Which of the following is an advantage of corporations relative to partnerships and sole proprietorships? Reduced legal liability for investors. Harder to transfer ownership. Lower taxes. Most common form of organization. The group of users of accounting information charged with achieving the goals of the business is its managers. auditors. investors. creditors. Which of the following financial statements is concerned with the company at a point in time? Retained Earnings statement. Income statement. Statement of cash flows. Balance sheet. An income statement reports the changes in assets, liabilities, and stockholders’ equity over a period of time. presents the revenues and expenses for a specific 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 relationship between short-term and long-term liabilities. projected net income for next year. net income for this year. relationship between current assets and current liabilities. A liquidity ratio measures the ability of a company to survive over a long period of time. short-term ability of a company to pay its maturing obligations and to meet unexpected needs for cash. percentage of total financing provided by creditors. income or operating success of a company over a period of time. The convention of consistency refers to consistent use of accounting principles within industries. among accounting periods. among firms. throughout the accounting periods. Horizontal analysis is also known as linear analysis. vertical analysis. common size analysis. trend 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 highest number to the lowest number. that has been arranged from the lowest number to the highest 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. as a percent of the item in the previous year. as a percent of a base amount. in dollars and cents. Process costing is used when production is aimed at filling a specific customer order. dissimilar products are involved. costs are to be assigned to specific jobs. the production process is continuous. 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: on job cost sheets. w.

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

2. Retained Earnings statement.
Income statement.
Statement of cash flows.
Balance sheet.
An income statement
reports the changes in assets, liabilities, and stockholders’
equity over a period of time.
presents the revenues and expenses for a specific 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
relationship between short-term and long-term liabilities.

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

4. throughout the accounting periods.
Horizontal analysis is also known as
linear analysis.
vertical analysis.
common size analysis.
trend 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 highest number to the lowest
number.
that has been arranged from the lowest number to the highest
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.
as a percent of the item in the previous year.
as a percent of a base amount.
in dollars and cents.
Process costing is used when
production is aimed at filling a specific customer order.
dissimilar products are involved.
costs are to be assigned to specific jobs.
the production process is continuous.
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.

6. consists of one unit of output.
must be similar to previous jobs completed.
In a process cost system, product costs are summarized:
on job cost sheets.
when the products are sold.
after each unit is produced.
on production cost reports.
An activity that has a direct cause-effect relationship with the
resources consumed is a(n)
cost driver.
product activity.
overhead rate.
cost pool.
Activity-based costing

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

8. total sales equal total variable costs.
contribution margin equals total fixed costs.
total variable costs equal total fixed costs.
Fixed costs are $600,000 and the contribution margin per unit is
$150. What is the break-even point?
$4,000,000
1,500 units
4,000 units
$1,500,000
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.

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

10. the comparison of actual results with planned objectives.
the preparation of long-term plans.
the valuation of inventories.
approval of the budget by the stockholders.
The purpose of the sales budget report is to
control sales commissions.
determine whether sales goals are being met.
control selling expenses.
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.

11. flexible accounting.
responsibility accounting.
master budgeting.
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
management accountants.
the controller.
factory workers.
department heads.

12. The process of evaluating financial data that change under
alternative courses of action is called
double entry analysis.
incremental analysis.
cost-benefit 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 $8,000.
Income would increase by $40,000.
Income would increase by $140,000.
Income would decrease by $8,000.

13. 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
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?
Buy and save $30,000
Buy and save $10,000
Make and save $30,000
Make 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?

14. Process further, the company will be better off by $20,000.
Sell now, the company will be better off by $20,000.
Process further, the company will be better off by $180,000.
Sell now, the company will be better off by $200,000