Business Decision Making
Midterm Exam
Course Introduction
Business Decision Making is a course designed to equip students with the analytical tools and critical thinking skills required to make informed and effective decisions in a business environment. The course covers various problem-solving methodologies, quantitative and qualitative analysis techniques, and introduces key concepts such as risk assessment, forecasting, and decision-making models. Through real-world case studies and simulations, students learn how to evaluate alternative courses of action, use data for strategic planning, and incorporate ethical considerations into organizational decision-making. By the end of the course, students will be able to develop structured approaches to address complex business challenges and improve overall decision quality within an organization.
Recommended Textbook
Managerial Accounting 12th Edition by Carl S. Warren
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Chapter 2: Job Order Costing
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Sample Questions
Q1) The cost of production of completed and finished goods during the period amounted to $450,000, and the finished products shipped to customers had total production costs of $357,000. From the following, select the entry to record the transfer of costs from work in process to finished goods.
A) Finished Goods 357,000 Work in Process 357,000
B) Finished Goods 450,000 Work in Process 450,000
C) Work in Process 450,000 Finished Goods 450,000
D) Work in Process 357,000 Finished Goods 357,000
Answer: B
Q2) In the job order system, the finished goods account is the controlling account for the factory overhead ledger.
A)True
B)False
Answer: False
Q3) Cavy Company completed 26,000 units during the year at a cost of $2,139,800. The beginning finished goods inventory was 5,000 units at $405,000. Determine the cost of goods sold for 20,000 units, assuming a FIFO cost flow.
Answer: $405,000 + (15,000 * $82.30) = $1,639,500
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Page 3
Chapter 3: Process Cost Systems
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Sample Questions
Q1) The cost of production report reports the cost of the goods sold.
A)True
B)False
Answer: False
Q2) Which of the following industries would normally use job order costing systems and which would normally use process costing systems?
Answer: Business consulting
Chemicals
Food Movie
Soap and cosmetics
Web designing
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Q3) In a process costing system, a separate work in process inventory account is maintained for each customer's job.
A)True
B)False
Answer: False
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Chapter 4: Cost Behavior and Cost-Volume-Profit Analysis
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Sample Questions
Q1) Given the following:
Variable cost as a percentage of sales = 60%
Unit Variable cost = $30
Fixed costs = $200,000
What is the break-even point in units?
Q2) What ratio indicates the percentage of each sales dollar that is available to cover fixed costs and to provide a profit?
A) Margin of safety ratio
B) Contribution margin ratio
C) Costs and expenses ratio
D) Profit ratio
Q3) The three most common cost behavior classifications are:
A) variable costs, product costs, and sunk costs
B) fixed costs, variable costs, and mixed costs
C) variable costs, period costs, and differential costs
D) variable costs, sunk costs, and opportunity costs
Q4) The cost graphs in the illustration below shows various types of cost behaviors.
Q5) The Grant Company has sales of $300,000, and the break-even point in sales dollars if $225,000. Determine the company's margin of safety percentage.
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Chapter 5: Variable Costing for Management Analysis
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Sample Questions
Q1) On the variable costing income statement, all of the fixed costs are deducted from the contribution margin.
A)True
B)False
Q2) Edna's Chocolates had planned to sell chocolate-covered strawberries for $3.00 each. Due to various factors, the actual price was $2.75. Edna's was able to sell 1,000 more strawberries than the anticipated 4,000. What is (1) the quantity factor and (2) the price factor for sales?
A) (1) $3,000, (2) $(1,250)
B) (1) $3,000, (2) $3,000
C) (1) $1,250, (2) $3,000
D) (1) $(4,000) (2) $(3,000)
Q3) The contribution margin ratio is computed as contribution margin divided by sales. A)True B)False
Q4) Variable costing is also known as direct costing.
A)True
B)False
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Page 6
Chapter 6: Budgeting
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Sample Questions
Q1) The cash budget presents the expected inflow and outflow of cash for a specified period of time.
