WGU C213-ACCOUNTING FOR DECISION MAKERS OA EXAM –
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1. Which of the following best describes the primary objective of managerial accounting
compared to financial accounting?
A. Providing historical financial statements for external regulatory agencies
B. Providing relevant, timely information to internal managers for decision-making and control
C. Ensuring strict adherence to Generally Accepted Accounting Principles for tax reporting
D. Calculating exact net income for investors and creditors
Managerial accounting focuses heavily on internal users, emphasizing future-oriented,
relevant information for operational decisions, whereas financial accounting targets external
stakeholders using strict GAAP standards.
2. A manufacturing company incurs costs for factory rent, utilities, and supervisory
salaries. How are these costs typically classified in a traditional cost accounting system?
A. Direct materials
B. Direct labor
C. Manufacturing overhead
D. Period costs
Factory rent, utilities, and supervisory salaries are indirect production costs that cannot be
easily or cost-effectively traced directly to a specific unit of product, thus falling under
manufacturing overhead.
3. In a cost-volume-profit (CVP) analysis, what does the contribution margin represent?
A. Total revenues minus total fixed costs
B. Sales revenue minus variable expenses, available to cover fixed costs and contribute to net
operating income
C. Gross profit minus operating expenses
D. Net income divided by total sales volume
Contribution margin is the amount remaining from sales revenue after variable expenses
have been deducted, which first goes toward covering fixed costs and then generates profit.
4. A company produces widgets with a selling price of fifty dollars per unit. Variable costs
are thirty dollars per unit, and total fixed costs are one hundred thousand dollars. What is
the break-even point in units?
,A. 2,000 units
B. 3,333 units
C. 5,000 units
D. 10,000 units
The break-even point in units is calculated by dividing total fixed costs ($100,000) by the unit
contribution margin ($50 selling price minus $30 variable cost equals $20), resulting in 5,000
units.
5. Which of the following costs is considered a product cost for external financial reporting
under GAAP?
A. Advertising expenses for a new product launch
B. Sales commissions paid to the regional sales team
C. Wages paid to assembly line workers in the factory
D. Corporate headquarters office depreciation
Product costs are incurred in the production process, including direct labor like assembly line
wages. Advertising, sales commissions, and corporate depreciation are period costs.
6. Company X uses a job-order costing system. Which of the following jobs would most
appropriately use a job-order costing system rather than a process costing system?
A. A petroleum refinery producing standard gasoline
B. A custom yacht manufacturer building luxury vessels to client specifications
C. A cereal manufacturer producing millions of identical boxes of cereal
D. A chemical plant producing industrial solvents in continuous batches
Job-order costing is used for unique, custom-made products or services where costs can be
traced to specific jobs. Standardized, continuous production uses process costing.
7. When applying overhead in a job-order costing system, what base is most commonly
used if overhead is driven heavily by human intervention and skill?
A. Machine hours
B. Direct labor hours or direct labor cost
C. Total administrative expenses
D. Cost of materials purchased
When production is labor-intensive, direct labor hours or cost serve as the best allocation
base because overhead resources are consumed proportionally to labor usage.
8. Underabsorbed overhead occurs when:
A. Actual overhead costs are less than applied overhead costs
B. Applied overhead costs are less than actual overhead costs incurred during the period
C. Fixed costs are treated as variable costs in decision-making
D. The predetermined overhead rate is set too high relative to actual operations
, Underabsorbed overhead means the business did not apply enough overhead to jobs during
the period compared to what was actually spent, leaving a debit balance in the manufacturing
overhead account.
9. In activity-based costing (ABC), activities are grouped into hierarchy levels. Which of
the following is classified as a batch-level activity?
A. Heating the factory building
B. Designing a brand-new product line
C. Setting up a machine to produce a new run of a specific product
D. Assembling an individual unit of a product
Batch-level activities are performed each time a batch is handled or processed, regardless of
how many units are in the batch, such as machine setups.
10. How does activity-based costing (ABC) typically affect product cost distortions
compared to traditional volume-based costing methods?
A. It overcosts high-volume standard products and undercosts low-volume specialized products
B. It undercosts high-volume standard products and overcosts low-volume specialized products
C. It treats all overhead costs as direct labor-driven expenses
D. It eliminates the need for predetermined overhead rates entirely
Traditional systems often overcost high-volume products by spreading complex overhead
evenly across all units. ABC traces costs to activities, revealing that specialized low-volume
products consume more overhead per unit.
11. Which budget is prepared first in the master budget process because all other
operational budgets depend on it?
A. Production budget
B. Direct materials budget
C. Sales budget
D. Cash budget
The sales budget is the foundation of the master budget. Management must estimate sales
volume and revenue before determining production levels, material needs, and cash flows.
12. A company expects to sell 10,000 finished units in Q1. Desired ending finished goods
inventory is 1,200 units, and beginning finished goods inventory is 800 units. How many
units must be produced?
