Q: Which formula correctly calculates the break-even point in units?

$$\text{Break-even units} = \frac{\text{Total Fixed Costs}}{\text{Contribution Margin per unit}}$$

Q: A company receives a special order for 500 units at $$8 per unit. Variable cost per unit is 6$$, and fixed costs will not change. What is the incremental profit from accepting the order?

$$500 \times (8$$ - $$6) = 1$$,000$

Q: A company wants to achieve a target profit of $$20,000. Fixed costs are 30$$,000, contribution margin per unit is $5. What is the required sales volume?

$$\frac{30,000 + 20,000}{5} = 10,000 \text{ units}$$

Question 1

Which of the following is an advantage of forming a partnership compared to a corporation?

Accepted Answer

Ease of formation and flexibility in management

Question 2

A partnership agreement states that Partner A receives a salary of $$10,000, Partner B receives interest of 10% on their 50$$,000 capital, and the remainder is split equally. If the partnership earned $40,000, how much does Partner B receive?

Accepted Answer

$17,500

Question 3

Which journal entry correctly records the issuance of 1,000 shares of $$1 par value common stock at 5 $$per share?

Accepted Answer

Debit Cash $$5,000; Credit Common Stock 1$$,000; Credit Paid-in Capital in Excess of Par $4,000

Question 4

Which of the following is NOT a disadvantage of a corporation?

Accepted Answer

Limited liability

Question 5

Which section of the Statement of Cash Flows would include the purchase of equipment for $20,000?

Accepted Answer

Investing activities

Question 6

A company has net income of $$50,000, depreciation expense of 5$$,000, and an increase in accounts receivable of $2,000. What is the cash flow from operating activities?

Accepted Answer

$53,000

Question 7

Which formula correctly calculates the break-even point in units?

Accepted Answer

$$	ext{Break-even units} = \frac{	ext{Total Fixed Costs}}{	ext{Contribution Margin per unit}}$$

Question 8

A company is considering eliminating a segment that has sales of $$100,000, variable costs of 60$$,000, and fixed costs of $$50,000. If the segment is eliminated, 20$$,000 of fixed costs will remain unavoidable. What is the effect on overall profit?

Accepted Answer

Profit will decrease by $20,000

Question 9

Which of the following best describes a job order costing system?

Accepted Answer

Costs are accumulated for each individual job or batch

Question 10

Using the high-low method, if the highest activity level is 1,000 units with total costs of $$5,000, and the lowest is 600 units with total costs of 3$$,400, what is the variable cost per unit?

Accepted Answer

$$\frac{5,000 - 3,400}{1,000 - 600} = 4$

Question 11

Which journal entry records the transfer of completed goods from Work in Process to Finished Goods in a manufacturing company?

Accepted Answer

Debit Finished Goods; Credit Work in Process

Question 12

A company receives a special order for 500 units at $$8 per unit. Variable cost per unit is 6$$, and fixed costs will not change. What is the incremental profit from accepting the order?

Accepted Answer

$$500 	imes (8$$ - $$6) = 1$$,000$

Question 13

Which of the following is NOT included in the calculation of Cost of Goods Manufactured?

Accepted Answer

Selling expenses

Question 14

A company wants to achieve a target profit of $$20,000. Fixed costs are 30$$,000, contribution margin per unit is $5. What is the required sales volume?

Accepted Answer

$$\frac{30,000 + 20,000}{5} = 10,000 	ext{ units}$$

Question 15

Which of the following is a characteristic of variable costs?

Accepted Answer

Increase in total as activity increases

Question 16

Which formula is used to calculate the direct materials purchases budget?

Accepted Answer

$$	ext{Direct Materials Purchases} = 	ext{Materials Needed for Production} + 	ext{Desired Ending Inventory} - 	ext{Beginning Inventory}$$

Question 17

A company must decide whether to make or buy a component. The cost to make is $$10 per unit, and the supplier offers to sell it for 9 $$per unit. If fixed costs of $2 per unit are unavoidable, what is the relevant cost to compare?

Accepted Answer

$$10 - 2$$ = $$8$$ per unit vs. $$9$$ per unit

Question 18

Which of the following best describes a process costing system?

Accepted Answer

Costs are averaged over all units produced in a period

Question 19

Which section of the Statement of Cash Flows would include the payment of dividends?

Accepted Answer

Financing activities

Comprehensive Study Notes: Partnerships, Corporations, Cash Flows, Financial Analysis, and Managerial Accounting

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