1) Smallwood Corporation has provided the following data concerning manufacturing
overhead for January:
The Corporation’s Cost of Goods Sold was $223,000 prior to closing out its
Manufacturing Overhead account. The Corporation closes out its Manufacturing
Overhead account to Cost of Goods Sold. Which of the following statements is true?
A.Manufacturing overhead for the month was overapplied by $5,000; Cost of Goods
Sold after closing out the Manufacturing Overhead account is $228,000
B.Manufacturing overhead for the month was underapplied by $5,000; Cost of Goods
Sold after closing out the Manufacturing Overhead account is $218,000
C.Manufacturing overhead for the month was underapplied by $5,000; Cost of Goods
Sold after closing out the Manufacturing Overhead account is $228,000
D.Manufacturing overhead for the month was overapplied by $5,000; Cost of Goods
Sold after closing out the Manufacturing Overhead account is $218,000
2) On its statement of cash flows, what amount should Howard show for its cost of
goods sold adjusted to a cash basis (i.e., cash paid to suppliers)?
A.$345,000
B.$366,000
C.$379,000
D.$373,000
3) Under the direct method, sales adjusted to a cash basis would be:
A.$295,000
B.$345,000
C.$405,000
D.$355,000
4) If the project profitability index of an investment project is zero, then:
A.the project’s internal rate of return is less than the discount rate.
B.the project’s internal rate of return is greater than the discount rate.
C.the project’s internal rate of return is equal to the discount rate.
D.the relationship of the rate of return and the discount rate is impossible to determine
from the data given.
5) In a make-or-buy decision, relevant costs include:
A.unavoidable fixed costs
B.avoidable fixed costs
C.fixed factory overhead costs applied to products
D.fixed selling and administrative expenses
6) If current assets exceed current liabilities, prepaying an expense on the last day of the
year will:
A.decrease the current ratio.
B.increase the acid-test ratio.
C.decrease the acid-test ratio.
D.increase the current ratio.
7) A customer has requested that Gamba Corporation fill a special order for 3,000 units
of product Q41 for $25.00 a unit. While the product would be modified slightly for the
special order, product Q41’s normal unit product cost is $21.40:
Direct labor is a variable cost. The special order would have no effect on the company’s
total fixed manufacturing overhead costs. The customer would like modifications made
to product Q41 that would increase the variable costs by $7.00 per unit and that would
require an investment of $15,000 in special molds that would have no salvage value.
This special order would have no effect on the company’s other sales. The company has
ample spare capacity for producing the special order. If the special order is accepted,
the company’s overall net operating income would increase (decrease) by:
A) $(5,700)
B) $(21,300)
C) $(25,200)
D) $10,800
8) Assume that sufficient time is available on the constrained machine to satisfy
demand for all but the least profitable product. Up to how much should the company be
willing to pay to acquire more of this constrained resource?
A.$15.30 per minute
B.$18.80 per minute
C.$77.08 per unit
D.$122.10 per unit
The company should be willing to pay up to the contribution margin per minute for the
marginal job, which is $15.30 per minute for PW.
Crane Corporation makes four products in a single facility. Data concerning these
products appear below:
9) Zee Corporation has developed the following cost standards for the production of its
leather backpacks:
Variable overhead at Zee is applied on the basis of direct labor hours. The actual results
for last month were as follows:
The direct materials purchases variance is computed when the materials are purchased.
Required:
Compute the following variances for Zee.
a. Materials price variance.
b. Materials quantity variance.
c. Labor efficiency variance.
d. Variable overhead rate variance.
10) Jolin Corporation keeps careful track of the time required to fill orders. The times
recorded for a particular order appear below:
The delivery cycle time was:
A.11 hours
B.37.1 hours
C.2 hours
D.38.5 hours
11) Jiminian Clinic uses client-visits as its measure of activity. During March, 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 used in its
budgeting and its actual results for March:
Data used in budgeting:
Actual results for March:
The net operating income in the flexible budget for March would be closest to:
A.$11,654
B.$13,101
C.$12,330
D.$13,389
12) Bolding Inc.’s contribution margin ratio is 61% and its fixed monthly expenses are
$42,000. Assuming that the fixed monthly expenses do not change, what is the best
estimate of the company’s net operating income in a month when sales are $126,000?
A.$76,860
B.$7,140
C.$34,860
D.$84,000
13) At Worthe Corporation, indirect labor is a variable cost that varies with direct
labor-hours. Last month’s performance report showed that actual indirect labor cost
totaled $7,920 for the month and that the associated spending variance was $240 F. If
10,200 direct labor-hours were actually worked last month, then the flexible budget cost
formula for indirect labor must be (per direct labor-hour) closest to:
A.$0.95
B.$0.90
C.$0.80
D.$0.85
14) Contribution income statements are used to measure the performance of:
A.cost centers.
B.both cost centers and profit centers.
C.both cost centers and investment centers.
D.both profit centers and investment centers.