Decision Making in Accounting Test Questions
Course Introduction
Decision Making in Accounting explores the critical role of accounting information in the decision-making processes of organizations. This course examines how financial and managerial accounting data are used by managers, investors, and other stakeholders to make informed strategic, operational, and financial decisions. Students will analyze topics such as cost behavior, budgeting, performance evaluation, risk assessment, and ethical considerations in accounting. Through case studies and practical examples, the course emphasizes interpreting and utilizing accounting information to solve real-world business problems and support effective decision-making in a variety of contexts.
Recommended Textbook
Introduction to Managerial Accounting 8th Edition by Peter Brewer
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Page 2
Chapter 1: Managerial Accounting and Cost Concepts
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Sample Questions
Q1) The cost of napkins put on each person's tray at a fast food restaurant is a variable cost with respect to how many persons are served.
A)True
B)False
Answer: True
Q2) For financial reporting purposes, the total amount of period costs incurred to sell 5,000 units is closest to:
A)$12,500
B)$8,300
C)$7,000
D)$5,500
Answer: A
Q3) If 6,000 units are produced, the total amount of indirect manufacturing cost incurred is closest to:
A)$23,100
B)$9,900
C)$11,000
D)$20,900
Answer: D
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Page 3
Chapter 2: Job-Order Costing: Calculating Unit Product Costs
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Sample Questions
Q1) The predetermined overhead rate for the Finishing Department is closest to:
A)$5.84 per direct labor-hour
B)$3.60 per direct labor-hour
C)$11.00 per direct labor-hour
D)$14.60 per direct labor-hour
Answer: D
Q2) Bernson Corporation is using a predetermined overhead rate that was based on estimated total fixed manufacturing overhead of $492,000 and 30,000 machine-hours for the period.The company incurred actual total fixed manufacturing overhead of $517,000 and 28,300 total machine-hours during the period.The amount of manufacturing overhead that would have been applied to all jobs during the period is closest to:
A)$464,120
B)$492,000
C)$487,703
D)$25,000
Answer: A
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4
Chapter 3: Job-Order Costing: Cost Flows and External Reporting
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Sample Questions
Q1) The cost of goods manufactured for May is:
A)$205,000
B)$210,000
C)$207,000
D)$212,000
Answer: B
Q2) The journal entry to record the allocation of any underapplied or overapplied manufacturing overhead for November would include the following:
A)credit to Finished Goods of $250
B)credit to Finished Goods of $57,370
C)debit to Finished Goods of $250
D)debit to Finished Goods of $57,370
Answer: A
Q3) The overhead for the year was:
A)$714 overapplied
B)$7,626 underapplied
C)$714 underapplied
D)$7,626 overapplied
Answer: B
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Chapter 4: Activity-Based Costing
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Sample Questions
Q1) A plantwide predetermined overhead rate based on direct labor-hours results in low overhead costs for products with a high direct labor-hour content and high overhead costs for products with a low direct labor-hour content.
A)True
B)False
Q2) The activity rate for the General Factory activity cost pool under activity-based costing is closest to:
A)$36.23 per MH
B)$68.48 per MH
C)$96.19 per MH
D)$33.59 per MH
Q3) Product-level activities relate to specific products and typically must be carried out whenever a batch is run or a unit of the product is made.
A)True
B)False
Q4) An activity rated is computed for each product.
A)True
B)False
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Chapter 5: Process Costing6 Cost-Volume-Profit Relationships
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Sample Questions
Q1) How many units were started into production during the month?
A)68,000 units
B)84,000 units
C)72,000 units
D)56,000 units
Q2) Bims Corporation uses the weighted-average method in its process costing system.The Assembly Department started the month with 2,000 units in its beginning work in process inventory that were 70% complete with respect to conversion costs.An additional 61,000 units were transferred in from the prior department during the month to begin processing in the Assembly Department.There were 18,000 units in the ending work in process inventory of the Assembly Department that were 60% complete with respect to conversion costs. What were the equivalent units for conversion costs in the Assembly Department for the month?
A)45,000
B)77,000
C)54,400
D)55,800
Q3) In a process costing system, costs are traced directly to jobs.
A)True
B)False
Page 7
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Chapter 6: Cost-Volume-Profit Relationships
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Sample Questions
Q1) Which of the following is an assumption underlying standard CVP analysis?
A)In multiproduct companies, the sales mix is constant.
B)In manufacturing companies, inventories always change.
C)The price of a product or service is expected to change as volume changes.
D)Fixed expenses will change as volume increases.
Q2) Which of the following is true regarding the contribution margin ratio of a company that produces only a single product?
A)As fixed expenses decrease, the contribution margin ratio increases.
B)The contribution margin ratio multiplied by the selling price per unit equals the contribution margin per unit.
C)The contribution margin ratio will decline as unit sales decline.
D)The contribution margin ratio equals the selling price per unit less the variable expense ratio.
