1) The data given below are from the accounting records of the Kuhn Corporation:
Based on this information, the net cash provided by operating activities using the
indirect method would be:
A.$55,000
B.$58,000
C.$50,000
D.$60,000
2) ( The management of Duker Corporation is investigating purchasing equipment that
would increase sales revenues by $130,000 per year and cash operating expenses by
$39,000 per year. The equipment would cost $328,000 and have an 8 year life with no
salvage value. The simple rate of return on the investment is closest to:
A.12.5%
B.27.7%
C.38.5%
D.15.2%
Simple rate of return = Annual incremental net operating income / Initial investment
= $50,000 / $328,000 = 15.2% (rounded)
( Baldock Inc. is considering the acquisition of a new machine that costs $420,000 and
has a useful life of 5 years with no salvage value. The incremental net operating income
and incremental net cash flows that would be produced by the machine are:
3) Weidert Clinic uses the step-down method to allocate service department costs to
operating departments. The clinic has two service departments, Personnel and
Information Technology (IT), and two operating departments, Family Medicine and
Geriatric Medicine. Data concerning those departments follow:
Personnel costs are allocated first on the basis of employees and IT costs are allocated
second on the basis of PCs.
The total Geriatric Medicine Department cost after allocations is closest to:
A.$338,117
B.$338,676
C.$328,768
D.$292,616
4) The predetermined overhead rate was based on how many estimated machine-hours?
A.5,783
B.6,000
C.5,900
D.5,842
5) The Clyde Corporation’s variable expenses are 35% of sales. Clyde Corporation is
contemplating an advertising campaign that will cost $25,000. If sales increase by
$75,000, the company’s net operating income will increase by:
A.$26,250
B.$23,750
C.$1,250
D.$65,000
6) Randt Footwear Corporation’s flexible budget cost formula for supplies, a variable
cost, is $2.79 per unit of output. The company’s flexible budget performance report for
last month showed a $5,363 favorable spending variance for supplies. During that
month, 17,300 units were produced. Budgeted activity for the month had been 17,200
units. The actual cost per unit for indirect materials must have been closest to:
A.$2.48
B.$2.18
C.$2.79
D.$2.17
7) Martz Corporation manufactures a single product. The following data pertain to the
company’s operations over the last two years:
Required:
a. Determine the absorption costing net operating income for last year. Show your
work!
b. Determine the absorption costing net operating income for this year. Show your
work!
8) Stench Foods Corporation uses a standard cost system to collect costs related to the
production of its garlic flavored yogurt. The garlic (materials) standards for each
container of yogurt produced are 0.8 ounces of crushed garlic at a standard cost of
$2.30 per ounce.
During the month of June, Stench purchased 75,000 ounces of crushed garlic at a total
cost of $171,000. Stench used 64,000 of these ounces to produce 71,500 containers of
yogurt.
The direct materials purchases variance is computed when the materials are purchased.
What is Stench’s materials quantity variance for June?
A.$1,500 Favorable
B.$15,640 Unfavorable
C.$17,250 Favorable
D.$23,800 Favorable
9) Holding all other things constant, an increase in variable selling costs will affect:
A.the selling price under the absorption costing approach to cost-plus pricing.
B.the profit-maximizing price.
C.both the selling price under the absorption costing approach to cost-plus pricing and
the profit-maximizing price.
D.neither the selling price under the absorption costing approach to cost-plus pricing
nor the profit-maximizing price.
10) The inventory turnover for Year 2 is closest to:
A.1.06
B.0.94
C.4.36
D.4.24
11) A manufacturing company uses a standard costing system in which standard
machine-hours (MHs) is the measure of activity. Data from the company’s flexible
budget for manufacturing overhead are given below:
The following data pertain to operations for the most recent period:
The overhead applied to products during the period was closest to:
A.$112,850
B.$113,415
C.$116,550
D.$110,889
12) Delta Railroad has two operating divisions–Freight and Passenger. The
Maintenance Department serves both divisions. Variable Maintenance Department costs
are budgeted at $12 per thousand miles. The fixed Maintenance Department costs are
budgeted at $800,000 per year. The level of the fixed Maintenance Department costs are
determined by the peak-period requirements. Data for last year follow:
During last year, the Maintenance Department actually incurred $650,000 in variable
costs and $815,000 in fixed costs.
For performance evaluation purposes, how much of the Maintenance Department’s
actual fixed costs should be retained in that department as a spending variance?
A.$0
B.$15,000
C.$12,000
D.$18,000
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.
The cost of ending work in process inventory in the first processing department
according to the company’s cost system is closest to:
A.$26,693
B.$69,888
C.$34,944
D.$20,966
14) The best estimate of the total cost to manufacture 1,200 units is closest to:
A) $68,520
B) $100,920
C) $111,720
D) $90,120