Business Accounting
Test Questions
Course Introduction
Business Accounting introduces students to the fundamental concepts, principles, and practices of accounting within a business context. The course covers essential topics such as the accounting cycle, preparation of financial statements, interpretation of financial information, and the role of accounting in decision-making. Students learn to apply accounting techniques for recording transactions, managing assets and liabilities, and analyzing financial performance. Emphasis is placed on ethical standards and the use of accounting information in planning, control, and evaluation of business operations, preparing students for further study or roles in business and finance.
Recommended Textbook
Fundamental Managerial Accounting Concepts 9th Edition by Thomas P Edmonds
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14 Chapters
2127 Verified Questions
2127 Flashcards
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Page 2
Chapter 1: Management Accounting and Corporate Governance
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146 Verified Questions
146 Flashcards
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Sample Questions
Q1) A merchandising business paid $2,500 to purchase inventory and $50 to have the inventory delivered to its customers.Its product costs were $2,550.
A)True
B)False
Answer: False
Q2) Assuming that the inventory on hand at the end of the period is sold during the following period,misclassifying a period cost as a product cost during a period will usually correct itself in the following period.
A)True
B)False
Answer: True
Q3) All costs incurred prior to delivery of the product to the customer are referred to as upstream costs.
A)True
B)False
Answer: False
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Page 3
Chapter 2: Cost Behavior, operating Leverage, and Profitability Analysis
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152 Verified Questions
152 Flashcards
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Sample Questions
Q1) If managers of a company do not understand the behavior of its costs,they are likely to make poor decisions about the company's operations.
A)True
B)False
Answer: True
Q2) How does variable cost per unit behave when volume decreases?
Answer: Variable cost per unit is constant when volume decreases.
Q3) The following income statement is provided for Grant,Inc. \[\begin{array} { l r }
\text { Sales revenue (1,500@\$30per unit) } & \$ 45,000 \\
\text { Variable costs } ( 1,500 @ \$ 14 \text { per unit) } & 21,000 \\
\text { Fixed costs } & \underline{ 16,000} \\
\text { Net incorne }& \underline{\$ 8,000 }\\
\end{array}\] What is this company's magnitude of operating leverage?
A) 0.33
B) 1.31
C) 2.00
D) 3.00
Answer: D
Page 4
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Chapter 3: Analysis of Cost, volume, and Pricing to Increase Profitability
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149 Verified Questions
149 Flashcards
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Sample Questions
Q1) When computing the break-even point in units,a company should round to the next whole unit because partial units ordinarily are not sold.
A)True
B)False
Answer: True
Q2) The pricing strategy that begins with the determination of a price at which a product will sell and then focuses on developing a cost structure for the product that will yield a profit is known as:
A) cost-plus pricing.
B) prestige pricing.
C) developmental pricing.
D) target costing.
Answer: D
Q3) How can contribution margin per unit be used to find the break-even point in units?
Answer: The break-even point in units equals total fixed costs divided by the contribution margin per unit.
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Chapter 4: Cost Accumulation,tracing,and Allocation
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158 Verified Questions
158 Flashcards
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Sample Questions
Q1) An allocation base has a cause-and-effect relationship with a cost object.
A)True
B)False
Q2) How do you account for costs incurred before the split-off point? How do you account for costs incurred after the split-off point?
Q3) Which of the following is an appropriate cost driver for allocating indirect costs to a human resources department in a service company?
A) Number of employees
B) Number of customers
C) Square footage of office space
D) Either number of employees or square footage of office space depending on the nature of the indirect cost
Q4) Which of the following costs generally can be traced directly to units of product?
A) Indirect materials
B) Overhead costs
C) Assembly labor
D) Indirect materials and assembly labor
Q5) What are cost objects? List examples of cost objects.
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Chapter 5: Cost Management in an Automated Business
Environment: ABC, ABM, and TQM
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153 Verified Questions
153 Flashcards
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Sample Questions
Q1) Perez Company manufactures two products.Making Product A requires 6,000 hours of labor,and Product B requires 4,000 hours of labor.Perez undertakes an automation program that reduces the consumption of labor required by Product A to only 3,000 hours of labor.Product B is not affected by the automation process.Overhead cost prior to the automation totaled $30,000.After automation,overhead cost amounted to $56,000.Perez uses direct labor hours as a companywide allocation base before and after the automation.
