1) Accounts receivable turnover will normally decrease as a result of:
A.the write-off of an uncollectible account against the allowance for bad debts.
B.a significant sales volume decrease near the end of the accounting period.
C.an increase in cash sales in proportion to credit sales.
D.a change in credit policy to lengthen the period for cash discounts.
2) Hoffhines 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, E00X and E71U,
about which it has provided the following data:
The company’s estimated total manufacturing overhead for the year is $1,021,200 and
the company’s estimated total direct labor-hours for the year is 20,000.
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:
Required:
a. Determine the manufacturing overhead cost per unit of each of the company’s two
products under the traditional costing system.
b. Determine the manufacturing overhead cost per unit of each of the company’s two
products under activity-based costing system.
3) Conely Corporation has provided the following data from its activity-based costing
accounting system:
Distribution of Resource Consumption across Activity Cost Pools:
The “Other” activity cost pool consists of the costs of idle capacity and
organization-sustaining costs that are not assigned to products.
How much supervisory wages and salaries and factory supplies cost would be assigned
to the Batch Processing activity cost pool?
A.$231,000
B.$420,000
C.$840,000
D.$147,000
4) Renfrew Corporation has provided the following data concerning its only product:
The margin of safety as a percentage of sales is closest to:
A.29%
B.59%
C.71%
D.41%
5) The debt-to-equity ratio at the end of Year 2 is closest to:
A.0.43
B.0.24
C.0.17
D.0.54
Debt-to-equity ratio = Total liabilities Stockholders’ equity = $440 $1.020 = 0.43
(rounded)
Data from Lheureux Corporation’s most recent balance sheet and the company’s income
statement appear below:
6) Mallery Legal Services, LLC, uses the step-down method to allocate service
department costs to operating departments. The firm has two service departments,
Personnel and Information Technology (IT), and two operating departments, Family
Law and Corporate Law. Data concerning those departments follow:
Personnel costs are allocated first on the basis of employees and IT costs are allocated
second on the basis of PCs.
The total Corporate Law Department cost after allocations is closest to:
A.$413,367
B.$368,946
C.$422,931
D.$423,304
7) Peixoto Framing’s cost formula for its supplies cost is $1,150 per month plus $14 per
frame. For the month of July, the company planned for activity of 556 frames, but the
actual level of activity was 555 frames. The actual supplies cost for the month was
$9,190. The supplies cost in the planning budget for July would be closest to:
A.$8,920
B.$9,207
C.$8,934
D.$9,190
8) The net cash provided by (used in) operating activities for the year was:
A.$32
B.$59
C.$130
D.$150
9) Bourret Corporation has provided the following information concerning a capital
budgeting project:
The company uses straight-line depreciation on all equipment. 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.$27,928
B.$67,928
C.$49,000
D.$44,020
10) Ricwy Corporation uses the cost formula Y = $4,800 + $0.40X for the maintenance
cost, where X is machine-hours. The August budget is based on 9,000 hours of planned
machine time. Maintenance cost expected to be incurred during August is:
A) $4,800
B) $3,600
C) $8,400
D) $1,200
11) In April direct labor was 70% of conversion cost. If the manufacturing overhead for
the month was $42,000 and the direct materials cost was $28,000, the direct labor cost
was:
A) $98,000
B) $65,333
C) $18,000
D) $12,000
12) What would be the effect on the company’s overall net operating income if product
V41B were dropped?
A) Overall net operating income would increase by $71,000.
B) Overall net operating income would increase by $132,000.
C) Overall net operating income would decrease by $132,000.
D) Overall net operating income would decrease by $71,000.
13) If the new equipment is purchased, the present value of the cash flows that occur
now is:
A.$(48,000)
B.$(39,000)
C.$(41,000)
D.$(37,000)
14) Carmon Corporation uses the weighted-average method in its process costing
system. This month, the beginning inventory in the first processing department
consisted of 700 units. The costs and percentage completion of these units in beginning
inventory were:
A total of 7,900 units were started and 6,900 units were transferred to the second
processing department during the month. The following costs were incurred in the first
processing department during the month:
The ending inventory was 70% complete with respect to materials and 35% complete
with respect to conversion costs.
Note: Your answers may differ from those offered below due to rounding error. In all
cases, select the answer that is the closest to the answer you computed. To reduce
rounding error, carry out all computations to at least three decimal places.
How many units are in ending work in process inventory in the first processing
department at the end of the month?
A.900
B.1,700
C.1,000
D.7,200
15) The net cash provided by (used in) investing activities for the year was:
A.$(127)
B.$(138)
C.$138
D.$127
16) What would be the total prevention cost appearing on the quality cost report?
A.$64,000
B.$73,000
C.$93,000
D.$78,000
17) Barker Corporation uses the weighted-average method in its process costing
system. This month, the beginning inventory in the first processing department
consisted of 300 units. The costs and percentage completion of these units in beginning
inventory were:
A total of 9,100 units were started and 8,700 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 85% complete with respect to materials and 20% 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.
How many units are in ending work in process inventory in the first processing
department at the end of the month?
A.8,800
B.900
C.400
D.700
18) According to the company’s accounting system, what is the net operating income
earned by product I11S? Include all costs in this calculationwhether relevant or not.
A) $410,000
B) $46,000
C) $(46,000)
D) $(410,000)
19) Assume that Jebb is currently selling only 50,000 heads of lettuce per year instead
of 60,000. Under this scenario, what will be Jebb’s increase or decrease in profit for the
year if he chooses to start slicing up the lettuce instead of selling it whole?
A) $2,000 increase
B) $2,500 decrease
C) $3,000 increase
D) $3,500 decrease
20) Eliezrie Corporation makes a product with the following standard costs:
In January the company’s budgeted production was 7,400 units but the actual
production was 7,500 units. The company used 45,580 kilos of the direct material and
2,030 direct labor-hours to produce this output. During the month, the company
purchased 48,500 kilos of the direct material at a cost of $53,350. The actual direct
labor cost was $18,473 and the actual variable overhead cost was $7,714.
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 labor rate variance for January is:
A.$2,025 U
B.$1,827 U
C.$1,827 F
D.$2,025 F