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Appendix A – Lecture Notes AppA-1 Appendix A Lecture Notes Main theme: This appendix focuses on pricing products and services. It explains the economist’s approach to pricing, the absorption costing approach to cost-plus pricing, and the meaning of target costing. […]

Appendix A Pricing Products and Services Solutions to Questions A-1 In cost-plus pricing, prices are set by applying a markup percentage to a product’s cost. A-2 The price elasticity of demand measures the degree to which a change in price […]

Problem A-4 (continued) 4. If the postal service wants to maximize the contribution margin and profit from sales of souvenir sheets, the new price should be: Profit-maximizing price = d εVariable cost per unit æö ÷ ç÷ ç÷ d 1+ε […]

Problem A-7 (continued) 2. A chart based on the above table would look like the following: Based on this chart, a selling price of about $18 would maximize net op- erating income. –$15,000 –$10,000 –$5,000 $0 $5,000 $10,000 $15,000 $20,000 […]

Appendix B – Lecture Notes AppB-1 Appendix B Lecture Notes Main theme: Perhaps more than any other information, managers would like to know the profitability of their products, customers, and other business segments. Accordingly, this appendix provides a coherent framework […]

Appendix B Profitability Analysis Solutions to Questions B-1 Absolute profitability measures the impact on overall profits of adding or dropping a particular segment, such as a product or measured by the profitability index, which is computed by dividing the incremental […]

Problem B-5 (continued) 5. The selling price for the new product should at least cover its variable cost and opportunity cost: Selling price of Variable cost of + the new product the new product Opportunity cost Amount of the constrained […]

Chapter 01 – Lecture Notes 1-1 Chapter 1 Lecture Notes Chapter theme: This chapter explains why managerial accounting is important to the future careers of all business students. It answers two questions: (1) what is managerial accounting? and (2) why […]

Chapter 01 – Lecture Notes 1-9 supervisor or next highest uninvolved managerial level. b. If immediate supervisor is the CEO, consider the board of directors or the audit committee. c. Contact above immediate supervisor should only be initiated with supervisor’s […]

Exercise 1-6 (15 minutes) Industry Type of Risk Control Airlines An airplane might crash. Implement a preventive maintenance program. Pharmaceutical drugs A customer might be harmed by a drug. Design tamper-proof packaging. Package delivery A package may get lost. Implement […]

Chapter 10 Solutions Manual Content 10-1 Chapter 10: Applying Excel The completed worksheet is shown below. Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. Chapter 10 Solutions Manual […]

Chapter 10 – Lecture Notes 10-1 Chapter 10 Lecture Notes Chapter theme: This chapter extends our study of management control by explaining how standard costs are used by managers to control costs. It demonstrates how to compute direct materials, direct […]

Chapter 10 – Lecture Notes 10-8 materials price variance, and materials quantity variance, respectively. 1. The standard price is used to compute the quantity variance so that the production manager is not held responsible for the performance of the purchasing […]

Chapter 10 Standard Costs and Variances Solutions to Questions 10-1 A quantity standard indicates how much of an input should be used to make a unit of output. A price standard indicates how much the input should cost. 10-2 Separating […]

Exercise 10-4 (continued) 3. Actual Hours of Input, at the Actual Rate Actual Hours of Input, at the Standard Rate Standard Hours Allowed for Output, at the Standard Rate (AH × AR) (AH × SR) (SH × SR) 5,750 hours […]

Problem 10-9 (continued) 2. Many students will miss parts 2 and 3 because they will try to use product costs as if they were hourly costs. Pay particular attention to the computation of the standard direct labor time per unit […]

Problem 10-13 (45 minutes) 1. a. Actual Quantity of Input, at Actual Price (AQ × AP) Actual Quantity of Input, at Standard Price (AQ × SP) Standard Quantity Allowed for Actual Output, at Standard Price (SQ × SP) 21,600 feet** […]

Problem 10-15 (continued) 2. Summary of variances: Material price variance …………………….. $ 3,000 F Material quantity variance ………………… 8,400 U Labor rate variance …………………………. 11,800 U Labor efficiency variance ………………….. 1,200 F Variable overhead rate variance …………. 590 U Variable […]

Exercise 10A–2 (continued) 3. Variable overhead rate variance: Variable overhead rate variance = (AH × AR) – (AH × SR) ($185,600) – (64,000 hours × $3 per hour) = $6,400 F Variable overhead efficiency variance: Variable overhead efficiency variance = […]

Problem 10A-9 (continued) Fixed overhead variances: Actual Fixed Overhead Budgeted Fixed Overhead Fixed Overhead Applied to Work in Process $209,400 $210,000 32,000 hours × $6 per hour = $192,000    Budget Variance, $600 F Volume Variance, $18,000 U […]

Problem 10A-12 (continued) Alternative solution: Budget variance: = $271,600 – $270,000 Budget Actual fixed Budgeted fixed = – variance overhead overhead = $1,600 U Volume variance: æö ÷ ç÷ ç÷ ç÷ ç÷ ÷ ç èø ´ Fixed portion of Standard […]

Problem 10B-3 (continued) 5. The variances have many possible causes. Some of the more likely causes include the following: Materials variances: Favorable price variance: Good price, inferior quality materials, unusual discount due to quantity purchased, drop in market price, less […]

Chapter 10A – Lecture Notes 10A-1 I. Appendix 10A: predetermined overhead rates and overhead analysis in a standard costing system (Slide #1 is the title slide) Learning Objective 4: Compute and interpret the fixed overhead budget and volume variances. A. […]

Chapter 10B – Lecture Notes 10B-1 I. Appendix 10B: General Ledger Entries to Record Variances (Slide #1 is the title slide) Learning Objective 5: Prepare journal entries to record standard costs and variances. A. Glacier Peak Outfitters – revisited i. […]

Chapter 11 Solutions Manual Content 11-1 Chapter 11: Applying Excel The completed worksheet is shown below. Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. Chapter 11 Solutions Manual […]

Chapter 11 – Lecture Notes 11-1 Chapter 11 Lecture Notes Chapter theme: Managers in large organizations have to delegate some decisions to those who are at lower levels in the organization. This chapter explains how responsibility accounting systems, return on […]

Chapter 11 – Lecture Notes 11-8 1. Economic Value Added (EVA®) is an adaptation of residual income. We will not distinguish between these two terms. B. Calculating residual income i. The equation for computing residual income is as shown. Notice: […]

Chapter 11 Performance Measurement in Decentralized Organizations Solutions to Questions 11-1 In a decentralized organization, decision-making authority isn’t confined to a few top executives; instead, decision-making authority is spread throughout the organization. operating assets. 11-6 If ROI is used to […]

Exercise 11-4 (continued) 3. Management will be able to tell if a hypothesis is false if an improvement in a performance measure at the bottom of an arrow does not, in fact, lead to improvement in the performance measure at […]

Exercise 11-11 (30 minutes) 1. Net operating income Margin = Sales $70,000 = = 5% $1,400,000 Sales Turnover = Average operating assets $1,400,000 = = 4 $350,000 ROI = Margin × Turnover = 5% × 4 = 20% 2. Net […]

Problem 11-16 (continued) 3. Students’ answers may differ in some details from this solution. Time to fill an order Customer satisfaction with breadth of product offerings customers acquired Average change- over time Number of different paper grades produced Average manufacturing […]

Problem 11-21 (continued) 2. Students’ answers may differ in some details from this solution. Applied Pharmaceuticals Return on Stockholders’ Equity Financial Customer perception of first-to-market capability Customer perception of product quality Customer R&D Yield Defect rates Internal Business Processes Dollars […]

Appendix 11A Transfer Pricing Exercise 11A-1 (30 minutes) 1. a. The lowest acceptable transfer price from the perspective of the selling division is given by the following formula: Total contribution margin on lost sales Variable cost Transfer price + per […]

Problem 11A-6 (60 minutes) 1. From the standpoint of the selling division, Alpha Division: Total contribution margin on lost sales Variable cost Transfer price + per unit Number of units transferred ³ ( ) ³($30 – $18) × 5,000 Transfer […]

Appendix 11B Service Department Charges Exercise 11B-1 (15 minutes) 1. and 2. Northern Plant Southern Plant Total Variable cost charges: $0.25 per ton × 130,000 tons ……….. $ 32,500 $0.25 per ton × 50,000 tons …………. $ 12,500 $ 45,000 […]

Chapter 11A – Lecture Notes 11A-1 I. Appendix 11A: transfer pricing (Slide #1 is a title slide) A. Key concepts/definitions i. A transfer price is the price charged when one segment of a company provides goods or services to another […]

Chapter 11B – Lecture Notes 11B-1 I. Appendix 11B: Service Department Charges (Slide #1 is a title slide) Learning Objective 6: Charge operating departments for services provided by service departments. A. Most large organizations have both operating departments and service […]

Chapter 12 Solutions Manual Content 12-1 Chapter 12: Applying Excel The completed worksheet is shown below. Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. Chapter 12 Solutions Manual […]

Chapter 12 – Lecture Notes 12-1 Chapter 12 Lecture Notes Chapter theme: Making decisions is one of the basic functions of a manager. To be successful in decision making, managers must be able to perform differential analysis, which focuses on […]

Chapter 12 – Lecture Notes 12-10 ii. In the Essex Company example that we just completed, if Essex had an alternative use for the capacity that it used to make part 4A, there would have been an opportunity cost to […]

Chapter 12 Differential Analysis: The Key to Decision Making Solutions to Questions 12-1 A relevant cost is a cost that differs in total between the alternatives in a decision. 12-2 An incremental cost (or benefit) is the the fixed costs […]

Exercise 12-2 (continued) 2. The segmented report can be improved by eliminating the allocation of the common fixed expenses. Following the format introduced in Chapter 12 for a segmented income statement, a better report would be: Total Dirt Bikes Mountain […]

Exercise 12–10 (15 minutes) The target production level is 40,000 starters per period, as shown by the relations between per-unit and total fixed costs. “Cost” Per Differential Costs Unit Make Buy Explanation Direct materials …… $3.10 $3.10 Can be avoided […]

Problem 12-18 (continued) Given this information, the simplest approach to the solution is: Contribution margin lost if the plant is closed (3,000 units × $14 per unit*) …………………….. $(42,000) Fixed costs that can be avoided if the plant is closed: […]

