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Blue Practice Test

Westcoe Company’s goods in transit at December 31 include sales made
FOB destination and FOB shipping point
As an incentive for customers to pay their accounts promptly, a business may offer its customers a
Sales discount
When the cost of a product is matched with its sales price, the result (difference) is
Gross profit
Two companies report the same cost of goods available for sale but each employ a different inventory costing method. If the price of goods has increased during the period, then the company using
FIFO will have the highest ending inventory
The LIFO inventory method assumes that the cost of the latest units purchased are
The first to be allocated to cost of goods sold
When the sales price rises, the number of units required to be sold to break-even
decreases
Two categories of expenses in merchandising companies are
COGS and operating expenses
The credit terms offered to a customer by a business firm were 2/10, n/3o, which means that
The customer can deduct a 2% discount if the bill is paid within 10 days of the invoice date
The factor which determines whether or not goods should be included in a physical count of inventory is
legal title
If goods in transit are shipped FOB destination
the seller has legal title to the goods until they are delivered
Which of the following will increase net income
decrease fixed costs
Which of the following is the difference between the sales revenue per unit and the variable cost per unit?
Contribution margin per unit
Cost behavior analysis focuses on
how costs change as input changes
When the sales volume is above break-even point, the company’s
Total revenues exceed total costs
The excess of a products selling price over its variable costs is referred to as
contribution margin
Which of the following should not be recorded as an expense
Paid factory maintenance costs
Which of the following is incorrect with regard to product cost?
Product costs are expensed in the period incurred
Which of the following statements concerning product costs versus general, selling, and administrative costs is true?
Product costs may be divided between the balance sheet and income statement
What is true about a manufacturing company compared to product costs in a service company?
Service companies are less competitive
Fixed cost per unit
decreases as production volume increases

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