1) the fixed manufacturing overhead budget variance and the fixed manufacturing
overhead volume variance taken together explain the difference between the actual
fixed manufacturing overhead cost incurred and the fixed manufacturing overhead cost
applied to production.
2) the present value of a cash flow decreases as it moves further into the future.
3) a favorable materials quantity variance would appear as a debit in a journal entry.
4) efforts designed to increase the rate of output should generally be applied to
non-constraint work stations.
5) if the denominator activity used to compute the predetermined overhead rate is equal
to the standard activity allowed for the actual output of the period, then there is no
volume variance.
6) for performance evaluation purposes, actual service department costs instead of
budgeted service department costs should be allocated to operating departments.
7) the beginning cash balance is not included on the cash budget because the cash
budget deals exclusively with cash flows rather than with balance sheet amounts.
8) in a process costing system, overhead is allocated to departments before being
applied to units of product.
9) in a manufacturing firm, all costs are product costs.
10) an action analysis report reconciles activity-based costing product costs with
traditional product costs based on direct labor.
11) net operating income is not affected by changes in production when absorption
costing is used.
12) when completed goods are sold, the transaction is recorded as a debit to cost of
goods sold and a credit to work in process.
13) the step-down method requires that an order of allocation is established before
service department costs can be allocated to operating departments.
14) unit-level production activities are performed each time a unit is made.
15) lorello manufacturing corporation has a traditional costing system in which it
applies manufacturing overhead to its products using a predetermined overhead rate
based on direct labor-hours (dlhs). the company has two products, l05j and y22f, about
which it has provided the following data:
the company’s estimated total manufacturing overhead for the year is $1,248,600 and
the company’s estimated total direct labor-hours for the year is 30,000.
the company is considering using a variation of activity-based costing to determine its
unit product costs for external reports. data for this proposed activity-based costing
system appear below:
required:
a. determine the manufacturing overhead cost per unit of each of the company’s two
products under the traditional costing system.
b. determine the manufacturing overhead cost per unit of each of the company’s two
products under activity-based costing system.
16) kania corporation’s most recent balance sheet appears below:
the net income for the year was $171. cash dividends were $44. the net cash provided
by (used by) investing activities for the year was:
a.($91)
b.($139)
c.$91
d.$139
17) mire corporation staffs a helpline to answer questions from customers. the costs of
operating the helpline are variable with respect to the number of calls in a month. at a
volume of 29,000 calls in a month, the costs of operating the helpline total $171,100.
to the nearest whole dollar, what should be the total cost of operating the helpline costs
at a volume of 31,200 calls in a month? (assume that this call volume is within the
relevant range.)
a.$171,100
b.$177,590
c.$184,080
d.$159,035
18) holmon surgical hospital uses the direct method to allocate service department costs
to operating departments. the hospital has two service departments, information
technology and administration, and two operating departments, surgery and recovery.
information technology department costs are allocated on the basis of computer
workstations and administration department costs are allocated on the basis of
employees.
the total surgery department cost after service department allocations is closest to:
a.$463,368
b.$457,933
c.$470,058
d.$467,841
19) albro corporation keeps careful track of the time required to fill orders. the times
recorded for a particular order appear below:
the delivery cycle time was:
a.9.8 hours
b.29.9 hours
c.31.6 hours
d.2.6 hours
20) excerpts from shelton corporation’s most recent balance sheet appear below:
sales on account in year 2 amounted to $1,320 and the cost of goods sold was $890.
the acid-test ratio at the end of year 2 is closest to:
a.0.89
b.1.21
c.0.82
d.0.55
21) the fletcher company uses standard costing. the following data are available for
october:
the standard quantity of material allowed for october production is:
a.23,000 pounds
b.24,000 pounds
c.24,500 pounds
d.25,000 pounds
22) fauste corporation uses the weighted-average method in its process costing system.
the assembly department started the month with 10,000 units in its beginning work in
process inventory that were 70% complete with respect to conversion costs. an
additional 55,000 units were transferred in from the prior department during the month
to begin processing in the assembly department. during the month 52,000 units were
completed in the assembly department and transferred to the next processing
department. there were 13,000 units in the ending work in process inventory of the
assembly department that were 80% complete with respect to conversion costs.
what were the equivalent units for conversion costs in the assembly department for the
month?
a.58,000
b.55,400
c.62,400
d.52,000
23) marston enterprises sells three chemicals: petrol, septine, and tridol. petrol’s unit
contribution margin is higher than septine’s which is higher than tridol’s. which one of
the following events is most likely to decrease the company’s overall break-even point?
a.the installation of new computer-controlled equipment that reduces variable costs and
increases fixed costs
b.a decrease in tridol’s selling price
c.an increase in the overall market demand for septine
d.a change in the relative market demand for the products, with the increase favoring
petrol relative to septine and tridol
24) madtack company’s beginning and ending inventories for the month of november
were as follows:
madtack applies manufacturing overhead cost to jobs at the rate of 70% of direct labor
cost incurred. the company does not close underapplied or overapplied manufacturing
overhead to cost of goods sold until the end of the year.
madtack company’s cost of goods sold for november was:
a.$484,000
b.$491,000
c.$502,000
d.$476,000
25) gattuso corporation’s total current assets are $270,000, its noncurrent assets are
$760,000, its total current liabilities are $130,000, its long-term liabilities are $400,000,
and its stockholders’ equity is $500,000.
required:
compute the company’s current ratio. show your work!
26) mataalii corporation uses the weighted-average method in its process costing. the
following data pertain to its assembly department for september.
required:
compute the equivalent units of production for both materials and conversion costs for
the assembly department for september using the weighted-average method.
27) smolinski corporation produces a single product and has the following cost
structure:
required:
compute the unit product cost under absorption costing. show your work!
28) last year, jaquet corporation’s variable costing net operating income was $58,000.
the fixed manufacturing overhead costs deferred in inventory under absorption costing
amounted to $9,000.
required:
determine the absorption costing net operating income last year. show your work!
29) during may, sarkin corporation incurred $69,000 of actual manufacturing overhead
costs. during the same period, the manufacturing overhead applied to work in process
was $73,000.
required:
prepare journal entries to record the incurrence of manufacturing overhead and the
application of manufacturing overhead to work in process.
30) gabris company’s quality cost report is to be based on the following data:
required:
prepare a quality cost report in good form with separate sections for prevention costs,
appraisal costs, internal failure costs, and external failure costs.
31) lakes corporation has provided the following data from its activity-based costing
accounting system:
required:
compute the activity rates for each of the three cost pools. show your work!
32) (ignore income taxes in this problem.) the management of matza corporation is
considering the purchase of a machine that would cost $370,000, would last for 9 years,
and would have no salvage value. the machine would reduce labor and other costs by
$63,000 per year. the company requires a minimum pretax return of 10% on all
investment projects.
required:
determine the net present value of the project. show your work!
33) mcclaflin corporation uses process costing. a number of transactions that occurred
in august are listed below.
required:
prepare journal entries for each of the transactions listed above.
34) dugue inc. uses the weighted-average method in its process costing. the following
data concern the company’s mixing department for the month of february.
required:
compute the cost per equivalent unit for materials and conversion for the mixing
department in february.