Business Decision Making
Question Bank
Course Introduction
Business Decision Making is a comprehensive course that explores the principles, tools, and frameworks essential for making effective decisions in various business contexts. The course covers both quantitative and qualitative decision-making processes, including problem identification, data collection and analysis, handling uncertainty, evaluating alternatives, and implementing chosen solutions. Students learn to apply decision-support systems, models such as cost-benefit analysis and decision trees, as well as ethical considerations and the impact of group dynamics on decision outcomes. Through case studies and real-world scenarios, participants develop the skills necessary to analyze complex business situations, justify recommendations, and make sound, strategic decisions in dynamic environments.
Recommended Textbook
Cornerstones of Managerial Accounting 5th Edition by Maryanne M. Mowen
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16 Chapters
2824 Verified Questions
2824 Flashcards
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Page 2
Chapter 1: Introduction to Managerial Accounting
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64 Verified Questions
64 Flashcards
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Sample Questions
Q1) Developing a company strategy for responding to anticipated new markets is an example of
A) planning.
B) controlling.
C) decision making.
D) all of these are correct.
Answer: A
Q2) The belief that each member of a group bears no responsibility for the well-being of other members is a common principle underlying all ethical systems.
A)True
B)False
Answer: False
Q3) Time is not a crucial element in all phases of the value chain.
A)True
B)False
Answer: False
Q4) Managerial accounting strongly emphasizes providing information about
Answer: future events
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Chapter 2: Basic Managerial Accounting Concepts
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247 Verified Questions
247 Flashcards
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Sample Questions
Q1) Cost is a dollar measure of the resources used to achieve a given benefit.
A)True
B)False
Answer: True
Q2) Glue used in the manufacture of cabinets would be an example of a fixed cost.
A)True
B)False Answer: False
Q3) Which of the following would not be found on an income statement of a service organization?
A) selling expenses
B) cost of goods sold
C) operating income
D) sales revenue
Answer: B
Q4) Any costs associated with storing, selling, and delivering the product are classified as product costs.
A)True
B)False
Answer: False
Page 4
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Chapter 3: Cost Behavior
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237 Verified Questions
237 Flashcards
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Sample Questions
Q1) Which of the following would not be an example of a fixed cost?
A) glue used to put together tables
B) insurance on factory building
C) depreciation on factory building
D) property taxes
Answer: A
Q2) Refer to Figure 3-4. Calculate the total variable utility cost for the month of April.
A) $1,200.00
B) $7,477.50
C) $6,277.50
D) $5,077.50
Answer: C
Q3) Refer to Figure 3-3. What would the estimate of Okafor Company's total lease cost be at a level of 500 machine hours?
A) $19,606
B) $19,556
C) $16,464
D) $18,546
Answer: B
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Page 5
Chapter 4: Cost-Volume-Profit Analysis: a Managerial Planning Tool
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179 Verified Questions
179 Flashcards
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Sample Questions
Q1) Dirth Company sells only one product at a regular price of $7.50 per unit. Variable expenses are 60% of sales and fixed expenses are $30,000. Management has decided to decrease the selling price to $6.00 in hopes of increasing its volume of sales. What is the contribution margin ratio when the selling price is reduced to $6 per unit?
A) 25%
B) 40%
C) 75%
D) 60%
Q2) To determine the number of units that must be sold to earn a target operating income, one can use the equation for operating income and replace the operating income term with the target operating income.
A)True
B)False
Q3) The linear equation for revenue is price multiplied by fixed cost.
A)True
B)False
Q4) The _________________________ depicts the relationships among cost, volume, and profits by plotting the total revenue line and the total cost line on a graph.
Page 6
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Chapter 5: Job-Order Costing
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196 Verified Questions
196 Flashcards
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Sample Questions
Q1) An approach that assigns actual costs of direct materials, direct labor, and overhead to products
A)actual cost system
B)job-order costing system
C)normal cost system
D)process-costing system
Q2) Every time a new job is started this is prepared.
A)Job-order cost sheet
B)Time ticket
C)Materials requisition form
Q3) Refer to Figure 5-14.
Required:
A.) Determine the amount of overhead to apply to each job for the period.
B.) Calculate the cost of work-in-process at the end of the month.
C.) Calculate the cost of finished goods, assuming that finished goods inventory on December 1st was zero.
Q4) A(n) ___________________________ determines unit cost by adding actual direct materials, actual direct labor, and estimated overhead.