A)True
B)False
Q2) Which of the following budgets allow for adjustments in activity levels?
A) Static Budget
B) Continuous Budget
C) Zero-Based Budget
D) Flexible Budget
Q3) Budgetary slack can be avoided if lower and mid-level managers are requested to support all of their spending requirements with specific operational plans.
A)True
B)False
Q4) Which of the following would not be used in preparing a cash budget for October?
A) Beginning cash balance on October 1.
B) Budgeted salaries expense for October.
C) Estimated depreciation expense for October.
D) Budgeted sales and collections for October.
Q5) What is a cash budget? How does management use a cash budget?
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Chapter 7: Performance Evaluation Using Variances From
Standard Costs
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Sample Questions
Q1) Standards are designed to evaluate price and quantity variances separately.
A)True
B)False
Q2) If at the end of the fiscal year the variances from standard are significant, the variances should be transferred to the:
A) work in process account only
B) cost of goods sold account only
C) finished goods account only
D) work in process, cost of goods sold, and finished goods accounts
Q3) The most effective means of presenting standard factory overhead cost variance data is through a factory overhead cost variance report.
A)True
B)False
Q4) If the price paid per unit differs from the standard price per unit for direct materials, the variance is termed a:
A) variable variance
B) controllable variance
C) price variance
D) volume variance
8
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Chapter 8: Performance Evaluation for Decentralized Operations
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Sample Questions
Q1) Mason Corporation had $650,000 in invested assets, sales of $700,000, income from operations amounting to $99,000, and a desired minimum rate of return of 15%. The investment turnover for Mason is:
A) 1.08
B) .93
C) 6.57
D) 7.07
Q2) Hamlin Corporation had $220,000 in invested assets, sales of $242,000, income from operations amounting to $70,400, and a desired minimum rate of return of 3%. The rate of return on investment for Hamlin is:
A) 7%
B) 32%
C) 3%
D) 29%
Q3) Responsibility accounting reports for profit centers will include A) costs.
B) revenues.
C) expenses and fixed assets.
D) revenues, expenses, net income or loss from operations.
Page 9
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Chapter 9: Differential Analysis and Product Pricing
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Sample Questions
Q1) When using the total cost concept of applying the cost-plus approach to product pricing, what is included in the markup?
A) Total selling and administrative expenses plus desired profit
B) Total fixed manufacturing costs, total fixed selling and administrative expenses, and desired profit
C) Total costs plus desired profit
D) Desired profit
Q2) Which of the following would be considered a sunk cost?
A) Purchase price of new equipment
B) Equipment rental for the production area
C) Net book value of equipment that has no market value
D) Warehouse lease expense
Q3) The Owl Company produces and sells Product X at a total cost of $35 per unit, of which $28 is product cost and $7 is selling and administrative expenses. In addition, the total cost of $35 is made up of $24 variable cost and $11 fixed cost. The desired profit is $6 per unit. Determine the mark up percentage on product cost.
Q4) The lowest contribution margin per scarce resource is the most profitable.
A)True
B)False
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Chapter 10: Capital Investment Analysis
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Q1) All of the following qualitative considerations may impact upon capital investment analysis except:
A) time value of money
B) employee morale
C) the impact on product quality
D) manufacturing flexibility
Q2) For years one through five, a proposed expenditure of $250,000 for a fixed asset with a 5-year life has expected net income of $40,000, $35,000, $25,000, $25,000, and $25,000, respectively, and net cash flows of $90,000, $85,000, $75,000, $75,000, and $75,000, respectively. The cash payback period is 3 years.
A)True
B)False
Q3) A qualitative characteristic that may impact upon capital investment analysis is employee morale.
A)True
B)False
Q4) What is capital investment analysis? Why are capital investment analysis decisions often difficult and risky?
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11
Chapter 11: Cost Allocation and Activity-Based Costing
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Sample Questions
Q1) A plantwide factory overhead rate is computed by dividing total budgeted factory overhead costs by the plantwide allocation base.
