Archives: Quiz

A good financial statement analysis report often includes the following sections: Executive summary, analysis overview, evidential matter, assumptions, key factors, and inferences. Answer: The “cumulative effect of a change in accounting principles” is shown below the extraordinary items section on […]

With credit terms of 2/10, n/30, the seller is offering the purchaser a 2% cash discount if the amount is paid within 10 days of the invoice date. Otherwise, the full amount is due in 30 days. Answer: Product costs […]

Most managers stress the importance of understanding and predicting cash flows for business decisions. Answer: TRUE The assignment of costs to cost of goods sold and to inventory using specific identification is the same for both the perpetual and periodic […]

One possible explanation for direct labor rate and efficiency variances is the use of workers with different skill levels. Answer: The present value of 1 formula is often useful when a borrowed asset must be repaid in full at a […]

In process cost accounting, direct labor includes only the labor that is applied directly to the products. Answer: According to the cost principle, it is preferable for managers to report the most current estimate of an asset’s value. Answer: FALSE […]

Product level costs do not vary with the number of units or batches produced. Answer: When LIFO is used with the periodic inventory system, cost of goods sold is assigned costs from the most recent purchases at the point of […]

The budgeted balance sheet is prepared with data contained in the previously prepared components of the master budget. Answer: The matching principle requires that revenue not be assigned to the accounting period in which it is earned. Answer: FALSE A […]

Auditors rely on accounting system databases when they audit financial statements and a company’s controls. Answer: Earned but uncollected revenues that are recorded during the adjusting process with a credit to a revenue account and a debit to an expense […]

To check for accuracy after posting: first a trial balance is completed, then the subsidiary ledgers are tested by preparing a schedule of the controlling account. Answer: Revenues are increases in retained earnings from a company’s earnings activities. Answer: TRUE […]

The cost of an inventory item includes its invoice cost and any added or incidental costs necessary to make it saleable less any discount. Answer: The focus of financial accounting is on an organization’s projects, processes, and subdivisions, and the […]

Relevant benefits refer to the additional revenue generated by selecting a particular course of action over another. Answer: The relevant range of operations includes extremely high and low levels of production that are unlikely to occur. Answer: False If the […]

A retailer is an intermediary that buys products from manufacturers and sells them to wholesalers. Answer: Under the cash basis of accounting, no adjustments are made for prepaid, unearned, and accrued items. Answer: TRUE Process and job order manufacturing operations […]

Financing activities include the purchase and sale of long-term assets. Answer: Fixed budgets are also known as flexible budgets. Answer: False FUTA requires employers to pay a federal unemployment tax on the first $7,000 in salary or wages paid to […]

Assets tied up in inventory are referred to as nonproductive assets. Answer: Job order costing is applicable to manufacturing firms only and not service firms. Answer: False A typical sales journal is used to record cash sales. Answer: FALSE An […]

If a company sells merchandise with credit terms 2/10, n/60, the credit period is 10 days and the discount period is 60 days. Answer: FALSE Dividends are a type of business expense. Answer: FALSE Internal controls include policies to direct […]

The concept of incremental cost is the same as the concept of differential cost. Answer: An advantage of the break-even time (BET) method over the payback period method is that it recognizes the time value of money. Answer: True Earnings […]

Leather Head Sports operates on a small production scale using expensive, top-quality materials. How does cost-volume-profit analysis benefit this company? Answer: ____________________________ is an outgrowth of ABC that draws on the link between activities and cost incurrence for better management. […]

The Pacific Company manufactures a single product. The following data relate to the year just completed: During the last year, 5,000 units were produced and 4,800 units were sold. There were no beginning inventories. The carrying value of finished goods […]

Which of the following characteristics applies to process costing, but does not apply to job order costing? A. the need for averaging. B. the use of equivalent units of production. C. separate, identifiable jobs. D. the use of predetermined overhead […]

At the end of the year, actual manufacturing overhead costs were $110,000 and applied manufacturing overhead costs were $118,800. If the denominator activity for the year was 20,000 machine-hours, and if 22,000 standard machine-hours were allowed for the years production, […]

Excerpts from Goodrow Corporation’s most recent balance sheet and income statement appear below: Dividends on common stock during Year 2 totaled $20 thousand. Dividends on preferred stock totaled $10 thousand. The market price of common stock at the end of […]

Ring, Incorporated’s income statement for the most recent month is given below. Refer to the original data. If Store Q sales increase by $30,000 with no change in fixed expenses, the overall company net operating income should: A. increase by […]

Rothe Company manufactures and sells a single product that it sells for $90 per unit and has a contribution margin ratio of 35%. The company’s fixed expenses are $46,800. If Rothe desires a monthly target net operating income equal to […]

Reference: 8-7 Edington Clinic uses client-visits as its measure of activity. During September, the clinic budgeted for 2,800 client-visits, but its actual level of activity was 2,850 client-visits. The clinic has provided the following data concerning the formulas to be […]

Reference: 8A-4 The Phelps Company applies overhead costs to products on the basis of standard direct labor-hours. The standard cost card shows that 5 direct labor-hours are required per unit of product. Phelps Company had the following budgeted and actual […]

