1) relative profitability is concerned with ranking business segments for the purpose of
making trade-offs among the segments.
2) 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. the amount of
overhead that the company would apply to finished production would ordinarily be the
actual direct labor-hours times the predetermined overhead rate per direct labor-hour.
3) the contribution margin ratio measures the effect on the total contribution margin of a
given change in total sales.
4) in determining whether a company’s financial condition is improving or deteriorating
over time, vertical analysis of financial statement data would be more useful than
horizontal analysis.
5) under the direct method of determining the net cash provided by operating activities
on the statement of cash flows, an increase in accounts payable would be deducted from
cost of goods sold to convert cost of goods sold to a cash basis.
6) the sarbanes-oxley act of 2002 was intended to protect the interests of those who
invest in publicly traded companies by ensuring that their original investments could be
recovered in case of fraud.
7) a contribution approach income statement can usually be easily prepared from the
information contained in a corporation’s published income statement.
8) direct labor is always considered to be a product cost under variable costing.
9) a credit balance in the manufacturing overhead account at the end of the year means
that overhead was underapplied.
10) job-order costing is used in those situations where units of a product are
homogeneous, such as in the manufacture of sugar.
11) the relevant range concept is not applicable to mixed costs.
12) weygandt corporation reported the following data for the month of february:
the total manufacturing cost for february was:
a.$90,000
b.$158,000
c.$67,000
d.$162,000
13) derflinger corporation reported the following data for the month of january:
the total manufacturing cost for january was:
a.$176,000
b.$74,000
c.$106,000
d.$172,000
14) united industries manufactures a number of products at its highly automated factory.
the products are very popular, with demand far exceeding the factory’s capacity. to
maximize profit, management should rank products based on their:
a.gross margin
b.contribution margin
c.selling price
d.contribution margin per unit of the constrained resource
15) the koski company has established standards as follows:
actual production figures for the past year were as follows:
the variable overhead rate variance is:
a.$345 f
b.$95 f
c.$655.50 f
d.$345 u
16) dodge company makes two products from a common input. joint processing costs
up to the split-off point total $44,800 a year. the company allocates these costs to the
joint products on the basis of their total sales values at the split-off point. each product
may be sold at the split-off point or processed further.
what is the net monetary advantage (disadvantage) of processing product x beyond the
split-off point?
a.$31,300
b.$5,300
c.$23,500
d.$(2,500)
17) financial statements for larkins company appear below:
dividends during year 2 totaled $135 thousand, of which $12 thousand were preferred
dividends. the market price of a share of common stock on december 31, year 2 was
$150.
larkins company’s return on total assets for year 2 was closest to:
a.13.6%
b.16.0%
c.15.3%
d.17.0%
18) management of solman corporation has asked your help as an intern in preparing
some key reports for june. the beginning balance in the raw materials inventory account
was $20,000. during the month, the company made raw materials purchases amounting
to $69,000. at the end of the month, the balance in the raw materials inventory account
was $32,000. direct labor cost was $24,000 and manufacturing overhead was $71,000.
the beginning balance in the work in process account was $24,000 and the ending
balance was $19,000. the beginning balance in the finished goods account was $53,000
and the ending balance was $58,000. selling expense was $20,000 and administrative
expense was $35,000.
the conversion cost for june was:
a.$95,000
b.$140,000
c.$93,000
d.$152,000
19) kulp corporation has two major business segments-east and west. in july, the east
business segment had sales revenues of $900,000, variable expenses of $441,000, and
traceable fixed expenses of $171,000. during the same month, the west business
segment had sales revenues of $450,000, variable expenses of $234,000, and traceable
fixed expenses of $45,000. the common fixed expenses totaled $321,000 and were
allocated as follows: $180,000 to the east business segment and $141,000 to the west
business segment.
a properly constructed segmented income statement in a contribution format would
show that the segment margin of the east business segment is:
a.$288,000
b.$279,000
c.$108,000
d.$441,000
20) caparros corporation manufactures a variety of products. variable costing net
operating income was $62,800 last year and was $74,900 this year. last year, ending
inventory decreased by 3,300 units. this year, ending inventory increased by 1,900
units. fixed manufacturing overhead cost is $7 per unit.
what was the absorption costing net operating income last year?
a.$72,600
b.$85,900
c.$62,800
d.$39,700
21) detmer enterprises has budgeted sales for the next five months as follows:
past experience has shown that the ending inventory for each month should be equal to
10% of the next month’s sales in units. the inventory on december 31 contained 400
units, which was in excess of the desired level of inventory. the company needs to
prepare a production budget for the first quarter of the year.
the desired ending inventory for april is:
a.460 units
b.540 units
c.720 units
d.680 units
22) menson corporation manufactures and sells a single product. the company uses
units as the measure of activity in its budgets and performance reports. during
december, the company budgeted for 5,800 units, but its actual level of activity was
5,830 units. the company has provided the following data concerning the formulas to be
used in its budgeting:
the net operating income in the planning budget for december would be closest to:
a.$19,788
b.$24,979
c.$19,380
d.$25,238
23) utility costs at one of hambley corporation’s factories are listed below:
management believes that utility cost is a mixed cost that depends on machine-hours.
required:
estimate the variable cost per machine-hour and the fixed cost per month using the
high-low method. show your work!
24) hausman hospital bases its budgets on patient-visits. the hospital’s static planning
budget for october appears below:
required:
prepare a flexible budget for 8,900 patient-visits per month.
25) heaslet fabrication is a division of a major corporation. last year the division had
total sales of $36,640,000, net operating income of $1,795,360, and average operating
assets of $8,000,000. the company’s minimum required rate of return is 12%.
required:
what is the division’s return on investment (roi)?
26) clune clinic bases its budgets on the activity measure patient-visits. during october,
the clinic planned for an activity level of 2,100 patient-visits, but the activity level was
actually 2,600 patient-visits. the clinic has provided the following data concerning the
formulas it uses in its budgeting:
required:
prepare the clinic’s flexible budget for october based on the actual level of activity for
the month.
27) novielli corporation bases its budgets on the activity measure customers served.
during november, the company planned to serve 39,000 customers, but actually served
44,000 customers. the company has provided the following data concerning the
formulas it uses in its budgeting:
required:
prepare the company’s flexible budget for november based on the actual level of activity
for the month.
28) aderholt emergency care hospital uses the step-down method to allocate service
department costs to operating departments. the hospital has two service departments,
administration and information technology (it), and two operating departments,
emergency room and intensive care.
administration department costs are allocated first on the basis of employees and it
department costs are allocated second on the basis of computers.
required:
allocate the service department costs to the operating departments using the step-down
method.
29) sailer corporation uses the following activity rates from its activity-based costing to
assign overhead costs to products.
last year, product j34u involved 48 batches, 22 customer orders, and 395 assembly
hours.
required:
how much overhead cost would be assigned to product j34u using the company’s
activity-based costing system? show your work!
30) campman 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:
using the weighted-average method, determine the equivalent units of production for
materials and conversion costs.
31) data concerning emmanuel corporation’s single product appear below:
fixed expenses are $650,000 per month. the company is currently selling 8,000 units per
month.
required:
the marketing manager would like to introduce sales commissions as an incentive for
the sales staff. the marketing manager has proposed a commission of $12 per unit. in
exchange, the sales staff would accept an overall decrease in their salaries of $79,000
per month. the marketing manager predicts that introducing this sales incentive would
increase monthly sales by 300 units. what should be the overall effect on the company’s
monthly net operating income of this change? show your work!