Problem 12-23 (continued) 3. At a volume of 120,000 boxes, the company should buy the tubes. The computations are: Cost of making 120,000 boxes: 120,000 boxes × $1.15 per box ………………. $138,000 Rental cost of equipment ……………………….. 40,000 Total cost […]

Problem 12-26 (continued) 2. Based on the data in (1), the North Store should not be closed. If the store is closed, then the company’s overall net operating income will decrease by $29,800 per quarter. If the store space cannot […]

Case 12-30 (90 minutes) 1. The original cost of the facilities at Clayton is a sunk cost and should be ignored in any decision. The decision being considered here is whether to continue operations at Clayton. The only relevant costs […]

Case 12–32 (continued) 4. The computation of the contribution margins and the analysis of the best product mix are repeated here under the assumption that direct labor costs are variable. Solution assuming direct labor is a variable cost Manufactured Purchased […]

Chapter 13 Solutions Manual Content 13-1 Chapter 13: Applying Excel The completed worksheet is shown below. Note: Your worksheet may differ from the above in rows 29 and 30. The worksheet above has been set to use the rounded-off discount […]

Chapter 13 – Lecture Notes 13-1 Chapter 13 Lecture Notes Chapter theme: The term capital budgeting is used to describe how managers plan significant cash outlays on projects that have long-term implications such as the purchase of new equipment and […]

Chapter 13 – Lecture Notes 13-11 2. This implies that the cash inflows are sufficient to recover the $3,169 initial investment and to provide exactly a 10% return on the investment IV. The internal rate of return method Learning Objective […]

Chapter 13 Capital Budgeting Decisions Solutions to Questions 13-1 A capital budgeting screening decision is concerned with whether a proposed investment project passes a preset hurdle, such as a 15% rate of return. A capital budgeting preference decision is concerned […]

Exercise 13-3 (30 minutes) 1. Annual savings in part-time help ………………………. $3,800 Added contribution margin from expanded sales (1,000 dozen × $1.20 per dozen) …………………… 1,200 Annual cash inflows ……………………………………….. $5,000 2. Investment required Factor of the internal = rate […]

Exercise 13–12 (10 minutes) Note: All present value factors in the computation below have been taken from Exhibit 13B-1 in Appendix 13B, using a 12% discount rate. Amount of the investment ………………………. $104,950 Less present value of Year 1 and […]

Problem 13-19 (continued) 3. The formula for the payback period is: Investment required Payback period = Annual net cash inflow $270,000 = = 4.5 years $60,000* *Net operating income + Depreciation = Annual net cash inflow $43,200 + $16,800 = […]

Problem 13-24 (continued) 4. The formula for the internal rate of return is: $94,500 = = 4.500 $21,000 Looking in Exhibit 13B-2, and reading along the 12-period line, a factor of 4.500 represents an internal rate of return of approximately […]

Problem 13-30 (continued) 4. a. Several intangible benefits are usually associated with investments in automated equipment. These intangible benefits include: ◼ Greater throughput. ◼ Greater variety of products. ◼ Higher quality. ◼ Reduction in inventories. The value of these benefits […]

Exercise 13A-5 (10 minutes) 1. From Exhibit 13B-2, the factor for 16% for 8 periods is 4.344. The computer system should be purchased only if its net present value is positive. This will occur only if the purchase price is […]

Chapter 13A – Lecture Notes 13A-1 I. Appendix 13A: the concept of present value (Slide #1 is the title slide for this appendix) Learning Objective 7: Understand present value concepts and the use of present value tables. A. The mathematics […]

Chapter 13C – Lecture Notes 13C-1 I. Appendix 13C: Income taxes and the net present value method (Slide #1 is the title slide for this appendix) Learning Objective 8: Include income taxes in a net present value analysis. A. Six […]

Chapter 14 – Lecture Notes 14-1 Chapter 14 Lecture Notes Chapter theme: This chapter explains how to prepare and interpret the statement of cash flows. I. Statement of cash flows A. Setting the stage i. The statement of cash flows […]

Chapter 14 – Lecture Notes 14-8 1. The accounts receivable balance decreased by $17, so this amount needs to be added to net income. 2. The inventory balance increased by $49, so this amount needs to be subtracted from net […]

© The McGraw-Hill Companies, Inc., 2015. All rights reserved. Solutions Manual, Chapter 14 1 Chapter 14 Statement of Cash Flows Solutions to Questions 14-1 The statement of cash flows highlights They are included with cash because investments of this type […]

Exercise 14-4 (continued) Because Pavolik did not retire any bonds or issue any of its own stock during the year, the corresponding amounts in the table on the prior page represent the gross cash flows that are included in the […]

Problem 14-8 (20 minutes) Transaction Operating Investing Financing Cash Inflow Cash Outflow a. Paid suppliers for inventory purchases ….. X X b. Bought equipment for cash ……………….. X X c. Paid cash to repurchase its own stock ….. X X […]

Problem 14-11 (continued) Step 3: The company had a $2,000 gain on the sale of equipment. The book value of the equipment was $13,000 (= $50,000 – $37,000). The company sold the equipment for $15,000, so its gain on the […]

Exercise 14A-3 (15 minutes) Sales ………………………………………………… $275 Adjustments to a cash basis: Decrease in accounts receivable ………… + 2 $277 Cost of goods sold ………………………………. 150 Adjustments to a cash basis: Increase in inventory ………………………. + 10 Increase in accounts […]

Chapter 14A – Lecture Notes 14A-1 I. Appendix 14A: The direct method of determining the net cash provided by operating activities (Slide #1 is a title slide for the appendix) Learning Objective 4: Use the direct method to determine the […]

Chapter 15 – Lecture Notes 15-1 Chapter 15 Lecture Notes Chapter theme: This chapter focuses on financial statement analysis which managers use to assess the financial health of their companies. It includes examining trends in key financial data, comparing financial […]

Chapter 15 – Lecture Notes 15-10 2. A related measure called the average sale period is computed as shown. a. It measures the number of days being taken, on average, to sell the entire inventory one time. b. Norton Corporation’s […]

© The McGraw-Hill Companies, Inc., 2015. All rights reserved. Solutions Manual, Chapter 15 1 Chapter 15 Financial Statement Analysis Solutions to Questions 15-1 Horizontal analysis examines how a particular item on a financial statement such as 15-2 By looking at […]

Exercise 15-5 (10 minutes) 1. Calculation of the gross margin percentage: Gross margin Gross margin percentage = Sales $27,000 = = 34.2% $79,000 2. Calculation of the net profit margin percentage: Net income Net profit margin percentage = Sales $3,540 […]

Problem 15-13 (45 minutes) Effect on Ratio Reason for Increase, Decrease, or No Effect 1. Decrease Declaring a cash dividend will increase current liabilities, but have no effect on current assets. Therefore, the current ratio will decrease. 2. Increase A […]

Problem 15-16 (continued) 2. Lydex Company Comparative Income Statements This Year Last Year Sales …………………………………………….. 100.0 % 100.0 % Cost of goods sold …………………………….. 80.0 79.3 Gross margin ……………………………………. 20.0 20.7 Selling and administrative expenses ………. 10.1 12.5 Net operating […]

Problem 15-19 (continued) e. Financial leverage is positive in both years because the return on equity is greater than the return on total assets. This positive financial leverage is due to two factors: the bonds, which have an after-tax interest […]

Chapter 2 Solutions Manual Content 2-1 Chapter 2: Applying Excel The completed worksheet is shown below. Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. Chapter 2 Solutions Manual […]

Chapter 02 – Lecture Notes 2-1 Chapter 2 Lecture Notes Chapter theme: This chapter explains how managers need to rely on different cost classifications for different purposes. The four main purposes emphasized in this chapter include assigning costs to cost […]

Chapter 02 – Lecture Notes 2-7 III. The analysis of mixed costs a. Account analysis and the engineering approach i. In account analysis, each account under consideration is classified as variable or fixed based on the analyst’s prior knowledge about […]

Problem 2A-3 (30 minutes) 1. The scattergraph plot and regression estimates of fixed and variable costs using Microsoft Excel are shown below: The cost formula, in the form Y = a + bX , using tons mined as the activity […]

Appendix 2B Cost of Quality Exercise 2B-1 (10 minutes) 1. Quality of conformance 2. Quality costs 3. Quality circles 4. Prevention costs, appraisal costs 5. Internal failure costs, external failure costs 6. External failure costs 7. Appraisal costs 8. Prevention […]

Chapter 02A – Lecture Notes 2A-1 I. Appendix 2A: Least-Squares Regression Computations (Slide #1 is a title slide) Learning Objective 8: Analyze a mixed cost using a scattergraph plot and the least-squares regression method. a. The data set i. Assume […]

Appendix 02B – Lecture Notes 2B-1 I. Appendix 2B: cost of quality (Slide #1 is the title slide) Learning Objective 9: Identify the four types of quality costs and explain how they interact. A. Quality costs − Costs incurred to […]

Chapter 3 Solutions Manual Content 3-1 Chapter 3: Applying Excel The completed worksheet is shown below. Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. Chapter 3 Solutions Manual […]

Chapter 03 – Lecture Notes 3-1 Chapter 3 Lecture Notes Chapter theme: Managers need to assign costs to products to facilitate external financial reporting and internal decision making. This chapter illustrates an absorption costing approach to calculating product costs known […]

Chapter 03 – Lecture Notes 3-11 2. In journal entry form: a. Debit Manufacturing Overhead and credit various accounts as shown. iv. Applying manufacturing overhead costs to work in process 1. In T-account form: a. Work in process is debited […]

Chapter 3 Job-Order Costing Solutions to Questions 3-1 By definition, manufacturing overhead consists of costs that cannot be practically traced to jobs. Therefore, if these costs are to be as- signed to jobs, they must be allocated rather than traced. […]

Exercise 3-5 (20 minutes) Parts 1 and 2. Cash Raw Materials (a) 94,000 (a) 94,000 (b) 89,000 (c) 132,000 Bal. 5,000 (d) 143,000 Work in Process Finished Goods (b) 78,000 (f) 342,000 (f) 342,000 (c) 112,000 Bal. 0 (e) 152,000 […]

