Managerial Use and Analysis Practice Exam
Which of the following is a key financial statement used to reflect an organization’s financial health?
A) Income Statement
B) Statement of Cash Flows
C) Balance Sheet
D) All of the above
What is the purpose of managerial accounting?
A) To prepare financial statements for external users
B) To assist managers in decision-making and control
C) To assess the organization’s tax obligations
D) To comply with government regulations
Which of the following financial statements is used primarily for decision-making purposes within a company?
A) Balance Sheet
B) Income Statement
C) Statement of Retained Earnings
D) Statement of Cash Flows
The balance sheet shows a company’s:
A) Profitability over time
B) Financial position at a specific point in time
C) Cash inflows and outflows during a period
D) Changes in the equity section of the company
Which of the following is an example of a fixed cost?
A) Direct materials used
B) Salary of the factory supervisor
C) Sales commissions
D) Factory utilities
The primary purpose of financial reporting is to:
A) Provide useful information for internal decision-making
B) Meet legal obligations
C) Prepare budgets and forecasts
D) Provide useful information for external decision-making
Which of the following accounts would not be considered a liability?
A) Accounts payable
B) Bonds payable
C) Common stock
D) Notes payable
What does the statement of cash flows report?
A) Revenue and expenses for a given period
B) Changes in equity over time
C) The cash inflows and outflows during a period
D) The company’s total assets and liabilities
Which of the following is an example of an operating activity on the statement of cash flows?
A) Purchase of new equipment
B) Issuance of stock
C) Payment of dividends
D) Payment to suppliers
The matching principle in accounting states that:
A) Revenues should be recognized when cash is received
B) Expenses should be recognized in the period when the related revenues are earned
C) Assets should be recognized at their current market value
D) Liabilities should be recognized when they are incurred
The statement of stockholders’ equity shows:
A) The revenues and expenses for the period
B) The cash inflows and outflows during the period
C) Changes in equity accounts during the period
D) The company’s financial position at a given point in time
Which of the following methods of inventory valuation is used to match costs with revenues most effectively?
A) FIFO
B) LIFO
C) Average cost
D) Specific identification
Which of the following would be classified as a current asset?
A) Land
B) Equipment
C) Accounts receivable
D) Long-term debt
In cost-volume-profit analysis, the contribution margin is:
A) Total revenue minus total fixed costs
B) Total sales minus total variable costs
C) The difference between total costs and total sales
D) Fixed costs divided by total sales
Which of the following is a purpose of financial analysis in managerial accounting?
A) To predict future financial performance
B) To prepare tax returns
C) To ensure compliance with regulatory agencies
D) To allocate overhead costs
Which of the following is considered a non-operating expense?
A) Depreciation
B) Cost of goods sold
C) Interest expense
D) Selling expenses
Which of the following ratios measures a company’s ability to meet its short-term obligations?
A) Debt-to-equity ratio
B) Current ratio
C) Return on equity
D) Gross profit margin
Which of the following would be classified as an intangible asset?
A) Inventory
B) Patents
C) Land
D) Accounts payable
Depreciation on equipment is an example of:
A) A variable cost
B) A fixed cost
C) A direct cost
D) A sunk cost
Which of the following is an example of a financing activity?
A) Selling equipment
B) Issuing stock
C) Paying suppliers
D) Paying rent
A company’s return on equity (ROE) is calculated by dividing:
A) Net income by total assets
B) Net income by stockholders’ equity
C) Operating income by sales
D) Gross profit by net sales
Which of the following would be considered an indirect cost in the production of goods?
A) Direct labor
B) Direct materials
C) Rent on factory building
D) Factory supervisor wages
Which of the following is an example of a direct cost?
A) Rent on factory building
B) Factory supervisor salary
C) Direct materials
D) Depreciation of office equipment
The primary difference between managerial accounting and financial accounting is that:
A) Managerial accounting focuses on external users while financial accounting focuses on internal users
B) Managerial accounting is concerned with past transactions while financial accounting is concerned with future decisions
C) Managerial accounting provides more detailed information for decision-making
D) Managerial accounting must adhere to generally accepted accounting principles (GAAP)
Which of the following is true about a company’s profit margin ratio?
A) A higher profit margin ratio indicates better profitability
B) A higher profit margin ratio indicates higher sales volume
C) A higher profit margin ratio means higher fixed costs
D) A higher profit margin ratio means more debt
When calculating the break-even point, fixed costs are divided by:
A) Selling price per unit
B) Contribution margin per unit
C) Total variable costs
D) Total sales
Which of the following is a characteristic of variable costs?
A) They remain constant per unit with changes in production levels
B) They increase in total as production increases
C) They do not vary with production levels
D) They are typically considered a fixed cost
Which of the following is a measure of a company’s liquidity?
A) Return on assets
B) Current ratio
C) Gross profit margin
D) Debt-to-equity ratio
A company’s gross profit is calculated by subtracting:
A) Operating expenses from sales
B) Cost of goods sold from sales
C) Net income from sales
D) Interest expense from sales
The direct materials cost is considered a:
A) Fixed cost
B) Period cost
C) Product cost
D) Selling cost
Which of the following financial statements provides the best information about a company’s ability to generate cash?
A) Income Statement
B) Balance Sheet
C) Statement of Cash Flows
D) Statement of Retained Earnings
In which section of the statement of cash flows would the purchase of a new building be reported?
A) Operating activities
B) Investing activities
C) Financing activities
D) Non-cash activities
The cost of goods sold (COGS) is subtracted from which of the following to determine gross profit?
A) Operating expenses
B) Net income
C) Revenues from sales
D) Total liabilities
Which of the following is true about the relationship between fixed costs and production volume?
A) Fixed costs increase as production volume increases
B) Fixed costs do not change with changes in production volume
C) Fixed costs decrease as production volume increases
D) Fixed costs fluctuate depending on market conditions
What is the primary purpose of a cash flow statement?
A) To provide information about a company’s financial performance
B) To provide information about a company’s liquidity and cash management
C) To show the company’s profitability over time
D) To show the company’s solvency position
The formula for the current ratio is:
A) Current assets / Current liabilities
B) Net income / Total assets
C) Operating income / Revenue
D) Total assets / Current liabilities
Which of the following describes a situation where costs do not vary with changes in production?
A) Fixed costs
B) Variable costs
C) Mixed costs
D) Direct costs
Which of the following methods is most commonly used to allocate overhead costs in a manufacturing company?
A) FIFO
B) Absorption costing
C) Activity-based costing (ABC)
D) Direct costing
What is the main purpose of managerial accounting?
