1) The Sarbanes-Oxley Act prohibits CPAs from providing nonaudit investment
banking services.
2) One inherent risk to using just-in-time philosophy is that companies are at higher risk
of inventory shortage during volatile times such as strikes, weather, etc. than the
traditional philosophy.
3) Service department charges are similar to the expenses of a profit center that
purchased services from a source outside the company.
4) Hill Co. can further process Product O to produce Product P. Product O is currently
selling for $60 per pound and costs $42 per pound to produce. Product P would sell for
$82 per pound and would require an additional cost of $13 per pound to produce.
The differential revenue of producing Product P is $22 per pound.
5) Methods that ignore present value in capital investment analysis include the average
rate of return method.
6) The master budget of a small manufacturer would normally include all component
budgets that impact on the financial statements.
7) Budget preparation is best determined in a top-down managerial approach.
8) An advantage of the current ratio is that it considers the makeup of the current assets.
9) A payment system that uses computerized electronic impulses to effect a cash
transaction is called electronic funds transfer (EFT).
10) Held-to-maturity securities maturing beyond a year are reported as noncurrent
assets.
11) Cash flows from investing activities, as part of the statement of cash flows, include
payments for the purchase of treasury stock.
12) The budget procedure that requires all levels of management to start from zero in
estimating sales, production, and other operating data is called continuous budgeting.
13) Accounts in the ledger are usually maintained in alphabetical order.
14) A credit to the cash account will increase the account.
15) As product costs are incurred in the manufacturing process, they are accounted for
as assets and reported on the balance sheet as inventory.
16) Activity cost pools are assigned to products, using factory overhead rates for each
activity.
17) If the standard to produce a given amount of product is 2,000 units of direct
materials at $12 and the actual was 1,600 units at $13, the direct materials quantity
variance was $5,200 favorable.