1) if improvement in a performance measure on a balanced scorecard should lead to
improvement in another performance measure, but does not, then management should
reexamine its strategy.
2) if the expected level of activity is appreciably above or below the company’s present
capacity, it may be desirable to adjust fixed costs in the budget.
3) the fixed costs of service departments should be allocated to operating departments
in proportion to the amount of capacity the service departments actually use during the
period.
4) in order to use process costing, the output of a processing department should be
homogeneous.
5) in the merchandise purchases budget, the required purchases (in units) for a period
can be determined by subtracting the beginning merchandise inventory (in units) from
the budgeted sales (in units).
6) when used in return on investment (roi) calculations, operating assets include
investments in land held for future use and investments in other companies.
7) managerial accounting is primarily concerned with the organization as a whole rather
than with segments of the organization.
8) if production exceeds sales for the period, variable costing net operating income will
typically be greater than absorption costing net operating income.
9) a fixed cost is constant per unit of product.
10) the cost per equivalent unit for conversion costs will always be the same under both
the fifo and the weighted-average methods if there is no beginning work in process
inventory.
11) the legal department of an organization is not considered a responsibility center
because it does not generate revenue.
12) in activity-based costing, as in traditional costing systems, nonmanufacturing costs
are not assigned to products.
13) the price-earnings ratio is determined by dividing the price of a product by its profit
margin.
14) under the fifo process costing method, the equivalent units of production relate only
to work done during the current period.
15) magnano inc.’s inspection costs are listed below:
management believes that inspection cost is a mixed cost that depends on units
produced.
using the least-squares regression method, the estimate of the fixed component of
inspection cost per month is closest to:
a.$4,400
b.$1,290
c.$4,585
d.$1,318
16) job 607 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 $14 per machine-hour. the total cost that would be
recorded on the job cost sheet for job 607 would be:
a.$4,107
b.$6,319
c.$3,432
d.$4,863
17) becky works on the assembly line of a manufacturing company where she installs a
component part for one of the company’s products. she is paid $16 per hour for regular
time and time and a half for all work in excess of 40 hours per week.
becky works 42 hours during a week in which there was no idle time. the allocation of
becky’s wages for the week between direct labor cost and manufacturing overhead cost
would be:
a.choice a
b.choice b
c.choice c
d.choice d
18) davie corporation is preparing its manufacturing overhead budget for the fourth
quarter of the year. the budgeted variable factory overhead rate is $6.00 per direct
labor-hour; the budgeted fixed factory overhead is $92,000 per month, of which
$16,000 is factory depreciation.
the december cash disbursements for manufacturing overhead on the manufacturing
overhead budget should be:
a.$92,720
b.$121,600
c.$81,320
d.$11,400
19) dilom farm supply is located in a small town in the rural west. data regarding the
store’s operations follow:
sales are budgeted at $260,000 for november, $230,000 for december, and $210,000 for
january.
collections are expected to be 55% in the month of sale, 40% in the month following
the sale, and 5% uncollectible.
the cost of goods sold is 80% of sales.
the company purchases 50% of its merchandise in the month prior to the month of sale
and 50% in the month of sale. payment for merchandise is made in the month following
the purchase.
other monthly expenses to be paid in cash are $21,700.
monthly depreciation is $17,000.
ignore taxes.
the cost of december merchandise purchases would be:
a.$176,000
b.$208,000
c.$184,000
d.$84,000
20) the concept of responsibility accounting means that:
a.budgetary data should be reviewed and approved by the budget committee
b.budgetary data should be reviewed and approved by all levels of management
c.an employee’s performance should be evaluated only on those items under his or her
control
d.an employee’s performance should be evaluated only by his or her immediate
supervisor
21) the costs that stewart company would classify as mixed would be:
a.lubrication and advertising
b.maintenance and insurance
c.supplies and lubrication
d.supplies and utilities
22) a project requires an initial investment of $70,000 and has a project profitability
index of 0.141. the present value of the future cash inflows from this investment is:
a.$61,350
b.$68,920
c.$75,210
d.$79,870
23) bosril corporation uses the weighted-average method in its process costing system.
this month, the beginning inventory in the first processing department consisted of 400
units. the costs and percentage completion of these units in beginning inventory were:
a total of 5,600 units were started and 4,900 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 85% 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 total cost transferred from the first processing department to the next processing
department during the month is closest to:
a.$209,622
b.$171,191
c.$196,000
d.$189,800
24) delmar corporation is considering the use of residual income as a measure of the
performance of its divisions. what major disadvantage of this method should the
company consider before deciding to institute it?
