1) If income from operations for a division is $30,000, sales are $243,750, and invested
assets are $187,500, the investment turnover would be 1.3 .
2) A qualitative characteristic that influences capital investment analysis is
manufacturing productivity.
3) Goodwill refers to the excess of purchase price of a business over the fair value of its
net assets.
4) Once a static budget has been determined, it is changed regularly as the underlying
activity changes.
5) The ratio of current assets to current liabilities is referred to as the acid-test ratio.
6) The master budget of a small manufacturer would normally include all necessary
component budgets except the capital expenditures budget.
7) In capital rationing, alternative proposals are initially screened by establishing
minimum standards using the cash payback and the average rate of return methods.
8) The budgeted direct materials purchases are based on the sum of (1) the materials
needed for production and (2) the desired ending materials inventory, less (3) the
estimated beginning materials inventory.
9) The underlying principle of allocating operating expenses to departments is to assign
each department an amount of expense proportional to the revenues of that department.
10) Depreciation expense on store equipment for a department store is a direct expense.
11) Indirect labor is included in factory overhead.
12) In using the variable cost concept of applying the cost-plus approach to product
pricing, variable manufacturing costs and variable selling and administrative expenses
must be covered by the markup.
13) A companys assets are comprised of the following: Cash, $25,000; Receivables,
$5,600; Marketable Securities, $7,200; and Equipment, $65,000. The total of quick
assets is $37,800.
14) The process by which management plans, evaluates, and controls long- term
investment decisions involving fixed assets is called cost-volume-profit analysis.
15) If the market rate of interest is 6% and a corporation’s bonds bear interest at 7%, the
bonds will sell at a discount.
16) Liabilities that will not be due for more that one year are called long-term liabilities.
17) Johnson, Inc. purchased land for cash. What effect does this transaction have?
A.Increase in Cash and decrease in Land
B.Decrease in Cash and decrease in Land
C.Increase in Cash and increase in Land
D.Decrease in Cash and increase in Land
18) For the year that just ended, a company reports net income of $1,500,000. There are
500,000 shares authorized, 300,000 shares issued, and 250,000 shares of common stock
outstanding. What is the earnings per share?
A.$5.00
B.$2.50
C.$6.00
D.$3.00
19) ________ is an example of internal stakeholders.
A.Managers
B.Creditors
C.Stockholders
D.Suppliers
20) A difference in quantity of materials used on two comparable jobs may be caused
by:
A.inadequately trained employees
B.poor quality materials
C.employee carelessness
D.all of these
21) A company has a margin of safety of 25%, a contribution margin ratio of 30%, and
sales of $1,000,000.
(a) What was the break-even point?
(b) What was the operating income?
(c) If neither the relationship between variable costs and sales nor the amount of fixed
costs is expected to change in the next year, how much additional operating income can
be earned by increasing sales by $110,000?
22) Goodwill is:
A.amortized in a manner similar to other intangibles
B.written down only if an impairment in value occurs
C.charged to expense immediately
D.amortized over 40 years or its economic life, whichever is shorter
23) Which of the following is not a product cost?
A.direct materials
B.sales and administrative expenses
C.direct labor
D.factory overhead
24) Based on the following data for the current year, compute the number of days’ sales
in accounts receivable?
A.7.5
B.18.25
C.16.0
D.20.5
25) If sales are $200,000, variable costs are 56% of sales, and operating income is
$30,000, what is the contribution margin ratio?
