1) Gambino Corporation is a wholesaler that sells a single product. Management has
provided the following cost data for two levels of monthly sales volume. The company
sells the product for $138.80 per unit.
The best estimate of the total monthly fixed cost is:
A) $776,400
B) $340,200
C) $812,750
D) $849,100
2) Assume Melrose expects to sell 60,000 units of Product C to regular customers next
year. If Moore company offers to buy the 7,000 special units at $90 per unit, the effect
of accepting the special order on Melrose’s net operating income for next year will be:
A.$42,000 increase
B.$54,000 decrease
C.$105,000 increase
D.$248,500 increase
3) The manufacturing overhead budget at Cardera Corporation is based on budgeted
direct labor-hours. The direct labor budget indicates that 2,300 direct labor-hours will
be required in January. The variable overhead rate is $1.00 per direct labor-hour. The
company’s budgeted fixed manufacturing overhead is $28,060 per month, which
includes depreciation of $4,600. All other fixed manufacturing overhead costs represent
current cash flows.
The January cash disbursements for manufacturing overhead on the manufacturing
overhead budget should be:
A.$30,360
B.$2,300
C.$23,460
D.$25,760
4) Division B has asked Division A of the same company to supply it with 4,000 units
of part K932 this year to use in one of its products. Division B has received a bid from
an outside supplier for the parts at a price of $31.00 per unit. Division A has the
capacity to produce 10,000 units of part K932 per year. Division A expects to sell 8,000
units of part K932 to outside customers this year at a price of $36.00 per unit. To fill the
order from Division B, Division A would have to cut back its sales to outside
customers. Division A produces part K932 at a variable cost of $18.00 per unit. The cost
of packing and shipping the parts for outside customers is $3.00 per unit. These packing
and shipping costs would not have to be incurred on sales of the parts to Division B.
Required:
a. What is the range of transfer prices within which both the Divisions’ profits would
increase as a result of agreeing to the transfer of 4,000 parts this year from Division B
to Division A?
b. Is it in the best interests of the overall company for this transfer to take place?
Explain.
5) Darnold Corporation has provided the following information concerning a capital
budgeting project:
The equipment will have a 4 year expected life and zero salvage value. The company’s
income tax rate is 35% and the after-tax discount rate is 9%. The company uses
straight-line depreciation on all equipment; the annual depreciation expense will be
$10,000. Assume cash flows occur at the end of the year except for the initial
investments. The company takes income taxes into account in its capital budgeting.
The net present value of the project is closest to:
A.$74,497
B.$57,170
C.$34,497
D.$52,000
6) Higgins Corporation sells three products, Product A, Product B, and Product C. Data
concerning the company’s most recent month of operations, June, appear below:
The total fixed expense for the company was $525,000.
The contribution margin ratio for Product C for June was:
A.0%
B.30%
C.38%
D.70%
7) The company is considering launching a new product that would have a variable cost
of $55.00 per unit. It would require 5 minutes of the constrained resource. The absolute
minimum acceptable selling price for the new product should be:
A.$87.00
B.$61.40
C.$55.00
D.$91.00
Production of product E76 would be 2,610 minutes / 15 minutes per unit of E76 = 174
units of E76. Because unsatisfied demand for this product exists, its profitability index
establishes the opportunity cost of the constrained resource.
8) The total of the period costs listed above for December is:
A) $82,000
B) $340,000
C) $389,000
D) $307,000
9) Nitrol Corporation manufactures brass vases using a standard cost system with
standard machine-hours as the activity base for overhead. The following information
relates to vase production at Nitrol for last year:
The standard machine-hours per vase is 1.25. Last year Nitrol produced 84,000 vases.
What was Nitrol’s fixed manufacturing overhead volume variance for last year?
A.$2,500 Favorable
B.$7,500 Favorable
C.$12,500 Favorable
D.$40,000 Unfavorable
10) The following data pertains to activity and costs for two months:
Assuming that these activity levels are within the relevant range, the manufacturing
overhead for July was:
A) $10,000
B) $11,700
C) $19,000
D) $9,300
11) Caprice Corporation is a wholesaler of industrial goods. Data regarding the store’s
operations follow:
Sales are budgeted at $350,000 for November, $320,000 for December, and $300,000
for January.
Collections are expected to be 80% in the month of sale, 16% in the month following
the sale, and 4% uncollectible.
The cost of goods sold is 70% of sales.
The company desires an ending merchandise inventory equal to 60% of the cost of
goods sold in the following month. Payment for merchandise is made in the month
following the purchase.
The November beginning balance in the accounts receivable account is $78,000.
The November beginning balance in the accounts payable account is $254,000.
Required:
a. Prepare a Schedule of Expected Cash Collections for November and December.
b. Prepare a Merchandise Purchases Budget for November and December.
12) Vandel Inc. bases its selling and administrative expense budget on budgeted unit
sales. The sales budget shows 6,600 units are planned to be sold in April. The variable
selling and administrative expense is $9.70 per unit. The budgeted fixed selling and
administrative expense is $127,380 per month, which includes depreciation of $8,580
per month. The remainder of the fixed selling and administrative expense represents
current cash flows. The cash disbursements for selling and administrative expenses on
the April selling and administrative expense budget should be:
A.$191,400
B.$118,800
C.$64,020
D.$182,820
13) Bierly Corporation has two operating divisions–an Atlantic Division and a Pacific
Division. The company’s Logistics Department services both divisions. The variable
costs of the Logistics Department are budgeted at $34 per shipment. The Logistics
Department’s fixed costs are budgeted at $345,000 for the year. The fixed costs of the
Logistics Department are determined based on peak-period demand.
At the end of the year, actual Logistics Department variable costs totaled $343,680 and
fixed costs totaled $356,530. The Atlantic Division had a total of 4,700 shipments and
the Pacific Division had a total of 4,900 shipments for the year. How much Logistics
Department cost should be charged to the Pacific Division at the end of the year?
A.$408,100
B.$342,694
C.$357,399
D.$424,991
14) Epley Corporation makes a product with the following standard costs:
In July the company produced 3,300 units using 12,240 pounds of the direct material
and 2,760 direct labor-hours. During the month, the company purchased 13,000 pounds
of the direct material at a cost of $35,100. The actual direct labor cost was $51,612 and
the actual variable overhead cost was $20,148.
The company applies variable overhead on the basis of direct labor-hours. The direct
materials purchases variance is computed when the materials are purchased.
The variable overhead rate variance for July is:
A.$1,932 U
B.$1,932 F
C.$1,848 U
D.$1,848 F
15) The Jenkins Division recorded operating data as follows for the past year:
For the past year, the return on investment was:
A.5%
B.15%
C.30%
D.25%
16) Which of the following items are included in calculating the markup percentage
under the absorption approach to cost-plus pricing described in the text?
A.Option A
B.Option B
C.Option C
D.Option D
17) Kuzuck Corporation uses the weighted-average method in its process costing
system. Data concerning the first processing department for the most recent month are
listed below:
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 of ending work in process inventory in the first processing department
according to the company’s cost system is closest to:
A.$28,118
B.$15,981
C.$35,148
D.$5,272
