Accounting for Decision Making Solved Exam Questions
Course Introduction
Accounting for Decision Making introduces students to the fundamental accounting concepts and tools used by managers to make informed financial decisions within organizations. The course covers key topics such as cost behavior, budgeting, performance measurement, and financial analysis, equipping students with analytical skills to evaluate financial information critically. Through case studies and practical exercises, students learn how accounting data supports strategic planning, operational control, and effective resource allocation in various business contexts. This course is designed to bridge the gap between accounting theory and managerial practice, enabling students to interpret and utilize financial information for effective decision-making.
Recommended Textbook
Management Accounting 2nd Edition by Leslie G.
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Eldenburg
Page 2
Chapter 1: The Role of Accounting Information in Management Decision Making
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Sample Questions
Q1) Uncertainties
A) Are issues about which managers have doubts
B) Do not impact accounting information, which is highly objective and reliable
C) Are preconceived notions developed without careful thought
D) Are rarely a problem in business decision making
Answer: A
Q2) An organisation's value chain can incorporate its I Own customers
II Own suppliers
III Customers' customers
IV Suppliers' suppliers
A) I and II
B) I and III
C) II and IV
D) I, II, III, and IV
Answer: D
Q3) The cost of your old car is relevant in the decision to purchase a new car.
A)True
B)False
Answer: False
Page 3
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Chapter 2: Cost Concepts, Behaviour and Estimation
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Sample Questions
Q1) Three different divisions of a toy manufacturing company are estimating costs for their human resources departments. Each division has a cost structure that is different from the other divisions' and those structures are represented by the following cost behavior patterns. Which cost is best described as mixed?
A) Cost A
B) Cost B
C) Cost C
D) Cost B and Cost C
Answer: C
Q2) Mixed costs
A) Consist of fixed and variable costs
B) Are constant in total
C) Consist of the variable portion of all costs
D) Have a constant per-unit value
Answer: A
Q3) Financial statements usually distinguish between fixed and variable costs.
A)True
B)False
Answer: False
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Page 4
Chapter 3: A Costing Framework and Cost Allocation
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Sample Questions
Q1) Sales Smart allocates advertising expenses to its two departments, F and M, using sales as the cost driver. For the current year the sales for department F are estimated to be $900,000 and for department M $600,000 and total advertising expenses are budgeted at $55,000. The indirect cost rate is:
A) F$33,000: M $22,000
B) $.036 per sales dollar
C) F$.0611: M $.0917 per sales dollar
D) F$36,667: M $18,333
Answer: B
Q2) If the cost object is the payroll department in a large manufacturing firm which of these would be a direct cost?
A) The raw materials cost of the products produced
B) A share of the building space occupied based on percentage of floor space used
C) the payroll department manager's yearly bonus payment
D) The salaries of the shop floor employees that are paid by the payroll department staff
Answer: C
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Chapter 4: Cost-Volume-Profit Cvp Analysis
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Sample Questions
Q1) In CVP analysis, managers usually assume that the revenue function is linear. Which of the following equations best represents a linear revenue function if the cost is a variable cost?
A) y = $200 + $60x
B) y = $60x2
C) y = $60x
D) y = $200
Q2) SXF sells its single product for $14 per unit, and its variable cost per unit is $4. Total fixed costs are $800. Its CVP graph is as follows: If SXF increases its sales volume by 10%, what will happen to its breakeven point?
A) It will decrease
B) It will increase
C) It will stay the same
D) Cannot be determined
Q3) How is the relevant range of activity related to CVP analysis?
A) Managers are normally uncertain about the relevant range
B) In CVP analysis, operations are assumed to be within the relevant range
C) The relevant range is irrelevant to CVP analysis
D) The relevant range affects costs but not revenues
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Page 6
Chapter 5: Job Costing Systems
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Sample Questions
Q1) The cost that would not be included as an inventoriable product cost is:
A) Factory manager's salary
B) Depreciation of factory equipment
C) Selling cost
D) None, i.e. all would be included as inventoriable product costs
Q2) Under a job costing system rework costs are often not tracked.
A)True
B)False
Q3) In job costing the allocation of overhead results in a debit to:
A) the overhead control account
B) the work in process inventory account
C) the finished goods inventory account
D) the cost of goods sold account
Q4) When developing an estimated overhead allocation rate which of the following could be used for the numerator?
A) actual annual overhead cost
B) estimated annual overhead cost
C) estimated direct labour hours
D) estimated annual revenue
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Chapter 6: Process Costing Systems
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Sample Questions
Q1) Miramar Ltd uses a weighted-average process costing system which recognises normal spoilage as 5% of good output. During the current period, 14,000 units were started and 10,000 units completed. Materials are added at the beginning of the process, conversion costs occur uniformly, and the inspection point is at the 70% point. Beginning work in process was 6,000 units, 40% complete, and ending work in process 9,000 units, 80% complete. The cost per equivalent unit for material was $1.00 and for conversion costs $3.00. The cost of ending work in process was
A) $31,995
B) $30,600
C) $31,334
D) $31,547
Q2) Managers can only use the FIFO method in process costing if it is reflected in the physical flow of units.
