1) What account should Chelm debit when the production manager has earned her
salary?
A.Direct Labor
B.Work in Process
C.Manufacturing Overhead
D.Salaries and Wages Receivable
E.Salaries and Wages Expense
2) If management decides to buy part P42 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 decline by $5,000 per year.
B.Net operating income would decline by $59,000 per year.
C.Net operating income would decline by $51,000 per year.
D.Net operating income would decline by $55,000 per year.
3) Zuppa Corporation currently maintains its own printing department. The annual costs
of running this department are as follows:
Somatic Copy Service has offered to provide Zuppa with all of its printing needs at a
total annual cost of $68,000. If Zuppa went with this offer, they would close down their
printing department. Except for 30% of the fixed costs, all of the annual printing
department costs above can be avoided if it was closed down. Based on this
information, would Zuppa be better off to keep its printing department or to shut it
down and take Somatic’s offer and by how much?
A.$4,000 better off to go with Somatic
B.$5,000 better off to keep the department
C.$20,000 better off to keep the department
D.$22,000 better off to go with Somatic
4) Walborn Corporation uses the weighted-average method in its process costing
system. The beginning work in process inventory in a particular department consisted
of 11,000 units, 100% complete with respect to materials cost and 30% complete with
respect to conversion costs. The total cost in the beginning work in process inventory
was $22,400. A total of 45,000 units were transferred out of the department during the
month. The costs per equivalent unit were computed to be $1.20 for materials and $3.40
for conversion costs. The total cost of the units completed and transferred out of the
department was:
A.$207,000
B.$184,600
C.$204,980
D.$182,580
5) Irawaddy Company, a retailer, had cost of goods sold of $230,000 last year. The
beginning inventory balance was $24,000 and the ending inventory balance was
$22,000. The company’s average sale period was closest to:
A.36.5 days
B.73.0 days
C.38.1 days
D.34.9 days
6) A manufacturer of tiling grout has supplied the following data:
The company’s break-even in unit sales is closest to:
A.43,774
B.237,143
C.76,615
D.80,606
7) Narciso Corporation is preparing a bid for a special order that would require 880
liters of material R19S. The company already has 280 liters of this raw material in stock
that originally cost $6.10 per liter. Material R19S is used in the company’s main product
and is replenished on a periodic basis. The resale value of the existing stock of the
material is $5.45 per liter. New stocks of the material can be readily purchased for
$6.20 per liter. What is the relevant cost of the 880 liters of the raw material when
deciding how much to bid on the special order?
A) $5,006
B) $5,456
C) $4,796
D) $5,456
8) Sechrest Corporation manufactures a single product. Last year, the company’s
variable costing net operating income was $80,500. Fixed manufacturing overhead
costs released from inventory under absorption costing amounted to $18,400. What was
the absorption costing net operating income last year?
A.$18,400
B.$80,500
C.$98,900
D.$62,100
9) The net present value of the entire project is closest to:
A.$106,760
B.$147,868
C.$126,000
D.$67,868
Depreciation expense = (Original cost – Salvage value) / Useful life
= ($80,000 – $0) / 4 years = $20,000 per year
Kostka Corporation is considering a capital budgeting project that would require
investing $160,000 in equipment with an expected life of 4 years and zero salvage
value. Annual incremental sales would be $480,000 and annual incremental cash
operating expenses would be $330,000. The project would also require an immediate
investment in working capital of $20,000 which would be released for use elsewhere at
the end of the project. The project would also require a one-time renovation cost of $0
in year 3. The company’s income tax rate is 30% and its after-tax discount rate is 9%.
The company uses straight-line depreciation. Assume cash flows occur at the end of the
year except for the initial investments. The company takes income taxes into account in
its capital budgeting.
10) Managers will often allocate common fixed expenses to business segments because:
A.this is required by law.
B.not allocating these costs will lead to bad decisions.
C.they believe this practice will ensure that the company’s common fixed expenses are
covered.
D.they do not want the sum of the business segment margins to equal the net operating
income for the company.
11) Federick Clinic uses client-visits as its measure of activity. During October, the
clinic budgeted for 3,000 client-visits, but its actual level of activity was 3,040
client-visits. The clinic has provided the following data concerning the formulas used in
its budgeting and its actual results for October:
Data used in budgeting:
Actual results for October:
The activity variance for administrative expenses in October would be closest to:
A.$152 U
B.$152 F
C.$8 U
D.$8 F
12) 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 variable costing?
A.$8,500
B.$9,300
C.$3,200
D.$15,100
13) Oddo Corporation makes a product with the following standard costs:
The company reported the following results concerning this product in December.
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 labor efficiency variance for December is:
A.$4,026 F
B.$4,026 U
C.$4,400 F
D.$4,400 U
14) The company’s gross margin percentage for Year 2 is closest to:
A.59.6%
B.2.5%
C.37.3%
D.4076.9%
15) Schwering Corporation uses activity-based costing to assign overhead costs to
products. Overhead costs have already been allocated to the company’s three activity
cost pools as follows: Machining, $20,800; Order Filling, $30,400; and Other, $48,800.
Machining costs are assigned to products using machine-hours (MHs) and Order Filling
costs are assigned to products using the number of orders. The costs in the Other
activity cost pool are not assigned to products. Activity data appear below:
What is the overhead cost assigned to Product U1 under activity-based costing?
A.$20,016
B.$50,000
C.$6,080
D.$13,936
16) 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.$33.60 per minute
B.$3.00 per minute
C.$4.80 per minute
D.$57.00 per minute
Production of product J45Z would be 3,230 minutes / 19 minutes per unit of J45Z = 170
units of J45Z.
This leaves unsatisfied demand for product J45Z. Consequently, the company should be
willing to pay up to $3.00 per minute for more of the constrained resource.
17) Under super-variable costing, which of the following is treated as a period cost?
A.Option A
B.Option B
C.Option C
D.Option D