A. 9,600 units
B. 10,000 units
C. 10,400 units
D. 12,000 units
QUESTIONS AND ANSWERS | VERIFIED AND WELL DETAILED
ANSWERS PLUS RATIONALES | GUARANTEED PASS | LATEST EXAM
UPDATE | EXAM PREP | STUDY GUIDE | PRACTICE TEST| DOWNLOAD
INSTANT PDF
1. Which of the following best describes the primary objective of managerial accounting
compared to financial accounting?
A. Providing historical financial statements for external regulatory agencies
B. Providing relevant, timely information to internal managers for decision-making and control
C. Ensuring strict adherence to Generally Accepted Accounting Principles for tax reporting
D. Calculating exact net income for investors and creditors
Managerial accounting focuses heavily on internal users, emphasizing future-oriented,
relevant information for operational decisions, whereas financial accounting targets external
stakeholders using strict GAAP standards.
2. A manufacturing company incurs costs for factory rent, utilities, and supervisory
salaries. How are these costs typically classified in a traditional cost accounting system?
A. Direct materials
B. Direct labor
C. Manufacturing overhead
D. Period costs
Factory rent, utilities, and supervisory salaries are indirect production costs that cannot be
easily or cost-effectively traced directly to a specific unit of product, thus falling under
manufacturing overhead.
3. In a cost-volume-profit (CVP) analysis, what does the contribution margin represent?
A. Total revenues minus total fixed costs
B. Sales revenue minus variable expenses, available to cover fixed costs and contribute to net
operating income
C. Gross profit minus operating expenses
D. Net income divided by total sales volume
Contribution margin is the amount remaining from sales revenue after variable expenses
have been deducted, which first goes toward covering fixed costs and then generates profit.
4. A company produces widgets with a selling price of fifty dollars per unit. Variable costs
are thirty dollars per unit, and total fixed costs are one hundred thousand dollars. What is
the break-even point in units?
,A. 2,000 units
B. 3,333 units
C. 5,000 units
D. 10,000 units
The break-even point in units is calculated by dividing total fixed costs ($100,000) by the unit
contribution margin ($50 selling price minus $30 variable cost equals $20), resulting in 5,000
units.
5. Which of the following costs is considered a product cost for external financial reporting
under GAAP?
A. Advertising expenses for a new product launch
B. Sales commissions paid to the regional sales team
C. Wages paid to assembly line workers in the factory
D. Corporate headquarters office depreciation
Product costs are incurred in the production process, including direct labor like assembly line
wages. Advertising, sales commissions, and corporate depreciation are period costs.
6. Company X uses a job-order costing system. Which of the following jobs would most
appropriately use a job-order costing system rather than a process costing system?
A. A petroleum refinery producing standard gasoline
B. A custom yacht manufacturer building luxury vessels to client specifications
C. A cereal manufacturer producing millions of identical boxes of cereal
D. A chemical plant producing industrial solvents in continuous batches
Job-order costing is used for unique, custom-made products or services where costs can be
traced to specific jobs. Standardized, continuous production uses process costing.
7. When applying overhead in a job-order costing system, what base is most commonly
used if overhead is driven heavily by human intervention and skill?
A. Machine hours
B. Direct labor hours or direct labor cost
C. Total administrative expenses
D. Cost of materials purchased
When production is labor-intensive, direct labor hours or cost serve as the best allocation
base because overhead resources are consumed proportionally to labor usage.
8. Underabsorbed overhead occurs when:
A. Actual overhead costs are less than applied overhead costs
B. Applied overhead costs are less than actual overhead costs incurred during the period
C. Fixed costs are treated as variable costs in decision-making
D. The predetermined overhead rate is set too high relative to actual operations
, Underabsorbed overhead means the business did not apply enough overhead to jobs during
the period compared to what was actually spent, leaving a debit balance in the manufacturing
overhead account.
9. In activity-based costing (ABC), activities are grouped into hierarchy levels. Which of
the following is classified as a batch-level activity?
A. Heating the factory building
B. Designing a brand-new product line
C. Setting up a machine to produce a new run of a specific product
D. Assembling an individual unit of a product
Batch-level activities are performed each time a batch is handled or processed, regardless of
how many units are in the batch, such as machine setups.
10. How does activity-based costing (ABC) typically affect product cost distortions
compared to traditional volume-based costing methods?
A. It overcosts high-volume standard products and undercosts low-volume specialized products
B. It undercosts high-volume standard products and overcosts low-volume specialized products
C. It treats all overhead costs as direct labor-driven expenses
D. It eliminates the need for predetermined overhead rates entirely
Traditional systems often overcost high-volume products by spreading complex overhead
evenly across all units. ABC traces costs to activities, revealing that specialized low-volume
products consume more overhead per unit.
11. Which budget is prepared first in the master budget process because all other
operational budgets depend on it?
A. Production budget
B. Direct materials budget
C. Sales budget
D. Cash budget
The sales budget is the foundation of the master budget. Management must estimate sales
volume and revenue before determining production levels, material needs, and cash flows.
12. A company expects to sell 10,000 finished units in Q1. Desired ending finished goods
inventory is 1,200 units, and beginning finished goods inventory is 800 units. How many
units must be produced?
A. 9,600 units
B. 10,000 units
C. 10,400 units
D. 12,000 units