A) To prepare financial statements for external users
B) To help managers plan, control, and make decisions
C) To determine the profitability of the organization
D) To comply with regulatory requirements
Which of the following is a characteristic of a variable cost?
A) It remains constant as production volume changes
B) It varies in total with changes in production volume
C) It is incurred regardless of the level of production
D) It is classified as a period cost
Which of the following is included in the financing activities section of the statement of cash flows?
A) Purchase of equipment
B) Payment of dividends
C) Sale of inventory
D) Interest payments
What is the purpose of an income statement?
A) To report on the company’s financial position at a specific point in time
B) To summarize the company’s revenues, expenses, and profits over a period of time
C) To track cash inflows and outflows during a period
D) To report the company’s stockholder equity changes
A company’s earnings before interest and taxes (EBIT) is also known as:
A) Net income
B) Operating income
C) Gross profit
D) Earnings per share
A firm’s return on investment (ROI) is typically calculated by dividing:
A) Net income by total assets
B) Operating income by shareholders’ equity
C) Gross profit by net sales
D) Net income by shareholders’ equity
Which of the following represents an example of a direct cost in a manufacturing company?
A) Administrative salaries
B) Factory rent
C) Direct labor
D) Office supplies
What is the first step in the budgeting process?
A) Establishing the budget period
B) Preparing revenue forecasts
C) Identifying the cost drivers
D) Setting goals and objectives
What is the break-even point in units?
A) Fixed costs divided by variable cost per unit
B) Fixed costs divided by selling price per unit
C) Total revenue divided by total costs
D) Fixed costs divided by contribution margin per unit
In a cost-volume-profit (CVP) analysis, the contribution margin ratio is calculated by dividing:
A) Contribution margin by sales revenue
B) Total costs by sales revenue
C) Fixed costs by variable costs
D) Net income by total revenue
The acid-test ratio (or quick ratio) is a more stringent measure of liquidity than the current ratio because:
A) It excludes long-term liabilities from assets
B) It includes only cash, marketable securities, and receivables in the numerator
C) It includes inventory in the numerator
D) It excludes receivables from current assets
Which of the following is an example of an indirect expense?
A) Direct materials
B) Direct labor
C) Administrative salaries
D) Depreciation of factory equipment
Which of the following is considered an operating activity in the statement of cash flows?
A) Borrowing money
B) Issuing stock
C) Paying employee wages
D) Selling property
The formula for the debt-to-equity ratio is:
A) Total liabilities / Total assets
B) Total assets / Total liabilities
C) Total liabilities / Total equity
D) Total equity / Total liabilities
What is a company’s gross profit margin ratio calculated by?
A) Gross profit / Net income
B) Gross profit / Revenue
C) Operating income / Sales
D) Net income / Shareholders’ equity
The purpose of a cost-volume-profit (CVP) analysis is to:
A) Determine the total expenses of a business
B) Analyze the profitability of specific products
C) Determine the break-even point and profit for various levels of sales
D) Forecast future sales growth
A cost that changes in total with changes in activity level, but remains constant per unit, is known as:
A) Variable cost
B) Fixed cost
C) Mixed cost
D) Step cost
The term “depreciation” refers to:
A) The allocation of the cost of tangible assets over their useful life
B) The decrease in the market value of an asset
C) The loss in value due to inventory obsolescence
D) The expense of interest on a loan
A company uses a specific identification method for inventory. Which of the following would most likely be the reason?
A) The company sells a large volume of similar products
B) The company sells high-cost, low-volume items
C) The company wants to minimize tax liability
D) The company has a large amount of inventory turnover
The contribution margin per unit is calculated as:
A) Sales price per unit – Variable cost per unit
B) Sales price per unit – Fixed cost per unit
C) Total fixed costs / Total units sold
D) Selling price per unit / Variable cost per unit
The income tax expense is classified as:
A) A period cost
B) A product cost
C) An indirect cost
D) A fixed cost
Which of the following is an example of a sunk cost?
A) The cost of inventory purchased
B) The cost of equipment already purchased and no longer relevant to future decisions
C) The wages of workers currently producing products
D) The cost of materials used in production
Which of the following is considered a fixed cost for a manufacturing company?
A) Direct labor
B) Factory utilities
C) Depreciation on factory machinery
D) Raw materials
What is the primary purpose of financial accounting?
A) To provide information for internal decision-making
B) To record transactions in the general ledger
C) To provide information to external users such as investors and creditors
D) To forecast future sales and production levels
When a company uses the perpetual inventory system, inventory is updated:
A) At the end of each period
B) Only when a physical count is done
C) Continuously with each sale or purchase
D) At the end of the fiscal year
The main purpose of variance analysis is to:
A) Measure financial ratios
B) Identify differences between budgeted and actual results
C) Allocate costs to different departments
D) Predict future financial performance
A company purchased equipment for $50,000. The equipment has an estimated useful life of 5 years with no salvage value. What is the annual depreciation using straight-line depreciation?
A) $50,000
B) $10,000
C) $5,000
D) $12,500
The contribution margin ratio is calculated by:
A) Contribution margin / Sales
B) Sales / Contribution margin
C) Contribution margin / Variable costs
D) Gross profit / Sales
Which of the following is considered an operating expense on the income statement?
A) Cost of goods sold
B) Depreciation expense
C) Interest expense
D) Income tax expense
The primary difference between absorption costing and variable costing is:
A) Treatment of fixed manufacturing overhead
B) The method of allocating direct costs
C) The inclusion of administrative expenses
D) The classification of fixed costs
A company has the following financial data: Sales of $200,000, variable costs of $120,000, and fixed costs of $50,000. What is the contribution margin?
A) $50,000
B) $80,000
C) $120,000
D) $30,000
A company’s return on assets (ROA) is calculated by:
A) Net income / Total assets
B) Operating income / Total liabilities
C) Net income / Shareholders’ equity
D) Sales revenue / Total assets
In a manufacturing setting, which of the following is considered an indirect cost?
A) Direct materials
B) Direct labor
C) Factory rent
D) Sales commission
When determining a company’s break-even point, which of the following is considered a fixed cost?
A) Raw material costs
B) Labor costs
C) Rent for factory space
D) Sales commissions
Which of the following is true regarding activity-based costing (ABC)?
A) It allocates overhead costs based on direct labor hours
B) It assigns costs to products based on the activities that drive overhead
C) It focuses on a single overhead rate for all products
D) It is used for financial accounting rather than managerial decision-making
What is the primary goal of cost-volume-profit (CVP) analysis?
