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1) burgett corporation's balance sheet and income statement appear below:
cash dividends were $41. the company sold equipment for $15 that was originally
purchased for $4 and that had accumulated depreciation of $4.
the net cash provided by (used by) investing activities for the year was:
a.($132)
b.($117)
c.$117
d.$15
2) accola company uses activity-based costing. the company has two products: a and b.
the annual production and sales of product a is 1,100 units and of product b is 700 units.
there are three activity cost pools, with estimated costs and expected activity as follows:
the cost per unit of product a is closest to:
a.$59.23
b.$57.20
c.$47.89
d.$22.70
3) reddy company has the following cost formulas for overhead:
based on these cost formulas, the total overhead cost at 600 machine hours is expected
to be:
a.$4,500
b.$5,200
c.$5,620
d.$5,340
4) the central valley company is a merchandising firm that sells a single product. the
company's revenues and expenses for the last three months are given below:
required:
a. determine which expenses are mixed and, by use of the high-low method, separate
each mixed expense into its variable and fixed components. state the cost formula for
each mixed expense.
b. compute the company's total contribution margin for may.
5) karnofski corporation uses the step-down method to allocate service department costs
to operating departments. the company has two service departments, service department
a and service department b, and two operating departments, operating department x and
operating department y. data concerning those departments follow:
service department a costs are allocated first on the basis of allocation base a and
service department b costs are allocated second on the basis of allocation base b.
the total operating department y cost after allocations is closest to:
a.$398,810
b.$397,211
c.$399,285
d.$387,190
6) financial statements for praven company appear below:
dividends during year 2 totaled $89 thousand, of which $18 thousand were preferred
dividends. the market price of a share of common stock on december 31, year 2 was
$130.
required:
compute the following for year 2:
a. earnings per share of common stock.
b. price-earnings ratio.
c. dividend payout ratio.
d. dividend yield ratio.
e. return on total assets.
f. return on common stockholders' equity.
g. book value per share.
h. working capital.
i. current ratio.
j. acid-test ratio.
k. accounts receivable turnover.
l. average collection period.
m. inventory turnover.
n. average sale period.
o. times interest earned.
p. debt-to-equity ratio.
7) consider the following costs incurred in a recent period:
what was the total amount of the period costs listed above for the period?
a.$78,000
b.$71,000
c.$46,000
d.$37,000
8) look manufacturing corporation has a traditional costing system in which it applies
manufacturing overhead to its products using a predetermined overhead rate based on
direct labor-hours (dlhs). the company has two products, n06d and m09k, about which it
has provided the following data:
the company's estimated total manufacturing overhead for the year is $2,532,200 and
the company's estimated total direct labor-hours for the year is 44,000.
the company is considering using a variation of activity-based costing to determine its
unit product costs for external reports. data for this proposed activity-based costing
system appear below:
the manufacturing overhead that would be applied to a unit of product m09k under the
activity-based costing system is closest to:
a.$76.73
b.$92.08
c.$11.00
d.$168.81
9) schlaefer llc is a consulting firm that is considering six projects for the upcoming
period. the six projects under consideration are listed below, along with relevant data.
the managing partner's time is the constraint in the firm. only 113 hours of this
constrained resource are available during the upcoming period.
required:
a. determine which projects should be accepted for the upcoming period.
b. determine the total incremental profit for the upcoming period if your plan from part
(a) above is adopted.
10) chabud corporation uses the weighted-average method in its process costing system.
this month, the beginning inventory in the first processing department consisted of 500
units. the costs and percentage completion of these units in beginning inventory were:
a total of 8,100 units were started and 7,300 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 40% 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.$16.72
b.$18.15
c.$17.52
d.$17.33
11) kimbeth manufacturing makes dust density sensors (dds), a safety device for the
mining industry. the company uses a process costing system and has only a single
processing department. the following information pertains to operations for the month
of may:
the beginning work in process inventory was 60% complete with respect to materials
and 20% complete with respect to conversion costs. the ending work in process
inventory was 90% complete with respect to materials and 40% complete with respect
to conversion costs. the costs were as follows:
using the fifo method, the equivalent units for may for conversion costs are:
a.85,600 units
b.88,800 units
c.95,200 units
d.98,400 units
12) braston corporation is a small wholesaler of gourmet food products. data regarding
the store's operations follow:
sales are budgeted at $350,000 for november, $330,000 for december, and $340,000 for
january.
collections are expected to be 70% in the month of sale, 26% in the month following
the sale, and 4% uncollectible.
the cost of goods sold is 70% of sales.
the company purchases 50% of its merchandise in the month prior to the month of sale
and 50% in the month of sale. payment for merchandise is made in the month following
the purchase.
other monthly expenses to be paid in cash are $20,100.
monthly depreciation is $22,000.
ignore taxes.
december cash disbursements for merchandise purchases would be:
a.$119,000
b.$234,500
c.$231,000
d.$238,000
13) orebic department store had net income of $642,000 for the year just ended. orebic
collected the following additional information to prepare its statement of cash flows for
the year:
orebic uses the indirect method to prepare its statement of cash flows. what is orebic's
net cash provided (used) by operating activities?
