Are advanced receipts from customers treated as revenue at the time of receipt? Why or why not? Yes, the intent of the company is to perform the work and the customer is confident that the services will be completed. Yes, they are treated as revenue at the time of receipt because the company has access to the cash. No, revenue cannot be recognized until the work is performed. No, the amount of revenue cannot be adequately determined until the company completes the work. Ben Gordon, Inc. manufactures 2 products, wheels and seats. The company has estimated its overhead in the assembling department to be $660,000. The company produces 300,000 wheels and 600,000 seats each year. Each wheel uses 2 parts, and each seat uses 3 parts. How much of the assembly overhead should be allocated to wheels? $220,000 $264,000 $165,000 $282,856 Henson Company began the year with retained earnings of $380,000. During the year, the company recorded revenues of $500,000, expenses of $380,000, and paid dividends of $40,000. What was Henson’s retained earnings at the end of the year? $500,000 $460,000 $840,000 $540,000 At September 1, 2017, Baxter Inc. reported Retained Earnings of $423,000. During the month, Baxter generated revenues of $60,000, incurred expenses of $36,000, purchased equipment for $15,000 and paid dividends of $6,000. What is the balance in Retained Earnings at September 30, 2017? $441,000 credit $24,000 credit $423,000 debit $426,000 credit The investigation of materials price variance usually begins in the: controller’s office. purchasing department. first production department. accounts payable department. Miller Manufacturing’s degree of operating leverage is 1.5. Warren Corporation’s degree of operating leverage is 3. Warren’s earnings would go up (or down) by ________ as much as Miller’s with an equal increase (or decrease) in sales. 2 times 1/2 times 4.5 times 1.5 times Which of the following statements is not true? When a company’s sales revenue is increasing, high operating leverage is good because it means that profits will increase rapidly. Companies that have higher fixed costs relative to variable costs have higher operating leverage. Operating leverage refers to the extent to which a company’s net income reacts to a given change in sales. When a company’s sales revenue is decreasing, high operating leverage is good because it means that profits will decrease at a slower pace than revenues decrease. Which one of the following is an example of a period cost? A box cost associated with computers. Workers’ compensation insurance on factory workers’ wages allocated to the factory. A manager’s salary for work that is done in the corporate head office. A change in benefits for the union workers who work in the New York plant of a Fortune 1000 manufacturer. The entry to record the acquisition of raw materials on account is: Work in Process Inventory Accounts Payable Raw Materials Inventory Accounts Payable Manufacturing Overhead Raw Materials Inventory Accounts Payable Accounts Payable Raw Materials Inventory Which of the following statements concerning users of accounting information is incorrect? Regulatory authorities are considered internal users. Present creditors are considered external users. Taxing authorities are considered external users. Management is considered an internal user. It costs Garner Company $12 of variable and $5 of fixed costs to produce one bathroom scale which normally sells for $35. A foreign wholesaler offers to purchase 3,000 scales at $15 each. Garner would incur special shipping costs of $1 per scale if the order were accepted. Garner has sufficient unused capacity to produce the 3,000 scales. If the special order is accepted, what will be the effect on net income? $9,000 decrease $6,000 increase $6,000 decrease $45,000 increase Which of the following is not an underlying assumption of CVP analysis? Changes in activity are the only factors that affect costs. Beginning inventory is larger than ending inventory. Sales mix is constant. Cost classifications are reasonably accurate.
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