Business Decision Making
Review Questions
Course Introduction
Business Decision Making is a course designed to equip students with the essential tools and methodologies used by managers to make effective and strategic business choices. Focusing on both quantitative and qualitative analysis, the course covers topics such as decision-making processes, risk assessment, cost-benefit analysis, and ethical considerations in business scenarios. Students engage with real-world case studies, simulations, and data-driven techniques to develop critical thinking, problem-solving, and analytical skills. By the end of the course, participants will be able to apply structured frameworks and evidence-based approaches to support sound decision making in dynamic business environments.
Recommended Textbook
Horngrens Cost Accounting A Managerial Emphasis16th Global Edition by Srikant M. Datar
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4103 Verified Questions
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Chapter 1: The Manager and Management Accounting
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Sample Questions
Q1) Which of the following is true of planning in decision making?
A)It helps an organization to select goals and strategies.
B)It improves the quality of products.
C)It helps in evaluating performance.
D)It helps in the analysis of actual performance.
Answer: A
Q2) The supply chain describes the flow of goods,services,and information from the initial sources of materials and services to the delivery of products to consumers.
A)True
B)False
Answer: True
Q3) Cost accounting is the process of measuring,analyzing,and reporting financial and nonfinancial information related to the costs of acquiring or using resources in an organization.
A)True
B)False Answer: True
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Chapter 2: An Introduction to Cost Terms and Purposes
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Sample Questions
Q1) Which one of the following items is a direct cost?
A)Customer-service costs of a multiproduct firm;Product A is the cost object.
B)Printing costs incurred for payroll check processing;payroll check processing is the cost object.
C)The salary of a maintenance supervisor in a multiproduct manufacturing plant;Product B is the cost object.
D)Utility costs of the administrative offices;the accounting department is the cost object.
Answer: B
Q2) Which of the following factors affect the direct/indirect classification of a cost?
A)the level of budgeted profit for the next year
B)the estimation of time required to complete the order
C)the ability to execute an order in the most cost-efficient manner
D)the design where a particular area is dedicated to a specific cost object
Answer: D
Q3) Overtime premium is normally considered as a component of direct labor.
A)True
B)False
Answer: False
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4
Chapter 3: Cost-Volume-Profit Analysis
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Sample Questions
Q1) You can find the breakeven revenues using total revenues,total variable costs,and total fixed costs;you don't need unit prices and costs.
A)True
B)False
Answer: True
Q2) If breakeven point is 1,000 units,each unit sells for $31,and fixed costs are $30,000,then on a graph the ________.
A)total revenue line and the total cost line will intersect at $31,000 of revenue
B)total cost line will be zero at zero units sold
C)revenue line will start at $30,000
D)total revenue line and the total cost line will intersect at $61,000 of revenue
Answer: A
Q3) In multiproduct situations,when sales mix shifts toward the product with the lowest contribution margin,the operating income will be lower.
A)True
B)False
Answer: True
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Chapter 4: Job Costing
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Sample Questions
Q1) Benny Industries allocates manufacturing overhead at a predetermined rate of 160% of direct labor cost.Any overallocated or underallocated overhead is closed to the cost of goods sold at the end of the month.Below is information on job 205 that was in process at the end of the month of October
Direct materials $4,000
Direct labor $3,000
Allocated manufacturing overhead $4,800
Jobs 206,207,and 208 were started in November.Direct materials that were used in November were $26,000 and direct labor costs were $21,000.For the month of November,actual manufacturing overhead was $32,000.The only job still in process on the last day of November was job 104 with the following costs: $3,000 for direct materials and $1,500 for direct labor.
Required:
Calculate the cost of goods manufacturered for November.
Q2) Work-in-Process Control will be decreased (credited)for the amount of direct-labor costs incurred.
A)True
B)False
Q3) Differentiate between a cost pool and a cost-allocation base.
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Page 6
Chapter 5: Activity-Based Costing and Activity-Based Management
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Sample Questions
Q1) Using activity-cost rates rather than department indirect-cost rates to allocate costs results in different product costs when ________.
A)a single activity accounts for a sizable portion of department costs
B)there are several homogeneous cost pools
C)different activities have the same cost-allocation base
D)different products use different resources in the same proportion
Q2) Only indirect costs are included in the cost pools of ABC.
A)True
B)False
Q3) Managers consider the accuracy gained by converting from a traditional cost accounting system to the cost of implementation and measurement required by ABC.
A)True
B)False
Q4) Activity-based costing is most likely to yield benefits for companies ________.
A)with complex product design processes that vary significantly from product to product
B)with operations that remain fairly consistent across product lines
C)in a monopolistic market
D)having nominal percentage of indirect costs
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Chapter 6: Master Budget and Responsibility Accounting
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Sample Questions
Q1) Which of the following is a reason why budgets in multinational companies are not used to evaluate the firm's performance relative to its budgets?
