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Sample Question: accounting multiple choice

1. Which of the following is not a piece of qualitative information in a decision?
A) The effect of the decision on employees' morale.
B) The effect of the decision on customer perception of service quality.
C) The effect of the decision on the quality of the product produced.
D) The total cost savings to be gained from the decision.

2. Which of the following activities would be included in the value chain of a manufacturing company?
A) Research and Development
B) Customer Service
C) Design
D) All of the above are included in the value chain

3. Which of the following should be considered part of a manufacturing company's direct labor cost?
A) Factory supervisor's salary
B) Forklift operator's hourly wages
C) Employer-paid health insurance on factory assemblers' wages
D) Cost of idle time

4. Prime costs are the same as:
A) Manufacturing overhead costs.
B) Indirect labor costs.
C) Direct labor and direct materials used.
D) Direct labor and direct materials purchased.

5. If the amount of Transfers Out exceeds the amount of Transfers In of an account during the period:
A) The inventory balance will increase
B) The inventory balance will decrease
C) The inventory balance will remain the same
D) Additional information is needed to determine the answer

6. Rusticoville Company inadvertently assigns a $50,000 advertising expense to Manufacturing Overhead. Rusticoville Company has more inventory at the end of the year than at the beginning of the year. The result of this error will be to:
A) Understate inventory and profit for the year.
B) Have no effect on inventory and profit for the year.
C) Overstate inventory and profit for the year.
D) Overstate inventory but have no effect on profit for the year.

7. Which of the following is not a basic step that is used to determine the cost of goods using Activity- Based Costing?
A) Identify and classify the activities related to the company's products.
B) Calculate a cost-driver rate for each activity.
C) Classify all costs into variable and fixed cost behavior.
D) Assign activity costs to products.

8. Which of the following statements about choosing the best cost driver base is not true?
A) The base should logically have a cause and effect relationship with the activity and the use of resources.
B) The cost driver should be based on the theoretical capacity of the resource to support activities.
C) The base should be feasible to measure.
D) The base should predict or explain activities' use of resources with reasonable accuracy.

9. Which of the following is a value-added activity?
A) Painting the final assembled product.
B) Producing to build inventory
C) Rewriting faulty software code
D) Inspection to inspect out defective units

10. Which of the following is not a value-added activity.
A) Setup of machinery in a manufacturing company
B) Making new products in a manufacturing company
C) Making customer calls in a sales department
D) Processing payments at the telephone company

11. What issues come up in the task of assigning costs to customers?
A) A system that enables the company to identify which customers are using customer support services and how frequently they do so.
B) Tracking the time the marketing department spends on a customer to make the sale and to provide ongoing services.
C) Cost of making the product or providing a service for the customer.
D) All of the above.

12. Elton Industries desires a return on sales of 20%. Their current sales revenue is $10,000,000 and their current return on sales is 15%. Assuming sales remain the same, to achieve their desired target profit, they must reduce their costs by
A) $ 500,000
B) $1,500,000
C) $2,000,000
D) none of the above

13. Which of the following statements about quality is False?
A) The maximum quality level is almost always lower than the optimum quality level.
B) Total delight represents a condition when a customer receives a product or service far exceeding his or her expectations of quality.
C) Return on quality is the view that assumes there is a tradeoff between the costs and benefits of improving quality.
D) Optimum quality level of products and services maximizes profits rather than quality.

14. Which of the following will not reduce customer response time?
A) Electronic ordering
B) Eliminating non-value-added activities
C) Increasing production cycle time
D) Eliminating bottlenecks

15. Which of the following statements regarding operation costing is True? (Appendix B)
A) Costs of conversion are accounted for separately, while all products have the same materials cost.
B) Is ideal in mass production of units in continuous processes.
C) Direct materials for each batch passing through a particular operation are different, while conversion costs are the same.
D) It is best used in companies that make customized products.

