Business Administration
Solved Exam Questions
Course Introduction
Business Administration is a comprehensive course designed to provide students with a foundational understanding of the principles, practices, and challenges involved in managing and operating organizations. The course covers core topics such as management theory, organizational behavior, marketing, finance, human resources, and strategic planning. Students will develop essential analytical, decision-making, and leadership skills through case studies, group projects, and real-world applications. By the end of the course, students will be equipped with the knowledge and competencies necessary to pursue careers in various business sectors or to continue advanced studies in business-related fields.
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) R&D, production, and customer service are business functions that are all included as part of ________.
A) the value chain
B) benchmarking
C) customer relationship management
D) the supply chain
Answer: A
Q2) A report showing the actual financial results for a period compared to the budgeted financial results for that same period would most likely be called a ________.
A) strategic plan
B) management forecast
C) performance report
D) revised plan
Answer: C
Q3) Bonuses given to employees based on performance is an example of extrinsic reward.
A)True
B)False
Answer: True
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Page 3
Chapter 2: An Introduction to Cost Terms and Purposes
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Sample Questions
Q1) Cost accounting helps to aids managers in formulating strategies, setting prices for products and services and making decisions about the mix of products and services to be offered to customers.
A)True
B)False
Answer: True
Q2) For an automobile manufacturer, period costs include the cost of ________.
A) the dashboard
B) labor used for assembly
C) advertising
D) assembly-line equipment
Answer: C
Q3) Wood used to manufacture chairs is considered a direct variable cost when the cost object is the chair.
A)True
B)False
Answer: True
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Chapter 3: Cost-Volume-Profit Analysis
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Sample Questions
Q1) Family Furniture sells a table for $950. Its fixed costs are $2,500, while its variable costs are $500 per table. It currently plans to sell 180 tables this month. What is the budgeted operating income for the month assuming that Family Furniture sells 180 tables?
A) $168,500
B) $81,000
C) $78,500
D) $171,000
Answer: C
Q2) The contribution income statement highlights ________.
A) gross margin
B) the segregation of costs into period costs and inventoriable costs
C) different product lines
D) variable and fixed costs
Answer: D
Q3) Contribution margin = Contribution margin percentage × Revenues (in dollars).
A)True
B)False
Answer: True
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Page 5
Chapter 4: Job Costing
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Sample Questions
Q1) Payment of the factory rent would require debits and credits to which accounts?
A) Debit: Work-in-Process Control account Credit: Cash
B) Debit: Manufacturing Overhead Control account Credit: Cash
C) Debit: Cost of Goods Sold account Credit: Prepaid Rent
D) Debit: Factory Depreciation account Credit: Accumulated Depreciation Control
Q2) Using job costing would not be appropriate in the shipping industry.
A)True
B)False
Q3) Normal costing assigns indirect costs based on an actual indirect-cost rate.
A)True
B)False
Q4) The ________ adjusts individual job-cost records to account for underallocated or overallocated overhead.
A) adjusted allocation-rate
B) proration approach
C) write-off to cost of goods sold approach
D) weighted-average cost approach
Q5) A materials-requisition record is an example of a source document.
A)True
B)False
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Chapter 5: Activity-Based Costing and Activity-Based Management
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Sample Questions
Q1) When allocating the total indirect cost pool to cost pools such as setup costs including depreciation and maintenance costs of setup equipment, wages of setup employees, and allocation of supervisors is called a second-stage allocation.
A)True
B)False
Q2) How are cost drivers selected in activity-based costing systems?
Q3) For a manufacturing firm that produces multiple families of products requiring various combinations of different types of parts, what would be the best allocation base for human resource adminstration costs?
A) direct labor hours
B) electricity costs
C) number of parts purchased
D) machine hours
Q4) For a company which produce its products in batches, the CEO's salary is a(n) ________ cost.
A) batch-level
B) output unit-level
C) facility-sustaining
D) product-sustaining
Chapter 6: Master Budget and Responsibility Accounting
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Sample Questions
Q1) The cash budget is a schedule of expected cash receipts ,disbursements, and financing.
A)True
B)False
Q2) The ________ is required to prepare the cash budget of an organization.
A) statement of shareholders' equity
B) budgeted balance sheet
C) capital expenditures budget
D) budgeted statement of cash flow
Q3) In general, which of the following budgets is prepared first?
A) sales budget
B) production budget
C) direct labor budget
D) overhead budget
Q4) 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
Q5) Describe the concept of kaizen budgeting.
Page 8
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Chapter 7: Flexible Budgets, Direct-Cost Variances, and Management Control
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Sample Questions
Q1) Better Products Inc. planned to use $40 of material per unit but actually used $30 of material per unit, and planned to make 1,560 units but actually made 1,310 units. The sales-volume variance for materials is ________.