a.$518,000
b.$588,000
c.$838,000
d.$870,000
14) mccaughey corporation's most recent balance sheet and income statement appear
below:
the acid-test ratio at the end of year 2 is closest to:
a.1.31
b.0.92
c.0.88
d.1.04
15) libbee corporation is presently making part i50 that is used in one of its products. a
total of 8,000 units of this part are produced and used every year. the company's
accounting department reports the following costs of producing the part at this level of
activity:
an outside supplier has offered to produce and sell the part to the company for $24.50
each. if this offer is accepted, the supervisor's salary and all of the variable costs,
including direct labor, can be avoided. the special equipment used to make the part was
purchased many years ago and has no salvage value or other use. the allocated general
overhead represents fixed costs of the entire company, none of which would be avoided
if the part were purchased instead of produced internally.
if management decides to buy part i50 from the outside supplier rather than to continue
making the part, what would be the annual impact on the company's overall net
operating income?
a.net operating income would decline by $6,400 per year
b.net operating income would decline by $32,800 per year
c.net operating income would increase by $32,800 per year
d.net operating income would increase by $6,400 per year
16) wandersee corporation keeps careful track of the time required to fill orders. data
concerning a particular order appear below:
the delivery cycle time was:
a.33.9 hours
b.32.5 hours
c.2.1 hours
d.6.3 hours
17) (ignore income taxes in this problem.) jones and company has just purchased a new
piece of equipment, the cost characteristics of which are given below:
the company uses a required rate of return of 10% and depreciates equipment using the
straight-line method.
the net present value of the investment is:
a.$15,636
b.$24,000
c.$45,636
d.$60,000
18) fordham florist specializes in large floral bouquets for hotels and other commercial
spaces. the company has provided the following data concerning its annual overhead
costs and its activity based costing system:
the "other" activity cost pool consists of the costs of idle capacity and
organization-sustaining costs.
the amount of activity for the year is as follows:
what would be the total overhead cost per delivery according to the activity based
costing system? in other words, what would be the overall activity rate for the deliveries
activity cost pool? (round to the nearest whole cent.)
a.$6.88
b.$5.50
c.$6.19
d.$6.00
19) the following monthly data are available for the challenger company and its only
product, product sw:
required:
a. without resorting to calculations, what is the total contribution margin at the
break-even point?
b. management is contemplating the use of plastic gearing rather than metal gearing in
product sw. this change would reduce variable costs by $15. the company's marketing
manager predicts that this would reduce the overall quality of the product and thus
would result in a decline in sales to a level of 350 units per month. should this change
be made?
c. assume that challenger company is currently selling 400 units of product sw per
month. management wants to increase sales and feels this can be done by cutting the
selling price by $25 per unit and increasing the advertising budget by $20,000 per
month. management believes that these actions will increase unit sales by 50%. should
these changes be made?
d. assume that challenger company is currently selling 400 units of product sw.
management wants to automate a portion of the production process for product sw. the
new equipment would reduce direct labor costs by $20 per unit but would result in a
monthly rental cost for the new robotic equipment of $10,000. management believes
that the new equipment will increase the reliability of product sw thus resulting in an
increase in monthly sales of 12%. should these changes be made?
20) (ignore income taxes in this problem.) the management of seman corporation is
considering the purchase of a machine that would cost $41,110 and would have a useful
life of 6 years. the machine would have no salvage value. the machine would reduce
labor and other operating costs by $10,000 per year.
required:
determine the internal rate of return on the investment in the new machine. show your
work!
21) why is the total materials variance divided into a price variance and a quantity
variance?
22) the selling and administrative expense budget of hiser corporation is based on the
number of units sold, which are budgeted to be 1,900 units in august. the variable
selling and administrative expense is $6.10 per unit. the budgeted fixed selling and
administrative expense is $22,420 per month, which includes depreciation of $5,130.
the remainder of the fixed selling and administrative expense represents current cash
flows.
required:
prepare the selling and administrative expense budget for august.
23) petrosino corporation's most recent income statement appears below:
the beginning balance of total assets was $760,000 and the ending balance was
$710,000.
required:
compute the return on total assets. show your work!
24) vilanova memorial diner is a charity supported by donations that provides free
meals to the homeless. the diner's budget for may is to be based on 2,700 meals. the
diner's director has provided the following cost formulas to use in the budget:
required:
prepare the diner's budget for the month of may. the budget will only contain the costs
listed above; no revenues will be on the budget.
25) witch's brew company manufactures and sells three potions that all use gargoyle
eyelashes as an ingredient. the high demand for all three of these potions exceeds the
supply of gargoyle eyelashes that witch's brew is able to buy from its suppliers.
information related to the three potions is provided below:
each year, witch's brew is only able to buy 6,000 gargoyle eyelashes. annual fixed costs
at witch's brew are $45,000.
required:
based on these restrictions, what is the maximum annual net operating income that
witch's brew can make each year?
26) fietsam corporation's only product sells for $120 per unit. its current sales are
43,400 units and its break-even sales are 37,324 units.
required:
compute the margin of safety in both dollars and as a percentage of sales.
