ACCT 202 Cumulative
Which of the following budgets are prepared before the sales budget? Budgeted Income Statement Direct Labor Budget A)YesYesB)YesNoC)NoYesD)NoNo
Choice D
Direct labor cost is classified as:
Conversion Cost and Prime Cost
Which costs will change with a decrease in activity within the relevant range?
Unit fixed costs and total variable cost.
Break-even analysis assumes that:
Unit variable expense is constant.
A merchandising company typically will have a high proportion of which type of cost in its cost structure?
Variable.
Which of the following measures of performance encourages continued expansion by an investment center so long as it is able to earn a return in excess of the minimum required return on average operating assets?
residual income
Some investment opportunities that should be accepted from the viewpoint of the entire company may be rejected by a manager who is evaluated on the basis of:
return on investment.
The production department should generally be responsible for materials price variances that resulted from:
rush orders arising from poor scheduling.
A preference decision in capital budgeting
is concerned with determining which of several acceptable alternatives is best
Factory overhead is typically a(n):
mixed cost.
If a company increases its selling price by $2 per unit due to an increase in its variable labor cost of $2 per unit, the break-even point in units will:
not change.
Which of the following would not affect the break-even point?
number of units sold
A joint product is:
one of several products produced from a common input.
The assumption that the cash flows from an investment project are reinvested at the company's discount rate applies to
only the net present value method
In a statement of cash flows, a change in an income taxes payable account would be recorded in the
operating activities section
Property taxes on a company's factory building would be classified as a(n):
product cost.
When preparing a direct materials budget, the required purchases of raw materials in units equals:
raw materials needed to meet the production schedule + desired ending inventory of raw materials − beginning inventory of raw materials.
A cost incurred in the past that is not relevant to any current decision is classified as a(n):
sunk cost.
Which of the following costs are always irrelevant in decision making?
sunk costs
An example of a committed fixed cost would be:
taxes on real estate.
When manufacturing overhead is applied to production, it is added to:
the Work in Process account.
Accepting a special order will improve overall net operating income if the revenue from the special order exceeds:
the incremental costs associated with the order.
In the standard cost formula Y = a + bX, what does the "X" represent?
the level of activity
The usual starting point for a master budget is:
the sales forecast or sales budget.
A favorable labor rate variance indicates that
the standard rate exceeds the actual rate.
A reason why absorption costing income statements are sometimes difficult to interpret is that:
they shift portions of fixed manufacturing overhead from period to period according to changing levels of inventories.
Which of the following is correct? The break-even point occurs on the Cost-Volume-Profit graph where:
total contribution margin equals total fixed expenses.
In the standard cost formula Y = a + bX, what does the "Y" represent?
total cost
Net operating income computed under variable costing would exceed net operating income computed using absorption costing if:
units sold exceed units produced.
For an automobile manufacturer, the cost of a driver's side air bag purchased from a supplier and installed in every automobile would best be described as a:
variable cost.
The costing method that treats all fixed costs as period costs is:
variable costing.
A cost that would be included in product costs under both absorption costing and variable costing is:
variable manufacturing costs.
Within the relevant range, variable costs can be expected to:
vary in total in direct proportion to changes in the activity level.
The profitability index and the internal rate of return
will sometimes result in different preference rankings for investment projects
To obtain the dollar sales volume necessary to attain a given target profit, which of the following formulas should be used?
(Fixed expenses + Target net profit)/Contribution margin ratio
Product Y sells for $15 per unit, and has variable expenses of $9 per unit. Fixed expenses total $300,000 per year. How many units of Product Y must be sold each year to yield an annual profit of $90,000?
65,000 units
Which of the following would be considered an operating asset in return on investment computations?
Accounts receivable.
Which of the following may appear on a flexible budget performance report?
All of the above may appear on a flexible budget performance report.
Which of the following statements about book value per share is most correct?
Book value per common share is based on past transactions whereas the market price of a share of stock mainly reflects what investors expect to happen in the future
Which of the following will usually be found on an income statement prepared using absorption costing? Contribution MarginGross MarginA)YesYesB)YesNoC)NoYesD)NoNo
Choice C
All other things equal, which of the following would increase a division's residual income?
Decrease in average operating assets.
Which of the following would be considered a cash inflow in the financing activities section of the statement of cash flows?
Issuing bonds payable
There are various budgets within the master budget. One of these budgets is the production budget. Which of the following BEST describes the production budget?
It is calculated based on the sales budget and the desired ending inventory.
Which one of the following transactions should be classified as a financing activity on the statement of cash flows?
Purchase of the company's own stock
Which of the following would be classified as a financing activity on the statement of cash flows?
Repurchasing capital stock from owners
Contribution margin is:
Sales less variable production, variable selling, and variable administrative expenses.
Sand Company has an acid-test ratio of 0.8. Which of the following actions would improve the acid-test ratio?
Sell some equipment for cash
The general model for calculating a quantity variance is:
Standard price × (Actual quantity of inputs used − Standard quantity allowed for output).
The ratio of total cash, marketable securities, accounts receivable to current liabilities is
The acid-test ratio
Which of the following is true regarding the contribution margin ratio of a company that produces only a single product?
The contribution margin ratio multiplied by the selling price per unit equals the contribution margin per unit.
In a flexible budget, what will happen to fixed costs as the activity level increases?
The fixed cost per unit will decrease.
In a statement of cash flows, which of the following would be classified as an investing activity?
The sale of equipment
An example of a committed fixed cost is:
a long-term equipment lease.
If the contribution margin is not sufficient to cover fixed expenses:
a loss occurs.
A company has unlimited funds to invest at its discount rate. The company should invest in all projects having
a net present value greater than zero
A segment of a business responsible for both revenues and expenses would be called:
a profit center.
An unfavorable materials quantity variance indicates that:
actual usage of material exceeds the standard material allowed for output.
The salary paid to the president of a company would be classified on the income statement as a(n):
administrative expense.
Manufacturing overhead includes:
all manufacturing costs except direct labor and direct materials.
In a statement of cash flows, the sale of a long-term investment would ordinarily be classified as
an investing activity
Costs that can be eliminated in whole or in part if a particular business segment is discontinued are called:
avoidable costs.
Differential costs can:
be either fixed or variable.
Direct costs:
can be easily traced to a particular cost object.
The relative proportion of variable, fixed, and mixed costs in a company is known as the company's:
cost structure.
A company's current ratio is greater than 1. Purchasing raw materials on credit would
decrease the current ratio
When using a flexible budget, a decrease in activity within the relevant range:
decreases total costs.
Prime cost consists of:
direct materials and direct labor.
If the net present value of a project is zero based on a discount rate of 16% then the internal rate of return is
equal to 16%
Variable manufacturing overhead is applied to products on the basis of standard direct labor-hours. If the labor efficiency variance is favorable, the variable overhead efficiency variance will be:
favorable.
In a statement of cash flows, issuing bonds payable affects the
financing activities section
A budget that is based on the actual activity of a period is known as a:
flexible budget.
The market price of Friden Company's common stock increased from $15 to $18. Earnings per share of common stock remained unchanged. The company's price-earnings ratio would
increase
A company's current ratio and it's acid-test ratio are both greater than 1. Payment of an account payable would
increase the current ratio but the acid-test ratio would not be affected.
Selling used equipment at book value for cash will:
increase working capital
The internal rate of return method assumes that a project's cash flows are reinvested at the
internal rate of return