Q5) In a _______________________________ costs are accumulated by job.
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Chapter 6: Process Costing
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177 Flashcards
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Sample Questions
Q1) The number of physical units is multiplied by the _____________________ to calculate equivalent units.
Q2) Which of the following businesses is most likely to use process costing?
A) custom home builder
B) CPA firm
C) chemical manufacturer
D) custom machine tools manufacturer
Q3) Under the _______________ method equivalent units of output are computed by adding units completed to equivalent units in ending working-in-process.
Q4) Firms that offer services cannot have work-in-process inventories.
A)True
B)False
Q5) In process costing, each producing department has its own work-in-process account.
A)True
B)False
Q6) Describe the differences between process costing and job-order costing.
Q7) ___________ costs are a type of raw material cost.
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Q8) The _____________________ provides an analysis of the physical flow of units.
Chapter 7: Activity-Based Costing and Management
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178 Verified Questions
178 Flashcards
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Sample Questions
Q1) A product currently requires 5 moves. By changing the plant layout, the number of moves can be reduced to 1. The cost per move is $30. Calculate the reduction in nonvalue-added cost of the moving activity.
A) $7.50
B) $30
C) $0
D) $120
E) $150
Q2) Refer to Figure 7-3. Calculate the total activity cost per component associated with using Traynor Inc., as the supplier.
A) $15.75
B) $10.00
C) $19.38
D) $20.00
E) $22.80
Q3) A ____________________ is classified as value-added provided it simultaneously meets three conditions.
Q4) ___________________ are incurred to prevent poor quality in the products and services being produced.
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Chapter 8: Absorption and Variable Costing, and Inventory Management
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Sample Questions
Q1) Inventory values calculated using variable costing as opposed to absorption costing will generally be
A) equal.
B) less.
C) greater.
D) twice as much.
Q2) Refer to Figure 8-9. What is the value of ending inventory using the absorption costing method?
A) $310,000
B) $250,000
C) $200,000
D) $390,000
Q3) The _______________ income statement groups expenses according to cost behavior.
Q4) The _______________________ is the number of units in the optimal size order quantity.
Q5) A ____________ is a subunit of a company of sufficient importance to warrant the production of performance reports.
Q6) _______________ assigns all manufacturing costs to the product.
Q7) Inventory taxes, obsolescence, and insurance are examples of Page 10
Q8) The ___________________ income statement groups expenses according to function.
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Chapter 9: Profit Planning
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Sample Questions
Q1) In budgeting direct labor hours for the coming year, it is important to
A) multiply production in units by the direct labor hours per unit.
B) divide production in units by the direct labor hours per unit.
C) subtract production in units from the direct labor hours per unit.
D) subtract direct labor hours per unit from production in units.
E) multiply production in units by the labor wage rate.
Q2) Budgets identify objectives and the actions needed to achieve them because they are foresighted financial plans.
A)True
B)False
Q3) Which of the following statements is true?
A) The production budget is the first budget to be prepared in the master budget.
B) The cash budget is prepared before the direct materials purchases budget.
C) The budgeted balance sheet is prepared after the cash budget.
D) Service firms need not prepare a master budget.
E) The cost of goods sold budget is prepared before the direct labor and overhead budgets.
Q4) What are the advantages of budgeting?
Q5) A __________________ is a moving 12-month budget.
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Chapter 10: Standard Costing: a Managerial Control Tool
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180 Flashcards
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Sample Questions
Q1) The sources of quantitative standards include
A) historical experience.
B) engineering studies.
C) input from operating personnel.
D) historical experience, engineering studies, and input from operating personnel.
E) None of these.
Q2) Standard costs are developed for direct materials, direct labor, and variable overhead only.
A)True
B)False
Q3) Refer to Figure 10-4. What was High Fliers' total labor variance?
A) $61,500 F
B) $76,500 F
C) $76,500 U
D) $61,500 U
Q4) Kaizen costing provides fixed standards which reflect continuous improvement efforts.
A)True B)False
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Chapter 11: Flexible Budgets and Overhead Analysis
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172 Flashcards
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Sample Questions
Q1) The variable overhead spending variance measures the aggregate effect of differences between the
A) the total variable overhead and the applied variable overhead.
B) the total variable overhead and total budgeted overhead costs.
C) the total variable overhead and the budgeted overhead for the expected activity.
D) the actual variable overhead rate and the standard variable overhead rate.
E) None of these.
Q2) In an activity framework, controlling costs is equivalent to managing activities.