Required:
1)Compute the amount of overhead costs allocated to both products before automation.
2)Compute the amount of overhead costs allocated to both products after automation.
3)Are direct labors hours a good choice for allocation after the automation? Why or why not?
Q2) Anderson Company produces a variety of products,some in labor-intensive departments and some in heavily automated departments.Using a companywide overhead allocation rate based on direct labor will result in overcosting some products and undercosting others.
A)True
B)False
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Chapter 6: Relevant Information for Special Decisions
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151 Verified Questions
151 Flashcards
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Sample Questions
Q1) Select the incorrect statement regarding sunk costs.
A) Sunk costs cannot be avoided.
B) Sunk costs are relevant if they differ among the alternatives.
C) Sunk costs are costs that have been incurred in past transactions.
D) Sunk costs include historical costs such as equipment acquisition costs.
Q2) Smith Company makes three different products,each of which must pass through one very expensive machine.Assuming that availability of machine time is limited to 4,000 hours per year,which is less than the 5,000 hours demanded,how should the company decide which product to make?
Q3) Which of the following costs is an example of a batch-level cost?
A) Assembly setup costs.
B) Materials handling costs.
C) Shipping and handling costs to ship an order to a customer.
D) All of these answers are correct.
Q4) Relevant costs are frequently called unavoidable costs.
A)True
B)False
Q5) Variable costs are always relevant in decision making.
A)True
B)False
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Chapter 7: Planning for Profit and Cost Control
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150 Verified Questions
150 Flashcards
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Sample Questions
Q1) Which of the following is not considered a pro forma financial statement?
A) Sales budget
B) Balance sheet
C) Cash flow statement
D) Income statement
Q2) When a company's district managers submitted their preliminary budget proposals,top management discovered that the southern district manager had requested a new project management information system.Unfortunately,the system is incompatible with the system used at headquarters.Which of the following advantages of budgeting reduces the likelihood that the company will end up with two incompatible systems?
A) Planning
B) Coordination
C) Performance measurement
D) Corrective measures
Q3) Proper handling of human relations is essential to the establishment of an effective budgeting system.There is a natural tendency for people to be uncomfortable with budgets.Describe how participative budgeting helps create a healthy atmosphere surrounding the budgeting process.
Q4) Why is cash management important to a business?
Page 9
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Chapter 8: Performance Evaluation
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156 Verified Questions
156 Flashcards
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Sample Questions
Q1) How are managers likely to respond if variances are used to punish them?
Q2) Which manager is usually held responsible for materials usage variances?
A) Production supervisor
B) Marketing manager
C) Purchasing agent
D) None of these answers are correct.
Q3) In most cases,the production manager should be held accountable for fixed cost volume variances.
A)True
B)False
Q4) A cost variance is unfavorable if actual cost exceeds standard cost.
A)True
B)False
Q5) The total sales variance includes both price and volume variances.
A)True
B)False
Q6) The sales volume variance is the difference between sales revenue on the static budget and sales revenue on the flexible budget.
A)True
B)False
Page 10
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Chapter 9: Responsibility Accounting
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145 Flashcards
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Sample Questions
Q1) A major benefit of a decentralized organization is that:
A) Managers are more motivated to improve productivity.
B) Upper-level managers are more involved in routine decisions.
C) It avoids the necessity for a managerial accounting system.
D) It avoids decision making by less experienced lower-level managers.
Q2) Indicate whether each of the following statements about return on investment is true or false.
Return on investment for a division is calculated by dividing net income by total assets.______
Using book value as the valuation base for calculating return on investment can distort ROI and cause motivational problems among managers.______
Accounts receivable are not included in operating assets for the purpose of calculating return on investment.______
Return on investment could be calculated based on historical cost or replacement cost for a division's assets.______
Return on investment can be calculated by multiplying margin by turnover.______
Q3) What are the different bases that can be used to establish transfer prices? Which would you generally recommend?
