You are on page 1of 23

This mock exam is just meant for revision purposes

AND should not be treated as tips or hints for the


final exam under whatsoever circumstances.

Your carry-mark will uploaded to Mybox website


as soon as possible

Please make sure you BOLD your Matric Number


correctly on the OMR paper
1. Which of the following best describes accounting?
a. records economic data but does not communicate the data to users according to
any specific rules
b. is an information system that provides reports to stakeholders
c. is of no use by individuals outside of the business
d. is used only for filling out tax returns and for financial statements for various type
of governmental reporting requirements

2. Public accountants are normally


a. Certified Public Accountants
b. Forensic accountants
c. Certified Internal Auditors
d. Certified Management Accountants

3. Which one of the following is a specialized field of accounting?


a. social accounting
b. tax accounting
c. environmental accounting
d. all of the above

4. Which of the following is recorded in the general journal?


a. services rendered for cash
b. correction of error in billing client
c. purchases of equipment on account
d. purchases of equipment for cash
5. A company returns defective supplies that were purchased for cash and receives a
cash refund. This transaction should be recorded in the
a. Purchases journal
b. Cash Receipts journal
c. General journal
d. Revenue journal
6. Which of the following is recorded in the cash receipts journal?
a. cash withdrawn by the owner
b. cash purchase of equipment
c. cash received on customer's account
d. adjusting entry for depreciation
7. Services performed for cash should be recorded in the
a. Revenue journal
b. General journal
c. Cash Receipts journal
d. Cash Payments journal
8. In which journal would an adjustment for an overcharge by a creditor be recorded?
a. General journal
b. Purchases journal
c. Cash Payments journal
d. Cash Receipts journal
9. Which of the following transactions is recorded in the revenue journal?
a. sale of excess office equipment for cash
b. rendering services for cash
c. rendering services on account
d. sale of excess office equipment on account
10. Which of the following financial statements reports information as of a specific date?
a. income statement
b. statement of owner's equity
c. statement of cash flows
d. balance sheet

11. The financial statement that presents a summary of the revenues and expenses of a
business for a specific period of time, such as a month or year, is called a(n)
a. prior period statement
b. statement of owner's equity
c. income statement
d. balance sheet

12. Revenues are reported when


a. a contract is signed
b. cash is received from the customer
c. work is begun on the job
d. work is completed on the job

13. Expenses are recorded when


a. cash is paid for services rendered
b. a bill is received in advance of services rendered
c. services are rendered
d. none of the above

14. The asset created by a business when it makes a sale on account is termed
a. accounts payable
b. prepaid expense
c. unearned revenue
d. accounts receivable

15. The debt created by a business when it makes a purchase on account is referred to as
an
a. account payable
b. account receivable
c. asset
d. expense payable

16. If total assets decreased by $47,000 during a period of time and owner's equity
increased by $24,000 during the same period, then the amount and direction (increase
or decrease) of the period's change in total liabilities is
a. $23,000 increase
b. $47,000 decrease
c. $71,000 decrease
d. $71,000 increase

17. Owner's withdrawals


a. increase expenses
b. decrease expenses
c. increase cash
d. decrease owner's equity

18. How does the rendering of services on account affect the accounting equation?
a. assets increase; owner’s equity increases
b. assets decrease; owner's equity decrease
c. assets increase; owner's equity decreases
d. liabilities increase; owner's equity decreases

19. How does paying a liability in cash affect the accounting equation?
a. assets increase; liabilities decrease
b. assets increase; liabilities increase
c. assets decrease; liabilities decrease
d. liabilities decrease; owner's equity increases

20. How does receiving a bill to be paid next month for services rendered affect the
accounting equation?
a. assets decrease; owner's equity decreases
b. assets increase; liabilities increase
c. liabilities increase; owner's equity increases
d. liabilities increase; owner's equity decreases

21. How does the collection of cash from a customer who was previously put on account
affect the accounting equation?
a. assets decrease; owner's equity decreases
b. assets increase; owner's equity increases
c. assets increase; assets decrease
d. assets increase; liabilities increase

22. Land, originally purchased for $20,000, is sold for $75,000 in cash. What is the effect
of the sale on the accounting equation?
a. assets increase $75,000; owner's equity increases $75,000
b. assets increase $55,000; owner's equity increases $55,000
c. assets increase $75,000; liabilities decrease $20,000; owner's equity increases
$55,000
d. assets increase $20,000; no change for liabilities; owner's equity increases $75,000

