Archives: Quiz

1) Most employers are required to withhold federal unemployment taxes from employee earnings. 2) Paid-in capital and retained earnings are the two major categories of stockholders’ equity for a corporation. Answer: TRUE 3) FICA tax is a payroll tax that […]

1) Differential analysis can aid management in making decisions on a variety of alternatives, including whether to discontinue an unprofitable segment and whether to replace fixed assets. 2) Fixed assets are reported at their book value on the balance sheet. […]

1) The data needed to adjust a depositor’s books are shown in the “adjustments to the depositor’s records” section of a bank reconciliation. 2) The accounting equation is expressed as follows: Assets = Liabilities + Stockholders’ Equity. Answer: TRUE 3) […]

1) Goal conflict can be avoided if budget goals are carefully designed for consistency across all areas of the organization. 2) The basic type of stock issued to owners is called common stock. Answer: TRUE 3) The percentage analysis of […]

1) Lower-of-cost-or-market is a method of inventory valuation. 2) Obligations that depend on future events and are based on past transactions are contingent liabilities. Answer: TRUE 3) If Division Inc. expects to sell 300,000 units in 2012, desires ending inventory […]

1) DeGiaimo Co. has an operating leverage of 5. If next year’s sales are expected to increase by 10%, then the company’s operating income will increase by 50%. 2) When a corporation issues bonds, it executes a contract with the […]

1) Manufacturers implement the philosophy of just-in-time processing to produce products with high quality, low cost, and instant availability. 2) The amount of details presented in a budget performance report for a cost center depends upon the level of management […]

1) The par value of common stock is rarely equal to its market value on the date the stock is issued. 2) The anticipated purchase of a fixed asset for $400,000, with a useful life of 5 years and a […]

1) The computations required for the net present value method are less than those the computation required for the average rate of return method. 2) The underapplied factory overhead amount may be transferred to cost of goods sold at the […]

1) In preparing a bank reconciliation, the amount of a canceled check omitted from the depositor’s records is deducted from the cash balance per books. 2) The current year’s advertising costs are normally considered as product costs. Answer: FALSE 3) […]

1) On the income statement, sales returns and allowances and sales discounts are added to gross sales to yield net sales. 2) Purchases of merchandise increase the merchandise inventory account under the perpetual inventory system. Answer: TRUE 3) If the […]

1) Sales discounts is used in accounting for transactions with customers. 2) Total fixed costs remain constant as the level of activity changes within the relevant range. Answer: TRUE 3) In a transaction where purchased merchandise has been returned, the […]

1) The product cost concept includes the selling and administrative expenses in the cost amount to which the markup is added to determine product price. 2) During deflationary periods, the use of the LIFO method of costing inventory will result […]

1) If a business sells two products, it is not possible to estimate the break-even point. 2) If income from operations for a division is $6,000, invested assets are $25,000, and sales are $30,000, the profit margin calculated would be […]

1) The process by which management allocates available investment funds among competing capital investment proposals is termed present value analysis. 2) The relevant range is useful for analyzing cost behavior for management decision-making purposes. Answer: TRUE 3) When a product […]

1) Fees earned and received in cash will increase cash flows from operating activity as well as retained earnings. 2) A job order cost system accumulates costs for each of the departments or processes within the factory. Answer: FALSE 3) […]

1) Leasing assets may be a favorable alternative to purchasing assets if the asset has a high risk of becoming obsolete. 2) Before a stock dividend can be declared or paid, there must be sufficient cash. Answer: FALSE 3) Under […]

1) The depositor reconciles the bank’s statement to the depositor’s records. 2) An unfavorable cost variance occurs when budgeted cost at actual volumes exceeds actual cost. Answer: FALSE 3) Qualitative considerations in capital investment decisions are most appropriate for strategic […]

1) The excess of current liabilities over quick assets is referred to as working capital. 2) If a firm has an quick ratio of 1, the subsequent payment of an account payable will cause the ratio to increase. Answer: FALSE […]

1) If a company sells a fixed asset for an amount which is less than its book value, a gain must be recognized. 2) The payment of utilities expense in cash would affect the operating activities in the statement of […]

1) A credit memorandum received with a bank statement means the company’s bank account has been increased. 2) Current position analysis indicates a company’s ability to liquidate current liabilities. Answer: TRUE 3) The person who is to be paid when […]

1) What is budget slack? What are the pros and cons of building slack into the budget from the point of view of (a) an employee and (b) a senior manager? 2) An example of a direct cost in a […]

1) After conducting a market research study, Stewart Manufacturing decided to produce a new interior door to complement its exterior door line. It is estimated that the new interior door can be sold at a target price of $120. The […]

1) A budget is a qualitative expression of the cash inflows and outflows that show whether the current operating plan will meet the firm’s organizational objectives. 2) (Appendix) The direct allocation method recognizes possible interactions between service departments when allocating […]

1) Suppliers play a key role in the success of target costing. 2) Global competition led to the development of international quality standards such as ISO 9000 Standards. Answer: TRUE 3) Smoothing is a form of earnings management. Answer: TRUE […]

