Question 1
Which of the following is an advantage of
corporations relative to partnerships and sole proprietorships?
Harder to transfer ownership.
Most common form of organization.
Reduced legal liability for investors.
Lower taxes.
Question 2
The group of users of accounting information charged
with achieving the goals of the business is its
Question 3
Which of the following financial statements is
concerned with the company at a point in time?
Income statement.
Balance sheet.
Retained Earnings statement.
Statement of cash flows.
Question 4
An income statement
reports the changes in assets, liabilities, and
stockholders’ equity over a period of time.
reports the assets, liabilities, and stockholders’
equity at a specific date.
presents the revenues and expenses for a specific
period of time.
summarizes the changes in retained earnings for a
specific period of time.
Question 5
The most important information needed to determine
if companies can pay their current obligations is the
relationship between short-term and long-term
net income for this year.
projected net income for next year.
relationship between current assets and current
Question 6
A liquidity ratio measures the
ability of a company to survive over a long period
of time.
short-term ability of a company to pay its maturing
obligations and to meet unexpected needs for cash.
income or operating success of a company over a
period of time.
percentage of total financing provided by creditors.
Question 7
The convention of consistency refers to consistent
use of accounting principles
among firms.
throughout the accounting periods.
among accounting periods.
within industries.
Question 8
Horizontal analysis is also known as
vertical analysis.
trend analysis.
common size analysis.
linear analysis.
Question 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 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.
that has been arranged from the highest number to
the lowest number.
Question 10
Vertical analysis is a technique that expresses each
item in a financial statement
in dollars and cents.
as a percent of the item in the previous year.
as a percent of a base amount.
starting with the highest value down to the lowest
Question 11
Process costing is used when
the production process is continuous.
production is aimed at filling a specific customer
dissimilar products are involved.
costs are to be assigned to specific jobs.
Question 12
An important feature of a job order cost system is
that each job
must be completed before a new job is accepted.
consists of one unit of output.
must be similar to previous jobs completed.
has its own distinguishing characteristics.
Question 13
In a process cost system, product costs are
after each unit is produced.
on production cost reports.
when the products are sold.
on job cost sheets.
Question 14
An activity that has a direct cause-effect
relationship with the resources consumed is a(n)
cost pool.
product activity.
cost driver.
overhead rate.
Question 15
Activity-based costing
assigns activity cost pools to products and
services, then allocates overhead back to the activity cost pools.
allocates overhead to multiple activity cost pools,
and it then assigns the activity cost pools to products and services by means
of cost drivers.
allocates overhead directly to products and services
based on activity levels.
accumulates overhead in one cost pool, then assigns
the overhead to products and services by means of a cost driver.
Question 16
A cost which remains constant per unit at various
levels of activity is a
fixed cost.
variable cost.
mixed cost.
manufacturing cost.
Question 17
The break-even point is where
total variable costs equal total fixed costs.
total sales equal total fixed costs.
contribution margin equals total fixed costs.
total sales equal total variable costs.
Question 18
Fixed costs are $600,000 and the contribution margin
per unit is $150. What is the break-even point?
4,000 units
1,500 units
Question 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
product costing.
variable costing.
operations costing.
absorption costing.
Question 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
absorption costing, in order to increase net income.
variable costing, in order to increase net income.
absorption costing, in order to decrease net income.
variable costing, in order to decrease net income.
Question 21
An unrealistic budget is more likely to result when
is developed with performance appraisal usages in
has been developed in a bottom up fashion.
has been developed in a top down fashion.
has been developed by all levels of management.
Question 22
A major element in budgetary control is
the preparation of long-term plans.
approval of the budget by the stockholders.
the comparison of actual results with planned
the valuation of inventories.
Question 23
The purpose of the sales budget report is to
determine whether income objectives are being met.
control selling expenses.
control sales commissions.
determine whether sales goals are being met.
Question 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
flexible accounting.
static reporting.
master budgeting.
responsibility accounting.
Question 25
Variance reports are
external financial reports.
SEC financial reports.
internal reports for management.
all of these.
Question 26
Internal reports that review the actual impact of
decisions are prepared by
the controller.
department heads.
management accountants.
factory workers.
Question 27
The process of evaluating financial data that change
under alternative courses of action is called
contribution margin analysis.
cost-benefit analysis.
double entry analysis.
incremental analysis.
Question 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 $140,000.
Income would increase by $40,000.
Income would increase by $8,000.
Income would decrease by $8,000.
Question 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?
Make and save $30,000
Buy and save $30,000
Make and save $10,000
Buy and save $10,000
Question 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?
Sell now, the company will be better off by
Process further, the company will be better off by
Sell now, the company will be better off by $20,000.
Process further, the company will be better off by

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