Question 26

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The percentage of change in long-term liabilities between two balance sheet dates is an example of

Select one:

a.

vertical analysis.

b.

solvency analysis.

c.

profitability analysis.

d.

horizontal analysis.

Question 27

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Profitability refers to the ability of the business to

Select one:

a.

earn a reasonable amount of income.

b.

provide owners with dividends.

c.

pay its current and noncurrent liabilities.

d.

manage its accounts receivable and inventory.

Question 28

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The balance sheets at the end of each of the first two years of operations indicate the following:

2011

2010

Total current assets

$600,000

$560,000

Total investments

60,000

40,000

Total property, plant, and equipment

900,000

700,000

Total current liabilities

125,000

80,000

Total long-term liabilities

350,000

250,000

Preferred 9% stock, $100 par

100,000

100,000

Common stock, $10 par

600,000

600,000

Paid-in capital in excess of par--common stock

60,000

60,000

Retained earnings

325,000

210,000

If net income is $130,000 and interest expense is $40,000 for 2011, what are the earnings per share on common stock for 2011 (rounded to two decimal places)?

Select one:

a.

$2.17

b.

$2.68

c.

$2.02

d.

$2.32

Question 29

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If the accounts receivable turnover for the current year has decreased when compared with the ratio for the preceding year, there has been an acceleration in the collection of receivables.

Select one:

a.

true

b.

false

Question 30

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An analysis in which all the components of an income statement are expressed as a percentage of net sales is called

Select one:

a.

vertical analysis.

b.

horizontal analysis.

c.

liquidity analysis.

d.

common-size analysis.

Question 31

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Statements in which all items are expressed only in relative terms (percentages of a common base) are

Select one:

a.

horizontal statements.

b.

percentage statements.

c.

vertical statements.

d.

common-size statements.

Question 32

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Based on the following data for the current year, what is the inventory turnover?

Net sales on account during year

$ 500,000

Cost of merchandise sold during year

300,000

Accounts receivable, beginning of year

45,000

Accounts receivable, end of year

35,000

Inventory, beginning of year

90,000

Inventory, end of year

110,000

Select one:

a.

3.0

b.

2.7

c.

4.0

d.

3.3

Question 33

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The ratio of the market price per share of common stock on a specific date to the annual earnings per share is referred to as the price-earnings ratio.

Select one:

a.

true

b.

false

Question 34

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Which of the following statements is TRUE regarding fixed and variable costs?

Select one:

a.

Both costs are constant when considered on a per-unit basis.

b.

Both costs are constant when considered on a total basis.

c.

Fixed costs are fixed in total, and variable costs are fixed per unit.

d.

Variable costs are fixed in total, and fixed costs vary in total.

Question 35

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The point where the sales line and the total costs line intersect on the cost-volume-profit chart represents

Select one:

a.

the maximum possible operating loss.

b.

the maximum possible operating income.

c.

the total fixed costs.

d.

the break-even point.

Question 36

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In cost-volume-profit analysis, all costs are classified into the following two categories:

Select one:

a.

mixed costs and variable costs.

b.

sunk costs and fixed costs.

c.

discretionary costs and sunk costs.

d.

variable costs and fixed costs.

Question 37

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If fixed costs are $810,000, the unit selling price is $60, and the unit variable costs are $48, what is the break-even sales (in units) if the variable costs are increased by $2?

Select one:

a.

16,200 units

b.

57,875 units

c.

81,000 units

d.

67,500 units

Question 38

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Winston Co. manufactures office furniture. During the most productive month of the year, 3,500 desks were manufactured at a total cost of $84,400. In its slowest month, the company made 1,100 desks at a cost of $46,000. Using the high-low method of cost estimation, total fixed costs are

Select one:

a.

$56,000.

b.

$28,400.

c.

$17,600.

d.

$29,900.

Question 39

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Which of the following costs is a mixed cost?

Select one:

a.

Salary of a factory supervisor

b.

Electricity costs of $2 per kilowatt-hour

c.

Rental costs of $5,000 per month plus $0.30 per machine hour of use

d.

Straight-line depreciation on factory equipment

Question 40

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If sales are $200,000, variable costs are 56% of sales, and operating income is $30,000, what is the contribution margin ratio?

Select one:

a.

42%

b.

37%

c.

44%

d.

15%

Question 41

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If yearly insurance premiums are increased, this change in fixed costs will result in a decrease in the break-even point.

Select one:

a.

true

b.

false

Question 42

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Cost-volume-profit analysis CANNOT be used if which of the following occurs?

Select one:

a.

Costs cannot be properly classified into fixed and variable costs

b.

The total fixed costs change

c.

The per-unit variable costs change

d.

Per-unit sales prices change

Question 43

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A low operating leverage is normal for highly automated industries.

Select one:

a.

true

b.

false

Question 44

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If fixed costs are $850,000 and the unit contribution margin is $90, what amount of units must be sold in order to have a zero profit?

Select one:

a.

9,445

b.

8,500

c.

7,650

d.

85,000

Question 45

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If a business had a capacity of $10,000,000 of sales, actual sales of $6,000,000, break-even sales of $4,500,000, fixed costs of $1,800,000, and variable costs of 60% of sales, what is the margin of safety expressed as a percentage of sales?

Select one:

a.

25%

b.

18%

c.

33.3%

d.

15%

Question 46

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Which of the following conditions would cause the break-even point to decrease?

Select one:

a.

Total fixed costs increase

b.

Unit selling price decreases

c.

Unit variable cost decreases

d.

Unit variable cost increases

Question 47

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Which of the following activity bases would be the most appropriate for food costs of a hospital?

Select one:

a.

Number of cooks scheduled to work

b.

Number of x-rays taken

c.

Number of patients who stay in the hospital

d.

Number of scheduled surgeries

Question 48

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A mixed cost has characteristics of both a variable cost and a fixed cost.

Select one:

a.

true

b.

false

Question 49

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Assume that Crowson Co. sold 8,000 units of Product A and 2,000 units of Product B during the past year. The unit contribution margins for Products A and B are $20 and $45, respectively. Crowson has fixed costs of $350,000. The break-even point in units is

Select one:

a.

14,000 units.

b.

25,278 units.

c.

8,000 units.

d.

10,769 units.

Question 50

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With the aid of computer software, managers can vary assumptions regarding selling prices, costs, and volume and can immediately see the effects of each change on the break-even point and profit. Such an analysis is called

Select one:

a.

'what if' or sensitivity analysis.

b.

vary the data analysis.

c.

computer-aided analysis.

d.

data gathering.