Accounting for Decision Making and Control
Exam Answer Key
Course Introduction
Accounting for Decision Making and Control focuses on the role of accounting information in the decision-making processes of managers within organizations. The course covers key concepts in cost measurement, budgeting, performance evaluation, and financial analysis, emphasizing how accounting data supports planning, control, and operational decisions. Students learn to interpret and apply accounting information for resource allocation, process improvement, and strategic planning, fostering an understanding of how effective use of financial and non-financial information drives organizational success.
Recommended Textbook
Managerial Accounting The Cornerstone of Business Decision Making 7th Edition by Maryanne M.
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Page 2
Chapter 1: Introduction to Managerial Accounting
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Sample Questions
Q1) In June 2002, Congress passed the________________________ in response to financial scandals such as Enron.
Answer: Sarbanes-Oxley Act (SOX)
Q2) Which of the following would not be an example of a value-added activity?
A) timely delivery of products
B) offering the customer a variety of products
C) storage of finished products
D) excellent customer service
Answer: C
Q3) Financial accounting is governed by GAAP.
A)True
B)False
Answer: True
Q4) The managerial activity of monitoring a plan's implementation and taking corrective action as needed is referred to as ______________.
Answer: controlling
Q5) Only a _________________________ is permitted to serve as an external auditor.
Answer: Certified Public Accountant (CPA)
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Chapter 2: Basic Managerial Accounting Concepts
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Sample Questions
Q1) A cost object is any item such as products, customers, departments, regions, and so on, for which costs are measured and assigned.
A)True
B)False
Answer: True
Q2) A cost that stays the same in total regardless of changes in output
A)period cost
B)direct cost
C)opportunity cost
D)variable cost
E)indirect cost
F)fixed cost
G)product cost
Answer: F
Q3) Gross margin equals
A) cost of goods sold selling and administrative expenses.
B) direct materials + direct labor + manufacturing overhead.
C) sales revenue cost of goods sold.
D) cost of goods manufactured + selling and administrative expenses.
Answer: C
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Chapter 3: Cost Behavior, Cost Forecasting, and Segmented Income Statements
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Sample Questions
Q1) __________________________ is critically important in determining cost behavior and is by far the most widely used method in practice.
Answer: Managerial judgement
Q2) The fabric used to manufacture curtains is an example of a material or a ____________ cost.
Answer: variable
Q3) Mixed cost is computed using the formula Total Cost = Fixed Cost + (Variable Rate × Output).The _____ explains changes in the dependent variable of the mixed cost formula.
A) sum of the fixed cost and the variable cost
B) difference of the total cost and the fixed cost
C) units of output
D) variable rate of cost per unit
Answer: C
Q4) sales commissions
A)variable
B)fixed
Answer: A
Q5) Rental expense for a warehouse is an example of a ___________ cost.
Answer: fixed
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Chapter 4: Job-Order Costing and Normal Cost Overhead Application
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Sample
Questions
Q1) direct materials, direct labor and applied overhead are totaled to yield manufacturing cost of job
A)completion of job
B)end of each accounting period
C)materials are moved from storage into production
D)product is sold
E)end of year
Q2) The difference between actual overhead and applied overhead
A)predetermined overhead rate
B)plantwide overhead rate
C)departmental overhead rate
D)overhead variance
E)overapplied overhead
F)underapplied overhead
G)applied overhead
H)normal cost of goods sold
Q3) The cost of goods sold appearing on the income statement as an expense, when using a normal costing system, is the normal cost of goods sold.
A)True
B)False
Page 6
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Chapter 5: Activity-Based Costing and Management
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Sample Questions
Q1) Increasing the efficiency of necessary activities by using economies of scale is known as
A) activity inputs.
B) activity sharing.
C) control activities.
D) cycle time.
Q2) One of the questions answered by activity analysis should be "What activities are done?"
A)True
B)False
Q3) Product diversity means that products consume overhead activities in systematically different proportions.
A)True
B)False
Q4) Which of the following is a value-added activity?
A) Reordering parts
B) Rework
C) Processing sales orders
D) Handling customer complaints
Q5) ___________________ are performed each time a unit is produced.
Page 7
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Chapter 6: Process Costing
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Sample Questions
Q1) The _____________________ provides an analysis of the physical flow of units.
Q2) If changes occur in the ________ of the manufacturing inputs from one period to the next, then FIFO produces a more accurate unit cost than does the weighted average method.
Q3) By October 31, the 3,600 units that were 85% complete remained in mixing department.Eclypso uses the weighted average method.Which of the following is Eclypso's cost of October's ending work in process for the mixing department? (Note: Round answer to two decimal places.)
A) $27,500.40
B) $29,200.60
C) $22,520.50
D) $37,117.80
Q4) The FIFO method is the only method used to calculate equivalent units in process costing.
A)True
B)False
Q5) ___________ costs are a type of raw material cost.
Q6) Costing system used by a food manufacturer.
A)Process Costing
B)Job Order Costing
Page 8
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Chapter 7: Cost-Volume-Profit Analysis
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Sample Questions
Q1) A graph that depicts the relationships among cost, volume and profits (operating income) is the
A) Cost graph.
B) Volume graph.
C) Cost-volume-profit graph.
D) Profit-volume graph.
E) break-even graph.
Q2) Which of the following can be considered a crude measure of operating risk?
A) The margin of safety
B) The operating leverage
C) The indifference point
D) The variable cost ratio
Q3) If the contribution margin ratio increases, the break-even point in sales dollars will
A) increase.
B) decrease.
C) remain the same.
D) double.
Q4) The quantity at which two systems produce the same operating income is referred to as the ___________________.
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Chapter 8: Tactical Decision-Making and Relevant Costing
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Sample Questions
Q1) At split-off, the joint costs of production for joint products are not relevant to the sell-or-process-further decision.