Q3) The break-even point in dollar sales is closest to:
A)$175,500
B)$261,600
C)$246,000
D)$0
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Chapter 7: Variable Costing and Segment Reporting: Tools for Management
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Sample Questions
Q1) A properly constructed segmented income statement in a contribution format would show that the segment margin of the Consumer business segment is:
A)$164,000
B)$62,000
C)$394,000
D)$184,000
Q2) Under absorption costing, what is Beach Corporation's actual net operating income for its first year?
A)$60,000
B)$115,200
C)$117,600
D)$124,800
Q3) The contribution margin of the Commercial business segment is:
A)$137,000
B)$184,000
C)$62,000
D)$423,000
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Chapter 8: Master Budgeting
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Sample Questions
Q1) The direct labor budget shows the direct labor-hours required to satisfy the production budget.
A)True
B)False
Q2) If the budgeted direct labor time for December is 4,000 hours, then the predetermined manufacturing overhead per direct labor-hour for December would be:
A)$9.20
B)$30.70
C)$23.20
D)$1.70
Q3) The budgeted purchases for May are:
A)$49,400
B)$50,400
C)$60,000
D)$33,600
Q4) The master budget consists of a number of separate but interdependent budgets.
A)True
B)False
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Chapter 10: Performance Measurement in Decentralized Organizations
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Sample Questions
Q1) The turnover for the investment opportunity is closest to:
A)14.29
B)3.20
C)0.07
D)0.31
Q2) Last year's margin was closest to:
A)10.0%
B)73.3%
C)5.0%
D)31.7%
Q3) The Casket Division of Saal Corporation had average operating assets of $950,000 and net operating income of $135,200 in January.The company uses residual income to evaluate the performance of its divisions, with a minimum required rate of return of 13%. Required: What was the Casket Division's residual income in January?
Q4) Residual income can be used most effectively in comparing the performance of divisions of different size.
A)True
B)False
11
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Chapter 11: Differential Analysis: The Key to Decision Making
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Sample Questions
Q1) Which product makes the LEAST profitable use of the milling machines?
A)Product A
B)Product B
C)Product C
D)Product D
Q2) Up to how much should the company be willing to pay for one additional minute of grinding machine time if the company has made the best use of the existing grinding machine capacity? (Round off to the nearest whole cent.)
A)$18.33
B)$12.20
C)$0.00
D)$19.30
Q3) Avoidable costs are irrelevant costs in decisions.
A)True
B)False
Q4) In a special order situation that involves using capacity that is not idle, opportunity costs are zero.
A)True B)False
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Chapter 12: Capital Budgeting Decisions
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Sample Questions
Q1) (Ignore income taxes in this problem.)Anthony operates a part time auto repair service.He estimates that a new diagnostic computer system will result in increased cash inflows of $1,500 in Year 1, $2,100 in Year 2, and $3,200 in Year 3.If Anthony's required rate of return is 10%, then the most he would be willing to pay for the new diagnostic computer system would be:
A)$4,599
B)$5,501
C)$5,638
D)$5,107
Q2) Ignoring the cash inflows, to the nearest whole dollar how large would the salvage value of the equipment have to be to make the investment in the equipment financially attractive?
A)$625,400
B)$1,518,333
C)$273,300
D)$49,194
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13
Chapter 9: Flexible Budgets Standard Costs and Variance Analysis
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Sample Questions
Q1) The labor efficiency variance for May is:
A)$4,482 U
B)$4,482 F
C)$4,140 U
D)$4,140 F
Q2) The variable overhead efficiency variance for the month is closest to:
A)$1,003 U
B)$935 U
C)$1,003 F
D)$935 F
Q3) The labor rate variance for August is:
A)$464 F
B)$512 U
C)$464 U
D)$512 F
Q4) Fixed costs should usually be included in performance reports because fixed costs are generally controllable.
A)True
B)False
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Chapter 13: Statement of Cash Flows
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Sample Questions
Q1) Under the indirect method of determining the net cash provided by operating activities on the statement of cash flows, a decrease in inventory would be added to net income.
A)True
B)False
Q2) The net cash provided by (used in)operating activities for the year was:
A)$60
B)$95
C)$94
D)$85
Q3) Based solely on the information above, the net cash provided by (used in)financing activities on the statement of cash flows would be:
A)$(70,000)
B)$70,000
C)$(130,000)
D)$130,000
Q4) Free cash flow decreases when a company issues common stock for cash.
A)True
B)False
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Chapter 14: Financial Statement Analysis
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Sample Questions
Q1) The company's earnings per share for Year 2 is closest to:
A)$8.18 per share
B)$0.38 per share
C)$0.54 per share
D)$0.68 per share
Q2) The company's equity multiplier at the end of Year 2 is closest to:
A)0.69
B)2.23
C)0.45
D)1.45
Q3) Which of the following actions would improve a current ratio of 0.8?
A)Use cash to pay off some current liabilities.
B)Purchase additional marketable securities with cash.
C)Acquire a parcel of land in exchange for common stock.
D)Purchase additional inventory on credit.
