WGU C213 Accounting For Decision
Makers Oa And Final Exam Review | All
Questions And Solutions (Rationales) |
Exam Prep Q&A 2026/2027
1. A manufacturing company is preparing its monthly income statement. Which statement
best describes the primary purpose of managerial accounting information?
A. To provide standardized financial reports exclusively to external investors
B. To support internal planning, decision-making, and performance evaluation
C. To ensure that all financial statements comply with generally accepted accounting principles
D. To calculate the company's income tax liability for regulatory reporting
Rationale: Managerial accounting provides internal managers with relevant financial and
nonfinancial information for planning operations, controlling costs, evaluating performance,
and making strategic decisions.
2. A company purchases raw materials for $18,000, of which $14,000 is used during the
month. The remaining materials are still in storage. How should the $14,000 be classified
for a manufacturer if it has been issued to production but not yet incorporated into
completed goods?
A. Selling expense
B. Period cost
C. Direct labor
D. Work-in-process inventory
Rationale: Materials issued to production become part of manufacturing inventory. Until the
related goods are completed, the cost is included in work-in-process inventory rather than
treated as a period expense.
3. A company manufactures office chairs. Which cost is most likely a direct material cost?
A. The wood used to construct the chair frames
B. The factory supervisor's monthly salary
C. Depreciation on the factory building
D. Electricity used throughout the production facility
,Rationale: Direct materials are physical inputs that can be conveniently and economically
traced to individual products. The wood used in each chair is traceable to the product, unlike
general factory overhead.
4. A business pays its factory supervisor a fixed monthly salary regardless of production
volume. How should this salary generally be classified within the relevant production
range?
A. Direct material
B. Variable manufacturing overhead
C. Fixed manufacturing overhead
D. Selling and administrative expense
Rationale: A factory supervisor's salary supports manufacturing operations but does not vary
directly with the number of units produced. It is therefore generally classified as fixed
manufacturing overhead.
5. A company manufactures 4,000 units at a total variable manufacturing cost of $48,000. If
production increases to 5,000 units and the variable cost per unit remains constant, what is
the expected total variable manufacturing cost?
A. $48,000
B. $60,000
C. $54,000
D. $72,000
Rationale: Variable cost per unit is $48,000 ÷ 4,000 = $12. At 5,000 units, total variable cost is
5,000 × $12 = $60,000, assuming the relevant range and unit cost remain unchanged.
6. A manager is deciding whether to discontinue a product line that reports an accounting
loss. Which information is most important before making the decision?
A. The product's historical sales revenue alone
B. The total corporate overhead allocated to the product
C. The original purchase price of the equipment used by the product line
D. The contribution margin lost and the avoidable costs eliminated if the line is discontinued
Rationale: A discontinuation decision should compare the contribution margin that would be
lost with the costs that would actually be avoided. Allocated fixed costs that remain after
discontinuation do not represent savings from the decision.
7. Which financial statement reports a company's assets, liabilities, and equity at a specific
date?
,A. Balance sheet
B. Income statement
C. Statement of cash flows
D. Statement of retained earnings
Rationale: The balance sheet presents the company's financial position at a particular point in
time and follows the accounting equation: Assets = Liabilities + Equity.
8. A business earns revenue of $125,000 and incurs expenses of $91,000 during a reporting
period. Assuming no other income statement items, what is its net income?
A. $216,000
B. $91,000
C. $34,000
D. $125,000
Rationale: Net income equals revenue minus expenses. Subtracting $91,000 from $125,000
produces net income of $34,000.
9. A company purchases production equipment for $80,000 in cash. What is the immediate
effect of this transaction on the accounting equation, ignoring transaction costs and
subsequent depreciation?
A. Assets increase by $80,000 and liabilities increase by $80,000
B. Total assets remain unchanged because cash decreases while equipment increases
C. Equity decreases by $80,000
D. Total assets decrease by $80,000
Rationale: The transaction exchanges one asset, cash, for another asset, equipment. Cash
decreases by $80,000 and equipment increases by $80,000, leaving total assets unchanged at
the purchase date.
10. A company's accounts receivable balance is increasing faster than its sales revenue.
Which issue should management investigate first?