A)True
B)False
Q3) Activity-based budgeting begins with the _____________ and _______________ budgets.
Q4) A before-the-fact flexible budget
A) calculates expected costs for various levels of activity.
B) allows managers to deal with uncertainty.
C) can be used to generate results for a number of plausible scenarios.
D) is a useful planning tool.
E) All of these.
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14
Chapter 12: Performance Evaluation and Decentralization
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166 Flashcards
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Sample Questions
Q1) Using Economic Value Added (EVA) to calculate residual income, the cost of capital employed is
A) the standard percentage cost of capital multiplied by the average capital employed.
B) the actual percentage cost of capital multiplied by the average capital employed.
C) the standard percentage cost of capital multiplied by the total capital employed.
D) the actual percentage cost of capital multiplied by the total capital employed.
Q2) Using EVA to calculate residual income, the dollar cost of capital employed is the actual percentage cost of capital multiplied by the total capital employed.
A)True
B)False
Q3) If there is a competitive outside market for the transferred product, then the best transfer price is the cost-based transfer price. A)True B)False
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15
Chapter 13: Short-Run Decision Making: Relevant Costing
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170 Flashcards
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Sample Questions
Q1) Victor's Detailing customers would be willing to pay $57 per detail. The company requires an 80% markup on each job. The average job would cost $30. Victor's Detailing uses markup pricing to set the price on each job. What is the price Victor should quote a new customer?
A) $30
B) $24
C) $54
D) $84
E) $240
Q2) Refer to Figure 13-4. What is the contribution margin per hour of machine time for a classic lamp?
A) $26
B) $104
C) $16
D) $65
E) $13
Q3) Irrelevant costs are costs that are the same for more than one alternative.
A)True
B)False
Q4) Segmented reports are helpful for managers to make _______________ decisions.
16
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Chapter 14: Capital Investment Decisions
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172 Flashcards
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Sample Questions
Q1) A series of equal future cash flows is a(n)
A) future amount.
B) future earnings.
C) annuity.
D) earnings to be discounted.
E) insurance.
Q2) Refer to Figure 14-6. Jan Rigby is considering an investment that will cost $20,000 initially, and return annual cash flows of $10,000 in each of three years. Jan requires a minimum rate of return of 8%. What is the present value of the cash inflows? (Note: there may be a rounding error depending on the table you use to compute your answer. Choose the answer closest to the one you calculate.)
A) $25,770
B) $20,000
C) $5,770
D) $45,770
E) $10,000
Q3) If the internal rate of return (IRR) is greater than the required rate, the project is deemed ___________.
Q4) Which model of capital investment decision making is most widely used? Why?
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Chapter 15: Statement of Cash Flows
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185 Flashcards
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Sample Questions
Q1) Last year Lawson Company reported sales of $150,000 on its income statement. During the year, accounts receivable decreased by $15,000 and accounts payable decreased by $35,000. The company uses the direct method to determine the net cash flows from operating activities on the statement of cash flows. The sales revenue adjusted to a cash basis would be
A) $165,000.
B) $185,000.
C) $170,000.
D) $130,000.
Q2) Reported profitable operations (Net Income)
A)Operating Activity, Source of Cash
B)Operating Activity, Use of Cash
C)Investing Activity, Source of Cash
D)Investing Activity, Use of Cash
E)Financing Activity, Source of Cash
F)Financing Activity, Use of Cash
G)Non-cash Investing & Financing Activity
Q3) In the ________________, each line on the income statement is adjusted to produce a cash flow income statement.
Q4) Income statements are prepared on a (n) ______________.
Page 18
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Chapter 16: Financial Statement Analysis
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Sample Questions
Q1) Horizontal analysis is also known as
A) linear analysis.
B) vertical analysis.
C) trend analysis.
D) budget analysis.
Q2) Investors who prefer gains through appreciation will generally prefer a ___________ payout ratio.
Q3) The average stockholders' equity for Holloway Co. last year was $2,000,000. Included in this figure was $200,000 par value of 8% preferred stock. If the return on common stockholders' equity was 12.5% for the year, net income was
A) $225,000.
B) $250,000.
C) $241,000.
D) $234,000.
Q4) How long it takes a company to turn its receivables into cash is known as the ________________.
Q5) The _________________ is a measure of liquidity that compares only the most liquid assets with current liabilities.
Q6) ______________ and ____________ are the two major sources of capital.
Page 19
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