A)True
B)False
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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Page 8
Chapter 7: Absorption, Variable and Throughput Costing
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Sample Questions
Q1) Throughput costing assumes that product costs other than materials tend to be fixed in the short run.
A)True
B)False
Q2) General Ltd. budgeted fixed overhead costs of $25,000 per quarter and 1,000 units per quarter in its normal absorption costing system. Any volume variance is carried forward and closed at year-end. The company experienced the following activity: The volume variance in quarter 1 was
A) $2,500 Unfavorable
B) $10,000 Unfavorable
C) $7,500 Favorable
D) $5,000 Favorable
Q3) Absorption costing will produce a larger operating profit than variable costing if
A) Fixed production overhead increases
B) Fixed production overhead decreases
C) Units produced exceed units sold
D) Units sold exceed units produced
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9
Chapter 8: Activity Analysis: Costing and Management
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Sample Questions
Q1) Generally speaking, activity-based costing traces direct costs more accurately than traditional costing.
A)True
B)False
Q2) In an ABC system, a "cost object" could be a unit of product, a product line, or a customer.
A)True
B)False
Q3) In an ABC system, a cost driver must be chosen for each
A) Activity
B) Cost pool
C) Cost object
D) Unit-level activity
Q4) An allocation base is
A) Normally related to cost changes in a traditional costing system
B) A measure of activity that causes costs to fluctuate
C) Seldom related to cost changes in an ABC system
D) Often used incorrectly as a synonym for "cost driver"
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Chapter 9: Relevant Costs for Decision Making
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Sample Questions
Q1) As long as managers can identify all the relevant quantitative information for making non-routine operating decisions, they will make the best decision.
A)True
B)False
Q2) Sebastian is a manager at DLL Restaurant. He is considering accepting a special order from a neighborhood homeless shelter for 150 Christmas meals. Which of the following is a relevant qualitative factor he should consider?
A) The number of homeless who will be served
B) His production capacity
C) The potential publicity for his restaurant
D) All of the above
Q3) Sunk costs should be considered in
A) Both routine and non-routine operating decisions
B) Neither routine or non-routine operating decisions
C) Routine decisions only
D) Non-routine operating decisions only
Q4) Non-routine operating decisions rarely require analysis of qualitative factors.
A)True
B)False
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Chapter 10: Standard Costs, Flexible Budgets and Variance Analysis
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Sample Questions
Q1) Intentional worker damage is most likely to result in which type of variance?
A) Direct materials price variance
B) Direct materials efficiency variance
C) Direct labor price variance
D) Variable overhead spending variance
Q2) ELM introduced a new automated production process that has reduced the amount of labour needed, but not affected the use of materials. The standard cost system has not been changed yet to reflect this new process. Assuming the machinery is functioning properly and that workers were properly trained in its use, which of the following variances is most likely to result?
A) Favorable variable overhead spending variance
B) Favorable direct labor efficiency variance
C) Unfavorable direct labor efficiency variance
D) Favorable direct materials price variance
Q3) A contract with a new supplier may cause an unfavorable materials price variance.
A)True
B)False
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Page 12
Chapter 11: Operational Budgets
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Sample Questions
Q1) Kelita Ltd, projects sales for its first three months of operation as follows: Inventory on 1<sup>st</sup> October is $40,000. Subsequent beginning inventories should be 40% of that month's cost of goods sold. Goods are priced at 140% of their cost. 50% of purchases are paid for in the month of purchase; the balance is paid in the following month. It is expected that 50% of credit sales will be collected in the month following sale, 30% in the second month following the sale, and the balance the third month. A 5% discount is given if payment is received in the month following sale. What are the anticipated cash disbursements for October?
A) $120,000
B) $180,000
C) $140,000
D) $60,000
Q2) Budgeting provides a means for defining managers' decision rights (responsibility and financial decision making authority).
A)True
B)False
Q3) The shortest period for which a cash budget can be prepared is six months.
A)True
B)False
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Page 13
Chapter 12: Strategy and Control
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Sample Questions
Q1) Management control systems have one main role; to facilitate decisions by providing relevant and timely information to support decision making.
A)True
B)False
Q2) Which of these is an informal control mechanism as opposed to a formal mechanism?
A) the influence of the owner/founder
B) social work settings
C) one-on-one consultations between senior managers
D) all are informal control mechanisms
Q3) 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
Q4) A Friedman's 'flattner' in his discussion of 'flat world' theory is:
A) the rise of the personal computer
B) the development of the Internet
C) outsourcing
D) all of the above are 'flattners'.
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Chapter 13: Planning and Budgeting for Strategic Success
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Q1) Which of these is a contemporary approach to budgeting?
A) flexible budgeting
B) static budgeting
C) incremental budgeting
D) none are contemporary approaches to budgeting
Q2) In an activity-based budgeting system, managers develop budgets for each:
A) Cost pool
B) General ledger account
C) Cost driver
D) Activity
Q3) Kaizen budgeting is designed to improve quality and reduce costs over time.
