Accounting and Finance MCQs

Refining produces large quantities of similar output through continuous processes.
Average process costs are appropriate.

Operating leverage describes how fixed operating costs amplify changes in profit as sales change.
A business with higher fixed operating costs generally has greater operating leverage.

Existence applies mainly to recorded balances and occurrence to recorded transactions.
The auditor seeks evidence that they are not fictitious.

Equivalent units measure the amount of work performed on incomplete production.
They support assignment of material and conversion costs.

Budgets translate objectives into expected revenues, costs, cash flows, and resources.
They support planning and control.

Completeness addresses omitted items.
Auditors often trace from source evidence into the accounting records.

Prime cost combines the major directly traceable production inputs.
It excludes manufacturing overhead.

The rate is established before or during the period using budgeted amounts.
It allows overhead to be applied as production occurs.

Flexible budgets separate activity effects from spending performance.
They provide a fairer comparison with actual results.

An asset may physically exist without belonging to the entity.
The auditor examines ownership, title, and contractual obligations.

Conversion costs are incurred to transform materials into finished goods.
They include labor and factory overhead.

The rate equals 600,000 divided by 30,000 machine hours.
This gives 20 of overhead per machine hour.