1) The company is considering launching a new product that would have a variable cost
of $168.00 per unit and no avoidable fixed costs. It would require 9 minutes of the
constrained resource. The absolute minimum acceptable selling price for the new
product should be:
A.$168.00
B.$171.00
C.$211.20
D.$195.00
Production of product J45Z would be 3,230 minutes / 19 minutes per unit of J45Z = 170
units of J45Z.
This leaves unsatisfied demand for product J45Z. Consequently, the profitability index
for product J45Z establishes the opportunity cost for the constrained resource.
2) Widman, Inc. makes and sells only one product and uses standard costing. The
standard cost sheet for one unit of product includes the following:
Direct materials: 5 grams at $0.35 per gram
Direct labor: 1 hour at $8 per hour
Last period the company had the following results:
5,000 grams of direct materials purchased at $0.40 per gram
4,000 grams of direct materials used in production
900 units of product were made
850 hours of direct labor were used at $8.50 per hour
The journal entry to record the purchase of direct materials last period would include:
A.Raw materials $2,000, Debit; materials price variance $250, Credit
B.Raw materials $1,750, Debit; materials price variance $250, Credit
C.Raw materials $2,000, Debit; materials price variance $250, Debit
D.Raw materials $1,750, Debit; materials price variance $250, Debit
3) Jolin Corporation keeps careful track of the time required to fill orders. The times
recorded for a particular order appear below:
The throughput time was:
A.12.4 hours
B.35.1 hours
C.38.5 hours
D.3.4 hours
4) NOTE TO THE INSTRUCTOR:
The problem requirement does not indicate whether the indirect or direct method must
be used to determine the net cash provided by operating activities. You can, if you
choose, specify that either (or even both) methods be used. The solution contains
solutions for both methods.
Dauber Corporation’s comparative balance sheet and income statement for last year
appear below:
The company declared and paid a cash dividend of $55,000 during the year. It did not
sell any long-term investments, issue any bonds payable, or repurchase any of its own
common stock.
Required:
a. Construct in good form the operating activities section of the company’s statement of
cash flows for the year.
b. Construct in good form the investing activities section of the company’s statement of
cash flows for the year.
c. Construct in good form the financing activities section of the company’s statement of
cash flows for the year.
5) If the company bases its predetermined overhead rate on capacity, by how much was
manufacturing overhead underapplied or overapplied?
The management of Aamot Corporation would like to investigate the possibility of
basing its predetermined overhead rate on activity at capacity. 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 43,000 machine-hours. In addition, capacity is
47,000 machine-hours and the actual level of activity for the year is 42,100
machine-hours. All of the manufacturing overhead is fixed and is $828,610 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. It is further assumed that this is
also the actual amount of manufacturing overhead for the year.
A.$17,343 Overapplied
B.$17,343 Underapplied
C.$86,387 Overapplied
D.$86,387 Underapplied
6) Jublot Corporation uses the weighted-average method in its process costing system.
Data concerning the first processing department for the most recent month are listed
below:
Note: Your answers may differ from those offered below due to rounding error. In all
cases, select the answer that is the closest to the answer you computed. To reduce
rounding error, carry out all computations to at least three decimal places.
The cost per equivalent unit for conversion costs for the first department for the month
is closest to:
A.$21.76
B.$19.45
C.$23.22
D.$24.38
7) Henry Company has an Equipment Services department which performs all needed
maintenance work on the equipment in the company’s Fabrication and Assembly
departments. Costs of the Equipment Services department are charged to the
Fabrication and Assembly departments on the basis of direct labor-hours. Data on direct
labor-hours for the most recent year follow:
The company budgeted its variable maintenance costs at $16,200 for the year. Actual
variable maintenance costs totaled $22,800.
For performance evaluation purposes, how much (if any) of the actual variable
maintenance cost should not be allocated to the Fabrication and Assembly Departments
at the end of the year?
A.$1,200
B.$0
C.$6,600
D.$22,800
8) Data concerning the direct labor costs for March of Boler Corporation appear below:
The journal entry to record the incurrence of direct labor costs in March would include
the following for Work in Process:
A.credit of $125,139.
B.debit of $114,948.
C.credit of $114,948.
D.debit of $125,139.
9) Natcher Corporation’s accounts receivable at the end of Year 2 was $126,000 and its
accounts receivable at the end of Year 1 was $130,000. The company’s inventory at the
end of Year 2 was $127,000 and its inventory at the end of Year 1 was $120,000. Sales,
all on account, amounted to $1,380,000 in Year 2. Cost of goods sold amounted to
$800,000 in Year 2. The company’s operating cycle for Year 2 is closest to:
A.44.7 days
B.17.3 days
C.62.8 days
D.90.2 days
10) Muzyka Corporation uses the FIFO method in its process costing system. Data
concerning the first processing department for the most recent month are listed below:
Note: Your answers may differ from those offered below due to rounding error. In all
cases, select the answer that is the closest to the answer you computed.
What are the equivalent units for conversion costs for the month in the first processing
department?
A.5,600
B.5,060
C.4,500
D.320
11) Under the FIFO method, unit costs would:
A.result from costs in the beginning inventory being added in with current period costs.
B.contain some element of cost from the prior period.
C.not contain some elements of cost from the prior period.