Managerial Accounting

7. When monthly financial statements are prepared, overapplied overhead

will appear as

a. unearned revenue.

b. a current asset.

c. a loss on the income statement under "Other Expenses and Losses."

d. miscellaneous expense.

8. A process cost system would most likely be used by a company that

makes

a. motion pictures. b. repairs to automobiles. c. breakfast cereal.

d. college graduation announcements.

(Did I ever tell you that UNIT costs were going to be an important concept? Just wondering! J)

9. If the manufacturing overhead costs applied to jobs worked on were

greater than the actual manufacturing costs incurred during a

period, overhead is said to be

a. underapplied. b. overapplied. c. in error. d. prepaid.

10. If manufacturing overhead has been overapplied during the year, the

adjusting entry at the end of the year will show a

a. debit to Manufacturing Overhead. b. credit to Finished Goods Inventory

c. debit to Cost of Goods Sold. d. credit to Work in Process Inventory.

11. The Finishing Department adds materials at the beginning of a

process and incurs conversion costs uniformly throughout the

process. During October, 5,000 units with a cost of $20,000 were

transferred to the Finishing Department from the Fabricating

Department. The $20,000 transferred-in costs should be

a. deducted from the total cost charged to the Finishing Department.

b. added to the conversion costs charged to the Finishing

Department.

c. added to the material costs charged to the Finishing Department.

d. charged back to the Fabricating Department.

12. If there are no units in process at the beginning of the period,

then

a. the company must be using a job order cost system.

b. only one computation of equivalent units of production will be

necessary.

c. the units started will equal the number of units transferred out.

d. the units to be accounted for will equal the units transferred

out and the units in process at the end of the period.

13. Price Manufacturing assigns overhead based on machine hours.

Department A logs 600 machine hours and Department B shows 1,200

machine hours for the period. If the predetermined overhead rate is

$5 per machine hour, the entry to assign overhead will show a

a. debit to Manufacturing Overhead for $9,000.

b. credit to Work in ProcessDepartment B for $6,000.

c. debit to Work in Process for $6,000.

d. credit to Manufacturing Overhead for $9,000.

14. Which of the following statements about process costing is true?

a. The first department of a two department production process will

not show any overhead applied.

b. The second department of a two department production process will

show a debit for transferred-in costs from the first department.

c. The first department of a two department production process will

transfer costs directly to finished goods.

d. The costs of completed goods is transferred from the last

department's work in process directly to cost of goods sold.

15. A department had the following information for the month:

Total materials costs $30,000.00

Conversion cost per unit $3.00

Total manufacturing cost per unit $5.50

What are the equivalent units of production for materials?

a. 12,000. b. 10,000. c. 6,000. d. Cannot be determined.

16. The Byers Company had the following department information for the

month:

Total materials costs $90,000

Equivalent units of materials 10,000

Total conversion costs $150,000

Equivalent units conversion costs 20,000

What is the total manufacturing cost per unit?

a. $8.00. b. $7.50. c. $9.00. d. $16.50.

17. It is necessary to calculate equivalent units of production in a

department because

a. a physical count of units is impossible.

b. some units worked on in the department are not fully complete.

c. the physical units in the department are always 100% complete.

d. at times a department may use a job order cost system and then

switch to a process cost system.

18. Which of the following would not appear as a debit in the Work in

Process account of a second department in a two stage production

process?

a. Transferred in costs

b. Overhead applied

c. Labor used

d. Cost of completed products transferred out

19. In applying the high-low method, which months are relevant?

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Month Miles Total Cost

January 80,000 $ 96,000

February 50,000 80,000

March 70,000 94,000

April 90,000 130,000

a. January and February b. January and April

c. February and April d. February and March

20. A variable cost is a cost that

a. varies per unit at every level of activity.

b. occurs at various times during the year.

c. varies in total in proportion to changes in the level of

activity.

d. may or may not be incurred, depending on management's discretion.

