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 the time required to fill orders. Data
concerning a particular order appear below:
The throughput time was:
A.30.5 hours
B.4.5 hours
C.13.9 hours
D.26 hours
3) Manning Products, Inc., operates an electric power plant that provides all electrical
power for the company’s Machining and Fabrication Departments. Information on kwh
of power usage in these departments for May follows:
The costs of the electric power plant are all fixed. The level of budgeted fixed costs is
determined by the peak-period requirements. Budgeted fixed costs for May totaled
$120,000. Actual fixed costs for the month totaled $130,000. The Machining
Department requires 70% of the peak-period capacity and the Fabrication Department
requires 30%.
For performance evaluation purposes, how much of the electric power plant’s fixed
costs should be charged to the Fabrication Department at the end of the month?
A.$36,000
B.$91,000
C.$44,000
D.$97,500
4) Slezak Corporation manufactures and sells one product. The following information
pertains to the company’s first year of operations:
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 35,000 units and sold 31,000 units. The company’s only product is sold for
$264 per unit.
Required:
a. Assume the company uses super-variable costing. Compute the unit product cost for
the year and prepare an income statement for the year.
b. Assume that the company uses an absorption costing system that assigns $28 of
direct labor cost and $68 of fixed manufacturing overhead to each unit that is produced.
Compute the unit product cost for the year and prepare an income statement for the
year.
5) Deschamp Corporation’s variable overhead is applied on the basis of direct
labor-hours. The company has established the following variable overhead standards for
product O28H:
The following data pertain to the most recent month’s operations during which 2,160
units of product O28H were made:
Required:
a. What was the variable overhead rate variance for the month?
b. What was the variable overhead efficiency variance for the month?
6) Moffa Corporation manufactures and sells one product. The following information
pertains to the company’s first year of operations:
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 54,000 units and sold 47,000 units. The company’s only product is sold for
$256 per unit.
The company is considering using either super-variable costing or a variable costing
system that assigns $14 of direct labor cost to each unit that is produced. Which of the
following statements is true regarding the net operating income in the first year?
A.Super-variable costing net operating income exceeds variable costing net operating
income by $98,000.
B.Variable costing net operating income exceeds super-variable costing net operating
income by $98,000.
C.Super-variable costing net operating income exceeds variable costing net operating
income by $448,000.
D.Variable costing net operating income exceeds super-variable costing net operating
income by $448,000.
7) The total cash flow net of income taxes in year 2 is:
A.$90,000
B.$103,000
C.$27,000
D.$130,000
8) Phoeuk Corporation manufactures and sells one product. The following information
pertains to the company’s first year of operations:
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 41,000 units and sold 40,000 units. The company’s only product is sold for
$231 per unit.
The unit product cost under super-variable costing is:
A.$88 per unit
B.$166 per unit
C.$110 per unit
D.$209 per unit
9) Gastineau Tile Installation Corporation measures its activity in terms of square feet
of tile installed. Last month, the budgeted level of activity was 1,230 square feet and the
actual level of activity was 1,200 square feet. The company’s owner budgets for supply
costs, a variable cost, at $2.70 per square foot. The actual supply cost last month was
$2,690. In the company’s flexible budget performance report for last month, what would
have been the spending variance for supply costs?
A.$67 F
B.$550 F
C.$631 F
D.$81 F
10) Hallford Clinic has two service departments, Administrative and Support, and two
operating departments, Adult Medicine and Pediatrics.
The clinic uses the direct method to allocate service department costs to operating
departments. Administrative Department costs are allocated on the basis of employee
hours and Support Department costs are allocated on the basis of space occupied in
square feet.
The total amount of Administrative Department cost allocated to the Adult Medicine
Department is closest to:
A.$31,019
B.$20,520
C.$21,600
D.$18,240
11) The predetermined overhead rate for the year was closest to:
A.$34.95
B.$34.83
C.$34.98
D.$35.10
12) Under absorption costing, fixed manufacturing overhead costs:
A.are deferred in inventory when production exceeds sales.
