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Accounting 281 combine

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Products for which sales of one contribute to the sales of another are called: a) complementary products b) competing products c) contributory products d) codependent products

a) complementary products

Products for which sales of one contribute to the sales of another are called: a) complementary products b) dompeting products c) contributory products d) codependent products

a) complementary products

Even though costs, revenues and other factors do not vary among possible courses of action, they may be relevant to a decision true/false

false

Executive salaries are typically considered variable costs. true/false

false

Standard costs are typically reviewed once per year true/false

false

The acid test ratio includes marketable securities but does not include accounts receivable true/false

false

The amount of cash dividends paid to common stockholders is part of the computation of earnings per share true/false

false

The behavioral approach to budgeting has as its goal the complete elimination of inefficiency true/false

false

The board of directors is at the top of a corporate organization chart, followed by the stockholders, then the CEO or president of the coproation true/false

false

The break even point is the level of activity at which operating income is equal to cost of goods sold true/false

false

The company's CEO is the only person who analyzes costs variances true/false

false

The contribution margin is the difference between total revenue and fixed costs true/false

false

The costs of storing and delivering finished goods are allocated to the finished goods account true/false

false

The current ratio may be less than, equal to,or greater than the quick ratio true/false

false

The date on a statement of retained earnings is at a point in time, such as, at December 31, 2018 true/false

false

The debt ratio is computed by dividing total liabilities by current assets true/false

false

The purchase or sale of marketable securities is reported in the statement of cash flows as a financing activity. true/false

false they are in investing

A stock split will decrease the par value per share of stock true/false

true

Contribution margin is total revenue less variable costs true/false

true

Cost-volume-profit analysis is often complex when applied to a company with different products true/false

true

Costs flow through a process costing system in the same sequence as actual products move through the assembly process true/false

true

If actual overhead costs are less than the amount of overhead applied to production, this indicates that manufacturing overhead is over-applied true/false

true

The inventory turnover rate indicates how quickly inventory sells true/false

true

The operating activities section of the cash flow statement includes the cash effects of those transactions reported on the income statement true/false

true

The owners of a corporation are not personally responsible or the debts of the business true/false

true

The par value of a stock is the minimum amount of capital of the corporation existing for the protection of creditors true/false

true

The preparation of a budgeted balance sheet requires consideration of the budgeted capital expenditures and budgeted net income true/false

true

The purchase of treasury stock for cash causes no change in total assets true/false

true

The purchasing manager is often included in evaluating cost variances true/false

true

The quality of earnings tends to be higher for a company that uses accounting principles and methods that lead to a conservative measurement of earnings true/false

true

The range over which output may be expected to vary is called the relevant range true/false

true

In a single-step income statement, all revenue items are listed, then all expense items are combined and deducted from total revenue true/false

true

In a standard cost system actual costs are recorded in Material, Direct Labor and Overhead accounts, but standard costs are charged to Work in Process true/false

true

In a statement of cash flows, the term "cash" includes both cash and cash equivalents true/false

true

In addition to quantitative information, many nonfinancial factors must be taken into consideration when making a decision true/false

true

In an attempt to appeal to investors, a company may be tempted to overstate net income true/false

true

In cost-volume-profit analysis, the number of units sold is assumed to be equal to the number of units produced true/false

true

In determining earnings per share when a preferred stock has dividends in arrears, only the current year's dividend is deducted to arrive at earnings per share true/falase

true

In determining whether to scrap or to rebuild defective units of product, the cost already incurred in producing the defective units is not relevant true/false

true

In evaluating cost variances, the accounting department determines whether variances are favorable or unfavorable true/false

true

In preparing a master budget, budgeted levels for production, manufacturing costs and operating expenses normally are determined after preparing the sales forecast true/false

true

In setting standards, management's level of performance expectation must be something less than ideal true/false

true

Incremental revenue is relevant in decision-making true/false

true

Interest paid belongs in the operating activities section of the statement of cash flows true/false

true

International accounting standards required mandatory redeemable preferred stock to be classified as a liability on the balance sheet and not as equity true/false

true

It is possible for the overhead volume variance to be favorable and the overhead spending variance to be unfavorable true/false

true

Just-in-time and total quality management can reduce or eliminate many unfavorable cost variances true/false

true

Large cash flows from operations are more important to financial statement analysts over the long term than cash flows from financing or investing true/false

true

Large stock dividends tend to keep stock prices down true/false

true

Management accounting encompasses the design and use of accounting information systems inside the company to achieve the company's objectives true/false

true

Management accounting reports may provide sufficient means of monitoring, evaluating and rewarding performance true/false

true

Management uses a cost accounting system to evaluate and reward employee performance true/false

true

Manufacturing overhead is a term used to describe all manufacturing costs other than direct materials and direct labor true/false

true

Manufacturing overhead is considered an indirect cost, since overhead costs generally cannot be traced conveniently and directly to specific units of production true/false

true

Net cash flows from operating activities will have the same total no matter which method is used, direct or indirect true/false

true

Net income stated as a percentage of sales is one means of evaluating a company's ability to control its expenses true/false

true

Non-recurring items that are unusual and infrequent and the results of discontinued operations are shown in the income statement net of any related income tax effects true/false

true

Overhead application rates allow overhead to be assigned as units are being produced throughout the accounting period true/false

true

Prime costs include direct materials and direct labor used in the production of goods and services true/false

true

Prior period adjustments are shown in the financial statements by adjusting the beginning balance of retained earnings in the statement of retained earnings true/false

true

Product costs become part of inventory and are placed on the balance sheet until the products are sold true/false

true

Standard cost systems are generally compatible with job cost systems or with process cost systems true/false

true

Stock dividends and stock splits do not cause a change in the total amount of stockholders' equity true/false

true

Sunk costs have already been incurred and cannot be changed by future actions true/false

true

Supervisor salaries, equipment repairs, depreciation of machinery, and indirect materials are all examples of manufacturing overhead true/false

true

The "worksheet approach" to preparing a statement of cash flows involves analyzing changes in non-cash balance sheet accounts true/false

true

The FASB has not compiled a comprehensive list of what is considered to be unusual and/or infrequent items; thus the determination is a matter of judgment true/false

true

The FASB permits a company to use the direct method or the indirect method for the statement of cash flows true/false

true

The amount transferred out of retained earnings when a 4% stock dividend is declared is equal to the prevailing market value per share times the number of dividend shares to be distributed true/false

true

The contribution margin is the amount by which revenue exceeds variable costs true/false

true

The cost transferred to Cost of Goods Sold is equal to the total manufacturing costs incurred for the units sold true/false

true

The costs to organize a corporation (organization costs) are reported as an intangible asset in the balance sheet and amortized to expense over the 5-year life used by the IRS true/false

true

The gross profit rate is gross profit expressed as a percentage of net sales true/false

true

The gross profit rate usually is lowest on fast moving merchandise and highest on specialty and novelty products true/false

true

The indirect method of computing cash flows from operations begins with net income true/false

true

The level of production plays an important role in determining cost standards true/false

true

The more pessimistic investors' expectations regarding a company's future performance, the lower the price-earnings ratio is likely to be true/false

true

The most common method to allocate joint costs is in proportion to the relative sales volume of the products true/false

true

The only information relevant to a business decision is that which varies among possible courses of outcomes be considered. true/false

true

The relationship between book value and market price of capital stock is a measure of investors' confidence in a company's management true/false

true

The split-off point is the point at which joint products can be separated into two or more products true/false

true

If total current assets are $140,000 at the end of Year 1, increase by $50,000 by end of Year 2, and increase by $50,000 in Year 3, the percentage increase of the preceding year is less in Year 3 than in Year 2 true/false

true

In a production cost report, the units transferred out refer to the equivalent units completed during the period that have been moved to the next department or to Finished Goods Inventory true/false

true

An increase in an activity base must cause an increase in actual overhead costs incurred for that base to be considered a cost driver true/false

true

An opportunity cost is a relevant cost when making a business decision true/false

true

An overhead application rate is a device used to assign overhead costs to units of production in proportion to some "activity base" that can be traced directly to the manufactured products true/false

true

An unfavorable cost variance will be debited to a cost variance account true/false

true

As units are completed, their cost is transferred from the Work in Process Inventory account to the Finished Goods Inventory account true/false

true

As volume increases, total fixed costs remain the same true/false

true

Both FASB and IASB require the cash flow statement to be organized in three categories, operating activities, investing activities, and financing activities true/false

true

Both the direct method and the indirect method of computing net cash flow from operating activities convert accrual-based income statement amounts into cash flows true/false

true

Collections of interest revenue are classified as operating activities true/false

true

Comprehensive income differs from net income in that it includes events that are recognized but not realized true/false

true

Contribution margin ratio is equal to contribution margin per unit divided by unit sales price true/false

true

Costs that increase in total amount in direct proportion to an increase in output are called variable costs true/false

true

Current assets are those assets that are expected to be converted into cash within a relatively short period of time true/false

true

Deferring income taxes by using legal accounting methods is one strategy to permanently improve cash flow true/false

true

Depreciation expense reduces net income but does not reduce the net cash flow from operating activities true/false

true

Depreciation is a non-cash expenses true/false

true

Diluted earnings per share represents a hypothetical case, showing what earnings per share would be if certain securities were converted into additional shares of common stock true/false

true

Direct labor and overhead costs that are required to convert raw materials into finished goods are considered to be conversion costs true/false

true

Direct material costs are always considered relevant costs in a make or buy decision true/false

true

Earnings per share is equal to net income applicable to common stock, divided by the weighted number of common shares outstanding true/false

true

Economies of scale can be achieved by using facilities more intensively true/false

true

Flexible budgeting may be viewed as combining the concepts of budgeting with cost-volume-profit analysis true/false

true

From a creditor's point of view, the lower the debt ratio; the safer the creditor's position true/false

true

If accounts receivable increased during the year, deducting the increase from net sales determines the amount of cash received true/false

true

If the behavioral approach is employed to determine the levels at which budgeted amounts are set, then reasonable and achievable levels should be used true/false

true

If the total quality management approach is employed to determine the level at which budgeted amounts are set, then absolute efficiency is assumed true/false

true

The statement of cash flows helps investors and creditors assess both the cash and noncash aspects of a company's investing and financing activities true/false

true

The statement of stockholders' equity discloses the amount of cash dividends as well as stock dividends declared during the current year true/false

true

The term "out-of-pocket cost" is often used to describe costs which have not yet been incurred and which may vary among alternative courses of action true/false

true

The three basic types of manufacturing costs are direct materials, direct labor, and manufacturing overhead true/false

true

The trend in ratios is usually more useful than looking at a single year's ratio true/false

true

The two steps required in activity-based costing are identifying separate activity cost pool and allocating each cost pool to the product using an appropriate cost driver true/false

true

The use of excessive quantities of materials in manufacturing a product causes unfavorable materials quantity variance true/false

true

The yield rate on stock is measured by dividing dividends per share by market price per share true/false

true

To be consistent with international standards, the FASB has changed reporting requirements for redeemable preferred stock to require it to be reported in the equity section true/false

true

When a small (under 10%) stock dividend is declared, the market value of the stock is transferred from retained earnings into other stockholder equity accounts true/false

true

When a stockholder sends in a proxy statement to a corporation he or she owns stock in, they grant management the voting rights associated with their shares true/false

true

When actual levels of output exceed normal levels of output, the overhead volume variance will be favorable true/false

true

When analyzing make or buy decisions, it is important to realize that not all variable costs are incremental ad that some fixed costs may be incremental in a given situation true/false

true

When par value capital stock is issued, capital stock is credited with the par value of the shares issued, regardless of whether the issuance price is equal to par,more than par, or less than par true/false

true

When preparing a statement of cash flows, money held in cash equivalents is considered the same as cash true/false

true

Whether one uses the direct or the indirect method of presentation of the statement of cash flows, the totals from each of the three sections (activities) will be the same regardless of the method used true/false

true

While the price-earnings ratio is computed using historical earnings, it reflect investors' expectations of future earnings true/false

true

With fixed costs, the cost per unit varies with changes in volumes true/false

true

Working capital is the excess of current assets over current liabilities true/false

true

Smith Corporation's budgeted production for the upcoming quarter is 60,000 units. Each unit produced is expected to require 1.25 direct labor hours, and its variable overhead application rate is $10 per direct labor hour. At this budgeted level of output, the company's average fixed manufacturing cost is $5 per unit. The company's total budgeted overhead for the upcoming quarter is $

$1,050,000 60,000 x 1.25 x 10 = 750,000 variable manufacturing overhead 60,000 x 5 = 300.000 fixed manufacturing overhead 750,000 + 300,000 = 1,050,000 total budgeted overhead

Dyer Corporation's budgeted production for the upcoming quarter is 15,000 units. Each unit requires 5 pounds of material costing $20 per pound. The company's beginning materials inventory is 15,000 pounds, and it desires 10,000 pounds of material at the end of the upcoming quarter. The company's budgeted cost of material purchases is $

$1,400,000 (15,000 units x 5 pounds) + 10,000 pounds - 15,000 pounds = 70,000 pounds 70,000 pounds x 20 = 1,400,000

A company has $30,000 of debt outstanding. In the upcoming quarter,it budgets a total debt service cost associated with this obligation of $2,100. The annual interest rate on this debt is 8%. Of the company's total debt service budget, the amount allocated to debt principal payments is $

$1,500 8%/4 = 2% quarterly interest $2,100 - (30,000 x 2%) = 1,500

Quinton Corporation uses a standard cost system. At its normal expected level of monthly output of 25,000 units, its budgeted fixed overhead is $100,000 and its variable overhead is $5 per unit. In the current month, the company actually produced 28,000 units. The company's overhead volume variance was:

$12,000 252,000 - 240,000 = 12,000

Guthrie Corporation's budgeted sales for the upcoming quarter are 90,000 units. The company desires 18,000 units of inventory at the end of the upcoming quarter, and its beginning inventory is 8,000 units. Each unit that the company produces requires 0.1 direct labor hours at an average rate of $15 per hour. The company's direct labor budget for the upcoming quarter is $

$150,000 90,000 + 18,000 - 8,000 = 100,000 units of production 100,000 x 0.1 x 15 = 150,000

Hamline Corporation uses a flexible budgeting process. Its budgeted variable manufacturing costs for direct labor, direct materials and variable overhead total $60 per unit, and its fixed manufacturing overhead costs are budgeted at $50,000 per month. At its normal level of budgeted production of 2,000 units per month, its budgeted manufacturing costs total $170,000 ((2,000 units + $60 per unit) + 50,000). In the most recent month, the company produced 1,800 units at a total manufacturing cost of $165,000. The company's budgeted total month cost to produce 1,800 units is $ In the current month, the company was over budget by $

$158,000 50,000 + (60 x 1800) = 158.000 $7,000 165,000 - 158.000 = 7,000 over budget

Wilson sells industrial benders. Wilson's sales price per bender is $500, and its variable cost per bender is $300. The company's fixed costs total $900,000. The company's break-eve point in sales dollars is?

$2,250,000

A company's accounts receivable balance at the beginning of the current year is $100,000. The company's sales budgets for the upcoming first and second quarters report credit sales of $500,000 and $700,000, respectively. Budgeted collections on account in the first and second quarter are estiated at $450,000 and $650,000 respectively. The company's budgeted accounts receivable balance at the end of the second quarter is $

$200,000 100,000 + 500,000 + 700,000 - 450,000 - 650,000 = 200,000

Thurman Corporation issued 450,000 shares of $.50 par value capital stock at its date of incorporation for cash at a price of $4 per share. During the first year of operations, the company earned $100,000 and declared a dividend of $40,000. At the end of this first year of operations, the balance of the Common Stock account is:

$225,000 450,000 x .50 = 225,000 dividends do not lower stock value, they lower retained earnings

Winger Corporation uses a standard cost system. At its normal expected level of monthly output of 30,000 units, its budgeted fixed overhead is $180,000 and its variable overhead is $10 per unit. In the current month, the company actually produced 26,000 units. The company's overhead volume variance was:

$24,000 440,000 - 416,000 = 24,000

Holland corporations budgeted sales for the upcoming quarter are $500,000. Its supporting budgets and schedules show a beginning finished goods inventory of $20,000, budgeted cost of goods manufactured of $250,000, and a projected ending finished goods inventory of $30,000. Its selling and administrative budget projects expenses of $170,000, its budgeted interest expense is $5,000, and its tax rate averages 40%. The company's budgeted income taxes for the upcoming quarter is $

$34,000 85,000 income before tax x 40% = 34,000

Topper Corporation has 60,000 shares of $1 par value common stock and 16,000 shares of cumulative 7%, $100 pa preferred stock outstanding. Topper has not paid a dividend for the prior year. If Topper declares a $1.95 per common share dividend this year, what will be the total amount they must pay their shareholders?

$341,000 1.95 x 60,000 = 117,00 plus preferred 100 x .07 x 16,000 = 112,000 arrears, plus 112,000this year 117,000 + 112,000 + 112,000 = 341,000

$440,000 (26,000 x 10) + 180,000 - 440,000

Coronet Corp. has total stockholders' equity of $7,400,000. The company's outstanding capital stock includes 100,000 shares of $10 par value common stock and 20,000 shares of 6%, $100 par value preferred stock. (No dividends are in arrears). The book value per share of common stock is:

$54 preferred: 20,000 x 100 = 2,000,000 7,400,000 - 2,000,000 = 5,400,000/100,000 = 54

Swift Corporation's budgeted sales for the upcoming quarter are 100,000 units. The company desires 5,000 units of inventory at the end of the upcoming quarter, and its beginning inventory is 10,000 units. Each unit that the company produces requires .25 direct labor hours at an average rate of $24 per hour. The company's direct labor budget for the upcoming quarter is $

$570,000 100,000 + 5,000 - 10,000 = 95,000 units of production 95,000 x .25 x 24 = 570,000

A company's standard labor input allowed for the actual number of units produced during the month was 2,000 direct labor hours. Its standard direct labor rate was $25 per hour. The company's total direct labor variance for the month was $5,000 favorable, of which its labor efficiency variance was $6,000 unfavorable. Labor efficiency variance

$6,000

A company's standard labor input allowed for the actual number of units it produced during the month was 3,000 direct labor hours. Its standard direct labor rate was $22 per hour. The company's total direct labor variance for the month was $2,000 favorable, of which its labor rate variance was $500 favorable. Direct Labor

$64,000 credit 3000 x 22 = 66,000 66,000 - 2,000 = 64,000

Scott Corporation's production budget for the upcoming quarter reveals total manufacturing costs of $700,000 (average of $25 per unit). The company's beginning finished goods inventory is $6,000 and its budgeted ending finished goods inventory is 500 units. The company's budgeted cost of goods sold for the upcoming quarter is $

$693,500 6,000 beginning finished goods inventory + 700,000 cost of goods manufactured - 12,500 budgeted ending finished goods inventory = 693,500

Harford Manufacturing uses the high-low method to estimate the fixed and variable cost elements of its total manufacturing overhead. The company used machine-hours (MH) as its activity base. In the current year, the highest month of activity was 4,500 MH, with a corresponding total manufacturing overhead costs of $800,000. Its lowest month of activity was 2,000 MH with a corresponding total manufacturing overhead of $360,0000. The company anticipates that it will us 3,000 MH in January of the upcoming year. Use the high-low method to determine the following: The monthly fixed manufacturing overhead cost is $

$8,000 $800,000 - (4500 MH x 176/MH) = 8,000 or $360,000 - (2000 MH x 176/MH) = 8,000

Sebeka Corporation's current payables total $200,000. Its manufacturing cost projections for material, labor, and overhead for the upcoming quarter total $700,000, and its selling and administrative costs are budgeted at $300,000. Of its total cost and expense projections, $175,000 pertaining to depreciation, and $30,000 pertain to prepayments converting into expenses. After careful analysis, the company estimates that payables outstanding at the end of the upcoming quarter will total $145,000. The company's budgeted cash payments on current payables in the upcoming quarter total $

$850,000 200,000 beginning payables + 700,000 manufacturing costs + 300,000 S&A costs - 175,000 depreciation - 30,000 prepayment conversions - 145,000 ending payables = 850,000

Mayfair Corporation has outstanding 70,000 shares of $1 par value common stock as well as 20,000 shares of 7%, $100 par value cumulative preferred stock. At the beginning of the year, the balance in retained earnings was $800,000, and one year's dividends were in arrears. Net income for the current year is $580,000. Compute the balance in retained earnings at the end of the year if Mayfair Corporation pays a dividend of $ per share on its common stock this year.

$890,000 100 x .07 = 7 x 20,000 = 140,000 arrears, plus 140,000 this year 70,000 x 3 = 210,000 total dividends: 140,000 + 140,000 + 210,000 = 490,000 800,000 + 580,000 = 1,380,000 1,380,000 - 490,000 = 890,000

Thompson Corporation sells regulators at a normal selling price of $50 per unit. The variable cost per unit of each regulator is $20, and the company's total fixed cost is $500,000 per month. The company has excess capacity of 75,000 units per month. Management was recently contacted by a potential buyer with whom they had no prior experience. The buyer offer to buy a special order of 30,000 regulators at a discount price of $40 per unit. The special nature of the order would increase variable costs associated with it by $5 per unit over the normal variable cost. The special order would have not impact on fixed costs. If the special order is accepted, operating income will increase by $

(40 - (20 + 5)) x 30,000 units = 450,000

Required Sales Volume in Units

(Fixed Cost + Target Operating Income)/Unit Contribution Margin

Required Sales Volume in Dollars

(Fixed cost +target operating income/contribution margin ratio

The year-end balance sheet of Columbus Products, Inc., includes the following stockholders' equity section: Capital Stock: 7% cumulative preferred stock, $100 par value $14,000,000 Common stock, $5 par value, 5,000,000 shares authorized, 4,200,000 shares issued and outstanding: $21,000,000 Additional paid-in capital: Common stock $48,000,000 Retained earnings $64,450,000 Total stockholders equity $147,450,000 a) How many shares of preferred stock have been issued?

