1) division a makes a part with the following characteristics:
division b, another division of the same company, would like to purchase 5,000 units of
the part each period from division a. division b is now purchasing these parts from an
outside supplier at a price of $24 each.
suppose that division a has ample idle capacity to handle all of division b’s needs
without any increase in fixed costs and without cutting into sales to outside customers.
if division b continues to purchase parts from an outside supplier rather than from
division a, the company as a whole will be:
a.worse off by $30,000 each period
b.worse off by $10,000 each period
c.better off by $15,000 each period
d.worse off by $35,000 each period
2) the apoundright company uses standard costing and has established the following
standards for its single product:
direct materials: 2 gallons at $3 per gallon
direct labor: 0.5 hours at $8 per hour
variable overhead: 0.5 hours at $2 per hour
during november, the company made 4,000 units and incurred the following costs:
direct materials purchased: 8,100 gallons at $3.10 per gallon
direct materials used: 7,600 gallons
direct labor used: 2,200 hours at $8.25 per hour
actual variable overhead: $4,175
the company applies variable overhead to products on the basis of standard direct
labor-hours.
the materials quantity variance for november was:
a.$1,200 u
b.$1,200 f
c.$300 u
d.$1,500 f
3) a company that makes organic fertilizer has supplied the following data:
the company’s unit contribution margin is closest to:
a.$4.50
b.$6.90
c.$3.60
d.$4.20
4) whetstine kennel uses tenant-days as its measure of activity; an animal housed in the
kennel for one day is counted as one tenant-day. during september, the kennel budgeted
for 3,200 tenant-days, but its actual level of activity was 3,180 tenant-days. the kennel
has provided the following data concerning the formulas to be used in its budgeting:
the net operating income in the flexible budget for september would be closest to:
a.$8,548
b.$4,967
c.$5,029
d.$8,720
5) the institute of management accountants’ statement of ethical professional practice
states that when faced with significant ethical issues, management accountants should
first:
a.discuss such problems with the immediate superior except when it appears that the
superior is involved
b.clarify relevant concepts by confidential discussion with an objective advisor to
obtain an understanding of possible courses of action
c.follow the established policies of the organization bearing on the resolution of such
conflict
d.submit an informative memorandum describing the ethical issue to an appropriate
representative of the organization and resign if no action is taken as a result of the
memorandum
6) lindgren corporation’s most recent comparative balance sheet appears below:
the net cash provided by (used by) financing activities for the year was:
a.($5)
b.($21)
c.$4
d.$12
7) the controller of hallowell company estimates the amount of materials handling
overhead cost that should be allocated to the company’s two products using the data that
are given below:
the total materials handling cost for the year is expected to be $18,257.40.
if the materials handling cost is allocated on the basis of direct labor-hours, how much
of the total materials handling cost would be allocated to the wall mirrors? (round off
your answer to the nearest whole dollar.)
a.$6,086
b.$9,129
c.$11,618
d.$3,961
8) the following information is available on company a:
company a’s residual income is:
a.$9,000
b.$21,000
c.$45,000
d.$24,000
9) palczewski corporation manufactures and sells a single product. the company uses
units as the measure of activity in its budgets and performance reports. during
december, the company budgeted for 5,000 units, but its actual level of activity was
4,980 units. the company has provided the following data concerning the formulas to be
used in its budgeting:
the activity variance for net operating income in december would be closest to:
a.$2,372 u
b.$328 f
c.$2,372 f
d.$328 u
10) an outdoor barbecue grill manufacturer has a standard costing system based on
standard direct labor-hours (dlhs) as the measure of activity. data from the company’s
flexible budget for manufacturing overhead are given below:
the following data pertain to operations for the most recent period:
what was the fixed manufacturing overhead volume variance for the period to the
nearest dollar?
a.$507 u
b.$775 f
c.$495 u
d.$1,270 u
11) lounsberry inc. regularly uses material o55p and currently has in stock 360 liters of
the material for which it paid $2,484 several weeks ago. if this were to be sold as is on
the open market as surplus material, it would fetch $6.35 per liter. new stocks of the
material can be purchased on the open market for $6.90 per liter, but it must be
purchased in lots of 1,000 liters. you have been asked to determine the relevant cost of
800 liters of the material to be used in a job for a customer. the relevant cost of the 800
liters of material o55p is:
a.$5,080
b.$5,322
c.$5,520
d.$6,900
12) maxwell company has a total expense per unit of $2.00 per unit at the 16,000 level
of activity and total expense per unit of $1.95 at the 21,000 unit level of activity.
the best estimate of the total expected costs at the 19,000 level of activity for maxwell
company is:
a.$37,050
b.$38,000
c.$37,370
d.$39,830
13) sharko corporation produces a single product and has the following cost structure:
the variable costing unit product cost is:
a.$89
b.$86
c.$164
d.$87
14) poulsen corporation manufactures and sells a single product. the company uses
units as the measure of activity in its budgets and performance reports. during july, the
company budgeted for 7,300 units, but its actual level of activity was 7,270 units. the
company has provided the following data concerning the formulas to be used in its
budgeting:
the direct materials in the flexible budget for july would be closest to:
a.$68,338
b.$70,298
c.$68,620
d.$70,879
15) managerial accounting:
a.has its primary emphasis on the future
b.is required by regulatory bodies such as the sec
c.focuses on the organization as a whole, rather than on the organization’s segments
d.responses a, b, and c are all correct
16) rappaport corporation reported the following data for the month of february:
the direct materials cost for february is:
a.$95,000
b.$88,000
c.$79,000
d.$63,000
17) 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.
the budgeted direct labor cost per pod would be:
a.$13.44
b.$9.60
c.$7.38
d.$11.00
18) deemer corporation has provided the following data concerning its two products:
the profitability index for product t57u is closest to:
a.0.06
b.0.20
c.$11.00 per ounce
d.$2.20 per ounce
19) crimp corporation uses direct labor-hours in its predetermined overhead rate. at the
beginning of the year, the estimated direct labor-hours were 15,000 hours and the total
estimated manufacturing overhead was $258,000. at the end of the year, actual direct
labor-hours for the year were 13,100 hours and the actual manufacturing overhead for
the year was $253,000. overhead at the end of the year was:
a.$27,680 overapplied
b.$32,680 overapplied
c.$27,680 underapplied
d.$32,680 underapplied
20) part f77 is used in one of wilcutt corporation’s products. the company’s accounting
department reports the following costs of producing the 7,000 units of the part that are
needed every year.
an outside supplier has offered to make the part and sell it to the company for $28.30
each. if this offer is accepted, the supervisor’s salary and all of the variable costs,
including direct labor, can be avoided. the special equipment used to make the part was
purchased many years ago and has no salvage value or other use. the allocated general
overhead represents fixed costs of the entire company. if the outside supplier’s offer
were accepted, only $9,000 of these allocated general overhead costs would be avoided.
required:
a. prepare a report that shows the effect on the company’s total net operating income of
buying part f77 from the supplier rather than continuing to make it inside the company.
b. which alternative should the company choose?