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1. Inventory turnover is calculated by dividing (Points: 4) 55 Question and answers

1. Inventory turnover is calculated by dividing (Points: 4)
Cost of goods sold by the ending inventory.
Cost of goods sold by the beginning inventory.
Cost of goods sold by the average inventory.
Average inventory by cost of goods sold.

2. The order of presentation of nontypical items that may appear on the income statement is (Points: 4)
Extraordinary items, Discontinued operations, Other revenues and expenses.
Discontinued operations, Extraordinary items, Other revenues and expenses.
Other revenues and expenses, Discontinued operations, Extraordinary items.
Other revenues and expenses, Extraordinary items, Discontinued operations.

3. Horizontal analysis is also called (Points: 4)
Linear analysis.
Vertical analysis.
Trend analysis.
common size analysis.

4. Assume the following sales data for a company: 2009 $945,000 2008 780,000 2007 650,000 If 2007 is the base year, what is the percentage increase in sales from 2007 to 2008? (Points: 4)
25% 20% 125% 143%

5. Profit margin is calculated by dividing (Points: 4)
Sales by cost of goods sold.
Gross profit by net sales.
Net income by stockholders' equity.
Net income by net sales.

6. Which of the following is not a profitability ratio? (Points: 4)
Payout ratio
Profit margin
Times interest earned
Return on common stockholders' equity

7. Times interest earned is also called the (Points: 4)
Money multiplier.
Interest coverage ratio.
Coupon coverage ratio.
Premium ratio.

8. The ratio that uses weighted average common shares outstanding in the denominator is the (Points: 4)
Price-earnings ratio.
Return on common stockholders' equity.
Earnings per share.
Payout ratio.

9. Each of the following is an extraordinary item except the (Points: 4)
Effects of major casualties, if rare in the area.
Effects of a newly enacted law or regulation.
Expropriation of property by a foreign government.
Losses attributable to labor strikes.

10. Waters Department Store had net credit sales of $12,000,000 and cost of goods sold of $9,000,000 for the year. The average inventory for the year amounted to $2,000,000. The average number of days in inventory during the year was (Points: 4)
122 days. 81 days. 61 days. 35 days.

11. Times interest earned is also called the (Points: 4)
Money multiplier.
Interest coverage ratio.
Coupon coverage ratio.
Premium ratio.

12. Which of the following characteristics does not apply to cash equivalents? (Points: 4)
Short-term
Highly-liquid
Readily convertible into cash
Sensitive to interest rate changes

13. The category that is generally considered to be the best measure of a company's ability to continue as a going concern is (Points: 4)
Cash flows from operating activities.
Cash flows from investing activities.
Cash flows from financing activities.
Usually different from year to year.

14. For the following transaction, indicate where, if at all, it would be classified on the statement of cash flows. Assume the indirect method is used. Decrease in income taxes payable. (Points: 4) Operating activities section
Investing activities section
Financing activities section
Does not represent a cash flow

15. For the following transaction, indicate where, if at all, it would be classified on the statement of cash flows. Assume the indirect method is used. Purchased land for cash. (Points: 4)
Operating activities section
Investing activities section
Financing activities section
Does not represent a cash flow

16. Starting with net income and adjusting it for items that affected reported net income but which did not affect cash is called the (Points: 4)
Direct method.
Indirect method.
Working capital method.
Cost-benefit method.

17. Using the indirect method, patent amortization expense for the period (Points: 4)
is deducted from net income.
Causes cash to increase.
Causes cash to decrease.
Is added to net income.

18. Which of the following would be subtracted from net income using the indirect method? (Points: 4)
Depreciation expense
An increase in accounts receivable
An increase in accounts payable
A decrease in prepaid expenses

19. Which of the following would be added to net income using the indirect method? (Points: 4)
An increase in accounts receivable
An increase in prepaid expenses
Depreciation expense
A decrease in accounts payable

20. Free cash flow equals cash provided by (Points: 4)
Operations less capital expenditures and cash dividends.
Operations less cash dividends.
Investing activities less capital expenditures and cash dividends.
Operations less capital expenditures.