Exercise 3-14 (20 minutes) 1. The estimated total manufacturing overhead cost is computed as fol- lows: Y = $650,000 + ($3.00 per MH)(100,000 MHs) Estimated fixed manufacturing overhead ………………. $650,000 Estimated variable manufacturing overhead: $3.00 per MH × 100,000 MHs […]

Exercise 3-19 (20 minutes) 1. Because $120,000 of studio overhead was applied to Work in Process on the basis of $75,000 of direct staff costs, the predetermined overhead rate was 160%: Studio overhead applied $120,000 = = 160% rate Direct […]

Problem 3-25 (continued) 2. Gitano Products Schedule of Cost of Goods Manufactured Direct materials: Raw materials inventory, beginning …………… $ 20,000 Add purchases of raw materials ………………… 510,000 Total raw materials available ……………………. 530,000 Deduct raw materials inventory, ending ……… […]

Problem 3-28 (60 minutes) 1. and 2. Cash Accounts Receivable Bal. 63,000 (m) 785,000 Bal. 102,000 (l) 850,000 (l) 850,000 (k) 925,000 Bal. 128,000 Bal. 177,000 Raw Materials Prepaid Insurance Bal. 30,000 (b) 200,000 Bal. 9,000 (g) 7,000 (a) 185,000 […]

Exercise 3A-2 (45 minutes) 1. The unit product costs under the company’s conventional costing system would be computed as follows: Rascon Parcel Total Number of units produced (a) ………………… 20,000 80,000 Direct labor-hours per unit (b) ………………… 0.40 0.20 Total […]

Problem 3A-5 (60 minutes) 1. The company’s estimated direct labor-hours can be computed as fol- lows: Deluxe model: 5,000 units × 2 DLHs per unit ….. 10,000 DLHs Regular model: 40,000 units × 1 DLH per unit … 40,000 DLHs […]

Exercise 3B-1 (continued) Consequently, the income statement would appear as follows: Wixis Cabinets Income Statement Sales ……………………………………………. $43,740 Cost of goods sold (see above) ………….. 26,510 Gross margin …………………………………. 17,230 Cost of unused capacity ……………………. $1,920 Selling and administrative expenses […]

Chapter 03A – Lecture Notes 3A-1 I. Appendix 3A: Activity-Based Absorption Costing (Slide 1 is the title slide) Learning Objective 8: Use activity-based absorption costing to compute unit product costs. A. Key definitions/concepts i. Activity-based absorption costing assigns all manufacturing […]

Chapter 03B – Lecture Notes 3B-1 I. Appendix 3B: The Predetermined Overhead Rate and Capacity (Slide #1 is a title slide) Learning Objective 9: Understand the implications of basing the predetermined overhead rate on activity at capacity rather than on […]

Chapter 4 Solutions Manual Content 4-1 Chapter 4: Applying Excel The completed worksheet is shown below. Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. Chapter 4 Solutions Manual […]

Chapter 04 – Lecture Notes 4-1 Chapter 4 Lecture Notes Chapter theme: Managers need to assign costs to products to facilitate external financial reporting and internal decision making. This chapter illustrates an absorption costing approach to calculating product costs known […]

Chapter 04 – Lecture Notes 4-8 i. Characteristics of the weighted-average method: 1. This method makes no distinction between work done in the prior and current periods. It blends together units and costs from the prior and current periods. 2. […]

Exercise 4-7 (10 minutes) Work in Process—Cooking ………… 42,000 Raw Materials Inventory ……… 42,000 Work in Process—Cooking ………… 50,000 Work in Process—Molding ………… 36,000 Wages Payable ………………….. 86,000 Work in Process—Cooking ………… 75,000 Work in Process—Molding ………… 45,000 Manufacturing Overhead […]

Problem 4-15 (45 minutes) Weighted-Average Method 1. Equivalent units of production: Materials Conversion Transferred to next department …………………… 160,000 160,000 Ending work in process: Materials: 40,000 units x 100% complete ……. 40,000 Conversion: 40,000 units x 25% complete …… 10,000 […]

Case 4-20 (continued) The percentage of completion, X, affects the cost of goods sold by its effect on the unit cost, which can be determined as follows: Unit cost = $187.50 + $20,807,500 200,000 + 10,000X And the cost of […]

Exercise 4A-8 (15 minutes) FIFO Method 1. Tons of Pulp Work in process, June 1 …………………………………… 20,000 Started into production during the month …………….. 190,000 Total tons in process ……………………………………….. 210,000 Deduct work in process, June 30 ………………………… 30,000 Completed […]

Exercise 4B-2 (15 minutes) Service Departments Operating Departments Admini- stration Janitorial Groceries Gifts Total Departmental costs before allocations ….. $150,000 $40,000 $2,320,000 $950,000 $3,460,000 Allocations: Administration costs (160/4,000, 3,100/4,000, 740/4,000)* ……………………………… (150,000) 6,000 116,250 27,750 Janitorial costs (4,000/5,000, 1,000/5,000)† ………… […]

Appendix 04A – Lecture Notes 4A-1 I. Appendix 4A: FIFO method (slide 1: title slide) A. FIFO vs. weighted-average method i. The FIFO method (generally considered more accurate than the weighted-average method) differs from the weighted-average method in two ways: […]

Chapter 04B – Lecture Notes 4B-1 I. Appendix 4B: Service Department Allocations (slide 1 is the title slide) A. Key definitions/concepts i. Operating departments carry out the central purpose of the organization. Examples of operating departments include: 1. The Surgery […]

Chapter 5 Solutions Manual Content 5-1 Chapter 5: Applying Excel The completed worksheet is shown below. Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. Chapter 5 Solutions Manual […]

Chapter 05 – Lecture Notes 5-1 Chapter 5 Lecture Notes Chapter theme: Cost-volume-profit (CVP) analysis helps managers understand the interrelationships among cost, volume, and profit by focusing their attention on the interactions among the prices of products, volume of activity, […]

Chapter 05 – Lecture Notes 5-9 v. Change in variable cost, fixed cost, and sales volume. 1. What is the profit impact if RBC: (1) pays a $15 sales commission per bike sold instead of paying salespersons flat salaries that […]

Chapter 5 Cost-Volume-Profit Relationships Solutions to Questions 5-1 The contribution margin (CM) ratio is the ratio of the total contribution margin to total sales revenue. It can also be expressed as the ratio of the contribution margin per unit to […]

Exercise 5-3 (continued) 2. Looking at the graph, the break-even point appears to be 3,200 units. This can be verified as follows: Profit = Unit CM × Q − Fixed expenses = $5 × Q − $16,000 = $5 × […]

Exercise 5-17 (30 minutes) 1. Profit = Unit CM × Q − Fixed expenses $0 = ($50 − $32) × Q − $108,000 $0 = ($18) × Q − $108,000 $18Q = $108,000 Q = $108,000 ÷ $18 Q = […]

Problem 5-20 (continued) c. This problem illustrates the difficulty faced by some companies. When variable labor costs increase, it is often difficult to pass these cost increases along to customers in the form of higher prices. Thus, companies are forced […]

Problem 5-25 (45 minutes) 1. The contribution margin per unit on the first 16,000 units is: Per Unit Sales price …………………….. $3.00 Variable expenses ……………. 1.25 Contribution margin …………. $1.75 The contribution margin per unit on anything over 16,000 units […]

Problem 5-28 (continued) 2. The sales mix has shifted over the last year from Standard sets to Deluxe sets. This shift has caused a decrease in the company’s overall CM ratio from 54.2% in April to 47.1% in May. For […]

Problem 5-31 (continued) 2. a. Line 3: Remain unchanged. Line 9: Have a steeper slope. Break-even point: Decrease. b. Line 3: Have a flatter slope. Line 9: Remain unchanged. Break-even point: Decrease. c. Line 3: Shift upward. Line 9: Remain […]

Chapter 6 Solutions Manual Content 6-1 Chapter 6: Applying Excel The completed worksheet is shown below. Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. Chapter 6 Solutions Manual […]

Chapter 06 – Lecture Notes 6-1 Chapter 6 Lecture Notes Chapter theme: Two general approaches are used for valuing inventories and cost of goods sold. One approach, called absorption costing, is generally used for external reporting purposes. The other approach, […]

Chapter 06 – Lecture Notes 6-10 fixed cost of the Fritos business segment of PepsiCo. (2). The maintenance cost for the building in which Boeing 747s are assembled is a traceable fixed cost of the 747 business segment of Boeing. […]

Chapter 6 Variable Costing and Segment Reporting: Tools for Management Solutions to Questions 6-1 Absorption and variable costing differ in how they handle fixed manufacturing overhead. Under absorption costing, fixed manufacturing overhead is treated as a product cost and hence […]

Exercise 6-4 (10 minutes) Total Company Weedban Greengrow Sales* …………………………….. $300,000 $90,000 $210,000 Variable expenses** ………….. 183,000 36,000 147,000 Contribution margin …………… 117,000 54,000 63,000 Traceable fixed expenses …….. 66,000 45,000 21,000 Product line segment margin .. 51,000 $ 9,000 […]

Exercise 6-11 (20 minutes) 1. Division Total Company East Central West Sales ………………………… $1,000,000 $250,000 $400,000 $350,000 Variable expenses ……….. 390,000 130,000 120,000 140,000 Contribution margin …….. 610,000 120,000 280,000 210,000 Traceable fixed expenses . 535,000 160,000 200,000 175,000 Divisional […]

Problem 6-18 (continued) 2 b. The variable costing income statements appear below: Year 1 Year 2 Year 3 Sales ……………………………………………………………… $3,480,000 $2,900,000 $3,770,000 Variable expenses: Variable cost of goods sold @ $36 per unit ………….. 2,160,000 1,800,000 2,340,000 Variable selling […]

Problem 6-23 (60 minutes) 1. a. Absorption costing unit product cost is: Direct materials ……………………………. $ 3.50 Direct labor …………………………………. 12.00 Variable manufacturing overhead …….. 1.00 Fixed manufacturing overhead ($300,000 ÷ 30,000 units) …………… 10.00 Absorption costing unit product cost […]

Problem 6-26 (60 minutes) 1. The disadvantages or weaknesses of the company’s version of a segmented income statement are as follows: a. The company should include a column showing the combined results of the three regions taken together. b. The […]

