1) in preference decision situations, a project with a high net present value will always
be preferable to a project with a lower net present value.
2) when long-term investment funds are the constraint and the company is choosing
from among potential long-term projects, the profitability index should be computed by
dividing the net present value of a project by the expected total revenues from the
project.
3) when computing the net cash provided by operating activities under the indirect
method on the statement of cash flows, a decrease in common stock would be added to
net income.
4) under the absorption costing method, a company can increase profits by increasing
production rather than by increasing sales.
5) all future costs are relevant in decision making.
6) two or more different products that are manufactured in the same production period
are known as joint products.
7) when long-term investment funds are the constraint and the company is choosing
from among potential long-term projects, the profitability index should be computed by
dividing the total expected revenues from the project by the amount of long-term
investment funds required by the project.
8) in a decision to drop a segment, the opportunity cost of the space occupied by the
segment would be the profit that could be derived from the best alternative use of the
space.
9) the book value of old equipment is not a relevant cost in a decision.
10) for purposes of preparing a the statement of cash flows, cash equivalents consist of
short-term, highly liquid investments such as treasury bills, commercial paper, and
money market funds that are made solely for the purpose of generating a return on
funds that are temporarily idle.
11) managers should pay little attention to bottleneck operations because they have
limited capacity for producing output.
12) in order to improve the accuracy of unit costs, most companies recompute the
predetermined overhead rate each month.
13) a flexible budget performance report should contain fixed as well as variable and
mixed costs.
14) in a job-order costing system, costs are traced to departments and then allocated to
units of product using an average process.
15) which of the following represents value-added time in the manufacturing cycle?
a.inspection time
b.queue time
c.move time
d.process time
16) green company produces 1,000 parts per year, which are used in the assembly of
one of its products. the unit product cost of these parts is:
the part can be purchased from an outside supplier at $20 per unit. if the part is
purchased from the outside supplier, two thirds of the fixed manufacturing costs can be
eliminated. the annual impact on the company’s net operating income as a result of
buying the part from the outside supplier would be:
a.$1,000 increase
b.$1,000 decrease
c.$5,000 increase
d.$2,000 decrease
17) suppose an investment has cash inflows of r dollars at the end of each year for two
years. the present value of these cash inflows using a 12% discount rate will be:
a.greater than under a 10% discount rate
b.less than under a 10% discount rate
c.equal to that under a 10% discount rate
d.sometimes greater than under a 10% discount rate and sometimes less; it depends on r
18) walsh company produces a single product. last year, the company manufactured
25,000 units and sold 22,000 units. production costs were as follows:
sales totaled $440,000, variable selling and administrative expenses were $110,000, and
fixed selling and administrative expenses were $45,000. there was no beginning
inventory. assume that direct labor is a variable cost.
under absorption costing, the gross margin would be:
a.$176,000
b.$242,000
c.$66,000
d.$21,000
19) bear publishing sells a nature guide. the following information was reported for a
typical month (sales volume is constant each month):
bear is expecting a 20 cent increase in variable expenses. no other changes are expected
or planned. how much contribution margin should bear expect after the increase?
a.$7,700
b.$4,100
c.$9,900
d.cannot be determined
20) creer company uses the fifo method in its process costing system. department a had
20,000 units in process at the beginning of january, that were 40% complete with
respect to conversion costs. all materials are added at the beginning of the process in
department a. the january 1 work in process inventory in department a contained
$10,000 in materials cost and $11,600 in conversion cost. during january, materials
costs were $0.50 per equivalent unit and conversion costs were $1.50 per equivalent
unit. all of the units in the beginning work in process inventory were completed and
transferred out during the month. what was the total cost attached to these units when
they were transferred to the next department?
a.$39,600
b.$33,600
c.$45,600
d.$37,600
21) the following standards for variable overhead have been established for a company
that makes only one product:
the following data pertain to operations for the last month:
what is the variable overhead rate variance for the month?
a.$4,194 f
b.$4,194 u
c.$2,670 f
d.$2,670 u
22) carbert corporation has provided the following production and average cost data for
two levels of monthly production volume. the company produces a single product.
the best estimate of the total cost to manufacture 4,300 units is closest to:
a.$899,345
b.$951,160
c.$847,530
d.$915,010
23) wriphoff company uses a standard cost system to collect costs related to the
production of its clay bud vases. manufacturing overhead at wriphoff is applied to
production on the basis of standard direct labor-hours. the overhead standards used at
wriphoff are as follows:
the standards above were based on an expected annual volume of 40,000 bud vases or
36,000 direct labor-hours. the actual results for last year were as follows:
what was wriphoff’s fixed manufacturing overhead budget variance for last year?
a.$7,600 favorable
b.$9,200 unfavorable
c.$30,416 unfavorable
d.$38,016 unfavorable
24) last year burbach company’s cash account increased by $10,000. net cash provided
by investing activities was $16,000. net cash used in financing activities was $34,000.
on the statement of cash flows, the net cash flow provided by (used in) operating
activities was:
a.$28,000
b.$(8,000)
c.$10,000
d.$(18,000)
25) erdmann corporation has provided its contribution format income statement for july.
the company produces and sells a single product.
if dorian company desires a monthly net operating income equal to 10% of sales,
monthly sales will have to be:
a.$90,000
b.$45,600
c.$120,000
d.$96,000
26) brittman corporation makes three products that use the current constraint-a
particular type of machine. data concerning those products appear below:
assume that sufficient constraint time is available 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 the constrained resource?
