Accounting Information Systems
Test Bank
Course Introduction
Accounting Information Systems examines the integration of accounting principles and information technology to collect, process, and communicate financial data within organizations. The course covers the design, implementation, and monitoring of accounting systems, the role of information systems in supporting decision-making, and the use of internal controls to ensure data accuracy and safeguard assets. Students will explore topics such as database management, system documentation, cybersecurity risks, and the impact of emerging technologies like cloud computing and automation on accounting processes, preparing them for effective participation in modern, technology-driven accounting environments.
Recommended Textbook
Horngrens Cost Accounting A Managerial Emphasis 16th Edition by Srikant M. Datar
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2
Chapter 1: The Manager and Management Accounting
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Sample Questions
Q1) The increasing pace of technological information has resulted in longer product life cycles.
A)True
B)False
Answer: False
Q2) Line management includes ________.
A) distribution managers
B) human-resource managers
C) information-technology managers
D) management-accounting managers
Answer: A
Q3) Which of the following is a responsibility of the CFO?
A) budget funds for a plant upgrade
B) managing short-term and long-term financing
C) investing in new equipment
D) conducting internal audit
Answer: B
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Page 3
Chapter 2: An Introduction to Cost Terms and Purposes
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Q1) When costs can be traced to a particular cost object in an economically feasible way, the cost is a:
A) direct cost
B) indirect cost
C) allocated cost
D) budgeted cost
Answer: A
Q2) The most likely cost driver of distribution costs is the ________.
A) number of parts within the product
B) number of miles driven
C) number of products manufactured
D) number of production hours
Answer: B
Q3) Accountants define a cost as the amount of money spent on a resource.
A)True
B)False
Answer: False
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Page 4
Chapter 3: Cost-Volume-Profit Analysis
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Sample Questions
Q1) To calculate the breakeven point in a multiproduct situation, one must assume that the sales mix of the various products remains constant.
A)True
B)False
Answer: True
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) The three methods used to study CVP analysis are graph method, contribution method, and equation method.
A)True
B)False
Answer: True
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Chapter 4: Job Costing
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Sample Questions
Q1) The proration approach to allocating overapplied or underapplied overhead adjusts individual job-cost records.
A)True
B)False
Q2) Which of the following statements regarding manufacturing overhead allocation is true?
A) It includes all manufacturing costs that cannot be directly traced to a product or service.
B) The costs can be grouped only as a single indirect-cost pool.
C) Total costs are unknown at the end of the accounting period.
D) Allocated amounts are debited to Manufacturing Overhead Control.
Q3) Process costing is ________.
A) used to enhance employees' job satisfaction
B) used by businesses to price unique products or identical products produced in batches
C) used by businesses to price identical products
D) used by businesses when manufacturing goods above normal capacity
Q4) The Salaries Payable Control account has underlying subsidiary ledgers.
A)True
B)False
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Chapter 5: Activity-Based Costing and Activity-Based Management
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Sample Questions
Q1) It is important that the product costs reflect as much of the diversity and complexity of the manufacturing process so that ________.
A) total costs reflect market price
B) value-added costs can be eliminated
C) there is high likelihood of cross-subsidizing of product costs
D) product-pricing errors are minimal
Q2) A well-designed, activity-based cost system helps managers make better decisions because information derived from an ABC analysis ________.
A) can be used to eliminate nonvalue-added activities
B) is easy to analyze and interpret
C) takes the choices and judgment challenges away from the managers
D) emphasizes how managers can achieve higher sales
Q3) ABC system are likely to provide the most benefits to a company with significant amounts of indirect costs that are allocated using just one or two costs pools and products that make diverse demands on resources.
A)True
B)False
Q4) Explain how a top-selling product may actually result in losses for the company.
Page 7
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Chapter 6: Master Budget and Responsibility Accounting
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Sample Questions
Q1) Describe some of the drawbacks of using the operating budget as a control device.
Q2) A key type of sensitivity analysis for managers is to play "what-if" with the cash budget so as to anticipate outcomes and take steps to minimize the effects of shortfalls in cash balances.
A)True
B)False
Q3) Which of the following departments is most likely to be a cost center?
A) sales department of a company selling industrial tools
B) call center of a company that serves customers and cross-sells other products
C) maintenance department of a luxury resort
D) research department of a company providing consultancy services
Q4) A responsibility center is a part, segment, or subunit of an organization, whose manager is accountable for a specified set of activities that impact revenues, costs, or profits and in the case of an investment center, profits.
A)True
B)False
Q5) Explain what is meant by sensitivity analysis in budgeting, and discuss how managers might use sensitivity analysis in practice.
