1) your boss would like you to estimate the fixed and variable components of a
particular cost. actual data for this cost over four recent periods appear below.
using the least-squares regression method, what is the cost formula for this cost?
a.y = $24.51 + $1.08x
b.y = $10.33 + $1.92x
c.y = $0.00 + $32x
d.y = $15.80 + $1.70x
2) (ignore income taxes in this problem.) treads corporation is considering the
replacement of an old machine that is currently being used. the old machine is fully
depreciated but can be used by the corporation for five more years. if treads decides to
replace the old machine, picco company has offered to purchase the old machine for
$60,000. the old machine would have no salvage value in five years.
the new machine would be acquired from hillcrest industries for $1,000,000 in cash. the
new machine has an expected useful life of five years with no salvage value. due to the
increased efficiency of the new machine, estimated annual cash savings of $300,000
would be generated.
treads corporation uses a discount rate of 12%.
the net present value of the project is closest to:
a.$171,000
b.$136,400
c.$141,500
d.$560,000
3) the waverly company has budgeted sales for next year as follows:
the ending inventory of finished goods for each quarter should equal 25% of the next
quarter’s budgeted sales in units. the finished goods inventory at the start of the year is
3,000 units. scheduled production for the third quarter should be:
a.17,500
b.18,500
c.22,000
d.13,500
4) burget clinic uses client-visits as its measure of activity. during july, the clinic
budgeted for 2,100 client-visits, but its actual level of activity was 2,110 client-visits.
the clinic has provided the following data concerning the formulas used in its budgeting
and its actual results for july:
the spending variance for medical supplies in july would be closest to:
a.$580 u
b.$645 u
c.$645 f
d.$580 f
5) rahner company has a current ratio of 1.75. this ratio will decrease if rahner
company:
a.borrows cash using a six-month note
b.pays the taxes payable which have been a current liability
c.pays the following month’s rent on the last day of the year
d.sells inventory for more than their cost
6) smith company makes and sells a single product called a pod. each pod requires 1.4
hours of labor at a labor rate of $9.60 per hour. smith company needs to prepare a direct
labor budget for the second quarter of the year.
if the budgeted direct labor cost for april is $201,600, then the budgeted production of
pods for april would be:
a.21,000 units
b.29,400 units
c.18,273 units
d.15,000 units
7) when the actual price paid on credit for a raw material is less than its standard price,
the journal entry would include:
a.debit to raw materials; credit to materials price variance
b.debit to accounts payable; credit to materials price variance
c.debit to raw materials; debit to materials price variance
d.debit to accounts payable; debit to materials price variance
8) spragg corporation is developing standards for its products. one product requires an
input that is purchased for $62.00 per kilogram from the supplier. by paying cash, the
company gets a discount of 6% off this purchase price. shipping costs from the
supplier’s warehouse amount to $4.45 per kilogram. receiving costs are $0.50 per
kilogram. each unit of output requires 0.48 kilogram of this input. the allowance for
waste and spoilage is 0.04 kilogram of this input for each unit of output. the allowance
for rejects is 0.13 kilogram of this input for each unit of output.
required:
a. determine the standard price per kilogram of this input. show your work!
b. determine the standard kilograms of this input per unit of output. show your work!
9) compos corporation has provided the following data concerning its only product:
what is the margin of safety in dollars?
a.$2,091,000
b.$2,460,000
c.$1,640,000
d.$369,000
10) bracken company’s net income last year was $85,000 and its interest expense was
$10,000. total assets at the beginning of the year were $660,000 and total assets at the
end of the year were $600,000. the company’s income tax rate was 30%. the company’s
return on total assets for the year was closest to:
a.14.6%
b.14.0%
c.13.5%
d.15.1%
11) the following cost data pertain to the operations of lefthand department stores, inc.,
for the month of december.
the brentwood store is just one of many stores owned and operated by the company. the
shoe department is one of many departments at the brentwood store. the central
warehouse serves all of the company’s stores.
what is the total amount of the costs listed above that are direct costs of the shoe
department?
a.$43,000
b.$35,000
c.$79,000
d.$40,000
12) the following financial data have been taken from the records of cpz enterprises.
what is the company’s acid-test ratio?
a.0.68
b.1.68
c.2.14
d.2.31
13) the corporate controller’s salary would be considered a(n):
a.manufacturing cost
b.product cost
c.administrative cost
d.selling expense
14) acton company has two products: a and b. annual production and sales are 800 units
of product a and 500 units of product b. the company has traditionally used direct
labor-hours as the basis for applying all manufacturing overhead to products. product a
requires 0.3 direct labor hours per unit and product b requires 0.2 direct labor hours per
unit. the total estimated overhead for next period is $92,02
the company is considering switching to an activity-based costing system for the
purpose of computing unit product costs for external reports. the new activity-based
costing system would have three overhead activity cost poolsactivity 1, activity 2, and
general factorywith estimated overhead costs and expected activity as follows:
(note: the general factory activity cost pool’s costs are allocated on the basis of direct
labor hours.)
the predetermined overhead rate (i.e., activity rate) for activity 1 under the
activity-based costing system is closest to:
a.$28.97
b.$13.17
c.$83.66
d.$24.15
15) beauchesne corporation, a manufacturing company, has provided the following data
for the month of may:
raw materials purchased during may totaled $69,000 and the cost of goods
manufactured totaled $146,000.
required:
a. what was the cost of raw materials used in production during may? show your work.
b. what was the cost of goods sold for may? show your work.
16) (ignore income taxes in this problem.) bleeker corporation is investigating buying a
small used aircraft for the use of its executives. the aircraft would have a useful life of 8
years. the company uses a discount rate of 12% in its capital budgeting. the net present
value of the initial investment and the annual operating cash cost is -$240,849.
management is having difficulty estimating the annual benefit of having the aircraft and
estimating the salvage value of the aircraft.
ignoring the annual benefit, to the nearest whole dollar how large would the salvage
value of the aircraft have to be to make the investment in the aircraft financially
attractive?
a.$2,007,075
b.$240,849
c.$28,902
d.$596,161
17) which of the following costs at a sofa manufacturing company would be treated as a
period cost under the variable costing method?
a.the cost of glue used to assemble the wood frame of each sofa produced
b.depreciation on sales vehicles
c.the salary of a factory manager
d.both b and c above
18) (ignore income taxes in this problem.) arthur operates a part-time auto repair
service. he estimates that a new diagnostic computer system will result in increased
cash inflows of $2,100 in year 1, $3,200 in year 2, and $4,000 in year 3. if arthur’s
discount rate is 10%, then the most he would be willing to pay for the new computer
system would be:
a.$6,652
b.$6,984
c.$7,747
d.$7,556
19) finkler 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.
in the first step of the allocation, the amount of personnel department cost allocated to
the family law department is closest to:
a.$30,752
b.$32,837
c.$45,636
d.$29,177
