1) Iaci Corporation is a wholesaler that sells a single product. Management has
provided the following cost data for two levels of monthly sales volume. The company
sells the product for $133.60 per unit.
The best estimate of the total contribution margin when 4,300 units are sold is:
A) $112,230
B) $162,110
C) $28,380
D) $45,150
2) Feltner Corporation manufactures and sells one product. The following information
pertains to the company’s first year of operations:
The company does not have any variable manufacturing overhead costs or variable
selling and administrative costs. During its first year of operations, the company
produced 49,000 units and sold 42,000 units. The company’s only product is sold for
$225 per unit.
Assume that the company uses an absorption costing system that assigns $19 of direct
labor cost and $50 of fixed manufacturing overhead to each unit that is produced. The
net operating income under this costing system is:
A.$882,000
B.$399,000
C.$(210,000)
D.$532,000
3) The following labor standards have been established for a particular product:
The following data pertain to operations concerning the product for the last month:
What is the labor efficiency variance for the month?
A.$7,230 U
B.$9,030 U
C.$7,230 F
D.$9,150 U
4) Activity rates from Mcelderry Corporation’s activity-based costing system are listed
below. The company uses the activity rates to assign overhead costs to products:
Last year, Product Q06J involved 10 customer orders, 580 assembly hours, and 12
batches. How much overhead cost would be assigned to Product Q06J using the
activity-based costing system?
A.$71.01
B.$219.12
C.$2,388.22
D.$42,748.02
5) When using the absorption approach to cost-plus pricing described in the text:
A.all costs are included in the cost base.
B.the “plus” or markup figure contains fixed costs and desired profit.
C.the cost base is made up of the unit product cost.
D.only selling and administrative expenses are included in the cost base.
6) Grosvenor Corporation’s most recent income statement appears below:
The gross margin percentage is closest to:
A.80.9%
B.44.7%
C.376.0%
D.26.6%
7) The predetermined overhead rate (i.e., activity rate) for Activity 1 under the
activity-based costing system is closest to:
Adams Corporation makes two products: Product A and Product B. Annual production
and sales are 500 units of Product A and 900 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 0.4 direct labor-hours per unit and Product B
requires 0.5 direct labor-hours per unit. The total estimated overhead for next period is
$67,522.
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 pools–Activity 1, Activity 2,
and General Factory–with 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.)
A.$23.05
B.$13.83
C.$34.58
D.$135.04
8) The ratio of total cash, marketable securities, accounts receivable, and short-term
notes to current liabilities is:
A.the debt-to-equity ratio.
B.the current ratio.
C.the acid-test ratio.
D.working capital.
9) The acid-test ratio at the end of Year 2 is closest to:
A.2.17
B.1.78
C.1.74
D.1.06
10) Assume that the cafeteria expects to serve 1,850 meals during Week 8. Using the
high-low method, the expected total cost of the cafeteria would be:
A) $5,340
B) $5,180
C) $5,300
D) $4,375
11) The cost of goods sold for March was:
A) $146,000
B) $150,000
C) $142,000
D) $237,000
12) Barrus Corporation makes 30,000 motors to be used in the productions of its power
lawn mowers. The average cost per motor at this level of activity is as follows:
This motor has recently become available from an outside supplier for $25 per motor. If
Barrus decides not to make the motors, none of the fixed manufacturing overhead
would be avoidable and there would be no other use for the facilities. If Barrus decides
to continue making the motor, how much higher or lower will the company’s net
operating income be than if the motors are purchased from the outside supplier?
Assume that direct labor is a variable cost in this company.
A.$36,000 lower
B.$207,000 higher
C.$94,500 higher
D.$130,500 higher
13) Minden Corporation estimates that the following costs and activity would be
associated with the manufacture and sale of product A:
If the company uses the absorption costing approach to cost-plus pricing described in
the text and desires a 25% rate of return on investment (ROI), the required markup on
absorption cost for Product A would be closest to:
A.12%
B.15%
C.17%
D.25%