Accounting for Decision Making Review Questions
Course Introduction
Accounting for Decision Making introduces students to the role of accounting information in the decision-making processes of managers and other stakeholders. The course covers fundamental concepts in both financial and managerial accounting, emphasizing how to analyze, interpret, and use accounting data to support strategic planning, budgeting, performance evaluation, and operational control. Through real-world case studies and practical exercises, students learn to assess the financial health of organizations, make informed choices about resource allocation, and communicate financial insights effectively to guide business decisions.
Recommended Textbook Management Accounting 2nd Edition by Leslie G. Eldenburg
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Page 2
Chapter 1: The Role of Accounting Information in Management Decision Making
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81 Flashcards
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Sample Questions
Q1) A value chain is the sequence of business processes in which
A) Costs are determined with activity-based principles
B) Value is added to a product or service
C) All non-value-added activities are eliminated
D) Managers determine prices
Answer: B
Q2) Organisational core competencies can include
A) A mission statement
B) Patents, copyrights and special legal protections
C) A code of conduct
D) An operating plan
Answer: B
Q3) Analysing the strengths and weaknesses of different alternatives includes all of the following except
A) Recognising and evaluating assumptions
B) Drawing a conclusion about which alternative is best overall
C) Gauging the quality of information
D) Considering different viewpoints
Answer: B
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Chapter 2: Cost Concepts, Behaviour and Estimation
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Sample Questions
Q1) Milano Company has an average overhead cost per hour of $10.50 at 3,500 machine hours, and at 3,000 hours it is $11.25. The company managers wish to estimate the overhead cost function. What is the fixed overhead cost?
A) $15,750
B) $36,750
C) $21,000
D) $18,000
Answer: A
Q2) Simple regression analysis produces an equation of the form : Y= + X +
A)True
B)False
Answer: True
Q3) The high-low method is a specific application of this method of cost estimation
A) Two-point
B) Scatter plot
C) Engineered estimate of cost
D) Analysis at the account level
Answer: A
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4
Chapter 3: A Costing Framework and Cost Allocation
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45 Verified Questions
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Sample Questions
Q1) Which of these departments would not be considered a support department for a manufacturer of bathroom fittings?
A) accounts
B) security
C) computing departments
D) none of the above, i.e. all would be considered support departments for a manufacturer
Answer: D
Q2) The same cost that is a direct cost for one cost object can be an indirect cost for a different cost object.
A)True
B)False
Answer: True
Q3) Indirect costs can also be referred to as overhead costs.
A)True
B)False
Answer: True
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Chapter 4: Cost-Volume-Profit Cvp Analysis
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Sample Questions
Q1) CVP analysis can be used to make decisions about discretionary expenditures, such as
A) Advertising
B) Taxes
C) Direct materials purchases
D) City license fees
Q2) In CVP analysis, managers usually assume that the cost function is linear. Which of the following equations best represents a linear function for total cost if the cost is a mixed cost?
A) y = $200 + $60x
B) y = $60x2
C) y = $60x
D) y = $200
Q3) Which of the following is not an assumption in CVP analysis?
A) Actual costs will be exactly the amount that we predict in the analysis
B) Operations are within the relevant range
C) The revenue function is linear
D) The cost function is linear
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6
Chapter 5: Job Costing Systems
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Sample Questions
Q1) In a job costing system the accounting entry made at the time job 664 is delivered to the customer is:
A) debit to cost of goods sold; credit to finished goods inventory
B) debit to finished goods inventory; credit to work in process
C) debit to sales; credit to work in process
D) debit to cost of goods sold; credit to work in process
Q2) A cost driver is a synonym for an allocation base.
A)True
B)False
Q3) The accounting standard dealing with inventories is AASB 102. A)True B)False
Q4) The actual allocation rate under a job costing system is; actual overhead cost divided by actual quantity of allocation base.
A)True B)False
Q5) The job cost record does not include non-traceable costs assigned to a particular job.
A)True
B)False
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Chapter 6: Process Costing Systems
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Sample Questions
Q1) Hendrix Ltd employs a process costing system. Direct materials are added at the beginning of the process. Here is information about July's activities: Using the FIFO method, the cost of goods completed and transferred out during July was
A) $225,150
B) $225,060
C) $213,300
D) $213,000
Q2) Hendrix Ltd employs a process costing system. Direct materials are added at the beginning of the process. Here is information about July's activities: Using the weighted average method, the cost of the goods completed and transferred out was
A) $225,150
B) $225,060
C) $213,300
D) $213,000
Q3) When an organisation uses a long-term procurement contract, direct labor costs are normally stable over long periods of time.
A)True
B)False
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Chapter 7: Absorption, Variable and Throughput Costing
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102 Flashcards
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Sample Questions
Q1) Supply-based capacity levels include I Normal capacity
II Practical capacity
III Theoretical capacity
A) I and II only
B) I and III only
C) II and III only
D) I, II, and III
Q2) Under which costing method(s) are administrative and selling costs considered period expenses? I Absorption costing
II Throughput costing
III Variable costing
A) I and II only
B) II and III only
C) I and III only
D) I, II, and III
Q3) Variable costing does not conform to GAAP because it does not match manufacturing costs with revenues.
