Accounting Information for Decision Making
Chapter Exam Questions
Course Introduction
This course explores the fundamental role of accounting information in organizational decision making. Students will learn to interpret and analyze financial statements, evaluate cost behaviors, and apply accounting data to planning, control, and operational decisions. Emphasis is placed on the use of accounting information to support management in budgeting, performance evaluation, and strategic planning, enabling future professionals to make informed, data-driven decisions within various business contexts.
Recommended Textbook
Cost Accounting A Managerial Emphasis 7th Canadian Edition by Charles T. Horngren
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Chapter 1: The Accountants Vital Role in Decision Making
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Sample Questions
Q1) Professional codes of conduct relating to the accounting profession
A)supercede the provincial laws but not federal laws.
B)are enforced by the solicitor general of the relevant province.
C)specify penalties up to and including incarceration.
D)are not enforceable as they are not actually laws.
E)specify how professional accountants must behave.
Answer: E
Q2) The Global Reporting Initiative has developed and supports several frameworks,however,the most common form of sustainability accounting is the Balanced Scorecard.
A)True
B)False
Answer: False
Q3) Explain how a budget can help management implement strategy.
Answer: A budget is a planning tool,a quantitative expression of a plan of action that is developed within the framework of the strategic plan.Executing the activities quantified in the budget is synonymous to executing the strategic plan.The budgeting process facilitates communication and coordination throughout the organization which is also necessary in the execution of the strategic plan.
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Page 3
Chapter 2: An Introduction to Cost Terms and Purposes
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Sample Questions
Q1) What is the unit cost for the plant leasing costs for 2016 assuming plant leasing costs are for the production of 1,014,000 units?
A)$0.119
B)$0.118
C)$0.110
D)$0.900
E)$0.943
Answer: B
Q2) Calculate this year's operating income if the company plans to produce and sell 60,000 units.
A)$150,000
B)$0
C)$<300,000>
D)$<650,000>
E)$300,000
Answer: E
Q3) Work-in-process consists of partially completed goods not yet ready for sale. A)True
B)False
Answer: True
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Chapter 3: Cost-Volume-Profit Analysis
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Sample Questions
Q1) What is meant by the term break-even point? Why should a manager be concerned about the break-even point?
Answer: The break-even point is the level of production and sales at which total revenues equal total costs.Managers should be concerned about the break-even point because it helps determine when a business venture will be profitable.Break-even point shows a company how far sales can decline before a net loss will be incurred.It helps to assess the risk of loss.
Q2) CVP analysis requires the time value of money to be factored into formula when comparing revenues and costs.
A)True
B)False
Answer: False
Q3) The key to applying CVP analysis in non-profit and service organizations is to measure their output.
A)True
B)False
Answer: True
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Page 5
Chapter 4: Job Costing
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Sample Questions
Q1) For normal costing,even though the budgeted indirect-cost rate is based on estimates,indirect costs are allocated to products based on actual levels of the cost-allocation base.
A)True
B)False
Q2) Which of the following is part of the approach to computing the budgeted indirect cost allocation rate?
A)identify the costs which are part of the indirect cost pool
B)identify costs associated with the direct cost pool
C)estimate the cost items for direct cost pool
D)adjust the cost allocation base for variances
E)divide the total quantity of the cost allocation base into the total costs in the direct cost pool
Q3) Which of the following is NOT possible to use as a cost allocation base for manufacturing overhead?
A)direct labour dollars
B)direct labour hours
C)direct material dollars
D)direct labour hours or dollars
E)indirect labour hours
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Chapter 5: Activity-Based Costing and Management
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Sample Questions
Q1) A top-selling product might actually result in recorded losses for the company.
A)True
B)False
Q2) The previous controller at the transportation company had always estimated the indirect costs at 25% of billings.What indirect costs were accumulated for each major client for the month under this assumption?
A)School Board,$33,610.00;City Gov't,$1,080.88
B)School Board,$2,022.50;City Gov't,$33,610.00
C)School Board,$33,610.00;City Gov't,$1,762.63
D)School Board,$1,762.63;City Gov't,$1,921.25
E)School Board,$2,022.50;City Gov't,$1,762.63
Q3) Using activity-based costing to allocate overhead costs,what is the total manufacturing overhead cost estimate for Hapless Systems during 2016?
