1) Manufacturers implement the philosophy of just-in-time processing to produce
products with high quality, low cost, and instant availability.
2) The amount of details presented in a budget performance report for a cost center
depends upon the level of management to which the report is directed.
3) The process by which management plans, evaluates, and controls long-term
investment decisions involving fixed assets is called capital investment analysis.
4) Available discounts taken by the buyer for early payment of an invoice are termed
sales discounts by the seller.
5) When budget goals are set too tight, the budget becomes less effective for planning
and controlling operations.
6) The bank informs the depositor of bank service charges by including a debit
memorandum with the monthly bank statement.
7) Land is an example of a current asset.
8) Most employers are required to withhold a portion of the earnings of each employee
for FICA tax.
9) If an asset is discarded, a loss is recognized equal to its salvage value.
10) The budgeted volume of production is normally computed as the sum of (1) the
expected sales volume and (2) the desired ending inventory.
11) If the standard to produce a given amount of product is 1,000 units of direct
materials at $11 and the actual was 800 units at $12, the direct materials price variance
was $800 favorable.
12) In a computerized system, paid vouchers are transferred to a paid voucher file.
13) The cost of wages paid to employees directly involved in the manufacturing process
of converting materials into finished product is classified as:
A.factory overhead cost
B.direct labor cost
C.wages expense
D.direct materials cost
14) The summary of the payroll for the monthly pay period ending July 15 indicated the
following:
Illustrate the effects on the accounts and the financial statements of (a) the payroll and
(b) the employer’s payroll tax expense for the month. The state unemployment tax rate
is 4.2%, and the federal unemployment tax rate is 0.8%. Only $30,000 of salaries are
subject to unemployment taxes.
15) One of the ways in which just-in-time 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 cross-training 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
16) The presentation of net accounts receivable on the balance sheet will be most
accurate under the
A.direct write-off method
B.cash basis accounting
C.estimate based on analysis of receivables
D.none of these
17) DAF Company paid a utility bill of $300 and paid rent of $700 in December. By
how much would these events reduce stockholders’ equity?
A.$300
B.$1,000
C.$400
D.$700
18) For EFG Co., the transaction “payment of interest expense” would:
A.increase total assets
B.decrease total assets
C.have no effect on total assets
D.increase stockholders equity
19) Currently, fixed costs are $810,000, the unit selling price is $60, and the unit
variable cost is $48. What would be the break-even sales (in units), if the variable cost
is increased by $2?
A.16,200 units
B.57,875 units
C.81,000 units
D.67,500 units
20) Materials used by Boone Company in producing Division C’s product are currently
purchased from outside suppliers at a cost of $20 per unit. However, the same materials
are available from Division A. Division A has unused capacity and can produce the
materials needed by Division C at a variable cost of $17 per unit. A transfer price of $19
per unit is negotiated and 60,000 units of material are transferred, with no reduction in
Division A’s current sales.
How much would Division C’s income from operations increase?
A.$0
B.$180,000
C.$60,000
D.$120,000
21) Which of the following formula is used to calculate direct labor rate variance?
A.Actual Costs + (Actual hours Standard Rate)
B.Actual costs Standard cost
C.(Actual hours Standard rate) Standard costs
D.Actual costs (Actual hours Standard rate)
22) The expected average rate of return for a proposed investment of $540,000 in a
fixed asset, with a useful life of four years, recognition is given to the effect of
straight-line depreciation on the investment, no residual value, and an expected total net
income of $216,000 for the 4 years, is:
A.18%
B.15%
C.27%
D.20%
23) Which ratio indicates the percentage of each sales dollar that is available to cover
fixed costs and to provide a profit?
A.Margin of safety ratio
B.Contribution margin ratio
C.Costs and expenses ratio
D.Profit ratio
24) Which of the following would not be considered as an internal centralized service
department?
A.Payroll accounting department
B.Manufacturing department
C.Information systems department
D.Purchasing department
25) A payment of dividends decreases which section on the statement of cash flows?
A.Operating activities
B.Investing activities
C.Financing activities
D.None of these
26) If sales are $820,000, variable costs are 68% of sales, and operating income is
$260,000, what is the contribution margin ratio?
A.53%
B.38%
C.47%
D.32%
27) Which of the following businesses is a merchandising business?
A.H&R Block
B.Becker Law Office
C.Little Tykes Daycare
D.Kohls
28) The cost of materials entering directly into the manufacturing process is classified
as:
A.direct labor cost
B.factory overhead cost
C.burden cost
D.direct materials cost
29) A. Bonds Company
The following is a single-step income statement for the A. Bonds Company:
Refer to A. Bonds Company. If the income statement were prepared in a multiple-step
format, income from operations would be:
A.$101,000
B.$113,500
C.$118,500
D.$152,500
30) A note receivable due in 90 days is listed on the balance sheet under:
A.long-term liabilities
B.fixed assets
C.current liabilities
D.current assets
31) Indicate whether each of the following costs of a cabinet manufacturer would be
classified as direct materials cost, direct labor cost, factory overhead cost, or period
cost.
a. Plant managers salary
b. Office administrative assistants salary
c. Depreciation on factory equipment
d. Rent on office building
e. Varieties of wood
f. Varnish for coating cabinets
g. Utilities cost on the factory
h. Cabinet assembly workers salary
i. Advertising costs
j. Screws and glue used in assembly process
32) Which of the following is true in regards to a limited liability company?
