1) Home Corporation will open a new store on January 1. Based on experience from its
other retail outlets, Home Corporation is making the following sales projections:
Home Corporation estimates that 70% of the credit sales will be collected in the month
following the month of sale, with the balance collected in the second month following
the month of sale.
The March 31 balance in accounts receivable will be:
A.$100,000
B.$60,000
C.$95,000
D.$75,000
2) In December, one of the processing departments at Rumsey Corporation had ending
work in process inventory of $21,000. During the month, $110,000 of costs were added
to production and the cost of units transferred out from the department was $99,000.
In the department’s cost reconciliation report for December, the total cost accounted for
would be:
A.$230,000
B.$120,000
C.$31,000
D.$240,000
3) Crossbow Corp. produces a single product. Data concerning June’s operations
follow:
For the year in question, net operating income under variable costing will be:
A.higher than net operating income under absorption costing.
B.lower than net operating income under absorption costing.
C.the same as net operating income under absorption costing.
D.The relation between absorption costing and variable costing net operating income
cannot be determined.
4) Lafoe Corporation produces two intermediate products, A and B, from a common
input. Intermediate product A can be further processed into end product X. Intermediate
product B can be further processed into Product Y. The common input is purchased in
batches that cost $40 each and the cost of processing a batch to produce intermediate
products A and B is $18. Intermediate product A can be sold as is for $28 or processed
further for $19 to make Product X that is sold for $50. Intermediate product B can be
sold as is for $30 or processed further for $21 to make product Y that is sold for $49.
Required:
a. Assuming that no other costs are involved in processing the common input or in
selling products, what is the profit (loss) from processing one batch of the common
input into the products X and Y? Show your work!
b. Should each of the intermediate products, A and B, be sold as is or processed further?
Explain.
5) The Murray Corporation uses a standard cost system in which it applies
manufacturing overhead on the basis of standard direct labor-hours (DLHs). The
company recorded the following activity and cost data for May:
The fixed manufacturing overhead budget variance for May was:
A.$8,000 F
B.$8,000 U
C.$1,600 F
D.$1,600 U
6) The contribution margin ratio is equal to:
A.Total manufacturing expenses/Sales.
B.(Sales – Variable expenses)/Sales.
C.1 – (Gross Margin/Sales).
D.1 – (Contribution Margin/Sales).
7) Your boss would like you to estimate the fixed and variable components of a
particular cost. Actual data for this cost over four recent periods appear below.
Using the least-squares regression method, what is the cost formula for this cost?
A.Y = $0.00 + $7.55X
B.Y = $110.44 + $2.70X
C.Y = $103.38 + $3.00X
D.Y = $113.35 + $0.89X
8) The Cost of Goods Manufactured was:
A.$22,900
B.$26,300
C.$6,400
D.$49,200
9) What would be the total prevention cost appearing on the quality cost report?
A.$167,000
B.$130,000
C.$112,000
D.$102,000
10) What is the maximum amount the company should be willing to pay an outside
supplier per unit for the part if the supplier commits to supplying all 40,000 units
required each year?
A.$6.60 per unit
B.$44.60 per unit
C.$59.90 per unit
D.$66.50 per unit
Eley Corporation produces a single product. The cost of producing and selling a single
unit of this product at the company’s normal activity level of 40,000 units per month is
as follows:
The normal selling price of the product is $86.10 per unit.
An order has been received from an overseas customer for 2,000 units to be delivered
this month at a special discounted price. This order would have no effect on the
company’s normal sales and would not change the total amount of the company’s fixed
costs. The variable selling and administrative expense would be $1.20 less per unit on
this order than on normal sales.
11) ( Harrison Corporation is studying a project that would have an eight-year life and
would require a $300,000 investment in equipment which has no salvage value. The
project would provide net operating income each year as follows for the life of the
project:
The company’s required rate of return is 10%. The payback period for this project is
closest to:
A.3 years
B.2 years
C.2.5 years
D.2.67 years
12) Hudek Inc., a manufacturing Corporation, has provided the following data for the
month of July. The balance in the Work in Process inventory account was $20,000 at the
beginning of the month and $10,000 at the end of the month. During the month, the
Corporation incurred direct materials cost of $50,000 and direct labor cost of $22,000.
The actual manufacturing overhead cost incurred was $58,000. The manufacturing
overhead cost applied to Work in Process was $56,000. The cost of goods manufactured
for July was:
A.$138,000
B.$140,000
C.$130,000
D.$128,000
13) What is the total amount of the costs listed above that are direct costs of the Shoe
Department?
A) $38,000
B) $29,000
C) $70,000
D) $34,000
14) Data concerning Cutshall Enterprises Corporation’s single product appear below:
The unit sales to attain the company’s monthly target profit of $16,000 is closest to:
A.3,872
B.2,320
C.4,834
D.4,462
15) Frantic Corporation had $130,000 in sales on account last year. The beginning
accounts receivable balance was $10,000 and the ending accounts receivable balance
was $16,000. The corporation’s accounts receivable turnover was closest to:
A.5.00
B.13.00
C.10.00
D.8.13