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1) The net present value of overhauling the present system is closest to:
A.$(321,084)
B.$(532,516)
C.$(560,536)
D.$(592,516)
2) 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 materials price variance for April is:
A.$1,066 U
B.$1,200 U
C.$1,200 F
D.$1,066 F
3) Consider the following statements:
I. A division's net operating income, after deducting both traceable and allocated
common fixed costs, is negative.
II. The division's avoidable fixed costs exceed its contribution margin.
III. The division's traceable fixed costs plus its allocated common corporate costs
exceed its contribution margin.
Which of the above statements is a valid reason for eliminating the division?
A) Only I
B) Only II
C) Only III
D) Only I and II
4) A manufacturer of tiling grout has supplied the following data:
The company's contribution margin ratio is closest to:
A.67.7%
B.74.2%
C.32.3%
D.25.8%
5) The constraint at Johngrass Corporation is time on a particular machine. The
company makes three products that use this machine. Data concerning those products
appear below:
Assume that sufficient time is available on the constrained machine to satisfy demand
for all but the least profitable product. Up to how much should the company be willing
to pay to acquire more of the constrained resource?
A) $11.60 per minute
B) $14.10 per minute
C) $91.64 per unit
D) $22.24 per unit
6) Castle Corporation has two service departments and two operating departments. The
number of employees in each department are:
The fixed costs of the Personnel Department are allocated on the basis of the number of
employees. If these costs are budgeted at $37,125, the amount of cost allocated to the
Cafeteria under the step-down method would be:
A.$0
B.$1,718.75
C.$1,687.50
D.$1,802.18
7) The average collection period for Year 2 is closest to:
A.64.0 days
B.0.9 days
C.61.3 days
D.1.1 days
8) Moyer Corporation is a specialty component manufacturer with idle capacity.
Management would like to use its extra capacity to generate additional profits. A
potential customer has offered to buy 2,300 units of component TIB. Each unit of TIB
requires 9 units of material F58 and 7 units of material D66. Data concerning these two
materials follow:
Material F58 is in use in many of the company's products and is routinely replenished.
Material D66 is no longer used by the company in any of its normal products and
existing stocks would not be replenished once they are used up.
What would be the relevant cost of the materials, in total, for purposes of determining a
minimum acceptable price for the order for product TIB?
A.$189,290
B.$174,215
C.$168,533
D.$200,905
9) Which of the following performance measures will decrease if the minimum required
rate of return increases?
A.Option A
B.Option B
C.Option C
D.Option D
10) Kari Kennel uses tenant-days as its measure of activity; an animal housed in the
kennel for one day is counted as one tenant-day. During May, the kennel budgeted for
3,200 tenant-days, but its actual level of activity was 3,230 tenant-days. The kennel has
provided the following data concerning the formulas used in its budgeting and its actual
results for May:
Data used in budgeting:
Actual results for May:
The spending variance for food and supplies in May would be closest to:
A.$297 F
B.$540 U
C.$297 U
D.$540 F
11) 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.
In the first step of the allocation, the amount of Personnel Department cost allocated to
the Family Medicine Department is closest to:
A.$26,555
B.$56,343
C.$28,875
D.$25,788
12) The following data have been provided by Mathews Corporation:
Lubricants and supplies are both elements of variable manufacturing overhead.
The variable overhead rate variance for supplies is closest to:
A.$430 U
B.$736 F
C.$306 U
D.$736 U
13) Cartier Inc. bases its manufacturing overhead budget on budgeted direct
labor-hours. The variable overhead rate is $5.80 per direct labor-hour. The company's
budgeted fixed manufacturing overhead is $39,930 per month, which includes
depreciation of $12,870. All other fixed manufacturing overhead costs represent current
cash flows. The direct labor budget indicates that 3,300 direct labor-hours will be
required in April.
The company recomputes its predetermined overhead rate every month. The
predetermined overhead rate for April should be:
A.$14.00 per direct labor-hour
B.$5.80 per direct labor-hour
C.$17.90 per direct labor-hour
D.$12.10 per direct labor-hour
14) Daab Products is a division of a major corporation. The following data are for the
most recent year of operations:
The division's turnover used to compute ROI is closest to:
A.3.84
B.0.11
C.35.71
D.3.47
15) Wenig Inc. has some material that originally cost $73,500. The material has a scrap
value of $45,600 as is, but if reworked at a cost of $6,600, it could be sold for $58,100.
What would be the incremental effect on the company's overall profit of reworking and
selling the material rather than selling it as is as scrap?
A.decrease of $22,000
B.decrease of $67,600
C.increase of $51,500
D.increase of $5,900
16) Which of the following companies would have the highest proportion of variable
costs in its cost structure?
A) Public utility.
B) Airline.
C) Fast food outlet.
D) Architectural firm.
17) 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 fixed Maintenance Department
cost should be charged to the Freight Division at the end of the year?
A.$480,000
B.$440,000
C.$472,000
D.$50,000
18) The company's earnings per share for Year 2 is closest to:
A.$0.31 per share
B.$0.47 per share
C.$0.79 per share
D.$3.88 per share
