Course Introduction
Business Decision Making
Textbook Exam Questions
Business Decision Making explores the processes and analytical tools required for effective decision making in a business environment. The course covers topics such as problem identification, data collection and analysis, risk assessment, forecasting, and the application of quantitative and qualitative decision-making models. Students will learn to leverage critical thinking, ethical considerations, and strategic frameworks to solve complex business problems. Through case studies and real-world scenarios, the course emphasizes the use of evidence-based approaches and the importance of teamwork and communication in reaching sound business decisions.
Recommended Textbook
Managerial Accounting 6th Edition by John J Wild
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Page 2
Chapter 1: Managerial Accounting Concepts and Principles
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Sample Questions
Q1) Direct costs are incurred for the benefit of more than one cost object.
A)True
B)False
Answer: False
Q2) Managerial accounting is different from financial accounting in that:
A) Managerial accounting is more focused on the organization as a whole and financial accounting is more focused on subdivisions of the organization.
B) Managerial accounting never includes nonmonetary information.
C) Managerial accounting includes many projections and estimates whereas financial accounting has a minimum of predictions.
D) Managerial accounting is used extensively by investors, whereas financial accounting is used only by creditors.
E) Managerial accounting is mainly used to set stock prices.
Answer: C
Q3) A ________ system means that a company acquires or produces inventory only when needed.
Answer: just-in-time (JIT) or just-in-time manufacturing
Q4) ________ are beliefs that distinguish right from wrong.
Answer: Ethics
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Chapter 2: Job Order Costing and Analysis
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Sample Questions
Q1) Underapplied overhead is the amount by which actual overhead cost exceeds the overhead applied to products during the period.
A)True
B)False
Answer: True
Q2) Describe the purpose of a job cost sheet, and explain what information is found on the job cost sheet.
Answer: A job cost sheet is a separate record that is maintained for each job. The job cost sheet will include the job number, the customer name, and the costs of the job separated into direct materials, direct labor, and overhead.
Q3) When a job is finished, its job cost sheet is completed and moved from the file of jobs in process to the file of finished jobs that are yet to be delivered to customers.
A)True
B)False
Answer: True
Q4) ________, or customized production, produces products in response to customer orders.
Answer: Job order production
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4
Chapter 3: Process Costing and Analysis
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Sample Questions
Q1) The following data is available for Donaldson Corp. for the current year: Beginning inventory of Work in Process 12,000 units, 60% completed Ending inventory of Work in Process 18,000 units, 30% completed Units completed and transferred to finished goods during the year 144,000 units
Calculate the equivalent units of production for the year using the weighted average method.
Answer: Physical % of Work Equivalent Units Performed Units
11ea7438_d33a_3849_b7dd_0315e0f3f2a5_TB2579_00
Q2) If a department that uses process costing starts the reporting period with 100,000 physical units that were 20% complete with respect to direct labor, the equivalent units of direct labor in beginning Work in Process are 20,000. A)True B)False
Answer: True
Q3) When the final production department completes goods, the cost of the completed goods are transferred to ________.
Answer: Finished Goods
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Page 5
Chapter 4: Activity Based Costing and Analysis
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Sample Questions
Q1) What are the overhead rates used to apply material handling (MH) and storage costs (SC) using activity-based costing?
A) MH $300/batch; SC $2.73/unit.
B) MH $300/batch; SC $.20/lb.
C) MH $525/batch; SC $.205/unit.
D) MH $700/batch; SC $.205/lb.
E) MH $700/batch; SC $8.20/lb.
Q2) K Company estimates that overhead costs for the next year will be $2,900,000 for indirect labor and $800,000 for factory utilities. The company uses direct labor hours as its overhead allocation base. If 80,000 direct labor hours are planned for this next year, what is the company's plantwide overhead rate?
A) $.02 per direct labor hour.
B) $46.25 per direct labor hour.
C) $36.25 per direct labor hour.
D) $10 per direct labor hour.
E) $.10 per direct labor hour.
Q3) A ________ overhead rate is a single overhead rate determined by using volume-related measures.
Q4) Explain cost flows for the departmental overhead rate method.
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Chapter 5: Cost Behavior Cost-Volume-Profit Analysis
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Sample Questions
Q1) A firm expects to sell 25,000 units of its product at $11 per unit. Pretax income is predicted to be $60,000. If the variable costs per unit are $5, total fixed costs must be:
A) $65,000.
B) $90,000.
C) $125,000.
D) $215,000.
E) $275,000.
Q2) Assume that sales are predicted to be $3,750, the expected contribution margin is $1,500, and a net loss of $250 is anticipated. The break-even point in sales dollars is:
A) $1,750.
B) $2,500.
C) $4,000.
