1) 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
2) The Dean Corporation produces and sells a single product. The following data refer
to the year just completed:
Assume that direct labor is a variable cost.
Required:
a. Compute the cost of a single unit of product under both the absorption costing and
variable costing approaches.
b. Prepare an income statement for the year using absorption costing.
c. Prepare a contribution format income statement for the year using variable costing.
d. Reconcile the absorption costing and variable costing net operating income figures in
(b) and (c) above.
3) Sund Corporation bases its budgets on the activity measure customers served. During
April, the company plans to serve 38,000 customers. The company has provided the
following data concerning the formulas it uses in its budgeting:
Required:
Prepare the company’s planning budget for April.
4) For which situation(s) below would an organization be more likely to use a process
costing system of rather than a job-order costing system?
A.a paper mill that processes wood pulp into large rolls of paper
B.a shop that restores old cars to ‘showroom” quality
C.a framing shop that builds picture frames to order for individual customers
D.a masonry company that builds brick walls, bulkheads, and walkways designed by
architects
5) Spacer Corporation has two service departments and two operating departments.
Budgeted costs and budgeted activity in the various departments for last year are shown
below:
Service department costs are allocated to operating departments with the costs of
Custodial Services allocated on the basis of square feet of space occupied and the costs
of the Cafeteria on the basis of number of employees. The departmental costs for the
cutting and assembly departments are overhead costs. Predetermined overhead rates in
the Cutting and Assembly departments are based on machine-hours.
Assume that the company uses the step-down method of allocation with Custodial
Services allocated first. The amount of cost allocated from the Cafeteria to the Cutting
Department would be:
A.$0
B.$12,000
C.$14,160
D.$12,390
6) The net present value of the entire project is closest to:
A.$4,258
B.$15,698
C.$65,000
D.$41,080
Depreciation expense = (Original cost – Salvage value) / Useful life
= ($80,000 – $0) / 4 years = $20,000 per year
Lanfranco Corporation is considering a capital budgeting project that would require
investing $160,000 in equipment with an expected life of 4 years and zero salvage
value. Annual incremental sales would be $480,000 and annual incremental cash
operating expenses would be $330,000. The project would also require an immediate
investment in working capital of $10,000 which would be released for use elsewhere at
the end of the project. The project would also require a one-time renovation cost of
$100,000 in year 3. The company’s income tax rate is 35% and its after-tax discount
rate is 6%. The company uses straight-line depreciation. Assume cash flows occur at the
end of the year except for the initial investments. The company takes income taxes into
account in its capital budgeting.
7) Which of the following would be classified as an external failure cost on a quality
cost report?
A.Product recalls.
B.Quality engineering.
C.Quality training.
D.Systems development.
8) 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.
A proposal has been made that will lower variable expenses in Store A to 62% of sales.
However, this reduction can only be accomplished by an increase in Store A’s traceable
fixed expenses of $8,000. If this proposal is implemented and sales remain constant,
overall company net operating income should:
A.remain the same
B.decrease by $4,200
C.increase by $2,000
D.increase by $8,000
9) Which of the following would produce a labor rate variance?
A.Poor quality materials causing breakage and work interruptions.
B.Use of persons with high hourly wage rates in tasks that call for low hourly wage
rates.
C.Excessive number of hours worked in completing a job.
D.An unfavorable variable overhead rate variance.
10) Sand Company has an acid-test ratio of 0.8. Which of the following actions would
improve the acid-test ratio?
A.Collect some accounts receivable.
B.Acquire some inventory on account.
C.Sell some equipment for cash.
D.Use cash to pay off some accounts payable.
11) The balance in the Work in Process inventory account on May 1 was:
A.$0
B.$6,700
C.$4,500
D.$8,500
12) Using the high-low method of analysis, the estimated fixed cost per month for
electricity is closest to:
A) $53.46
B) $0.00
C) $3.40
D) $48.00
13) Assuming Comco uses the high-low method of analysis, if machine hours are
budgeted to be 20,000 hours then the budgeted total maintenance cost would be
expected to be:
A) $25,400
B) $25,560
C) $23,700
D) $24,720
14) Which of the following would be classified as an internal failure cost on a quality
cost report?
A.Warranty repairs and replacements.
B.Supplies used in testing and inspection.
C.Debugging software errors.
D.Final product testing and inspection.
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 activity variance for selling and administrative expenses in July would be closest
to:
A.$2 F
B.$982 U
C.$2 U
D.$982 F
16) Broxterman Corporation has provided the following information concerning a
capital budgeting project:
The company uses straight-line depreciation on all equipment.
The total cash flow net of income taxes in year 3 is:
A.$89,000
B.$56,500
C.$60,000
D.$39,000
17) Futter Corporation uses an activity-based costing system with three activity cost
pools. The company has provided the following data concerning its costs:
The distribution of resource consumption across the three activity cost pools is given
below:
How much cost, in total, would be allocated in the first-stage allocation to the
Fabricating activity cost pool?
A.$84,000
B.$300,000
C.$238,000
D.$462,000