Amortization refers to systematic periodic transfer of the cost of a fixed asset to an
expense account.
a. True
b. False
Robbson Manufacturers has estimated total factory overhead costs of $184,000 and
25,000 direct labor hours for the current fiscal year. If job number 115 incurred 1,200
direct labor hours, the workinprocess account will be increased and factory overhead
will be decreased by:
a. $25,000.
b. $8,832.
c. $7,022.
d. $153.
Personnel administration expense for a department in a store is an indirect expense.
a. True
b. False
In using the variable cost concept of applying the costplus approach to product pricing,
variable manufacturing costs and variable selling and administrative expenses must be
covered by the markup.
a. True
b. False
If the standard to produce a given amount of product is 500 direct labor hours at $15
and the actual was 600 hours at $17, the rate variance was $1,200 favorable.
a. True
b. False
Under the negotiated price approach, the transfer price is the price at which the product
or service transferred could be sold to outside buyers.
a. True
b. False
_____ is a method of setting prices that combines marketbased pricing with a
costreduction emphasis.
a. Product costing
b. Target costing
c. Markup costing
d. Activitybased costing
Use the following data to calculate the cost of ending inventory using the LIFO method.
September 1Beginning Inventory15 units at $20 each
September 10Purchase20 units at $25 each
September 20Purchase25 units at $28 each
September 30Ending Inventory30 units
a. $825
b. $750
c. $675
d. $600
The following information is given for the maintenance department of Goldenrod Co.
Calculate the variable costs per unit using the highlow method.
CostProduction in units
July$2,10014,000
August 1,000 9,000
September 1,80010,000
October 4,00021,000
a. $0.17
b. $0.11
c. $0.25
d. $0.08
The ability of a business to pay its debts as they come due and to earn a reasonable
amount of income is referred to as:
a. solvency and profitability.
b. solvency and liquidity.
c. solvency and equity.
d. solvency and leverage.
By dividing gross profit by cost of merchandise sold we arrive at:
a. gross profit percent.
b. average markup percent.
c. ratio of sales to assets.
d. sales percent.
The estimate of uncollectible accounts receivable based on the sales method violates the
matching principle.
a. True
b. False
Allowance for Doubtful Accounts has an unadjusted balance of $800 at the end of the
year, and an analysis of accounts in the customers’ ledger indicates doubtful accounts of
$15,000. Which of the following records the proper provision for doubtful accounts?
a. Increase Uncollectible Accounts Expense, $800; increase Allowance for Doubtful
Accounts, $800
b. Increase Uncollectible Accounts Expense $15,000; increase Allowance for Doubtful
Accounts, $15,000
c. Increase Uncollectible Accounts Expense, $14,200; increase Allowance for Doubtful
Accounts, $14,200
d. Increase Uncollectible Accounts Expense, $15,800; increase Allowance for Doubtful
Accounts, $15,800
Which of the following businesses is most likely to use process cost accounting system?
a. Custom cabinet manufacturer
b. Dress designer
c. Lumber mill
d. Printing firm
The accrual basis of accounting requires revenue to be recorded when the service is
performed.
a. True
b. False
Below is budgeted production and sales information for Octofic Cans, Inc. for the
month of March:
AluminumTin
Estimated beginning inventory 12,000 units 6,000 units
Desired ending inventory15,000 units 4,000 units
Region I, anticipated sales 380,000 units 85,000 units
Region II, anticipated sales 125,000 units 25,000 units
The unit selling price for aluminum cans is $0.15 and for tin cans is $0.20.
Budgeted sales for the month are:
a. $97,550.
b. $123,000.
c. $82,750.
d. $81,550.