D) $4,250.
E) $4,375.
Q3) The margin of safety can be expressed in units of product, in dollars, or as a percent of sales.
A)True
B)False
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Chapter 6: Variable Costing and Analysis
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Sample Questions
Q1) The traditional income statement format used for financial reporting is called the contribution margin format.
A)True
B)False
Q2) What costs are treated as product costs under the absorption costing method?
Q3) Absorption costing is also called ________ costing.
Q4) Which of the following statements is true?
A) Variable costing treats fixed overhead as a period cost.
B) Absorption costing treats fixed overhead as a period cost.
C) Absorption costing treats fixed overhead as an expense in the period it is incurred.
D) Variable costing excludes all overhead from product costs.
E) Managers can manipulate earnings more easily under variable costing by varying the production level.
Q5) A variable costing income statement focuses attention on the relationship between costs and sales that is not evident from the absorption costing format.
A)True
B)False
Q6) How can the use of absorption costing result in overproduction?
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Chapter 7: Master Budgets and Performance Planning
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Q1) The merchandise purchases budget is the starting point for preparing the master budget of a merchandiser.
A)True
B)False
Q2) The financial statement effects of the budgeting process are summarized on the cash budget and the capital expenditures budget.
A)True
B)False
Q3) Activity-based budgeting is a budget system based on expected activities and their levels for the budget period, which helps management plan for the resources required.
A)True
B)False
Q4) What is activity-based budgeting?
Q5) The selling expenses budget is normally prepared before the sales budget because selling expenses affect the amount of sales.
A)True
B)False
Q6) Briefly describe the process by which budgets are developed and administered.
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Chapter 8: Flexible Budgets and Standard Costs
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Sample Questions
Q1) Static budget is another name for:
A) Standard budget.
B) Flexible budget.
C) Variable budget.
D) Fixed budget.
E) Master budget.
Q2) A cost variance is the difference between actual cost and standard cost.
A)True
B)False
Q3) A variable or flexible budget is so named because it only focuses on variable costs.
A)True
B)False
Q4) At the end of the accounting period, immaterial variances are closed to ________.
Q5) Identify and explain the primary differences between fixed and flexible budgets.
Q6) Explain variance analysis. Describe how variance analysis assists managers.
Q7) A flexible budget is also called a ________ budget.
Q8) The fixed overhead variance can be broken down into the ________ variance and the ________ variance.
10
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Chapter 9: Performance Measurement and Responsibility Accounting
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Sample Questions
Q1) No standard rule identifies the best basis of allocating expenses across departments, so it is impossible to allocate costs in a manner that will be perceived as fair.
A)True
B)False
Q2) Costs that the manager does not have the power to determine or at least significantly affect are:
A) Variable costs.
B) Uncontrollable costs.
C) Indirect costs.
D) Direct costs.
E) Joint costs.
Q3) What is the purpose of a departmental accounting system?
Q4) In producing oat bran, the joint cost of milling the oats into bran, oatmeal, and animal feed is considered a direct cost to the oat bran, because the oat bran cannot be produced without incurring the joint cost.
A)True
B)False
Q5) What is a profit center and how is its performance evaluated?
Q6) What is an investment center and how is its performance evaluated?
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Chapter 10: Relevant Costing for Managerial Decisions
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Sample Questions
Q1) Ahngram Corp. has 1,000 defective units of a product that cost $3 per unit in direct costs and $6.50 per unit in indirect cost when produced last year. The units can be sold as scrap for $4 per unit or reworked at an additional cost of $2.50 and sold at full price of $12. The incremental net income (loss) from the choice of reworking the units would be:
A) $5,500.
B) $0.
C) ($2,500).
D) $9,500.
E) $2,500.
Q2) A(n) ________ arises from a past decision and cannot be avoided or changed; it is irrelevant to future decisions.
Q3) Assume markup percentage equals desired profit divided by total costs. What is the correct calculation to determine the dollar amount of the markup per unit?
A) Total cost times markup percentage.
B) Total cost per unit times markup percentage per unit.
C) Total cost per unit divided by markup percentage per unit.
D) Markup percentage per unit divided by total cost per unit.
E) Markup percentage divided by total cost.
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12
Chapter 11: Capital Budgeting and Investment Analysis
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Sample Questions
Q1) The calculation of the payback period for an investment when net cash flow is even (equal) is:
A) Cost of investment/Annual net cash flow
B) Cost of investment/Total net cash flow
C) Annual net cash flow/Cost of investment
D) Total net cash flow/Cost of investment
E) Total net cash flow/Annual net cash flow
Q2) The process of restating future cash flows in today's dollars is known as:
A) Budgeting.
B) Annualization.
C) Discounting.
