1) What would be the effect on the company’s overall net operating income if product
I11S were dropped?
A.Overall net operating income would decrease by $46,000.
B.Overall net operating income would increase by $93,000.
C.Overall net operating income would increase by $46,000.
D.Overall net operating income would decrease by $93,000.
2) The company’s dividend yield ratio for Year 2 is closest to:
A.1.0%
B.18.4%
C.26.3%
D.2.5%
3) The income tax expense in year 3 is:
A.$28,000
B.$10,500
C.$52,500
D.$17,500
4) Gayheart Corporation is considering a capital budgeting project that would require
investing $80,000 in equipment with an expected life of 4 years and zero salvage value.
The annual incremental sales would be $260,000 and the annual incremental cash
operating expenses would be $190,000. The company’s income tax rate is 30%. The
company uses straight-line depreciation on all equipment.
The total cash flow net of income taxes in year 2 is:
A.$50,000
B.$55,000
C.$70,000
D.$34,000
5) Tempel Corporation has provided the following data:
The market price of common stock at the end of Year 2 was $2.77 per share. The
company’s price-earnings ratio for Year 2 is closest to:
A.9.23
B.0.35
C.4.54
D.13.40
6) The following events occurred last year at Dorder Corporation:
Based on the above information, the cash provided (used) by investing activities for the
year on the statement of cash flows would net to:
A.$(21,000)
B.$(12,000)
C.$(32,000)
D.$(69,000)
7) Within the relevant range:
A) variable cost per unit decreases as production decreases.
B) fixed cost per unit increases as production decreases.
C) fixed cost per unit decreases as production decreases.
D) variable cost per unit increases as production decreases.
8) Lucarell Corporation has provided the following information concerning a capital
budgeting project:
The company uses straight-line depreciation on all equipment.
The income tax expense in year 3 is:
A.$24,500
B.$14,000
C.$10,500
D.$38,500
9) Manton Corporation uses an activity based costing system to assign overhead costs
to products. In the first stage, two overhead costs-equipment expense and indirect
labor-are allocated to the three activity cost pools-Processing, Supervising, and
Other-based on resource consumption. Data to perform these allocations appear below:
In the second stage, Processing costs are assigned to products using machine-hours
(MHs) and Supervising costs are assigned to products using the number of batches. The
costs in the Other activity cost pool are not assigned to products. Activity data for the
company’s two products follow:
The activity rate for the Processing activity cost pool under activity-based costing is
closest to:
A.$2.16 per MH
B.$2.10 per MH
C.$4.10 per MH
D.$1.00 per MH
10) The desired profit according to the target costing calculations is:
A.$380,000
B.$303,000
C.$41,800
D.$77,000
11) Yuvil Corporation produces a single product. At the end of the company’s first year
of operations, 1,000 units of inventory remained on hand. Its variable manufacturing
overhead cost is $45 per unit and its fixed manufacturing overhead cost is $10 per unit.
Yuvil’s absorption costing net operating income would be higher than its variable
costing net operating income by:
A.$0
B.$10,000
C.$35,000
D.$45,000
12) The net present value on this investment is closest to:
A.$160,000
B.$240,024
C.$58,800
D.$26,750
13) What would be the total variable cost at an activity level of 5,600 units? Assume
that this level of activity is within the relevant range.
A) $275,330
B) $361,570
C) $87,808
D) $280,336
14) Rede Inc. manufactures a single product. Variable costing net operating income was
$63,800 last year and its inventory decreased by 300 units. Fixed manufacturing
overhead cost was $4 per unit for both units in beginning and in ending inventory. What
was the absorption costing net operating income last year?
A.$65,000
B.$1,200
C.$63,800
D.$62,600