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11
Chapter 10: Planning for Capital Investments
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Sample Questions
Q1) Mr.J's Bagels invested in a new oven for $14,000.The oven reduced the amount of time for baking which increased production and sales for five years by the following amounts of cash inflows: \[\begin{array} { l l l l l }
\text { Year } 1 & \text { Year 2 } & \text { Year 3 } & \text { Year 4 } & \text { Year 5 } \\ \$ 8,000 & \$ 6,000 & \$ 5,000 & \$ 6,000 & \$ 5,000 \end{array}\] Using the averaging method,the payback period for the investment in the oven would be:
A) 5.0 years.
B) 2.3 years.
C) 2.0 years.
D) 0.5 years.
Q2) When calculating the present value of an ordinary annuity,it is assumed that:
A) cash flows will be reinvested at the required rate of return.
B) cash flows occur at the end of each accounting period.
C) the investor will wait until the end of the investment period to withdraw cash flows.
D) cash flows will be reinvested at the required rate of return and cash flows occur at the end of each accounting period.
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Page 12
Chapter 11: Product Costing in Service and Manufacturing
Entities
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148 Verified Questions
148 Flashcards
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Sample Questions
Q1) Product cost flows are cyclical in that the set of transactions that records the acquisition of raw materials,the conversion of raw materials to finished goods,and the sale of finished goods and related collection of cash occur over and over again.
A)True
B)False
Q2) The cost of direct materials purchased on account is expensed at the time the: A) goods made in the manufacturing process are sold.
B) cash is paid to settle the associated accounts payable.
C) manufacturing process is complete.
D) materials are purchased.
Q3) Product costs flow through the manufacturer's inventory accounts in the following order: raw materials,finished goods,and cost of goods sold.
A)True
B)False
Q4) Service companies do not transform raw materials into finished goods.
A)True
B)False
Q5) Why does a service company need cost information about the services it provides?
Q6) Describe how firms use service and product cost information.
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Chapter 12: Job-Order, process, and Hybrid Costing Systems
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147 Verified Questions
147 Flashcards
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Sample Questions
Q1) Which of the following accounts is reported on the balance sheet?
A) Raw Materials Inventory.
B) Work in Process Inventory.
C) Finished Goods Inventory.
D) All of these answers are correct.
Q2) The purchase of raw materials for cash is:
A) An asset source transaction.
B) An asset exchange transaction.
C) An asset use transaction.
D) A claims exchange transaction.
Q3) The purchase of raw materials on account is:
A) An asset use transaction.
B) An asset exchange transaction.
C) An asset source transaction.
D) A claims exchange transaction.
Q4) Select the incorrect statement regarding the cost of production report.
A) The report consists of two sections, a units section and a costs section.
B) The report is produced monthly by job or batch.
C) The cost inputs on the report come from the Work in Process account.
D) The report indicates the cost of units transferred out.
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Chapter 13: Financial Statement Analysis
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153 Flashcards
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Sample Questions
Q1) Which of the following statements regarding the information disclosed in financial statements is incorrect?
A) The costs of providing all possible information about a firm would be prohibitively high for the business.
B) Some information disclosed in financial statements may be irrelevant to some users.
C) Financial statements should be detailed enough to answer any financial-related question an investor might have.
D) When too much information is presented, users may suffer from information overload.
Q2) Which of the following statements regarding net margin is incorrect?
A) Net margin refers to the average amount of each sales dollar remaining after all expenses are subtracted.
B) Net margin may be calculated in several ways.
C) The amount of net margin is affected by a company's choices of accounting principles.
D) The smaller the net margin the better.
Q3) Discuss the limitations that affect financial statement analysis.
Q4) Describe the factors involved in communicating useful financial information.
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15
Chapter 14: Statement of Cash Flows
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Sample Questions
Q1) Pingry Company's accounts receivable balance increased by $14,000 during the year.The company's income statement reports sales revenue of $437,500,all on account.How much cash was collected from customers during the year?
A) $437,500
B) $451,500
C) $423,500
D) None of these answers are correct.
Q2) Cash from the sale of treasury stock would be classified as an investing cash flow. A)True
B)False
Q3) A decrease in retained earnings may indicate a cash outflow occurred to pay a dividend.
A)True B)False
Q4) What is the major advantage of using the direct method of preparing the statement of cash flows?
Q5) What can cause cash flow from operating activities to be greater than net income from operating activities?
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