Accounting for Decision Making
Exam Answer Key
Course Introduction
Accounting for Decision Making is a course designed to equip students with the essential concepts and tools of accounting that support informed managerial decision-making. Emphasizing both financial and management accounting principles, the course explores the use of accounting information for planning, controlling, and evaluating business operations in various organizational settings. Students will learn how to interpret financial statements, analyze costs, assess performance, and make strategic decisions based on relevant accounting data. Real-world case studies and practical problems are incorporated to develop analytical and problem-solving skills critical for effective business leadership.
Recommended Textbook Cornerstones of Managerial Accounting 2nd Canadian Edition by Maryanne Mowen
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14 Chapters
2059 Verified Questions
2059 Flashcards
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Chapter 1: Introduction to Managerial Accounting
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Sample Questions
Q1) What does the Triple Bottom Line include?
A) measures of revenues generated by the company
B) measures of activities not simply related to increasing profits
C) measures of activities related to the costs incurred by the company
D) measures of activities related to increasing profits
Answer: B
Q2) Management accounting information is important for both for-profit and not-for-profit organizations.
A)True
B)False Answer: True
Q3) A cost accountant would normally occupy a staff position within an organization.
A)True
B)False Answer: True
Q4) Only financial accounting is governed by IASB.
A)True
B)False Answer: True
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Chapter 2: Basic Managerial Accounting Concepts
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Sample Questions
Q1) The cost of maintenance personnel in a factory building would be classified as direct labour.
A)True
B)False
Answer: False
Q2) Prime cost is the sum of direct materials and direct labour.
A)True
B)False
Answer: True
Q3) Book City had cost of goods sold of $140,000 for the year ended December 31.The finished goods inventory on January 1 was $35,000 and the finished goods inventory on December 31was $17,000.What was the amount of cost of goods manufactured for the year?
A) $52,000
B) $157,000
C) $158,000
D) $175,000
Answer: B
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Chapter 3: Cost Behaviour
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Sample Questions
Q1) Why would cost behaviour change outside of the relevant range?
Answer: The relevant range is the normal range of activity where cost relationships ordinarily remain valid.If an organization's output is outside of the relevant range,various fixed costs may increase or decrease.For example; the factory supervisor's salary is normally fixed,but if output increases beyond the relevant range,an additional supervisor may be needed.If output decreases dramatically outside of the relevant range,the factory supervisor may no longer be needed and the fixed cost would be eliminated.
Q2) Factory supervisor's salary
A)Variable
B)Fixed
Answer: B
Q3) Calculation of the cost line using the high-low method tests the lowest cost period to see if it is an outlier.
A)True
B)False
Answer: False
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Page 5
Chapter 4: Costvolumeprofit Analysis: a Managerial Planning Tool
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Sample Questions
Q1) Refer to the Figure.How many deluxe models are sold at break-even?
A) 220
B) 440
C) 660
D) 850
Q2) Which of the following is a characteristic of the cost-volume-profit graph?
A) It is hard to interpret.
B) It reveals how costs change as sales volume remains the same.
C) It cannot be plotted if the break-even point is known.
D) It shows the relationship among cost,volume,and profits.
Q3) What is the result when actual sales equal break-even sales?
A) the margin of safety is negative
B) the margin of safety is positive
C) the margin of safety equals zero
D) the margin of safety is negative or positive
Q4) Refer to the Figure.What is the contribution margin ratio?
A) 36%
B) 40%
C) 44%
D) 50%
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Chapter 5: Job-Order Costing
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176 Flashcards
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Sample Questions
Q1) Costs of job are transferred from work in process to finished goods
A)Completion of job
B)End of each accounting period
C)Materials are removed from storage into production
D)Product is sold
E)End of year
Q2) Refer to the Figure.What is the cost of goods sold for February?
A) $125,790
B) $175,700
C) $188,790
D) $307,300
Q3) Which of the following is a characteristic of job-order costing?
