Schedule of Activity Costs
From the above schedule, calculate the (a) value-added and (b) non-value-added costs.
Answer:
Salesman commissions
Match the items below for a bakery to the type of cost (a-d).
a. Direct materials
b. Direct labor
c. Factory overhead
d. Non-manufacturing cost
Answer:
The vice presidents of production and sales and the controller hold line positions in
most large organizations.
a. True
b. False
Answer:
Percentage analyses, ratios, turnovers, and other measures of financial position and
operating results are
a. a substitute for sound judgment
b. useful analytical measures
c. enough information for analysis; industry information is not needed
d. unnecessary for analysis, but reaction is better
Answer:
The process by which management plans, evaluates, and controls long-term investment
decisions involving fixed assets is called
a. absorption cost analysis
b. variable cost analysis
c. capital investment analysis
d. cost-volume-profit analysis
Answer:
Mason Corporation had $650,000 in invested assets, sales of $700,000, income from
operations amounting to $99,000, and a desired minimum rate of return of 15%.
The investment turnover for Mason is
a. 1.08
b. 0.93
c. 6.57
d. 7.07
Answer:
The first step in determining the cost of goods completed and ending inventory
valuation using process costing is to calculate equivalent units of production.
a. True
b. False
Answer:
Given the following data:
What is the amount of raw materials used? a. $5,000
b. $55,000
c. $75,000
d. $30,000
Answer:
Standards are more widely used for nonmanufacturing activities than for manufacturing
activities.
a. True
b. False
Answer:
Contribution margin is
a. the excess of sales revenue over variable cost
b. another term for volume in the “cost-volume-profit” analysis
c. profit
d. the same as sales revenue
Answer:
A company is contemplating investing in a new piece of manufacturing machinery. The
amount to be invested is $100,000. The present value of the future cash flows at the
company’s desired rate of return is $105,000. The IRR on the project is 12%. Which of
the following statements is true?
a. The project should not be accepted because the net present value is negative.
b. The desired rate of return used to calculate the present value of the future cash flows
is less than 12%.
c. The desired rate of return used to calculate the present value of the future cash flows
is more than 12%.
d. The desired rate of return used to calculate the present value of the future cash flows
is equal to 12%.
Answer:
Indicates the possible decrease in sales that may occur before operating loss results
Match the following terms (a-e) with their definitions.
a. Profit-volume chart
b. Cost-volume-profit chart
c. Sales mix
d. Operating leverage
e. Margin of safety
Answer:
Jase Manufacturing Co.’s static budget at 10,000 units of production includes $40,000
for direct labor and $4,000 for electric power. Total fixed costs are $24,000. At 12,000
units of production, a flexible budget would show
a. variable costs of $52,800 and $29,000 of fixed costs
b. variable costs of $44,000 and $24,000 of fixed costs
c. variable costs of $52,800 and $24,000 of fixed costs
d. variable and fixed costs totaling $68,000
Answer:
quick ratio
Match each ratio that follows to its use (items a’“h). Items may be used more than
once.
a. assess the profitability of the assets
b. assess the effectiveness in the use of assets
c. indicate the ability to meet currently maturing obligations
d. indicate the margin of safety to creditors
e. indicate instant debt-paying ability
f. assess the profitability of the investment by common stockholders
g. indicate future earnings prospects
h. indicate the extent to which earnings are being distributed to common stockholders
Answer:
The first budget customarily prepared as part of an entity’s master budget is the
a. production budget
b. cash budget
c. sales budget
d. direct materials purchases
Answer:
Flanders Industries collects 35% of its sales on account in the month of the sale, and
65% in the month following the sale. Sales on account are budgeted to be $175,000 for
May and $225,000 for June. What are the budgeted cash receipts from sales on account
for June?
Answer:
On October 31, the end of the first month of operations, Morristown & Co. prepared the
following income statement based on absorption costing:
Morristown & Co.
Absorption Costing Income Statement
For Month Ended October 31, 20-
If the fixed manufacturing costs were $42,900 and the variable selling and
administrative expenses were $14,600, prepare an income statement using variable
costing.
Answer:
Rodger’s Cabinet Manufacturers uses flexible budgets that are based on the following
manufacturing data for the month of July:
Prepare a flexible budget for Rodger’s based on production of 10,000, 15,000, and
20,000 units.
Answer:
Using the variable cost concept, determine the selling price for 30,000 units using the
following data: variable cost p unit, $15.00; total fixed costs, $90,000; and desired
profit, $150,000.
Answer:
Can be determined by initial cost divided by annual net cash inflow of an investment
Match the definition that follows with the term (a’“e) it defines.
u. Capital investment analysis
v. Time value of money concept
w. Net present value method
x. Average rate of return
y. Cash payback period
Answer:
allocate costs to transferred and partially completed units
Answer:
Identify four capital investment evaluation methods discussed in the chapter and discuss
the strengths and weaknesses of each method.
Answer:
Snipe Company has been purchasing a component, Part Q for $19.20 per unit. Snipe is
currently operating at 70% of capacity and no significant increase in production is
anticipated in the near future. The cost of manufacturing a unit of Part Q is estimated as
follows:
Prepare a differential analysis report, dated March 12 of the current year, on the
decision to make or buy Part Q.
Answer:
From the following data for Norton Company for the year ended December 31, prepare
a multiple-step income statement. Show earnings per share for the following: income
from continuing operations, loss on discontinued operations (less applicable income
tax), income before extraordinary item, extraordinary item (less applicable income tax),
and net income.
Answer:
