Accounting for Decision Making Exam Preparation Guide
Course Introduction
Accounting for Decision Making is designed to equip students with the essential accounting tools and concepts necessary for effective managerial decision-making. The course emphasizes the use of financial and management accounting information in planning, controlling, and evaluating business operations. Topics include cost behavior analysis, budgeting, performance measurement, relevant costing, and capital investment decisions. Through case studies and real-world applications, students learn how to interpret accounting data to support strategic and operational choices in various business contexts, enhancing their ability to make informed and value-driven decisions.
Recommended Textbook
Cost Accounting Foundations and Evolutions 9th Edition by Kinney
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19 Chapters
2844 Verified Questions
2844 Flashcards
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Page 2
Chapter 1: Introduction to Cost Accounting
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98 Verified Questions
98 Flashcards
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Sample Questions
Q1) Which ethical standard is violated when an accountant uses information from a financial statement he is preparing to advise a relative of a stock purchase?
A)Competence
B)Confidentiality
C)Integrity
D)Credibility
Answer: B
Q2) Mission statements typically remain unchanged throughout the life of an organization.
A)True
B)False
Answer: False
Q3) Which of the following is not a valid method for determining product cost?
A)arbitrary assignment
B)direct measurement
C)systematic allocation
D)cost-benefit measurement
Answer: D
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3
Chapter 2: Cost Terminology and Cost Behaviors
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129 Flashcards
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Sample Questions
Q1) The three primary inventory accounts in a manufacturing company are
A)Merchandise Inventory,Supplies Inventory,and Finished Goods Inventory.
B)Merchandise Inventory,Work in Process Inventory,and Finished Goods Inventory.
C)Supplies Inventory,Work in Process Inventory,and Finished Goods Inventory.
D)Raw Material Inventory,Work in Process Inventory,and Finished Goods Inventory.
Answer: D
Q2) Conversion cost does not include A)direct labor.
B)direct material.
C)factory depreciation.
D)supervisors' salaries.
Answer: B
Q3) A cost that shifts upward or downward when activity changes by a certain interval is referred to as a step cost.
A)True
B)False
Answer: True
Q4) Anything for which management wants to accumulate or collect costs is known as a
Answer: cost object
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Chapter 3: Predetermined Overhead Rates, Flexible Budgets,
and Absorptionvariable Costing
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Sample Questions
Q1) Since overhead costs are indirect costs, A)they require some process of allocation.
B)they can be easily traced to production.
C)a predetermined overhead rate is not advantageous. D)they cannot be allocateD.
Answer: A
Q2) Why is absorption costing not used for CVP analysis?
Answer: Absorption costing is not used in break-even analysis because it presents a classification of costs by function rather than by behavior.Without a behavioral classification of costs,it is impossible to predict how total costs change as volume changes.
Q3) If underapplied factory overhead is material,it is prorated among Work in Process Inventory,Finished Goods Inventory,and Cost of Goods Sold. A)True
B)False
Answer: True
Q4) The performance measure that considers routine interruptions is known as ____________________ capacity.
Answer: practical
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Chapter 4:
Activity-Based Management and Activity-Based Costing
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Sample Questions
Q1) A value chart indicates
A)all steps in a process and the time it takes for them to be completed.
B)the value-added steps in a process and the time it takes for them to be completed.
C)the time and cost of all value-added steps in a process.
D)the time and costs of all value-added and non-value-added steps in a process.
Q2) Activity-based costing is appropriate for a company that manufactures a single product.
A)True
B)False
Q3) When a firm redesigns a product to reduce the number of component parts,the firm is
A)increasing consumer value.
B)increasing the value added to the product.
C)decreasing product variety.
D)decreasing non-value-added costs.
Q4) What are the three classes of activities defined by activity-based management.What is customer response to each of these activities? What is management's reaction to each of these activities?
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Q5) Discuss the characteristics of a company for which ABC would be appropriate.
Chapter 5: Job Order Costing
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Sample Questions
Q1) Debits to Cost of Goods Sold typically represent the A)transfer of completed items to Finished Goods Inventory.
B)costs of items sold.
C)selling price of items sold.
D)the cost of goods manufactureD.
Q2) The source document that records the amount of raw material that has been requested by production is the A)job-order cost sheet.
B)bill of lading.
C)interoffice memo.
D)material requisition.
Q3) When raw materials are placed into production,the ___________ account is debited
Q4) In an actual job-order costing system,factory overhead is assigned to a job on a periodic basis.
A)True
B)False
Q5) When raw materials are placed into production,the materials inventory account is debited.
A)True
B)False
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Chapter 6: Process Costing
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Sample Questions
Q1) A ____________________ costing system is appropriate where products manufactured have different direct materials but similar processing techniques.
Q2) Continuous production losses are assumed to occur uniformly throughout the process.