23. The Melville Company sold land for $60,000 in cash. The land was originally
purchased for $40,000, and at the time of the sale, $15,000 was still owed to First
National Bank on that purchase. After the sale, The Melville Company paid off the
loan to First National Bank. What is the effect of the sale and the payoff of the loan
on the accounting equation?
a. assets increase $20,000; liabilities decrease $15,000; owner's equity increases
$5,000
b. assets increase $5,000; liabilities decrease $15,000; owner's equity increases
$20,000
c. assets increase $60,000; liabilities decrease $15,000; owner's equity increases
$20,000
d. assets increase $20,000; liabilities decrease $15,000; owner's equity increases
$35,000

24. On November 1 of the current year, the assets and liabilities of Jim Chu, M.D., are as
follows: Cash, $10,000; Accounts Receivable, $8,200; Supplies, $1,050; Land,
$25,000; Accounts Payable, $6,530. What is the amount of owner's equity (Jim Chu's
capital) as of November 1 of the current year?
a. $37,720
b. $44,430
c. $21,500
d. $50,780

25. Al Shea is the sole owner and operator of SawTooth Company. As of the end of its
accounting period, December 31, 2005, SawTooth Company has assets of $925,000
and liabilities of $285,000. During 2006, Al Shea invested an additional $50,000 and
withdrew $30,000 from the business. What is the amount of net income during 2006,
assuming that as of December 31, 2006, assets were $980,000, and liabilities were
$255,000?
a. $ 95,000
b. $ 65,000
c. $165,000
d. $725,000

26. The total assets and the total liabilities of a business at the beginning and at the end of
the year appear below. During the year, the owner had withdrawn $50,000 for
personal use and had made an additional investment of $35,000 in the business.

Assets Liabilities
Beginning of year $295,000 $190,000
End of year 355,000 220,000

The amount of net income for the year was


a. $85,000
b. $40,000
c. $135,000
d. $45,000

27. An account is said to have a debit balance if


a. the amount of the debits exceeds the amount of the credits
b. there are more entries on the debit side than on the credit side
c. its normal balance is debit without regard to the amounts or number of entries on
the debit side
d. the first entry of the accounting period was posted on the debit side

28. Which statement(s) concerning cash is (are) true?


a. cash will always have more debits than credits
b. cash will never have a credit balance
c. cash is increased by debiting
d. all of the above

29. Which of the following groups of accounts have a normal debit balance?
a. revenues, liabilities, capital
b. capital, assets
c. liabilities, expenses
d. assets, expenses

30. Which one of the statements below is not a purpose for the journal?
a. to show increases and decreases in accounts
b. to show a chronological order by date
c. to show a complete transaction in one place
d. to help locate errors

31. A credit signifies a decrease in


a. drawing
b. liabilities
c. capital
d. revenue

32. Which of the following applications of the rules of debit and credit is true?
a. decrease Prepaid Insurance with a credit and the normal balance is a credit
b. increase Accounts Payable with a credit and the normal balance is a debit
c. increase Supplies Expense with a debit and the normal balance is a debit
d. decrease Cash with a debit and the normal balance is a credit

33. The classification and normal balance of the accounts payable account is
a. an asset with a credit balance
b. a liability with a credit balance
c. owner's equity with a credit balance
d. revenue with a credit balance

34. In which of the following types of accounts are decreases recorded by debits?
a. assets
b. revenues
c. expenses
d. drawing

35. A credit balance in which of the following accounts would indicate a likely error?
a. Fees Earned
b. Salary Expense
c. Peter Penn, Capital
d. Accounts Payable

36. Randomly listed below are the steps in the accounting cycle:

(1) prepare the financial statements


(2) post the journal entries to the ledger
(3) record journal entries
(4) prepare a trial balance

What is the proper order of these steps?

a. (3), (2), (4), (1)


b. (2), (3), (4), (1)
c. (3), (2), (1), (4)
d. (4), (3), (2), (1)

37. Office supplies purchased by J's Appliance Repair on account were returned. Which
of the following entries for J's Appliance Repair records this transaction?
a. Cash, debit; Office Supplies, credit
b. Office Supplies, debit; Accounts Receivable, credit
c. Accounts Payable, debit; Office Supplies, credit
d. Office Supplies, debit; Accounts Payable, credit

38. Cash was paid by J's Appliance Repair to creditors on account. Which of the
following entries for J's records this transaction?
a. Cash, debit; J's, Capital, credit
b. Accounts Payable, debit; Cash, credit
c. Accounts Receivable, debit; Cash, credit
d. Accounts Payable, debit; Account Receivable, credit

