1) The company’s accounts receivable turnover for Year 2 is closest to:
A.1.06
B.5.06
C.5.21
D.0.94
2) The total cash flow net of income taxes in year 2 is:
A.$137,000
B.$170,000
C.$67,000
D.$110,000
3) Up to how much should the company be willing to pay to obtain enough of the
constrained resource to satisfy demand for the two existing products?
A.$3.80 per minute
B.$7.20 per minute
C.$38.00 per minute
D.$14.40 per minute
4) Suppose there is ample idle capacity to produce the units required by the overseas
customer and the special discounted price on the special order is $76.40 per unit. By
how much would this special order increase (decrease) the company’s net operating
income for the month?
A.$(17,000)
B.$13,400
C.$48,000
D.$(5,000)
5) A manufacturing company that produces a single product has provided the following
data concerning its most recent month of operations:
What is the total period cost for the month under variable costing?
A.$124,200
B.$123,200
C.$168,200
D.$45,000
6) Ishibashi Snow Removal’s cost formula for its vehicle operating cost is $1,240 per
month plus $337 per snow-day. For the month of February, the company planned for
activity of 17 snow-days, but the actual level of activity was 12 snow-days. The actual
vehicle operating cost for the month was $5,140. The spending variance for vehicle
operating cost in February would be closest to:
A.$144 U
B.$1,829 U
C.$1,829 F
D.$144 F
7) Meyer Corporation has two sales areas: North and South. During April, the
contribution margin in the North was $90,000, or 30% of sales. The segment margin in
the South was $25,000, or 10% of sales. Traceable fixed expenses were $30,000 in the
North and $15,000 in the South. Meyer Corporation reported a total net operating
income of $52,000.
The total fixed expenses for Meyer Corporation were:
A.$45,000
B.$33,000
C.$85,000
D.$78,000
8) Longview Hospital performs blood tests in its laboratory. The following standards
have been set for each blood test performed:
During May, the laboratory performed 1,500 blood tests. On May 1 there were no direct
materials (plates) on hand; after a plate is used for a blood test it is discarded. Variable
overhead is assigned to blood tests on the basis of standard direct labor-hours. The
following events occurred during May:
3,600 plates were purchased for $9,540
3,200 plates were used for blood tests
340 actual direct labor-hours were worked at a cost of $5,550
The direct materials purchases variance is computed when the materials are purchased.
The variable overhead efficiency variance for May is
A.$350 F
B.$350 U
C.$280 U
D.$280 F
9) The company’s return on equity for Year 2 is closest to:
A.5.60%
B.4.09%
C.2.66%
D.68.28%
10) Zemlya Corporation currently records $4,000 of depreciation each year on the
computer that it uses for its major data processing needs. The computer currently has
one more year of useful life left and it will have a salvage value of zero at the end of
that year. Jennifer, one of the accountants at Zemlya, suggested that the computer be
sold immediately for $3,000 and that the company hire a data processing firm to handle
the corporation’s data processing needs. The computer currently requires $25,000 in
annual operating costs in addition to the depreciation. The data processing firm would
charge $10,000 per year for its services. If Zemlya decides to implement this change,
what effect will this have on the corporation’s net cash flow for the last year of the
computer’s useful life?
A) increase of $15,000
B) increase of $18,000
C) decrease of $22,000
D) decrease of $25,000
11) The Western Division of Pryto Corporation sells Part D to other companies for $750
per unit. According to the company’s cost accounting system, the costs to Western
Division to make a unit of Product D are:
The Southern Division of Pryto Corporation uses a part much like Part D in one of its
products. The Southern Division can buy this part from an outside supplier for $725 per
unit. However, the Southern Division could use Part D instead of this part that it
purchases from outside suppliers. What is the most that the Southern Division would be
willing to pay the Western Division for Product D?