A) $10,000 favorable
B) $10,000 unfavorable
C) $7,500 unfavorable
D) $7,500 favorable
Q2) A percentage of products started and completed without requiring any rework is an example of nonfinancial performance measure.
A)True
B)False
Q3) If management experiences an unfavorable direct materials efficiency variance, which of the following would not be the possible corrective action?
A) Improve the design of the product
B) Provide additional training for the direct laborers
C) Purchase higher quality materials
D) Negotiate lower prices for material acquisition
Q4) Describe the purpose of variance analysis.
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Chapter 8: Flexible Budgets, Overhead Cost Variances, and Management Control
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Sample Questions
Q1) The fixed setup overhead flexible-budget variance is calculated as actual costsflexible-budget variance.
A)True
B)False
Q2) 'Managers should be wary of using the same unitized fixed overhead costs for planning and control purposes'. Do you agree with this argument? Give reasons for your answer.
Q3) Skytalk Company manufactures weathervanes. The 2015 operating budget is based on the production of 5,300 weathervanes with 1.25 machine-hour allowed per weathervane. Variable manufacturing overhead is anticipated to be $145,750. Actual production for 2015 was 5,250 weathervanes using 6,050 machine-hours. Actual variable costs were $21.75 per machine-hour.
Required:
Calculate the variable overhead spending and the efficiency variances.
Q4) Effective planning of fixed overhead costs includes ________.
A) planning day-to-day operational decisions
B) eliminating value-added costs
C) determining which products are to be produced
D) choosing the appropriate level of investment in productive assets
Page 10
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Chapter 9: Inventory Costing and Capacity Analysis
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Sample Questions
Q1) The contribution-margin format of the income statement distinguishes manufacturing costs from nonmanufacturing costs.
A)True
B)False
Q2) Cape Cod Technolgy Inc. manufactures heavy duty flash lights. January and February operations were identical in every way except for the planned production. January had a production denominator of 80,000 units. February had a production denominator of 60,000 units. Fixed manufacturing costs totaled $200,000.
Sales for both months totaled 62,000 units with variable manufacturing costs of $4 per unit. Selling and administrative costs were $0.60 per unit variable and $51,000 of fixed. The selling price was $10 per unit.
Required:
Compute the operating income for both months using absorption costing.
Q3) The basis of the difference between variable costing and absorption costing is how fixed manufacturing costs are accounted for.
A)True
B)False
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Chapter 10: Determining How Costs Behave
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Sample Questions
Q1) High Tech Manufacturing Inc., incurred total indirect manufacturing labor costs of $480,000. The company is labor intensive. Total labor hours during the period were 5,000. Using qualitative analysis, the manager and the management accountant determine that over the period the indirect manufacturing labor costs are mixed costs with only one cost driver-labor-hours. They separated the total indirect manufacturing labor costs into costs that are fixed ($140,000 based on 8,500 hours of labor) and costs that are variable ($340,000) based on the number of labor-hours used. The company has estimated 7,400 labor hours during the next period. What will be the variable cost per hour?
A) $68.00
B) $40.00
C) $56.47
D) $96.00
Q2) A step variable-cost function ________.
A) is fixed over the long run but not over the short run
B) is often approximated with a continuous variable-cost function
C) remains the same over a wide range of activity
D) example includes adding additional warehouse space
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Page 12
Chapter 11: Decision Making and Relevant Information
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Sample Questions
Q1) Each of the following are true of relevant information except:
A) Past costs are helpful when making predictions but not relevant when making decisions
B) Different alternatives can be compared by examining differences in expected future revenues and expected total future costs
C) significant past investment amounts are relevant to decision making
D) Not all future revenues and expenses are relevant
Q2) Determining which products should be produced when the plant is operating at full capacity is referred to as a(n) ________.
A) outsourcing analysis
B) total alternative approach
C) product-mix decision
D) short-run focus decision
Q3) Employee morale at Dos Santos, Inc., is very high. This type of information is an example of ________.
A) qualitative factors
B) quantitative factors
C) irrelevant factors
D) financial factors
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Page 13
Chapter 12: Strategy, Balanced Scorecard, and Strategic
Profitability Analysis
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Sample Questions
Q1) Which of the strategic perspectives of the balanced scorecard focuses on a company's own operations that create value for customers that, in turn, help achieve financial objectives?
A) Financial
B) Customer
C) Internal-business-process
D) Learning-and-growth
Q2) Which of the following statements is true of strategic analysis of operating income?
A) Change in operating income from one period to any future period can be subdivided into product differentiation, cost leadership, and growth components.
B) Subdividing the change in operating income to evaluate the success of a strategy has no similarity to the variance analysis.
