1) Division X makes a part that it sells to customers outside of the company. Data
concerning this part appear below:
Division Y of the same company would like to use the part manufactured by Division X
in one of its products. Division Y currently purchases a similar part made by an outside
company for $70 per unit and would substitute the part made by Division X. Division Y
requires 5,000 units of the part each period. Division X can already sell all of the units
it can produce on the outside market. What should be the lowest acceptable transfer
price from the perspective of Division X?
A.$75
B.$66
C.$16
D.$50
2) What account should Chelm debit when the president of the company has earned her
salary?
A.Direct Labor
B.Work in Process
C.Manufacturing Overhead
D.Salaries and Wages Receivable
E.Salaries and Wages Expense
3) Welti Corporation has provided the following information concerning a capital
budgeting project:
The company uses straight-line depreciation on all equipment; the annual depreciation
expense will be $30,000. 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.
The net present value of the project is closest to:
A.$140,000
B.$150,960
C.$220,155
D.$100,155
4) Division A makes a part with the following characteristics:
Division B, another division of the same company, would like to purchase 5,000 units
of the part each period from Division A. Division B is now purchasing these parts from
an outside supplier at a price of $28 each.
Suppose that Division A has ample idle capacity to handle all of Division B’s needs
without any increase in fixed costs and without cutting into sales to outside customers.
If Division A refuses to accept the $28 price internally and Division B continues to buy
from the outside supplier, the company as a whole will be:
A.worse off by $40,000 each period.
B.worse off by $20,000 each period.
C.better off by $10,000 each period.
5) The unit product cost of product U86Y under the company’s traditional costing
system is closest to:
Kebort Manufacturing Corporation has a traditional costing system in which it applies
manufacturing overhead to its products using a predetermined overhead rate based on
direct labor-hours (DLHs). The company has two products, U86Y and M91F, about
which it has provided the following data:
The company’s estimated total manufacturing overhead for the year is $2,541,760 and
the company’s estimated total direct labor-hours for the year is 47,000.
The company is considering using a variation of activity-based costing to determine its
unit product costs for external reports. Data for this proposed activity-based costing
system appear below:
A.$71.15
B.$55.50
C.$75.86
D.$38.00
6) ( Crockin Corporation is considering a machine that will save $8,000 a year in cash
operating costs each year for the next six years. At the end of six years it would have no
salvage value. If this machine costs $33,848 now, the machine’s internal rate of return is
closest to:
A.9%
B.10%
C.11%
D.12%
7) Smyer Corporation makes a product with the following standard costs:
The company reported the following results concerning this product in July.
The materials price variance is recognized when materials are purchased. Variable
overhead is applied on the basis of direct labor-hours.
Required:
a. Compute the materials quantity variance.
b. Compute the materials price variance.
c. Compute the labor efficiency variance.
d. Compute the labor rate variance.
e. Compute the variable overhead efficiency variance.
f. Compute the variable overhead rate variance.
8) Rawe Corporation’s accounts receivable at the end of Year 2 was $329,000 and its
accounts receivable at the end of Year 1 was $280,000. Sales, all on account, amounted
to $1,350,000 in Year 2. The company’s average collection period (age of receivables)
for Year 2 is closest to:
A.1.2 days
B.1.0 days
C.82.4 days
D.89.0 days
9) Seiersen Corporation’s contribution format income statement for February appears
below:
The degree of operating leverage is closest to:
A.10.98
B.0.22
C.0.09
D.4.48
10) Kosco Corporation produces a single product. The company’s absorption costing
income statement for March follows:
During March, the company’s variable production costs were $8 per unit and its fixed
manufacturing overhead totaled $5,000.
The break-even point in units for the month under variable costing would be:
A.600 units
B.900 units
C.1,017 units
D.1,525 units
11) Stenquist Corporation has provided the following data for January.
Required:
a. Compute the budget variance for January. Show your work!
b. Compute the volume variance for January. Show your work!
12) What would be the total appraisal cost appearing on the quality cost report?
A.$75,000
B.$102,000
C.$112,000
D.$92,000
13) Jiminian Clinic uses client-visits as its measure of activity. During March, the clinic
budgeted for 3,700 client-visits, but its actual level of activity was 3,660 client-visits.
The clinic has provided the following data concerning the formulas used in its
budgeting and its actual results for March:
Data used in budgeting:
Actual results for March:
The occupancy expenses in the flexible budget for March would be closest to:
A.$12,870
B.$12,491
C.$12,222
D.$12,826
14) Pujol Children’s Clinic allocates service department costs to operating departments
using the step-down method. The clinic has two service departments, Administration
and Information Technology (IT), and two operating departments, Prenatal and
Pediatric. Data concerning those departments follow:
Administration costs are allocated first on the basis of employees and IT costs are
allocated second on the basis of PCs. The total Pediatric Department cost after
allocations is closest to:
A.$370,790
B.$328,202
C.$361,823
D.$370,659