A) To calculate the cost of goods sold
B) To determine the impact of production volume on profits
C) To allocate indirect costs to products
D) To set selling prices for products
Which of the following is a characteristic of a variable cost?
A) It remains the same in total as the production level increases
B) It changes in direct proportion to the production level
C) It does not change with production levels
D) It decreases as production volume decreases
When preparing a statement of cash flows, which of the following activities is reported under investing activities?
A) Issuing stock
B) Purchasing equipment
C) Paying dividends
D) Paying interest on debt
What is the purpose of the accounts receivable turnover ratio?
A) To assess the company’s liquidity
B) To determine the average number of days it takes to collect receivables
C) To measure the profitability of the company
D) To assess how quickly the company can sell its inventory
The direct materials cost is classified as:
A) A variable cost
B) A fixed cost
C) An indirect cost
D) A sunk cost
In managerial accounting, the contribution margin is defined as:
A) Sales revenue minus variable costs
B) Net income minus fixed costs
C) Sales revenue minus fixed costs
D) Gross profit minus operating expenses
Which of the following is a period cost rather than a product cost?
A) Direct materials
B) Factory wages
C) Sales commissions
D) Factory rent
Which of the following would be classified as a long-term liability?
A) Accounts payable
B) Bonds payable
C) Wages payable
D) Dividends payable
The cost of debt is best described as:
A) The return expected by equity investors
B) The interest rate paid by the company on its borrowings
C) The cost of equity financing
D) The total return on capital
Which of the following is an example of a financial ratio used to assess a company’s profitability?
A) Current ratio
B) Return on equity (ROE)
C) Debt-to-equity ratio
D) Quick ratio
Which of the following is an example of a sunk cost?
A) Cost of new equipment purchased
B) Cost of research and development already incurred
C) Cost of labor for future projects
D) Cost of future marketing campaigns
If a company has a gross profit margin of 40%, what is the cost of goods sold (COGS) ratio?
A) 40%
B) 60%
C) 50%
D) 30%
Which of the following would be included in the financing activities section of the statement of cash flows?
A) Repayment of a long-term loan
B) Payment of dividends to shareholders
C) Sale of company-owned property
D) Cash payments for inventory purchases
Which of the following is the primary purpose of the cost-volume-profit (CVP) analysis?
A) To determine the break-even point
B) To calculate net income
C) To estimate future costs and revenues
D) To predict stock prices
What is the total cost of a product made in a company with $100,000 in direct materials, $50,000 in direct labor, and $30,000 in factory overhead?
A) $180,000
B) $100,000
C) $150,000
D) $50,000
Which of the following methods is used to calculate the depreciation of an asset?
A) Matching principle
B) Straight-line method
C) Contribution margin method
D) Cost-volume-profit method
If a company has a quick ratio of 1.5, it indicates that:
A) The company is highly leveraged
B) The company has more liquid assets than current liabilities
C) The company has a significant amount of inventory
D) The company is not profitable
The formula for calculating the breakeven point in units is:
A) Fixed Costs / Contribution Margin
B) Contribution Margin / Variable Costs
C) Fixed Costs / Variable Costs
D) Sales Revenue / Fixed Costs
Which of the following is classified as a financing activity on the statement of cash flows?
A) Issuing bonds
B) Purchasing inventory
C) Paying salaries
D) Purchasing equipment
If a company has a 40% return on equity (ROE), this means:
A) The company is generating 40% of sales from equity investment
B) For every dollar of equity, the company generates 40% in net income
C) 40% of the company’s assets are funded by equity
D) 40% of the company’s liabilities are equity-financed
What does the acid-test ratio measure?
A) A company’s ability to pay short-term obligations using liquid assets
B) A company’s ability to turn sales into profit
C) A company’s ability to cover long-term obligations
D) A company’s operational efficiency
The allocation of fixed overhead costs to each unit of production is done under:
A) Absorption costing
B) Variable costing
C) Job order costing
D) Activity-based costing
In the context of cost-volume-profit analysis, what is the contribution margin ratio?
A) Contribution margin / Sales revenue
B) Total sales revenue / Contribution margin
C) Contribution margin / Total costs
D) Fixed costs / Variable costs
Which of the following costs are considered product costs?
A) Marketing expenses
B) Depreciation on factory equipment
C) Administrative salaries
D) Advertising expenses
A company’s gross profit margin is calculated as:
A) Gross profit / Sales revenue
B) Gross profit / Total assets
C) Operating income / Sales revenue
D) Operating income / Total assets
When inventory is recorded at cost using a perpetual system, which of the following is true?
A) The company does not update the inventory record until the end of the accounting period
B) The company continuously updates the inventory record with each sale or purchase
C) The company only updates inventory for purchases
D) The company uses the same inventory valuation method for both cash and credit sales
Under the direct write-off method, bad debts are:
A) Estimated at the beginning of the period
B) Written off when they are deemed uncollectible
C) Accrued as a liability in the income statement
D) Recognized as an allowance in the balance sheet
The cost of goods manufactured includes:
A) Only direct costs
B) Direct materials, direct labor, and factory overhead
C) Only direct labor and direct materials
D) Only factory overhead costs
What is the main difference between a fixed cost and a variable cost?
A) Fixed costs remain the same regardless of production volume, while variable costs change with production levels
B) Fixed costs change with production levels, while variable costs remain constant
C) Fixed costs only apply to manufacturing, while variable costs apply to sales
D) Fixed costs are only relevant in short-term decision-making
Which of the following is a characteristic of managerial accounting?
A) Focus on external reporting
B) Provides information for internal decision-making
C) Used to prepare financial statements for government entities
D) Follows generally accepted accounting principles (GAAP)
In the cost of production report, which of the following would be classified as a direct cost?
A) Factory supervisor’s salary
B) Factory utilities
C) Direct labor
D) Depreciation on factory building
The accounting principle that requires businesses to report their financial results consistently over time is known as:
A) Conservatism principle
B) Consistency principle
C) Matching principle
D) Revenue recognition principle
In the preparation of the statement of cash flows, which of the following is considered an investing activity?
A) Borrowing money from a bank
B) Purchasing land
C) Paying off debt
D) Issuing stock
A company’s income statement includes the following items: Sales revenue of $500,000, COGS of $300,000, and operating expenses of $100,000. What is the operating income?
A) $500,000
B) $100,000
C) $200,000
D) $300,000
What is the main purpose of a cash flow statement?
