1) an action analysis report reconciles activity-based costing product costs with
traditional product costs based on direct labor.
2) under variable costing, product cost contains some fixed manufacturing overhead
cost.
3) the payback method of making capital budgeting decisions gives full consideration to
the time value of money.
4) positive free cash flow suggests that the company did not generate enough cash flow
from its operating activities to fund its capital expenditures and dividend payments.
5) the volume variance represents the difference between actual fixed manufacturing
overhead costs and budgeted fixed manufacturing overhead costs.
6) the main difference between a flexible budget and a static budget is that a flexible
budget does not contain fixed costs.
7) to determine the effect of income taxes on a project, multiply the net present value of
the project by one minus the tax rate.
8) in process costing, the same equivalent units figure is used for both materials and
conversion costs.
9) the opportunity cost of using a unit of the constrained resource in a volume trade-off
decision is determined by the profitability index of the company’s least profitable
product–even if none of that product is currently being made.
10) the variable overhead efficiency variance measures how efficiently variable
overhead resources were used.
11) in the statement of cash flows, increases in a company’s capital stock accounts are
treated as a “use” rather than as a ‘source” of cash.
12) on a cvp graph for a profitable company, the line representing total expenses is
steeper than the line representing total revenue.
13) idle time for direct labor factory workers is classified as an indirect manufacturing
cost.
14) when a company has a production constraint, the selling price of any new product
should cover both its variable cost and the opportunity cost involved in using the
constrained resource.
15) the cost of disposing of defective units would be classified as a(n):
a.prevention cost
b.appraisal cost
c.internal failure cost
d.external failure cost
16) cromuel corporation has provided the following data for january. the beginning
balance in the raw materials inventory account was $27,000. during the month, the
company made raw materials purchases amounting to $50,000. at the end of the month,
the balance in the raw materials inventory account was $24,000. direct labor cost was
$53,000 and manufacturing overhead was $70,000. the beginning balance in the work
in process account was $14,000 and the ending balance was $12,000. the beginning
balance in the finished goods account was $33,000 and the ending balance was
$51,000. sales totaled $270,000. selling expense was $21,000 and administrative
expense was $48,000.
the net operating income for january was:
a.$41,000
b.$78,000
c.$110,000
d.$28,000
17) gallager 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.$290,600
b.$112,200
c.$231,200
d.$343,400
18) 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 cost of the thread
used to sew the jeans together?
a.choice a
b.choice b
c.choice c
d.choice d
19) whitford corporation uses the following activity rates from its activity-based costing
to assign overhead costs to products.
required:
a. how much overhead cost would be assigned to product w52q using the company’s
activity-based costing system? show your work!
b. how much overhead cost would be assigned to product q29d using the company’s
activity-based costing system? show your work!
20) mccaughey corporation’s most recent balance sheet and income statement appear
below:
the current ratio at the end of year 2 is closest to:
a.0.34
b.0.30
c.1.31
d.1.12
21) eccles corporation uses a job-order costing system and applies overhead to jobs
using a predetermined overhead rate. during the year the company’s finished goods
inventory account was debited for $384,000 and credited for $325,900. the ending
balance in the finished goods inventory account was $72,100. at the end of the year,
manufacturing overhead was underapplied by $5,400.
the cost of goods manufactured was:
a.$22,900
b.$22,700
c.$8,200
d.$45,600
22) the clark company makes a single product and uses standard costing. some data
concerning this product for the month of may follow:
the variable overhead rate variance for may was closest to:
a.$2,290 f
b.$2,290 u
c.$1,710 f
d.$1,710 u
23) holding all other things constant, an increase in fixed production costs will affect:
a.the selling price under the absorption costing approach to cost-plus pricing
b.the profit-maximizing price
c.both the selling price under the absorption costing approach to cost-plus pricing and
the profit-maximizing price
d.neither the selling price under the absorption costing approach to cost-plus pricing nor
the profit-maximizing price
24) andreoli corporation’s most recent balance sheet appears below:
the net income for the year was $189. cash dividends were $ the net cash provided by
(used by) financing activities for the year was:
a.$4
b.($80)
c.($47)
d.($123)
25) balance sheet accounts for hollis, inc. contained the following amounts at the ends
of years 1 and 2:
the company’s income statement for year 2 follows:
there were no sales or retirements of plant and equipment in year 2. cash dividends of
$5,000 were paid during year 2. the company pays no income taxes. the company uses
the direct method to determine the net cash provided by operating activities on the
statement of cash flows.
