1) Yankee Corporation manufactures a single product. The company has the following
cost structure:
Last year, 4,000 units were produced and 3,500 units were sold. There were no
beginning inventories.
Under absorption costing, the cost of goods sold for the year would be:
A.$28,000
B.$24,500
C.$17,500
D.$14,000
2) The income tax expense in year 2 is:
A.$144,000
B.$12,000
C.$33,000
D.$99,000
3) Cowles Corporation, Inc. makes and sells a single product, Product R. Three yards of
Material K are needed to make one unit of Product R. Budgeted production of Product
R for the next five months is as follows:
The company wants to maintain monthly ending inventories of Material K equal to 30%
of the following month’s production needs. On July 31, this requirement was not met
because only 3,500 yards of Material K were on hand. The cost of Material K is $0.80
per yard. The company wants to prepare a Direct Materials Purchase Budget for the rest
of the year.
The desired ending inventory of Material K for September is:
A.12,750 yards
B.12,500 yards
C.13,050 yards
D.12,150 yards
4) Manning Products, Inc., operates an electric power plant that provides all electrical
power for the company’s Machining and Fabrication Departments. Information on kwh
of power usage in these departments for May follows:
The costs of the electric power plant are all fixed. The level of budgeted fixed costs is
determined by the peak-period requirements. Budgeted fixed costs for May totaled
$120,000. Actual fixed costs for the month totaled $130,000. The Machining
Department requires 70% of the peak-period capacity and the Fabrication Department
requires 30%.
How much (if any) of the electric power plant’s actual fixed costs should not be
allocated to the other departments?
A.$0
B.$10,000
C.$5,000
D.$20,000
5) Larance Detailing’s cost formula for its materials and supplies is $2,230 per month
plus $1 per vehicle. For the month of November, the company planned for activity of 75
vehicles, but the actual level of activity was 25 vehicles. The actual materials and
supplies for the month was $2,160.
The materials and supplies in the flexible budget for November would be closest to:
A.$2,305
B.$768
C.$2,255
D.$2,160
6) Ebright Corporation would like to determine the relative profitability of the
company’s products for purposes of making volume trade-off decisions. For example,
the selling price of product H25Z is $50.00 and its unit variable cost is $30.00. One unit
of the product requires 2 ounces of the constrained resource. Monthly sales are 6,300
units. What is the profitability index for product H25Z?
A.$126,000
B.$25.00 per ounce
C.0.40
D.$10.00 per ounce
7) Hitchens Inc. produces and sells two products. Data concerning those products for
the most recent month appear below:
The fixed expenses of the entire company were $24,010. The break-even point for the
entire company is closest to:
A.$33,817
B.$10,990
C.$34,160
D.$24,010
8) Managerial performance can be measured in many different ways including return on
investment (ROI) and residual income. A good reason for using residual income instead
of ROI is:
A.Residual income can be computed without having to measure operating assets.
B.Managers are more likely to accept projects that are beneficial to the company.
C.ROI does not take into account both turnover and margin.
D.A minimum rate of return does not have to be specified when the residual income
approach is used.
9) Cutterski Corporation manufactures a propeller. Shown below is Cutterski’s cost
structure:
In its first year of operations, Cutterski produced 60,000 propellers but only sold
54,000.
What is the total cost that would be assigned to Cutterski’s finished goods inventory at
the end of the first year of operations under variable costing?
A.$765,000
B.$684,000
C.$804,000
D.$912,000
10) In April, one of the processing departments at Salatino Corporation had beginning
work in process inventory of $27,000 and ending work in process inventory of $36,000.
During the month, the cost of units transferred out from the department was $261,000.
The company uses the FIFO method in its process costing system.
In the department’s cost reconciliation report for April, the total cost accounted for
would be:
A.$297,000
B.$594,000
C.$63,000
D.$567,000
11) The manufacturing overhead budget of Paparella Corporation is based on budgeted
direct labor-hours. The November direct labor budget indicates that 6,000 direct
labor-hours will be required in that month. The variable overhead rate is $2.00 per
direct labor-hour. The company’s budgeted fixed manufacturing overhead is $79,200
per month, which includes depreciation of $21,000. All other fixed manufacturing
overhead costs represent current cash flows.
Required:
a. Determine the cash disbursements for manufacturing overhead for November. Show
your work!
b. Determine the predetermined overhead rate for November. Show your work!
12) Mitri Corporation uses the direct method to allocate service department costs to
operating departments. The company has two service departments, Administrative and
Facilities, and two operating departments, Assembly and Finishing.
Administrative Department costs are allocated on the basis of employee hours and
Facilities Department costs are allocated on the basis of space occupied.
Required:
Allocate the service department costs to the operating departments using the direct
method.
13) The simple rate of return on the investment is closest to:
A.12.5%
B.10.0%
C.20.8%
D.8.3%
14) Criblez Corporation has two divisions: Blue Division and Gold Division. The
following report is for the most recent operating period:
The Blue Division’s break-even sales is closest to:
A.$383,825
B.$218,286
C.$77,551
D.$112,163
15) What would be the total appraisal cost appearing on the quality cost report?
A.$157,000
B.$127,000
C.$79,000
D.$140,000
16) The company’s accounts receivable turnover for Year 2 is closest to:
A.1.06
B.5.06
C.5.21
D.0.94