1) The Southern Division of Amelia Corporation had sales of $6,500,000 and operating
income of $1,200,000 last year. The total assets of the Southern Division were
$3,000,000, while current liabilities were $450,000. Amelia Corporation’s target rate of
return is 10%, while its weighted average cost of capital is 6%. The effective tax rate
for the company is 30%.
What is the Southern Division’s Return on Investment (ROI)?
A) 25.00%
B) 6.00%
C) 40.00%
D) 200.00%
2) LVN Corporation’s direct labor costs and related information for the month of June
were as follows:
What is LVN Corporation’s direct labor efficiency variance?
A) $1,978 favorable
B) $1,978 unfavorable
C) $1,750 unfavorable
D) $1,750 favorable
3) Johnson Trucking Company wants to determine a fuel surcharge to add to its
customers’ bills based on the number of miles driven to each area. It wants to separate
the fixed and variable portion of the truck’s operating costs so it has a better idea of how
distance affects these costs. Johnson Trucking Company has the following data
available.
Using the high-low method, the fixed costs in a month are
A) $ 2,100
B) $13,650
C) $46,200
D) $10,500
4) Peddlin’ Pete’s Cycles sells its entry-level bicycles for $400 each. Its variable cost is
$250 per bicycle. Fixed costs are $35,000 per month for volumes up to 1,200 bicycles.
Above 1,200 bicycles, monthly fixed costs are $55,000. What is the budgeted operating
income at a level of 900 bicycles per month?
A) $100,000
B) $135,000
C) $325,000
D) $ 80,000
5) Westfall Watches has two product lines: Luxury watches and Sporty watches. Income
statement data for the most recent year follow:
If $20,000 of fixed costs will be eliminated by discontinuing the Sporty line, how will
operating income be affected?
A) Decrease $30,000
B) Increase $10,000
C) Increase $69,000
D) Increase $128,000
6) The following information relates to The Roberta Corporation.
Required:
a.What is the acid-test ratio for the current year?
b.What is the inventory turnover for the current year?
c.What is days’ sales in receivables for the current year?
d.What is the current ratio for the current year?
7) Cuyahoga Corporation reports the following standards for direct labor for the year:
Standard cost per hour$17.75
Standard quantity per finished good2.0 hours
During the year, 35,000 finished goods were produced. The direct labor efficiency
variance was $2,650 favorable. The direct labor flexible budget variance was $550
favorable.
Calculate the following items regarding direct labor for Cuyahoga Corporation for the
year:
A. Direct labor rate variance
B. Standard hours of direct labor for actual production
C. Actual hours of direct labor incurred for actual production
8) Barkley Company sells two products, red cups and black mugs. Barkley predicts that
it will sell 2,500 red cups and 1,000 black mugs in the next period. The unit
contribution margins for red cups and black mugs are $2.80 and $3.50, respectively.
What is the weighted-average unit contribution margin?
A) $2.33
B) $7.00
C) $3.00
D) $1.00
9) Beartowne Enterprises uses an activity-based costing system to assign costs in its
auto-parts division.
The following units were produced in December with the following information:
Total assembly fees for Part 002 is
A) $1,000
B) $1,250
C) $1,500
D) $2,500
10) Fun Stuff Manufacturing produces frisbees using a three-step process that includes
molding, coloring and finishing. Which account is debited when the frisbees are totally
completed?
A) WIP inventory-finishing
B) Finished goods inventory
C) Manufacturing overhead
D) WIP inventory-coloring
11) Which of these documents informs the storeroom to send specific materials to the
factory floor?
A) Receiving report
B) Bill of materials
C) Purchase order
D) Materials requisition
12) Vandalay Industries manufactures two products: toasters and blenders. The annual
production and sales of toasters is 2,200 units, while 1,500 units of blenders are
produced and sold. The company has traditionally used direct labor hours to allocate its
overhead to products. Toasters require 1.25 direct labor hours per unit, while blenders
require 1 direct labor hours per unit. The total estimated overhead for the period is
$149,115. The company is looking at the possibility of changing to an activity-based
costing system for its products. If the company used an activity-based costing system, it
would have the following three activity cost pools:
The overhead cost per blender using an activity-based costing system would be closest
to
A) $ 27.72
B) $ 73.00
C) $ 99.41
D) $ 40.66
13) Fun Stuff Manufacturing produces frisbees using a three-step process that includes
molding, coloring and finishing. Which of the following accounts is credited for direct
labor used during the molding process?