1) Management accounting can provide information on customer satisfaction. 2) The goal of both job order costing and process costing is accurate product cost. Answer: TRUE 3) For service organizations, activity-based cost systems clarify appropriate cost assignments to services and […]

1) Breakeven time brings together the two elements of R&D and profitability. 2) In determining whether to keep or drop a product line, product contribution is calculated as sales minus variable costs, minus avoidable fixed costs. Answer: TRUE 3) In […]

1) Process layouts are characterized by long production paths, high inventory levels and small batches of unique products. 2) Management accounting information is primarily oriented to external stakeholders, such as investors, creditors, regulators, and tax authorities. Answer: FALSE Explanation: Management […]

1) Supply chain management may result in buyers and suppliers sharing information about each other’s companies. 2) Total-life-cycle costing manages costs along the entire value chain. Answer: TRUE 3) Fixed costs depend on the resources acquired, not the resources used. […]

1) (Appendix) The direct method of allocating service department costs assigns indirect costs to products in two stages. In the first stage, production department costs are allocated to the service departments. 2) Contribution margin is the best measure of the […]

1) Environmental costing computes the cost effects an organization has on the environment. 2) Activity based pricing prices products, not orders. Answer: FALSE Explanation: Activity based pricing prices orders not products. 3) When demand for a product is low, a […]

1) Product lines that produce different variations (models, styles, or colors) often require specialized activities that translate into lower overhead costs for each product line. 2) Activity based costing can be used to trace revenue deductions such as discounts to […]

1) Increasing prices in the face of falling demand is never a good strategy and can cause what is called a death spiral. 2) Individuals are motivated by both financial and nonfinancial means of compensation. Answer: TRUE 3) Nonprofit and […]

1) Determining cost pools and realistic cost driver rates is a relatively complex process. 2) To perform cost-volume-profit analysis, a company must be able to separate costs into fixed and variable components. Answer: TRUE 3) The 80/20 rules states that […]

1) In job order costing, only direct costs are used to determine the cost of a job. 2) An example of an intrinsic reward is recognizing employee accomplishment with a plaque. Answer: FALSE Explanation: An example of an extrinsic reward […]

1) Organizations use nonfinancial control to provide a summary measure of how well their systems of operations control are working. 2) Monitoring is the process of measuring the system’s current level of performance. Answer: TRUE 3) The buildup of inventories […]

1) The human resources model of motivation is strongly influenced by Japanese management practices. 2) If the organization’s code of ethics is more stringent than an individual’s code of ethics, conflicts may arise. Answer: TRUE 3) Customer lifetime value is […]

1) If external markets exist, then market-based transfer prices are the most appropriate. 2) An organization’s code of ethics should not be integrated into the management accounting and control system design. Answer: FALSE Explanation: An organization’s code of ethics should […]

1) In recent years, fixed costs have decreased as a proportion of total manufacturing costs. 2) A primary purpose of an organization’s code of ethics is to encourage behavior that is consistent with the company’s ethical and cultural norms. Answer: […]

1) The post-sale service and disposal cycle is distinct from the manufacturing cycle. 2) For some employees, pay may not be a motivator. Answer: TRUE 3) Prepackaged ABC software packages must be customized to the products, services and related activities […]

1) Operating profit is an example of nonfinancial information. 2) (Appendix) Using the direct method for service department’s cost allocations are likely to undercost low-volume products. Answer: TRUE 3) If the link to strategy is not clearly established, key performance […]

1) Under traditional costing, supervisors and engineers are assumed to have superior knowledge about how to improve processes because they actually work with the manufacturing processes used to produce products. 2) Video surveillance is an example of results control. Answer: […]

1) Government and nonprofit organizations, as well as profit-seeking enterprises, are feeling the pressures for improved performance. 2) For a particular decision, differential revenues and costs are always relevant. Answer: TRUE 3) The Federal Accounting Standards Advisory Board sets cost […]

1) Due to unstable world markets, most large U.S. corporations do almost all of their business in the United States. 2) In theory, shareholders select the board of directors, but in reality, management effectively selects the directors. Answer: TRUE 3) […]

1) A corporation with $1 million in retained earnings at the end of the year could easily pay a dividend of $500,000. 2) Long-term debt is generally less costly than short-term debt, but also results in more illiquidityhence, the risk/return […]

1) In order to profit from an expected near-term increase in the relative value of the British pound versus the U.S. dollar, an investor would be wise to maintain a short position in pounds, then sell when the pound rises […]

1) If we ignore bankruptcy and agency costs then the optimal capital structure for a firm under the moderate view would be 100% debt. 2) Terms of sale are frequently changed by the financial manager in order to increase sales. […]

1) The estimated value of reducing float by 1-day is one day’s interest on the freed up sales. 2) U.S. Treasury Bills are extremely liquid due to excellent secondary markets. Answer: TRUE 3) The required return of a preferred stockholder, […]

1) Operating leverage is measured as the responsiveness of the firm’s earnings before interest and taxes relative to fluctuations in sales. 2) The discounted payback period takes the time value of money into account in that it uses discounted free […]

1) The financial manager typically cannot control the level of credit sales, and hence the company’s investment in accounts receivable, as the level of credit sales is determined in large part by the nature of the business enterprise. 2) When […]