Misc. Accounting Multiple Choice Questions

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St. James, Inc., currently uses traditional costing procedures, applying $800,000 of overhead to products Beta and Zeta on the basis of direct labor hours. The company is considering a shift to activity-based costing and the creation of individual cost pools that will use direct labor hours (DLH), production setups (SU), and number of parts components (PC) as cost drivers. Data on the cost pools and respective driver volumes follow.? ?The overhead cost allocated to Zeta by using traditional costing procedures would be:

Minimized View
A
B
C $240,000.??
D
E
F $356,000.??
G
H
I $444,000.??
J
K
L $560,000.??
M
N
some other amount.

Cartwright Graphics uses a special purpose paper on 80% of its jobs. The paper is purchased in 100-sheet packages at a cost of $100 per package. Management estimates that the cost of placing and receiving a typical order is $15, and the annual cost of carrying a package in inventory is $1.50. Cartwright uses 2,600 packages each year. Production is constant, and the lead time to receive an order is 1 week. The economic order quantity is approximately:
A
B
C 203 packages.??
D
E
F 225 packages.??
G
H
I 228 packages.??
J
K
L 565 packages.??
M
N
631 packages.

During a recent accounting period, Marty’s shipping department processed 26 orders. Each order typically takes four hours to complete; however, the average time increased to five hours because of various departmental inefficiencies. If shipping labor is paid $14 per hour, the company’s non-value-added cost would be:
A
B
C $0.?
D
E
F $56.?
G
H
I $364.?
J
K
L $1,456.?
M
N
$1,820.?

St. James, Inc., currently uses traditional costing procedures, applying $800,000 of overhead to products Beta and Zeta on the basis of direct labor hours. The company is considering a shift to activity-based costing and the creation of individual cost pools that will use direct labor hours (DLH), production setups (SU), and number of parts components (PC) as cost drivers. Data on the cost pools and respective driver volumes follow.? ?The overhead cost allocated to Zeta by using activity-based costing procedures would be:

Minimized View
A
B
C $240,000.??
D
E
F $356,000.??
G
H
I $444,000.??
J
K
L $560,000.??
M
N
some other amount.

Burgoon uses an economic order quantity model and has determined an optimal order size of 500 units. Annual demand is 10,000 units, ordering costs are $50 per order, and holding costs are $4 per unit. The company’s annual ordering and holding costs total:
A
B
C $2,000.??
D
E
F $3,000.??
G
H
I $21,000.??
J
K
L $41,000.??
M
N
some other amount.

The following tasks are associated with an activity-based costing system:?1— Assignment of cost to products?2— Calculation of pool rates?3— Identification of cost drivers?4— Identification of cost pools?Which of the following choices correctly expresses the proper order of the preceding tasks??
A
B
C 1, 2, 3, 4.??
D
E
F 2, 4, 1, 3.??
G
H
I 3, 4, 2, 1.??
J
K
L 4, 2, 1, 3.??
M
N
4, 3, 2, 1.??

St. James, Inc., currently uses traditional costing procedures, applying $800,000 of overhead to products Beta and Zeta on the basis of direct labor hours. The company is considering a shift to activity-based costing and the creation of individual cost pools that will use direct labor hours (DLH), production setups (SU), and number of parts components (PC) as cost drivers. Data on the cost pools and respective driver volumes follow.? ?The overhead cost allocated to Beta by using traditional costing procedures would be:

Minimized View
A
B
C $240,000.??
D
E
F $356,000.??
G
H
I $444,000.??
J
K
L $560,000.??
M
N
some other amount.

St. James, Inc., currently uses traditional costing procedures, applying $800,000 of overhead to products Beta and Zeta on the basis of direct labor hours. The company is considering a shift to activity-based costing and the creation of individual cost pools that will use direct labor hours (DLH), production setups (SU), and number of parts components (PC) as cost drivers. Data on the cost pools and respective driver volumes follow.? ?The overhead cost allocated to Beta by using activity-based costing procedures would be:

Minimized View
A
B
C $240,000.??
D
E
F $356,000.??
G
H
I $444,000??
J
K
L $560,000.??
M
N
some other amount.

In an activity-based costing system, direct materials used would typically be classified as a:
A
B
C unit-level cost.?
D
E
F batch-level cost.?
G
H
I product-sustaining cost.?
J
K
L facility-level cost.?
M
N
matrix-level cost.?

