Free Practice Questions for WGU Accounting-for-Decision-Makers Exam

Answer : C

The correct answer is C. $130,000. A contribution margin income statement separates variable costs from fixed costs, which makes it useful for forecasting profit at different sales levels. OpenStax explains that contribution margin analysis shows how much sales revenue remains after variable costs to cover fixed costs and profit.

First calculate the per-unit amounts based on 10,000 shoes:

Sales per unit = $600,000 / 10,000 = $60

Variable cost per unit = $400,000 / 10,000 = $40

Contribution margin per unit = $20

For 14,000 shoes, total contribution margin would be:

14,000 $20 = $280,000

Now subtract fixed costs, which stay the same at $150,000:

Forecasted net income = $280,000 - $150,000 = $130,000

So the company would expect to earn $130,000 if it sells 14,000 shoes. This is exactly why CVP and contribution margin statements are useful for planning: they allow managers to estimate the profit impact of volume changes quickly, as long as selling price, variable cost per unit, and fixed costs remain stable. Therefore, Option C is correct.

Answer : C

The correct answer is C. Under activity-based costing (ABC), overhead is reassigned based on the activities that actually drive cost consumption. ABC often reveals that one product was previously undercosted while another was overcosted under traditional volume-based allocation. OpenStax explains that ABC can shift overhead between products and provide more accurate product-cost information for pricing and decision-making.

For Product A, the new overhead rises from $3 to $8, increasing total unit cost from $6 ($2 + $1 + $3) to $11 ($2 + $1 + $8). Since the current selling price is only $8, Product A is now shown as underpriced, so its selling price would likely need to increase. For Product B, overhead falls from $4 to $2, reducing total unit cost from $9 to $7. With a current selling price of $12, Product B appears more profitable than previously believed, so management could choose to decrease its price if needed for competitive reasons. Therefore, the most logical result is Product A price up, Product B price down, which is Option C.

Answer : A, B

The correct answers are A and B. Cost-volume-profit (CVP) analysis is a forward-looking planning tool used to study how changes in costs, sales volume, and selling price affect contribution margin, break-even point, and target profit. OpenStax describes CVP analysis as one of the most useful tools in managerial accounting for analyzing how changing business situations affect profit.

Option A is correct because CVP helps management estimate how a future change in variable costs or fixed costs would influence profit. Option B is also correct because CVP can determine how many units must be sold to achieve a desired target income or profit level. In contrast, Options C and D focus on past transactions and past tax costs, which are not the primary purpose of CVP analysis. CVP is mainly a planning and decision-making method rather than a historical reporting tool. It helps managers ask ''what happens if'' questions about future operations, such as what sales volume is needed to earn a target profit or how a change in cost structure would affect margins. Therefore, the correct choices are A and B.

Answer : D

The correct answer is D. $17,700. To find the ending cash balance, start with the beginning cash balance and then add all cash inflows and subtract all cash outflows.

Beginning cash = $1,200

Inflows:

Cash from sales = $16,000

Cash received from non-trading securities = $5,000

Cash received from loans = $8,000

Total inflows = $29,000

Outflows:

Wages and salaries paid = $4,500

Cash paid for plant assets = $6,000

Cash paid in repayment of loans = $2,000

Total outflows = $12,500

Now calculate ending cash:

Ending cash = $1,200 + $29,000 - $12,500 = $17,700

This is the amount of cash remaining after considering all listed cash transactions. The classification of the cash flows is not necessary to solve the question, but they include operating, investing, and financing effects. What matters mathematically is that every cash receipt increases total cash and every cash payment decreases it. Since the net increase in cash is $16,500, adding that to the beginning cash of $1,200 gives $17,700. Therefore, Option D is correct.

Answer : C

The correct answer is C. Activity-based costing (ABC) is generally more precise than traditional costing when a company makes multiple products that consume overhead resources differently. ABC assigns overhead by identifying activities and using multiple cost drivers that better reflect how products actually use resources. Sources on ABC explain that it improves cost accuracy compared with traditional systems, especially in more complex production environments.

Option A is incorrect because the statement is reversed. Traditional costing often uses a single volume-based driver such as labor hours or machine hours, while ABC commonly uses multiple cost drivers. Option B is incorrect because ABC is usually more time-consuming and expensive to administer, not less. Option D is also incorrect because ABC is especially useful when products are heterogeneous, meaning they differ in the amount and type of overhead resources they consume. Therefore, the key difference is that ABC gives a more precise assignment of overhead costs than traditional costing when multiple products are produced. That makes Option C the correct answer.