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Chapter 7: Flexible Budgets, Direct-Cost Variances, and Management Control
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Sample Questions
Q1) When using variance analysis for performance evaluation, managers often focus on effectiveness and efficiency as two of the common attributes used in comparing expected results with actual results.
A)True
B)False
Q2) Standard material cost per kg of raw material is $6.50. Standard material allowed per unit is 5 Kg. Actual material used per unit is 6.00 Kg. Actual cost per kg is $6.00. What is the standard cost per output unit?
A) $30.00
B) $36.00
C) $32.50
D) $39.00
Q3) From the perspective of control, the direct materials price variance should be isolated at the time of sales.
A)True
B)False
Q4) A favorable variance should be ignored by management.
A)True
B)False
9
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Chapter 8: Flexible Budgets, Overhead Cost Variances, and Management Control
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Sample Questions
Q1) The variable overhead efficiency variance measures the difference between the ________, multiplied by the budgeted variable overhead cost per unit of the cost-allocation base.
A) budgeted quantity of the cost-allocation base used and the budgeted quantity of the cost-allocation base that should have been used to produce the actual output
B) actual quantity of the cost-allocation base used and the budgeted quantity of the cost-allocation base that should have been used to produce the actual output
C) actual cost incurred and the budgeted quantity of the cost-allocation base that should have been used to produce the actual output
D) budgeted cost and the actual cost used to produce the actual output
Q2) What are the two components of sales-volume variance? Explain why sales-volume variance could be helpful to managers.
Q3) An unfavorable fixed overhead spending variance indicates that ________.
A) there was more excess capacity than planned
B) the price of fixed overhead items cost more than budgeted
C) the fixed overhead cost-allocation base was not used efficiently
D) the denominator level was more than planned
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Page 10
Chapter 9: Inventory Costing and Capacity Analysis
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Sample Questions
Q1) ________ is a method of inventory costing in which all variable manufacturing costs and all fixed manufacturing costs are included as inventoriable costs.
A) Variable costing
B) Mixed costing
C) Absorption costing
D) Standard costing
Q2) In planning and control of capacity costs, managers must consider possible capacity measures. Which of the following measures the available supply of capacity in a factory?
A) Theoretical capacity
B) Practical capacity
C) Normal capacity
D) Master-budget capacity
Q3) Absorption costing is the required inventory method for external financial reporting in most countries.
A)True
B)False
Q4) Discuss the three methods to dispose of production volume variance.
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Chapter 10: Determining How Costs Behave
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Sample Questions
Q1) Simple regression analysis estimates the relationship between the dependent variable and one independent variable.
A)True
B)False
Q2) In a cost function y = 18,000, the slope coefficient is zero.
A)True
B)False
Q3) An example of a physical cause-and-effect relationship is when additional units of production increase total direct material costs.
A)True
B)False
Q4) Bennet Company employs 20 individuals. Eighteen employees are paid $18 per hour and the rest are salaried employees paid $3,000 a month. Which of the following is the total cost function of personnel?
A) y = a + bX
B) y = b
C) y = bX
D) y = a
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Chapter 11: Decision Making and Relevant Information
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Sample Questions
Q1) Management is considering two alternatives. Alternative A has projected revenue per year of $100,000 and costs of $70,000 while Alternative B has revenue of $100,000 and costs of $60,000. Both projects require an initial investment of $250,000 of which $75,000 has already been set aside and will be used as a down payment on the project that is chosen. There are also other qualitative factors that management must consider before making a final choice. Which of the following statements is correct about relevant costs and relevant revenues.
A) The sunk cost of $75,000 is relevant
B) The projected revenues are relevant to the decision
C) The initial investment of $250,000, the projected revenues, and the projected costs are all relevant
D) The only relevant item are the costs as they differ between alternatives
Q2) In evaluating different alternatives, it is useful to concentrate on ________.
A) variable costs
B) fixed costs
C) total costs
D) relevant costs
Q3) How does a manager go about choosing which of three products to produce and sell when each product uses a single machine with a limited capacity?
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Page 13
Chapter 12: Strategy, Balanced Scorecard, and Strategic
Profitability Analysis
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Sample Questions
Q1) Which component of strategy measures the changes in operating income attributed solely to an increase in the quantity of output between Year 1 and Year 2?
A) the growth component
B) the price-recovery component
C) the productivity component
D) the cost leadership component
Q2) Discretionary costs arise from periodic (usually annual) decisions and have a measurable cause-and-effect relationship between output and resources used.
A)True
B)False
Q3) Which of the following is the correct mathematical expression to calculate total factor productivity?
