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
B.B, C, A
C.C, A, B
D.A, C, B
2) The average sale period for Year 2 is closest to:
A.58.5 days
B.33.4 days
C.217.3 days
D.56.2 days
3) Pevy Corporation has two divisions: Southern Division and Northern Division. The
following data are for the most recent operating period:
The common fixed expenses have been allocated to the divisions on the basis of sales.
The company’s overall break-even sales is closest to:
A.$286,163
B.$174,205
C.$236,996
D.$49,167
4) 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 tenant-days.
The kennel has provided the following data concerning the formulas to be used in its
budgeting:
The activity variance for administrative expenses in September would be closest to:
A.$89 F
B.$1 F
C.$1 U
D.$89 U
5) Betterton Corporation uses an activity based costing system to assign overhead costs
to products. In the first stage, two overhead costs-equipment depreciation and
supervisory expense-are allocated to three activity cost pools-Machining, Order Filling,
and Other-based on resource consumption. Data to perform these allocations appear
below:
In the second stage, Machining costs are assigned to products using machine-hours
(MHs) and Order Filling costs are assigned to products using the number of orders. The
costs in the Other activity cost pool are not assigned to products. Activity data for the
company’s two products follow:
What is the overhead cost assigned to Product A8 under activity-based costing?
A.$3,720
B.$3,975
C.$26,000
D.$7,695
6) The total cash flow net of income taxes in year 3 is:
A.$151,000
B.$73,000
C.$31,000
D.$80,000
7) The constrained resource at Nealen Corporation is a key raw material. A total of
9,800 ounces of the constrained resource are available. Data concerning the company’s
two products, B08 and O05, follow:
Product B08 requires 6 ounces of the constrained resource; product O05 requires 4
ounces.
Required:
a. Which product is most profitable, given the company’s constraint?
b. How much of each product should be produced?
c. What is the total contribution margin if your plan in part (b) above is followed?
8) If current assets exceed current liabilities, prepaying an expense on the last day of the
year will:
A.decrease the current ratio.
B.increase the acid-test ratio.
C.decrease the acid-test ratio.
D.increase the current ratio.
9) The company’s average collection period (age of receivables) for Year 2 is closest to:
A.70.1 days
B.1.1 days
C.72.1 days
D.1.0 days
10) Kosco Corporation produces a single product. The company’s absorption costing
income statement for March follows:
During March, the company’s variable production costs were $8 per unit and its fixed
manufacturing overhead totaled $5,000.
Net operating income under variable costing for March would be:
A.$7,200
B.$7,000
C.$7,600
D.$6,800
11) Based on the information above, what will be Jebb’s increase or decrease in profit
for the year if he chooses to start slicing up the lettuce instead of selling it whole?
A) $3,000 increase
B) $3,000 decrease
C) $12,000 decrease
D) $30,000 increase
12) Kowaleski Corporation makes a product with the following standard costs:
In June the company produced 9,100 units using 27,010 kilos of the direct material and
930 direct labor-hours. During the month the company purchased 30,600 kilos of the
direct material at a price of $3.70 per kilo. The actual direct labor rate was $19.90 per
hour and the actual variable overhead rate was $4.20 per hour. The materials price
variance is computed when materials are purchased. Variable overhead is applied on the
basis of direct labor-hours.
Required:
a. Compute the materials quantity variance.
b. Compute the materials price variance.
c. Compute the labor efficiency variance.
d. Compute the labor rate variance.
e. Compute the variable overhead efficiency variance.
f. Compute the variable overhead rate variance.
13) The following data relate to the Blending Department of Tru-Color Paint
Corporation for a recent month:
All materials are added prior to the beginning of work in the Blending Department.
Assuming Tru-Color Paint Corporation uses the FIFO method, the equivalent units for
conversion costs would be:
A.42,600
B.44,400
C.46,000
D.54,000
14) Escau Corporation is a wholesale distributor that uses activity-based costing for all
of its overhead costs. The company has provided the following data concerning its
annual overhead costs and its activity based costing system:
The “Other” activity cost pool consists of the costs of idle capacity and
organization-sustaining costs.
The activity measures for the activity cost pools for the year are as follows:
To the nearest whole dollar, how much wages and salaries cost would be allocated to a
customer who made 8 orders in a year?
A.$14,784
B.$11,704
C.$7,392
D.$9,548