1.

Gross profi t will result if:

a. operating expenses are less than net income.
b. sales revenues are greater than operating expenses.
c. sales revenues are greater than cost of goods sold.
d. operating expenses are greater than cost of goods sold.
2. Under a perpetual inventory system, when goods are purchased for resale by a company:
a. purchases on account are debited to Inventory.
b. purchases on account are debited to Purchases.
c. purchase returns are debited to Purchase Returns and Allowances
d. freight costs are debited to Freight-Out
3. The sales accounts that normally have a debit balance are:
a. Sales Discounts.
b. Sales Returns and Allowances.
c. Both (a) and (b).
d. Neither (a) nor (b).
4. If sales revenues are $400,000, cost of goods sold is $310,000, and operating expenses are $60,000,
the gross profi t is:
a. $30,000.
b. $340,000.
c. $90,000.
d. $400,000
5. A credit sale of $750 is made on June 13, terms 2/10, net/30. A return of $50 is granted on June 16.
The amount received as payment in full on June 23 is:
a. $700.
b. $685.
c. $686.
d. $650.
6. To record the sale of goods for cash in a perpetual inventory system:
a. only one journal entry is necessary to record cost of goods sold and reduction of inventory.
b. only one journal entry is necessary to record the receipt of cash and the sales revenue.
c. two journal entries are necessary: one to record the receipt of cash and sales revenue, and one
to record the cost of goods sold and reduction of inventory.
d. two journal entries are necessary: one to record the receipt of cash and reduction of inventory,
and one to record the cost of goods sold and sales revenue.
7. In determining cost of goods sold in a periodic system:
a. purchase discounts are deducted from net purchases.
b. freight-out is added to net purchases.
c. purchase returns and allowances are deducted from net purchases.
d. freight-in is added to net purchase
8. Which of the following is incorrect concerning subsidiary ledgers?
a. The purchases ledger is a common subsidiary ledger for creditor accounts.
b. The accounts receivable ledger is a subsidiary ledger.
c. A subsidiary ledger is a group of accounts with a common characteristic.
d. An advantage of the subsidiary ledger is that it permits a division of labor in posting
9. A sales journal will be used for:

Credit Sales Cash Sales Sales Discount

a. No Yes Yes
b. Yes No No
c. Yes No No
d. Yes Yes No

10. The management of an organization performs several broad functions. They are:
a. planning, directing, and selling.
b. planning, directing, and controlling.
c. planning, manufacturing, and controlling.
d. directing, manufacturing, and controlling
11. Direct materials are a

