1) A company has several service departments that provide differing amounts of service
to each other and to the company’s operating departments. Which of the following
statements is true?
A.The direct method and the step-down method will result in the same amount of cost
being allocated to each operating department.
B.The direct method will result in the same amount of cost being allocated to each
operating department regardless of which service department is allocated first.
C.The step-down method will result in the same amount of cost being allocated to each
operating department regardless of which service department is allocated first.
D.The direct method is more accurate than the step-down method when service
departments provide services to each other.
2) Carmon Corporation uses the weighted-average method in its process costing
system. This month, the beginning inventory in the first processing department
consisted of 700 units. The costs and percentage completion of these units in beginning
inventory were:
A total of 7,900 units were started and 6,900 units were transferred to the second
processing department during the month. The following costs were incurred in the first
processing department during the month:
The ending inventory was 70% complete with respect to materials and 35% complete
with respect to conversion costs.
Note: Your answers may differ from those offered below due to rounding error. In all
cases, select the answer that is the closest to the answer you computed. To reduce
rounding error, carry out all computations to at least three decimal places.
The cost per equivalent unit for materials for the month in the first processing
department is closest to:
A.$23.23
B.$19.94
C.$21.85
D.$21.20
3) The acid-test ratio at the end of Year 2 is closest to:
A.1.67
B.1.00
C.0.97
D.1.25
4) A volume variance is computed for:
A.both variable and fixed manufacturing overhead.
B.variable manufacturing overhead only.
C.fixed manufacturing overhead only.
D.direct labor costs as well as overhead costs.
5) Gunderman Corporation has two divisions: the Alpha Division and the Charlie
Division. The Alpha Division has sales of $230,000, variable expenses of $131,100, and
traceable fixed expenses of $63,300. The Charlie Division has sales of $540,000,
variable expenses of $307,800, and traceable fixed expenses of $120,700. The total
amount of common fixed expenses not traceable to the individual divisions is $119,200.
What is the company’s net operating income?
A.$147,100
B.$331,100
C.$27,900
D.$211,900
6) Traveller Corporation sells one product and uses a standard cost system. Last year
the overhead volume variance was zero. Which of the following is correct?
A.Actual variable manufacturing overhead cost was equal to standard variable
manufacturing overhead cost.
B.Total applied overhead was equal to total actual overhead.
C.The denominator activity was equal to actual activity.
D.The budgeted fixed costs were equal to the applied fixed costs.
7) Cabal Products is a division of a major corporation. Last year the division had total
sales of $10,040,000, net operating income of $582,320, and average operating assets of
$4,000,000. The company’s minimum required rate of return is 14%.
The division’s residual income is closest to:
A.$582,320
B.$22,320
C.$(823,280)
D.$1,142,320
8) The desired profit according to the target costing calculations is:
A.$420,000
B.$50,400
C.$48,000
D.$372,000
9) Spartan Systems reported total sales of $300,000, at a price of $20 and per unit
variable expenses of $12, for the sales of their single product.
What is the amount of contribution margin if sales volume increases by 30%?
A.$19,500
B.$15,000
C.$156,000
D.$120,000
10) Florea Corporation has provided the following data concerning its most important
raw material, compound K09B:
The raw material was purchased on account.
The debits to the Raw Materials account for August would total:
A.$39,750
B.$15,900
C.$14,840
D.$40,050
11) Imrie Corporation makes a product that uses a material with the quantity standard of
9.5 grams per unit of output and the price standard of $5.00 per gram. In January the
company produced 2,900 units using 26,940 grams of the direct material. During the
month the company purchased 28,900 grams of the direct material at $4.90 per gram.
The direct materials purchases variance is computed when the materials are purchased.
The materials quantity variance for January is:
A.$2,989 F
B.$3,050 F
C.$2,989 U
D.$3,050 U
12) If Carne Company were to sell 40,000 units, the total expected cost per unit would
be:
A) $2.50
B) $2.25
C) $2.13
D) $1.88
13) Tribley Inc. has an operating leverage of 8.0. If the company’s sales increase by
19%, its net operating income should increase by about:
A.152.0%
B.19.0%
C.8.0%
D.42.1%
14) Which of the following would be classified as a prevention cost on a quality cost
report?
A.Quality improvement projects.
B.Disposal of defective products.
C.Depreciation of test equipment.
D.Final product testing and inspection.
15) What account should Chelm debit when the workers who carve the wood for the
instruments have earned their pay?
A.Direct Labor
B.Work in Process
C.Manufacturing Overhead
D.Salaries and Wages Receivable
E.Salaries and Wages Expense