) cost accumulation system.
Q5) The costing method, which excludes fixed manufacturing overhead from the cost of products.
Q6) The costing method, which capitalizes fixed manufacturing overhead as product cost.
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Chapter 5: Cost Allocation and Activity-Based Costing Systems
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Sample Questions
Q1) Which of the following is NOT a type of cost allocation?
A) Allocation of costs to the appropriate organizational unit
B) Reallocation of costs from service departments to production departments
C) Allocation of costs of a particular organizational unit to products or services
D) Reallocation of costs from production departments to service departments
Q2) In a just-in-time production system,
A) customer orders drive the production process.
B) an organization purchases materials in large quantities in order to receive quantity discounts.
C) goods are produced ahead of time to protect against stockouts.
D) inventory levels are maintained as high as possible.
Q3) Which of the following statements regarding by-products is FALSE?
A) A by-product is not individually identifiable until the split-off point.
B) A by-product is the same as a joint product.
C) By-products have relatively insignificant total sales value.
D) Only separable costs are allocated to by-products.
Q4) The company cafeteria is an example of a producing department.
A)True
B)False
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Chapter 6: Job-Costing Systems
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Q1) Reed Company incurred actual overhead costs of $640,000 for the year. A budgeted factory-overhead rate of 210 percent of direct-labour cost was determined at the beginning of the year. Budgeted factory overhead was $630,000, and budgeted direct-labour cost was $300,000. Actual direct-labour cost was $320,000 for the year. The disposition of the variance, assuming an immaterial amount, would include a
A) debit to Cost of Goods Sold for $32,000.
B) credit to Cost of Goods Sold for $32,000.
C) debit to Cost of Goods Sold for $10,000.
D) credit to Cost of Goods Sold for $10,000.
Q2) If Job 100 used 838 direct-labour hours, the overhead applied using direct-labour hours as the cost driver should be
A) $11,972.
B) $12,570.
C) $13,408.
D) $12,770.
Q3) In nonprofit organizations, the product is usually called a program or a class of service.
A)True
B)False
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Page 8
Chapter 7: Process-Costing Systems
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Sample Questions
Q1) The equivalent units of production for conversion is
A) 112,000.
B) 118,000.
C) 122,800.
D) 130,000.
Q2) Which of the following is NOT an example of a product that would be manufactured in a process-costing system?
A) Flour
B) Glass
C) Toothpaste
D) A house
Q3) In process costing, the journal entry to record direct labour would include a A) debit to Accrued Payroll.
B) credit to Factory Overhead.
C) debit to Work-in-process Department Name.
D) credit to Finished Goods.
Q4) A unit-costing method that excludes prior-period work and costs in computing current-period unit work and costs.
Q5) The expression of a department's processing activity in terms of fully completed units.
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Chapter 8: Relevant Information and Decision Making: Marketing Decisions
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Sample Questions
Q1) A decision model is any method for making a choice, sometimes requiring elaborate qualitative procedures.
A)True
B)False
Q2) A market in which a firm can sell as much of a product as it can produce, all at a single market price.
Q3) Any method of making a choice, sometimes requiring elaborate quantitative procedures.
Q4) Costs that will not continue if an ongoing operation is changed or deleted.
Q5) The average target profit percentage for setting prices as a percentage of variable manufacturing costs would be
A) 72 percent.
B) 31 percent.
C) 220 percent.
D) 344 percent.
Q6) The item that restricts or constrains the production or sale of a product or service.
Q7) The amount by which price exceeds cost.
Q8) The additional cost resulting from producing and selling one additional unit.
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Chapter 9: Relevant Information and Decision Making: Production
Decisions
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Sample Questions
Q1) Obsolete inventory costs are not relevant, because they are not an expected future cost but a past cost.
A)True
B)False
Q2) The salary foregone by a person who quits a job to start a business is an example of a(n)
A) sunk cost.
B) opportunity cost.
C) amortizable cost.
D) outlay cost.
Q3) In processing Product C further,
A) profits will decrease by $7,000.
B) incremental profits will exceed incremental costs.
C) profits will increase by $25,000.