The following data are available for the South Division of Redride Products, Inc. and the single product it makes: How many units must South sell each year to have an ROI of 16%? A. 240,000 B. 1,300,000 C. 52,000 D. […]

Reference: 8-34 Caquias Corporation makes a product with the following standard costs: The company reported the following results concerning this product in August. The company applies variable overhead on the basis of direct labor-hours. The direct materials purchases variance is […]

When there is a production constraint, a company should emphasize the products with: A. the highest unit contribution margins. B. the highest contribution margin ratios. C. the highest contribution margin per unit of the constrained resource. D. the highest contribution […]

Enz Corporation manufactures a variety of products. The following data pertain to the company’s operations over the last two years: What was the absorption costing net operating income this year? A. $92,000 B. $56,000 C. $73,000 D. $75,000 Answer: Excerpts […]

The most recent comparative balance sheet of Broekemeier Corporation appears below: The company uses the indirect method to construct the operating activities section of its statements of cash flows. Which of the following is correct regarding the operating activities section […]

The economic impact of the inability to reach a target denominator level of activity would best be measured by: A. the amount of the volume variance. B. the contribution margin lost by failing to meet the target denominator level of […]

At a sales volume of 35,000 units, Thoma Corporation’s sales commissions (a cost that is variable with respect to sales volume) total $448,000. To the nearest whole dollar, what should be the total sales commissions at a sales volume of […]

In February, one of the processing departments at Whisenhunt Corporation had beginning work in process inventory of $35,000 and ending work in process inventory of $11,000. During the month, the cost of units transferred out from the department was $410,000. […]

Reference: 8-22 Friou Corporation manufactures and sells a single product. The company uses units as the measure of activity in its flexible budgets. During July, the company budgeted for 6,300 units, but its actual level of activity was 6,250 units. […]

Diorio Corporation keeps careful track of the time required to fill orders. The times recorded for a particular order appear below: The manufacturing cycle efficiency (MCE) was closest to: A. 0.15 B. 0.05 C. 0.45 D. 0.18 Answer: Bonine Corporation […]

Guerra Electronics manufactures a variety of electronic gadgets for use in the home. Which of the following would probably be the most accurate measure of activity to use for allocating the cost of inspecting the finished products at Guerra? A. […]

Resendes Refiners, Inc., processes sugar cane that it purchases from farmers. Sugar cane is processed in batches. A batch of sugar cane costs $48 to buy from farmers and $16 to crush in the company’s plant. Two intermediate products, cane […]

A product sells for $20 per unit and has a contribution margin ratio of 40 percent. Fixed expenses total $240,000 annually. How many units of the product must be sold to yield a profit of $60,000? A. 37,500 units B. […]

Sartain Corporation is in the process of preparing its annual budget. The following beginning and ending inventory levels are planned for the year. Each unit of finished goods requires 2 grams of raw material. If the company plans to sell […]

Mounts Corporation produces and sells two products. In the most recent month, Product I05L had sales of $32,000 and variable expenses of $10,880. Product P42T had sales of $45,000 and variable expenses of $18,380. And the fixed expenses of the […]

Reference: 8-32 Gentile Corporation makes a product with the following standard costs: The company produced 6,000 units in May using 36,970 kilos of direct material and 4,340 direct labor-hours. During the month, the company purchased 40,400 kilos of the direct […]

Reference: 8-17 Hamp Kennel uses tenant-days as its measure of activity; an animal housed in the kennel for one day is counted as one tenant-day. During December, the kennel budgeted for 3,000 tenant-days, but its actual level of activity was […]

The Consumer Products Division of Weiter Corporation had average operating assets of $570,000 and net operating income of $65,100 in March. The minimum required rate of return for performance evaluation purposes is 12%. What was the Consumer Products Division’s residual […]

The Chase Company has a standard cost system in which manufacturing overhead is applied on the basis of standard direct labor-hours (DLHs). The company recorded the following activity and cost data relating to manufacturing overhead for October: The amount of […]

Fixed manufacturing overhead is included in product costs under: A. Option A B. Option B C. Option C D. Option D Answer: The following is Allison Corporation’s contribution format income statement for last month: The company has no beginning or […]

Atwich Corporation uses the weighted-average method in its process costing system. This month, the beginning inventory in the first processing department consisted of 600 units. The costs and percentage completion of these units in beginning inventory were: A total of […]

Broze Company makes four products in a single facility. These products have the following unit product costs: Additional data concerning these products are listed below. The grinding machines are potentially the constraint in the production facility. A total of 53,600 […]

Financial statements for Orange Company appear below: Dividends during Year 2 totaled $156 thousand, of which $18 thousand were preferred dividends. The market price of a share of common stock on December 31, Year 2 was $100. Orange Company’s return […]

An automated turning machine is the current constraint at Naik Corporation. Three products use this constrained resource. Data concerning those products appear below: Rank the products in order of their current profitability from most profitable to least profitable. In other […]

Nilgiri Corporation uses the FIFO method in its process costing system. Data concerning the first processing department for the most recent month are listed below: Note: Your answers may differ from those offered below due to rounding error. In all […]