1) suppose fewer units are sold in year 2 than in year 1. if production exceeds sales in
year 2, net operating income under absorption costing could be higher in year 2 than in
year 1.
2) the statement of ethical professional practice promulgated by the institute of
management accountants specifically states, among other things, that management
accountants have a responsibility to inform responsible journalists of any wrongdoing
they uncover in the organization.
3) a cost that will be incurred regardless of which course of action a manager takes is
relevant to the manager’s decision.
4) in capital budgeting decisions, a $10,000 decrease in annual cash outflows can be
treated as if it is a $10,000 increase in annual cash inflows.
5) activities such as the purchase of inventory on account should be included as part of
a company’s financing activities on the statement of cash flows.
6) if the sales mix changes, the average contribution margin ratio is likely to change as
well.
7) all other things equal, the margin of safety in a company with high fixed costs and
low variable costs will tend to be higher than the margin of safety in a similar company
that has low fixed costs and high variable costs.
8) the usual starting point in budgeting is to make a forecast of cash receipts and cash
disbursements.
9) the payback period is the length of time it takes for an investment to recoup its initial
cost out of the cash receipts it generates.
10) tosta kennel uses tenant-days as its measure of activity; an animal housed in the
kennel for one day is counted as one tenant-day. during may, the kennel budgeted for
2,100 tenant-days, but its actual level of activity was 2,050 tenant-days. the kennel has
provided the following data concerning the formulas used in its budgeting and its actual
results for may:
the activity variance for net operating income in may would be closest to:
a.$2,770 u
b.$720 u
c.$720 f
d.$2,770 f
11) a study has been conducted to determine if one of the departments in parry
company should be discontinued. the contribution margin in the department is $50,000
per year. fixed expenses charged to the department are $65,000 per year. it is estimated
that $40,000 of these fixed expenses could be eliminated if the department is
discontinued. these data indicate that if the department is discontinued, the company’s
overall net operating income would:
a.decrease by $25,000 per year
b.increase by $25,000 per year
c.decrease by $10,000 per year
d.increase by $10,000 per year
12) (ignore income taxes in this problem.) banderas corporation is considering the
purchase of a machine that would cost $330,000 and would last for 9 years. at the end
of 9 years, the machine would have a salvage value of $79,000. by reducing labor and
other operating costs, the machine would provide annual cost savings of $59,000. the
company requires a minimum pretax return of 12% on all investment projects. the net
present value of the proposed project is closest to:
a.$12,871
b.$63,352
c.-$15,648
d.$35,692
13) harstin corporation has provided the following data:
the margin for the past year was:
a.19.2%
b.14.4%
c.11.2%
d.8.0%
14) abdol company, which has only one product, has provided the following data
concerning its most recent month of operations:
what is the total period cost for the month under the variable costing approach?
a.$263,500
b.$71,500
c.$302,500
d.$231,000
15) the following information relates to the cranberry division of innovative bologna
corporation for last year:
assume that cranberry was being evaluated solely on the basis of return on investment
(roi). which of the following investment opportunities would cranberry want to invest
in?
a.choice a
b.choice b
c.choice c
d.choice d
16) henkel clinic uses client-visits as its measure of activity. during november, the clinic
budgeted for 3,600 client-visits, but its actual level of activity was 3,550 client-visits.
the clinic has provided the following data concerning the formulas used in its budgeting
and its actual results for november:
the occupancy expenses in the flexible budget for november would be closest to:
a.$14,422
b.$14,831
c.$15,325
d.$15,400
17) palmerin corporation is preparing its cash budget for november. the budgeted
beginning cash balance is $30,000. budgeted cash receipts total $167,000 and budgeted
cash disbursements total $171,000. the desired ending cash balance is $50,000.
the excess (deficiency) of cash available over disbursements for november is:
a.$34,000
b.($4,000)
c.$26,000
d.$197,000
18) the koski company has established standards as follows:
actual production figures for the past year were as follows:
the labor efficiency variance is:
a.$400 f
b.$800 f
c.$800 u
d.$500 f
19) corcetti company manufactures and sells prewashed denim jeans. large rolls of
denim cloth are purchased and are first washed in a giant washing machine. after the
cloth is dried, it is cut up into jean pattern shapes and then sewn together. the completed
jeans are sold to various retail chains.
which of the following terms could be used to correctly describe the wages paid to the
workers that cut up the cloth into the jean pattern shapes?