Case 6-30 (75 minutes) 1. See the segmented statement on the second following page. Supporting computations for the statement are given below: Sales: Membership dues (20,000 × $100) …………………….. $2,000,000 Assigned to Magazine Subscriptions Division (20,000 × $20) ……………………………………………. 400,000 […]

Exercise 6A-3 (20 minutes) 1 a. Under super–variable costing, the unit product cost for both years includes direct materials of $12. 1 b. Year 1 Year 2 Sales ………………………………………………… $2,000,000 $3,000,000 Variable cost of goods sold (@ $12 per unit) […]

Chapter 06A – Lecture Notes 6A-1 I. Appendix 6A: super-variable costing (slide #1 is the title slide) Learning Objective 6: Prepare an income statement using super-variable costing and reconcile this approach with variable costing. A. Super-variable costing i. The unit […]

Chapter 7 Solutions Manual Content 7-1 Chapter 7: Applying Excel The completed worksheet is shown below. Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. Chapter 7 Solutions Manual […]

Chapter 07 – Lecture Notes 7-1 Chapter 7 Lecture Notes Chapter theme: This chapter introduces students to activity-based costing (ABC) which is a tool that has been embraced by a wide variety of service, manufacturing, and non-profit organizations. I. Activity-based […]

Chapter 07 – Lecture Notes 7-11 (3). SureStart consumed 480,000 machine-hours and LongLife consumed 320,000 machine- hours. b. The overhead cost assignments to SureStart and LongLife are as shown. Notice: (1). The total overhead costs assigned to SureStart and LongLife […]

Chapter 7 Activity-Based Costing: A Tool to Aid Decision Making Solutions to Questions 7-1 Activity-based costing differs from traditional costing systems in a number of ways. In activity-based costing, nonmanufacturing as well as manufacturing costs may be assigned to products. […]

Exercise 7-5 (15 minutes) Sales ($1,850 per standard model glider × 20 standard model gliders + $2,400 per custom designed glider × 3 custom designed gliders) …….. $44,200 Costs: Direct materials ($564 per standard model glider × 20 standard model […]

Exercise 7-13 (30 minutes) 1. Activity rates are computed as follows: Activity Cost Pool (a) Estimated Overhead Cost (b) Expected Activity (a) ÷ (b) Activity Rate Machine setups …… $72,000 400 setups $180 per setup Special processing .. $200,000 5,000 […]

Problem 7-17 (45 minutes) 1. Under the traditional direct labor-hour based costing system, manufacturing overhead is applied to products using the predetermined overhead rate computed as follows: Estimated total manufacturing overhead cost Predetermined = overhead rate Estimated total direct labor […]

Problem 7-20 (continued) 5. Gallatin Carpet Cleaning appears to be losing money on the Flying N Ranch job. However, caution is advised. Some of the costs may not be avoidable and hence would have been incurred even if the Flying […]

Exercise 7A-4 (continued) 2. The activity rates are computed by dividing the costs in the cells of the first-stage allocation above by the total activity from the top of the column. Direct Labor Support Order Processing Customer Support Total activity […]

Chapter 07A – Lecture Notes 7A-1 I. Appendix 7A: ABC action analysis (slide #1 is a title slide) Learning Objective 6: Prepare an action analysis report using activity-based costing data and interpret the report. A. Key definitions/concepts i. A conventional […]

Chapter 8 Solutions Manual Content 8-1 Chapter 8: Applying Excel The completed worksheet is shown below. Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. Chapter 8 Solutions Manual […]

Chapter 08 – Lecture Notes 8-1 Chapter 8 Lecture Notes Chapter theme: This chapter describes how organizations define their financial goals by preparing numerous budgets that collectively form an integrated business plan known as a master budget. The master budget […]

Chapter 08 – Lecture Notes 8-11 Learning Objective 4: Prepare a direct materials budget, including a schedule of expected cash disbursements for purchases of materials. C. The direct materials budget i. Assume the information as shown to enable the preparation […]

Chapter 08 – Lecture Notes 8-17 a. The ending inventory in units (5,000) is derived from the production budget. Learning Objective 7: Prepare a selling and administrative expense budget. G. The selling and administrative expense budget i. Assume the information […]

Chapter 8 Master Budgeting Solutions to Questions 8-1 A budget is a detailed quantitative plan for the acquisition and use of financial and other resources over a given time period. Budgetary control involves using budgets to increase the likelihood that […]

Exercise 8-5 (15 minutes) 1. Yuvwell Corporation Manufacturing Overhead Budget 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Year Budgeted direct labor-hours ………………………….. 8,000 8,200 8,500 7,800 32,500 Variable manufacturing overhead rate …………….. × $3.25 × $3.25 × $3.25 × […]

Exercise 8-13 (30 minutes) 1. Schedule of expected cash collections: Month July August September Quarter From accounts receivable . $136,000 $136,000 From July sales: 45% × 210,000 ………… 94,500 94,500 55% × 210,000 ………… $115,500 115,500 From August sales: 45% […]

Problem 8-18 (continued) 2. Minden Company Budgeted Income Statement For the Month of May Sales ………………………………………………. $220,000 Cost of goods sold: Beginning inventory …………………………. $ 30,000 Add purchases ………………………………… 120,000 Goods available for sale …………………….. 150,000 Ending inventory ……………………………… 40,000 […]

Problem 8-24 (45 minutes) 1. a. The reasons that Marge Atkins and Pete Granger use budgetary slack include the following: • These employees are hedging against the unexpected (reducing uncertainty/risk). • The use of budgetary slack allows employees to exceed […]

Problem 8-27 (continued) 4. Shilow Company Income Statement For the Quarter Ended June 30 Sales ($60,000 + $72,000 + $90,000) ……. $222,000 Cost of goods sold: Beginning inventory (Given) ………………. $ 36,000 Add purchases (Part 2) ……………………… 159,300 Goods available […]

Problem 8-29 (continued) 4. Income statement: Hillyard Company Income Statement For the Quarter Ended March 31 Sales ………………………………………………… $1,300,000 Cost of goods sold: Beginning inventory (Given) ………………… $ 60,000 Add purchases (Part 2) ……………………….. 750,000 Goods available for sale ………………………. […]

Chapter 9 Solutions Manual Content 9-1 Chapter 9: Applying Excel The completed worksheet is shown below. Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. Chapter 9 Solutions Manual […]

Chapter 09 – Lecture Notes 9-1 Chapter 9 Lecture Notes Chapter theme: This chapter explains how to prepare flexible budgets and how to compare them to actual results for the purposes of computing revenue and spending variances. I. The variance […]

Chapter 09 – Lecture Notes 9-7 Learning Objective 3: Prepare a report showing revenue and spending variances. C. Key terminology i. A revenue variance is the difference between the actual total revenue and what the total revenue should have been, […]

Chapter 9 Flexible Budgets and Performance Analysis Solutions to Questions 9-1 The planning budget is prepared for the perhaps misleading for activity variances that planned level of activity. It is static because it is not adjusted even if the level […]

Exercise 9-6 (10 minutes) The variance report compares actual results to the planning budget and should not be used to evaluate how well costs were controlled during April. The planning budget is based on 100 jobs, but the actual results […]

Exercise 9-15 (continued) 3. The flexible budget performance report appears below. This report does not include revenue or net operating income because the production department is a cost center that does not have any revenue. Packaging Solutions Corporation Production Department […]

Problem 9-21 (45 minutes) 1. The variance report should not be used to evaluate how well costs were controlled. In July, the planning budget was based on 150 lessons, but the actual results are for 155 lessons—an increase of more […]

Problem 9-25 (45 minutes) 1. The cost control report compares the planning budget, which was prepared for 35,000 machine-hours, to actual results for 38,000 machine-hours. This is like comparing apples to oranges. Costs that are variable or mixed should be […]

1) Ignoring any cash flows from intangible benefits, to the nearest whole dollar how large would the salvage value of the automated equipment have to be to make the investment in the automated equipment financially attractive? A.$24,318 B.$514,020 C.$673,637 D.$127,991 […]

1) Rhoda Corporation manufactures and sells one product. In the company’s first year of operations, the variable cost consisted solely of direct materials of $87 per unit. The annual fixed costs were $912,000 of direct labor cost, $2,128,000 of fixed […]

1) If Madison has a limit of 10,000 direct labor hours but no limit on machine hours, then the ranking of the products from the most profitable to the least profitable use of the constrained resource is: A.A, B, C […]

1) In making the decision to invest in the model 230 machine, the opportunity cost was: A) $278,000 B) $305,000 C) $207,000 D) $266,000 2) Which of the following is classified as a direct labor cost? Wages of assembly-line workers […]

1) Bateman Corporation, which has only one product, has provided the following data concerning its most recent month of operations: What is the unit product cost for the month under variable costing? A.$89 per unit B.$97 per unit C.$108 per […]

1) A direct materials quantity standard generally includes an allowance for waste. 2) The costs assigned to units in inventory are typically lower under variable costing than under absorption costing. Answer: TRUE 3) Suppose a company evaluates divisional performance using […]

1) Last year Javer Corporation had a net income of $200,000, income tax expense of $74,000, and interest expense of $20,000. The corporation’s times interest earned was closest to: A.10.0 B.11.0 C.5.3 D.14.7 2) Ebsen Corporation keeps careful track of […]

1) When a company has a production constraint, the selling price of any new product should cover both its fully allocated cost–including common fixed costs–and the opportunity cost involved in using the constrained resource. 2) All differences between super-variable costing […]

1) Frankin Corporation’s net cash provided by operating activities was $192; its capital expenditures were $154; and its cash dividends were $27. The company’s free cash flow was: A.$38 B.$373 C.$11 D.$165 2) The management of Westrope Corporation would like […]

1) If all four of Argo Corporation’s overhead variances are favorable, Argo’s overhead will be underapplied. 2) When the predetermined overhead rate is based on the level of activity at capacity, underapplied manufacturing overhead may be called the Cost of […]

1) Acquiring land by taking out a long-term mortgage will not affect the current ratio. 2) A contribution format income statement for a merchandising company organizes costs into two categoriescost of goods sold and selling and administrative expenses. Answer: F […]

1) A cost that can be avoided by choosing one alternative over another is not relevant for decision purposes. 2) To increase total asset turnover, management must either increase sales or reduce total stockholders’ equity. Answer: FALSE 3) Inspection Time […]