Product Cost Manufacturing Period Cost

Overhead Cost
a. Yes Yes No
b. Yes No No
c. Yes Yes Yes
d. No Yes No
12. For the year, Redder Company has cost of goods manufactured of $600,000, beginning finished
goods inventory of $200,000, and ending finished goods inventory of $250,000. The cost of goods
sold is:
a. $450,000.
b. $550,000.
c. $500,000.
d. $600,000.
13. The formula to determine the cost of goods manufactured is:
a. Beginning raw materials inventory 1 Total manufacturing costs 2 Ending work in process
inventory.
b. Beginning work in process inventory 1 Total manufacturing costs 2 Ending finished goods
inventory.
c. Beginning finished good inventory 1 Total manufacturing costs 2 Ending finished goods
inventory.
d. Beginning work in process inventory 1 Total manufacturing costs 2 Ending work in process
inventory
14. A company is more likely to use a job order cost system if:
a. it manufactures a large volume of similar products.
b. its production is continuous.
c. it manufactures products with unique characteristics.
d. it uses a periodic inventory system.
15. In recording the issuance of raw materials in a job order cost system, it would be incorrect to:
a. debit Work in Process Inventory.
b. debit Finished Goods Inventory.
c. debit Manufacturing Overhead.
 d. credit Raw Materials Inventory
16. In Crawford Company, the predetermined overhead rate is 80% of direct labor cost. During the
month, Crawford incurs $210,000 of factory labor costs, of which $180,000 is direct labor and
$30,000 is indirect labor. Actual overhead incurred was $200,000. The amount of overhead debited
to Work in Process Inventory should be:
a. $200,000.
b. $144,000.
c. $168,000.
d. $160,000
17. Mynex Company completes Job No. 26 at a cost of $4,500 and later sells it for $7,000 cash. A
correct entry is:
a. debit Finished Goods Inventory $7,000 and credit Work in Process Inventory $7,000.
b. debit Cost of Goods Sold $7,000 and credit Finished Goods Inventory $7,000.
c. debit Finished Goods Inventory $4,500 and credit Work in Process Inventory $4,500.
d. debit Accounts Receivable $7,000 and credit Sales Revenue $7,000.
18. Manufacturing overhead is underapplied if:
a. actual overhead is less than applied.
b. actual overhead is greater than applied.
c. the predetermined rate equals the actual rate.
d. actual overhead equals applied overhead.
19. In a process cost system, the flow of costs is:
a. work in process, cost of goods sold, finished goods.
b. finished goods, work in process, cost of goods sold.
c. finished goods, cost of goods sold, work in process.
d. work in process, finished goods, cost of goods sold
20. Which of the following items is not characteristic of a process cost system?
a. Once production begins, it continues until the finished product emerges.
b. The products produced are heterogeneous in nature.
c. The focus is on continually producing homogeneous products.
d. When the finished product emerges, all units have precisely the same amount of materials,
labor, and overhead
21. The Mixing Department’s output during the period consists of 20,000 units completed and
transferred out, and 5,000 units in ending work in process 60% complete as to materials and
conversion costs. Beginning inventory is 1,000 units, 40% complete as to materials and conversion
costs. The equivalent units of production are:
a. 22,600.
b. 24,000.
c. 23,000.
d. 25,000.
22. In RYZ Company, there are zero units in beginning work in process, 7,000 units started into
production, and 500 units in ending work in process 20% completed. The physical units to be
accounted for are:
a. 7,000.
b. 7,500.
 c. 7,360.
d. 7,340
23. Mora Company has 2,000 units in beginning work in process, 20% complete as to conversion costs,
23,000 units transferred out to finished goods, and 3,000 units in ending work in process 33,1/3 %
complete as to conversion costs. The beginning and ending inventory is fully complete as to
materials costs. Equivalent units for materials and conversion costs are, respectively:
a. 22,000, 24,000.
b. 26,000, 24,000.
c. 24,000, 26,000.
d. 26,000, 26,000.
24. Largo Company has unit costs of $10 for materials and $30 for conversion costs. If there are 2,500
units in ending work in process, 40% complete as to conversion costs, and fully complete as to
materials cost, the total cost assignable to the ending work in process inventory is:
a. $45,000.
b. $75,000.
c. $55,000.
d. $100,000.
25. In a production cost report, units to be accounted for are calculated as:
a. Units started into production + Units in ending work in process.
b. Units started into production - Units in beginning work in process.
c. Units transferred out + Units in beginning work in process.
d. Units started into production + Units in beginning work in process.
26. Activity-based costing:
a. assumes that the cost of a product is equal to the sum of the costs of all activities performed to
manufacture it.
b. has become more widespread as overhead costs have been decreasing relative to materials
and labor costs.
c. is similar to a conventional cost accounting system in accounting for direct labor and
manufacturing overhead but differs in regard to direct materials.
d. uses a single unit-level basis to allocate overhead costs to products

27. Variable costs are costs that:

a. vary in total directly and proportionately with changes in the activity level.
b. remain the same per unit at every activity level.
c. Neither of the above.
d. Both (a) and (b) above
28. Your cell phone service provider offers a plan that is classified as a mixed cost. The cost per
month for 1,000 minutes is $50. If you use 2,000 minutes this month, your cost will be:
a. $50.
b. more than $100.
c. $100.
d. between $50 and $100
29. Which of the following is not involved in CVP analysis?
a. Sales mix.
 b. Unit selling prices.
c. Fixed costs per unit.
d. Volume or level of activity
30. Contribution margin:
a. is revenue remaining after deducting variable costs.
b. may be expressed as unit contribution margin.
c. is selling price less cost of goods sold.
d. Both (a) and (b) above.
31. Brownstone Company’s contribution margin ratio is 30%. If Brownstone’s sales revenue is $100
greater than its break-even sales in dollars, its net income:
a. will be $100.
b. will be $70.
c. will be $30.
d. cannot be determined without knowing fixed costs
32. The mathematical equation for computing required sales to obtain target net income is
Required sales =
a. Variable costs + Target net income.
b. Variable costs + Fixed costs + Target net income.
c. Fixed costs + Target net income.
d. No correct answer is given
33. Margin of safety is computed as:
a. Actual sales - Break-even sales.
b. Contribution margin - Fixed costs.
c. Break-even sales - Variable costs.
d. Actual sales - Contribution margin.
34. Gossen Company is planning to sell 200,000 pliers for $4 per unit. The contribution margin ratio
is 25%. If Gossen will break even at this level of sales, what are the fixed costs?
a. $100,000.
b. $200,000.
c. $160,000.
d. $300,000
35. Under variable costing, fi xed manufacturing costs are classifi ed as:
a. period costs.
b. product costs.
c. both period and product costs.
d. neither period nor product costs.