1) from a standpoint of cost control, the most effective time to recognize materials price
variances is when the materials are placed into production.
2) a production budget is to a manufacturing firm as a merchandise purchases budget is
to a merchandising firm.
3) when combining activities in an activity-based costing system, activities should be
grouped together at the same level. for example, batch-level activities should not be
combined with unit-level activities.
4) iso 9000 standards were established to make sure that all consumer products
incorporate certain safety features.
5) the present value of a given sum to be received in five years is exactly twice as large
as the present value of an equal sum to be received in ten years.
6) in a manufacturing company using absorption costing, the fixed costs associated with
idle production capacity are commonly included as part of the product cost.
7) when computing the return on total assets, the after-tax effect of interest expense
must be subtracted from net income.
8) transactions that involve acquiring or disposing of noncurrent assets are generally
classified as investing activities on the statement of cash flows.
9) one of the distinct advantages of a budget is that it can help to uncover potential
bottlenecks before they occur.
10) variable selling and administrative expenses are part of product costs under the
variable costing approach.
11) the gross margin percentage is computed by dividing net income before interest and
taxes by sales.
12) the r2 (i.e., r-squared) indicates the proportion of a mixed cost that is variable.
13) the manufacturing overhead budget at formica corporation is based on budgeted
direct labor-hours. the direct labor budget indicates that 4,400 direct labor-hours will be
required in october. the variable overhead rate is $8.90 per direct labor-hour. the
company’s budgeted fixed manufacturing overhead is $86,680 per month, which
includes depreciation of $16,280. all other fixed manufacturing overhead costs
represent current cash flows. the company recomputes its predetermined overhead rate
every month. the predetermined overhead rate for october should be:
a.$19.70
b.$24.90
c.$8.90
d.$28.60
14) mccaughey corporation’s most recent balance sheet and income statement appear
below:
the inventory turnover for year 2 is closest to:
a.1.20
b.0.83
c.6.64
d.7.30
15) the culver company is preparing its manufacturing overhead budget for the third
quarter of the year. budgeted variable factory overhead is $3.00 per unit produced;
budgeted fixed factory overhead is $75,000 per month, with $16,000 of this amount
being factory depreciation.
if the budgeted production for august is 5,000 units, then the total budgeted factory
overhead per unit is:
a.$15
b.$18
c.$20
d.$22
16) a manufacturing company that produces a single product has provided the following
data concerning its most recent month of operations:
the total contribution margin for the month under variable costing is:
a.$83,900
b.$221,400
c.$135,000
d.$270,000
17) 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 $92,023.
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 under the traditional costing system is closest to:
a.$37.46
b.$21.60
c.$13.17
d.$270.66
18) porus corporation makes and sells a single product called a yute. the company is in
the process of preparing its selling and administrative expense budget for the last
quarter of the year. the following budget data are available:
all of these expenses (except depreciation) are paid in cash in the month they are
incurred.
if the company has budgeted to sell 20,000 yutes in december, then the budgeted total
cash disbursements for selling and administrative expenses for december would be:
a.$546,000
b.$547,000
c.$189,000
d.$358,000
19) roberts enterprises has budgeted sales in units for the next five months as follows:
past experience has shown that the ending inventory for each month must be equal to
10% of the next month’s sales in units. the inventory on may 31 contained 410 units. the
company needs to prepare a production budget for the second quarter of the year.
the total number of units to be produced in july is:
a.7,630 units
b.7,100 units
c.6,920 units
d.7,280 units
20) excerpts from niederhauser corporation’s comparative balance sheet appear below:
which of the following classifications of changes in balance sheet accounts as sources
and uses is correct?
a.the change in property, plant, and equipment is a source; the change in long-term debt
is a source
b.the change in property, plant, and equipment is a use; the change in long-term debt is
a use
c.the change in property, plant, and equipment is a source; the change in long-term debt
is a use
d.the change in property, plant, and equipment is a use; the change in long-term debt is
a source
21) kuczenski corporation’s cost formula for its manufacturing overhead is $45,700 per
month plus $53 per machine-hour. for the month of march, the company planned for
activity of 6,200 machine-hours, but the actual level of activity was 6,150
machine-hours. the actual manufacturing overhead for the month was $373,630.
