1) the costs assigned to units in inventory are typically lower under absorption costing
than under variable costing.
2) when using internal rate of return to evaluate investment projects, if the internal rate
of return is less than the required rate of return, the project would be accepted.
3) customer value propositions tend to fall into three broad categoriestheory of
constraints, six sigma, and enterprise risk management.
4) the net present value method assumes that cash flows from a project are immediately
reinvested at a rate of return equal to the discount rate.
5) if a company switches from a traditional costing system to an activity-based costing
system in which some activities are batch-level and product-level, costs ordinarily shift
from high-volume to low-volume products.
6) wander company’s comparative balance sheet and income statement for last year
appear below:
the company declared and paid $39,000 in cash dividends during the year. the following
questions pertain to the company’s statement of cash flows.
the net cash provided by (used in) operating activities last year was:
a.$44,000
b.$152,000
c.$123,000
d.$98,000
7) hanson corporation uses the weighted-average method in its process costing system.
data concerning the first processing department for the most recent month are listed
below:
note: your answers may differ from those offered below due to rounding error. in all
cases, select the answer that is the closest to the answer you computed. to reduce
rounding error, carry out all computations to at least three decimal places.
the cost per equivalent unit for materials for the month in the first processing
department is closest to:
a.$20.52
b.$20.85
c.$20.15
d.$20.48
8) metz corporation’s variable overhead is applied on the basis of direct labor-hours. the
standard cost card for product m70t specifies 7.7 direct labor-hours per unit of m70t. the
standard variable overhead rate is $6.30 per direct labor-hour. during the most recent
month, 400 units of product m70t were made and 3,000 direct labor-hours were worked.
the actual variable overhead incurred was $18,000.
required:
a. what was the variable overhead rate variance for the month?
b. what was the variable overhead efficiency variance for the month?
9) mcgougan corporation produces a single product and has the following cost
structure:
the unit product cost under variable costing is:
a.$139
b.$126
c.$122
d.$127
10) the average collection period for year 2 is closest to:
a.1.1 days
b.0.9 days
c.63.6 days
d.59.4 days
11) during august at schlappi corporation, $80,000 of raw materials were requisitioned
from the storeroom for use in production. these raw materials included both direct and
indirect materials. the indirect materials totaled $2,000. the journal entry to record this
requisition would include a debit to manufacturing overhead of:
a.$2,000
b.$80,000
c.$78,000
d.$0
12) a manufacturing company that has only one product has established the following
standards for its variable overhead. the company uses direct labor-hours (dlhs) as its
measure of activity.
the following data pertain to operations for the last month:
what is the variable overhead rate variance for the month?
a.$480 u
b.$480 f
c.$1,624 f
d.$1,624 u
13) franca corporation has two service departments, administrative and facilities, and
two operating departments, assembly and customer feedbacks.
the company uses the direct method to allocate service department costs to operating
departments. administrative costs are allocated on the basis of employee hours and
facilities costs are allocated on the basis of space occupied.
the total amount of administrative department cost allocated to the assembly department
is closest to:
a.$37,806
b.$28,217
c.$28,830
d.$26,524
14) dufour corporation uses the weighted-average method in its process costing system.
this month, the beginning inventory in the first processing department consisted of 600
units. the costs and percentage completion of these units in beginning inventory were:
a total of 5,700 units were started and 4,900 units were transferred to the second
processing department during the month. the following costs were incurred in the first
processing department during the month:
the ending inventory was 85% complete with respect to materials and 70% complete
with respect to conversion costs.
note: your answers may differ from those offered below due to rounding error. in all
cases, select the answer that is the closest to the answer you computed. to reduce
rounding error, carry out all computations to at least three decimal places.
how many units are in ending work in process inventory in the first processing
department at the end of the month?
a.5,100
b.800
c.1,400
d.900
15) a furniture manufacturer has a standard costing system based on standard direct
labor-hours (dlhs) as the measure of activity. data from the company’s flexible budget
for manufacturing overhead are given below:
the following data pertain to operations for the most recent period:
what was the fixed manufacturing overhead budget variance for the period to the
nearest dollar?