140,000 shares ($14,000,000 total par value, divided by $100 par value per share)

A company's actual total manufacturing overhead for the month was $350,000. Its budgeted manufacturing overhead for the actual level output achieved was $335,000, and the overhead applied to production during the period was $300,000. Overhead spending variance

15,000 debit 350,000 - 335,000 = 15,000

A company's standard quantity of materials allowed for the actual number of units produced during the month was 15,000 pounds. Its standard direct materials cost was $20 per pound. The company's total materials variance for the month was $20,000 unfavorable, of which its materials price variance was $8,000 favorable. What is amount of: work in process inventory

15,000 pounds x 20 = 300,000 debit

176 (800,000 - 360,000)/(4500 MH - 2000 MH) =$176 per MH

Ames Manufacturing recently upgraded its production equipment at a cost of $500,000. During the testing phase of the new equipment, calibrations were set incorrectly, and 10,000 defective units were produced at a cost of $100,000 before the company discovered the issue. Recalibrating the equipment will cost $8,000. The defective products can be sold as scrap for $2 per unit. As an alternative, the defects can be corrected at a cost of $6 per unit, after which they can be sold for $14 per unit. If the units are scraped, incremental income will increase $

20,000 2 x 10,000 = 20,000

20,000 unfavorable total materials variance + 8,000 favorable materials price variance = 28,000 debit

Banks Corporation uses a standard cost system. For the current month, the company's standard quantity of material allowed for the actual number of units is produced was 15,000 tons. The standard of material is $120 per ton. The company actually used 17,000 tons of material for which it incurred an average cost of $125 per ton. The company's materials usage variance for the month was:

240,000 120 x (15,000 - 17,0000 = 240,000 unfavorble

240,000 28,000 x 5) + 100,000 = 240,000

A company's standard quantity of materials allowed for the actual number of units it produced during the month was 50,000 tons. Its standard direct materials cost was $5 per ton. The company's total materials variance for the month was $25,000 unfavorable, of which its materials price variance was $5,000 favorable. Work in process inventory amount:

250,000 debit 50,000 x 5 = 250,000

260,000 20,000 beginning finished goods inventory + 250,000 cost of goods manufactured - 30,000 ending finished goods inventory =$240,000 500,000 sales - 240,000 cost of goods sold - 260,000

A company's cycle time is 90 days. Inventories remain on-hand twice as long before being sold as accounts receivable remain outstanding before being collected. The average time accounts receivable remain outstanding before being collected

30 days

A company has a contribution margin ratio of 30%. Up to the break even point, each dollar of sales will contribute __________ cents to the coverage of __________ costs.

30, fixed

300,000 debit overhead applied to production

300,000 standard allowed + 20,000 unfavorable total materials variance = 320,000 credit

The year-end balance sheet of Columbus Products, Inc., includes the following stockholders' equity section: Capital Stock: 7% cumulative preferred stock, $100 par value $14,000,000 Common stock, $5 par value, 5,000,000 shares authorized, 4,200,000 shares issued and outstanding: $21,000,000 Additional paid-in capital: Common stock $48,000,000 Retained earnings $64,450,000 Total stockholders equity $147,450,000 What is the book value per share of common stock, assuming no dividends in arrears?

31.77 per share 147,450,000 - 14,000,000 = 133,450,00 / 4,200,000 = 31.77

Rommel Trucking uses cargo miles drive (CMD) as an activity base. The company reports the following breakdown of cost behaviors: Purely fixed costs = $900,000/year Purely variable costs = $2.50/CMD Semivariable (mixed) costs = $100,000/yr + .50/CMD Compute the company's estimated total cost per CMD if the following miles are logged by drivers during the year: The estimated total cost at 1,000,000 miles logged is $

4 1,000,000 + (1,000,000 cmd x 3/cmd) = 4,000,000 4,000,000/1,000,000 = 4/cmd or 900,000 / 1,000,000 = .90 100,000/1,000,000 = .10 .90 + 2.50 + .10 + .50 = 4

Rommel Trucking uses cargo miles driven (CMD) as an activity base. The company reports the following breakdown of cost behaviors: Purely fixed costs = $900,000/yr Purely variable costs = $2.50/CMD Semivariable (mixed) costs = $100,000/yr + .50/CMD Compute the company's estimated total cost per CMD if the following miles are logged by drivers during the year: The estimated total cost per CMD at 1,000,000 miles logged is:

4 900,000/1,000,000 = .90 100,000/1,000,000 = .1 .90 + 2.50 + .10 + .50 = 4.00

416,000 10 + (180,000/30,000) = 16 per unit application rate 26,000 x 16 = 416,000

5.50 1,000,000 + (400,000 cmd x 3 cmd) =2,200,000 2,200,000/400,000 cmd = 5.50/cmd or 900,000/400,000 = 2.25 100,000/400,000 = .25 2.25 + 2.50 + .25 + .50 = 5.50

66,000 debit 3000 x 22 = 66,000

Wolfe uses a standard cost system. For the current month, the company's standard labor input allowed for the actual number of units it produced was 3,000 direct labor hours. The standard labor rate is $16 per hour. The company actually used 2,900 direct labor hours for which it incurred an average cost of $14 per hour. The company's total labor variance for the month was:

7,400 (3000 x 16) - (2900 x 14) = 7,400 favorable

8,000 credit (favorable)

80,000 14 x 10,000 = 140,000 6 x 10,000 = 60,000 140,000 - 60,000 = 80,000

85,000 17,000x (120-125) = 85,000 unfavorable

Flint corporation incurs cost of $900,000 building a custom piece of machinery for one of its customers. Prior to delivering the machine, the customer cancels the order. Flint sues the customer and is awarded $400,000 in damages. Due to the custom design of the machine, there are no other potential buyers. Flint can sell the machine as scrap for $50,000 or it can redesign the machine for $80,000, after which it could be sold for $150,000. Give the above information, and assuming Flint's cost and revenue estimates pertaining to scrapping or redesigning the machine are accurate, answer the following questions. Costs irrelevant to this decision total:

900,000

The year-end balance sheet of Columbus Products, Inc., includes the following stockholders' equity section: Capital Stock: 7% cumulative preferred stock, $100 par value $14,000,000 Common stock, $5 par value, 5,000,000 shares authorized, 4,200,000 shares issued and outstanding: $21,000,000 Additional paid-in capital: Common stock $48,000,000 Retained earnings $64,450,000 Total stockholders equity $147,450,000 b) What is the total amount of the annual dividends to which preferred stockholders are entitled?

980,000 14,000,000 x .07 (or 140,000 x 100 x .07)

A 2-for-1 stock split will: a) increase the total par value of the stock and increase the number of shares outstanding b) decrease the total par value of the stock and increase the number of shares outstanding c) not change the total par value of the stock and increase the number of shares outstanding d) increase total stockholders' equity

? b) decrease the total par value of the stock and increase the number of shares outstanding

Margin of Safety

Actual Sales Volume - Break-Even Sales volume

Labor Rate Variance

Actual hours x (standard rate - actual rate)

Materials Price Variance

Actual quantity x (standard price - actual price)

Prior to the fASB/IASB convergence project, interest costs incurred on funds borrowed to bring assets into marketable condition (such as money borrowed to finance construction costs) were not ___________________ under international standards (IFRS)

Capitalized

Change in Operating Income

Change in Sales Volume x Contribution Margin Ratio

The unit cost savings from increasing output by using production facilities more intensively are referred to as:

Economies of Scale

A corporation is a legal entity separate from its owners; it may sue and be sued, but may not own property in its own name: True/False

False

Authorization of a stock issue creates an asset on the books of the issuing corporation true/false

False

Book value per share of preferred stock is computed as total stockholders' equity less the amount assigned to common stock plus any dividends in arrears divided by the number of shares of preferred stock outstanding true/false

False

The number of shares a corporation may issue is specified in the articles of incorporation and approved by the Securities and Exchange Commission True/False

False

The additional paid-in capital account repesents profit to the corporation and, as such, it is credited to Retained Earnings. True/false

False Credited to additional paid in capital

When a corporation issues capital stock, most state laws require the corporation to credit Retained Earnings for the par value of shares of stock issued true/false

False credit Capital Stock

If capital stock is issued by a corporation at a price lower than par value, the difference represents a loss in the period in which the shares of stock are issued true/false

False not a loss, reduces the amount of stockholders equity on the balance sheet

The year-end balance sheet of Columbus Products, Inc., includes the following stockholders' equity section: Capital Stock: 7% cumulative preferred stock, $100 par value $14,000,000 Common stock, $5 par value, 5,000,000 shares authorized, 4,200,000 shares issued and outstanding: $21,000,000 Additional paid-in capital: Common stock $48,000,000 Retained earnings $64,450,000 Total stockholders equity $147,450,000 What is the amount of legal capital and the amount of total paid-in capital? Legal Capital? Total paid-in Capital?

Legal: 35,000,000 14,000,000 + 21,000,000 = 35,000,000 Total paid-in capital: 83,000,000 35,000,000 + 48,000,000 = 83,000,000

Operating Income

Margin of Safety x Contribution Margin Ratio

For the year end December 31, Southern Supply had net sales of $7,240,000, costs and other expenses (including income tax) of $6,160,000 and a gain from discontinued operations (net of income tax) of $420,000. Prepare a condensed income statement (including earnings per share), assuming that 910,000 shares of common stock were outstanding through out the year

Net Sales: $7,240,000 Less: Costs and expenses: $6,160,000 Income before continuing operations: $1,080,000 Discontinued operations, net of income tax: $420,000 Net Income: $1,500,000 Earnings per share: Income from continuing operations: $1.19 1,080,000/910,000 = 1.19 Discontinued operations, net of income tax: $.46 420,000/910,000 = .456 Net Income: $1.65 1,500,000/910,000 = 1.65

Complete the following formula: Revenue - Variable Costs - Fixed Costs =

Operating Income

Speedy Co. manufactures four products. Direct materials and direct labor are available in sufficient quantities, but machine capacity is limited to 3,000 hours. Cost and revenue data for the four products are given below: Product A - Selling price per unit $36, variable cost per unit $19, unit produced per machine hour 3 Product B - Selling price per unit $42, variable cost per unit $16, unit produced per machine hour 4 Product C - Selling price per unit $46, variable cost per unit $25, unit produced per machine hour 3 Product D - selling price per unit $56, variable cost per unit $37, unit produced per machine hour 3 Of the four products, which is the most profitable for Speedy Co?

Product B - Selling price per unit $42, variable cost per unit $16, unit produced per machine hour 4

Sales of those products in a company's sales mix with the highest contribution margins often are referred to as __________________ sales.

Quality

Unit Contribution Margin

Selling price per unit - variable cost per unit

Income taxes are neither a fixed cost nor a variable cost because they depend on a company's _________________ ________________ rather than sales volume

Taxable income

Total Contribution Margin

Total Sales Revenue - Total variable cost

When no-par stock is issued, the entire proceeds are credited to Capital Stock and this amount is viewed as legal capital not subject to withdrawal. True/False

True

Assuming that the MR corporation has an inventory of 200 defective motors costing $450,000 to produce and $150,000 to repair, the repaired units can be sold for $425,000. The company receives an offer to purchase these motors for $325,000 before repairing them. The company's decision should be to sell the motors at the offered price. true/false

True 450,000are sunk costs and irrelevant. Net proceeds of repaired units is $275,000 (425,000 - 150,000 = 275,000) offer to purchase is 325,000 before repair is better

Baxter Corporation made the following budget cost estimates for the upcoming months: Direct labor = $30 per unit Direct Materials = $50 per unit Variable manufacturing overhead = $20 per unit Variable selling and administrative costs = $15 per unit Fixed manufacturing overhead = $300,000 per month Fixed selling and administrative costs = $450,000 The variable costs necessary to prepare a production budget total $_______ per unit The fixed costs necessary to prepare a production budget total $___________ per month

Variable cost per unit $100 30 + 50 + 20 = 100 Fixed costs per month $300,000

Which earnings is used to compute the price-earnings? EPS on earnings from continuing operations The $1.19 earnings per share from continuing operations

Which of the following costs are considered variable selling expenses? a) sales commissions b) shipping and delivery costs c) variable manufacturing overhead d) sales salaries

a and b

Which of the following would be considered relevant in deciding whether to mow your own lawn or to hire someone else to mow it for your? a) the additional time you would have to play golf by having someone else perform the service b) the cost of buying fertilizer for your lawn c) the savings in gasoline costs realized from having someone else perform the service d) the amount you paid last year to purchase your lawn mower

a and c

As input units of a particular activity base increase, the difference between the average total cost per unit of that activity base and the average fixed cost per unit of that activity base (check all that apply) a) stay the same b) increases at a decreasing rate c) decreases at an increasing rate d) equals variable cost per unit of the activity base

a and d

Which of the following is/are true regarding opportunity costs? (check all that apply) a) opportunity costs are benefits that could have been obtained by pursuing an alternative decision b) unlike other costs, opportunity costs are recorded with credits, not debits c) opportunity costs are recorded with debits d) the opportunity costs of particular decisions are sometimes not known at the time those decisions are made

a and d

A company with monthly fixed costs of $170,000 expects to earn monthly operating income of $25,000 by selling 6,500 units per month. What is the company's expected unit contribution margin? a) $30 per unit b) $26 per unit c) $22 per unit d) the information given is insufficient to determine unit contribution margin

a) $30 per unit

The setting of direct labor standards typically involves: a) establishing standard wage rates of direct labor workers b) normal and reasonable estimates of labor input variables c) establishing the standard time allowed per unit produced d) input from people within the company but not from people external to the company e) input from industrial engineers and union representatives

a, b, c, and e

Which of the following are likely to result in a favorable labor efficiency variance? ( check all that apply) a) using more experienced workers than normal b) using less experienced workers than normal c) using fewer overtime hours than normal d) using more overtime hours than normal

a, c

Which of the following elements of a master budget flow(s) directly into a cash budget? a) current payables budget b) selling and administrative budget c) prepayments budget d) debt service budget e) income tax budget

all except b

Which of the following estimates are included in a cash budget? a) budgeted payables distributions b) budgeted debt service payments c) budgeted prepayments d) budgeted selling and administrative expenses e) budgeted tax payments

all except d

Which of the following manufacturing cost estimates are necessary to prepare a production budget a) direct labor costs b) fixed manufacturing overhead c) direct material costs d) selling and administrative costs e) variable manufacturing overhead

all except selling and administrative costs

Overhead volume variance

applied overhead - budgeted overhead

As input units of a particular activity base increase, the difference between the average total cost per unit of that activity base and the average fixed cost per unit of that activity base: a) increases at a decreasing rate b) equal the variable cost per unit of the activity base c) decreases at an increasing rate d) stay the same

b and d

Which of the following budgets are typically considered financial budgets? a) selling and administrative expense budgets b) budgeted income statements c) sales budgets d) production budgets e) budgeted balance sheets

b and e

Which of the following costs and expenses are NOT financed with payables in the current period? a) direct labor costs b) depreciation expense c) administrative salaries d) direct materials costs e) the expiration of prepayments

b and e

The Davidson Compay's breakeven point in units is 40,000. Assuming that variable costs are 60% and fixed costs are $300,000, what is the company's projected operating income if sales are $1,000,000? a) $750,000 b) $100,000 c) $250,000 d) $400,000

b) $100,000

During the year 2018, Torino Corporation suffered a $1,200,000 loss when its factory was severely damaged in an earthquake. Assuming the corporate income tax rate is 30%, what amount will Torino report as a non-recurring loss on its income statement for 2018? Assume earthquakes are not common in this area. a) $1,200,000 b) $840,000 c) $360,000 d) nothing since this does not qualify as a non-recurring item

b) $840,000 1,200,000 x (1-.30) = 840,000

Amalgamated Corporation's net income was $2,400,000 in 2017 and $800,000 in 2018. What percentage increase in net income must Amalgamated achieve in 2019 to offset the decline in profits in 2018? a) 75% b) 300% c) 33.33% d) 800%

b) 300%

During the month of August, $582,000 of costs were transferred from the Mixing Department to the Baking Department. The journal entry to summarize the transfer of these costs includes: a) a debit to the Mixing department for $582,000 b) a debit to the Baking department for $582,000 c) a credit to the baking department for $582,000 d) a debit to finished goods inventory

b) a debit to the Baking department for $582,000

During the month of August, $582,000 of costs were transferred from the Mixing Department to the Baking Department. The journal entry to summarize the transfer of these costs includes: a) a debit to the Mixing department for $582,000 b) a debit to the baking department for $582,000 c) a credit to the baking department for $582,000 d) a debit to finished goods inventory

b) a debit to the baking department for $582,000

The most widely used budgeting philosophy is the: a) operational approach b) behavioral approach c) strategic approach d) tactical approach

b) behavioral approach

The method used by managers when comparing unit costs with budgeted costs or other measures is broadly known as: a) sales management b) cost control c) employee evaluation d) account reconciliation

b) cost control

All of the following are measures of liquidity except: a) quick ratio b) debt ratio c) current ratio d) working capital

b) debt ratio

Component percentages indicate the relative size of each item included in a total. Which of the following statements is true? a) income statement items are expressed as a percentage of net income, while balance sheet items are expressed as a percentage of total assets b) income statement items are expressed as a percentage of net sales, while balance sheet items are expressed as a percentage of total assets c) income statement items are expressed as a percentage of net income, while balance sheet items are expressed as a percentage of net assets d) both income statement and balance sheet items are expressed as a percentage of net assets

b) income statement items are expressed as a percentage of net sales, while balance sheet items are expressed as a percentage of total assets

Incremental costs can be defined as: a) costs that are expected to increase regardless of the course of action b) the difference between costs incurred under alternative courses of action c) costs incurred in the past d) costs that are irrelevant in decision making

b) the difference between costs incurred under alternative courses of action

Who would most likely be held responsible for controlling the materials price variance? a) the production manager b) the purchasing manager c) the direct labor workers d) the marketing manamger

b) the purchasing manager

All of the following are true regarding benchmark studies except: a) the studies are shared with customers and suppliers b) the studies are shared with competitors c) the studies are prepared by collecting information from companies in the same industry d) the studies show an organization how its costs and processes compare with other companies

b) the studies are shared with competitors

Which philosophy in setting budgeted amounts assumes both the complete elimination of inefficiencies and a level of absolute efficiency? a) the behavioral approach b) the total quality management approach c) the strategic approach d) the master budget approach

b) the total quality management approach

The net income of Foster Furniture, Inc., amounted to $1,600,000 for the current year. Compute the amount of earnings per share assuming that the shares of capital stock outstanding throughout the year consisted of 400,000 shares of $1 par value common stock and no preferred stock. $4.00 EPS 1,600,000 / 400,000 = 4.00 Is the earnings per share figure considered to be basic or diluted?

basic preferred stock must be convertible into common stock in order to result in a diluted EPS

The two prevailing philosophies for establishing budgetary amounts are the _______________ and the ______________ _______________ _____________ approach

behavioral and total quality management

When preparing a budgeted balance sheet, the source of the account information required from the master budget for accounts receivable is

budgeted accounts receivable and collections budget

When preparing a budgeted balance sheet, the source of the account information required from the master budget for finished goods inventory

budgeted cost of goods manufactured and sold budget

When preparing a budgeted balance sheet, the source of the account information required from the master budget for retained earnings

budgeted income statement

Overhead spending variance

budgeted overhead - actual overhead

When net cash flow from operating activities is presented by the direct method, the statement of cash flows is accompanied by a supplementary schedule reconciling: a) net cash flow from operating activities with net sales b) net income with the net increase or decrease in cash and cash equivalents c) net income with net cash flow from operating activites d) net cash flow from operating activities shown in the statement with that which would result from use of the indirect method

In a manufacturing company, the cost of goods sold is equal to: a) the beginning inventory of finished goods,plus net purchases, less the ending inventory of finished goods b) the sum of the manufacturing costs charged (debited) to the work in process inventory account during the period c) the costs of direct materials, direct labor, and manufacturing overhead incurred in manufacturing the goods sold during the period d) the beginning inventory of work in process, plus total manufacturing costs for the period, less ending inventory of work in process

c) the costs of direct materials, direct labor, and manufacturing overhead incurred in manufacturing the goods sold during the period

Which of the following is considered an operating budget? a) the prepayments budget b) the debt service budget c) the customer service budget d) the capital expenditures budget

c) the customer service budget

When preparing a budgeted balance sheet, the source of the account information required from the master budget for cash is

cash budget

Products for which sales of one contribute to the sales of another are called __________________ products

complementary

Calculated on a per-unit basis, a company's contribution margin ratio equals its _______________ _________ per unit divided by its aver unit __________ __________

contribution margin, sales price

The high low method enables managers to determine a ____________ ______________ used to project total semivariable costs at various levels of activity.

cost formula

In most cases, joint products will NOT be processed further beyond the split-off point when the incremental ___________ exceeds the ____________ revenue of doing so.

cost, incremental

Determining how costs and profits behave in response to changes in levels of business activity is commonly referred to as:

cost-volume-profit analysis

Favorable labor rate variances are recorded with ____________ entries, and unfavorable labor rate variances are recorded with __________________ entries:

credit, debit

When preparing a budgeted balance sheet, the source of the account information required from the master budget for other payables

current payables budget

Sue's Soup Products uses a process costing system with two processing departments: the Mixing and Cooking Department and the Canning Department. Work in process inventories are reduced to zero each month. In March, the Mixing and Cooking Department incurred manufacturing cost of $67,600 to mix 52,000 gallons of soup. The Canning department incurred manufacturing costs of $5,500. A total of 110,000 cans of soup were transferred to the finished goods warehouse during the month The unit cost per can of soup transferred to the finished goods warehouse during March was: a) $1.30 b) $1.41 c) $.88 d) $.66

d) $.66

Which of the following is not a right of stockholders? a) to vote for directors and on key issues b) to participate in dividends declared c) to share in the distribution of assets if the corporation is liquidated d) to select the Chief Executive Officer

d) to select the Chief Executive Officer

The ownership of common stock in a corporation usually carries all of the following rights except: a) to vote for directors b) to participate in dividends c) tosharein a distribution of assets if the corporation is to be liquidated d) to set corporate policies

d) to set corporate policies

Which of the following statements about direct materials standards is/are true? check all that apply a) using more costly, high-quality materials is generally unrelated to establishing product prices b) using more costly, high-quality materials is generally unrelated to customer demand for products c) using more costly, high-quality materials often results in less efficient usage of materials in the production process d) using more costly, high-quality materials often results in more efficient usage of materials in the production process

d) using more costly, high-quality materials often results in more efficient usage of materials in the production process

