Accounting for Decision Making Final Exam
Questions
Course Introduction
Accounting for Decision Making introduces students to the fundamental principles and techniques of financial and managerial accounting as essential tools for effective business decision-making. The course emphasizes the role of accounting information in planning, controlling, and evaluating organizational performance, equipping students with the skills to interpret and analyze financial statements, assess costs, and make informed decisions for both short-term operations and long-term strategy. Through real-world case studies, practical exercises, and application of analytical tools, students gain the competency to use accounting data to solve business problems, allocate resources efficiently, and support ethical and strategic decisions across diverse organizational contexts.
Recommended Textbook
Cost Accounting 15th Edition by Charles T. Horngren
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Page 2
Chapter 1: The Manager and Management Accounting
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Sample Questions
Q1) Which of the following is a guideline used by management accountants to assist in strategic and operational decision making?
A) employing a cost-benefit approach
B) employing a supply chain approach
C) employing a six sigma approach
D) employing a regression approach
Answer: A
Q2) Managers use management accounting information to ________.
A) help external users such as investors, banks, regulators, and suppliers
B) communicate, develop, and implement strategies
C) communicate a firm's financial position to investors, banks, regulators, and other outside parties
D) ensure that financial statements are consistent with the SEC rules
Answer: B
Q3) What areas of responsibility does a chief financial officer have in a typical organization?
Answer: The responsibilities vary among organizations,but generally include the following areas: controllership,treasury,risk management,taxation,investor relations,and internal audit.
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Page 3
Chapter 2: An Introduction to Cost Terms and Purposes
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Sample Questions
Q1) Product costs used for government contracts generally include ________.
A) marketing costs, and customer service costs
B) design costs and production costs
C) all the costs for pricing and product-mix decisions
D) production costs, distribution costs, marketing costs, and customer service costs
Answer: B
Q2) A fixed cost remains unchanged in total for a given time period,despite wide changes in the related level of total activity or volume of output produced.
A)True
B)False
Answer: True
Q3) Inventoriable costs are expensed on the income statement ________.
A) when direct materials for the product are purchased
B) after the products are manufactured
C) when the products are sold
D) when the goods move from work-in process to finished goods account
Answer: C
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Chapter 3: Cost-Volume-Profit Analysis
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Sample Questions
Q1) Which of the following is true of net income?
A) Net income is operating income divided by income tax rate.
B) Net income is operating income plus operating revenues minus operating costs minus income taxes.
C) Net income is operating income plus nonoperating revenues minus nonoperating costs minus income taxes.
D) Net income is operating income minus nonoperating revenues minus nonoperating costs minus sales taxes.
Answer: C
Q2) In the merchandising sector ________.
A) only variable costs are subtracted to determine gross margin
B) fixed overhead costs are subtracted to determine gross margin
C) fixed overhead costs are subtracted to determine contribution margin
D) all operating costs are subtracted to determine contribution margin
Answer: A
Q3) Sales margin = Contribution margin percentage × Revenues (in dollars).
A)True
B)False
Answer: False
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Page 5
Chapter 4: Job Costing
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Sample Questions
Q1) Which of the following companies will use a process costing system?
A) an oil refining company
B) a manufacturer of ships
C) a custom watch manufacturer
D) an advertising firm
Q2) What amount of manufacturing overhead costs will be allocated to Job #316?
A) $439
B) $502
C) $595
D) $532
Q3) How much should the client be billed in an actual costing system if 200 professional labor-hours are used?
A) $5,000
B) $6,960
C) $7,480
D) $6,400
Q4) One reason indirect costs may be underapplied is if actual indirect costs are less than budgeted indirect costs.
A)True
B)False
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Chapter 5: Activity-Based Costing and Activity-Based Management
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Sample Questions
Q1) Activity based costing system differs from traditional costing systems in the treatment of ________.
A) direct labor costs
B) direct material costs
C) prime costs
D) indirect costs
Q2) Using the three cost pools to allocate overhead costs,what is the total amount of overhead costs to be allocated to the Mossman Job?
A) $389.00
B) $380.00
C) $385.50
D) $376.00
Q3) If administrative expense of $62,500 is allocated on the basis of number of employees,the cost per cost driver rate would be ________.
A) $500.00
B) $312.50
C) $833.33
D) $572.50
Q4) How does ABC costing system help service companies?
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Chapter 6: Master Budget and Responsibility Accounting
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Sample Questions
Q1) A master budget ________.
A) is the initial plan of what the company intends to accomplish in the period and evolves from both the operating and financing decisions
B) is a substitute for the management functions of planning and coordination
C) improves companies' market capitalization and evolves from both the investing and financing decisions
D) provides an ethical framework for decision making
Q2) The manufacturing labor budget depends on wage rates,production methods,and hiring plans.