A. Whether depreciation expense is being calculated correctly
B. Whether inventory purchases are too low
C. Whether the company has excessive cash balances
D. Whether customers are paying more slowly or collection procedures have weakened
Rationale: Accounts receivable growing faster than sales may indicate slower collections,
extended credit terms, or deteriorating customer payment behavior. Management should
examine receivable aging and collection performance before concluding that a problem
exists.
, 11. A company uses the accrual basis of accounting. It completes consulting work in
December but receives payment in January. In which month should it generally recognize
the revenue?
A. December, when the service is performed and the revenue is earned
B. January, when the cash is received
C. The month in which the annual financial statements are issued
D. The month in which the customer signs the next contract
Rationale: Under accrual accounting, revenue is generally recognized when the applicable
performance obligation is satisfied, not merely when cash is collected. If the consulting service
was completed in December, the revenue generally belongs in December.
12. A factory produces 10,000 units. Its total fixed manufacturing overhead is $50,000, and
the activity level remains within the relevant range. What happens to fixed manufacturing
overhead per unit if production increases to 12,500 units?
A. It increases from $5 to $6.25
B. It remains at $5
C. It decreases from $5 to $4
D. It decreases from $6.25 to $5
Rationale: Fixed overhead per unit is $50,000 ÷ 10,000 = $5 initially. At 12,500 units, it
becomes $50,000 ÷ 12,500 = $4. Total fixed overhead remains constant, while the cost per
unit declines as production increases.
13. Which cost is most likely a period cost for a manufacturing company?
A. Direct labor used to assemble products
B. Sales commissions paid to sales representatives
C. Indirect materials consumed in the factory
D. Depreciation on production machinery
Rationale: Sales commissions are selling expenses and are generally expensed in the period
incurred. Direct labor, factory indirect materials, and production machinery depreciation are
generally product costs included in manufacturing overhead or inventory.
14. A company reports the following monthly costs: direct materials, $25,000; direct labor,
$18,000; and manufacturing overhead, $12,000. What is the total manufacturing cost
incurred during the month?
A. $43,000
B. $30,000
C. $55,000
D. $37,000
Makers Oa And Final Exam Review | All
Questions And Solutions (Rationales) |
Exam Prep Q&A 2026/2027
1. A manufacturing company is preparing its monthly income statement. Which statement
best describes the primary purpose of managerial accounting information?
A. To provide standardized financial reports exclusively to external investors
B. To support internal planning, decision-making, and performance evaluation
C. To ensure that all financial statements comply with generally accepted accounting principles
D. To calculate the company's income tax liability for regulatory reporting
Rationale: Managerial accounting provides internal managers with relevant financial and
nonfinancial information for planning operations, controlling costs, evaluating performance,
and making strategic decisions.
2. A company purchases raw materials for $18,000, of which $14,000 is used during the
month. The remaining materials are still in storage. How should the $14,000 be classified
for a manufacturer if it has been issued to production but not yet incorporated into
completed goods?
A. Selling expense
B. Period cost
C. Direct labor
D. Work-in-process inventory
Rationale: Materials issued to production become part of manufacturing inventory. Until the
related goods are completed, the cost is included in work-in-process inventory rather than
treated as a period expense.
3. A company manufactures office chairs. Which cost is most likely a direct material cost?
A. The wood used to construct the chair frames
B. The factory supervisor's monthly salary
C. Depreciation on the factory building
D. Electricity used throughout the production facility
,Rationale: Direct materials are physical inputs that can be conveniently and economically
traced to individual products. The wood used in each chair is traceable to the product, unlike
general factory overhead.
4. A business pays its factory supervisor a fixed monthly salary regardless of production
volume. How should this salary generally be classified within the relevant production
range?
A. Direct material
B. Variable manufacturing overhead
C. Fixed manufacturing overhead
D. Selling and administrative expense
Rationale: A factory supervisor's salary supports manufacturing operations but does not vary
directly with the number of units produced. It is therefore generally classified as fixed
manufacturing overhead.
5. A company manufactures 4,000 units at a total variable manufacturing cost of $48,000. If
production increases to 5,000 units and the variable cost per unit remains constant, what is
the expected total variable manufacturing cost?
