Based on the following information, calculate the overall process yield.
Process M:
Units passing inspection 7,755 units
Units entering process 11,750 units
Process N:
Units passing inspection 5,762 units
Units entering process 6,700 units
a. 80.93%
b. 60.82%
c. 66.00%
d. 56.76%
On September 1, a machine was purchased for $47,000 with a useful life of 8 years, and
a residual value of $3,000. What is the depreciation expense in the year of purchase
under straightline method, assuming a December 31 yearend?
a. $3,917
b. $3,667
c. $1,958
d. $1,833
The “rules” of accounting are called:
a. income tax regulations.
b. SEC regulations.
c. Internet rules.
d. Generally Accepted Accounting Principles.
In attempting to improve profitability when faced with a bottleneck related to hours that
is involved in the production of two or more products, which of the following is most
important for management to consider?
a. Contribution margin per unit for each product
b. Time required for each different product passing through the bottleneck
c. Selling price or sales revenue generated by each product produced through the
bottleneck
d. Contribution margin per bottleneck hour for each product
Under accrual accounting, expenses are recorded when incurred regardless of when
paid.
a. True
b. False
Cost behavior refers to the manner in which:
a. a cost changes as the related activity changes.
b. a cost is allocated to products.
c. a cost is used in setting selling prices.
d. a cost is estimated.
When evaluating a proposal by use of the cash payback method, if net cash flows
exceed the capital investment within the time deemed acceptable by management, the
proposal should be accepted.
a. True
b. False
A mixed cost has characteristics of both a variable cost and a fixed cost.
a. True
b. False
Liabilities that are due and payable beyond one year or paid out of noncurrent assets are
termed longterm liabilities.
a. True
b. False
A company made some expensive repairs to equipment and buildings during the past
year. (a) What criteria is used in determining whether the repairs are capital
expenditures or revenue expenditures, and (b) what is the effect on the company’s
financial statements if they are incorrectly recorded as capital expenditures?
Standards that can be achieved only under perfect operating conditions, such as no idle
time, no machine breakdowns, and no materials spoilage, are called:
a. theoretical standards.
b. appropriate standards.
c. normal standards.
d. breakeven standards.
Which one of the following should be added to net income in calculating net cash flow
from operating activities using the indirect method?
a. A gain on the sale of land
b. A decrease in accounts payable
c. An increase in accrued liabilities
d. Dividends paid on common stock
Merchandise subject to terms 2/10, n/30, FOB shipping point, is sold on account to a
customer for $35,000. The seller issued a credit memorandum for $8,000 prior to
payment. What is the amount of the cash discount allowable?
a. $700
b. $540
c. $860
d. $350
If a proposed expenditure of $400,000 for a fixed asset with a 4year life has an annual
expected net cash flow and net income of $160,000 and $60,000, respectively, the cash
payback period is 2.5 years.
a. True
b. False
Hill Co. can further process Product O to produce Product P. Product O is currently
selling for $65 per pound and costs $42 per pound to produce. Product P would sell for
$82 per pound and would require an additional cost of $13 per pound to produce. The
differential revenue of producing Product P is $17 per pound.
a. True
b. False
When evaluating a proposal by use of the net present value method, if there is an excess
of the present value of future cash inflows over the amount to be invested, the rate of
return on the proposal exceeds the rate used in the analysis.
a. True
b. False
Standard cost per unit is calculated as:
a. standard rate per hour multiplied by standard time.
b. standard price multiplied by standard quantity.
c. standard quantity divided by standard price.
d. service units used divided by available service units.
Which of the following is an example of an intangible asset?
a. Goodwill
b. Patents
c. Copyrights
d. All of these
The doubledecliningbalance method of depreciation is also referred to as an accelerated
depreciation method.
a. True
b. False
The resources a business owns are called:
a. assets.
b. liabilities.
c. earnings.
d. stockholders’ equity.