39. The process of initially recording a business transaction is called


a. trial balancing
b. posting
c. journalizing
d. balancing

40. Which of the following entries records the acquisition of office supplies on account?
a. Office Supplies, debit; Cash, credit
b. Cash, debit; Office Supplies, credit
c. Office Supplies, debit; Accounts Payable, credit
d. Accounts Receivable, debit; Office Supplies, credit

41. The revenue recognition concept


a. is in not in conflict with the cash method of accounting
b. determines when revenue is credited to a revenue account
c. states that revenue is not recorded until the cash is received
d. controls all revenue reporting for the cash basis of accounting

42. The matching concept


a. addresses the relationship between the journal and the balance sheet
b. determines whether the normal balance of an account is a debit or credit
c. requires that the dollar amount of debits equal the dollar amount of credits on a
trial balance
d. determines that expenses related to revenue be reported at the same time the
revenue is reported
43. Using accrual accounting, revenue is recorded and reported only
a. when cash is received without regard to when the services are rendered
b. when the services are rendered without regard to when cash is received
c. when cash is received at the time services are rendered
d. if cash is received after the services are rendered

44. Using accrual accounting, expenses are recorded and reported only
a. when they are incurred, whether or not cash is paid
b. when they are incurred and paid at the same time
c. if they are paid before they are incurred
d. if they are paid after they are incurred

45. One of the accounting concepts upon which deferrals and accruals are based is
a. matching
b. Cost
c. price-level adjustment
d. conservatism

46. If the effect of the debit portion of an adjusting entry is to increase the balance of an
expense account, which of the following describes the effect of the credit portion of
the entry?
a. decreases the balance of an owner's equity account
b. increases the balance of an liability account
c. increases the balance of an asset account
d. decreases the balance of an expense account

47. If the effect of the credit portion of an adjusting entry is to increase the balance of a
liability account, which of the following describes the effect of the debit portion of the
entry?
a. increases the balance of a contra asset account
b. increases the balance of an asset account
c. decreases the balance of an owner's equity account
d. increases the balance of an expense account

48. The primary difference between deferred and accrued expenses is that deferred
expenses have
a. been incurred and accrued expenses have not
b. not been incurred and accrued expenses have been incurred
c. been recorded and accrued expenses have not been incurred
d. not been recorded and accrued expenses have been incurred

49. Accrued expenses have


a. not yet been incurred, paid, or recorded
b. been incurred, not paid, but have been recorded
c. been incurred, not paid, and not recorded
d. been paid but have not yet been incurred

50. Deferred expenses have


a. not yet been recorded as expenses or paid
b. been recorded as expenses and paid
c. been incurred and paid
d. not yet been recorded as expenses

51. Adjusting entries affect at least one


a. income statement account and one balance sheet account
b. revenue and the drawing account
c. asset and one owner's equity account
d. revenue and one capital account

52. Which account would normally not require an adjusting entry?


a. Wages Expense
b. Accounts Receivable
c. Accumulated Depreciation
d. Smith, Capital

53. Which one of the accounts below would likely be included in an accrual adjusting
entry?
a. Insurance Expense
b. Prepaid Rent
c. Interest Expense
d. Unearned Rent

54. Which one of the following accounts below would likely be included in a deferral
adjusting entry?
a. Interest Revenue
b. Unearned Revenue
c. Salaries Payable
d. Accounts Receivable

55. The balance in the prepaid rent account before adjustment at the end of the year is
$15,000, which represents three months' rent paid on December 1. The adjusting
entry required on December 31 is
a. debit Rent Expense, $5,000; credit Prepaid Rent, $5,000
b. debit Prepaid Rent, $10,000; credit Rent Expense, $5,000
c. debit Rent Expense, $10,000; credit Prepaid Rent, $5,000
d. debit Prepaid Rent, $5,000; credit Rent Expense, $5,000

56. The balance in the office supplies account on June 1 was $5,200, supplies purchased
during June were $2,500, and the supplies on hand at June 30 were $2,000. The
amount to be used for the appropriate adjusting entry is
a. $4,500
b. $2,500
c. $9,700
d. $5,700