1) The net cash provided by (used in) financing activities for the year was: A.$(18) B.$5 C.$(5) D.$8 Answer: C Financial statements of Rukavina Corporation follow: Cash dividends were $8. The company did not dispose of any property, plant, and […]

1) The income tax expense in year 3 is: A.$28,000 B.$10,500 C.$7,000 D.$17,500 2) The Gomez Corporation is considering two projects, T and V. The following information has been gathered on these projects: Based on this information, which of the […]

1) On the statement of cash flows, the cost of goods sold adjusted to a cash basis would be: A.$546,000 B.$536,000 C.$544,000 D.$540,000 2) Data from Estrin Corporation’s most recent balance sheet and income statement appear below: The average sale […]

1) When computing standard cost variances, the difference between actual and standard price multiplied by actual quantity yields a(n): A.combined price and quantity variance. B.efficiency variance. C.price or rate variance. D.quantity variance. 2) Milano Corporation is working on its direct […]

1) The manufacturing overhead that would be applied to a unit of product C43S under the activity-based costing system is closest to: Koszyk Manufacturing Corporation has a traditional costing system in which it applies manufacturing overhead to its products using […]

1) A common fixed cost is a fixed cost that supports more than one business segment and is traceable in whole or in part to at least one of the business segments. 2) There is no difference in the unit […]

1) Yoder Corporation uses the weighted-average method in its process costing system. The following data pertain to operations in the first processing department for a recent month: How much cost, in total, was assigned to the ending work in process […]

1) A flexible budget should not be used when making comparisons to actual results such as actual expenses. 2) Directly comparing static budget costs to actual costs only makes sense if the costs are variable. Answer: FALSE 3) In calculating […]

1) Salley Corporation produces and sells a single product. Data concerning that product appear below: Fixed expenses are $1,133,000 per month. The company is currently selling 9,000 units per month. Management is considering using a new component that would increase […]

1) Nash Corporation manufactures and sells custom snowmobiles. From the time an order is placed till the time the snowmobile reaches the customer averages 50 days. This 50 days is spent as follows: What is Nash’s manufacturing cycle efficiency (MCE) […]

1) Consider the following production and cost data for two products, L and C: The company can only perform 65,000 machine set-ups each period due to limited skilled labor and there is unlimited demand for each product. What is the […]

1) Barker Corporation uses the weighted-average method in its process costing system. This month, the beginning inventory in the first processing department consisted of 300 units. The costs and percentage completion of these units in beginning inventory were: A total […]

1) The following information relates to next year’s projected operating results of the Consumer Division of Xampa Corporation: If the Consumer Division is eliminated, $1,600,000 of the above fixed expenses could be avoided. What will be the effect on Xampa’s […]

1) The management of Roger Corporation would like to investigate the possibility of basing its predetermined overhead rate on activity at capacity rather than on the estimated amount of activity for the year. The company’s controller has provided an example […]

1) The contribution margin for April was: A) $1,017,600 B) $1,465,600 C) $600,400 D) $3,512,400 2) The following labor standards have been established for a particular product: The following data pertain to operations concerning the product for the last month: […]

1) Hagel Clinic uses client-visits as its measure of activity. During July, the clinic budgeted for 2,300 client-visits, but its actual level of activity was 2,320 client-visits. The clinic has provided the following data concerning the formulas used in its […]

1) Shelby Boat Wash’s cost formula for its cleaning equipment and supplies is $2,200 per month plus $34 per boat. For the month of September, the company planned for activity of 82 boats, but the actual level of activity was […]

1) Which product makes the LEAST profitable use of the milling machines? A.Product A B.Product B C.Product C D.Product D 2) Glassing Clinic uses client-visits as its measure of activity. During September, the clinic budgeted for 3,700 client-visits, but its […]

1) When fixed costs are included in the cost of goods sold, the gross margin percentage should increase and decrease with sales volume. 2) The units in beginning work in process inventory plus the units in ending work in process […]

1) The payback period for the investment is: A.0.27 years B.3.75 years C.10.00 years D.2.13 years 2) Mussenden Corporation has an activity-based costing system with three activity cost pools-Machining, Order Filling, and Other. In the first stage allocations, costs in […]

1) A fixed cost cannot be a differential cost. 2) In a special order situation, any fixed cost that could be avoided if the special order were not accepted would be irrelevant. Answer: TRUE 3) The price-earnings ratio is determined […]

1) The company’s dividend payout ratio for Year 2 is closest to: A.1.6% B.21.1% C.2.6% D.14.7% 2) Kampmann Corporation is presently making part Z95 that is used in one of its products. A total of 5,000 units of this part […]

1) Aaker Corporation, which has only one product, has provided the following data concerning its most recent month of operations: What is the unit product cost for the month under variable costing? A.$66 per unit B.$93 C.$87 D.$60 2) Larance […]

1) The following data have been provided by Mathews Corporation: Lubricants and supplies are both elements of variable manufacturing overhead. The variable overhead rate variance for lubricants is closest to: A.$1,376 F B.$516 U C.$860 F D.$1,376 U 2) The […]

1) Pardoe, Inc., manufactures a single product in which variable manufacturing overhead is assigned on the basis of standard direct labor-hours. The company uses a standard cost system and has established the following standards for one unit of product: During […]

1) Jui Corporation’s Maintenance Department provides services to the company’s two operating divisions–the Paints Division and the Stains Division. The variable costs of the Maintenance Department are budgeted based on the number of cases produced by the operating departments. The […]

1) What account should Chelm debit when the production manager has earned her salary? A.Direct Labor B.Work in Process C.Manufacturing Overhead D.Salaries and Wages Receivable E.Salaries and Wages Expense 2) If management decides to buy part P42 from the outside […]

1) The internal rate of return on the investment is closest to: A.23% B.25% C.24% D.21% 2) Duckhorn Housecleaning provides housecleaning services to its clients. The company uses an activity-based costing system for its overhead costs. The company has provided […]

1) Zelinsky Inc. has provided the following data for the month of April. There were no beginning inventories; consequently, the direct materials, direct labor, and manufacturing overhead applied listed below are all for the current month. Manufacturing overhead for the […]

1) The sales budget is usually prepared before the production budget. 2) The split-off point in a process that produces joint products is the point in the manufacturing process at which the joint products are sent to separate customers. Answer: […]

1) Data from Keniston Corporation’s most recent balance sheet and income statement appear below: The average collection period for this year is closest to: A.39.1 days B.45.1 days C.54.3 days D.57.5 days 2) The company’s accounts receivable turnover for Year […]

1) The company’s equity multiplier at the end of Year 2 is closest to: A.0.64 B.1.65 C.1.57 D.0.61 Equity multiplier = Average total assets* Average stockholders’ equity* = $1,179,000 $716,000 = 1.65 (rounded) *Average total assets = ($1,198,000 + $1,160,000) […]

1) Tulip Midwifery’s cost formula for its wages and salaries is $2,420 per month plus $388 per birth. For the month of January, the company planned for activity of 119 births, but the actual level of activity was 123 births. […]

1) Are the materials costs and processing costs relevant in the choice between alternatives A and B? (Ignore the equipment rental and occupancy costs in this question.) A) Both materials costs and processing costs are relevant B) Only materials costs […]

1) All other things the same, an increase in total fixed expenses will increase the break-even point. 2) Process Time is the only non-value-added component of Throughput Time. Answer: FALSE 3) When a company is involved in only one activity […]

1) Monce Corporation has two divisions: Home Division and Commercial Division. The following report is for the most recent operating period: The common fixed expenses have been allocated to the divisions on the basis of sales. Required: a. What is […]

1) Home Corporation will open a new store on January 1. Based on experience from its other retail outlets, Home Corporation is making the following sales projections: Home Corporation estimates that 70% of the credit sales will be collected in […]

1) ( An investment project has the following characteristics: The life of the equipment is closest to: A.It is impossible to determine from the data given. B.7 years C.12 years D.4.56 years. 2) If the company bases its predetermined overhead […]

1) The net operating income for March was: A) $130,000 B) $134,000 C) $43,000 D) $47,000 2) At a break-even point of 800 units sold, White Corporation’s variable expenses are $8,000 and its fixed expenses are $4,000. What will the […]

1) Direct labor-hours or direct labor cost should not be used as a measure of activity in an activity-based costing system. 2) The step-down method of allocation is simpler and easier to apply than the direct method. Answer: FALSE 3) […]

1) Degeare Corporation’s balance sheet and income statement appear below: Cash dividends were $10. The company sold equipment for $18 that was originally purchased for $10 and that had accumulated depreciation of $5. The net cash provided by (used in) […]

1) (Ignore income taxes in this problem) The management of Favreau Corporation is considering the purchase of a machine that would cost $310,464 and would have a useful life of 5 years. The machine would have no salvage value. The […]

1) The company’s accounts receivable turnover for Year 2 is closest to: A.1.06 B.5.06 C.5.21 D.0.94 2) The total cash flow net of income taxes in year 2 is: A.$137,000 B.$170,000 C.$67,000 D.$110,000 Answer: A Depreciation expense = (Original cost […]

1) Eberley Corporation’s cost formula for its manufacturing overhead is $25,700 per month plus $10 per machine-hour. For the month of July, the company planned for activity of 5,900 machine-hours, but the actual level of activity was 5,920 machine-hours. The […]

1) Harris Corporation, a retailer, had cost of goods sold of $290,000 last year. The beginning inventory balance was $26,000 and the ending inventory balance was $24,000. The corporation’s inventory turnover was closest to: A.12.08 B.11.60 C.5.80 D.11.15 2) An […]

1) Which one of the following statements about book value per share is most correct? A.Market price per common share usually approximates book value per common share. B.Book value per common share is based on past transactions whereas the market […]

1) How much Maintenance Department cost should be allocated to the Stains Division at the end of the year? A.$900,532 B.$924,994 C.$858,220 D.$882,420 2) The unit product cost of product R21V under the company’s traditional costing system is closest to: […]

1) A company has several service departments that provide differing amounts of service to each other and to the company’s operating departments. Which of the following statements is true? A.The direct method and the step-down method will result in the […]

1) How many units of product L06K should be produced each month? A.975 B.500 C.0 D.175 2) Goldsmith Corporation has provided the following data: The company’s net income in Year 2 was $24,400. The company’s book value per share at […]