Which of the following is true of EFT?
a. It cost more than receiving cash payments through the mail.
b. It can process certain cash transactions at less cost than by using the mail.
c. It is easy to document purchase and sale transactions.
d. It means Effective Funds Transfer.
A business is considering a cash outlay of $880,000 for the purchase of land, which it
intends to lease for $200,000 per year. If alternative investments are available that yield
a 15% return, the opportunity cost of the purchase of the land is:
a. $132,000.
b. $102,000.
c. $200,000.
d. $175,000.
Qualitative considerations are best evaluated using present value methods such as
internal rate of return.
a. True
b. False
An anticipated purchase of equipment for $1,000,000, with a useful life of 8 years and
no residual value, is expected to yield the following annual net incomes and net cash
flows:
YearNet IncomeNet Cash Flow
1$210,000 $400,000
2180,000 320,000
3145,000 280,000
4125,000 270,000
560,000 220,000
660,000 220,000
760,000 220,000
860,000 220,000
What is the cash payback period?
a. 5 years
b. 4 years
c. 6 years
d. 3 years
One of the ways in which justintime processing is accomplished in manufacturing and
nonmanufacturing processes is by:
a. moving a product from process to process as each function is completed.
b. combining processing functions into work centers and crosstraining workers to
perform more than one function.
c. having production supervisors attempt to enter enough materials into manufacturing
to keep all manufacturing departments operating.
d. having workers typically perform one function on a continuous basis.
Purchases of merchandise increase the merchandise inventory account under the
perpetual inventory system.
a. True
b. False
Variable costs as a percentage of sales is equal to 100% minus the contribution margin
ratio.
a. True
b. False
The manager of a profit center does not make decisions concerning the fixed assets
invested in the center.
a. True
b. False
Which of the following is the formula to calculate the return on stockholders’ equity?
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a. HTMLENTITY#8203HTMLENTITYOperating income / Average stockholders’
equity
b. HTMLENTITY#8203HTMLENTITYGross income / Average stockholders’ equity
c. HTMLENTITY#8203HTMLENTITYAverage stockholders’ equity / Operating
income
d. HTMLENTITY#8203HTMLENTITYAverage stockholders’ equity / Gross income
Sales to customers who use bank credit cards, such as MasterCard and VISA, are
generally treated as credit sales.
a. True
b. False
If operating income for a division is $6,000, invested assets are $25,000, and sales are
$30,000, the investment turnover would be 5.0.
a. True
b. False
Cash payment for monthly rent is an example of _____.
a. the present value index
b. discounted cash flow
c. compounding
d. an annuity
With the aid of computer software, managers can vary assumptions regarding selling
prices, costs, and volume and can immediately see the effects of each change on the
breakeven point and profit. Such an analysis is called:
a. “what if” or sensitivity analysis.
b. vary the data analysis.
c. computeraided analysis.
d. data gathering.
SarbanesOxley Act of 2002 requires which of the following report to be prepared by the
management of the company?
a. A report identifying the competency of the company’s board of directors.
b. A report assessing the market value of the company’s current stock price.
c. A report showing management’s assessment of internal control.
d. A report evaluating the probability that the company will remain in business.
The following cost graphs illustrate various types of cost behaviors.
For each of the following costs, identify the cost graph that best describes its cost
behavior as the number of units produced and sold increases.
(a)Perunit cost of direct labor
(b)Rent on warehouse of $10,000 per month
(c)Insurance costs of $2,500 per month
(d)Sales commissions of $5,000 plus $0.05 for each item sold
(e)Total salaries of quality control supervisors. One supervisor must be added for each
additional work shift
(f)Total employer pension costs of $0.30 per direct labor hour
(g)Perunit straightline depreciation costs
(h)Perunit cost of direct materials
(i)Total direct materials cost
(j)Electricity costs of $5,000 per month plus $0.0004 per kilowatthour
(k)Perunit cost of plant superintendent’s salary
(l)Straightline depreciation on factory equipment
(m)Repairs and maintenance costs of $3,000 for each 2,000 hours of factory machine
usage
(n)Total direct labor cost