1) Solve the following two cases (the cases are independent).
a.If you invest $5,000 today at 10% interest, what is the value of the investment at the
end of 5 years?
b.If you invest $1,200 at the end of each of the next 5 years and the investment earns
10% interest, what is the value of the investment at the end of 5 years?
2) Which product costing system would be better for custom-order products?
A) Product costing system
B) Company costing system
C) Job costing system
D) Overhead costing system
3) Use the following information to do a horizontal analysis of Marcus Corporation’s
income statement for the current year and prior year
What is the percentage change in cost of goods sold?
A) -22.00%
B) 27.00%
C) 127.00%
D) 33.59%
4) Jackson Industries has collected the following data for one of its products:
How much is the direct materials price variance?
A) $1,750 favorable
B) $1,750 unfavorable
C) $1,900 favorable
D) $1,900 unfavorable
5) The cost of direct materials used in production is debited to
A) either manufacturing overhead or work in process inventory
B) finished goods inventory
C) work in process inventory
D) manufacturing overhead
6) If a company were to increase its appraisal costs by inspecting more units as the units
are completed, the company’s external failure costs would most likely
A) decrease
B) increase
C) remain the same
D) Unable to predict
7) A tennis ball maker gives us its data for the year:
Units in ending WIP inventory were 90% complete for materials and 60% complete for
conversion costs.
On December 31, the total costs of units complete and transferred would be closest to
A) $7,569
B) $29,325
C) $14,361
D) $19,320
8) O’Mally Department Stores is considering two possible expansion plans. One
proposal involves opening 5 stores in Indiana at the cost of $1,920,000. Under the other
proposal, the company would focus on Kentucky and open 6 stores at a cost of
$2,500,000. The following information is available:
The accounting rate of return for the Indiana proposal is closest to
A) 10.32%
B) 11.09%
C) 20.83%
D) 10.83%
9) Capital Manufacturing designs and manufactures bathtubs for home and commercial
applications. Capital recorded the following data for its commercial bathtub production
line during the month of March:
What is the variable manufacturing overhead rate variance for March?
A) $1,625 unfavorable
B) $325 unfavorable
C) $1,625 favorable
D) $325 favorable
10) (Present value tables are needed.) The Janus Vending Machine Company is looking
to expand its business by adding a new line of vending machines. The management
team is considering expanding into either soda machines or snack machines. Following
is the relevant financial data relating to the decision:
What is the net present value for the snack machines?
A) $(65,220)
B) $104,920
C) $54,920
D) $86,920
11) Before the year began, Coia Manufacturing estimated that manufacturing overhead
for the year would be $200,000 and that 25,000 direct labor hours would be worked.
Actual results for the year included the following:
If the company allocates manufacturing overhead based on direct labor hours, the
manufacturing overhead for the year would have been
A) $18,000 overallocated
B) $22,000 underallocated
C) $22,000 overallocated
D) $18,000 underallocated
12) Serenity Now Industries manufactures custom fiberglass hulls for luxury yachts and
pleasure boats. The current cost accounting system uses machine hours to allocate
manufacturing overhead to each job. Serenity estimates that in the coming year it will
incur $600,000 in manufacturing overhead costs and use 8,000 machine hours.
Depending on the specifications requested by the customer, the hull may use hazardous
chemicals that incur greater disposal costs. Serenity’s traditional accounting system
includes the cost of hazardous waste disposal in with total manufacturing overhead.
Serenity is planning to implement an activity based costing system to more accurately
assign hazardous waste disposal costs to each job.
Expected usage and costs for manufacturing overhead are as follows:
During the year, Yacht #633 was started and completed:
Requirements:
a.Calculate the cost of Yacht #633 using the Serenity’s current method of allocating
manufacturing overhead.
b.Calculate the cost of Yacht #633 using the proposed activity based costing system.
How is this information useful to an environmental management accounting (EMA)
system?
13) Boots Plus has two product lines: Hiking boots and Fashion boots. Income
statement data for the most recent year follow:
Assuming the Fashion line is discontinued, total fixed costs remain unchanged, and the
space formerly used to produce the line is rented for $30,000 per year, how will
operating income be affected?