C) Management accountants compare actual and budgeted operating performance over the same time periods.
D) It focuses on differences in individual categories of costs (direct materials, direct manufacturing labor, and overheads).
Q3) What are the four key perspectives in the balanced scorecard?
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Page 14
Chapter 13: Pricing Decisions and Cost Management
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Sample Questions
Q1) A life-cycle budget is usually prepared to budget for costs and production for a period of one year.
A)True
B)False
Q2) Which of the following is true of target costing?
A) the target cost is the target price minus the target operating income per unit
B) the target cost includes all past costs to produce the product
C) input from suppliers and distributors are not relevant.
D) a key goal is to minimize value added activities of a product.
Q3) Which of the following is true of value engineering?
A) It is the process of building a new product by first determining the selling price of the product.
B) It is the process by which a company analyzes its own process to reduce cost.
C) It is the process by which a systematic evaluation of all aspects of the value chain, with the objective of reducing costs and achieving a predetermined quality level.
D) It is the process by which the competitor's products are disassembled and analyzed.
Q4) What factors may influence the level of markups?
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Chapter 14: Cost Allocation, Customer-Profitability Analysis, and Sales-Variance Analysis
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Sample Questions
Q1) The sales-quantity variance will be unfavorable when which of the following occurs?
A) the composite unit for the actual mix is less than for the budgeted mix
B) the actual unit sales are less than the budgeted unit sales
C) the actual contribution margin per unit is less than the static-budget contribution margin
D) the actual sales mix shifts toward the less profitable units
Q2) The Conity Corporation has an Electric Mixer Division and an Electric Lamp Division. Of a $16,000,000 bond issuance, the Electric Mixer Division used $9,600,000 and the Electric Lamp Division used $6,400,000 for expansion. Interest costs on the bond totaled $1,000,000 for the year. What amount of interest costs should be allocated to the Electric Lamp Division? (Round any intermediary calculations two decimal places and your final answer to the nearest dollar.)
A) $400,000
B) $600,000
C) $625,000
D) $6,400,000
Q3) What are the two components of the sales-quantity variance?
Q4) How can a company's revenues and costs differ across customers?
Page 16
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Chapter 15: Allocation of Support-Department Costs, Common
Costs, and Revenues
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Sample Questions
Q1) Which of the following methods ranks individual products in a bundle for revenue allocation?
A) stand-alone revenue-allocation method
B) incremental revenue-allocation method
C) unit-cost weighting method
D) physical-unit weighting method
Q2) The direct method is conceptually the most precise method because it considers the mutual services provided among all support departments.
A)True
B)False
Q3) What is an operating department and how is it different from a support department? Give examples of each.
Q4) The stand-alone cost allocation method ranks the individual users of a cost object in order of users most responsible for a common cost and then uses these rankings to allocate the costs among the users.
A)True
B)False
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Chapter 16: Cost Allocation: Joint Products and Byproducts
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Sample Questions
Q1) Explain the difference between a joint product and a byproduct. Can a byproduct ever become a joint product? Also, can a joint product ever become a byproduct?
Q2) In joint costing, the constant gross-margin percentage NRV method is an example of allocating costs using physical measures.
A)True
B)False
Q3) In joint costing, outputs with no sales value are always excluded when costs are allocated using physical measures.
A)True
B)False
Q4) In joint costing, which method assumes that all the markup is attributable to the joint process costs?
A) sales value at split-off method
B) NRV method
C) constant gross-margin percentage method
D) physical measures method
Q5) Discuss in brief how easy it is for companies to classify products as main products, joint products, and byproducts.
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Chapter 17: Process Costing
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Sample Questions
Q1) A distinct feature of the FIFO process-costing method is that the ________.
A) work done on beginning inventory before the current period is blended with the work done during the current period in the calculation of equivalent units
B) work done on beginning inventory before the current period is kept separate from the work done during the current period in the calculation of equivalent units
C) work done on ending inventory is kept separate from the work done during the current period in the calculation of equivalent units and is usually not included in the calculation
D) FIFO process-costing method is only minimally different from the weighted-average process-costing method
Q2) Job-costing systems separate costs into cost categories according to when costs are introduced into the process of manufacture.
A)True
B)False
Q3) What is the difference between a weighted-average method of process costing and a first-in, first-out method of process costing?
Q4) List and describe the five steps in process costing.
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Chapter 18: Spoilage, Rework, and Scrap
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Sample Questions
Q1) A company produces 11,000 units of which 600 are spoiled units because the process, even though carefully and efficiently executed is unable to produce good units 100% of the time. Another 80 units are spoiled because machines broke down and there also were operator errors. What is the normal spoilage rate (round to two decimal places)
A) 6.18%
B) 5.81%
C) 5.45%
D) 0.73%
Q2) Costs of normal spoilage are usually accounted for as ________.
