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web.groovymark@gmail.com
- December 8, 2024
Question 21
Which of the following is an example of indirect labor?
A. Assembly line workers
B. Factory supervisors
C. Sales staff
D. Maintenance workers
Answer: B
Explanation: Factory supervisors are considered indirect labor because their work cannot be directly traced to the production of specific units.
Question 22
Which of the following is classified as a current liability?
A. Bonds payable
B. Accounts payable
C. Equipment
D. Retained earnings
Answer: B
Explanation: Accounts payable is a current liability because it is expected to be paid within one year.
Question 23
If a company repays $20,000 of a loan, how does this transaction affect the accounting equation?
A. Decrease assets; decrease liabilities
B. Increase assets; increase liabilities
C. Decrease assets; increase equity
D. Increase assets; decrease liabilities
Answer: A
Explanation: Repayment of a loan reduces both assets (cash) and liabilities (loan payable).
Question 24
What is the predetermined overhead rate if estimated overhead is $150,000 and estimated direct labor hours are 10,000 hours?
A. $10 per direct labor hour
B. $12 per direct labor hour
C. $15 per direct labor hour
D. $20 per direct labor hour
Answer: C
Explanation: The predetermined overhead rate is calculated by dividing estimated overhead by estimated direct labor hours. ($150,000 / 10,000 hours = $15 per direct labor hour).
Question 25
Which financial statement shows changes in owner’s equity during a period?
A. Balance sheet
B. Income statement
C. Statement of retained earnings
D. Statement of cash flows
Answer: C
Explanation: The statement of retained earnings shows how net income and dividends affect retained earnings over a period.
Question 26
What is the total contribution margin if a company has sales of $400,000 and variable costs of $250,000?
A. $100,000
B. $150,000
C. $200,000
D. $250,000
Answer: B
Explanation: Contribution margin is calculated by subtracting total variable costs from total sales. ($400,000 - $250,000 = $150,000).
Question 27
What is the journal entry to record the purchase of equipment on credit?
A. Debit equipment; credit cash
B. Debit cash; credit equipment
C. Debit equipment; credit accounts payable
D. Debit accounts payable; credit equipment
Answer: C
Explanation: When equipment is purchased on credit, equipment is debited (increased), and accounts payable is credited (increased).
Question 28
Which of the following is an example of a direct material?
A. Glue used in furniture assembly
B. Wood used to build furniture
C. Lubricants for factory machines
D. Office supplies
Answer: B
Explanation: Direct materials are those that are easily traceable to the production of a product, such as wood in furniture manufacturing.
Question 29
What type of cost is unaffected by changes in production volume?
A. Variable cost
B. Fixed cost
C. Mixed cost
D. Stepped cost
Answer: B
Explanation: Fixed costs remain constant in total, regardless of production volume.
Question 30
Which of the following is an example of a job that would use job order costing?
A. Refining gasoline
B. Custom furniture production
C. Mass production of cereal
D. Manufacturing of paper
Answer: B
Explanation: Job order costing is used for custom jobs where the costs are traced to individual units or batches.
Question 31
What is the contribution margin if the sales price is $25 per unit and the variable cost is $15 per unit?
A. $5
B. $10
C. $15
D. $20
Answer: B
Explanation: Contribution margin is calculated by subtracting the variable cost from the sales price. ($25 - $15 = $10).
Question 32
Which financial statement reports cash flows from operating, investing, and financing activities?
A. Income statement
B. Balance sheet
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.
Question 33
What is the formula for break-even in units?
A. Fixed costs / Sales price per unit
B. Fixed costs / Contribution margin per unit
C. Sales price per unit / Variable costs
D. Fixed costs / Variable costs
Answer: B
Explanation: Break-even in units is calculated by dividing fixed costs by the contribution margin per unit.
Question 34
What type of cost includes both fixed and variable components?
A. Fixed cost
B. Mixed cost
C. Variable cost
D. Stepped cost
Answer: B
Explanation: Mixed costs have both fixed and variable components, such as utilities, where there is a base charge and additional cost for usage.
Question 35
Which budget includes expected expenditures for factory maintenance and utilities?
A. Direct labor budget
B. Manufacturing overhead budget
C. Sales budget
D. Administrative expense budget
Answer: B
Explanation: The manufacturing overhead budget includes indirect costs related to production, such as factory maintenance and utilities.
Question 36
What is the break-even point in units if the sales price per unit is $50, variable costs per unit are $30, and fixed costs are $40,000?
A. 1,500 units
B. 2,000 units
C. 2,500 units
D. 3,000 units
Answer: B
Explanation: Break-even in units is calculated by dividing fixed costs by the contribution margin per unit. ($40,000 / ($50 - $30) = 2,000 units).
Question 37
Which of the following is classified as a long-term asset?
A. Accounts receivable
B. Inventory
C. Equipment
D. Prepaid expenses
Answer: C
Explanation: Equipment is a long-term asset, as it is expected to provide benefits for more than one year.
Question 38
Which costing system is used by companies that produce a continuous flow of identical products?
A. Job order costing
B. Process costing
C. Activity-based costing
D. Standard costing
Answer: B
Explanation: Process costing is used for continuous production of identical products, such as in the chemical or food industries.
Question 39
What is the primary purpose of financial accounting?
A. To provide information to internal users
B. To help managers make decisions
C. To provide information to external users
D. To allocate costs
Answer: C
Explanation: Financial accounting provides financial information to external users, such as investors and creditors.
Question 40
What is the journal entry to record the payment of wages?
A. Debit wages expense; credit cash
B. Debit cash; credit wages expense
C. Debit wages payable; credit wages expense
D. Debit wages expense; credit accounts payable
Answer: A
Explanation: When wages are paid, wages expense is debited (increased), and cash is credited (decreased).
