1-30
Questions
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.
14 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
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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