21. Which one of the following is not an assumption of CVP analysis?

a. All units produced are sold.

b. All costs are variable costs.

c. Sales mix remains constant.

d. The behavior of costs and revenues are linear within the relevant

range.

22. Fixed costs are $900,000 and the variable costs are 75% of the unit

selling price. What is the break-even point in dollars?

a. $2,100,000. b. $2,700,000. c. $3,600,000. d. $1,200,000.

23. If American Airlines cuts its domestic fares by 30%,

a. its fixed costs will decrease.

b. profit will increase by 30%.

c. a profit can only be earned by decreasing the number of flights.

d. a profit can be earned either by increasing the number of

passengers or by decreasing variable costs.

24. Sales are $250,000 and variable costs are $175,000. What is the

contribution margin ratio?

a. 43%

b. 30%

c. 70%

d. cannot be determined because amounts are not expressed per unit.

25. How much sales are required to earn a target net income of $96,000

if total fixed costs are $120,000 and the contribution margin ratio

is 40%?

a. $300,000. b. $486,000. c. $540,000. d. $240,000.

26. If graphed, fixed costs that behave in a curvilinear fashion

resemble

a. an S-curve. b. an inverted S-curve. c. a straight line. d. a stair-step pattern.

27. A liquidity ratio measures the

a. income or operating success of an enterprise over a period of

time.

b. ability of the enterprise to survive over a long period of time.

c. short-term ability of the enterprise to pay its maturing

obligations and to meet unexpected needs for cash.

d. number of times interest is earned.

28. In analyzing financial statements, horizontal analysis is a

a. requirement. b. tool. c. principle. d. theory.

29. A ratio calculated in the analysis of financial statements

a. expresses a mathematical relationship between two numbers.

b. shows the percentage increase from one year to another.

c. restates all items on a financial statement in terms of dollars

of the same purchasing power.

d. is meaningful only if the numerator is greater than the

denominator.

30. The profit margin ratio is calculated by dividing

a. sales by cost of goods sold.

b. gross profit by net sales.

c. net income by stockholders' equity.

d. net income by net sales.

31. If equal amounts are added to the numerator and the denominator of

the current ratio, the ratio will always

a. increase. b. decrease. c. stay the same. d. equal zero.

32. If a company has an acid-test ratio of 1.2:1, what respective

effects will the borrowing of cash by short-term debt and collection

of accounts receivable have on the ratio?

Short-term Borrowing Collection of Receivable

a. Increase No effect

b. Increase Increase

c. Decrease No effect

d. Decrease Decrease

33. The current assets of Kile Company are $150,000. The current

liabilities are $120,000. The current ratio expressed as a

proportion is

a. 125% b. 1.25:1 c. .80:1 d. $150,000 $120,000

34. Which one of the following is not a tool in financial statement

analysis?

a. Horizontal analysis b. Circular analysis c. Vertical analysis d. Ratio analysis

35. Earnings per share is calculated

a. only for common stock.

b. only for preferred stock.

c. for common and preferred stock.

d. only for treasury stock.

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The Waters Department Store had net credit sales of $12,000,000 and

cost of goods sold of $9,000,000 for the year. The average

inventory for the year amounted to $2,000,000.

36. The inventory turnover ratio for the year is

a. 6 times. b. 10.5 times. c. 4.5 times. d. 3 times.

37. Which one of the following ratios would not likely be used by a

short-term creditor in evaluating whether to sell on credit to a

company?

a. Current ratio b. Acid-test ratio c. Asset turnover d. Receivables turnover

38. Long-term creditors are usually most interested in evaluating

a. liquidity and solvency. b. solvency and marketability.

c. liquidity and profitability. d. profitability and solvency.

39. The asset turnover ratio measures

a. how often a company replaces its assets.

b. how efficiently a company uses its assets to generate sales.

c. the portion of the assets that have been financed by creditors.

d. the overall rate of return on assets.

40. A horizontal analysis performed on a statement of retained earnings

would not show a percentage change in

a. dividends paid. b. net income. c. expenses. d. beginning retained earnings.