A.$78.50 per unit
B.$76.00 per unit
C.$74.00 per unit
D.$78.25 per unit
12) Enwall Corporation’s standard wage rate is $11.20 per direct labor-hour (DLH) and
according to the standards, each unit of output requires 2.9 DLHs. In December, 5,900
units were produced, the actual wage rate was $10.20 per DLH, and the actual hours
were 14,150 DLHs.
The Labor Rate Variance for December would be recorded as a:
A.debit of $14,150.
B.credit of $17,110.
C.debit of $17,110.
D.credit of $14,150.
13) The company’s acid-test (quick) ratio at the end of Year 2 is closest to:
A.1.96
B.1.41
C.1.20
D.1.48
14) Monard Clinic uses client-visits as its measure of activity. During January, the clinic
budgeted for 3,700 client-visits, but its actual level of activity was 3,710 client-visits.
The clinic has provided the following data concerning the formulas used in its
budgeting and its actual results for January:
Data used in budgeting:
Actual results for January:
The activity variance for administrative expenses in January would be closest to:
A.$4 F
B.$206 U
C.$4 U
D.$206 F
15) Chown Corporation, which has only one product, has provided the following data
concerning its most recent month of operations:
The total contribution margin for the month under variable costing is:
A.$179,400
B.$390,000
C.$421,200
D.$142,000
16) In making the decision to invest in the model 260 machine, the opportunity cost
was:
A) $418,000
B) $456,000
C) $474,000
D) $496,000
17) Part O43 is used in one of Scheetz Corporation’s products. The company’s
Accounting Department reports the following costs of producing the 6,000 units of the
part that are needed every year.
An outside supplier has offered to make the part and sell it to the company for $26.40
each. If this offer is accepted, the supervisor’s salary and all of the variable costs,
including direct labor, can be avoided. The special equipment used to make the part was
purchased many years ago and has no salvage value or other use. The allocated general
overhead represents fixed costs of the entire company. If the outside supplier’s offer
were accepted, only $1,000 of these allocated general overhead costs would be avoided.
Required:
a. Prepare a report that shows the effect on the company’s total net operating income of
buying part O43 from the supplier rather than continuing to make it inside the company.
b. Which alternative should the company choose?
18) Derf Corporation uses a standard cost system in which it applies manufacturing
overhead on the basis of standard direct labor-hours. Two direct labor-hours are
required for each unit produced. The denominator activity was set at 9,000 units.
Manufacturing overhead was budgeted at $135,000 for the period; 20 percent of this
cost was fixed. The 17,200 hours worked during the period resulted in production of
8,500 units. Variable manufacturing overhead cost incurred was $108,500 and fixed
manufacturing overhead cost was $28,000.
The fixed manufacturing overhead volume variance for the period was:
A.$750 Unfavorable
B.$2,500 Unfavorable
C.$1,500 Unfavorable
D.$1,000 Unfavorable
19) Which of the following statements is correct?
A.Project B is preferred over Project C according to the project profitability index.
B.Project B is preferred over Project A according to the internal rate of return.
C.Project C is preferred over Project A according to the project profitability index.
D.Project A is preferred over Project C according to a net present value ranking.
20) Albanese Corporation manufactures and sells one product. The following
information pertains to the company’s first year of operations:
The company does not have any variable manufacturing overhead costs or variable
selling and administrative costs. During its first year of operations, the company
produced 36,000 units and sold 29,000 units. The company’s only product is sold for
$236 per unit.
The company is considering using either super-variable costing or an absorption costing
system that assigns $16 of direct labor cost and $72 of fixed manufacturing overhead to
each unit that is produced. Which of the following statements is true regarding the net
operating income in the first year?
A.Super-variable costing net operating income exceeds absorption costing net operating
income by $616,000.
B.Absorption costing net operating income exceeds super-variable costing net operating
income by $616,000.
C.Absorption costing net operating income exceeds super-variable costing net operating
income by $504,000.
D.Super-variable costing net operating income exceeds absorption costing net operating
income by $504,000.