1) The company’s dividend payout ratio for Year 2 is closest to:
A.1.6%
B.21.1%
C.2.6%
D.14.7%
2) Kampmann Corporation is presently making part Z95 that is used in one of its
products. A total of 5,000 units of this part are produced and used every year. The
company’s Accounting Department reports the following costs of producing the part at
this level of activity:
An outside supplier has offered to make and sell the part to the company for $24.10
each. If this offer is accepted, the supervisor’s salary and all of the variable costs can be
avoided. The special equipment used to make the part was purchased many years ago
and has no salvage value or other use. The allocated general overhead represents fixed
costs of the entire company, none of which would be avoided if the part were purchased
instead of produced internally. If management decides to buy part Z95 from the outside
supplier rather than to continue making the part, what would be the annual impact on
the company’s overall net operating income?
A.Net operating income would decrease by $36,000 per year.
B.Net operating income would decrease by $34,000 per year.
C.Net operating income would increase by $34,000 per year.
D.Net operating income would increase by $36,000 per year.
3) Desalvo Corporation is introducing a new product whose direct materials cost is $41
per unit, direct labor cost is $20 per unit, variable manufacturing overhead is $5 per
unit, and variable selling and administrative expense is $4 per unit. The annual fixed
manufacturing overhead associated with the product is $120,000 and its annual fixed
selling and administrative expense is $8,000. Management plans to produce and sell
8,000 units of the new product annually. The new product would require an investment
of $2,192,000 and has a required return on investment of 10%. Management would like
to set the selling price on a new product using the absorption costing approach to
cost-plus pricing.
Required:
a. Determine the unit product cost for the new product.
b. Determine the markup percentage on absorption cost for the new product.
c. Determine the selling price for the new product using the absorption costing
approach.
4) 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 unit product cost under super-variable costing is:
A.$213 per unit
B.$88 per unit
C.$174 per unit
D.$104 per unit
5) Dills Corporation has provided the following data concerning its two products–O24
and C50:
The total amount of the constrained resource available each month is 49,250 grams.
Each unit of product O24 requires 17 grams of the constrained resource and each unit of
product C50 requires 5 grams. What is the maximum contribution margin the company
can earn per month?
A.$570,850
B.$475,225
C.$453,457
D.$438,250
6) Carter Lumber sells lumber and general building supplies to building contractors in a
medium-sized town in Montana. Data regarding the store’s operations follow:
Sales are budgeted at $380,000 for November, $390,000 for December, and $400,000
for January.
Collections are expected to be 70% in the month of sale, 27% in the month following
the sale, and 3% uncollectible.
The cost of goods sold is 65% of sales.
The company desires to have an ending merchandise inventory equal to 80% of the
following month’s cost of goods sold. Payment for merchandise is made in the month
following the purchase.
Other monthly expenses to be paid in cash are $22,000.
Monthly depreciation is $20,000.
Ignore taxes.
The net income for December would be:
A.$114,500
B.$94,500
C.$101,400
D.$82,800
7) Boenisch Corporation produces and sells a single product with the following
characteristics:
The company is currently selling 8,000 units per month. Fixed expenses are $406,000
per month. Consider each of the following questions independently.
The marketing manager believes that a $10,000 increase in the monthly advertising
budget would result in a 170 unit increase in monthly sales. What should be the overall
effect on the company’s monthly net operating income of this change?
A.increase of $1,560
B.increase of $11,560
C.decrease of $1,560
D.decrease of $10,000
8) The current ratio at the end of Year 2 is closest to:
A.1.67
B.0.32
C.0.80
D.0.41
9) ( Riveros, Inc., is considering the purchase of a machine that would cost $120,000
and would last for 8 years. At the end of 8 years, the machine would have a salvage
value of $29,000. The machine would reduce labor and other costs by $25,000 per year.
Additional working capital of $9,000 would be needed immediately. All of this working
capital would be recovered at the end of the life of the machine. The company requires
a minimum pretax return of 18% on all investment projects. The net present value of the
proposed project is closest to:
A.$(18,050)
B.$(63,683)
C.$(10,336)
D.$(16,942)
10) The company’s dividend yield ratio for Year 2 is closest to:
A.1.0%
B.18.4%
C.26.3%
D.2.5%
11) The cost of goods sold for July after allocation of any underapplied or overapplied
manufacturing overhead for the month is closest to:
A.$101,950
B.$107,950
C.$107,020
D.$102,880
12) Arenz Corporation processes sugar cane in batches. The company purchases a batch
of sugar cane for $53 from farmers and then crushes the cane in the company’s plant at
the cost of $15. Two intermediate products, cane fiber and cane juice, emerge from the
crushing process. The cane fiber can be sold as is for $24 or processed further for $18 to
make the end product industrial fiber that is sold for $40. The cane juice can be sold as
is for $41 or processed further for $25 to make the end product molasses that is sold for
$72. Which of the intermediate products should be processed further?
A.Cane fiber should be processed into industrial fiber; Cane juice should be processed
into molasses
B.Cane fiber should NOT be processed into industrial fiber; Cane juice should NOT be
processed into molasses
C.Cane fiber should be processed into industrial fiber; Cane juice should NOT be
processed into molasses
D.Cane fiber should NOT be processed into industrial fiber; Cane juice should be
processed into molasses
13) Oxyrom Corporation uses the FIFO method in its process costing system. Operating
data for the Brazing Department for the month of November appear below:
What were the equivalent units for conversion costs in the Brazing Department for
November?
A.49,040
B.50,200
C.43,200
D.48,280
14) Manico Corporation produces three products — X, Y, & Z — with the following
characteristics:
The company has only 2,000 machine-hours available each month. If demand exceeds
the company’s capacity, in what sequence should orders be filled if the company wants
to maximize its total contribution margin?
A.orders for Z first, X second, and Y third
B.orders for X first, Z second, and Y third
C.orders for Y first, X second, and Z third
D.orders for Z first and no orders for X or Y
15) Part S00 is used in one of Morsey Corporation’s products. The company makes
6,000 units of this part each year. The company’s Accounting Department reports the
following costs of producing the part at this level of activity:
An outside supplier has offered to produce this part and sell it to the company for
$16.10 each. If this offer is accepted, the supervisor’s salary and all of the variable
costs, including direct labor, can be avoided. The special equipment used to make the
part was purchased many years ago and has no salvage value or other use. The allocated
general overhead represents fixed costs of the entire company. If the outside supplier’s
offer were accepted, only $6,000 of these allocated general overhead costs would be
avoided.
If management decides to buy part S00 from the outside supplier rather than to continue
making the part, what would be the annual impact on the company’s overall net
operating income?
A.Net operating income would decrease by $3,000 per year.
B.Net operating income would decrease by $71,400 per year.
C.Net operating income would decrease by $77,400 per year.
D.Net operating income would decrease by $65,400 per year.
16) Suppose the selling price of the upgraded computers has not been set. At what
selling price per unit would the company be as well off upgrading the computers as if it
just sold the computers in their present condition?
A) $100
B) $770
C) $300
D) $210
17) Which one of the following statements about book value per share is most correct?
A.Market price per common share usually approximates book value per common share.
B.Book value per common share is based on past transactions whereas the market price
of a share of stock mainly reflects what investors expect to happen in the future.
C.A market price per common share that is greater than book value per common share
is an indication of an overvalued stock.
D.Book value per common share is the amount that would be paid to stockholders if the
company were sold to another company.