Q4) The company's working capital at the end of Year 2 is:
A)$732,000
B)$831,000
C)$289,000
D)$590,000
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Chapter 15: Job-Order Costing: Cost Flows and External Reporting
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Sample Questions
Q1) In the Excel, or spreadsheet, approach to recording financial transactions, factory depreciation is recorded as a decrease in the Property, Plant, and Equipment column and as a decrease in the Retained Earnings column.
A)True
B)False
Q2) In the Excel, or spreadsheet, approach to recording financial transactions, any transactions involving sales or expenses will be recorded in the Net Income column of the balance sheet.
A)True
B)False
Q3) In the Excel, or spreadsheet, approach to recording financial transactions, factory utility costs paid in cash are recorded as a decrease in the Cash column and as an increase in the Manufacturing Overhead column.
A)True
B)False
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Chapter 16: Process Costing6 Cost-Volume-Profit Relationships
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Sample Questions
Q1) Marston Corporation uses the FIFO method in its process costing system.The equivalent units of production for March for conversion costs totaled 37,500 units.The beginning work in process inventory in March consisted of 15,000 units, 60% complete with respect to conversion costs.The ending work in process inventory in March consisted of 10,000 units, 75% complete with respect to conversion costs.The number of units started during the month was:
A)41,500 units
B)34,000 units
C)25,000 units
D)72,500 units
Q2) What are the equivalent units for conversion costs for the month in the first processing department?
A)8,095
B)7,100
C)9,300
D)750
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Chapter 17: Cost-Volume-Profit Relationships
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Sample Questions
Q1) A major advantage of the high-low method of cost estimation is that it omits all data from the analysis other than the lowest and highest costs.
A)True
B)False
Q2) If 7,800 setups are projected for the next period, total expected overhead cost would be closest to:
A)$156,000
B)$236,000
C)$214,400
D)$276,000
Q3) Using the high-low method, the estimate of the fixed component of inspection cost per month is closest to:
A)$10,344
B)$10,441
C)$3,852
D)$10,176
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19
Chapter 18:Flexible Budgets, Standard Costs, and Variance Analysis
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Sample Questions
Q1) The variable overhead efficiency variance is:
A)$1,645 F
B)$2,121 U
C)$2,121 F
D)$1,645 U
Q2) The variable overhead rate variance is:
A)$18,955 F
B)$19,125 F
C)$19,125 U
D)$18,955 U
Q3) At the beginning of last year, Monze Corporation budgeted $600,000 of fixed manufacturing overhead and chose a denominator level of activity of 100,000 direct labor-hours.At the end of the year, Monze's fixed manufacturing overhead budget variance was $8,000 unfavorable.Its fixed manufacturing overhead volume variance was $21,000 favorable.Actual direct labor-hours for the year were 96,000.What was Monze's actual fixed manufacturing overhead for last year?
A)$563,000
B)$579,000
C)$608,000
D)$592,000
Page 20
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Chapter 19: Flexible Budgets, Standard Costs, and Variance Analysis
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Sample Questions
Q1) Landoni Corporation uses a standard cost system in which inventories are recorded at their standard costs and any variances are closed directly to Cost of Goods Sold.The standards for direct materials for the company's only product specify 2.7 kilos per unit at $5.00 per kilo or $13.50 per unit.During the year, the company purchased 75,200 kilos of raw material at a price of $4.90 per kilo and used 69,290 kilos of the raw material to produce 25,700 units of work in process.
Assume that all transactions are recorded on a worksheet as shown in the text.On the left-hand side of the equals sign in the worksheet are columns for Cash, Raw Materials, Work in Process, Finished Goods, and PP&E (net).All of the variance columns are on the right-hand-side of the equals sign along with the column for Retained Earnings.
When recording the raw materials purchases, the Raw Materials inventory account will increase (decrease)by:
A)($368,480)
B)$376,000
C)($376,000)
D)$368,480
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Page 21
Chapter 20: A Capital Budgeting Decisions
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Sample Questions
Q1) (Ignore income taxes in this problem.)Suddeth Corporation has entered into a 6 year lease for a building it will use as a warehouse.The annual payment under the lease will be $2,468.The first payment will be at the end of the current year and all subsequent payments will be made at year-ends.If the discount rate is 5%, the present value of the lease payments is closest to:
A)$12,528
B)$14,103
C)$14,808
D)$11,050
Q2) The present value of a cash flow will never be greater than the future dollar amount of the cash flow.
A)True
B)False
Q3) The present value of a cash flow increases as it moves further into the future.
A)True
B)False
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22
Chapter 21: A Statement of Cash Flows
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Sample Questions
Q1) Under the direct method of determining the net cash provided by (used in)operating activities on the statement of cash flows, a decrease in prepaid expenses would be added to selling and administrative expenses to convert selling and administrative expenses to a cash basis.
A)True
B)False
Q2) On its statement of cash flows, what amount should Howard show for its net sales adjusted to a cash basis (i.e., cash received from sales)?
A)$616,000
B)$623,000
C)$625,000
D)$595,000
Q3) The net cash provided by (used in)investing activities for the year was:
A)$(127)
B)$(138)
C)$138
D)$127
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