1) The current ratio at the end of Year 2 is closest to: A.0.38 B.2.17 C.0.94 D.0.40 2) The following costs were incurred in April: Prime costs during the month totaled: A) $53,000 B) $67,000 C) $38,000 D) $103,000 Answer: […]

1) If a company has computed a project profitability index of -0.015 for an investment project, then: A.the project’s internal rate of return is less than the discount rate. B.the project’s internal rate of return is greater than the discount […]

1) What would be the effect on the company’s overall net operating income if product I11S were dropped? A.Overall net operating income would decrease by $46,000. B.Overall net operating income would increase by $93,000. C.Overall net operating income would increase […]

1) Adi Manufacturing Corporation is estimating the following raw material purchases for the final four months of the year: At Adi, 30% of raw materials purchases are normally paid for in the month of purchase. The remaining 70% is paid […]

1) Evita Corporation prepares its statement of cash flows using the indirect method. Evita’s statement showed “Net cash provided by operating activities” of $46,000. Under the direct method, this number would have been: A.$0. B.$46,000. C.greater than $46,000. D.less than […]

1) Karma Corporation has total assets of $190,000 and total liabilities of $90,000. The corporation’s debt-to-equity ratio is closest to: A.0.47 B.0.90 C.0.53 D.0.32 2) The Dillon Corporation makes and sells a single product. Overhead costs are applied on the […]

1) Last year a company had sales of $400,000, a turnover of 2.4, and a return on investment of 36%. The company’s net operating income for the year was: A.$144,000 B.$120,000 C.$80,000 D.$60,000 2) The company’s average collection period (age […]

1) Mars Corporation has provided the following data for Year 2: The company’s total stockholders’ equity at the end of Year 2 amounted to $1,095,000 and at the end of Year 1 to $1,060,000. The company’s return on equity for […]

1) A cost that can be avoided by choosing one alternative over another is not relevant for decision purposes. 2) Pricing decisions are most difficult in those situations in which a company makes a product that is in competition with […]

1) If the Tudor Retailing Company uses the high-low method of analysis, the total selling and administrative expense if Tudor Retailing Company sells 6,500 units during a month would be estimated to be: A) $37,000 B) $44,850 C) $38,250 D) […]

1) Able Inc. uses the weighted-average method in its process costing system. The following data concern the operations of the company’s first processing department for a recent month. Required: a. Determine the equivalent units of production. b. Determine the costs […]

1) A direct cost is a cost that cannot be easily traced to the particular cost object under consideration. 2) Opportunity costs are not usually recorded in the accounts of a business. Answer: T 3) If the FIFO cost method […]

1) The company’s acid-test (quick) ratio at the end of Year 2 is closest to: A.1.96 B.1.41 C.1.20 D.1.48 Answer: B Acid-test (quick) ratio = Quick assets* Current liabilities = $424,000 $301,000 = 1.41 (rounded) *Quick assets = Cash + […]

1) The cost categories that appear on a job cost sheet include selling expense, manufacturing expense, and administrative expense. 2) If the actual rate per direct labor-hour exceeds the standard rate per direct labor-hour, then the journal entry to record […]

1) The price elasticity of demand is NOT used to determine the markup over cost when computing the profit-maximizing price. 2) Queue time is considered value-added time. Answer: FALSE 3) Under the direct method of determining the net cash provided […]

1) Yankee Corporation manufactures a single product. The company has the following cost structure: Last year, 4,000 units were produced and 3,500 units were sold. There were no beginning inventories. Under absorption costing, the cost of goods sold for the […]

1) The predetermined overhead rate under the traditional costing system is closest to: Adams Corporation makes two products: Product A and Product B. Annual production and sales are 500 units of Product A and 900 units of Product B. The […]

1) Gambino Corporation is a wholesaler that sells a single product. Management has provided the following cost data for two levels of monthly sales volume. The company sells the product for $138.80 per unit. The best estimate of the total […]

1) The markup percentage on the new product would be closest to: A.15.0% B.46.6% C.31.6% D.50.0% 2) Noel Enterprises has budgeted sales in units for the next five months as follows: Past experience has shown that the ending inventory for […]

1) Feiler Corporation has total current assets of $483,000, total current liabilities of $347,000, total stockholders’ equity of $1,057,000, total net plant and equipment of $1,031,000, total assets of $1,514,000, and total liabilities of $457,000. The company’s current ratio is […]

1) Compound K52E is a raw material used to make Pinkos Corporation’s major product. The standard cost of compound K52E is $46.00 per ounce and the standard quantity is 5.0 ounces per unit of output. Data concerning the compound for […]

1) Manico Corporation produces three products — X, Y, & Z — with the following characteristics: The company has only 2,000 machine-hours available each month. If demand exceeds the company’s capacity, in what sequence should orders be filled if the […]

1) The project profitability index is used to compare the net present values of two investments that require different amounts of investment funds. 2) Commissions paid to salespersons are a variable selling expense. Answer: T 3) Any difference in the […]

1) In a traditional format income statement for a merchandising company, the selling and administrative expenses report all period costs that have been expensed as incurred. 2) An increase in the number of shares of common stock outstanding will increase […]

1) A cost that differs from one month to another is known as a differential cost. 2) Incremental analysis is generally the most complicated and least direct approach to decision making. Answer: TRUE 3) The acid-test ratio is usually greater […]

1) The net cash provided by (used in) operating activities for the year was: A.$23 B.$133 C.$157 D.$87 2) The Consumer Products Division of Mickolick Corporation had average operating assets of $450,000 and net operating income of $38,700 in August. […]

1) The degree of operating leverage in a company is largest at the break-even point and decreases as sales rise. 2) The manufacturing overhead budget lists all costs of production other than selling and administrative expenses. Answer: FALSE 3) A […]

1) Keyton Corporation’s net operating income in Year 2 was $43,714, net income before taxes was $30,714, and the net income was $21,500. Total common stock was $200,000 at the end of both Year 2 and Year 1. The par […]

1) Crooks Corporation processes sugar beets in batches that it purchases from farmers for $57 a batch. A batch of sugar beets costs $12 to crush in the company’s plant. Two intermediate products, beet fiber and beet juice, emerge from […]

1) In the absorption approach to cost-plus pricing, the anticipated markup in dollars is NOT equal to the anticipated profit. 2) Paying taxes to governmental bodies is considered a cash outflow in the operating activities section on the statement of […]

1) Depreciation on office equipment would be included in product costs. 2) The equivalent units of production will be the same under the weighted-average and the FIFO method if there is no ending work in process inventory. Answer: FALSE 3) […]

1) Accounts receivable turnover will normally decrease as a result of: A.the write-off of an uncollectible account against the allowance for bad debts. B.a significant sales volume decrease near the end of the accounting period. C.an increase in cash sales […]

1) All other things the same, if the fixed expenses increase in a company then one would expect the margin of safety to increase. 2) As the inventory turnover increases, the average sales period decreases. Answer: TRUE 3) An unfavorable […]

1) Galla Corporation makes a product with the following standard costs: The company budgeted for production of 2,400 units in June, but actual production was 2,500 units. The company used 19,850 pounds of direct material and 980 direct labor-hours to […]

1) Purchasing inventory on credit increases the book value per share of a retailer. 2) One disadvantage of a self-imposed budget is that budget estimates prepared by front-line managers are often less accurate and reliable than estimates prepared by top […]

1) The income tax expense in year 3 is: A.$21,000 B.$6,000 C.$9,000 D.$15,000 2) Which of the following comparisons best isolates the impact that changes in operating efficiency have on performance? A.static planning budget and flexible budget B.static planning budget […]

1) A company’s current ratio and an acid-test ratio are both greater than 1. Payment of an account payable would: A.increase the current ratio but the acid-test ratio would not be affected. B.increase the acid-test ratio but the current ratio […]

1) The actual manufacturing overhead incurred at Fraze Corporation during November was $79,000, while the manufacturing overhead applied to Work in Process was $65,000. The Corporation’s Cost of Goods Sold was $385,000 prior to closing out its Manufacturing Overhead account. […]

1) In the absence of a constraint, all business segments that are absolutely profitable should be retained. 2) A company has a standard cost system in which fixed and variable manufacturing overhead costs are applied to products on the basis […]

1) Barker Corporation uses the weighted-average method in its process costing system. This month, the beginning inventory in the first processing department consisted of 300 units. The costs and percentage completion of these units in beginning inventory were: A total […]

1) Ohme Framing’s cost formula for its supplies cost is $1,620 per month plus $13 per frame. For the month of April, the company planned for activity of 882 frames, but the actual level of activity was 878 frames. The […]

1) A company whose inventory turnover ratio is much slower than the average for its industry may have too much inventory or the wrong sorts of inventory. 2) Vertical analysis of financial statements is accomplished by preparing common-size statements. Answer: […]

1) Hoppy Corporation compares monthly operating results to a static budget prepared at the beginning of the month. When the actual level of activity is less than budgeted, which of the following would be true? A.Variable costs would show favorable […]

1) Smallwood Corporation has provided the following data concerning manufacturing overhead for January: The Corporation’s Cost of Goods Sold was $223,000 prior to closing out its Manufacturing Overhead account. The Corporation closes out its Manufacturing Overhead account to Cost of […]

1) The salvage value of new equipment should be considered when using the internal rate of return method to evaluate a project. 2) Assuming the LIFO inventory flow assumption, if production equals sales for the period, absorption costing and variable […]

1) Delta Railroad has two operating divisions–Freight and Passenger. The Maintenance Department serves both divisions. Variable Maintenance Department costs are budgeted at $12 per thousand miles. The fixed Maintenance Department costs are budgeted at $800,000 per year. The level of […]

1) Pearse Kennel uses tenant-days as its measure of activity; an animal housed in the kennel for one day is counted as one tenant-day. During December, the kennel budgeted for 3,000 tenant-days, but its actual level of activity was 2,980 […]

1) Nantua Corporation has two divisions, Southern and Northern. The following information was taken from last year’s income statement segmented by division: Net operating income last year for Nantua Corporation was $400,000. If the Northern Division’s sales last year were […]

1) The following information was obtained from the records of the first processing department of Bapst Corporation for the month of May. The company uses the FIFO method in its process costing system. All materials are added at the beginning […]