A.42%
B.37%
C.44%
D.15%
26) Just-in-time manufacturing practices include all of the following except:
A.eliminating defective or poor-quality products
B.partnering with suppliers to provide high-quality, low-cost, and on-time materials
C.emphasizing push manufacturing to ensure inventory levels that will provide a buffer
against production problems
D.employee involvement using teams organized in product cells
27) The purpose of the Sarbanes-Oxley Act of 2002 is to:
A.restore public confidence and trust in the financial statements of publicly held
companies
B.require all companies to prepare financial statements
C.protect companies from demands of investors, stockholders, and creditors
D.do all of these
28) If the market rate of interest is 10%, a $10,000, 12%, 10-year bond that pays
interest semiannually would sell at an amount:
A.less than face value
B.equal to the face value
C.greater than face value
D.that cannot be determined
29) The major subdivisions of the Stockholders’ Equity section of the balance sheet are:
A.Paid-in Capital and Retained Earnings
B.Common Stock and Retained Earnings
C.Stock, Paid-In Capital, and Retained Earnings
D.Common Stock and Preferred Stock
30) A summary of the cash receipts and cash payments for a specific period of time is
a(n):
A.income statement
B.balance sheet
C.statement of cash flows
D.retained earnings statement
31) Standards that represent levels of operation that can be attained with reasonable
effort are called:
A.theoretical standards
B.ideal standards
C.reasonable standards
D.normal standards
32) The following data are taken from the management accounting reports of Dancer
Co.:
If an incentive bonus is paid to the manager who achieved the highest income from
operations before service department charges, it follows that:
A.division A’s manager is given the bonus
B.division B’s manager is given the bonus
C.division C’s manager is given the bonus
D.the managers of Divisions B and C divide the bonus
33) If the wage rate paid per hour differs from the standard wage rate per hour for direct
labor, the variance is termed:
A.variable variance
B.rate variance
C.quantity variance
D.volume variance
34) The sales, income from operations, and invested assets for each division of Salem
Company are as follows:
Management has established a minimum rate of return for invested assets of 11%.
35) Allowance for Doubtful Accounts has an unadjusted balance of $1,100 at the end of
the year, and an analysis of customers’ accounts indicates doubtful accounts of $12,900.
Which of the following records the proper provision for doubtful accounts?
A.Increase Uncollectible Accounts Expense, $14,000; increase Allowance for Doubtful
Accounts, $14,000
B.Decrease Allowance for Doubtful Accounts, $14,000; decrease Uncollectible
Accounts Expense, $14,000
C.Decrease Allowance for Doubtful Accounts, $11,800; decrease Uncollectible
Accounts Expense, $11,800
D.Increase Uncollectible Accounts Expense, $11,800; increase Allowance for Doubtful
Accounts, $11,800
36) Based on the following data for the current year, determine the inventory turnover?
A.7.2
B.3.6
C.3.2
D.4.2
37) X&Y Co. received $4,000 in payments from clients for services billed in a previous
month. What effect does this transaction have on the accounts under the accrual basis of
accounting?
A.Total assets increase by $4,000
B.Assets will increase by $4,000 and revenues will increase $4,000
C.Total assets will be decrease by $4,000
D.The net effect on assets is zero
38) Matthews Company is considering replacing equipment that originally cost
$250,000 and that has $225,000 accumulated depreciation to date. A new machine will
cost $500,000, and the old equipment can be sold for $6,000. What is the sunk cost in
this situation?
A.$225,000
B.$25,000
C.$250,000
D.$0
39) When merchandise is purchased to resell to customers, it is recorded in the account
entitled:
A.Supplies
B.Cost of Goods Sold
C.Merchandise Inventory
D.Sales
40) In large businesses, decentralization is often advantageous because:
A.it allows top management to make all decisions, thus ensuring that overall
operational goals are met
B.it prevents decisions from one unit to negatively affect the profitability of the entire
company
C.it allows departmental managers to focus on acquiring expertise in their areas of
responsibility
D.it prevents duplication of assets and expense
41) Compute factory overhead cost from the following costs:
A.$23,000
B.$43,000
C.$70,000
D.$113,000
42) Determine the cost of the land, based on the following data.
43) Under a perpetual inventory system,
A.accounting records continuously disclose the amount ofinventory
B.increases in inventory resulting from purchases are debitedto Purchases
C.there is no need for a year-end physical count
D.the purchase returns and allowances account is credited when goods are returned to
vendors
44) The sales, income from operations, and invested assets for each division of Garner
Company are as follows:
45) The costs of services charged to a profit center based on the usage of the service are
called:
A.operating expenses
B.noncontrollable charges
C.service department charges
D.activity charges
46) An equipment was purchased for $30,000. It has a useful life of 5 years, and a
residual value of $4,000. Compute the depreciation expense for the second year using
the double-declining-balance method.
A.$5,200
B.$6,000
C.$6,240
D.$7,200