In deciding whether or not to accept a special order, what is the opportunity cost of using machinery for which the firm has sufficient excess capacity to accept the order? a) the historical cost of the machinery b) the undepreciated cost of the machinery c) the same machinery cost allocated to regular production orders d) zero

d) zero

Unfavorable manufacturing overhead variances are recorded with ____________ entries, and favorable manufacturing overhead variances are recorded with _______________ entries

debit, credit

When preparing a budgeted balance sheet, the source of the account information required from the master budget for notes payable

debt service budget

A selling and administrative expense budget reports only fixed selling and administrative costs true/false

falase

A budget prepared using the total quality management approach is always achievable by departments within a company true/false

false

A cash budget determines the maximum amount of money that can be spent during the period true/false

false

A company cannot be increasing its market share if its net sales are declining true/false

false

A company may choose to use process costing or job order costing, but never both simultaneously. true/false

false

A company's liquidity refers to its ability to remain profitable. true/false

false

A corporation must always have more than one class of stock true/fale

false

A debit balance in the Direct Labor account represents a liability for wages payable true/false

false

A debit balance in the manufacturing overhead account at month end indicates overhead applied to jobs was greater than the actual overhead costs true/false

false

A difference between a standard cost and an actual cost would be recorded in the work in process account true/false

false

A favorable materials price variance indicates that actual prices paid in acquiring materials were more than standard prices true/false

false

A flexible budget allows management to spend more or less for labor and materials without regard to the amount of production true/false

false

A good standard cost system should always generate favorable variances true/false

false

A materials price variance is arrived at by taking standard quantity multiplied by actual price, less standard price true/false

false

Incremental analysis rarely requires the decision maker to exercise judgement true/false

false

Inventory is an example of a quick asset true/false

false

Sunk costs are relevant costs when considering special order true/false

false

deducting the cost of goods sold from net income gives us operating income true/false

false

Metalworks applies manufacturing overhead on the basis of direct materials used in production. During the current period, direct materials used for Job #123 amounted to $22,545. If Metalworks overhead rate is .65 of direct materials used, the overhead applied to Job #123 for the period is $15,000 true/false

false 22,545 x .65 = 14,654.25

Completing 3,000 units, which were each 75% complete at the beginning of the period, represents 2,250 equivalent units of work during the current period. true/false

false 3000 x (100% - 75%) = 750 equivalent units

Assuming that the MR Corporation has an inventory of 200 defective motors costing $450,000 to produce and $150,000 to repair, the repaired units can be sold for $275,000. The company receives an offer to purchase these motors for $100,000 before repairing them. The company's decision should be to sell the motors at the offered price true/false

false 450,000 are sunk costs and irrelevant Net proceeds from sale of repaired units $125,000 (275,000 - 150,000 = 125,000) The 100,000 before repair is less then proceeds from sales after repair - better to repair then sell

Shown below are selected data from the financial statements of Supreme Co. Dollar amounts are in millions (except for the per share data). Income statement data: Net Sales $1,410 Cost of Goods sold $565 Operating expenses $485 Net income $480 Balance Sheet data: average total equity $3,300 average total assets $4,900 Supreme reported earnings per share for the year of $4 and paid cash dividends of $1 per share. At year-end, the Wall Street Journal listed Supreme's capital stock as trading at $97 per share Supreme's gross profit rate was: a) 40.07% b) 59.93% c) 25.53% d) 34.04%

gross profit = net sales - cost of goods 1,410 - 565 = 845 gross profit rate = gross profit / net sales 845/1410 = 59.93

The __________ _________ method is an easy way to determine the fixed and variable elements of semivariable costs

high-low

Under _____________ conditions, standards would be set under the assuption that there will be no waste, spoilage, or other cost overruns caused by inefficiencies

ideal

When preparing a budgeted balance sheet, the source of the account information required from the master budget for income taxes payable

income tax budget

irrelevant

Products that result from shared manufacturing processes as a group are called _______________________ products. The shared input resources relating to these products are called _______________ ________________

joint joint costs

The dollar amount by which actual sales volume exceeds the break-even point is referred to as the ___________________ ______________________ ____________

margin of safety

The year-end balance sheet of Columbus Products, Inc., includes the following stockholders' equity section: Capital Stock: 7% cumulative preferred stock, $100 par value $14,000,000 Common stock, $5 par value, 5,000,000 shares authorized, 4,200,000 shares issued and outstanding: $21,000,000 Additional paid-in capital: Common stock $48,000,000 Retained earnings $64,450,000 Total stockholders equity $147,450,000 Is it possible to determine the fair market value per share of common stock from the stockholders' equity section above?

Reasonably achievable standards should be used that correspond to cost expectations under ___________ operating conditions

normal

Elements of a master budget that are internal working budgets used primarily by managers, such as sales budgets and production budgets, are commonly referred to as _________________ budgets

operating

After the break-even point has been reached, each dollar of contribution margin contributes directly to a company's _______________________

operating income

Benefits forgone (given up) by choosing one alternative over another are referred to as ________________ costs

opportunity

If a decision to rebuild defective units and sell them at regular prices, as opposed to scrapping them at reduced prices, interferes with the production space required to fulfill other orders, the revenue lost while the defective units are being rebuild is considered a(n)____________________ cost?

opportunity

When actual levels of output exceed normal levels of output for the period, manufacturing overhead will be _______________ (overapplied/underapplied)

overapplied

Budgets provide a yardstick by which management's _______________ can be measured and evaluated

performance

When preparing a budgeted balance sheet, the source of the account information required from the master budget for prepayments

prepayments budget

A debt service budget reports anticipated payments of debt _______________ plus accrued _______________

principal, interest

The overhead spending variance is typically the responsibility of the ________________ manager

production

When preparing a budgeted balance sheet, the source of the account information required from the master budget for direct materials inventory

production budget (direct materials schedule)

Costs identified as important with regard to making a particular business decision are referred to as ______________ costs

relevant

For most companies, it is reasonable to assume that total costs tend to vary with volume in a straight-line pattern within a_______________________ of output:

relevant range

Elements of a master budget that are organized by responsibility center are generally referred to as _______________ budgets

responsibility

Most organizations use a(n) _____________ budget approach, whereby a new quarter or month is added to the end of the budget as the current quarter or month draws to a close

rolling

A company's expected dollar change in ____________ volume multiplied by its _____________ ______________ ____________ equals its estimated change in operating income:

sales (volume), contribution margin ratio

The term _________________ ____________________ is often used to describe the relative percentages of total sales provided by a company's different products.

sales mix

Mixed costs composed of both fixed and variable elements are often referred to as __________ costs?

semivariable

Once manufacturing overhead rates have been established, overhead is applied to production at the _________ cost allowed per unit produced

standard

A(n)_______________ ____________ is the per-unit cost expected to be incurred under normal (but efficient) operating conditions

standard cost

Materials quantity variance

standard price x (standard quantity - actual quantity)

Labor efficiency variance

standard rate x (standard hours - actual hours)

A(n) __________ cost is one that has already been incurred and cannot b e changed by future actions.

sunk

The net assets of a corporation are equal to:

total assets - total liabilities

A "non-cash" investing and financing transactions should be disclosed in a supplementary schedule accompanying a statement of cash flows true/false

true

A budget provides a comprehensive plan enabling multiple departments to work together in a coordinated manner. true/false

true

A collection of job cost sheets would be similar to a subsidiary ledger and the work-in-process account would be similar to the controlling account true/false

true

Identifying information relevant to a particular business decision requires an understand of both quantitative and qualitative considerations true/false

true

If accounts receivable decrease during the period, cash received from customers probably exceeds net sales true/false

true

Margin of safety is the dollar amount by which actual sales volume exceeds the break even sales volume true/false

true

Nonfinancial considerations are relevant in decision-making true/false

true

The return on equity ratio may be either higher or lower than the return on assets ratio true/false

true

The selling and administrative expense budget is indirectly reflected in the budgeted balance sheet through the following accounts: Cash, Retained Earnings, Prepayments and Other Current Payables true/false

true

unfavorable

When normal levels of output exceed actual levels of production during the period, the overhead volume variance will be ______________ (favorable/unfavorable)

unfavorable when normal levels exceed actual levels of production, additional fixed overhead must be added to the system (doing so reduces income and is therefore unfavorable)

Opportunity costs are recorded in the accounting records true/false

false

$11,000 credit 5,000 + 6,000 = 11,000

1,600 favorable 16 x (3000 - 2900) = 1,600 favorable

A company has $400,000 of debt outstanding. In the upcoming quarter,, it budgets a total debt service cost associated with this obligation of $25,000. Of this amount, $15,000 applies to principal payments. The annual percentage rate associated with interest on this obligation is ____________

10% 25,000 - 15,000 = 10,000 interest 10,000/25,000 = 2.5% quarterly 2.5 x 4 = 10% annually

Gilmore Corporation uses a standard cost system. At its normal expected level of monthly output of 15,000 units, its budgeted fixed overhead is $30,000 and its variable overhead is $3 per unit. In the current month, the company actually produced 20,000 units. The company's overhead volume variance was:

10,000

Watson uses a standard cost system. For the current month, the company's standard labor input allowed for the actual number of units it produced was 1,500 direct labor hours. The standard labor rate is $25 per hour. The company actually used 1,700 direct labor hours for which it incurred an average cost of $22 per hour. The company's total labor variance for the month was:

100 (1500 x 25) - (1700 x 22) = 100

100,000

A company is trying to choose between 2 short-term courses of action. Alternative #1 will result in incremental operating costs of $4,000 and incremental operating revenue of $7,000. Alternative #2 will result in incremental operating costs of $5,000 and incremental operating revenue of $9,000. The incremental operating income of Alternative 32 over that of Alternative # 1 is $

1000 (9000 - 5000) - (7000 - 4000) = 1000

Pence corporation uses a standard cost system. The standard costs per unit for one of its product lines are shown below: direct materials = $16 per unit direct labor = $8 per unit variable overhead = $2 per unit fixed overhead = $9 per unit The company's fixed overhead costs per unit are based on a normal output of 10,000 units per month. During the current month, the company produced 9,400 units at a total manufacturing cost of $340,000. The company's total cost variance for the month was:

11,000 unfavorable 340,000 actual costs - ((16+8+2+9) x 9400)) = 11,000 unfavorable

252,000 $5 variable + (100,000/25,000) = 9 per unit application rate 28,000 x 9 = 252,000

275,000 credit 50,000 x 5 = 250,000 250,000 + 25,000 = 275,000

30,000 debit 25,000 unfavorable + 5,000 favorable = 30,000

325,000

A company must choose between 2 short-term courses of action. Alternative #1 will result in incremental operating costs of $9000 and incremental operating revenue of $4000. Alternative #2 will result in incremental operating costs of $6000 and incremental operating revenue of $5000. The incremental operating income of Alternative #2 over that of Alternative #1 is _____________________

4000

45,000 credit 2000 x 25 = 50,000 50,000 - 5,000 = 45,000

5,000 (1700 - 1500) x 25 = 5,000

5,000 credit

5,100 (1700 x 25) - (1700 x 22) = 5,100

5,800 favorable 2900 x (16 - 14) = 5,800 favorable

536,000 (176 x 3,000 MH) + 8,000 = 536,000

60 days x=accounts receivable days 2x = inventory days x + 2x = 90 days 3x = 90 days x = 30 days 2x = 60 days

Ames Manufacturing recently upgraded its production equipment at a cost of $500,000. During the testing phase of the new equipment, calibrations were set incorrectly, and 10,000 defective units were produced at a cost of $100,000 before the company discovered the issue. Recalibrating the equipment will cost $8,000. The defective products can be sold as scrap for $2 per unit. As an alternative, the defects can be corrected at a cost of $6 per unit, after which they can be sold for $14 per unit. Costs irrelevant to this scrap or rebuild decision total $

608,000 500,000 + 100,000 + 8,000 = 608,000

70,000 150,000 - 80,000 = 70,000

Until the related goods are sold, product costs are viewed as: a) assets b) liabilities c) operating expenses d) manufacturing overhead

a) assets

In a flexible budget for a profit center, which of the following items would not be expected to vary with the level of activity? a) revenue b) fixed manufacturing overhead c) direct materials cost d) variable manufacturing overhead

b) fixed manufacturing overhead

Hamilton Company reported an increase of $370,000 in accounts receivable during the year 2018. The company's statement of cash flows for 2018 reported $1 million of cash received from customers. What amount of net sales must Hamilton have recorded in 2018? a) $630,000 b) $1,370,000 c) $1,000,000 d) $370,000

b) $1,370,000 1,000,000 reported on statement of cash flows which already deducted the accounts receivable 1,000,000 + 370,000 = 1,370,000

If the standard quantity of materials is 84,500 units at $0.15 per unit and the actual quantity is 95,000 units at $0.12 per unit, then the materials quantity variance is: a) $2,850 favorable b) $1,575 unfavorable c) $1,275 favorable d) $2,850 unfavorable

b) $1,575 unfavorable (95,000 x .15) - (84,500 x .15) = 1,575 unfavorable

Baskin Promotions, Inc. sells T-shirts decorated for a variety of concert performers. The company has developed the following budget for the coming year based on a sales forecast of 74,000 T-shirts: Sales $1,290,560 Cost of Goods Sold 754,060 Gross Profit 536,500 Operating expenses (100,000 is fixed) 394,520 Operating income 141,980 Income taxes (30% of operating income) 42,594 Net Income 99,386 Cost of goods sold and variable operating expenses vary directly with sales, and the income tax rate is 30% at all levels of operating income. If the concert season is slow due to poor weather, Baskin estimates that sales could fall to as low as 54,000 T-shirts. What unit cost did Baskin use in budgeting the cost of goods sold for the year? a) $5.90 per unit b) $10.19 per unit c) $17.44 per unit d) some other amount

b) $10.19 per unit 754,060 / 74,000 = 10.19

The Davidson Company's break even point in units is 40,000. Assuming that variable costs are 60% and fixed costs are $300,000, what is the company's projected operating income if sales are $1,000,000? a) $750,000 b) $100,000 c) $250,000 d) $400,000

b) $100,000 (1,000,000 x .40) - 300,000 = 100,000

Legendary Motors has 7,000 defective autos on hand, which cost $12,880,000 to manufacture. Legendary can either sell these defective autos as scrap for $8,000 per auto, or spend an additional $18,320,000 on repairs and then sell them for $12,000 per unit. What is the net advantage to repair the autos compared to selling them for scrap? a) $84,000,000 b) $18,320,000 c) $ 9,680,000 d) $56,000,000

c) $ 9,680,000

Preferred stockholders generally do not have the same voting rights in a corporation as common stockholders true/false

false

As the volume of output increases: a) variable costs per unit will increase b) variable costs per unit will decrease c) variable costs per unit will not change d) variable costs in total will decrease

c) variable costs per unit will not change

Unique Corporation manufactures two products: Product D - contribution margin ratio 50%, relative sales mix 40% Product F - contribution margin ratio 30%, relative sales mix 60% If Unique's monthly fixed costs averages $400,000, what is its break even point expressed in sales dollars? a) $1,320,462 b) $1,250,000 c) $1,400,000 d) $1,052,632

d) $1,052,632

One characteristic common to all types of costs is the tendency to rise and fall in direct proportion to changes in the volume of business output true/false

false

Comprehensive income may be presented in a statement with net income, in a separate statement, or as part of the notes to the financial statements true/false

false

Opportunity costs are irrelevant i decision-making true/false

false

favorable more overhead was applied than was budgeted,so the volume variance is favorable

A ________________ __________________ is one that can be adjusted easily to show budgeted revenue, costs, and cash flow at different levels of activity

flexible budget

The budgeting process is often referred to as financial _____________ beacuse of its forward-looking focus

forcasting

A process costing system is suitable for a company with a large volume of standard products produced on a relatively continuous basis, for example, golf balls or petrolium. true/false

true

A spending variance results from incurring more overhead costs than allowed for the actual level of activity achieved true/false

true

A standard cost is predetermined, that is, determined before actual costs of the current period have been computed true/false

true

A common means of performance evaluation occurs by comparing budgeted amounts with actual amounts true/false

true

A favorable variance occurs when actual costs are less than standard costs true/false

true

Metalworks employs three assembly workers that, on average, each work 40 hours per week and earn $9 per hour. During the current accounting period, Job #543 consumed 77 hours of direct labor totaling $693 true/false

true 77 x 9 = 693

The James Company has incurred the following costs of production: Direct Materials: $350,000 Direct Labor: $475,000 Manufacturing Overhead: $722,000 Selling and Administrative Costs: $256,000 The James Company conversion costs are $1,197,000 true/false

true conversion costs = direct labor + manufacturing overhead 475,000 + 722,000 = 1,197,000

The high-low method is the only method to be used when determining semivariable costs true/false

false

The higher the unit contribution margin, the higher the volume of unit sales required to cover a given amount of fixed costs true/false

false

The lower the current ratio, the more liquid the company appears true/false

false

$12,500 500 x 25 = 12,500

The year-end balance sheet of Columbus Products, Inc., includes the following stockholders' equity section: Capital Stock: 7% cumulative preferred stock, $100 par value $14,000,000 Common stock, $5 par value, 5,000,000 shares authorized, 4,200,000 shares issued and outstanding: $21,000,000 Additional paid-in capital: Common stock $48,000,000 Retained earnings $64,450,000 Total stockholders equity $147,450,000 c) What was the average issuance price per share of common stock?

$16 per share (21,000,000 + 48,000,000)/4,200,000 = 16

The net income of Foster Furniture, Inc., amounted to $1,600,000 for the current year. Compute the amount of earnings per share assuming that the shares of capital stock outstanding throughout the year consisted of 100,000 shares of 8 percent,$100 par value preferred stock and 300,000 shares of $5 par value common stock

$2.67 EPS 1,600,000 - 800,000 = 800,000 800,000/300,000 = 2.67 Preferred stock dividend: 100,000 x .08 x 100 = 800,000 deduct from net income

A company's marketing manager is considering a plan to increase his annual advertising budget by $180,000. By doing so, he estimates that the company's annual revenue would increase by $400,000 over its current level. The Company's contribution margin ratio is 40%. If the marketing managers plan is implemented, the company's operating income is expected to decrease by $

$20,000 400,000 x 40% = 160,000 increase in operating income before taking into account the 180,000 cost of additional advertising: 160,000 - 180,000 = 20,000 decrease

One of Ajax Company's products has a unit contribution margin of $25 Currently, the company sells an average of 103,600 units of this product annually, from which it consistently generates an operating income of $2.5 million. Competition is increasing, and the company's brand manager anticipates that annual sales will level off at 100,000 units in the years ahead. Her goal is to increase the product's annual operating income by 16.4%, to $2.91 million per year. Her strategy for achieving this goal is to change suppliers, which will reduce direct materials costs by $2 per unit, and to increase the product's selling price, thereby making it more comparable to the pricing of its competitors. If the product's annual fixed costs remain unchanged at $90,000, the current unit selling price must be increased by $

$3 CM = Unit Contribution Margin (90,000 + 2,910,000)/CM = 100,000 units DM = 3,000,000/100,000 units = $30 per unit (a $5 per unit increase over the current CM of $25) The $2 reduction in direct materials costs will increase the CM by only $2, so to achieve a $5 increase, the selling price per unit must be increased by $3 (from $60 to $63)

Eskola Corporation's budgeted production for the upcoming quarter is 40,000 units. Each unit requires 6 gallons of material costing $15 per gallon. The company's beginning materials inventory is 14,000 gallons, and it desires 12,000 gallons of material at the end of the upcoming quarter. The company's budgeted cost of material purchases is $

$3,570,000 (40,000 units x 6 gallons) + 12,000 gallons - 14,000 gallons = 238,000 gallons 238,000 gallons x 15 = 3,570,000

$4.00 EPS 1,600,000 / 400,000 = 4.00

$5.50 900,000/400,000 = 2.25 100,000/400,000 = .25 2.25 + 2.50 + .25 + .50 = 5.50

$50,000

$51,000 85,000 - 34,000 = 51,000

Jensen Corporation uses the high-low method to estimate the fixed and variable cost elements of its total manufacturing overhead. The company uses machine-hours (MH) as its activity base. In the current year, its highest month of activity was 1,400 MH, with a corresponding total manufacturing overhead cost of $90,000. Its lowest month of activity was 900 MH, with a corresponding total manufacturing overhead cost of $60,000. Use the high-low method to determine the following: The monthly fixed manufacturing overhead cost is $

$6,000 90,000 - (1400 x 60) = 6,000 per month or 60,000 - (900 x 60) = 6,000 per month

Jensen Corporation uses the high-low method to estimate the fixed and variable cost elements of its total manufacturing overhead. The company uses machine-hours (MH) as its activity base. In the current year, its highest month of activity was 1,400 MH, with a corresponding total manufacturing overhead cost of $90,000. Its lowest month of activity was 900 MH, with a corresponding total manufacturing overhead cost of $60,000. Use the high-low method to determine the followings: The variable manufacturing overhead cost per MH is::::::::

$60 (90,000 - 60,000)/(1400 MH - 900MH) = $60 per MH

Wilson Corporation sells an industrial solvent at a normal selling price of $100 per barrel. The variable cost per barrel is $40, and the company's total fixed cost is $900,000 per month . The company has excess capacity of 30,000 barrels per month. Management was recently contacted by a potential buyer with whom they had no prior experience. The buyer offered to buy a special order of 5,000 barrels at a discount price of $80 per barrel. The special nature of the order would increase variable costs associated with it by $10 per barrel over the normal variable cost. The special order would also increased fixed costs by $60,000. If the special order is accepted, operating income will increase by:

$90,000 ((80 - (40+10)) x 5,000 barrels) - 60,000 = 90,000

The margin of safety sales volume times the contribution margin ratio equals operating income true/false

false

1,500 credit 2000 - 500 = 1500

Demand for a company's product is expected in increase significantly in the upcoming year, resulting in additional direct labor overtime costs of $2 per unit. The higher volume of output also is expected to increase annual maintenance costs on the company's manufacturing equipment b $20,000. Annual fixed costs currently average $500,000 per year, and the company's contribution margin per unit is currently $27 The company must produce _______________ units to earn a target operating income of $250,000 in the upcoming year.