A) Wages payable
B) Manufacturing overhead
C) Raw materials inventory
D) WIP inventory-molding
14) On the line in front of each variance, enter the letters of the items needed to
compute that variance. You will enter more than one item on each line.
A.Actual price
B.Actual quantity
C.Standard price
D.Standard quantity
______Direct materials price variance
______Direct materials quantity variance
15) Sunnyside Orchards, a juice manufacturer, uses a process that adds flavoring at the
beginning of the process and vitamins and minerals 65% of the way through the
process. Conversion costs are evenly distributed. Assume there are no beginning
inventories. The company started making 14,000 gallons of the drink, and the 1,500
gallons left in ending WIP were 50% of the way through the process.
The number of equivalent units for conversion costs is
A) 1,500
B) 14,750
C) 13,250
D) 14,000
16) Sunnyside Orchards, a juice manufacturer, uses a process that adds flavoring at the
beginning of the process and vitamins and minerals 65% of the way through the
process. Conversion costs are evenly distributed. Assume there are no beginning
inventories. The company started making 14,000 gallons of the drink, and the 1,500
gallons left in ending WIP were 50% of the way through the process.
The equivalent units for flavoring is
A) 14,000
B) 15,500
C) 13,250
D) 1,500
17) Yellow Company’s variable expenses are 40% of sales and have monthly fixed
expenses of $15,000. The monthly target operating income is $3,750. What is the
monthly margin of safety as a percentage of target sales in dollars?
A) 20.00%
B) 180.00%
C) 60.00%
D) 25.00%
18) Pitt Company is evaluating two possible investments in depreciable plant assets.
The company uses the straight-line method of depreciation. The following information
is available:
How long is the payback period for Investment A?
A) 4.50 years
B) 4.10 years
C) 11.25 years
D) 2.49 years
19) Which of the following is a sign that a product cost system is not working properly?
A) The cost system is fully depreciated
B) The cost system was installed five years ago
C) The cost system has multiple allocation bases
D) Managers don’t understand costs and profits
20) Indirect materials and indirect labor are ________ for a manufactured product.
A) overhead and period costs
B) operating and period costs
C) overhead and product costs
D) operating and product costs
21) What are the ending inventory equivalent units for materials if 15,500 units are
completed and transferred out and 4,200 remain in ending WIP at 35% complete?
A) 3,955
B) 4,200
C) 1,470
D) 5,425
22) Hummingbird Manufacturing manufactures small parts and uses an activity-based
costing system.
The following parts were produced in October with the following information:
Total manufacturing costs for part C is
A) $27,250
B) $31,500
C) $36,250
D) $22,500
23) Selected financial information for Greek Food Producers is presented in the
following table (000s omitted).
What was cost of goods manufactured?
A) $1,440
B) $1,040
C) $1,720
D) $1,160
24) For Dubinsky Company, experience has shown that payment for the credit sales is
received as follows: 10% in the month of sale, 65% in the first month after sale, 20% in
the second month after sale, and 5% uncollectible. Dubinsky Company has budgeted
the following credit sales during the last four months of the year: September, $20,000;
October, $24,000; November $22,000; December, $28,000. How much cash can
Dubinsky Company expect to collect in November as a result of credit sales?
A) $17,800
B) $19,600
C) $21,800
D) $22,000
25) Pizza Hut, a division of Yum! Brands, is most likely treated as a(n)
A) cost center
B) investment center
C) profit center
D) revenue center
26) A company’s ability to pay liabilities with current assets is measured by which of
the following ratios?
