1. Which of the following is not a profitability ratio? (Points: 4)Payout ratioProfit marginTimes interest earnedReturn on common stockholders’ equity2. The ratio that uses weighted average common shares outstanding in the denominator is the (Points: 4)price-earnings ratio.return on common stockholders’ equity.earnings per share.payout ratio.3. The disposal of a significant segment of a business is called (Points: 4)a change in accounting principle.an extraordinary item.an other expense.discontinued operations.4. 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.Inventory turnover for the year is (Points: 4)6 times.10.5 times.4.5 times.3 times.5. Inventory turnover is calculated by dividing (Points: 4)cost of goods sold by the ending inventory.cost of goods sold by the beginning inventory.cost of goods sold by the average inventory.average inventory by cost of goods sold.6. Which of the following is not a profitability ratio? (Points: 4)Payout ratioProfit marginTimes interest earnedReturn on common stockholders’ equity7. The order of presentation of nontypical items that may appear on the income statement is (Points: 4)Extraordinary items, Discontinued operations, Other revenues and expenses.Discontinued operations, Extraordinary items, Other revenues and expenses.Other revenues and expenses, Discontinued operations, Extraordinary items.Other revenues and expenses, Extraordinary items, Discontinued operations.8. Profit margin is calculated by dividing (Points: 4)sales by cost of goods sold.gross profit by net sales.net income by stockholders’ equity.net income by net sales.9. The ratio that uses weighted average common shares outstanding in the denominator is the (Points: 4)price-earnings ratio.return on common stockholders’ equity.earnings per share.payout ratio.10. The statement of cash flows (Points: 4)must be prepared on a daily basis.summarizes the operating, financing, and investing activities of an entity.is another name for the income statement.is a special section of the income statement.11. For the following transaction, indicate where, if at all, it would be classified on the statement of cash flows. Assume the indirect method is used.Decrease in income taxes payable. (Points: 4)Operating activities sectionInvesting activities sectionFinancing activities sectionDoes not represent a cash flow12. For the following transaction, indicate where, if at all, it would be classified on the statement of cash flows. Assume the indirect method is used.Purchased land for cash. (Points: 4)Operating activities sectionInvesting activities sectionFinancing activities sectionDoes not represent a cash flow13. Wilton Company reported net income of $40,000 for the year. During the year, accounts receivable decreased by $7,000, accounts payable increased by $3,000 and depreciation expense of $5,000 was recorded. Net cash provided by operating activities for the year is (Points: 4)$30,000.$55,000.$39,000.$35,000.14. Using the indirect method, patent amortization expense for the period (Points: 4)is deducted from net income.causes cash to increase.causes cash to decrease.is added to net income.15. In developing the cash flows from operating activities, most companies in the U. S. (Points: 4)use the direct method.use the indirect method.present both the indirect and direct methods in their financial reports.prepare the operating activities section on the accrual basis.16. Which of the following would be added to net income using the indirect method? (Points: 4)An increase in accounts receivableAn increase in prepaid expensesDepreciation expenseA decrease in accounts payable17. Cola Co. manufactures a product with a standard direct labor cost of two hours at $24.00 per hour. During July, 2,000 units were produced using 4,200 hours at $24.40 per hour. The labor price variance was (Points: 4)$1,680 U.$6,480 U.$6,480 F.$4,800 U.18. The direct labor quantity standard is sometimes called the direct labor (Points: 4)volume standard.effectiveness standard.efficiency standard.quality standard.19. A standard which represents an efficient level of performance that is attainable under expected operating conditions is called a(n) (Points: 4)ideal standard.loose standard.tight standard.normal standard.20. An unfavorable materials quantity variance would occur if (Points: 4)more materials were purchased than were used.actual pounds of materials used were less than the standard pounds allowed.actual labor hours used were greater than the standard labor hours allowed.actual pounds of materials used were greater than the standard pounds allowed.21. The most rigorous of all standards is the (Points: 4)normal standard.realistic standard.ideal standard.conceivable standard.22. A purchases budget is used instead of a production budget by (Points: 4)merchandising companies.service enterprises.not-for-profit organizations.manufacturing companies.23. For a merchandiser, the starting point in the development of the master budget is the (Points: 4)cash budget.sales budget.selling and administrative expenses budget.budgeted income statement.24. Stanbrough Company has the following budgeted sales: July $100,000, August $150,000, and September $125,000. 40% of the sales are for cash and 60% are on credit. For the credit sales, 50% are collected in the month of sale, and 50% the next month. The total expected cash receipts during September are (Points: 4)$140,000.$132,500.$131,250.$125,000.25. The following credit sales are budgeted by Roswell Company:January $102,000February 150,000March 210,000April 180,000The company’s past experience indicates that 70% of the accounts receivable are collected in the month of sale, 20% in the month following the sale, and 8% in the second month following the sale. The anticipated cash inflow for the month of April is (Points: 4)$185,160.$168,000.$180,000.