30,800 Estimated total fixed costs: $500,000 + 20,000 = 520,000 Estimated contribution margin per unit $27 + $2 = 25 per unit (520,000 + 250,000)/25 = 30,800 units

35,000 debit 335,000 - 300,000 = 35,000

350,000 credit actual total manufacturing overhead

Tharp industries sells wood pallets at a normal selling price of $200 per ton. The variable costs per ton is $70, and the company's total fixed cost is $100,000 per month. The company has excess capacity of 50,000 tons per month. Management was recently contacted by a potential buyer with whom they had no prior experience. The buyer offered to buy a special order of 200 tons at a discount of $146 per ton. The order calls for a lower quality of raw materials that would decrease variable costs associated with it by $4 per ton over the normal variable cost. The special order would also increase fixed costs by $20,000. If the special order is accepted, operating income will decrease by $

4,000

4.25 1,000,000 + (800,000 cmd x 3/cmd) = 3,400,000 3,400,000/800,000 cmd = 4.25 or 900,000/800,000 = 1.125 100,000/800,000 = .125 1.125 + 2.50 + .125 + .50 = 4.25

4.25 900,000/800,000 = 1.125 100,000/800,000 = .125 1.125 + 2.50 + .125 + .50 = 4.25

Filmont Manufacturing desires inventory of 15,000 tires at the end of the upcoming quarter. Its beginning inventory is 6,000 units, and its budgeted production is 59,000 units. The company's budgeted sales for the upcoming quarter are _____________ units

50,000 59,000 + 6,000 - 15,000 = 50,000 units

50,000 debit 2,000 x 25 = 50,000

500 credit the labor rate variance was 500 favorable

85,000 260,000 gross profit - 170,000 - 5,000 = 85,000

90,000 (20,000 x 3) + 30,000 = 90,000 budgeted

The materials price variance is calculated by multiplying the difference between actual unit price and standard unit price by the standard units purchased true/false

false

The most important factor affecting the market price of common stock is the stated dividend rate true/false

false

The operating cycle is the average time required to manufacture products for sale true/false

false

Activity-based costing tracks cost to the activities that consume resources true/false

true

Activity-based costing uses multiple activity basis to assign overhead costs to units of production true/false

true

All incremental revenue or incremental costs are relevant true/false

true

All three inventory accounts (raw materials, work in process, and finished goods) are considered current assets true/false

true

If a budget is to provide a basis for evaluating departmental performance, departmental managers should not know what their budget targets are until after the budget period has ended true/false

false

If a company uses the indirect method to prepare its statement of cash flows, it must provide a supplementary schedule showing the computation of net cash flow from operating activities using the direct method true/false

false

An equivalent unit measures the percentage of a completed unit's cost that is present in a partially finished unit. true/false

true

When Resisto Systems, Inc. was formed, the company was authorized to issue 5,000 shares of $100 par value, 8 percent cumulative preferred stock, and 100,000 shares of $2 stated value common stock. Half of the preferred stock was issued at a price of $103 per share, and 75,000 shares of common stock were sold for $16 per share. At the end of the current year, Resisto has retained earnings of $382,000. Prepare the stockholders' equity section of the company's balance sheet at the end of the current year

Cumulative preferred stock $250,000 Common stock $150,000 Additional paid-in Capital Cumulative preferred stock $7,500 Common Stock $1,050,000 Total paid-in capital $1,457,500 Retained earnings: $382,000 Total stockholders' equity $1,839,500 8% cumulative preferred stock, $100 par value. 5,000 shares authorized. 2,500 shares issued and outstanding = $250,000 Common stock, $2 stated value. 100,000 shares authorized, 75,000 shares issued and outstanding = $150,000

How would a company's working capital be affect if a substantial amount of accounts payable were paid in cash? a) it would be unaffected b) it would fall c) it would increase d) the change would depend on the relationship between the payables liquidated and current liabilities

a) it would be unaffected

Which of the following is not a commonly used cost accounting system? a) manufacturing yield costing b) job order costing c) process costing d) activity-based costing

a) manufacturing yield costing

If cash increased during the year and there was also a net loss for the year, there must be positive cash flows from financing and investing activities true/false

false

If the manufacturing overhead account at month end has a credit balance before adjustment, this indicates that overhead is under-applied true/false

false

If the return on total assets ratio is substantially below the cost of borrowing, common stockholders will benefit from a high debt ratio true/false

false

In a classified balance sheet, assets are subdivided into current assets, plant and equipment and other assets, while all liabilities are classified as current true/false

false

Dividends become a liability of a corporation: a) on the date the board of directors declares the dividend b) on the date of record c) on the date payment is to be made d) when cumulative preferred stock dividends are in arrears

a) on the date the board of directors declares the dividend

Free cash flow arises out of: a) operating activities b) investing activities c) financing activities d) management activities

a) operating activities

The interest coverage ratio is computed by dividing: a) operating income by annual interest expense b) net income by annual interest expense c) carrying value of bonds by cash interest payments d) earnings per share by the prime interest rate

a) operating income by annual interest expense

Shares that have been sold are in the hands of stockholders are called: a) outstanding b) issued c) treasury d) underwritten

a) outstanding

Direct labor costs in a paint factory would include wages of employees who: a) supervise heavy equipment operations b) operate paint-mixing machines c) develop highly secret formulas for new products d) paint the interior of the factory every two years

b) operate paint-mixing machines

In a flexible budget, both variable and fixed costs will vary with the level of activity true/false

false

Speedy Co. manufactures four products. Direct materials and direct labor are available in sufficient quantities, but machine capacity is limited to 3000 hours. Cost and revenue data for the f our products are given below: Product A: Selling price $36, variable costs per unit $19, unit produced per machine hour 3 Product B: Selling price $42, variable costs per unit $16, unit produced per machine hour 4 Product C: Selling price $46, variable costs per unit $25, unit produced per machine hour 2 Product D: Selling price $56, variable costs per unit $37, unit produced per machine hour 3 Of the four products, which is the most profitable for Speedy Co.?

Product B Product A: Contribution Margin 17 x 9,000 = 153,000 Product B: contribution margin 26 x 12,000 = 312,000 Product C: contribution margin 21 x 6000 = 126,000 Product D: contribution margin 19 x 9000 = 171,000

In a job order cost system, the costs of direct materials, direct labor and manufacturing overhead are accumulated separately for each department for a given period of time true/false

false

In a master budget, the sales forecast would be dependent upon the budgeted production figures true/false

false

The sales forecast directly affects any elements of the master budget. Which of the following would be least affected by short-term fluctuations in the sales forecasts? a) the production schedule b) the budgeted income statement c) the capital expenditures budget d) the operating expense budget

c) the capital expenditures budget

In most companies using standard cost procedures, the costs charged to work in process, finished goods, and cost of goods sold are the actual costs, not the standard costs true/false

false

In a process costing system that uses equivalent units of production the per-unit cost of direct materials equals the total cost of materials used in the current month divided by the number of units completed and transferred during the current month true/false

false

In a production cost report, the units in beginning work-in-process are always expressed as equivalent units true/false

false

In a standard cost system, actual costs are charged to work in process as they are incurred true/false

false

Mark Corporation has total stockholders' of $7,400,000. The company has outstanding 300,000 shares at $1 par value common stock and 20,000 shares at 8% preferred stock, $100 par value. (no dividends are in arrears.) The book value per share of common stock is: a) $9 b) $24.06 c) $24.66 d) $18.00

d) $18.00

In activity-based costing, only one cost driver should be used in applying overhead true/false

false

Depreciation on a manufacturing facility is considered a period cost whereas depreciation on a warehouse used to store finished goods is considered a product costs true/false

false

Differential costs are those that are the same among alternatives true/false

false

Diluted earnings per share are shown to alert investors that earnings per share could increase by the effects of conversions of securities into common stock true/false

false

Which of the following items would be included in comprehensive income but not reported as a component of net income? a) a lower-of-cost-or-market write-down of inventory b) a material loss due to natural disaster c) an unrealized gain on the portfolio of available-for-sale marketable securities d) a gain on the sale of a segment of the business

c) an unrealized gain on the portfolio of available-for-sale marketable securities

A flexible budget: a) consists of estimates of costs and expenses for various possible levels of activity b) is designed to be adjusted at frequent intervals for changes in the general price level c) is better suited for use with a job cost system than a standard cost system d) cannot be prepared when a standard cost system is in use

a) consists of estimates of costs and expenses for various possible levels of activity

Which of the following might cause total variable cost behavior to appear as a curvilinear function? a) paying overtime wages to direct labor workers as output volume increases to higher and higherlevels b) renting additional storage warehouse space as output volume increases to higher and higher levels c) adding additional salaried supervisors as output volume increases to higher and higher levels d) receiving price discounts on larger and larger purchases of direct materials as output volumes rises to higher and higher levels

a and d

Which of the following statements about budgeted income taxes is/are true? a) if a beginning tax liability exceeds the ending liability, tax payments during the period exceeded tax expenses b) if an ending tax liability exceeds the beginning liability, tax payments during the period exceed tax expenses c) if a beginning tax liability exceeds the ending liability, tax expenses during the period exceeded tax payments d) if an ending tax liability exceeds the beginning liability, tax expenses during the period exceeded tax payments

a and d

In order to calculate break-even sales units, fixed costs are divided by the: a) contribution margin per unit b) contribution margin percentage c) target operating income d) sales volume

a) contribution margin per unit

The FASB classifies interest received on investments and interest paid on debt financing as part of operating cash flows, while the IASB: a) allows interest received to be classified as either operating or inventing and interest paid as either operating or financing b) allows interest received to be classified as either operating or financing and interest paid as either operating or investing c) allows interest received to be classified only as investing and interest paid only as financing d) allows interest received to be classified only as financing and interest paid only as investing

Baskin Promotions, Inc. sells T-shirts decorated for a variety of concert performers. The company has developed the following budget for the coming year based on a sales forecast of 74,000 T-shirts: Sales $1,290,560 Cost of Goods Sold 754,060 Gross Profit 536,500 Operating expenses (100,000 is fixed) 394,520 Operating income 141,980 Income taxes (30% of operating income) 42,594 Net Income 99,386 Cost of goods sold and variable operating expenses vary directly with sales, and the income tax rate is 30% at all levels of operating income. If the concert season is slow due to poor weather, Baskin estimates that sales could fall to as low as 54,000 T-shirts. Assume Baskin actually achieves the 54,000 unit sales level, and that the net income actually earned at this level was $56,000. A performance report would indicate that net income was: a) $2,594 over budget b) $43,186 under budget c) $22,806 under budget d) at the budget level

a) $2,594 over budget sales per unit: 1,290,560/74,000 = 17.44 x 54,000 = 941,760 cost of goods: 754,060/74,000 = 10.19 x 54,000 = 550,260 gross profit: 391,500 operating expenses (100,000 fixed) 394,520 - 100,000/74,000 = 3.98 x 54,000 + 100,000 = 314,920 operating income: 76,580 Income taxes (30% of operating income) 22,974 Net income $53,606 56,000 - 53,606 = 2,594 over budget

The Parry Company's breakeven point in units is 20,000. Assuming that variable costs are 30% and fixed costs are $100,000, what is the company's projected operating income if sales are $750,000 a) $425,000 b) $125,000 c) $250,000 d) $400,000

a) $425,000

National Corporation was organized on January 1 and issued 600,00 shares of common stock on that date. On July 1, and additional 200,000 shares were issued for cash. Net income for the year was $3,675,000. Net earnings per share amounted to: a) $5.25 b) $6.13 c) $4.59 d) $9.19

a) $5.25 (600,000 x 6/12) + (800,000 x 6/12) = 700,000 3,675,000 / 700,000 = 5.25

National Corporation was organized on January 1 and issued 600,000 shares of common stock on that date. On July 1, an additional 200,000 shares were issued for cash. Net income for the year was $3,675,000. Net earnings per share amounted to: a) $5.25 b) $6.13 c) $4.59 (no) d) $9.19

a) $5.25 (600,000 x 6/12) + (800,000 x 6/12) = 700,000; $3,675,000/700,000 = $5.25

Ross Corporation makes all sales on account. The June 30th balance sheet in its accounts receivable is $410,000, of which $245,000 pertain to sales that were made during June. Budgeted sales for July are $1,260,000. Ross collects 65% of sales in the month of sale; 15% in the following month; and the final 20% in the second month after the sales. What is the budgeted balance of Ross's accounts receivable as of July 31? a) $581,000 b) $1,064,000 c) $888,750 d) $1,020,750

a) $581,000 1,260,000 x .35 = 441,000 july sales in accts receivable 245,000/.35 = 700,000 June sales 700,000 x .20 = 140,000 June sales collect in Aug (2 month) 441,000 + 140,000 = 581,000

The following information has been taken from the perpetual inventory system of Elite Mfg. Co. for the month ended August 31: Purchases of direct materials: $76,000 Direct materials used: $62,500 Direct labor costs assigned to production: $20,000 Manufacturing overhead costs incurred (and applied): $35,000 Balances in Inventory: August 31 August 1 materials ? 36.000 work in process 60,000 55,000 finished goods 65,000 47,800 The cost of goods sold in August is: a) $95,300 b) $17,200 c) $160,300 d) some other amount

a) $95,300 work in process: 55,000 + 62.500 + 20,000 + 35,000 - 60,000 = 112,500 finished goods 47,800 + 112,500 - 65,000 = 95,300 cost of goods sold

Capri Boat Corporation uses a job order cost system and applies overhead based on a percentage of direct labor cost. Cost flows through the work in process inventory account during march are given below: Work in Process Beginning balance 0 direct materials 45,000 direct labor 84,000 overhead 168,000 ending balance 112,600 transferred out 184,40 Only job #007 was still in process at the end of March and this job had been charged with $40,000 in direct materials cost. The predetermined overhead application rate at Capri Boat is what percentage of direct labor costs? a) 200% b) 50% c) 67% d) 400%

a) 200%

If the monthly sales volume required to break even is $190,000 and monthly fixed costs are $55,900, the contribution margin ratio is closest to: a) 29% b) 71% c) 23% d) 340%

a) 29%

Shown below is information relating to the stockholders' equity of Reeve Corporation as of December 31, 2018: 8.5% cumulative preferred stock, $100 par: $ 900,000 Common stock, $10 par, 340 shares authorized, 136,000 shares issued and outstanding: $1,360,000 Additional paid-in capital: Common Stock: $1,088,000 Retained earnings (deficit) ($ 68,000) Dividends in arrears: $ 76,500 How many shares of preferred stock are issued and outstanding? a) 9,000 shares b) 90,000 shares c) 13,600 shares d) 34,000 shares

a) 9,000 shares

If the actual cost per pound of direct materials is less than the standard cost per pound, there is: a) a favorable materials price variance b) an unfavorable materials price variance c) a favorable materials quantity variance d) a favorable total materials variance

a) a favorable materials price variance

A budget that can be easily adjusted to show budgeted revenues, costs, and cash flows at different levels of activity is known as: a) a flexible budget b) a master budget c) a production budget d) a multi-level budget

a) a flexible budget

The contribution margin ratio is expressed as: a) a percentage of revenue b) a total dollar amount for the period c) a contribution margin per unit d) total contribution margin amoun

a) a percentage of revenue

If the hourly wage rate actually paid during January is higher than the standard rate, the result is: a) an unfavorable labor rate variance b) a favorable labor rate variance c) an unfavorable labor efficiency variance d) a favorable total labor variance

a) an unfavorable labor rate variance

Process costing systems: a) are used when companies product homogeneous units b) do not have work in process accounts for each department c) do no use equivalent units of production d) track costs to individual products

a) are used when companies product homogeneous units

How will a company's contribution margin be affected by an investment in equipment that increases fixed costs in order to achieve a reduction in direct labor cost? a) contribution margin will increase b) contribution margin will fall c) contribution margin will either increase or decrease depending on the relative magnitudes of the changes in fixed and variable costs d) contribution margin will remain the same

a) contribution margin will increase

Which of the following is not a period cost? a) depreciation on factory equipment b) depreciation on the retail store building c) salesperson salaries d) office supplies used

a) depreciation on factory equipment

Which of the following is not a characteristic of most preferred stock? a) dividends that vary as income changes b) preference as to dividends c) preference as to assets in the event of liquidation of the company d) no voting power

a) dividends that vary as income changes

The benefits of budgeting include all of the following except: a) enabling the company to produce more for less costs b) assigning responsibility for situations that require corrective action c) coordinating activities between departments within the organization d) creating standards for evaluating performance

a) enabling the company to produce more for less costs

The ending inventory of a merchandising company corresponds most closely to which of the following amounts of a manufacturer? a) ending inventory of finished goods b) cost of finished goods manufactured c) ending inventory of work in process d) total manufacturing costs incurred during the period

a) ending inventory of finished goods

As the volume of output decrease: a) fixed costs per unit will increase b) fixed costs per unit will decrease c) fixed costs per unit will not change d) fixed costs in total will decrease

a) fixed costs per unit will increase

In comparison with a financial statement prepared in conformity with generally accepted accounting principles, a managerial accounting report is less likely to: a) focus upon the entire organization as the accounting entity b) focus upon future accounting periods c) make use of estimated amounts d) be tailored to the specific needs of an individual decision maker

a) focus upon the entire organization as the accounting entity

Earnings per share figures are shown in the income statement: a) for income before non-recurring items and for income form continuing operations, as well as for net income b) for common stock as well as for preferred stock c) for all publicly owned, as well as for all privately held, corporations d) as an optional disclosure for all corporations, and may be omitted completely or disclosed in a footnote at the option o the issuing corporation

a) for income before non-recurring items and for income form continuing operations, as well as for net income

Sunk costs: a) have already been incurred as a result of past actions b) vary among the alternative courses of action being considered c) are benefits that could have been obtained by following another course of action d) result from unfavorable cost variances

a) have already been incurred as a result of past actions

A company's most profitable products are often those which: a) have the highest contribution margin ratios and the highest sales volumes b) have the highest contribution margin ratios and the lowest sales volumes c) have the lowest contribution margin ratios and the highest sales volumes d) have the lowest contribution margin ratios and the lowest sales volumes

a) have the highest contribution margin ratios and the highest sales volumes

Benefits derived from budgeting include all of the following except: a) improved relationship with shareholders b) enhanced management responsibilities c) improved coordination of activities d) enhanced performance evaluations

a) improved relationship with shareholders

JNC Industries normally produces and sells 5,000 keyboard for personal computers each month. Variable manufacturing costs amount to $25 per unit, and fixed costs are $146,000 per month. The regular sales price of the keyboards is $86 per unit. JCN has been approached by a foreign company that wants to purchase an additional 1,000 keyboards per month at a reduced price. Filling this special order would not affect JCN's regular sales volume or fixed manufacturing costs. Assume that the price offered by the foreign company is $43 per unit. Accepting the special order will cause JCN's operating income to: a) increase by $18,000 b) decrease by $2,000 c) decrease by $33,000 d) decrease by $35,000

a) increase by $18,000

At the end of 2018, Schenck Corporation sold its only piece of equipment for $9,000 cash, a price that resulted in a loss of $3,000. During 2018, depreciation expense recognized by Schenck was $1,000. Schenck uses the indirect method to compute net cash flow from operating activities. In reconciling net income to net cash flow from operating activities under the indirect method, the required adjustments based upon the given data: a) increase net income by $4,000 b) increase net income by $1,000 c) decrease net income by $4,000 d) increase net income by $3,000

a) increase net income by $4,000 With indirect method, add depreciation expense and non-operating loss to net income

At the beginning of 2018, Baldwin Corporation bought an automobile for $36,000 by issuing a not payable. The automobile has a six-year life and is depreciated using the straight-line method. To determine net cash flow from operating activities for 2018 using the indirect method, net income should be: a) increased by $6,000 b) decreased by $6,000 c) increased b y $42,000 d) neither increased nor decreased. No adjustments are necessary since no cash was received or paid

a) increased by $6,000 depreciation is added to net income. 36,000/6 = 6,000 per year in depreciation

At the beginning of 2018, Baldwin Corporation bought an automobile for $36,000 by issuing a note payable. The automobile has a six-year life and is depreciated using the straight-line method. To determine net cash flow from operating activities for 2018 using the indirect method, net income should be: a) increased by $6,000 b) decreased by $6,000 c) increased by $42,000 d) neither increased nor decreased.No adjustments are necessary since no cash was received or paid

a) increased by $6,000 indirect method: add depreciation to net income. 36,000/6 = 6,000 add to net income

When using the indirect method, depreciation expense: a) increases net cash flow from operations b) decreases net cash flow from operations c) does not affect net income d) does not affect net cash flow from operations

a) increases net cash flow from operations

Overhead costs are assigned to production using an overhead application rate, whereas no such "application rate" is used to assign the costs of direct materials and direct labor to production. The reason for this difference in procedures is that: a) overhead is an indirect cost which cannot be traced easily and directly to specific units of product b) overhead is always larger in dollar amount than either direct materials or direct labor c) the amounts of direct materials and direct labor applicable to each unit of production cannot be determined as easily as the amount of overhead d) overhead is always equal to a constant percentage of direct labor costs

a) overhead is an indirect cost which cannot be traced easily and directly to specific units of product

Which of the following is a measure of short-term liquidity? a) quick ratio b) return on assets c) dividend yield d) debt ratio

a) quick ratio

Which of the following is appropriate activity base for a retail company to use for cost-volume-profit analysis? a) sales revenue generated b) delivery miles driven c) machine hours d) inventory shipments received

a) sales revenue generated

All of the following statements regarding management accounting's role in assigning decision-making authority are true except: a) since management accounting information is used for decision-making purposes, historical information is unnecessary b) information from the management accounting system supports decision-making c) the syllabus for a college course is a type of report that outlines students' decision-making responsibilities d) all members of an organization have some decision-making abilitiy

a) since management accounting information is used for decision-making purposes, historical information is unnecessary

The calculation of the labor efficiency variance is: a) standard hourly rate x (standard hours - actual hours) b) standard hours x (standard rate - actual rate) c) actual hours x (standard rate - actual rate) d) actual rate x (standard hours - actual hours)

a) standard hourly rate x (standard hours - actual hours)

Which cost is NOT relevant in making financial decisions? a) sunk costs b) opportunity costs c) incremental costs d) out-of-pocket costs

a) sunk costs

Which cost is NOT relevant in making financial decisions? a) sunk costs b) opportunity costs c) incrementala costs d) out-of-pocket costs

a) sunk costs

Debits to the manufacturing overhead account record: a) the actual amounts of overhead costs incurred during a period b) the amount of overhead applied to production during a period c) the amount of overhead incurred on a specific job d) all conversion costs of a period

a) the actual amounts of overhead costs incurred during a period

The slope of the line of a cost-volume-profit graph equals a) the average variable cost per unit b) the average fixed cost per unit c) operating income per unit d) 45 degrees

a) the average variable cost per unit

Amounts credited to the Work in Process Inventory account may best be described as: a) the cost of finished goods manufactured b) the total manufacturing costs charged to productiion c) the cost of goods sold d) direct materials purchased, direct labor costs paid, and payments for items classified as manufacturing overhead

a) the cost of finished goods manufactured

Since manufacturing costs (direct materials, direct labor, and overhead) are incurred in the process of manufacturing units of product, these costs are credited to: a) the direct materials inventory, direct labor and manufacturing overhead accounts respectively b) liability accounts c) work in process inventory account d) cost of goods sold account

a) the direct materials inventory, direct labor and manufacturing overhead accounts respectively

