Business Decision Making
Pre-Test Questions
Course Introduction
Business Decision Making explores the essential tools, models, and strategies used by managers and leaders to analyze complex business problems and make informed decisions. The course covers both quantitative and qualitative decision-making methods, including data analysis, risk assessment, and the use of decision support systems. Through case studies and real-world scenarios, students learn to identify alternatives, evaluate potential outcomes, and implement effective solutions while considering ethical, social, and organizational factors. By the end of the course, students will have developed practical skills in critical thinking, problem-solving, and strategic planning to support sound decision-making within various business contexts.
Recommended Textbook
Fundamental Managerial Accounting Concepts 9th Edition by Thomas P Edmonds
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14 Chapters
2127 Verified Questions
2127 Flashcards
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Chapter 1: Management Accounting and Corporate Governance
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146 Flashcards
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Sample Questions
Q1) Average costs are used for internal decision-making,but actual costs are required for calculating cost of goods sold.
A)True
B)False
Answer: False
Q2) Most internal users of accounting information need primarily global information that reflects the performance of the company as a whole.
A)True
B)False
Answer: False
Q3) Select the incorrect statement regarding costs and expenses.
A) Some costs are initially recorded as expenses while others are initially recorded as assets.
B) Expenses are incurred when assets are used to generate revenue.
C) Manufacturing-related costs are initially recorded as expenses.
D) Non-manufacturing costs should be expensed in the period in which they are incurred.
Answer: C
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Chapter 2: Cost Behavior, operating Leverage, and Profitability Analysis
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152 Verified Questions
152 Flashcards
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Sample Questions
Q1) Hard Nails and Bright Nails are competing nail salons.Both companies have the same number of customers.Both charge the same price for a manicure.The only difference is that Hard Nails pays its manicurists on a salary basis (i.e.,a fixed cost structure)while Bright Nails pays its manicurists on the basis of the number of customers they serve (i.e.,a variable cost structure).Both companies currently make the same amount of net income.If sales of both salons increase by an equal amount,Hard Nails:
A) will earn a higher profit than Bright Nails.
B) will earn a lower profit than Bright Nails.
C) will earn the same amount of profit as Bright Nails.
D) The answer cannot be determined from the information provided.
Answer: A
Q2) An advantage of using the scattergraph method over the high-low method is that all points of data are used in determining the cost line.
A)True
B)False
Answer: True
Q3) How does total fixed cost behave when volume increases?
Answer: Total fixed cost is constant (does not change)when volume increases.
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Chapter 3: Analysis of Cost, volume, and Pricing to Increase Profitability
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Sample Questions
Q1) How can contribution margin per unit be used to find the break-even point in units?
Answer: The break-even point in units equals total fixed costs divided by the contribution margin per unit.
Q2) For a company that sells several products,different sales mixes generally give rise to different break-even sales levels,even if overall sales volume remains unchanged.
A)True
B)False
Answer: True
Q3) Acme Company has variable costs equal to 30% of sales.The company is considering a proposal that will increase sales by $10,000 and total fixed costs by $7,000.By what amount will net income increase?
A) $0
B) $3,000
C) $7,000
D) $4,000
Answer: A
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Chapter 4: Cost Accumulation,tracing,and Allocation
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Sample Questions
Q1) Alvarez Company makes three joint products,products A,B,and C.For each batch,the materials cost is $16,000,direct labor cost is $4,000,and manufacturing overhead is $10,000.From each batch,the company makes 2,000 pounds of A,1,200 pounds of B,and 800 pounds of C.
Required:
1)What are the total joint costs for each batch of the products?
2)Allocate the joint costs to each of the three products.
3)Determine the cost per pound for product A.
Q2) Using the step method of allocating service department costs,the costs are allocated to:
A) service departments only.
B) operating departments only.
C) both service departments and operating departments.
D) neither service departments nor operating departments.
Q3) The process of dividing a total cost into parts and assigning it to cost objects is known as:
A) cost tracing.
B) cost division.
C) cost allocation.
D) None of the answers are correct.