A)Evaluations based on budgets can be meaningless due to factors such as exchange rate risk and other volatility.
B)Evaluations based on budgets are not possible because of cultural differences in the budgeting approach.
C)Evaluations based on relative regional performance are considered more meaningful as compared to evaluations against budgets.
D)Evaluations based on budgets are harder when managers use sophisticated techniques to minimize foreign currency exposure.
Q2) Kaizen budgeting does NOT make sense for cost centers.
A)True
B)False
Q3) Kaizen budgeting encourages dramatic improvements and substantial reduction in costs.
A)True
B)False
Q4) Describe the benefits of preparing an operating budget to an organization.
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Chapter 7: Flexible Budgets,direct-Cost Variances,and Management Control
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Sample Questions
Q1) In variance analysis,if any single performance measure is underemphasized,managers will tend to make decisions that will cause the particular performance measure to look good.
A)True
B)False
Q2) Management by exception is a practice whereby managers focus more closely on
A)variances in the larger departments
B)areas not operating as anticipated and less closely on areas that are operating as anticipated
C)activity-based budgeting
D)unfavorable variances
Q3) Goodard Inc.planned to use $156 of material per unit but actually used $141 of material per unit,and planned to make 1,150 units but actually made 920 units. The flexible-budget variance for materials is ________.
A)$13,800 favorable
B)$13,800 unfavorable
C)$17,250 unfavorable
D)$17,250 favorable
Page 9
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Chapter 8: Flexible Budgets, overhead Cost Variances, and Management Control
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Sample Questions
Q1) The major challenge when planning fixed overhead is ________.
A)calculating total costs
B)calculating the cost-allocation rate
C)choosing the appropriate level of capacity
D)choosing the appropriate planning period
Q2) Zitrik Corporation manufactured 110,000 buckets during February.The variable overhead cost-allocation base is $5.45 per machine-hour.The following variable overhead data pertain to February:
\(\begin{array}{lll}&\text { Actual }&\text { Budgeted } \\
\text { Production } & 110,000 \text { units } & 110,000 \text { units } \\
\text { Machine-hours } & 10,500 \text { hours } & 10,000 \text { hours } \\
\text { Variable overhead cost per machine-hour } & \$ 5.55 & \$ 5.45 \end{array}\)
What is the variable overhead spending variance?
A)$1,050 favorable
B)$1,000 unfavorable
C)$1,050 unfavorable
D)$1,000 favorable
Q3) Briefly explain the meaning of the variable overhead efficiency variance and the variable overhead spending variance.
Page 10
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Chapter 9: Inventory Costing and Capacity Analysis
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Sample Questions
Q1) Which of the following statements is true of absorption costing?
A)Absorption costing allocates fixed manufacturing overhead to actual units produced during the period.
B)Absorption costing carries over nonmanufacturing costs to the future periods.
C)Absorption costing shows the same level of profit as variable costing irrespective of the level of inventories.
D)Absorption costing allocates total manufacturing cost using the budgeted level of production for a particular year.
Q2) Throughput margin equals revenues minus all product costs.
A)True
B)False
Q3) U.S.tax reporting requires end-of-period reconciliation between actual and applied indirect costs using the adjusted allocation-rate method or the proration method.
A)True
B)False
Q4) Absorption costing is also referred to as super-variable costing.
A)True
B)False
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Chapter 10: Determining How Costs Behave
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Sample Questions
Q1) Which of the following best describes a step variable-cost function?
A)a step cost function in which cost remains the same over narrow ranges of the level of activity in each relevant range
B)a step cost function in which cost remains the same over narrow ranges of the level of activity outside the relevant range
C)step cost function where the cost remains the same over wide ranges of the activity in each relevant range
D)step cost function where the cost remains the same over wide ranges of the activity outside the relevant range
Q2) Nonlinear cost functions can result because of learning curves.
A)True
B)False
Q3) In a graphical display of a cost function,the steepness of a line represents the total amount of fixed costs.
A)True
B)False
Q4) Discuss the potential use of nonlinear curves in cost functions and cost analysis.Give some examples.
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Chapter 11: Decision Making and Relevant Information
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Sample Questions
Q1) A restaurant is deciding whether it wants to update its image or not.It currently has a cozy appeal with an outdated decor that is still in good condition,menus and carpet that need to be replaced anyway,and loyal customers.
Identify for the restaurant management
a.those costs that are relevant to this decision, b.those costs that are not differential, c.and qualitative considerations.
Q2) A relevant revenue is revenue that is a(n)________.
A)past revenue and differs among alternative courses of action
B)future revenue and differs among alternative courses of action
C)in-hand revenue
D)earned revenue
Q3) If management takes a multiple-year view in the decision model and judges success according to the current year's results,a problem will occur in the ________.
