1) mahan, inc., uses the absorption costing approach to cost-plus pricing described in
the text to set prices for its products. based on budgeted sales of 60,000 units next year,
the unit product cost of a particular product is $56.20. the company’s selling and
administrative expenses for this product are budgeted to be $1,302,000 in total for the
year. the company has invested $320,000 in this product and expects a return on
investment of 8%.
the selling price for this product based on the absorption costing approach would be
closest to:
a.$108.57
b.$77.90
c.$78.33
d.$60.70
2) faust corporation has provided its contribution format income statement for august.
the degree of operating leverage is closest to:
a.18.93
b.0.14
c.0.05
d.7.21
3) castanada corporation has provided the following data concerning its direct labor
costs for august:
the journal entry to record the incurrence of direct labor costs in august would include
the following for work in process:
a.debit of $222,768
b.credit of $264,768
c.credit of $222,768
d.debit of $264,768
4) the following cost data relate to the manufacturing activities of the kamas company
during the most recent year:
the company uses a predetermined overhead rate to charge overhead cost to production.
the rate for the year just completed was $4.00 per machine-hour; a total of 6,000
machine-hours were recorded for the year.
required:
a. compute the amount of underapplied or overapplied overhead cost for the year just
ended.
b. prepare a schedule of cost of goods manufactured for the year.
5) data concerning hahl corporation’s single product appear below:
the break-even in monthly unit sales is closest to:
a.4,529
b.3,470
c.2,394
d.7,724
6) the management of hendren corporation would like to investigate the possibility of
basing its predetermined overhead rate on activity at capacity rather than on the
estimated amount of activity for the year. the company’s controller has provided an
example to illustrate how this new system would work. in this example, the allocation
base is machine-hours and the estimated amount of the allocation base for the upcoming
year is 10,000 machine-hours. in addition, capacity is 12,000 machine-hours and the
actual activity for the year is 10,100 machine-hours. all of the manufacturing overhead
is fixed and is $12,000 per year. for simplicity, it is assumed that this is the estimated
manufacturing overhead for the year as well as the manufacturing overhead at capacity
and the actual amount of manufacturing overhead for the year. job a76w, which
required 420 machine-hours, is one of the jobs worked on during the year.
required:
a. determine the predetermined overhead rate if the predetermined overhead rate is
based on the amount of the allocation base at capacity.
b. determine how much overhead would be applied to job a76w if the predetermined
overhead rate is based on the amount of the allocation base at capacity.
c. determine the underapplied or overapplied overhead for the year if the predetermined
overhead rate is based on the amount of the allocation base at capacity.
7) the mohawk-hudson company is an electric utility which has two service
departments, accounting and maintenance. it has two operating departments, generation
and transmission. the company does not distinguish between fixed and variable service
department costs. maintenance department costs are allocated on the basis of
maintenance hours. accounting department costs are allocated to operating departments
on the basis of accounting hours of service provided. budgeted costs and other data for
the coming year are as follows:
the step-down method is used to allocate service department costs, with the accounting
department being allocated first.
the amount of accounting department costs allocated to the maintenance department
would be:
a.$0
b.$20,000
c.$19,048
d.$18,000
8) vernon mills, inc. is a large producer of men’s and women’s clothing. the company
uses standard costs for all of its products. the standard costs and actual costs per unit of
product for a recent period are given below for one of the company’s product lines:
during this period, the company produced 4,800 units of this product. a comparison of
standard and actual costs for the period on a total cost basis is given below:
there was no inventory of materials on hand at the beginning of the period. during the
period, 21,120 yards of materials were purchased, all of which were used in production.
required:
a. for direct materials, compute the price and quantity variances for the period and
prepare journal entries to record all activity relating to direct materials for the period.
b. for direct labor, compute the rate and efficiency variances and prepare a journal entry
to record the incurrence of direct labor cost for the period.
c. for variable overhead, compute the rate and efficiency variances.
9) bob is a quality inspector on the assembly line of a manufacturing company. he is
paid $16 per hour for regular time and time and a half for all work in excess of 40 hours
per week. he is classified as a direct labor worker.
bob’s employer offers fringe benefits that cost the company $4 for each hour of
employee time (both regular and overtime). during a given week, bob works 45 hours
but is idle for 2 hours due to material shortages. the company treats all fringe benefits
relating to direct labor as added direct labor cost and the remainder as part of
manufacturing overhead. the allocation of bob’s wages and fringe benefits for the week
between direct labor cost and manufacturing overhead would be:
a.choice a
b.choice b
c.choice c
d.choice d
10) megenity company’s net income last year was $194,000. changes in the company’s
balance sheet accounts for the year appear below:
the company declared and paid cash dividends of $132,000 last year. the following
questions pertain to the company’s statement of cash flows.
the net cash provided by (used in) operating activities last year was:
a.$194,000
b.$253,000
c.$234,000
d.$293,000
11) trusillo corporation’s net operating income last year was $103,000; its interest
expense was $17,000; its total stockholders’ equity was $1,260,000; and its total
liabilities were $380,000.
required:
compute the following for year 2:
a. times interest earned.
b. debt-to-equity ratio.
12) (ignore income taxes in this problem.) hull inc. is considering the acquisition of
equipment that costs $200,000 and has a useful life of 6 years with no salvage value.
the incremental net cash flows that would be generated by the equipment are:
the payback period of this investment is closest to:
a.2.8 years
b.2.6 years
c.3.1 years
d.5.0 years