1) Acquiring land by taking out a long-term mortgage will not affect the current ratio.
2) A contribution format income statement for a merchandising company organizes
costs into two categoriescost of goods sold and selling and administrative expenses.
3) 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. A fixed
manufacturing overhead volume variance will NOT necessarily occur in a month in
which production volume differs from sales volume.
4) Planning involves gathering feedback to ensure that the plan is being properly
executed or modified as circumstances change.
5) All other things the same, if a company uses long-term debt to purchase land to
develop in the future, the company’s return on total assets will decrease.
6) A materials price variance is unfavorable if the actual price exceeds the standard
price.
7) 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 company’s
choice of the denominator level of activity affects the fixed manufacturing overhead
volume variance.
8) As the accounts receivable turnover ratio decreases, the average collection period
increases.
9) The net cash provided by (used in) financing activities for the year was:
A.$(8)
B.$(44)
C.$(51)
D.$1
10) Degregorio Corporation makes a product that uses a material with the following
direct material standards:
The company produced 5,600 units in November using 21,750 kilos of the material.
During the month, the company purchased 24,800 kilos of the direct material at a total
cost of $168,640. The direct materials purchases variance is computed when the
materials are purchased.
The materials quantity variance for November is:
A.$3,290 F
B.$3,196 F
C.$3,290 U
D.$3,196 U
11) The income tax expense in year 3 is:
A.$70,000
B.$42,000
C.$7,000
D.$49,000
12) The July contribution format income statement of Raiche Corporation appears
below:
The degree of operating leverage is closest to:
A.6.72
B.13.44
C.0.15
D.0.07
13) What would be the average fixed inspection cost per unit at an activity level of
6,700 machine-hours in a month? Assume that this level of activity is within the
relevant range.
A) $23.04
B) $90.32
C) $24.12
D) $45.83
14) Assume the company has 50 units left over from last year which have small defects
and which will have to be sold at a reduced price for scrap. The sale of these defective
units will have no effect on the company’s other sales. Which of the following costs is
relevant in this decision?
A) $3.50 variable manufacturing cost
B) $3.90 unit product cost
C) $2.00 variable selling and administrative cost
D) $6.70 full cost
15) Longview Hospital performs blood tests in its laboratory. The following standards
have been set for each blood test performed:
During May, the laboratory performed 1,500 blood tests. On May 1 there were no direct
materials (plates) on hand; after a plate is used for a blood test it is discarded. Variable
overhead is assigned to blood tests on the basis of standard direct labor-hours. The
following events occurred during May:
3,600 plates were purchased for $9,540
3,200 plates were used for blood tests
340 actual direct labor-hours were worked at a cost of $5,550
The direct materials purchases variance is computed when the materials are purchased.
The materials price variance for May is:
A.$360 F
B.$360 U
C.$740 F
D.$740 U
16) What would be the total external failure cost appearing on the quality cost report?
A.$91,000
B.$52,000
C.$156,000
D.$338,000
17) Which of the following would be classified as an internal failure cost on a quality
cost report?
A.Supervision of testing and inspection activities.
B.Re-entering data because of keying errors.
C.Cost of field servicing and handling complaints.
D.Depreciation of test equipment.
18) The selling price based on the absorption costing approach is closest to:
A.$85.28
B.$84.50
C.$110.89
D.$56.95
19) The overhead for the year was:
A.$702 underapplied
B.$898 underapplied
C.$702 overapplied
D.$898 overapplied
20) Feiler Corporation has total current assets of $483,000, total current liabilities of
$347,000, total stockholders’ equity of $1,057,000, total net plant and equipment of
$1,031,000, total assets of $1,514,000, and total liabilities of $457,000. The company’s
current ratio is closest to:
A.0.32
B.0.30
C.1.39
D.0.95
21) Using the least-squares regression method, the estimate of the variable component
of maintenance cost per machine-hour is closest to:
A.$1.85
B.$10.30
C.$1.67
D.$1.90
22) An outdoor barbecue grill manufacturer has a standard costing system based on
standard direct labor-hours (DLHs) as the measure of activity. Data from the company’s
flexible budget for manufacturing overhead are given below:
The following data pertain to operations for the most recent period:
The fixed manufacturing overhead budget variance for the period is closest to:
A.$166 U
B.$422 F
C.$585 F
D.$1,400 U
23) Burns Corporation’s net income last year was $91,000. Changes in the company’s
balance sheet accounts for the year appear below:
The company did not dispose of any property, plant, and equipment, sell any long-term
investments, issue any bonds payable, or repurchase any of its own common stock
during the year. The company declared and paid a cash dividend of $4,000.
Required:
a. Construct in good form the operating activities section of the company’s statement of
cash flows for the year. (Use the indirect method.)
b. Construct in good form the investing activities section of the company’s statement of
cash flows for the year.
c. Construct in good form the financing activities section of the company’s statement of
cash flows for the year.
24) Alden Corporation’s most recent comparative Balance Sheet is as follows:
Alden’s net income was $34,000. No equipment was purchased and no long-term
investments were sold. There was a gain of $3,000 when equipment was sold. The
accumulated depreciation on the equipment that was sold was $12,000. Cash dividends
of $20,000 were declared and paid during the year.
Required:
Prepare Alden’s statement of cash flows using the indirect method.
25) Wegener Corporation’s most recent balance sheet and income statement appear
below:
26) Job 231 was recently completed. The following data have been recorded on its job
cost sheet:
The company applies manufacturing overhead on the basis of machine-hours. The
predetermined overhead rate is $11 per machine-hour.
Required:
Compute the unit product cost that would appear on the job cost sheet for this job.
27) Ochwat Clinic bases its budgets on the activity measure patient-visits. During July,
the clinic planned for 3,600 patient-visits, but its actual level of activity was 4,100
patient-visits. The clinic has provided the following data concerning the formulas it
uses in its budgeting:
Required:
Prepare a report showing the clinic’s activity variances for July. Indicate in each case
whether the variance is favorable (F) or unfavorable (U).
28) Mitchel Corporation manufactures a single product. Last year, variable costing net
operating income was $55,000. 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!
29) Lineback Corporation bases its budgets on the activity measure customers served.
During April, the company planned to serve 33,000 customers, but actually served
30,000 customers. The company uses the following revenue and cost formulas in its
budgeting, where q is the number of customers served:
Revenue: $2.60q
Wages and salaries: $26,000 + $0.70q
Supplies: $0.50q
Insurance: $5,400
Miscellaneous expense: $2,700 + $0.20q
Required:
Prepare a report showing the company’s activity variances for April. Indicate in each
case whether the variance is favorable (F) or unfavorable (U).