Multiple Choice Questions
1) The following information is available for product N6.
Direct material costs ........................ $67.00 per unit of product
Costs of machining ......................... $47.50 per machine hour
Costs of packing ............................ $16.90 per carton
What is the total full cost of an order for 1,000 units of product N6 which will use 60 machine hours and 50 cartons?
A. $67 000
B. $70 695
C. $131 400
D. $114 500
2) The fundamental purpose of accounting standards is to improve:
A. Company share price
B. Company profits
C. Resource allocation in business
D. All of the above
3) If opening equity is $60 000, assets and liabilities at the end of the period are $178 000 and $55 000 respectively and owner's drawings are $11 000, profit for the period must be:
A. $52 000
B. $74 000
C. $63 000
D. Cannot be determined
4) Financial reports of large companies often report consolidated entity results. A consolidated entity is:
A. A parent entity and its subsidiaries
B. An entity that owns shares in another entity
C. A group of subsidiaries
D. None of the above
5) Which method of inventory pricing will result in the highest figure for closing inventory during a period of rising prices?
A. Last-in, first-out
B. Weighted average cost
C. First-in, first-out
D. None of the above
6) A machine is purchased for $50 000. It is estimated that it has a useful life of 5 years and will then be sold for $5000. The straight-line method is used to calculate depreciation. What is the carrying value of the machine at the end of its second year of useful life?
A. $32 000
B. $30 000
C. $25 000
D. $27 000
7) Which statement is correct in relation to fixed costs per unit of output?
A. They increase as the level of output increases
B. They decline as the level of output increases
C. They stay the same irrespective of the level of output
D. They are semi-variable with the level of output
8) If the current ratio is 2.5 and current liabilities are $300 000 then current assets are:
A. $800 000
B. $450 000
C. $500 000
D. $750 000
9) Calculate the cash available from operating activities
Net profit $140 000
Depreciation $45 000
Accounts receivable increased by $20 000
Accrued expense increased by $2000
There were no other increases or decreases in relevant balance sheet accounts.
A. $163 000
B. $203 000
C. $207 000
D. $167 000
10) If operating profit is $150 000, required rate of return is 12% and average operating assets are $1 600 000 residual income is:
A. $18 000
B. $1 450 000
C. $42 000
D. 2.63%