Archives: Quiz

1) Under variable costing, fixed manufacturing overhead is expensed immediately as a period cost. 2) Net present value and the internal rate of return are examples of discounted cash flow models used in capital budgeting decisions. Answer: TRUE 3) The […]

1) The total cost of a job shown on the job cost record is the sum of the direct materials and direct labor traced to the job divided by the manufacturing overhead allocated to the job. 2) Variable costing considers […]

1) ISO 9001:2008 is a certification program for companies that adhere to an international set of quality management standards and guidelines. 2) Manufacturing overhead costs cannot be directly traced to jobs. Answer: TRUE 3) Manufacturers follow four steps to implement […]

1) Managerial accounting has its roots in the industrial age of manufacturing. 2) The benefits of adopting ABC/ABM are higher for companies in more competitive markets. Answer: TRUE 3) Benchmarking is the comparison of year-to-year results of the company. Answer: […]

1) From a purely financial standpoint, if a product line has a negative contribution margin, the product line should be discontinued. 2) When creating the sales budget, management simply takes the sales from the year before and divides that total […]

1) The direct labor rate variance is calculated by multiplying the standard hours that should have been worked for the actual output by the difference between the standard labor rate and the actual labor rate. 2) One key to analyzing […]

1) A debit balance in the direct materials price variance indicates the standard cost of materials was less than the actual cost of materials. 2) Total fixed costs can be expressed as y = vx, where y = total variable […]

1) When calculating the breakeven point in terms of units, fixed costs should be divided by the contribution per unit. 2) Comparative balance sheets analyze balance sheets by comparing the ending balances of two fiscal periods; usually highlighting the changes […]

1) The number of equivalent units is computed before computing the cost per equivalent unit. 2) The discounted cash flow methods for capital budgeting are generally considered inferior to the payback period and the ARR because they consider the time […]

1) If the cost savings from discontinuing a product exceed the lost revenues from discontinuing the product, it should be retained. 2) The existence of ending work in process inventory necessitates the use of the 5-step process costing procedure. Answer: […]

1) When units are sold, Finished Goods Inventory is debited. 2) Net income is used as the base for vertical analysis percentages on the income statement. Answer: FALSE 3) When units are sold, Finished Goods Inventory is credited. Answer: TRUE […]

1) Currently, the SEC does not require publicly-held corporations to disclose the costs related to remediation of contaminated sites. 2) The hurdle rate is the length of time it takes to recoup an investment’s initial cost from the cash inflows […]

1) All costs contain both a fixed and a variable portion. 2) On a CVP graph, total fixed costs are shown as a horizontal line. Answer: TRUE in costs and volume on a company’s profits 3) The indirect method of […]

1) Actual manufacturing overhead costs are accumulated as debits to a single general ledger account called manufacturing overhead. 2) Job costing is not commonly used by service firms (such as law firms) or trades people (such as auto mechanics). Answer: […]

1) Activity-based management refers to using activity-based cost information to make decisions that may increase profits while satisfying customers’ needs. 2) If manufacturing overhead allocated is less than the actual manufacturing overhead incurred, then jobs have been overcosted. Answer: FALSE […]

1) The Future Value of $1 table is used to calculate how much $100 in hand today would be worth in 5 years. 2) Investors and management use the statement of cash flows to evaluate a firm’s profitability. Answer: FALSE […]

1) When using the high-low method, the “low” point should be chosen as the data point with the lowest volume (not the lowest cost). 2) Cost distortion occurs when some products are overcosted while other products are undercosted by the […]

1) The bill of materials lists all of the raw materials needed to manufacture the job. 2) The number of partially completed units multiplied by the percentage of process completed equals the number of equivalent units. Answer: TRUE 3) A […]

1) Manufacturing companies usually have three types of inventory. 2) When graphing total variable costs, the cost line begins at the origin. Answer: TRUE 3) A credit balance means that a variance is unfavorable since it decreases income (just like […]

1) Goal congruence is a system for evaluating the performance of each responsibility center and its manager. 2) Merchandising companies prepare a direct materials budget. Answer: FALSE 3) The flexible budget total cost formula applies only to a specific relevant […]

1) Management uses budgeting to express its plans and to assess how well it’s reaching its goals. 2) Cost for direct materials, direct labor and manufacturing overhead are assigned to each job. Answer: FALSE 3) Two main benefits of ABC […]

1) Companies often try to gain more control over pricing by attempting to differentiate their products. 2) The operating activities section of the statement of cash flows is the most important section. Answer: TRUE 3) One advantage of the internal […]

1) The journal entry to record the ultimate completion of the units would include a credit to the WIP inventory account of the last sequential production department. 2) The breakeven point on a CVP graph is the point where the […]

1) Self-check-in machines at airports are an example of capital assets. 2) Costs that differ between alternatives are irrelevant. Answer: FALSE 3) The intercept-coefficient in regression analysis yields the fixed cost portion of the total costs. Answer: TRUE 4) Total […]

1) Decentralization allows top management to concentrate on long-term strategic planning. 2) Raw material, ruined through mistakes during production, will result in a materials quantity variance. Answer: TRUE 3) In a regression output, the “intercept coefficient” represents the fixed cost […]

