1) Assuming no other changes, operating income will be the same under both the
variable and absorption costing methods when the number of units manufactured equals
the number of units sold.
2) A rental cost of $20,000 plus $.70 per machine hour of use is an example of a mixed
cost.
3) A backlog in recording transactions is an example of a warning sign from the
accounting system.
4) Only large companies such as Wal-Mart, JCP, General Motors, and the Bank of
America can be organized as corporations.
5) Nonfinancial performance output measures are used to improve the input measures.
6) Only the value of the inventory that is sold will appear in the income statement.
7) Patents are exclusive rights to manufacture, use, or sell a particular product or
process.
8) Two factors that typically lead to ethical violations are relevance and timeliness of
accounting information.
9) The cash budget is affected by the sales budget, the various budgets for
manufacturing costs and operating expenses, and the capital expenditures budget.
10) To determine cash payments for operating expenses for the cash flow statement
using the direct method, a decrease in accrued expenses is added to operating expenses
other than depreciation.
11) Journalizing a transaction with both the debit and the credit for $69 instead of $96
will cause the trial balance to be out of balance.
12) Factory overhead includes all manufacturing costs except direct materials and direct
labor.
13) Expenditures from a petty cash fund are documented by a petty cash receipt.
14) The excess of the cash flowing in from revenues over the cash flowing out for
expenses is termed net cash flow.
15) A company must choice either a standard system or nonfinancial performance
measures to evaluate the performance of a company.
16) Maximum effectiveness and efficiency are reached when the just-in-time (JIT)
philosophy is used by both manufacturers and their suppliers.
17) Normally standard costs should be revised when labor rates change to incorporate
new union contracts.