1) The split-off point in a process that produces joint products is the point in the
manufacturing process at which the joint products are sent to separate customers.
2) All other things the same, purchasing merchandise inventory would have no effect on
the accounts receivable turnover ratio at a retailer.
3) Paying interest to lenders is classified as an operating activity on the statement of
cash flows.
4) If the acid-test ratio is less than one, then paying off some current liabilities with
cash will increase the acid-test (quick) ratio.
5) When cash flows are uneven and vary from year to year, the net present value
method is easier to use than the internal rate of return method.
6) The book value of a machine, as shown on the balance sheet, is not relevant in a
decision concerning the replacement of that machine by another machine. (Ignore
taxes.)
7) All other things the same, if a company uses long-term debt to purchase land to
develop in the future, the company’s return on total assets will decrease.
8) When a flexible budget is used in performance evaluation, actual costs are compared
to the static planning budget rather than to what the costs should have been for the
actual level of activity during the period.
9) Investing activities on the statement of cash flows generate cash inflows and
outflows related to borrowing from and repaying principal to creditors and completing
transactions with the company’s owners such as selling or repurchasing shares of
common stocks and paying dividends.
10) The “costs to be accounted for” portion of the cost reconciliation report includes the
cost of ending work in process inventory and the costs added during the period.
11) Common fixed costs should not be charged to the individual segments when
preparing a segmented income statement.
12) The “costs accounted for” portion of the cost reconciliation report includes the cost
of beginning work in process inventory and the costs added to production during the
period.
13) The selling and administrative expense adjusted to a cash basis would be:
A.$120,000
B.$106,000
C.$110,000
D.$112,000
14) Quinnett Corporation has two divisions: the Export Products Division and the
Business Products Division. The Export Products Division’s divisional segment margin
is $34,300 and the Business Products Division’s divisional segment margin is $86,700.
The total amount of common fixed expenses not traceable to the individual divisions is
$95,600. What is the company’s net operating income?
A.$216,600
B.$121,000
C.$25,400
D.($121,000)
15) The gross margin percentage is equal to:
A.(Net operating income + Selling and administrative expenses)/Sales
B.Net operating income/Sales
C.Cost of goods sold/Sales
D.Cost of goods sold/Net income
16) How much more profit (loss) does the company make by processing one batch of
sugar cane into the end products industrial fiber and molasses?
A.$(96)
B.$1
C.$7
D.$6
17) Wiacek Corporation has received a request for a special order of 4,000 units of
product F65 for $26.60 each. Product F65’s unit product cost is $25.80, determined as
follows:
Direct labor is a variable cost. The special order would have no effect on the company’s
total fixed manufacturing overhead costs. The customer would like modifications made
to product F65 that would increase the variable costs by $3.00 per unit and that would
require an investment of $23,000 in special molds that would have no salvage value.
This special order would have no effect on the company’s other sales. The company has
ample spare capacity for producing the special order. If the special order is accepted,
the company’s overall net operating income would increase (decrease) by:
A.$(31,800)
B.$3,800
C.$3,200
D.$(48,400)
18) The Prattle Corporation makes and sells only one product called a Deb. The
company is in the process of preparing its Selling and Administrative Expense Budget
for next year. The following budget data are available:
All of these expenses (except depreciation) are paid in cash in the month they are
incurred.
If the company has budgeted to sell 20,000 Debs in March, then the average budgeted
selling and administrative expenses per unit sold for March is closest to:
A.$7.80 per unit
B.$9.00 per unit
C.$8.50 per unit
D.$6.80 per unit
19) Garth Corporation sells a single product. If the selling price per unit and the
variable expense per unit both increase by 10% and fixed expenses do not change, then:
A.Option A
B.Option B
C.Option C
D.Option D
20) A manufacturing company that has only one product has established the following
standards for its variable manufacturing overhead. Variable manufacturing overhead
standards are based on machine-hours.
The following data pertain to operations for the last month:
What is the variable overhead rate variance for the month?
A.$1,739 U
B.$595 F
C.$595 U
D.$1,739 F
21) When the activity level declines within the relevant range, what should happen with
respect to the following?
Fixed cost per unit Variable cost per unit
A) No change Increase
B) Increase Increase
C) Increase No change
D) No change No change
22) The following are budgeted data:
Two pounds of material are required for each finished unit. The inventory of materials
at the end of each month should equal 20% of the following month’s production needs.
Purchases of raw materials for May should be:
A.39,200 pounds
B.52,000 pounds
C.36,800 pounds
D.38,000 pounds
23) Crystal Corporation produces a single product. The company’s variable costing
income statement for the month of May appears below:
The company produced 80,000 units in May and the beginning inventory consisted of
25,000 units. Variable production costs per unit and total fixed costs have remained
constant over the past several months.
Under absorption costing, for May the company would report a:
A.$30,000 loss
B.$0 profit
C.$30,000 profit
D.$60,000 profit