57. What is the proper adjusting entry at June 30, the end of the fiscal year, based on a
prepaid insurance account balance before adjustment, $15,500, and unexpired
amounts per analysis of policies, $4,500?
a. debit Insurance Expense, $4,500; credit Prepaid Insurance, $4,500
b. debit Insurance Expense, $15,500; credit Prepaid Insurance, $15,500
c. debit Prepaid Insurance, $11,500; credit Insurance Expense, $11,500
d. debit Insurance Expense, $11,000; credit Prepaid Insurance, $11,000

58. The entry to adjust for the cost of supplies used during the accounting period is
a. Supplies Expense, debit; Supplies, credit
b. James Smith, Capital, debit; Supplies, credit
c. Accounts Payable, debit; Supplies, credit
d. Supplies, debit; credit James Smith, Capital

59. A business pays weekly salaries of $20,000 on Friday for a five-day week ending on
that day. The adjusting entry necessary at the end of the fiscal period ending on
Thursday is
a. debit Salaries Payable, $16,000; credit Cash, $16,000
b. debit Salary Expense, $16,000; credit Drawing, $16,000
c. debit Salary Expense, $16,000; credit Salaries Payable, $16,000
d. debit Drawing, $16,000; credit Cash, $16,000

60. Depreciation Expense and Accumulated Depreciation are classified, respectively, as


a. expense, contra asset
b. asset, contra liability
c. revenue, asset
d. contra asset, expense

61. The type of account and normal balance of Accumulated Depreciation is


a. asset, credit
b. asset, debit
c. contra asset, credit
d. contra asset, debit

62. The type of account and normal balance of Unearned Rent is


a. revenue, credit
b. expense, debit
c. liability, credit
d. liability, debit

63. Data for an adjusting entry described as "accrued wages, $2,020" means to debit
a. Wages Expense and credit Wages Payable
b. Wages Payable and credit Wages Expense
c. Accounts Receivable and credit Wages Expense
d. Drawing and credit Wages Payable

