1) wable inc. has provided the following data to be used in evaluating a proposed
investment project:
for tax purposes, the entire initial investment without any reduction for salvage value
will be depreciated over 5 years. the company uses a discount rate of 16%.
when computing the net present value of the project, what is the after-tax cash flow
from the salvage value in the final year?
a.$55,000
b.$38,500
c.$16,500
d.$0
2) woofter corporation manufactures and sells a single product. the company uses units
as the measure of activity in its budgets and performance reports. during january, the
company budgeted for 7,600 units, but its actual level of activity was 7,560 units. the
company has provided the following data concerning the formulas used in its budgeting
and its actual results for january:
the net operating income in the planning budget for january would be closest to:
a.$16,410
b.$16,238
c.$28,604
d.$29,140
3) rowena corporation manufactures laser printers. rowena currently manufactures the
32,000 imaging drums that it uses in its printers. the annual costs to manufacture these
32,000 drums are as follows:
hardware solutions, inc. has offered to provide rowena with all of its imaging drum
needs for $72 per drum. if rowena accepts this offer, 70% of the fixed manufacturing
cost above could be totally eliminated. also, rowena will be able to use the freed up
space to generate $240,000 of income each year in the production of alternative
products.
assume that demand for rowena printers goes up from 32,000 annually to 40,000
annually. also assume that rowena has the idle capacity to produce the extra 8,000
drums needed for the printers. under these conditions, would rowena be better off to
make the drums or buy the drums and by how much? (assume that there is no change in
cost structure.)
a.$96,000 better to buy
b.$160,000 better to buy
c.$204,000 better to make
d.$264,000 better to make
4) gayman corporation applies manufacturing overhead to products on the basis of
standard machine-hours. the company bases its predetermined overhead rate on 7,300
machine-hours. the company’s total budgeted fixed manufacturing overhead is $28,470.
in the most recent month, the total actual fixed manufacturing overhead was $28,940.
the company actually worked 7,510 machine-hours during the month. the standard
hours allowed for the actual output of the month totaled 7,670 machine-hours. what was
the overall fixed manufacturing overhead volume variance for the month?
a.$819 favorable
b.$819 unfavorable
c.$470 unfavorable
d.$1,443 favorable
5) the current ratio at the end of year 2 is closest to:
a.0.95
b.0.38
c.0.40
d.1.76
6) in a job-order costing system, direct labor costs usually are recorded initially with a
debit to:
a.manufacturing overhead
b.finished goods inventory
c.direct labor expense
d.work in process
7) kava inc. manufactures industrial components. one of its products, which is used in
the construction of industrial air conditioners, is known as k65. data concerning this
product are given below:
the above per unit data are based on annual production of 4,000 units of the component.
direct labor can be considered to be a variable cost.
source: cma, adapted
refer to the original data in the problem. what is the current contribution margin per unit
for component k65 based on its selling price of $180 and its annual production of 4,000
units?
a.$142
b.$102
c.$40
d.$140
8) derflinger corporation reported the following data for the month of january:
the cost of goods sold for january was:
a.$126,000
b.$180,000
c.$255,000
d.$170,000
9) (ignore income taxes in this problem.) the management of crail corporation is
considering a project that would require an initial investment of $51,000. no other cash
outflows would be required. the present value of the cash inflows would be $60,180. the
profitability index of the project is closest to:
a.0.18
b.0.82
c.1.18
d.0.15
10) information on four investment proposals is given below:
rank the proposals in terms of preference according to the project profitability index:
a.3, 4, 1, 2
b.1, 2, 3, 4
c.1, 3, 2, 4
d.2, 1, 4, 3
11) supreme celery corporation manufactures four celery based products. floods and fire
on the west coast are going to cause a shortage of celery for supreme next month.
information related to the four celery products that it produces are shown below. the
numbers relate to the cost per case and the amount of celery per case of product:
to maximize profit next month, in what order would it be best for supreme to schedule
production (first to last)?
a.jelly, cracker spread, soup, snack bars
b.jelly, snack bars, cracker spread, soup
c.cracker spread, snack bars, jelly, soup
d.snack bars, jelly, soup, cracker spread
12) eber wares is a division of a major corporation. the following data are for the latest
year of operations:
required:
a. what is the division’s margin?
b. what is the division’s turnover?
c. what is the division’s return on investment (roi)?
d. what is the division’s residual income?
13) the following data pertain to harriman company’s operations during july:
the ending finished goods inventory was:
a.$17,000
b.$12,000
c.$7,000
d.$2,000
14) gorley 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 february, the kennel budgeted
for 3,900 tenant-days, but its actual level of activity was 3,940 tenant-days. the kennel
has provided the following data concerning the formulas to be used in its budgeting:
the activity variance for net operating income in february would be closest to:
a.$368 f
b.$368 u
c.$632 f
d.$632 u
15) an increase in the bonds payable account of $200,000 over the course of a year
would be shown on the company’s statement of cash flows prepared under the indirect
method as:
a.an addition of $200,000 under investing activities
b.a deduction of $200,000 under investing activities
c.an addition of $200,000 under financing activities
d.a deduction of $200,000 under financing activities
16) modesto company produces and sells product alphab. to guard against stockouts,
the company requires that 20% of the next month’s sales be on hand at the end of each
month. budgeted sales of product alphab over the next four months are:
budgeted production for august would be:
a.62,000 units
b.70,000 units
c.58,000 units
d.50,000 units
17) aardvik corporation is considering renting a new building at an annual rent of
$10,000. at a tax rate of 40%, the after-tax cost of the proposed rent would be:
a.$4,000
b.$6,000
c.$10,000
d.$5,000
18) financial statements for raridan company appear below:
required:
compute the following for year 2:
a. current ratio.
b. acid-test ratio.
c. average collection period.
d. inventory turnover.
e. times interest earned.
f. debt-to-equity ratio.
19) the following information is available on browning inc.’s product a:
the company uses the absorption costing approach to cost-plus pricing described in the
text. based on these data, the total selling and administrative expenses each year are:
a.$720,000
b.$480,000
c.$640,000
d.$400,000
20) (ignore income taxes in this problem.) vetrano corporation uses a discount rate of
13% in its capital budgeting. partial analysis of an investment in automated equipment
with a useful life of 5 years has thus far yielded a net present value of -$553,822. this
analysis did not include any estimates of the intangible benefits of automating this
process nor did it include any estimate of the salvage value of the equipment.
required:
a. ignoring any salvage value, how large would the additional cash flow per year from
the intangible benefits have to be to make the investment in the automated equipment
financially attractive?
b. ignoring any cash flows from intangible benefits, how large would the salvage value
of the automated equipment have to be to make the investment in the automated
equipment financially attractive?