1) Product Q77H has been considered a drag on profits at Zenke Corporation for some time and management is considering discontinuing the product altogether. Data from the company’s accounting system appear below: In the company’s accounting system all fixed expenses […]

1) Eliezrie Corporation makes a product with the following standard costs: In January the company’s budgeted production was 7,400 units but the actual production was 7,500 units. The company used 45,580 kilos of the direct material and 2,030 direct labor-hours […]

1) In business, a budget is a method for putting a limit on spending. 2) Insurance and utility expenses are considered operating activities on the statement of cash flows. Answer: TRUE 3) A self-imposed budget is a budget that is […]

1) The company’s dividend yield ratio is closest to: A.1.7% B.17.1% C.1.3% D.26.3% 2) A customer has requested that Gamba Corporation fill a special order for 3,000 units of product Q41 for $25.00 a unit. While the product would be […]

1) The split-off point in a process that produces joint products is the point in the manufacturing process at which the joint products are sent to separate customers. 2) All other things the same, purchasing merchandise inventory would have no […]

1) If the company bases its predetermined overhead rate on capacity, the predetermined overhead rate is closest to: The management of Wray Corporation would like to investigate the possibility of basing its predetermined overhead rate on activity at capacity. The […]

1) If the actual rate per direct labor-hour is less than the standard rate per direct labor-hour, then the journal entry to record the Labor rate variance would be a credit. 2) Direct materials is considered to be a product […]

In capital budgeting computations, discounted cash flow methods: 1) A.automatically provide for recovery of initial investment. B.can’t be used unless cash flows are uniform from year to year. C.assume that all cash flows occur at the beginning of a period. […]

1) To encourage salespersons to sell the most profitable products, they should be paid sales commissions based on the profitability index and the amount of constraint time sold rather than on sales revenue. 2) All other things the same, when […]

1) Fortmann Kennel uses tenant-days as its measure of activity; an animal housed in the kennel for one day is counted as one tenant-day. During September, the kennel budgeted for 2,000 tenant-days, but its actual level of activity was 2,010 […]

1) The net present value of the proposed project is closest to: A.$154,663 B.$322,000 C.$117,796 D.$245,246 ( The Sawyer Corporation has $80,000 to invest and is considering two different projects, X and Y. The following data are available on the […]

1) Iaci Corporation is a wholesaler that sells a single product. Management has provided the following cost data for two levels of monthly sales volume. The company sells the product for $133.60 per unit. The best estimate of the total […]

1) Groeneweg Corporation has provided the following data: Dividends on common stock during Year 2 totaled $4,500. The market price of common stock at the end of Year 2 was $9.45 per share. The company’s dividend payout ratio for Year […]

1) The company is considering launching a new product that would have a variable cost of $168.00 per unit and no avoidable fixed costs. It would require 9 minutes of the constrained resource. The absolute minimum acceptable selling price for […]

1) Dennisport Corporation has an acid-test ratio of 2.5. It has current liabilities of $40,000 and noncurrent assets of $70,000. The corporation’s current assets consist of cash, marketable securities, accounts receivable, prepaid expenses, and inventory; it has no short-term notes […]

1) Schwering Corporation uses activity-based costing to assign overhead costs to products. Overhead costs have already been allocated to the company’s three activity cost pools as follows: Machining, $20,800; Order Filling, $30,400; and Other, $48,800. Machining costs are assigned to […]

1) Sorrow Kennel uses tenant-days as its measure of activity; an animal housed in the kennel for one day is counted as one tenant-day. During November, the kennel budgeted for 2,300 tenant-days, but its actual level of activity was 2,350 […]

1) Alden Company recorded the following transactions for the just completed month. The company had no beginning inventories. (a) $72,000 in raw materials were purchased for cash. (b) $67,000 in raw materials were requisitioned for use in production. Of this […]

1) Carson Corporation uses the FIFO method in its process costing system. The Assembly Department started the month with 6,000 units in its beginning work in process inventory that were 20% complete with respect to conversion costs. An additional 74,000 […]

1) If the actual level of activity is 4% less than planned, then the variable costs in the static budget should be decreased by 4% before comparing them to actual costs. 2) The dividend payout ratio is equal to the […]

1) Onorato Corporation has provided the following information concerning a capital budgeting project: The company uses straight-line depreciation on all equipment. The total cash flow net of income taxes in year 2 is: A.$133,000 B.$160,000 C.$90,000 D.$98,000 2) Calin Corporation […]

1) Falmouth Corporation’s debt to equity ratio is 0.6. Current liabilities are $120,000, long term liabilities are $360,000, and working capital is $140,000. Total assets of the corporation must be: A.$600,000 B.$1,200,000 C.$800,000 D.$1,280,000 2) The following accounts are from […]

1) All other things the same, if long-term debt is exchanged for short-term debt, the debt-to-equity ratio will be unchanged. 2) When a company sells used equipment for a loss, the net profit margin percentage is unaffected. Answer: FALSE 3) […]

1) Suppose there is not enough idle capacity to produce all of the units for the overseas customer and accepting the special order would require cutting back on production of 700 units for regular customers. The minimum acceptable price per […]

1) The company’s debt-to-equity ratio at the end of Year 2 is closest to: A.0.22 B.0.27 C.0.45 D.0.19 2) Spirer Corporation manufactures and sells a single product. The company uses units as the measure of activity in its budgets and […]

1) What is the net monetary advantage (disadvantage) of processing Product Y beyond the split-off point? A.$3,500 B.$7,900 C.$29,900 D.$25,500 2) The Dean Corporation produces and sells a single product. The following data refer to the year just completed: Assume […]

1) Based solely on the information above, the net cash provided by (used in) investing activities on the statement of cash flows would be: A.$110,000 B.$55,000 C.$150,000 D.$130,000 2) Florea Corporation has provided the following data concerning its most important […]

1) If a company operates at the break even point for each of its segments, it will lose money overall if common fixed expenses exist. 2) Fixed costs may or may not be sunk costs. Answer: TRUE 3) The budgeted […]

1) The data given below are from the accounting records of the Kuhn Corporation: Based on this information, the net cash provided by operating activities using the indirect method would be: A.$55,000 B.$58,000 C.$50,000 D.$60,000 2) ( The management of […]

1) The net present value of overhauling the present system is closest to: A.$(321,084) B.$(532,516) C.$(560,536) D.$(592,516) 2) BieryCorporation makes a product with the following standard costs: The company produced 4,100 units in April using 5,380 liters of direct material […]

1) Division X makes a part that it sells to customers outside of the company. Data concerning this part appear below: Division Y of the same company would like to use the part manufactured by Division X in one of […]

1) The constraint at Fulena Inc. is an expensive milling machine. The three products listed below use this constrained resource. Required: a. Rank the products in order of their current profitability from the most profitable to the least profitable. In […]

1) If the company bases its predetermined overhead rate on the estimated amount of the allocation base for the upcoming year, by how much was manufacturing overhead underapplied or overapplied? The management of Richbourg Corporation would like to investigate the […]

1) Smee Inc. produces and sells a single product. The selling price of the product is $130.00 per unit and its variable cost is $52.00 per unit. The fixed expense is $281,580 per month. The break-even in monthly dollar sales […]

1) The Adams Corporation, a merchandising firm, has budgeted its activity for November according to the following information: Sales at $450,000, all for cash. Merchandise inventory on October 31 was $200,000. The cash balance November 1 was $18,000. Selling and […]

1) The number of units to be produced in a period can be determined by adding the expected sales to the beginning inventory and then deducting the desired ending inventory. 2) Return on investment is superior to residual income as […]

1) Acklac Corporation uses the weighted-average method in its process costing system. This month, the beginning inventory in the first processing department consisted of 700 units. The costs and percentage completion of these units in beginning inventory were: A total […]

1) Using the high-low method, the estimate of the variable component of electrical cost per machine-hour is closest to: A) $0.12 B) $20.38 C) $7.98 D) $3.97 2) Weston Corporation is considering eliminating a department that has a contribution margin […]

1) A manufacturer of premium wire strippers has supplied the following data: The company’s margin of safety in units is closest to: A.135,429 units B.16,923 units C.223,333 units D.320,317 units 2) LFM Corporation makes and sells a product called Product […]

1) A cement manufacturer has supplied the following data: The company’s contribution margin ratio is closest to: A.40.0% B.50.0% C.60.0% D.10.7% 2) Akey Hospital bases its budgets on patient-visits. The hospital’s static budget for March appears below: The total overhead […]

1) The times interest earned for Year 2 is closest to: A.2.22 B.4.17 C.3.17 D.5.95 2) If Madison has a limit of 15,000 machine hours but no limit on direct labor hours, then the ranking of the products from the […]

1) The management of Brockington Corporation is considering introducing a new product–a compact barbecue. At a selling price of $80 per unit, management projects sales of 70,000 units. Launching the barbecue as a new product would require an investment of […]

1) Linscott Corporation manufactures and sells a single product. The company uses units as the measure of activity in its budgets and performance reports. During July, the company budgeted for 5,400 units, but its actual level of activity was 5,380 […]

1) All other things the same, when a company increases its inventories in anticipation of later higher sales, the accounts receivable turnover ratio for the current period increases. 2) The step-down method allocates less total cost to operating departments than […]

1) Under absorption costing, fixed manufacturing overhead is treated as a product cost. 2) A cost that is relevant in one decision may not be relevant in another decision. Answer: T 3) The contribution margin is the amount remaining from […]

1) Coderre Corporation manufactures and sells a single product. The company uses units as the measure of activity in its budgets and performance reports. During July, the company budgeted for 7,800 units, but its actual level of activity was 7,780 […]

1) Delvin Corporation, which has only one product, has provided the following data concerning its most recent month of operations: What is the total period cost for the month under variable costing? A.$42,000 B.$49,200 C.$35,700 D.$7,200 2) Romasanta Corporation manufactures […]

1) Which of the following would be classified as an appraisal cost on a quality cost report? A.Quality circles. B.Downtime caused by quality problems. C.Supplies used in testing and inspection. D.Quality engineering. 2) Dilbert Farm Supply is located in a […]

1) Cabal Products is a division of a major corporation. Last year the division had total sales of $10,040,000, net operating income of $582,320, and average operating assets of $4,000,000. The company’s minimum required rate of return is 14%. The […]