16. An error was made in the computation of the percentage of completion of the current year ending Work-in-Process inventory. The error resulted in assigning a higher percentage of completion to each component than was actually the case. Assume that there was no beginning inventory. The effect of this error on equivalent units, cost per equivalent unit and costs assigned to the goods transferred out would be:

Equivalent units Cost per Equivalent unit Goods transferred
A) Overstate Overstate Overstate
B) Understate Understate Understate
C) Overstate Understate Understate
D) Overstate Understate Overstate

A) Item A
B) Item B
C) Item C
D) Item D

17. Which of the following would be an appropriate cost-allocation base for allocating the cost of the company cafeteria?
A) Square footage occupied by departments
B) Number of hours of use
C) Number of meals served
D) Salaries of personnel purchasing meals

18. Murray River Corporation maintains computer equipment and provides services in all 50 states and in 20 countries. The Corporation has a fleet of 3 Corporate Jets and 2 Helicopters and employs 6 full time pilots who receive salary and benefits. The most appropriate way to allocate the total cost of the corporate jets, helicopters and pilots to individual user departments would be:
A) Number of trips taken by each department
B) Sales revenue generated by each department
C) Number of miles flown by each department
D) Number of employees in each department

19. What will be the difference in the total service department costs allocated between the step-method and the direct-method?
A) The step method results in more total cost being allocated to producing departments.
B) The direct method results in more total cost being allocated to producing departments.
C) There is no difference in the amount of total cost being allocated to producing departments.
D) The answer depends on how many service departments are allocated.

20. Which of the following statements about the choice of cost-allocation method is false?
A) Improper implementation of cost allocation methods can create distrust among internal departments.
B) The direct method does not consider any interactions among service departments.
C) The step-method considers all interactions among service departments.
D) ABC cost-driver bases better reflect cause-and-effect relations between resource spending and use than traditional cost-allocation bases.

21. Which of the following would most likely increase when the activity level increases, within the relevant range?
A) Total fixed costs.
B) Per unit fixed costs.
C) Total variable costs.
D) Per unit variable costs.

22. In the cost equation TC = F + VX, F is best described as the:
A) slope of the equation.
B) activity level used to estimate the dependent variable.
C) dependent variable.
D) costs that do not vary with changes in the activity level.

23. Clerical costs in the billing department of Seth Company are a mixture of variable and fixed components. Records indicate that average unit processing costs are $0.50 per account processed at an activity level of 32,000 accounts. When only 22,000 accounts are processed, the total cost of processing is $12,500. Given these data, at a budgeted level of 26,000 accounts:
A) processing costs are expected to total $9,100.
B) fixed processing costs are expected to be $10,400.
C) the variable processing costs are expected to be $0.35 per account processed.
D) processing costs are expected to total $13,000.

24. How would an increase in fixed manufacturing costs and variable selling costs, respectively, affect the contribution margin?
A) Not affect; Not affect.
B) Decrease; Decrease.
C) Decrease; Not affect.
D) Not affect; Decrease.

25. Contribution margin is:
A) sales revenue minus cost of goods sold.
B) sales revenue minus all variable costs.
C) sales revenue minus variable production costs.
D) sales revenue minus all variable and fixed costs.

26. Cost-volume profit (CVP) analysis is a key factor in many decisions, including choice of product lines, pricing of products, marketing strategy, and use of productive facilities. A calculation used in a CVP analysis is the break-even point. Once the break-even point has been reached, operating income will increase by the:
A) contribution margin per unit for each additional unit sold.
B) fixed cost per unit for each additional unit sold.
C) variable cost per unit for each additional unit sold.
D) none of the above.

27. Edison Company has 5,000 obsolete desk lamps that are carried in inventory at a manufacturing cost of $50,000. If the lamps are reworked for $20,000, they could be sold for $35,000. Alternatively, the lamps could be sold for $8,000 for scrap. In a decision model analyzing these alternatives, the sunk cost would be:
A) $8,000.
B) $15,000.
C) $20,000.
D) $50,000.

