Bacon Financial Advisors provides accounting and finance assistance to customers in
the retail business. Bacon has four professionals on staff and an office with six clerical
staff. Total compensation, including benefits, for the professional staff runs about
$573,000 per year, and normal billable hours are 8,000 hours per year. The professional
staff keep detailed time sheets organized by client number. The total office and
administrative costs for the year are $753,000. What is the direct labor rate for the
professional staff? (Round your answer to the nearest cent.)
A) $94.13 per hour
B) $22.50 per hour
C) $71.63 per hour
D) $165.75 per hour
The accountant for Hobson Electrical Repair, Inc. failed to make an adjusting entry to
record $5,000 of unpaid salaries for the last two weeks of the year. Which of the
following statements is true?
A) The total revenue will be overstated.
B) The total revenue will be understated.
C) The total expenses will be overstated.
D) The total expenses will be understated.
Holiday Foods is famous for its frosted fruit cake. The main ingredient of the cake is
dried fruit, which Holiday purchases by the pound. In addition, the production requires
a certain amount of direct labor. Holiday uses a standard cost system, and at the end of
the first quarter, there was a favorable direct labor efficiency variance. Which of the
following is a logical explanation for that variance?
A) The cost of workers’ medical insurance plans jumped up dramatically during the
quarter.
B) The factory lost two experienced workers at the beginning of the quarter, and their
replacements wasted a large amount of direct materials during their training period.
C) The purchasing manager was able to secure a volume discount on dried fruit,
purchasing the fruit for less than the amount set by standard.
D) The production staff changed the work flow process so that production required
fewer direct labor hours.
Horizon Marine Stores Company manufactures special metallic materials and
decorative fittings for luxury yachts that require highly skilled labor. Horizon uses
standard costs to prepare its flexible budget. For the first quarter of the year, direct
materials and direct labor standards for one of their popular products were as follows:
Direct materials: 4 pounds per unit; $4 per pound
Direct labor: 4 hours per unit; $15 per hour
Horizon produced 5,000 units during the quarter. At the end of the quarter, an
examination of the labor costs records showed that the direct labor cost variance was
$6,000 F. Which of the following is a logical explanation for this variance?
A) The company used fewer labor hours than allowed by the standards.
B) The company paid a lower cost per hour for labor than allowed by the standards.
C) The company used a lower quantity of direct materials than allowed by the
standards.
D) The company paid a lower cost for the direct materials than allowed by the
standards.
Argentina Moving Company reported the following amounts on its balance sheet as of
December 31, 2016 and December 31, 2017:
For the vertical analysis, what is the percentage of stockholders’ equity as of December 31,
2017? (Round your answer to two decimal places.)
A) 100.00%
B) 59.53%
C) 54.76%
D) There is not enough information provided to make this computation.
On December 31, 2017, Clark Sales has 10-year Bonds Payable of $89,000 and
Discount on Bonds Payable of $2,350. How will this be shown on the December 31,
2016 Balance Sheet?
A) Bonds Payable $89,000 less Discount on Bonds Payable $2,350 for a carrying
amount of $86,650
B) Bonds Payable $89,000 plus Discount on Bonds Payable for a carrying amount of
$91,350
C) Bonds Payable $89,000
D) Bonds Payable $89,000 less one-tenth of $2,350 for a carrying amount of $88,765
Cat Nap Corp. uses the indirect method to prepare the statement of cash flows. Refer to
the following section of the comparative balance sheet:
Cat Nap Corp.
Comparative Balance Sheet
December 31, 2017 and 2016
How will the change in Accounts Receivable be shown on the statement of cash flows?
A) addition to net income under the operating activities section
B) subtraction from net income under the operating activities section
C) positive cash flow under the financing activities section
D) negative cash flow under the investing activities section
Antique Works is owned and operated by a craftsman who makes replicas of historic
firearms for museums, sportsmen, and collectors. The data are as follows:
If Antique expects to sell 40 units per month, what is his margin of safety expressed in
units per month?
A) 14 units
B) 40 units
C) 66 units
D) 12 units
Pretty, Inc. provides the following data:
Calculate days’ sales in inventory for 2017. (Round any intermediate calculations and your
final answer to two decimal places.)
A) 84.23
B) 148.81
C) 63.11
D) 116.61
Young Company has provided the following information:
Calculate the contribution margin per unit.
A) $36.00
B) $52.00
C) $68.00
D) $16.00
Cash received in advance of providing goods or performing services is recorded as
________.
A) Unearned Revenue
B) Accrued Revenue
C) Service Revenue
D) Uncollected Revenue
Agostino, Inc. uses a just-in-time costing system. During the month, Agostino incurred
$300,000 as direct labor and $9,000 as overhead. Which of the following is the correct
journal entry to record the conversion costs?
A)
B)
C)
D)
Candy Man, Inc. reports the following information:
What is the unit product cost using variable costing? (Round your answer to the nearest
cent.)
A) $69.45
B) $44.00
C) $52.45
D) $98.18
Saffron Foods sells jars of special spices used in Spanish cooking. The variable cost is
$1 per unit. Fixed costs are $9,000,000 per year. It has $42,000,000 of average assets,
and the desired profit is a 4% return on assets. Saffron Foods sells 5,000,000 units per
year. The company uses cost-plus pricing because it is the only company that produces
this kind of product. Using cost-plus pricing methodology, determine the sales price per
unit. (Round your answer to the nearest cent.)
A) $1.25
B) $3.14
C) $2.80
D) $1.00
Colin was a professional classical guitarist until a motorcycle accident left him
disabled. After long months of therapy, he hired an experienced luthier and started a
small shop to make and sell Spanish guitars. The guitars sell for $900, and the fixed
monthly operating costs are as follows:
Colin’s accountant told him about contribution margin ratios, and Colin understood clearly
that for every dollar of sales, $0.60 went to cover his fixed costs, and anything above that
point was profit.
