1) Schwering Corporation uses activity-based costing to assign overhead costs to
products. Overhead costs have already been allocated to the company’s three activity
cost pools as follows: Machining, $20,800; Order Filling, $30,400; and Other, $48,800.
Machining costs are assigned to products using machine-hours (MHs) and Order Filling
costs are assigned to products using the number of orders. The costs in the Other
activity cost pool are not assigned to products. Activity data appear below:
The activity rate for the Order Filling activity cost pool under activity-based costing is
closest to:
A.$30.40 per order
B.$100.00 per order
C.$4.00 per order
D.$20.00 per order
2) In a sell or process further decision, which of the following costs is relevant?
I. A variable production cost incurred after split-off.
II. A fixed production cost incurred prior to split-off.
A.Only I
B.Only II
C.Both I and II
D.Neither I nor II
3) A manufacturer of cedar shingles has supplied the following data:
The company’s degree of operating leverage is closest to:
A.2.80
B.7.00
C.2.29
D.20.72
4) The Cost of Goods Manufactured for May was:
A.$84,500
B.$95,000
C.$75,500
D.$81,500
Cost of Goods Manufactured
Echo Corporation uses a job-order costing system and applies overhead to jobs using a
predetermined overhead rate. During the year the company’s Finished Goods inventory
account was debited for $360,000 and credited for $338,800. The ending balance in the
Finished Goods inventory account was $36,600. At the end of the year, manufacturing
overhead was overapplied by $15,900.
5) Seventy percent of Parlee Corporation’s sales are collected in the month of sale, 25%
in the month following sale, and 5% in the second month following sale. The following
are budgeted sales data for the company:
Total budgeted cash collections in April would be:
A.$35,000
B.$125,000
C.$210,000
D.$370,000
6) In December, Mccullum Corporation sold 2,900 units of its only product. Its total
sales were $281,300, its total variable expenses were $130,500, and its total fixed
expenses were $122,600.
Required:
a. Construct the company’s contribution format income statement for December.
b. Redo the company’s contribution format income statement assuming that the
company sells 3,100 units.
7) Ibarra 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 conversion costs for the month in the first processing
department?
A.7,070
B.6,800
C.8,600
D.270
8) Which of the following terms could be used to correctly describe the cost of the
thread used to sew the jeans together?
Manufacturing Overhead Cost Fixed Cost
A) Yes Yes
B) Yes No
C) No Yes
D) No No
9) Maraby Corporation’s average collection period for Year 2 was closest to:
A.38.6 days
B.46.6 days
C.32.6 days
D.27.0 days
10) Koen Corporation has two divisions: Division A and Division B. Last month, the
company reported a contribution margin of $50,000 for Division A. Division B had a
contribution margin ratio of 30% and its sales were $250,000. Net operating income for
the company was $30,000 and traceable fixed expenses were $50,000. Koen
Corporation’s common fixed expenses were:
A.$95,000
B.$75,000
C.$45,000
D.$50,000
11) Bulan Inc. makes a range of products. The company’s predetermined overhead rate
is $20 per direct labor-hour, which was calculated using the following budgeted data:
Component T6 is used in one of the company’s products. The unit product cost of the
component according to the company’s cost accounting system is determined as
follows:
An outside supplier has offered to supply component T6 for $101 each. The outside
supplier is known for quality and reliability. Assume that direct labor is a variable cost,
variable manufacturing overhead is really driven by direct labor-hours, and total fixed
manufacturing overhead would not be affected by this decision. Bulan chronically has
idle capacity.
Required:
Is the offer from the outside supplier financially attractive? Why?
12) The Milham Corporation has two divisionsEast and West. The divisions have the
following revenues and expenses:
Management at Milham is considering the elimination of the West Division. If the West
Division were eliminated, its traceable fixed costs could be avoided. Total common
corporate costs would be unaffected by this decision. Given these data, the elimination
of the West Division would result in an overall company net operating income of:
A.$100,000
B.$80,000
C.$120,000
D.$50,000
13) Hossack Corporation produces a single product and has the following cost
structure:
The unit product cost under absorption costing is:
A.$231 per unit
B.$103 per unit
C.$133 per unit
D.$102 per unit
14) Peterson Corporation produces a single product. Data from the company’s records
for last year follow:
Under variable costing, net operating income would be:
A.$217,000
B.$307,000
C.$352,000
D.$374,500
15) Linscott Corporation manufactures and sells a single product. The company uses
units as the measure of activity in its budgets and performance reports. During July, 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 July:
Data used in budgeting:
Actual results for July:
The spending variance for direct materials in July would be closest to:
A.$2,570 U
B.$2,796 U
C.$2,796 F
D.$2,570 F
16) The Portland Division’s operating data for the past two years is as follows:
The Portland Division’s margin in Year 2 was 150% of the margin for Year 1.
The average operating assets for Year 2 were:
A.$750,000
B.$400,000
C.$1,200,000
D.$800,000