Accounting for Decision Making Practice Questions
Course Introduction
Accounting for Decision Making explores the fundamental principles and techniques of accounting and their application in managerial decision-making processes. Students learn to interpret and analyze financial statements, understand cost behavior, budgeting, and performance evaluation to support strategic business decisions. The course emphasizes the role of accounting information in planning, controlling operations, and evaluating alternatives, enabling students to become effective decision makers and contributors to organizational success.
Recommended Textbook
Cornerstones of Managerial Accounting 2nd Canadian Edition by Maryanne Mowen
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14 Chapters
2059 Verified Questions
2059 Flashcards
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Chapter 1: Introduction to Managerial Accounting
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Sample Questions
Q1) Time is NOT a crucial element in all phases of the value chain.
A)True
B)False
Answer: False
Q2) Which of the following is a characteristic of management accounting?
A) It provides objective financial information.
B) It must adhere to mandatory rules.
C) It has no mandatory rules.
D) Its main users are outside of the organization.
Answer: C
Q3) What are the establishing objectives to include social and environmental impact called?
A) triple accounting
B) triple bottom line
C) triple cost analysis
D) triple threat
Answer: B
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Chapter 2: Basic Managerial Accounting Concepts
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156 Flashcards
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Sample Questions
Q1) Period costs are those costs associated with the manufacture of goods or the providing of services.
A)True
B)False
Answer: False
Q2) Refer to the Figure.Suppose Econo Company sold 10,000 units during July and gross margin totalled $29,800.What would be the sales price per unit?
A) $9.94
B) $10.00
C) $10.09
D) $10.11
Answer: B
Q3) Refer to the Figure.What were the total manufacturing costs in July?
A) $50,000
B) $69,600
C) $70,100
D) $71,000
Answer: C
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4
Chapter 3: Cost Behaviour
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Sample Questions
Q1) Refer to the Figure.Which element is the slope?
A) variable rate
B) output
C) fixed cost
D) total cost
Answer: A
Q2) Which of the following is characteristic for the method of least squares?
A) It uses the results of regression analysis to construct a cost formula.
B) It is less accurate than the scattergraph method.
C) It analyzes a cost relationship by graphing the data points.
D) It can easily be calculated without a calculator.
Answer: A
Q3) The slope of a mixed cost line is equal to the variable cost per unit element of the cost.
A)True
B)False
Answer: True
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Page 5
Chapter 4: Costvolumeprofit Analysis: a Managerial Planning Tool
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160 Flashcards
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Sample Questions
Q1) The impact on a firm's income resulting from a change in the number of units sold can be assessed by multiplying the unit contribution margin by the change in units sold assuming that fixed costs remain the same.
A)True
B)False
Q2) Refer to the Figure.What is the budgeted operating income?
A) $92,500
B) $320,000
C) $322,500
D) $457,500
Q3) Refer to the Figure.What is the overall sales revenue at break-even?
A) $387,200
B) $778,800
C) $968,000
D) $1,288,700
Q4) Where is the break-even point on a cost-volume-profit graph?
A) at the intersection of the revenue line and the profit line
B) at the intersection of the revenue line and the total cost line
C) at the intersection of the fixed cost line and the variable cost line
D) at the intersection of the contribution margin line and the fixed cost line
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Chapter 5: Job-Order Costing
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176 Flashcards
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Sample Questions
Q1) Refer to the Figure .What is the total cost of Job 3?
A) $112,000
B) $134,600
C) $145,800
D) $229,000
Q2) Giant Company is a job-order costing company that produces customized bicycles.During the month of October,Giant had three jobs in-process,Job 50cm,Job 56cm,and Job 60 cm.By the end of the month,all three jobs had been completed,with Job 60cm being sold for $484.50.The following costs belong to each job: \(\begin{array}{lrrr}&\text { Job } 50 \mathrm{~cm}&\text { Job } 56 \mathrm{~cm}&\text { Job } 60 \mathrm{~cm}\\
\text { Direct Materials } & \$ 90 & \$ 85 & \$ 95 \\
\text { Direct Labour } & 100 & 110 & 95 \\
\text { Applied Overhead } & 140 & 154 & 133 \\
\text { Total } & \$ 330 & \$ 349 & \$ 323
\end{array}\) A. Overhead is applied based on direct labour dollars. What is the overhead rate?
