1) if a company operates at a profit, the after-tax cost of a tax-deductible cash expense
is determined by multiplying the cash expense by one minus the tax rate.
2) a favorable labor efficiency variance would result in a credit balance in the labor
efficiency variance account.
3) when computing the acid-test ratio, prepaid expenses are ignored.
4) free cash flow is net cash provided by operating activities less capital expenditures
and dividends.
5) since variable costing emphasizes costs by behavior, it works well with
cost-volume-profit analysis.
6) job-order costing would be more likely to be used than process costing in situations
where many different products or services are produced each period to customer
specifications.
7) a balanced scorecard is an integrated set of performance measures that should be
designed to support management’s strategy throughout the organization.
8) the following journal entry would be made to apply overhead cost to jobs in a
job-order costing system:
9) when the activity measure is the number of units sold, the revenue variance is
unfavorable if the average actual selling price is less than expected.
10) if personnel department expenses are allocated on the basis of the number of
employees in various departments, then the number of employees in the personnel
department itself must be included in the allocation base when the step-down method is
used.
11) palmerin corporation is preparing its cash budget for november. the budgeted
beginning cash balance is $30,000. budgeted cash receipts total $167,000 and budgeted
cash disbursements total $171,000. the desired ending cash balance is $50,000.
to attain its desired ending cash balance for november, the company should borrow:
a.$0
b.$76,000
c.$50,000
d.$24,000
12) financial statements for oram company appear below:
dividends during year 2 totaled $161 thousand, of which $10 thousand were preferred
dividends. the market price of a share of common stock on december 31, year 2 was
$610.
oram company’s times interest earned for year 2 was closest to:
a.10.8
b.11.8
c.19.5
d.7.5
13) 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 price-earnings ratio on december 31, year 2 was closest to:
a.8.91
b.8.57
c.20.79
d.6.00
14) earnings per share of common stock will immediately increase as a result of:
a.the sale of additional shares of common stock by the company
b.an increase in the dividends paid to common stockholders by the company
c.an increase in the company’s net income
d.the issuance of bonds by the company to finance construction of new buildings
15) weygandt corporation reported the following data for the month of february:
the net operating income for february was:
a.$48,000
b.$6,000
c.$68,000
d.-$4,000
16) the following labor standards have been established for a particular product:
the following data pertain to operations concerning the product for the last month:
required:
a. what is the labor rate variance for the month?
b. what is the labor efficiency variance for the month?
17) the management of zorrilla corporation is considering dropping product r10c. data
from the company’s accounting system appear below:
all fixed expenses of the company are fully allocated to products in the company’s
accounting system. further investigation has revealed that $42,000 of the fixed
manufacturing expenses and $48,000 of the fixed selling and administrative expenses
are avoidable if product r10c is discontinued.
what would be the effect on the company’s overall net operating income if product r10c
were dropped?
a.overall net operating income would decrease by $28,000
b.overall net operating income would decrease by $45,000
c.overall net operating income would increase by $28,000
d.overall net operating income would increase by $45,000
18) meleski corporation’s recent utility costs are listed below:
management believes that utility cost is a mixed cost that depends on machine-hours.
using the least-squares regression method, the estimate of the variable component of
utility cost per machine-hour is closest to:
a.$4.40
b.$4.79
c.$3.47
d.$3.37
19) tempcon, inc. sells and installs furnaces for $3,000 per furnace. the following cost
formula relates to last year’s operations at tempcon:
y = $125,000 + $1,800x
if tempcon sold and installed 500 furnaces last year, what was its total contribution
margin last year?
a.$475,000
b.$900,000
c.$1,025,000
d.$600,000
20) suppose that the albany division buys the 3,000 units from the outside supplier at a
price of $10 per unit. also suppose that the buffalo division can sell 10,000 units on the
outside market. as a result of albany shifting its purchases to the outside supplier, the
yearly net operating income of alfred products, inc. as a whole will:
a.decrease by $9,000
b.increase by $9,000
c.decrease by $6,000
d.increase by $6,000
incremental revenue on units sold = ($12 – $10) x 3,000 = $6,000 increase in net
operating income.