64. In the accounting cycle, the last step is


a. preparing the financial statements
b. journalizing and posting the adjusting entries
c. preparing a post-closing trial balance
d. journalizing and posting the closing entries
65. On August 1, a company collects revenue in advance for the next twelve months and
credits a liability account. The adjusting entry at year end would
a. increase a liability account
b. decrease an asset account
c. decrease a revenue account
d. decrease a liability account
66. Accumulated Depreciation appears on the
a. balance sheet in the current assets section
b. balance sheet in the fixed assets section
c. balance sheet in the long-term liabilities section
d. income statement as an operating expense
67. Which one of the fixed asset accounts listed below will not have a related contra asset
account?
a. Office Equipment
b. Land
c. Delivery Equipment
d. Building
68. Adjusting entries are dated in the journal as of
a. the date they are actually journalized
b. the last day of the accounting period
c. the first day of the accounting period
d. the middle of the accounting period
69. Adjusting entries
a. need not be journalized since they appear on the work sheet
b. need not be posted if the financial statements are prepared from the work sheet
c. are not needed if reversing entries are prepared
d. must be journalized and posted
70. Closing entries
a. need not be journalized if reversing entries are prepared
b. need not be posted if the financial statements are prepared from the work sheet
c. are not needed if adjusting entries are prepared
d. must be journalized and posted
71. Closing entries are dated in the journal as of
a. the date they are actually journalized, although they are generally prepared after
the end of the accounting period
b. the last day of the accounting period, although they are actually journalized after
the end of the accounting period
c. the first day of the accounting period, although they are actually journalized after
the end of the accounting period
d. the first day of the subsequent accounting period
72. Which of the following accounts will not be closed to Income Summary at the end of
the fiscal year?
a. Salaries Expense
b. Fees Earned
c. Unearned Rent
d. Depreciation Expense
73. Generally, the revenue account for a merchandising business is entitled
a. Sales
b. Net Sales
c. Gross Sales
d. Gross Profit
74. What is the term applied to the excess of net revenue from sales over the cost of
merchandise sold?
a. gross profit
b. income from operations
c. net income
d. gross sales
75. Using a perpetual inventory system, the entry to record the sale of merchandise on
account includes a
a. debit to Sales
b. debit to Merchandise Inventory
c. credit to Merchandise Inventory
d. credit to Accounts Receivable
76. Merchandise is ordered on November 12; the merchandise is shipped by the seller and
the invoice is prepared, dated, and mailed by the seller on November 15; the
merchandise is received by the buyer on November 17; the entry is made in the
buyer's accounts on November 18. The credit period begins with what date?
a. November 12
b. November 15
c. November 17
d. November 18
77. Using a perpetual inventory system, the entry to record the return from a customer of
merchandise sold on account includes a
a. credit to Sales Returns and Allowances
b. debit to Merchandise Inventory
c. credit to Merchandise Inventory
d. debit to Cost of Merchandise Sold
78. In credit terms of 1/10, n/30, the "1" represents the
a. number of days in the discount period
b. full amount of the invoice
c. number of days when the entire amount is due
d. percent of the cash discount
79. Merchandise with a sales price of $500 is sold on account with term 2/10, n/30. The
journal entry to record the sale would include a
a. debit to Cash for $500
b. Debit to Sales Discounts for $10
c. Credit to Sales for $500
d. Debit to Accounts Receivable for $$490
80. Merchandise subject to terms 1/10, n/30, FOB shipping point, is sold on account to a
customer for $15,000. The seller paid transportation costs of $1,000 and issued a
credit memorandum for $5,000 prior to payment. What is the amount of the cash
discount allowable?
a. $160
b. $150
c. $140
d. $100
81. A sales invoice included the following information: merchandise price, $4,000;
transportation, $300; terms 1/10, n/eom, FOB shipping point. Assuming that a credit
for merchandise returned of $600 is granted prior to payment, that the transportation
is prepaid by the seller, and that the invoice is paid within the discount period, what is
the amount of cash received by the seller?
a. $3,366
b. $3,400
c. $3,666
d. $3,950
82. Which of the following accounts usually has a debit balance?
a. Purchase Discounts
b. Sales tax Payable
c. Allowance for Doubtful Accounts
d. Transportation-In
83. Merchandise is sold for cash. The selling price of the merchandise is $2,000 and the
sale is subject to a 5% state sales tax. The journal entry to record the sale would
include
a. A debit to Cash for $2,000.
b. A credit to Sales for $2,100.
c. A credit to Sales Tax Payable for $100.
d. None of the above.
84. If the buyer is to pay the transportation costs of delivering merchandise, delivery
terms are stated as
a. FOB shipping point
b. FOB destination
c. FOB n/30
d. FOB buyer
85. The percentage analysis of increases and decreases in individual items in comparative
financial statements is called
a. vertical analysis
b. solvency analysis
c. profitability analysis
d. horizontal analysis
86. The percent of fixed assets to total assets is an example of
a. vertical analysis
b. solvency analysis
c. profitability analysis
d. horizontal analysis
87. The ability of a business to pay its debts as they come due and to earn a reasonable
amount of income is referred to as
a. solvency and leverage
b. solvency and profitability
c. solvency and liquidity
d. solvency and equity
88. Which of the following is not an analysis used in assessing solvency?
a. number of times interest charges are earned
b. current position analysis
c. ratio of net sales to assets
d. inventory analysis
89. A company with working capital of $400,000 and a current ratio of 2.5 pays a
$75,000 short-term liability. The amount of working capital immediately after
payment is
a. $475,000
b. $325,000
c. $400,000
d. $75,000
90. Which of the following is a measure of the liquid position of a corporation?
a. earnings per share
b. inventory turnover
c. current ratio
d. number of times interest charges earned
91. Which of the following is not included in the computation of the quick ratio?
a. inventory
b. marketable securities
c. accounts receivable
d. Cash
92. Based on the following data for the current year, what is the inventory turnover?

Net sales on account during year $ 500,000


Cost of merchandise sold during year 330,000
Accounts receivable, beginning of year 45,000
Accounts receivable, end of year 35,000
Inventory, beginning of year 90,000
Inventory, end of year 110,000

