1) The following information relates to next year’s projected operating results of the
Consumer Division of Xampa Corporation:
If the Consumer Division is eliminated, $1,600,000 of the above fixed expenses could
be avoided. What will be the effect on Xampa’s profit next year if Consumer Division is
eliminated?
A.$300,000 increase
B.$300,000 increase
C.$200,000 decrease
D.$200,000 increase
2) Loggin Midwifery’s cost formula for its wages and salaries is $2,380 per month plus
$231 per birth. For the month of April, the company planned for activity of 100 births,
but the actual level of activity was 102 births. The actual wages and salaries for the
month was $25,510. The spending variance for wages and salaries in April would be
closest to:
A.$30 F
B.$432 U
C.$30 U
D.$432 F
3) The direct method is used by Adamski Publishing, Inc., to allocate service
department costs to operating departments. The company has two service departments,
Information Technology and Personnel, and two operating departments, Prepress and
Printing.
Information Technology Department costs are allocated on the basis of computer
workstations and Personnel Department costs are allocated on the basis of employees.
The total Prepress Department cost after service department allocations is closest to:
A.$459,351
B.$455,856
C.$450,938
D.$461,782
4) Spacer Corporation has two service departments and two operating departments.
Budgeted costs and budgeted activity in the various departments for last year are shown
below:
Service department costs are allocated to operating departments with the costs of
Custodial Services allocated on the basis of square feet of space occupied and the costs
of the Cafeteria on the basis of number of employees. The departmental costs for the
cutting and assembly departments are overhead costs. Predetermined overhead rates in
the Cutting and Assembly departments are based on machine-hours.
Assume that the company uses the direct method of allocation. The amount of Custodial
Services cost allocated to the Cutting Department would be:
A.$0
B.$20,160
C.$22,400
D.$19,200
5) The net cash provided by (used in) operating activities for the year was:
A.$187
B.$231
C.$257
D.$201
6) If machine-hours is Madison’s production constraint, then the ranking of the products
from the most profitable to the least profitable use of the constrained resource is:
A) A, B, C
B) A, C, B
C) B, C, A
D) C, A, B
7) G Products, Inc. manufactures garlic gravy. G’s production budget indicated the
following units (jars) of gravy to be produced for the upcoming months indicated:
Five grams of garlic are needed for every jar of gravy. G also likes to have enough
garlic on hand at the end of the month to cover 10% of the next month’s production
requirements for garlic. How many grams of garlic should G plan on purchasing during
the month of May?
A.397,500 grams
B.399,500 grams
C.407,500 grams
D.437,500 grams
8) Somani Corporation has an activity-based costing system with three activity cost
pools-Machining, Setting Up, and Other. The company’s overhead costs, which consist
of equipment depreciation and indirect labor, have been allocated to the cost pools
already and are provided in the table below.
Costs in the Machining cost pool are assigned to products based on machine-hours
(MHs) and costs in the Setting Up cost pool are assigned to products based on the
number of batches. Costs in the Other cost pool are not assigned to products. Data
concerning the two products and the company’s costs appear below:
Required:
a. Calculate activity rates for each activity cost pool using activity-based costing.
b. Determine the amount of overhead cost that would be assigned to each product using
activity-based costing.
c. Determine the product margins for each product using activity-based costing.
9) Tabeling Corporation manufactures and sells a single product. The company uses
units as the measure of activity in its budgets and performance reports. During August,
the company budgeted for 6,500 units, but its actual level of activity was 6,540 units.
The company has provided the following data concerning the formulas used in its
budgeting and its actual results for August:
Data used in budgeting:
Actual results for August:
The net operating income in the planning budget for August would be closest to:
A.$21,300
B.$21,908
C.$11,005
D.$10,871
10) Higgins Corporation sells three products, Product A, Product B, and Product C.
Data concerning the company’s most recent month of operations, June, appear below:
The total fixed expense for the company was $525,000.
The contribution margin in dollars for Product B for June was:
A.$45,000
B.$111,000
C.$180,000
D.$300,000