21) data from karmely corporation’s most recent balance sheet and the company’s
income statement appear below:
the debt-to-equity ratio at the end of year 2 is closest to:
a.0.28
b.0.77
c.0.60
d.0.37
22) similien corporation produces and sells a single product. data concerning that
product appear below:
fixed expenses are $300,000 per month. the company is currently selling 5,000 units per
month. the marketing manager would like to cut the selling price by $14 and increase
the advertising budget by $17,000 per month. the marketing manager predicts that these
two changes would increase monthly sales by 1,400 units. what should be the overall
effect on the company’s monthly net operating income of this change?
a.increase of $64,200
b.increase of $215,400
c.decrease of $64,200
d.decrease of $5,800
23) magnano inc.’s inspection costs are listed below:
management believes that inspection cost is a mixed cost that depends on units
produced.
using the least-squares regression method, the estimate of the variable component of
inspection cost per unit produced is closest to:
a.$3.51
b.$3.49
c.$4.93
d.$3.54
24) holmon surgical hospital uses the direct method to allocate service department costs
to operating departments. the hospital has two service departments, information
technology and administration, and two operating departments, surgery and recovery.
information technology department costs are allocated on the basis of computer
workstations and administration department costs are allocated on the basis of
employees.
the total amount of information technology department cost allocated to the two
operating departments is closest to:
a.$37,740
b.$24,997
c.$98,705
d.$33,474
25) 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 wages and salaries in february would be closest to:
a.$1,152 u
b.$1,152 f
c.$292 u
d.$292 f
26) weltin industrial gas corporation supplies acetylene and other compressed gases to
industry. data regarding the store’s operations follow:
sales are budgeted at $390,000 for november, $370,000 for december, and $380,000 for
january.
collections are expected to be 90% in the month of sale, 5% in the month following the
sale, and 5% uncollectible.
the cost of goods sold is 60% of sales.
the company purchases 70% of its merchandise in the month prior to the month of sale
and 30% in the month of sale. payment for merchandise is made in the month following
the purchase.
other monthly expenses to be paid in cash are $21,800.
monthly depreciation is $18,000.
ignore taxes.
required:
a. prepare a schedule of expected cash collections for november and december.
b. prepare a merchandise purchases budget for november and december.
c. prepare cash budgets for november and december.
d. prepare budgeted income statements for november and december.
e. prepare a budgeted balance sheet for the end of december.
27) ceder products is a division of a major corporation. last year the division had total
sales of $21,520,000, net operating income of $538,000, and average operating assets of
$8,000,000. the company’s minimum required rate of return is 18%.
the division’s turnover is closest to:
a.2.52
b.0.07
c.40.00
d.2.69
28) financial statements for marcalo company appear below:
marcalo company’s acid-test ratio at the end of year 2 was closest to:
a.1.08
b.2.05
c.0.49
d.0.32
29) the contribution margin ratio of lukasiewicz corporation’s only product is 62%. the
company’s monthly fixed expense is $297,600 and the company’s monthly target profit
is $37,200.
required:
determine the dollar sales to attain the company’s target profit. show your work!
30) hirpara inc. has provided the following data for july:
required:
prepare t-accounts for raw materials, work in process, finished goods, and
manufacturing overhead, and cost of goods sold. record the beginning balances and
each of the transactions listed above. finally, determine the ending balances.
31) rabin corporation uses the fifo method in its process costing. the following data
concern the company’s mixing department for the month of august.
required:
compute the cost per equivalent unit for materials and conversion for the mixing
department for august using the fifo method.
32) soffer corporation manufactures a variety of products. last year, variable costing net
operating income was $72,000. the fixed manufacturing overhead costs released from
inventory under absorption costing amounted to $24,000.
required:
determine the absorption costing net operating income last year. show your work!
33) the ending and beginning balances of tourville corporation’s balance sheet accounts
for the most recent year are listed below:
the company’s net income (loss) for the year was ($8,000) and its cash dividends were
$3,000.
required:
classify the change for the year in each balance sheet account as a source, use, or
neither a source nor a use.