A)decision model
B)performance evaluation model
C)production evaluation model
D)quantitative model
Q4) Explain what revenues and costs are relevant when choosing among alternatives.
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Chapter 12: Strategy,balanced Scorecard,and Strategic
Profitability Analysis
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Sample Questions
Q1) The lower the inputs for a given set of outputs or the higher the outputs for a given set of inputs,the higher the level of ________.
A)overallocation
B)expenditure
C)productivity
D)labor costs
Q2) Partial productivity and total factor productivity measures work best together because both measures have the same kind of strengths and weaknesses.
A)True
B)False
Q3) Which of the following is a measure of the balanced scorecard's customer perspective?
A)Number of client complaints
B)Defect rates
C)Number of process improvements
D)Revenue growth
Q4) Engineered costs contain a higher level of uncertainty than discretionary costs.
A)True
B)False
14
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Chapter 13: Pricing Decisions and Cost Management
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Sample Questions
Q1) What are the five steps that are followed while implementing target pricing and target costing?
Q2) When target costing and target pricing are used together ________.
A)the target cost is established first,then the target price
B)the target cost is the estimated long-run cost that enables a product or service to achieve a desired profit
C)the focus of target pricing is to undercut the competition
D)target costs are generally higher than current costs
Q3) In case of pricing for special orders,managers include all future costs,variable costs,and costs that are fixed in the short run.
A)True
B)False
Q4) Which of the following is true of price bidding with the federal government?
A)the price can only cover direct costs
B)the price can only cover direct costs and marketing costs
C)the price is based on costs that include fully allocated manufacturing and design costs but not include marketing costs
D)the price can include only fixed manufacturing costs and design costs but not include marketing costs
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Chapter 14: Cost Allocation, customer-Profitability Analysis, and Sales-Variance Analysis
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Sample Questions
Q1) For companies in which full allocation is not followed,which of the following is true of corporate sustaining costs?
A)allocated to divisions using cause-and-effect relationship
B)allocated to customers using cause-and-effect relationship
C)added to aggregate operating incomes of the divisions
D)subtracted as a lump-sum amount after aggregating operating incomes of the divisions
Q2) Which cost-allocation criterion is most likely to subsidize poor performers at the expense of the best performers?
A)the fairness or equity criterion
B)the benefits-received criterion
C)the ability to bear criterion
D)the cause-and-effect criterion
Q3) Corporate-sustaining costs are costs of activities to support individual customers,regardless of the number of units or batches of product delivered to the customer.
A)True
B)False
Q4) What are the two components of the sales-volume variance?
Page 16
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Chapter 15: Allocation
of Support-Department Costs, common Costs, and Revenues
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Sample Questions
Q1) The FASB (Financial Accounting Standards Board)provides cost accounting guidance (standards)for U.S.government contractors who do business with the federal government.
A)True
B)False
Q2) Emrald Corp currently uses a manufacturing facility costing $520,000 per year;85% of the facility's capacity is currently being used.A start-up business has proposed a plan that would utilize the other 15% of the facility and increase the overall costs of maintaining the space by 12%.If the stand-alone method were used,what amount of cost would be allocated to the start-up business?
A)$75,660
B)$78,000
C)$66,300
D)$87,360
Q3) If the incremental users are newly formed companies or subunits,the incremental method may decrease their chances for short-run survival by assigning them a high allocation of the common costs.
A)True
B)False
Page 17
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Chapter 16: Cost Allocation: Joint Products and Byproducts
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Q1) Joint costs are the costs of a production process that yields multiple products simultaneously.
A)True
B)False
Q2) All separable costs in joint-cost allocations are always incremental costs.
A)True
B)False
Q3) 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?
Q4) Timber logs are processed into standard lumber used in home construction and wood chips that will be sold to landscapers.How would these products be classified?
A)primary products
B)main products
C)joint products
D)a primary product and a byproduct
Q5) What are joint costs,separable costs,and a split-off point?
Q6) What are the reasons for allocating joint costs to individual products or services?
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Chapter 17: Process Costing
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Sample Questions
Q1) The principal difference between process costing and job costing is that in job costing an averaging process is used to compute the unit costs of products or services.
A)True
B)False
Q2) The Esther Valve Corporation was recently formed to produce a brass valve that forms an essential part of a compressor manufactured by a major corporation.The direct materials are added at the start of the production process while conversion costs are added uniformly throughout the production process.September is Parson's first month of operations,and therefore,there was no beginning inventory.Direct materials cost for the month totaled $2,800,000,while conversion costs equaled $3,600,000.Accounting records indicate that 1,600,000 valves were started in September and 1,400,000 valves were completed.