A)True
B)False
Q2) In order to be classified as a _________________, a cost must possess these two characteristics: 1) they are future costs and 2) they differ across alternatives.
Q3) The markup includes desired profit and any costs not included in the base cost.
A)True
B)False
Q4) Which of the following is a qualitative factor that Fuller would consider in making the decision to accept or reject the special order?
A) cost of yarn and backing
B) cost of setup labor
C) the no-layoff policy
D) the use of machinery
E) the machining and electricity
Q5) A _________________ can be used to structure the decision maker's thinking and to organize the information to make a good decision.
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Chapter 9: Profit Planning and Flexible Budgets
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Sample Questions
Q1) The cash budget and budgeted balance sheet are part of the ________________.
Q2) ending finished goods inventory budget
A)Operating Budget
B)Financial Budget
Q3) What is the flexible budget variance for the first quarter?
A) $1,000 U
B) $23,000 U
C) $23,000 F
D) $1,000 F
E) None of these.
Q4) The direct materials purchases budget is based on the sales budget.
A)True
B)False
Q5) What is the budgeted production of SR200 for May in units?
A) 8,750
B) 9,950
C) 8,000
D) 1,200
E) 10,500
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Chapter 10: Standard Costing and Variance Analysis
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Sample Questions
Q1) These reflect the amount that should be paid for the quantity of input to be used.
A)Quantity Standards
B)Ideal Standards
C)Price Standards
D)Standard Cost Sheet
E)Upper Control Limit
F)Currently Attainable Standards
G)Kaizen Standards
Q2) The standard unit cost is developed before the standard costs for direct materials, direct labor, and overhead can be set.
A)True
B)False
Q3) What is the fixed overhead spending variance for Griffen?
A) $2,000 U
B) $8,000 U
C) $4,000 U
D) $20,000 U
Q4) The ____________________ is the difference between budgeted fixed overhead and applied fixed overhead.
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Chapter 11: Performance Evaluation and Decentralization
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Sample Questions
Q1) Economic value added is just a specific way of calculating residual income.
A)True
B)False
Q2) The most common measure of performance for an investment center.
A)Turnover
B)Margin
C)ROI
D)Residual income
Q3) The Balanced Scorecard perspective that defines the capabilities than an organization needs to create long-term growth and improvement is the ____ perspective.
A) learning and growth
B) internal business process
C) customer
D) financial
E) None of these.
Q4) Decentralization is usually achieved by creating units called divisions.
A)True
B)False
Q5) _________________ emphasizes only effectiveness of implementation.
Page 13
Q6) _______________ indicate the minimum ROI necessary to accept an investment.
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Page 14
Chapter 12: Capital Investment Decisions
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Sample Questions
Q1) Postaudits ensure that resources are used wisely by evaluating profitability.
A)True
B)False
Q2) Tina invested in a project with a payback period of 4 years.The project brings $20,000 per year for a period of 10 years.What was the initial investment?
A) $80,000
B) $107,500
C) $162,000
D) $240,000
E) Cannot be determined from this information.
Q3) The minimum acceptable rate of return for a project is the required rate of return.
A)True
B)False
Q4) The interest rate that sets the present value of a project's cash inflows equal to the present value of the project's cost is called the internal rate of return.
A)True
B)False
Q5) The major disadvantage of a postaudit is that it is ____________.
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Chapter 13: Emerging Topics in Managerial Accounting:
Sustainability, Quality Cost, Lean Accounting, International
Issues, Enterprise Risk Management, the Managerial Accountant in
Forensicfraud Accounting
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Sample Questions
Q1) A manufacturing cell within a value stream is structured with four processes and associated unit processing times, which are as follows: Cutting: 4 minutes
Welding: 10 minutes
Polishing: 6 minutes
Finishing: 5 minutes
How many units can the cell produce per hour on a continuous running basis (production rate)?
A) 15 units
B) 10 units
C) 6 units
D) 5 units
Q2) ?Costs incurred because products and services fail to conform to requirements where lack of conformity is discovered prior to external sale
A)?Risk response net benefit
B)?Sustainability assurance
C)?Internal failure costs
D)?Duration-based costing
E)?Transaction risk
F)?Fraud Page 16
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Page 17
Chapter 14: Statement of Cash Flows
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Sample Questions
Q1) Worksheets offer increased ____________ in form and the added convenience of spreadsheet software packages.
Q2) All SEC-registered firms must issue a statement of cash flows, in addition to the income statement and balance sheet.
A)True
B)False
Q3) The activity from the balance sheet to be presented in the financing activities section of the statement of cash flows is based on an analysis of stockholders' equity only.
A)True
B)False
Q4) Which of the following activities include acquiring and selling land?
A) Research activities
B) Investing activities
C) Financing activities
D) Warehouse activities
Q5) Acquiring new equipment, selling long-term investments, and purchasing land are all examples of _______________.
Q6) Income statements are prepared on a (n) ______________.
Page 18
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Chapter 15: Financial Statement Analysis
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Sample Questions
Q1) A company has an account receivable turnover ratio of 4.The average accounts receivable during the period is $200,000.What is the amount of net sales for the period?
A) $220,000
B) $800,000
C) $520,000
D) $740,000
Q2) Which of the following items is generally used as a base in vertical analysis to express as its percentage the line items on the balance sheet?
A) Owner's equity
B) Depreciation expense
C) Total assets
D) Cost of goods sold
Q3) A liquidity ratio measures the
A) income or operating success of an enterprise over a period of time.
B) ability of the enterprise to survive over a long period of time.
C) short-term ability of the enterprise to pay its obligations and to meet unexpected needs for cash.
D) number of times interest is earned.
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