1) if the finished goods inventory increases between the beginning and the end of a
period, then the cost of goods manufactured for the period is larger than the cost of
goods sold.
2) the cost of shipping parts from a supplier is considered a product cost.
3) the cost of fringe benefits given to direct labor workers is best classified as a period
cost.
4) it may be easier to control fixed costs than variable costs.
5) net operating income will always increase when a company increases its accounts
receivable turnover.
6) the management of harlow corporation, a manufacturing company, would like your
help in contrasting the traditional and contribution approaches to the income statement.
the company has provided the following financial data for january:
the company had no beginning or ending inventories
the contribution margin for january was:
a.$172,000
b.$42,000
c.$166,000
d.$110,000
7) fryer corporation uses the weighted-average method in its process costing system.
this month, the beginning inventory in the first processing department consisted of 700
units. the costs and percentage completion of these units in beginning inventory were:
a total of 7,300 units were started and 6,200 units were transferred to the second
processing department during the month. the following costs were incurred in the first
processing department during the month:
the ending inventory was 80% complete with respect to materials and 45% complete
with respect to conversion costs.
note: your answers may differ from those offered below due to rounding error. in all
cases, select the answer that is the closest to the answer you computed. to reduce
rounding error, carry out all computations to at least three decimal places.
the cost of ending work in process inventory in the first processing department
according to the company’s cost system is closest to:
a.$66,571
b.$53,257
c.$41,897
d.$29,957
8) ferron corporation’s net cash provided by operating activities was $81; its income
taxes were $36; its capital expenditures were $34; and its cash dividends were $15. the
company’s free cash flow was:
a.$68
b.$32
c.-$13
d.$166
9) acton company has two products: a and b. annual production and sales are 800 units
of product a and 500 units of product b. the company has traditionally used direct
labor-hours as the basis for applying all manufacturing overhead to products. product a
requires 0.3 direct labor hours per unit and product b requires 0.2 direct labor hours per
unit. the total estimated overhead for next period is $92,023.
the company is considering switching to an activity-based costing system for the
purpose of computing unit product costs for external reports. the new activity-based
costing system would have three overhead activity cost poolsactivity 1, activity 2, and
general factorywith estimated overhead costs and expected activity as follows:
(note: the general factory activity cost pool’s costs are allocated on the basis of direct
labor hours.)
the overhead cost per unit of product b under the traditional costing system is closest to:
a.$54.13
b.$7.49
c.$4.32
d.$2.63
10) kalinowski 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 2,300 tenant-days, but its actual level of activity was 2,320 tenant-days.
the kennel has provided the following data concerning the formulas used in its
budgeting and its actual results for february:
the facility expenses in the flexible budget for february would be closest to:
a.$18,680
b.$19,046
c.$19,379
d.$18,772
11) 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 net operating income of the company as a whole is:
a.$138,000
b.$675,000
c.$459,000
d.-$183,000
12) community general hospital has a food services department that provides meals for
all patients in the hospital. budgeted and actual meals served for the month just ended
are:
the budgeted variable cost of meals for the month just ended was $100,000; the actual
variable cost of meals for the month was $130,000.
how much of the $130,000 actual food services variable cost should be charged to the
surgical department at the end of the month just completed?
a.$62,500
b.$65,000
c.$95,000
d.$98,800
13) the gross margin for a manufacturing company is the excess of sales over:
a.cost of goods sold, excluding fixed manufacturing overhead
b.all variable costs, including variable selling and administrative expenses
c.cost of goods sold, including fixed manufacturing overhead
d.variable costs, excluding variable selling and administrative expenses
14) ruggeri corporation reported the following data for the month of july:
the cost of goods sold for july was:
a.$196,000
b.$120,000
c.$148,000
d.$244,000
15) wakeman products inc. makes two productsw28h and z28d. product w28h’s selling
price is $27.00 and its unit variable cost is $21.60. product z28d’s selling price is
$170.00 and its unit variable cost is $153.00. the monthly demand is 2,030 units for
product w28h and 730 units for z28d. the constrained resource is a particular machine
that is available for 9,500 minutes each month. each unit of product w28h requires 3
minutes on this machine and each unit of product z28d requires 10 minutes on this
machine.
up to how much should the company be willing to pay to obtain enough of the
constrained resource to satisfy demand for the two existing products?
a.$17.00 per minute
b.$1.70 per minute
c.$1.80 per minute
d.$5.40 per minute
16) during december, ketchum corporation purchased $64,000 of raw materials on
credit to add to its raw materials inventory. a total of $80,000 of raw materials was
requisitioned from the storeroom for use in production. these requisitioned raw
materials included $7,000 of indirect materials.
required:
prepare journal entries to record the purchase of materials and their use in production.
17) gramling clinic bases its budgets on patient-visits. during july, the clinic plans for a
level of activity of 2,500 patient-visits. the clinic has provided the following data
concerning the formulas it uses in its budgeting:
required:
prepare the clinic’s planning budget for july.
18) (ignore income taxes in this problem.) ab company is considering the purchase of a
machine that promises to reduce operating costs by the same amount for every year of
its 6-year useful life. the machine will cost $83,150 and has no salvage value. the
machine has a 20% internal rate of return.
required:
what are the annual cost savings promised by the machine?
19) friddell inc., which produces a single product, has provided the following data for
its most recent month of operation:
the company had no beginning or ending inventories.
required:
compute the unit product cost under variable costing. show your work!
20) mcduffey memorial diner is a charity supported by donations that provides free
meals to the homeless. the diner’s budget for september was based on 2,900 meals, but
the diner actually served 2,800 meals. the diner’s director has provided the following
cost formulas to use in budgets:
required:
prepare the diner’s flexible budget for the actual number of meals served in september.
the budget will only contain the costs listed above; no revenues will be on the budget.
21) bufford corporation uses the fifo method in its process costing system. the following
data concern the company’s assembly department for the month of september.
required:
determine the cost of ending work in process inventory and the cost of units transferred
out of the department during september using the fifo method.
22) recent balance sheets of warnick co. appear below, together with an income
statement for the latest year.
note: stock in bowen co., held as a long-term investment, was sold for $8,000 cash.
dividends of $10,500 were declared and paid during the year.
required:
prepare a statement of cash flows for warnick co. for the year ended may 31, year2. use
the indirect method.
23) harville company’s quality cost report is to be based on the following data:
required:
prepare a quality cost report in good form with separate sections for prevention costs,
appraisal costs, internal failure costs, and external failure costs.
24) job 484 was recently completed. the following data have been recorded on its job
cost sheet:
the company applies manufacturing overhead on the basis of direct labor-hours. the
predetermined overhead rate is $24 per direct labor-hour.
required:
compute the unit product cost that would appear on the job cost sheet for this job.