In a horizontal analysis balance sheet, the percentage change columns do not add up in
the same way as the dollar amounts because each of the percentages was calculated
using a different denominator.
The formula for return on common stockholders’ equity is (Net sales revenue minus
preferred dividends) divided by average common stockholders’ equity.
First-stage allocation is the process of assigning manufacturing overhead costs to
activity pools.
In a job order costing system, products are manufactured in batches and costs are
accumulated in the departments where the work is done.
If a cost is incurred to support the administrative functions and is not classified as direct
labor or direct material, it is part of overhead.
Which of the following formulas represents the calculation for markup percentage?
a. (Sales price – Cost) / Cost
b. (Sales price – Cost) / Sales price
c. Sales price / Cost
d. Sales price / Contribution margin
Which of the following is not a measure that relates to the learning and growth
perspective?
a. Net income per employee
b. Revenue per employee
c. Training dollars spent per employee
d. Suggestions generated by employees
Using the direct method of preparing the statement of cash flows, which of the
following is not an activity generating operating cash flows?
a. Issuance of debt
b. Payments to suppliers
c. Payments for income taxes
d. Payments for operating expenses
There are four common cost behavior patterns that serve as the foundation for
cost-volume-profit analysis.
Required:
a.Explain the term cost behavior.
b.List the four common cost behavior patterns that serve as the foundation for
cost-volume-profit analysis and give an example of each type of cost classified by
behavior.
c.Explain the relationship between level of activity and each of the four types of cost
behavior.
Which of the following statements is not true?
a. The higher the price, the lower the demand for a product.
b. At lower prices, customers will demand a higher quantity than they will at a higher
price.
c. The lower the price, the fewer units of product a company is willing to supply.
d. The price paid for a product should not reflect its value.
The Sarbanes-Oxley Act requires that all publicly traded companies disclose whether
certain executives are subject to a corporate code of ethics. Which of the following
executive position need not be disclosed?
a.Principal executive officer.
b.Principal marketing officer.
c.Principal financial officer.
d.Principal accounting officer.
The finished goods inventory account records the costs of all products that have been
a. Started but not yet complete.
b. Completed.
c. Completed and sold.
d. None of these answer choices are correct.
Using the following unit data for a company that produces Product X and Y, what is the
breakeven point when fixed costs total $280,000?
a. 1,120 Product A; 1,120 Product B
b. 0 Product A; 2,000 Product B
c. 1,000 Product A; 1,000 Product B
d. 2,000 Product A; 2,000 Product B
Which of the following is a reason a company would be willing to accept new business
at a loss?
a. The new business will allow the company to reduce its fixed costs.
b. The new business will always cover variable costs.
c. The new business may result in certain customers influencing other potential
customers.
d. All of these answer choices are correct.
In which of the following decisions do managers determine which projects will actually
receive funds by rank-ordering them based on selected criteria?
a. Hurdle
b. Screening
c. Capital
d. Preference
Which of the following is an advantage of ideal standards?
a. Employees will be motivated.
b. Employees will take pride in their work.
c. Employee morale will be high.
d. None of these choices are advantages of ideal standards.
Which of the following parties would be least interested in the return on assets.
a. Creditors
b. Stockholders
c. Vendors.
d. Managers.
When a company sells equipment for cash, which of the following amounts is reported
in the investing section of the statement of cash flows?
a. Book value
b. Gain on sale of equipment
c. Depreciation expense
d. Amount of cash received
Nancy’s Nursery provides and maintains live plants in office buildings. The company’s
120 customers are charged $90 per month for this service, which includes weekly
watering visits. The variable cost to service a customer’s location is $22 per month. The
company incurs $2,000 each month to maintain its equipment and service vans and
$3,000 each month in salaries. Nancy pays a CPA firm $5 per customer for accounting
services.
Required:
a.Prepare Nancy’s contribution format income statement for the month.
b.What is the expected monthly operating income if 10 customers are added?
Period costs are associated with the
a. Selling of products.
b. The administration of the business.
c. Both selling of products and the administration of the business.
d. Neither selling of products nor the administration of the business..
When a company accepts an outsourcing offer, managers must take specific action to
eliminate internal costs. Which of the following is not an example of such an action?
a. Reduce work force
b. Sell production equipment
c. Eliminate income taxes
d. Reduce inventory levels
MousePad Computer Company, in addition to its retail sales, conducts night classes in
computer technology. MousePad has provided you the following information:
Required:
Construct a contribution margin format income statement.
Midland Industries is the manufacturer of metal-frame backyard pools and pool
accessories. The controller of the company recognizes that the success of the company
depends on both financial and nonfinancial measures. Place an “X ” in the appropriate
columns to indicate whether the following measures are leading or lagging and
financial or nonfinancial.
Suppose Kathy Lentz Company sells hand tatted lace for $25 per yard. Her materials
cost $4 per yard and labor costs her $10 per yard. She also estimates her fixed cost to be
$50 per month. If she sells 2,000 yards of lace during the month, what is her
contribution margin ratio?
Finance theory says that the rate of return required by creditors is the same as the return
required by investors.
The margin of safety represents the volume of sales that it takes to break even.