a. 3.3
b. 8.3
c. 3.7
d. 3.0
93. Once inventory is excessive which item below is not true?
a. reduce solvency
b. increase taxes
c. increase ordering costs
d. increase storage costs
94. In order to be useful to managers, management accounting reports should possess all
of the following characteristics EXCEPT:
a. provide objective measures of past operations and subjective estimates about
future decisions
b. be prepared in accordance with generally accepted accounting principles
c. be provided at any time management needs information
d. be prepared to report information for any unit of the business to support decision
making
95. What is the primary criterion for the preparation of managerial accounting reports?
a. Relevance of the reports
b. Meet the manager needs
c. Timing of the reports
d. Cost of the reports
96. Which of the following is most associated with managerial accounting?
a. Must follow GAAP
b. May rely on estimates and forecasts
c. Is prepared for users outside the organization.
d. Always reports on the entire entity
97. Compute conversion costs given the following data: Direct Materials, $352,700;
Direct Labor, $196,300; Factory Overhead, $177,600.
a. $549,000
b. $726,600
c. $373,900
d. $530,300
98. Which of the following is false in regards to direct materials for an auto
manufacturer?
a. Steel would probably be a direct material.
b. Upholstery fabric would probably be a direct material
c. Oil to lubricate factory machines would not be a direct material.
d. Small plastic clips to hold on door panels, because they become part of the auto,
must be accounted for as direct materials.
99. The cost of a manufactured product generally consists of which of the following
costs?
a. Direct materials cost and factory overhead cost
b. Direct labor cost and factory overhead cost
c. Direct labor cost, direct materials cost, and factory overhead cost
d. Direct materials cost and direct labor cost
100. The cost of materials entering directly into the manufacturing process is classified as:
a. direct labor cost
b. factory overhead cost
c. burden cost
d. direct materials cost
101. Which of the following is an example of direct materials cost for an automobile
manufacturer?
a. Cost of oil lubricants for factory machinery
b. Cost of wages of assembly worker
c. Salary of production supervisor
d. Cost of interior upholstery
102. If the cost of direct materials is a small portion of total production cost, it may be
classified as part of:
a. direct labor cost
b. selling and administrative costs
c. miscellaneous costs
d. factory overhead cost
103. Which of the following is an example of direct labor cost for an airplane
manufacturer?
a. Cost of oil lubricants for factory machinery
b. Cost of wages of assembly worker
c. Salary of plant supervisor
d. Cost of jet engines
104. Costs other than direct materials cost and direct labor cost incurred in the
manufacturing process are classified as:
a. factory overhead cost
b. miscellaneous expense
c. product costs
d. other manufacturing costs
105. Which of the following is an example of a factory overhead cost?
a. Repair and maintenance cost on the administrative building
b. Factory heating and lighting cost
c. Insurance premiums on salespersons' automobiles
d. President's salary
106. The three most common cost behavior classifications are:
a. variable costs, product costs, and sunk costs
b. fixed costs, variable costs, and mixed costs
c. variable costs, period costs, and differential costs
d. variable costs, sunk costs, and opportunity costs
107. Which of the following costs is an example of a cost that remains the same in total as
the number of units produced changes?
a. Direct labor
b. Salary of a factory supervisor
c. Units of production depreciation on factory equipment
d. Direct materials
108. For purposes of analysis, mixed costs are generally:
a. classified as fixed costs
b. classified as variable costs
c. classified as period costs
d. separated into their variable and fixed cost components
109. If sales are $820,000, variable costs are 62% of sales, and operating income is
$260,000, what is the contribution margin ratio?
a. 53.1%
b. 38%
c. 62%
d. 32%
110. A firm operated at 80% of capacity for the past year, during which fixed costs were
$210,000, variable costs were 65% of sales, and sales were $1,000,000. Operating
profit was:
a. $140,000
b. $150,000
c. $310,000
d. $200,000
111. If sales are $425,000, variable costs are 63% of sales, and operating income is
$50,000, what is the contribution margin ratio?
a. 37%
b. 26.8%
c. 11.8%
d. 63%
112. If fixed costs are $750,000 and variable costs are 70% of sales, what is the break-even
point (dollars)?
a. $1,071,429
b. $525,000
c. $2,500,000
d. $1,275,000
113. If fixed costs are $250,000, the unit selling price is $105, and the unit variable costs
are $65, what is the break-even sales (units)?
a. 3,846 units
b. 2,381 units
c. 10,000 units
d. 6,250 units
114. If fixed costs are $1,400,000, the unit selling price is $220, and the unit variable costs
are $120, what is the amount of sales required to realize an operating income of
$200,000?
a. 14,000 units
b. 12,000 units
c. 16,000 units
d. 13,333 units
115. If fixed costs are $300,000, the unit selling price is $25, and the unit variable costs are
$20, what is the break-even sales (units) if fixed costs are reduced by $40,000?
a. 60,000 units
b. 52,000 units
c. 62,000 units
d. 64,000 units
116. If fixed costs are $450,000, the unit selling price is $75, and the unit variable costs are
$50, what are the old and new break-even sales (units) if the unit selling price
increases by $5?
a. 6,000 units and 5,250 units
b. 18,000 units and 6,000 units
c. 18,000 units and 15,000 units
d. 9,000 units and 15,000 units
117. Morino Corporation sells product W for $125 per unit, the variable cost per unit is
$90, the fixed costs are $450,000, and Morino is in the 30% corporate tax bracket.
What are the sales (dollars) required to earn a net income (after tax) of $25,000?