A)True
B)False
Q3) To reduce budgetary slack management may ________.
A) incorporate stretch or challenge targets
B) use external benchmark performance measures
C) award bonuses for achieving budgeted amounts
D) reduce projected cost targets by 10% across all areas
Q4) Responsibility accounting focuses on control,NOT on information and knowledge.
A)True
B)False
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Chapter 7: Flexible Budgets, direct-Cost Variances, and Management Control
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Sample Questions
Q1) Coffey Company maintains a very large direct materials inventory because of critical demands placed upon it for rush orders from large hospitals.Item A contains hard-to-get material Y.Currently,the standard cost of material Y is $4.00 per gram.During February,22,000 grams were purchased for $4.10 per gram,while only 20,000 grams were used in production.There was no beginning inventory of material Y.
Required:
a.Determine the direct materials price variance,assuming that all materials costs are the responsibility of the materials purchasing manager.
b.Determine the direct materials price variance,assuming that all materials costs are the responsibility of the production manager.
c.Discuss the issues involved in determining the price variance at the point of purchase versus the point of consumption.
Q2) The actual amount spent for Material B was ________.
A) $31,700
B) $30,500
C) $33,500
D) $32,300
Q3) What is benchmarking,and how is it useful to a company?
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Chapter 8: Flexible Budgets, overhead Cost Variances, and Management Control
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Sample Questions
Q1) Explain two concerns when interpreting the production-volume variance as a measure of the economic cost of unused capacity.
Q2) When forecasting fixed costs,managers should concentrate on total lump-sum costs instead of unitized fixed overhead costs.
A)True
B)False
Q3) Lungren has budgeted construction overhead for August of $260,000 for variable costs and $435,000 for fixed costs.Actual costs for the month totaled $275,000 for variable and $445,000 for fixed.Allocated fixed overhead totaled $440,000.The company tracks each item in an overhead control account before allocations are made to individual jobs.Spending variances for August were $10,000 unfavorable for variable and $10,000 unfavorable for fixed.The production-volume overhead variance was $5,000 favorable.
Required:
a.Make journal entries for the actual costs incurred.
b.Make journal entries to record the variances for August.
Q4) Unskilled workforce can lead to unfavorable efficiency variance.
A)True
B)False
Page 10
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Chapter 9: Inventory Costing and Capacity Analysis
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Sample Questions
Q1) What is cost of goods sold per unit using variable costing?
A) $22.10
B) $26
C) $39
D) $58.50
Q2) Fixed manufacturing costs expensed on the income statement (excluding adjustments for variances)total ________.
A) $14,400
B) $19,200
C) $24,000
D) 0
Q3) ________ is the level of capacity utilization that managers expect for the current budget period,which is typically one year.
A) Practical capacity
B) Master-budget capacity utilization
C) Theoretical capacity
D) Normal capacity utilization
Q4) Practical capacity can never exceed theoretical capacity.
A)True
B)False
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Chapter 10: Determining How Costs Behave
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Sample Questions
Q1) A linear cost function can only represent fixed cost behavior.
A)True
B)False
Q2) Which of the following represents the correct linear cost function?
A) y = $390,000 + $ 48.75X
B) y = $110,000 + $100 X
C) y = $110,000 + $78 X
D) y = $390,000 + $62.50 X
Q3) The quantitative analysis method of cost estimation is based on opinions from various departments and is quick and of low cost to apply.
A)True
B)False
Q4) All cost functions are linear.
A)True
B)False
Q5) The major advantages of quantitative methods are that they are objective,so managers can use them to evaluate different cost drivers.
A)True
B)False
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Chapter 11: Decision Making and Relevant Information
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Sample Questions
Q1) Which of the following would be a consideration in a make-or-buy decision?
A) excess capacity
B) wages to CEO
C) marketing costs
D) audit expenses
Q2) When there is a constraining resource,a firm should attempt to maximize sales of the product or service with the greatest contribution margin per unit.
A)True
B)False
Q3) Which of the following is an example of insourcing?
A) a pharmaceutical company's research team developing a new patent using current resources
B) a smartphone manufacturing company factoring its receivables as a source of capital
C) a large conglomerate company selling a business wing to its competitor
D) a petrochemical company assigning a vendor to make software for its supply chain management
Q4) Explain what revenues and costs are relevant when choosing among alternatives.
Q5) Explain the five-step decision process that managers can use to make decisions.
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Chapter 12: Strategy, balanced Scorecard, and Strategic
Profitability Analysis
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Sample Questions
Q1) Which of the following statements best define strategy?
A) It describes how an organization can create value for its customers while differentiating itself from its competitors.
B) It is an organization's ability to achieve lower costs relative to competitors through productivity and efficiency improvements, elimination of waste, and tight cost control.