A)True
B)False
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Chapter 8: Activity Analysis: Costing and Management
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Sample Questions
Q1) Le Pavilion is a historic hotel just outside of Melbourne. It is owned by Refined Hotels, which operates additional properties in Sydney, Brisbane and Perth. Le Pavilion has 9 floors, with approximately 20 rooms per floor. Facilities also include a workout room, restaurant, and pool. The hotel is organised in 5 departments: front desk, engineering, housekeeping, food & beverage, and customer relations. As part of its operation, Le Pavilion regularly incurs the following costs: General manager's salary
Housekeeping supplies
Utility costs
Depreciation on workout room equipment
Advertising
Food and beverage costs
Depreciation on restaurant equipment
Advertising for the Refined Hotels chain is best described as a(n)
A) Facility-sustaining cost
B) Organisation-sustaining cost
C) Product-sustaining cost
D) Batch-level cost
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Chapter 9: Relevant Costs for Decision Making
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Sample Questions
Q1) Wagner Ltd can manufacture 490,000 tennis rackets a year at a variable cost of $15 per racket and fixed costs of $500,000. Wagner budgeted that it can sell 400,000 at $25 each. An additional order of 100,000 was received, but at a discount of 35% from the regular price. If Wagner accepts the special order, profit before taxes will
A) Decrease by $100,000
B) Increase by $125,000
C) Increase by $25,000
D) Some other amount
Q2) The general rule is to discontinue a service when its total fixed costs are less than its avoidable fixed costs.
A)True
B)False
Q3) If a service organisation is at capacity, it would only accept a special order for service if it was priced at or above the price that regular customers pay for the service.
A)True
B)False
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Chapter 10: Standard Costs, Flexible Budgets and Variance Analysis
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104 Verified Questions
104 Flashcards
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Sample Questions
Q1) The variable overhead budget variance is the difference between allocated variable overhead cost and actual variable overhead cost.
A)True
B)False
Q2) Mason Ltd uses a standard costing system. Overhead costs are allocated based on direct labor hours. The standard variable overhead and fixed overhead rates are $1 and $5 per direct labor hour, respectively. Data relevant for the current period include: The direct materials efficiency variance is
A) $60,000 Favorable
B) $60,000 Unfavorable
C) $65,000 Favorable
D) $65,000 Unfavorable
Q3) Managers investigate
A) All variances
B) All unfavorable variances
C) Variances they consider important
D) Variances that are reported in the financial statements
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Page 12
Chapter 11: Operational Budgets
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Sample Questions
Q1) TNR is preparing its budgeted income statement for the month of August. Budgeted sales are $18,000. Cost of goods sold is twice the amount of operating costs, and operating costs plus cost of goods sold equals 40% of net profit. Return on sales (net profit / sales) is anticipated to be 50%. TNR's budgeted operating costs are
A) $3,600
B) $2,400
C) $1,200
D) None of the above
Q2) Sales of $250,000 are forecast for the third quarter. Gross profit is 60% of sales, and beginning inventory is $165,000. If ending inventory is budgeted as $183,000, what are the budgeted purchases?
A) $118,000
B) $132,000
C) $168,000
D) $82,000
Q3) In a production budget, beginning inventory plus budgeted production equals sales plus targeted ending inventory.
A)True
B)False
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Page 13
Chapter 12: Strategy and Control
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Sample Questions
Q1) Prior to the 1980's accounting for internal control did not have a strategic component.
A)True
B)False
Q2) The value-based management (VBM) technique takes a holistic approach to the management of an organisation and focuses on the underlying 'drivers' of value.
A)True
B)False
Q3) In Porter's competitive forces model which of the following is a decision influencing control tool rather than a decision facilitating control tool?
A) budget targets
B) cost data for pricing purposes
C) discounted cash flow analysis
D) all are decision influencing control tools
Q4) Porter classifies strategy into either cost leadership or product differentiation.
A)True
B)False
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Chapter 13: Planning and Budgeting for Strategic Success
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Sample Questions
Q1) With traditional budgeting it is untrue that:
A) Many entities adopt policies so that departments lose authority over unspent budget amounts
B) Adding an adjustment to last year's budget, as a means of planning, encourages managers to seek ways to use the organisation's resources more efficiently
C) If actual costs are lower than budgeted costs next year's budget is often cut
D) None of the statements are untrue
Q2) Which of these is not part of the Beyond Budgeting approach?
A) top-down planning
B) the use of annual planning cycles
C) rewarding employees for meeting fixed targets
D) none of the above is part of the Beyond Budgeting approach
Q3) Dysfunctional behaviour is more likely in discretionary rather than engineering cost centres.
A)True
B)False
Q4) Kaizen budgeting is designed to improve quality and reduce costs over time.
A)True
B)False
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Chapter 14: Capital Budgeting and Strategic Investment
Decisions
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Sample Questions
Q1) The local school board is considering the purchase of a new computer system. It will cost $100,000 and will be sold back to the dealer at the end of 6 years for $8,000. If the required rate of return is 14%, what is the minimal annual cost saving required to justify the purchase? Ignore income taxes.