A)$3,113.75
B)$1,495.00
C)$2,068.00
D)$3,412.50
E)$3,665.00
Q4) List four ways that activity-based management can be effective.
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Chapter 6: Master Budget and Responsibility Accounting
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Sample Questions
Q1) Listed below are elements of the master budget.Determine whether each budget is an operating budget or a financial budget.Place an O for operating budget or F for a financial budget.
1.Capital expenditures budget
2.Cost of goods sold budget
3.Revenues budget
4.Budgeted statement of cash flows
5.Distribution costs budget
6.Marketing costs budget
7.Cash budget
8.Direct materials cost budget
9.Budgeted balance sheet
10.Budgeted income statement
Q2) On the 2015 budgeted income statement,what amount will be reported for gross margin?
A)$122,000
B)$90,000
C)$48,000
D)$30,000
E)$120,000
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Page 8
Chapter 7: Flexible Budgets,variances,and Management
Control: I
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Sample Questions
Q1) For any actual level of output,the efficiency variance is the difference between actual quantity of input used and the budgeted quantity of input allowed to produce actual output,multiplied by the budgeted price.
A)True
B)False
Q2) Flexible budget quantity computations should be focused at the appropriate level of the cost hierarchy.
A)True
B)False
Q3) What is the static-budget variance of revenues?
A)$60,000 favourable
B)$240,000 favourable
C)$240,000 unfavourable
D)$6,000 favourable
E)$6,000 unfavourable
Q4) A flexible-budget variance can be decomposed into an efficiency variance and a rate variance.
A)True
B)False
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Chapter 8: Flexible Budgets,variances,and Management
Control: II
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Sample Questions
Q1) What is the Michelle Inc.variable manufacturing overhead rate variance?
A)$30,000 unfavourable
B)$28,500 favourable
C)$20,000 unfavourable
D)$16,000 favourable
E)$16,000 unfavourable
Q2) Kelly's Pillow Company manufactures pillows.The current year operating budget is based on production of 40,000 pillows with 0.5 machine-hour allowed per pillow.Variable manufacturing overhead is anticipated to be $440,000.
Actual production was 36,000 pillows using 19,000 machine-hours.Actual variable costs were $20 per machine-hour.
Required:
Calculate the variable overhead rate and efficiency variances.
Q3) Fixed overhead costs are a lump sum that does not change in total despite changes in the cost driver.
A)True
B)False
Q4) Explain the meaning of a favourable production-volume variance.
Q5) Explain why sales-volume variance could be helpful to managers.
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Chapter 9: Income Effects of Denominator Level on Inventory Valuation
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Sample Questions
Q1) Johnson and Sons Company was concerned that increased sales did not result in increased profits for 2016.Both variable unit and total fixed manufacturing costs for 2015 and 2016 remained constant at $20 and $2,000,000,respectively.
In 2015 the company produced 100,000 units and sold 80,000 units at a price of $50 per unit.There was no beginning inventory in 2011.In 2016 the company made 70,000 units and sold 90,000 units at a price of $50.Selling and administrative expenses were all fixed at $100,000 each year.
Required:
a.Prepare income statements for each year using absorption costing in the gross margin format.
b.Prepare income statements for each year using variable costing in the contribution margin format.
c.Explain why the income was different each year using the two methods.Show computations.
Q2) Master-budget capacity utilization can be more reliably estimated than normal capacity utilization.
A)True
B)False
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Chapter 10: Analysis of Cost Behaviour
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Sample Questions
Q1) When using the high-low method,the denominator in the equation that determines the slope is the
A)dependent variable.
B)independent variable.
C)difference between the high and low observations of the cost driver.
D)difference between the high and low observations of the dependent variables.
E)the intercept.
Q2) To complete the first setup on a new machine took an employee 200 minutes.Using an 80% cumulative average-time learning curve indicates that the second setup on the new machine is expected to take
A)160 minutes.
B)120 minutes.
C)80 minutes.
D)60 minutes.
E)128 minutes.
Q3) A linear cost function is a function in which the graph of total costs versus a single cost driver forms a straight line,within the relevant range.
A)True
B)False
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Page 12
Chapter 11: Decision Making and Relevant Information
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Sample Questions
Q1) Producing more non-bottleneck output
A)creates more inventory but does not increase throughput contribution.
B)creates more inventory and increases throughput contribution.
