A company uses the indirect method to prepare the statement of cash flows. It presents the following data on its financial statements:
End of this year End of prior year
Accounts receivable $115,000 $100,000
Cost of goods sold 560,000
Sales revenue 830,000
Accounts payable* 75,000 67,000
Inventory 86,000 105,000
Salary payable 13,000 10,000
Salary expense 49,000 45,000
*Relates solely to the acquisition of inventory
What will appear in the operating activities section related to salary payable?
A) The decrease of $3,000 will be subtracted from cost of goods sold.
B) The decrease of $3,000 will be added to cost of goods sold.
C) The decrease of $3,000 will be added to net income.
D) The decrease of $3,000 will be subtracted from net income.
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A company uses the indirect method to prepare the statement of cash flows. It presents the following data on its financial statements:
End of this year End of prior year
Accounts receivable $115,000 $100,000
Cost of goods sold 550,000
Sales revenue 820,000
Accounts payable* 80,000 70,000
Inventory 90,000 100,000
Salary payable 15,000 10,000
Salary expense 50,000 44,000
*Relates solely to the acquisition of inventory
What will appear in the operating activities section related to accounts receivable?
A) The increase of $15,000 will be subtracted from net income.
B) The increase of $15,000 will be added to net income.
C) The increase of $15,000 will be subtracted from sales revenue.
D) The increase of $15,000 will be added to sales revenue.
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Which of the following statements is true of activity-based costing?
A) There is a clear cause-and-effect relationship between costs and the cost driver in the long run.
B) There is no variety of cost drivers and cost pools.
C) The system focuses on activities in together and not on individual activities.
D) A single cost driver should be identified for all the activities.
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Which of the following statements is true of activity-based costing?
A) Activity-based costing ignores the allocation of marketing and distribution costs.
B) Activity-based costing is more likely to result in major differences from traditional costing systems if the firm manufactures only one product rather than multiple products.
C) Activity-based costing classifies some of the indirect costs as direct costs.
D) Chances of product-cost cross-subsidization are higher in activity-based costing compared to traditional costing systems.
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Which of the following statements is true of activity-based costing?
A) In activity-based costing, direct labor-hours is always the best allocation base to allocate all non-manufacturing indirect costs.
B) Activity based costing is more suited to companies with high product diversity than companies with single product line.
C) Activity based costing broadly averages or spreads the cost of resources uniformly to cost objects such as products or services.
D) The main advantage of activity-based costing over peanut-butter costing is the accurate distribution of all direct costs to the products.
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Regarding activity-based costing systems, which of the following statements is true?
A) ABC costing systems have separate indirect cost allocation rates for each activity.
B) ABC costing systems can be used in manufacturing firms only.
C) ABC systems accumulate overhead costs by departments.
D) ABC costing systems are less complex and, therefore, less costly than traditional systems.
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Which of the following statements is true of costing systems?
A) Single-indirect cost pool systems always result in overcosting of products.
B) Single-indirect cost pool systems classify some direct costs as indirect costs.
C) ABC systems always result in overcosting of products.
D) ABC systems classify some indirect costs as direct costs helping to improve processes
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Activity-based costing systems (ABC) have only one cost system and one cost pool.
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Activity-based costing systems use the quantitative analysis method exclusively for cost estimation because of its accuracy.
[True or False]
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Suppose a firm is a natural monopoly. Then, until the long-run average cost curve crosses the demand curve, as the quantity increases the long-run average costs
A) increase.
B) decrease.
C) decrease and then increase.
D) increase and then decrease.
Ques. 2
If the market price faced by a perfectly competitive firm increases, in the short run how does the firm respond?
What will be an ideal response?
Ques. 3
The U.S. tax system
A) reduces inequality and shifts the Lorenz curve away from the line of equality.
B) reduces inequality and shifts the Lorenz curve toward the line of equality.
C) increases inequality and shifts the Lorenz curve toward the line of equality.
D) increases inequality and shifts the Lorenz curve away from the line of equality.
Ques. 4
The table above provides information about the marginal private benefit for education.
The marginal private cost, which also equals the marginal social cost, of educating a student is 16,000 per year and does not change as more students are educated. There is an external benefit from education that is equal to 12,000 per student year and does not change as more students are educated. What is the efficient amount of education? A) 40,000 student-years
B) 60,000 student-years
C) 80,000 student-years
D) 100,000 student-years
Ques. 5
The cost data in the above table data show that production is characterized by
A) economies of scale.
B) constant returns to scale.
C) decreasing returns to scale.
D) More information is needed to answer the question.
Ques. 6
Firms in monopolistic competition maximize their profit by setting their price equal to their marginal revenue.
Indicate whether the statement is true or false
Ques. 7
In the above figure, if income is 8, the initial price of a soft drink is 1, and the initial price of a milkshake is 2, a decrease in the price of a milkshake to 1 will move the consumer from point ________ to point ________.
A) a; b
B) b; c
C) a; d
D) a; c
Ques. 8
If a natural monopoly is broken up into many smaller firms then
A) the price will decrease.
B) the average total costs of production will increase.
C) efficiency will increase.
D) None of the above because it is illegal to break up a natural monopoly into smaller firms.
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