Accounting for Management Decisions Study Guide Questions
Course Introduction
Accounting for Management Decisions introduces students to the principles and techniques of managerial accounting, focusing on the use of accounting information in planning, controlling, and decision-making processes within organizations. The course covers topics such as cost behavior analysis, budgeting, performance evaluation, and the application of quantitative data to support strategic choices. Through practical case studies and real-world scenarios, students learn how managers utilize accounting tools to assess financial performance, allocate resources effectively, and make informed business decisions to drive organizational success.
Recommended Textbook
ACCT Managerial Asia Pacific Edition 1st Edition by Prabhu Sivabalan
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15 Chapters
1304 Verified Questions
1304 Flashcards
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Page 2
Chapter 1: Introduction to Managerial Accounting
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51 Flashcards
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Sample Questions
Q1) ___________ involve(s)the development of short-terms objectives and goals.
A) Controlling activities
B) Strategic planning
C) Operational planning
D) Financial activities
Answer: C
Q2) You are now considering your housing options for next semester.If the cost of a dorm room and the cost of an apartment are exactly the same,housing costs are:
A) sunk costs.
B) an opportunity cost.
C) not relevant.
D) relevant.
Answer: C
Q3) Looking at how a company will distinguish itself from its competitors involves:
A) operational planning.
B) strategic planning.
C) internal planning.
D) financial planning.
Answer: B
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Page 3
Chapter 2: Product Costing: Manufacturing Processes, cost
Terminology and Cost Flows
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Sample Questions
Q1) Johnson Manufacturing has the following selected information available for the year: \(\begin{array}{lr}
\text { Direct material purchased } &\$40000\\
\text { Direct material used } &45000\\
\text { Direct labour incurred } &75000\\
\text {Manufacturing overhead incurred } &50000\\
\text { Cost of goods manufactured} &100000\\ \end{array}\)
In addition,the cost of the finished goods inventory increased by $10 000 from the beginning to the end of the year.Cost of goods sold for the year is:
A) $ 80 000
B) $170 000
C) $ 90 000
D) $110 000
Answer: C
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4
Chapter 3: Cost Behaviour
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106 Flashcards
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Sample Questions
Q1) To the nearest dollar,what would be the estimated total costs if 500 units were produced?
A) $ 544
B) $4236
C) $3692
D) $3147
Answer: C
Q2) When predicting cost behaviour,the volume of production for which the fixed and variable cost relationships are assumed to hold true is called the:
A) relevant cost area.
B) regression area.
C) dependent variable area.
D) relevant range.
Answer: D
Q3) Regression analysis is a technique used to:
A) estimate the step and mixed components of total cost.
B) estimate the fixed and variable components of a mixed cost.
C) estimate the fixed and variable components of a step cost.
D) estimate the fixed and mixed components of step cost.
Answer: B
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Chapter 4: Job Costing and Overhead Costing Systems
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60 Verified Questions
60 Flashcards
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Sample Questions
Q1) Which of the following statements regarding plantwide overhead rates is true?
A) As the number of diverse products a company makes increases,the likelihood that a plantwide overhead rate will be accurate increases.
B) Plantwide overhead rates must use machine hours as their cost driver.
C) As the number of diverse products a company makes increases,the likelihood that a company will replace a plantwide overhead rate with a departmental overhead rate increases.
D) Plantwide overhead rates are usually more costly to prepare than a departmental overhead rate.
Q2) Brian James Productions purchased $13 000 in direct materials in June.There was $7000 in direct materials at the end of May,and $3000 in direct materials at the end of June.Additionally,indirect labour costs of $13 000 were incurred in June.Manufacturing costs are $125 000 and manufacturing overhead was 30 per cent of conversion costs. Required:
What is the direct labour cost for May?
Q3) What is the purpose of a job cost report and what are some of the items that should be found on one?
Q4) Explain the term 'cost driver' and give several examples.
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Page 6
Chapter 5: Process Costing Systems
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Sample Questions
Q1) Lee Manufacturing uses process costing.The following information is available for the current year: \(\begin{array}{lr}
\text { Number of units in beginning inventory } &1000\\
\text { Number of units started in the current period} &\underline{10000}\\
\text {Number of units available in the current period } &11000\\
\text { Number of units in ending inventory} &\underline{(1600)}\\
\text {Number of units completed in the current period } &9400\\
\end{array}\)
If Lee uses the FIFO method of process costing,which units are assumed to be the first ones finished during the year?
A) The 1600 units in ending inventory
B) The 9400 out of the 10 000 units that were started in the current period
C) The 1000 units in beginning inventory
D) One-half of the beginning units and one-half of the ending units
Q2) Discuss the differences between normal spoilage and abnormal spoilage.