21. Cola Co. manufactures a product with a standard direct labor cost of two hours at $24.00 per hour. During July, 2,000 units were produced using 4,200 hours at $24.40 per hour. The labor price variance was (Points: 4)
$1,680 U. $6,480 U. $6,480 F. $4,800 U.

22. The per-unit standards for direct labor are 1.5 direct labor hours at $12 per hour. If in producing 2,400 units, the actual direct labor cost was $36,800 for 3,000 direct labor hours worked, the total direct labor variance is (Points: 4)
$1,920 unfavorable. $6,400 favorable. $4,000 unfavorable. $6,400 unfavorable.

23. Ideal standards (Points: 4)
Are rigorous but attainable.
Are the standards generally used in a master budget.
Reflect optimal performance under perfect operating conditions.
Will always motivate employees to achieve the maximum output.

24. An unfavorable materials quantity variance would occur if (Points: 4)
More materials were purchased than were used.
Actual pounds of materials used were less than the standard pounds allowed.
Actual labor hours used were greater than the standard labor hours allowed.
Actual pounds of materials used were greater than the standard pounds allowed.

25. Most companies that use standards set them at (Points: 4)
The normal level.
A conceivable level.
The ideal level.
Last year's level.

26. The difference between a budget and a standard is that (Points: 4)
A budget expresses what costs were, while a standard expresses what costs should be.
A budget expresses management's plans, while a standard reflects what actually happened.
A budget expresses a total amount, while a standard expresses a unit amount.
Standards are excluded from the cost accounting system, whereas budgets are generally incorporated into the cost accounting system.

27. An unfavorable materials quantity variance would occur if (Points: 4)
More materials were purchased than were used.
Actual pounds of materials used were less than the standard pounds allowed.
Actual labor hours used were greater than the standard labor hours allowed.
Actual pounds of materials used were greater than the standard pounds allowed.

28. Most companies that use standards set them at (Points: 4)
The normal level.
A conceivable level.
The ideal level.
Last year's level.

29. The most rigorous of all standards is the (Points: 4)
Normal standard.
Realistic standard.
Ideal standard.
Conceivable standard.

30. What is a standard cost? (Points: 4)
The total number of units times the budgeted amount expected
Any amount that appears on a budget
The total amount that appears on the budget for product costs
The amount management thinks should be incurred to produce a good or service

31. A purchases budget is used instead of a production budget by (Points: 4)
Merchandising companies.
Service enterprises.
Not-for-profit organizations.
Manufacturing companies.

32. Which one of the following budgets would be prepared for a manufacturer but not for a merchandiser? (Points: 4)
Direct labor budget
Cash budget
Sales budget
Budgeted income statement

33. Sargent.Com plans to sell 2,000 purple lawn chairs during May, 1,900 in June, and 2,000 during July. The company keeps 15% of the next month's sales as ending inventory. How many units should Sargent.Com produce during June? (Points: 4)
1,915 2,200 1,885 Not enough information to determine.

34. An unrealistic budget is more likely to result when it (Points: 4)
Has been developed in a top down fashion.
Has been developed in a bottom up fashion.
Has been developed by all levels of management.
Is developed with performance appraisal usages in mind.

35. A product line should be eliminated whenever (Points: 4)
The product line generates a net loss.
The unavoidable fixed costs exceed the product line's contribution margin.
The product line generates a negative contribution margin.
The avoidable costs are less than the product line's contribution margin.

36. Products produced from a common production process and a single raw material are referred to as (Points: 4)
Separable products.
Joint products.
Common products.
Independent products.

37. Which one of the following is not a disadvantage of buying rather than making a component of a company's product? (Points: 4)
Quality control specifications may not be met.
The outside supplier could increase prices significantly in the future.
Profitable product lines may be dropped.
The supplier may not deliver on time.

38. Wishnell Toys can make 1,000 toy robots with the following costs: Direct Materials $70,000 Direct Labor 26,000 Variable Overhead 15,000 Fixed Overhead 15,000 The company can purchase the 1,000 robots externally for $120,000. The avoidable fixed costs are $5,000 if the units are purchased externally. What is the cost savings if the company makes the robots? (Points: 4)
$1,000 $5,000 $10,000 $4,000

39. Costs that will differ between alternatives and influence the outcome of a decision are (Points: 4)
Sunk costs.
Unavoidable costs.
Relevant costs.
Product costs.

