Archives: Quiz

1) Convertible bonds are debt securities that can be converted into a firm’s stock at a prespecified price. 2) As a rule, any cash flows that are not affected by the accept/reject criterion should not be included in capital-budgeting analysis. […]

1) The present value of a deferred annuity (e.g., an annuity that starts 10 years from today) can be calculated in two steps: (1) calculate the future value of the annuity, and (2) calculate the present value of the amount […]

1) On an accrual basis income statement, revenues equal cash receipts and expenses equal cash expenditures. 2) A grocery store decides to offer beer for sale and this decision results in more potato chip sales. This is an example of […]

1) A security is considered liquid if it can be sold, regardless of the time it takes to make the sale. 2) The risk-return tradeoff that investors face on a day-to-day basis is based on realized rates of return because […]

1) Capital budgeting projects that expand sales are more likely to involve increases in working capital than are projects that involve the replacement of existing assets. 2) Sources of spontaneous financing include trade credit, salaries payable, and accrued taxes. Answer: […]

1) Only individual investors participate in public offerings, while institutional investors participate in private placements. 2) A project’s standing alone risk allows for diversification within a sole firm. Answer: FALSE 3) The existence of a forward-spot differential creates an arbitrage […]

1) The following information is available for three companies. The information relates to the companies’ plant assets. For each of the companies, determine the unknown amounts. Fox Co. Wolf Co. Coyote Co. Beginning plant assets, net of depreciation $860,000 $715,000 […]

1) At Plastastic, Inc., the beginning balance of the work in process inventory account in April of the most recent year was $19,000. Direct materials used during April totaled $130,000. Total manufacturing labor incurred in April was $180,000, 75% of […]

1) The following is information about the units produced and the total manufacturing costs for Rose’s Rug Company for the past six months. Rose’s Rug Company uses the high-low method to estimate its costs. Answer the following questions: a.What is […]

1) Matthew Company uses a job cost system. The overhead account shows a $5,000 overallocated balance at the end of the year. Actual overhead incurred was $100,000. Other balances are: The entry to close manufacturing overhead would include a A) […]

1) The following information describes a company’s usage of direct labor in a recent period: How much is the direct labor efficiency variance? A) $8,375 favorable B) $8,375 unfavorable C) $8,500 unfavorable D) $8,500 favorable 2) Beasley Company currently sells […]

1) Martin Enterprises provides the following information about its single product. How many units must be sold to earn the targeted operating income? A) 13,417 B) 63,000 C) 40,900 D) 22,100 2) Brittany Furniture manufactures two products: Couches and Beds. […]

1) Beta Company uses a predetermined overhead rate based on direct labor hours to allocate manufacturing overhead to jobs. The company estimated that it would incur $600,000 of manufacturing overhead during the year and that 150,000 direct labor hours would […]

1) (Present value tables are needed.) Cleveland Cove Enterprises is evaluating the purchase of an elaborate hydraulic lift system for all of its locations to use for the boats brought in for repair. The company has narrowed their choices down […]

1) Managers should consider all of the following when deciding whether to accept a special order, except A) available excess capacity B) the variable costs associated with the special order C) the effect of the order on regular sales D) […]

1) Refusing gifts or favors that could be perceived to influence your actions is an example of which ethical standard? A) Credibility B) Integrity C) Confidentiality D) Competence 2) The ability of a company to collect receivables is measured by […]

1) Solve the following two cases (the cases are independent). a.If you invest $5,000 today at 10% interest, what is the value of the investment at the end of 5 years? b.If you invest $1,200 at the end of each […]

1) The Top Hat Division of Blandon’s Fine Menswear had the following results last year (in thousands). Management’s target rate of return is 12% and the weighted average cost of capital is 9%. What is the Top Hat Division’s Residual […]

1) The central reservation office at MegaBus is most likely treated as a(n) A) cost center B) investment center C) revenue center D) profit center 2) Yellow Company’s variable expenses are 40% of sales and have monthly fixed expenses of […]

1) The number of warranty claims would be an example of the A) financial perspective B) customer perspective C) learning and growth perspective D) internal business perspective 2) Selected financial data for the Photocopies Division of Elizabeth’s Business Machines is […]

1) Manufacturers follow four steps to implement a manufacturing overhead allocation system. Which step is not performed before the year begins? A) Allocate some manufacturing overhead to each individual job B) Select an allocation base and estimate the total amount […]

1) The Southern Division of Amelia Corporation had sales of $6,500,000 and operating income of $1,200,000 last year. The total assets of the Southern Division were $3,000,000, while current liabilities were $450,000. Amelia Corporation’s target rate of return is 10%, […]

1) What is the promotion of products and services known as? A) Customer service B) Marketing C) Distribution D) Design 2) A product is sold at $60.00 per unit, the variable expense per unit is $30, and total fixed expenses […]

1) All of the following are examples of cash outflows from an investing activity except A) purchase of equity securities B) loans made to another party C) purchase of commercial real estate D) purchase of treasury stock 2) The following […]

1) Nemec Manufacturing uses job costing. In May, material requisitions were $44,000 ($39,000 of these were direct materials), and raw material purchases were $60,000. The end of month balance in raw materials inventory was $24,300. What was the beginning raw […]

