1) Which of the following is an advantage of corporations relative to partnerships and sole proprietorships?
Reduced legal liability for investors.
Most common form of organization.
2) The group of users of accounting information charged with achieving the goals of the business is its
3) Fixed costs are $600,000 and the contribution margin per unit
is $150. What is the break-even point?
4) Seasons Manufacturing manufactures a product with a unit variable cost of $100 and a unit sales price of $176. Fixed manufacturing costs were $480,000 when 10,000 units were produced and sold. The company has a one-time opportunity to sell an additional 1,000 units at $140 each in a foreign market which would not affect its present sales. If the company has sufficient capacity to produce the additional units, acceptance of the special order would affect net income as follows:
Income would increase by $40,000.
Income would decrease by $8,000.
Income would increase by $8,000.
Income would increase by $140,000.
5) Carter, Inc. can make 100 units of a necessary component part
with the following costs:
Direct Materials $120,000
Direct Labor 20,000
Variable Overhead 60,000
Fixed Overhead 40,000
If Carter can purchase the component externally for $220,000 and only $10,000 of the fixed costs can be avoided, what is the correct make-or-buy decision?
Buy and save $30,000
Buy and save $10,000
Make and save $30,000
Make and save $10,000
6) A company has a process that results in 15,000 pounds of Product A that can be sold for $16 per pound. An alternative would be to process Product A further at a cost of $200,000 and then sell it for $28 per pound. Should management sell Product A now or should Product A be processed further and then sold? What is the effect of the action?
Process further, the company will be better off by $20,000.
Process further, the company will be better off by $180,000.
Sell now, the company will be better off by $200,000.
Sell now, the company will be better off by $20,000.
6) A liquidity ratio measures the
short-term ability of a company to pay its maturing obligations and to meet unexpected needs for cash.
ability of a company to survive over a long period of time.
income or operating success of a company over a period of time.
percentage of total financing provided by creditors.
7) Horizontal analysis is a technique for evaluating a series of financial statement data over a period of time
that has been arranged from the highest number to the lowest number.
that has been arranged from the lowest number to the highest number.
to determine which items are in error.
to determine the amount and/or percentage increase or decrease that has taken place
8)Vertical analysis is a technique that expresses each item in a financial statement
starting with the highest value down to the lowest value.
as a percent of a base amount.
as a percent of the item in the previous year.
in dollars and cent
9)Process costing is used when
the production process is continuous.
costs are to be assigned to specific jobs.
dissimilar products are involved.
production is aimed at filling a specific customer order.
10)In a process cost system, product costs are summarized:
on job cost sheets.
on production cost reports.
after each unit is produced.
when the products are sold.
11) Activity-based costing
assigns activity cost pools to products and services, then allocates overhead back to the activity cost pools.
allocates overhead directly to products and services based on activity levels.
allocates overhead to multiple activity cost pools, and it then assigns the activity cost pools to products and services by means of cost drivers.
accumulates overhead in one cost pool, then assigns the overhead to products and services by means of a cost driver.
12) The break-even point is where
contribution margin equals total fixed costs.
total sales equal total variable costs.
total variable costs equal total fixed costs.
total sales equal total fixed costs.
13) When a company assigns the costs of direct materials, direct labor, and both variable and fixed manufacturing overhead to products, that company is using
14) An income statement
reports the assets, liabilities, and stockholders’ equity at a specific date.
summarizes the changes in retained earnings for a specific period of time.
presents the revenues and expenses for a specific period of time.
reports the changes in assets, liabilities, and stockholders’ equity over a period of time.
15)If a division manager's compensation is based upon the division's net income, the manager may decide to meet the net income targets by increasing production when using
variable costing, in order to increase net income.
variable costing, in order to decrease net income.
absorption costing, in order to decrease net income.
absorption costing, in order to increase net income.
16)An unrealistic budget is more likely to result when it
has been developed in a bottom up fashion.
has been developed by all levels of management.
is developed with performance appraisal usages in mind.
has been developed in a top down fashion.
17)The purpose of the sales budget report is to
control sales commissions.
determine whether income objectives are being met.
control selling expenses.
determine whether sales goals are being met.
18)Variance reports are
(a) external financial reports.
(b) SEC financial reports.
(c) internal reports for management.
(d) all of thes
19 The process of evaluating financial data that change under alternative courses of action is called
double entry analysis.
contribution margin analysis.
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