The following information is given for a company:
Process AProcess B
Units passing inspection 8,800 units3,000 units
Units entering process10,000 units5,000 units
Calculate the (a) process yield for Process A, (b) process yield for Process B, and (c)
overall process yield.
Production estimates for August are as follows:
Estimated inventory (units), August 13,000
Desired inventory (units), August 312,000
Expected sales volume (units), August40,000
For each unit produced, the direct materials requirements are as follows:
Direct material A ($2 per lb.)5 lbs.
Direct material B ($11 per lb.)1 lb.
The number of pounds of materials A and B required for August production is:
a. 195,000 lbs. of A; 39,000 lbs. of B.
b. 200,000 lbs. of A; 40,000 lbs. of B.
c. 205,000 lbs. of A; 41,000 lbs. of B.
d. 210,000 lbs. of A; 42,000 lbs. of B.
Operating income is calculated by subtracting _____ from gross profit.
a. operating expenses
b. prepaid expenses
c. accrued expenses
d. nonoperating expenses
The manager of a profit center has the responsibility for making decisions that affect the
center’s _____.
a. costs, revenues, and investment in fixed assets.
b. investment in fixed assets, but not costs.
c. costs and revenues, but not investment in fixed assets.
d. revenues and investment in fixed assets, but not costs.
When a company has a high debt ratio, it is an indication of a:
a. high solvency risk.
b. weak operating efficiency.
c. high profit margin.
d. low asset turnover.
The internal control environment is enhanced by the hiring and retention of competent,
honest employees.
a. True
b. False
If fixed costs are $300,000 and variable costs are 70% of breakeven sales, profit is zero
when sales revenue is $1,000,000.
a. True
b. False
The process by which management allocates available investment funds among
competing investment proposals is called:
a. investment capital management.
b. capital budgeting.
c. costvolumeprofit analysis.
d. capital rationing.
A business that requires all cash payments be made by check cannot use a petty cash
system.
a. True
b. False
In deciding whether to accept business at a special price when the company is operating
at full capacity, the special price should be set high enough to cover all fixed and
variable costs and expenses.
a. True
b. False
Transic Corporation has the following financial data for 2016 and 2017.
20172016
ASSETS
Current Assets:
Cash$ 48,000$ 14,000
Marketable Securities9,00013,000
Accounts Receivable35,00024,000
Other Current Assets15,00018,000
Total Current Assets107,00069,000
Fixed Assets (net)140,000130,000
Total Assets$247,000$199,000
LIABILITIES
Current Liabilities$ 72,000$ 52,000
Longterm Liabilities50,00037,000
Total Liabilities$122,000$ 89,000
Total Stockholders’ Equity$125,000$110,000
Total Liabilities And Stockholders’ Equity$247,000$199,000
Based on Transic’s current ratio, which of the following statements is true regarding the
company?
a. Transic’s current ratio has decreased, indicating that the company is in a more
favorable position to obtain shortterm credit than in 2016.
b. Transic’s current ratio has increased, indicating that the company is in a more
favorable position to obtain shortterm credit than in 2016.
c. Transic’s current ratio has increased, indicating that the company is in a less favorable
position to obtain shortterm credit than in 2016.
d. Transic’s current ratio has decreased, indicating that the company is in a less
favorable position to obtain shortterm credit than in 2016.
Nonmanufacturing costs are generally classified into two categories: selling and
administrative.
a. True
b. False
The objective of most businesses is to maximize profits.
a. True
b. False
Process yield measures the efficiency of a process.
a. True
b. False
The following data is given for the Walker Company:
Budgeted production1,000 units
Actual production980 units
Materials:
Standard price per lb$2.00
Standard pounds per completed unit12
Actual pounds purchased and used in production11,800
Actual price paid for materials$23,000
Labor:
Standard hourly labor rate$14 per hour
Standard hours allowed per completed unit4.5
Actual labor hours worked4,560
Actual total labor costs$62,928
Overhead:
Actual and budgeted fixed overhead$27,000
Standard variable overhead rate$3.50per standard labor hour
Actual variable overhead costs$15,500
Overhead is applied on standard labor hours.
The factory overhead volume variance is:
a. $65 unfavorable.
b. $65 favorable.
c. $540 unfavorable.
d. $540 favorable.
The balanced scorecard measures:
a. only financial information.
b. only nonfinancial information.
c. both financial and nonfinancial information.
d. both external and internal information.
The primary accounting tool for controlling and reporting for cost centers is a budget
performance report.
a. True
b. False
Accrued revenue is shown on a balance sheet as:
a. an asset.
b. common stock.
c. a liability.
d. retained earnings.
Operating expenses are subtracted from fees earned for a service business and from
gross profit for a merchandising business.
a. True
b. False
In preparing a bank reconciliation, the amount of outstanding checks is deducted from
the cash balance per books.
a. True
b. False
Standard costs serve as a device for measuring efficiency.
a. True
b. False
Depositing all cash, checks, etc. in a bank and paying with checks is an internal control
procedure over cash.
a. True
b. False
The bank section begins with the cash balance according to the bank statement and ends
with the adjusted balance.
a. True
b. False
Standard costs should be revised when they differ from actual costs.
a. True
b. False
The difference between the current sales revenue and the sales at the breakeven point is
called the:
a. contribution margin.
b. margin of safety.
c. price factor.
d. operating leverage.
Zilova Inc. issues a credit memo of $850 to a customer. What is the effect of this
transaction on profitability and liquidity?HTMLENTITY#8203HTMLENTITY
a. Both profitability and liquidity increase.
b. HTMLENTITY#8203HTMLENTITYProfitability increases while liquidity
decreases.
c. HTMLENTITY#8203HTMLENTITYBoth profitability and liquidity remain
unchanged.
d. HTMLENTITY#8203HTMLENTITYProfitability decreases while liquidity
increases.
The ratio of operating income to sales is termed the profit margin, a component of the
rate of return on investment.
a. True
b. False
During inflationary periods, the value of inventory that appears on the balance sheet
using FIFO method will be more than its current replacement cost.
a. True
b. False
Joe Co. paid a notes payable of $6,000 with interest. As a result of this transaction, the
company’s:
a. earnings per share increases.
b. earnings per share decreases.
c. net assets do not change.
d. net assets increase.
HTMLENTITY#8203HTMLENTITYBlue Ivy Inc. has the following transactions for
the month of March:
Issued common stock $60,000
Purchased land by paying cash $100,000
Paid expenses $25,000
Earned cash fees $75,000
As a cumulative result of these transactions, the liquidity of Blue Ivy Inc.:
a. HTMLENTITY#8203HTMLENTITYincreases by $75,000.
b. HTMLENTITY#8203HTMLENTITYincreases by $10,000.
c. HTMLENTITY#8203HTMLENTITYdecreases by $25,000.
d. HTMLENTITY#8203HTMLENTITYdecreases by $50,000.