A) $25,714
B) $23,142
C) $24,776
D) $23,656
Q2) Managers responsible for proposing a project are likely to be favorably biased in their estimates of future project cash flows.
A)True
B)False
Q3) A capital investment's expected useful life is inversely correlated with the uncertainty of its cash flows.
A)True
B)False
Q4) Income taxes have a major effect on capital budgeting decisions.
A)True
B)False
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Chapter 15: The Strategic Management of Costs and Revenues
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Sample Questions
Q1) Kaizen costing relies on
A) Sales forecasts of prices and volumes
B) Commodity markets
C) Zero-based budgeting processes
D) Classification based on cost behavior
Q2) The practice of charging higher prices for products or services when they are first introduced is known as
A) Transfer pricing
B) Price skimming
C) Peak load pricing
D) Price gouging
Q3) Managers determine what a customer is willing to pay for a product or service under which one of these pricing method?
A) Market-based
B) Cost-based
C) Activity-based
D) Life cycle
Q4) Market-based prices are typically based on some measure of customer demand.
A)True
B)False
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Chapter 16: Strategic Management Control: a Lean Perspective
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Sample Questions
Q1) Under a traditional accounting system any build up of inventory will increase profit as it will include deferred fixed overheads.
A)True
B)False
Q2) Lean accounting refocuses performance measurement systems to emphasise social controls such as training.
A)True
B)False
Q3) The statement concerning total quality management (TQM) that is not true is:
A) TQM is an important part of lean accounting
B) it promotes an organisation-wide philosophy
C) the units cost of the product or service generally increase slightly as quality is improved
D) none of the statements is untrue. i.e. all are true statements
Q4) The originator of the total quality management (TQM) approach was an American, W. Edwards Deming.
A)True
B)False
Page 18
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Chapter 17: Responsibility Accounting, Performance
Evaluation
and Transfer Pricing
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Sample Questions
Q1) Residual income is calculated as
A) Operating profit - (required rate of return × average operating assets)
B) Net profit - (required rate of return × average operating assets)
C) Operating profit - (required rate of return × average equity)
D) Net profit - (required rate of return × average equity)
Q2) If a supplying division has excess capacity, the best transfer price is the product's variable cost.
A)True
B)False
Q3) Setting transfer prices can be especially problematic when
A) Managers are evaluated based on non-financial factors
B) Compensation is tied to the financial performance of responsibility centres
C) Centralised decision making is the organisational norm
D) Compensation is tied to the financial performance of the organisation as a whole
Q4) A corporate accounting department would most often be considered a
A) Cost centre, because it is typically a high cost operation
B) Cost centre, because its costs can be controlled by upper management
C) Revenue centre, if accountants have input in pricing decisions
D) Cost centre, because it is a support service
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Chapter 18: The Balanced Scorecard and Strategy Maps
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Sample Questions
Q1) Managers have traditionally relied on which of the following measures to evaluate performance?
A) Qualitative factors
B) Financial measures
C) Non-financial measures
D) Core competencies
Q2) Which of the following is a synonym for an organisation's vision?
A) Purpose and ideology
B) Core competencies
C) Organisational strategies
D) Operating plans
Q3) In which order should the following steps be taken in implementing a balanced scorecard? 1 Develop links among the objectives of the organisation, divisions, departments, and individuals.
2 Provide feedback to employees and others.
3 Establish action plans and specific performance targets
A) 1, 2, 3
B) 2, 1, 3
C) 3, 2, 1
D) 1, 3, 2
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Chapter 19: Rewards, Incentives and Risk Management
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Sample Questions
Q1) Which of these is an advantage of rewarding senior executives with cash rather than with non-cash payments?
A) It helps to overcome the agency problem
B) It is likely to be preferred by a risk-averse executive
C) The lasting nature of cash
D) All of the above are advantages
Q2) Share-based compensation rather than cash payments is used to encourage
A) a focus on long-range results
B) a focus on short-term results
C) higher compensation for executives
D) lower compensation for executives
Q3) It is more likely that the performance of a top executive will be measured at which of these levels?
A) individual
B) department
C) product
D) corporate
Q4) Managers can reduce agency costs through the use of compensation contracts.
A)True
B)False
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Chapter 20: Sustainability Management Accounting
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Sample Questions
Q1) Which of these is not a core indicator of the Global Reporting Initiative's sustainability reporting framework?
A) information on product labeling
B) information on employee turnover
C) information on childcare places provided
D) information on occupational health and safety
Q2) Indexes like the Global Reporting Index are not important for management accountants but are only used by financial accountants for external financial reporting.
A)True
B)False
Q3) Which of these is a behavioural issue as opposed to a technical issue when implementing sustainability change processes within an organisation?
A) Arriving at suitable objectives in line with sustainability strategies
B) Identifying suitable social and environmental measures for performance evaluation
C) Creating ownership of projects by participants
D) All are behavioural issues
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