Cartwright Graphics uses a special purpose paper on 80% of its jobs. The paper is purchased in 100-sheet packages at a cost of $100 per package. Management estimates that the cost of placing and receiving a typical order is $15, and the annual cost of carrying a package in inventory is $1.50. Cartwright uses 2,600 packages each year. Production is constant, and the lead time to receive an order is 1 week. The reorder point is:
A
B
C 25 packages.??
D
E
F 50 packages.??
G
H
I 100 packages.??
J
K
L 203 packages.??
M
N
225 packages.

At the economic order quantity:
A
B
C total annual inventory costs, holding costs, and ordering costs are all minimized.?
D
E
F total annual inventory costs and holding costs are minimized.?
G
H
I total annual inventory costs are minimized, and holding costs equal ordering costs.?
J
K
L total annual inventory costs are minimized, and holding costs exceed ordering costs.?
M
N
total annual inventory costs are minimized, and ordering costs exceed holding costs.

Alaina’s customer service department follows up on customer complaints by telephone inquiry. During a recent period, the department initiated 10,000 calls and incurred costs of $312,000. Of these calls, 3,800 were for the company’s wholesale operation; the remainder were for the retail division. Costs allocated to the wholesale operation are:
A
B
C $0.?
D
E
F $31,200.?
G
H
I $118,560.?
J
K
L $193,440.?
M
N
$203,000.

Consider the following statements:?I. Product diversity creates costing problems because diverse products tend to utilize manufacturing activities in different ways.?II. Overhead costs that are not incurred at the unit level create costing problems because such costs do not vary with traditional application bases such as direct labor hours or machine hours.?III. Product diversity typically exists when a single product (e.g., a ballpoint pen) is made in different colors.?Which of the above statements is (are) true?
A
B
C I only.??
D
E
F II only.??
G
H
I I and II.??
J
K
L I and III.??
M
N
II and III.

Which of the following is classified as an inventory shortage cost?
A
B
C Purchase order preparation.?
D
E
F Production disruption.?
G
H
I Lost sales and lost customers.?
J
K
L Spoilage.?
M
N
Production disruption, lost sales, and lost customers.?

Consider the following statements regarding traditional costing systems:?I. Overhead costs are applied to products on the basis of volume-related measures.?II. All manufacturing costs are easily traceable to the goods produced.?III. Traditional costing systems tend to distort unit manufacturing costs when numerous goods are made that have widely varying production requirements.?Which of the above statements is (are) true?
A
B
C I only.??
D
E
F II only.??
G
H
I III only.??
J
K
L I and III.??
M
N
II and III

Alamo’s customer service department follows up on customer complaints by telephone inquiry. During a recent period, the department initiated 7,000 calls and incurred costs of $203,000. If 2,940 of these calls were for the company’s wholesale operation (the remainder were for the retail division), costs allocated to the retail division should amount to:
A
B
C $0.?
D
E
F $29.?
G
H
I $85,260.?
J
K
L $117,740.?
M
N
$203,000.

Activity-based costing systems:
A
B
C use a single, volume-based cost driver.?
D
E
F assign overhead to products based on the products’ relative usage of direct labor.?
G
H
I often reveal products that were under- or over-costed by traditional costing systems.?
J
K
L typically use fewer cost drivers than more traditional costing systems.?
M
N
have a tendency to distort product costs.

Which of the following does not minimize ordering costs when using JIT purchasing?
A
B
C Reducing the number of vendors.?
D
E
F Negotiating long-term supply agreements.?
G
H
I Making less frequent payments.?
J
K
L Maintaining a safety stock.?
M
N
Eliminating inspections.?

Inventory holding costs typically include:
A
B
C clerical costs of purchase-order preparation.?
D
E
F costs of deterioration, theft, or spoilage.?
G
H
I costs associated with lost sales to customers.?
J
K
L forgone interest on money tied up in inventory.?
M
N
costs of deterioration, theft, or spoilage and forgone interest on money tied up in inventory.?

Feinstein, Inc., an appliance manufacturer, is developing a new line of ovens that uses controlled-laser technology. The research and testing costs associated with the new ovens is said to arise from a:

A
B unit-level activity.?
C

D batch-level activity.?

E product-sustaining activity.?

F facility-level activity.?

competitive-level activity.?