C) It is an organization's ability to offer products or services its customers perceive to be superior and unique relative to the products or services of its competitors.
D) It describes how an organization motivates its employees to work for more hours without any increase in their wages.
Q2) When analyzing the change in operating income,the strategy component of productivity will increase when ________.
A) capacity is reduced
B) quality is enhanced
C) selling prices are increased
D) more units are produced and sold
Q3) Define engineered and discretionary costs and give two examples of each.
Q4) What are the four key perspectives in the balanced scorecard?
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Chapter 13: Pricing Decisions and Cost Management
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Sample Questions
Q1) Direct material costs are usually locked in when they are ________.
A) designed
B) assembled
C) sold
D) delivered
Q2) Three major influences on pricing decisions are ________.
A) competition, costs, and customers
B) competition, demand, and production efficiency
C) continuous improvement, customer satisfaction, and supply
D) variable costs, fixed costs, and mixed costs
Q3) Einstein Motors,has a capacity to produce 25,000 electric cars.Due to a temporary subsidy announced,there is a sudden increase in demand.Einstein decides to adopt peak-load pricing and charge a premium of 25% over its normal selling price of $2,000.It has already accepted orders for 20,000 units at normal selling price.What is the total contribution to the company on sale of additional 5,000 units if the variable cost per unit is $900?
A) $10,000,000
B) $8,000,000
C) $4,500,000
D) $4,000,000
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Chapter 14: Cost Allocation, customer-Profitability Analysis, and Sales-Variance Analysis
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Sample Questions
Q1) Managers who utilize customer profitability charts should drop customers that generate a negative customer operating income,since dropping an unprofitable customer will automatically cause overall income to increase.
A)True
B)False
Q2) The flexible-budget variance is the difference between an actual result and the flexible-budget amount based on the level of output actually achieved in the budget period.
A)True
B)False
Q3) The sales-mix variance can be explained in terms of the budgeted contribution margin per composite unit of the sales mix.
A)True
B)False
Q4) Costs of activities related to a group of units sold to a customer is termed as customer batch-level costs.
A)True
B)False
Q5) What are the two components of the sales-volume variance?
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Chapter 15: Allocation of Support-Department Costs, common
Costs, and Revenues
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Sample Questions
Q1) The advantage of using practical capacity to allocate costs ________.
A) is that it allows a downward supply spiral to develop
B) is that it focuses management's attention on managing unused capacity
C) is that budgets are much easier to develop
D) is that it results in departments bearing a lower percentage of fixed costs
Q2) Which of the following is one of the methods of allocating support department costs to operating departments?
A) dual-cost allocation method
B) incremental method
C) step-down method
D) single-rate cost allocation method
Q3) Van Meter Fig Company has substantial fluctuations in its production costs because of the seasonality of figs.
Would you recommend an actual or budgeted allocation base? Why? Would you recommend calculating monthly,seasonal,or annual allocation rates? Why?
Q4) Explain three approaches to determining weights for the the stand-alone revenue-allocation.Which method do managers prefer?
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Chapter 16: Cost Allocation: Joint Products and Byproducts
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Q1) When a single manufacturing process yields two products,one of which has a relatively high sales value compared to the other,the two products are respectively known as ________.
A) joint products and byproducts
B) joint products and scrap
C) main products and byproducts
D) main products and joint products
Q2) When using a physical-volume measure,what is the approximate amount of joint costs that will be allocated Premium chips?
A) $768,182
B) $1,170,000
C) $975,000
D) $780,000
Q3) The sales-value at splitoff method of joint cost allocation involves computation of the relative amounts of the sales value of the amount of each joint product sold during the period.
A)True
B)False
Q4) What are joint costs,separable costs,and a splitoff point?
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Chapter 17: Process Costing
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Sample Questions
Q1) A distinct feature of the FIFO process-costing method is that the ________.
A) work done on beginning inventory before the current period is blended with the work done during the current period in the calculation of equivalent units
B) work done on beginning inventory before the current period is kept separate from the work done during the current period in the calculation of equivalent units
C) work done on ending inventory is kept separate from the work done during the current period in the calculation of equivalent units and is usually not included in the calculation
D) FIFO process-costing method is only minimally different from the weighted-average process-costing method
Q2) What is the cost of the goods transferred out during February?
A) $417,750.5
B) $454,694.8
C) $476,750.6
D) $505,000 .2
Q3) Ford Motor Company is said to use a hybrid costing system.What is a hybrid costing system,and what would be the advantage to Ford of such a system?
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Chapter 18: Spoilage, rework, and Scrap
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Sample Questions
Q1) Costs of normal spoilage are usually accounted for as ________.
