1) If a company operates at the break even point for each of its segments, it will lose
money overall if common fixed expenses exist.
2) Fixed costs may or may not be sunk costs.
3) The budgeted selling and administrative expense is calculated by multiplying the
budgeted unit sales by the selling and administrative expense per unit.
4) Most of the opportunities to reduce the cost of a product come from designing the
product so that it is simple to make, uses inexpensive parts, and is robust and reliable.
5) If a company’s operating cycle is much longer than its average payment period for
suppliers, it creates the need to borrow money to fund its inventories and accounts
receivable.
6) The fixed costs of service departments should be allocated to operating departments
in predetermined lump-sum amounts that are determined in advance.
7) Spomer Corporation’s inventory at the end of Year 2 was $114,000 and its inventory
at the end of Year 1 was $120,000. Cost of goods sold amounted to $710,000 in Year 2.
The company’s inventory turnover for Year 2 is closest to:
A.5.92
B.1.05
C.6.07
D.6.23
8) The company’s net cash used in investing activities is:
A.$20,000
B.$5,000
C.$45,000
D.$22,000
9) Weightman Corporation’s net operating income in Year 2 was $76,385, net income
before taxes was $55,385, and the net income was $36,000. Total common stock was
$200,000 at the end of both Year 2 and Year 1. The par value of common stock is $4 per
share. The company’s total stockholders’ equity at the end of Year 2 amounted to
$983,000 and at the end of Year 1 to $950,000. The market price per share at the end of
Year 2 was $7.92. The company’s price-earnings ratio for Year 2 is closest to:
A.7.14
B.0.58
C.5.18
D.11.00
10) Epley Corporation makes a product with the following standard costs:
In July the company produced 3,300 units using 12,240 pounds of the direct material
and 2,760 direct labor-hours. During the month, the company purchased 13,000 pounds
of the direct material at a cost of $35,100. The actual direct labor cost was $51,612 and
the actual variable overhead cost was $20,148.
The company applies variable overhead on the basis of direct labor-hours. The direct
materials purchases variance is computed when the materials are purchased.
The materials quantity variance for July is:
A.$2,070 F
B.$2,070 U
C.$1,863 F
D.$1,863 U
11) BieryCorporation makes a product with the following standard costs:
The company produced 4,100 units in April using 5,380 liters of direct material and
2,610 direct labor-hours. During the month, the company purchased 6,000 liters of the
direct material at $5.80 per liter. The actual direct labor rate was $19.80 per hour and
the actual variable overhead rate was $2.90 per hour.
The company applies variable overhead on the basis of direct labor-hours. The direct
materials purchases variance is computed when the materials are purchased.
The variable overhead efficiency variance for April is:
A.$435 F
B.$435 U
C.$450 U
D.$450 F
12) Bartelt Inc., which produces a single product, has provided the following data for its
most recent month of operations:
There were no beginning or ending inventories. The absorption costing unit product
cost was:
A.$125 per unit
B.$246 per unit
C.$117 per unit
D.$183 per unit
13) Hache 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.750
B.5,900
C.4,400
D.5,150
14) The operations of Kalispell Company resulted in overapplied manufacturing
overhead for the month just completed. Which of the following journal entries can be
correct if Kalispell allocates underapplied or overapplied manufacturing overhead
among the Work in Process, Finished Goods, and Cost of Goods Sold?
A.Option A
B.Option B
C.Option C
D.Option D
15) Criblez Corporation has two divisions: Blue Division and Gold Division. The
following report is for the most recent operating period:
What is the company’s overall net operating income if it operates at the break-even
points for its two divisions?
A.$0
B.$(245,960)
C.$(68,960)
D.$30,230
16) A company produces a single product. Variable production costs are $12 per unit
and variable selling and administrative expenses are $3 per unit. Fixed manufacturing
overhead totals $36,000 and fixed selling and administration expenses total $40,000.
Assuming a beginning inventory of zero, production of 4,000 units and sales of 3,600
units, the dollar value of the ending inventory under variable costing would be:
A.$4,800
B.$8,400
C.$6,000
D.$3,600
17) What is the maximum contribution margin the company can earn per month?
A.$19,788
B.$18,770
C.$28,950
D.$19,249
18) Rogers Corporation is preparing its cash budget for July. The budgeted beginning
cash balance is $25,000. Budgeted cash receipts total $141,000 and budgeted cash
disbursements total $139,000. The desired ending cash balance is $30,000.
The excess (deficiency) of cash available over disbursements for July is:
A.$23,000
B.$2,000
C.$166,000
D.$27,000
19) Mcindoe Clinic bases its budgets on the activity measure patient-visits. During
May, the clinic planned for an activity level of 3,200 patient-visits, but the activity level
was actually 3,600 patient-visits. The clinic has provided the following data concerning
the formulas it uses in its budgeting:
Required:
Prepare the clinic’s flexible budget for May based on the actual level of activity for the
month.
20) Mihok Corporation has provided the following financial data:
Dividends on common stock during Year 2 totaled $5,000. The market price of common
stock at the end of Year 2 was $0.97 per share.
21) The Casket Division of Landazuri Corporation had average operating assets of
$620,000 and net operating income of $86,000 in February. The company uses residual
income to evaluate the performance of its divisions, with a minimum required rate of
return of 14%.
Required:
What was the Casket Division’s residual income in February?
22) During October, Haubold Corporation budgeted for 30,000 customers, but actually
served 29,000 customers. Revenue should be $3.80 per customer served. Wages and
salaries should be $31,200 per month plus $1.40 per customer served. Supplies should
be $0.70 per customer served. Insurance should be $8,500 per month. Miscellaneous
expenses should be $3,700 per month plus $0.10 per customer served.
Required:
Prepare the company’s flexible budget for October based on the actual level of activity
for the month.
23) Benjamin Signal Company produces products R, J, and C from a joint production
process. Each product may be sold at the split-off point or be processed further. Joint
production costs of $92,000 per year are allocated to the products based on the relative
number of units produced. Data for Benjamin’s operations for the current year are as
follows:
Product R can be processed beyond the split-off point for an additional cost of $26,000
and can then be sold for $105,000. Product J can be processed beyond the split-off point
for an additional cost of $38,000 and can then be sold for $117,000. Product C can be
processed beyond the split-off point for an additional cost of $12,000 and can then be
sold for $57,000.
Required:
Which products should be processed beyond the split-off point?
24) Hirz Corporation produces and sells a single product. Data concerning that product
appear below:
Required:
Determine the monthly break-even in either unit or total dollar sales. Show your work!
25) The management of Featherston, Inc., is considering a new product that would have
a selling price of $77 per unit and projected sales of 50,000 units. The new product
would require an investment of $100,000. The desired return on investment is 20%.
Required:
Determine the target cost per unit for the new product.
26) Lafollette Inc. uses the weighted-average method in its process costing. The
following data concern the company’s Assembly Department for the month of
November.
Required:
Compute the costs per equivalent unit for the Assembly Department for November.