1) Which of the following would be classified as an appraisal cost on a quality cost
report?
A.Quality circles.
B.Downtime caused by quality problems.
C.Supplies used in testing and inspection.
D.Quality engineering.
2) 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.
December cash disbursements for merchandise purchases would be:
A.$141,700
B.$149,500
C.$157,300
D.$81,900
3) Nova Corporation produces a single product and uses a standard cost system to help
control costs. Overhead is applied to production on the basis of standard
machine-hours. According to the company’s flexible budget, the following overhead
costs should be incurred at an activity level of 18,000 machine-hours (the denominator
activity level chosen for the current year):
During the current year, the following operating results were recorded:
At the end of the year, the company’s Manufacturing Overhead account showed total
debits for actual overhead costs of $145,100 and total credits of $136,000 for overhead
applied. The difference $(9,100) represents under-applied overhead, the cause of which
management would like to know.
Required:
a. Compute the predetermined overhead rate that would have been used during the year,
showing separately the variable and fixed components of the rate.
b. Show how the $136,000 of overhead actually applied was computed.
c. Analyze the $9,100 under-applied overhead figure in terms of the variable overhead
rate and efficiency variances and the fixed manufacturing overhead budget and volume
variances.
4) Hallford Clinic has two service departments, Administrative and Support, and two
operating departments, Adult Medicine and Pediatrics.
The clinic uses the direct method to allocate service department costs to operating
departments. Administrative Department costs are allocated on the basis of employee
hours and Support Department costs are allocated on the basis of space occupied in
square feet.
The total Pediatrics Department cost after the allocations of service department costs is
closest to:
A.$521,388
B.$519,234
C.$509,100
D.$521,700
5) Ignoring any salvage value, to the nearest whole dollar how large would the
additional cash flow per year from the intangible benefits have to be to make the
investment in the automated equipment financially attractive?
A.$32,370
B.$15,999
C.$127,991
D.$24,318
6) Cutsinger Corporation has provided the following data from its most recent income
statement:
The times interest earned ratio is closest to:
A.1.83
B.0.28
C.1.28
D.0.19
7) Nicklin Corporation is considering two alternatives that are code-named M and N.
Costs associated with the alternatives are listed below:
Required:
a. Which costs are relevant and which are not relevant in the choice between these two
alternatives?
b. What is the differential cost between the two alternatives?
8) Fabio Corporation is considering eliminating a department that has a contribution
margin of $30,000 and $60,000 in fixed costs. Of the fixed costs, $15,000 cannot be
avoided. The effect of eliminating this department on Fabio’s overall net operating
income would be:
A) a decrease of $30,000.
B) an increase of $30,000.
C) a decrease of $15,000.
D) an increase of $15,000.
9) According to the company’s accounting system, what is the net operating income
earned by product V41B? Include all costs in this calculationwhether relevant or not.
A) $71,000
B) $516,000
C) $(516,000)
D) $(71,000)
10) Bowen Corporation is considering several investment proposals, as shown below:
If the project profitability index is used, the ranking of the projects from most to least
profitable would be:
A.D, C, A, B
B.D, B, A, C
C.B, A, C, D
D.D, A, B, C
11) Lantagne Clinic uses client-visits as its measure of activity. During May, the clinic
budgeted for 3,800 client-visits, but its actual level of activity was 3,820 client-visits.
The clinic 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 net operating income in the planning budget for May would be closest to:
A.$16,844
B.$17,040
C.$17,426
D.$16,668
12) The following events occurred last year for the Cart Corporation:
Based solely on the above information, the net cash provided by financing activities for
the year on the statement of cash flows was:
A.$12,000
B.$24,000
C.$20,000
D.$49,000