B. What rate does Giant use to price its jobs?
C. What is the gross margin on Job \(60 \mathrm {~cm}\) ?
Q3) Discuss overapplied and underapplied overhead.
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Chapter 6: Process Costing
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Sample Questions
Q1) The following information is provided: \(\begin{array}{lr}&\text { Units }\\
\text { Work in process, May } 1 \text { (10\% complete) } & 5,000 \\
\text { Started in May } & 18,000 \\
\text { Work in process, May } 31 \text { (20\% complete) } & 4,000 \end{array}\) Materials and conversion are incurred uniformly throughout the process. What would be the equivalent units of production for conversion when using the weighted average method?
A) 17,400
B) 18,600
C) 21,000
D) 22,000
Q2) Process costing is most useful in situations where there are a large number of homogeneous products.
A)True
B)False
Q3) Costing system used by a cruise ship builder
A)Process costing
B)Job order costing
Q4) Refer to Process Department A.What is the unit manufacturing cost for Department A for October?
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Chapter 7: Activity-Based Costing and Management
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155 Flashcards
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Sample Questions
Q1) Financial and nonfinancial information items that describe individual activities
A)Activity drivers
B)Activity-based costing system
C)Consumption ratio
D)Unit-level activities
E)Activity attributes
F)Resource drivers
Q2) Which of the following is a view of conformance that assumes an acceptable range of values exists for each specification or quality characteristic?
A) standard
B) normal
C) common
D) traditional
Q3) Refer to StrongLive Company.
A. Calculate the activity rate for machining.
B. Calculate the activity rate for engineering.
C. Calculate the activity rate for packing.
Q4) A defective product is one that conforms to specifications.
A)True
B)False
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Chapter 8: Absorption and Variable Costing,and Inventory Management
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Sample Questions
Q1) Birdd Company uses 450 units of a part each year.The cost of placing one order is $10; the cost of carrying one unit in inventory for a year is $2.Birdd currently orders 90 units at a time. A. What is the annual ordering cost of Birdd's current policy?
B. What is the annual carrying cost of Birdd's current policy?
C. What is the total cost of Birdd's current policy?
D. What is the EOQ for Birdd?
E. What is the total inventory-related cost at the EOQ?
Q2) Lauren Company orders 250 units at a time and places 15 orders per year.Total ordering cost is $1,600,and total carrying cost is $1,250.What is the economic order quantity?
A) The economic order quantity (EOQ)is 250.
B) The economic order quantity (EOQ)is more than 250.
C) The economic order quantity (EOQ)is less than 250.
D) The economic order quantity (EOQ)is 15.
Q3) A major advantage to the JIT inventory approach is that it decreases carrying costs.
A)True
B)False
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Page 10
Chapter 9: Budgeting, production, cash, and Master Budget
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Sample Questions
Q1) Which of the following does traditional organization theory use to motivate workers?
A) bonuses
B) self-esteem
C) the nature of the work itself
D) increased responsibility
Q2) The master budget is composed of operating budgets and financial budgets.
A)True
B)False
Q3) The department manager reviews the budget,provides policy guidelines and budgetary goals,resolves differences that arise as the budget is prepared,approves the final budget,and monitors the actual performance of the organization as the year unfolds.
A)True
B)False
Q4) Control is looking ahead to see what actions should be taken to realize particular goals.
A)True
B)False
Q5) What are the advantages of budgeting?
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Chapter 10: Standard Costing: a Managerial Control Tool
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Sample Questions
Q1) The standard cost sheet provides the input standards needed to compute the total amount of inputs allowed for the actual output,an essential component in computing efficiency variances.
