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1) The internal rate of return on the investment is closest to:
A.23%
B.25%
C.24%
D.21%
2) Duckhorn Housecleaning provides housecleaning services to its clients. The
company uses an activity-based costing system for its overhead costs. The company has
provided the following data from its activity-based costing system.
The "Other" activity cost pool consists of the costs of idle capacity and
organization-sustaining costs.
One particular client, the Lumbard family, requested 31 jobs during the year that
required a total of 62 hours of housecleaning. For this service, the client was charged
$1,620.
Required:
a. Compute the activity rates (i.e., cost per unit of activity) for the activity cost pools.
Round off all calculations to the nearest whole cent.
b. Using the activity-based costing system, compute the customer margin for the
Lumbard family. Round off all calculations to the nearest whole cent.
c. Assume the company decides instead to use a traditional costing system in which
ALL costs are allocated to customers on the basis of cleaning hours. Compute the
margin for the Lumbard family. Round off all calculations to the nearest whole cent.
3) Oaklis Company has provided the following data for maintenance cost:
Maintenance cost is a mixed cost with variable and fixed components. The fixed and
variable components of maintenance cost are closest to:
A) $24,000 per year; $2.30 per machine hour
B) $6,000 per year; $1.80 per machine hour
C) $6,000 per year; $2.30 per machine hour
D) $24,000 per year; $1.80 per machine hour
4) Ravelo Corporation has provided the following data from its activity-based costing
system:
Data concerning the company's product L19B appear below:
According to the activity-based costing system, the average cost of product L19B is
closest to:
A.$48.19 per unit
B.$82.31 per unit
C.$85.56 per unit
D.$77.53 per unit
5) The following are budgeted data for the Bingham Corporation, a merchandising
company:
Assuming that the Bingham Corporation had inventory on hand of $70,000 (at cost) on
January 1, the purchases for January (at cost) would be:
A.$180,000
B.$250,000
C.$263,000
D.$110,000
6) Grogam Catering uses activity-based costing for its overhead costs. The company
has provided the following data concerning the activity rates in its activity-based
costing system:
The number of meals served is the measure of activity for the Preparing Meals activity
cost pool. The number of functions catered is used as the activity measure for the
Arranging Functions activity cost pool.
Management would like to know whether the company made any money on a recent
function at which 100 meals were served. The company catered the function for a fixed
price of $21 per meal. The cost of the raw ingredients for the meals was $8.25 per meal.
This cost is in addition to the costs of wages, supplies, and other expenses detailed
above.
For the purposes of preparing action analyses, management has assigned ease of
adjustment codes to the costs as follows: wages are classified as a Yellow cost; supplies
and raw ingredients as a Green cost; and other expenses as a Red cost.
According to the activity-based costing system, what was the total cost (including the
costs of raw ingredients) of the function mentioned above? (Round to the nearest whole
dollar.)
A.$1,560
B.$1,760
C.$1,060
D.$910
7) Sosinski Corporation has two divisions: Domestic Division and Foreign Division.
The following data are for the most recent operating period:
The common fixed expenses have been allocated to the divisions on the basis of sales.
The company's overall break-even sales is closest to:
A.$126,874
B.$466,116
C.$339,241
D.$320,490
8) Which of the following would produce a materials price variance?
A.An excess quantity of materials used.
B.An excess number of direct labor-hours worked in completing a job.
C.Shipping materials to the plant by air freight rather than by truck.
D.Breakage of materials in production.
9) Zack Company has a current ratio of 2.5. What will be the effect of a purchase of
inventory with cash on the acid-test ratio and on working capital?
A.Option A
B.Option B
C.Option C
D.Option D
10) In a statement of cash flows, issuing bonds payable affects the:
A.operating activities section.
B.financing activities section.
C.investing activities section.
D.free cash flow activities section.
11) When computing the net cash provided by operating activities using the indirect
approach on the statement of cash flows, which item below would NOT be added to net
income?
A.Depreciation.
B.Loss on the sale of an asset.
C.Decrease in accounts payable.
D.Decrease in prepaid expenses.
12) Financial data for Redstone Company for last year appear below:
The company paid dividends of $32,200 last year. The "Investment in Balsam
Company" on the statement of financial position represents an investment in the stock
of another company.
Required:
a. Compute the company's margin, turnover, and return on investment for last year.
b. The Board of Directors of Redstone has set a minimum required return of 25%. What
was the company's residual income last year?
