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web.groovymark@gmail.com
- December 5, 2024
Question 21
Which budget helps a company determine how much inventory to keep on hand?
A. Sales budget
B. Inventory budget
C. Production budget
D. Cash budget
Answer: B
Explanation: The inventory budget helps a company plan how much inventory it needs to maintain based on projected sales and production requirements.
Question 22
Which of the following is classified as a current asset?
A. Land
B. Equipment
C. Accounts payable
D. Inventory
Answer: D
Explanation: Inventory is classified as a current asset because it is expected to be sold or used within one year.
Question 23
In which situation would a company use job order costing?
A. Mass production of identical products
B. Production of custom-made goods
C. Continuous production of homogeneous items
D. Automated assembly line production
Answer: B
Explanation: Job order costing is used when products are custom-made or produced in small batches, allowing costs to be traced to specific jobs.
Question 24
Which of the following is an example of a non-controllable cost for a department manager?
A. Direct labor
B. Sales commissions
C. Factory rent
D. Office supplies
Answer: C
Explanation: Factory rent is typically a fixed cost and not controllable by a department manager, whereas direct labor and office supplies may be managed.
Question 25
Which type of business is most likely to use activity-based costing (ABC)?
A. A small bakery
B. A large electronics manufacturer
C. A custom furniture maker
D. A local retail store
Answer: B
Explanation: Large manufacturers with complex operations, like an electronics manufacturer, are more likely to use ABC to allocate overhead accurately.
Question 26
What is the correct formula to calculate break-even point in sales dollars?
A. Fixed costs / contribution margin per unit
B. Fixed costs / variable cost per unit
C. Fixed costs / contribution margin ratio
D. Fixed costs / sales price per unit
Answer: C
Explanation: To calculate the break-even point in sales dollars, divide fixed costs by the contribution margin ratio, which expresses the contribution margin as a percentage of sales.
Question 27
Which of the following is considered a cash inflow from financing activities in the statement of cash flows?
A. Paying salaries
B. Borrowing money from a bank
C. Purchasing equipment
D. Paying rent
Answer: B
Explanation: Borrowing money from a bank is considered a financing activity because it involves raising funds for business operations.
Question 28
What is the contribution margin per unit if the sales price per unit is $70 and the variable cost per unit is $40?
A. $30
B. $40
C. $50
D. $70
Answer: A
Explanation: The contribution margin per unit is calculated by subtracting the variable cost per unit from the sales price per unit. ($70 - $40 = $30).
Question 29
What does the predetermined overhead rate represent?
A. Actual overhead costs incurred during production
B. Estimated overhead costs divided by an estimated level of activity
C. Direct labor costs divided by sales revenue
D. Fixed costs divided by total costs
Answer: B
Explanation: The predetermined overhead rate is used to allocate overhead costs based on an estimated level of activity, such as direct labor hours or machine hours.
Question 30
Which account is considered a liability?
A. Accounts receivable
B. Inventory
C. Notes payable
D. Sales revenue
Answer: C
Explanation: Notes payable represents amounts the company owes and is considered a liability on the balance sheet.
Question 31
Which of the following statements about fixed costs is true?
A. Fixed costs decrease as production increases
B. Fixed costs remain constant regardless of production levels
C. Fixed costs increase in direct proportion to production levels
D. Fixed costs vary directly with sales
Answer: B
Explanation: Fixed costs, such as rent, remain the same regardless of production levels within the relevant range.
Question 32
What is the main objective of managerial accounting?
A. To provide information for external users
B. To prepare tax returns
C. To help managers make informed business decisions
D. To prepare financial statements
Answer: C
Explanation: Managerial accounting focuses on providing internal information to managers to aid in planning, controlling, and decision-making processes.
Question 33
What does a sales budget typically include?
A. Projected sales revenue and units sold
B. Projected expenses and liabilities
C. Total fixed and variable costs
D. Production costs for the budget period
Answer: A
Explanation: A sales budget forecasts the amount of sales in both revenue and units sold for a specific period.
Question 34
Which of the following is an example of a mixed cost?
A. Factory rent
B. Utility bills with a fixed charge and a variable charge based on usage
C. Direct labor costs
D. Depreciation on factory equipment
Answer: B
Explanation: A mixed cost contains both fixed and variable components, such as utility bills that have a base charge plus an additional charge based on usage.
Question 35
Which of the following is an indirect labor cost?
A. Wages paid to production line workers
B. Wages paid to factory supervisors
C. Wages paid to sales staff
D. Wages paid to administrative assistants
Answer: B
Explanation: Indirect labor costs, like factory supervisors' wages, are part of manufacturing overhead because they cannot be traced directly to specific products.
Question 36
In a process costing system, how are costs accumulated?
A. By individual job or batch
B. By department or process
C. By sales region
D. By customer order
Answer: B
Explanation: In a process costing system, costs are accumulated by department or process, especially in industries where similar products are mass-produced.
Question 37
Which of the following costs is considered a period cost?
A. Wages of production workers
B. Raw materials used in production
C. Advertising expenses
D. Factory maintenance
Answer: C
Explanation: Period costs, like advertising expenses, are not directly tied to production and are expensed in the period they are incurred.
Question 38
Which type of cost remains constant in total but varies per unit with changes in the level of activity?
A. Fixed cost
B. Variable cost
C. Mixed cost
D. Stepped cost
Answer: A
Explanation: Fixed costs remain constant in total but vary on a per-unit basis depending on the level of production.
Question 39
Which financial statement shows the total revenue and expenses of a company for a specific period?
A. Balance sheet
B. Income statement
C. Statement of cash flows
D. Statement of retained earnings
Answer: B
Explanation: The income statement shows the company's total revenues and expenses over a specific period and calculates net income.
Question 40
Which type of company is most likely to use job order costing?
A. A manufacturer of identical goods
B. A custom home builder
C. A cereal producer
D. An oil refinery
Answer: B
Explanation: Job order costing is used for custom jobs or products, like those produced by a custom home builder, where each job has unique costs.
