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web.groovymark@gmail.com
- December 8, 2024
Question 01
Which cost is classified as a product cost for a manufacturing company?
A. Office supplies
B. Direct labor
C. Advertising expense
D. Salaries of sales staff
Answer: B
Explanation: Product costs include costs directly involved in producing goods, such as direct labor, raw materials, and manufacturing overhead.
Question 02
What is an example of a period cost?
A. Raw materials
B. Factory maintenance
C. Office rent
D. Direct labor
Answer: C
Explanation: Period costs, such as office rent, are expensed in the period in which they are incurred and are not tied directly to the production process.
Question 03
What is a company’s break-even point if fixed costs are $12,000 and the contribution margin per unit is $3?
A. 2,000 units
B. 3,000 units
C. 4,000 units
D. 5,000 units
Answer: C
Explanation: Break-even point in units is calculated by dividing fixed costs by the contribution margin per unit. ($12,000 / $3 = 4,000 units).
Question 04
Which of the following is classified as a current asset?
A. Factory building
B. Equipment
C. Cash
D. Land
Answer: C
Explanation: Cash is considered a current asset, as it can be converted into other assets within a year.
Question 05
Which of the following is an indirect material?
A. Timber used in building a house
B. Nails used in assembling furniture
C. Fabric used in making clothing
D. Circuit boards used in making electronics
Answer: B
Explanation: Nails are considered indirect materials because their cost is not significant and cannot be traced to a specific product unit.
Question 06
What is the primary difference between job order costing and process costing?
A. Job order costing averages costs across all units
B. Process costing is used for custom jobs
C. Job order costing is used for unique or custom products
D. Process costing assigns costs to individual jobs
Answer: C
Explanation: Job order costing is used for custom or unique jobs, while process costing is used for mass production of identical items.
Question 07
Which cost behavior pattern refers to costs that are fixed in total but decrease per unit as production volume increases?
A. Variable costs
B. Mixed costs
C. Fixed costs
D. Stepped costs
Answer: C
Explanation: Fixed costs remain constant in total but decrease on a per-unit basis as production increases.
Question 08
Which document is typically prepared first in the budgeting process?
A. Direct labor budget
B. Production budget
C. Sales budget
D. Manufacturing overhead budget
Answer: C
Explanation: The sales budget is typically prepared first because it forecasts the company’s sales, which drives the rest of the budgeting process.
Question 09
What type of account is retained earnings?
A. Liability
B. Asset
C. Equity
D. Revenue
Answer: C
Explanation: Retained earnings represent the portion of a company’s profits that are reinvested in the business and are classified under equity.
Question 10
Which of the following is an example of a financing activity?
A. Paying suppliers
B. Purchasing raw materials
C. Borrowing money
D. Selling inventory
Answer: C
Explanation: Borrowing money is a financing activity, as it involves raising capital for the business.
Question 11
What is the primary purpose of managerial accounting information?
A. To provide data to external users
B. To help managers make decisions
C. To comply with tax regulations
D. To prepare financial statements for investors
Answer: B
Explanation: Managerial accounting provides internal information to help managers make informed business decisions.
Question 12
Which cost is included in manufacturing overhead?
A. Direct materials
B. Direct labor
C. Factory utilities
D. Administrative salaries
Answer: C
Explanation: Manufacturing overhead includes all indirect costs related to production, such as factory utilities, indirect labor, and depreciation of equipment.
Question 13
What is the break-even point in sales dollars if fixed costs are $24,000 and the contribution margin ratio is 40%?
A. $36,000
B. $48,000
C. $60,000
D. $80,000
Answer: D
Explanation: Break-even in sales dollars is calculated by dividing fixed costs by the contribution margin ratio. ($24,000 / 0.40 = $60,000).
Question 14
Which of the following is an investing activity on the statement of cash flows?
A. Paying wages
B. Buying equipment
C. Borrowing money
D. Paying dividends
Answer: B
Explanation: Buying equipment is an investing activity, as it involves acquiring long-term assets.
Question 15
If actual overhead costs are lower than applied overhead, the company has:
A. Overapplied overhead
B. Underapplied overhead
C. Favorable cost variance
D. Unfavorable cost variance
Answer: A
Explanation: Overapplied overhead occurs when more overhead is applied to production than was actually incurred.
Question 16
What is an example of a noncontrollable cost?
A. Direct labor
B. Raw materials
C. Property taxes
D. Office supplies
Answer: C
Explanation: Property taxes are typically noncontrollable costs, as they are determined by external factors and cannot be easily changed by management.
Question 17
What is the primary function of cost-volume-profit (CVP) analysis?
A. To allocate costs to products
B. To analyze how changes in costs and sales affect profit
C. To calculate fixed costs
D. To determine inventory levels
Answer: B
Explanation: CVP analysis is used to understand how changes in costs, sales volume, and price affect a company's profit.
Question 18
Which of the following is classified as a long-term liability?
A. Accounts payable
B. Salaries payable
C. Mortgage payable
D. Utilities payable
Answer: C
Explanation: Mortgage payable is a long-term liability because it is not expected to be paid within the next year.
Question 19
Which of the following represents a mixed cost?
A. Factory rent
B. Direct labor
C. Utilities
D. Depreciation
Answer: C
Explanation: Utilities are considered a mixed cost because they have both a fixed component (base charge) and a variable component (usage charge).
Question 20
What is the contribution margin ratio if the selling price per unit is $75 and the variable cost per unit is $45?
A. 0.20
B. 0.30
C. 0.40
D. 0.60
Answer: C
Explanation: Contribution margin ratio is calculated by dividing the contribution margin by the selling price. ($30 / $75 = 0.40).