a.this method does not take into account differences in the size of divisions
b.investments may be adopted that will decrease the overall return on investment
c.the minimum required rate of return may eliminate desirable investments
d.residual income does not measure how effectively the division manager controls costs
25) in december, one of the processing departments at stiel corporation had ending
work in process inventory of $38,000. during the month, $119,000 of costs were added
to production and the cost of units transferred out from the department was $92,000.
in the department’s cost reconciliation report for december, the total cost accounted for
would be:
a.$249,000
b.$130,000
c.$49,000
d.$260,000
26) posson catering uses two measures of activity, jobs and meals, in the cost formulas
in its budgets and performance reports. the cost formula for catering supplies is $210
per month plus $96 per job plus $20 per meal. a typical job involves serving a number
of meals to guests at a corporate function or at a host’s home. the company expected its
activity in march to be 20 jobs and 162 meals, but the actual activity was 17 jobs and
164 meals. the actual cost for catering supplies in march was $4,990. the spending
variance for catering supplies in march would be closest to:
a.$380 f
b.$132 u
c.$132 f
d.$380 u
27) (ignore income taxes in this problem.) isomer industrial training corporation is
considering the purchase of new presentation equipment at a cost of $150,000. the
equipment has an estimated useful life of 10 years with an expected salvage value of
zero. the equipment is expected to generate net cash inflows of $35,000 per year in each
of the 10 years. isomer’s discount rate is 16%. isomer uses the straight-line method of
depreciation for its assets.
what is the simple rate of return of the presentation equipment?
a.13.3%
b.22.7%
c.23.3%
d.26.0%
28) hoeper clinic uses client-visits as its measure of activity. during january, the clinic
budgeted for 2,600 client-visits, but its actual level of activity was 2,570 client-visits.
the clinic has provided the following data concerning the formulas used in its budgeting
and its actual results for january:
the activity variance for personnel expenses in january would be closest to:
a.$1,416 u
b.$486 f
c.$1,416 f
d.$486 u
29) pratt corporation uses the fifo method in its process costing system. data concerning
the first processing department for the most recent month are listed below:
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.
what are the equivalent units for materials for the month in the first processing
department?
a.10,300
b.550
c.9,570
d.8,900
30) henifin corporation has provided the following data concerning its most important
raw material, compound k91j:
the raw material was purchased on account.
the debits to the raw materials account for january would total:
a.$39,330
b.$21,981
c.$19,395
d.$38,790
31) mccatty inc. maintains a call center to take orders, answer questions, and handle
complaints. the costs of the call center for a number of recent months are listed below:
management believes that the cost of the call center is a mixed cost that depends on the
number of calls taken.
required:
estimate the variable cost per call and fixed cost per month using the least-squares
regression method.
32) ramil corporation has provided the following data for the most recent month:
required:
prepare t-accounts for raw materials, work in process, finished goods, manufacturing
overhead, and cost of goods sold. record the beginning balances and each of the
transactions listed above. finally, determine the ending balances.
33) (ignore income taxes in this problem.) lajeunesse limos, inc., is considering the
purchase of a limousine that would cost $195,661, would have a useful life of 9 years,
and would have no salvage value. the limousine would bring in cash inflows of $47,000
per year in excess of its cash operating costs.
required:
determine the internal rate of return on the investment in the new limousine. show your
work!
34) last year, brunkow corporation’s variable costing net operating income was $93,500
and ending inventory increased by 800 units. fixed manufacturing overhead cost per
unit was $7.
required:
determine the absorption costing net operating income for last year. show your work!
35) drobot tech is a for-profit vocational school. the school bases its budgets on two
measures of activity (i.e., cost drivers), namely student and course. the school uses the
following data in its budgeting:
in november, the school budgeted for 1,470 students and 126 courses. the actual activity
for the month was 1,770 students and 122 courses.
required:
prepare the school’s planning budget for november.
36) matuseski corporation is preparing its cash budget for october. the budgeted
beginning cash balance is $17,000. budgeted cash receipts total $187,000 and budgeted
cash disbursements total $177,000. the desired ending cash balance is $40,000. the
company can borrow up to $120,000 at any time from a local bank, with interest not
due until the following month.
required:
prepare the company’s cash budget for october in good form.
37) lasswell corporation uses the fifo method in its process costing. the following data
pertain to its assembly department for may.
required:
determine the equivalent units of production for the assembly department for may using
the fifo method.
38) macdowell corporation’s manufacturing overhead includes $2.50 per machine-hour
for supplies; $3.50 per machine-hour for indirect labor; $214,200 per period for
salaries; and $307,020 per period for depreciation.
required:
determine the predetermined overhead rate if the denominator level of activity is 8,500
machine-hours. show your work!
39) dinius corporation has provided the following data for the month of december:
required:
prepare a schedule of cost of goods manufactured for december.