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Chapter 5: Cost Management in an Automated Business
Environment: ABC, ABM, and TQM
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153 Verified Questions
153 Flashcards
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Sample Questions
Q1) Actions or units of work undertaken by an organization to accomplish its mission are referred to as:
A) costs.
B) work in process.
C) activities.
D) cost objects.
Q2) Explain how the use of direct labor hours as a cost driver can distort costs of products in a highly automated manufacturing environment.
Q3) Voluntary costs refer to:
A) prevention and appraisal costs.
B) prevention and internal failure costs.
C) appraisal and external failure costs.
D) internal failure costs and external failure costs.
Q4) Which of the following costs is likely to be driven by machine usage?
A) Factory insurance
B) Depreciation on factory building
C) Factory utilities
D) Factory rent
Page 7
Q5) Discuss how an increase in one or more quality cost(s)can decrease others.
Q6) What is the purpose of target pricing? What are the steps in target pricing?
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Chapter 6: Relevant Information for Special Decisions
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Sample Questions
Q1) Bates Golf Supply produces a golf bag that sells for $220.Although the company's production capacity is 5,000 bags per year,only 4,000 bags are currently being produced and sold.The production costs for 4,000 bags are as follows:
\[\begin{array} { l r }
\text { Unit-level material cost } & \$ 300,000 \\
\text { Unit-level labor cost } & 240,000 \\
\text { Unit-level overhead } & 75,000 \\
\text { Batch-level setup costs (500 units per batch) } & 16,000 \\
\text { Product-level costs } & 20,000 \\
\text { Allocated facility-level costs } & 25,000
\end{array}\] Golf Mart Stores has offered to purchase 1,000 golf bags as a one-time special purchase at a price of $170 per bag.
Required:
1)Prepare a quantitative analysis that indicates whether the special order should be accepted.
2)What qualitative factors should be considered in this special order decision?
Q2) Direct labor is an example of a product-level cost.
A)True
B)False
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Chapter 7: Planning for Profit and Cost Control
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Sample Questions
Q1) Sales for January are budgeted at 50,000 units,and the company expects sales to increase 4% each month.How many units will need to be purchased in February if the company's policy is to keep ending inventory each month at 10,000 units?
A) 52,000 units
B) 54,000 units
C) 62,000 units
D) None of these answers is correct.
Q2) The cash budget is not the same as the pro forma cash flow statement.
A)True
B)False
Q3) The pro forma income statement gives managers an advance estimate of a company's profitability.
A)True
B)False
Q4) The master budget details:
A) Long-term objectives.
B) Intermediate objectives.
C) Short-term objectives.
D) All of the answers are correct.
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Chapter 8: Performance Evaluation
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Sample Questions
Q1) A static budget is one that shows estimated revenues and costs at multiple activity levels.
A)True
B)False
Q2) \(\begin{array}{lcc}
\text { Item to Classify } &\text { Standard } &\text {Actual }\\
\text { Sales volume } & 100,000 \text { units } &96,000 \text { units }\\
\text { Sales price } & \$ 4 \text { per unit }&\$3.90 \text { per unit } \\
\text { Material usage } & 40,000 \text { gallons } &42,000 \text { gallons }\\
\text { Labor price } & 12.50\text { per hour }&12.45 \text { per hour } \end{array}\) All of the following variances are unfavorable except?
A) Materials usage
B) Sales price
C) Sales volume
D) Labor price
Q3) What should be the organizational purpose for identifying and calculating variances?
Q4) What aspects of variances should managers consider in deciding which variances to investigate?
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Chapter 9: Responsibility Accounting
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Sample Questions
Q1) In a responsibility reporting system,the reports of a particular manager contain summary information about the revenue and cost items directly under his or her control and detailed data on the activities of the responsibility centers that fall under his or her chain of authority.
A)True
B)False
Q2) Liam manages a division that is part of a large decentralized business.He has a substantial degree of control over the division's costs,revenues,and investment in assets.Based on this information,the division would be classified as a profit center.
A)True
B)False
Q3) A tool that is often used to depict the lines of authority and responsibility within a firm is:
A) A variance report.
B) An organization chart.
C) A master budget.
D) A responsibility report.