A) To show a company’s profitability
B) To report a company’s assets and liabilities
C) To analyze the company’s financial position
D) To show how cash moves in and out of the company
Which of the following would be included in the manufacturing cost of a product?
A) Office rent
B) Raw materials
C) Advertising expenses
D) Selling expenses
If a company is considering whether to invest in a new project, what should be included in the analysis?
A) Only future costs and revenues
B) Only past costs and revenues
C) Sunk costs and future costs
D) Only future costs
A company’s net income for the year is $500,000, with depreciation of $50,000. The company also paid off $20,000 in long-term debt. What is the operating cash flow?
A) $500,000
B) $550,000
C) $470,000
D) $530,000
The statement of retained earnings reports the change in:
A) Stockholders’ equity
B) Net income
C) Cash flow
D) Dividends paid
The formula for calculating the current ratio is:
A) Current liabilities / Current assets
B) Total assets / Total liabilities
C) Current assets / Current liabilities
D) Total liabilities / Total equity
Which of the following costs would not be included in product costs under absorption costing?
A) Direct materials
B) Factory overhead
C) Selling and administrative expenses
D) Direct labor
A company purchases a building for $100,000 and incurs $10,000 in legal fees related to the purchase. The total cost to be capitalized for the building is:
A) $110,000
B) $100,000
C) $10,000
D) $120,000
In which section of the statement of cash flows would the payment of dividends be reported?
A) Operating activities
B) Financing activities
C) Investing activities
D) Non-cash activities
Which of the following is an example of an internal control?
A) A company’s financial statements
B) The use of segregation of duties in accounting processes
C) The market price of a company’s stock
D) Depreciation expense
Which of the following is considered an operating activity in the statement of cash flows?
A) Issuing stock
B) Purchasing equipment
C) Paying wages
D) Borrowing money
What is the primary advantage of using activity-based costing (ABC)?
A) It simplifies the cost allocation process
B) It allocates overhead costs more accurately based on activities that drive costs
C) It reduces the number of cost pools used
D) It uses only direct costs for cost allocation
Which of the following would be classified as a cash outflow from investing activities?
A) Payment of interest on debt
B) Cash received from stock issuance
C) Cash payment for equipment purchase
D) Cash payment for dividends
Which of the following is not included in the cost of goods sold (COGS)?
A) Raw materials
B) Direct labor
C) Sales commission
D) Factory overhead
The formula for calculating return on assets (ROA) is:
A) Net income / Total equity
B) Net income / Sales revenue
C) Net income / Total assets
D) Sales revenue / Total assets
A company uses a job order costing system. Which of the following is true about this costing method?
A) Costs are assigned to products based on the number of units produced
B) Costs are tracked for individual jobs or orders
C) It is used only for mass-produced items
D) It is used only for service industries
Under variable costing, which of the following is treated as a period cost?
A) Direct materials
B) Fixed factory overhead
C) Variable selling expenses
D) Variable manufacturing overhead
In a flexible budget, what is adjusted based on actual activity levels?
A) Fixed costs
B) Sales revenue
C) Variable costs
D) Depreciation expense
Which of the following is an example of a non-controlling interest in consolidated financial statements?
A) A minority ownership stake in a subsidiary
B) Common stock issued by the parent company
C) Intercompany sales transactions
D) A related-party transaction between parent and subsidiary
The primary objective of managerial accounting is to:
A) Provide information for external reporting
B) Prepare the company’s tax returns
C) Assist management in decision-making and planning
D) Meet the requirements of the IRS
Which of the following is true regarding a company’s break-even point?
A) At the break-even point, total revenue equals total costs
B) The break-even point is the point at which a company incurs its highest costs
C) A company’s profit at the break-even point is equal to the contribution margin
D) The break-even point increases as fixed costs decrease
The margin of safety measures:
A) The difference between actual sales and break-even sales
B) The amount of revenue required to cover fixed costs
C) The amount of profit earned over the break-even point
D) The company’s ability to cover variable costs
Which of the following costs would be considered a sunk cost?
A) The cost of raw materials for the current period
B) A payment for a lease made last year
C) The cost of advertising for a new product launch
D) Future research and development costs
Under absorption costing, fixed manufacturing overhead is:
A) Treated as a period cost
B) Allocated to each unit produced
C) Included as a separate line item in the income statement
D) Excluded from product costs
In the context of cost-volume-profit analysis, what is the contribution margin ratio?
A) Contribution margin / Variable costs
B) Fixed costs / Contribution margin
C) Contribution margin / Sales revenue
D) Sales revenue / Total costs
A company that produces a single product would likely use:
A) Process costing
B) Job order costing
C) Activity-based costing
D) Hybrid costing
Which of the following is considered an operating activity in the statement of cash flows?
A) Cash inflows from issuing common stock
B) Cash payments for purchasing property
C) Cash receipts from customers
D) Cash payments to bondholders
A company’s debt-to-equity ratio is calculated as:
A) Total liabilities / Total assets
B) Total equity / Total liabilities
C) Total liabilities / Total equity
D) Net income / Total equity
Which of the following is an example of a financing activity in the statement of cash flows?
A) Cash payment to creditors
B) Issuance of common stock
C) Cash payment for operating expenses
D) Cash receipt from customers
The fixed cost per unit will:
A) Increase as production increases
B) Remain constant as production increases
C) Decrease as production increases
D) Vary with the number of units produced
Which of the following is true about managerial accounting reports?
A) They are prepared for external stakeholders only
B) They must comply with GAAP
C) They are used for decision-making and performance evaluation
D) They focus primarily on past financial results
Which of the following is true for the indirect method of preparing the statement of cash flows?
A) It starts with net income and adjusts for non-cash items
B) It starts with cash inflows and outflows
C) It only includes operating activities
D) It does not account for changes in working capital
A company uses the perpetual inventory system. Which of the following is true?
A) Inventory is updated only at the end of the period
B) Purchases are recorded as inventory immediately
C) Only physical counts of inventory are recorded
D) Inventory is updated only for purchases, not sales
The term “working capital” refers to:
A) Total assets minus total liabilities
B) Current assets minus current liabilities
C) The amount of cash available to the company
D) Fixed assets minus liabilities
What is the purpose of a cash flow forecast?
A) To predict future revenues and expenses
B) To calculate the company’s profit for the period
C) To assess the company’s ability to meet short-term obligations
D) To determine the company’s financial position at year-end
Which of the following would be considered a direct cost in job order costing?
