Which of the following is an advantage of corporations relative to partnerships and sole proprietorships? Lower taxes. Most common form of organization. Reduced legal liability for investors. Harder to transfer ownership. The group of users of accounting information charged with achieving the goals of the business is its auditors. investors. creditors. managers. Which of the following financial statements is concerned with the company at a point in time? Statement of cash flows. Retained Earnings statement. Balance sheet. Income statement. An income statement presents the revenues and expenses for a specific period of time. reports the changes in assets, liabilities, and stockholders’ equity over a period of time. reports the assets, liabilities, and stockholders’ equity at a specific date. summarizes the changes in retained earnings for a specific period of time. The most important information needed to determine if companies can pay their current obligations is the projected net income for next year. relationship between current assets and current liabilities. relationship between short-term and long-term liabilities. net income for this year. A liquidity ratio measures the income or operating success of a company over a period of time. ability of a company to survive over a long period of time. percentage of total financing provided by creditors. short-term ability of a company to pay its maturing obligations and to meet unexpected needs for cash. The convention of consistency refers to consistent use of accounting principles among firms. among accounting periods. throughout the accounting periods. within industries. Horizontal analysis is also known as vertical analysis. trend analysis. linear analysis. common size analysis. Horizontal analysis is a technique for evaluating a series of financial statement data over a period of time to determine the amount and/or percentage increase or decrease that has taken place. that has been arranged from the lowest number to the highest number. that has been arranged from the highest number to the lowest number. to determine which items are in error. Vertical analysis is a technique that expresses each item in a financial statement starting with the highest value down to the lowest value. in dollars and cents. as a percent of the item in the previous year. as a percent of a base amount. Process costing is used when production is aimed at filling a specific customer order. dissimilar products are involved. the production process is continuous. costs are to be assigned to specific jobs. An important feature of a job order cost system is that each job has its own distinguishing characteristics. must be completed before a new job is accepted. consists of one unit of output. must be similar to previous jobs completed. In a process cost system, product costs are summarized: after each unit is produced..

1. Which of the following is an advantage of corporations relative
to partnerships and sole proprietorships?
Lower taxes.
Most common form of organization.
Reduced legal liability for investors.
Harder to transfer ownership.
The group of users of accounting information charged with
achieving the goals of the business is its
auditors.
investors.
creditors.
managers.
Which of the following financial statements is concerned with
the company at a point in time?
Statement of cash flows.
Retained Earnings statement.

2. Balance sheet.
Income statement.
An income statement
presents the revenues and expenses for a specific period of time.
reports the changes in assets, liabilities, and stockholders’
equity over a period of time.
reports the assets, liabilities, and stockholders’ equity at a
specific date.
summarizes the changes in retained earnings for a specific
period of time.
The most important information needed to determine if
companies can pay their current obligations is the
projected net income for next year.
relationship between current assets and current liabilities.
relationship between short-term and long-term liabilities.

3. net income for this year.
A liquidity ratio measures the
income or operating success of a company over a period of time.
ability of a company to survive over a long period of time.
percentage of total financing provided by creditors.
short-term ability of a company to pay its maturing obligations
and to meet unexpected needs for
cash.
The convention of consistency refers to consistent use of
accounting principles
among firms.
among accounting periods.
throughout the accounting periods.
within industries.
Horizontal analysis is also known as

4. vertical analysis.
trend analysis.
linear analysis.
common size analysis.
Horizontal analysis is a technique for evaluating a series of
financial statement data over a period of time
to determine the amount and/or percentage increase or decrease
that has taken place.
that has been arranged from the lowest number to the highest
number.
that has been arranged from the highest number to the lowest
number.
to determine which items are in error.
Vertical analysis is a technique that expresses each item in a
financial statement

5. starting with the highest value down to the lowest value.
in dollars and cents.
as a percent of the item in the previous year.
as a percent of a base amount.
Process costing is used when
production is aimed at filling a specific customer order.
dissimilar products are involved.
the production process is continuous.
costs are to be assigned to specific jobs.
An important feature of a job order cost system is that each job
has its own distinguishing characteristics.
must be completed before a new job is accepted.
consists of one unit of output.
must be similar to previous jobs completed.
In a process cost system, product costs are summarized:

