1) the standards for product j35 call for 1.0 pounds of a raw material that costs $15.60
per pound. last month, 5,700 pounds of the raw material were purchased for $90,345.
the actual output of the month was 5,280 units of product j35. a total of 5,200 pounds of
the raw material were used to produce this output.
required:
a. what is the materials price variance for the month?
b. what is the materials quantity variance for the month?
2) modine corporation has provided the following data for september.
required:
a. compute the budget variance for september. show your work!
b. compute the volume variance for september. show your work!
3) the axle division of labate company makes and sells only one product. annual data on
the axle division’s single product follow:
if axle sells 16,000 units per year, the return on investment should be:
a.12%
b.15%
c.16%
d.18%
4) (ignore income taxes in this problem.) the whitton company uses a discount rate of
16%. the company has an opportunity to buy a machine now for $18,000 that will yield
cash inflows of $10,000 per year for each of the next three years. the machine would
have no salvage value. the net present value of this machine to the nearest whole dollar
is:
a.$22,460
b.$4,460
c.$(9,980)
d.$12,000
5) expense a is a fixed cost; expense b is a variable cost. during the current year the
activity level has increased, but is still within the relevant range. in terms of cost per
unit of activity, we would expect that:
a.expense a has remained unchanged
b.expense b has decreased
c.expense a has decreased
d.expense b has increased
6) draper company’s working capital is $12,000 and its current liabilities are $71,000.
the company’s current ratio is closest to:
a.0.83
b.1.17
c.6.92
d.0.17
7) acer corporation, which applies manufacturing overhead on the basis of
machine-hours, has provided the following data for its most recent year of operations.
the estimates of the manufacturing overhead and of machine-hours were made at the
beginning of the year for the purpose of computing the company’s predetermined
overhead rate for the year.
the predetermined overhead rate is closest to:
a.$49.23
b.$49.90
c.$49.78
d.$50.45
8) nowak corporation is a specialty component manufacturer with idle capacity.
management would like to use its extra capacity to generate additional profits. a
potential customer has offered to buy 1,600 units of component fhb. each unit of fhb
requires 8 units of material n95 and 1 unit of material k78. data concerning these two
materials follow:
material n95 is in use in many of the company’s products and is routinely replenished.
material k78 is no longer used by the company in any of its normal products and
existing stocks would not be replenished once they are used up.
what would be the relevant cost of the materials, in total, for purposes of determining a
minimum acceptable price for the order for product fhb?
a.$65,658
b.$61,279
c.$62,135
d.$64,160
9) boyar corporation manufactures a variety of products. the following data pertain to
the company’s operations over the last two years:
required:
a. determine the absorption costing net operating income last year. show your work!
b. determine the absorption costing net operating income this year. show your work!
10) reenu company manufactures wigs out of used dental floss. the variable cost
standards for wig production developed by reenu are as follows:
variable overhead at reenu is based on direct labor-hours. the actual results for the
month of october were as follows:
what is reenu’s materials quantity variance for october?
a.$2,660 unfavorable
b.$14,440 unfavorable
c.$17,100 unfavorable
d.$51,300 unfavorable
11) corcetti company manufactures and sells prewashed denim jeans. large rolls of
denim cloth are purchased and are first washed in a giant washing machine. after the
cloth is dried, it is cut up into jean pattern shapes and then sewn together. the completed
jeans are sold to various retail chains.
which of the following terms could be used to correctly describe the cost of the soap
used to wash the denim cloth?
a.choice a
b.choice b
c.choice c
d.choice d
12) reenu company manufactures wigs out of used dental floss. the variable cost
standards for wig production developed by reenu are as follows:
variable overhead at reenu is based on direct labor-hours. the actual results for the
month of october were as follows:
what is reenu’s variable overhead rate variance for october?
a.$3,400 favorable
b.$4,850 unfavorable
c.$8,250 unfavorable
d.$26,400 favorable
13) (ignore income taxes in this problem.) the management of kissinger corporation is
investigating automating a process. old equipment, with a current salvage value of
$23,000, would be replaced by a new machine. the new machine would be purchased
for $330,000 and would have a 6 year useful life and no salvage value. by automating
the process, the company would save $108,000 per year in cash operating costs. the
simple rate of return on the investment is closest to:
a.17.3%
b.16.7%
c.16.1%
d.32.7%
14) holding all other things constant, an increase in fixed selling costs will affect:
a.the markup under the absorption costing approach to cost-plus pricing
b.the markup used to compute the profit-maximizing price
c.both the markup under the absorption costing approach to cost-plus pricing and the
markup used to compute profit-maximizing price
d.neither the markup under the absorption costing approach to cost-plus pricing nor the
markup used to compute profit-maximizing price
15) fletcher company has three products with the following characteristics:
if total units sold remain unchanged, but the sales mix shifts more heavily toward
product c, one would expect the overall contribution margin ratio to:
a.increase
b.decrease
c.remain unchanged
d.none of these