a.$13.50 per minute
b.$15.50 per minute
c.$78.65 per unit
d.$39.15 per unit
27) balance sheet accounts for hollis, inc. contained the following amounts at the ends
of years 1 and 2:
the company’s income statement for year 2 follows:
there were no sales or retirements of plant and equipment in year 2. cash dividends of
$5,000 were paid during year 2. the company pays no income taxes. the company uses
the direct method to determine the net cash provided by operating activities on the
statement of cash flows.
net cash provided by financing activities for year 2 would be:
a.$6,000
b.$10,000
c.$5,000
d.$11,000
28) the return on common stockholders’ equity for year 2 is closest to:
a.5.94%
b.7.69%
c.6.59%
d.6.93%
29) the following data have been provided by a company for a recent accounting
period:
the cost of goods manufactured for the period was:
a.$147,000
b.$151,000
c.$153,000
d.$154,000
30) krikorian corporation has two operating divisions-an atlantic division and a pacific
division. the company’s logistics department services both divisions. the variable costs
of the logistics department are budgeted at $37 per shipment. the logistics department’s
fixed costs are budgeted at $330,600 for the year. the fixed costs of the logistics
department are determined based on peak-period demand.
how much logistics department cost should be charged to the altlantic division at the
end of the year for performance evaluation purposes?
a.$198,840
b.$272,600
c.$169,200
d.$218,080
31) the axle division of labate company makes and sells only one product. annual data
on the axle division’s single product follow:
suppose the manager of axle desires a return on investment of 22%. in order to achieve
this goal, axle must sell how many units per year?
a.14,500
b.16,750
c.18,250
d.19,500
32) tjelmeland corporation is considering dropping product s85u. data from the
company’s accounting system appear below:
all fixed expenses of the company are fully allocated to products in the company’s
accounting system. further investigation has revealed that $55,000 of the fixed
manufacturing expenses and $71,000 of the fixed selling and administrative expenses
are avoidable if product s85u is discontinued.
required:
a. according to the company’s accounting system, what is the net operating income
earned by product s85u? show your work!
b. what would be the effect on the company’s overall net operating income of dropping
product s85u? should the product be dropped? show your work!
33) faggs corporation bases its budgets on the activity measure customers served.
during december, the company planned to serve 33,000 customers, but actually served
36,000 customers. the company has provided the following data concerning the
formulas it uses in its budgeting:
required:
prepare a report showing the company’s activity variances for december. indicate in
each case whether the variance is favorable (f) or unfavorable (u).
34) rana corporation produces and sells a single product. data concerning that product
appear below:
required:
determine the monthly break-even in unit sales. show your work!
35) duell clinic uses patient-visits as its measure of activity. the following report
compares the planning budget to the actual operating results for the month of january:
required:
prepare the clinic’s flexible budget performance report for january. label each variance
as favorable (f) or unfavorable (u).
36) zins corporation produces and sells a single product. the company’s contribution
format income statement for august appears below:
required:
redo the company’s contribution format income statement assuming that the company
sells 1,400 units.
37) a direct labor worker at gallet corporation is paid $20 per hour for regular time and
time and a half for all work in excess of 40 hours per week. this employee works 44
hours during a week in which there was no idle time.
required:
determine how much of the worker’s wages for the week would be classified as direct
labor cost and how much would be classified as manufacturing overhead cost. show
your work.
38) during june, defee clinic plans for an activity level of 3,200 patient-visits. revenue is
$50.80 per patient-visit. personnel expenses are $35,300 per month plus $16.70 per
patient-visit. medical supplies are $1,400 per month plus $8.50 per patient-visit.
occupancy expenses are $12,500 per month plus $2.60 per patient-visit. administrative
expenses are $7,200 per month plus $0.20 per patient-visit.
required:
prepare the clinic’s planning budget for june.
39) mulry urban diner is a charity supported by donations that provides free meals to
the homeless. the diner’s budget for september was based on 3,000 meals, but the diner
actually served 2,800 meals. the diner’s director has provided the following cost data to
use in the budget: groceries, $2.45 per meal; kitchen operations, $4,900 per month plus
$1.65 per meal; administrative expenses, $3,600 per month plus $0.60 per meal; and
fundraising expenses, $1,200 per month. the director has also provided the diner’s
statement of actual expenses for the month:
required:
prepare a report showing the activity variances for each of the expenses and for total
expenses for september.
40) during march, holston corporation plans to serve 31,000 customers. the company
uses the following revenue and cost formulas in its budgeting, where q is the number of
customers served:
revenue: $4.60q
wages and salaries: $36,600 + $1.60q
supplies: $0.80q
insurance: $10,900
miscellaneous: $8,500 + $0.20q
required:
prepare the company’s planning budget for march.
41) stamp printing corp., a book printer, has provided the following data:
management believes that the press setup cost is a mixed cost that depends on the
number of titles printed. (a specific book that is to be printed is called a “title”.
typically, thousands of copies will be printed of each title. specific steps must be taken
to setup the presses for printing each title-for example, changing the printing plates. the
costs of these steps are the press setup costs.)
required:
estimate the variable cost per title printed and the fixed cost per month using the
least-squares regression method.
42) watrous corporation is developing standards for a product. each unit of output of the
product requires 0.82 kilogram of a particular input. the allowance for waste and
spoilage is 0.07 kilogram of this input for each unit of output. the allowance for rejects
is 0.09 kilogram of this input for each unit of output.
required:
determine the standard kilograms of this input per unit of output. show your work!