The cost of finished goods manufactured will exceed the cost of goods sold whenever: a) the inventory of finished goods increases over the period b) the inventory of work in process increases over the period c) the inventory of finished goods decreases over the period d) the inventory of work in process decreases over the period

a) the inventory of finished goods increases over the period

A statement of stockholders' equity discloses each of the following except: a) the market value of the stockholders' equity at the end of the year b) the cost of treasury stock owned at the end of the year c) net income for the current year d) the amount of cash dividends declared during the current year

a) the market value of the stockholders' equity at the end of the year

The master budget may be comprised of: a) the production budget b) the current period income statement c) the current period balance sheet d) the current period statement of cash flows

a) the production budget

Controlling the materials price variance is usually the responsibility of: a) the purchasing agent b) the marketing director c) the production supervisor d) the cost accountant

a) the purchasing agent

Craig Corporation's reported net income for 2018 is less than its net cash flow from operating activities. One reason for this could be: a) the sale of machinery at a loss in 2018 b) an increase in inventory levels during 2018 c) the sale of investments at a gain in 2018 d) an error in the preparation of the statement of cash flows: net income should be greater than or equal to net cash flow from operating activities

a) the sale of machinery at a loss in 2018

The accountant Eric's Plumbing Equipment Company recently made a journal entry consisting of a debit to Work in Process and a credit to Raw Materials Inventory. This entry recorded: a) the use of raw materials in the production process b) payment for raw materials c) the return of unused materials to inventory d) the receipt of raw materials from t he company's supplier

a) the use of raw materials in the production process

The accountant for Eric's Plumbing Equipment Company recently made a journal entry consisting of a debit to work in process and a credit to raw materials inventory. This entry recorded: a) the use of raw materials in the production process b) payment of raw materials c) the return of unused materials to inventory d) the receipt of raw materials from the company's supplier

a) the use of raw materials in the production process

Discontinued operations is an example of an unusual and/or infrequent item true/false

false

Discontinued operations should be shown on the statement of retained earnings net of taxes true/false

false

Which of the following apply to closely held corporation? a) there is no organized market for buying and selling the company's shares b) the company must prepare and issue its financial statements in conformity with generally accepted accounting principles c) the company must have its financial statements audited by an independent firm of CPAs d) The Company's financial information must be submitted to the Securities and Exchange Commission

a) there is no organized market for buying and selling the company's shares

Comparative financial statements compare the company's current statements with: a) those of prior periods b) those of other companies in the same industry c) those of the company's principal competitor d) the budgeted level of performance for the period

a) those of prior periods

In a process costing system, the number of units started and completed for a period is equal to: a) units transferred out less units in beginning work in process b) units transferred out less units in ending work in process c) units transferred out plus units of beginning work in process d) units transferred out plus units in ending work in process

a) units transferred out less units in beginning work in process

Which of the following is a nonfinancial concern pertaining to a make or buy decision? a) will the external vendor provide goods of the same quality that are currently being manufactured b) by how much will the external vendor increase prices each year c) will the external vendor be responsible for freight charges d) will the external vendor offer purchase discounts for larger-than normal orders

a) will the external vendor provide goods of the same quality that are currently being manufactured

Examples of standard costs that rise and fall in total in response to short-term changes in production levels include: a) direct labor costs b) direct materials costs c) fixed manufacturing costs d) variable manufacturing costs

a, b and d

Incremental analysis requires judgement about financial and nonfinancial concerns. Nonfinancial concerns may include: (check all that apply) a) ethical considerations b) legal issues c) reputation effects d) environmental impacts d) increased break-even points

a, b, c , d

Which of the following statements is/are true about budgets? a) budgets play an important role in controlling costs b) budgeting is of little significance to small businesses c) budgeting is an essential step in financial planning d) budgets are formal written plans for achieving financial goals

a, c and d

Which of the following are likely to result in an unfavorable labor rate variance? a) using higher-paid workers than normal b) using fewer overtime hours than normal c) using lower-paid workers than normal d) using more overtime hours than normal

a, d

In a statement of cash flows, the term "cash" includes: a) only money on deposit in bank accounts b) only bank accounts and cash on hand c) bank accounts, cash on hand, and cash equivalents d) bank accounts, cash on hand, cash equivalents, and marketable securities classified as current assets

c) bank accounts, cash on hand, and cash equivalents

The following information has been taken from the perpetual inventory system of Elite Mfg. Co. for the month ended August 31: Purchases of direct materials: $76,000 Direct materials used: $62,500 Direct labor costs assigned to production: $20,000 Manufacturing overhead costs incurred (and applied): $35,000 Balances in Inventory: August 31 August 1 materials ? 36.000 work in process 60,000 55,000 finished goods 65,000 47,800 The cost of finished goods manufactured in August is: a) $173,500 b) $112,500 c) $54,000 d) some other amount

b) $112,500 55,000 + 62,500 + 20,000 + 35,000 - 60,000 = 112,500

A company with an operating income of $72,000 and a contribution margin ratio of 56% has a margin of safety of: a) $40,320 b) $128,571 c) $163,636 d) it is not possible to determine the margin of safety from the information provided

b) $128,571

Mary's Metal Shop uses a job order cost system. It applies overhead to jobs at a rate of 175% of direct labor costs. Job No. 2617 required $800 in direct labor costs. The job was initially budgeted to required $850 in direct labor costs. Overhead applied to Job no. 2617 during the period amounted to: a) $850 b) $1400 c) $1275 d) $1487.50

b) $1400 800 x 175% = 1400

Shown below is information relating to the stockholders' equity of Reeve Corporation as of December 31, 2018: 8.5% cumulative preferred stock, $100 par: $ 900,000 Common stock, $10 par, 340 shares authorized, 136,000 shares issued and outstanding: $1,360,000 Additional paid-in capital: Common Stock: $1,088,000 Retained earnings (deficit) ($ 68,000) Dividends in arrears: $ 76,500 What was the original issue price per share of common stock? a) $4 per share b) $18 per share c) $7.20 per share d) $10 per share

b) $18 per share

In making a decision, management will look thoroughly at both relevant and irrelevant data. True/false

false

Waterede Corporation has budgeted a total of $361,800 in costs and expenses for the upcoming quarter. Of this amount, $45,000 represents depreciation expense and $7,300 represents the expiration of prepayments. Wateredge's current payables balance is $265,000 at the beginning of the quarter. Budgeted payments on current payables for the quarter amount to $370,000. The company's estimated current payables balance at the end of the quarter is: a) $179,500 b) $204,500 c) $203,500 d) $310,000

b) $204,500 265,000 + 361,800 - 45,000 - 7,300 - 370,000 = 204,500

Wateredge Corporation has budgeted a total of $361,800 in costs and expenses for the upcoming quarter. Of this amount, $45,000 represents depreciation expense and $7,300 represents the expiration of prepayments Wateredge's current payables balance is $265,000 at the beginning of the quarter. Budgeted payments on current payables for the quarter amount to $370,000. The company's estimated current payables balance at the end of the quarter is: a) $179,500 b) $204,500 c) $203,500 d) $310,000

b) $204,500 361,800 - 45,000 - 7,300 + 265,000 - 370,000 = 204,500

Alton Company produces metal belts. During the current month, the company incurred the following product costs: Raw materials $100,000 Direct labor $75,000 electricity used in the factory $25,000 Factory foreperson salary $3,750 Maintenance of factory machinery $2,000 Alton Company's indirect product costs totaled: a) $175,000 b) $30,750 c) $75,000 d) $28,750

b) $30,750 25,000 + 3,750 + 2,000 = 30,750

Alton Company produces metal belts. During the current month, the company incurred the following product costs: raw materials $100,000 direct labor $75,000 electricity used in the factory $25,000 factory foreperson salary $3,750 Maintenance of factory machinery $2,000 Alton Company's indirect product costs totaled: a) $175,000 b) $30,750 c) $75,000 d) $28,750

b) $30,750 25,000 + 3750 + 2000 = 30,750

Baskin Promotions, Inc. sells T-shirts decorated for a variety of concert performers. The company has developed the following budget for the coming year based on a sales forecast of 74,000 T-shirts: Sales $1,290,560 Cost of Goods Sold 754,060 Gross Profit 536,500 Operating expenses (100,000 is fixed) 394,520 Operating income 141,980 Income taxes (30% of operating income) 42,594 Net Income 99,386 Cost of goods sold and variable operating expenses vary directly with sales, and the income tax rate is 30% at all levels of operating income. If the concert season is slow due to poor weather, Baskin estimates that sales could fall to as low as 54,000 T-shirts. I a flexible budget for sales of 54,000 T-shirts, how much would Baskin budget for operating expenses? a) $214,920 b) $314,920 c) $394,520 d) $294,520

b) $314,920 394,520 - 100,000/74,000 = 3.98 3.98 x 54,000 +100,000 = 314,920

The Fine Point Company produces all of the components for its one product, an electric pencil sharpener. The unit cost of manufacturing the motor for this pencil sharpener is: Direct materials $1.75 Direct labor $1.65 Variable overhead $0.75 Fixed overhead $0.60 The company is considering the possibility of buying this motor from a subcontractor and has been quoted a price of $3.60 per unit. The relevant cost of manufacturing the motor to be considered in reaching the decision is: a) $4.75 b) $4.15 c) $3.55 d) $4.05

b) $4.15

Rent expense in Burr Company's income statement is $480,000. If Prepaid Rent was $120,000 on January 1 and is $95,000 on December 31, the cash paid for rent during the year is: a) $480,000 b) $455,000 c) $360,000 d) $575,000

b) $455,000 120,000 - 95,000 = 25,000 480,000 - 25,000 = 455,000

At the beginning of the current year, Wilson Corporation had 200,000 shares of $1 par common stock outstanding and had retained earnings of $4,800,000. During the year, the company earned $1,675,000 and paid a year-end cash dividend of $3 per share. What was Wilson Corporation's retained earnings at the end of the year? a) $6,275,000 b) $5,875,000 c) $6,475,000 d) $4,800,000

b) $5,875,000 200,000 x 3 = 600,000 1,675,000 - 600,000 = 1,075,000 1,075,000 + 4,800,000 = 5,875,000

If monthly fixed costs are $21,000 and the contribution margin ratio is 42%, the monthly sales volume required to break even is: a) $8,820 b) $50,000 c) $78,000 d) $39,207

b) $50,000 21,000/.42 = 50,000

Edwards Auto Body uses a job order cost system. Overhead is applied to jobs on the basis of direct labor hours. During the current period Job No. 337 was charged $425 in direct materials, $475 in direct labor and $190 in overhead. If direct labor costs an average of $16 per hour, the company's overhead application rate is: a) $7.27 per direct labor hour b) $6.40 per direct labor hour c) $17.50 per direct labor hour d) $40 per direct labor hour

b) $6.40 per direct labor hour

John Boyd Corporation manufactures and sells 1,000 tractors each month. The primary component in each tractor is the motor. John Boyd has the monthly capacity to product 1,300 motors. The variable costs associated with manufacturing each motor are shown below: Direct ma.terials $24 Direct labor $16 Variable manufacturing overhead $29 Fixed manufacturing overhead per month (for up to 1,300 units of production) averages $27,000. Joan Reid, Inc. has offered to purchase 200 motors from John Boyd per month to be used in its own outboard motors What is the incremental cost of producing each additional motor? a) $29 per unit b) $69 per unit c) $95 per unit d) some other amount

b) $69 per unit

If the unit sales price is $12, variable costs are $6 per unit, and fixed costs are $36,000, what sales volume (in dollars) is necessary to break-even? a) $90,000 b) $72,000 c) $70,000 d) $60,000

b) $72,000

Zigma Corporation is authorized to issue 2,000,000 shares of $4 par value capital stock. The corporation issued half the stock for cash at $8 per share, earned $336,000 during the first three months of operation and declared a cash dividend of $60,000. The total paid-in capital of Zigma Corporation after three months of operations is: a) $7,940,000 b) $8,000,000 c) $8,276,000 d) $8,336,000

b) $8,000,000 2,000,000/2 = 1,000,000 x 8 =8,000,000

Moran Company uses a job order cost system and has established a predetermined overhead application rate for the current year of 150% of direct labor cost, based on budgeted overhead of $900,000 and budgeted direct labor cost of $600,000. Job. No. 1 was charged with direct materials of $36,000 and with overhead of $27,000. What is the total cost of Job No. 1? a) $64,000 b) $81,000 c) $91,000 d) cannot be determined without additional information

b) $81,000 36,000 + 27,000 + 18,000 = 81,000 27,000 / 1.5 = 18,000

Which of the budgeted financial statements is generally prepared last? a) budgeted income statement b) cost of goods sold budget c) budgeted balance sheet d) cash balance

c) budgeted balance sheet

Shown below are selected data from the financial statements of Supreme Co. Dollar amounts are in millions (except for the per share data). Income statement data: Net Sales $1,410 Cost of Goods sold $565 Operating expenses $485 Net income $480 Balance Sheet data: average total equity $3,300 average total assets $4,900 Supreme reported earnings per share for the year of $4 and paid cash dividends of $1 per share. At year-end, the Wall Street Journal listed Supreme's capital stock as trading at $97 per share Supreme's price-earnings ratio at year end was: a) 25 b) 24.25 c) 4 d) 100

b) 24.25 p/e ratio = market price per share/annual earnings per share

If the unit sales price is $14, variable costs are $7 per unit and fixed costs are $42,000, how many units must be sold to earn an income of $250,000. a) 52,142 b) 41,175 c) 34,762 d) 29,796

b) 41,175

If the unit sales price is $12, variable costs are $6 per unit and fixed costs are $26,000 what is the contribution margin ratio per unit? a) 40% b) 50% c) 60% d) 70%

b) 50%

Mentha Company currently has the following statistics: Days in Inventory - 80 Operating cycle - 148 What is Mentha's days in accounts receivable? a) 80 days b) 68 days c) 148 days d) cannot be determined from the information given

b) 68 days 148 - 80 = 68

Shown below are selected data from the financial statements of Supreme Co. Dollar amounts are in millions (except for the per share data). Income statement data: Net Sales $1,410 Cost of Goods sold $565 Operating expenses $485 Net income $480 Balance Sheet data: average total equity $3,300 average total assets $4,900 Supreme reported earnings per share for the year of $4 and paid cash dividends of $1 per share. At year-end, the Wall Street Journal listed Supreme's capital stock as trading at $97 per share Supreme's return on assets was: a) 9.8% b) 7.35% c) 17.24% d) 28.78%

b) 7.35% return on assets = operating income/average total assets 360/4900 = 7.35 operating income: net sales - cost of goods sold - operating expenses

Which statement is true as to the FASB's position on the presentation of the statement of cash flows? a) The FASB recommends the use of the indirect method, but most companies us the direct method b) The FASB recommends the use of the direct method, but most companies use the indirect method c) the FASB recommends the use of the direct method, and most companies us the direct method d) the FASB recommends the use of the indirect method, and most companies use the indirect method

b) The FASB recommends the use of the direct method, but most companies use the indirect method

Which element of a master budget would normally be prepared last? a) a cash budget b) a budgeted balance sheet c) a budgeted income statement d) a production budget

b) a budgeted balance sheet

Which of the following indicates a cash receipt? a) a decrease in accrued expenses, such as wages payable b) a decrease in accounts receivable c) an increase in inventory d) a decrease in accounts payable

b) a decrease in accounts receivable

On January 31, 2018, Village Bank had 500,000 shares of $2 par value common stock outstanding. On that date, the company declared a 14% stock dividend when the market price of the stock was $37 per share. The immediate effect of this dividend upon Village Bank was: a) a reduction in cash of $2,590,000 b) a reduction in retained earnings of $2,590,000 c) a reduction in retained earnings of $140,000 d) a liability to the stockholders of $140000

b) a reduction in retained earnings of $2,590,000

Mell Co. manufactured 100 personal computers at a cost of $30,000. It can sell them as is for $65,000, or install hard disks in them for $25,000 and sell them for $105,000. The $30,000 original manufacturing cost is: a) an out-of-pocket cost because it has already been paid b) a sunk cost because it is not relevant to the decision c) an incremental cost because it is relevant to the decision d) a fixed cost because it will remain the same no matter which action is taken

b) a sunk cost because it is not relevant to the decision

The payment of raw materials previously purchased on account is recorded by an entry debiting: a) raw materials inventory b) accounts payable c) work in process inventory d) cash

b) accounts payable

In an activity-based costing system, manufacturing overhead costs are divided into separate: a) cost drivers b) activity cost pools c) activity bases d) indirect cost centers

b) activity cost pools

A prior period adjustment appears in the financial statements of the current year when: a) an error was made in computing the net income of the current period b) an error was made in measuring the net income of a previous year or years c) a non-recurring loss in a prior year was included among normal results of operations in the prior year d) earnings per share figures from prior years are restated to reflect the increased number of shares outstanding due to a stock split or a stock dividend

b) an error was made in measuring the net income of a previous year or years

The common stock of Securetech Corporation consistently sells at a market price of 20 times earnings (i.e., at a p/e ratio of 20). What would be the most likely effect of a 10-cent increase in Securetech's basic EFP? a) an increase in market price of approximately 10 cents per share b) an increase in market price of approximately $2 per share c) a reduction in the P/e ratio due to the larger EPS d) nothing. since market price reflects expectations of future earnings

b) an increase in market price of approximately $2 per share

The common stock of Securetech Corporation consistently sells at a market price of 20 times earnings (i.e., at a p/e ratio of 20). What would be the most likely effect of a 10-cent increase in Securetech's basic EPS? a) an increase in the market price of approximately 10 cents per share b) an increase in market price of approximately $2 per share c) a reduction in the p/e ratio due to the larger EPS d) nothing, since market price reflects expectations of future earnings

b) an increase in market price of approximately $2 per share

The computation of equivalent units is generally not necessary when: a) beginning work-in-process inventories are significantly larger than ending work-in-process inventories b) beginning and ending work in process inventories differ only slightly c) the number of units in ending work-in-process exceeds the number of units completed and transferred to finished goods during the period d) per-unit costs become distorted as a result of not computing equivalent units of production

b) beginning and ending work in process inventories differ only slightly

Which of the following is not a benefit of a careful and thorough budgeting process? a) budgeting increases management's awareness of the company's external economic environment b) budgeted net income assures the company of operating profitably c) the budget may provide advance warning of pending problems d) budgets provide a yardstick for evaluating future performance

b) budgeted net income assures the company of operating profitably

Which of the following is not a benefit of a careful and thorough budgeting process? a) budgeting increases management's awareness of the company's external economic environment b) budgeted net income assures the company of operating profitably c) the budget may provide advanced warning of pending problems d) budgets provide a yardstick for evaluating future performance

b) budgeted net income assures the company of operating profitably

A semivariable cost: a) increases and decreases and proportionately with changes in volume b) changes in response to a change in volume, but not proportionately c) increases if volume increases, but remains constant if volume decreases d) changes inversely in response to a change in volume

b) changes in response to a change in volume, but not proportionately

A semivariable cost: a) increases and decreases directly and proportionately with changes in volume b) changes in response to a change in volume, but not proportionately c) increases if volume increase, but remains constant if volume decreases d) changes inversely in response to a change in volume

b) changes in response to a change in volume, but not proportionately

In an aircraft factory, the inventory of direct materials would not include: a) electronic instruments to be installed in aircraft b) completed aircraft, available for sale c) sheet aluminum to be used for the exterior "skin" of the aircraft d) ejection seats to be installed only in military aircraft

b) completed aircraft, available for sale

In evaluating the efficiency of a production department, management should: a) consider all costs of production across departments b) consider that department activities only c) consider all corporate-wide period costs d) compare the costs of production across deparments

b) consider that department activities only

A company failed to make an adjusting entry in the prior year to accrue earned revenue. To correct this they should: a) correct last year's statement by increasing net income b) correct this year's statements with a prior period adjustment increasing beginning retained earnings c) correct this year's statements with a prior period adjustment decreasing beginning retained earnings d) correct this years statements with a prior period adjustment increasing ending retained earnings (no)

b) correct this year's statements with a prior period adjustment increasing beginning retained earnings

The debt ratio is used primarily as a measure of: a) short-term liquidity b) creditors' long-term risk c) profitability d) return of investment

b) creditors' long-term risk

The wages paid to employees working directly on a company's products would be shown as a: a) credit to direct labor b) debit to direct labor c) credit to work in process d) debit to manufacturing overhead

b) debit to direct labor

Rather small favorable standard cost variances are closed by: a) debiting work in process inventory and crediting the variance b) debiting the variance and crediting Cost of Goods sold c) debiting cost of goods sold and crediting the variance d) debiting the variance and crediting work in process inventory

b) debiting the variance and crediting Cost of Goods sold

When volume increases, fixed cost per unit: a) increases b) decreases c) stays the same d) increases or decreases depending upon the situation

b) decreases

When volume increases, fixed cost per unit: a) increases b) decreases c) stays the same d) increases or decreases, depending upon the situation

b) decreases

Preparation of a budgeted income statement does not require: a) estimates of cost of goods sold b) estimates of the timing of cash receipts and payments c) preparation of sales forecast d) anticipation of operating expenses

b) estimates of the timing of cash receipts and payments

The current ratio will be __________ the quick ratio. a) less than b) greater than or equal to c) the same as d) always different than

b) greater than or equal to

The current ratio will be _____________ the quick ratio a) less than b) greater than or equal to c) the same as d) always different than

b) greater than or equal to

Aircraft Products, a manufacturer of aircraft landing gear, makes 1,000 units each year of a special valve used in assembling one of its products. The unit cost of producing this valve includes variable costs of $70 and fixed cost of $60. The valves could be purchased from an outside supplier at $77 each. If the valve were purchased from the outside supplier, 40% of the total fixed costs incurred in producing this valve could be eliminated. Buying the valves from the outside supplier instead of making them would cause the company's operating income to: a) increase by$26 b) increase by $17,000 c) decrease by $9,000 d) decrease by $29,000

b) increase by $17,000

The principal difference between managerial accounting and financial accounting is that managerial accounting information is: a) prepared by managers b) intended primarily for use by decision makers inside the business organization c) prepared in accordance with a set of accounting principles developed by the institute of certified managerial accountants c) oriented toward measuring solvency rather than profitability

b) intended primarily for use by decision makers inside the business organization