A) a deduction from the cost of goods sold
B) a component of the costs of good units manufactured
C) a "loss from normal spoilage account" in income statement
D) a liability on a balance sheet
Q3) Scrap and rework are considered to be the same thing by managerial accountants.
A)True
B)False
Q4) Abnormal spoilage is spoilage inherent in a particular production process.
A)True
B)False
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Chapter 19: Balanced Scorecard: Quality and Time
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Sample Questions
Q1) Which of the following is true of COQ measures?
A) They forecast customer satisfaction and employee satisfaction, which are useful indicators of long-run performance.
B) They help managers evaluate costs and benefits of incurring prevention and appraisal costs
C) They direct attention to financial processes that help managers identify the precise problem areas that need improvement.
D) They provide immediate short-run feedback on whether quality-improvement efforts are succeeding.
Q2) Ventaz Corp manufactures small windows for back yard sheds. Historically, its demand has ranged from 30 to 50 windows per day with an average of 43. Alex is the one production worker and he works eight hours a day, five days a week. Each order is one window and each window takes 5 minutes. What is the average waiting time in minutes?
A) 2.50
B) 4.06
C) 2.03
D) 21.50
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21
Chapter 20: Inventory Management, Just-in-Time, and Simplified Costing Methods
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Sample Questions
Q1) A company's inventory levels are dependent on a number of variables including the demand for the product, supplier relationships, and supplier relationships with their manufacturers.
A)True
B)False
Q2) For inventory carrying costs, which of the following statements is true of the relevant opportunity cost of capital of inventory?
A) It is the return received by investing capital in inventory rather than elsewhere. B) It is calculated as the per-unit costs of carrying inventory divided by the required rate of return .
C) It is the return foregone by investing capital elsewhere rather than in inventory.
D) It is calculated as the required rate of return multiplied by the per-unit costs of acquiring inventory including the purchase price, incoming freight, and incoming inspection.
Q3) What are five features of a just-in-time manufacturing system?
Q4) Lean accounting is much simpler than traditional product costing. Why?
Q5) What are the principles of lean accounting? Are there any limitations? Discuss.
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Chapter 21: Capital Budgeting and Cost Analysis
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Sample Questions
Q1) Difend Cleaners has been considering the purchase of an industrial dry-cleaning machine. The existing machine is operable for three more years and will have a zero disposal price. If the machine is disposed now, it may be sold for $170,000. The new machine will cost $360,000 and an additional cash investment in working capital of $170,000 will be required. The new machine will reduce the average amount of time required to wash clothing and will decrease labor costs. The investment is expected to net $130,000 in additional cash inflows during the first year of acquisition and $290,000 each additional year of use. The new machine has a three-year life, and zero disposal value. These cash flows will generally occur throughout the year and are recognized at the end of each year. Income taxes are not considered in this problem. The working capital investment will not be recovered at the end of the asset's life. What is the net present value of the investment, assuming the required rate of return is 6%? Would the company want to purchase the new machine?
A) $264,290; yes
B) $243,489.592; yes
C) $($243,489.592); no
D) $($264,290); no
Q2) Explain why the term tax shield is used in conjunction with depreciation.
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Page 23
Chapter 22: Management Control Systems, Transfer
Pricing, and Multinational
Considerations
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Sample Questions
Q1) The costs used in cost-based transfer prices ________.
A) are actual costs
B) are budgeted costs
C) can either be actual or budgeted costs
D) are lower than the market-based transfer prices
Q2) What is the role of unused capacity within the selling division in the determination of a negotiated transfer price to another division?
Q3) If a computer manufacturer used its common stock price as a Balanced Scorecard control measure, it would be utilizing which of the following?
A) an external measure
B) customer related measure
C) internal business process measure
D) learning and growth measure
Q4) Effort refers to physical exertion, such as a worker producing at a faster rate, but excludes non-physical aspects like acumen and diligence of a worker.
A)True
B)False
Q5) 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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Sample Questions
Q1) Higher inflation will lead to higher prices for goods or services, which will increase a company's operating income and lead to a higher ROI.
A)True
B)False
Q2) A company which favors the residual income approach to financial performance evaluation wants managers to ________.
A) concentrate on maximizing an absolute amount of dollars of residual income as opposed to a percentage yield as is the case with ROI
B) concentrate on maximizing a percentage return in excess of the cost of capital
C) maximize the investment turnover ratio
D) maximize return on sales
Q3) Some companies, make environmental performance a line item on every employee's salary appraisal report.
A)True
B)False
Q4) When designing the steps in accounting-based performance measures, should the decisions in these steps be sequential?
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