On May 31, a retail firm pays rent of $2,700 for the month of May. When this
transaction is recorded in the cash payments journal, ________.
A) assets and equity will increase by $2,700
B) assets and liabilities will decrease by $2,700
C) assets and equity will decrease by $2,700
D) liabilities and equity will increase by $2,700
The journal entry to record direct labor costs actually incurred involves a debit to the
________.
A) Work-in-Process Inventory account
B) Wages Payable account
C) Manufacturing Overhead account
D) Raw Materials Inventory account
Jennings Company manufactures ceiling fans and uses an activity-based costing system.
Each ceiling fan has 20 separate parts. The direct materials cost is $85 and each ceiling
fan requires 2.50 hours of machine time to manufacture. Additional information is as
follows:
What is the total manufacturing cost per ceiling fan? (Round any intermediate
calculations and your final answer to the nearest cent.)
A) $97.70
B) $104.80
C) $112.80
D) $116.70
Which of the following is the most appropriate cost driver for allocating the cost of
warranty services?
A) number of employees
B) number of materials purchased
C) number of machine hours
D) number of service calls
In a typical computerized accounting information system, ________.
A) transactions must be recorded in debit and credit format
B) the software automatically knows to record a debit or a credit
C) transactions are posted manually
D) spreadsheets must be used to produce financial statements
Gnome Company is deciding whether to continue to manufacture a component or to
buy the component from a supplier. Which of the following is relevant to this decision?
A) the potential uses of the facilities that are currently used to manufacture the
component
B) the insurance on the manufacturing facility that will continue regardless of the
decision
C) fixed costs that do not differ between the alternatives
D) the cost of the equipment that is currently being used to manufacture the component
Which of the following statements is true of absorption and variable costing methods?
A) Both costing methods consider selling and administrative costs to be period costs.
B) Variable costing considers variable selling and administrative costs to be product
costs.
C) Absorption costing considers fixed manufacturing overhead to be period costs.
D) Both costing methods consider fixed manufacturing overhead to be product costs.
Nylan Tiles is considering an investment in new equipment costing $858,000. The
equipment will be depreciated on a straight-line basis over a five-year life and is
expected to have a residual value of $62,000. The equipment is expected to generate net
cash inflows of $1,002,000 in total during the five-year life. What is the accounting rate
of return associated with the equipment investment? (Round your answer to two
decimal places.)
A) 12.36%
B) 8.96%
C) 45.23%
D) 9.34%
In a ________, the manager is responsible for generating revenues and controlling
costs.
A) cost center
B) profit center
C) revenue center
D) transfer pricing center
Which of the following is an output device in an accounting information system?
A) keyboard
B) internet protocol
C) printer
D) mouse
Lloyd’s Moving Company is considering purchasing new equipment that costs
$728,000. Its management estimates that the equipment will generate cash flows as
follows:
Present value of $1:
The company’s annual required rate of return is 9%. Using the factors in the table,
calculate the present value of the cash flows. (Round all calculations to the nearest
whole dollar.)
A) $892,000
B) $864,646
C) $853,320
D) $894,000
Underallocated overhead occurs when ________.
A) allocated overhead costs are less than actual overhead costs
B) actual overhead costs are less than allocated overhead costs
C) estimated overhead costs are greater than budgeted overhead costs
D) estimated overhead costs are greater than actual overhead costs
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
Lobel Machines Company is evaluating an investment of $1,100,000 which will yield
net cash inflows of $197,062 per year for 7 years with no residual value. What is the
internal rate of return?
Present value of ordinary annuity of $1:
A) 5%
B) 6%
C) 7%
D) 8%
Parker, Inc. has a cash balance of $20,000 on April 1. The company is now preparing
the cash budget for the second quarter. Budgeted cash collections and payments are as
follows:
There are no budgeted capital expenditures or financing transactions during the quarter.
Based on the above data, calculate the projected cash balance at the end of April.
A) $44,000
B) $34,500
C) $24,000
D) $38,000
