The SarbanesOxley Act of 2002 requires companies to maintain strong and effective
internal controls over recording transactions and preparing financial statements.
a. True
b. False
The standard factory overhead rate is $7.50 per machine hour ($6.20 for variable
factory overhead and $1.30 for fixed factory overhead) based on 100% capacity of
80,000 machine hours. The standard cost and the actual cost of factory overhead for the
production of 15,000 units during August were as follows:
Actual:Variable factory overhead$360,000
Fixed factory overhead 104,000
Standard:60,000 hours at $7.50 450,000
What is the amount of the fixed factory overhead volume variance?
a. $26,000 unfavorable
b. $12,000 favorable
c. $26,000 favorable
d. $12,000 unfavorable
Obligations that depend on future events and are based on past transactions are
contingent liabilities.
a. True
b. False
Transic Corporation has the following financial data for 2016 and 2017.
20172016
ASSETS
Current Assets:
Cash$ 48,000$ 14,000
Marketable Securities9,00013,000
Accounts Receivable35,00024,000
Other Current Assets15,00018,000
Total Current Assets107,00069,000
Fixed Assets (net)140,000130,000
Total Assets$247,000$199,000
LIABILITIES
Current Liabilities$ 72,000$ 52,000
Longterm Liabilities50,00037,000
Total Liabilities$122,000$ 89,000
Total Stockholders’ Equity$125,000$110,000
Total Liabilities And Stockholders’ Equity$247,000$199,000
What is Transic’s current ratio for 2017?
a. 1.49
b. 2.14
c. 0.21
d. 0.88
The person who is to be paid when a note matures is called the payee.
a. True
b. False
The following data are taken from the management accounting reports of Dancer Co.:
Div. A Div. B Div. C
Operating income$3,600,000$3,700,000$2,700,000
Total service department charges3,400,0002,100,0002,200,000
If an incentive bonus is paid to the manager who achieved the highest operating income
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.
The cost of a patent should be amortized :
a. over 10 years.
b. over its economic life.
c. over 20 years or its economic life, whichever is shorter.
d. only if an impairment occurs.
Kohlman Company began its operations on March 31 of the current year. Projected
manufacturing costs for the first three months of business are $156,800, $195,200, and
$217,600, respectively, for April, May, and June. Depreciation, insurance, and property
taxes represent $28,800 of the estimated monthly manufacturing costs. Insurance was
paid on March 31, and property taxes will be paid in November. Threefourths of the
remainder of the manufacturing costs are expected to be paid in the month in which
they are incurred with the balance to be paid in the following month.
The cash payments for manufacturing in the month of May are:
a. $185,600.
b. $156,800.
c. $124,800.
d. $146,400.
Standard and actual costs for direct materials for the manufacture of 1,000 units of
product were as follows:
Actual costs1,450 lbs. @ $8.10
Standard costs1,500 lbs. @ $8.00
Determine the (a) quantity variance, (b) price variance, and (c) total direct materials
cost variance.
Division M for Movism Company has a rate of return on investment of 20% and an
investment turnover of 1.5. What is the profit margin?
a. 20%
b. 13%
c. 15%
d. 30%
Contingent liabilities that are probable but cannot be reasonably estimated are disclosed
in the:
a. notes to the financial statements.
b. current liabilities section of the balance sheet.
c. retained earnings section of the statement of stockholders’ equity.
d. long termliabilities section of the balance sheet.
Investing activities include:
a. collecting cash on loans made.
b. obtaining cash from creditors.
c. obtaining capital from owners.
d. repaying money previously borrowed.
All receivables that are expected to be realized in cash within a year are presented in the
current assets section of the balance sheet.
a. True
b. False
Costs are often classified by their relationship to a segment of operations, called a
_____.
a. prime cost
b. controlling account
c. cost object
d. cost sheet
Green Co. incurs a cost of $15 per pound to produce Product X, which it sells for $26
per pound. The company can further process Product X to produce Product Y. Product
Y would sell for $30 per pound and would require an additional cost of $10 per pound
to be produced. The differential revenue of producing Product Y is _____.
a. $4 per pound
b. $30 per pound
c. $26 per pound
d. $5 per pound
Which of the following will be classified as a current liability?
a. Twoyear notes payable
b. Bonds payable
c. Mortgage loan
d. Unearned rent
Manufacturers must conform to the RobinsonPatman Act, which prohibits price
discrimination within the United States unless differences in prices can be justified by
different costs.
a. True
b. False
A list of assets, liabilities, and owners’ equity as of a specific date is a(n):
a. income statement.
b. balance sheet.
c. statement of cash flows.
d. retained earnings statement.
In an investment center, the manager has responsibility and authority for making
decisions that affect:
a. only costs.
b. both costs and revenues.
c. only assets.
d. costs, revenues, and assets.
Activities that cause costs to change are called activity bases.
a. True
b. False
For higher levels of management, responsibility accounting reports:
a. are more detailed than for lower levels of management.
b. are more summarized than for lower levels of management.
c. contain almost the same level of detail as reports for lower levels of management.
d. are rarely provided or reviewed.
Costvolumeprofit analysis cannot be used if which of the following occurs?
a. Costs cannot be properly classified into fixed and variable costs
b. The total fixed costs change
c. The perunit variable costs change
d. Perunit sales prices change
When the contract rate of interest on bonds is less than the market rate of interest, the
bonds sell at:
a. a premium.
b. their face value.
c. their maturity value.
d. a discount.
The total earnings of an employee for a payroll period is referred to as gross pay.
a. True
b. False
If the market rate of interest is 7% and a corporation’s bonds bear interest at 8%, the
bonds will sell at a premium.
a. True
b. False
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 breakeven sales (in units) for (a) the past year and (b) the
coming year.
Below is budgeted production and sales information for Octofic Cans, Inc. for the
month of March:
AluminumTin
Estimated beginning inventory12,000 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 production for aluminum cans during the month is:
a. 383,000 units.
b. 508,000 units.
c. 502,000 units.
d. 532,000 units.
Internal control consist of policies and procedures that _____.
a. involve costbenefit considerations
b. deal with human element of controls such as, fatigue, carelessness, etc.
c. ensure public relations
d. ensure the accuracy of business information
Elite, Inc. has estimated total factory overhead costs of $900,000, and 25,000 direct
labor hours for the current fiscal year. If the direct labor hours for Job N41 is 2,000,
calculate the total factory overhead applied to this job.
a. $40,000
b. $25,000
c. $4,000
d. $72,000
Debts owed by a business are referred to as:
a. accounts receivable.
b. equities.
c. stockholders’ equity.
d. liabilities.
Budget performance reports prepared for the vicepresident of production would
generally contain less detail than the reports prepared for the various plant managers.
a. True
b. False
In recording the cost of merchandise sold for cash using a perpetual inventory system,
the effect on the accounts is:
a. increase Cost of Merchandise Sold; increase Cash.
b. increase Cost of Merchandise Sold; decrease Merchandise Inventory.
c. increase Merchandise Inventory; decrease Cost of Merchandise Sold.
d. increase Accounts Receivable; decrease Merchandise Inventory.
A business receives $10,000 cash for a sale of merchandise and records this receipt of
cash as an increase in accounts receivable by mistake. The accounting equation is still
in balance.
a. True
b. False