40. Which of the following steps in the management decision-making process generally involves the managerial accountant? (Points: 4)
Determine possible courses of action.
Make the appropriate decision based on relevant data.
Prepare internal reports that review the impact of decisions.
Assign responsibility.

41. Reducing reliance on human workers and instead investing heavily in computers and online Technology will (Points: 4)
Reduce fixed costs and increase variable costs.
Reduce variable costs and increase fixed costs.
Have no effect on the relative proportion of fixed and variable costs.
Make the company less susceptible to economic swings.

42. In a sales mix situation, at any level of units sold, net income will be higher if (Points: 4)
More higher contribution margin units are sold than lower contribution margin units.
More lower contribution margin units are sold than higher contribution margin units.
More fixed expenses are incurred.
Weighted-average unit contribution margin decreases.

43. The margin of safety ratio is (Points: 4)
Expected sales divided by break-even sales.
Expected sales less break-even sales.
Margin of safety in dollars divided by expected sales.
Margin of safety in dollars divided by break-even sales.

44. In 2008, Masset sold 3,000 units at $500 each. Variable expenses were $350 per unit, and fixed expenses were $200,000. The same selling price, variable expenses, and fixed expenses are expected for 2009. What is Masset's break-even point in units for 2009? (Points: 4)
1,333 3,000 4,285 6,667

45. In 2008, Masset sold 3,000 units at $500 each. Variable expenses were $350 per unit, and fixed expenses were $200,000. What was Masset's 2008 net income? (Points: 4)
$250,000 $450,000 $1,050,000 $1,500,000

46. For Danks Company, sales is $500,000, variable expenses are $310,000, and fixed expenses are $140,000. Danks' contribution margin ratio is (Points: 4)
10%. 28%. 38%. 62%.

47. Cost-volume-profit analysis is the study of the effects of (Points: 4)
Changes in costs and volume on a company's profit.
Cost, volume, and profit on the cash budget.
Cost, volume, and profit on various ratios.
Changes in costs and volume on a company's profitability ratios.

48. Tiny Tots Toys has actual sales of $400,000 and a break-even point of $260,000. How much is its margin of safety ratio? (Points: 4)
35% 65% 154% 53.8%

49. A company sells a product which has a unit sales price of $5, unit variable cost of $3 and total fixed costs of $120,000. The number of units the company must sell to break even is (Points: 4)
60,000 units. 24,000 units. 240,000 units. 40,000 units.

50. A company has total fixed costs of $120,000 and a contribution margin ratio of 20%. The total sales necessary to break even are (Points: 4)
$480,000. $600,000. $150,000. $144,000.

51. Hess, Inc. sells a product with a contribution margin of $12 per unit, fixed costs of $74,400, and sales for the current year of $100,000. How much is Hess's break-even point? (Points: 4)
4,600 units $25,600 6,200 units 2,133 units

52. At the break-even point of 2,500 units, variable costs are $55,000, and fixed costs are $32,000. How much is the selling price per unit? (Points: 4)
$34.80 $9.20 $12.80 $22.00
 
53. A manufacturing process requires small amounts of glue. The glue used in the production process Is classified as a(n) (Points: 4)
Period cost.
Indirect material.
Direct material.
Miscellaneous expense.

54. Cost of goods sold (Points: 4)
Only appears on merchandising companies' income statements.
Only appears on manufacturing companies' income statements.
Appears on both manufacturing and merchandising companies' income statements.
Is calculated exactly the same for merchandising and manufacturing companies.

55. Cost of goods manufactured is calculated as follows: (Points: 4)
Beginning WIP + direct materials used + direct labor + manufacturing overhead + ending WIP.
Direct materials used + direct labor + manufacturing overhead - beginning WIP + ending WIP. Beginning WIP + direct materials used + direct labor + manufacturing overhead - ending WIP.
Direct materials used + direct labor + manufacturing overhead - ending WIP - beginning WIP.

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