the spending variance for manufacturing overhead in march would be closest to:
a.$670 f
b.$1,980 u
c.$1,980 f
d.$670 u
22) tilson company has projected sales and production in units for the second quarter of
the coming year as follows:
cash-related production costs are budgeted at $7 per unit produced. of these production
costs, 40% are paid in the month in which they are incurred and the balance in the
following month. selling and administrative expenses will amount to $110,000 per
month. the accounts payable balance on march 31 totals $193,000, which will be paid in
april.
all units are sold on account for $16 each. cash collections from sales are budgeted at
60% in the month of sale, 30% in the month following the month of sale, and the
remaining 10% in the second month following the month of sale. accounts receivable
on april 1 totaled $520,000 $(100,000 from february’s sales and the remainder from
march).
required:
a. prepare a schedule for each month showing budgeted cash disbursements for the
tilson company.
b. prepare a schedule for each month showing budgeted cash receipts for tilson
company.
23) harnish corporation is developing standards for its products. one product requires an
input that is purchased for $55.00 per kilogram from the supplier. by paying cash, the
company gets a discount of 8% off this purchase price. shipping costs from the
supplier’s warehouse amount to $5.17 per kilogram. receiving costs are $0.28 per
kilogram. each unit of output of the product requires 0.75 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 0.11 kilogram of this input for each unit of output.
the standard price per kilogram of this input should be:
a.$55.00
b.$56.05
c.$53.95
d.$64.85
24) massie corporation, which produces commercial safes, has provided the following
data:
the variable overhead efficiency variance for supplies is:
a.$4,050 f
b.$18,947 f
c.$18,947 u
d.$4,050 u
25) iacollia company makes two products from a common input. joint processing costs
up to the split-off point total $47,600 a year. the company allocates these costs to the
joint products on the basis of their total sales values at the split-off point. each product
may be sold at the split-off point or processed further. data concerning these products
appear below:
required:
a. what is the net monetary advantage (disadvantage) of processing product x beyond
the split-off point?
b. what is the net monetary advantage (disadvantage) of processing product y beyond
the split-off point?
c. what is the minimum amount the company should accept for product x if it is to be
sold at the split-off point?
d. what is the minimum amount the company should accept for product y if it is to be
sold at the split-off point?
26) cresol corporation has a large number of potential investment opportunities that are
acceptable. however, cresol does not have enough investment funds to invest in all of
them. which calculation would be the best one for cresol to use to determine which
projects to choose?
a.payback period
b.simple rate of return
c.net present value
d.project profitability index
27) two products, td and ib, emerge from a joint process. product td has been allocated
$31,200 of the total joint costs of $48,000. a total of 5,000 units of product td are
produced from the joint process. product td can be sold at the split-off point for $24 per
unit, or it can be processed further for an additional total cost of $15,000 and then sold
for $26 per unit. if product td is processed further and sold, what would be the effect on
the overall profit of the company compared with sale in its unprocessed form directly
after the split-off point?
a.$5,000 less profit
b.$115,000 more profit
c.$36,200 less profit
d.$26,200 more profit
28) verkamp corporation has two divisions: the ydi division and the qcc division. the
corporation’s net operating income is $31,800. the ydi division’s divisional segment
margin is $111,800 and the qcc division’s divisional segment margin is $152,800. what
is the amount of the common fixed expense not traceable to the individual divisions?
a.$143,600
b.$184,600
c.$264,600
d.$232,800
29) roofe inc. has provided the following data for the month of october. there were no
beginning inventories; consequently, the direct materials, direct labor, and
manufacturing overhead applied listed below are all for the current month.
manufacturing overhead for the month was underapplied by $2,000.
the company allocates any underapplied or overapplied overhead among work in
process, finished goods, and cost of goods sold at the end of the month on the basis of
the overhead applied during the month in those accounts.