The production schedule in units: a) cannot be prepared until the budgeted income statement is completed b) is dependent upon the sales forecast for the period c) is based upon the manufacturing cost budget, that is, upon the level of funds available for manufacturing costs d) is the starting point in the preparation of the master budget

b) is dependent upon the sales forecast for the period

Products that emerge from a shared manufacturing process are referred to as: a) complementary products b) joint products c) contributory products d) codependent products

b) joint products

In most process costing systems, the number of units "in process" at any one time is usually significant relative to the total production output of the period true/false

false

All of the following are true of operating expenses except: a) operating expenses are incurred for the purpose of producing revenue b) operating expenses are subdivided into the classifications of component and trend c) the administrative expenses portion of operating expenses tends to remain constant from period to period d) subdividing operating expenses ito different classifications helps managers and investors evaluate different aspects of the company's operations

b) operating expenses are subdivided into the classifications of component and trend

Costs that have not yet been incurred and that may vary among different courses of action are called: a) opportunity costs b) out-of-pocket costs c) joint costs d) sunk costs

b) out-of-pocket costs

Which of the following is not classified among the operating activities in a statement of cash flows? a) payment of interest on a bank loan b) payment of the principal amount owed on a bank loan c) payment of an account payable to a merchandise supplier d) payment of income taxes

b) payment of the principal amount owed on a bank loan

A comparative financial statement: a) places the balance sheet, the income statement, and the statement of cash flows side-by-side in order to compare the results b) places two or more years of a financial statement side-by-side in order to compare results c) places the financial statements of two or more companies side-by-side in order to compare results d) places the dollar amounts next to the percentage amounts of a given year for the income statement

b) places two or more years of a financial statement side-by-side in order to compare results

Which of the following statements is/are true regarding prepayments for items such as rent and insurance? a) prepayments represent operating cash outflows that have an immediate effect on operating income b) prepayments represent operating cash outflows that have no immediate effect on operating income c) prepayments have an immediate effect on operating income but no immediate effect on operating cash flow d) payments have no immediate effect on operating cash flow or on operating income

b) prepayments represent operating cash outflows that have no immediate effect on operating income

Costs that are traceable to a particular unit and inventoriable are called: a) period costs b) product costs c) overhead costs d) job costs

b) product costs

Return on equity computations are used in evaluating: a) liquidity b) profitability c) gross profit d) whether a ratio is improving or deteriorating over time

b) profitability

Being profit rich, yet cash poor is often attributed to a) expenses exceeding revenue b) rapid growth c) operating cash flow outpacing revenue d) sluggish growth

b) rapid growth

The placing of direct materials into the production process is recorded by an entry crediting: a) materials expense b) raw materials inventory c) work in process inventory c) finished goods inventory

b) raw materials inventory

It would be _____________________ for managers to make decisions based only on financial information. a) prudent b) short-sighted c) irrefutable d) factual

b) short-sighted

If a material accounting error was made in a prior year, that error: a) should be reflected on the current year's income statement b) should be reflected, net of taxes, on the retained earnings statement c) should be reflected as a change in accounting principle d) should be considered as a non-recurring item, and shown, net of taxes, on the income statement

b) should be reflected, net of taxes, on the retained earnings statement

Assuming there is no preferred stock, book value per share of common stock is derived by which of the following? a) stockholders' equity divided by the number of shares authorized b) stockholders' equity divided by the number of shares outstanding c) net income divided by the number of shares outstanding d) net income divided b the number of shares authorized

b) stockholders' equity divided by the number of shares outstanding

Fancy Furniture produced a batch of 2,000 coffee tables at a cost of $355,000. It was discovered that the entire batch was finished improperly. Fancy can sell the tables as seconds for $305,000 or spend an additional $315,000 to refinish them and sell them $605,000. Which of the following is NOT relevant to management's decision regarding refinishing the tables or selling them as is? a) the additional $300,000 revenue that can be generated if the tables are refinished b) the $355,000 manufacturing cost of the tables already incurred c) the additional $315,000 cost to refinish the tables d) the effect of selling "seconds" on Fancy's reputation as a fine-furniture manufacturer

b) the $355,000 manufacturing cost of the tables already incurred

Which statement is true as to the FASB's position on the presentation of the statement of cash flows? a) the FASB recommends the use of the indirect method, but most companies use the direct method b) the FASB recommends the use of the direct method, but most companies use the indirect method c) the FASB recommends the use of the direct method, and most companies use the direct method d) the FASB recommends the use of the indirect method, and most companies us the indirect method

b) the FASB recommends the use of the direct method, but most companies use the indirect method

Which of the following would be an example of a sunk cost? a) the cost of a new oil burner that replaced a destroyed one b) the cost of an old inefficient oil burner that will be replaced by a more modern and efficient one c) depreciation expense d) lost revenue from a bad debt

b) the cost of an old inefficient oil burner that will be replaced by a more modern and efficient one

Incremental costs can be defined as: a) costs that are expected to increase regardless of the course of action b) the differences between costs incurred under alternative courses of action c) costs incurred in the past d) costs that are irrelevant in decision making

b) the differences between costs incurred under alternative courses of action

Accepting a special order is profitable whenever the revenue from the special order exceeds: a) the average unit cost of production multiplied by the number of units in the order b) the incremental cost of producing the order c) the materials and direct labor costs of producing the order d) the fixed manufacturing costs for the period

b) the incremental cost of producing the order

In order for a loss on the disposal of a discontinued operation to be classified on the income statement as a discontinued operation, it must be unusual in nature true/false

false

When no-par stock is issued: a) the entire amount received is credited to the Additional Paid-in Capital account b) the issue price is credited to the capital stock account c) there is no legal capital created because there is no par or stated value d) the transaction usually involves only an exchange for non-cash assets or services, since the stock has no value on the stock exchanges

b) the issue price is credited to the capital stock account

A company's relevant range of production is: a) the production range from zero to 100% of plant capacity b) the production range over which CVP assumptions are valid c) the production range beyond the break even point d) the production range that covers fixed but not variable costs

b) the production range over which CVP assumptions are valid

A company's relevant range of production is: a) the production range from zero to 100% of plant capacity b) the production range over which CVP assumptions are valid c) the production range beyond the break-even point d) the production range that covers fixed but not variable costs

b) the production range over which CVP assumptions are valid

Which of the following does not decrease the cash flow from operating activities? a) the prepayment of an expense b) the purchase of operating equipment c) the payment of interest d) the prepayment of an expense, the purchase of operating equipment, and the payment of interest all decrease cash from operating activities

b) the purchase of operating equipment

There will be a favorable materials price variance if: a) the standard price per unit is less than the actual price per unit b) the standard price per unit is greater than the actual price per unit c) the actual quantity purchased is greater than expected d) the actual quantity purchased is less than expected

b) the standard price per unit is greater than the actual price per unit

Which philosophy is setting budgeted amounts assumes both the complete elimination of inefficiencies and a level of absolute efficiency? a) the behavioral approach b) the total quality management approach c) the strategic approach d) the master budget approach

b) the total quality management approach

The rights of a common stockholder do not include the right: a) to vote for directors b) to withdraw a share of corporate net assets proportionate to the person's stockholdings c) to receive a proportionate share of corporate assets upon liquidation, after creditors have been paid d) to share in profits when the board of directors declares a dividend

b) to withdraw a share of corporate net assets proportionate to the person's stockholdings

Grands Co.'s ending inventory of work in process is twice as large as at the beginning of the period. Therefore: a) the ending inventory of finished goods must be larger than the beginning inventory of finished goods b) total manufacturing costs for the period must exceed the cost of finished goods manufactured c) total manufacturing costs for the period must exceed the costs of goods sold d) the cost of finished goods manufactured must be smaller than the cost of goods sold

b) total manufacturing costs for the period must exceed the cost of finished goods manufactured

The changes in financial statement items from a base year to following years are called: a) money changes b) trend percentages c) component percentages d) ratios

b) trend percentages

An unfavorable volume variance in a factory is generally: a) the responsibility of production manager b) viewed as an idle capacity loss c) the result of actual volume exceeding normal volume d) treated as pat of the controlled factory overhead variance

b) viewed as an idle capacity loss

When products are completed: a) finished goods inventory is credited b) work in process inventory is credited c) cost of goods sold is debited d) work in process inventory is debited

b) work in process inventory is credited

Which of the following are likely to result in an unfavorable materials price variance? a) the use of lower-quality direct materials than normal b) the use of higher-quality direct materials than normal c) the use of more expensive direct materials than normal d) the use of less expensive direct materials than normal

b, c

Which of the following are examples of fixed costs? check all that apply a) weekly sales commissions b) quarterly property taxes c) semiannual insurance premiums d) monthly depreciation expense

b, c and d

Which of the following are examples of variable costs? check all that apply a) semiannual insurance premiums b) overtime wages paid to production workers c) sales commissions d) weekly fuel costs for delivery trucks

b, c and d

Which of the following statements is/are true regarding the relevance of information required to make business decisions? a) qualitative concerns, such as ethical sensitivity, are generally not considered relevant to business decisions b) identifying relevant information requires judgment c) relevant financial information focuses primarily upon costs and revenues d) the only information relevant to a particular business decision is that which varies among possible outcomes

b, c and d

As units sold flow out of Finished goods inventory in a standard cost system, (check all that apply) a) finished goods inventory is credited at actual cost amounts b) cost of goods sold is debited at standard cost amounts c) cost of goods sold is debited at actual cost amounts d) finished goods inventory is credited at standard cost amounts

b, d

Which of the following are likely to result in an unfavorable labor efficiency variance? a) using more experienced workers than normal b) using more overtime hours than normal c) using fewer overtime hours than normal d) using less experienced workers than normal

b, d

The quick ratio a) is computed by dividing current assets by current liabilities b) is always higher than the current ratio c) cannot be higher than the current ratio d) may be higher or lower than the current ratio

c) cannot be higher than the current ratio

The following information has been taken from the perpetual inventory system of Elite Mfg. Co. for the month ended August 31: Purchases of direct materials: $76,000 Direct materials used: $62,500 Direct labor costs assigned to production: $20,000 Manufacturing overhead costs incurred (and applied): $35,000 Balances in Inventory: August 31 August 1 materials ? 36.000 work in process 60,000 55,000 finished goods 65,000 47,800 Total manufacturing costs charged (debited) to work in process during August amount to: a) $55,000 b) $153,500 c) $117,500 d) some other amounts

c) $117,500 62,500 + 20,000 + 35,000 = 117,500

On September 1, 2018, Maryland Corporation's common stock was selling at a market price of $200 per share. On that date, Maryland announced a 3 for 2 stock split. At what price would you expect the stock to trade immediately after the split goes into effect? a) $100 per share b) $200 per share c) $133.33 per share d) $2.25 per share

c) $133.33 per share

During July, the equivalent units of direct materials added to the product worked on by Department A amounted to a total of 90,000 applied as follows: beginning inventory 20,000 units; units started and completed in July 60,000 units; ending inventory 10,000 units. Assuming that the cost of direct materials requisitioned by the department in July was $135,000; the amount of the materials cost to be assigned to the ending inventory would be: a) $16,875 b) $54,000 c) $15,000 d) $18,000

c) $15,000 $135,000 x (10,000/90,000) = $15,000

The SEC requires public companies to use the indirect method for the statement of cash flows true/false

false

The following information has been taken from the perpetual inventory system of Elite Mfg. Co. for the month ended August 31: Purchases of direct materials: $76,000 Direct materials used: $62,500 Direct labor costs assigned to production: $20,000 Manufacturing overhead costs incurred (and applied): $35,000 Balances in Inventory: August 31 August 1 materials ? 36.000 work in process 60,000 55,000 finished goods 65,000 47,800 The total amount of inventory to be included in Elite's August 31st balance sheet amounts to: a) $138,500 b) $237,000 c) $174,500 d) some other amount

c) $174,500 76,000 +62,500 + 36,000 = 174,500

If a retail store has a current ratio of 2.5 and working capital of $117,000. What are the total of the current assets? a) $46,800 b) $117,000 c) $195,000 d) $292,500

c) $195,000 wc = current assets - current liab current ratio = current assets/current liabilities

Alton Company produces metal belts. During the current month, the company incurred the following product costs: raw materials $100,000 direct labor $75,000 electricity used in the factory $25,000 factory foreperson salary $3,750 maintenance of factory machinery $2,000 alton Company's total product costs: a) $175,000 b) $30,750 c) $205,750 d) $28,750

c) $205,750 100,000 + 75,000 +25,000 +3,750 + 2,000 = 205,750

Monarch Company uses the indirect method to prepare its statement of cash flows. The following information has been gathered for the current period: Gain on sale of land $54,000 Net Income $171,000 Depreciation expense $83,000 Cash received from sale of land $169,000 Decrease in inventory $ 19,000 Increase in accounts receivable $14,000 Increase in accounts payable $20,000 On the basis of the above information only, Monarch Company's statement of cash flows shows net cash flow from operating activities to be: a) $187,000 b) $333,000 c) $225,000 d) $361,000

c) $225,000 net income + depreciation +increase in accounts payable +decrease in inventory - increase in accounts receivable - gain on sale of land 171,000 + 83,000 + 20,000 + 19,000 -14,000 - 54,000 = 225,000

Haven Corporation issued $700,000 of 10-year bonds payable at par in 2014. During 2018, Haven paid $50,000 interest and an additional $233,333 to retire one-third of the bonds at par. These activities would be reported in Haven's statement of cash flows for 2018 as: a) $283,333 net cash provided by financing activities b) $283,333 net cash used in financing activities c) $233,333 net cash used in financing activities, and $50,000 cash disbursed for operating activities d) $466,667 net cash provided by financing activities, and $50,000 cash disbursed for operating activities

c) $233,333 net cash used in financing activities, and $50,000 cash disbursed for operating activities

Sherman has budgeted sales for the upcoming quarter as follows: April - 1,600 units May - 1,900 units June - 1,750 units The desired ending finished goods inventory for each month is one-half of next month's budgeted sales. Three pounds of direct material are required for each unit produced. If direct material costs $5 per pound, and must be paid for in the month purchased, the budgeted direct materials purchases (in dollars) for April are: a) $17,500 b) $40,500 c) $26,250 d) $38,250

c) $26,250 800 units for April (800 was produced in March) + 950 for May (produced in April) = 1,750 units x 3 x 5 = 26,250

For the current year, Voque Company reported basic earnings per share of $8 and diluted earnings per share of $3. The difference between these figures is attributable to outstanding shares of convertible preferred stock. If all this preferred stock had actually been converted into common stock at the beginning of the current year, Voque Company would have reported only one earnings per share amount, which would have been: a) $8 b) $5 c) $3 d) cannot be determined

c) $3

A company had 125,000 shares of common stock outstanding on January 1 and then sold 35,000 additional shares on March 30. Net income for the year was $594,750. What are earnings per share? a) $4.73 b) $4.58 c) $3.93 d) $6.61

c) $3.93 125,000 x 3/12 + 160,000 x 9/12 = 151,250 594,750 / 151,250 = $3.93

Susan is contemplating whether to host a family reunion in June. The decision would increase her June food budget from its current amount of $400 to $700. What dollar amount pertaining to Susan's June food budget is relevant to this decision? a) $700 b) $1,100 c) $300 d) $400

c) $300

Shown below are selected data from the financial statements of Supreme Co. Dollar amounts are in millions (except for the per share data). Income statement data: Net Sales $1,410 Cost of Goods sold $565 Operating expenses $485 Net income $480 Balance Sheet data: average total equity $3,300 average total assets $4,900 Supreme reported earnings per share for the year of $4 and paid cash dividends of $1 per share. At year-end, the Wall Street Journal listed Supreme's capital stock as trading at $97 per share What was Supreme's operating income (in millions)? a) $845 b) $480 c) $360 d) $565

c) $360 1410 - 565 - 485 = 360

Stupper Corporation manufactures two products; data are shown below: Product D - Contribution margin ratio 50%, relative sales mix 60% Product F - Contribution margin ratio 60%, relative sales mix 40% If Stupper's monthly fixed costs average $200,000, what is its break even point expressed in sales dollars? a) $320,000 b) $250,000 c) $370,370 d) $152,632

c) $370,370

Capri Boat Corporation uses a job order cost system and applies overhead based on a percentage of direct labor cost. Cost flows through the work in process inventory account during march are given below: Work in Process Beginning balance 0 direct materials 45,000 direct labor 84,000 overhead 168,000 ending balance 112,600 transferred out 184,40 Only job #007 was still in process at the end of March and this job had been charged with $40,000 in direct materials cost. The amount of overhead costs applied to Job #007 during March was: a) $24,200 b) $44,000 c) $48,400 d) $72,600

c) $48,400

Capri Boat Corporation uses a job order cost system and applies overhead based on a percentage of direct labor cost. Cost flows through the work in process inventory account during march are given below: Work in Process Beginning balance 0 direct materials 45,000 direct labor 84,000 overhead 168,000 ending balance 112,600 transferred out 184,40 Only job #007 was still in process at the end of March and this job had been charged with $40,000 in direct materials cost. The amount of direct materials cost charged to completed jobs during march was: a) $20,000 b) $42,000 c) $5,000 d) $112,500

c) $5,000 45,000 - 40,000 = 5,000

Large stock dividends tend to: a) increase stock prices b) have no effect upon stock prices c) keep stock prices down d) decrease total assets

c) keep stock prices down

During the current year, Jules Company incurred the following product costs: Direct materials used in production: $250,000 Direct labor: $185,000 Manufacturing overhead: $245,500 Jules Company's beginning Work in Process Inventory was $20,000 and its ending Work in Process Inventory amounted to $30,000. What is the company's cost of finished goods manufactured for the year? a) $700,500 b) $690,500 c) $670,500 d) $430,500

c) $670,500 20,000 + 250,000 + 185,000 + 245,000 = 700,500 700,500 - 30,000 = 670,500

The Plaza Company has working capital of $540,000, and a current ratio of 3 to 1. The amount of current assets is: a) $405,000 b) $540,000 c) $810,000 d) $270,000

c) $810,000 current assets - current liabilities = working capital

Determine the amount of manufacturing overhead given the following information: Depreciation on a factory building: $2,600 Telephone expense in factory office: $950 Telephone expense in sales showroom: $1,050 Factory foreman's salary: $5,200 Maintenance costs for the factory: $1,000 Maintenance costs for the sales showroom: $880 a) $7,750 b) $10,430 c) $9,750 d) $11,080

c) $9,750 2,600 + 950 + 5,200 + 1,000 = 9,750

Determine the amount of manufacturing overhead given the following information: Depreciation on a factory building $2,600 Telephone expense in factory office $950 Telephone expense in sales showroom $1,050 Factory foreman's salary $5,200 Maintenance costs for the factory $1,000 Maintenance costs for the sales showroom $880 a) $7,750 b) $10,430 c) $9,750 d) $11,080

c) $9,750 2600 +950 + 5200 + 1000 = 9,750

John Boyd Corporation manufactures and sells 1,000 tractors each month. The primary component in each tractor is the motor. John Boyd has the monthly capacity to product 1,300 motors. The variable costs associated with manufacturing each motor are shown below: Direct materials $24 Direct labor $16 Variable manufacturing overhead $29 Fixed manufacturing overhead per month (for up to 1,300 units of production) averages $27,000. Joan Reid, Inc. has offered to purchase 200 motors from John Boyd per month to be used in its own outboard motors. If Joan Reid's order is rejected, what will be John Boyd's average unit cost of manufacturing each month? a) $68 per unit b) $70 per unit c) $96 per unit d) some other amount

c) $96 per unit

Mentha Company currently has the following statistics: Days in Inventory - 80 Days in Accounts receivable - 68 What is Mentha's operating cycle? a) 80 days b) 68 days c) 148 days d) cannot be determined from the information given

c) 148 days

Mentha Company currently has the following statistics: Days in inventory - 80 Days in accounts receivable - 68 What is Mentha's operating cycle? a) 80 days b) 68 days c) 148 days d) cannot be determined from the information given

c) 148 days

Product X sells for $35 per unit and has related variable costs of $25 per unit. The fixed costs of producing product X are $65,000 per month. How many units of product X must be sold each month to earn a monthly operating income of $85,000? a) 2,833 units b) 6,000 units c) 15,000 units d) 10,000 units

c) 15,000 units

Doyle Co. uses a job order cost accounting system. At year-end the work-in-process inventory controlling account showed a debit balance of $43,125. For the two jobs in process at year-end, one showed $6,000 in direct materials and $4,500 in direct labor. The job cost sheet for the second job showed $9,000 in direct materials and $6,750 in direct labor. If the company is using a predetermined overhead application rate based on direct labor cost, the rate is: a) 55% b) 100% c) 150% d) 200%

c) 150%

Generally speaking, which appears to be a desirable current ratio: a) 20 to 1 b) 1 to 20 c) 2 to 1 d) 1 to 2

c) 2 to 1

Which of the following is a measure of short-term liquidity a) quick ratio b) return on assets c) dividend yield d) debt ratio

c) 2 to 1

If 8,000 units were in beginning inventory, 26,000 units were started, and 6,000 units were in ending inventory, how many units were transferred out? a) 40,000 units b) 26,000 units c) 28,000 units d) 24,000 units

c) 28,000 units 8,000 + 26,000 - 6,000 = 28,000

On January 1, 2018, Carleton Corporation had 55,000 shares of $6 per value common stock outstanding. On March 31, 2018, Carleton issued an additional 10,000 shares in exchange for a building. What number of shares will be used in the computation of earnings per share for the year 2018? a) 55,000 b) 65,000 c) 62,500 d) 62,000

c) 62,500

Assume the following: FC = fixed costs CM = contribution margin per unit TOI = targeted operating income Units = sales volume in units Which of the following is the formula for determining the sales volume required in units to earn a desired level of operating income? a) Units = (fC - TOI)/CM b) Units = (fc + cm)/TOI c) Units = (fc + TOI)/CM d) Units = (fc - cm)/TOI

c) Units = (fc + TOI)/CM

Which of the following is a major component of a master budget? a) a production throughput schedule b) a machinery maintenance schedule c) a cash budget d) an employee training budget

c) a cash budget

During the month of June, $352,150 of costs were transferred from Department A to Department B. The journal entry to summarize the transfer of these costs includes: a) a debit to department A for $352,150 b) a credit to department B for $352,150 c) a credit to department A for $352,150 d) no entry is required when costs are transferred between departments

c) a credit to department A for $352,150

During the month of June, $352,150 of costs were transferred from Department A to Department B. The journal entry to summarize the transfer of these costs includes: a) a debit to department A for $352,150 b) a credit to department B for $352,150 c) a credit to department a for $352,150 d) no entry is required when costs are transferred between departments

c) a credit to department a for $352,150

A master budget usually includes all of the following except: a) a sales forecast b) a cash budget c) a projected tax return d) projected financial statements

c) a projected tax return

Which of the following would indicate a cash disbursement? a) selling equipment at a loss b) a decrease in accounts receivable c) an increase in prepaid expenses d) a decrease in inventory

c) an increase in prepaid expenses

Equivalent units of production significantly differ from units completed and transferred during the period only when no significant differences exist between beginning and ending workin process true/false

false

Fancy Furniture produced a batch of 2,000 coffee tables at a cost of $355,000. It was discovered that the entire batch was finished improperly. Fancy can sell the tables as seconds for $305,000 or spend an additional $315,000 to refinish them and sell them $605,000. In deciding whether to rework the tables or sell them as is, management should: a) compare the $305,000 proceeds from the sale of the tables as is, with the $355,000 cost of the tables b) compare the $605,000 possible revenue from refinished tables with the total cost of $355,000 plus $315,000 to refinish c) compare the $315,000 cost to refinish the tables with the incremental revenue of $300,000 if the tables are refinished d) eliminate any alternative that results in a loss on the sale of the product

c) compare the $315,000 cost to refinish the tables with the incremental revenue of $300,000 if the tables are refinished