1) The ARR allows managers to compare the present value of future cash generated by a project against the cost of investing in that project. 2) A decision must be made at the point in a process where a product […]

1) Goal congruence is more likely to be achieved at a centralized organization rather than a decentralized organization. 2) Managers use a variety of financial ratios to evaluate a company’s performance. Answer: TRUE 3) Total mixed costs increase as volume […]

1) The cost equation determined by regression analysis is usually more accurate than the line determined by the high-low method. 2) Sunk costs should be considered when deciding whether to sell a product as is or process it further. Answer: […]

1) The cost to design and market new models would be considered a facility-level cost. 2) To calculate the weighted-average contribution margin, divide the sum of the individual product contribution margins by the sales mix in units. Answer: TRUE 3) […]

1) Direct materials are often added at a particular point in the production process. 2) The predetermined manufacturing overhead rate is calculated by dividing the total estimated manufacturing overhead costs by the total estimated amount of the allocation base. Answer: […]

1) The contribution margin per unit is how much profit each unit contributes after fixed costs are considered. 2) The cash budget helps managers determine whether or not the company will need financing in a given month. Answer: TRUE 3) […]

1) Service firms follow the same approach for indirect costs as manufacturing companies because they develop a predetermined indirect cost allocation rate. 2) In most circumstances, all fixed costs can be eliminated by outsourcing a product. Answer: FALSE 3) The […]

1) A plantwide overhead rate is calculated by dividing the estimated total manufacturing overhead costs for the year by estimated total amount of the allocation base for the year. 2) Price and quantity variances are a way to motivate employees. […]

1) Merchandising companies include both wholesalers and retailers. 2) Managers’ decisions are based solely on quantitative factors. Answer: FALSE 3) When making outsourcing (make-or-buy) decisions, the focus is on how best to use available resources. Answer: TRUE 4) The end […]

1) On which one of the following dates are dividend checks mailed? A.Date of record B.Ex-dividend date C.Payment date D.Declaration date E.Public announcement date 2) The spot rate between the UK and the U.S. is £0.6789 = $1, while the […]

1) In the process of liquidation, some types of claims receive preference over other claims. Which one of the following determines which type of claim is paid first? A.Technical insolvency definition B.Absolute priority rule C.Accounting insolvency definition D.Chapter 7 of […]

1) If Treasury bills are currently paying 3.2 percent and the inflation rate is 2.8 percent, what is the approximate real rate of interest? The exact real rate? A.0.40 percent; 3.89 percent B.0.40 percent; 3.98 percent C.6.00 percent; 5.67 percent […]

1) Which one of the following is a speculative motive for holding cash? A.Buying extra inventory because a key supplier offered a special one-time discount B.Paying a $100 bonus to all employees at year-end C.Paying the annual insurance premium on […]

1) Julie wants to create a $5,000 portfolio. She also wants to invest as much as possible in a high risk stock with the hope of earning a high rate of return. However, she wants her portfolio to have no […]

1) Which one of the following is the best definition of Eurocurrency? A.Any paper money used by a country that has adopted the euro as its common currency B.Money deposited in a financial institution outside the country whose currency is […]

1) Which one of the following best defines a regular cash dividend? A.Distribution by a firm to its shareholders B.Payment from any source by a firm to its owners C.One-time payment of cash by a firm to its shareholders D.Cash […]

1) Kris will receive $800 a month for the next five years from an insurance settlement. The interest rate is 4 percent, compounded monthly, for the first two years and 5 percent, compounded monthly, for the final three years. What […]

1) Which one of the following is the primary advantage of payback analysis? A.Incorporation of the time value of money concept B.Ease of use C.Research and development bias D.Arbitrary cutoff point E.Long-term bias 2) Alpha Industries is considering a project […]

1) Cash flow to creditors is defined as: A.interest paid minus net new borrowing B.interest paid plus net new borrowing C.the operating cash flow minus net capital spending minus change in net working capital D.dividends paid plus net new borrowing […]

1) The dividend growth model can be used to value the stock of firms that pay which type of dividends? I. Constant annual dividend II. Annual dividend with a constant increasing rate of growth III. Annual dividend with a constant […]

1) The accounts receivable turnover rate for Big Men’s Wear has gone from an average of 10.8 times to 10.2 times per year. How has this change affected the firm’s accounts receivable period? A.Decrease of 1.98 days B.Increase of 1.98 […]

1) Dividends are best defined as: A.cash payments to shareholders B.cash payments to either bondholders or shareholders C.cash or stock payments to shareholders D.cash or stock payments to either bondholders or shareholders E.distributions of stock to current shareholders 2) Which […]

1) You are analyzing a project and have developed the following estimates. The depreciation is $19,800 a year and the tax rate is 34 percent. What is the best-case operating cash flow? A.$60,456 B.$62,333 C.$64,011 D.$65,650 E.$66,240 2) Which one […]

1) To be a member of the NYSE, you must: A.be a primary dealer B.buy a seat C.own a trading license D.be registered as a floor trader E.be a DMM 2) Which one of the following is contained in the […]

1) Martin & Martin, Inc. stock is currently selling for $19 per share. The firm just made an offer to one of its major shareholders to repurchase all the shares owned by that shareholder for $25 per share. What type […]