Business Accounting
Textbook Exam Questions
Course Introduction
Business Accounting introduces students to the fundamental principles and practices of accounting within the context of business operations. The course covers essential topics such as the accounting cycle, financial statement preparation and analysis, recording business transactions, and understanding assets, liabilities, and equity. Through practical exercises and case studies, students gain insights into the role of accounting in decision-making, financial planning, and business management. The course also explores the use of accounting software and ethical considerations in financial reporting. By the end of the course, students will be equipped with the foundational knowledge required to interpret financial data and support business objectives.
Recommended Textbook Management Accounting for Business 6th Edition by Colin Drury
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Chapter 1: Introduction to Management Accounting
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Sample Questions
Q1) Improvement in time performance is most likely NOT enhanced by A) redesign of products.
B) adding processes in production.
C) eliminating waste.
D) eliminating nonvalue-added activities.
Answer: B
Q2) Investigating production variances and adjusting the production process is an example of
A) planning.
B) control.
C) internal auditing.
D) both a and c
Answer: B
Q3) To compete on the basis if price, the seller must carefully manage: A) cost
B) service
C) quality
D) none of the above
Answer: A
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Chapter 2: An Introduction to Cost Terms and Concepts
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Sample Questions
Q1) A cost used up in the production of revenues is a(n)
A) unexpired cost.
B) expense.
C) loss.
D) asset.
Answer: B
Q2) Fixed cost per unit is £9 when 20,000 units are produced and £6 when 30,000 units are produced. What is the total fixed cost when nothing is produced?
A) £120,000
B) £270,000
C) £15
D) £180,000
Answer: D
Q3) Prime product costs include
A) only factory overhead.
B) only direct labour.
C) direct labour and factory overhead.
D) direct materials and direct labour.
Answer: D
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Chapter 3: Cost-Volume-Profit Analysis
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Sample Questions
Q1) A "what if" technique that examines the impact of changes in underlying assumptions on an answer is
A) degree of sensitivity
B) sensitivity analysis
C) sensitivity training
D) none of the above
Answer: B
Q2) In 2004, Angel's Bath and Body Shop had variable costs of £27,000, fixed costs of £18,000, and a net loss of £4,500. Angel's 2004 break-even sales volume was
A) £36,000.
B) £37,500.
C) £49,500.
D) £54,000.
Answer: D
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Chapter 4: Measuring Relevant Costs and Revenues for Decision-Making
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Sample Questions
Q1) If a cost is identical under each alternative under consideration within a given decision context, the cost is considered:
A) an alternative cost.
B) a discounted cost.
C) an irrelevant cost.
D) a procedural cost.
Q2) Future costs that differ across alternatives describe
A) relevant costs.
B) target cost.
C) full costs.
D) activity-based costs.
Q3) Firms may be asked to accept a special order of their product for a reduced price if A) it can be concealed from the government.
B) excess capacity exists.
C) the order is small.
D) the plant is producing at maximum capacity.
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Chapter 5: Pricing Decisions and Profitability Analysis
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Sample Questions
Q1) Refer to Figure 1 above, what amount of order-filling costs would be allocated to the large customer if these costs are allocated using an activity-based costing approach?
A) £10,000
B) £350,000
C) £28,800
D) £331,200
Q2) _____ on the international market is called dumping.
A) Price discrimination
B) Predatory pricing
C) Price skimming
D) Penetration pricing
Q3) A target cost is computed as
A) the cost to manufacture plus a desired markup
B) the cost to manufacture plus the designated selling expenses
C) the market willingness to pay less the cost to manufacture
D) the market willingness to pay less the desired profit
Q4) Discuss the limitation of profit measurement.
Q5) Provide a short critique of cost-based pricing. What are the four major drawbacks to this pricing approach?
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Chapter 6: Capital Investment Decisions
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Sample Questions
Q1) Firms may select projects with short paybacks because A) projects with longer paybacks may be riskier
B) shorter paybacks may help reduce liquidity problems
C) if the risk of obsolescence is high, the firm may want to recover the funds rapidly
D) All of the above are correct.
Q2) Refer to Figure 1. If the cash inflows occur at the end of each year, the net present value of the project using a 12 percent discount rate would be
A) (£12,210)
B) £5,250
C) (£5,250)
D) £12,210
Q3) Refer to Figure 5. The net present value of the project is A) (£3,215)
B) £393
C) £6,102
D) £6,412
Q4) Compare the various quantitative models used to evaluate capital budgeting proposals. Which models are preferred if used as the only criterion?
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Chapter 7: Cost Assignment
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Sample
Questions
Q1) What is the rationale for the use of departmental rates rather than plantwide rates?
A) less overapplied or underapplied overhead
B) easier to apply than plantwide rates
C) applying overhead more equitably because plantwide rates are average rates
D) none of the above
Q2) Discuss how managerial product costing differs from product costing for financial reporting.
Q3) _____ refers to the assignment of indirect costs to cost objects.
A) Allocation
B) Direct tracing
C) Physical observation
D) Cost management
Q4) Although adding more cost pools to a costing system may improve the accuracy of product costing, this increase in accuracy must be judged against:
A) the cost of the product
B) the price of the product
C) the cost of developing and maintaining the additional cost pools
D) all of the above
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Chapter 8: Activity-Based Costing
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Sample Questions
Q1) What is the initial step in implementing an activity-based costing system?
A) assigning costs to activities
B) assigning costs to products
C) identifying activities and attributes
D) dividing activity costs by activity drivers
Q2) If activity-based costing is used, product inspections would be classified as a
A) unit-level activity.
B) batch-level activity.
C) product-level activity.
D) facility-level activity.
Q3) In an activity-based cost system, what types of drivers are used to describe cost behaviour?
