Accompanying the bank statement was a debit memorandum for an NSF check
received from a customer. This item would be included on the bank reconciliation as
a(n):
a. deduction from the cash balance per books.
b. addition to the cash balance per bank.
c. deduction from the cash balance per bank.
d. addition to the cash balance per books.
When there are major changes in strategy, senior management, business structure, or
operations, evaluations of controls is usually performed by _____.
a. internal auditors
b. management
c. supervisors
d. directors
The primary disadvantage of decentralized operations is that decisions made by one
manager may affect other managers in such a way that the profitability of the entire
company may suffer.
a. True
b. False
Which one of the following is not a measure that management can use in evaluating and
controlling investment center performance?
a. Rate of return on investment
b. Negotiated price
c. Residual income
d. Operating income
The range of activity over which changes in cost are of interest to management is called
the relevant range.
a. True
b. False
The standard cost is a detailed estimate of how much a product should cost.
a. True
b. False
A manufacturing business reports three types of inventory on its balance sheet: direct
materials, products in the process of being manufactured, and finished products.
a. True
b. False
Dinkins Inc. is considering disposing of a machine with a book value of $50,000 and an
estimated remaining life of five years. The old machine can be sold for $15,000. A new
machine with a purchase price of $150,000 is being considered as a replacement. It will
have a useful life of five years and no residual value. It is estimated that variable
manufacturing costs will be reduced from $70,000 to $45,000 if the new machine is
purchased. The net differential increase or decrease in cost for the entire five years for
the new equipment is:
a. $10,000 increase.
b. $25,000 decrease.
c. $10,000 decrease.
d. $25,000 increase.
Gross profit percent is calculated by dividing gross profit by net sales.
a. True
b. False
Yellco Inc., a toy manufacturer, provided the following information:
Domestic unit sales price$50
Unit manufacturing costs:
Variable10
Fixed8
The company has received an offer from an exporter for 9,000 units of toys at $60 per
unit. The additional business is not expected to affect the normal production or
domestic sales prices of Yellco Inc. The company’s differential cost from the acceptance
of the offer is _____.
a. $72,000
b. $378,000
c. $153,000
d. $90,000
Accompanying the bank statement was a credit memorandum for a shortterm note
collected by the bank for the depositor. This item would be included on the bank
reconciliation as a(n):
a. deduction from the cash balance per books.
b. addition to the cash balance per bank.
c. deduction from the cash balance per bank.
d. addition to the cash balance per books.
Answer Corporation uses standard cost system. The standard costs and actual costs for
direct materials, direct labor, and factory overhead for the manufacture of 2,500 units of
product are as follows:
Standard Costs
Direct materials2,500 kilograms @ $8
Direct labor7,500 hours @ $12
Actual Costs
Direct materials2,600 kilograms @ $8.75
Direct labor7,400 hours @ $11.40
Factory overhead (100% capacity 10,000 hrs.):
Variable cost @ $2 per hour
Total variable cost, $18,000
Fixed cost @ $0.80 per hour
Total fixed cost, $8,000
The amount of the direct labor rate variance is:
a. $4,440 unfavorable.
b. $4,500 favorable.
c. $4,440 favorable.
d. $4,500 unfavorable.
Indirect labor is included in factory overhead.
a. True
b. False
A company should purchase an asset when the minimum rate of return exceeds its
average rate of return.
a. True
b. False
Allowance for Doubtful Accounts is a contra liability account.
a. True
b. False
A cost that will not be affected by later decisions is termed as sunk cost.
a. True
b. False
Capital market stakeholders have an interest in a company because:
a. they collect taxes from the company.
b. they depend upon the continued success of the company for keeping their jobs.
c. they purchase the company’s products or services or sell their products or services to
the company.
d. they provide major financing for the business.
A cost that will not be affected by later decisions is termed an opportunity cost.
a. True
b. False
Direct materials, workinprocess, and finished goods inventory are most likely to be
reported on the balance sheet of a(n):
a. financial consultant.
b. apparel boutique.
c. automobile company.
d. insurance company.
Based on the following information, calculate process yield.
Units passing inspection 12,750 units
Units entering process 15,000 units
a. 85%
b. 15%
c. 90%
d. 117%
Paleota Company purchased a patent from Finise for $234,000. At the time of purchase,
the patent had a remaining useful life of 10 years. Determine the patent amortization
expense for the first year.
a. $23,400
b. $23,000
c. $14,000
d. $9,800
Hill Co. can further process Product O to produce Product P. Product O is currently
selling for $65 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 $82 per pound.
a. True
b. False
Which of the following accounts is a contra account to Sales?
a. Accounts Payable
b. Sales Returns and Allowances
c. Accounts Receivable
d. Interest Revenue
The merchandise inventory account is found on the balance sheet.
a. True
b. False
Which of the following is considered to be a liability?
a. Prepaid expenses
b. Investments
c. Unearned revenues
d. Accrued revenues
When someone purchases merchandise and incurs the cost of transportation, these costs
of purchasing inventory are added to the cost of the inventory.
a. True
b. False
Under the straightline method, the amount of depreciation expense for the first full year
of use of a fixed asset costing $95,000, with an estimated residual value of $5,000, and
a useful life of 5 years, will be $18,000.
a. True
b. False
The standard factory overhead rate of Quaker Inc. is $10 per direct labor hour ($8 for
variable factory overhead and $2 for fixed factory overhead) based on 100% capacity of
30,000 direct labor hours. The standard cost and the actual cost of factory overhead for
the production of 5,000 units during May were as follows:
Standard:25,000 hours at $10$250,000
Actual:Variable factory overhead202,500
Fixed factory overhead60,000
What is the amount of the variable factory overhead controllable variance?
a. $10,000 favorable
b. $2,500 unfavorable
c. $10,000 unfavorable
d. $2,500 favorable
As product costs are incurred in the manufacturing process, they are accounted for as
assets and reported on the balance sheet as inventory.
a. True
b. False
Federal unemployment compensation tax is a tax that is paid only by employers.
a. True
b. False
The following is an example of _____.
Increase (Decrease)
Current YearPrior YearAmountPercent
Current assets$ 420,000 $ 500,000 $(80,000)(16%)
Fixed assets 1,530,000 1,500,000 30,000 2%
a. net assets analysis
b. horizontal analysis
c. marketability analysis
d. regression analysis
Costs that remain constant on a perunit level as the level of activity changes are called:
a. fixed costs.
b. mixed costs.
c. opportunity costs.
d. variable costs.
Which of the items below is not a business organization form?
a. Venture entrepreneurship
b. Proprietorship
c. Partnership
d. Corporation