Business Accounting
Study Guide Questions
Course Introduction
Business Accounting provides students with a comprehensive introduction to the fundamental principles and practices of accounting within a business context. The course covers key concepts such as the accounting cycle, financial statement preparation and analysis, recording and summarizing business transactions, and understanding how financial information supports decision-making. Students will explore topics including assets, liabilities, equity, revenues, and expenses while gaining hands-on experience with accounting software and real-world case studies. By the end of the course, students will have developed the essential skills needed to interpret financial data, ensure accuracy in financial reporting, and understand the role of accounting in strategic business planning.
Recommended Textbook Management Accounting 6th Canadian Edition by Charles T. Horngren
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Page 2
Chapter 1: Management Accounting and Management Decisions
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Sample Questions
Q1) Planning determines action, action generates feedback, and feedback influences A) reports.
B) accounting systems.
C) further planning.
D) deviations.
Answer: C
Q2) Management by exception involves a detailed analysis of all deviations from planned performance regardless of the amount.
A)True
B)False
Answer: False
Q3) The codes of conduct for integrity include all of the following EXCEPT
A) avoiding actual or apparent conflicts of interest.
B) refusing to advise or assist with the commission of fraud.
C) recognizing and communicating professional limitations.
D) communicating information subjectively.
Answer: D
Q4) The largest Canadian professional organization of accountants whose major interest is management accounting.
Answer: Society of Management Accountants
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Chapter 2: Cost Behaviour and Cost-Volume Relationships
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Q1) If targeted sales volume in units is 124,600, total fixed costs are $15,600, and contribution margin per unit is $0.30, then the targeted net income is
A) $37,380.
B) $32,700.
C) $15,600.
D) $21,780.
Answer: D
Q2) As the level of activity decreases within the relevant range,
A) total fixed costs increases.
B) fixed costs per unit decreases.
C) total variable costs decreases.
D) variable costs per unit decreases.
Answer: C
Q3) In certain situations, gross margin can equal contribution margin. A)True
B)False
Answer: True
Q4) A firm's ratio of fixed and variable costs.
Answer: Operating leverage
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Chapter 3: Measurement of Cost Behaviour
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Sample Questions
Q1) The total fixed cost is
A) $16,650.
B) $15,711.
C) $ 6,652.
D) $ 3,726.
Answer: A
Q2) The application of cost measures to expected future activity levels to forecast future costs is
A) activity analysis.
B) cost prediction.
C) budgeting.
D) cost measurement.
Answer: B
Q3) Explain management influences on cost behaviour.
Answer: Management can influence cost behaviour by measuring and evaluating current cost behaviour. In addition, management influences cost behaviour through decisions about such factors as product or service attributes, capacity, technology, and policies to create incentives to control costs. Among the influences of product or service attributes are managers' choices of product mix, design, performance, quality, features and distribution.
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Chapter 4: Cost Management Systems
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Q1) Which of the following is NOT a factor in determining whether a cost is direct or indirect?
A) The cost can be identified specifically with a given cost objective.
B) The identification of the cost is economically feasible.
C) The cost objective used.
D) The manager's preference.
Q2) In variable costing, costs are separated into the major categories of
A) manufacturing and non-manufacturing.
B) manufacturing and fixed.
C) fixed and variable.
D) variable and non-manufacturing.
Q3) Which of the following would NOT be an example of a cost objective?
A) A department
B) A product
C) A territory
D) A parcel of land
Q4) Cost accounting system typically includes two processes, cost accumulation and cost determination.
A)True
B)False
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Chapter 5: Cost Allocation and Activity-Based Costing Systems
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Sample Questions
Q1) What is the cost per driver unit for the account billing activity?
A) $40.00
B) $0.07
C) $3.75
D) $12.50
Q2) If activity-based costing is used, then the total cost of the components used in the deluxe model would be
A) $3,455.
B) $110,545.
C) $193,455.
D) $304,000.
Q3) If the step-down method is used to allocate costs, and the Maintenance Department renders the greatest service, then the total cost of the Mixing Department after allocation would be
A) $30,107.
B) $30,642.
C) $30,428.
D) $15,000.
Q4) The time from initiating production to delivering the goods to the customer.
Page 7
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Chapter 6: Job-Costing Systems
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Q1) Which of the following is a product cost?
A) Direct material costs
B) Selling costs
C) Distribution costs
D) Administrative costs
Q2) The journal entry to record the application of the factory overhead would include a
A) debit to Factory Department Overhead Control for $143,000.
B) debit to WIP Inventory for $143,000.
C) credit to Factory Department Overhead Control for $146,000.
D) credit to WIP Inventory for $146,000.
Q3) The journal entry to record the application of the factory overhead would include a
A) debit to Factory Department Overhead Control for $286,000.
B) debit to WIP Inventory for $286,000.
C) credit to Factory Department Overhead Control for $292,000.
D) credit to WIP Inventory for $292,000.
Q4) A system that accumulates manufacturing costs by jobs.
Q5) A variance that results when applied overhead is greater than the actual overhead cost incurred.
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Chapter 7: Process-Costing Systems
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Q1) The total cost of units completed and transferred to Finishing is
A) $2,112,000.
B) $2,140,000.
C) $1,848,000.
D) $352,000.
Q2) What is the unit cost of conversion costs?
A) $ .88
B) $5.18
C) $4.14
D) $4.50
Q3) The unit cost for materials is
A) $1.62.
B) $1.47.