A) Sales commissions
B) Factory supervisor’s salary
C) Direct materials used in production
D) Advertising costs
Which of the following is a characteristic of a process costing system?
A) It is used for custom, unique products
B) It assigns costs to batches of products
C) It is used for homogeneous, mass-produced items
D) It allocates costs based on job orders
If a company has a high debt-to-equity ratio, it means:
A) The company is relying more on equity than debt to finance its operations
B) The company is more likely to be able to cover its debt obligations
C) The company is highly leveraged and may have higher financial risk
D) The company’s equity base is large compared to its liabilities
Which of the following is an example of a period cost under variable costing?
A) Direct materials
B) Variable selling expenses
C) Factory rent
D) Fixed manufacturing overhead
What is the primary difference between job order costing and process costing?
A) Job order costing is used for homogeneous products, while process costing is for custom jobs
B) Job order costing assigns costs by batch, while process costing assigns costs by job
C) Job order costing is for unique products, while process costing is for mass production
D) There is no difference between job order and process costing
The cash conversion cycle measures:
A) The time taken to convert sales into cash
B) The time taken to pay off current liabilities
C) The time taken to convert raw materials into finished goods
D) The time taken from when inventory is purchased until cash is received from sales
The formula for calculating the quick ratio is:
A) Current assets / Current liabilities
B) (Current assets – Inventory) / Current liabilities
C) Total liabilities / Total assets
D) Current assets / Total liabilities
If a company’s fixed costs increase, what happens to the breakeven point?
A) It decreases
B) It remains the same
C) It increases
D) It becomes negative
A company’s operating leverage is high when:
A) Fixed costs are low relative to variable costs
B) The company has a low contribution margin
C) Fixed costs are high relative to variable costs
D) Sales fluctuate greatly
In the statement of cash flows, the net increase or decrease in cash is calculated by:
A) Subtracting cash outflows from cash inflows
B) Adding net income to cash inflows
C) Adding cash received from customers to net income
D) Subtracting operating cash flows from investing cash flows
In managerial accounting, which of the following is considered a discretionary fixed cost?
A) Rent for office space
B) Depreciation on equipment
C) Advertising expense
D) Salaries of factory workers
When a company purchases raw materials on account, which of the following occurs?
A) Assets increase and liabilities decrease
B) Assets decrease and liabilities increase
C) Assets increase and liabilities increase
D) Assets and liabilities remain unchanged
Under the cost-plus pricing method, the price of a product is determined by:
A) Adding a fixed profit margin to the cost of production
B) Using a competitive market price as a baseline
C) Adding a variable profit margin to the sales price
D) Considering customer demand as the primary factor
A company’s income tax expense is calculated based on:
A) The cash received from customers
B) The net income before taxes
C) The gross revenue generated during the period
D) The net sales revenue minus costs
Which of the following best describes the concept of “contribution margin”?
A) The amount of money left over after all fixed costs are paid
B) The difference between sales and fixed costs
C) The difference between sales and total variable costs
D) The total cost of producing one unit of product
Which of the following is the correct formula for the acid-test ratio?
A) Quick assets / Current liabilities
B) Total assets / Total liabilities
C) Cash / Total liabilities
D) Current assets / Current liabilities
What is the primary purpose of a bank reconciliation?
A) To calculate the company’s cash flow
B) To ensure that the accounting records match the bank’s records
C) To verify the company’s income and expenses
D) To assess the company’s financial position
Which of the following is NOT a component of a company’s internal control system?
A) Segregation of duties
B) Physical safeguards
C) Management decision-making
D) Independent verification
Which of the following is true regarding variable costs?
A) They remain constant per unit regardless of production levels
B) They increase as production volume decreases
C) They do not change with the level of output
D) They are incurred only for fixed costs
The primary goal of financial accounting is to:
A) Provide information for internal decision-making
B) Measure and record the financial performance of an organization
C) Prepare tax returns
D) Assist in setting pricing strategies
Which of the following is NOT a typical item reported in the statement of cash flows?
A) Cash paid for operating expenses
B) Cash inflow from the issuance of stock
C) Cash payments to suppliers
D) Accounts receivable balance
In a process costing system, which of the following would be true for the production of large quantities of identical units?
A) Costs are accumulated by job
B) Units are tracked individually from production to sale
C) Costs are accumulated by department or process
D) Production costs are treated as period costs
The direct materials cost in a job order costing system would include:
A) Wages of factory workers
B) The cost of raw materials used in production
C) Depreciation on factory equipment
D) Administrative salaries
Which of the following is an example of a capital expenditure?
A) Payment for monthly utility bills
B) Purchase of office supplies
C) Purchase of new machinery
D) Payment for employee bonuses
Which of the following is a characteristic of a traditional absorption costing system?
A) Only variable costs are assigned to the product
B) Fixed costs are treated as period costs
C) Variable and fixed manufacturing costs are included in product costs
D) It uses only direct labor costs as part of product cost
A budget that is prepared for a range of activity levels is called a:
A) Static budget
B) Flexible budget
C) Master budget
D) Incremental budget
In the context of managerial decision-making, sunk costs are:
A) Costs that are relevant for future decisions
B) Costs that have already been incurred and cannot be recovered
C) Costs that will vary depending on the decision
D) Costs that affect the financial statements for the period
A company decides to discontinue a product line. Which of the following would be considered a relevant cost in the decision?
A) Sunk costs associated with the product line
B) Fixed costs that will remain unchanged regardless of the decision
C) Costs that can be avoided if the product line is discontinued
D) Depreciation on equipment used to produce the product
When a company issues bonds, the proceeds from the bonds are considered:
A) Operating activities in the statement of cash flows
B) Investing activities in the statement of cash flows
C) Financing activities in the statement of cash flows
D) Non-cash transactions
The accounting equation is:
A) Assets = Liabilities + Equity
B) Assets = Liabilities – Equity
C) Revenues = Expenses + Profits
D) Assets = Revenue + Expenses
Which of the following is an advantage of using the perpetual inventory system?
A) It requires less detailed record-keeping than periodic systems
B) It allows real-time tracking of inventory levels
C) It is only suitable for small businesses
D) It is more accurate than a periodic system during the physical count
A company’s earnings before interest and taxes (EBIT) is calculated as:
A) Net income + Interest expense + Income taxes
B) Net income + Interest expense
C) Net income + Depreciation + Operating income
D) Operating revenue – Operating expenses
A company’s fixed costs are $20,000, its selling price per unit is $50, and its variable cost per unit is $30. What is the break-even point in units?