A) Products produced are identical in nature
B) Unit cost is computed by dividing process costs of the period by the units produced in the period.
C) Unit cost is computed by dividing total job costs by units sold on that job.
D) The cost of one job is typically different from that of another job.
Q4) The raw materials account is an inventory account located on the balance sheet.
A)True
B)False
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Chapter 6: Process Costing
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Sample Questions
Q1) The costs transferred from a prior process to a subsequent process
A)Equivalent units of production
B)Transferred-in costs
C)FIFO costing methods
D)Production report
Q2) It combines beginning inventory costs and work done with current-period costs and work to calculate this period's unit cost.
A)Parallel processing
B)Sequential processing
C)Process costing
D)Weighted average costing method
Q3) Refer to the Figure.How many units were started in Door Specialists second department during March?
A) 37,000
B) 40,000
C) 50,000
D) 63,000
Q4) Describe how process costing for services differs from process costing for manufactured goods.
Q5) Describe the differences between process costing and job-order costing.
Page 8
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Chapter 7: Activity-Based Costing and Management
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Sample Questions
Q1) The robust quality view of conformance is that variations in the product are acceptable.
A)True
B)False
Q2) What quality-control method involves sampling from batches of finished goods to determine whether they meet an acceptable quality level?
A) process acceptance
B) product acceptance
C) quality acceptance
D) velocity acceptance
Q3) Which of the following is NOT a category of environmental cost?
A) prevention costs
B) detection costs
C) total quality costs
D) internal failure costs
Q4) To calculate an activity rate,the practical capacity of each activity must be determined.
A)True B)False
Q5) What is the activity based costing hierarchy? Give an example for each.
Page 9
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Chapter 8: Absorption and Variable Costing,and Inventory Management
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Sample Questions
Q1) Birdd Company uses 450 units of a part each year.The cost of placing one order is $10; the cost of carrying one unit in inventory for a year is $2.Birdd currently orders 90 units at a time. A. What is the annual ordering cost of Birdd's current policy?
B. What is the annual carrying cost of Birdd's current policy?
C. What is the total cost of Birdd's current policy?
D. What is the EOQ for Birdd?
E. What is the total inventory-related cost at the EOQ?
Q2) Refer to Carmel Company.Carmel has decided to begin ordering 60 units at a time.What is the average annual carrying cost of Benton's new policy?
A) $5
B) $30
C) $120
D) $180
Q3) What is the economic order quantity (EOQ)?
A) the quantity that minimizes total ordering cost
B) the quantity that maximizes total profit
C) the quantity that minimizes total inventory-related costs
D) the quantity that maximizes carrying costs
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Chapter 9: Budgeting, production, cash, and Master Budget
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Sample Questions
Q1) The output of the cost of goods sold budget is entered into the pro forma income statement.
A)True
B)False
Q2) Refer to the Figure.How many kilograms of raw materials purchases were budgeted for in February?
A) 30,000 kg
B) 32,000 kg
C) 54,000 kg
D) 72,000 kg
Q3) Budgeted capital expenditures
A)Operating budget
B)Financial budget
Q4) Ideally,managers are held accountable for controllable costs.
A)True
B)False
Q5) Budgets identify objectives and the actions needed to achieve them because they are foresighted financial plans.
A)True
B)False
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Chapter 10: Standard Costing: a Managerial Control Tool
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Sample Questions
Q1) Why are standard cost systems adopted?
A) to collect additional information
B) to increase efficiency in a just-in-time environment
C) to improve planning and control,and to facilitate product costing
D) to enhance the operational control of firms that emphasize continuous improvement
Q2) RJB Builders makes mouldings.Its standard quantity of material allowed is 1 m of wood per 1 m of moulding at a standard price of $2.00 per metre.During September,RJB Builders purchased 500,000 m of wood at a cost of $1.90 per metre,which produced only 499,000 m of moulding.What was the materials price variance and the materials usage variance,respectively?
