1) The manufacturing overhead that would be applied to a unit of product C43S under
the activity-based costing system is closest to:
Koszyk Manufacturing Corporation has a traditional costing system in which it applies
manufacturing overhead to its products using a predetermined overhead rate based on
direct labor-hours (DLHs). The company has two products, P85G and C43S, about
which it has provided the following data:
The company’s estimated total manufacturing overhead for the year is $2,264,000 and
the company’s estimated total direct labor-hours for the year is 40,000.
The company is considering using a variation of activity-based costing to determine its
unit product costs for external reports. Data for this proposed activity-based costing
system appear below:
A.$71.04
B.$138.96
C.$67.92
D.$11.04
2) Smithj 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 3,500 tenant-days, but its actual level of activity was 3,490 tenant-days. The kennel
has provided the following data concerning the formulas used in its budgeting and its
actual results for February:
Data used in budgeting:
Actual results for February:
The revenue variance for February would be closest to:
A.$640 F
B.$918 F
C.$640 U
D.$918 U
3) The present value of the annual cost savings of $102,000 is closest to:
A.$849,012
B.$612,000
C.$195,872
D.$407,796
4) The net cash provided by (used in) operating activities last year was:
A.$98,000
B.$178,000
C.$156,000
D.$120,000
5) The selling and administrative expense budget of Ruffing Corporation is based on
budgeted unit sales, which are 4,800 units for February. The variable selling and
administrative expense is $8.10 per unit. The budgeted fixed selling and administrative
expense is $71,520 per month, which includes depreciation of $16,800 per month. The
remainder of the fixed selling and administrative expense represents current cash flows.
The cash disbursements for selling and administrative expenses on the February selling
and administrative expense budget should be:
A.$38,880
B.$54,720
C.$110,400
D.$93,600
6) The net present value of a proposed investment is negative. Therefore, the discount
rate used must be:
A.greater than the project’s internal rate of return.
B.less than the project’s internal rate of return.
C.greater than the minimum required rate of return.
D.less than the minimum required rate of return.
7) If the company bases its predetermined overhead rate on capacity, the predetermined
overhead rate is closest to:
The management of Aamot Corporation would like to investigate the possibility of
basing its predetermined overhead rate on activity at capacity. The company’s controller
has provided an example to illustrate how this new system would work. In this
example, the allocation base is machine-hours and the estimated amount of the
allocation base for the upcoming year is 43,000 machine-hours. In addition, capacity is
47,000 machine-hours and the actual level of activity for the year is 42,100
machine-hours. All of the manufacturing overhead is fixed and is $828,610 per year.
For simplicity, it is assumed that this is the estimated manufacturing overhead for the
year as well as the manufacturing overhead at capacity. It is further assumed that this is
also the actual amount of manufacturing overhead for the year.
A.$17.63
B.$19.27
C.$19.14
D.$19.68
8) LFM Corporation makes and sells a product called Product WZ. Each unit of Product
WZ requires 3.5 hours of direct labor at the rate of $16.00 per direct labor-hour.
Management would like you to prepare a Direct Labor Budget for June.
The budgeted direct labor cost per unit of Product WZ would be:
A.$4.57
B.$19.50
C.$16.00
D.$56.00
9) 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 total cost to be
accounted for would be:
A.$37,000
B.$323,000
C.$619,000
D.$646,000
10) Which terms would make the following sentence true? Manufacturing companies
that benefit the most from activity-based costing are those where overhead costs are a
_________ percentage of total product cost and where there is ___________ diversity
among the various products that they produce.
A.low; little
B.low; considerable
C.high; little
D.high; considerable
11) The Collins Corporation uses standard costing and has established the following
direct material and direct labor standards for each unit of the single product it makes:
Direct materials: 4 gallons at $8 per gallon
Direct labor: 1 hour at $16 per hour
During July, the company made 6,000 units of product and incurred the following costs:
Direct materials purchased: 26,800 gallons at $8.20 per gallon
Direct materials used: 25,200 gallons
Direct labor used: 5,600 hours at $15.30 per hour
The direct materials purchases variance is computed when the materials are purchased.
The materials price variance for July was:
A.$5,360 Favorable
B.$5,360 Unfavorable
C.$5,040 Favorable
D.$5,040 Unfavorable
12) Tillinghast Corporation estimates that its variable manufacturing overhead is $9.60
per machine-hour and its fixed manufacturing overhead is $14,630 per period.
If the denominator level of activity is 1,000 machine-hours, the fixed component in the
predetermined overhead rate would be:
A.$24.23 per machine-hour
B.$14.63 per machine-hour
C.$960.00 per machine-hour
D.$9.60 per machine-hour