Q3) What is the weighted average process costing method?
Q4) Why do different resources have different equivalent units of production?
Page 7
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Chapter 6: Service and Operations Costing
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Sample Questions
Q1) The predetermined overhead rate for the month of June is:
A) $4.50 per labour hour
B) $9.00 per labour hour
C) $3.00 per labour hour
D) $1.90 per labour hour
Q2) Which of the following statements regarding service costing is true?
A) Service costing is used by manufacturing firms only.
B) Service costing is less relevant in a high uncertainty environment.
C) Mass services firms are a type of service organisation.
D) Mass shops are a type of service organisation.
Q3) Compared to manufacturing firms,cost allocation in service firms:
A) always requires greater sophistication in order to make work.
B) usually places a greater emphasis on direct labour costs.
C) emphasises direct material costs.
D) only requires the consideration of overhead costs.
Q4) How might retail organisations utilise service costing principles?
Q5) Explain how professional services,mass services and service shops relate to other costing systems existing in product organisations.
Q6) What is the purpose of a service profit value chain?
Q7) How is service costing different to traditional product costing?
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Chapter 7: Departmental Overhead Costing
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61 Flashcards
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Sample Questions
Q1) What is the overhead allocated to a product that uses 3 direct labour hours in Assembly and 5 machine hours in Machinery?
A) $960
B) $0
C) $1020
D) $900
Q2) Assuming that Motlop Manufacturing Company allocates service department 1 costs first,the amount of service department 1 costs allocated to Producing 2 under the direct method would be:
A) $6667
B) $3333
C) $6500
D) $3500
Q3) What are direct departmental overhead costs? Please give two examples in your explanation.
Q4) Which of the following would be classified as a service department?
A) The bottling department of a soft drink manufacturer
B) The painting department of an automobile manufacturer
C) The accounting department of a manufacturing company
D) The claims processing department of an insurance company
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Chapter 8: Activity-Based Costing
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Sample Questions
Q1) Which of the following would most likely be a batch-level cost?
A) Factory rent
B) Quality control
C) Energy costs for factory machinery
D) Research and development costs for a new product line
Q2) Traditional overhead allocation methods as opposed to activity-based allocation methods work best when:
A) there are many different volume-based cost drivers.
B) most costs are unit-level costs.
C) overhead can be estimated.
D) most costs are facility-level costs.
Q3) What would one expect to occur when cross subsidies are eliminated with the use of activity-based costing (ABC)?
A) Lower-volume products pick up more of their fair share of overhead costs.
B) Higher-volume products pick up more of their fair share of overhead costs.
C) Lower-volume products will be determined as being unprofitable.
D) Higher-volume products will be determined as being unprofitable.
Q4) Can activity-based costing (ABC)be used by service companies? If so,is the implementation of an ABC system in a service company different than that of a manufacturing company?
Page 10
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Chapter 9: Cost-Volume-Profit Analysis
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Sample Questions
Q1) Harrison Manufacturing has the following product information available: \(\begin{array}{ll}
\text { Sales price } & \$ 50 \text { per unit } \\
\text { Variable costs } & \$ 26 \text { per unit } \\
\text { Fixed costs } & \$ 87600 \end{array}\)
If Harrison is in the 35% tax bracket,how many units need to be sold in order to earn an after-tax target profit of $260 000?
A) 16 667
B) 14 483
C) 22 282
D) 20 317
Q2) The __________ represents the amount of each additional sales dollar that contributes towards the payment of fixed costs and,ultimately,net profit.
A) contribution margin ratio
B) contribution margin per unit
C) break-even point
D) variable cost per unit
Q3) What does operating leverage reveal about a company?
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Chapter 10: Relevant Costs and Product Planning Decisions
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75 Flashcards
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Sample Questions
Q1) What are the relevant costs per unit of Compton making the motors themselves?
A) $21.00
B) $23.25
C) $27.75
D) $30.00
Q2) In the decision on whether or not to drop an unprofitable product line,the product line will most likely be dropped if:
A) all of the product line's fixed costs are unavoidable.
B) the product line's total fixed costs are less than the contribution margin lost from dropping the product line.
C) the contribution margin lost from dropping the product line is less than the fixed costs avoided from dropping the product line.
D) the contribution margin lost from dropping the product line is more than the fixed costs avoided from dropping the product line.
Q3) Describe the theory of constraints.In doing so,define bottlenecks and throughput.
Q4) List at least two factors that should be considered in a make or buy decision.
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Chapter 11: Long-Term Capital Investmentdecisions
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Sample Questions
Q1) Peddler Products Inc.requires all capital investments to generate an internal rate of return of 14 per cent.The company is currently considering an investment that is expected to generate annual cash inflows of $25 000 for 5 years.