A) 1,000 units
B) 2,000 units
C) 500 units
D) 400 units
If a company has $10,000 in assets and $6,000 in liabilities, what is its equity?
A) $6,000
B) $4,000
C) $16,000
D) $10,000
Which of the following is NOT an example of a direct labor cost?
A) Wages of workers assembling products
B) Salaries of supervisors on the production line
C) Wages of employees who inspect finished products
D) Wages of employees working directly on production
Which of the following best describes a fixed cost?
A) A cost that varies in total with the level of production
B) A cost that remains constant per unit with changes in production
C) A cost that does not change with the level of production
D) A cost that is incurred only when a product is sold
A company with low working capital may face which of the following problems?
A) It will have difficulty covering short-term obligations
B) It will have a higher return on equity
C) It is more likely to be highly liquid
D) It can easily access additional financing
The matching principle in accounting requires that:
A) Revenues are recognized when cash is received
B) Expenses are recognized when cash is paid
C) Revenues are matched with expenses in the period in which they occur
D) Assets are recognized when they are purchased
In a manufacturing company, which of the following would be classified as a period cost?
A) Direct labor
B) Raw materials
C) Factory rent
D) Advertising expense
What type of cost is depreciation on factory machinery?
A) Fixed cost
B) Variable cost
C) Semi-variable cost
D) Period cost
The break-even point is the level of sales at which:
A) The company makes a profit
B) Total revenue equals total expenses
C) Fixed costs exceed variable costs
D) Variable costs exceed fixed costs
Which of the following best describes an operating lease?
A) A lease in which the lessee assumes the risk of ownership of the asset
B) A lease that is classified as an operating expense for tax purposes
C) A lease where the lessee has the option to purchase the asset at the end of the lease
D) A lease that is recorded as an asset on the balance sheet
Which of the following would NOT be considered a financing activity on the statement of cash flows?
A) Issuance of common stock
B) Payment of dividends
C) Borrowing money from a bank
D) Purchase of equipment
In activity-based costing (ABC), overhead costs are allocated based on:
A) The amount of raw materials used
B) Direct labor hours
C) Activities that drive overhead costs
D) The number of units produced
Which of the following is true regarding managerial accounting?
A) It is focused on external financial reporting
B) It uses historical data to make decisions for future operations
C) It is primarily concerned with tax preparation
D) It is governed by generally accepted accounting principles (GAAP)
A company has a margin of safety of $50,000. If the sales decrease by $10,000, what will happen to the margin of safety?
A) It will increase by $10,000
B) It will decrease by $10,000
C) It will remain unchanged
D) It will double
Which of the following financial statements is prepared using the direct method for operating activities?
A) Income statement
B) Statement of cash flows
C) Statement of retained earnings
D) Balance sheet
The formula for the return on equity (ROE) is:
A) Net income / Total liabilities
B) Net income / Total assets
C) Net income / Shareholder’s equity
D) Operating income / Total revenue
What is the primary difference between financial accounting and managerial accounting?
A) Managerial accounting focuses on historical data, while financial accounting focuses on future predictions
B) Financial accounting is used for internal decision-making, while managerial accounting is used for external reporting
C) Managerial accounting uses internal financial data for decision-making, while financial accounting focuses on reporting financial performance to external stakeholders
D) Financial accounting includes forecasts, while managerial accounting does not
Which of the following would be considered a direct cost in a manufacturing process?
A) Depreciation on office equipment
B) Factory utility expenses
C) Direct materials used in production
D) Advertising costs
Which of the following is a characteristic of a variable cost?
A) It does not change in total with changes in the production level
B) It is incurred only once per period
C) It varies in total directly with changes in the level of production or activity
D) It remains constant per unit regardless of production levels
A company is considering purchasing new machinery. Which of the following would be a relevant cost in the decision-making process?
A) Depreciation on the old machinery
B) The sunk cost of research already conducted
C) The purchase price of the new machinery
D) Previous advertising costs
Which of the following is an example of an internal control activity?
A) Employees receiving bonuses based on company profits
B) Company management performing regular audits
C) Posting financial statements publicly for investor review
D) Offering discounts for early payments from customers
Which of the following would be classified as an operating activity on the statement of cash flows?
A) Issuing bonds
B) Purchasing a new building
C) Paying salaries to employees
D) Selling equipment
If a company’s contribution margin is $200,000 and its fixed costs are $150,000, what is the company’s operating income?
A) $200,000
B) $150,000
C) $50,000
D) $350,000
Which of the following is true about the cost of goods sold (COGS)?
A) It includes only the cost of raw materials used in production
B) It is recorded as an expense when goods are sold
C) It includes only direct labor costs
D) It is classified as a period cost on the income statement
The weighted-average cost of capital (WACC) is used to determine:
A) The cost of debt financing
B) The company’s tax rate
C) The average cost of capital from both debt and equity financing
D) The amount of equity issued by the company
Which of the following is an example of a sunk cost?
A) A payment for materials purchased for production
B) Research and development costs incurred in the past
C) Expected future utility bills for operating machinery
D) Future wages for employees working on a project
If a company has a cost of sales of $1,000,000 and total revenue of $2,500,000, what is its gross profit margin?
A) 40%
B) 60%
C) 50%
D) 20%
A company’s target net income is calculated by:
A) Adding all expenses to total revenue
B) Subtracting fixed costs from total revenue
C) Adding taxes to gross profit
D) Subtracting all costs from total revenue
If a company’s debt-to-equity ratio is 2:1, it means that:
A) The company has $2 in debt for every $1 in equity
B) The company has $2 in equity for every $1 in debt
C) The company has more equity than debt
D) The company’s equity equals its liabilities
The matching principle in accounting requires that:
A) Revenues are recognized when cash is received
B) Expenses are recognized when incurred, regardless of when cash is paid
C) All revenues are recognized in the period in which the cash is collected
D) Only cash transactions are recorded in the financial statements
In a job order costing system, overhead costs are typically allocated based on:
A) Direct labor hours
B) Direct materials cost
C) The number of units produced
D) Machine hours used
The break-even point in units is calculated as:
A) Total fixed costs divided by unit selling price
B) Total fixed costs divided by unit contribution margin
C) Unit contribution margin divided by total fixed costs
D) Total revenue divided by unit contribution margin
Which of the following is an example of a direct material cost in a manufacturing environment?
A) Factory rent
B) Assembly line supervisor’s salary
C) Raw materials used in production
D) Office supplies for administrative staff
If the actual cost of materials is greater than the standard cost, the company will have:
A) A favorable variance
B) An unfavorable variance
C) A zero variance
D) No impact on profit
Which of the following is considered a non-cash transaction that appears on the statement of cash flows?