A) $49,900 U and $2,000 F
B) $49,900 F and $1,900 U
C) $50,000 F and $1,900 U
D) $50,000 F and $2,000 U
Q3) The quantity of each input that should be used to produce one unit of output is documented on the standard cost sheet.
A)True
B)False
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Chapter 11: Flexible Budgets and Overhead Analysis
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Sample Questions
Q1) What is the formula for total fixed overhead variance?
A) total actual overhead total applied overhead
B) AFOH standard overhead rate × SH
C) AFOH SFOR × SH
D) AFOH SFOR × AH
Q2) Refer to the Figure.Which of the following can be concluded when comparing the static budget to the actual outcomes?
A) The manager had less direct labour hours.
B) The variances are all unfavourable.
C) The comparison is useful for assessing managerial efficiency.
D) A static budget should be used for assessing efficiency.
Q3) In an activity framework,recording costs is equivalent to managing activities.
A)True
B)False
Q4) What is the formula for the variable overhead spending variance?
A) (AH SH)SVOR
B) (AVOR SVOR)SH
C) (AVOR SVOR)AH
D) (AH SH)AVOR
Q5) What is a performance report?
Page 13
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Chapter 12: Performance Evaluation and Decentralization
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Sample Questions
Q1) Ruter Company had the following historical accounting data per unit: \(\begin{array}{lr}
\text { Direct materials } & \$ 70 \\
\text { Direct labour } & 40 \\
\text { Variable overhead } & 25 \\
\text { Fixed overhead } & 34 \\
\text { Variable selling expenses } & 55 \\
\text { Fixed selling expenses } & 19 \end{array}\) The units are normally transferred internally from Division X to Division Y.The units also may be sold externally for $210 per unit.The minimum profit level accepted by the company is a markup of 30%.There was no beginning or ending inventories. Suppose Division X uses full cost plus markup.What would be the transfer price?
A) $129.00
B) $136.50
C) $167.00
D) $219.70
Q2) Transfer pricing does not affect divisional profits.
A)True B)False
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Page 14
Chapter 13: Short-Run Decision Making: Relevant Costing
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Sample Questions
Q1) Western Industries manufactures 40,000 components per year.The manufacturing cost of the components was determined as follows: \[\begin{array} { l r }
\text { Direct materials } & \$ 75,000 \\
\text { Direct labour } & 120,000 \\
\text { Variable manufacturing overhead } & 45,000 \\
\text { Fixed manufacturing overhead } & 60,000 \\
\text { Total } & \$ 300,000
\end{array}\] An outside supplier has offered to sell the component for $12.75. Western Industries can rent its unused manufacturing facilities for $45,000 if it purchases the component from the outside supplier.
What is the effect on income if Western purchases the component from the outside supplier?
A) a $135,000 increase
B) a $165,000 decrease
C) a $195,000 increase
D) a $225,000 decrease
Q2) Target costing involves much more up-front work than cost-based pricing.
A)True
B)False
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Page 15
Chapter 14: Capital Investment Decisions
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Sample Questions
Q1) Less objective results are obtainable if an independent party performs the postaudit of a capital investment.
A)True B)False
Q2) A postaudit evaluates the overall outcome of the investment and proposes corrective action if needed.
A)True B)False
Q3) Today Production Company is considering the purchase of a flexible manufacturing system.The cash benefits / savings associated with the system are as follows: \[\begin{array} { l r }
\text { Decreased waste } & \$ 150,000 \\
\text { Increased quality } & 200,000 \\
\text { Decrease in operating costs } & 125,000 \\
\text { Increase in on-time deliveries } & 25,000
\end{array}\] The system will cost $1,500,000 and will last 10 years.The company's cost of capital is 10%.
Required: A. What is the payback period for the flexible manufacturing system? B. What is the NPV for the flexible manufacturing system?
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Page 16