Match the following items with the appropriate financial statement:
a.Income statement
b.Balance sheet
c.Retained earnings statement
d.Statement of cash flows
(1)Cash
(2)Salary expense
(3)Unearned revenue
(4)Depreciation expense
(5)Capital stock
(6)Cash flows from operating activities
(7)Accounts receivable
(8)Beginning balance of retained earnings
(9)Notes payable
(10)Accounts payable
(11)Changes in current assets and current liabilities
(12)Total expenses
In using the total cost concept of applying the costplus approach to product pricing,
only profit is covered in the markup.
a. True
b. False
In contrast to the total product and variable cost concepts used in setting selling prices,
the target cost approach assumes that:
a. a markup is added to total cost.
b. selling price is set by the market price.
c. a markup is added to variable cost.
d. a markup is added to product cost.
Red Co. uses the product cost concept of applying the costplus approach to product
pricing. Below is cost information for the production and sale of 40,000 units of its sole
product. Red Co. desires a profit equal to a 15% rate of return on invested assets of
$1,200,000.
Fixed factory overhead cost$80,000.00
Fixed selling and administrative costs140,000.00
Variable direct materials cost per unit7.00
Variable direct labor cost per unit11.00
Variable factory overhead cost per unit3.00
Variable selling and administrative cost per unit2.00
What is the markup percentage for the company’s product? (Round the answer to two
decimal places.)
a. 30.30%
b. 43.50%
c. 40.00%
d. 35.60%
The accounting equation is expressed as follows: Assets = Liabilities + Stockholders’
Equity.
a. True
b. False
The balanced scorecard evaluates managers on financial and nonfinancial measures of
performance.
a. True
b. False
The following financial information was summarized from the accounting records of
Globe Corporation for the current year ended December 31:
Northern Southern Corporate
Division
Division
Total
Cost of goods sold$310,000$175,000
Direct operating expenses250,000115,000
Net sales600,000410,000
Interest expense$12,000
General overhead101,000
Income tax26,700
The operating income for the Southern Division is:
a. $150,000.
b. $120,000.
c. $295,000.
d. $154,400.
Which of the following is an example of direct materials cost for an automobile
manufacturer?
a. Cost of oil lubricants for factory machinery
b. Cost of wages of assembly worker
c. Varnish for coating
d. Cost of interior upholstery
All of the following qualitative considerations may impact upon capital investments
analysis except:
a. manufacturing productivity.
b. manufacturing sunk cost.
c. manufacturing flexibility.
d. manufacturing control.
Johnson, Inc. issued $15,000 in common stock in exchange for cash. What is the effect
of this transaction?
a. Total assets remain unchanged.
b. Cash flow from Financing Activities will increase.
c. Net Income will increase.
d. Total Retained Earnings will increase.
If skilled, highly paid employees are used in jobs that are normally performed by
unskilled, lowerpaid employees, it will result in:
a. an unfavorable direct labor time variance.
b. a favorable variable overhead variance.
c. a favorable direct labor rate variance.
d. an unfavorable direct labor rate variance.
Which of the following metrics is affected when a business makes prepayment of rent?
HTMLENTITY#8203HTMLENTITY
a. HTMLENTITY#8203HTMLENTITYProfitability
b. HTMLENTITY#8203HTMLENTITYLeverage
c. HTMLENTITY#8203HTMLENTITYLiquidity
d. HTMLENTITY#8203HTMLENTITYContingency
In a perpetual inventory system, merchandise returned to vendors reduces the
merchandise inventory account.
a. True
b. False
A present value index can be used to rank competing capital investment proposals when
the net present value method is used.
a. True
b. False
Which of the following statements is true of a traditional production process?
a. It focuses on reducing time and cost and eliminating poor quality.
b. It emphasizes on continually improving the manufacturing process and product
quality.
c. In a traditional production process, supervisors enter materials into manufacturing so
as to keep all the manufacturing departments (processes) operating.
d. In a traditional production process, service activities may be assigned to individual
work centers, rather than to centralized service departments.
Fixed assets are reported at their book value on the balance sheet.
a. True
b. False
Which of the following is a reason to undergo a reverse stock split?
a. To reduce the stock’s market price per share.
b. To increase total stockholders’ equity.
c. To reduce total stockholders’ equity.
d. To increase the market value of the stock per share.