Q4) What are the advantages of using a market-based transfer price? Why is it not always used?
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Chapter 10: Planning for Capital Investments
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Sample Questions
Q1) Investment projects A and B offer equal cash inflows over their lives,but the cash inflows for project A occur sooner than those for project B.The two projects are otherwise identical (the cost is the same,for example).Based on this information,the internal rate of return for A is lower than for B.
A)True
B)False
Q2) The cost of capital represents the maximum acceptable rate of return that a capital investment should earn.
A)True
B)False
Q3) Which of the following is the approximate internal rate of return for an investment that costs $33,550 and provides a $5,000 annuity for 10 years? (PV of $1 and PVA of $1)(Use appropriate factor(s)from the tables provided.)
A) 5%
B) 6%
C) 8%
D) 10%
Q4) Why is the time value of money often taken into account in analyzing a capital investment?
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Chapter 11: Product Costing in Service and Manufacturing
Entities
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Sample Questions
Q1) Product costs are expensed as cost of goods sold:
A) when production is complete.
B) at the start of production.
C) when the related products are sold.
D) when the related revenue is collected.
Q2) Coleridge Company estimates that its production workers will work 125,000 direct labor hours during the upcoming period and that overhead costs will amount to $750,000.Assume overhead to be allocated on the basis of direct labor hours.What predetermined overhead rate would be used to apply overhead to production during the period?
A) $6.00 per direct labor hour
B) $0.67 per direct labor hour
C) $0.67 per unit
D) $6.00 per unit
Q3) Hutton Company reported a $750 unfavorable overhead variance on a recent performance report.This means that factory overhead was underapplied during the period.
A)True
B)False
Q4) Describe how firms use service and product cost information.
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Chapter 12: Job-Order, process, and Hybrid Costing Systems
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Sample Questions
Q1) All of the following transactions lead to an entry on the job cost sheet except:
A) Indirect material used on the job.
B) A materials requisition for material used on a job.
C) Work ticket for direct labor incurred on the job.
D) Application of estimated overhead to the job.
Q2) Which of the following items is provided on a work ticket?
A) Job number
B) Employee identification
C) Work description
D) All of these answers are correct.
Q3) For a company using a process costing system,as units are transferred from one department to the next,their costs are transferred along as well.
A)True
B)False
Q4) An indirect material:
A) Is an overhead cost.
B) Is a product cost.
C) Does not need to be accounted for using the perpetual method.
D) All of these answers are correct.
Q5) What source documents would be used in preparing a job cost sheet?
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Chapter 13: Financial Statement Analysis
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Sample Questions
Q1) Which of the following is a potential limitation of financial statement analysis?
A) Lack of comparability of firms in different industries
B) The impact of changing economic conditions
C) The impact of having more than one acceptable alternative accounting principle for accounting for a given transaction or economic event
D) All of these answers are correct.
Q2) Selected financial information for Martin Company for Year 2 follows: \(\begin{array}{lr}
\text { Sales } & \$ 498,000 \\
\text { Cost of goods sold } & 320,000 \\
\text { Merchandise inventory } & \\
\text { Beginning of year } &72,000 \\
\text { End of year } & 80,000 \end{array}\)
Required:
How many times did Martin's merchandise inventory turnover during Year 2? (Round your answer to one decimal place.)
Q3) Describe the factors involved in communicating useful financial information.
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Chapter 14: Statement of Cash Flows
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Sample Questions
Q1) Wade Company reported wages expense of $32,000 during the year.The beginning balance in wages payable was $1,200,and at the end of the year,the balance in wages payable was $1,700.What was the amount of cash paid for employee wages during the year?
A) $29,100
B) $31,500
C) $34,400
D) $32,500
Q2) Which of the following statements is incorrect regarding preparing a statement of cash flows using the direct method?
A) The direct method shows adjustments to net income.
B) The direct method shows the specific sources and uses of cash that are associated with operating activities.
C) Noncash expenses, gains, and losses are not used in the determination of net cash flow from operating activities.
D) A majority of companies use the indirect method rather than the direct method.
Q3) What types of accounts are reconciled to determine cash flows from operating activities?
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