ACC 561 Week 6 Final Guide

ACC 561 Week 6 Final Guide
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Multiple Choice Question 49
Which of the following is an advantage of corporations relative to partnerships and sole
proprietorships?
Lower taxes.
Harder to transfer ownership.
Most common form of organization.
Reduced legal liability for investors.
Multiple Choice Question 64
The group of users of accounting information charged with achieving the goals of the
business is its
auditors.
creditors.
managers.
investors.

Multiple Choice Question 110
Which of the following financial statements is concerned with the company at a point in
time?
Entry field with correct answer
Income statement.
Balance sheet.
Retained Earnings statement.
Statement of cash flows.
Multiple Choice Question 112
An income statement
presents the revenues and expenses for a specific period of time.
summarizes the changes in retained earnings for a specific period of time.
reports the assets, liabilities, and stockholders’ equity at a specific date.
reports the changes in assets, liabilities, and stockholders’ equity over a period of time.
Multiple Choice Question 118
The most important information needed to determine if companies can pay their current
obligations is the
net income for this year.
relationship between current assets and current liabilities.
projected net income for next year.
relationship between short-term and long-term liabilities.

Multiple Choice Question 124
A liquidity ratio measures the
short-term ability of a company to pay its maturing obligations and to meet unexpected
needs for cash.
percentage of total financing provided by creditors.
income or operating success of a company over a period of time.
ability of a company to survive over a long period of time.
Multiple Choice Question 165
The convention of consistency refers to consistent use of accounting principles
throughout the accounting periods.
among firms.
within industries.
among accounting periods.
Multiple Choice Question 90
Horizontal analysis is also known as
common size analysis.
linear analysis.
vertical analysis.
trend analysis.
Multiple Choice Question 92
Horizontal analysis is a technique for evaluating a series of financial statement data over a
period of time

to determine which items are in error.
that has been arranged from the highest number to the lowest number.
to determine the amount and/or percentage increase or decrease that has taken place.
that has been arranged from the lowest number to the highest number.
Multiple Choice Question 111
Vertical analysis is a technique that expresses each item in a financial statement
as a percent of a base amount.
in dollars and cents.
starting with the highest value down to the lowest value.
as a percent of the item in the previous year.
Multiple Choice Question 41
Process costing is used when
the production process is continuous.
costs are to be assigned to specific jobs.
production is aimed at filling a specific customer order.
dissimilar products are involved.
Multiple Choice Question 43
An important feature of a job order cost system is that each job
must be similar to previous jobs completed.
has its own distinguishing characteristics.

must be completed before a new job is accepted.
consists of one unit of output.
Multiple Choice Question 49
In a process cost system, product costs are summarized:
on job cost sheets.
on production cost reports.
when the products are sold.
after each unit is produced.
Multiple Choice Question 33
An activity that has a direct cause-effect relationship with the resources consumed is a(n)
overhead rate.
product activity.
cost driver.
cost pool.
Multiple Choice Question 40
Activity-based costing
allocates overhead to multiple activity cost pools, and it then assigns the activity cost pools
to products and services by means of cost drivers.
assigns activity cost pools to products and services, then allocates overhead back to the
activity cost pools.
accumulates overhead in one cost pool, then assigns the overhead to products and services
by means of a cost driver.

allocates overhead directly to products and services based on activity levels.
Multiple Choice Question 40
A cost which remains constant per unit at various levels of activity is a
mixed cost.
fixed cost.
manufacturing cost.
variable cost.
Multiple Choice Question 105
The break-even point is where
total sales equal total variable costs.
total variable costs equal total fixed costs.
total sales equal total fixed costs.
contribution margin equals total fixed costs.
Multiple Choice Question 109
Fixed costs are $600,000 and the contribution margin per unit is $150. What is the breakeven
point?
$1,500,000
$4,000,000
1,500 units
4,000 units

Multiple Choice Question 94
When a company assigns the costs of direct materials, direct labor, and both variable and
fixed manufacturing overhead to products, that company is using
product costing.
operations costing.
absorption costing.
variable costing.
Multiple Choice Question 122
If a division manager's compensation is based upon the division's net income, the manager
may decide to meet the net income targets by increasing production when using
variable costing, in order to increase net income.
variable costing, in order to decrease net income.
absorption costing, in order to increase net income.
absorption costing, in order to decrease net income.
Multiple Choice Question 50
An unrealistic budget is more likely to result when it
has been developed by all levels of management.
has been developed in a bottom up fashion.
has been developed in a top down fashion.
is developed with performance appraisal usages in mind.
Multiple Choice Question 39

A major element in budgetary control is
the valuation of inventories.
the preparation of long-term plans.
approval of the budget by the stockholders.
the comparison of actual results with planned objectives.
Multiple Choice Question 43
The purpose of the sales budget report is to
control sales commissions.
control selling expenses.
determine whether income objectives are being met.
determine whether sales goals are being met.
Multiple Choice Question 89
The accumulation of accounting data on the basis of the individual manager who has the
authority to make day-to-day decisions about activities in an area is called
flexible accounting.
static reporting.
responsibility accounting.
master budgeting.
Multiple Choice Question 142
Variance reports are

(a) external financial reports.
(b) SEC financial reports.
(c) internal reports for management.
(d) all of these.
Multiple Choice Question 40
Internal reports that review the actual impact of decisions are prepared by
the controller.
management accountants.
factory workers.
department heads.
Multiple Choice Question 42
The process of evaluating financial data that change under alternative courses of action is
called
cost-benefit analysis.
contribution margin analysis.
incremental analysis.
double entry analysis.
Multiple Choice Question 54
Seasons Manufacturing manufactures a product with a unit variable cost of $100 and a
unit sales price of $176. Fixed manufacturing costs were $480,000 when 10,000 units were
produced and sold. The company has a one-time opportunity to sell an additional 1,000
units at $140 each in a foreign market which would not affect its present sales. If the

company has sufficient capacity to produce the additional units, acceptance of the special
order would affect net income as follows:
Income would increase by $40,000.
Income would decrease by $8,000.
Income would increase by $140,000.
Income would increase by $8,000.
Multiple Choice Question 70
Carter, Inc. can make 100 units of a necessary component part with the following costs:
Direct Materials $120,000
Direct Labor 20,000
Variable Overhead 60,000
Fixed Overhead 40,000
If Carter can purchase the component externally for $220,000 and only $10,000 of the fixed
costs can be avoided, what is the correct make-or-buy decision?
Buy and save $30,000
Make and save $10,000
Buy and save $10,000
Make and save $30,000
Multiple Choice Question 84
A company has a process that results in 15,000 pounds of Product A that can be sold for
$16 per pound. An alternative would be to process Product A further at a cost of $200,000
and then sell it for $28 per pound. Should management sell Product A now or should
Product A be processed further and then sold? What is the effect of the action?
Sell now, the company will be better off by $20,000.
Sell now, the company will be better off by $200,000.

Process further, the company will be better off by $180,000.
Process further, the company will be better off by $20,000.
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