The investment turnover is calculated as the ratio of sales to:
a. operating income.
b. invested assets.
c. marketable investments.
d. profit margin.
Following is the information about Standard Inc.
The standard costs and actual costs for direct materials, direct labor, and factory
overhead for the manufacture of 2,500 units of product are as follows:
Standard Costs
Direct materials2,500 kilograms @ $8
Direct labor7,500 hours @ $12
Actual Costs
Direct materials2,600 kilograms @ $8.75
Direct labor7,400 hours @ $11.40
Factory overhead (100% capacity 10,000 hrs.):
Variable cost @ $2 per hour
Total variable cost, $18,000
Fixed cost @ $0.80 per hour
Total fixed cost, $8,000
The amount of the direct materials quantity variance is:
a. $875 favorable.
b. $875 unfavorable.
c. $800 favorable.
d. $800 unfavorable.
The standard costs and actual costs for direct materials for the manufacture of 2,500
actual units of product are as follows:
Standard Costs
Direct materials (per completed unit)1.04 kilograms @$8.75
Actual Costs
Direct materials2,500 kilograms @ $8
The amount of direct materials price variance is:
a. $1,875 unfavorable.
b. $1,950 favorable.
c. $1,875 favorable.
d. $1,950 unfavorable.
The accrual basis of accounting recognizes:
a. revenues when cash is received and expenses when cash is paid.
b. revenues when earned and expenses when cash is paid.
c. revenues when cash is received and expenses when incurred.
d. revenues when earned and expenses when incurred.
The balance sheets at the end of each of the first two years of operations indicate the
following:
20172016
Total current assets$600,000$560,000
Total investments60,00040,000
Total property, plant, and equipment900,000700,000
Total current liabilities125,00080,000
Total longterm liabilities350,000250,000
Preferred 9% stock, $100 par100,000100,000
Common stock, $10 par600,000600,000
Paidin capital in excess of parcommon stock60,00060,000
Retained earnings325,000210,000
Based on the above information, if net income is $130,000 and interest expense is
$40,000 for 2017, and the market price is $40, what is the priceearnings ratio on
common stock (round to one decimal place)?
a. 14.9
b. 19.8
c. 17.3
d. 18.4
Cash and other assets that are expected to be converted to cash or sold or used up within
one year or less through the normal operations of the business are called:
a. current assets.
b. intangible assets.
c. fixed assets.
d. notes receivable.
When deciding to make or buy a part needed for the manufacturing process,
management needs to consider whether the plant has excess production capacity
available to make the part or if current production will need to be interrupted to
manufacture the part.
a. True
b. False
HTMLENTITY#8203HTMLENTITYAs a result of inventory shrinkage:
a. HTMLENTITY#8203HTMLENTITYthe working capital increases, whereas the
gross profit percent decreases.
b. HTMLENTITY#8203HTMLENTITYthe working capital decreases, whereas the
gross profit percent increases.
c. HTMLENTITY#8203HTMLENTITYthe working capital as well as the gross profit
percent decreases.
d. HTMLENTITY#8203HTMLENTITYthe working capital as well as the gross profit
percent increases.
The following data relate to direct labor costs for the current period of Executive Inc.:
Standard costs6,000 hours at $12.00
Actual costs7,500 hours at $11.60
What is the direct labor rate variance?
a. $3,000 unfavorable
b. $3,000 favorable
c. $2,400 unfavorable
d. $2,400 favorable
Year 2 Year 1
Sales$170,000$130,000
Cost of sales 135,000 105,000
Gross profit$ 35,000$ 25,000
Using the above information, calculate the percentage increase or decrease in cost of
sales from Year 1 to Year 2?
a. Increase of 2.1%
b. Decrease of 1.4%
c. Increase of 1.4%
d. Decrease of 2.1%
The computations required for the net present value method are more than the
computation required for the average rate of return method.
a. True
b. False
Which of the following is the effect of issue of additional common stock by a company
on its liquidity and profitability metrics?
a. Its profitability increases.
b. Its profitability and liquidity increase.
c. Its profitability and liquidity remain unaffected.
d. Its liquidity increases.
Benjamin Corporation began its operations on September 1 of the current year.
Budgeted sales for the first three months of business are $250,000, $300,000, and
$420,000, respectively, for September, October, and November. The company expects
to sell 20% of its merchandise for cash. Of sales on account, 70% are expected to be
collected in the month of the sale, 25% in the month following the sale, and the
remainder in the following month.
The cash collections from accounts receivable in November are:
a. $305,200.
b. $294,000.
c. $235,200.
d. $381,500.
Depletion is the process of transferring the cost of intangible assets to an expense
account.
a. True
b. False
Office salaries, depreciation of office equipment, and office supplies are examples of
what type of expense?
a. Selling expense
b. Miscellaneous expense
c. Administrative expense
d. Other expense
Compute factory overhead cost from the following costs:
Depreciation on factory buildings$ 45,950
Depreciation on office equipment32,980
Direct materials used96,840
Indirect labor6,580
a. $73,000
b. $52,530
c. $96,840
d. $78,930
The _____ is an integrated set of operating, investing, and financing budgets for a
period of time.
a. standard budget
b. budget performance report
c. zerobased budget
d. master budget
Which of the following is the effect of purchasing merchandise on account with credit
terms 2/10, n/30?
a. There is no effect on the liquidity and profitability metrics.
b. There is an increase in liquidity, while profitability remains unchanged.
c. There is an increase in profitability, while liquidity remains unchanged.
d. There is an increase in the liquidity and profitability metrics.
A capital expenditures budget summarizes the decisions made for the acquisition of
fixed assets.
a. True
b. False
The balance of the allowance for doubtful accounts is added to accounts receivable on
the balance sheet.
a. True
b. False
Declaring and paying cash dividends affects which account/ accounts?
a. Cash only
b. Common stock only
c. Cash and retained earnings
d. Cash and common stock
The gross increases in stockholders’ equity attributable to business activities are called:
a. assets.
b. liabilities.
c. revenues.
d. net income.
If the buyer is to pay the delivery expense of delivering merchandise, delivery terms are
stated as:
a. FOB shipping point.
b. FOB destination.
c. FOB n/30.
d. FOB buyer.
If factory overhead applied is less than the actual costs, the overhead is said to be
underapplied.
a. True
b. False
Matt, Inc., a toy manufacturing company uses job order cost system. The time tickets
from September jobs are summarized below.
Job 100$3,500
Job 1011,800
Job 1021,200
Job 1032,800
Factory supervision1,700
Factory overhead is applied to jobs on the basis of a predetermined overhead rate of $25
per direct labor hour. The direct labor rate is $30 per hour.
a. Determine the total factory labor costs transferred to Work in Process and Factory
Overhead for September.
b. Determine the amount of factory overhead applied to production for September.
Manufacturing businesses change basic inputs into products that are sold to individual
customers.
a. True
b. False
If a company sells a fixed asset for an amount which is less than its book value, a gain
must be recognized.
a. True
b. False
Normally standard costs should be revised when labor rates change to incorporate new
union contracts.
a. True
b. False
The party promising to pay a note at maturity is the payee.
a. True
b. False
The basic type of stock issued to owners is called common stock.
a. True
b. False