a. $1,249,020
b. $674,625
c. $1,734,693
d. $1,904,750
118. Scher Corporation sells product G for $150 per unit, the variable cost per unit is $105,
the fixed costs are $720,000, and Scher is in the 25% corporate tax bracket. What are
the sales (dollars) required to earn a net income (after tax) of $40,000?
a. $2,533,350
b. $2,577,777
c. $2,933,400
d. $2,400,000
119. If variable costs per unit increased because of an increase in hourly wage rates, the
break-even point would:
a. decrease
b. increase
c. remain the same
d. increase or decrease, depending upon the percentage increase in wage rates
120. If variable costs per unit decreased because of a decrease in utility rates, the break-
even point would:
a. decrease
b. increase
c. remain the same
d. increase or decrease, depending upon the percentage increase in utility rates
121. If fixed costs increased and variable costs per unit decreased, the break-even point
would:
a. increase
b. decrease
c. remain the same
d. increase, decrease, or remain the same, depending upon the amounts of increase in
fixed cost and decrease in variable cost
122. Which of the following conditions would cause the break-even point to decrease?
a. Total fixed costs increase
b. Unit selling price decreases
c. Unit variable cost decreases
d. Unit variable cost increases
123. Which of the following conditions would cause the break-even point to increase?
a. Total fixed costs decrease
b. Unit selling price increases
c. Unit variable cost decreases
d. Unit variable cost increases
124. Which of the following conditions would cause the break-even point to increase?
a. Total fixed costs increase
b. Unit selling price increases
c. Unit variable cost decreases
d. Total fixed costs decrease
125. Cialini Co. has budgeted salary increases to factory supervisors totaling 10%. If
selling prices and all other cost relationships are held constant, next year's break-even
point will:
a. decrease by 10%
b. increase by 10%
c. not be determined from the data given
d. increase at a rate greater than 10%
126. The benefits of comparing actual performance of the operations against planned goals
include all of the following except:
a. providing prompt feedback to employees about their performance relative to the
goal
b. preventing unplanned expenditures
c. helping to establish spending priorities
d. determining how managers are performing against prior years' actual operating
results
127. Budgeting supports the planning process by encouraging all of the following activities
except:
a. requiring all organizational units to establish their goals for the upcoming period
b. increasing the motivation of managers and employees by providing agreed-upon
expectations
c. directing and coordinating operations during the period
d. improving overall decision making by considering all viewpoints, options, and cost
reduction possibilities
128. For February, sales revenue is $700,000; sales commissions are 5% of sales; the sales
manager's salary is $96,000; advertising expenses are $80,000; shipping expenses
total 2% of sales; and miscellaneous selling expenses are $2,100 plus 1/2 of 1% of
sales. Total selling expenses for the month of February are:
a. $185,650
b. $189,500
c. $196,100
d. $230,600
129. The first budget customarily prepared as part of an entity's master budget is the:
a. production budget
b. cash budget
c. sales budget
d. direct materials purchases
130. If the expected sales volume for the current period is 7,000 units, the desired ending
inventory is 200 units, and the beginning inventory is 300 units, the number of units
set forth in the purchase budget, representing total purchase for the current period, is:
a. 7,000
b. 6,900
c. 7,100
d. 7,200
131. Wright Corporation began its operations on September 1 of the current year.
Budgeted sales for the first three months of business are $240,000, $300,000, and
$420,000, respectively, for September, October, and November. The company
expects to sell 20% of its merchandise for cash. Of sales on account, 70% are
expected to be collected in the month of the sale, 25% in the month following the sale,
and the remainder in the following month. The cash collections in September from
accounts receivable are:
a. $240,000
b. $134,400
c. $192,000
d. $168,000
132. Which of the following conditions normally would not indicate that standard costs
should be revised?
a. The engineering department has revised product specifications in responding to
customer suggestions.
b. The company has signed a new union contract which increases the factory wages
on average by $2.00 an hour.
c. Actual costs differed from standard costs for the preceding week.
d. The world price of raw materials increased.
133. Standards that represent levels of operation that can be attained with reasonable effort
are called:
a. theoretical standards
b. ideal standards
c. variable standards
d. normal standards
134. Which of the following conditions normally would not indicate that standard costs
should be revised?
a. The engineering department has revised product specifications in responding to
customer suggestions.
b. The company has signed a new union contract which increases the factory wages
on average by $2.00 an hour.
c. Actual costs differed from standard costs for the preceding week.
d. The world price of raw materials increased.
135. Standards that represent levels of operation that can be attained with reasonable effort
are called:
a. theoretical standards
b. ideal standards
c. variable standards
d. normal standards
136. The standard price and quantity of direct materials are separated because:
a. GAAP reporting requires this separation
b. direct materials prices are controlled by the purchasing department, and quantity
used is controlled by the production department
c. standard quantities are more difficult to estimate than standard prices
d. standard prices change more frequently than standard quantities