A)True
B)False
Q3) Jackson Company transferred 6,000 units to Finished Goods Inventory during August.On August 1,the company had 400 units on hand (35 percent complete as to both material and conversion costs).On August 31,the company had 750 units (20 percent complete as to material and 30 percent complete as to conversion costs).The number of units started and completed during August was:
A)5,600
B)5,860
C)6,000
D)6,750
Q4) Conversion costs include all manufacturing costs other than direct materials.
A)True
B)False
Q5) When is a hybrid costing system appropriate in a manufacturing setting?
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Chapter 7: Standard Costing and Variance Analysis
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226 Flashcards
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Sample Questions
Q1) The material price variance (computed at point of purchase)is
A)the difference between the actual cost of material purchased and the standard cost of material purchased.
B)the difference between the actual cost of material purchased and the standard cost of material used.
C)primarily the responsibility of the production manager.
D)both a and c.
Q2) The standard predominantly used in Western cultures for motivational purposes is a(n)____ standard.
A)expected annual
B)ideal
C)practical
D)theoretical
Q3) Discuss why standards may need to be changed after they have been in effect for some period of time.
Q4) Discuss briefly the type of information contained on (a)a bill of materials and (b)an operations flow document.
Q5) Why are fixed overhead variances considered noncontrollable?
Q6) List and discuss briefly the three standards of attainability.
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Chapter 8: The Master Budget
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Sample Questions
Q1) Key variables that are identified in strategic planning are
A)normally controllable if they are internal.
B)seldom if ever controllable.
C)normally controllable if they occur in a domestic market.
D)normally uncontrollable if they are internal.
Q2) The cash budget is constructed after all other budgets have been completed.
A)True
B)False
Q3) Depreciation on the production equipment would appear in which of the following budgets?
A)cash budget
B)production budget
C)selling and administrative expense budget
D)manufacturing overhead budget
Q4) A budget that is developed by both top management and operating personnel is referred to as a(n)______________________________.
Q5) In a manufacturing organization,the cash budget is prepared immediately after the sales budget.
A)True
B)False
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Chapter 9: Break-Even Point and Cost-Volume-Profit Analysis
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Sample Questions
Q1) CVP analysis relies on the assumptions that costs are either strictly fixed or strictly variable.Consistent with these assumptions,as volume decreases total
A)fixed costs decrease.
B)variable costs remain constant.
C)costs decrease.
D)costs remain constant.
Q2) A managerial preference for a very low degree of operating leverage might indicate that
A)an increase in sales volume is expected.
B)a decrease in sales volume is expected.
C)the firm is very unprofitable.
D)the firm has very high fixed costs.
Q3) How do changes in volume affect the break-even point?
Q4) Break-even point may be expressed in terms of units or dollars.
A)True
B)False
Q5) The formula for margin of safety is _____________.
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Q6) The ____________ is computed by dividing the contribution margin by profit before tax.
Chapter 10: Relevant Information for Decision Making
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Sample Questions
Q1) Which of the following costs is irrelevant in making a decision about a special order price if some of the company facilities are currently idle?
A)direct labor
B)equipment depreciation
C)variable cost of utilities
D)opportunity cost of production
Q2) An outside firm selected to provide services to an organization is called a A)contract vendor.
B)lessee.
C)network organization.
D)centralized insourcer.
Q3) Why is depreciation expense irrelevant to most managerial decisions,even when it is a future cost?
Q4) In an outsourcing decision,unavoidable fixed costs are irrelevant.
A)True
B)False
Q5) Under what circumstances is the sum of variable production and selling costs the appropriate minimum price for special orders?
Q6) What are three characteristics of relevant information?
Page 12
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Chapter 11: Allocation of Joint Costs and Accounting for
By-Products
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136 Flashcards
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Sample Questions
Q1) Joplin Corporation produces three products from a common manufacturing process.The total joint cost of producing 2,000 pounds of Product A;1,000 pounds of Product B;and 1,000 pounds of Product C is $7,500.Selling price per pound of the three products are $15 for Product A;$10 for Product B;and $5 for Product C.Joint cost is allocated using the sales value method.
Required:
a.Compute the unit cost of Prochuct A if all three products are main products
b. Compute the unit cost of Prochict A if Products A and B are main products and Product C is a by-prochuct for which the cost reduction method is used
Q2) Incremental revenues and costs need to be considered when using which allocation method?
\(\text
{\underline{Physical measures}
}\) \(\text
{\underline{ Sales value at split-of} }\)
A)yes yes
B)yes no
C)no no
D)no yes
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Chapter 12: Introduction to Cost Management Systems
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Sample Questions
Q1) A management information system should do which of the following?
Collect Organize data &nb sp; Analyze data \(\text {\underline{ data}
}\) \(\text {\underline{for managers}
}\) \(\text {\underline{ for management} }\)
A)yes no yes
B)yes yes no
C)no no yes
D)yes yes yes
Q2) A packaged business software system that allows an organization to improve the quality and timeliness of information as well as integrate and standardize information is referred to as a(n)_____________________________________________. or
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Chapter 13: Responsibility Accounting,support Department
Allocations,and Transfer Pricing
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175 Flashcards
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Sample Questions
Q1) An organizational unit whose manager is responsible for acquiring,using,and disposing of assets in order to maximize return on assets is referred to as a(n)______________________________.
