1) All other things the same, an increase in total fixed expenses will increase the
break-even point.
2) Process Time is the only non-value-added component of Throughput Time.
3) When a company is involved in only one activity in the entire value chain, it is
vertically integrated.
4) A company could improve its acid-test ratio by selling some equipment it no longer
needs for cash.
5) Direct labor is a part of prime cost, but not conversion cost.
6) Kienle Corporation’s Year 2 income statement appears below:
The company’s total assets at the end of Year 2 amounted to $1,359,000 and at the end
of Year 1 to $1,320,000. The company’s return on total assets for Year 2 is closest to:
A.2.48%
B.3.14%
C.2.52%
D.3.10%
7) The journal entry to record the allocation of any underapplied or overapplied
manufacturing overhead for November would include the following:
A.debit to Cost of Goods Sold of $66,060
B.credit to Cost of Goods Sold of $66,060
C.debit to Cost of Goods Sold of $1,100
D.credit to Cost of Goods Sold of $1,100
8) The income tax expense in year 3 is:
A.$48,000
B.$30,000
C.$6,000
D.$24,000
9) Tempel Corporation has provided the following data:
The market price of common stock at the end of Year 2 was $2.77 per share. The
company’s price-earnings ratio for Year 2 is closest to:
A.9.23
B.0.35
C.4.54
D.13.40
10) Which of the following would probably be the most accurate measure of activity to
use for allocating the costs associated with a factory’s purchasing department?
A.Machine-hours
B.Direct labor-hours
C.Number of orders processed
D.Cost of materials purchased
11) Rough Corporation’s total assets at the end of Year 2 were $1,247,000 and at the end
of Year 1 were $1,270,000. The company’s total liabilities at the end of Year 2 were
$512,000 and at the end of Year 1 were $550,000. The company’s total stockholders’
equity at the end of Year 2 was $735,000 and at the end of Year 1 was $720,000. The
company’s equity multiplier is closest to:
A.1.73
B.1.44
C.0.69
D.0.58
12) The following data were provided by Rider, Inc, which produces a single product:
For the year in question, one would expect the net operating income under absorption
costing to be:
A.higher than the net operating income under variable costing.
B.lower than the net operating income under variable costing.
C.the same as the net operating income under variable costing.
D.the relation between absorption costing and variable costing net operating incomes
cannot be determined.
13) Tout Corporation makes a product that has the following direct labor standards:
The company budgeted for production of 6,400 units in October, but actual production
was 6,500 units. The company used 610 direct labor-hours to produce this output. The
actual direct labor rate was $21.80 per hour.
The labor rate variance for October is:
A.$122 U
B.$130 F
C.$122 F
D.$130 U
14) Fongeallaz Corporation’s income statement for Year 2 appears below:
The company’s total stockholders’ equity at the end of Year 2 amounted to $841,000 and
at the end of Year 1 to $810,000. The company’s return on equity for Year 2 is closest
to:
A.64.40%
B.8.93%
C.6.75%
D.4.72%
15) Vontungeln Corporation uses activity-based costing to compute product margins. In
the first stage, the activity-based costing system allocates two overhead
accounts-equipment depreciation and supervisory expense-to three activity cost
pools-Machining, Order Filling, and Other-based on resource consumption. Data to
perform these allocations appear below:
In the second stage, 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.
Finally, sales and direct cost data are combined with Machining and Order Filling costs
to determine product margins.
How much overhead cost is allocated to the Machining activity cost pool under
activity-based costing in the first stage of allocation?
A.$32,000
B.$16,000
C.$400
D.$32,400
16) ( Messersmith Corporation is investigating automating a process by purchasing a
machine for $688,000 that would have an 8 year useful life and no salvage value. By
automating the process, the company would save $160,000 per year in cash operating
costs. The new machine would replace some old equipment that would be sold for scrap
now, yielding $19,000. The annual depreciation on the new machine would be $86,000.
The simple rate of return on the investment is closest to:
A.23.3%
B.11.1%
C.10.8%
D.12.5%
17) Beltram Corporation’s balance sheet and income statement appear below:
The company did not dispose of any property, plant, and equipment, issue any bonds
payable, or repurchase any of its own common stock during the year. The company
declared and paid a cash dividend of $13.
Required:
Prepare a statement of cash flows in good form using the indirect method.
18) Kestner Corporation has provided the following financial data:
19) Bowdish Corporation purchases potatoes from farmers. The potatoes are then
peeled, producing two intermediate products-peels and depeeled spuds. The peels can
then be processed further to make a cocktail of organic nutrients. And the depeeled
spuds can be processed further to make frozen french fries. A batch of potatoes costs
$37 to buy from farmers and $14 to peel in the company’s plant. The peels produced
from a batch can be sold as is for animal feed for $22 or processed further for $13 to
make the cocktail of nutrients that are sold for $40. The depeeled spuds can be sold as is
for $37 or processed further for $21 to make frozen french fries that are sold for $53.
20) Pilgrim Corporation makes a range of products. The company’s predetermined
overhead rate is $23 per direct labor-hour, which was calculated using the following
budgeted data:
Management is considering a special order for 800 units of product N89E at $69 each.
The normal selling price of product N89E is $88 and the unit product cost is determined
as follows:
If the special order were accepted, normal sales of this and other products would not be
affected. The company has ample excess capacity to produce the additional units.
Assume that direct labor is a variable cost, variable manufacturing overhead is really
driven by direct labor-hours, and total fixed manufacturing overhead would not be
affected by the special order.
Required:
If the special order were accepted, what would be the impact on the company’s overall
profit?
21) Mouret Corporation uses the following activity rates from its activity-based costing
to assign overhead costs to products.
Last year, Product N79A required 28 batches, 6 customer orders, and 712 assembly
hours.
Required:
How much overhead cost would be assigned to Product N79A using the company’s
activity-based costing system? Show your work!
22) Pinkney Corporation has provided the following data concerning its direct labor
costs for November:
Required:
Prepare the journal entry to record the incurrence of direct labor costs.
23) Christofferse Corporation bases its predetermined overhead rate on the estimated
machine-hours for the upcoming year. Data for the most recently completed year appear
below:
Required:
Compute the company’s predetermined overhead rate for the recently completed year.
24) Buentello Corporation produces and sells a single product. The company’s
contribution format income statement for January appears below:
Required:
Redo the company’s contribution format income statement assuming that the company
sells 1,600 units.
