1) Dennisport Corporation has an acid-test ratio of 2.5. It has current liabilities of
$40,000 and noncurrent assets of $70,000. The corporation’s current assets consist of
cash, marketable securities, accounts receivable, prepaid expenses, and inventory; it has
no short-term notes receivable. If Dennisport’s current ratio is 3.1, its inventory and
prepaid expenses must be:
A.$12,400
B.$24,000
C.$30,000
D.$40,000
2) Bohlen Corporation produces and sells a single product. Data concerning that
product appear below:
Fixed expenses are $716,000 per month. The company is currently selling 6,000 units
per month. Consider each of the following questions independently.
The marketing manager would like to cut the selling price by $17 and increase the
advertising budget by $42,000 per month. The marketing manager predicts that these
two changes would increase monthly sales by 1,000 units. What should be the overall
effect on the company’s monthly net operating income of this change?
A.increase of $85,000
B.increase of $121,000
C.decrease of $85,000
D.decrease of $17,000
3) During February at Iniquez Corporation, $79,000 of raw materials were requisitioned
from the storeroom for use in production. These raw materials included both direct and
indirect materials. The indirect materials totaled $4,000. The journal entry to record the
requisition from the storeroom would include a:
A.debit to Work in Process of $79,000
B.debit to Work in Process of $75,000
C.credit to Manufacturing Overhead of $4,000
D.debit to Raw Materials of $79,000
4) Prater Corporation manufactures and sells a single product. The company uses units
as the measure of activity in its budgets and performance reports. During February, the
company budgeted for 5,400 units, but its actual level of activity was 5,380 units. The
company has provided the following data concerning the formulas used in its budgeting
and its actual results for February:
Data used in budgeting:
Actual results for February:
The direct labor in the planning budget for February would be closest to:
A.$17,754
B.$17,820
C.$18,164
D.$18,232
5) Suppose the special order is for 4,000 haks this month. If this offer is accepted by
Molis, the company’s operating income for the month will:
A) increase by $6,000
B) decrease by $6,000
C) increase by $5,000
D) decrease by $5,000
6) What is the net monetary advantage (disadvantage) of processing Product Y beyond
the split-off point?
A) $3,500
B) $7,900
C) $29,900
D) $25,500
7) The net present value of the new system alternative is:
A.$(483,095)
B.$(583,095)
C.$(596,395)
D.$(536,395)
( Lebert, Inc., is considering the purchase of a machine that would cost $380,000 and
would last for 7 years. At the end of 7 years, the machine would have a salvage value of
$49,000. The machine would reduce labor and other costs by $96,000 per year.
Additional working capital of $6,000 would be needed immediately. All of this working
capital would be recovered at the end of the life of the machine. The company requires
a minimum pretax return of 18% on all investment projects.
8) Zacher Corporation makes a product with the following standards for direct labor
and variable overhead:
In February the company’s budgeted production was 6,900 units, but the actual
production was 7,000 units. The company used 1,980 direct labor-hours to produce this
output. The actual variable overhead cost was $10,296. The company applies variable
overhead on the basis of direct labor-hours.
The variable overhead efficiency variance for February is:
A.$624 F
B.$600 F
C.$624 U
D.$600 U
9) An example of a discretionary fixed cost would be:
A) taxes on the factory.
B) depreciation on manufacturing equipment.
C) insurance.
D) research and development.
10) Fulton Corporation uses the weighted-average method in its process costing system.
This month, the beginning inventory in the first processing department consisted of 800
units. The costs and percentage completion of these units in beginning inventory were:
A total of 9,900 units were started and 8,900 units were transferred to the second
processing department during the month. The following costs were incurred in the first
processing department during the month:
The ending inventory was 70% complete with respect to materials and 60% complete
with respect to conversion costs.
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 total cost transferred from the first processing department to the next processing
department during the month is closest to:
A.$323,168
B.$388,528
C.$349,400
D.$364,800
11) The company’s book value per share at the end of the year is closest to:
A.$11.37 per share
B.$7.37 per share
C.$0.19 per share
D.$16.81 per share
12) The income tax expense in year 2 is:
A.$7,000
B.$3,500
C.$10,500
D.$17,500
13) When the actual direct labor-hours exceeds the standard direct labor-hours allowed
for the actual output of the period, the journal entry would include:
A.Credit to Wages Payable; Credit to Labor Efficiency Variance
B.Credit to Work-In-Process; Credit to Labor Efficiency Variance
C.Credit to Wages Payable; Debit to Labor Efficiency Variance
D.Credit to Work-In-Process; Debit to Labor Efficiency Variance
14) Lumb 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.
What are the equivalent units for materials for the month in the first processing
department?
A.595
B.7,995
C.8,100
D.7,400
15) O’Neill, Incorporated’s segmented income statement for the most recent month is
given below.
For each of the following questions, refer back to the above original data.
If Store B sales increase by $20,000 with no change in fixed expenses, the overall
company net operating income should:
A.increase by $2,500
B.increase by $5,000
C.increase by $8,000
D.increase by $12,000
16) Guo Corporation uses the weighted-average method in its process costing system.
This month, the beginning inventory in the first processing department consisted of 500
units. The costs and percentage completion of these units in beginning inventory were:
A total of 9,700 units were started and 9,100 units were transferred to the second
processing department during the month. The following costs were incurred in the first
processing department during the month:
The ending inventory was 85% complete with respect to materials and 75% complete
with respect to conversion costs.
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.
What are the equivalent units for materials for the month in the first processing
department?
A.935
B.9,100
C.10,200
D.10,035
17) The net present value of project Y is closest to:
A.$15,110
B.$30,250
C.$11,708
D.$(11,708)