What is the amount of revenue Colin should earn each month to break even? (Round your
answer to the nearest dollar.)
A) $7,938
B) $5,292
C) $4,500
D) $4,125
Lee Maritime Company manufactures special metallic materials and decorative fittings
for luxury yachts that require highly skilled labor. Lee uses standard costs to prepare its
flexible budget. For the first quarter of the year, direct materials and direct labor
standards for one of their popular products were as follows:
Direct materials: 2 pounds per unit; $3 per pound
Direct labor: 4 hours per unit; $14 per hour
Lee produced 5,000 units during the quarter. At the end of the quarter, an examination
of the labor costs records showed that the company used 30,000 direct labor hours and
actual total direct labor costs were $375,000. What is the direct labor cost variance?
(Round any intermediate calculations to the nearest cent, and your final answer to the
nearest dollar.)
A) $45,000 Favorable
B) $280,000 Favorable
C) $280,000 Unfavorable
D) $45,000 Unfavorable
Which of the following appears on both the statement of retained earnings and the
balance sheet?
A) Ending retained earnings
B) Total assets
C) Total revenues
D) Net income
Which of the following is a variable cost?
A) property taxes
B) salary of plant manager
C) direct materials cost
D) straight-line depreciation expense
A company ships goods to a customer and pays transportation costs. To the seller, the
transportation costs are
A) freight out
B) freight in
C) sales commission
D) brokerage
On November 1, 2017, Rodgers Enterprises sold merchandise with a cost of $5,000 for
$10,000, FOB destination, with payment terms of 2/10, n/40. The company paid
transportation costs of $100. Customer returns on this sale were $3,000 (with a cost of
$1,500). The merchandise was returned on November 6. The company received the
payment for the balance amount on November 10, 2017. Calculate the net sales
revenue.
A) $6,860
B) $7,000
C) $3,500
D) $7,100
The formula for computing the current ratio is ________.
A) Current ratio = Current assets / Total assets
B) Current ratio = Current assets / Total liabilities
C) Current ratio = Current assets / Stockholders’ Equity
D) Current ratio = Current assets / Current liabilities
The accountant for Belden Jewelry Repair Services, Inc. forgot to make an adjusting
entry for Depreciation Expense for the current year. Which of the following is an effect
of this error?
A) Total assets are understated.
B) Revenues are overstated.
C) Total assets are overstated.
D) Net income is understated.
Dana Appliances sells dishwashers with a four-year warranty. In 2017, sales revenue for
dishwashers is $97,000. The company estimates warranty expense at 4.5% of revenues.
What is the 2017 warranty expense?
A) $4,365
B) $1,091.25
C) $0
D) $3,423.53
The cost of units sold is recorded by debiting Cost of Goods Sold and crediting
________.
A) Finished Goods Inventory
B) Sales Revenue
C) Work-in-Process Inventory
D) Wages Payable
Pattern Manufacturing produces a chemical pesticide and uses process costing. There
are three processing departments—Mixing, Refining, and Packaging. On January 1, the
first department—Mixing—had no beginning inventory. During January, 48,000 fl. oz.
of chemicals were started in production. Of these, 40,000 fl. oz. were completed, and
8,000 fl. oz. remained in process. In the Mixing Department, all direct materials are
added at the beginning of the production process, and conversion costs are applied
evenly through the process.
At the end of January, the equivalent unit data for the Mixing Department were as
follows:
* Percent complete for conversion costs: 44%
In addition to the above, the costs per equivalent unit were $1.35 for direct materials and
$5.30 for conversion costs. Using this data, calculate the full cost of the ending WIP
balance in the Mixing Department. The weighted-average method is used.
A) $43,520
B) $10,800
C) $29,456
D) $64,800
An account that is not closed at the end of the period is called a(n) ________.
A) expense account
B) temporary account
C) permanent account
D) revenue account
Emerald, Inc., earned revenues of $69,000 and incurred expenses of $74,000. No
dividends were declared. Which of the following statements is correct?
A) The entry to close Income Summary is the same regardless of a net income or a net
loss.
B) Retained Earnings will be debited for $5,000 and Income Summary will be credited
for $5,000.
C) The entries to close revenues and expenses will differ if there is a net loss.
D) The entry to close Income Summary requires a debit to the Income Summary
account.
White Hat Digital, Inc. starts the year with a credit balance of $3,500 in its Estimated
Warranty Payable account. During the year, there were $224,000 in sales and $4,800 in
warranty repair payments. White Hat Digital estimates warranty expense at 2% of sales.
At the end of the year, what is the balance in the Estimated Warranty Payable account?
A) $4,480 debit
B) $4,800 credit
C) $3,500 debit
D) $3,180 credit
Regarding the sales budget, which of the following statements is incorrect?
A) The forecast of sales revenue is the cornerstone of the master budget.
B) The level of sales affects expenses and almost all other elements of the master
budget.
C) The budgeted sales are carried from the sales budget to the balance sheet.
D) Budgeted total sales for each product equal the sales price multiplied by the
expected number of units sold.
Which of the following is the correct accounting equation?
A) Assets + Liabilities = Equity
B) Assets = Liabilities + Equity
C) Assets + Revenues = Equity
D) Assets + Revenues = Liabilities + Expenses
A business borrows cash by signing a note payable. Which of the following accounts is
debited?
A) Notes Payable
B) Accounts Payable
C) Notes Receivable
D) Cash
Which of the following types of stock has less investment risk?
A) common stock
B) par value stock
C) no-par stock
D) preferred stock