A) a deduction from the cost of goods sold
B) a component of the costs of good units manufactured
C) a "loss from normal spoilage account" in income statement
D) a liability on a balance sheet
Q2) Scrap is residual material that results from manufacturing a product; it has low total sales value compared with the total sales value of the product.
A)True
B)False
Q3) Cost of spoiled units equals ________.
A) all costs incurred in producing them up to the point of delivery
B) all costs incurred in producing them up to the point of inspection
C) all costs incurred in producing them up to the point of selling
D) all costs incurred in producing them up to the point of packaging
Q4) Companies calculate the units of abnormal spoilage and record the cost in the Loss from Abnormal Spoilage account,which appears as a separate line item in an income statement.
A)True
B)False
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Chapter 19: Balanced Scorecard: Quality and Time
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Q1) Diane has been asked to consider plans to add the retrieval of larger tooling fixtures to her duties.She anticipates that there would be an average of 12 tooling fixtures per day requested.Each tooling fixture would take Diane 4 minutes to retrieve. What is the average waiting time,in minutes,if Diane continues to be the only worker that would retrieve the small tools as well as the larger tooling fixtures?
A) 3.50 minutes
B) 7.00 minutes
C) 9.25 minutes
D) 64.00 minutes
Q2) Longer manufacturing cycle times results in ________.
A) lower revenues and higher inventory carrying costs
B) higher opportunity costs and low profit margins
C) lower opportunity costs and high profit margins
D) higher revenues and lower inventory carrying costs
Q3) What is the average waiting time,in minutes?
A) 1.0
B) 1.5
C) 2.5
D) 3.5
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Chapter 20: Inventory Management, just-In-Time, and Simplified Costing Methods
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Q1) Which of the following costs is a relevant inventory carrying cost under EOQ decision model?
A) The lost contribution margin on future sales forgone as a result of customer dissatisfaction in product quality.
B) The lost contribution margin on sales forgone because of the shortage of inventory.
C) The costs of storage space owned that cannot be used for other profitable purposes when inventories decrease.
D) The costs of receiving and inspecting inventory and moving the inventories to the warehouses.
Q2) The costs that result from theft of inventory are ________.
A) shrinkage costs
B) external failure costs
C) stockout costs
D) costs of quality
Q3) Lean accounting is much simpler than traditional product costing.Why?
Q4) Lean accounting takes in to consideration all costs associated with inventories.
A)True
B)False
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Chapter 21: Capital Budgeting and Cost Analysis
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Sample Questions
Q1) Diamond Manufacturing Company provides glassware machines for major department store retailers.The company has been investigating a new piece of machinery for its production department.The old equipment has a remaining life of four years and the new equipment has a value of $87,776 with a four-year life.The expected additional cash inflows are $32,000 per year.What is the internal rate of return?
A) 10%
B) 12%
C) 17%
D) 20%
Q2) Capital budgeting is the process of making long-run planning decisions for investments in projects.
A)True
B)False
Q3) In the "Identify projects" stage of capital budgeting,companies gather information from all parts of the value chain to evaluate alternative projects.
A)True
B)False
Q4) Explain why the term tax shield is used in conjunction with depreciation.
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Chapter 22: Management Control Systems, transfer Pricing, and Multinational Considerations
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Q1) One concern with dual pricing is that it leads to disputes about which price should be used when computing the taxable income of subunits located in different tax jurisdictions.
A)True
B)False
Q2) The range over which two divisions will negotiate a transfer price is ________.
A) between the supplying division's variable cost and the market price of the product
B) between the supplying division's variable cost and its full cost of the product
C) it could be anywhere above the supplying division's full cost of the product
D) between the supplying division's full cost and 180% above its full cost
Q3) What is decentralization and what are its benefits?
Q4) The tariffs and customs duties governments levy on imports of products into a country also affect the transfer pricing practices of multinationals.
A)True
B)False
Q5) Dual pricing is not widely used.Explain its disadvantages.
Q6) Briefly explain each of the three methods used to determine a transfer price.
Page 24
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Chapter 23: Performance Measurement, compensation,
and Multinational Considerations
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Q1) Bouvous Corporation had the following information for 2015: \(\begin{array}{lr}
\text { Revenue } & \$ 400,000 \\
\text { Operating expenses } & 350,000 \\ \text { Total assets } & 500,000 \end{array}\) What is the return on investment?
A) 10%
B) 20%
C) 25%
D) 18.2%
Q2) Which of the following steps in designing an accounting-based performance measure includes decisions such as defining assets as total assets or net assets in the calculation of return on assets?
A) choosing performance measures that align with top management's financial goals
B) choosing the time horizon of each performance measure
C) choosing the details for each performance measure
D) choosing a target level of performance
Q3) ROI,RI,or EVA measures are more appropriate than ROS to measure the performance of a company.Why?
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