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web.groovymark@gmail.com
- December 5, 2024
Question 01
Which of the following describes a cost driver in a manufacturing setting?
A. Direct labor hours
B. Raw material costs
C. Factory rent
D. Advertising expenses
Answer: A
Explanation: A cost driver is a factor that causes overhead costs to increase or decrease, and in manufacturing, direct labor hours can be a significant cost driver.
Question 02
What does a manufacturing overhead budget typically exclude?
A. Factory utility costs
B. Direct materials
C. Indirect labor costs
D. Depreciation of factory equipment
Answer: B
Explanation: A manufacturing overhead budget includes indirect costs such as utilities, indirect labor, and depreciation, but excludes direct costs like direct materials.
Question 03
Which of the following is classified as an operating expense?
A. Raw material costs
B. Salaries of sales staff
C. Factory rent
D. Depreciation on production machinery
Answer: B
Explanation: Operating expenses include costs related to running the business, such as salaries for sales staff, which are not directly tied to production.
Question 04
Which type of business is most likely to use process costing?
A. Custom furniture manufacturer
B. Construction company
C. Cereal manufacturer
D. IT consulting firm
Answer: C
Explanation: Process costing is typically used by businesses that produce homogeneous products in large quantities, such as a cereal manufacturer.
Question 05
Which financial statement reports a company’s assets and liabilities?
A. Income statement
B. Balance sheet
C. Statement of cash flows
D. Statement of retained earnings
Answer: B
Explanation: The balance sheet shows a company's assets, liabilities, and shareholders' equity, providing a snapshot of its financial position at a specific point in time.
Question 06
Which of the following is a variable cost?
A. Factory rent
B. Depreciation on office equipment
C. Wages of assembly line workers
D. Insurance premiums
Answer: C
Explanation: Variable costs change in proportion to the level of production, such as the wages of assembly line workers, which increase as production increases.
Question 07
What is the contribution margin ratio if the sales price per unit is $40 and the variable cost per unit is $25?
A. 0.25
B. 0.375
C. 0.50
D. 0.625
Answer: B
Explanation: Contribution margin ratio is calculated by subtracting variable costs from sales price and then dividing by the sales price. (40 - 25) / 40 = 0.375.
Question 08
Which of the following costs is considered a period cost?
A. Direct materials
B. Indirect labor
C. Sales commissions
D. Factory depreciation
Answer: C
Explanation: Period costs are non-manufacturing costs and include expenses such as sales commissions, which are expensed in the period in which they occur.
Question 09
Which of the following is classified as a product cost?
A. Utilities for the company’s headquarters
B. Marketing expenses
C. Raw materials
D. Sales commissions
Answer: C
Explanation: Product costs include all costs necessary to produce goods, such as raw materials, direct labor, and manufacturing overhead.
Question 10
In a job order costing system, how are costs assigned?
A. Costs are averaged across all units produced
B. Costs are accumulated by job or batch
C. Costs are assigned equally to each product
D. Costs are based on sales volume
Answer: B
Explanation: In a job order costing system, costs are accumulated for each job or batch of products, which are typically unique or custom-made.
Question 11
What is the break-even point in units if the sales price per unit is $50, variable cost per unit is $30, and fixed costs are $100,000?
A. 2,000 units
B. 3,000 units
C. 5,000 units
D. 10,000 units
Answer: C
Explanation: Break-even point is calculated by dividing fixed costs by the contribution margin per unit. ($100,000 / ($50 - $30)) = 5,000 units.
Question 12
Which of the following costs is included in manufacturing overhead?
A. Wages of factory workers
B. Raw materials
C. Factory supervisor’s salary
D. Advertising costs
A. Wages of factory workers
B. Raw materials
C. Factory supervisor’s salary
D. Advertising costs
Question 13
Which account would appear on a company’s balance sheet?
A. Sales revenue
B. Cost of goods sold
C. Depreciation expense
D. Accounts receivable
Answer: D
Explanation: Accounts receivable is an asset account that appears on the balance sheet, representing amounts owed to the company by customers.
Question 14
What is the primary purpose of a cash budget?
A. To forecast future sales
B. To determine product pricing
C. To manage cash inflows and outflows
D. To allocate manufacturing overhead costs
Answer: C
Explanation: A cash budget helps companies manage their cash inflows and outflows to ensure they have enough liquidity to cover expenses.
Question 15
Which cost is considered a fixed cost?
A. Raw material costs
B. Sales commissions
C. Monthly rent
D. Direct labor
Answer: C
Explanation: Fixed costs, such as rent, remain constant regardless of production levels, unlike variable costs like raw materials or direct labor.
Question 16
Which of the following is an example of a direct cost?
A. Utilities for the corporate office
B. Wages of assembly line workers
C. Depreciation on factory equipment
D. Advertising expenses
Answer: B
Explanation: Direct costs can be directly traced to a specific product or job, such as wages paid to assembly line workers.
Question 17
What is the correct order of preparing budgets in a manufacturing company?
A. Production budget, sales budget, direct materials budget
B. Sales budget, production budget, direct materials budget
C. Direct materials budget, sales budget, production budget
D. Production budget, direct materials budget, sales budget
Answer: B
Explanation: The correct order is sales budget, production budget, and then direct materials budget, as production depends on the expected sales.
Question 18
Which of the following is a product cost?
A. Rent for the corporate office
B. Factory utilities
C. Administrative salaries
D. Sales commissions
Answer: B
Explanation: Product costs include all costs associated with manufacturing, such as factory utilities, while administrative salaries and sales commissions are period costs.
Question 19
What is the break-even sales revenue if the contribution margin ratio is 40% and fixed costs are $120,000?
A. $200,000
B. $250,000
C. $300,000
D. $400,000
Answer: C
Explanation: Break-even sales revenue is calculated by dividing fixed costs by the contribution margin ratio. $120,000 / 0.40 = $300,000.
Question 20
What does a statement of cash flows report?
A. Revenue, expenses, and net income
B. Cash inflows and outflows
C. Assets, liabilities, and equity
D. Net income and retained earnings
Answer: B
Explanation: The statement of cash flows reports cash inflows and outflows related to operating, investing, and financing activities.
