WGU C213 ACCOUNTING FOR
DECISION MAKERS EXAM QUESTIONS
AND ANSWERS
1. Which of the following describes the impact of using LIFO instead of FIFO in an inflationary
environment?
A. Higher ending inventory and higher net income
B. Lower cost of goods sold and higher taxes
C. Higher net income and lower cost of goods sold
D. Lower ending inventory and higher cost of goods sold
Answer: D
Conceptual Explanation: In an inflationary environment, LIFO (Last-In, First-Out)
assumes the last items purchased (most expensive) are sold first, resulting in higher Cost of
Goods Sold and lower ending inventory compared to FIFO.
2. Company A has current assets of $50,000, current liabilities of $30,000, and inventory of
$10,000. What is the quick ratio?
A. 1.67
,B. 1.25
C. 2.00
D. 1.33
Answer: D
Conceptual Explanation: The quick ratio is calculated as (Current Assets - Inventory) /
Current Liabilities. Here, ($50,000 - $10,000) / $30,000 = 1.33.
3. Which accounting principle requires that expenses incurred to generate revenue be
recognized in the same period as the revenue?
A. Revenue Recognition Principle
B. Full Disclosure Principle
C. Going Concern Assumption
D. Matching Principle
Answer: D
Conceptual Explanation: The matching principle dictates that efforts (expenses) be
matched with accomplishments (revenues) in the period they occur.
4. A company purchases a machine for $100,000 with a salvage value of $10,000 and a 5-year
useful life. What is the depreciation expense for year 2 using the double-declining balance
method?
A. $18,000
, B. $40,000
C. $24,000
D. $20,000
Answer: C
Conceptual Explanation: DDB rate = 2/5 = 40%. Year 1: $100,000 * 40% = $40,000. Year
2 Book Value: $100,000 - $40,000 = $60,000. Year 2 Expense: $60,000 * 40% = $24,000.
5. If a company has a contribution margin ratio of 40% and fixed costs of $120,000, what is
the break-even point in sales dollars?
A. $480,000
B. $48,000
C. $200,000
D. $300,000
Answer: D
Conceptual Explanation: Break-even in sales dollars = Fixed Costs / Contribution Margin
Ratio. $120,.40 = $300,000.
6. Which of the following is considered a product cost under GAAP?
A. Sales commissions
B. Administrative salaries
DECISION MAKERS EXAM QUESTIONS
AND ANSWERS
1. Which of the following describes the impact of using LIFO instead of FIFO in an inflationary
environment?
A. Higher ending inventory and higher net income
B. Lower cost of goods sold and higher taxes
C. Higher net income and lower cost of goods sold
D. Lower ending inventory and higher cost of goods sold
Answer: D
Conceptual Explanation: In an inflationary environment, LIFO (Last-In, First-Out)
assumes the last items purchased (most expensive) are sold first, resulting in higher Cost of
Goods Sold and lower ending inventory compared to FIFO.
2. Company A has current assets of $50,000, current liabilities of $30,000, and inventory of
$10,000. What is the quick ratio?
A. 1.67
,B. 1.25
C. 2.00
D. 1.33
Answer: D
Conceptual Explanation: The quick ratio is calculated as (Current Assets - Inventory) /
Current Liabilities. Here, ($50,000 - $10,000) / $30,000 = 1.33.
3. Which accounting principle requires that expenses incurred to generate revenue be
recognized in the same period as the revenue?
A. Revenue Recognition Principle
B. Full Disclosure Principle
C. Going Concern Assumption
D. Matching Principle
Answer: D
Conceptual Explanation: The matching principle dictates that efforts (expenses) be
matched with accomplishments (revenues) in the period they occur.
4. A company purchases a machine for $100,000 with a salvage value of $10,000 and a 5-year
useful life. What is the depreciation expense for year 2 using the double-declining balance
method?
A. $18,000
, B. $40,000
C. $24,000
D. $20,000
Answer: C
Conceptual Explanation: DDB rate = 2/5 = 40%. Year 1: $100,000 * 40% = $40,000. Year
2 Book Value: $100,000 - $40,000 = $60,000. Year 2 Expense: $60,000 * 40% = $24,000.
5. If a company has a contribution margin ratio of 40% and fixed costs of $120,000, what is
the break-even point in sales dollars?
A. $480,000
B. $48,000
C. $200,000
D. $300,000
Answer: D
Conceptual Explanation: Break-even in sales dollars = Fixed Costs / Contribution Margin
Ratio. $120,.40 = $300,000.
6. Which of the following is considered a product cost under GAAP?
A. Sales commissions
B. Administrative salaries