A) activity drivers
B) production or unit-level drivers
C) nonunit-level drivers
D) both production (or unit-level) and nonunit-level drivers
Q4) Describe several of the major differences between a traditional functional-based cost management system and an activity-based cost management system.
Q5) Explain how the activity resource usage model is used in assessing relevancy.
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Chapter 9: The Budgeting Process
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Sample Questions
Q1) A bank manager may review a company's cash budget to
A) determine whether the firm will earn net income
B) uncover possible employee theft
C) evaluate the company's ability to repay a loan
D) do all of the above
Q2) Activity-based budgeting
A) focuses on processes that result in output.
B) focuses on eliminating nonvalue-added activities.
C) focuses on the best use of capacity.
D) All of the above are correct.
Q3) Refer to Figure 1. How many pounds of material would Sommers need to purchase?
A) 216,000
B) 225,000
C) 207,000
D) 201,000
Q4) Discuss the features of an ideal budgetary process.
Q5) Define budgeting and control. How are budgets used in planning? How are budgets used to control? What are some of the reasons for budgeting?
Q6) Discuss the role of budgeting in planning, control, and decision making.
Q7) Describe zero-based budgeting.
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Chapter 10: Management Control Systems
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Sample Questions
Q1) One of the ways that functional-based accounting systems may inadvertently induce managers to act against the company's best interest is to
A) pass along defective parts to avoid an unfavorable materials usage variance
B) produce less units than demanded to avoid a labour efficiency variance
C) acquire materials in large quantities to avoid a favorable materials price variance
D) use more experienced workers to avoid a labour rate variance
Q2) If budget performance is overemphasized, myopic behaviour can occur where a manager takes actions that improve budgetary performance in the short run but cause long-run harm to the firm.
Required:
a.
Give at least two examples of myopic behaviour that might be encouraged if there is an overemphasis on budgets as a performance measure. b.
Discuss ways to discourage or prevent myopic behaviour in managers.
Q3) Identify and discuss the key features that a budgetary system should have to encourage managerial, goal-congruent behaviour.
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Chapter 11: Standard Costing and Variance Analysis
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Sample Questions
Q1) Refer to Figure 5. Ebola's labour efficiency variance would be
A) £18,000 favorable
B) £18,000 unfavorable
C) £17,700 unfavorable
D) £17,700 favorable
Q2) Refer to Figure 2. Rax's variable standard cost per unit would be
A) £78
B) £192
C) £246
D) £222
Q3) Refer to Figure 5. Ebola's materials price variance would be
A) £46,000 favorable
B) £46,000 unfavorable
C) £44,000 favorable
D) £44,000 unfavorable
Q4) Refer to Figure 6. The standard rate for total overhead is
A) £14
B) £13
C) £10
D) £4
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Chapter 12: Divisional Financial Performance Measurement
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Sample Questions
Q1) An example of an investment centre is a
A) production department.
B) company.
C) marketing department.
D) credit department.
Q2) Explain why an organization should not use only financial measures to monitor performance.
Q3) Evaluating performance using ROI encourages managers to focus on
A) income and investment
B) cost efficiency and operating asset efficiency
C) both a and b
D) neither a nor b
Q4) Refer to Figure 2. Dartmouth, SA.'s turnover for the current year is
A) 5.6
B) 13.9
C) 4
D) 2.5
Q5) a. Identify advantages of a decentralized approach to management.
b. In comparison, identify advantages of a centralized approach to management.
Q6) Compare and contrast return on investment (ROI) and economic value added (EVA).
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Chapter 13: Transfer Pricing in Divisionalized Companies
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Sample Questions
Q1) Discuss the advantages of decentralization in a multinational company.
Q2) Refer to Figure 6 above. Assume the Jones Division can sell 4,000 units at £420. Any excess capacity will be unused unless the units are purchased by the Thomas Division, which could use up to 200 units. The minimum transfer price that the Jones Division would be willing to accept would be
A) £400
B) £200
C) £420
D) £360
Q3) Refer to Figure 2. Assume the Fahl Division can sell 800 units at £120 each. Any excess capacity will be unused unless the units are purchased by the Melton Division, which could use up to 100 units. The minimum transfer price that the Fahl Division would be willing to accept would be
A) £120
B) £110
C) £100
D) £40
Q4) What is the role of transfer pricing in a decentralized firm?
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Chapter 14: Cost Management
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Sample Questions
Q1) Which of the following focuses on the relationship of activity inputs to activity outputs?
A) activity reduction
B) quality
C) time
D) efficiency
Q2) Nonvalue-added activities
A) are unnecessary inputs.
B) are valued outputs to internal users.
C) are valued outputs to external users.
D) help meet the organization's needs, not the product needs.
Q3) An activity analysis is used to determine
A) the activities an organization performs
B) how many people perform activities
C) the time and resources required to perform activities
D) all of the above
Q4) Compare and contrast functional-based, activity-based, and strategic-based responsibility accounting.
Q5) Discuss cycle time (and its components) and its importance in JIT.
Q6) Explain process value analysis.
Page 16
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Chapter 15: Strategic Performance Management
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Sample Questions
Q1) _____ are relationships among activities that are performed with a firm's portion of the value chain.
A) External linkages
B) Internal linkages
C) Industrial value chain
D) Both a and b
Q2) _____ provide some idea of what to expect currently or in the near future.
A) Trailing measures
B) Leading measures
C) Financial measures
D) All of the above
Q3) When a computer company targets customers in the South, it is following a A) focusing strategy.
B) low-cost strategy.
C) differentiation strategy.
D) strategic positioning strategy.
Q4) How does the Balanced Scorecard communicate strategy to the organization? How is strategy translated into performance measures?
Q5) Describe the basic features of the Balanced Scorecard.
Q6) List three benefits of a value chain perspective.
Page 17
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