D) the additional revenue produced will exceed the additional costs.
Q4) In processing Product B further,
A) profits will decrease by $28,000.
B) incremental profits will exceed incremental costs.
C) profits will increase by $100,000.
D) the additional revenue produced will exceed the additional costs.
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Chapter 10: Capital Budgeting Decisions
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Sample Questions
Q1) A company with pretax income of $60,000 is required to pay taxes of 20 percent on all income up to $20,000 and 32 percent on any income in excess of $20,000. The company's average tax rate is
A) 20 percent.
B) 28 percent.
C) 32 percent.
D) higher than its marginal rate.
Q2) If the depreciation is $25,000 per year, the accounting rate of return based on the initial investment is
A) 11%.
B) 12%.
C) 16%.
D) 17.2%.
Q3) A tax rule that assumes a newly acquired asset is in service for one-half of the taxable year regardless of when it is actually placed in service.
Q4) The rate of return that equates the present value of a project's cash inflows with the present value of its cash outflows (the NPV equals zero).
Q5) The decline in the general purchasing power of the monetary unit
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Chapter 11: The Master Budget
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Q1) ________ for budgeting is the systematic varying of budget data input to determine the effects of each change on the budget.
A) Sensitivity analysis
B) What-if analysis
C) Strategic planning
D) Both a and b
Q2) ________ includes the capital budget, cash budget, and budgeted balance sheet.
A) Operating budget
B) Financial budget
C) Continuous budget
D) Strategic plan
Q3) A budget that describes expected sales in units and dollars for the coming period.
Q4) The total cash collections in July will be
A) $140,000.
B) $126,000.
C) $80,000.
D) $66,000.
Q5) A plan that sets the overall goals and objectives of the organization.
Q6) Producing forecasted financial statements for five- or ten-year periods.
Page 13
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Chapter 12: Flexible Budgets and Variance Analysis
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Q1) The costing system that uses actual direct labour and materials cost but uses standards for applying overhead is called
A) actual costing.
B) standard costing.
C) variance costing.
D) normal costing.
Q2) For Product Y, the total actual cost for producing the 300 units was
A) $9,000.
B) $9,900.
C) $12,000.
D) $13,200.
Q3) What would be the total flexible budget if the number of lines increased to 2,600,000?
A) $176,800
B) $245,000
C) $251,800
D) Cannot be determined
Q4) The cost most likely to be attained.
Q5) The amount of fixed manufacturing overhead applied to each unit of production.
Page 14
Q6) The variance of actual results from the master budget.
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Chapter 13: Management Control Systems, the Balanced
Scorecard, and Responsibility Accounting
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Q1) Compare financial and nonfinancial performance, and explain why planning and control systems should consider both.
Q2) Decreasing cycle time
A) requires a low quality product or service.
B) creates reduced flexibility and slower reactions to customer needs.
C) requires smooth-running processes.
D) results in bringing products or services less quickly to customers.
Q3) Controllable costs should be ignored in evaluating the responsibility centre manager's performance.
A)True
B)False
Q4) All of the following are categories of quality costs EXCEPT
A) development.
B) prevention.
C) appraisal.
D) internal failure.
Q5) Any cost that cannot be affected by the management of a responsibility centre within a given time span.
Q6) A measure of outputs divided by inputs.
Q7) A responsibility centre for controlling revenues as well as costs. Page 15
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Chapter 14: Management Control in Decentralized Organizations
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Sample Questions
Q1) Income divided by revenue.
Q2) The decision-making power of segment managers is called
A) goal congruence.
B) segment autonomy.
C) managerial effort.
D) segment superiority.
Q3) A theory used to describe the formal choices of performance measures and rewards.
Q4) What is the income percentage of revenue?
A) 10.000 percent
B) 3.125 percent
C) 1.000 percent
D) None of the above.
Q5) According to agency theory, employment contracts will trade off the following three factors:
A) incentive, risk and cost of measuring performance.
B) cost-benefit, risk and uncontrollable factors.
C) goal congruence, incentive and risk.
D) cost of measuring performance, cost-benefit and risk.
Q6) The decision-making power of segment managers. Page 17
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