1) If the company bases its predetermined overhead rate on the estimated amount of the
allocation base for the upcoming year, by how much was manufacturing overhead
underapplied or overapplied?
The management of Richbourg Corporation would like to investigate the possibility of
basing its predetermined overhead rate on activity at capacity. The company’s controller
has provided an example to illustrate how this new system would work. In this
example, the allocation base is machine-hours and the estimated amount of the
allocation base for the upcoming year is 63,000 machine-hours. In addition, capacity is
70,000 machine-hours and the actual level of activity for the year is 66,200
machine-hours. All of the manufacturing overhead is fixed and is $2,866,500 per year.
For simplicity, it is assumed that this is the estimated manufacturing overhead for the
year as well as the manufacturing overhead at capacity. It is further assumed that this is
also the actual amount of manufacturing overhead for the year.
A.$87,232 Underapplied
B.$27,648 Underapplied
C.$27,648 Overapplied
D.$87,232 Overapplied
2) A company that makes organic fertilizer has supplied the following data:
The company’s margin of safety in units is closest to:
A.140,000 units
B.202,238 units
C.125,714 units
D.32,105 units
3) Eickhoff Corporation’s contribution format income statement for the most recent
month follows:
Required:
a. Compute the degree of operating leverage to two decimal places.
b. Using the degree of operating leverage, estimate the percentage change in net
operating income that should result from a 1% increase in sales.
4) Valdovinos Corporation has provided the following data:
The company’s net profit margin percentage is closest to:
A.38.3%
B.3.5%
C.1.3%
D.2.0%
5) Buonocore Clinic uses client-visits as its measure of activity. During August, the
clinic budgeted for 2,800 client-visits, but its actual level of activity was 2,770
client-visits. The clinic has provided the following data concerning the formulas used in
its budgeting and its actual results for August:
Data used in budgeting:
Actual results for August:
The revenue variance for August would be closest to:
A.$4,150 F
B.$2,764 F
C.$2,764 U
D.$4,150 U
6) 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
7) Fahringer Corporation makes three products that use compound W, the current
constrained resource. Data concerning those products appear below:
Rank the products in order of their current profitability from most profitable to least
profitable. In other words, rank the products in the order in which they should be
emphasized.
A) XS,BJ,QR
B) QR,BJ,XS
C) BJ,QR,XS
D) QR,XS,BJ
8) Vanderhyde 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 3,300 tenant-days, but its actual level of activity was 3,340 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 administrative expenses in the planning budget for May would be closest to:
A.$7,792
B.$7,886
C.$8,136
D.$8,120
9) Gilpatric Corporation produces and sells two products. In the most recent month,
Product Q71M had sales of $28,000 and variable expenses of $7,840. Product V04P
had sales of $49,000 and variable expenses of $27,580. The fixed expenses of the entire
company were $34,630.
The break-even point for the entire company is closest to:
A.$70,050
B.$64,130
C.$34,630
D.$42,370
10) The Murray Corporation makes and sells a single product. The company recorded
the following activity and cost data for May:
The fixed component of the predetermined overhead rate is $0.95 per direct labor-hour.
The amount of fixed manufacturing overhead cost applied to work in process during
May was:
A.$61,725
B.$62,700
C.$42,750
D.$64,125
11) Assembling a product is an example of a:
A.Unit-level activity.
B.Batch-level activity.
C.Product-level activity.
D.Organization-sustaining.
12) Ricric Corporation has provided the following data for one of its products:
The delivery cycle time for this operation is:
A.8 days
B.17 days
C.9.3 days
D.7.7 days
13) Hettinger Hospital bases its budgets on patient-visits. The hospital’s static budget
for March appears below:
The total fixed cost at the activity level of 7,700 patient-visits per month should be:
A.$123,970
B.$187,680
C.$212,520
D.$109,480
14) The journal entry to record the allocation of any underapplied or overapplied
manufacturing overhead for November would include the following:
A.debit to Work in Process of $16,240
B.credit to Work in Process of $16,240
C.debit to Work in Process of $180
D.credit to Work in Process of $180
15) Bruley Corporation applies manufacturing overhead to products on the basis of
standard machine-hours. The company’s predetermined overhead rate for fixed
manufacturing overhead is $3.30 per machine-hour and the denominator level of
activity is 3,500 machine-hours. In the most recent month, the total actual fixed
manufacturing overhead was $11,570 and the company actually worked 3,430
machine-hours during the month. The standard hours allowed for the actual output of
the month totaled 3,450 machine-hours. What was the overall fixed manufacturing
overhead volume variance for the month?
A.$66 Favorable
B.$231 Favorable
C.$231 Unfavorable
D.$165 Unfavorable
16) The company’s average collection period (age of receivables) for Year 2 is closest
to:
A.1.1 days
B.28.2 days
C.1.0 days
D.27.9 days
17) What would be the average fixed maintenance cost per unit at an activity level of
8,600 machine-hours in a month? Assume that this level of activity is within the
relevant range.
A) $93.64
B) $67.08
C) $64.74
D) $75.15
18) ( Betterway Pharmacy has purchased a small auto for delivery of prescriptions. The
auto cost $30,000 and will be usable for five years. Delivery of prescriptions (which the
pharmacy has never done before) should increase revenues by at least $29,000 per year.
The cost of these prescriptions will be about $21,000 per year. The pharmacy
depreciates all assets by the straight-line method.
Required:
a. Compute the payback period on the new auto.
b. Compute the simple rate of return of the new auto.