1) Using the high-low method, the estimate of the variable component of electrical cost
per machine-hour is closest to:
A) $0.12
B) $20.38
C) $7.98
D) $3.97
2) Weston Corporation is considering eliminating a department that has a contribution
margin of $70,000 and $140,000 in fixed costs. Of the fixed costs, $100,000 cannot be
avoided. The effect of eliminating this department on Weston’s overall net operating
income would be:
A.an increase of $70,000.
B.a decrease of $70,000.
C.an increase of $30,000.
D.a decrease of $30,000.
3) 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 activity variance for personnel expenses in August would be closest to:
A.$468 F
B.$468 U
C.$1,248 F
D.$1,248 U
4) Dilbert Farm Supply is located in a small town in the rural west. Data regarding the
store’s operations follow:
Sales are budgeted at $260,000 for November, $230,000 for December, and $210,000
for January.
Collections are expected to be 80% in the month of sale, 19% in the month following
the sale, and 1% uncollectible.
The cost of goods sold is 65% of sales.
The company desires to have an ending merchandise inventory at the end of each
month equal to 60% of the next month’s cost of goods sold. Payment for merchandise is
made in the month following the purchase.
Other monthly expenses to be paid in cash are $20,300.
Monthly depreciation is $20,000.
Ignore taxes.
Retained earnings at the end of December would be:
A.$380,400
B.$418,300
C.$471,300
D.$466,400
5) Last year Lawn Corporation reported sales of $115,000 on its income statement.
During the year, accounts receivable decreased by $10,000 and accounts payable
increased by $15,000. The company uses the direct method to determine the net cash
provided by operating activities on the statement of cash flows. The sales revenue
adjusted to a cash basis for the year would be:
A.$125,000
B.$90,000
C.$140,000
D.$100,000
6) Flyer Corporation manufactures two products, Product A and Product B. Product B is
of fairly recent origin, having been developed as an attempt to enter a market closely
related to that of Product A. Product B is the more complex of the two products,
requiring three hours of direct labor time per unit to manufacture compared to one and
one-half hours of direct labor time for Product A. Product B is produced on an
automated production line.
Overhead is currently assigned to the products on the basis of direct-labor-hours. The
company estimated it would incur $396,000 in manufacturing overhead costs and
produce 5,500 units of Product B and 22,000 units of Product A during the current year.
Unit costs for materials and direct labor are:
Required:
a. Compute the predetermined overhead rate under the current method of allocation and
determine the unit product cost of each product for the current year.
b. The company’s overhead costs can be attributed to four major activities. These
activities and the amount of overhead cost attributable to each for the current year are
given below:
Using the data above and an activity-based costing approach, determine the unit product
cost of each product for the current year.
7) Blaster, Inc., manufactures portable radios. Each radio requires 3 units of Part
XBEZ52, which has a standard cost of $1.45 per unit. During May, the company
purchased 12,000 units of the part for a total of $18,000. Also during May, the company
manufactured 3,000 radios, using 10,000 units of part XBEZ The direct materials
purchases variance is computed when the materials are purchased.
During May, the materials quantity variance for part XBEZ52 was:
A.$1,450 U
B.$1,450 F
C.$4,350 F
D.$4,350 U
8) Ignoring the cash inflows, to the nearest whole dollar how large would the salvage
value of the equipment have to be to make the investment in the equipment financially
attractive?
A.$379,100
B.$2,354,210
C.$23,542
D.$235,421
9) The applied manufacturing overhead for the year is closest to:
A.$136,269
B.$138,348
C.$136,987
D.$137,630
10) Pardoe, Inc., manufactures a single product in which variable manufacturing
overhead is assigned on the basis of standard direct labor-hours. The company uses a
standard cost system and has established the following standards for one unit of
product:
During March, the following activity was recorded by the company:
The company produced 3,000 units during the month.
A total of 8,000 pounds of material were purchased at a cost of $23,000.
There was no beginning inventory of materials on hand to start the month; at the end of
the month, 2,000 pounds of material remained in the warehouse.
During March, 1,600 direct labor-hours were worked at a rate of $6.50 per hour.
Variable manufacturing overhead costs during March totaled $1,800.
The direct materials purchases variance is computed when the materials are purchased.
The variable overhead rate variance for March is:
A.$200 U
B.$600 U
C.$600 F
D.$200 F