The measurement of the relative size of each item included in a total is called: a) money changes b) trend percentages c) component percentages d) ratios

c) component percentages

A flexible budget is one that: a) is revised monthly in the light of changing business conditions b) is a compromise plan reflecting diverse views of various supervisors c) contains estimated cost data for several different levels of activity d) separates factory overhead between the variable and fixed portions

c) contains estimated cost data for several different levels of activity

A primary disadvantage of the corporate form of organization is: a) unlimited personal liability for business debts b) ownership is difficult to transfer c) corporate earnings are subject to double taxation d) corporation may continue its operations without disruption despite retirement of individual stockholders

c) corporate earnings are subject to double taxation

Flexible budgeting may be viewed as combining the concepts of budgeting and: a) incremental analysis b) product costing c) cost-volume-profit analysis d) financial statement analysis

c) cost-volume-profit analysis

A job cost sheet will include: a) all raw material purchased b) actual overhead c) direct labor applied to production d) selling costs

c) direct labor applied to production

In most process costing systems, per-unit costs are determined by: a) dividing the number of units completed during the period by the total manufacturing costs incurred during the period b) dividing the total manufacturing costs incurred during the period by the number of units worked on during the period c) dividing the total manufacturing costs incurred during the period by the equivalent number of units completed during the period d) unit costs cannot be determined in a process costing system

c) dividing the total manufacturing costs incurred during the period by the equivalent number of units completed during the period

The completion of a computer by First Wireless, Inc. would require a debit to which of the following accounts? a) cost of goods sold b) work in process inventory c) finished goods inventory d) materials inventory

c) finished goods inventory

Overhead volume variances indicate: a) efficient performance b) inefficient performance c) fluctuations in the level of production from month to month d) inadequate budgeting

c) fluctuations in the level of production from month to month

Which is an example of joint products? a) sugar and beef b) pens and erasers c) granulated charcoal and methyl alcohol d) iron and plastic

c) granulated charcoal and methyl alcohol

Which of the following types of cost are always relevant to a decision? a) sunk costs b) average costs c) incremental costs d) fixed costs

c) incremental costs

Which of the following is not a characteristic of managerial accounting? a) reports are used primarily by insiders rather than by persons outside of the business entity b) its purpose is to assist managers in planning and controlling business operations c) information must be developed in conformity with generally accepted accounting principles or with income tax regulations d) information may be tailored to assist in specific managerial decisions

c) information must be developed in conformity with generally accepted accounting principles or with income tax regulations

Under-applied overhead at the end of a month: a) results when actual overhead costs are less than amounts applied to work in process b) indicates a poorly designed cost accounting system c) is represented by a debit balance remaining in the manufacturing overhead account d) is represented by a credit balance remaining in the Work in Process Inventory account

c) is represented by a debit balance remaining in the manufacturing overhead account

The operating cycle of a company: a) must be less than one year b) is usually greater than oe year c) is the time it takes to purchase inventory, sell inventory and collect cash from the sale d) is the time it takes to acquire a loan, pay the interest, and retire the loan by paying the creditor in full

c) is the time it takes to purchase inventory, sell inventory and collect cash from the sale

which of the following is a characteristic of manufacturing overhead in a job order cost system? a) it is directly traceable to specific jobs or units b) it includes costs of all labor relating to manufacturing operations c) it is assigned to units produced by means of an overhead application rate d) it includes the cost of direct materials used and of indirect labor

c) it is assigned to units produced by means of an overhead application rate

JNC Industries normally produces and sells 5,000 keyboard for personal computers each month. Variable manufacturing costs amount to $25 per unit, and fixed costs are $146,000 per month. The regular sales price of the keyboards is $86 per unit. JCN has been approached by a foreign company that wants to purchase an additional 1,000 keyboards per month at a reduced price. Filling this special order would not affect JCN's regular sales volume or fixed manufacturing costs. On the basis of the above information only, which of the following is not true? a) at the 5,000 unit level of production, JCNS's average cost per unit is $54.20 b) at the 6,000 unit level of production, JCN's average cost per unit is $49.33 c) it would not be profitable for JCN to consider the special order at a price less than $49 per unit d) the fixed manufacturing costs of $146,000 are not relevant to this decision regarding the special order

c) it would not be profitable for JCN to consider the special order at a price less than $49 per unit

External auditors are often called upon to evaluate cost variances true/false

false

All of the following are advantages of an increasing cash flow from operating except: a) a company is likely to pay its current bills with cash from operations not earnings b) a company with cash is in a better position to fund growth c) large cash flows eliminate the need for borrowing d) earnings are viewed better if cash flows from operations closely match net income

c) large cash flows eliminate the need for borrowing

The price-earnings ratio is measure by dividing: a) book value by earnings per share b) par value by earnings per share c) market value by earnings per share d) market value by total net income

c) market value by earnings per share

Incremental revenues: a) always increase revenue when one course of action is selected over another b) always decrease revenue when one course of action is selected over another c) may increase or decrease when one course of action is selected over another d) cause revenues to remain steady

c) may increase or decrease when one course of action is selected over another

Operating income can be calculated by: a) dividing fixed costs by the contribution margin ratio b) multiplying fixed costs by the contribution margin ratio c) multiplying the margin of safety by the contribution margin ratio d) dividing the margin of safety by the contribution margin ratio

c) multiplying the margin of safety by the contribution margin ratio

When a stock dividend is declared, total stockholder's equity will: a) decrease (no) b) increase c) not change d) increase or decrease, depending upon whether it's a small or large stock dividend

c) not change

c) not change the total par value of the stock and increase the number of shares outstanding

By choosing to go into business for himself, Jim Lazar foregoes the possibility of getting a highly paid job with a large company. This is called a(n): a) sunk cost b) out-of-pocket cost c) opportunity cost d) joint cost

c) opportunity cost

Which of the following is not one of the three types of inventories of a manufacturing company? a) raw materials inventory b) work in process inventory c) product inventory d) finished goods inventory

c) product inventory

In order for investors and creditors to decide whether to invest in a company or loan a company funds they should do all of the following except. a) analyze financial statements for the company b) focus on corporate governance of the company c) rely on assurances of reliability by the company's leaders d) compute profitability, liquidity, and leverage ratios for the company

c) rely on assurances of reliability by the company's leaders

The par value of the common stock of a large listed corporation: a) tends to establish a ceiling for the market price of the stock b) tends to establish a floor for the market price of the stock c) represents legal capital and is not related to the market price of the stock d) is increased by net income and decreased by dividends

c) represents legal capital and is not related to the market price of the stock

A budget that adds a new month when the current month ends is called a: a) capital budget b) master budget c) rolling budget d) quarterly budget

c) rolling budget

Which of the following costs would not be considered part of the manufacturing overhead of a chemical plant? a) the costs of disposing of toxic waste materials b) salaries of factory medical personnel c) salaries of employees who operate distilling equipment used in the production process d) the cost of complying with federal safety regulations concerningplant operaitons

c) salaries of employees who operate distilling equipment used in the production process

Variable costs would include: a) insurance expense b) amortization expense c) sales commission expense d) executive salaries expense

c) sales commission expense

An example of a non-cash investing or financing activity that is disclosed in a supplementary schedule accompanying the statement of cash flows is: a) recording depreciation expense for the current year b) declaring, but not paying, dividends on common stock c) selling land in exchange for a note receivable d) transferring cash from a checking account into a money market fund

c) selling land in exchange for a note receivable

Sovereign Foods suffered a $1,500,000 loss (net of tax) when the FDA prohibited the sale of food products containing red dye no 3. On its other products, Sovereign Foods had a net sales of $6,580,000 and costs and other expenses of $6,505,000. Which of the following statements is NOT true? (Ignore taxes) a) sovereign foods reports a net loss of $1,425,000 for the current year b) sovereign foods reports income before non-recurring items of $75,000 c) sovereign foods combines the $1,500,000 loss with its other costs and expenses of $6,505,000,, since this item does not qualify for any special disclosure d) sovereign foods shows the $1,500,000 loss in a separate section of the income statement as a non-recurring item

c) sovereign foods combines the $1,500,000 loss with its other costs and expenses of $6,505,000,, since this item does not qualify for any special disclosure

In a system designed to measure cost variances, goods transferred from the work in process account to the finished goods inventory are valued at: a) actual cost b) market value c) standard costs d) the lower of actual cost or market value

c) standard costs

The margin of safety is calculated by a) dividing fixed costs plus target income by the contribution margin b) subtracting break-even income from current income c) subtracting break-even sales from current sales d) subtracting fixed costs from current contribution margin

c) subtracting break-even sales from current sales

Which factor is NOT relevant in deciding whether or not to accept a special order? a) incremental revenue that will be earned b) additional costs that will be incurred c) the effect that the order will have on the company's regular sales volume and selling prices c) the average cost of production if the special order is accepted

c) the average cost of production if the special order is accepted

Finished goods is comprised of direct materials purchased, direct labor and manufacturing overhead true/false

false

When production is constrained by a limited input resource, incremental analysis involves the use of: a) the contribution margin ratio of the company's product b) resources acquired from a third-party provider c) the contribution margin per unit of limited input resources d) alternative input resources

c) the contribution margin per unit of limited input resources

Perfect Plumbing Corporation currently manufactures a valve for use in water pumps that it produces for sale. The company is considering purchasing the valves from an outside supplier rather than manufacturing them. Which of the following costs is NOT relevant to the decision? a) the cost of direct material required to make the valve b) the price charged by the outside supplier for an identical valve c) the cost of the machinery owned by Perfect Plumbing used exclusively to manufacture this valve d) the salvage value of the machinery owned by Perfect Plumbing used exclusively to manufacture this valve

c) the cost of the machinery owned by Perfect Plumbing used exclusively to manufacture this valve

Perfect Plumbing Corporation currently manufactures a valve for use in water pumps that it produces for sale. The company is considering purchasing the valves from an outside supplier rather than manufacturing them. Which of the following costs is NOT relevant to the decision? a) the cost of direct material required to make the valve b) the price charged by the outside supplier for an identical valve c) the cost of the machinery owned by Perfect Plumbing used exclusively to manufacture this valve d) the salvage valve of the machinery owned by perfect plumbing used exclusively to manufacture this valve

c) the cost of the machinery owned by Perfect Plumbing used exclusively to manufacture this valve

In a cash budget, the budgeted level of cash receipts depends on all of the following except: a) the sales forecast b) the credit terms offered to customers c) the credit terms offered by suppliers d) experience in collecting receivables

c) the credit terms offered by suppliers

As a result of a 5% stock dividend: a) total stockholders' equity decreases by 5% b) the par value per share decreases by 5% c) the number of shares owned by each stockholder increases by 5%, but total stockholders' equity does not change d) both the number of shares outstanding and total stockholders' equity increase by 5%

c) the number of shares owned by each stockholder increases by 5%, but total stockholders' equity does not change

Which of the following would NOT be an important nonfinancial factor for a farming company to consider in making a decision about the application of fertilizer? a) the weather forecast during the week of the application b) the industry reports on ethical sourcing of fertilizer c) the planned fertilizing schedule of a competing farming company d) the full disclosure of fertilizer ingredients to the farming company's clients

c) the planned fertilizing schedule of a competing farming company

Which of the following would likely be a relevant nonfinancial consideration in the decision of whether to hire a catering service to provide food for a New Year's Eve party in your home or to prepare the food yourself? a) the increase in interest expense associated with charging the catering service to your credit card b)the wear-and-tear on your carpet associated with hosting a New Year's Eve party in your home c) the quality of the food preparation d) the cost savings of not having to buy additional groceries for the party

c) the quality of the food preparation

Most preferred stocks have one or more of the following characteristics, except: a) to receive dividends on a preferred basis b) cumulative dividends c) voting rights d) callable at the option of the corporation

c) voting rights

During the years 2016 through 2018, Powers, Inc., reported the following amounts of net income (dollars in thousands): 2018 $170 2017 $150 2016 $120 Relative to the prior year, the percentage change in net income: a) was the same in 2017 and 2018 b) was larger in 218 than in 2017 c) was smaller in 218 than in 2017 d) cannot be determined without knowing how many shares of stock were outstanding

c) was smaller in 218 than in 2017 2016-2017 increase of 30,000/120 = .25 2017-2018 increase of 20,000/150 = .13

The placing of direct materials into the production process is recorded by an entry debiting: a) materials expense b) raw materials inventory c) work in process inventory d) finished goods inventory

c) work in process inventory

When goods are completed and transferred from the assembly line: a) cost of goods sold is debited and finished goods inventory is credited b) work in process inventory is debited and finished goods inventory is credited c) finished goods inventory is debited and cost of goods sold is credited c) work in process inventory is credited and finished goods inventory is debited

c) work in process inventory is credited and finished goods inventory is debited

When direct materials are used: a) manufacturing overhead is debited b) raw materials inventory is debited c) cost of goods sold is debited c) work in process inventory is debited

c) work in process inventory is debited

Flexible budgets an be prepared for sales budgets but not for production budgets true/false

false

Unique Corporation manufactures two products; data are shown below: Product D has contribution margin ratio of 50% and relative sales mix of 40% Product F has contribution margin ratio of 30% and relative sales mix of 60% If Unique's monthly fixed costs average $400,000, what is its break even point expressed in sales dollars? (round the answer to nearest dollar) a) $1,320,462 b) $1,250,000 c) $1,400,000 d) $1,052,632

d) $1,052,632 Average contribution margin = .50 x .40) + (.30 x .60) = 38% or .38 400,000/.38 = 1,052,632 rounded

Sue's Soup Products uses a process costing system with two processing departments: the Mixing and Cooking Department and the Canning Department. Work in process inventories are reduced to zero each month. In March, the Mixing and Cooking Department incurred manufacturing cost of $67,600 to mix 52,000 gallons of soup. The Canning department incurred manufacturing costs of $5,500. A total of 110,000 cans of soup were transferred to the finished goods warehouse during the month The unit cost per gallon of soup transferred to the Canning Department during arch was: a) $1.41 b) $9.45 c) $2.12 d) $1.30

d) $1.30

The following information is available: sales $90,000 break even sales $50,000 Contribution Margin Ratio 26% What is the operating income? a) $40,000 b) $50,000 c) $ 8,000 d) $10,400

d) $10,400 (90,000 - 50,000) x .26 = 10,400

If a retail store has a current ratio of 2.5 and current assets of $195,000, the amount of working capital is: a) $78,000 b) $380,000 c) $330,000 d) $117,000

d) $117,000 195,000 * 2.5 = 78,000 195,000 - 78,000 = 117,000

If a retail store has a current ratio of 2.5 and current assets of $195,000, the amount of working capital is: a) $78,000 b) $380,000 c) $330,000 d) $117,000

d) $117,000 195,000/2.5 = 78,000 195,000 - 78,000 = 117,000

John Boyd Corporation manufactures and sells 1,000 tractors each month. The primary component in each tractor is the motor. John Boyd has the monthly capacity to product 1,300 motors. The variable costs associated with manufacturing each motor are shown below: Direct ma.terials $24 Direct labor $16 Variable manufacturing overhead $29 Fixed manufacturing overhead per month (for up to 1,300 units of production) averages $27,000. Joan Reid, Inc. has offered to purchase 200 motors from John Boyd per month to be used in its own outboard motors Assuming John Boyd wants to earn a pretax profit of $10,000 on this special order, what price must it charge Joan Reid? a) $69 per unit b) $83 per unit c) $95 per unit d) $119 per unit

d) $119 per unit

Free cash flow is computed as net cash flow from operating activities plus cash used to acquire plant assets minus cash paid for dividends true/false

false

Payment to pay off notes payable: $195,000 Proceeds from issuance of bonds payable: $635,000 Payment to purchase equipment: $275,000 Payment of wages: $115,000 Payment of dividends: $155,000 On the basis of the above transactions alone, determine the net cash flow from financing activities: a) $275,000 net cash used for financing activities b) $440,000 net cash provided by financing activities c) zero: cash inflows equal cash outflows from financing activities d) $285,000 net cash provided by financing activities

d) $285,000 net cash provided by financing activities 635,000 - 195,000 - 155,000 = 285,000

Shown below is information relating to the stockholders' equity of Reeve Corporation as of December 31, 2018: 8.5% cumulative preferred stock, $100 par: $ 900,000 Common stock, $10 par, 340 shares authorized, 136,000 shares issued and outstanding: $1,360,000 Additional paid-in capital: Common Stock: $1,088,000 Retained earnings (deficit) ($ 68,000) Dividends in arrears: $ 76,500 What is total paid-in capital? a) $3,203,500 b) $3,416,000 c) $3,280,000 d) $3,348,000

d) $3,348,000

The following information is available about the August transactions of Helpful Tool Company: Invoices for product costs paid during the month: $493,000 Product costs charged to Work in Process: $737,000 Cost of finished goods manufactured: $718,000 Cost of goods sold: $739,000 The product costs to be deducted from revenue in August amount to: a) $493,000 b) $737,000 c) $718,000 d) $739,000

d) $739,000

The following information is available about the August transactions of the Helpful Tool Company: Invoices for product costs paid during the month: $493,000 Product costs charged to work in progress: $737,000 Cost of finished goods manufactured: $718,000 Cost of goods sold: $739,000 The product costs to be deducted from revenue in August amount to: a) $493,000 b) $737,000 c) $718,000 d) $739,000

d) $739,000

The following information is available about the August transactions of the helpful Tool Company: Invoices for product costs paid during the month $493,000 Product costs charged to work in process $737,000 Cost of finished goods manufactured $718,000 Cost of Goods sold $739,000 The product costs to be deducted from revenue in August amount to: a) $493,000 b) $737,000 c) $718,000 d) $739,000

d) $739,000

If beginning inventory in Work in Process is zero, 2,000 units are started during the period, and 300 units remain in ending inventory, how many equivalent units were completed and transferred out? a) 2,000 units b) 285 units c) 300 units d) 1,700 units

d) 1,700 units

Shown below are selected data from the financial statements of Supreme Co. Dollar amounts are in millions (except for the per share data). Income statement data: Net Sales $1,410 Cost of Goods sold $565 Operating expenses $485 Net income $480 Balance Sheet data: average total equity $3,300 average total assets $4,900 Supreme reported earnings per share for the year of $4 and paid cash dividends of $1 per share. At year-end, the Wall Street Journal listed Supreme's capital stock as trading at $97 per share Supreme's return of equity was: a) 10.91% b) 25.61% c) 7.16% d) 14.55%

d) 14.55% return on equity = net income/average total equity 480/4900 = 14.55

If the unit sales price is $7 and variable costs are $3, how many units have to be sold to earn a profit of $3,600 if fixed costs equal $5,000? a) 900 units b) 1,250 units c) 1,500 units d) 2,150 units

d) 2,150 units

The Piazza Company has working capital of $540,000 and current assets of $810,000. The current ratio is: a) .67 b) 1.50 c) 2.00 d) 3.00

d) 3.00 810,000 - 540,000 = 270,000 liabilities 810,000/270,000 = 3.0

On January 1, 2018, Alice Corporation had 20,000 shares of $6 value common stock and 10,000 shares of 8%, $100 par value convertible preferred stock outstanding. The preferred shares carried a 3-for-1 conversion privilege. As of December 31, 2018, none of the preferred shares had been converted. What number of shares must Alice use in computing diluted earnings per share at December 31, 2018? a) 10,000 b) 20,000 c) 30,000 d) 50,000

d) 50,000 20,000 + (10,000 x 3) = 50,000

If preferred stock is convertible, it is so at the option of the: a) Board of directors (no) b) CEO c) CFO d) Stockholders

d) Stockholders

Which company would most likely NOT use a process costing system? a) Bic Pens b) Pepsi Cola c) Hershey Candy d) Tiffany Jewelers

d) Tiffany Jewelers

A cash budget is affect directly by each of the following except: a) a capital expenditures budget b) a sales forecast c) a manufacturing cost budget d) a budgeted income statement

d) a budgeted income statement

Manufacturing overhead is not: a) a product cost b) an indirect cost c) a manufacturing cost d) a period cost

d) a period cost

A job order cost system would be suitable for which of the following: a) a manufacturer of laundry detergent b)s a manufacturer of candy bars c) a sugar refinery d) a sailboat builder

d) a sailboat builder

Which element of a master budget would normally be prepared first? a) a production budget b) a cash budget c) a budget of operating expenses d) a sales forecast

d) a sales forecast

The advantages of corporations going public include all of the following except: a) professional management b) transferability of ownernershop c) limited shareholder liability d) ability to remove assets

d) ability to remove assets

The cost of the employee who computes total manufacturing costs would be considered: a) direct labor b) indirect labor c) manufacturing overhead d) administrative costs

d) administrative costs

Which of the following is a period cost? a) direct materials used b) direct labor costs applicable to production c) manufacturing overhead d) advertising expense

d) advertising expense

Stock splits: a) allow management to conserve cash b) give stockholders more shares c) cause no change in total assets, liabilities, or stockkholders' equity d) allow management to conserve cash, give sockholdes moe shares, and aus no change in total assets, liabilities, or stockholders' equity

d) allow management to conserve cash, give sockholdes moe shares, and aus no change in total assets, liabilities, or stockholders' equity

