, Question 1
A company uses the indirect method to prepare its statement of cash flows. It
reports net income of $120,000, depreciation expense of $30,000, a gain on
sale of equipment of $8,000, an increase in accounts receivable of $15,000, and
a decrease in accounts payable of $5,000. What is net cash provided by
operating activities?
A. $122,000
B. $132,000
C. $138,000
D. $112,000
Correct Answer: A - $122,000
RATIONALE
Net cash from operating activities = Net income + Depreciation - Gain
+ Decrease in AR + Decrease in AP = $120,000 + $30,000 - $8,000 +
$15,000 + $5,000 = $162,000? Wait, re-evaluate: AR increase is
subtracted, AP decrease is subtracted. Correct calculation: $120,000 +
$30,000 - $8,000 - $15,000 - $5,000 = $122,000. Thus A is correct;
other options reflect errors in adjusting for non-cash items or working
capital changes.
Question 2
Which of the following best describes the primary difference between financial
accounting and managerial accounting?
A. Financial accounting focuses on future-oriented reports, while
managerial accounting focuses on historical reports.
B. Financial accounting must follow GAAP and is for external users,
while managerial accounting is flexible and for internal users.
C. Financial accounting reports are prepared monthly, while managerial
accounting reports are prepared annually.
D. Financial accounting emphasizes segment reporting, while managerial
accounting emphasizes the company as a whole.
Page 2
,Correct Answer: B - Financial accounting must follow GAAP and
is for external users, while managerial accounting is flexible and
for internal users.
RATIONALE
Financial accounting is governed by GAAP for external reporting,
whereas managerial accounting is tailored to internal decision-making
without prescribed rules. Option B correctly captures this distinction;
the other options misstate the orientation, frequency, or scope of the
two fields.
Question 3
A company has fixed costs of $200,000, a selling price of $50 per unit, and
variable costs of $30 per unit. What is the break-even point in units and the
margin of safety percentage if actual sales are 15,000 units?
A. 10,000 units; 33.33%
B. 8,000 units; 46.67%
C. 6,667 units; 55.56%
D. 12,000 units; 20%
Correct Answer: A - 10,000 units; 33.33%
RATIONALE
Contribution margin per unit = $50 - $30 = $20. Break-even units =
$200,000 / $20 = 10,000 units. Margin of safety = (15,000 - 10,000) /
15,000 = 33.33%. Thus A is correct; other options miscalculate the
break-even point or margin of safety.
Question 4
A company uses a job order costing system. Job 101 incurred $10,000 in direct
materials, $15,000 in direct labor, and was assigned $12,000 in manufacturing
overhead. If the job consisted of 1,000 units, what is the unit product cost?
A. $37
Page 3
, B. $25
C. $27
D. $22
Correct Answer: A - $37
RATIONALE
Total product cost = Direct materials + Direct labor + Manufacturing
overhead = $10,000 + $15,000 + $12,000 = $37,000. Unit product cost
= $37,,000 = $37. Option A is correct; other options omit one
or more cost components.
Question 5
A company's static budget was based on 10,000 units, with variable costs of $5
per unit and fixed costs of $50,000. Actual production was 12,000 units, with
actual variable costs of $66,000 and actual fixed costs of $52,000. What is the
flexible budget variance for total costs?
A. $4,000 unfavorable
B. $2,000 favorable
C. $4,000 favorable
D. $2,000 unfavorable
Correct Answer: D - $2,000 unfavorable
Page 4
A company uses the indirect method to prepare its statement of cash flows. It
reports net income of $120,000, depreciation expense of $30,000, a gain on
sale of equipment of $8,000, an increase in accounts receivable of $15,000, and
a decrease in accounts payable of $5,000. What is net cash provided by
operating activities?
A. $122,000
B. $132,000
C. $138,000
D. $112,000
Correct Answer: A - $122,000
RATIONALE
Net cash from operating activities = Net income + Depreciation - Gain
+ Decrease in AR + Decrease in AP = $120,000 + $30,000 - $8,000 +
$15,000 + $5,000 = $162,000? Wait, re-evaluate: AR increase is
subtracted, AP decrease is subtracted. Correct calculation: $120,000 +
$30,000 - $8,000 - $15,000 - $5,000 = $122,000. Thus A is correct;
other options reflect errors in adjusting for non-cash items or working
capital changes.
Question 2
Which of the following best describes the primary difference between financial
accounting and managerial accounting?
A. Financial accounting focuses on future-oriented reports, while
managerial accounting focuses on historical reports.
B. Financial accounting must follow GAAP and is for external users,
while managerial accounting is flexible and for internal users.
C. Financial accounting reports are prepared monthly, while managerial
accounting reports are prepared annually.
D. Financial accounting emphasizes segment reporting, while managerial
accounting emphasizes the company as a whole.
Page 2
,Correct Answer: B - Financial accounting must follow GAAP and
is for external users, while managerial accounting is flexible and
for internal users.
RATIONALE
Financial accounting is governed by GAAP for external reporting,
whereas managerial accounting is tailored to internal decision-making
without prescribed rules. Option B correctly captures this distinction;
the other options misstate the orientation, frequency, or scope of the
two fields.
Question 3
A company has fixed costs of $200,000, a selling price of $50 per unit, and
variable costs of $30 per unit. What is the break-even point in units and the
margin of safety percentage if actual sales are 15,000 units?
A. 10,000 units; 33.33%
B. 8,000 units; 46.67%
C. 6,667 units; 55.56%
D. 12,000 units; 20%
Correct Answer: A - 10,000 units; 33.33%
RATIONALE
Contribution margin per unit = $50 - $30 = $20. Break-even units =
$200,000 / $20 = 10,000 units. Margin of safety = (15,000 - 10,000) /
15,000 = 33.33%. Thus A is correct; other options miscalculate the
break-even point or margin of safety.
Question 4
A company uses a job order costing system. Job 101 incurred $10,000 in direct
materials, $15,000 in direct labor, and was assigned $12,000 in manufacturing
overhead. If the job consisted of 1,000 units, what is the unit product cost?
A. $37
Page 3
, B. $25
C. $27
D. $22
Correct Answer: A - $37
RATIONALE
Total product cost = Direct materials + Direct labor + Manufacturing
overhead = $10,000 + $15,000 + $12,000 = $37,000. Unit product cost
= $37,,000 = $37. Option A is correct; other options omit one
or more cost components.
Question 5
A company's static budget was based on 10,000 units, with variable costs of $5
per unit and fixed costs of $50,000. Actual production was 12,000 units, with
actual variable costs of $66,000 and actual fixed costs of $52,000. What is the
flexible budget variance for total costs?
A. $4,000 unfavorable
B. $2,000 favorable
C. $4,000 favorable
D. $2,000 unfavorable
Correct Answer: D - $2,000 unfavorable
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