A200 EXAM 2 QUESTIONS AND ANSWERS FULLY SOLVED LATEST UPDATE 2025-2026
As an incentive for customers to pay their accounts promptly, a business may offer its
customers - Answers a sales discount
When the cost of a product is matched with its sales price, the result (difference) is - Answers
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 - Answers FIFO will have the highest ending inventory
During the first year of operations, Vail Company paid $15,000 for direct materials, paid
production employees $10,000 and paid general, selling, and administrative expenses of $5,000.
Assuming that the average cost to produce one unit was $16 and that 2,000 units were
produced during the period, how much overhead was incurred? - Answers $7,000
If more units are sold, - Answers net income increases
The LIFO inventory method assumes that the cost of the latest units purchased are - Answers
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 - Answers
decreases
Two categories of expenses in merchandising companies are - Answers cost of goods sold and
operating expenses
The credit terms offered to a customer by a business firm were 2/10, n/30 which means that -
Answers the customer can deduct a 2% discount if the bill is paid within 10 days of the invoice
date
The factor which determines whether of not goods should be included in a physical count of
inventory is - Answers legal title
If goods in transit are shipped FOB destination - Answers the seller has legal title to the goods
until they are delivered
Tom's Thimbles, a manufacturing company, had 100 thimbles that were complete at the end of
the year but had not yet been sold. Where would the costs of these items be found? - Answers
finished goods
Which of the following will increase net income? - Answers decrease fixed costs
If variable cost per unit increases, the net income - Answers decreases
Which of the following is the difference between the sales revenue per unit and the variable cost
, per unit? - Answers contribution margin per unit
Cost behavior analysis focuses on - Answers how costs change as output changes
Variable expenses increase when - Answers sales increase
Variable expenses decrease when - Answers sales decrease
When the sales volume is above the break-even point, the company's - Answers total revenues
exceed total costs
The excess of a product's selling price over its variable costs is referred to as - Answers
contribution margin
What should not be recorded as an expense? - Answers paid factory maintenance costs
Which statement is incorrect with regard to product costs? - Answers product costs are
expensed in the period incurred
Product costs - Answers stay in inventory if not sold
Product costs flow - Answers from the balance sheet to the income statement.
Unlike direct material and direct labor costs, - Answers overhead costs must be allocated to
products
Depreciation on manufacturing equipment is an - Answers indirect product cost
Which of the following statements concerning product costs versus general, selling, and
administrative costs is true? - Answers product costs may be divided between the balance
sheet and income statement
Identify the true statement regarding how product costs in a manufacturing company differ
from product costs in a service company. - Answers manufacturing companies accumulate
product costs in inventory accounts, while services companies do not
Fixed cost per unit - Answers decreases as production volume increases
The basic purpose of offering customers cash discounts such as 2/10, n/30 is to - Answers
speed up the collection of accounts receivable
What is a quantity discount? - Answers a reduction in sales price of a good or service because
of the number of items purchase
Ward Company discovered that merchandise purchased on account was defective and returned
this merchandise to the supplier. The entry to record this return will reduce Ward's - Answers
inventory and liabilities
As an incentive for customers to pay their accounts promptly, a business may offer its
customers - Answers a sales discount
When the cost of a product is matched with its sales price, the result (difference) is - Answers
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 - Answers FIFO will have the highest ending inventory
During the first year of operations, Vail Company paid $15,000 for direct materials, paid
production employees $10,000 and paid general, selling, and administrative expenses of $5,000.
Assuming that the average cost to produce one unit was $16 and that 2,000 units were
produced during the period, how much overhead was incurred? - Answers $7,000
If more units are sold, - Answers net income increases
The LIFO inventory method assumes that the cost of the latest units purchased are - Answers
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 - Answers
decreases
Two categories of expenses in merchandising companies are - Answers cost of goods sold and
operating expenses
The credit terms offered to a customer by a business firm were 2/10, n/30 which means that -
Answers the customer can deduct a 2% discount if the bill is paid within 10 days of the invoice
date
The factor which determines whether of not goods should be included in a physical count of
inventory is - Answers legal title
If goods in transit are shipped FOB destination - Answers the seller has legal title to the goods
until they are delivered
Tom's Thimbles, a manufacturing company, had 100 thimbles that were complete at the end of
the year but had not yet been sold. Where would the costs of these items be found? - Answers
finished goods
Which of the following will increase net income? - Answers decrease fixed costs
If variable cost per unit increases, the net income - Answers decreases
Which of the following is the difference between the sales revenue per unit and the variable cost
, per unit? - Answers contribution margin per unit
Cost behavior analysis focuses on - Answers how costs change as output changes
Variable expenses increase when - Answers sales increase
Variable expenses decrease when - Answers sales decrease
When the sales volume is above the break-even point, the company's - Answers total revenues
exceed total costs
The excess of a product's selling price over its variable costs is referred to as - Answers
contribution margin
What should not be recorded as an expense? - Answers paid factory maintenance costs
Which statement is incorrect with regard to product costs? - Answers product costs are
expensed in the period incurred
Product costs - Answers stay in inventory if not sold
Product costs flow - Answers from the balance sheet to the income statement.
Unlike direct material and direct labor costs, - Answers overhead costs must be allocated to
products
Depreciation on manufacturing equipment is an - Answers indirect product cost
Which of the following statements concerning product costs versus general, selling, and
administrative costs is true? - Answers product costs may be divided between the balance
sheet and income statement
Identify the true statement regarding how product costs in a manufacturing company differ
from product costs in a service company. - Answers manufacturing companies accumulate
product costs in inventory accounts, while services companies do not
Fixed cost per unit - Answers decreases as production volume increases
The basic purpose of offering customers cash discounts such as 2/10, n/30 is to - Answers
speed up the collection of accounts receivable
What is a quantity discount? - Answers a reduction in sales price of a good or service because
of the number of items purchase
Ward Company discovered that merchandise purchased on account was defective and returned
this merchandise to the supplier. The entry to record this return will reduce Ward's - Answers
inventory and liabilities