Required: What amount should the cost of the investment not exceed? Show computations and ignore income taxes.
Q2) Valeria Products is considering the purchase of a new machine costing $500 000.The machine is expected to reduce annual operating costs by $90 000 and will be depreciated using the straight-line method (with no half-year convention)over 10 years with no salvage value at the end of its useful life.Assuming a 40 per cent income tax rate,the machine's payback period is:
A) 5.56 years
B) 6.76 years
C) 9.26 years
D) 3.57 years
Q3) Answer the following questions with respect to a 'depreciation tax shield'.
A. What is a 'depreciation tax shield'?
B. What does it generate - a cash inflow or outflow?
C. Can it impact the net present value of a capital investment? Why or why not?
Q4) How is net present value (NPV)computed and interpreted?
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Chapter 12: Fixed and Rolling Budgets for Planning and Decision Making
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Sample Questions
Q1) Keep-it-Hot Inc.manufactures popular thermos flasks.On 30 June,the company had 1000 thermos flasks in inventory.Each thermos sells for $8.00.The company's policy is to maintain a thermos inventory equal to 10 per cent of next month's sales.The company expects the following sales activity for the third quarter of the year: \(\begin{array}{lc}
\text { July } & 7000 \text { units } \\ \text { August } & 15000 \text { units } \\ \text { September } & 10000 \text { units } \end{array}\)
In addition,October's sales are expected to be 9000 units.
Required:
A. Prepare a sales budget for the third quarter of the year.
B. Prepare a production budget for the third quarter of the year
Q2) Other than prior years' sales,list two other factors that are often used in the development of a sales forecast.
Q3) What is the difference between a static budget and a flexible budget?
Q4) Which type of budget,static or flexible,should be used by managers for control activities? Explain your answer.
Q5) There are many advantages of budgeting.List four of these advantages.
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Chapter 13: Management Accounting for Cost Control and Performance Evaluation Flexible
Budgets and Variance Analysis
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108 Verified Questions
108 Flashcards
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Sample Questions
Q1) The direct materials price variance for 2009 was:
A) $ 92 000 U
B) $ 92 000 F
C) $100 000 U
D) $100 000 F
Q2) The fixed overhead volume variance is calculated by taking the difference between:
A) actual fixed overhead and budgeted fixed overhead.
B) budgeted fixed overhead and budgeted variable overhead.
C) budgeted fixed overhead and applied fixed overhead.
D) budgeted fixed overhead per the flexible budget and budgeted fixed overhead per the static budget.
Q3) What was JAX Inc.'s sales price variance for 2009?
A) $29 600 F
B) $29 600 U
C) $13 600 F
D) $13 600 U
Q4) Drummel Ltd.has a $7000 unfavourable variable overhead efficiency variance.Give one possible reason for this variance.
Q5) What is 'task analysis' and how is it used in the context of variance analysis? Page 15
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Page 16
Chapter 14: Decentralisation and Modern Performance
Management Systems the Balanced Scorecard
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Sample Questions
Q1) Under what type of situation would return on investment (ROI)be a better performance measure than residual income and vice versa?
Q2) Barksdale Manufacturing Inc.produces its products in batches containing 100 units.Barksdale randomly samples 15 of the units in each batch for quality control.The costs of performing these random sample tests would most likely be which type of quality cost?
A) External failure cost
B) Prevention cost
C) Internal failure cost
D) Appraisal (detection)cost
Q3) Austin Inc.has a return on investment (ROI)of 10.2 per cent.The company's margin was 60 per cent and its turnover was 17. How do margin and turnover relate back to ROI and what kinds of information do each of them provide?
Q4) The segment margin for the miniature golf division is:
A) $175 000
B) $145 000
C) $125 000
D) $ 85 000
Page 17
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Chapter 15: Accounting for Sustainability Social
Reporting,environmental Reporting and Management Accounting
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Sample Questions
Q1) 'Management accounting cannot contribute to our understanding of sustainability issues in organisations.' To what extent do you agree or disagree with this statement?
Q2) How might the sustainability value chain perspective affect how the National Australia Bank (NAB)conducts its operations?
Q3) Which of the following elements does not relate to the environmental aspect of triple bottom line reporting?
A) GHG emissions
B) Water use
C) Spills onto waterways
D) Exports
Q4) Which of the following stakeholders of an organisation are least likely to be directly impacted by its external costs?
A) Environment
B) Society
C) Suppliers
D) Managers
Page 18
Q5) Why can't accounting systems capture external costs at present?
Q6) What are appraisal costs? How are they different to prevention costs?
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Page 19