1) A cost that can be avoided by choosing one alternative over another is not relevant
for decision purposes.
2) To increase total asset turnover, management must either increase sales or reduce
total stockholders’ equity.
3) Inspection Time is generally considered to be non-value-added time.
4) In a standard costing system where the denominator activity for the predetermined
overhead rate is labor-hours, overhead costs are applied to work in process on the basis
of the standard labor-hours allowed for the actual output.
5) An unfavorable spending variance may reflect waste as well as paying too much for
inputs.
6) If direct labor-hours is used as the allocation base in a job-order costing system, but
overhead costs are not caused by direct-labor hours, then jobs with high direct labor
requirements will tend to be undercosted relative to jobs with low direct labor
requirements.
7) The standard price per unit for direct materials should not include the cost of
delivering the materials.
8) Margin equals net operating income divided by sales.
9) Under the indirect method of determining the net cash provided by operating
activities on the statement of cash flows, a loss on the sale of an asset would be added
to net income.
10) The gross margin percentage is computed by dividing sales by the gross margin.
11) Budgets are used to plan and to control operations.
12) Batch-level activities are performed each time a unit is produced.
13) A portrait painter has been asked to do far more portraits in the next three months
than she has time to paint during that time period. To rank the possible portraits in order
of their profitability, she should divide each portrait’s estimated incremental profit by
the amount of time she estimates it will take to paint the portrait.
14) The credits to the Raw Materials account for the month of August total:
A.$35,000
B.$91,000
C.$56,000
D.$69,000
15) Which of the following are needed to compute the cost per equivalent unit for
materials under the weighted-average method of process costing?
A.Option A
B.Option B
C.Option C
D.Option D
16) Beakins Corporation produces a single product. The standard cost card for the
product follows:
During a recent period the company produced 1,200 units of product. Various costs
associated with the production of these units are given below:
The company records all variances at the earliest possible point in time. Variable
manufacturing overhead costs are applied to products on the basis of standard direct
labor-hours.
The materials price variance for the period is:
A.$1,250 F
B.$1,500 F
C.$1,250 U
D.$1,500 U
17) Diemert Corporation bases its budgets on machine-hours. The company’s static
planning budget for June appears below:
Actual results for the month were:
The spending variance for supplies costs in the flexible budget performance report for
the month should be:
A.$5,180 F
B.$2,420 U
C.$5,180 U
D.$2,420 F
18) In September, one of the processing departments at Wielgus Corporation had
beginning work in process inventory of $27,000 and ending work in process inventory
of $10,000. During the month, $296,000 of costs were added to production.
In the department’s cost reconciliation report for September, the cost of units transferred
out of the department would be:
A.$313,000
B.$323,000
C.$303,000
D.$286,000
19) Given the cost formula, Y = $7,000 + $1.80X, total cost for an activity level of
4,000 units would be:
A) $7,000
B) $200
C) $7,200
D) $14,200
20) Bracken Corporation is a small wholesaler of gourmet food products. Data
regarding the store’s operations follow:
Sales are budgeted at $330,000 for November, $340,000 for December, and $340,000
for January.
Collections are expected to be 80% in the month of sale, 17% in the month following
the sale, and 3% uncollectible.
The cost of goods sold is 75% of sales.
The company would like to maintain ending merchandise inventories equal to 70% of
the next month’s cost of goods sold. 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 $19,000.
Ignore taxes.
The difference between cash receipts and cash disbursements for December would be:
A.$34,000
B.$19,550
C.$87,550
D.$53,550
21) Valdovinos Corporation has provided the following data:
The company’s net profit margin percentage is closest to:
A.38.3%
B.3.5%
C.1.3%
D.2.0%
22) Elliot Corporation, which has only one product, has provided the following data
concerning its most recent month of operations:
What is the net operating income for the month under variable costing?
A.$18,000
B.$(19,600)
C.$9,600
D.$8,400
23) The absolute profitability of a business segment is determined by:
A.subtracting the variable costs of the business segment from its revenue.
B.subtracting the avoidable costs of the business segment from its revenue.
C.subtracting the full costs, including allocations of common fixed costs, of the
business segment from its revenue.
D.finding the larger of the segments full costs or its revenues.
24) Manila Corporation’s comparative balance sheet appears below:
The company’s net income (loss) for the year was $0 and its cash dividends were
$2,000. It did not dispose of any property, plant, and equipment, issue any bonds
payable, or repurchase any of its own common stock during the year.
Required:
Compute the change in each balance sheet account denoted with an asterisk (*).
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.
25) Maloney Corporation’s balance sheet and income statement appear below:
Cash dividends were $42. The company did not dispose of any property, plant, and
equipment during the year.
Required:
Prepare the operating activities section of the statement of cash flows using the direct
method.
26) Freet Inc. is preparing its cash budget for November. The budgeted beginning cash
balance is $11,000. Budgeted cash receipts total $126,000 and budgeted cash
disbursements total $130,000. The desired ending cash balance is $20,000. The
company can borrow up to $170,000 at any time from a local bank, with interest not
due until the following month.
Required:
Prepare the company’s cash budget for November in good form. Make sure to indicate
what borrowing, if any, would be needed to attain the desired ending cash balance.
27) Whether a company uses process costing or job-order costing depends on its
industry. A number of companies in different industries are listed below:
1) Contract printer that produces posters, books, and pamphlets to order
2) Asparagus cannery
3) Brick manufacturer
4) Contract oil drilling company
5) Custom boat builder
6) Flour mill
Required:
For each company, indicate whether the company is most likely to use job-order costing
or process costing.
28) Lindboe Corporation has provided the following financial data:
Dividends on common stock during Year 2 totaled $4,800. The market price of common
stock at the end of Year 2 was $5.46 per share.