the cost of goods sold for october after allocation of any underapplied or overapplied
overhead for the month is closest to:
a.$241,320
b.$237,960
c.$241,640
d.$237,640
30) the james company has four departments with data as follows:
maintenance department costs are allocated on the basis of labor hours. the amount of
cost allocated to milling from maintenance under the direct method would be:
a.$5,600
b.$6,720
c.$5,250
d.$5,700
31) the following account balances have been provided for the end of the most recent
year:
the book value per share is:
a.$28
b.$25
c.$36
d.$34
32) spraque air uses two measures of activity, flights and passengers, in the cost
formulas in its budgets and performance reports. the cost formula for plane operating
costs is $40,520 per month plus $2,733 per flight plus $11 per passenger. the company
expected its activity in june to be 71 flights and 207 passengers, but the actual activity
was 70 flights and 205 passengers. the actual cost for plane operating costs in june was
$239,580.
the plane operating costs in the flexible budget for june would be closest to:
a.$233,504
b.$234,085
c.$239,580
d.$236,840
33) fuquay corporation uses customers served as its measure of activity. the company
bases its budgets on the following information: revenue should be $4.80 per customer
served. wages and salaries should be $26,500 per month plus $1.70 per customer
served. supplies should be $0.90 per customer served. insurance should be $7,100 per
month. miscellaneous expenses should be $4,700 per month plus $0.20 per customer
served.
the company reported the following actual results for may:
required:
prepare a report showing the company’s revenue and spending variances for may. label
each variance as favorable (f) or unfavorable (u).
34) palamino jeep tours operates jeep tours in the heart of the colorado rockies. the
company bases its budgets on two measures of activity (i.e., cost drivers), namely
guests and jeeps. one vehicle used in one tour on one day counts as a jeep. each jeep has
one tour guide. the company uses the following data in its budgeting:
in january, the company budgeted for 330 guests and 143 jeeps. the company’s income
statement showing the actual results for the month appears below:
required:
prepare a flexible budget performance report showing both the company’s activity
variances and revenue and spending variances for january. label each variance as
favorable (f) or unfavorable (u).
35) data concerning uthe corporation’s single product appear below:
fixed expenses are $522,000 per month. the company is currently selling 6,000 units per
month.
required:
the marketing manager would like to cut the selling price by $19 and increase the
advertising budget by $30,900 per month. the marketing manager predicts that these
two changes would increase monthly sales by 1,600 units. what should be the overall
effect on the company’s monthly net operating income of this change? show your work!
36) villella memorial diner is a charity supported by donations that provides free meals
to the homeless. the diner’s budget for october was based on 3,800 meals. the diner’s
director has provided the following cost formulas to use in budgets:
the director has also provided the diner’s statement of actual expenses for the month:
required:
prepare a report showing the spending variances for each of the expenses and for total
expenses for october. label each variance as favorable (f) or unfavorable (u).
37) (ignore income taxes in this problem.) varnes corporation is contemplating
purchasing equipment that would increase sales revenues by $217,000 per year and
cash operating expenses by $109,000 per year. the equipment would cost $324,000 and
have a 6 year life with no salvage value. the annual depreciation would be $54,000.
required:
determine the simple rate of return on the investment to the nearest tenth of a percent.
show your work!
38) the management of reagon corporation expects sales in january to be $122,000. the
company’s contribution margin ratio is 69% and its fixed monthly expenses are
$50,000.
required:
estimate the company’s net operating income for january, assuming that the fixed
monthly expenses do not change. show your work!
39) the following data have been provided by witty corporation, which uses the
weighted-average method in its process costing. the data are for the company’s shaping
department for march.
required:
compute the equivalent units of production for both materials and conversion costs for
the shaping department for march using the weighted-average method.
40) the following data have been provided by leon corporation for the circuit prep
department. the company uses the fifo method in its process costing.
required:
determine the equivalent units of production for the circuit prep department for
december using the fifo method.
41) the following data have been provided by montis corporation:
required:
compute the variable overhead rate variances for lubricants and for supplies. indicate
whether each of the variances is favorable (f) or unfavorable (u). show your work!
42) a number of costs and measures of activity are listed below.
required:
for each item above, indicate whether the cost is mainly fixed or variable with respect
to the possible measure of activity listed next to it.