A)True
B)False
Q4) The longer cash remains tied up in inventory and/or accounts receivable the greater the strain on the cash resources and liquidity of the company.
A)True
B)False
Q5) In any planning exercise, profit is regarded as the key independent variable. A)True
B)False
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Chapter 14: Capital Budgeting and Strategic Investment
Decisions
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Sample Questions
Q1) A negative net present value means that the
A) Internal rate of return is less than the required rate of return
B) Project is acceptable
C) Present value of the inflows exceeds the present value of the outflows
D) Company chose the wrong discount rate
Q2) Bailey Pty Ltd is considering modernising its production by purchasing a new machine and selling an old machine. The following data have been collected on this investment: The income tax rate is 40%, and the required rate of return is 16%. Depreciation is $5,000 per year for the old machine. The new machine would be depreciated $7,600 in 2008, $5,700 in 2009, $3,800 in 2010, and $1,900 in 2011. Assume Bailey would purchase the new machine in December 2007 and dispose of the old machine in January 2008.
The relevant annual pretax cash operating cost associated with Bailey's decision will be
A) $4,000
B) $14,000
C) $18,000
D) $2,400
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Page 16
Chapter 15: The Strategic Management of Costs and Revenues
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Sample Questions
Q1) List one advantage and one disadvantage for using target and kaizen costing. Correct
Q2) List the three product characteristics that a target costing design team would choose to enhance or minimise as they make trade-offs to achieve the target cost. Describe two of the types of trade-offs they may consider.
Correct
Q3) BLG produces and sells yachts for wealthy customers. BLG's accountants produced the data shown below as a basis for client negotiations for the coming year: Assume that all the preceding costs are avoidable. The company will incur an additional $800 in unavoidable costs during the coming year. BLG's managers want to achieve a profit margin of 80% based on total costs.
Suppose BLG allocates unavoidable corporate costs based on total avoidable costs. The selling price of Sport Star's yacht will be
A) $1,833
B) $3,300
C) $1,467
D) $2,200
Q4) Compare and contrast target costing with kaizen costing.
Correct
Page 17
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Chapter 16: Strategic Management Control: a Lean Perspective
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Q1) The total quality management (TQM) approach originated in:
A) Japan
B) Germany
C) USA
D) South Korea
Q2) Physical inspections at every point of the value chain is the key principle underlying TQM.
A)True
B)False
Q3) Under TOC a constraint that is a demand side rather an a supply side constraint is:
A) insufficient processing time available
B) lack of the necessary knowledge or skills
C) a shortage of raw materials
D) none of the above are demand side constraints, all are supply side constraints
Q4) Under a lean accounting system it is possible to dispense with supplier's invoices.
A)True B)False
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Chapter 17: Responsibility Accounting, Performance
Evaluation and Transfer Pricing
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Sample Questions
Q1) 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
Q2) When decision making is decentralised
A) Upper management does not make decisions
B) Decision-making authority is delegated throughout the organisation
C) The important information in an organisation is very general
D) Organisations are less likely to experience agency costs concerning goal congruence
Q3) Transfer pricing policies can affect a company's tax liability, particularly if it does business internationally.
A)True
B)False
Q4) Choices about decision-making authority and about organisational structure are often related.
A)True
B)False
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Chapter 18: The Balanced Scorecard and Strategy Maps
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Q1) Learning and growth measures, if incorporated in a balanced scorecard, cannot focus on employees.
A)True
B)False
Q2) The first step in implementing a balanced scorecard is developing measures for each of the perspectives.
A)True
B)False
Q3) The steps and cycles in the value chain are most closely associated with which balanced scorecard perspective?
A) Financial
B) Customer
C) Internal business process
D) Learning and growth
Q4) The nature of an organisation's strategies influences the types of performance objectives managers establish.
A)True
B)False
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Page 20
Chapter 19: Rewards, Incentives and Risk Management
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Q1) According to agency theory, under what circumstances could companies eliminate agency costs?
A) If their shares are not traded on the stock exchange
B) If bonuses are based on financial performance
C) If they publish audited financial statements
D) Organisations cannot eliminate agency costs
Q2) In the largest Australian companies bonuses typically make up what percentage of the total compensation package for top executives?
A) 20%
B) 40%
C) 60%
D) 80%
Q3) Compensation contracts prepared to deal with the agency problem can be based on accounting and/or non-accounting measurements.
A)True
B)False
Q4) An organisation's chief executive officer can be both a principal and an agent.
A)True
B)False
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Chapter 20: Sustainability Management Accounting
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Q1) Sustainability management accounting is essentially a one-way process that generates information about how the pursuit of sustainability impacts on the organisation.
A)True
B)False
Q2) The three sustainability management goals of economic, environmental, and social sustainability are generally in harmony.
A)True
B)False
Q3) In calculating a carbon footprint for an entity which of these is an indirect as opposed to a direct emission?
A) Fuel usage for transporting inputs
B) Onsite waste
C) Emissions generated from purchased electricity
D) All of the above are indirect emissions
Q4) Currently, in many organizations, sustainability costs tend not to be treated as separate costs within the accounting system.
A)True
B)False
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