28. Albert Company plans to discontinue a division that generates a total contribution margin of $20,000 per year. Fixed overhead associated with this division is $50,000, of which $5,000 cannot be eliminated. If the division is discontinued, how would Albert's operating income be affected?
A) Have no effect on operating income.
B) Decrease operating income by $15,000.
C) Increase operating income by $25,000.
D) Increase operating income by $30,000.

29. Which of the following is a difference between master budgets for nonprofit organizations and those for other companies?
A) Nonprofit organizations begin their budgeting process with a budget showing the level of service to be provided.
B) Nonprofit organizations prepare budgets showing their anticipated funding.
C) Nonprofit organizations frequently provide services free of charge, thus having no traditional sales budget.
D) All of the above are differences.

30. Bard Company has the following information for next month: planned production of 20,000 units which require 3 gallons of Material A each; beginning inventory of Material A of 4,800 gallons; desired ending inventory of Material A of 6,000 gallons. How much material A needs to be purchased?
A) 21,200 gallons
B) 60,000 gallons
C) 61,200 gallons
D) 70,800 gallons

31. Temme Inc., a retail establishment, expects to sell $450,000 of a particular item in October. Its gross profit percentage is 70 percent. The ending inventory in September of this item cost $18,000 and the company wants an ending inventory of $22,000. How much needs to be purchased?
A) $131,000
B) $139,000
C) $446,000
D) $454,000

32. Salvant's records for March show the following information from its standard costing system:

Standard price per pound of direct material $5
Actual price per pound of direct material $4.75
Direct material purchase price variance $3,500 favorable
Actual output 4,500 units
Standard pounds allowed for actual production 13,500 pounds
Standard cost of direct material purchased $66,500

How much direct material was purchased in March?
A) 14,000 pounds
B) 13,500 pounds
C) 14,500 pounds
D) 13,000 pounds

33. Funke Manufacturing uses a standard cost system for its guitar boxes. The standard labor rate per box is $1 per box. This standard was established on the basis of producing 8 boxes per hour. This month, Funke produced 1,500 boxes using 580 direct labor hours at an actual direct labor cost of $5,800. The direct labor rate variance was
A) $ 1,600 favorable
B) $ 1,160 favorable
C) $ 1,600 unfavorable
D) $ 1,160 unfavorable

34. XYZ Corp. produced 26,000 units of its only product. Machine hours per unit are 2.8. The budget planned for 23,000 units. What are the budgeted machine hours and the flexible-budget machine hours, respectively?
A) 64,400 machine hours; 72,800 machine hours
B) 72,800 machine hours; 64,400 machine hours
C) 68,000 machine hours; 75,000 machine hours
D) 75,000 machine hours; 68,000 machine hours

Use the following to answer questions 35-36:

Grachev Co. manufactures hedge clippers, its only product. The following information relates to the company's manufacturing overhead
for an output of 20,000 clippers:

Budgeted output units 20,000 clippers
Budgeted machine hours 15,000 hours
Budgeted variable manufacturing overhead $ 90,000

Actual output units produced 35,000 clippers
Actual machine hours 25,000 hours
Actual variable manufacturing overhead $166,250

35. What is the variable manufacturing overhead static budget variance (i.e. a flexible budget is not used)?
A) $ 8,750 unfavorable
B) $ 8,750 favorable
C) $76,250 favorable
D) $76,250 unfavorable

36. What is the variable manufacturing overhead total variance?
A) $76,250 unfavorable
B) $16,250 unfavorable
C) $47,500 unfavorable
D) $47,500 favorable

37. Which of the following is a true statement regarding performance evaluation?
A) Managers should be evaluated on those things over which they have influence.
B) Managers should be evaluated on the performance of the entire organization.
C) Sales personnel do not have complete control over the level of sales.
D) Managers should not be evaluated on those things over which they have influence, if they do not have complete control over them.

Solution Preview

1. Which of the following is not a piece of qualitative information in a decision?
A) The effect of the decision on employees' morale.
B) The effect of the decision on customer perception of service quality.
C) The effect of the decision on the quality of the product produced.
D) The total cost savings to be gained from the decision.

