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a. Most common form of organization.

b. Reduced legal liability for investors.

c. Harder to transfer ownership.

d. Lower taxes.

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

a. Managers

b. auditors.

c. Investors

d. Creditors

3. Which of the following financial statements is concerned with the company at a point in time?

a. Retained Earnings statement.

b. Balance sheet.

c. Statement of cash flows.

d. Income statement.

4. An income statement

a. reports the changes in assets, liabilities, and stockholders’ equity over a period of time.

b. reports the assets, liabilities, and stockholders’ equity at a specific date.

c. presents the revenues and expenses for a specific period of time.

d. summarizes the changes in retained earnings for a specific period of time.

5. The most important information needed to determine if companies can pay their current obligations is the

a. relationship between current assets and current liabilities.

b. relationship between short-term and long-term liabilities.

c. net income for this year.

d. projected net income for next year.

6. A liquidity ratio measures the

a. percentage of total financing provided by creditors.

b. income or operating success of a company over a period of time.

c. short-term ability of a company to pay its maturing obligations and to meet unexpected needs for cash.

d. ability of a company to survive over a long period of time.

7. The convention of consistency refers to consistent use of accounting principles

a. within industries.

b. among firms.

c. among accounting periods.

d. throughout the accounting periods.

8. Horizontal analysis is also known as

a. trend analysis.

b. common size analysis.

c. linear analysis.

d. vertical analysis.

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

a. that has been arranged from the lowest number to the highest number.

b. to determine the amount and/or percentage increase or decrease that has taken place.

c. that has been arranged from the highest number to the lowest number.

d. to determine which items are in error.

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

a. as a percent of a base amount.

b. in dollars and cents.

c. as a percent of the item in the previous year.

d. starting with the highest value down to the lowest value.

11. Process costing is used when

a. the production process is continuous.

b. production is aimed at filling a specific customer order.

c. dissimilar products are involved.

d. costs are to be assigned to specific jobs.

12. An important feature of a job order cost system is that each job

a. consists of one unit of output.

b. has its own distinguishing characteristics.

c. must be completed before a new job is accepted.

d. must be similar to previous jobs completed.

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

a. on job cost sheets.

b. after each unit is produced.

c. when the products are sold.

d. on production cost reports.

14. An activity that has a direct cause-effect relationship with the resources consumed is a(n)

a. product activity.

b. overhead rate.

c. cost pool.

d. cost driver.

15. Activity-based costing

a. allocates overhead to multiple activity cost pools, and it then assigns the activity cost pools to products and services by means of cost drivers.

b. accumulates overhead in one cost pool, then assigns the overhead to products and services by means of a cost driver.

c. assigns activity cost pools to products and services, then allocates overhead back to the activity cost pools.

d. allocates overhead directly to products and services based on activity levels.

16. A cost which remains constant per unit at various levels of activity is a

a. mixed cost.

b. manufacturing cost.

c. variable cost

d. fixed cost

17. The break-even point is where

a. total sales equal total fixed costs.

b. total variable costs equal total fixed costs.

c. contribution margin equals total fixed costs.

d. total sales equal total variable costs.

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

a. $4,000,000

b. 4,000 units

c. $1,500,000

d. 1,500 units

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

a. product costing.

b. absorption costing.

c. operations costing.

d. variable costing.

20. 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

a. absorption costing, in order to decrease net income.

b. variable costing, in order to decrease net income.

c. variable costing, in order to increase net income.

d. absorption costing, in order to increase net income.

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

a. has been developed in a bottom up fashion.

b. is developed with performance appraisal usages in mind.

c. has been developed in a top down fashion.

d. has been developed by all levels of management.

22. A major element in budgetary control is

a. approval of the budget by the stockholders.

b. the preparation of long-term plans.

c. the valuation of inventories.

d. the comparison of actual results with planned objectives

23. The purpose of the sales budget report is to

a. determine whether income objectives are being met.

b. determine whether sales goals are being met.

c. control sales commissions.

d. control selling expenses

24. The accumulation of accounting data on the basis of the individual manager who has the authority to make day-to-day decisions about activities in an area is called

a. flexible accounting.

b. responsibility accounting.

c. master budgeting.

d. static reporting.

25. Variance reports are

a. external financial reports.

b. SEC financial reports.

c. internal reports for management.

d. all of these.

26. Internal reports that review the actual impact of decisions are prepared by

a. department heads.

b. management accountants.

c. the controller.

d. factory workers.

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

a. cost-benefit analysis.

b. incremental analysis.

c. double entry analysis.

d. contribution margin analysis

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:

a. Income would decrease by $8,000.

b. Income would increase by $8,000.

c. Income would increase by $140,000.

d. Income would increase by $40,000.

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?

a. Buy and save $30,000

b. Buy and save $10,000

c. Make and save $10,000

d. Make and save $30,000

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?

a. Process further, the company will be better off by $20,000.

b. Sell now, the company will be better off by $200,000.

c. Sell now, the company will be better off by $20,000.

d. Process further, the company will be better off by $180,000.