1) Discounted cash flow techniques do not take into account recovery of initial
investment.
2) In traditional costing systems, manufacturing costs that are not caused by products
are not assigned to products.
3) A vertically integrated company is more dependent on its suppliers than a company
that is not vertically integrated.
4) A company has a standard cost system in which fixed and variable manufacturing
overhead costs are applied to products on the basis of direct labor-hours. The company’s
choice of the denominator level of activity affects the fixed manufacturing overhead
budget variance.
5) Process costing is used in those situations where many different products or services
are produced each period to customer specifications.
6) In the payback method, depreciation is deducted from net operating income when
computing the annual net cash flow.
7) Activity-based costing is a costing method that is designed to provide managers with
cost information for strategic and other decisions that potentially affect only variable
costs.
8) Throughput time is the amount of time required to process raw materials into
completed products.
9) In a merchandising company, the required merchandise purchases for a period are
determined by subtracting the desired ending inventory from the sum of the units to be
sold during the period and the units in beginning inventory.
10) A high price-earnings ratio means that investors are willing to pay a premium for
the company’s stock.
11) When using internal rate of return to evaluate investment projects, if the internal
rate of return is greater than the required rate of return, the project should be accepted.
12) As total sales increase beyond the break-even point, the degree of operating
leverage will decrease.
13) Under the step-down method, once a service department’s costs have been allocated
to other departments, no costs should be reallocated back to the service department.
14) Because absorption costing emphasizes costs by behavior, it works well with
cost-volume-profit analysis.
15) The impact on net operating income of a given dollar change in sales can be
computed by multiplying the contribution margin by the dollar change in sales.
16) Uhri Corporation has provided the following data:
Dividends on common stock during Year 2 totaled $4,000. The market price of common
stock at the end of Year 2 was $6.08 per share. The company’s dividend payout ratio for
Year 2 is closest to:
A.7.8%
B.1.3%
C.11.1%
D.0.8%
17) Lusk Corporation produces and sells 20,000 units of Product X each month. The
selling price of Product X is $30 per unit, and variable expenses are $21 per unit. A
study has been made concerning whether Product X should be discontinued. The study
shows that $50,000 of the $250,000 in fixed expenses charged to Product X would not
be avoidable even if the product was discontinued. If Product X is discontinued, the
company’s overall net operating income would:
A.decrease by $70,000 per month.
B.increase by $70,000 per month.
C.increase by $20,000 per month.
D.decrease by $20,000 per month.
18) The journal entry to record the requisition from the storeroom would include a:
A.debit to Work in Process of $69,000
B.debit to Work in Process of $63,000
C.debit to Raw Materials of $69,000
D.credit to Manufacturing Overhead of $6,000
19) Two products, LB and NH, emerge from a joint process. Product LB has been
allocated $30,800 of the total joint costs of $44,000. A total of 2,000 units of product
LB are produced from the joint process. Product LB can be sold at the split-off point for
$13 per unit, or it can be processed further for an additional total cost of $14,000 and
then sold for $15 per unit. If product LB is processed further and sold, what would be
the effect on the overall profit of the company compared with sale in its unprocessed
form directly after the split-off point?
A.$16,000 more profit
B.$20,800 more profit
C.$40,800 less profit
D.$10,000 less profit
20) Leflore Corporation has provided the following data:
Dividends on common stock during Year 2 totaled $6,000. The market price of common
stock at the end of Year 2 was $1.38 per share. The company’s dividend yield ratio for
Year 2 is closest to:
A.4.3%
B.1.2%
C.35.0%
D.50.0%
21) Hairr Corporation bases its predetermined overhead rate on variable manufacturing
overhead cost of $9.50 per machine-hour and fixed manufacturing overhead cost of
$947,672 per period. If the denominator level of activity is 8,900 machine-hours, the
predetermined overhead rate would be:
A.$9.50
B.$115.98
C.$106.48
D.$950.00
22) If a company wants to decrease its total quality cost, it would usually be best to
spend more money on:
A.prevention.
B.internal and external failure.
C.prevention and internal failure.
D.appraisal and external failure.
E.appraisal and internal failure.
23) Laverde Corporation has provided the following data:
The company’s total asset turnover for Year 2 is closest to:
A.1.22
B.7.60
C.0.13
D.0.82
24) Home Corporation will open a new store on January 1. Based on experience from
its other retail outlets, Home Corporation is making the following sales projections:
Home Corporation estimates that 70% of the credit sales will be collected in the month
following the month of sale, with the balance collected in the second month following
the month of sale.
Based on these data, the balance in accounts receivable on January 31 will be:
A.$40,000
B.$28,000
C.$12,000
D.$58,000
25) In February, one of the processing departments at Manger Corporation had
beginning work in process inventory of $25,000 and ending work in process inventory
of $34,000. During the month, $290,000 of costs were added to production and the cost
of units transferred out from the department was $281,000. In the department’s cost
reconciliation report for February, the total cost to be accounted for under the
weighted-average method would be:
A.$59,000
B.$605,000
C.$630,000
D.$315,000
26) What is Stone’s net cash provided by (used in) investing activities?
A.$0
B.$(15,000)
C.$25,000
D.$45,000
27) Marks Corporation’s balance sheet appears below:
Net income for the year was $77. Cash dividends were $13. The company did not
dispose of any property, plant, and equipment, retire any bonds payable, or repurchase
any of its own common stock during the year.
Required:
Prepare a statement of cash flows in good form using the indirect method.
28) During December, Mccroskey Corporation incurred $66,000 of actual
Manufacturing Overhead costs. During the same period, the Manufacturing Overhead
applied to Work in Process was $69,000.
Required:
Prepare journal entries to record the incurrence of manufacturing overhead and the
application of manufacturing overhead to Work in Process.
29) Excerpts from Candle Corporation’s most recent balance sheet (in thousands of
dollars) appear below:
Sales on account during the year totaled $1,200 thousand. Cost of goods sold was $800
thousand.
30) Satoe Corporation uses customers served as its measure of activity. During April,
the company budgeted for 25,000 customers, but actually served 23,000 customers. The
company has provided the following data concerning the formulas used in its budgeting
and its actual results for April:
Data used in budgeting:
Actual results for April:
Required:
Prepare the company’s flexible budget performance report for April. Label each
variance as favorable (F) or unfavorable (U).
31) Hyrkas Corporation’s most recent balance sheet and income statement appear
below:
Dividends on common stock during Year 2 totaled $30 thousand. The market price of
common stock at the end of Year 2 was $6.90 per share.
32) The following information is budgeted for McCracken Plumbing Supply
Corporation for next quarter:
All sales at McCracken are on credit. Forty percent are collected in the month of sale,
58% in the month following the sale, and the remaining 2% are uncollectible.
Merchandise purchases are paid in full the month following the month of purchase. The
selling and administrative expenses above include $8,000 of depreciation on display
fixtures and warehouse equipment. All other selling and administrative expenses are
paid as incurred. McCracken wants to maintain a cash balance of $15,000. Any amount
below this can be borrowed from a local bank as needed in increments of $1,000. All
borrowings are made at month end.
Required:
Prepare McCracken’s cash budget for May. McCracken expects to have $24,000 of cash
on hand at the beginning of May.
33) Straton Corporation has provided the following financial data:
Dividends on common stock during Year 2 totaled $2,100. The market price of common
stock at the end of Year 2 was $5.56 per share.