Archives: Quiz

Prorated allocation of production-volume variance has the effect of approximating the allocation of fixed costs based on actual costs and actual output. In calculating the net initial investment cash flows, any increase in working capital required for the project should […]

A flexible-budget variance pertaining to revenues is often called a sales-volume variance. Simple regression analysis estimates the relationship between the dependent variable and one independent variable. TRUE A budget is a qualitative expression of a plan. FALSE Explanation: Explanation: A […]

Process-costing systems using standard costs record standard direct material costs in Direct Materials Control and standard conversion costs in Conversion Costs Control. Joint costs are the costs of a production process that yields multiple products simultaneously. TRUE In the “obtain […]

The net present value of all cash flows over the life of an investment equals the net present value of the operating incomes. Absorption costing is the required inventory method for external financial reporting in most countries. TRUE All else […]

In relevant-cost analysis, managers should not consider all variable as relevant and all fixed costs as irrelevant. For short-run product-mix decisions, managers should focus on minimizing total fixed costs. FALSE Explanation: For short-run product mix decisions, managers should focus on […]

Deducting depreciation from operating cash flows would result in counting the initial investment twice in a discounted cash flow analysis. Costs of quality (COQ) reports usually consider opportunity costs. FALSE Explanation: Costs of quality (COQ) reports usually do not consider […]

The benefits of implementing a more-complex cost allocation system are relatively easy to quantify for application of the cost-benefit approach. The sales method for recognizing byproducts is conceptually correct because it is consistent with the matching principle. FALSE Explanation: The […]

Additional insight can be gained by dividing the sales-volume variance into the sales-mix variance and the sales-quantity variance. Higher selling prices, rather than unique products or services, provide a competitive advantage for the cost leader companies. FALSE Explanation: Lower selling […]

Decisions regarding sources of long-term financing are best made at subunit level as the subunit has local knowledge and can leverage it in negotiations. Managers track the costs incurred in each value-chain category is to reduce costs and to improve […]

The vertical difference, called the residual term, measures the distance between actual cost of one period and estimated cost of the next period. The theory of constraints is more useful for the long-run management of costs since it takes a […]

A cost is a resource sacrificed or forgone to achieve a specific objective. Continuous improvement through the use of standard costs is the process of repeatedly identifying the causes of variances, taking corrective actions, and evaluating results. TRUE The tariffs […]

In a job-costing system the cost object is an individual unit, batch, or lot of a distinct product or service. Fluctuations in exchange rates between different countries’ currencies affect costs and pricing decisions of a company. TRUE In each period, […]

Intrinsic motivation comes from being given greater responsibility, doing interesting and creative work, and having pride in doing that work. Successful implementation of a JIT production system and effective accomplishments of its goals should result in a decrease in the […]

Use of practical capacity results in an unrealistically small fixed manufacturing cost per unit because it is based on an idealistic and unattainable level of capacity. To evaluate overall performance, return on investment and residual income measures are more appropriate […]

Costs of activities related to a group of units sold to a customer is termed as customer batch-level costs. All costs other than direct materials and direct manufacturing labor are classified as indirect costs. TRUE Strategy describes how an organization […]

The accuracy of the completion estimate of conversion costs depends on the care, skill, and experience of the estimator and also the nature of the conversion process. The degree of operating leverage at a specific level of sales helps the […]

Under the cause and effect criterion, reasonableness is a matter of judgment rather than an operational criterion. If the sales mix shifts toward the lower-contribution-margin product, the breakeven quantity will decrease. FALSE Explanation: If the sales mix shifts toward the […]

In the banking industry, depositing a customer’s check into the wrong bank account is an example of quality of design failure. With disregard to all other factors, the use of high-quality raw materials is likely to result in a favorable […]

Differential revenue is the difference in total revenue between two alternatives. Costs in beginning inventory are pooled with costs in the current period when determining the costs of good units under the weighted-average method of process costing. TRUE If the […]

Companies that overcost products risk becoming less effective on pricing and losing market share when competition utilizes more accurate cost systems. The process of preparing a budget encourages coordination and communication throughout the company. TRUE If variable costs per unit […]

An unfavorable production-volume variance always infers that management made a bad planning decision regarding the plant capacity. The nominal rate of return is made up of a risk-free element when there is no expected inflation, a business-risk element, and an […]

Discontinuing an unprofitable customer should be solely done on the basis of profitability. If the production planners set the budgeted machine hours standards too loose, one could anticipate there would be a favorable fixed overhead efficiency variance. FALSE Explanation: There […]

Calculate the debt-to-EBITDA ratio given the following information. • EBIT: $100.0m • D&A: $150.0m • Cash: $50.0m • Debt: $75.0m A. 25% B. 30% C. 50% D. 37.5% I dentify the following formula. A. CAPM B. DCF C. PGM D. […]

What is the classification of a covenant that requires to buyer to maintain a minimum EBITDA? A. Affirmative B. Negative C. Maintenance D. Financial Revenue synergies tend to be more _______ than cost synergies. A. Safe B. Speculative C. Dependable […]

Given the following information, calculate the gross profit margin. • Revenue: $200.0mm • COGS: $100.0mm • Operating Expenses: $50.0mm A. 40% B. 50% C. 25% D. 10% If a computer manufacturer purchases a semiconductor company, what form of integration is […]