C) $1.17.
D) $1.30.
Q4) The total cost of units completed and transferred to Finishing is
A) $4,224,000.
B) $4,280,000.
C) $3,696,000.
D) $704,000.
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Chapter 8: Relevant Information and Decision Making: Marketing Decisions
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Q1) In the short run, the minimum price to be quoted for a product should be equal to the costs that may be avoided by not landing the order.
A)True
B)False
Q2) ________ is (are) defined as any method for making a choice.
A) A decision model
B) Irrelevant costs
C) Relevant costs
D) Prediction method
Q3) In using the four popular markup formulas for pricing, the decision-maker will get four different target prices and will pick the best one for the product.
A)True
B)False
Q4) Currently, the contribution approach cost of manufacturing one meter is
A) $174.
B) $160.
C) $224.
D) $252.
Q5) The effect of price changes on sales volume.
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Chapter 9: Relevant Information and Decision Making: Production
Decisions
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Q1) The juncture in manufacturing where the joint products become individually identifiable is known as the
A) joint processing juncture.
B) split-off point.
C) common point.
D) significant juncture.
Q2) Which of the data provided in the table is irrelevant?
A) The annual operating cost of the old machine
B) The original cost of the replacement machine
C) The disposal value of the old machine
D) The book value of the old machine
Q3) Which of the following is NOT likely to be relevant in a decision to replace equipment?
A) Cost of new equipment
B) Book value of old equipment
C) Selling price of old equipment
D) Maintenance costs of old equipment
Q4) Amortization on old or new equipment is irrelevant information.
A)True
B)False
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Chapter 10: Capital Budgeting Decisions
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Sample Questions
Q1) A company with pretax income of $60,000 is required to pay taxes of 20 percent on all income up to $20,000 and 32 percent on any income in excess of $20,000. The company's average tax rate is
A) 20 percent.
B) 28 percent.
C) 32 percent.
D) higher than its marginal rate.
Q2) What is (e)?
A) Below 6 percent
B) Between 6 and 8 percent
C) Between 8 and 10 percent
D) Between 10 and 12 percent
Q3) Depreciation deductions and similar deductions that protect that amount of income from taxation.
Q4) The process of altering certain key variables to assess the effect on the original outcome.
Q5) The rate of return used to compute the present value of future cash flows.
Q6) A requirement of Capital Cost Allowance that treats all assets as if they were placed in service at the midpoint of the tax year.
Page 12
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Chapter 11: The Master Budget
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Q1) The total cash received in September on September sales will be
A) $200,000.
B) $600,000.
C) $544,000.
D) $400,000.
Q2) A budget is a formal, quantitative expression of plans that provides a benchmark against which to measure actual performance.
A)True
B)False
Q3) The total cash received in May on May sales will be
A) $60,000.
B) $90,000.
C) $40,000.
D) none of the above.
Q4) A sales budget is a prediction of sales under a given set of conditions. A)True B)False
Q5) The cash budget is the first budget prepared in the master budget. A)True B)False
Page 13
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Chapter 12: Flexible Budgets and Variance Analysis
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Q1) The labour efficiency variance is
A) $5,250 favourable.
B) $5,250 unfavourable.
C) $6,000 favourable.
D) $6,000 unfavourable.
Q2) Who is best able to explain the reasons for flexible-budget variances?
A) The company president
B) A salesperson
C) A manufacturing department foreperson
D) A machine operator
Q3) The total flexible-budget variance can be broken down into a price variance and a usage variance.
A)True
B)False
Q4) A usage variance measures actual deviations from the quantity of inputs that should have been used to achieve the actual output quantity.
A)True
B)False
Q5) Levels of performance that can be achieved by realistic levels of effort.
Q6) The variance of actual results from the master budget.
Page 14
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Chapter 13: Management Control Systems, the Balanced
Scorecard, and Responsibility Accounting
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Sample Questions
Q1) Information to support the management control system often comes primarily from the organization's
A) internal control system.
B) top management.
C) stockholders.
D) financial accounting system.
Q2) Exists when individuals and groups aim at the same organizational goals.
Q3) An internal control system consists of all of the following EXCEPT
A) methods to prevent errors and irregularities.
B) procedures to promote goal congruence.
C) methods to promote operating efficiency.
D) procedures to detect errors and irregularities.
Q4) What is Conway's 20X3 productivity measure in terms of revenues per employee?
A) $1,015.00
B) $700.00
C) $714.29
D) $870.00
Q5) A responsibility centre for controlling revenues as well as costs.
Q6) A responsibility centre for which costs are accumulated.
Q7) Any cost that is influenced by a manager's decisions and actions. Page 15
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Chapter 14: Management Control in Decentralized Organizations
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Sample Questions
Q1) Revenue divided by invested capital.
Q2) Which of the following definitions of invested capital is NOT recommended for measuring the performance of division managers?
A) Total assets
B) Total assets less total liabilities
C) Total assets employed
D) Total assets less current liabilities
Q3) Any action taken in conflict with organizational goals is called
A) congruent behaviour.
B) managerial effort.
C) dysfunctional behaviour.
D) negotiating.
Q4) A transfer price exists when two segments of the same organization
A) sell a product to the same customer.
B) sell a service to each other.
C) sell a product in a foreign country.
D) sell the same service to competitors.
Q5) A theory used to describe the formal choices of performance measures and rewards.
Q6) The original cost of an asset less any accumulated depreciation. Page 17
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