1) Depreciation on office equipment would be included in product costs.
2) The equivalent units of production will be the same under the weighted-average and
the FIFO method if there is no ending work in process inventory.
3) Purchasing marketable securities with cash will have no effect on a company’s
acid-test ratio.
4) Indirect materials are charged to specific jobs.
5) The absolute profitability of a segment is measured by subtracting the segment’s
avoidable costs from its revenues.
6) If a company’s return on assets is substantially lower than its cost of borrowing, then
the common stockholders would normally want the company to have a relatively high
debt/equity ratio.
7) To compute turnover in the decomposition of ROI, average operating assets is used
in the numerator.
8) If a company’s return on assets is substantially lower than its cost of borrowing, then
the common stockholders would normally want the company to have a relatively high
debt/equity ratio.
9) Glassing Clinic uses client-visits as its measure of activity. During September, the
clinic budgeted for 3,700 client-visits, but its actual level of activity was 3,660
client-visits. The clinic has provided the following data concerning the formulas to be
used in its budgeting:
The activity variance for personnel expenses in September would be closest to:
A.$196 U
B.$196 F
C.$664 F
D.$664 U
10) The selling price would be closest to:
A.$28.71
B.$26.50
C.$22.00
D.$32.67
11) The company’s operating cycle for Year 2 is closest to:
A.66.2 days
B.16.5 days
C.95.3 days
D.45.6 days
12) Frodic Corporation has budgeted sales and production over the next quarter as
follows:
The company has 4,000 units of product on hand at July 1. 10% of the next month’s
sales in units should be on hand at the end of each month. October sales are expected to
be 71,500 units. Budgeted sales for September would be (in units):
A.65,000
B.61,000
C.55,000
D.57,000
13) The balance in the raw materials inventory account on May 30 was:
A.$33,500
B.$2,000
C.$40,000
D.$6,500
14) The net cash provided by (used in) financing activities last year was:
A.$(46,000)
B.$46,000
C.$(10,000)
D.$10,000
15) The company’s acid-test (quick) ratio is closest to:
A.2.47
B.2.83
C.3.10
D.4.25
Acid-test (quick) ratio = Quick assets* Current liabilities
= $473,000 $167,000 = 2.83 (rounded)
*Quick assets = Cash + Marketable securities + Current receivables
= $188,000 + $0 + $285,000 = $473,000
Macmillan Corporation has provided the following financial data:
16) The net present value and internal rate of return methods of capital budgeting are
superior to the payback method because they:
A.are easier to implement.
B.consider the time value of money.
C.require less data.
D.reflect the effects of depreciation and income taxes.
17) The company’s price-earnings ratio for Year 2 is closest to:
A.19.00
B.12.53
C.7.46
D.1.52
18) The Hanson Corporation employs a standard costing system. The following data are
available for February:
The actual direct labor rate for February is:
A.$7.60 per hour
B.$8.40 per hour
C.$8.00 per hour
D.$2.50 per hour
19) The net cash provided by (used in) operating activities for the year was:
A.$21
B.$75
C.$27
D.$69
20) Health Beverage Corporation uses a process costing system to collect costs related
to the production of its celery flavored cola. The cola is first processed in a Mixing
Department at Health and is then transferred out and finished up in the Bottling
Department. The finished cases of cola are then transferred to Finished Goods
Inventory. The following information relates to Health’s two departments for the month
of January:
How many cases of cola were completed and transferred to Finished Goods Inventory
during January?
A.66,000
B.71,000
C.72,000
D.74,000
21) A study has been conducted to determine if Product A should be dropped. Sales of
the product total $400,000 per year; variable expenses total $270,000 per year. Fixed
expenses charged to the product total $160,000 per year. The company estimates that
$70,000 of these fixed expenses are not avoidable even if the product is dropped. If
Product A is dropped, the companys overall net operating income would:
A) decrease by $40,000 per year
B) increase by $40,000 per year
C) decrease by $30,000 per year
D) increase by $30,000 per year
22) Juenemann Kennel uses tenant-days as its measure of activity; an animal housed in
the kennel for one day is counted as one tenant-day. During December, the kennel
budgeted for 3,800 tenant-days, but its actual level of activity was 3,770 tenant-days.
The kennel has provided the following data concerning the formulas used in its
budgeting and its actual results for December:
Data used in budgeting:
Actual results for December:
The wages and salaries in the planning budget for December would be closest to:
A.$31,780
B.$31,552
C.$32,922
D.$32,662
23) Coderre Corporation manufactures and sells a single product. The company uses
units as the measure of activity in its budgets and performance reports. During July, the
company budgeted for 7,800 units, but its actual level of activity was 7,780 units. The
company has provided the following data concerning the formulas used in its budgeting
and its actual results for July:
Data used in budgeting:
Actual results for July:
The spending variance for direct materials in July would be closest to:
A.$108 F
B.$108 U
C.$70 U
D.$70 F
24) Lantagne Clinic uses client-visits as its measure of activity. During May, the clinic
budgeted for 3,800 client-visits, but its actual level of activity was 3,820 client-visits.
The clinic has provided the following data concerning the formulas used in its
budgeting and its actual results for May:
Data used in budgeting:
Actual results for May:
The overall revenue and spending variance (i.e., the variance for net operating income
in the revenue and spending variance column on the flexible budget performance
report) for May would be closest to:
A.$284 U
B.$670 F
C.$670 U
D.$284 F