1) Suppose there is not enough idle capacity to produce all of the units for the overseas
customer and accepting the special order would require cutting back on production of
700 units for regular customers. The minimum acceptable price per unit for the special
order is closest to:
A) $86.10
B) $78.90
C) $69.10
D) $63.78
2) Fost Corporation’s contribution margin ratio is 20%. If the degree of operating
leverage is 15 at the $225,000 sales level, net operating income at the $225,000 sales
level must equal:
A.$2,250
B.$6,750
C.$3,000
D.$5,063
3) Wister Corporation had net sales of $462,000 for the just completed year. Shown
below are the beginning and ending balances of various Wister accounts:
Wister prepares its statement of cash flows using the direct method. On its statement of
cash flows, what amount should Wister show for its net sales adjusted to a cash basis
(i.e., cash received from sales)?
A.$488,000
B.$436,000
C.$462,000
D.$445,000
4) Part O43 is used in one of Scheetz Corporation’s products. The company’s
Accounting Department reports the following costs of producing the 6,000 units of the
part that are needed every year.
An outside supplier has offered to make the part and sell it to the company for $26.40
each. If this offer is accepted, the supervisor’s salary and all of the variable costs,
including direct labor, can be avoided. The special equipment used to make the part was
purchased many years ago and has no salvage value or other use. The allocated general
overhead represents fixed costs of the entire company. If the outside supplier’s offer
were accepted, only $1,000 of these allocated general overhead costs would be avoided.
Required:
a. Prepare a report that shows the effect on the company’s total net operating income of
buying part O43 from the supplier rather than continuing to make it inside the company.
b. Which alternative should the company choose?
5) 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.
The cost per equivalent unit for conversion costs for the first department for the month
is closest to:
A.$35.88
B.$32.54
C.$34.17
D.$33.83
6) Aaker Corporation, which has only one product, has provided the following data
concerning its most recent month of operations:
What is the net operating income for the month under variable costing?
A.$8,100
B.$3,900
C.$12,000
D.$(14,100)
7) Trupp 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 amount of Information Technology Department cost allocated to the two
operating departments is closest to:
A.$30,097
B.$134,836
C.$24,605
D.$33,048
8) Koutz Corporation uses activity-based costing to compute product margins.
Overhead costs have already been allocated to the company’s three activity cost
pools-Processing, Supervising, and Other. The costs in those activity cost pools appear
below:
Processing costs are assigned to products using machine-hours (MHs) and Supervising
costs are assigned to products using the number of batches. The costs in the Other
activity cost pool are not assigned to products. Activity data appear below:
Finally, sales and direct cost data are combined with Processing and Supervising costs
to determine product margins.
What is the product margin for Product O7 under activity-based costing?
A.$46,400
B.$10,111
C.-$600
D.$14,271
9) Gauani Corporation produces and sells a single product. Data concerning that
product appear below:
Required:
a. Assume the company’s monthly target profit is $21,600. Determine the unit sales to
attain that target profit. Show your work!
b. Assume the company’s monthly target profit is $54,000. Determine the dollar sales to
attain that target profit. Show your work!
10) Forse Florist specializes in large floral bouquets for hotels and other commercial
spaces. The company has provided the following data concerning its annual overhead
costs and its activity based costing system:
The “Other” activity cost pool consists of the costs of idle capacity and
organization-sustaining costs.
The amount of activity for the year is as follows:
What would be the total overhead cost per bouquet according to the activity based
costing system? In other words, what would be the overall activity rate for the making
bouquets activity cost pool? (Round to the nearest whole cent.)
A.$0.90
B.$1.05
C.$1.20
D.$1.10
11) The company’s working capital is:
A.$1,215,000
B.$542,000
C.$793,000
D.$709,000
12) Acklac Corporation uses the weighted-average method in its process costing
system. This month, the beginning inventory in the first processing department
consisted of 700 units. The costs and percentage completion of these units in beginning
inventory were:
A total of 9,200 units were started and 8,300 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 75% complete with respect to materials and 15% 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.$485,486
B.$407,024
C.$426,300
D.$440,300