A)True
B)False
Q2) Refer to the Figure.What is Aqua's total labour variance?
A) $97,500 U
B) $97,500 F
C) $120,000 U
D) $217,000 F
Q3) Refer to the Figure.What is Aqua's labour rate variance?
A) $97,500 U
B) $217,500 U
C) $217,500 F
D) $225,000 U
Q4) Which formula is used to compute the standard quantity of materials allowed?
A) unit quantity standard × standard output
B) unit quantity standard × actual input
C) unit quantity standard × standard input
D) unit quantity standard × actual output
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Chapter 11: Flexible Budgets and Overhead Analysis
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Sample Questions
Q1) Suppose an organization has implemented an ABC or ABM system.Which of the following has the organization already accomplished?
A) It has identified the activities within an organization.
B) It has estimated the demand for each activity's output.
C) It has assessed the cost of resources required to produce this activity output.
D) It has calculated the variances for the activities.
Q2) The variable overhead spending variance is conceptually identical to the price variances of materials and labour.
A)True
B)False
Q3) Static budgets are the best benchmarks for preparing a performance report.
A)True
B)False
Q4) The first step of building an activity-based budget is to identify the activities within an organization.
A)True
B)False
Q5) Define static budget and flexible budget.What is each type used for?
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Chapter 12: Performance Evaluation and Decentralization
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Sample Questions
Q1) Refer to the Figure.Assume that Giga-Stuff allows negotiated transfer pricing.What is the ceiling of the bargaining range,and which division sets it?
A) $2.15; Sophistosand
B) $2.15; Videostuff
C) $2.50; Sophistosand
D) $2.50; Videostuff
Q2) Which of the following is a disadvantage of a focus on return on investment?
A) It can encourage managers to focus on cost-cutting efforts.
B) It can produce a narrow focus on divisional profitability at the expense of profitability for the overall firm.
C) It can encourage managers to cut inventories and reduce overall investment.
D) It can encourage managers to focus on the long run at the expense of the short run.
Q3) In which of the following responsibility centres is a manager responsible for revenues,cost,and investment?
A) a cost centre
B) a revenue centre
C) a profit centre
D) an investment centre
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Chapter 13: Short-Run Decision Making: Relevant Costing
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Sample Questions
Q1) Refer to the Figure.Assume Victor's Detailing uses target costing to set price on each job.The company requires a 40% profit on each job.What price should Victor's Detailing quote to a new customer?
A) $24
B) $30
C) $54
D) $57
Q2) Acron Construction charges each customer a price equal to the cost of direct materials and direct labour plus 40%.Job 126 included the following costs: \(\begin{array} { l }
\text {Direct materials }&\$60,000\\ \text {Direct labour }&\$45,000\\ \end{array}\)
What price does Acron charge for Job 126?
A) $46,800
B) $65,400
C) $86,000
D) $148,400
Q3) Future costs that differ across alternatives are irrelevant.
A)True
B)False
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Chapter 14: Capital Investment Decisions
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Sample Questions
Q1) An investment of $4,000 provides an average net cash flow of $960 with zero salvage value.Depreciation is $80 per year.What is the accounting rate of return using the original investment?
A) 20%
B) 22%
C) 24%
D) 40%
Q2) Refer to the Figure.Gibb Clinical Practice is considering an investment in new imaging equipment that will cost $400,000.The equipment is expected to yield cash inflows of $80,000 per year for a six-year period.At the end of the sixth year,the firm expects to recover $150,000 from the sale of the equipment.Gibb set a required rate of return at 10%.What is the net present value of the investment? (Note: there may be a rounding error depending on the table you use to compute your answer.Choose the answer closest to the result you calculate.)
A) ($177,280)
B) ($33,000)
C) $33,000
D) $45,200
Q3) What are the limitations of Accounting Rate of Return?
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