A. $48,000
B. $60,000
C. $54,000
D. $72,000
Rationale: Variable cost per unit is $48,000 ÷ 4,000 = $12. At 5,000 units, total variable cost is
5,000 × $12 = $60,000, assuming the relevant range and unit cost remain unchanged.
6. A manager is deciding whether to discontinue a product line that reports an accounting
loss. Which information is most important before making the decision?
A. The product's historical sales revenue alone
B. The total corporate overhead allocated to the product
C. The original purchase price of the equipment used by the product line
D. The contribution margin lost and the avoidable costs eliminated if the line is discontinued
Rationale: A discontinuation decision should compare the contribution margin that would be
lost with the costs that would actually be avoided. Allocated fixed costs that remain after
discontinuation do not represent savings from the decision.
7. Which financial statement reports a company's assets, liabilities, and equity at a specific
date?
,A. Balance sheet
B. Income statement
C. Statement of cash flows
D. Statement of retained earnings
Rationale: The balance sheet presents the company's financial position at a particular point in
time and follows the accounting equation: Assets = Liabilities + Equity.
8. A business earns revenue of $125,000 and incurs expenses of $91,000 during a reporting
period. Assuming no other income statement items, what is its net income?
A. $216,000
B. $91,000
C. $34,000
D. $125,000
Rationale: Net income equals revenue minus expenses. Subtracting $91,000 from $125,000
produces net income of $34,000.
9. A company purchases production equipment for $80,000 in cash. What is the immediate
effect of this transaction on the accounting equation, ignoring transaction costs and
subsequent depreciation?
A. Assets increase by $80,000 and liabilities increase by $80,000
B. Total assets remain unchanged because cash decreases while equipment increases
C. Equity decreases by $80,000
D. Total assets decrease by $80,000
Rationale: The transaction exchanges one asset, cash, for another asset, equipment. Cash
decreases by $80,000 and equipment increases by $80,000, leaving total assets unchanged at
the purchase date.
10. A company's accounts receivable balance is increasing faster than its sales revenue.
Which issue should management investigate first?
A. Whether depreciation expense is being calculated correctly
B. Whether inventory purchases are too low
C. Whether the company has excessive cash balances
D. Whether customers are paying more slowly or collection procedures have weakened
Rationale: Accounts receivable growing faster than sales may indicate slower collections,
extended credit terms, or deteriorating customer payment behavior. Management should
examine receivable aging and collection performance before concluding that a problem
exists.
, 11. A company uses the accrual basis of accounting. It completes consulting work in
December but receives payment in January. In which month should it generally recognize
the revenue?
A. December, when the service is performed and the revenue is earned
B. January, when the cash is received
C. The month in which the annual financial statements are issued
D. The month in which the customer signs the next contract
Rationale: Under accrual accounting, revenue is generally recognized when the applicable
performance obligation is satisfied, not merely when cash is collected. If the consulting service
was completed in December, the revenue generally belongs in December.
12. A factory produces 10,000 units. Its total fixed manufacturing overhead is $50,000, and
the activity level remains within the relevant range. What happens to fixed manufacturing
overhead per unit if production increases to 12,500 units?
A. It increases from $5 to $6.25
B. It remains at $5
C. It decreases from $5 to $4
D. It decreases from $6.25 to $5
Rationale: Fixed overhead per unit is $50,000 ÷ 10,000 = $5 initially. At 12,500 units, it
becomes $50,000 ÷ 12,500 = $4. Total fixed overhead remains constant, while the cost per
unit declines as production increases.
13. Which cost is most likely a period cost for a manufacturing company?
A. Direct labor used to assemble products
B. Sales commissions paid to sales representatives
C. Indirect materials consumed in the factory
D. Depreciation on production machinery
Rationale: Sales commissions are selling expenses and are generally expensed in the period
incurred. Direct labor, factory indirect materials, and production machinery depreciation are
generally product costs included in manufacturing overhead or inventory.
14. A company reports the following monthly costs: direct materials, $25,000; direct labor,
$18,000; and manufacturing overhead, $12,000. What is the total manufacturing cost
incurred during the month?
A. $43,000
B. $30,000
C. $55,000
D. $37,000