A) Decrease $10,000
B) Increase $59,000
C) Increase $10,000
D) Increase $162,000
14) At the beginning of the year, Patio Living Corporation has 550 planters in
inventory. The company plans to sell 5,200 planters during the year and wants to have
1,200 planters in inventory at the end of the year. How many planters must Patio Living
Corporation produce during the year?
A) 5,850
B) 6,400
C) 3,450
D) 6,950
15) A company’s inventory account increased $26,500 and its accounts payable account
decreased $18,250 during the year. The accounts payable relates only to the acquisition
of inventory. Sales were $789,500 and cost of goods sold was $532,700. What was the
amount of payments to suppliers of inventory?
A) $550,950
B) $577,450
C) $540,950
D) $834,250
16) Lucky Cow Dairy provided the following expense information for May:
What is the total cost for the distribution category of the value chain?
A) $217,000
B) $23,000
C) $20,000
D) $151,000
17) The ________ from the balanced scorecard focuses on determining if customers are
satisfied.
A) internal business perspective
B) learning and growth perspective
C) customer perspective
D) financial perspective
18) High Rise Display Company manufactures display cases to be sold to retail stores.
The cases come in three sizes: Large, Medium, and Small. Currently, High Rise Display
Company uses a single plant-wide overhead rate to allocate its $3,357,800 of annual
manufacturing overhead. Of this amount, $820,000 is associated with the Large Case
line, $1,276,800 is associated with the Medium Case line, and $1,261,000 is associated
with the Small Case line. Clearview Display Company is currently running a total of
33,000 machine hours: 10,000 in the Large Case line, 13,300 in the Medium Case line,
and 9,700 in the Small Case line. High Rise Display Company uses machine hours as
the cost driver for manufacturing overhead costs.
Required:
a. Calculate the plant-wide manufacturing overhead rate.
b. Calculate the departmental overhead rate for each of the three departments listed.
c. Which product line(s) have been overcosted by using the plant-wide manufacturing
overhead rate? By how much per machine hour? Which product line(s) have been
undercosted by using the plant-wide manufacturing overhead rate? By how much per
machine hour?
19) What is the primary factor causing a “cost” called?
A) Cost driver
B) Cost allocation
C) Materials requisition
D) Predetermined manufacturing overhead rate
20) Country Furniture Company manufactures furniture at its Akron, Ohio, factory.
Some of its costs from the past year include:
Direct labor costs for Country Furniture Company totaled
A) $344,000
B) $115,000
C) $155,500
D) $321,000
21) Tall Timbers reports the following data for its first year of operation.
What are the total manufacturing costs?
A) $47,000
B) $135,000
C) $85,000
D) $117,000
22) Which of the following is a result of cost distortion?
A) Overcosting of all products
B) Undercosting of all products
C) Accurate costing of all products
D) Overcosting of some products and undercosting of other products
23) ________ is the business philosophy and a strategy of manufacturing without
waste.
A) ISO 9001
B) Lean thinking
C) TQM
D) Thin manufacturing
24) During the current period, 14,000 units were produced and 12,000 units were sold.
Fixed manufacturing costs incurred amounted to $126,000. An absorption costing
income statement would report fixed manufacturing costs as which of the following?
A) Costs of $108,000 as a deduction from gross profit to obtain operating income
B) Overhead of $126,000 as a deduction from sales revenue to obtain gross profit
C) Overhead of $108,000 as a deduction from sales revenue to obtain gross profit
D) Costs of $126,000 as a deduction from sales revenue to obtain contribution margin
25) Dairy Days Ice Cream sells ice cream cones for $4 per customer. Variable costs are
$3 per cone. Fixed costs are $2,500 per month. What is Dairy Days’ contribution margin
per ice cream cone?
A) $1.00
B) $3.00
C) $0.25
D) $4.00
26) Which of the following activities are included in the investing activities section of
the statement of cash flows?
A) Activities that obtain the cash needed to launch and sustain the business
B) Activities that increase or decrease long-term assets
C) Activities that create revenue or expenses in the entity’s major line of business
D) None of the above
27) When the extra revenue from processing further is less than the extra cost of
processing further, the best decision would be to
A) process further
B) develop a new product
C) not process further
D) start over
28) Where are noncash investing and financing activities reported?
A) The financing activities section of the statement of cash flows
B) A schedule accompanying the statement of cash flows
C) The investing activities section of the statement of cash flows
D) In both A and B