1) If fixed costs are $850,000 and the unit contribution margin is $50, profit is zero
when 15,000 units are sold.
2) Service firms can only have one activity base for analyzing changes in costs.
3) If a business sells two products, it is not possible to estimate the break-even point.
4) The first budget to be prepared is usually the cash budget.
5) Period costs are costs that are incurred for the production requirements of a certain
period.
6) A retained earnings statement reports all changes in cash for a period of time.
7) Unrealized gains and losses on trading securities are not included in the calculation
of net income.
8) Assets may be grouped according to common traits and depreciated by using a single
composite rate.
9) If bonds are sold for a discount, the carrying value of the bonds is equal to the face
value less the unamortized discount.
10) The methods of evaluating capital investment proposals can be grouped into two
general categories that can be referred to as (1) methods that ignore present value and
(2) present values methods.
11) Discounts taken by the buyer for early payment of an invoice are credited to Sales
Discounts by the buyer.
12) The objective of transfer pricing is to encourage each division manager to transfer
goods and services between divisions if overall company income can be increased by
doing so.
13) Consuming goods and services in the process of generating revenues results in
expenses.
14) The adjusted trial balance verifies that total debits equals total credits before the
adjusting entries are prepared.
15) In a multiple-step income statement the dollar amount for income from operations
is always the same as net income.
16) Carrolton, Inc. currently sells widgets for $80 per unit. The variable cost is $30 per
unit and total fixed costs equal $240,000 per year. Sales are currently 20,000 units
annually.
The company is considering a 20% drop in selling price that they believe will raise
units sold by 20%. Assuming all costs stay the same, what is the impact on income if
they make this change?
17) Schedule of Activity Costs
From the above schedule, calculate the internal failure costs.
18) Using a LIFO perpetual cost flow, calculate the value of the ending inventory and
the cost of goods sold for the month of November of Beamer Company using the data
below.
Calculate the following:
1> Inventory valuation at the end of November
2> Calculate the Cost of Goods Sold for November
19) Journalize the following transactions for the Evans Company. Assume the company
uses a perpetual inventory system.
20) Jenson Co., is considering the following alternative plans for financing their
company:
Income tax is estimated at 40% of income.
Determine the earnings per share of common stock under the two alternative financing
plans, assuming income before bond interest and income tax is $1,000,000.
21) Indicate whether the following error would cause the adjusted trial balance totals to
be unequal. If the error would cause the adjusted trial balance totals to be unequal,
indicate whether the debit or credit total is higher and by how much.
22) Piano Companys costs were over budget by $47,000. The Piano Company is
divided in two regions. The first regions costs were over budget by $5,000. Determine
the amount that the second regions cost was over or under budget.
23) The following adjusted trial balance is the result of the adjustments made at the end
of the month of March for Erik Martin Company. Utilize these adjusted values to
prepare the closing entries for Erik Martin Company.