C)creates less pressure for the bottleneck workstations.
D)allows for the maximization of overall contribution.
E)allows for the maximization of overall shop effectiveness.
Q2) A decision model is a formal method of making a choice that uses only quantitative analyses.
A)True
B)False
Q3) Book value of equipment is irrelevant in equipment-replacement decisions.
A)True
B)False
Q4) The greatest possible contribution margin per unit of the constraining factor will ensure which of the following?
A)minimum total variable costs
B)zero imputed costs
C)minimum fixed cost per unit of production
D)minimum variable costs per unit of production
E)maximum operating income
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Chapter 12: Pricing Decisions, product Profitability
Decisions, and Cost Management
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Q1) Value engineering is a time-and-motion system that can result in: improvements in product designs,changes in material specifications,or modifications in process methods.
A)True
B)False
Q2) When the firm uses the target-costing approach to pricing,the target cost per unit is the difference between the per unit target price and the per unit target
A)contribution margin.
B)operating income.
C)production costs.
D)gross margin.
E)fixed costs.
Q3) Reverse engineering has the objective of reducing costs while still satisfying customer needs.
A)True
B)False
Q4) In target costing,what are at least two techniques used to achieve target costing goals?
Q5) Describe the five steps in developing target pricing and target costs.
Page 14
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Chapter 13: Strategy,balanced Scorecard,and Profitability Analysis
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Sample Questions
Q1) Measures of the balanced scorecard's customer perspective include all of the following EXCEPT
A)market share.
B)customer satisfaction.
C)number of new customers.
D)employee training on new products.
E)number of repeat customers.
Q2) What is the Merrill Company's cost effect of the growth component for conversion costs?
A)$12,500 U
B)$0
C)$10,000 U
D)$10,000 F
E)$12,500 F
Q3) Required:
a.What amount is the revenue effect of the price-recovery component?
b.What amount is the cost effect of the price-recovery component?
c.What is the net change in operating income as a result of the price-recovery component?
Q4) Define engineered and discretionary costs and give two examples of each.
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Chapter 14: Period Cost Allocation
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Sample Questions
Q1) Under the incremental method of allocating common costs
A)the parties are interested in being viewed as primary users.
B)each party bears a proportionate share of the total costs in relation to their individual stand-alone costs.
C)fairness and equity are emphasized.
D)there is a disincentive to be titled the primary user.
E)no ranking of users is required.
Q2) Benefits from using a well-designed cost allocation system are more evident than the costs.
A)True
B)False
Q3) The reciprocal allocation method does not incorporate interdepartmental relationships fully into the support department cost allocations.
A)True
B)False
Q4) Using the single-rate method transforms the fixed costs per hour into a variable cost to users of that facility.
A)True
B)False
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Chapter 15: Cost Allocation: Joint Products and Byproducts
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Sample Questions
Q1) What is the approximate production cost per unit for each pencil casing if the sales value at splitoff method is used?
A)$0.0250
B)$0.0255
C)$0.0335
D)$0.0357
E)$0.0533
Q2) What is the approximate cost assigned to the pencil casings if joint costs are allocated using the sales value at splitoff method?
A)$750
B)$765
C)$1,005
D)$1,071
E)$1,500
Q3) A criticism of the practice of carrying inventories at estimated net realizable values is that this practice recognizes income before sales are made.
A)True
B)False
Q4) How should toxic waste be accounted for?
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Chapter 16: Revenue and Customer Profitability Analysis
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Sample Questions
Q1) Revenue tracing results in a more accurate assignment of revenues to products,than does revenue allocation.
A)True
B)False
Q2) What is the company's market-share variance?
A)$1,600 unfavourable
B)$1,600 favourable
C)$2,560 favourable
D)$1,200 unfavourable
E)$1,200 favourable
Q3) The market-share variance is caused solely by the actual market share being different than the budgeted market share.
A)True
B)False
Q4) What is the Zorro Company sales-quantity variance?
A)$1,500 U
B)$1,000 F
C)$500 U
D)$2,500 U
E)$500 F
Page 18
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Chapter 17: Process Costing
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Q1) What is the total amount of the work-in-process ending inventory for Department A at the end of February?
A)$ 385,970
B)$619,900
C)$ 315,571
D)$ 276,157
E)$315,571
Q2) Transferred in costs are costs which have been incurred in a preceding department.