A) Sales value of output produced ÷ Quantity of all inputs used
B) Quantity of output produced ÷ Quantity of the input used
C) Quantity of output produced ÷ Costs of all inputs used
D) Sales value of output produced ÷ Cost of inputs required to produce current year production in previous year
Q4) Define engineered and discretionary costs and give two examples of each.
Page 14
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Chapter 13: Pricing Decisions and Cost Management
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Sample Questions
Q1) When the firm uses the target-costing approach to pricing, the target cost per unit is the difference between the per unit target price and the per unit target ________.
A) contribution margin
B) operating income
C) cost of goods sold
D) gross margin
Q2) Predatory pricing is a type of price discrimination that ________.
A) allows prices to be cut to the level of variable costs
B) is required when a company declares bankruptcy so that it can sell its remaining goods quickly
C) is used in the food industry for perishable goods
D) deliberately sets prices very low, sometimes even below costs, to minimize competition
Q3) All costs are locked in at the design stage itself.
A)True
B)False
Q4) What are the undesirable effects of value engineering and target costing? How can these be reduced?
Q5) What is the primary reason a firm would adopt target costing?
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Chapter 14: Cost Allocation, Customer-Profitability Analysis, and Sales-Variance Analysis
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Sample Questions
Q1) For companies in which full allocation is not followed, which of the following is true of corporate sustaining costs?
A) allocated to divisions using cause-and-effect relationship
B) allocated to customers using cause-and-effect relationship
C) added to aggregate operating incomes of the divisions
D) subtracted as a lump-sum amount after aggregating operating incomes of the divisions
Q2) The market-share variance is the difference in actual contribution margin for actual market size in units caused solely by actual market share being different from budgeted market share.
A)True
B)False
Q3) Using the fairness criterion, the costs are allocated among the beneficiaries in proportion to the benefits each receives.
A)True
B)False
Q4) What actions might be taken with an unprofitable customer?
Q5) Why do managers prepare cost-hierarchy-based operating incomes statements?
Q6) 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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Q1) When budgeted cost-allocations rates are used ________.
A) user departments are not informed about the charges until the end of the period which makes decision making during the period difficult
B) user departments can determine the amount of service to request and if allowed, can determine whether to use an internal or external resource
C) user divisions pay for costs that exceed budgeted amounts
D) user divisions pay for inefficiencies of the supplier department
Q2) Which of the following is an 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
Q3) Both direct and the step-down method can provide relevant information for outsourcing decisions.
A)True
B)False
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Chapter 16: Cost Allocation: Joint Products and Byproducts
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Sample Questions
Q1) In joint costing, using physical measures at split-off to allocate costs enables the accountant to obtain individual product costs and gross margins.
A)True
B)False
Q2) Which of the following journal entries can happen only under the production method of recording byproducts?
A) Work in Process Finished Goods - Byproduct Accounts Payable
B) Cash or Accounts Receivable Revenues - Main product
C) Byproduct Inventory Finished Goods - Main product Work in Process
D) Cash or Accounts Receivable Revenues - Byproduct
Q3) What are the two methods to account for byproducts. Which is the more appropriate method to use and why?
Q4) The sales value at split-off method presupposes the exact number of subsequent steps undertaken for further processing. A)True
B)False
Q5) Explain why some companies choose not to allocate joint costs to products.
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Chapter 17: Process Costing
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Q1) BIG Manufacturing Products has been using FIFO process costing for tracking the costs of its manufacturing activities. However, in recent months, the system has become somewhat bogged down with details. It seems that, when the company purchased Brown Electronics last year, its product lines increased six-fold. This has caused both the accountants and the suppliers of the information, the line managers, great difficulty in keeping the costs of each product line separate. Likewise, the estimation of the completion of ending work-in-process inventories and the associated costs has become very cumbersome. The chief financial officer of the company is looking for ways to improve the reporting system of product costs.
Required: What can you recommend to improve the situation?
Q2) In hybrid-costing systems, managers use process costing to account for the conversion costs and job costing for the material and customizable components.
A)True
B)False
Q3) Standard costing is NOT possible in a firm that uses process costing. A)True
B)False
Q4) List and describe the five steps in process costing.
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Chapter 18: Spoilage, Rework, and Scrap
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Q1) The last step in the five-step procedure for process costing with spoilage is to summarize total costs to account for.
A)True
B)False
Q2) To recognize the disposal value of normal spoilage, ________.
A) Manufacturing Overhead Control account is debited with spoiled goods at current net disposal value.
B) Materials Control account is debited with spoiled goods at current net disposal value.
C) Work-in-Process Control account is debited with spoiled goods at current net disposal value.