1) A payment of interest on a loan would be considered a A) cash outflow from investing activities B) cash outflow from operating activities C) cash outflow from financing activities D) cash outflow from depreciation 2) The manager at Wheeling […]

1) Selected financial information for Brookeville Manufacturing is presented in the following table (000s omitted). What was cost of goods sold? A) $1,450 B) $1,350 C) $1,470 D) $ 790 2) Which of the following product costing systems is normally […]

1) Which of the following types of costing is used for many similar products? A) Process costing B) Batch costing C) Service costing D) Job costing 2) In a particular department, 8,200 units were started and all but 800 were […]

1) Crown Industries has the following information about its standards and production activity for December: Actual manufacturing overhead cost incurred, $92,500 Variable manufacturing overhead cost @ $3.25 per unit produced Fixed manufacturing overhead cost @ $1.50 per unit produced ($22,500/15,000 […]

1) The margin of safety can be expressed in units, in sales dollars, or as a percentage. 2) Traditional cost systems with a single-allocation base tend to overcost high-volume products and undercost low-volume products as compared to activity-based costing systems. […]

1) Managers whose bonuses are based on operating income have more incentive to increase inventory levels when variable costing is used than when absorption costing is used. 2) In process costing, units that are partially completed are accounted for the […]

1) The sales budget is the cornerstone of the master budget. 2) A trend percentage is computed by dividing the dollar amount of change by the base-year amount. Answer: TRUE 3) The principal amount, the interest rate, and the number […]

1) If manufacturing overhead has been underallocated during the year, it means the jobs have been undercosted. 2) The acid test ratio is a tighter measure of a company’s ability to pay current liabilities than the current ratio. Answer: TRUE […]

1) KPI in the Balanced Scorecard stands for Knowledge Profitability Index. 2) The statement of cash flows shows not only the amount of cash used during a particular time, but also how the cash was used. Answer: TRUE 3) The […]

1) Rent on a factory building would likely be classified as a fixed cost. 2) The total cost of a cost object can only include the direct costs that are directly traced to that cost object. Answer: FALSE 3) Budgets […]

1) When a company is a price-setter, it emphasizes a target costing approach to pricing. 2) It is possible to have a situation where the direct materials price variance is favorable and the direct materials quantity variance is unfavorable. Answer: […]

1) If a scatter plot reveals a fairly weak relationship between cost and volume, the manager should select a different activity for modeling cost behavior. 2) If a product line has a negative contribution margin, the product is not covering […]

1) Cost-plus pricing is essentially the opposite of target-costing. 2) The fixed cost per unit of activity varies with changes in volume. Answer: TRUE 3) Horizontal analysis is the study of percentage changes in comparative financial statements. Answer: TRUE 4) […]

1) A “perfect” straight line would render an R-square value of 1.00 . 2) Process costing is used by companies that produce large numbers of identical units of production in a continuous fashion. Answer: TRUE 3) For purposes of the […]

1) A flexible budget is a budget prepared for a different level of volume than that which was originally anticipated. 2) The accounting rate of return uses non-cash flow factors including depreciation in calculating the operating income of the asset. […]

1) Budgets do not provide benchmarks to help managers evaluate performance. 2) Contribution margin income statements organize costs by behavior. Answer: TRUE 3) When deciding whether to discontinue a product, managers should only consider the costs that will be saved. […]

1) A sunk cost is a past cost that can be changed regardless of which future action is taken. 2) The estimated total manufacturing overhead costs that will be incurred in each department in the coming year are often referred […]

1) A rate variance for direct labor measures how well a company keeps unit prices of labor inputs within standards. 2) Non-value-added activities can be described as activities for which the customer is willing to pay. Answer: FALSE 3) Environmental […]

1) When a company uses the direct method to present the statement of cash flows, the payment of cash dividends reduces the amount of net cash provided by operating activities. 2) One cost that is irrelevant in decision making is […]

1) Direct costs can be traced to specific units. 2) A performance report compares expected revenues and expenses against budgeted figures for each responsibility center. Answer: FALSE 3) The first component of the operating budget is the production budget. Answer: […]

1) The maximum outsourcing price a company is willing to pay can be found by solving for the company’s indifference point. 2) The journal entry to record the use of direct labor in Processing Department #1 would include a debit […]

1) Generally Accepted Accounting Principles (GAAP) mandates the type of product costing system (job costing or process costing) that must be used by a manufacturer. 2) Direct labor hours would be the most appropriate cost allocation base for a Machining […]

1) The primary managerial accounting product is the company’s audited financial statements. 2) Companies use job costing when their products or services vary in terms of materials needed, time required to complete the product, and/or the complexity of the production […]

1) The line on a graph representing total fixed costs will be a horizontal line. 2) Special orders increase income if the revenue from the order does not exceed the incremental variable and fixed costs incurred to fill the order. […]

1) Fixed costs that will continue to exist if a product is discontinued are relevant. 2) Managerial accountants are now considered to be similar to advisors and business analysts. Answer: TRUE 3) Accrual-based accounting is not used in determining the […]