1) Investment turnover (as used in determining the rate of return on investment) focuses
on the rate of profit earned on each sales dollar.
2) Activity-based costing is a method of accumulating and allocating costs by
department.
3) In preparing a bank reconciliation, the amount of outstanding checks is deducted
from the cash balance per books.
4) If the ownership of merchandise passes to the buyer when the seller delivers the
merchandise for shipment, the terms are stated as FOB destination.
5) If 50,000 shares are authorized, 35,000 shares are issued, and 2,000 shares are
reacquired, the number of outstanding shares is 33,000.
6) The financial performance of responsibility centers is evaluated in the balanced
scorecard under the financial section of the scorecard.
7) In a multiple-step income statement, sales will be reduced by sales discounts and
sales returns and allowances to arrive at net sales.
8) Accrued expenses are expenses that have been incurred and paid.
9) The break-even point (in units) is calculated by dividing the total estimated fixed
costs by the net sales of a period.
10) When evaluating a proposal by use of the cash payback method, if net cash flows
exceed the capital investment within the time deemed acceptable by management, the
proposal should be accepted.
11) A voucher system is an example of an internal control procedure over cash receipts.
12) The total cost concept includes all manufacturing costs minus selling and
administrative expenses in the total cost amount to which the markup is added to
determine the product price.
13) Rental charges of $60,000 per year plus $2 for each machine hour over 15,000
hours is an example of a fixed cost.
14) Discounts taken by the buyer for early payment of an invoice are called purchases
discounts by the buyer.
15) The declaration of a cash dividend decreases a corporation’s stockholders’ equity
and increases its liabilities.
16) In using the variable cost concept of applying the cost-plus approach to product
pricing, fixed manufacturing costs and fixed selling and administrative expenses must
be covered by the markup.
17) Hill Co. can further process Product O to produce Product P. Product O is currently
selling for $65 per pound and costs $42 per pound to produce. Product P would sell for
$82 per pound and would require an additional cost of $13 per pound to produce. The
differential cost of producing Product P is $55 per pound.
18) Standard costs should be revised when they differ from actual costs.
19) The difference between a fixed assets initial cost and its current market value is
called the assets depreciable cost.