Business Accounting
Practice Questions
Course Introduction
Business Accounting introduces students to the fundamental principles and practices of accounting within a business context. The course covers essential topics such as the accounting cycle, preparation and analysis of financial statements, revenue and expense recognition, and the role of accounting in decision-making. Students will learn how to interpret financial data, understand internal controls, and apply accounting concepts to real-world business scenarios, laying a solid foundation for further studies in accounting and business management.
Recommended Textbook
Managerial Accounting An Introduction to Concepts Methods and Uses 11th Edition by Michael W.
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2
Chapter 1: Fundamental Concepts
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Sample Questions
Q1) The following provides the means for companies to outsource substantial portions of their information systems and enables the company to focus on its core competencies while taking advantage of the host's server and bandwidth capability.
A)Value chain.
B)Web hosting.
C)Total Quality Management.
D)Zero-Base Budgeting.
Answer: B
Q2) Which of the following works in planning,decision making,designing information systems,designing incentive systems,and helping managers make operating decisions?
A)Controller
B)Treasurer
C)Board of directors
D)Chief executive officer
Answer: A
Q3) List the six business functions in the value chain and describe how they contribute to the final product's service,quality,and cost.
Answer: 11ea906f_4cfb_793f_aec7_39fad535bf26_TB2144_00_TB2144_00
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Chapter 2: Measuring Product Costs
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Sample Questions
Q1) Michael Visual Works,Inc.uses a normal costing system and estimated its overhead costs for the current year to be as follows: fixed,$525,000;variable,$4 per unit.Michael expected to produce 350,000 units during the year.During the year,the company incurred overhead costs of $2,100,000 and produced 400,000 units.Calculate the rate to be used to apply manufacturing overhead costs to products.
Answer: 11ea906f_4c9d_a1c4_aec7_6972fc3add6d_TB2144_00_TB2144_00
Q2) Which of the following is true regarding normal costing?
A)Normal costing assigns to products actual direct material and direct labor costs plus an amount representing "normal" manufacturing overhead.
B)Under normal costing,a firm derives a rate for applying overhead to units produced before the production period begins.
C)Under normal costing,a firm uses a predetermined overhead rate in applying overhead to each unit as the firm produces it throughout the year.
D)All of the answers are correct.
Answer: D
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4
Chapter 3: Activity-Based Management
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Sample Questions
Q1) Which of the following costs are not customer activities in the product cost hierarchy?
A)Plant management.
B)Promotion.
C)Customer records.
D)Market research.
Answer: A
Q2) Which of the following are not examples of non-value-added costs?
A)Storage
B)Moving items
C)Waiting for work
D)Production
Answer: D
Q3) Which of the following is an example of a non-value-added cost?
A)Storage
B)Moving items
C)Waiting for work
D)All of the above are non-value-added costs.
Answer: D
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Page 5
Chapter 4: Strategic Management of Costs,quality,and
Time
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Sample Questions
Q1) Which statement is true concerning internal failure costs?
A)Internal failure costs are incurred to prevent defects in the products or services being produced.
B)Internal failure costs are incurred to detect individual units of products that do not conform to specifications.
C)Internal failure costs are incurred when the firm discovers nonconforming products and services before delivery to customers.
D)Internal failure costs are incurred when the customers discover nonconforming products and services at delivery.
Q2) Which of the following are the two costs of failing to control quality?
A)prevention costs and appraisal costs.
B)appraisal costs and internal failure.
C)internal failure and external failure costs.
D)prevention costs and external failure costs.
Q3) The new quality-based view includes which of the following?
A)waiting for inspections of finished products.
B)reworking defective goods.
C)establishing quality at the beginning of the process.
D)incurring less than 3 percent defects is a reasonable goal.
