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1. Which two items increase net income?
Choose 2 answers.
A) Gain on sale of assets
B) Cost of sales
C) Income tax expense
D) Interest income
2. A company presently uses traditional volume-based costing to allocate overhead to its products.
The following table provides information on two of the company's products:
Product A
Product B
Selling price
$8
$12
Direct material
$2
$3
Direct labor
$1
$2
Applied overhead
$3
$4
Gross margin
$2
$3
Overhead that would be applied to Product A would increase to $8 per unit after identifying cost pools and cost drivers, and the overhead applied to Product B would drop to $2 per unit .
How would this change in the way overhead is allocated affect the selling price of both products?
A) The price of Product A would decrease, and the price of Product B would increase
B) The price of neither product would change
C) The price of Product A would increase, and the price of Product B would increase
D) The price of Product A would increase, and the price of Product B would decrease
3. How are activity-based costing systems different from traditional costing systems?
A) Activity-based costing systems are based on a single cost driver and traditional costing systems are based on multiple cost drivers
B) Activity-based costing systems require less time and expense to administer than traditional costing systems
C) Activity-based costing systems provide a more precise assignment of overhead costs when multiple products are manufactured than traditional costing systems do
D) Activity-based costing systems are used with homogeneous products while traditional costing systems are used with heterogeneous products
4. The following list provides partial financial information for a company.
Beginning cash balance = $1,200
Received cash from sales of goods = $16,000
Paid wages and salaries = $4,500
Received cash from non-trading securities = $5,000
Paid cash for plant assets = $6,000
Received cash from loans = $8,000
Paid cash in repayment of loans = $2,000
What is the ending cash balance for this company?
A) $18,700
B) $16,500
C) $20,000
D) $17,700
5. What does it mean if a company has a debt ratio of 101.5%?
A) The company has 1.5% more total liabilities than gross sales
B) The company has 1.5% more current liabilities than current assets
C) The company has 1.5% more total liabilities than total assets
D) The company has 1.5% more total liabilities than net income
Solutions:
| Question # 1 Answer: A,D | Question # 2 Answer: D | Question # 3 Answer: C | Question # 4 Answer: D | Question # 5 Answer: C |
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