Multiple Choice Questions
1. The main difference between the income statement of a manufacturer and a merchandiser is that the merchandiser includes cost of goods manufactured rather than cost of goods purchased.
A) True
B) False
2. Four factors come together in the manufacturing process: beginning goods in process inventory, direct materials, direct labor, and factory overhead.
A) True
B) False
3. The series of activities that add value to a company's products or services is called a value chain.
A) True
B) False
4. A manufacturer's cost of goods manufactured is the sum of direct materials, direct labor, and factory overhead costs incurred in producing products.
A) True
B) False
5. The manufacturing statement is also known as the schedule of manufacturing activities or the schedule of cost of goods manufactured.
A) True
B) False
6. The asset section of a classified balance sheet usually includes:
A) Current assets, investments, plant assets, and intangible assets.
B) Current assets, long-term assets, revenues, and intangible assets.
C) Current assets, investments, plant assets, and equity.
D) Current liabilities, investments, plant assets, and intangible assets.
E) Current assets, liabilities, plant assets, and intangible assets.
7. The current ratio:
A) Is used to measure a company's profitability.
B) Is used to measure the relation between assets and long-term debt.
C) Measures the effect of operating income on profit.
D) Is used to help evaluate a company's ability to pay its short-term obligations.
E) Is calculated by dividing current assets by equity.