1) Compute the amount of raw materials used during August if $25,000 of raw materials were purchased during the month and the inventories were as follows: A.$16,000 B.$19,000 C.$23,000 D.$27,000 2) Schweinert Corporation manufactures a single product. The following data […]

1) Under variable costing, fixed manufacturing overhead cost is not treated as a product cost. 2) In companies that do not have “no lay-off” policies, the total direct labor cost for a budget period is computed by multiplying the total […]

1) Barrus Corporation makes 30,000 motors to be used in the productions of its power lawn mowers. The average cost per motor at this level of activity is as follows: This motor has recently become available from an outside supplier […]

1) Discounted cash flow techniques do not take into account recovery of initial investment. 2) In traditional costing systems, manufacturing costs that are not caused by products are not assigned to products. Answer: FALSE 3) A vertically integrated company is […]

1) Gabat Inc. is a merchandising company. Last month the company’s merchandise purchases totaled $67,000. The company’s beginning merchandise inventory was $19,000 and its ending merchandise inventory was $22,000. What was the company’s cost of goods sold for the month? […]

1) Which of the following would be classified as an external failure cost on a quality cost report? A.Net cost of scrap. B.Product recalls. C.Rework labor and overhead. D.Downtime caused by quality problems. 2) Holding all other things constant, an […]

1) Harry has just inherited $300,000. Harry has decided to quit his job and go to school full time for the next five years by living off this inheritance. Harry will invest the $300,000 in a money market account that […]

1) One way to increase the effective utilization of a bottleneck is to put less emphasis on preventing defects and simply discard defective units at final inspection before sending them to customers. 2) Under variable costing, variable production costs are […]

1) Chown Corporation, which has only one product, has provided the following data concerning its most recent month of operations: The total gross margin for the month under the absorption costing approach is: A.$196,800 B.$179,400 C.$390,000 D.$7,800 2) The net […]

1) Up to how much should the company be willing to pay for one additional minute of grinding machine time if the company has made the best use of the existing grinding machine capacity? (Round off to the nearest whole […]

1) The formula for the average sale period is: Average sale period = Accounts receivable turnover Inventory turnover. 2) The super-variable costing net operating income period can be computed by multiplying the number of units sold by the contribution margin […]

1) The prime cost for September was: A) $114,000 B) $100,000 C) $103,000 D) $47,000 2) Shelby Boat Wash’s cost formula for its cleaning equipment and supplies is $2,200 per month plus $34 per boat. For the month of September, […]

1) A cost that is traceable to a segment through activity-based costing may or may not be an avoidable cost for decision making. 2) ISO 9000 certification is relatively easy to achieve because little documentation on quality control procedures is […]

1) The order in which the costs of service departments are allocated will affect the amounts allocated to an operating department when the step-down method is used. 2) Joint products are products that are sold to customers as a set […]

1) Upchurch Corporation produces and sells a single product. Data concerning that product appear below: Assume the company’s target profit is $14,000. The dollar sales to attain that target profit is closest to: A.$326,180 B.$593,248 C.$494,212 D.$959,353 2) Rieben Corporation […]

1) Gandrud Kennel uses tenant-days as its measure of activity; an animal housed in the kennel for one day is counted as one tenant-day. During June, the kennel budgeted for 2,600 tenant-days, but its actual level of activity was 2,580 […]

1) The inventory turnover for Year 2 is closest to: A.3.75 B.1.20 C.4.09 D.0.83 2) Departmental overhead rates are generally preferred to plant-wide overhead rates when: A.the activities of the various departments in the plant are not homogeneous. B.the activities […]

1) When a multi-product factory operates at full capacity, decisions must be made about what products to emphasize. In making such decisions, products should be ranked based on: A) selling price per unit B) contribution margin per unit C) contribution […]

1) Last year Marton Corporation reported a cost of goods sold of $720,000 on its income statement. The following additional data were taken from the company’s comparative balance sheet for the year: The company uses the direct method to determine […]

1) The Portland Division’s operating data for the past two years is as follows: The Portland Division’s margin in Year 2 was 150% of the margin for Year 1. The turnover for Year 1 was: A.10.00 B.2.00 C.1.50 D.3.20 2) […]

1) A static planning budget is suitable for planning but is inappropriate for evaluating how well costs are controlled. 2) Residual income should not be used to evaluate a profit center. Answer: TRUE 3) In traditional costing, some manufacturing costs […]

1) A static planning budget is: A.a budget for a single level of activity. B.a budget that ignores inflation. C.used only for fixed costs. D.used when the mix of products does not change. 2) The working capital at the end […]

1) Up to how much should the company be willing to pay for one additional minute of milling machine time if the company has made the best use of the existing milling machine capacity? (Round your answer to the nearest […]

1) A flexible budget cannot be used to estimate what costs should have been at a given level of activity. 2) Negative free cash flow suggests that the company generated enough cash flow from its operating activities to fund its […]

1) Munar Corporation uses activity-based costing to compute product margins. Overhead costs have already been allocated to the company’s three activity cost pools-Machining, Order Filling, and Other. The costs in those activity cost pools appear below: Machining costs are assigned […]

1) At a volume of 8,000 units, Pwerson Company incurred $32,000 in factory overhead costs, including $12,000 in fixed costs. If volume increases to 9,000 units and both 8,000 units and 9,000 units are within the relevant range, then the […]

1) Setting up a machine to change from producing one product to another is an example of a: A.Unit-level activity. B.Batch-level activity. C.Product-level activity. D.Organization-sustaining activity. 2) Hasty Hardwood Floors installs oak and other hardwood floors in homes and businesses. […]

1) The North Division of Barter Company makes and sells a single product, which is a part used in manufacturing trucks. The annual production capacity is 35,000 units and the variable cost of each unit is $24. Presently the North […]

1) The company has received a special, one-time-only order for 300 units of component D53. There would be no variable selling expense on this special order and the total fixed manufacturing overhead and fixed selling and administrative expenses of the […]

1) Ragins Corporation produces a single product and has the following cost structure: The absorption costing unit product cost is: A.$219 per unit B.$154 per unit C.$159 per unit D.$252 per unit 2) Liscomb Tech is a for-profit vocational school. […]

1) When discounted cash flow methods of capital budgeting are used, the working capital required for a project is ordinarily counted as a cash inflow at the beginning of the project and as a cash outflow at the end of […]

1) Consider the following production and cost data for two products, Q and P: A total of 24,000 machine minutes are available each period and there is unlimited demand for each product. What is the largest possible total contribution margin […]

1) Given the following data: Return on investment (ROI) would be: A.5% B.12% C.25% D.60% 2) Qart Corporation uses the FIFO method in its process costing system. Operating data for the Cutting Department for the month of March appear below: […]

1) How much actual Maintenance Department cost should not be allocated to the operating divisions at the end of the year? A.$4,640 B.$0 C.$34,628 D.$29,988 2) ( Alesi Corporation is considering purchasing a machine that would cost $243,600 and have […]

1) The average collection period for Year 2 is closest to: A.64.0 days B.0.9 days C.61.3 days D.1.1 days 2) Hal currently works as the fry guy at Burger Haven but is thinking of quitting his job to attend college […]

1) Mars Corporation has provided the following data for Year 2: The company’s total stockholders’ equity at the end of Year 2 amounted to $1,095,000 and at the end of Year 1 to $1,060,000. The company’s return on equity for […]

1) The potential benefit that is given up when one alternative is selected over another is called an opportunity cost. 2) Activity-based costing involves a two-stage allocation in which overhead costs are first assigned to departments and then to jobs. […]

1) Gabbert Corporation, which has only one product, has provided the following data concerning its most recent month of operations: The total gross margin for the month under the absorption costing approach is: A.$95,200 B.$156,400 C.$6,800 D.$107,600 2) The income […]

1) Crumbley Inc. produces and sells two products. Data concerning those products for the most recent month appear below: Fixed expenses for the entire company were $42,760. Required: a. Determine the overall break-even point for the company in total sales […]

1) Under the weighted-average method, the equivalent units used to compute the unit costs of ending inventories relate only to work done during the current period. 2) The simple rate of return in any one year may be less than […]

1) Reetz Corporation would like to determine the relative profitability of the company’s products for purposes of making volume trade-off decisions. For illustration, the company has provided the following data for product A25H: What is the profitability index for product […]

1) Berends Corporation makes a product with the following standard costs: The company reported the following results concerning this product in April. The company applies variable overhead on the basis of direct labor-hours. The direct materials purchases variance is computed […]

1) Tysor Framing’s cost formula for its supplies cost is $2,610 per month plus $17 per frame. For the month of July, the company planned for activity of 710 frames, but the actual level of activity was 712 frames. The […]

1) A sunk cost is: A) a cost which may be saved by not adopting an alternative. B) a cost which may be shifted to the future with little or no effect on current operations. C) a cost which cannot […]

1) Selling costs can be either direct or indirect costs. 2) The contribution format is widely used for preparing external financial statements. Answer: F 3) A transaction driver provides a measure of the amount of time required to perform an […]

1) A company has a standard cost system in which fixed and variable manufacturing overhead costs are applied to products on the basis of direct labor-hours. A fixed manufacturing overhead volume variance will NOT necessarily occur in a month in […]

1) Under the weighted-average method of process costing, costs from the prior period are averaged with those of the current period in computing unit costs. 2) Under variable costing, product cost does not contain any fixed manufacturing overhead cost. Answer: […]

1) One assumption in CVP analysis is that the number of units produced and sold does not change. 2) Free cash flow will increase if a company increases its accounts payable balance by delaying payments to suppliers. Answer: TRUE 3) […]

1) Braverman Corporation’s net income last year was $75,000 and its interest expense was $10,000. Total assets at the beginning of the year were $650,000 and total assets at the end of the year were $610,000. The corporation’s income tax […]

1) The Millard Corporation has two service departments and two operating departments. The following data are available for a recent period: Millard makes no distinction between fixed and variable costs. Costs of Service Department A are allocated on the basis […]

1) The times interest earned ratio is based on net income because that is the amount of earnings that is available for making interest payments. Interest expense is deducted before taxes are determined; creditors have first claim on the earnings […]

1) Apex Corporation has two service departments and two operating departments. The costs of the Personnel department (a service department) are allocated to other departments on the basis of the number of employees in the other departments. Departments and number […]