What can potentially be reduced or eliminated in the event that economic or operating performance declines? A. Growth capex B. Assets C. Maintenance capex D. PP&E If a merger or acquisition is not immediately accretive, should the acquirer go through […]

Which document has the purchase price details as well as the exact date and guidelines for an M&A process? A. CIM B. Bid procedures letter C. Confidentiality agreement D. Final bid procedures letter Given the following information, calculate the cash […]

What situation would lead to a higher purchase price for a company? A. Merger of equals B. Targeted auction C. Hostile situation D. Private equity deal Which of the following is likely to be a non-recurring item on an income […]

Which form of integration expands an acquirer’s geographic reach, product lines, services, or distribution channels? A. Horizontal integration B. Geographic integration C. Vertical integration D. Transitional integration Which of the following is the cheapest form of financing? A. Cash on […]

Which of the following users would rely on managerial accounting information for decision-making purposes? A) potential investors B) creditors C) customers D) company managers Which of the following occurs when a 2-for-1 stock split is declared? A) The balance in […]

Which of the following is described as a system where customers send their checks directly to a post office box that belongs to a bank? A) an encryption system B) an imprest system C) a lock-box system D) a firewall […]

Which of the following statements is true of a sole proprietorship? A) A sole proprietorship joins two or more individuals as co-owners. B) The sole proprietor is personally liable for the liabilities of the business. C) A sole proprietorship is […]

Milton, Inc. provides the following income statement for 2019: Calculate the times-interest-earned ratio. (Round your answer to two decimal places.) A) 73.00 times B) 47.00 times C) 42.00 times D) 48.00 times Which of the following statements regarding the allowance […]

Which of the following accounts would be used under the accrual basis of accounting, but not under cash basis accounting? A) Cash B) Unearned Revenue C) Service Revenue D) Salaries Expense The cost of an asset is $1,020,000, and its […]

Global Commerce Corporation purchased trading debt investments for $49,000 on December 31, 2018. There is a decrease of $3800 in the fair value of the trading debt investments by the end of the year 2019. Which of the following is […]

As per the ________, the entity will remain in operation for the foreseeable future. A) economic entity concept B) monetary unit assumption C) going concern assumption D) cost principle A business makes a payment in cash for advertising expense. Which […]

Pioneer’s adjusted trial balance as of December 31, 2018 is given below: Compute the current ratio. (Round your answer to two decimal places.) A) 8.16 B) 2.36 C) 1.75 D) 2.78 D Explanation: D) A business purchases equipment for $8,000 […]

Regarding the double-entry system, which of the following statements is incorrect? A) A transaction would be incomplete if only one side were recorded. B) Because of technology, the use of the double-entry system of accounting is optional. C) The double-entry […]

Which of the following is the correct description of dividends in arrears? A) the cumulative amount of dividends that were not paid in previous years B) the cumulative amount of dividends that were paid in previous years C) the amount […]

A company has a petty cash fund amount of $200. When replenished, it has petty cash tickets of $33 for gas expense, $31 for postage expense, $16 for supplies expense, and $12 for miscellaneous expenses. Assume the cash balance is […]

Purple Corporation pays $536,000 to acquire 40% of the equity securities of Blue, Inc. on May 5, 2019. In the journal entry to record this transaction ________. A) Equity Investments—Blue Inc. will be credited for $536,000 B) Equity Investments—Blue Inc. […]

Consider the following accounts and identify each as an asset (A), liability (L), or equity (E). A company that uses a perpetual inventory system purchased inventory on account and later returned goods worth $100 to the vendor. Which of the […]

Refer to the following list of liability balances at December 31, 2018. What is the total amount of current liabilities? A) $35,380 B) $27,880 C) $27,480 D) $26,280 Converse Florists & Co. reported assets of $1,000 and equity of $450. […]

Which of the following is true of assets? A) Assets include Cash, Merchandise Inventory, and Accounts Payable. B) Assets are something of value the business owns or controls. C) Assets do not need to provide future benefit to the business. […]

Centennial, Inc. sold 600 units of inventory at $20 per unit on account. The company uses the perpetual inventory system and the last-in, first-out (LIFO) inventory costing system. The beginning inventory included 200 units at $9 per unit. The most […]

The Common Stock account is increased by a debit. On a multi-step income statement, merchandisers report operating expenses in two categories—selling expenses and administrative expenses. TRUE In a periodic inventory system, businesses must obtain a physical count of inventory to […]

If a physical count of inventory indicates that the Merchandise Inventory account is overstated, an adjusting entry is required to record the difference. Assume a perpetual inventory system is used. A worksheet is a substitute for the financial statements. FALSE […]

The total amount of assets a business possesses may or may not be equal to the total of liabilities and equity of the business. The environment is the culture of a business, and it starts with the CEO or CFO […]

The entry to record inventory shrinkage includes a debit to the Merchandise Inventory account. Assume a perpetual inventory system is used. Prenumbered source documents provide necessary control in a system by automatically assigning a sequential number to each new transaction. […]

When preparing the statement of cash flows using the indirect method, a loss on the sale of plant assets must be shown as a subtraction from the investing activities section. Any portion of a long-term liability that is due with […]