B.are always treated as period costs.
C.are released from inventory when production exceeds sales.
D.are ignored.
13) The Corporation’s ending work in process inventory consisted of one job, Job 42.
The job had been charged with $28,000 of direct labor cost, which consisted of 2,000
actual labor-hours. The direct materials cost in Job 42 totaled:
A.$33,000
B.$42,000
C.$17,000
D.$30,000
14) Bohlen Corporation produces and sells a single product. Data concerning that
product appear below:
Fixed expenses are $716,000 per month. The company is currently selling 6,000 units
per month. Consider each of the following questions independently.
Management is considering using a new component that would increase the unit
variable cost by $8. Since the new component would increase the features of the
company’s product, the marketing manager predicts that monthly sales would increase
by 400 units. What should be the overall effect on the company’s monthly net operating
income of this change?
A.increase of $54,400
B.decrease of $54,400
C.decrease of $6,400
D.increase of $6,400
15) Krenski Corporation has a Parts Division that does work for other Divisions in the
company as well as for outside customers. The company’s Equipment Division has
asked the Parts Division to provide it with 10,000 special parts each year. The special
parts would require $12.00 per unit in variable production costs.
The Equipment Division has a bid from an outside supplier for the special parts at
$31.00 per unit. In order to have time and space to produce the special part, the Parts
Division would have to cut back production of another part-the TW3 that it presently is
producing. The TW3 sells for $35.00 per unit, and requires $13.00 per unit in variable
production costs. Packaging and shipping costs of the TW3 are $3.00 per unit.
Packaging and shipping costs for the new special part would be only $2.00 per unit. The
Parts Division is now producing and selling 50,000 units of the TW3 each year.
Production and sales of the TW3 would drop by 10% if the new special part is produced
for the Equipment Division.
Required:
a. What is the range of transfer prices within which both the Divisions’ profits would
increase as a result of agreeing to the transfer of 10,000 special parts per year from the
Parts Division to the Equipment Division?
b. Is it in the best interests of Krenski Corporation for this transfer to take place?
Explain.
16) Gremel Corporation has provided the following financial data:
17) Nathan Company has an Equipment Services Department that performs all needed
maintenance work on the equipment in the company’s Fabrication and Assembly
Departments. Costs of the equipment Services Department are charged to the
Fabrication and Assembly Departments on the basis of direct labor-hours. Data on
direct labor-hours for last year follow:
For the year just ended, the company budgeted its variable maintenance costs at
$200,000 for the year. Actual variable maintenance costs for the year totaled $275,000.
For performance evaluation purposes, how much of the $275,000 of actual variable
maintenance cost should be charged to the Assembly Department at the end of the year
just ended?
A.$175,000
B.$116,900
C.$192,500
D.$150,000
18) Sarter Corporation is in the process of preparing its annual budget. The following
beginning and ending inventory levels are planned for the year.
Each unit of finished goods requires 3 grams of raw material. The company plans to sell
880,000 units during the year.
How much of the raw material should the company purchase during the year?
A.2,550,000 grams
B.2,490,000 grams
C.2,480,000 grams
D.2,500,000 grams
19) Division 1 of Ace Company makes and sells wheels that can either be sold to
outside customers or transferred to Division 2. The following data are available from
last month:
Division 1:
Division 2:
If Division 1 sells the wheels to Division 2, Division 1 can avoid $2 per unit in sales
commissions.
Suppose that Division 1 sells 11,500 units each month to outside customers. According
to the formula in the text, what is the lowest acceptable transfer price from the
viewpoint of the selling division?
A.$47.00 per unit
B.$43.50 per unit
C.$37.50 per unit
D.$34.73 per unit
20) Joeston Corporation makes a product with the following costs:
The company uses the absorption costing approach to cost-plus pricing described in the
text. The pricing calculations are based on budgeted production and sales of 14,000
units per year. The company has invested $540,000 in this product and expects a return
on investment of 10%. The markup on absorption cost would be closest to:
A.27.1%
B.124.2%
C.34.2%
D.10.0%