A) Purchase of equipment with cash
B) Depreciation expense
C) Sale of inventory
D) Issuance of stock for cash
What is the primary objective of cost-volume-profit (CVP) analysis?
A) To determine the break-even point
B) To calculate the gross margin
C) To assess profitability of individual products
D) To determine the fixed costs
If a company is analyzing its pricing strategy, which of the following would be classified as a fixed cost?
A) Direct labor
B) Raw materials
C) Factory supervisor’s salary
D) Sales commission
A company’s net income will be most directly affected by:
A) Operating income
B) Gross profit margin
C) Non-operating income
D) Cash inflows from customers
Which of the following is true of a cost structure with high fixed costs and low variable costs?
A) The company’s profitability is more sensitive to changes in sales volume
B) The company’s profitability is less sensitive to changes in sales volume
C) The company will have a lower contribution margin
D) The company will have higher operating leverage
The cost of goods manufactured is calculated as:
A) Beginning inventory + Purchases – Ending inventory
B) Direct materials used + Direct labor + Manufacturing overhead
C) Total sales – Gross profit
D) Beginning inventory + Purchases + Ending inventory
If a company experiences an increase in sales volume but no change in variable costs, what will happen to the contribution margin?
A) It will increase
B) It will decrease
C) It will remain unchanged
D) It will become zero
Which of the following would be an example of an operating activity on the statement of cash flows?
A) Borrowing funds from a bank
B) Paying interest on a loan
C) Issuing common stock
D) Purchasing a building
The correct formula for calculating the contribution margin ratio is:
A) Contribution margin / Net sales
B) Net sales / Contribution margin
C) Contribution margin / Total costs
D) Contribution margin / Gross profit
In a job order costing system, which of the following is true regarding the treatment of direct labor costs?
A) They are recorded as an asset until the job is completed
B) They are assigned directly to the specific job being worked on
C) They are pooled with indirect labor costs and allocated evenly
D) They are treated as period costs
A company has the following information: Total sales = $500,000, Fixed costs = $100,000, and Variable costs = $300,000. What is the contribution margin?
A) $100,000
B) $200,000
C) $400,000
D) $500,000
The cost of capital is defined as:
A) The required return by creditors and shareholders to invest in the company
B) The cost of debt financing only
C) The tax rate applicable to corporate income
D) The cost of acquiring new assets
The process of allocating indirect costs to products is known as:
A) Cost classification
B) Cost tracing
C) Cost allocation
D) Cost behavior analysis
In the context of managerial accounting, which of the following is considered a non-manufacturing cost?
A) Direct labor
B) Raw materials
C) Office supplies for administrative staff
D) Factory overhead
If a company’s contribution margin is $500,000 and fixed costs are $400,000, what is its operating income?
A) $500,000
B) $400,000
C) $100,000
D) $900,000
Which of the following best describes a variable cost?
A) It changes in total with changes in the level of activity
B) It remains the same regardless of the production volume
C) It increases as the level of activity decreases
D) It is only incurred at the start of the production process
Which of the following is true of the matching principle in accounting?
A) It requires that expenses be matched with revenues in the period in which they are incurred, not necessarily when cash is paid
B) It requires that revenue be recognized when cash is received
C) It requires that costs be recognized only when the related revenue is realized
D) It mandates that all transactions be reported on a cash basis
A company is using a cost-plus pricing strategy. This strategy adds a markup to:
A) Direct materials cost
B) Fixed costs
C) Variable costs
D) The total cost of producing a good or service
Which of the following is an example of a fixed cost in a service business?
A) Wages for hourly employees
B) Office supplies for daily operations
C) Rent for office space
D) Costs of selling goods
Which of the following is true of the statement of cash flows?
A) It is divided into operating, investing, and financing activities
B) It reports only cash receipts and payments related to operating activities
C) It is prepared based solely on the accrual basis of accounting
D) It provides a summary of the company’s income and expenses for the period
When using activity-based costing (ABC), overhead costs are allocated based on:
A) Direct labor hours
B) The amount of raw materials used
C) The activities that consume resources
D) Sales revenue
Which of the following would be classified as a sunk cost?
A) Marketing expenses for a new product line
B) Research and development costs for a completed project
C) Future costs of maintaining machinery
D) Purchase cost of new machinery
Which of the following statements is true regarding cost behavior?
A) Variable costs remain constant regardless of the level of production
B) Fixed costs change with changes in the production level
C) Mixed costs have both fixed and variable components
D) Variable costs per unit change as production increases
A company’s break-even point in units can be found by dividing:
A) Total variable costs by the contribution margin
B) Total fixed costs by the unit contribution margin
C) Fixed costs plus variable costs by total sales
D) Total contribution margin by total sales
If a company has total revenue of $300,000 and variable costs of $180,000, what is the contribution margin?
A) $180,000
B) $120,000
C) $300,000
D) $500,000
In a manufacturing company, the cost of goods sold includes:
A) Only the direct materials used in production
B) Direct materials, direct labor, and manufacturing overhead
C) Only the selling expenses related to finished goods
D) Only the direct labor used in production
In job order costing, the journal entry to record the transfer of materials from raw materials inventory to work in process inventory is:
A) Debit Work in Process, Credit Raw Materials
B) Debit Raw Materials, Credit Work in Process
C) Debit Work in Process, Credit Manufacturing Overhead
D) Debit Raw Materials, Credit Accounts Payable
A company produces 1,000 units of a product with a fixed cost of $50,000 and variable costs of $25 per unit. What is the total cost of producing 1,000 units?
A) $75,000
B) $50,000
C) $275,000
D) $275,000 plus $50,000
What is the impact on operating income if a company increases its contribution margin ratio?
A) Operating income will decrease
B) Operating income will remain unchanged
C) Operating income will increase
D) Operating income will become zero
Which of the following is an example of a discretionary fixed cost?
A) Rent on a factory building
B) Depreciation on factory equipment
C) Advertising expenses
D) Salaries of production workers
Which of the following is true about the statement of cash flows prepared using the indirect method?
A) It starts with net income and adjusts for changes in working capital accounts
B) It starts with total revenue and adjusts for operating expenses
C) It starts with cash flows from operating activities and adjusts for investments
D) It does not require any adjustments for non-cash items
Which of the following is NOT a characteristic of managerial accounting?
