week 6 test

1) Which of the following is an advantage of corporations relative to partnerships and sole proprietorships?

Reduced legal liability for investors.

Lower taxes.

Most common form of organization.

Managers

2) The group of users of accounting information charged with achieving the goals of the business is its

creditors.

auditors.

investors.

managers

18) Fixed costs are $600,000 and the contribution margin per unit is $150. What is the break-even point?

$4,000,000

$1,500,000

1,500 units

4,000 units

28) Seasons Manufacturing manufactures a product with a unit variable cost of $100 and a unit sales price of $176. Fixed manufacturing costs were $480,000 when 10,000 units were produced and sold. The company has a one-time opportunity to sell an additional 1,000 units at $140 each in a foreign market which would not affect its present sales. If the company has sufficient capacity to produce the additional units, acceptance of the special order would affect net income as follows:

	Income would increase by $40,000.
	Income would decrease by $8,000.
	Income would increase by $8,000.
	Income would increase by $140,000.

29) Carter, Inc. can make 100 units of a necessary component part with the following costs: 

Direct Materials	$120,000
Direct Labor	20,000
Variable Overhead	60,000
Fixed Overhead	40,000

If Carter can purchase the component externally for $220,000 and only $10,000 of the fixed costs can be avoided, what is the correct make-or-buy decision?

	Buy and save $30,000
	Buy and save $10,000
	Make and save $30,000
	Make and save $10,000

30) A company has a process that results in 15,000 pounds of Product A that can be sold for $16 per pound. An alternative would be to process Product A further at a cost of $200,000 and then sell it for $28 per pound. Should management sell Product A now or should Product A be processed further and then sold? What is the effect of the action?

	Process further, the company will be better off by $20,000.
	Process further, the company will be better off by $180,000.
	Sell now, the company will be better off by $200,000.
	Sell now, the company will be better off by $20,000.

6) A liquidity ratio measures the

	short-term ability of a company to pay its maturing obligations and to meet unexpected needs for cash.
	ability of a company to survive over a long period of time.
	income or operating success of a company over a period of time.
	percentage of total financing provided by creditors.

9) Horizontal analysis is a technique for evaluating a series of financial statement data over a period of time

	that has been arranged from the highest number to the lowest number.
	that has been arranged from the lowest number to the highest number.
	to determine which items are in error.
	to determine the amount and/or percentage increase or decrease that has taken place

Vertical analysis is a technique that expresses each item in a financial statement

	starting with the highest value down to the lowest value.
	as a percent of a base amount.
	as a percent of the item in the previous year.
	in dollars and cent

11)Process costing is used when

	the production process is continuous.
	costs are to be assigned to specific jobs.
	dissimilar products are involved.
	production is aimed at filling a specific customer order.

13)In a process cost system, product costs are summarized:

	on job cost sheets.
	on production cost reports.
	after each unit is produced.
	when the products are sold.

15) Activity-based costing

	assigns activity cost pools to products and services, then allocates overhead back to the activity cost pools.
	allocates overhead directly to products and services based on activity levels.
	allocates overhead to multiple activity cost pools, and it then assigns the activity cost pools to products and services by means of cost drivers.
	accumulates overhead in one cost pool, then assigns the overhead to products and services by means of a cost driver.

17) The break-even point is where

	contribution margin equals total fixed costs.
	total sales equal total variable costs.
	total variable costs equal total fixed costs.
	total sales equal total fixed costs.

19) When a company assigns the costs of direct materials, direct labor, and both variable and fixed manufacturing overhead to products, that company is using

	operations costing.
	product costing.
	absorption costing.
	variable costing.

4) An income statement

	reports the assets, liabilities, and stockholders’ equity at a specific date.
	summarizes the changes in retained earnings for a specific period of time.
	presents the revenues and expenses for a specific period of time.
	reports the changes in assets, liabilities, and stockholders’ equity over a period of time.

If a division manager's compensation is based upon the division's net income, the manager may decide to meet the net income targets by increasing production when using

	variable costing, in order to increase net income.
	variable costing, in order to decrease net income.
	absorption costing, in order to decrease net income.
	absorption costing, in order to increase net income.

21)An unrealistic budget is more likely to result when it

	has been developed in a bottom up fashion.
	has been developed by all levels of management.
	is developed with performance appraisal usages in mind.
	has been developed in a top down fashion.

23)The purpose of the sales budget report is to

	control sales commissions.
	determine whether income objectives are being met.
	control selling expenses.
	determine whether sales goals are being met.

25)Variance reports are

	(a) external financial reports.
	(b) SEC financial reports.
	(c) internal reports for management.
	(d) all of thes

27 The process of evaluating financial data that change under alternative courses of action is called

	double entry analysis.
	incremental analysis.
	contribution margin analysis.
	cost-benefit analysis.

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