Page 6
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Chapter 5: Cost Drivers and Cost Behavior
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Sample Questions
Q1) Narrative 5-1
The following question(s)refer to the this equation analyzing the relationship of total cost to changes in machine hours.The following relationship was determined:
TC = $2,200 + $3X
Refer to Narrative 5-1.The above equation was probably found through the use of which of the following mathematical techniques?
A)Linear programming
B)Multiple regression analysis
C)Simple Regression analysis
D)Dynamic programming
Q2) Analysts should take which step(s)in analyzing cost data?
A)Review alternative cost drivers.
B)Plot the data.
C)Examine the data and method of accumulation.
D)All of the answers are correct.
Q3) How does one interpret the results of regression analysis?
Q4) What is meant by cost behavior? Explain how it relates to the following terms: fixed,variable,and mixed cost.
Q5) Briefly explain how to use historical data to estimate costs.
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Chapter 6: Financial Modeling for Short-Term Decision Making
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Sample Questions
Q1) Explain how to use sales dollars as the measure of volume in performing cost-volume-profit (CVP)analysis.
Q2) The cost structure of an organization is the proportion of which of the following?
A)opportunity and variable costs to total costs.
B)fixed and opportunity costs to total costs.
C)variable and opportunity costs to total costs.
D)fixed and variable costs to total costs.
Q3) The formula used in performing cost-volume-profit (CVP)analysis for the Target Profit in Units,where t is the tax rate,is
A)(Total Fixed Costs + Before-Tax Target Profit)/ Unit Contribution Margin.
B)(Total Fixed Costs + Before-Tax Target Profit)/ Contribution Margin Ratio.
C)(Total Fixed Costs ´ t)/ Unit Contribution Margin.
D)(Total Fixed Costs + (Target Profit ´ t))/ Unit Contribution Margin.
Q4) How is the contribution margin ratio calculated?
A)variable costs/contribution margin.
B)fixed costs/contribution margin.
C)sales/contribution margin.
D)contribution margin/sales.
Q5) Describe the use of spreadsheets in financial modeling.
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Chapter 7: Differential Cost Analysis for Operating Decisions
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Sample Questions
Q1) In producing joint products,which are the relevant costs for decisions to sell or process further?
A)Costs incurred up to the splitoff point
B)Costs incurred after the splitoff point
C)Joint costs
D)Sunk costs
Q2) Which of the following is a method of managing purchasing,production,and sales,by which the firm attempts to time purchases so that items arrive just in time for sale or production?
A)total quality management.
B)flexible manufacturing practices.
C)just-in-time inventory.
D)theory of constraints.
Q3) Customer costs generally fall under several categories,including
A)cost to acquire the customer and cost to provide goods and services.
B)cost to maintain customers.
C)cost to retain customers.
D)All of the answers are correct.
Q4) Describe how to use differential analysis to measure customer profitability.
Q5) What is the theory of constraints and how is it applied?
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Chapter 8: Capital Expenditure Decisions
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Sample Questions
Q1) When using the internal rate of return to evaluate investment alternatives,analysts specify which of the following?
A)applicable federal rate.
B)cut-off rate.
C)risk-free rate.
D)prime rate.
Q2) Managers are often correct that the company would benefit from advanced manufacturing technology.However,the present value of future cash flows analysis usually results in a negative net present value for the investment because of the exclusion of benefits that are difficult to quantify such as
A)greater flexibility in the production process.
B)shorter cycle times and lead times.
C)reduction of non-value-added costs.
D)all of the above.
Q3) How does depreciation affect investment decisions?
Q4) Describe the steps of the net present value method for making long-term decisions using discounted cash flows.Analyze the effect of income taxes on cash flows.
Q5) What behavioral issues are involved in capital budgeting?
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Chapter 9: Profit Planning and Budgeting
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Sample Questions
Q1) Why are incentive compensation plans often criticized?
A)managers may take actions to improve short-run performance only.
B)managers may take actions to improve long-run performance only.
C)stock options affect market prices.
D)they are ineffective in motivating managers.