A) Inventory turnover ratio
B) Day’s sales in receivables
C) Acid-test ratio
D) Current ratio
27) Neeley Grocery has a monthly target operating income of $25,000. Variable
expenses are 20% of sales and monthly fixed expenses are $15,000. What is the
monthly margin of safety as a percentage of target sales in dollars?
A) 137.50%
B) 62.50%
C) 80.00%
D) 166.67%
28) The purchase of inventory would be considered a
A) cash outflow from investing activities
B) cash outflow from operating activities
C) cash outflow from financing activities
D) cash outflow from depreciation
29) Which of the following types of information differs between alternatives and can
affect the future?
A) Historical
B) Irrelevant
C) Relevant
D) Predictable
30) The Bedford Corporation reported the following income statement and balance
sheet amounts and additional information for the end of the current year.
Inventory and prepaid expenses account for $30,000 of the current year’s current assets.
Average inventory for the current year is $36,250.
Average net accounts receivable for the current year is $45,000.
There are 35,000 shares of common stock outstanding.
Total dividends paid during the current year were $17,000.
The market price per share of common stock is $20.
What is the book value per share of common stock on the last day of the current year?
A) $11.86
B) $24.41
C) $27.11
D) $20.00
31) Schenley Manufacturing builds playground equipment that it sells to elementary
schools and municipalities. Schenley’s management has contracted you to perform a
variance analysis on the fixed manufacturing overhead for its line of slides. Schenley’s
cost accounting team informs you that it allocates fixed overhead based on machine
hours. This period production was budgeted at 375 slides. Budgeted and actual
production data follows:
What is the fixed manufacturing overhead budget variance for this period?
A) $2,750 unfavorable
B) $1,320 unfavorable
C) $2,750 favorable
D) $1,320 favorable
32) Which of the following is unique to a process costing system?
A) Work is not started on a product until an order is received
B) Direct materials, direct labor and manufacturing overhead are assigned to the first
department only
C) Costs for each process stay with that process until the goods are moved to finished
goods
D) Each process has its own WIP account
33) For each of the following items, determine whether it would be more appropriate to
increase A) manufacturing overhead or B) work in process inventory. Enter either the
letter A or the letter B on the line in front of each statement.
____indirect materials used
____direct materials used
____indirect labor used
____direct labor used
____plant utilities
34) Common Paper Supply produces paper cups for a national chain of coffee shops.
Twenty-five percent of the paper used to produce the cups comes from post-consumer
(recycled) paper. This satisfies the demands of the national coffee chain, which, for
public relations reasons, requires a certain percentage of recycled content.
Common Paper has developed a new method that will allow it to increase the
percentage of post-consumer material per cup, while reducing the total paper needed
per cup. This is a selling feature for the coffee chain and also reduces Common Paper’s
costs.
The proposed method will reduce the total quantity of paper required per cup of .004
pounds by 15%, but will increase the overall cost of paper per pound from $1.20 per
pound to $1.30 per pound. The new method also requires a one-time charge of $9,000
for re-tooling.
Beginning inventory for the year will be 240 pounds and desired ending inventory is
1,200 pounds. Total production for the year is projected at 3,000,000 cups.
If Common Paper implements the new system, what is the expected reduction in the
quantity of paper that will need to be purchased?
A) 1,800 pounds
B) 2,500 pounds
C) 9,000 pounds
D) 1,200 pounds
35) Company X sells widgets. The following information summarizes the company’s
operating activities for the year:
What is operating income?
A) $12,500
B) $ 23,500
C) $ 15,500
D) $ 14,500
36) Which of the following positions is primarily responsible for raising capital and
investing funds?
A) The treasurer
B) The COO
C) The CFO
D) The CEO
37) It costs Homer’s Manufacturing $0.75 to produce baseballs and Homer sells them
for $4.00 a piece. Homer pays a sales commission of 5% of sales revenue to his sales
staff. Homer also pays $12,000 a month rent for his factory and store, and also pays
$75,000 a month to his staff in addition to the commissions. Homer sold 67,500
baseballs in June. If Homer prepares a contribution margin income statement for the
month of June, what would be his operating income?
A) $292,875
B) $270,000
C) $64,125
D) $118,875