1) data concerning sotero corporation’s single product appear below:
the company is currently selling 5,000 units per month. fixed expenses are $319,000 per
month. consider each of the following questions independently.
this question is to be considered independently of all other questions relating to sotero
corporation. refer to the original data when answering this question.
the marketing manager believes that a $12,000 increase in the monthly advertising
budget would result in a 180 unit increase in monthly sales. what should be the overall
effect on the company’s monthly net operating income of this change?
a.decrease of $3,120
b.increase of $3,120
c.decrease of $12,000
d.increase of $15,120
2) community general hospital has a food services department that provides meals for
all patients in the hospital. budgeted and actual meals served for the month just ended
are:
the budgeted variable cost of meals for the month just ended was $100,000; the actual
variable cost of meals for the month was $130,000.
how much fixed maintenance cost should be charged to the assembly department at the
end of the year for purposes of measuring performance?
a.$160,000
b.$176,000
c.$173,500
d.$147,800
3) decentralization refers to:
a.reporting for the company as a whole
b.focusing reporting on parts of the company
c.the delegation of decision-making authority throughout an organization
d.differences in organizations
4) data from gofman corporation’s most recent balance sheet appear below:
sales on account in year 2 amounted to $1,300 and the cost of goods sold was $900.
the average sale period for year 2 is closest to:
a.97.3 days
b.89.2 days
c.67.4 days
d.252.7 days
5) the contribution margin ratio of scoggins corporation’s only product is 69%. the
company’s monthly fixed expense is $364,320 and the company’s monthly target profit
is $14,000. the dollar sales to attain that target profit is closest to:
a.$261,041
b.$251,381
c.$548,290
d.$528,000
6) murdough corporation’s standard wage rate is $10.80 per direct labor-hour (dlh) and
according to the standards, each unit of output requires 2.0 dlhs. in february, 1,800 units
were produced, the actual wage rate was $9.80 per dlh, and the actual hours were 3,990
dlhs. the labor efficiency variance for february would be recorded as a:
a.debit of $4,212
b.credit of $4,212
c.debit of $3,822
d.credit of $3,822
7) financial statements for nardella company appear below:
nardella company’s debt-to-equity ratio at the end of year 2 was closest to:
a.0.31
b.0.23
c.0.70
d.0.54
8) henkel clinic uses client-visits as its measure of activity. during november, the clinic
budgeted for 3,600 client-visits, but its actual level of activity was 3,550 client-visits.
the clinic has provided the following data concerning the formulas used in its budgeting
and its actual results for november:
the spending variance for occupancy expenses in november would be closest to:
a.$775 u
b.$700 f
c.$775 f
d.$700 u
9) financial statements of farnham corporation follow:
cash dividends were $3.
the net cash provided by (used by) investing activities for the year was:
a.($32)
b.$32
c.($26)
d.$26
10) elizarraras air uses two measures of activity, flights and passengers, in the cost
formulas in its budgets and performance reports. the cost formula for plane operating
costs is $39,820 per month plus $2,938 per flight plus $8 per passenger. the company
expected its activity in june to be 64 flights and 229 passengers, but the actual activity
was 66 flights and 225 passengers. the actual cost for plane operating costs in june was
$234,570. the plane operating costs in the planning budget for june would be closest to:
a.$229,684
b.$227,462
c.$234,570
d.$235,528
11) superior industries’ sales budget shows quarterly sales for the next year as follows:
company policy is to have a finished goods inventory at the end of each quarter equal to
20% of the next quarter’s sales. budgeted production for the second quarter should be:
a.7,200 units
b.8,000 units
c.8,800 units
d.8,400 units
12) the management of crapser 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 58,000 machine-hours. in addition, capacity is 67,000
machine-hours and the actual level of activity for the year is 59,000 machine-hours. all
of the manufacturing overhead is fixed and is $2,098,440 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.
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?
a.$36,180 overapplied
b.$250,560 overapplied
c.$36,180 underapplied
d.$250,560 underapplied
13) swader 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 march, the kennel budgeted for
2,900 tenant-days, but its actual level of activity was 2,930 tenant-days. the kennel has
provided the following data concerning the formulas used in its budgeting and its actual
results for march:
the net operating income in the flexible budget for march would be closest to:
a.$12,522
b.$12,267
c.$9,414
d.$9,120
14) fagin company’s quality cost report is to be based on the following data:
what would be the total external failure cost appearing on the quality cost report?
a.$113,000
b.$263,000
c.$102,000
d.$479,000
15) in october, haldeman corporation, a manufacturing company, reported the following
financial data:
the company had no beginning or ending inventories.
the contribution margin for october was:
a.$5,000
b.$183,000
c.$264,000
d.$282,000
16) gallager company, 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 approach?
a.$59,400
b.$112,200
c.$343,400
d.$231,200
17) coble company recently changed the selling price of one of its products. data
concerning sales for comparable periods before and after the price change are presented
below.
the product’s variable cost is $15.70 per unit.
the product’s profit-maximizing price according to the formula in the text is closest to:
a.$46.48
b.$30.12
c.$49.21
d.$84.37
18) carner lumber sells lumber and general building supplies to building contractors in a
medium-sized town in montana. data regarding the store’s operations follow:
sales are budgeted at $370,000 for november, $360,000 for december, and $340,000 for
january.