A)True
B)False
Q2) In a service organization, the multiple department overhead rate method is the most effective in providing information about the cost of services.
A)True B)False
Q3) Tibet Company sells glasses, fine china, and everyday dinnerware. They use activity-based costing to determine the cost of the shipping and handling activity. The shipping and handling activity has an activity rate of $7 per pound. A box of glasses weighs 2 lbs, the box of china weighs 4 lbs, and a box of everyday dinnerware weighs 6 lbs. (a) Determine the shipping and handling activity for each product and (b) determine the total shipping and receiving costs for the china if 3,500 boxes are shipped.
Q4) Product costing consists of only direct materials and direct labor.
A)True B)False
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Chapter 12: Cost Management for Just-In-Time
Environments
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Q1) In a just-in-time (JIT) environment, the journal entry to record conversion costs would include a debit to the raw and in process inventory account.
A)True
B)False
Q2) Sifton Electronics Corporation manufactures and assembles electronic motor drives for video cameras. The company assembles the motor drives for several accounts. The process consists of a just-in-time cell for each customer. The following information relates only to one customer's just-in-time cell for the coming year. Projected labor and overhead, $7,370,000; materials costs, $28 per unit. Planned production included 4,000 hours to produce 27,500 motor drives. Actual production for August was 1,600 units, and motor drives shipped amounted to 1,380 units. From the foregoing information, determine the production costs transferred to Finished Goods during August.
A) $369,840
B) $408,480
C) $428,800
D) $473,600
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Chapter 13: Statement of Cash Flows
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Sample Questions
Q1) Free cash flow is cash flow from operations, less cash used to purchase fixed assets to maintain productive capacity and cash used for dividends.
A)True B)False
Q2) Baxter Company reported a net loss of $13,000 for the year ended December 31, 2010. During the year, accounts receivable decreased by $5,000, merchandise inventory increased by $8,000, accounts payable increased by $10,000, and depreciation expense of $4,000 was recorded. During 2010, operating activities
A) provided net cash of $8,000.
B) provided net cash of $2,000.
C) used net cash of $8,000.
D) used net cash of $2,000.
Q3) Free cash flow is the measure of operating cash flow available for corporate purposes after providing sufficient fixed asset additions to maintain current productive capacity and dividends.
A)True B)False
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14
Chapter 14: Financial Statement Analysis
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Sample Questions
Q1) The purpose of an audit is to
A) determine whether or not a company is a good investment.
B) render an opinion on the fairness of the statements.
C) determine whether or not a company complies with corporate social responsibility.
D) determine whether or not a company is a good credit risk.
Q2) An increase in the accounts receivable turnover may be due to an improvement in the collection of receivables or to a change in the granting of credit and/or in collection practices.
A)True
B)False
Q3) The dividend yield rate is equal to the dividends per share divided by the par value per share of common stock.
A)True
B)False
Q4) Why would you or why wouldn't you compare an organization like Ford Motor Company to the local car dealer "Johnson City Ford/Lincoln/Mercury" in vertical and horizontal analysis?
Q5) Define solvency and profitability. How are they alike?
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Chapter 15: Managerial Accounting Concepts and Principles
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Q1) Nonmanufacturing costs are classified into two categories: selling and administrative.
A)True
B)False
Q2) Cost of goods sold for a manufacturer equals cost of goods manufactured plus:
A) beginning work in process inventory less ending work in process inventory
B) ending work in process inventory less beginning work in process inventory
C) beginning finished goods inventory less ending finished goods inventory
D) ending finished goods inventory less beginning finished goods inventory
Q3) What is the primary criterion for the preparation of managerial accounting reports?
A) Relevance of the reports
B) Meet the manager needs
C) Timing of the reports
D) Cost of the reports
Q4) Period costs are operating costs that are expensed in the period in which the goods are sold.
A)True
B)False
Page 16
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