Q2) Incentive compatible compensation schemes often create many opportunities as well as problems.Identify two negative outcomes of incentive compensation systems,and suggest how companies can overcome them.
Q3) Which of the following is not a component of a comprehensive master budget?
A)budgeted income statement,
B)budgeted balance sheet.
C)budgeted retained earnings statement.
D)budgeted statement of cash flows.
Q4) Which of the following statements is true concerning the variable component of power cost?
A)This cost would be categorized as a unit level activity.
B)This cost would be categorized as a cost which varies in total with the unit level of output.
C)This cost would be categorized as a facility-related cost.
D)both "a" and "b"
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Chapter 10: Profit and Cost Center Performance Evaluation
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Sample Questions
Q1) Why do direct labor variances occur?
A)Managers do not correctly anticipate changes in wage rates.
B)Poor materials are used in production.
C)Supervisors encounter scheduling problems.
D)All of the above.
Q2) Why do fixed manufacturing cost variances occur?
A)Managers do not correctly anticipate changes in wage rates.
B)Poor materials are used in production.
C)Supervisors encounter scheduling problems.
D)Actual fixed costs differ from budgeted fixed costs.
Q3) What tools do managers use to decide when to investigate variances?
Q4) For external reporting purposes,how are fixed manufacturing costs treated?
A)As period costs.
B)Expensed as incurred.
C)Period costs included in the value of inventory.
D)Product costs included in the value of inventory.
Q5) How do you apply activity-based costing to variance analysis?
Q6) Explain how variable production cost variances are calculated and why they occur.
Q7) How are fixed production cost variances calculated and why do they occur?
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Chapter 11: Investment Center Performance Evaluation
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Sample Questions
Q1) What transfer pricing mechanism generally applies a normal markup to costs as a surrogate for market prices when intermediate market prices are not available?
A)Fixed price-based transfer pricing
B)Full-absorption costing
C)Activity-based costing
D)Cost-plus transfer pricing
Q2) EVA encourages the right kind of behavior from divisions because of its emphasis on
A)after-tax net income.
B)total capital employed.
C)true cost of capital.
D)before-tax operating income.
Q3) If the profit margin percentage of 30% stayed the same and the investment turnover ratio of 5.0 increased by 10%,what would happen to ROI?
A)increase by 10%
B)decrease by 10%
C)increase by 15%
D)remain the same
Q4) How do you calculate economic value added (EVA)and how is it used?
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13
Chapter 12: Incentive Issues
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Sample Questions
Q1) Explain the internal auditor's general role in detecting errors and irregularities.
Q2) Which of the following is not usually one of the perspectives used in the balanced scorecard?
A)Learning and growth
B)Congeniality
C)Customer
D)Financial
Q3) Which of the following are components of deferred compensation?
A)cash bonuses.
B)profit sharing plans.
C)special awards.
D)stock options.
Q4) In 1977,Congress addressed foreign bribes paid by U.S.Companies by passing which of the following acts?
A)Foreign Anti-bribery Practices Act.
B)Foreign Corruption Act.
C)Foreign Corrupt Practices Act.
D)Foreign Bribery and Corruption Act.
Q5) Describe three types of divisional incentive compensation plans.
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Chapter 13: Allocating Costs to Responsibility Centers
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Sample Questions
Q1) Net realizable value and physical measures are two methods for allocating which of the following costs?
A)direct costs.
B)opportunity costs.
C)joint-process costs.
D)sunk costs.
Q2) Which of the following is not a reason that costs of operating service departments are allocated to other departments?
A)Many departments consume the services provided by service departments and should be assigned a share of the costs associated with the services consumed.
B)Allocating service costs to other departments for services provided gives department managers incentives to control the use of support services.
C)External reporting regulations (for tax and financial reporting)require allocating manufacturing overhead to the units produced.
D)Many departments consume the services provided by service departments and should be charged an arbitrary share of the costs because the costs must be allocated to someone.
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