collections are expected to be 85% in the month of sale, 13% in the month following
the sale, and 2% uncollectible.
the cost of goods sold is 70% of sales.
the company purchases 30% of its merchandise in the month prior to the month of sale
and 70% in the month of sale. payment for merchandise is made in the month following
the purchase.
other monthly expenses to be paid in cash are $24,600.
monthly depreciation is $17,000.
ignore taxes.
accounts payable at the end of december would be:
a.$176,400
b.$252,000
c.$247,800
d.$71,400
19) dewey company uses the weighted-average method in its process costing system.
the first processing department, the welding department, started the month with 15,000
units in its beginning work in process inventory that were 20% complete with respect to
conversion costs. the conversion cost in this beginning work in process inventory was
$19,200. an additional 86,000 units were started into production during the month. there
were 13,000 units in the ending work in process inventory of the welding department
that were 60% complete with respect to conversion costs. a total of $575,360 in
conversion costs were incurred in the department during the month.
the cost per equivalent unit for conversion costs is closest to:
a.$5.812
b.$6.206
c.$6.400
d.$6.690
20) demeester corporation’s two products have the following characteristics:
the constrained resource is a particular machine that is available for 9,900 minutes each
month. each unit of product y56g requires 10 minutes on this machine and each unit of
product k46x requires 3 minutes on this machine.
the company is considering launching a new product that would have a variable cost of
$79.00 per unit. it would require 14 minutes of the constrained resource. the absolute
minimum acceptable selling price for the new product should be:
a.$79.00
b.$118.20
c.$80.80
d.$104.20
21) a direct labor worker at vorwald corporation is paid $14 per hour for regular time
and time and a half for all work in excess of 40 hours per week. the company’s fringe
benefits cost $6 for each hour of employee time (both regular and overtime). last week
this employee worked 43 hours but was idle for 4 hours due to material shortages. the
company treats all fringe benefits relating to direct labor as added direct labor cost and
the remainder as part of manufacturing overhead.
required:
determine how much of the worker’s wages for the week would be classified as direct
labor cost and how much would be classified as manufacturing overhead cost. show
your work.
22) a direct labor worker at langill corporation is paid $16 per hour for regular time and
time and a half for all work in excess of 40 hours per week. this employee works 49
hours in a given week but is idle for 4 hours during the week due to equipment
breakdowns.
required:
determine how much of the worker’s wages for the week would be classified as direct
labor cost and how much would be classified as manufacturing overhead cost. show
your work.
23) mashore jeep tours operates jeep tours in the heart of the colorado rockies. the
company bases its budgets on two measures of activity (i.e., cost drivers), namely
guests and jeeps. one vehicle used in one tour on one day counts as a jeep. each jeep has
one tour guide. the company uses the following data in its budgeting:
in april, the company budgeted for 495 guests and 187 jeeps. the company’s income
statement showing the actual results for the month appears below:
required:
prepare a report showing the company’s activity variances for april. label each variance
as favorable (f) or unfavorable (u).
24) boor international, inc., produces and sells a single product. the product sells for
$110.00 per unit and its variable expense is $37.40 per unit. the company’s monthly
fixed expense is $188,034.
required:
determine the monthly break-even in total dollar sales. show your work!
25) a direct labor worker at santana corporation is paid $22 per hour for regular time
and time and a half for all work in excess of 40 hours per week. the company’s fringe
benefits cost $6 for each hour of employee time (both regular and overtime). last week
this employee worked 43 hours but was idle for 4 hours due to material shortages. the
company treats all fringe benefits as part of manufacturing overhead.
required:
determine how much of the worker’s wages for the week would be classified as direct
labor cost and how much would be classified as manufacturing overhead cost. show
your work.
26) forth corporation has two major business segments-retail and wholesale. in march,
the retail business segment had sales revenues of $500,000, variable expenses of
$245,000, and traceable fixed expenses of $90,000. during the same month, the
wholesale business segment had sales revenues of $240,000, variable expenses of
$101,000, and traceable fixed expenses of $38,000. common fixed expenses totaled
$152,000 and were allocated as follows: $79,000 to the retail business segment and
$73,000 to the wholesale business segment.
required:
prepare a segmented income statement in the contribution format for the company. omit
percentages; show only dollar amounts.
27) the direct labor standards at lounsbury corporation are $12.50 per direct labor-hour
(dlh) and 6.1 dlhs per unit of output. in november, 4,700 units were produced, the actual
wage rate was $12.50 per dlh, and the actual hours were 29,570 dlhs.
required:
prepare the journal entry to record the incurrence of direct labor costs.
28) guy corporation uses customers served as its measure of activity. during january, the
company budgeted for 32,000 customers, but actually served 35,000 customers. the
company uses the following revenue and cost formulas in its budgeting, where q is the
number of customers served:
revenue: $4.20q
wages and salaries: $33,900 + $1.40q
supplies: $0.60q
insurance: $10,000
miscellaneous: $7,000 + $0.40q
the company reported the following actual results for january:
required:
prepare the company’s flexible budget performance report for january. label each
variance as favorable (f) or unfavorable (u).
