1) The constraint at Fulena Inc. is an expensive milling machine. The three products
listed below use this constrained resource.
Required:
a. Rank the products in order of their current profitability from the most profitable to
the least profitable. In other words, rank the products in the order in which they should
be emphasized. Show your work!
b. Assume that sufficient constraint time is available 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?
2) Under variable costing, fixed manufacturing overhead is:
A.carried in a liability account.
B.carried in an asset account.
C.ignored.
D.expensed as a period cost.
3) Holt Company makes three products in a single facility. Data concerning these
products follow:
The mixing machines are potentially the constraint in the production facility. A total of
25,800 minutes are available per month on these machines.
Direct labor is a variable cost in this company.
Required:
a. How many minutes of mixing machine time would be required to satisfy demand for
all three products?
b. How much of each product should be produced to maximize net operating income?
(Round off to the nearest whole unit.)
c. Up to how much should the company be willing to pay for one additional hour of
mixing machine time if the company has made the best use of the existing mixing
machine capacity? (Round off to the nearest whole cent.)
4) The company’s current ratio is closest to:
A.0.26
B.2.65
C.0.50
D.0.53
5) Hettinger Hospital bases its budgets on patient-visits. The hospital’s static budget for
March appears below:
The total variable cost at the activity level of 7,200 patient-visits per month should be:
A.$82,800
B.$78,200
C.$109,480
D.$115,920
6) The manufacturing overhead applied was:
A.$1,900
B.$6,800
C.$12,900
D.$3,000
7) Glassey Corporation uses activity-based costing to assign overhead costs to products.
Overhead costs have already been allocated to the company’s three activity cost pools as
follows: Processing, $20,000; Supervising, $33,500; and Other, $16,500. Processing
costs are assigned to products using machine-hours (MHs) and Supervising costs are
assigned to products using the number of batches. The costs in the Other activity cost
pool are not assigned to products. Activity data appear below:
The activity rate for the Processing activity cost pool under activity-based costing is
closest to:
A.$2.50 per MH
B.$2.00 per MH
C.$7.00 per MH
D.$1.95 per MH
8) Gabbert Corporation, which has only one product, has provided the following data
concerning its most recent month of operations:
What is the total period cost for the month under the absorption costing?
A.$88,400
B.$182,000
C.$61,200
D.$93,600
9) Suggett Corporation’s net cash provided by operating activities was $34; its income
taxes were $12; its capital expenditures were $24; and its cash dividends were $7. The
company’s free cash flow was:
A.$(19)
B.$77
C.$3
D.$15
10) Jarvix Corporation, 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.$25,900
B.$2,100
C.$17,800
D.$18,500
11) Management is considering a one-time-only special order. There is sufficient idle
capacity to fill the order without affecting any normal sales. Which one of the following
is NOT relevant in making the decision?
A) absorption costing unit product costs
B) variable costs
C) incremental costs
D) differential costs
12) The company’s return on total assets for Year 2 is closest to:
A.0.99%
B.1.00%
C.1.85%
D.1.83%
13) ( Avanca Fitness Center is considering an investment in some additional weight
training equipment. The equipment has an estimated useful life of 10 years with no
salvage value at the end of the 10 years. Ataxia’s internal rate of return on this
equipment is 12%. Ataxia’s discount rate is also 12%. The payback period on this
equipment is closest to:
A.10 years
B.5 years
C.5.65 years
D.4.26 years
14) 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 per equivalent unit for conversion costs for the first department for the month
is closest to:
A.$28.89
B.$22.61
C.$27.51
D.$25.90
15) Chow Corporation manufactures children’s chairs made of PVS plastic tubing and
heavy canvas material. Each chair requires eight feet of the PVC tubing and three yards
of material. Budgeted sales are 20,000 chairs for June, 25,000 chairs for July and
30,000 chairs for August. Ending finished goods inventory is budgeted at 10% of the
current month’s sales. Ending materials inventories are budgeted at 10% of the current
month’s production.
Required:
a. Prepare a production budget for each of the months of June, July and August. Assume
the beginning inventory of chairs in June will be 2,500 units.
b. Prepare schedules showing purchase requirements for PVC tubing and for material
for each of the months of June, July and August. Assume 16,000 feet of PVC tubing and
6,000 yards of material are on hand at the beginning of June.
16) The company’s gross margin percentage for Year 2 is closest to:
A.59.6%
B.2.5%
C.37.3%
D.4076.9%
17) Lusk Corporation produces and sells 20,000 units of Product X each month. The
selling price of Product X is $30 per unit, and variable expenses are $21 per unit. A
study has been made concerning whether Product X should be discontinued. The study
shows that $50,000 of the $250,000 in fixed expenses charged to Product X would not
be avoidable even if the product was discontinued. If Product X is discontinued, the
companys overall net operating income would:
A) decrease by $70,000 per month.
B) increase by $70,000 per month.
C) increase by $20,000 per month.
D) decrease by $20,000 per month.
18) Betterton Corporation uses an activity based costing system to assign overhead
costs to products. In the first stage, two overhead costs-equipment depreciation and
supervisory expense-are allocated to three activity cost pools-Machining, Order Filling,
and Other-based on resource consumption. Data to perform these allocations appear
below:
In the second stage, Machining costs are assigned to products using machine-hours
(MHs) and Order Filling costs are assigned to products using the number of orders. The
costs in the Other activity cost pool are not assigned to products. Activity data for the
company’s two products follow:
The activity rate for the Machining activity cost pool under activity-based costing is
closest to:
A.$2.60 per MH
B.$1.23 per MH
C.$0.60 per MH
D.$1.24 per MH