1) If all four of Argo Corporation’s overhead variances are favorable, Argo’s overhead
will be underapplied.
2) When the predetermined overhead rate is based on the level of activity at capacity,
underapplied manufacturing overhead may be called the Cost of Unused Capacity and
treated as a period expense.
3) In preference decision situations, a project with a lower net present value may be
preferable to a project with a higher net present value.
4) Manufacturing salaries and wages incurred in the factory are period costs.
5) The “costs to be accounted for” portion of the cost reconciliation report includes the
cost of beginning work in process inventory and the costs added during the period.
6) Purchasing inventory on credit increases the book value per share of a retailer.
7) In activity-based costing, some manufacturing costs can be excluded from product
costs.
8) One disadvantage of using the actual cost of a product as the transfer price is that it
does not provide a strong incentive for the producing division to control its costs.
9) Hepburn Clinic uses client-visits as its measure of activity. During July, the clinic
budgeted for 3,200 client-visits, but its actual level of activity was 3,180 client-visits.
The clinic has provided the following data concerning the formulas to be used in its
budgeting for July:
The net operating income in the planning budget for July would be closest to:
A.$22,183
B.$15,434
C.$21,906
D.$15,860
10) Leaphart 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 May, the kennel budgeted
for 2,800 tenant-days, but its actual level of activity was 2,840 tenant-days. The kennel
has provided the following data concerning the formulas to be used in its budgeting:
The administrative expenses in the planning budget for May would be closest to:
A.$7,026
B.$6,927
C.$7,336
D.$7,320
11) ( The following data pertain to an investment project:
The internal rate of return is closest to:
A.13%
B.14%
C.15%
D.16%
12) Which of the following costs should not be included in product costs for internal
management reports that are used for decision-making?
A.Costs of unit-level activities.
B.Costs of batch-level activities.
C.Costs of product-level activities.
D.Costs of organization-sustaining activities.
13) Vinup Corporation has provided the following data concerning an investment
project that it is considering:
The working capital would be released for use elsewhere at the end of the project in 4
years. The company’s discount rate is 13%. The net present value of the project is
closest to:
A.$8,486
B.$36,737
C.$89,000
D.$(36,263)
14) Partin Corporation’s cash and cash equivalents consist of cash and marketable
securities. Last year the company’s cash account increased by $31,000 and its
marketable securities account decreased by $22,000. Cash provided by operating
activities was $108,000. Net cash used in financing activities was $70,000. Based on
this information, the net cash flow from investing activities on the statement of cash
flows was:
A.a net $9,000 increase.
B.a net $29,000 decrease.
C.a net $38,000 increase.
D.a net $38,000 decrease.
15) Holiday Chemical Corporation uses a standard cost system to collect costs related
to the production of its “bowling ball” fruitcakes. The direct labor standard for each
fruitcake is 1.25 hours at a standard cost of $11.00 per hour. During the month of
November, Holiday’s fruitcake production used 9,820 direct labor-hours at a total direct
labor cost of $106,547. This resulted in production of 8,500 fruitcakes for November.
What is Holiday’s labor rate variance for November?
A.$8,855 Favorable
B.$1,473 Favorable
C.$13,047 Unfavorable
D.$14,520 Unfavorable
16) Stitt Corporation manufactures and sells a single product. The company uses units
as the measure of activity in its budgets and performance reports. During November, the
company budgeted for 5,900 units, but its actual level of activity was 5,880 units. The
company has provided the following data concerning the formulas used in its budgeting
and its actual results for November:
Data used in budgeting:
Actual results for November:
The manufacturing overhead in the flexible budget for November would be closest to:
A.$57,620
B.$56,056
C.$58,013
D.$56,080
17) Cuda Manufacturing Corporation uses a standard cost system with machine-hours
(MHs) as the activity base for overhead. The following information relates to Cuda’s
operations last year:
What was Cuda’s fixed manufacturing overhead budget variance?
A.$9,000 Favorable
B.$15,000 Unfavorable
C.$45,000 Favorable
D.$45,000 Unfavorable
18) Data for March for Lazarus Corporation and its two major business segments,
North and South, appear below:
In addition, common fixed expenses totaled $156,000 and were allocated as follows:
$84,000 to the North business segment and $72,000 to the South business segment.
The contribution margin of the South business segment is:
A.$18,000
B.$102,000
C.$293,000
D.$126,000
19) The ending and beginning balances of Farmer Corporation’s balance sheet accounts
for the most recent year are listed below:
The company’s net income (loss) for the year was $0 and its cash dividends were
$4,000. It did not dispose of any property, plant, and equipment, retire any bonds
payable, or repurchase any of its own common stock during the year.
Required:
Compute the change in each balance sheet account in the below table. Indicate whether
the change in each balance will be recorded in the operating, investing, or financing
activities section of the statement of cash flows. For items recorded in the operating
activities section, also indicate whether the change will be added to or subtracted from
net income. For all other items, indicate whether the change will be added as a cash
inflow or subtracted as a cash outflow. The first entry has been filled in as an example.
20) The investment required for the project profitability index should:
A.be reduced by the amount of any salvage recovered from the sale of old equipment.
B.be reduced by the amount of any salvage recovered from the sale of the new
equipment at the end of its useful life.
C.be reduced by the amount of any salvage recovered from the sale of both the old and
new equipment.
D.not be adjusted for the salvage value of old or new equipment.