1) Consider the following production and cost data for two products, L and C:
The company can only perform 65,000 machine set-ups each period due to limited
skilled labor and there is unlimited demand for each product. What is the largest
possible total contribution margin that can be realized each period?
A) $845,000
B) $975,000
C) $910,000
D) $1,820,000
2) Sparks Corporation has a cash balance of $7,500 on April 1. The company must
maintain a minimum cash balance of $6,000. During April, expected cash receipts are
$48,000. Cash disbursements during the month are expected to total $52,000. Ignoring
interest payments, during April the company will need to borrow:
A.$3,500
B.$2,500
C.$6,000
D.$4,000
3) The company’s inventory turnover for Year 2 is closest to:
A.5.17
B.5.56
C.6.00
D.0.86
4) Hanson, Inc. makes 1,000 units per year of a part called a prositron for use in one of
its products. Data concerning the unit production costs of the prositron follow:
An outside supplier has offered to sell Hanson, Inc. all of the prositrons it requires. If
Hanson, Inc. decided to discontinue making the prositrons, 10% of the above fixed
manufacturing overhead costs could be avoided.
Required:
a. Assume Hanson, Inc. has no alternative use for the facilities presently devoted to
production of the prositrons. If the outside supplier offers to sell the prositrons for $850
each, should Hanson, Inc. accept the offer? Fully support your answer with appropriate
calculations.
b. Assume that Hanson, Inc. could use the facilities presently devoted to production of
the prositrons to expand production of another product that would yield an additional
contribution margin of $50,000 annually. What is the maximum price Hanson, Inc.
should be willing to pay the outside supplier for prositrons?
5) The direct labor cost was:
A.$8,000
B.$12,300
C.$12,600
D.$11,000
6) Ellert Corporation manufactures and sells one product. The following information
pertains to the company’s first year of operations:
The company does not have any variable manufacturing overhead costs or variable
selling and administrative costs. During its first year of operations, the company
produced 52,000 units and sold 51,000 units. The company’s only product is sold for
$251 per unit.
Required:
a. Assume the company uses super-variable costing. Compute the unit product cost for
the year and prepare an income statement for the year.
b. Assume that the company uses a variable costing system that assigns $26 of direct
labor cost to each unit that is produced. Compute the unit product cost for the year and
prepare an income statement for the year.
7) The plant manager’s salary is an example of a:
A.Unit-level activity.
B.Batch-level activity.
C.Product-level activity.
D.Organization-sustaining activity.
8) Dodd 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 5,400 units were started and 4,700 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 30% 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 cost per equivalent unit for materials for the month in the first processing
department is closest to:
A.$21.37
B.$19.47
C.$20.04
D.$20.76
9) The Commonwealth Company uses a job-order costing system and applies
manufacturing overhead cost to jobs using a predetermined overhead rate based on the
cost of materials used in production. At the beginning of the year, the following
estimates were made as a basis for computing the predetermined overhead rate:
manufacturing overhead cost, $186,000; direct materials cost, $155,000. The following
transactions took place during the year (all purchases and services were acquired on
account):
a. Raw materials purchased, $96,000.
b. Raw materials requisitioned for use in production (all direct materials), $88,000.
c. Utility bills incurred in the factory, $17,000.
d. Costs for salaries and wages incurred as follows:
e. Maintenance costs incurred in the factory, $12,000.
f. Advertising costs incurred, $98,000.
g. Depreciation recorded for the year, $75,000 (75 percent relates to factory assets and
the remainder relates to selling, general, and administrative assets).
h. Rental cost incurred on buildings, $80,000 (80 percent of the space is occupied by
the factory, and 20 percent is occupied by sales and administration).
i. Miscellaneous selling, general, and administrative costs incurred, $12,000.
j. Manufacturing overhead cost was applied to jobs.
k. Cost of goods manufactured for the year, $480,000.
l. Sales for the year (all on account) totaled $900,000. These goods cost $550,000 to
manufacture.
Required:
Prepare journal entries to record the information above. Key your entries by the letters a
through l.
10) Wienecke Corporation manufactures and sells one product. The following
information pertains to the company’s first year of operations:
The company does not have any variable manufacturing overhead costs or variable
selling and administrative costs. During its first year of operations, the company
produced 44,000 units and sold 41,000 units. The company’s only product is sold for
$239 per unit.
The net operating income for the year under super-variable costing is:
A.$856,000
B.$544,000
C.$808,000
D.$1,066,000
11) Khanam Corporation, which has only one product, has provided the following data
concerning its most recent month of operations:
The company produces the same number of units every month, although the sales in
units vary from month to month. The company’s variable costs per unit and total fixed
costs have been constant from month to month.
What is the net operating income for the month under absorption costing?
A.$8,500
B.$9,300
C.$3,200
D.$15,100
12) The net present value of the entire project is closest to:
A.$331,080
B.$172,738
C.$377,000
D.$184,178
13) Poriss Corporation makes and sells a single product called a Yute. The company is
in the process of preparing its Selling and Administrative Expense Budget for the last
quarter of the year. The following budget data are available:
All of these expenses (except depreciation) are paid in cash in the month they are
incurred.
If the company has budgeted to sell 19,000 Yutes in November, then the total budgeted
selling and administrative expenses for November would be:
A.$546,000
B.$280,000
C.$266,000
D.$536,000
14) How much more profit (loss) does the company make by processing one batch of
sugar beets into the end products industrial fiber and refined sugar?
A.$(8)
B.$13
C.$(89)
D.$5
15) Williams Corporation uses the FIFO method in its process costing system. The
beginning work in process inventory in a particular department consisted of 10,000
units, 100% complete with respect to materials and 60% with respect to conversion
costs. The total cost in the beginning work in process inventory was $48,200. During
the month, 25,000 units were transferred out of the department. The costs per equivalent
unit were computed to be $3.10 for materials and $4.50 for conversion costs. The total
cost of the units completed and transferred out of the department was:
A.$190,000
B.$189,200
C.$180,200
D.$132,000
16) Gramajo Corporation’s standard wage rate is $10.10 per direct labor-hour (DLH)
and according to the standards, each unit of output requires 3.4 DLHs. In February,
2,400 units were produced, the actual wage rate was $9.40 per DLH, and the actual
hours were 7,920 DLHs. In the journal entry to record the incurrence of direct labor
costs in February, the Work in Process entry would consist of a:
A.credit of $74,448.
B.debit of $74,448.
C.debit of $82,416.
D.credit of $82,416.
17) Neelty Corporation has interest expense of $16,000, sales of $600,000, a tax rate of
30%, and after-tax net income of $56,000. The company’s times interest earned ratio is
closest to:
A.6.0
B.5.0
C.4.5
D.3.5