Treasury stock appears as: a) an asset account b) a liability account c) an expense account d) an equity account

d) an equity account

If manufacturing overhead is materially over-applied, it is best to: a) close it to work-in-process inventory b) close it to finished goods inventory c) close it to cost of goods sold d) apportion it among work-in-process, finished goods, and cost of goods sold

d) apportion it among work-in-process, finished goods, and cost of goods sold

The break-even point in the cost-volume-profit graph is always found: a) at 50% of full capacity b) at the sales volume resulting in the lowest average unit cost c) at the volume at which total revenue equals total variable costs d) at the volume at which total revenue equals total fixed costs plus total variable costs

d) at the volume at which total revenue equals total fixed costs plus total variable costs

which American industry would tend to have the greatest debt ratio? a) automotive b) retail clothing c) manufacturing d) banking

d) banking

In comparison with a financial statement prepared in conformity with generally accepted accounting principles, a managerial accounting report is more likely to: a) be used by decision makers outside of the business organization b) focus upon the operating results of the most recently completed accounting period c) view the entire organization as the reporting entity d) be tailored to the specific needs of an individual decision maker

d) be tailored to the specific needs of an individual decision maker

The payment of wages to factory employees who work directly on the goods being manufactured is recorded by an entry crediting: a) wages expense b) direct labor c) work in process inventory d) cash

d) cash

Which of the following should not be classified as a manufacturing cost? a) indirect factory labor costs, such as salaries of plant security guards b) direct materials used in the production process c) utility bills related to factory operations d) commissions paid to salespeople

d) commissions paid to salespeople

In a standard cost system, amounts are charged to production by: a) debiting work in process at the actual cost incurred for the number of units produced b) crediting work in process at the standard cost for the number of units produced c) crediting work in process at the actual cost incurred for the number of units produced d) debiting work in process at the standard cost for the number of units produced

d) debiting work in process at the standard cost for the number of units produced

Seidman Company manufactures and sells 30,000 units of product X per month. Each unit of product X sells for $16 a nd has a contribution margin of $7. If product X is discontinued, $85,000 in fixed monthly overhead costs would be eliminated and there would be no effect on the sales volume of Seidman Company's other products. If product X is discontinued, Seidman Company's monthly income before taxes should: a) increase $210,000 b) increase $125,000 c) decrease $210,000 d) decrease $125,000

d) decrease $125,000

Companies that compute equivalent units of production do so to: a) comply with income tax regulations b) compute total manufacturing costs for the period c) determine a manufacturing overhead application rate d) determine departmental per-unit costs

d) determine departmental per-unit costs

Equivalent units are usually computed for: a) only direct materials b) only direct labor c) only factory overhead d) direct materials, direct labor and factory overhead costs

d) direct materials, direct labor and factory overhead costs

Which of the following best describes retained earnings? a) cash available for dividends b) the amount initially invested in the business by stockholders c) cash available for expansion and growth d) income that has been reinvested in the business rather than distributed as dividends to stockholders

d) income that has been reinvested in the business rather than distributed as dividends to stockholders

As activity base volume increases, total variable costs a) stay the same b) equal total fixed costs c) decrease d) increase

d) increase

The cost of draining sap out of a maple tree to maufacture maple syrup and maple sugar is an example of: a) after-split-off costs b) sunk costs c) incremental costs d) joint costs

d) joint costs

In a schedule of cost of finished goods manufactured, the figure for total manufacturing costs: a) may be less than the cost of direct materials used b) may be less than the direct labor costs assigned to production c) may be less than the manufacturing overhead applied to production d) may be less than the cost of finished goods manufactured

d) may be less than the cost of finished goods manufactured

Benefits of activity-based costing include all of the following except: a) more accurate measures of product costs b) more accurate evaluations of profitablity c) a better understanding off what "drive" manufacturing overhead costs d) more subjective product pricing decisions

d) more subjective product pricing decisions

When equipment is purchased entirely through a loan: a) the equipment is shown as an increase in the investing activities section b) the equipment is shown as a decrease in the investing activities section c) the loan is shown as an increase in the financing section d) neither the loan nor the purchase of equipment is shown in the investing or the financing sections

d) neither the loan nor the purchase of equipment is shown in the investing or the financing sections

Shore and Gardiner each own 10,000 shares of S&G Corporation $12 value stock, which they purchased for $38 per share directly from the corporation. If Shore sells his stock to Gardiner for $475,000: a) stockholders equity of S&G Corporation increases (no) b) assets of S&G Corporation increases c) stockholders' equity of S&G Corporation decreases d) no account of S&G Corporation is affected

d) no account of S&G Corporation is affected

Cash flows from operating activities include all of the following except: a) collections from customers for sales of goods b) interest and dividends received c) payments of interest d) payments of dividends

d) payments of dividends

An unfavorable overhead volume variance results from: a) an unfavorable overhead spending variance b) poor decisions made by the production manager c) producing at levels of output that exceed normal output levels d) producing at levels of output that fall short of normal output levels

d) producing at levels of output that fall short of normal output levels

The comparative balance sheets of Apollo Rocket, Inc show a net increase in inventory of $79,000 and a net decrease in accounts payable of $42,000 during 2018. In computing net cash flow from operating activities under the indirect method, net income for 2018 should be: a) increased by $37,000 b) reduced by $37,000 c) increased by $121,000 d) reduced by $121,000

d) reduced by $121,000

Within the relevant range, fixed costs: a) fall as sales volume falls b) rise as sales volume rises c) rise as sales volume falls d) remain steady when sales volume changes

d) remain steady when sales volume changes

A liquidating dividend: a) occurs when a corporation distributes shares of its own stock as a dividend, rather than cash b) occurs whenever a corporation distributes non-cash assets as a dividend to its stockholders c) represents a distribution of a corporation's profits to the stockholders d) represents a return of invested capital to a corporation's owners, the stockholders

d) represents a return of invested capital to a corporation's owners, the stockholders

Flexible budgeting may be used for profit centers by applying cost-volume-profit relationships to the actual level of: a) units produced b) resources consumed c) costs incurred d) sales achieved

d) sales achieved

A fixed cost may include all of the following except: a) rent for a warehouse b) annual salary of the CEO c) depreciation d) sales commission expense

d) sales commission expense

A fixed cost may include all of the following except: a) rent for the warehouse b) annual salary of the CEO c) depreciation d) sales commission expense

d) sales commission expense

Capital expenditures budgets are typically prepared for a period of: a) 3 months b) 6 months c) one year d) several years

d) several years

A 2-for-1 stock split: a) is accounted for in the sameway as a 100% stock dividend b) increases the number of outstanding shares of common stock, but par value per share remains the same as before the split c) is recorded by transferring the par value of additional shares from retained earnings to the common stock account d) should logically cause the market price per share to drop by approximately 50%

d) should logically cause the market price per share to drop by approximately 50%

A cost that has already been incurred and cannot be changed is called a(n): a) opportunity cost b) out-of-pocket cost c) joint cost d) sunk cost

d) sunk cost

The slope of the total revenue line of a cost-volume-profit graph equals a) net cash flow from operating activities b) operating income minus fixed costs c) 45 degrees d) the average selling price per unit

d) the average selling price per unit

In a manufacturing company, the cost of finished goods manufactured is equal to: a) the beginning inventory of finished goods, plus net purchases, less the ending inventory of finished goods b) the sum of the manufacturing costs charged (debited) to the work in process inventory account during the period d) the costs of direct materials, direct labor and manufacturing overhead incurred in manufacturing the goods sold during the priod d) the beginning inventory o f work in process, plus total manufacturing costs for the period, less the ending inventory of work in process

d) the beginning inventory of work in process, plus total manufacturing costs for the period, less the ending inventory of work in process

Which of the following is considered a financial budget? a) the marketing budget b) the cost of goods sold budget c) the overhead budget d) the capital expenditures budget

d) the capital expenditures budget

Millar Company produces a single product that it sells for $89 a unit. If the fixed costs of manufacturing and selling the product are $68,400 a month and the variable costs are $57 a unit, which of the below is correct? a) the fixed costs amount to $32 per unit at any level of output within a relevant volume range b) the company will break even with a sales volume of $68,400 a month c) an increase is sales volume above $68,400 a month will cause an increase in fixed costs d) the contribution margin per unit of product is $32

d) the contribution margin per unit of product is $32 89 - 57 = 32

The Magic Microbrewery has a limited amount of vat capacity available in which it can ferment beer. In deciding which beers to brew, Magic management should consider: a) the contribution margins of the individual beers b) the unit contribution margins of the individual beers c) the contribution margin ratios of the individual beers d) the contribution margin per unit of vat capacity of the individual beers

d) the contribution margin per unit of vat capacity of the individual beers

Which of the following costs would not be considered part of the manufacturing overhead of a furniture manufacturer? a) the cost of compliance with federal factory safety regulations b) depreciation expense on factory equipment c) the cost of grease used to lubricate factory equipment d) the cost of wood used in furniture construction

d) the cost of wood used in furniture construction

The market price of a preferred stock will be affect by: a) the dividend rate b) the chance that the company will not operate profitably c) the level of interest rates d) the dividend rate, the chance the company will not operate profitably, and the level of interest rate

d) the dividend rate, the chance the company will not operate profitably, and the level of interest rate

Management accounting systems are designed to assist organizations in the performance of all of the following functions except: a) the assignment of decision-making authority over company assets b) planning and decision-making c) monitoring, evaluating, and rewarding performace d) the preparation of income tax returns

d) the preparation of income tax returns

Management accounting systems are designed to assist organizations in the performance of all of the following functions excepts: a) the assignment of decision-making authority over company assets b) planning and decision-making c) monitoring, evaluating, and rewarding performance d) the preparation of income tax returns

d) the preparation of income tax returns

Who would most likely be held responsible for controlling the materials price variance? a) the marketing manager b) the production manager c) the direct labor workers d) the purchasing manager

d) the purchasing manager

Free cash flow refers to the excess of cash inflows over cash outflows true/false

false

A prior period adjustment appears in: a) the income statement following the subtotal "income before Prior Period Adjustments." b) The statement of retained earnings, as an adjustment t o the ending balance o retained earnings c) foot notes to the financial statements d) the statement of retained earnings, as an adjustment to the beginning balance of retained earnings

d) the statement of retained earnings, as an adjustment to the beginning balance of retained earnings

In computing earnings per share, the number of shares used is: a) the year-end number of shares outstanding b) the beginning of the year number of shares outstanding c) the average of the beginning and the year-end number of shares outstanding d) the weighted average of shares outstanding for the year

d) the weighted average of shares outstanding for the year

Gannon Corporation uses the indirect method to prepare its statement of cash flows. Following this approach, a gain on sale of equipment was deducted from net income in computing net cash flow from operating activities. The most likely reason for this adjustment is that: a) the sale of equipment did not result in the receipt of any cash by Gannon Corporation b) the sale resulted in a cash receipt in an accounting period different from the period in which the gain was recognized c) the amount of the gain recognized was not equal to the cash received d) this type of transaction is not classified as an operating activity

d) this type of transaction is not classified as an operating activity

A net decrease in accounts payable to suppliers indicates that cash payments to suppliers were less than purchases made during the period true/false

false

A performance report can be easily adjusted to show budgeted revenues and costs at different levels of activity true/false

false

A principal objective of cost accounting systems is to ensure that cost reports to management are prepared in accordance with generally accepted accounting principals true/fals

false

A schedule of the cost of finished goods manufactured summarizes the flow of manufacturing costs into and out ot the finished goods inventory account

false

A single-step and a multiple-step statement are different in form and in the amount of net income reported true/false

false

A standard costs is the per unit cost actually incurred under normal operating conditions true/false

false

A stock split will normally increase the market price of the stock and decrease the number of shares on the market true/false

false

A sunk cost is an expenditure that has proven to be nonproductive true/false

false

A sunk cost is the benefit that could have been obtained by pursuing an alternate course of action true/false

false

A total cost variance for materials can be caused by differences in the quantity used, or in the price paid, but not by both true/false

false

An activity-based costing system does not help managers make better product pricing decisions true/false

false

An overhead application rate is computed by dividing the actual overhead costs by the expected amount of units in the activity base true/false

false

An underwriter is a bank or trust company that maintains a corporation's stockholder records true/false

false

An unusual and infrequent item (a non-recurring item) appears on the income statement before the section on discontinued operations true/false

false

Any business that operates at less than capacity will have smaller fixed costs than variable costs true/false

false

As costs flow from one production department to the next in a process costing system one work-in-process inventory account shows all the changes to the units in production true/false

false

As volume increases, per unit fixed costs stay the same true/false

false

As volume increases, per unit variable costs will decrease on a per-unit basis and stay the same in total true/false

false

Because a budget is merely a forecast of future events, its benefits are extremely narrow and limited true/false

false

Cash budget estimates are identical to operating budget estimates true/false

false

Companies that show profits on the income statement will always show positive cash flows from operating activities true/false

false

Comparative financial statements show side-by-side financial data for two or more companies true/false

false

Comprehensive income is a component of net income

false

Conversion costs include direct labor and direct materials associated with converting units, so that they can be transferred out of work in process true/false

false

Cost-Volume-profit analysis is not a useful planning tool if any or all of its underlying assumptions are violated. true/false

false

Costs to repair equipment are considered a direct cost true/false

false

Cumulative preferred stock means the stock is entitled to its regular dividend plus an additional share of the total amount of declared dividends true/false

false

Debiting work-in-process in department two and crediting work-in-process in department one represents costs transferred from department two to department one true/false

false

The expropriation (seizure of) of a multinational company's assets by a government is an example of a discontinued operation item true/false

false

In order to be consistent with IASB Standards, U.S. GAAP now requires that borrowing costs on assets that require a substantial period to bring them to a marketable condition be expensed immediately true/false

false

In order to receive a dividend, a stockholder must have owned the stock as of the declaration date true/false

false

In setting standard costs, management's expectations are that the standard costs will always be met true/false

false

In the Stockholders' Equity section of a balance sheet, par value of common stock is presented first, followed by par value of preferred stock, followed by additional paid-in capital on common stock, followed by additional paid-in capital on preferred stock true/false

false

In the long run, it is more important for a business to generate positive cash flows for investing activities than from operating activities true/false

false

Interest rates impact the market value of common stock more than they impact the market value of preferred stock true/false

false

It is illegal for the government to tax corporate earnings twice true/false

false

Jiffy Company has 3,000 units that are 70% complete. Jiffy's "equivalent units" are 3,000 completed units true/false

false

Job order costing cannot be used for a service company true/false

false

Job order costing involves averaging costs across products produced, and as such, the first step in job order costing is to clearly understand the physical flows: true/false

false

Job order costing is appropriate for businesses that produce mass quantities of identical units using the same amount of direct materials, direct labor and manufacturing overhead true/false

false

Joint costs are the middle costs of a product true/false

false

Joint products are similar products that serve the same exact function true/false

false

Management can compute the per-unit cost of finished goods accurately only when a job order cost system is in use true/false

false

Managerial accounting refers to the preparation and use of accounting information designed to meet the needs of decision makers inside and outside the business organization true/false

false

Manufacturing overhead is NOT applied to products when a process costing system is used true/false

false

Maple syrup and pancakes are examples of joint products true/false

false

Metalworks Incorporated purchased $54,500 worth of direct materials to be used in Job #222. During the accounting period, Job #222 used $45,600 of direct materials. The amount of direct materials that would be shown in Job #222 Job Cost Sheet at the end of the accounting period should be $54,500, since this is the amount of direct materials the company had purchased for this particular job. true/false

false

Once a company determines its desired production level, it uses that estimated production level to forecast sales for the period true/false

false

Pepsi Cola would most likely use a job order costing system true/false

false

Period costs are deducted from sales to arrive at gross profit true/false

false

Prior period adjustments appear in the statement of retained earnings and in the income statement for the current year true/false

false

Product costs are charged directly to expense accounts true/false

false

Product costs are offset against revenue in the period in which the related products are manufactured, rather than the period in which the products are sold true/false

false

Products resulting from a shared manufacturing process are referred to as complimentary products true/false

false

Recent rulings by the SEC now require all corporations to prepare an expanded version of the statement of retained earnings showing all equity accounts and their changes for the last three years true/false

false

Return on equity (ROE) is measured by dividing net income by average number of shares outstanding true/false

false

Sales of products with high contribution margins often are described as quantity sales true/false

false

Since cost accounting systems provide managers with information necessary to manage operations, the information from cost accounting systems is not useful for external reporting purposes true/false

false

Standard costs actually are ideal costs per unit true/false

false

Standard costs are established only for direct labor and direct materials true/false

false

Stock splits are always in a 2-for-1 ratio true/false

false

Stockholders in a corporation elect the board of directors, pass the bylaws of the corporation, and hire top corporate officers and managers true/false

false

Stockholders of a corporation are personally liable for the debts of the corporation if all shares are owned by the officers of the corporation true/false

false

Sunk costs are relevant to decisions about replacing plant assets true/false

false

Sunk costs may be defined as unavoidable future costs resulting from past decisions true/false

false

The "cost of finished goods manufactured," which appears on the bottom of the Schedule of Finished Goods Manufactured, flows to the balance sheet and is reported as the ending inventory balance true/false

false

The payment of cash dividends to common stockholders is classified as a financing activity on the statement of cash flows whereas payment of a cash dividend to preferred stockholders is classified as an investing activity true/false

false

The presence of fixed costs in manufacturing overhead causes the actual amount of manufacturing overhead per unit of output to vary, depending on the actual production volume attained true/false

false

The price-earnings ratio is calculated by dividing earnings per share by the current market price of a share of the company's stock true/false

false

The principal purpose of a statement of cash flows is to measure the profitability of a business that maintains its accounting records on the cash basis true/fals

false

The production cost report is an estimate of the equivalent units completed during the period true/false

false

The purchase of equipment for the manufacturing of inventory belongs in the operating activities section of the statement of cash flows true/false

false

The purchase of treasury stock creates an asset for the corporation and is recorded at the cost of the shares purchased true/false

false

The quick ratio is especially useful in evaluating the liquidity of a company with fast moving inventories true/false

false

The relevant costs and revenues to consider in a special order decision include variable costs, fixed costs and incremental revenues true/false

false

The sale of treasury stock at a price in excess of its cost results in a realized gain that should be presented as a non-operating item in the income statement true/false

false

The total quality management approach to budgeting sets budgeted amounts at levels that can be achieved through reasonably efficient operatioins true/false

false

The typical starting point of a master budget would be to prepare a budgeted balance sheet true/false

false

The volume of output that causes fixed costs to be equal in amount to total revenue is called the break even point true/false

false

Treasury stock is stock of a corporation that has been issued and then reacquired and then cancelled true/false

false

Treasury stock is stock that is issued and outstanding but not authorized true/false

false

Under the "total quality management" philosophy, budgeted amounts should be set at realistic and achievable levels rather than at levels representing absolute efficiency true/false

false

Under the indirect method, depreciation, increase in inventories, and "non-operating" losses are added to net income to arrive at net cash flow from operating activities true/false

false

Under the indirect method, when machinery is sold at a gain, the gain is added in the operating section of the statement of cash flows and the cost is added in the investing sections true/false

false

United Construction Company, which manufactures residential buildings, would most likely use a process costing system. true/false

false

Vertical analysis compares the results of financial information with a business in the same industry for a number of consecutive periods of time true/false

false

When a company uses peak pricing, it is charging the highest or "peak" prices the public will be willing to pay during periods of low demand true/false

false

When a corporation fails to pay a dividend one year on its common stock,it is said to be "in arrears" true/false

false

When a corporation present both basic and diluted earnings per share, basic earnings per share will be the smaller of the two figures true/false

false

When an income statement does not show gross profit or operating income, it is called a consolidated statement true/false

false

When applying the direct method in a statement of cash flows, the amount of depreciation is added to net income true/false

false

When cost-volume-profit analysis is used, the need for a cost accounting system is eliminated true/false

false

When direct materials are applied to the production process, materials inventory is debited and work in process is credited true/false

false

When goods are sold, a journal entry is made transferring the goods from cost of goods sold to finished goods true/false

false

When sales of one product contribute to the sales of another product they are called contribution products true/false

false

With variable costs, the cost per unit varies with changes in volume true/false

false

Dividends paid belong in the operating activities section of the statement of cash flows. true/false

false dividends paid in in financing activities

When credit sales exceed collections of cash from accounts receivable, the increase in accounts receivable is added to net sales to determine the amount of cash collected from customers during the period true/false

false it is deducted from net income

For a company to survive in the long-run it must have positive cash flows from investing activities true/false

false positive cash flows from operating activities

false prime costs = direct material + direct labor 350,000 + 475,000 = 825,000

favorable

A company should carry the amount of working capital necessary to conduct operations, not necessarily maximize its working capital true/false

true

A company that is profitable may not have sufficient cash on hand to meet its immediate needs true/false

true

A company whose future earnings are expected to rise substantially is likely to have a higher p/e ration than a company whose future earning are expected to decline. true/false

true

A company whose sales are growing at less than the rate of inflation may actually be selling less merchandise every year true/false

true

A company's operating cycle is the time between purchases of direct materials and conversion of these materials back into cash true/false

true

A corporation continues in existence even if a stockholder dies or withdraws from the organization true/fals

true

A cost driver is an activity base that is highly correlated with manufacturing overhead costs true/false

true

A credit balance in the manufacturing overhead account at month end indicates that the actual overhead costs were less than the amount of overhead costs applied to jobs true/false

true

A debit balance in the Manufacturing Overhead account at the end of the period indicates that overhead has been under-applied to jobs true/false

true

A decision to discontinue a given product on the basis of contribution margin data should include consideration of the probable impact of the discontinuance on the sales of other products true/false

true

A favorable variance would be credited to a cost variance account true/false

true

A labor efficiency variance relates to the number of hours actually worked, compared to the standard hours true/false

true

A master budget actually includes a number of related budgets true/false

true

A master budget is a comprehensive financial plan setting forth the financial and operational goals of a business true/false

true

A materials quantity variance is the standard price multiplied by standard quantity, less actual quantity true/false

true

A number of equivalent units of production during a period may be greater than, equal to, or smaller than the actual number of units completed and transferred to the finished goods warehouse. true/false

true

A prior period adjustment to retained earnings is made when a discovery of a material error was made to prior years' income true/false

true

A process costing system is highly desirable when a company mass produces identical goods. true/false

true

A statement of stockholders' equity is not a required financial statement and need not be prepared along with a statement of retained earnings true/false

true

A stock dividend provides a stockholder with more shares of stock, but his or her percentage of ownership in the company is no larger than before true/false

true

A stock split changes the par value of a stock, whereas a stock dividend does not true/false

true

A stockholders' subsidiary ledger will have entries made for each stockholder showing the number of shares held true/false

true

A value chain is a linked set of activities and resources necessary to create and deliver a product or service to a customer true/false

true

A variance is said to be unfavorable when actual costs exceed standard costs true/false

true

According to the Sarbanes-Oxley Act, lying to an external auditor can create a criminal penalty as well as a civil penalty true/falase

true

Activity-based costing systems always result in more accurate measurements of unit costs true/false

Accounting 281 combine

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