a.choice a
b.choice b
c.choice c
d.choice d
20) compound g92n is used to make passero corporation’s major product. the standard
cost of g92n is $28.60 per ounce and the standard quantity is 2.9 ounces per unit of
output. in the most recent month, 2,000 ounces of the raw material were purchased at a
cost of $29.50 per ounce. when recording the purchase of materials, raw materials
would be:
a.credited for $59,000
b.debited for $57,200
c.credited for $57,200
d.debited for $59,000
21) gudger 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 $10. two intermediate products, cane fiber and cane juice, emerge from the
crushing process. the cane fiber can be sold as is for $29 or processed further for $15 to
make the end product industrial fiber that is sold for $60. the cane juice can be sold as is
for $38 or processed further for $22 to make the end product molasses that is sold for
$52. which of the intermediate products should be processed further?
a.cane fiber should be processed into industrial fiber; cane juice should not be
processed into molasses
b.cane fiber should not be processed into industrial fiber; cane juice should be
processed into molasses
c.cane fiber should not be processed into industrial fiber; cane juice should not be
processed into molasses
d.cane fiber should be processed into industrial fiber; cane juice should be processed
into molasses
22) a furniture manufacturer has a standard costing system based on standard direct
labor-hours (dlhs) as the measure of activity. data from the company’s flexible budget
for manufacturing overhead are given below:
the following data pertain to operations for the most recent period:
what is the predetermined overhead rate to the nearest cent?
a.$15.94
b.$16.40
c.$14.61
d.$15.03
23) leriche corporation has provided the following data for a recent month:
the variable overhead rate variance for power is closest to:
a.$766 f
b.$424 u
c.$766 u
d.$342 u
24) when the actual direct labor-hours are less than the standard direct labor-hours
allowed for the actual output of the period, the journal entry would include:
a.credit to wages payable; credit to labor efficiency variance
b.credit to work-in-process; credit to labor efficiency variance
c.credit to wages payable; debit to labor efficiency variance
d.credit to work-in-process; debit to labor efficiency variance
25) in a job-order costing system, the entry to record depreciation on manufacturing
equipment would include:
a.a debit to the work in process inventory account
b.a debit to the depreciation expense account
c.a debit to the manufacturing overhead account
d.a credit to the work in process inventory account
26) gasco clinic uses patient-visits as its measure of activity. during august, the clinic
budgeted for 2,000 patient-visits, but its actual level of activity was 2,100 patient-visits.
the clinic uses the following revenue and cost formulas in its budgeting, where q is the
number of patient-visits:
revenue: $62.90q
personnel expenses: $28,500 + $20.40q
medical supplies: $1,400 + $9.90q
occupancy expenses: $8,200 + $3.30q
administrative expenses: $4,000 + $0.40q
the clinic reported the following actual results for august:
required:
prepare a report showing the clinic’s revenue and spending variances for august. label
each variance as favorable (f) or unfavorable (u).
27) ducey corporation’s total current assets are $250,000, its noncurrent assets are
$580,000, its total current liabilities are $160,000, its long-term liabilities are $470,000,
and its stockholders’ equity is $200,000.
required:
compute the company’s working capital. show your work!
28) data from shamp corporation’s most recent balance sheet and income statement
appear below:
required:
compute the average collection period for this year:
29) (ignore income taxes in this problem.) masone inc. has provided the following data
concerning a proposed investment project:
the company uses a discount rate of 10%.
required:
compute the net present value of the project.
30) domin corporation bases its budgets on the activity measure customers served.
during april, the company planned to serve 31,000 customers, but actually served
35,000 customers. revenue is $4.80 per customer served. wages and salaries are
$33,000 per month plus $1.60 per customer served. supplies are $1.00 per customer
served. insurance is $12,200 per month. miscellaneous expenses are $7,400 per month
plus $0.20 per customer served.
required:
prepare a report showing the company’s activity variances for april. indicate in each
case whether the variance is favorable (f) or unfavorable (u).
31) meleski corporation’s recent utility costs are listed below:
management believes that utility cost is a mixed cost that depends on machine-hours.
below are cost and activity data for a particular cost over the last four periods. your boss
has asked you to analyze this cost so that management will have a better understanding
of how this cost changes in response to changes in activity.
required:
using the least-squares regression method, estimate the cost formula for this cost.
32) (ignore income taxes in this problem.) the management of torn corporation is
considering a project that would require an initial investment of $332,000 and would
last for 8 years. the annual net operating income from the project would be $78,000,
including depreciation of $38,000. at the end of the project, the scrap value of the
project’s assets would be $28,000.
required:
determine the payback period of the project. show your work!
33) last year, iurato corporation’s dividend on common stock was $8.20 per share and
the dividend on preferred stock was $3.40 per share. the market price of common stock
at the end of the year was $50.70 per share.
required:
compute the dividend yield ratio. show your work!