Dotterel Corporation uses the variable cost concept of product pricing. Below is cost
information for the production and sale of 35,000 units of its sole product. Dotterel
desires a profit equal to an 11.2% rate of return on invested assets of $350,000.
The variable cost per unit for the production and sale of the company’s product is
a. $14.00
b. $12.60
c. $9.80
d. $11.20
Based on the above data, what is the amount of quick assets?
a. $205,000
b. $203,000
c. $131,000
d. $66,000
The following financial information was summarized from the accounting records of
Train Corporation for the current year ended December 31:
The income from operations for the Locomotive Division is
a. $57,960
b. $14,790
c. $27,240
d. $47,280
Direct materials and direct labor costs are examples of variable costs of production.
a. True
b. False
In rate of return on investment analysis, the investment turnover component focuses on
efficiency in the use of assets and indicates the rate at which sales are being generated
for each dollar of invested assets.
a. True
b. False
Operating expenses are product costs and are expensed when the product is sold.
a. True
b. False
In a just-in-time system, processing functions are combined into work centers,
sometimes called departments.
a. True
b. False
Recording jobs shipped and customers billed would include a credit to
a. Accounts Payable
b. Cash
c. Finished Goods
d. Cost of Goods Sold
Which method for evaluating capital investment proposals reduces the expected future
net cash flows originating from the proposals to their present values and computes a net
present value?
a. net present value
b. average rate of return
c. internal rate of return
d. cash payback
Production and sales estimates for March for the Robin Co. are as follows:
The number of units expected to be manufactured in March is a. 24,000
b. 27,000
c. 27,600
d. 21,600
The objectives of budgeting are (1) establishing specific goals for future operations, (2)
executing plans to achieve the goals, and (3) periodically comparing actual results with
these goals.
a. True
b. False
Delivery costs to take the bicycles to stores
Indicate whether the cost would typically be considered product or period cost for the
cost object given.
a. Product
b. Period
The Flapjack Corporation had 8,200 actual direct labor hours at an actual rate of $12.40
per hour. Original production had been budgeted for 1,100 units, but only 1,000 units
were actually produced. Labor standards were
7.6 hours per completed unit at a standard rate of $13.00 per hour.
The labor rate variance is
a. $4,920 unfavorable
b. $4,920 favorable
c. $4,560 favorable
d. $4,560 unfavorable
To calculate income from operations, total service department charges are
a. added to income from operations before service department charges
b. subtracted from operating expenses
c. subtracted from income from operations before service department charges
d. subtracted from gross profit margin
A company is planning to purchase a machine that will cost $24,000, have a 6-year life,
and have no salvage value. The company expects to sell the machine’s output of 3,000
units evenly throughout each year. Total income over the life of the machine is
estimated to be $12,000. The machine will generate net cash flows per year of $6,000.
The payback period for the machine is 12 years.
a. True
b. False
The anticipated purchase of a fixed asset for $400,000, with a useful life of 5 years and
no residual value, is expected to yield total net income of $200,000 for the 5 years. The
expected average rate of return on investment is 25.0%.
a. True
b. False
Rusty Co. sells two products, X and Y. Last year, Rusty sold 5,000 units of X and 35,000
units of Y. Related data are:
What was Rusty Co.’s weighted average unit selling price?
a. $180.00
b. $75.00
c. $100.00
d. $110.00
Department A had 5,000 units in work in process that were 60% completed as to labor
and overhead at the beginning of the period; 34,000 units of direct materials were added
during the period; 31,000 units were completed during the period; and 2,000 units were
80% completed as to labor and overhead at the end of the period. All materials are
added at the beginning of the process. The first-in, first-out method is used to cost
inventories.
The number of equivalent units of production for material costs for the period was
a. 34,000
b. 29,800
c. 29,000
d. 32,000
Factory overhead is applied to production using a predetermined overhead rate.
a. True
b. False
All of the following are true regarding product costs except
a. product costs are found on the balance sheet until they are sold
b. product costs consist of direct labor, direct materials, and factory overhead
c. product costs can be found in three accounts on the balance sheet
d. product costs include sales and administrative expenses
Under absorption costing, increases or decreases in income from operations due to
changes in inventory levels could be misinterpreted to be the result of operating
efficiencies or inefficiencies.
a. True
b. False
Carmen Co. can further process Product J to produce Product D. Product J is currently
selling for $20 per pound and costs $15.75 per pound to produce. Product D would sell
for $38 per pound and would require an additional cost of $8.55 per pound to produce.
What is the differential revenue of producing Product D?
a. $6.75 per pound
b. $22.25 per pound
c. $18.00 per pound
d. $6.25 per pound
The following information relates to manufacturing overhead for the Chapman
Company:
Standards:
Total fixed factory overhead ‘“ $450,000
Estimated production ‘“ 25,000 units (100% of normal capacity)
Overhead rates are based on machine hours
Standard hours allowed per unit produced ‘“ 2
Fixed overhead rate ‘“ $9.00 per machine hour
Variable overhead rate ‘“ $3.50 per hour
Actual:
Fixed factory overhead ‘“ $450,000
Production ‘“ 24,000 units
Variable overhead ‘“ $170,000
Compute (a) the fixed factory overhead volume variance, (b) the variable factory
overhead controllable variance, and (c) the total factory overhead cost variance.
The management of Charlton Corporation is considering the purchase of a new machine
costing $380,000. The company’s desired rate of return is 6%. The present value factor
for an annuity of $1 at interest of 6% for 5 years is 4.212. In addition to the foregoing
information, use the following data in determining the acceptability of this investment:
The cash payback period for this investment is
a. 4 years
b. 5 years
c. 19 years
d. 3.3 years
The following items are reported on a company’s balance sheet:
Determine the (a) current ratio, and (b) quick ratio. Round your answer to one decimal
place.