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Misc. Accounting Multiple Choice Questions

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Question 1
ABC is reviewing a project that will cost $1,431.The project will produce cash flows $210 at the end of each year for the first two years and $772 at the end of each year for the next two years. What is the profitability index? Assume interest rate is 4%.

a. 1.56

b. 0.95

c. 1.22

d. 2.56
Question 2
Suppose an investment offers to double your money in 39 years. What annual rate of return are you being offered if interest is compounded semi-annually?

a. 1.79%

b. 1.56%

c. 0.98%

d. 0.89%
Question 3
How many years will it take to quadruple (i.e. 4 times) your money at 9% compounded quarterly?

a. 7.2424

b. 15.5759

c. 5.6478

d. 3.3168
Question 4
A bond is currently selling for $1,087. If the yield to maturity is 10%, the coupon rate will be:

a. less than 10%.

b. equal than 10%.

c. more than 10%.

d. None above
Question 5
Suppose the real rate is 9.83% and the inflation rate is 4.65%. Solve for the nominal rate.

a. 11.32%

b. 12.87%

c. 14.93%

d. 21.74%
Question 6
An investment is acceptable if the profitability index (PI) of the investment is:

a. less than the net present value (NPV).

b. less than one.

c. greater than one.

d. greater than the internal rate of return (IRR).

e. greater than a pre-specified rate of return.
Question 7
A 8.9 percent $1,000 bond matures in 17 years, pays interest semiannually, and has a yield to maturity of 16.02 percent. What is the current market price of the bond?

a. $587.92

b. $456.23

c. $143.24

d. $693.22
Question 8
Uptown Insurance offers an annuity due with semi-annual payments for 19 years at 4.9 percent interest. The annuity costs $176,239 today. What is the amount of each annuity payment?

a. $7,008.06

b. $5,670.26

c. $8,300.23

d. $4,607.98
Question 9
ABC’s last dividend paid was $4.4, its required return is 13%, its growth rate is 6%, and its growth rate is expected to be constant in the future. What is ABC’s expected stock price in 19 years?

a. $104.37

b. $201.59

c. $98.15

d. $120.31
Question 10
Given the following cash flows, calculate the payback period:
Year CF
0 -921
1 368
2 253
3 291
4 784

a. 3.0115

b. 3

c. 2.0125

d. 4.5209
Question 11
A stock just paid a dividend of D0 = $3.4. The required rate of return is rs = 15.8%, and the constant growth rate is g = 3%. What is the current stock price?

a. $35.76

b. $24.469

c. $3.45

d. $27.359
Question 12
Suppose that today’s stock price is $49.8. If the required rate on equity is 18.6% and the growth rate is 7.9%, compute the expected dividend (i.e. compute D1)

a. $7.2447

b. $10.6483

c. $5.3286

d. $2.5643
Question 13
The common stock of ABC Industries is valued at $49 a share. The company increases their dividend by 3.1 percent annually and expects their next dividend to be $1.84. What is the required rate of return on this stock?

a. 2.82%

b. 3.61%

c. 4.87%

d. 6.86%
Question 14
The ABC Co. has $1,000 face value stock outstanding with a market price of $937.6. The stock pays interest annually, matures in 9 years, and has a yield to maturity of 10.7 percent. What is the current yield?

a. 5.11%

b. 10.22%

c. 7.34%

d. 14.94%
Question 15
The principal amount of a bond that is repaid at the end of term is called the par value or the:

a. call premium

b. perpetuity value

c. face value

d. back-end value

e. coupon value
Question 16
What is the effective rate of 18% compounded monthly?

a. 26.97%

b. 13.56%

c. 17.46%

d. 19.56%
Question 17
A project has the following cash flows. What is the internal rate of return?
Year 0 1 2 3
Cash flow -$121,000 68,150 $42,200 $39,100

a. 12.71%

b. 14.39%

c. 13.47%

d. 13.85%

e. 14.82%
Question 18
A cost that has already been incurred and cannot be recouped is called as a(n):

a. sunk cost

b. financial cost

c. opportunity cost

d. side cost

e. relevant cost
Question 19
ABC Corp. just paid a dividend of $2.4 per share at the end of the year. The stock has a required rate of return is 18%. The dividend is expected to grow at 6.9%. What is dividend at time = 8? (solve for D8?)

a. $7.667

b. $3.175

c. $6.451

d. $4.093
Question 20
What is the net present value of the following cash flows? Assume an interest rate of 3.5%

Year CF
0 -$11,895
1 $7,722
2 $5,687
3 $5,120

a. $5,492.69

b. $17,387.92

c. $6,247.34

d. $8,235.81
Question 21
A bond that sells for less than face value is called as:

a. discount bond

b. premium bond

c. par value bond

d. debenture

e. perpetuity

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