D) Manufacturing Overhead Control account is credited with spoiled goods at current net disposal value.
Q3) Normal spoilage is computed on the basis of the number of ________.
A) good units that pass inspection during the current period
B) units that pass the inspection point during the current period
C) units that are in ending work in process
D) units that started during the particular period
Q4) What is the distinction between normal and abnormal spoilage?
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Page 20
Chapter 19: Balanced Scorecard: Quality and Time
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Sample Questions
Q1) Longer manufacturing cycle times increase the inventory carrying costs and decrease revenues.
A)True
B)False
Q2) Rework is an example of ________.
A) prevention costs
B) appraisal costs
C) internal failure costs
D) external failure costs
Q3) What are control charts and how can inferences be drawn from them?
Q4) Brown Laundry has a variable demand. The daily demand ranges from 100 to 140 customers a day with an average of 5 items. The average daily demand is 110 customers. The laundry operates 10 hours a day. Each order takes approximately 5 minutes. Required:
a.What is the average customer waiting time, in minutes?
b.What is the cycle time for an order?
c.The manager has decided that the waiting time is too long and has increased the workday to 11 hours. What is the waiting time now? Will the customers be any happier?
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Chapter 20: Inventory Management, Just-in-Time, and Simplified Costing Methods
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Sample Questions
Q1) A positive aspect of backflush costing is the presence of the visible audit trail.
A)True
B)False
Q2) Sharing sales information throughout the supply chain leads to which of the following?
A) larger stockouts
B) increased manufacturing of products not immediately needed by retailers
C) fewer manufacturing orders that had to be expedited
D) higher inventories held by each company in the supply chain
Q3) Increases in the carrying cost and decreases in the ordering cost per purchase order result in ________.
A) smaller EOQ amounts
B) larger EOQ amounts
C) larger relevant total costs
D) smaller relevant total costs
Q4) The reorder point is the quantity level of inventory at which a new purchase order is made.
A)True
B)False
Chapter 21: Capital Budgeting and Cost Analysis
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Q1) The net present value method accurately assumes that project cash flows can only be reinvested at the company's required rate of return.
A)True
B)False
Q2) In situations where the required rate of return is not constant for each year of the project, it is advantageous to use ________.
A) the nominal rate-of-return method
B) the internal rate-of-return method
C) the net present value method
D) the projected income method
Q3) As a discounted cash flow method does not report good operating income results in the project's early years, managers are tempted to not use discounted cash flow methods even though the decisions based on them would be in the best interests of the company as a whole over the long run.
A)True
B)False
Q4) List the capital budgeting methods used to analyze financial information.
Q5) Explain why the term tax shield is used in conjunction with depreciation.
Q6) What are the relevant cash inflows and outflows for capital budgeting decisions?
Page 23
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Chapter 22: Management Control Systems, Transfer
Pricing, and Multinational Considerations
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Q1) The minimum transfer price equals ________.
A) opportunity costs less the additional outlay costs
B) opportunity costs times 125% plus the additional outlay costs
C) opportunity costs divided by the additional outlay costs
D) incremental costs plus opportunity costs
Q2) Aerated Water Company makes internal transfers at 175% of full cost. The Soda Refining Division purchases 30,500 containers of carbonated water per day, on average, from a local supplier, who delivers the water for $31 per container via an external shipper. To reduce costs, the company located an independent supplier in Missouri who is willing to sell 30,500 containers at $28 each, delivered to Aerated Water Company's Shipping Division in Missouri. The company's Shipping Division in Missouri has excess capacity and can ship the 30,500 containers at a variable cost of $8.00 per container. What is the total cost to Aerated Water Company if the carbonated water is purchased from the local supplier?
A) $945,500
B) $892,125
C) $2,318,000
D) $1,654,625
Q3) Why is decentralization costly?
Q4) What are transfer prices and what are its criteria?
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Chapter 23: Performance Measurement, Compensation, and Multinational Considerations
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Q1) Briefly explain each of the four levels of control. Why does a company need to implement more than a diagnostic control system?
Q2) The salary component of compensation dominates when performance measures that are sensitive to managers' actions are not available.
A)True
B)False
Q3) Discuss the issues and complications that may arise when multinational corporations conduct performance measurement and comparisons among divisions located in different countries.
Q4) Reducing the investment base to improve ROI involves decreasing idle cash, paying down debt, determining proper inventory levels, and spending carefully on long-term assets.
A)True B)False
Q5) Executive compensation plans are based on both financial and nonfinancial performance measures. Discuss
Q6) What are the factors involved in choosing the timing of the feedback in designing accounting-based performance measures?
Page 25
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