ACC 561 Final MCQs

ACC 561 Final  MCQs

1. Which of the following is an advantage of corporations relative to partnerships and sole proprietorships?

Harder to transfer ownership.
Lower taxes.
Most common form of organization.
Reduced legal liability for investors.

2. The group of users of accounting information charged with achieving the goals of the business is its

creditors.
auditors.
investors.
Managers

3. Which of the following financial statements is concerned with the company at a point in time?

Balance sheet.
Retained Earnings statement.
Income statement.
Statement of cash flows.
4. An income statement

presents the revenues and expenses for a specific period of time.

reports the assets, liabilities, and stockholders’ equity at a specific date.
summarizes the changes in retained earnings for a specific period of time.
reports the changes in assets, liabilities, and stockholders’ equity over a period of time.

5. The most important information needed to determine if companies can pay their current obligations is the

relationship between current assets and current liabilities.
projected net income for next year.
relationship between short-term and long-term liabilities.
net income for this year.

6. A liquidity ratio measures the

percentage of total financing provided by creditors.
income or operating success of a company over a period of time.
short-term ability of a company to pay its maturing obligations and to meet unexpected needs for cash.
ability of a company to survive over a long period of time.

7. The convention of consistency refers to consistent use of accounting principles

among firms.
throughout the accounting periods.
among accounting periods.
within industries.

8. Horizontal analysis is also known as

linear analysis.
common size analysis
vertical analysis.
trend analysis.

9. Horizontal analysis is a technique for evaluating a series of financial statement data over a period of time

to determine which items are in error.
to determine the amount and/or percentage increase or decrease that has taken place.
that has been arranged from the highest number to the lowest number.
that has been arranged from the lowest number to the highest number.

10. Vertical analysis is a technique that expresses each item in a financial statement

as a percent of the item in the previous year.
in dollars and cents.
starting with the highest value down to the lowest value.
as a percent of a base amount

11. Process costing is used when

dissimilar products are involved.
costs are to be assigned to specific jobs.
the production process is continuous.
production is aimed at filling a specific customer order

12. An important feature of a job order cost system is that each job
must be completed before a new job is accepted
must be similar to previous jobs completed
consists of one unit of output.
has its own distinguishing characteristics

13. In a process cost system, product costs are summarized:

when the products are sold.
after each unit is produced
on production cost reports
on job cost sheets

13. An activity that has a direct cause-effect relationship with the resources consumed is a(n)
cost pool.
product activity.
cost driver.
overhead rate

15. Activity-based costing

allocates overhead directly to products and services based on activity levels
allocates overhead to multiple activity cost pools, and it then assigns the activity cost pools to products and services by means of cost drivers.
assigns activity cost pools to products and services, then allocates overhead back to the activity cost pools.
accumulates overhead in one cost pool, then assigns the overhead to products and services by means of a cost driver.

16. A cost which remains constant per unit at various levels of activity is a

mixed cost.
manufacturing cost
variable cost
fixed cost

17. The break-even point is where
total sales equal total fixed costs.
total sales equal total variable costs.
contribution margin equals total fixed costs
total variable costs equal total fixed costs

18. Fixed costs are $600,000 and the contribution margin per unit is $150. What is the break-even point?

4,000 units
$1,500,000
$4,000,000
1,500 units
Break-even point = 600,000/ 150

19. When a company assigns the costs of direct materials, direct labor, and both variable and fixed manufacturing overhead to products, that company is using

absorption costing
product costing
variable costing
operations costing

20. If a division manager's compensation is based upon the division's net income, the manager may decide to meet the net income targets by increasing production when using

absorption costing, in order to increase net income
variable costing, in order to decrease net income
absorption costing, in order to decrease net income
variable costing, in order to increase net income

21. An unrealistic budget is more likely to result when it

has been developed by all levels of management.
is developed with performance appraisal usages in mind
has been developed in a bottom up fashion
has been developed in a top down fashion

22. A major element in budgetary control is

approval of the budget by the stockholders
the comparison of actual results with planned objectives
the valuation of inventories
the preparation of long-term plans

23. The purpose of the sales budget report is to

control selling expenses.
control sales commissions
determine whether sales goals are being met
determine whether income objectives are being met

24. The accumulation of accounting data on the basis of the individual manager who has the authority to make day-to-day decisions about activities in an area is called

static reporting.
master budgeting.
responsibility accounting
flexible accounting

25. Variance reports are
(a) external financial reports.
(b) SEC financial reports
(c) internal reports for management.
(d) all of these.

26. Internal reports that review the actual impact of decisions are prepared by

factory workers
the controller.
management accountants
department heads

27. The process of evaluating financial data that change under alternative courses of action is called

double entry analysis
cost-benefit analysis
incremental analysis
contribution margin analysis

28. Seasons Manufacturing manufactures a product with a unit variable cost of $100 and a unit sales price of $176. Fixed manufacturing costs were $480,000 when 10,000 units were produced and sold. The company has a one-time opportunity to sell an additional 1,000 units at $140 each in a foreign market which would not affect its present sales. If the company has sufficient capacity to produce the additional units, acceptance of the special order would affect net income as follows:

Income would increase by $140,000
Income would decrease by $8,000
Income would increase by $8,000
Income would increase by $40,000

29. Carter, Inc. can make 100 units of a necessary component part with the following costs:

Direct Materials           $120,000
Direct Labor                20,000
Variable Overhead       60,000
Fixed Overhead           40,000

If Carter can purchase the component externally for $220,000 and only $10,000 of the fixed costs can be avoided, what is the correct make-or-buy decision?

Make and save $10,000
Buy and save $10,000
Buy and save $30,000
Make and save $30,000

30. A company has a process that results in 15,000 pounds of Product A that can be sold for $16 per pound. An alternative would be to process Product A further at a cost of $200,000 and then sell it for $28 per pound. Should management sell Product A now or should Product A be processed further and then sold? What is the effect of the action?

Sell now, the company will be better off by $200,000.
Process further, the company will be better off by $180,000
Process further, the company will be better off by $20,000
Sell now, the company will be better off by $20,000

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