1) leonhardt corporation’s net income last year was $3,800,000. the dividend on
common stock was $2.00 per share and the dividend on preferred stock was $1.80 per
share. the market price of common stock at the end of the year was $53.40 per share.
throughout the year, 500,000 shares of common stock and 100,000 shares of preferred
stock were outstanding. the price-earnings ratio is closest to:
a.9.54
b.7.03
c.7.38
d.10.19
2) caruana corporation’s maintenance department provides services to the company’s
two operating divisions-the paints division and the stains division. the variable costs of
the maintenance department are budgeted based on the number of cases produced by
the operating departments. the fixed costs of the maintenance department are
determined by the number of cases produced by the operating departments during the
peak period. data appear below:
how much maintenance department cost should be allocated to the stains division at the
end of the year?
a.$582,027
b.$549,663
c.$575,460
d.$543,390
3) unizat corporation uses the weighted-average method in its process costing system.
the following information pertains to one of the company’s processing departments for a
recent month:
all materials are added at the beginning of the process. the cost per equivalent unit for
materials is closest to:
a.$0.86
b.$0.90
c.$1.10
d.$1.18
4) for which of the following decisions are sunk costs relevant?
a.the decision to keep an old machine or buy a new one
b.the decision to sell a product at the split-off point or after further processing
c.the decision to accept or reject a special order offer
d.all of these
e.none of these
5) kidwell company, which has only one product, has provided the following data
concerning its most recent month of operations:
the company produces the same number of units every month, although the sales in
units vary from month to month. the company’s variable costs per unit and total fixed
costs have been constant from month to month.
what is the net operating income for the month under variable costing?
a.$5,800
b.$5,400
c.$8,300
d.$16,000
6) kuhlman corporation applies manufacturing overhead to products on the basis of
standard machine-hours. budgeted and actual overhead costs for the most recent month
appear below:
the company based its original budget on 2,800 machine-hours. the company actually
worked 2,730 machine-hours during the month. the standard hours allowed for the
actual output of the month totaled 2,860 machine-hours. what was the overall fixed
manufacturing overhead volume variance for the month?
a.$623 unfavorable
b.$534 unfavorable
c.$623 favorable
d.$534 favorable
7) when closing overapplied manufacturing overhead to cost of goods sold, which of
the following would be true?
a.work in process will decrease
b.cost of goods sold will increase
c.net income will decrease
d.gross margin will increase
8) which of the following is a characteristic of financial accounting?
a.not mandatory
b.must follow gaap
c.emphasis on relevance of data, rather than precision
d.both a and c above
9) roufs inc. bases its selling and administrative expense budget on budgeted unit sales.
the sales budget shows 7,800 units are planned to be sold in april. the variable selling
and administrative expense is $3.20 per unit. the budgeted fixed selling and
administrative expense is $95,160 per month, which includes depreciation of $9,360 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.$85,800
b.$24,960
c.$120,120
d.$110,760
10) sala corporation uses the weighted-average method in its process costing system.
the fitting department is the second department in its production process. the data below
summarize the department’s operations in march.
the fitting department’s cost per equivalent unit for conversion cost for march was
$2.64.
how much conversion cost was assigned to the units transferred out of the fitting
department during march?
a.$118,800.00
b.$131,472.00
c.$126,508.80
d.$143,616.00
11) witherington corporation manufactures and sells a single product. the company uses
units as the measure of activity in its budgets and performance reports. during june, the
company budgeted for 7,800 units, but its actual level of activity was 7,850 units. the
company has provided the following data concerning the formulas used in its budgeting
and its actual results for june:
the net operating income in the flexible budget for june would be closest to:
a.$34,017
b.$33,585
c.$29,520
d.$30,190
12) brownell inc. currently has annual cash revenues of $240,000 and annual expenses
of $185,000. the expenses are all cash except for $35,000 of depreciation. the company
is considering the purchase of a new mixing machine costing $120,000 that would
increase cash revenues to $290,000 and expenses (including depreciation) to $205,000
in year two. the new machine would increase depreciation expense to $50,000 per year.
the company’s tax rate is 40%. brownell’s incremental after-tax cash flow from the new
mixing machine in year two would be:
a.$33,000
b.$24,000
c.$30,000
d.$18,000
13) in a plant operating at capacity:
a.every machine and person in the plant is working at the maximum possible rate
b.only some specific machines or processes are operating at the maximum rate possible
c.profits are maximized
d.managers should produce those products with the highest contribution margin in order
to deal with the constrained resource
14) sucher company uses a standard cost system in which manufacturing overhead costs
are applied to units of product on the basis of standard machine-hours. the company’s
standards are based on variable manufacturing overhead of $3 per machine-hour and
fixed manufacturing overhead of $300,000 per year. the denominator level of activity is
30,000 machine-hours. standards call for 2.5 machine-hours per unit of output. actual
activity and manufacturing overhead costs for the year are given below:
required:
a. what are the standard hours allowed for the output?
b. what was the variable overhead rate variance?
c. what was the variable overhead efficiency variance?
d. what was the fixed manufacturing overhead budget variance?
e. what was the fixed manufacturing overhead volume variance?
15) fonics corporation is considering the following three competing investment
proposals:
using the project profitability index, how would the above investments be ranked
(highest to lowest)?
a.aye, bee, cee
b.aye, cee, bee
c.cee, bee, aye
d.bee, cee, aye
aye’s profitability index is approximately 0.16 ($10,000 $62,000), bee’s is
approximately 0.11 ($8,000 $74,000 and cee’s is approximately 0.13 ($12,000
$95,000); therefore the projects would be ranked as follows: aye, cee, and bee.
16) data concerning shanor enterprises corporation’s single product appear below:
the unit sales to attain the company’s monthly target profit of $13,000 is closest to:
a.2,245
b.3,805
c.5,475
d.3,842
17) at a sales level of $300,000, james company’s gross margin is $15,000 less than its
contribution margin, its net operating income is $50,000, and its selling and
administrative expenses total $120,000. at this sales level, its contribution margin would
be:
a.$250,000
b.$155,000
c.$170,000
d.$185,000
18) choice of allocation base should be made based on:
a.the relative size of the base
b.the base’s relation to direct labor
c.the base’s activity
d.whether the base actually drives the cost being allocated