A)True
B)False
Q3) Conceptually transferred-in costs from another department are similar to A)direct labour.
B)finished goods inventory.
C)direct labour and materials.
D)manufacturing overhead.
E)materials provided by external suppliers.
Q4) Unit costs do not fluctuate between periods. A)True B)False
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Chapter 18: Spoilage, rework, and Scrap
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Q1) Harriette has been reviewing the accounting system for her company and is very concerned about the accounting for spoilage.It appears that spoilage is accounted for only at the end of the processing cycle.While this concept is acceptable in general,Harriette believes that a better method can be found to properly account for the spoilage when it occurs.She believes that there must be something better than the weighted-average method of accounting for spoilage.She would like the company to use a method that provides closer tracking of the spoilage with the accounting for the spoilage.
Required:
Discuss the problems Harriette is having with the accounting system.
Q2) What is the Waldorf Computer Systems Inc.cost transferred out assuming spoilage units are not included in the equivalent unit calculation?
A)$120,000
B)$112,500
C)$90,000
D)$82,500
E)$37,500
Q3) Distinguish among spoilage,reworked units,and scrap.Give an example of each.
Q4) What are the objectives in accounting for spoilage?
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Chapter 19: Inventory Cost Management Strategies
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Sample Questions
Q1) All inventory costs are available in financial accounting systems.
A)True
B)False
Q2) At the EOQ quantity,Sandrington's total annual relevant inventory costs would be:
A)$2,546
B)$3,557
C)$735
D)$4,310
E)$6,467
Q3) Which of the following would NOT be typical when a JIT production system is used?
A)manufacturing cells
B)emphasis on reducing setup time
C)workers who specialize in one function or operation
D)managing safety stock effectively
E)JIT purchasing
Q4) Discuss considerations that should be fully taken into account when developing inventory related relevant costs for use in an economic order quantity (EOQ)model.
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Chapter 20: Capital Budgeting: Methods of Investment Analysis
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Q1) A comparison of year-to-year changes in customer net present value estimates
A)is one way to be certain of the customer evaluation process.
B)highlights whether managers have been successful in maintaining long-run profitable relationships with their customers.
C)can be used to motivate customers.
D)is difficult to calculate because of the need to know the customers' cost of capital.
E)can be used in place of the payback method.
Q2) The initial investment in working capital is usually recovered
A)in year 0.
B)in year 1.
C)when the project is terminated.
D)in equal portions,with the recovery of the initial investment,based on the matching of revenues and all costs.
E)as soon as the RRR is achieved.
Q3) The net present value method is a discounted cash flow method that concentrates on cash accruals.
A)True
B)False
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Chapter 21: Transfer Pricing and Multinational Management
Control Systems
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Q1) One reason companies use full-cost transfer pricing is that it provides relevant costs for
A)long-run decisions even though poor short-run decisions may result.
B)long-run decisions and for short-run decisions.
C)short-run decisions but not for long-run decisions.
D)short-run decisions at the expense of the company.
E)long-run decisions and for employee staffing decisions.
Q2) One benefit of centralization is an increase in development of an experienced pool of management talent to fill higher-level management positions.
A)True
B)False
Q3) Assume the transfer price for a furnace is 130% of total costs of the Manufacturing Division and 5,000 of the furnaces are produced and transferred to the Assembly Division.The Manufacturing Division's operating income is
A)$3,250,000.
B)$1,175,000.
C)$2,500,000.
D)$2,625,000.
E)$2,760,000.
Page 23
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Chapter 22: Multinational Performance Measurement and Compensation
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Sample Questions
Q1) Many common performance measures rely on internal financial and accounting information.
A)True
B)False
Q2) What are Bleach's and Bleach-2's residual incomes,based on current values,respectively?
A)$116,250;$37,500
B)$110,000;$67,500
C)$67,500;$110,000
D)$37,500;$116,250
E)$115,340;$80,000
Q3) A corporation has a required rate of return of 13% for all subsidiaries.The Calgary subsidiary earned residual income of $200,000 in year 1,and $300,000 in year 2 on an investment base of $4,500,000.What rate of return did the Calgary subsidiary earn in years 1 and 2 respectively?
A)17.4% and 19.7%
B)4.4% and 6.7%
C)13.0% and 13.0%
D)7.9% and 10.9%
E)10.00% and 13.00%
Page 24
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