Question 1

1. If an equipment replacement decision would not affect revenue, its benefits could still be measured by analyzing its

   Answer

   	a.	net cash flows.
   	b.	cost savings.
   	c.	net cash outflows.
   	d.	effect on net income.

2 points

Question 2

1. Depreciation is a unique expense because it

   Answer

   	a.	does not affect income taxes.
   	b.	has to be calculated.
   	c.	does not require a cash outlay.
   	d.	is the same amount every accounting period.

2 points

Question 3

1. Capital investment analysis involves all of the following except

   Answer

   	a.	preparing reports for management.
   	b.	analyzing the sales mix.
   	c.	dividing available capital investment funds.
   	d.	selecting the best alternative.

2 points

Question 4

1. Smile Industries capital structure consists of $1,000,000 of debt at 6 percent interest and 1,500,000 of stockholders equity at 2 percent.The proportion of Equity in the total capital structure is

   Answer

   	a.	100%
   	b.	60%
   	c.	40%
   	d.	15%

2 points

Question 5

1. In developing performance measures, management must consider which of the following?

   Answer

   	a.	How should we measure?
   	b.	How can managers monitor financial performance?
   	c.	What should we measure?
   	d.	All of these choices

2 points

Question 6

1. The balanced scorecard links the perspectives of an organization's stakeholders with the organization's

   Answer

   	a.	mission and overall plan, performance measures, departmental plans, and resources.
   	b.	goals and vision, performance goals, strategic plan, and financial resources.
   	c.	mission and vision, performance measures, strategic plan, and resources.
   	d.	mission and vision, performance goals, overall plan, and resources.

2 points

Question 7

1. For purposes of computing EVA, the minimum desired rate or return on an investment is known as

   Answer

   	a.	residual income.
   	b.	ROI.
   	c.	cost of capital.
   	d.	profit margin.

2 points

Question 8

1. The manager of Center A is responsible for generating cash inflows and incurring costs with the goal of making money for the company. The manager has no responsibility for assets. What type of responsibility center is Center A?

   Answer

   	a.	Revenue center
   	b.	Profit center
   	c.	Discretionary cost center
   	d.	Cost center

2 points

Question 9

1. W and X are partners who have agreed to admit Y, who will invest $15,000 for a 20 percent interest. The previous capital balances were $15,000 and $30,000 for W and X, respectively. W and X had shared profits and losses equally. What amount will be recorded in Y's Capital account?

   Answer

   	a.	$9,000 credit
   	b.	$12,000 credit
   	c.	$6,000 credit
   	d.	$15,000 credit

2 points

Question 10

1. Joan pays Eva $60,000 for her $40,000 interest in a partnership. The entry to record the sale on the partnership books is:

   Answer

   	a.	Eva, Capital 60,000 Joan, Capital 60,000
   	b.	Eva, Capital 40,000 Joan, Capital 40,000
   	c.	Joan, Capital 60,000 Eva, Capital 60,000
   	d.	Eva, Capital 60,000 Cash 60,000

2 points

Question 11

1. Which of the following will not result in dissolution of a partnership?

   Answer

   	a.	Bankruptcy of a partner
   	b.	Admission of a new partner
   	c.	Negative capital balance of a partner
   	d.	Incapacitation of a partner

2 points

Question 12

1. W and X are partners who have agreed to admit Y, who will invest $15,000 for a 20 percent interest. The previous capital balances were $15,000 and $30,000 for W and X, respectively. W and X had shared profits and losses equally. The entry that records Y%u2019s admission to the partnership is:

   Answer

   	a.	Cash 12,000 Y, Capital 12,000
   	b.	Cash 15,000 W, Capital 1,500 X, Capital 1,500 Y, Capital 12,000
   	c.	Y, Capital 3,000 Cash 3,000
   	d.	Cash 15,000 Y, Capital 15,000

2 points

Question 13

1. Which of the following documents would be prepared (by a buyer of goods) after the others?

   Answer

   	a.	Purchase order
   	b.	Check
   	c.	Receiving report
   	d.	Purchase requisition

2 points

Question 14

1. Which of the following documents would be sent to the treasurer?

   Answer

   	a.	Purchase order
   	b.	Invoice
   	c.	Bank statement
   	d.	Check authorization

2 points

Question 15

1. Each of the following is a feature of internal control, except

   Answer

   	a.	separation of duties.
   	b.	a sound marketing plan.
   	c.	sound personnel policies.
   	d.	recording of all transactions.

