1) elgot company produces a single product. the cost of producing and selling a single
unit of this product at the company’s normal activity level of 30,000 units per month is
as follows:
the normal selling price of the product is $51.10 per unit.
an order has been received from an overseas customer for 3,000 units to be delivered
this month at a special discounted price. this order would have no effect on the
company’s normal sales and would not change the total amount of the company’s fixed
costs. the variable selling and administrative expense would be $0.50 less per unit on
this order than on normal sales.
direct labor is a variable cost in this company.
suppose the company is already operating at capacity when the special order is received
from the overseas customer. what would be the opportunity cost of each unit delivered
to the overseas customer?
a.$6.40
b.$2.20
c.$1.70
d.$18.20
2) jarmon company, which has only one product, has provided the following data
concerning its most recent month of operations:
the company produces the same number of units every month, although the sales in
units vary from month to month. the company’s variable costs per unit and total fixed
costs have been constant from month to month.
what is the net operating income for the month under variable costing?
a.$4,500
b.$10,900
c.$25,500
d.$12,800
3) the following cost data pertain to the operations of polek department stores, inc., for
the month of march.
the northridge store is just one of many stores owned and operated by the company. the
cosmetics department is one of many departments at the northridge store. the central
warehouse serves all of the company’s stores.
what is the total amount of the costs listed above that are not direct costs of the
northridge store?
a.$39,000
b.$66,000
c.$79,000
d.$147,000
4) buffo company fabricates metal folding chairs. data concerning the company’s
revenue and cost structure follow:
if buffo plans to produce and sell 3,000 units next month, the expected contribution
margin would be:
a.$30,750
b.$74,250
c.$26,750
d.$96,500
5) bob is a quality inspector on the assembly line of a manufacturing company. he is
paid $16 per hour for regular time and time and a half for all work in excess of 40 hours
per week. he is classified as a direct labor worker.
bob works 48 hours in a given week but is idle for 4 hours during the week due to
equipment breakdowns. the allocation of bob’s wages for the week between direct labor
cost and manufacturing overhead cost would be:
a.choice a
b.choice b
c.choice c
d.choice d
6) epler company’s management believes that every 3% decrease in the selling price of
one of the company’s products leads to a 8% increase in the product’s total unit sales.
the product’s price elasticity of demand as defined in the text is closest to:
a.-1.29
b.-2.87
c.-3.83
d.-2.53
7) the miller company paid off some of its accounts payable using cash. the company’s
current ratio is greater than 1. the company’s current ratio would:
a.increase
b.decrease
c.remain unchanged
d.impossible to determine from the information given
8) a partial listing of costs incurred at peggs corporation during september appears
below:
the total of the period costs listed above for september is:
a.$389,000
b.$318,000
c.$71,000
d.$351,000
9) the following standards for variable overhead have been established for a company
that makes only one product:
the following data pertain to operations for the last month:
what is the variable overhead efficiency variance for the month?
a.$30,561 u
b.$31,146 u
c.$28,136 u
d.$2,426 u
10) look 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, n06d and m09k, about which it
has provided the following data:
the company’s estimated total manufacturing overhead for the year is $2,532,200 and
the company’s estimated total direct labor-hours for the year is 44,000.
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:
the manufacturing overhead that would be applied to a unit of product n06d under the
company’s traditional costing system is closest to:
a.$28.78
b.$10.00
c.$63.31
d.$34.53
11) montgomery corporation’s most recent income statement appears below:
the beginning balance of total assets was $720,000 and the ending balance was
$730,000. the return on total assets is closest to:
a.17.4%
b.21.2%
c.24.8%
d.30.3%
12) dantuono corporation manufactures and sells a single product. the company uses
units as the measure of activity in its budgets and performance reports. during
november, the company budgeted for 7,700 units, but its actual level of activity was
7,720 units. the company has provided the following data concerning the formulas used
in its budgeting and its actual results for november:
the net operating income in the planning budget for november would be closest to:
a.$35,093
b.$29,340
c.$35,275
d.$29,604
13) (ignore income taxes in this problem.) finlay corporation is investigating
automating a process by purchasing a machine for $225,000 that would have a 9 year
useful life and no salvage value. by automating the process, the company would save
$54,000 per year in cash operating costs. the new machine would replace some old
equipment that would be sold for scrap now, yielding $24,000. the annual depreciation
on the new machine would be $25,000. the simple rate of return on the investment is
closest to:
a.24.0%
b.12.9%
c.11.1%
d.14.5%
14) the january contribution format income statement of steffel corporation appears
below:
the degree of operating leverage is closest to:
a.0.09
b.11.34
c.4.13
d.0.24
15) fontana corporation’s two products have the following characteristics:
the constrained resource is a particular machine that is available for 9,800 minutes each
month. each unit of product s83e requires 16 minutes on this machine and each unit of
product g29p requires 5 minutes on this machine.
how many units of product s83e should be produced each month?
a.923
b.0
c.460
d.150
16) mah clinic uses client-visits as its measure of activity. during april, the clinic
budgeted for 3,800 client-visits, but its actual level of activity was 3,750 client-visits.
the clinic has provided the following data concerning the formulas to be used in its
budgeting:
the occupancy expenses in the flexible budget for april would be closest to:
a.$15,575
b.$15,660
c.$14,975
d.$15,377
17) the net present value method assumes that the project’s cash flows are reinvested at
the:
a.internal rate of return
b.the simple rate of return
c.the discount rate used in the net present value calculation
d.the payback rate of return
18) abis corporation uses the weighted-average method in its process costing system.
this month, the beginning inventory in the first processing department consisted of 800
units. the costs and percentage completion of these units in beginning inventory were:
a total of 9,200 units were started and 8,200 units were transferred to the second
processing department during the month. the following costs were incurred in the first
processing department during the month:
the ending inventory was 80% complete with respect to materials and 20% complete
with respect to conversion costs.
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 conversion costs for the month in the first processing
department?
a.10,000
b.360
c.8,200
d.8,560