Q2) In computing a transfer price,the maximum price should be no higher than the highest market price at which the buying segment can obtain the good or service externally.
A)True
B)False
Q3) An administrative department provides services that benefit other internal units of an organization.
A)True
B)False
Q4) Which service department cost allocation method assigns indirect costs to cost objects after considering some of the interrelationships of the cost objects?
A)step method
B)indirect method
C)algebraic method
D)direct method
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Q5) Why is "standard cost" a better measure for a transfer price than "actual cost"?
Chapter 14: Performance Measurement, balanced
Scorecards, and Performance Rewards
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191 Flashcards
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Sample Questions
Q1) If a new project generates a positive residual income,the A)project's return on investment is less than the target rate.
B)project's return on investment is greater than the target rate.
C)project's return on investment is equal to the target rate.
D)relationship between the project's return on investment and the target rate cannot necessarily be determineD.
Q2) Tax deferral is the most desirable form of tax treatment for employee compensation elements.
A)True
B)False
Q3) Asset turnover measures the effective use of assets relative to revenue production. A)True
B)False
Q4) The number of good units or quantity of services that are produced and sold by an organization within a specified time is referred to as ____________________.
Q5) Performance measures need not be correlated with the mission of a subunit.
A)True
B)False
16
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Chapter 15: Capital Budgeting
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Sample Questions
Q1) A capital budget is used by management to determine \(\text {\underline{in what to invest } }\) \(\text {\underline{how much to invest } }\)
A)no no
B)no yes
C)yes no
D)yes yes
Q2) The after-tax net present value of a project is affected by A)tax-deductible cash flows.
B)non-tax-deductible cash flows.
C)accounting accruals.
D)all of the above.
Q3) A decision regarding whether a capital project is desirable based upon some previously established minimum criteria is referred to as a(n)___________________________________.
Q4) The payback period typically ignores the time value of money. A)True B)False
Page 17
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Chapter 16: Managing Costs and Uncertainty
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Sample Questions
Q1) If an actual discretionary cost is exactly equal to the budgeted level of that cost,which of the following statements is true?
A)Funds were appropriately spent.
B)The discretionary activity was efficient.
C)The discretionary activity was effective.
D)None of the above.
Q2) The portion of variance in a dependent variable explained by an independent variable is referred to as the
Q3) A committed fixed cost can
A)never be eliminated.
B)be eliminated in the short term and in the long term.
C)be eliminated in the long term but not in the short term.
D)be eliminated in the short term but not in the long term.
Q4) The maximum allowable expenditure is the A)appropriation.
B)allowance.
C)allocation.
D)committed fixed cost.
Q5) What are the five steps involved in implementing a cost control system?
Page 18
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Chapter 17: Implementing Quality Concepts
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Sample Questions
Q1) Money spent on employee training is a
A)prevention cost.
B)appraisal cost.
C)empowerment cost.
D)Pareto cost.
Q2) ____ places the primary responsibility for quality on the maker or producer.
A)Pareto analysis
B)Quality control
C)Benchmarking
D)Activity analysis
Q3) A total quality system should place an emphasis on prevention and continuous improvement.
A)True
B)False
Q4) Discuss the relationship between benchmarking and total quality management (TQM).
Q5) Discuss increased competition and improved problem solving skills as they relate to benchmarking.
Q6) Costs incurred to correct defects in products after shipment are referred to as
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Chapter 18: Inventory and Production Management
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Sample Questions
Q1) The cost of receiving inventory is regarded as
A)an ordering cost.
B)a carrying cost.
C)a purchasing cost.
D)a cost of not carrying goods in stock.
Q2) Kaizen costing is most often applied to new products.
A)True
B)False
Q3) Which of the following attributes is a characteristic of the Internet business model?
A)many physical assets
B)complex interrelationships among members of management
C)a direct pipeline to customers
D)one-to-one relationships between a company and its principal vendors.
Q4) Virtual reality has been used increasingly in the product design stage.
A)True
B)False
Q5) A system of inventory production where goods are produced in anticipation of customer orders is referred to as a _________________________.
Q6) What is the purpose of the EOQ model?
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Chapter 19: Emerging Management Practices
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Sample Questions
Q1) A method of examining processes to identify and eliminate or reduce functions that add little customer value to products or services is referred to as
Q2) For game playing to work,motivation must come from
A)individual employees.
B)lower management.
C)the board of directors.
D)upper management.
Q3) In an ERP system,data is decentralized among an organization's divisions.
A)True
B)False
Q4) ____ allows a company to accomplish a technology swap.
A)Data mining
B)Strategic alliance
C)Diversity
D)BPR
Q5) What are the risks and dangers of downsizing?
Q6) What are the three generic strategies for dealing with environmental effects of operations?
Q7) What forms can strategic alliances take?
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