1) Salley Corporation produces and sells a single product. Data concerning that product
appear below:
Fixed expenses are $1,133,000 per month. The company is currently selling 9,000 units
per month. Management is considering using a new component that would increase the
unit variable cost by $7. Since the new component would increase the features of the
company’s product, the marketing manager predicts that monthly sales would increase
by 500 units. What should be the overall effect on the company’s monthly net operating
income of this change?
A.decrease of $68,500
B.decrease of $5,500
C.increase of $68,500
D.increase of $5,500
2) Ortman Corporation makes a product with the following standard costs:
The company reported the following results concerning this product in May.
The company applies variable overhead on the basis of direct labor-hours. The direct
materials purchases variance is computed when the materials are purchased.
The materials quantity variance for May is:
A.$1,200 U
B.$1,200 F
C.$1,215 F
D.$1,215 U
3) The manufacturing overhead budget at Pendley Corporation is based on budgeted
direct labor-hours. The direct labor budget indicates that 8,900 direct labor-hours will
be required in August. The variable overhead rate is $5.50 per direct labor-hour. The
company’s budgeted fixed manufacturing overhead is $133,500 per month, which
includes depreciation of $30,260. All other fixed manufacturing overhead costs
represent current cash flows. The company recomputes its predetermined overhead rate
every month. The predetermined overhead rate for August should be:
A.$5.50
B.$17.10
C.$20.50
D.$15.00
4) 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 quantity variance for July was:
A.$22,960 Unfavorable
B.$22,400 Unfavorable
C.$9,600 Unfavorable
D.$9,840 Unfavorable
5) What is the maximum contribution margin the company can earn per month?
A.$27,820
B.$30,376
C.$29,155
D.$41,452
6) Paxton Corporation uses the weighted-average method in its process costing system.
The Molding Department is the second department in its production process. The data
below summarize the department’s operations in January.
The accounting records indicate that the conversion cost that had been assigned to
beginning work in process inventory was $10,973 and a total of $268,107 in conversion
costs were incurred in the department during January.
What was the cost per equivalent unit for conversion costs for January in the Molding
Department? (Round off to three decimal places.)
A.$5.348
B.$4.038
C.$5.080
D.$4.704
7) Up to how much should the company be willing to pay to obtain enough of the
constrained resource to satisfy demand for the two existing products?
A.$6.80 per minute
B.$95.20 per minute
C.$44.00 per minute
D.$8.80 per minute
8) Peterson Corporation produces a single product. Data from the company’s records for
last year follow:
Under variable costing the value of the ending finished goods inventory would be:
A.$90,000
B.$104,000
C.$105,000
D.$135,000
9) Carsten Wedding Fantasy Corporation makes very elaborate wedding cakes to order.
The owner of the company has provided the following data concerning the activity rates
in its activity-based costing system:
The measure of activity for the size-related activity cost pool is the number of planned
guests at the wedding reception. The greater the number of guests, the larger the cake.
The measure of complexity is the number of tiers in the cake. The activity measure for
the order-related cost pool is the number of orders. (Each wedding involves one order.)
The activity rates include the costs of raw ingredients such as flour, sugar, eggs, and
shortening. The activity rates do not include the costs of purchased decorations such as
miniature statues and wedding bells, which are accounted for separately.
Data concerning two recent orders appear below:
Assuming that all of the costs listed above are avoidable costs in the event that an order
is turned down, what amount would the company have to charge for the Ruise wedding
cake to just break even?
A.$229.40
B.$84.03
C.$277.57
D.$17.30
10) Harris Corporation produces a single product. Last year, Harris manufactured
17,000 units and sold 13,000 units. Production costs for the year were as follows:
Sales were $780,000 for the year, variable selling and administrative expenses were
$88,400, and fixed selling and administrative expenses were $170,000. There was no
beginning inventory. Assume that direct labor is a variable cost.
The contribution margin per unit was:
A.$17.50 per unit
B.$32.50 per unit
C.$27.30 per unit
D.$25.70 per unit
11) Craft Corporation produces a single product. Last year, the company had a net
operating income of $80,000 using absorption costing and $74,500 using variable
costing. The fixed manufacturing overhead cost was $5 per unit. There were no
beginning inventories. If 21,500 units were produced last year, then sales last year were:
A.16,000 units
B.20,400 units
C.22,600 units
D.27,000 units
12) The change in the companys overall annual net operating income that would result
from making the component, rather than buying it, would be:
A) $17,000 increase.
B) $1,000 decrease.
C) $14,000 decrease.
D) $5,000 increase.