A.It is organized as a corporation
B.It can elect to be taxed as a partnership
C.It provides tax and liability advantages to the owners
D.All are correct
33) Income from operations for Division M is $150,000, and income from operations
before service department charges is $975,000. Therefore,:
A.total operating expenses are $825,000
B.total manufacturing expenses are $825,000
C.direct materials, direct labor, and factory overhead total $825,000
D.total service department charges are $825,000
34) The portion of a corporation’s net income retained in the business is called:
A.interest earnings
B.dividends
C.tax expense
D.retained earnings
35) The following information is for employee William Heedy for the week ended
March15 .
Total hours worked: 48
Rate: $16 per hour, with double time for all hours in excess of 40
Federal income tax withheld: $200
United Fund deduction: $50
Cumulative earnings prior to current week: $6,400
Tax rates:
Social security: 6% on maximum earnings of $106,800
Medicare tax: 1.5% on all earnings; on both employer and employee
State unemployment: 4.2% on maximum earnings of $7,000; on employer
Federal unemployment: 0.8% on maximum earnings of $7,000; on employer
36) Allowance for Doubtful Accounts has an unadjusted balance of $500 at the end of
the year, and an analysis of accounts in the customers ledger indicates doubtful
accounts of $15,000. Compute the adjusted balance in the allowance for doubtful
accounts?
A.$15,000
B.$14,500
C.$14,000
D.$15,500
37) The following information is available for the first month of operations of Deer
Inc., a manufacturer of sports apparel:
Using the given information, determine the following:
a. Cost of goods sold
b. Direct materials cost
c. Direct labor cost
38) Stockholders’ equity:
A.is usually equal to cash on hand
B.includes paid-in capital and total liabilities
C.includes retained earnings and paid-in capital
D.is shown on the income statement
39) Which financial statement reconciles net income with net cash flows from operating
activities?
A.Balance sheet
B.Statement of retained earnings
C.Statement of cash flows
D.Income statement
40) A bond indenture is:
A.a contract between the corporation issuing the bonds and the underwriters selling the
bonds
B.the amount due at the maturity date of the bonds
C.a contract between the corporation issuing the bonds and the bondholders
D.the amount for which the corporation can buy back the bonds prior to the maturity
date
41) Which of the following are the two main types of cost accounting systems for
manufacturing operations?
A.Process cost and general accounting systems
B.Job order cost and process cost systems
C.Job order cost and general accounting systems
D.Process cost and replacement cost systems
42) The amount of increase or decrease in cost that is expected from a particular course
of action as compared to an alternative is termed:
A.period cost
B.product cost
C.differential cost
D.discretionary cost
43) ONI, Inc. purchased $60,000 of equipment for cash. How does this transaction
impact the statement of cash flows?
A.Decreases the cash flow from operating activities by $60,000
B.Decreases equipment by $60,000
C.Decreases the cash flow from investing activities section by $60,000
D.This transaction would not affect the statement of cash flows.
44) Sarbanes-Oxley Act of 2002 requires which of the following report to be prepared
by the management of the company?
A.A report evaluating the probability that the company will remain in business
B.A report showing managements assessment of internal control
C.A report assessing the market value of the companys current stock price
D.A report identifying the competency of the companys board of directors
45) A to Z Corporation paid a $10,000 cash dividend. On the Statement of Cash Flows,
the transaction would be classified as:
A.Cash Flows from Operating Activities
B.Cash Flows from Investing Activities
C.Cash Flows from Financing Activities
D.Noncash transaction
46) For the past year, Cline Company had fixed costs of $6,552,000, a unit variable cost
of $444, and a unit selling price of $600. For the coming year, no changes are expected
in revenues and costs except that a new wage contract will increase variable costs by $6
per unit. Determine the break-even sales (in units) for (a) the past year and (b) the
coming year.
47) If the actual direct labor hours spent producing a commodity differ from the
standard hours, the variance is termed:
A.time variance
B.price variance
C.quantity variance
D.rate variance
48) Periodic comparisons between planned objectives and actual performance are
reported in:
A.zero-base reports
B.budget performance reports
C.master budgets
D.budgets
49) The standard factory overhead rate of Quaker Inc. is $10 per direct labor hour ($8
for variable factory overhead and $2 for fixed factory overhead) based on 100%
capacity of 30,000 direct labor hours. The standard cost and the actual cost of factory
overhead for the production of 5,000 units during May were as follows:
Refer to the information provided for Quaker Inc. What is the amount of the fixed
factory overhead volume variance?
A.$12,500 favorable
B.$10,000 unfavorable
C.$12,500 unfavorable
D.$10,000 favorable
50) Which of the following is a present value method of analyzing capital investment
proposals?
A.Average rate of return
B.Cash payback method
C.Accounting rate of return
D.Net present value