Which of the following would be considered a direct labor cost for a manufacturing
company?
A) wages of the assembly line staff
B) wages of the factory janitors
C) wages of the factory manager
D) salaries of the internal auditors
Marsh Supply Services paid $350 cash to a materials supplier, the amount owed from
the previous month. Which of the following accounts decreases?
A) Accounts Receivable
B) Accounts Payable
C) Retained Earnings
D) Office Supplies
Cheapo Sales Company uses a standard cost system. Overhead costs are allocated based
on direct labor hours. In the first quarter, Cheapo Sales had a favorable efficiency
variance for variable overhead costs. Which of the following scenarios is a reasonable
explanation for this variance?
A) The actual number of direct labor hours was lower than the budgeted hours.
B) The actual variable overhead costs were higher than the budgeted costs.
C) The actual variable overhead costs were lower than the budgeted costs.
D) The actual number of direct labor hours was higher than the budgeted hours.
On January 1, 2016, Bratios Company purchased equipment and signed a six-year
mortgage note for $97,000 at 15%. The note will be paid in equal annual installments of
$25,631, beginning January 1, 2017. On January 1, 2017, the journal entry to record the
first installment payment will include a ________. (Round your answer to the nearest
whole number.)
A) debit to Mortgage Payable for $25,631
B) debit to Interest Expense for $14,550
C) credit to Cash for $11,081
D) credit to Mortgage Payable for $97,000
The predetermined overhead allocation rate is calculated by dividing ________.
A) the total estimated overhead costs by total number of days in a year
B) the estimated amount of cost driver by actual total overhead costs
C) the actual overhead costs by actual amount of the cost driver or allocation base
D) the estimated overhead costs by total estimated quantity of the overhead allocation
base
A company produces 1,000 packages of chicken feed per month. The sales price is $6
per pack. Variable cost is $1.50 per unit, and fixed costs are $1,600 per month.
Management is considering adding a vitamin supplement to improve the value of the
product. The variable cost will increase from $1.50 to $2.50 per unit, but there will be
no change in fixed costs. The company will price the new product at $4.50 to compete
with other products. How will this affect operating income?
A) Operating income will decrease by $2,500 per month.
B) Operating income will increase by $2,500 per month.
C) Operating income will decrease by $1,600 per month.
D) Operating income will remain unchanged.
Gem Corp. had cash sales of $10,000. The state sales tax rate is 10.8%. What amount is
debited to the Cash account?
A) $10,000
B) $11,080
C) $1,080
D) $1,000
Faros Hats, Inc. has two product lines—batting helmets and football helmets. The
income statement data for the most recent year is as follows:
What is the effect of dropping football helmets line on the operating income of the
company? (Assume that fixed costs remain unchanged and that there would be no adverse
effect on other sales.)
A) Operating income will increase by $40,000.
B) Operating income will increase by $90,000.
C) Operating income will decrease by $60,000.
D) Operating income will decrease by $350,000.
High Seas Sail Makers manufactures sails for sailboats. The company has the capacity
to produce 36,000 sails per year and is currently producing and selling 25,000 sails per
year. The following information relates to current production:
If a special pricing order is accepted for 5,700 sails at a sales price of $170 per unit, fixed
costs remain unchanged, and there are no variable selling and administrative costs for this
order, what is the change in operating income?
A) Operating income decreases by $627,000.
B) Operating income decreases by $684,000.
C) Operating income increases by $627,000.
D) Operating income increases by $684,000.
J-Time, Inc. is planning to launch a new brand of watches for kids. Similar watches are
available in the market for $58. In order to penetrate the market, the company plans to
use target pricing and desires a 22% net profit markup on total cost. Calculate the target
cost. (Round your answer to the nearest cent.)
A) $70.76
B) $12.76
C) $47.54
D) $45.24
Ronald, Inc. had the following balances and transactions during 2017:
What is the amount of the company’s Merchandise Inventory, as disclosed in the December
31, 2017 balance sheet, using the periodic weighted-average inventory costing method?
(Round the unit costs to two decimal places and total costs to the nearest dollar.)
A) $104
B) $87
C) $373
D) $616
Buildings, land, and equipment are classified as ________.
A) current assets
B) long-term assets
C) current liabilities
D) long-term liabilities
Galose Coffee Company sold 7,000 units in October at a sales price of $45 per unit. The
variable cost is $20 per unit. The monthly fixed costs are $8,000. What is the operating
income earned in October?
A) $175,000
B) $315,000
C) $167,000
D) $140,000
Felton Quality Productions uses a predetermined overhead allocation rate based on
machine hours. It has provided the following information for the year:
Based on the above information, calculate the predetermined overhead allocation rate
applied by Felton Quality. (Round your answer to the nearest cent.)
