1) Supply the missing data for each of the following proposals:
Proposal A Proposal B Proposal C
Initial investment (a) $62,900 $226,000
Annual net cash inflow $60,000 (c) (e)
Life, in years 10 6 10
Salvage value $0 $10,000 $0
Payback period in years (b) (d) 5.65
Internal rate of return 12% 24% (f)
2) Which of the following actions should a management accountant take first in
confronting a potential ethical conflict concerning your direct supervisor?
A) Inform the Board of Directors of the existence of a potential conflict.
B) Clarify relevant ethical issues by initiating a confidential discussion with an IMA
Ethics Counselor.
C) Consult the attorney as to legal obligations and rights concerning the ethical conflict.
D) Follow the organization’s procedures concerning resolution of such a conflict.
3) Which of the following is the mathematical expression to calculate the coefficient of
determination?
A) Coefficient of determination = 1 – (Unexplained variation / Total variation)
B) Coefficient of determination = (1 + Total variation ) / Unexplained variation)
C) Coefficient of determination = (1 – Unexplained variation ) / Total variation)
D) Coefficient of determination = 1 – Unexplained variation + Total variation)
4) Coldbrook Company has two sources of funds: long-term debt with a market and
book value of $15 million issued at an interest rate of 10%, and equity capital that has a
market value of $9 million (book value of $5 million). Coldbrook Company has profit
centers in the following locations with the following operating incomes, total assets,
and current liabilities. The cost of equity capital is 15%, while the tax rate is 30%.
What is the for Stonybrook?
A) $1,108,000
B) $1,168,700
C) $1,315,063
D) $1,403,063
5) Which of the following illustrates a purpose for allocating costs to cost objects?
A) to provide information for cost-control and pricing decisions
B) to provide information to customers
C) to determine marginal cost
D) to measure capital expenditure
6) If total rent expense of $180,000 is allocated on the basis of square footage, the
amount allocated to the Large Department would be ________.
A) $129,175
B) $129,475
C) $129,275
D) $129,375
7) Flyers Inc., had the following activities during 2015:
Required:
a.What is the cost of direct materials used during 2015?
b.What is cost of goods manufactured for 2015?
c.What is cost of goods sold for 2015?
d.What amount of prime costs was added to production during 2015?
e.What amount of conversion costs was added to production during 2015?
8) Gracius Manufacturing is approached by a European customer to fulfill a
one-time-only special order for a product similar to one offered to domestic customers.
Gracius Manufacturing has a policy of adding a 10% markup to full costs and currently
has excess capacity. The following per unit data apply for sales to regular customers:
What is the full cost of the product per unit for Gracius Manufacturing?
A) $40
B) $70
C) $190
D) $209
9) Which of the following is true of theoretical capacity?
A) It will be less than the real capacity available to a company.
B) It provides the best perspective of actual long-run costs.
C) It results in the lowest cost estimate of the four capacity options when used for
product costing.
D) It replicates the cost of capacity in a competitor’s cost structure.
10) Clothes, Inc., has an average annual demand for red, medium polo shirts of 25,000
units. The cost of placing an order is $80 and the cost of carrying one unit in inventory
for one year is $25.
Required:
a.Use the economic-order-quantity model to determine the optimal order size.
b.Determine the reorder point assuming a lead time of 10 days and a work year of 250
days.
c.Determine the safety stock required to prevent stockouts assuming the maximum lead
time is 20 days and the maximum daily demand is 125 units.
11) The IBP Grocery orders most of its items in lot sizes of 10 units. Average annual
demand per side of beef is 720 units per year. Ordering costs are $25 per order with an
average purchasing price of $100. Annual inventory carrying costs are estimated to be
40% of the unit cost.
Required:
a.Determine the economic order quantity.
b.Determine the annual cost savings if the shop changes from an order size of 10 units
to the economic order quantity.
c.Since the shelf life is limited, the IBP Grocery must keep the inventory moving.
Assuming a 360-day year, determine the optimal lot size under each of the following:
(1) a 20-day shelf life and (2) a 10-day shelf life.
12) The Chair Company manufactures two modular types of chairs: one for the
residential market, and the other for the office market. Budgeted and actual operating
data for the year 2015 are:
Required:
Compute the following variances in terms of contribution margin:
a.Compute the total static-budget variance, the total flexible-budget variance, and the
total sales-volume variance.
b.Compute the sale-mix variance and the sales-quantity variance by type of chair, and in
total.