Ending inventory was 20% complete as to conversion costs. Required:
a.What is the total manufacturing cost per valve for September?
b.Allocate the total costs between the completed valves and the valves in ending inventory.
Q3) 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) The standard-costing method ________.
A)adds a layer of complexity to the calculation of equivalent-unit costs in a process-costing environment
B)makes calculating equivalent-unit costs unnecessary
C)requires an analysis of the spoilage costs in beginning inventory
D)requires an analysis of the spoilage costs in ending inventory
Q2) How do job-costing systems account for spoilage?
Q3) Recognizing the value of scrap in the accounting records is always done at the time the scrap is produced.
A)True B)False
Q4) Normal spoilage costs are usually deducted from the costs of good units. A)True B)False
Q5) If a company inspects units only at the end of the production process,the units in ending work-in-process inventory are not assigned any costs of normal spoilage.
A)True
B)False
Q6) What are the objectives in accounting for spoilage?
Page 20
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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 ISO 9000?
A)It is a quality management system comprising different process improvement such as six sigma and lean manufacturing.
B)It is mandatory for all listed companies in US to get ISO certified.
C)It helps companies monitor,document,and certify the elements of their production processes that lead to quality.
D)It is a disciplined,data-driven,and statistical approach to improve the quality of products or services by identifying and removing the causes of defects.
Q2) The time from which a machine is setup for order till the product becomes a manufactured good is ________.
A)waiting time
B)manufacturing time
C)manufacturing cycle time
D)customer-response time
Q3) When evaluating alternatives to improve quality,both the relevant benefits as well as the relevant costs should be considered.
A)True
B)False
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Chapter 20: Inventory Management, just-In-Time, and Simplified Costing Methods
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Sample Questions
Q1) A push-through system that manufactures finished goods for inventory on the basis of demand forecasts and produces a master schedule for quantity and timing of units to be produced.
A)just-in-time purchasing
B)materials requirements planning
C)relevant total costs
D)economic order quantity
Q2) Carrying costs only include those costs that are entered into the financial accounting system and do not include the opportunity cost of the investment tied up in inventory.
A)True
B)False
Q3) Under backflush costing approach where three trigger points are used (stage A,stage C,and stage D),the purchase of materials is:
A)credited to the Materials and In-Process Inventory Control account
B)debited to the Materials and In-Process Inventory Control account
C)debited to the Materials Inventory Control account
D)ignored because the manufacturing process moves so quickly from acquisition of materials to the sale of the finished good
Page 22
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Chapter 21: Capital Budgeting and Cost Analysis
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Sample Questions
Q1) Hypore Darby Park Department is considering a new capital investment.The following information is available on the investment.The cost of the machine will be $348,400.The annual cost savings if the new machine is acquired will be $80,000.The machine will have a 6-year life,at which time the terminal disposal value is expected to be zero.Hypore Park Department is assuming no tax consequences.What is the internal rate of return for Hypore Park Department?
A)5%
B)10%
C)9%
D)11%
Q2) In the "make decisions by choosing among alternatives" stage of the capital budgeting process,a company determines which investment yields the greatest benefit and the least cost to the organization.
A)True
B)False
Q3) In determining whether to keep a machine or replace it,the original cost of the machine is a sunk cost and is NOT a relevant factor.
A)True
B)False
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Page 23
Chapter 22: Management Control Systems, transfer Pricing, and Multinational Considerations
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Q1) In decentralized organizations,a manager might look to further the success of their subunit to the detriment of other subunits.Such behavior would be from which of the following results of decentralization?
A)duplication of output
B)gains from raid decision making
C)unhealthy competition
D)broadening the reach of top management
Q2) Super Shoes Company manufactures sneakers.The Athletic Division sells its socks for $18 a pair to outsiders.Sneakers have manufacturing costs of $6.00 each for variable and $6.00 for fixed.The division's total fixed manufacturing costs are $315,000 at the normal volume of 70,000 units.
The European Division has offered to buy 15,000 Sneakers at the full cost of $12.The Athletic Division has excess capacity and the 15,000 units can be produced without interfering with the current outside sales of 70,000.The 85,000 volume is within the division's relevant operating range.
Explain whether the Athletic Division should accept the offer.
Q3) Negotiated transfer prices are often employed when market prices are stable.
A)True
B)False
Page 24
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Chapter 23: Performance Measurement, compensation, and Multinational Considerations
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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) There should be strict congruence between the performance evaluation of a subunit and the performance evaluation of that subunit's manager.
A)True
B)False
Q3) The balanced scorecard in most organizations is broken down into the following categories: commercial perspective,supplier perspective,external business-process perspective,and productivity perspective.
A)True
B)False
Q4) A major weakness of comparing two companies using only operating incomes as the basis of comparison is that it ignores the differences in the size of the investment and therefore any concept of yield or return on investment.
A)True
B)False
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