A) $1.75 per machine hour
B) $3.13 per machine hour
C) $6.88 per machine hour
D) $1.25 per machine hour
Which of the following describes working capital?
A) Current assets minus merchandise inventory
B) Current assets minus current liabilities
C) Total debt minus stockholders’ equity
D) Cost of goods sold divided by average merchandise inventory
Jetwell, Inc. incurred $4,000 for indirect labor in Department III. The journal entry to
record indirect labor utilized is ________.
A) debit Manufacturing Overhead, $4,000; credit Accounts Payable, $4,000
B) debit Accounts Payable, $4,000; credit Manufacturing Overhead, $4,000
C) debit Manufacturing Overhead, $4,000; credit Wages Payable, $4,000
D) debit Wages Payable, $4,000; credit Manufacturing Overhead, $4,000
Which of the following is true of the balance sheet presentation of the Allowance for
Bad Debts?
A) It is reported as a current liability.
B) It is reported as an operating expense.
C) It is reported as a separate, independent line item under current assets.
D) It is shown as a contra account related to accounts receivable.
Murray Products sells 2,100 kayaks per year at a price of $450 per unit. Murray sells in
a highly competitive market and uses target pricing. The company has $990,000 of
assets and the shareholders wish to make a profit of 17% on assets. Fixed costs are
$450,000 per year and cannot be reduced. Assume all products produced are sold. What
are the target variable costs?
A) $132,040
B) $990,000
C) $776,700
D) $326,700
The accountant for Sparks Electric, Inc. failed to make an adjusting entry to record
$3,000 of telephone expenses for the last two months of the year. Which of the
following statements is true?
A) The total liabilities will be overstated.
B) The total liabilities will be understated.
C) The total assets will be overstated.
D) The total assets will be understated.
Valuable Electronics uses a standard part in the manufacture of different types of radios.
The total cost of producing 42,000 parts is $100,000, which includes fixed costs of
$40,000 and variable costs of $60,000. The company can buy the part from an outside
supplier for $1 per unit and avoid 20% of the fixed costs. Assume that the company can
use the freed manufacturing space to make another product that can earn a profit of
$16,000. If Valuable outsources, what will be the effect on operating income?
A) increase of $42,000
B) decrease of $42,000
C) decrease of $8,000
D) increase of $16,000
A company has four vendors and the accounts payable subsidiary ledger shows the
following balances.
Calculate the accounts payable balance in the general ledger.
A) $436,295
B) $564,425
C) $278,821
D) $285,604
________ represents a debt owed for renting a building currently.
A) Prepaid Rent
B) Rent Payable
C) Rent Revenue
D) Rent Expense
Which of the following is an example of a direct materials efficiency standard?
A) $40 per direct labor hour
B) 50 square feet per unit
C) $0.95 per square foot
D) 6 direct labor hours per unit
Preferred stockholders ________.
A) are guaranteed that they will not have a loss on their investment
B) are guaranteed to receive an annual dividend payment
C) receive a set percentage of corporation net income
D) receive a dividend preference over common stockholders
At Cadmia Services, the cashier collects checks and cash from customers, and the
junior accountant records the transactions in the journal. The controller approves the
journal entries and bank reconciliations. The treasurer signs checks and approves
contracts.
Which internal control procedure is exemplified in the above situation?
A) assignment of responsibilities
B) competent, reliable, and ethical personnel
C) separation of duties
D) documents
________ is a “what if” technique that estimates profit or loss results if sales price,
costs, volume, or underlying assumptions change.
A) High-low method of analysis
B) Sensitivity analysis
C) Contribution margin
D) Operating leverage
The bank made an EFT payment of a telephone bill of $5,000. How would this
information be included on the bank reconciliation?
A) an addition on the bank side
B) a deduction on the book side
C) an addition on the book side
D) a deduction on the bank side
Pearland, Inc. has 9,000 shares of preferred stock outstanding. The preferred stock has a
$90 par value, a 14% dividend rate, and is noncumulative. If Pearland has sufficient
funds to pay dividends, what is the total amount of dividends that will be paid out to
preferred stockholders?
A) $32,143
B) $113,400
C) $57,857
D) $8,100
Which of the following principles states that a business’s financial statements must
report enough information for outsiders to make knowledgeable decisions about the
company?
A) conservatism
B) materiality concept
C) disclosure principle
D) consistency principle
The net income of Edwards Corporation amounted to $73,000 for this year. The
beginning balance of stockholders’ equity was $30,000 and the ending balance was
$70,000. The company issued no common stock during the year. What was the amount
of dividends distributed during the year?
A) $70,000
B) $33,000
C) $143,000
D) $30,000