\
137. The following data relate to direct materials costs for November:

Actual costs 4,600 pounds at $5.50


Standard costs 4,500 pounds at $6.00

What is the direct materials quantity variance?


a. $550 unfavorable
b. $600 favorable
c. $550 favorable
d. $600 unfavorable
138. The following data relate to direct labor costs for the current period:

Standard costs 6,000 hours at $12.00


Actual costs 7,500 hours at $11.60

What is the direct labor rate variance?


a. $15,000 unfavorable
b. $3,000 favorable
c. $17,400 unfavorable
d. $2,400 favorable
139. The unfavorable volume variance may be due to all but the following factors:
a. failure to maintain an even flow of work
b. machine breakdowns
c. unexpected increases in the cost of utilities
d. failure to obtain enough sales orders
140. Favorable volume variances may be harmful when:
a. machine repairs cause work stoppages
b. supervisors fail to maintain an even flow of work
c. production in excess of normal capacity cannot be sold
d. there are insufficient sales orders to keep the factory operating at normal capacity
141. The standard factory overhead rate is $7.50 per machine hour ($6.20 for variable
factory overhead and $1.30 for fixed factory overhead) based on 100% capacity of
80,000 machine hours. The standard cost and the actual cost of factory overhead for
the production of 15,000 units during August were as follows:

Actual: Variable factory overhead $360,000


Fixed factory overhead 104,000
Standard hours allowed for units 60,000 hours at $7.50
450,000
produced:

What is the amount of the factory overhead volume variance?


a. $12,000 unfavorable
b. $12,000 favorable
c. $14,000 unfavorable
d. $26,000 unfavorable
142. The standard factory overhead rate is $7.50 per machine hour ($6.20 for variable
factory overhead and $1.30 for fixed factory overhead) based on 100% capacity of
80,000 machine hours. The standard cost and the actual cost of factory overhead for
the production of 15,000 units during August were as follows:

Actual: Variable factory overhead $360,000


Fixed factory overhead 104,000
Standard hours allowed for units 60,000 hours at $7.50
450,000
produced:

What is the amount of the factory overhead controllable variance?


a. $12,000 unfavorable
b. $12,000 favorable
c. $14,000 unfavorable
d. $26,000 unfavorable
143. Incurring actual indirect factory wages in excess of budgeted amounts for actual
production results in a:
a. quantity variance
b. controllable variance
c. volume variance
d. rate variance
1. B 51. A 101. D
2. A 52. D 102. D
3. D 53. C 103. B
4. B 54. B 104. A
5. B 55. A 105. B
6. C 56. D 106. B
7. C 57. D 107. B
8. A 58. A 108. D
9. C 59. C 109. B
10. D 60. A 110. A
11. C 61. C 111. A
12. D 62. C 112. C
13. C 63. A 113. D
14. D 64. C 114. C
15. A 65. D 115. B
16. C 66. B 116. C
17. D 67. B 117. C
18. A 68. B 118. B
19. C 69. D 119. B
20. D 70. D 120. A
21. C 71. B 121. D
22. B 72. C 122. C
23. B 73. A 123. D
24. A 74. A 124. A
25. B 75. C 125. C
26. D 76. B 126. D
27. A 77. B 127. C
28. C 78. D 128. D
29. D 79. C 129. C
30. A 80. D 130. B
31. A 81. C 131. B
32. C 82. D 132. C
33. B 83. C 133. D
34. B 84. A 134. C
35. B 85. D 135. D
36. A 86. A 136. B
37. C 87. B 137. D
38. B 88. C 138. B
39. C 89. C 139. C
40. C 90. C 140. C
41. B 91. A 141. D
42. D 92. A 142. B
43. B 93. C 143. B
44. A 94. B
45. A 95. B
46. B 96. B
47. D 97. C
48. B 98. D
49. C 99. C
50. D 100. D