2 points

Question 16

1. The Sarbanes-Oxley Act of 2002 requires all of the following to certify a public company's system of internal control, except for the

   Answer

   	a.	auditors.
   	b.	chief executive officer.
   	c.	stockholders.
   	d.	chief financial officer.

2 points

Question 17

1. In a proposal to increase the production of clock radios, the sales managers of Rinaldo Electronics reported the total additional cost required to meet the increased production level. The increase in total cost is known as the

   Answer

   	a.	opportunity cost.
   	b.	controllable cost.
   	c.	out-of-pocket cost.
   	d.	incremental cost.

2 points

Question 18

1. California Chemical Co. produces several chemical compounds. Each compound can be sold at the split-off point or processed further. The following results apply to May:

   Compound	Sales Value at Split-off Point	Costs of Additional Processing	Sales Value After Additional Processing
   Chem I	$59,600	$7,300	$74,400
   Chem II	70,700	17,500	82,600
   Chem III	46,700	6,200	55,500

   After determining which products should be sold at the split-off point and which should be processed further, the total revenue provided by these three products would be

   Answer

   	a.	$200,600.
   	b.	$172,500.
   	c.	$212,500.
   	d.	$199,000.

2 points

Question 19

1. Irrelevant costs are costs that are

   Answer

   	a.	opportunity costs.
   	b.	sunk costs.
   	c.	different among alternatives.
   	d.	avoidable costs.

2 points

Question 20

1. Which of the following techniques is most useful for a special order decision?

   Answer

   	a.	Accounting rate-of-return method
   	b.	Incremental analysis
   	c.	Present value method
   	d.	Payback method

2 points

Question 21

1. If standard costing is not economically feasible for a company, predetermined overhead rates should not be used.

   Answer True False

1 points

Question 22

1. The direct materials price variance is the difference between the actual price and the standard price, multiplied by the standard quantity.

   Answer True False

1 points

Question 23

1. Variance analysis includes all of the following except

   Answer

   	a.	identification of the cause.
   	b.	taking corrective action.
   	c.	developing performance measures to track activities causing the variance.
   	d.	investigating all variances.

2 points

Question 24

1. Ewing Corporation's controller has developed the cost and usage data listed below in preparation of standard unit cost information for the coming year.

   Direct materials quantity standard	3 pounds per product
   Direct labor time standard	5 hours per product
   Direct materials price standard	$10 per pound
   Direct labor rate standard	$ 9 per hour
   Standard variable overhead rate	$ 5 per labor hour
   Standard fixed overhead rate	$10 per labor hour

   The standard unit cost for direct materials is

   Answer

   	a.	$50.
   	b.	$10.
   	c.	$27.
   	d.	$30.

2 points

Question 25

1. Sweet Dreams manufactures candy. Its records revealed the following data:

   Number of units produced	4,000
   Standard direct labor hours per unit	2
   Standard variable overhead rate	$2.50 per hour
   Standard fixed overhead rate	$5.00 per hour
   Budgeted fixed overhead costs	$40,800
   Actual variable overhead costs	$16,800
   Actual fixed overhead costs	$40,400
   Actual labor hours	8,000 direct labor hours
   Total actual overhead	$57,200

   The total overhead variance is

   Answer

   	a.	$2,800 (F).
   	b.	$800 (F).
   	c.	$300 (F).
   	d.	$800 (U).

2 points

Question 26

1. A(n) ________ cost is synonymous with the product cost calculated in a conventional standard cost accounting system.

   Answer

   	a.	joint
   	b.	expected
   	c.	direct
   	d.	fixed