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web.groovymark@gmail.com
- December 5, 2024
Question 01
Which budget includes all manufacturing costs except direct materials and direct labor?
A. Sales budget
B. Direct materials budget
C. Manufacturing overhead budget
D. Production budget
Answer: C
Explanation: The manufacturing overhead budget includes all indirect costs, such as factory utilities, indirect labor, and maintenance.
Question 02
What account represents money that is owed by customers but not yet received?
A. Accounts payable
B. Equity
C. Accounts receivable
D. Retained earnings
Answer: C
Explanation: Accounts receivable represents the money owed by customers who have purchased goods or services on credit.
Question 03
On which financial statement would you see the valuation of liabilities and assets?
A. Income statement
B. Statement of cash flows
C. Balance sheet
D. Statement of retained earnings
Answer: C
Explanation: The balance sheet presents the company's financial position, showing assets, liabilities, and equity as of a specific date.
Question 04
What is the first step in the accounting cycle?
A. Summarize the effects of transactions
B. Prepare financial reports
C. Analyze transactions
D. Record the effects of transactions
Answer: C
Explanation: Analyzing transactions is the first step, determining what accounts are affected and how.
Question 05
Which of the following is an example of an internal transaction?
A. Purchase of inventory
B. Sale of goods to customers
C. Paying a supplier
D. Depreciation of equipment
Answer: D
Explanation: Internal transactions do not involve external parties, such as depreciation, which is a non-cash adjustment within the company.
Question 06
Which financial statement shows how much cash a company generated and used during a specific period?
A. Income statement
B. Statement of cash flows
C. Balance sheet
D. Statement of retained earnings
Answer: B
Explanation: The statement of cash flows provides details on cash inflows and outflows related to operating, investing, and financing activities.
Question 07
What organization is responsible for enforcing public company disclosure laws in the U.S.?
A. Financial Accounting Standards Board (FASB)
B. American Institute of CPAs (AICPA)
C. International Accounting Standards Board (IASB)
D. Securities and Exchange Commission (SEC)
Answer: D
Explanation: The SEC ensures that publicly traded companies provide accurate and complete financial information to investors.
Question 08
How does a classified balance sheet benefit decision-makers?
A. It distinguishes between current and long-term assets
B. It includes non-publicly disclosed data
C. It distinguishes liabilities from equity
D. It provides information for a specific period
Answer: A
Explanation: A classified balance sheet helps decision-makers by clearly separating current assets and liabilities from long-term ones.
Question 09
Which of the following is an example of a controllable cost?
A. Factory rent
B. Depreciation
C. Direct labor
D. Insurance premiums
Answer: C
Explanation: Direct labor costs can be controlled by a manager through scheduling and staffing decisions.
Question 10
Which of the following is a direct product cost?
A. Office supplies
B. Rent expense
C. Raw materials
D. Administrative wages
Answer: C
Explanation: Direct product costs, such as raw materials, are those that are directly associated with the production of goods.
Question 11
What is considered an indirect cost in manufacturing?
A. Wages of factory workers
B. Utilities for the factory
C. Cost of raw materials
D. Sales commissions
Answer: B
Explanation: Utilities for the factory are considered indirect costs as they cannot be traced directly to specific units of production.
Question 12
If the selling price is $50 per unit and the variable cost is $30 per unit, what is the contribution margin ratio?
A. 0.20
B. 0.30
C. 0.40
D. 0.50
Answer: C
Explanation: The contribution margin ratio is calculated by dividing the contribution margin by the selling price. ($20 / $50 = 0.40).
Question 13
Which of the following is a variable cost in production?
A. Rent
B. Factory supervisor’s salary
C. Utilities
D. Raw materials
Answer: D
Explanation: Variable costs, such as raw materials, change directly in proportion to production levels.
Question 14
What is the total contribution margin if a company has sales of $500,000 and variable costs of $300,000?
A. $100,000
B. $200,000
C. $300,000
D. $500,000
Answer: B
Explanation: The contribution margin is the difference between sales and variable costs. ($500,000 - $300,000 = $200,000).
Question 15
Which of the following statements is true about fixed costs?
A. Fixed costs vary with production volume
B. Fixed costs remain the same regardless of production volume
C. Fixed costs decrease with increased production
D. Fixed costs only apply to manufacturing companies
Answer: B
Explanation: Fixed costs remain constant in total regardless of the level of production within the relevant range.
Question 16
Which financial statement includes details about a company’s operating, investing, and financing activities?
A. Balance sheet
B. Income statement
C. Statement of retained earnings
D. Statement of cash flows
Answer: D
Explanation: The statement of cash flows provides detailed information on cash inflows and outflows from a company’s activities.
Question 17
Which costing method is most appropriate for a custom furniture manufacturer?
A. Job order costing
B. Process costing
C. Activity-based costing
D. Standard costing
Answer: A
Explanation: Job order costing is used when products are made to customer specifications, such as custom furniture.
Question 18
What is the variable cost ratio if the variable cost per unit is $25 and the sales price per unit is $50?
A. 0.30
B. 0.50
C. 0.60
D. 0.70
Answer: B
Explanation: The variable cost ratio is calculated by dividing the variable cost per unit by the sales price per unit. ($25 / $50 = 0.50).
Question 19
Which of the following is included in manufacturing overhead?
A. Raw materials
B. Direct labor
C. Factory rent
D. Sales commissions
Answer: C
Explanation: Manufacturing overhead includes indirect costs like factory rent, which are necessary for production but cannot be traced directly to products.
Question 20
What is the purpose of the predetermined overhead rate?
A. To estimate direct labor costs
B. To allocate overhead costs to products
C. To calculate total sales revenue
D. To determine fixed costs
Answer: B
Explanation: The predetermined overhead rate is used to allocate indirect overhead costs to products or jobs based on estimated activity levels.
