1) Adi Manufacturing Corporation is estimating the following raw material purchases
for the final four months of the year:
At Adi, 30% of raw materials purchases are normally paid for in the month of purchase.
The remaining 70% is paid for in the month following the purchase.
In Adi’s budgeted balance sheet at December 31, at what amount will accounts payable
for raw materials be shown?
A.$760,000
B.$532,000
C.$228,000
D.$588,000
2) Sabino Corporation’s total common stock was $500,000 at the end of both Year 2 and
Year 1. The par value of common stock is $5 per share. The company’s total
stockholders’ equity at the end of Year 2 amounted to $1,125,000 and at the end of Year
1 to $1,090,000. The company’s total liabilities and stockholders’ equity at the end of
Year 2 amounted to $1,581,000 and at the end of Year 1 to $1,540,000. The company’s
retained earnings at the end of Year 2 amounted to $545,000 and at the end of Year 1 to
$510,000. The company’s net income in Year 2 was $39,000. The company’s book value
per share at the end of Year 2 is closest to:
A.$0.39 per share
B.$15.81 per share
C.$11.25 per share
D.$5.45 per share
3) In a sell or process further decision, which of the following costs is relevant?
I. A variable production cost incurred after split-off.
II. A fixed production cost incurred prior to split-off.
A) Only I
B) Only II
C) Both I and II
D) Neither I nor II
4) Under absorption costing, product costs include:
A.Option A
B.Option B
C.Option C
D.Option D
5) Brusveen Corporation applies manufacturing overhead to jobs on the basis of direct
labor-hours. The following information relates to Brusveen for last year:
What was Brusveen’s underapplied or overapplied overhead for last year?
A.$4,000 underapplied
B.$8,880 underapplied
C.$8,880 overapplied
D.$9,000 underapplied
6) Inventoriable costs are also known as:
A) variable costs.
B) conversion costs.
C) product costs.
D) fixed costs.
7) Holt Company makes three products in a single facility. Data concerning these
products follow:
The mixing machines are potentially the constraint in the production facility. A total of
25,800 minutes are available per month on these machines.
Direct labor is a variable cost in this company.
Required:
a. How many minutes of mixing machine time would be required to satisfy demand for
all three products?
b. How much of each product should be produced to maximize net operating income?
(Round off to the nearest whole unit.)
c. Up to how much should the company be willing to pay for one additional hour of
mixing machine time if the company has made the best use of the existing mixing
machine capacity? (Round off to the nearest whole cent.)
8) The company’s operating cycle for Year 2 is closest to:
A.71.2 days
B.93.5 days
C.18.6 days
D.41.0 days
9) Froio Corporation produces and sells two products. Data concerning those products
for the most recent month appear below:
Fixed expenses for the entire company were $26,570.
If the sales mix were to shift toward Product M06M with total sales remaining constant,
the overall break-even point for the entire company:
A.would increase.
B.could increase or decrease.
C.would not change.
D.would decrease.
10) Marovich Corporation has provided the following financial data:
Dividends on common stock during Year 2 totaled $4,000. The market price of common
stock at the end of Year 2 was $6.41 per share.
11) Keefe Corporation has two divisions: Western Division and Eastern Division. The
following report is for the most recent operating period:
The common fixed expenses have been allocated to the divisions on the basis of sales.
The Western Division’s break-even sales is closest to:
A.$266,255
B.$368,309
C.$307,709
D.$170,909
12) On the statement of cash flows, the income tax expense adjusted to a cash basis
would be:
A.$47,000
B.$39,000
C.$31,000
D.$49,000
13) 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:
How much overhead cost is allocated to the Processing activity cost pool under
activity-based costing in the first stage of allocation?
A.$10,600
B.$21,000
C.$21,600
D.$600
14) The company’s equity multiplier at the end of Year 2 is closest to:
A.1.60
B.1.68
C.0.63
D.0.60
Equity multiplier = Average total assets* Average stockholders’ equity*
= $1,326,500 $827,500 = 1.60 (rounded)
*Average total assets = ($1,333,000 + $1,320,000) 2 = $1,326,500
**Average stockholders’ equity = ($835,000 + $820,000) 2 = $827,500
Deacon Corporation has provided the following financial data from its balance sheet
and income statement:
15) Carter Lumber sells lumber and general building supplies to building contractors in
a medium-sized town in Montana. Data regarding the store’s operations follow:
Sales are budgeted at $380,000 for November, $390,000 for December, and $400,000
for January.
Collections are expected to be 70% in the month of sale, 27% in the month following
the sale, and 3% uncollectible.
The cost of goods sold is 65% of sales.
The company desires to have an ending merchandise inventory equal to 80% of the
following month’s cost of goods sold. Payment for merchandise is made in the month
following the purchase.
Other monthly expenses to be paid in cash are $22,000.
Monthly depreciation is $20,000.
Ignore taxes.
The accounts receivable balance, net of uncollectible accounts, at the end of December
would be:
A.$105,300
B.$88,700
C.$117,000
D.$207,900
16) Assume that Melrose expects to sell 60,000 units of Product C to regular customers
next year. At what selling price for the 7,000 units would Melrose be economically
indifferent between accepting and rejecting the special order from Moore?
A.$53.00
B.$54.50
C.$75.00
D.$76.50
17) The sunk cost in this situation is:
A.$40,000
B.$750,000
C.$690,000
D.$1,100,000