1) Crossroads Packaging Co. has budgeted the following amounts for its next fiscal
year:
To maintain the original breakeven sales in units if fixed expenses were to increase by
10%, the selling price per unit would have to be
A) increased by 2.00%.
B) increased by 58.00%.
C) decreased by 2.00%.
D) decreased by 58.00%.
2) The managerial accountant at Space Right Office Cubicles calculates fixed overhead
variances to complete the August report. The actual fixed overhead cost in the month of
August was $56,400 and the budgeted fixed overhead cost was $58,100. The standard
hours in August were 3,200 and the standard rate per machine-hour was $18. Calculate
the standard fixed overhead cost allocated to production, the fixed overhead budget
variance, and the fixed overhead volume variance.
A) $58,100;$2,200 U;$1,200 F
B) $56,400;$1,300 U; $1,700 F
C) $57,600;$1,700 U;$500 F
D) $52,300;$1,200 U;$1,700 F
3) The Nichols Corporation data for the current year:
What would a horizontal analysis report with respect to current liabilities?
A) Current liabilities saw a 30% increase from the prior year to the current year.
B) Current liabilities are 11.77% of total capital.
C) The current ratio is 1.06.
D) Current liabilities saw a 76.92% increase from the prior year to the current year.
4) Use the following information to do a horizontal analysis of Marcus Corporation’s
income statement for the current year and prior year:
What is the dollar change in selling/general expenses?
A) $(4,840)
B) $81,000
C) $22,000
D) $102,000
5) The following information relates to Truman Unlimited for the past two years.
The rate of return on total assets for the current year is closest to
A) 0.85.
B) 0.06.
C) 0.10.
D) 0.09.
6) A purpose of the statement of cash flows may be which of the following?
A) The purpose of the statement of cash flows is to evaluate the decisions made by the
board of directors.
B) The purpose of the statement of cash flows is to determine a company’s ability to
pay dividends to stockholders and interest and principle to its creditors.
C) The purpose of the statement of cash flows is to help predict the decisions of its
managers.
D) The purpose of the statement of cash flows is to report the earnings per share
7) Mississippi Mile Travel Company is conducting a sensitivity analysis in order to
assess the company’s margin of safety in units and in dollars. Predicted data indicate
that 4,750 travel package sales can be expected while 2,200 package sales are necessary
to meet the company’s breakeven point. Each travel package costs $3,000. Calculate the
company’s margin of safety in package units and dollars.
A) 2,200 travel package units; $5,610,000
B) 2,550 travel package units; $7,650,000
C) 3,500 travel package units; $8,010,000
D) 1,575 travel package units; $4,810,000
8) A company uses the indirect method to prepare the statement of cash flows. It
presents the following data on its financial statements:
*Relates solely to the acquisition of inventory
What will appear in the operating activities section related to inventory?
A) The decrease of $15,000 will be subtracted from net income.
B) The decrease of $15,000 will be subtracted from cost of goods sold.
C) The decrease of $15,000 will be added to net income.
D) The decrease of $15,000 will be added to cost of goods sold.
9) A company uses the indirect method to prepare the statement of cash flows. Which of
the following items would be subtracted from net income to determine the net cash flow
from operating activities on the statement of cash flows?
A) An increase in dividends payable would be subtracted from net income to determine
the net cash flow from operating activities in the statement of cash flows.
B) A loss on the sale of equipment would be subtracted from net income to determine
the net cash flow from operating activities in the statement of cash flows.
C) A gain on the sale of equipment would be subtracted from net income to determine
the net cash flow from operating activities in the statement of cash flows.
D) Depreciation expense would be subtracted from net income to determine the net
cash flow from operating activities in the statement of cash flows.
10) Jones Ice Cream Stand is operated by Mr. Jones and experiences different sales
patterns throughout the year. To plan for the future, Mr. Jones wants to determine its
cost behavior patterns. He has the following information available about the ice cream
stand’s operating costs and the number of soft serve cones served.
Using the high-low method, the monthly operating costs€if Mr. Jones sells 1,436 ice
cream cones in a month€are
A) $750.
B) $859.
C) $1,109.
D) $359.
11) A company uses the direct method to prepare the statement of cash flows. It
presents the following data on its financial statements:
*Relates solely to the acquisition of inventory
Which of the following is correct about inventory in the operating activities category of
the cash flow statement?
A) The decrease of $20,000 will be subtracted from net income.
B) The decrease of $20,000 will be added to net income.
C) The decrease of $20,000 will be subtracted from cost of goods sold to determine
payments to suppliers.
D) The decrease of $20,000 will be added to cost of goods sold to determine payments
to suppliers.
12) A cost benchmark is valid only if the standards are
A) based on historical costs.
B) kept up to date.
C) reviewed by salaried assembly-line workers.
D) practical and attainable.
13) Mr. Pattison is the managerial accountant at the Beach Bum Surf Shoppe. Mr.
Pattison advised the Sales Manager that budgeted sales at the store were 100 units, and
the store’s breakeven point is 14 units. What is the margin of safety in units at the Beach
Bum Surf Shoppe?
A) 84
B) 85
C) 86
D) 87
14) The manager of a local CVS drugstore that is in accountable to increase sales,
revenue, and controlling costs may be in charge of a(n)
A) cost center.
B) investment center.
C) revenue center.
D) profit center.
15) Using the direct method to prepare the statement of cash flows, cash payments for
merchandise inventory is categorized on the statement of cash flows as
A) a cash payment in the operating activities section on the statement of cash flows.
B) a cash receipt in the operating activities section on the statement of cash flows.
C) a cash payment in the investing activities section on the statement of cash flows.
D) a cash receipt in the investing activities section on the statement of cash flows.
16) The Bedford Corporation reported the following income statement and balance
sheet amounts and additional information for the end of the current year.
Inventory and prepaid expenses account for $30,000 of the current year’s current assets.
Average inventory for the current year is $36,250.
Average net accounts receivable for the current year is $45,000.
There are 35,000 shares of common stock outstanding.
Total dividends paid during the current year were $17,000.
The market price per share of common stock is $20.
What is the rate of return on net sales for the current year?
A) 0.37
B) 0.03
C) 0.14
D) 1.46
17) The Bedford Corporation reported the following income statement and balance
sheet amounts and additional information for the end of the current year.
Inventory and prepaid expenses account for $30,000 of the current year’s current assets.
Average inventory for the current year is $36,250.
Average net accounts receivable for the current year is $45,000.
There are 35,000 shares of common stock outstanding.
Total dividends paid during the current year were $17,000.
The market price per share of common stock is $20.
What is the current ratio for the current year?
A) 0.38
B) 0.53
C) 1.98
D) 0.50
18) To follow is selected information about The Boston Company for the current year
and prior year.
What is the current year’s income tax percentage (as would be found on a vertical
analysis of the income statement for the current year)?
A) 4.00%
B) 13.68%
C) 113.68%
D) 4.36%