1) The current ratio at the end of Year 2 is closest to:
A.0.38
B.2.17
C.0.94
D.0.40
2) The following costs were incurred in April:
Prime costs during the month totaled:
A) $53,000
B) $67,000
C) $38,000
D) $103,000
3) Labombard Clinic uses client-visits as its measure of activity. During February, the
clinic budgeted for 3,600 client-visits, but its actual level of activity was 3,650
client-visits. The clinic has provided the following data concerning the formulas used in
its budgeting and its actual results for February:
Data used in budgeting:
Actual results for February:
The net operating income in the planning budget for February would be closest to:
A.$7,382
B.$7,800
C.$8,425
D.$7,589
4) The income tax expense in year 2 is:
A.$90,000
B.$12,000
C.$126,000
D.$24,000
Depreciation expense = (Original cost – Salvage value) / Useful life
= ($160,000 – $0) / 4 years = $40,000 per year
5) The Collins Corporation uses standard costing and has established the following
direct material and direct labor standards for each unit of the single product it makes:
Direct materials: 4 gallons at $8 per gallon
Direct labor: 1 hour at $16 per hour
During July, the company made 6,000 units of product and incurred the following costs:
Direct materials purchased: 26,800 gallons at $8.20 per gallon
Direct materials used: 25,200 gallons
Direct labor used: 5,600 hours at $15.30 per hour
The direct materials purchases variance is computed when the materials are purchased.
The labor rate variance for July was:
A.$3,920 Unfavorable
B.$6,120 Unfavorable
C.$1,120 Favorable
D.$3,920 Favorable
6) The company’s inventory turnover for Year 2 is closest to:
A.6.54
B.5.67
C.6.07
D.0.87
7) Littleton Manufacturing uses a standard cost system in which manufacturing
overhead is applied to units of product on the basis of standard machine-hours. At
standard, each unit of product requires one machine-hour to complete. The standard
variable overhead is $1.80 per machine-hour and $432,000 per year. The denominator
level of activity is 120,000 machine-hours, or 120,000 units. Actual data for the year
were as follows:
Required:
a. What are the predetermined variable and fixed manufacturing overhead rates?
b. Compute the variable overhead rate and efficiency variances.
c. Compute the fixed manufacturing overhead budget and volume variances.
8) The company’s accounts receivable turnover for Year 2 is closest to:
A.0.97
B.10.38
C.1.03
D.10.22
9) Florek Inc. produces and sells a single product. The company has provided its
contribution format income statement for March.
If the company sells 5,900 units, its net operating income should be closest to:
A.$14,000
B.$10,600
C.$18,600
D.$10,972
10) The net present value of the entire project is closest to:
A.$47,047
B.$115,500
C.$327,047
D.$175,500
Depreciation expense = (Original cost – Salvage value) / Useful life
= ($280,000 – $0) / 4 years = $70,000 per year
Battaglia Corporation is considering a capital budgeting project that would require
investing $240,000 in equipment with an expected life of 4 years and zero salvage
value. Annual incremental sales would be $620,000 and annual incremental cash
operating expenses would be $460,000. The project would also require a one-time
renovation cost of $80,000 in year 3. The company’s income tax rate is 30% and its
after-tax discount rate is 7%. The company uses straight-line depreciation. Assume cash
flows occur at the end of the year except for the initial investments. The company takes
income taxes into account in its capital budgeting.
11) Iaci Company makes two products from a common input. Joint processing costs up
to the split-off point total $42,000 a year. The company allocates these costs to the joint
products on the basis of their total sales values at the split-off point. Each product may
be sold at the split-off point or processed further. Data concerning these products appear
below:
Required:
a. What is the net monetary advantage (disadvantage) of processing Product X beyond
the split-off point?
b. What is the net monetary advantage (disadvantage) of processing Product Y beyond
the split-off point?
c. What is the minimum amount the company should accept for Product X if it is to be
sold at the split-off point?
d. What is the minimum amount the company should accept for Product Y if it is to be
sold at the split-off point?
12) In October, one of the processing departments at Ridling Corporation had ending
work in process inventory of $39,000. During the month, $252,000 of costs were added
to production and the cost of units transferred out from the department was $235,000.
The company uses the FIFO method in its process costing system. In the department’s
cost reconciliation report for October, the total cost to be accounted for would be:
A.$526,000
B.$61,000
C.$548,000
D.$274,000
13) The company’s total asset turnover for Year 2 is closest to:
A.10.17
B.0.10
C.1.02
D.0.98
14) Hanson, Inc. makes 1,000 units per year of a part called a prositron for use in one of
its products. Data concerning the unit production costs of the prositron follow:
An outside supplier has offered to sell Hanson, Inc. all of the prositrons it requires. If
Hanson, Inc. decided to discontinue making the prositrons, 10% of the above fixed
manufacturing overhead costs could be avoided.
Required:
a. Assume Hanson, Inc. has no alternative use for the facilities presently devoted to
production of the prositrons. If the outside supplier offers to sell the prositrons for $850
each, should Hanson, Inc. accept the offer? Fully support your answer with appropriate
calculations.
b. Assume that Hanson, Inc. could use the facilities presently devoted to production of
the prositrons to expand production of another product that would yield an additional
contribution margin of $50,000 annually. What is the maximum price Hanson, Inc.
should be willing to pay the outside supplier for prositrons?
15) Shawl Corporation’s variable overhead is applied on the basis of direct labor-hours.
The standard cost card for product F02E specifies 5.5 direct labor-hours per unit of
F02E. The standard variable overhead rate is $6.80 per direct labor-hour. During the
most recent month, 1,560 units of product F02E were made and 8,700 direct
labor-hours were worked.
The actual variable overhead incurred was $52,635.
Required:
a. What was the variable overhead rate variance for the month?
b. What was the variable overhead efficiency variance for the month?
16) Gilson Corporation manufactures and sells a single product. The company uses
units as the measure of activity in its budgets and performance reports. During April,
the company budgeted for 5,100 units, but its actual level of activity was 5,060 units.
The company has provided the following data concerning the formulas used in its
budgeting and its actual results for April:
Data used in budgeting:
Actual results for April:
The spending variance for direct materials in April would be closest to:
A.$2,020 F
B.$2,020 U
C.$2,424 F
D.$2,424 U
17) The accounts receivable turnover for Year 2 is closest to:
A.1.10
B.0.91
C.11.52
D.12.10
18) The following standards have been established for a raw material used in the
production of product G13:
The following data pertain to a recent month’s operations:
Required:
a. What is the materials price variance for the month?
b. What is the materials quantity variance for the month?
c. Prepare journal entries to record the purchase and use of the raw material during the
month. (All raw materials are purchased on account.)
19) Carvana Clinic uses patient-visits as its measure of activity. During December, the
clinic budgeted for 3,400 patient-visits, but its actual level of activity was 3,100
patient-visits. The clinic has provided the following data concerning the formulas used
in its budgeting and its actual results for December:
Data used in budgeting:
Actual results for December:
Required:
Prepare a report showing the clinic’s revenue and spending variances for December.
Label each variance as favorable (F) or unfavorable (U).