A) It focuses on future planning and decision-making
B) It provides information to internal managers
C) It follows external reporting standards like GAAP
D) It is used for budgeting and performance evaluation
Which of the following best describes a fixed cost?
A) Costs that increase with production volume
B) Costs that remain constant regardless of production volume
C) Costs that vary based on sales volume
D) Costs that are directly tied to labor expenses
The direct materials cost for a company is $100,000. The direct labor cost is $200,000, and the manufacturing overhead is $50,000. What is the total manufacturing cost?
A) $350,000
B) $100,000
C) $450,000
D) $500,000
A company’s operating income can be calculated by subtracting:
A) Variable costs from total revenue
B) Fixed costs from total revenue
C) Cost of goods sold from gross profit
D) Total costs from gross profit
A company produces 5,000 units of product with a selling price of $50 per unit. The variable cost is $30 per unit, and the fixed costs are $60,000. What is the break-even sales volume in units?
A) 2,000 units
B) 3,000 units
C) 4,000 units
D) 5,000 units
In the context of cost accounting, which of the following best describes a cost driver?
A) An expense that is unrelated to production
B) A factor that causes a change in the cost of an activity
C) A cost that remains the same regardless of activity levels
D) A cost that can be easily traced to a specific product
The formula for calculating the margin of safety is:
A) Sales revenue minus break-even sales
B) Total fixed costs divided by contribution margin
C) Total variable costs divided by total revenue
D) Contribution margin divided by total sales
Which of the following would be considered a period cost in a manufacturing company?
A) Direct labor
B) Depreciation on factory equipment
C) Factory supervisor’s salary
D) Sales commission
The total cost of producing 1,000 units includes $50,000 in fixed costs and $30 per unit in variable costs. What is the total variable cost for 1,000 units?
A) $50,000
B) $30,000
C) $30,000 plus $50,000
D) $80,000
A company uses absorption costing, which includes both fixed and variable costs in the cost of goods sold. The primary purpose of absorption costing is:
A) To assign only variable costs to the product
B) To match all costs with revenues in the period they are incurred
C) To allocate fixed costs to the units produced during a period
D) To focus on the marginal cost of production
Which of the following is a common method of allocating overhead costs in a job order costing system?
A) Direct material costs
B) Direct labor hours
C) Activity-based costing
D) Total revenue
In the context of accounting, what is the primary purpose of the statement of cash flows?
A) To show the profitability of the company
B) To report the changes in the equity of the company
C) To provide information about the cash inflows and outflows during a period
D) To provide a detailed report of the company’s liabilities
A company has the following information for the year:
Sales revenue = $500,000
Cost of goods sold = $300,000
Fixed costs = $100,000
What is the company’s contribution margin?
A) $100,000
B) $200,000
C) $300,000
D) $500,000
If a company uses the direct method to prepare the statement of cash flows, which of the following is included in the operating activities section?
A) Depreciation
B) Proceeds from issuing stock
C) Payments to suppliers
D) Interest paid on bonds
Which of the following is true about activity-based costing (ABC)?
A) ABC assigns overhead costs based on the number of units produced
B) ABC assigns overhead costs based on activities that drive costs
C) ABC only considers variable costs for allocation
D) ABC does not use cost drivers
A company incurs $120,000 in fixed costs, and the unit selling price is $30 with variable costs of $15 per unit. What is the break-even point in units?
A) 4,000 units
B) 8,000 units
C) 12,000 units
D) 16,000 units
What type of cost is depreciation on office equipment?
A) Variable cost
B) Fixed cost
C) Mixed cost
D) Step cost
Which of the following is NOT a factor in the calculation of contribution margin?
A) Selling price per unit
B) Variable costs per unit
C) Fixed costs per unit
D) Contribution margin per unit
The term “operating income” refers to:
A) The revenue from all activities of the business
B) The income generated from regular operations before considering non-operating revenues and expenses
C) The income after deducting non-operating income and expenses
D) The total net income after all expenses and taxes
In job order costing, which of the following accounts is debited when the company incurs direct labor costs?
A) Work in Process
B) Manufacturing Overhead
C) Finished Goods
D) Raw Materials
Which of the following financial statements is used to assess a company’s ability to pay its short-term debts?
A) Income statement
B) Balance sheet
C) Statement of cash flows
D) Statement of retained earnings
Which of the following would increase the cash flow from operating activities?
A) Decrease in accounts payable
B) Increase in accounts receivable
C) Depreciation expense
D) Decrease in inventory
A company applies overhead using a predetermined overhead rate based on machine hours. If actual machine hours worked are higher than estimated, what would happen to the applied overhead?
A) Applied overhead would be higher than actual overhead
B) Applied overhead would be lower than actual overhead
C) Applied overhead would be equal to actual overhead
D) Applied overhead would remain unaffected
What is the primary purpose of managerial accounting?
A) To provide financial information to external stakeholders
B) To ensure compliance with regulatory requirements
C) To assist management in planning, controlling, and decision-making
D) To prepare financial statements according to GAAP
A company is calculating its weighted average cost of capital (WACC). Which of the following is included in the WACC calculation?
A) The cost of equity
B) The average tax rate for the industry
C) The rate of return on inventory
D) The cost of government grants
In a flexible budget, how is the variance for sales revenue calculated?
A) By comparing actual sales revenue to the budgeted sales revenue
B) By comparing budgeted costs to actual costs
C) By comparing actual production to standard production
D) By comparing variable costs to fixed costs
What is the main advantage of using a master budget?
A) It provides detailed financial statements
B) It helps the company in tracking stock prices
C) It helps management plan and control the company’s financial activities
D) It eliminates the need for financial reporting
A company uses the high-low method to estimate variable costs. If the highest level of activity was 5,000 units at $10,000, and the lowest level was 1,000 units at $4,000, what is the variable cost per unit?
A) $1.00
B) $2.00
C) $1.50
D) $3.00
The direct labor cost variance can be calculated by comparing:
A) Actual labor costs to the standard labor costs for actual production
B) Actual labor hours worked to standard labor hours
C) Total labor costs to the variable labor costs
D) Standard labor rate to actual labor rate
Which of the following is an example of a sunk cost?
A) The cost of raw materials used in production
B) The cost of a machine purchased last year that cannot be recovered
C) The future cost of labor
D) The variable cost of selling an additional unit
If a company decides to discontinue a product line, which of the following should be considered when evaluating the decision?
A) The fixed costs that are directly associated with the product line
B) The fixed costs that will remain unaffected by discontinuation
C) The variable costs that will increase when the product line is discontinued
D) The opportunity cost of keeping the product line active