RETL262 Exam 2
External users of accounting information:
Are not directly involved in operating the company.
Internal users of accounting information:
Are those individuals involved in managing and operating the company.
Which of the following is not a purpose of financial statement analysis:
Assuring that the company will avoid an IRS audit.
Which of the following product situations is better suited to job order costing than to process costing?
Costs are accumulated by department.
Which of the following production characteristics is better suited for process costing and not job order costing?
Costs are accumulated by department.
Current assets divided by current liabilities is the:
Current Ratio.
Which of the following statements regarding a business segment is false?
The income tax effects of a discontinued business segment are combined with income tax from continuing operations.
A process costing system is most likely used by which of the following?
a paper manufacturing company
A job order costing system is most likely used by which of the following?
an accounting firm specializing in tax returns
Which is not a task typically associated with ABC systems?
applying a single cost rate
The costs to be accounted for consist of which of the following?
costs in the beginning inventory and costs added during the period
What product cost is both a prime cost and a conversion cost?
direct labor
Which of the following is a conversion cost?
direct labor
Which of the following is a prime cost?
direct labor
Cost that are incurred as part of the manufacturing process, but are not clearly traceable to the specific unit of product or batches of product, are called
overhead cost
Nonproduction cost that are expensed immediately when incurred are called:
period cost
Which is not needed to compute equivalent units of production?
the material cost per unit
Overhead costs are assigned to each product based on ________.
the proportion of that product's use of the cost driver
During production, how are the costs in process costing accumulated?
to each individual department
A direct cost is one that is
traceable to the cost object
How many inventory accounts does a manufacturing company have?
3
Three common tools of financial analysis are:
Horizontal analysis, vertical analysis, ratio analysis.
The comparison of a company's financial condition and performance across time is known as:
Horizontal analysis.
The ability to meet short-term obligations and efficiently generate revenues is called:
Liquidity and efficiency.
Indirect material would fall into which category
Overhead cost
Gains and losses that are normal and frequent are reported as:
Part of continuing operations.
Net income divided by net sales is the:
Profit margin ratio.
The ability to provide financial rewards to attract and retain financing is called:
Profitability.
The measurement of key relations between financial statement items is known as:
Ratio analysis.
The ability to meet long-term obligations and generate future revenues is referred to as:
Solvency.
In horizontal analysis the percent change is computed by:
Subtracting the base period amount from the analysis period amount, dividing the result by the base period amount, then multiplying that amount by 100.
Net sales divided by average total assets is the:
Total asset turnover ratio.
Current assets minus current liabilities is:
Working capital.
Quick assets (cash, short-term investments, and current receivables) divided by current liabilities is the:
Acid-test ratio.
The dollar change for a comparative financial statement item is calculated by:
Subtracting the base period amount from the analysis period amount.
Financial reporting refers to:
The communication of financial information useful for making investment, credit, and other business decisions.
Which of the following is a reason a company would implement activity-based costing?
They want to improve the data on which decisions are made.
The comparison of a company's financial condition and performance to a base amount is known as:
Vertical analysis.
Conversion cost include
direct labor and overhead
Prime cost include
direct material and direct labor
The three major cost components of manufacturing a product are
direct material, direct labor, and overhead cost
During production, to what are the costs in job order costing applied?
each individual product
Which is the correct formula for computing the overhead rate?
estimated overhead for the activity/estimated use of the cost driver for the activity
Which of the following is a conversion cost?
factory depreciation expenses
Which document shows the cost of direct materials, direct labor, and overhead applied for each specific job?
job cost sheet
Which of the following lists contains only conversion costs for an inflatable raft manufacturing corporation?
machine operator, electricity, depreciation, insurance
In a process cost system, factory depreciation expense incurred is debited to ________.
manufacturing overhead
Managerial accounting looks at three broad functions which include
planning, controlling and evaluating
Continuous Improvement
rejects the notion of "good enough"
Assigning indirect costs to specific jobs is completed by which of the following?
using the predetermined overhead rate
In a process costing system, which account shows the overhead assigned to the department?
work in process inventory