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web.groovymark@gmail.com
- December 5, 2024
Question 21
What is looked at in financial accounting?
A. Customer satisfaction levels
B. Credit analysis, regulatory uses, and company valuation estimates
C. Breakeven analysis and performance evaluation
D. Customer segmentation
Answer: B
Explanation: Financial accounting provides information such as credit analysis and company valuation, primarily used by external stakeholders for regulatory and investment purposes.
Question 22
What is the purpose of an income statement?
A. To list all company assets and liabilities
B. To show the company’s cash inflows and outflows
C. To report how much profit or loss was made over a specific period
D. To provide details on shareholder equity
Answer: C
Explanation: The income statement reports a company’s revenue, expenses, and net income over a specific period, revealing its profitability.
Question 23
Which report provides details on a company’s obligations and its ownership claims?
A. Income statement
B. Statement of retained earnings
C. Balance sheet
D. Cash flow statement
Answer: C
Explanation: The balance sheet reports a company’s assets, liabilities, and equity, giving insight into its financial position.
Question 24
Which group establishes financial accounting rules in the United States?
A. Internal Revenue Service (IRS)
B. Financial Accounting Standards Board (FASB)
C. Securities and Exchange Commission (SEC)
D. American Institute of Certified Public Accountants (AICPA)
Answer: B
Explanation: The FASB is responsible for establishing generally accepted accounting principles (GAAP) used in financial accounting in the United States.
Question 25
How are direct labor costs treated in cost accounting?
A. They are classified as part of manufacturing overhead
B. They are added to the company’s profits
C. They are considered part of the company’s operating expenses
D. They are considered a product cost and traced directly to specific products
Answer: D
Explanation: Direct labor costs are treated as a product cost because they can be directly traced to the production of specific products.
Question 26
Which budget reflects a company’s plan for purchasing raw materials?
A. Sales budget
B. Production budget
C. Direct materials budget
D. Overhead budget
Answer: C
Explanation: The direct materials budget estimates the amount and cost of raw materials needed to meet production goals.
Question 27
Which type of cost fluctuates in total with production but remains constant per unit?
A. Fixed cost
B. Variable cost
C. Stepped cost
D. Overhead cost
Answer: B
Explanation: Variable costs change in total as production increases or decreases but remain constant per unit.
Question 28
Which of the following is an example of a liability account?
A. Accounts receivable
B. Retained earnings
C. Accounts payable
D. Cash
Answer: C
Explanation: Accounts payable is a liability account representing amounts owed to suppliers for goods or services purchased on credit.
Question 29
Which item is considered part of a company’s owners’ equity?
A. Notes payable
B. Inventory
C. Retained earnings
D. Prepaid expenses
Answer: C
Explanation: Retained earnings are part of owners' equity and represent accumulated profits not distributed as dividends.
Question 30
Which statement is true about fixed costs?
A. Fixed costs increase as production increases
B. Fixed costs decrease as production decreases
C. Fixed costs remain constant in total, regardless of production levels
D. Fixed costs vary with the number of units produced
Answer: C
Explanation: Fixed costs remain the same in total regardless of production levels, though the per-unit fixed cost decreases as more units are produced.
Question 31
What does a manufacturing overhead budget typically include?
A. Direct labor costs
B. Factory maintenance and utilities costs
C. Raw materials costs
D. Sales commission
Answer: B
Explanation: A manufacturing overhead budget includes indirect costs such as factory maintenance, utilities, and other expenses not directly tied to production labor or materials.
Question 32
Which type of account is accounts receivable?
A. Asset
B. Liability
C. Equity
D. Expense
Answer: A
Explanation: Accounts receivable is an asset account representing amounts owed to the company by customers for sales made on credit.
Question 33
Which report summarizes the financial position of a company at a specific point in time?
A. Income statement
B. Cash flow statement
C. Statement of retained earnings
D. Balance sheet
Answer: D
Explanation: The balance sheet provides a snapshot of a company’s financial position, listing its assets, liabilities, and owners’ equity as of a specific date.
Question 34
Which cost is classified as a product cost?
A. Office supplies
B. Marketing expense
C. Raw materials
D. Depreciation of headquarters building
Answer: C
Explanation: Product costs include all costs that are necessary to create a product, such as raw materials, direct labor, and manufacturing overhead.
Question 35
Which type of business operation would use a job costing system?
A. A company that mass-produces cereal
B. A furniture manufacturer that makes custom pieces
C. A company that refines oil
D. A retail clothing store
Answer: B
Explanation: Job costing systems are used by companies that manufacture unique, custom products, such as furniture made to order.
Question 36
What is the correct formula to compute the contribution margin?
A. Sales – Fixed Costs
B. Sales – Variable Costs
C. Fixed Costs – Variable Costs
D. Sales – Operating Costs
Answer: B
Explanation: Contribution margin is calculated as sales revenue minus variable costs, showing the amount available to cover fixed costs and contribute to profit.
Question 37
Which of the following is an indirect cost in a manufacturing company?
A. Wages for the production supervisor
B. Raw materials used to make a product
C. Direct labor for assembling a product
D. Sales commission
Answer: A
Explanation: The wages of a production supervisor are classified as indirect labor, part of manufacturing overhead, as they cannot be directly traced to individual products.
Question 38
Which financial statement reports the inflows and outflows of cash for a company?
A. Balance sheet
B. Income statement
C. Statement of cash flows
D. Statement of retained earnings
Answer: C
Explanation: The statement of cash flows reports cash inflows and outflows from operating, investing, and financing activities over a specific period.
Question 39
Which of the following is considered a direct cost?
A. Factory rent
B. Marketing expense
C. Cost of raw materials used in production
D. Salary of factory security staff
Answer: C
Explanation: Direct costs are those that can be directly traced to a specific product, such as raw materials or direct labor.
Question 40
Which of the following is an uncontrollable cost for a production manager?
A. Direct labor costs
B. Depreciation on factory equipment
C. Variable production supplies
D. Utility usage in the production process
Answer: B
Explanation: Depreciation on factory equipment is a fixed cost that cannot be controlled or influenced by a production manager, as it results from previous capital investment decisions.