Answer: D) The total cost savings to be gained from the decision.This is a quantitative information

2. Which of the following activities would be included in the value chain of a manufacturing company?
A) Research and Development
B) Customer Service
C) Design
D) All of the above are included in the value chain

Answer: D) All of the above are included in the value chain

3. Which of the following should be considered part of a manufacturing company's direct labor cost?
A) Factory supervisor's salary
B) Forklift operator's hourly wages
C) Employer-paid health insurance on factory assemblers' wages
D) Cost of idle time

Answer: B) Forklift operator's hourly wages

4. Prime costs are the same as:
A) Manufacturing overhead costs.
B) Indirect labor costs.
C) Direct labor and direct materials used.
D) Direct labor and direct materials purchased.

Answer: C) Direct labor and direct materials used.

5. If the amount of Transfers Out exceeds the amount of Transfers In of an account during the period:
A) The inventory balance will increase
B) The inventory balance will decrease
C) The inventory balance will remain the same
D) Additional information is needed to determine the answer

Answer: A) The inventory balance will increase

6. Rusticoville Company inadvertently assigns a $50,000 advertising expense to Manufacturing Overhead. Rusticoville Company has more inventory at the end of the year than at the beginning of the year. The result of this error will be to:
A) Understate inventory and profit for the year.
B) Have no effect on inventory and profit for the year.
C) Overstate inventory and profit for the year.
D) Overstate inventory but have no effect on profit for the year.

Answer: C) Overstate inventory and profit for the year.

Advertising expense are period cost and therefore are expensed during the year
Manufacturing OH are inventoriable costs and therefore become part of inventory

7. Which of the following is not a basic step that is used to determine the cost of goods using Activity- Based Costing?
A) Identify and classify the activities related to the company's products.
B) Calculate a cost-driver rate for each activity.
C) Classify all costs into variable and fixed cost behavior.
D) Assign activity costs to products.

Answer: C) Classify all costs into variable and fixed cost behavior.

8. Which of the following statements about choosing the best cost driver base is not true?
A) The base should logically have a cause and effect relationship with the activity and the use of resources.
B) The cost driver should be based on the theoretical capacity of the resource to support activities.
C) The base should be feasible to measure.
D) The base should predict or explain activities' use of resources with reasonable accuracy.

Answer: B) The cost driver should be based on the theoretical capacity of the resource to support activities.

9. Which of the following is a value-added activity?
A) Painting the final assembled product.
B) Producing to build inventory
C) Rewriting faulty software code
D) Inspection to inspect out defective units

Answer: A) Painting the final assembled product.

10. Which of the following is not a value-added activity.
A) Setup of machinery in a manufacturing company
B) Making new products in a manufacturing company
C) Making customer calls in a sales department
D) Processing payments at the telephone company

Answer: A) Setup of machinery in a manufacturing company
It is essential activity but does not add value to the customer

11. What issues come up in the task of assigning costs to customers?
A) A system that enables the company to identify which customers are using customer support services and how frequently they do so.
B) Tracking the time the marketing department spends on a customer to make the sale and to provide ongoing services.
C) Cost of making the product or providing a service for the customer.
D) All of the above.

Answer: D) All of the above.

12. Elton Industries desires a return on sales of 20%. Their current sales revenue is $10,000,000 and their current return on sales is 15%. Assuming sales remain the same, to achieve their desired target profit, they must reduce their costs by
A) $ 500,000
B) $1,500,000
C) $2,000,000
D) none of the above

Answer: A) $ 500,000

Sales revenue= $10,000,000
Cuurent Return= 15%
Therefore Cost= 85.00%
Therefore, current costs= $8,500,000

Desired Return= 20%
Therefore Cost= 80.00%
Therefore, desired costs= $8,000,000
Difference= $500,000

13. Which of the following statements about quality is ...

Solution Summary

Answers to 37 Accounting Multiple Choice Questions.

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