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
manufacturing overhead expense, and $1,320,000 of fixed selling and administrative
expense. The company does not have any variable manufacturing overhead costs or
variable selling and administrative costs. During its first year of operations, the
company produced 38,000 units and sold 33,000 units. The company’s only product is
sold for $240 per unit.
Required:
a. Assume the company uses super-variable costing. Compute the unit product cost for
the year.
b. Assume the company uses super-variable costing. Prepare an income statement for
the year.
2) Holding all other things constant, if the price elasticity of demand increases (i.e.,
becomes more negative), then the markup under the economists’ approach to pricing
will:
A.increase.
B.decrease.
C.remain the same.
D.The effect cannot be determined.
3) What would be the total internal failure cost appearing on the quality cost report?
A.$161,000
B.$129,000
C.$139,000
D.$170,000
4) Yehle Inc. regularly uses material Y51B and currently has in stock 460 liters of the
material for which it paid $2,530 several weeks ago. If this were to be sold as is on the
open market as surplus material, it would fetch $4.55 per liter. New stocks of the
material can be purchased on the open market for $5.45 per liter, but it must be
purchased in lots of 1,000 liters. You have been asked to determine the relevant cost of
720 liters of the material to be used in a job for a customer. The relevant cost of the 720
liters of material Y51B is:
A) $3,924
B) $5,450
C) $3,510
D) $3,276
5) Maraby Corporation’s accounts receivable turnover for Year 2 was closest to:
A.13.5
B.7.8
C.11.2
D.9.4
6) Hairston Corporation manufactures and sells a single product. The company uses
units as the measure of activity in its budgets and performance reports. During
November, the company budgeted for 7,700 units, but its actual level of activity was
7,720 units. The company has provided the following data concerning the formulas
used in its budgeting and its actual results for November:
Data used in budgeting:
Actual results for November:
The spending variance for direct materials in November would be closest to:
A.$40 U
B.$370 U
C.$40 F
D.$370 F
7) The ratio of total cash, marketable securities, accounts receivable, and short-term
notes to current liabilities is:
A.the debt-to-equity ratio.
B.the current ratio.
C.the acid-test ratio.
D.working capital.
8) Florea Corporation has provided the following data concerning its most important
raw material, compound K09B:
The raw material was purchased on account.
The Materials Price Variance for August would be recorded as a:
A.Credit of $112
B.Credit of $300
C.Debit of $112
D.Debit of $300
9) Richards Corporation has the following budgeted sales for the first half of next year:
The company is in the process of preparing a cash budget and must determine the
expected cash collections by month. To this end, the following information has been
assembled:
The accounts receivable balance on January 1 is $70,000. Of this amount, $60,000
represents uncollected December sales and $10,000 represents uncollected November
sales.
The total cash collected during January would be:
A.$270,000
B.$420,000
C.$345,000
D.$360,000
10) Dybala Corporation produces and sells a single product. Data concerning that
product appear below:
The company is currently selling 5,000 units per month. Fixed expenses are $173,000
per month. The marketing manager believes that a $6,000 increase in the monthly
advertising budget would result in a 170 unit increase in monthly sales. What should be
the overall effect on the company’s monthly net operating income of this change?
A.increase of $1,480
B.decrease of $6,000
C.increase of $7,480
D.decrease of $1,480
11) Wiacek Corporation has received a request for a special order of 4,000 units of
product F65 for $26.60 each. Product F65’s unit product cost is $25.80, determined as
follows:
Direct labor is a variable cost. The special order would have no effect on the company’s
total fixed manufacturing overhead costs. The customer would like modifications made
to product F65 that would increase the variable costs by $3.00 per unit and that would
require an investment of $23,000 in special molds that would have no salvage value.
This special order would have no effect on the company’s other sales. The company has
ample spare capacity for producing the special order. If the special order is accepted,
the company’s overall net operating income would increase (decrease) by:
A) $(31,800)
B) $3,800
C) $3,200
D) $(48,400)
12) The accounts receivable for Note Corporation was $240,000 at the beginning of the
year and $260,000 at the end of the year. If the accounts receivable turnover for the year
was 8 and 20% of the total sales were cash sales, the total sales for the year were:
A.$2,600,000
B.$2,000,000
C.$2,400,000
D.$2,500,000
13) The Collins Corporation uses standard costing and has established the following
direct material and direct labor standards for each unit of the single product it makes:
Direct materials: 4 gallons at $8 per gallon
Direct labor: 1 hour at $16 per hour
During July, the company made 6,000 units of product and incurred the following costs:
Direct materials purchased: 26,800 gallons at $8.20 per gallon
Direct materials used: 25,200 gallons
Direct labor used: 5,600 hours at $15.30 per hour
The direct materials purchases variance is computed when the materials are purchased.
The labor efficiency variance for July was:
A.$6,400 Favorable
B.$89,600 Favorable
C.$10,320 Favorable
D.$6,120 Favorable
14) Supply costs at Chobot Corporations chain of gyms are listed below:
Management believes that supply cost is a mixed cost that depends on client-visits. Use
the high-low method to estimate the variable and fixed components of this cost.
Compute the variable component first, rounding off to the nearest whole cent. Then
compute the fixed component, rounding off to the nearest whole dollar. Those estimates
are closest to:
A) $2.18 per client-visit; $26,745 per month
B) $1.01 per client-visit; $14,330 per month
C) $1.04 per client-visit; $13,949 per month
D) $0.99 per client-visit; $14,607 per month
15) The current ratio at the end of Year 2 is closest to:
A.0.45
B.1.93
C.0.44
D.1.04
16) The company’s earnings per share is closest to:
A.$7.37 per share
B.$0.45 per share
C.$0.30 per share
D.$0.19 per share
17) Vanikord Corporation currently has two divisions which had the following
operating results for last year:
Because the Rubber Division sustained a loss, the president of Vanikoro is considering
the elimination of this division. All of the divisions traceable fixed costs could be
avoided if the division was dropped. None of the allocated common corporate fixed
costs could be avoided. If the Rubber Division was dropped at the beginning of last
year, how much higher or lower would Vanikoro’s total net operating income have been
for the year?
A) $20,000 higher
B) $50,000 higher
C) $50,000 lower
D) $30,000 lower
18) The net cash provided (used) by investing activities would be:
A.$15,000
B.$(10,000)
C.$(8,000)
D.$5,000
19) The product’s profit-maximizing price according to the formula in the text is closest
to:
A.$10.73
B.$38.89
C.$9.16
D.$19.89