D) Payback period.
E) Capitalizing.
Q3) In using a capital budgeting method that takes the time value of money into consideration, management must consider a hurdle rate in making its decisions. What is a hurdle rate? What factors does management have to consider in selecting a hurdle rate?
Q4) You have evaluated three projects of similar investment amount and risk using the net present value (NPV method. How would you decide which one of the projects to select?
Page 13
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Chapter 12: Reporting Cash Flows
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Sample Questions
Q1) The reporting of investing activities in the statement of cash flows is identical under either the direct or indirect methods.
A)True
B)False
Q2) The FASB requires a reconciliation of net income to net cash provided or used by operating activities when the direct method is used (which can be reported in the notes).
A)True
B)False
Q3) ________ activities generally include those transactions and events that affect long-term assets.
Q4) Explain the purpose and format of the statement of cash flows. Also describe its relevance to decision makers.
Q5) ________ activities include the cash effects of transactions and events that determine net income.
Q6) The reporting of investing and financing activities is ________ under the direct and indirect methods of preparing the statement of cash flows.
Q7) Explain how cash flows from investing and financing activities are determined.
Page 14
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Chapter 13: Analysis of Financial Statements
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Q1) The following selected financial information for a company was reported for the current year end. Calculate the following company ratios:
(a) Accounts receivable turnover.
(b) Inventory turnover.
(c) Days' sales uncollected
Accounts receivable, beginning-year . $170,000
Accounts receivable, year-end 190,000
Merchandise inventory, beginning-year . 80,000
Merchandise inventory, year-end 60,000
Cost of goods sold ... 580,000
Credit sales ... 1,000,000
Q2) The income level most likely to continue into the future and is commonly used in PE ratios and other market-based measures of performance is the ________.
Q3) Trend percentage is calculated by dividing ________ by ________ and multiplying the result by 100.
Q4) General-purpose financial statements include the (1)________, (2) ________, (3) ________, (4) ________ and (5) ________.
Q5) Ratios may be expressed as (1) ________, (2) ________, or (3) ________.
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Chapter 14: Time Value of Money
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Sample Questions
Q1) What annual interest rate is required to accumulate $6,802.50 in four years from an investment of $5,000? (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.)
A) 5%
B) 8%
C) 10%
D) 12%
E) 15%
Q2) Explain the concept of the future value of a single amount.
Q3) A company has $46,000 today to invest in a fund that will earn 4% compounded annually. How much will the fund contain at the end of 6 years? (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.)
A) $58,204
B) $47,840
C) $58,075
D) $57,040
E) $62,582
Q4) Explain the concept of the future value of an annuity.
Q5) An ________ is a series of equal payments occurring at equal intervals.
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Chapter 15: Analyzing for Business Transactions
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Sample Questions
Q1) For each of the accounts in the following table (1) identify the type of account as an asset, liability, equity, revenue, or expense, and (2) identify the normal balance of the account.
\[\begin{array} { | l | l | l | }
\hline & \text { Account Type } & \text { Normal Balance } \\
\hline \text { a. Wages Expense } & & \\
\hline \text { b. Accounts Receivable } & & \\
\hline \text { c. CommissionsEarned } & & \\
\hline \text { d. Salaries Payable } & & \\
\hline \text { f. Common Stock } & & \\
\hline \text { g. Salaries Expense } & & \\
\hline \text { h. Magazine Subscription Revenue } & & \\
\hline \text { Dividends } & & \\
\hline
\end{array}\]
Q2) Neither U.S. GAAP nor IFRS require the use of accrual basis accounting.
A)True
B)False
Q3) To increase an asset account, we would ________ it and to increase a liability account, we would________ it.
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Chapter 16: Partnership Accounting
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Q1) Advantages of a partnership include:
A) Limited life.
B) Mutual agency.
C) Unlimited liability.
D) Tax-free designation of all income earned
E) Voluntary association.
Q2) Zheng invested $100,000 and Murray invested $200,000 in a partnership. They agreed to share incomes and losses by allowing a $60,000 per year salary allowance to Zheng and a $40,000 per year salary allowance to Murray, plus an interest allowance on the partners' beginning-year capital investments at 10%, with the balance to be shared equally. Under this agreement, the shares of the partners when the partnership earns $105,000 in income are:
A) $52,500 to Zheng; $52,500 to Murray.
B) $35,000 to Zheng; $70,000 to Murray.
C) $57,500 to Zheng; $47,500 to Murray.
D) $42,500 to Zheng; $62,500 to Murray.
E) $70,000 to Zheng; $60,000 to Murray.
Q3) What factors should be considered before establishing a partnership?
Q4) During the closing process, each partner's withdrawals account is closed to
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