$176,400.26. The starting point in preparing a master budget is the preparation of the (Points: 4)production budget.sales budget.purchasing budget.personnel budget.27. Which of the following would not appear as a fixed expense on a selling and admini-strative expense budget? (Points: 4)Freight-outOffice salariesProperty taxesDepreciation28. Long-range planning usually encompasses a period of at least (Points: 4)six months.1 year.5 years.10 years.29. Long-range planning (Points: 4)generally presents more detailed information than an annual budget.generally encompasses a longer period of time than an annual budget.is usually more accurate than an annual budget.is prepared on a quarterly basis if the budget is prepared on a quarterly basis.30. When will the elimination of a product line have no effect on the company’s overall profit? (Points: 4)When the avoidable fixed costs equal the product line’s contribution marginWhen the unavoidable fixed costs equal the product line’s contribution marginWhen there are no fixed costs incurred by the product lineWhen the product line contribution margin is negative31. A product line should be eliminated whenever (Points: 4)the product line generates a net loss.the unavoidable fixed costs exceed the product line’s contribution margin.the product line generates a negative contribution margin.the avoidable costs are less than the product line’s contribution margin.32. North Division has the following information:Sales $900,000Variable expenses 480,000Fixed expenses 465,000If this division is eliminated, the fixed expenses will be allocated to the company’s other divisions. What is the incremental effect on net income if the division is dropped? (Points: 4)$45,000 increase$465,000 decrease$420,000 decrease$435,000 increase33. Products produced from a common production process and a single raw material are referred to as (Points: 4)separable products.joint products.common products.independent products.34. Which one of the following is not a disadvantage of buying rather than making a component of a company’s product? (Points: 4)Quality control specifications may not be met.The outside supplier could increase prices significantly in the future.Profitable product lines may be dropped.The supplier may not deliver on time.35. Costs that will differ between alternatives and influence the outcome of a decision are (Points: 4)sunk costs.unavoidable costs.relevant costs.product costs.36. Which of the following steps in the management decision-making process generally involves the managerial accountant? (Points: 4)Determine possible courses of action.Make the appropriate decision based on relevant data.Prepare internal reports that review the impact of decisions.Assign responsibility.37. The margin of safety ratio (Points: 4)is computed as actual sales divided by break-even sales.indicates what percent decline in sales could be sustained before the company would operate at a loss.measures the ratio of fixed costs to variable costs.is used to determine the break-even point.38. Small Fry Company has sales of $1,000,000, variable costs of $400,000, and fixed costs of $450,000. Small Fry’s degree of operating leverage is (Points: 4).184.108.40.206.674.00.39. Reducing reliance on human workers and instead investing heavily in computers and online technology will (Points: 4)reduce fixed costs and increase variable costs.reduce variable costs and increase fixed costs.have no effect on the relative proportion of fixed and variable costs.make the company less susceptible to economic swings.40. Dye Company can sell all the units it can produce of either Plain or Fancy but not both. Plain has a unit contribution margin of $96 and takes two machine hours to make and Fancy has a unit contribution margin of $120 and takes three machine hours to make. There are 2,400 machine hours available to manufacture a product. What should Dye do? (Points: 4)Make Fancy which creates $24 more profit per unit than Plain does.Make Plain which creates $8 more profit per machine hour than Fancy does.Make Plain because more units can be made and sold than Fancy.The same total profits exist regardless of which product is made.41. In a sales mix situation, at any level of units sold, net income will be higher if (Points: 4)more higher contribution margin units are sold than lower contribution margin units.more lower contribution margin units are sold than higher contribution margin units.more fixed expenses are incurred.weighted-average unit contribution margin decreases.42. The margin of safety ratio is (Points: 4)expected sales divided by break-even sales.expected sales less break-even sales.margin of safety in dollars divided by expected sales.margin of safety in dollars divided by break-even sales.43. Margin of safety in dollars is (Points: 4)expected sales divided by break-even sales.expected sales less break-even sales.actual sales less expected sales.expected sales less actual sales.44. The contribution margin ratio is (Points: 4)sales divided by contribution margin.sales divided by fixed expenses.sales divided by variable expenses.contribution margin divided by sales.45. Buerhrle’s CVP income statement included sales of 2,000 units, a selling price of $100, variable expenses of $60 per unit, and fixed expenses of $44,000. Net income is (Points: 4)$200,000.$80,000.$76,000.$36,000.46. A CVP graph does not include a (Points: 4)variable cost line.fixed cost line.sales line.total cost line.47. A company sells a product which has a unit sales price of $5, unit variable cost of $3 and total fixed costs of $120,000. The number of units the company must sell to break even is (Points: 4)60,000 units.24,000 units.240,000 units.40,000 units.48. A company requires $1,020,000 in sales to meet its net income target. Its contribution margin is 30%, and fixed costs are $180,000. What is the target net income? (Points: 4)$306,000$234,000$420,000$126,00049. A CVP graph does not include a (Points: 4)variable cost line.fixed cost line.sales line.total cost line.50. Internal reports are generally (Points: 4)aggregated.detailed.regulated.unreliable.51. Manufacturing costs include (Points: 4)direct materials and direct labor only.direct materials and manufacturing overhead only.direct labor and manufacturing overhead only.direct materials, direct labor, and manufacturing overhead.52. Which one of the following does not appear on the balance sheet of a manufacturing company? (Points: 4)Finished goods inventoryWork in process inventoryCost of goods manufacturedRaw materials inventory53. Cost of goods manufactured is calculated as follows: (Points: 4)Beginning WIP + direct materials used + direct labor + manufacturing overhead + ending WIP.Direct materials used + direct labor + manufacturing overhead – beginning WIP + ending WIP.Beginning WIP + direct materials used + direct labor + manufacturing overhead – ending WIP.Direct materials used + direct labor + manufacturing overhead – ending WIP – beginning WIP.54. The equivalent of finished goods inventory for a merchandising firm is referred to as (Points: 4)purchases.cost of goods purchased.merchandise inventory.raw materials inventory.55. Product costs are also called (Points: 4)direct costs.overhead costs.inventoriable costs.capitalizable costs.
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