net cash used for investing activities for year 2 would be:
a.$12,000
b.$21,000
c.$17,000
d.$22,000
26) during the year just completed, anderson company reported a cost of goods sold of
$100,000. the company’s inventory at the beginning of the year was $11,000, and its
inventory at the end of the year was $19,000. the prepaid expense account increased by
$2,000 between the beginning and end of the year, and the accounts payable account
decreased by $4,000. cost of goods sold adjusted to the cash basis under the direct
method would be:
a.$94,000
b.$106,000
c.$112,000
d.$110,000
27) edmondson inc. produces and sells a single product. the selling price of the product
is $200.00 per unit and its variable cost is $50.00 per unit. the fixed expense is
$205,500 per month.
the break-even in monthly dollar sales is closest to:
a.$205,500
b.$274,000
c.$822,000
d.$433,833
28) during august, sherill corporation incurred $78,000 of actual manufacturing
overhead costs. during the same period, the manufacturing overhead applied to work in
process was $81,000.
the cost of goods manufactured is:
a.$56,000
b.$50,000
c.$61,000
d.$55,000
journal entry (7):
29) largo company recorded for the past year sales of $750,000 and average operating
assets of $375,000. what is the margin that largo company needed to earn in order to
achieve an roi of 15%?
a.2.00%
b.15.00%
c.9.99%
d.7.50%
30) the three basic elements of manufacturing cost are direct materials, direct labor,
and:
a.cost of goods manufactured
b.cost of goods sold
c.work in process
d.manufacturing overhead
31) a clothing manufacturer incurred the following factory maintenance costs: 2,100
units produced with maintenance cost of $61,500, and 750 units produced with
maintenance cost of $41,250. how much of the maintenance cost is made up of fixed
cost? (use the high-low method.)
a.$11,181
b.$20,125
c.$30,000
d.$50,319
32) burningham corporation uses the weighted-average method in its process costing.
the following data pertain to its materials preparation department for june.
required:
determine the equivalent units of production for the materials preparation department
for june using the weighted-average method.
33) during september, noaks clinic plans for an activity level of 3,300 patient-visits. the
clinic uses the following revenue and cost formulas in its budgeting, where q is the
number of patient-visits:
revenue: $30.50q
personnel expenses: $30,900 + $8.40q
medical supplies: $1,200 + $4.50q
occupancy expenses: $6,400 + $1.70q
administrative expenses: $3,700 + $0.10q
required:
prepare the clinic’s planning budget for september.
34) logiudice inc. has provided the following data concerning its only product:
required:
compute the margin of safety in both dollars and as a percentage of sales.
35) excerpts from thi corporation’s most recent balance sheet appear below:
net income for year 2 was $143,000. dividends on common stock were $60,000 in total
and dividends on preferred stock were $23,000 in total.
required:
compute the return on common stockholders’ equity. show your work!
36) in september, one of the processing departments at coon corporation had beginning
work in process inventory of $12,000. during the month, $136,000 of costs were added
to production and the cost of units transferred out from the department was $121,000.
required:
construct a cost reconciliation report for the department for the month of september.
37) ades inc. has provided the following data for the month of july. there were no
beginning inventories; consequently, the direct materials, direct labor, and
manufacturing overhead applied listed below are all for the current month.
manufacturing overhead for the month was underapplied by $5,000.
the company allocates any underapplied or overapplied overhead among work in
process, finished goods, and cost of goods sold at the end of the month on the basis of
the overhead applied during the month in those accounts.
required:
provide the journal entry that would record the allocation of underapplied or
overapplied among work in process, finished goods, and cost of goods sold.
