1) eyring industries has a truck purchased seven years ago at a cost of $6,000. at the
time of purchase, the ultimate salvage value was estimated at $500, but salvage value
was ignored in depreciation deductions. the truck is now fully depreciated. assuming a
tax rate of 40%, if the truck is sold for $500, the after-tax cash inflow for capital
budgeting purposes will be:
a.$500
b.$300
c.$200
d.$100
2) recent maintenance costs of pavelko corporation are listed below:
management believes that maintenance cost is a mixed cost that depends on
machine-hours.
using the least-squares regression method, the estimate of the fixed component of
maintenance cost per month is closest to:
a.$7,826
b.$6,036
c.$7,950
d.$6,199
3) in a cash budget for march, the total cash receipts would be:
a.$17,800
b.$8,200
c.$20,200
d.$16,000
4) hinsey corporation produces and sells a single product. data concerning the product
appear below:
fixed expenses are $300,000 per month. the company is currently selling 4,000 units per
month. consider each of the following questions independently.
this question is to be considered independently of all other questions relating to hinsey
corporation. refer to the original data when answering this question.
the marketing manager believes that an $18,000 increase in the monthly advertising
budget would result in a 180 unit increase in monthly sales. what should be the overall
effect on the company’s monthly net operating income of this change?
a.decrease of $2,160
b.decrease of $18,000
c.increase of $15,840
d.increase of $2,160
5) the lagrange company had the following budgeted sales for the first half of the
current year:
the company is in the process of preparing a cash budget and must determine the
expected cash collections by month. to this end, the following information has been
assembled:
collections on sales: 60% in month of sale
30% in month following sale
10% in second month following sale
the accounts receivable balance on january 1 of the current year was $70,000, of which
$50,000 represents uncollected december sales and $20,000 represents uncollected
november sales.
what is the budgeted accounts receivable balance on june 1 of the current year?
a.$56,000
b.$64,000
c.$76,000
d.$132,000
6) buffo company fabricates metal folding chairs. data concerning the company’s
revenue and cost structure follow:
if buffo plans to produce and sell 4,000 units next month, the expected gross margin
would be:
a.$41,000
b.$37,000
c.$68,000
d.$57,500
7) lucena corporation purchased a machine 7 years ago for $339,000 when it launched
product x05k. unfortunately, this machine has broken down and cannot be repaired. the
machine could be replaced by a new model 360 machine costing $353,000 or by a new
model 280 machine costing $332,000. management has decided to buy the model 280
machine. it has less capacity than the model 360 machine, but its capacity is sufficient
to continue making product x05k. management also considered, but rejected, the
alternative of dropping product x05k and not replacing the old machine. if that were
done, the $332,000 invested in the new machine could instead have been invested in a
project that would have returned a total of $426,000.
in making the decision to buy the model 280 machine rather than the model 360
machine, the sunk cost was:
a.$426,000
b.$339,000
c.$332,000
d.$353,000
8) which of the following documents is used to specify the type and quantity of
materials drawn from the storeroom, and identifies the job to which the costs of the
materials are to be charged?
a.job cost sheet
b.bill of materials
c.material requisition form
d.purchase order
9) brubacher company makes four products in a single facility. these products have the
following unit product costs:
the grinding machines are potentially the constraint in the production facility. a total of
20,500 minutes are available per month on these machines.
direct labor is a variable cost in this company.
up to how much should the company be willing to pay for one additional minute of
grinding machine time if the company has made the best use of the existing grinding
machine capacity? (round off to the nearest whole cent.)
a.$0.00
b.$18.30
c.$12.21
d.$10.00
10) the constraint at crumedy inc. is an expensive milling machine. the three products
listed below use this constrained resource.
required:
a. rank the products in order of their current profitability from the most profitable to the
least profitable. in other words, rank the products in the order in which they should be
emphasized. show your work!
b. assume that sufficient constraint time is available to satisfy demand for all but the
least profitable product. up to how much should the company be willing to pay to
acquire more of the constrained resource?
11) pilkinton corporation has provided its contribution format income statement for
july. the company produces and sells a single product.
if the company sells 10,300 units, its total contribution margin should be closest to:
a.$49,211
b.$391,400
c.$407,400
d.$376,200
12) the following data have been provided by letze corporation from its activity-based
costing accounting system:
the “other” activity cost pool consists of the costs of idle capacity and
organization-sustaining costs that are not assigned to products.
how much factory supervision and indirect factory labor cost would not be assigned to
products using the activity-based costing system?
a.$220,000
b.$90,000
c.$0
d.$460,000
13) carter company has projected sales and production in units for the second quarter of
next year as follows:
required:
a. cash production costs are budgeted at $6 per unit produced. of these production costs,
40% are paid in the month in which they are incurred and the balance in the following
month. selling and administrative expenses (all of which are paid in cash) amount to
$120,000 per month. the accounts payable balance on march 31 totals $192,000, all of
which will be paid in april. prepare a schedule for each month showing budgeted cash
disbursements for carter company.
b. assume that all units will be sold on account for $15 each. cash collections from sales
are budgeted at 60% in the month of sale, 30% in the month following the month of
sale, and the remaining 10% in the second month following the month of sale. accounts
receivable on march 31 totaled $510,000 $(90,000 from february’s sales and the
remainder from march). prepare a schedule for each month showing budgeted cash
receipts for carter company.