6. after each unit is produced.
on job cost sheets.
on production cost reports.
when the products are sold.
An activity that has a direct cause-effect relationship with the
resources consumed is a(n)
overhead rate.
cost pool.
cost driver.
product activity.
Activity-based costing
accumulates overhead in one cost pool, then assigns the
overhead to products and services by

7. means of a cost driver.
allocates overhead directly to products and services based on
activity levels.
allocates overhead to multiple activity cost pools, and it then
assigns the activity cost pools to
products and services by means of cost drivers.
assigns activity cost pools to products and services, then
allocates overhead back to the activity
cost pools.
A cost which remains constant per unit at various levels of
activity is a
mixed cost.
manufacturing cost.
fixed cost.
variable cost.
The break-even point is where
total variable costs equal total fixed costs.
total sales equal total variable costs.
total sales equal total fixed costs.

8. contribution margin equals total fixed costs.
Fixed costs are $600,000 and the contribution margin per unit is
$150. What is the break-even point?
4,000 units
$4,000,000
$1,500,000
1,500 units
When a company assigns the costs of direct materials, direct
labor, and both variable and fixed manufacturing overhead to
products, that company is using
variable costing.
product costing.
absorption costing.
operations costing.
If a division manager's compensation is based upon the
division's net income, the manager may decide to meet the net

9. income targets by increasing production when using
variable costing, in order to increase net income.
absorption costing, in order to decrease net income.
variable costing, in order to decrease net income.
absorption costing, in order to increase net income.
An unrealistic budget is more likely to result when it
has been developed by all levels of management.
is developed with performance appraisal usages in mind.
has been developed in a bottom up fashion.
has been developed in a top down fashion.
A major element in budgetary control is

10. the valuation of inventories.
the preparation of long-term plans.
the comparison of actual results with planned objectives.
approval of the budget by the stockholders.
The purpose of the sales budget report is to
control sales commissions.
control selling expenses.
determine whether sales goals are being met.
determine whether income objectives are being met.
The accumulation of accounting data on the basis of the
individual manager who has the authority to make day-to-day
decisions about activities in an area is called
static reporting.
responsibility accounting.
flexible accounting.
master budgeting.

11. Variance reports are
(a) external financial reports.
(b) SEC financial reports.
(c) internal reports for management.
(d) all of these.
Internal reports that review the actual impact of decisions are
prepared by
factory workers.
management accountants.
department heads.
the controller.
The process of evaluating financial data that change under
alternative courses of action is called
cost-benefit analysis.

12. incremental analysis.
double entry analysis.
contribution margin analysis.
Seasons Manufacturing manufactures a product with a unit
variable cost of $100 and a unit sales price of $176. Fixed
manufacturing costs were $480,000 when 10,000 units were
produced and sold. The company has a one-time opportunity to
sell an additional 1,000 units at $140 each in a foreign market
which would not affect its present sales. If the company has
sufficient capacity to produce the additional units, acceptance
of the special order would affect net income as follows:
Income would increase by $40,000.
Income would decrease by $8,000.
Income would increase by $8,000.
Income would increase by $140,000.
Carter, Inc. can make 100 units of a necessary component part
with the following costs:
Direct Materials
$120,000
Direct Labor
20,000
Variable Overhead
60,000

13. Fixed Overhead
40,000
If Carter can purchase the component externally for $220,000
and only $10,000 of the fixed costs can be avoided, what is the
correct make-or-buy decision?
Make and save $30,000
Make and save $10,000
Buy and save $30,000
Buy and save $10,000
A company has a process that results in 15,000 pounds of
Product A that can be sold for $16 per pound. An alternative
would be to process Product A further at a cost of $200,000 and
then sell it for $28 per pound. Should management sell Product
A now or should Product A be processed further and then sold?
What is the effect of the action?
Process further, the company will be better off by $180,000.
Sell now, the company will be better off by $20,000.
Sell now, the company will be better off by $200,000.

14. Process further, the company will be better off by $20,000.