a.$1,050 f
b.$257 f
c.$1,657 u
d.$1,970 u
16) fenestre corporation’s contribution margin ratio is 25%. the company’s break-even is
80,000 units and the selling price of its only product is $4.00 a unit. what are the
company’s fixed expenses?
a.$80,000
b.$320,000
c.$20,000
d.$120,000
17) harvey 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 price elasticity of demand as defined in the text is closest to:
a.-1.98
b.-1.78
c.-2.40
d.-1.92
18) tosta 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 may, the kennel budgeted for
2,100 tenant-days, but its actual level of activity was 2,050 tenant-days. the kennel has
provided the following data concerning the formulas used in its budgeting and its actual
results for may:
the net operating income in the flexible budget for may would be closest to:
a.$9,140
b.$8,420
c.$11,626
d.$12,200
19) erdmann corporation has provided its contribution format income statement for july.
the company produces and sells a single product.
the break-even point in sales dollars is:
a.$48,000
b.$72,000
c.$28,800
d.$0
20) a partial listing of costs incurred during february at urfer corporation appears below:
the total of the period costs listed above for february is:
a.$379,000
b.$277,000
c.$61,000
d.$318,000
21) information concerning the common stock of morris company as of the end of the
company’s fiscal year is presented below.
the dividend yield ratio is closest to:
a.50.0%
b.33.3%
c.120.0%
d.11.1%
22) nordstrand company’s net income last year was $36,000. changes in selected
balance sheet accounts for the year appear below:
based solely on this information, the net cash provided by operations under the indirect
method on the statement of cash flows would be:
a.$4,000
b.$68,000
c.$50,000
d.$54,000
23) super drive is a computer hard drive manufacturer. the company’s balance sheet for
the fiscal year ended on november 30 appears below:
additional information regarding super drive’s operations appear below:
sales are budgeted at $520,000 for december and $500,000 for january.
collections are expected to be 60% in the month of sale and 40% in the month
following sale. there are no bad debts.
80% of the disk drive components are purchased in the month prior to the month of the
sale, and 20% are purchased in the month of the sale. purchased components comprise
40% of the cost of goods sold.
payment for components purchased is made in the month following the purchase.
assume that the cost of goods sold is 80% of sales.
the budgeted gross margin for the month ending december 31 would be:
a.$416,000
b.$104,000
c.$134,000
d.$536,000
24) czepiel corporation is developing standards for its products. one product requires an
input that is purchased for $48.00 per kilogram from the supplier. by paying cash, the
company gets a discount of 9% off this purchase price. shipping costs from the
supplier’s warehouse amount to $2.84 per kilogram. receiving costs are $0.59 per
kilogram.
required:
determine the standard price per kilogram of this input. show your work!
25) smurnov company has a purchasing department that provides services to two
factories located in austin and the other in belmont. budgeted costs for the purchasing
department consist of $91,000 per year of fixed costs and $7 per purchase order for
variable costs. the level of budgeted fixed costs is determined by the peak-period
requirements. the austin factory requires 3/7 of the peak-period capacity and the
belmont factory requires 4/7.
during the year, 2,700 purchase orders were processed for the austin factory and 3,900
purchase orders for the belmont factory.
required:
compute the amount of purchasing department cost that should be charged to each
factory for the year.
26) yundt corporation produces and sells a single product. data concerning that product
appear below:
required:
determine the monthly break-even in total dollar sales. show your work!
27) (ignore income taxes in this problem.) seastrand corporation is investigating
automating a process by purchasing a new machine for $322,000 that would have a 7
year useful life and no salvage value. by automating the process, the company would
save $117,000 per year in cash operating costs. the company’s current equipment would
be sold for scrap now, yielding $17,000. the annual depreciation on the new machine
would be $46,000.
required:
determine the simple rate of return on the investment to the nearest tenth of a percent.
show your work!
28) a number of costs are listed below.
required:
for each item above, indicate whether the cost is direct or indirect with respect to the
cost object listed next to it.
29) furgason corporation produces and sells a single product. data concerning that
product appear below:
fixed expenses are $303,000 per month. the company is currently selling 5,000 units per
month.
required:
the marketing manager believes that a $9,000 increase in the monthly advertising
budget would result in a 120 unit increase in monthly sales. what should be the overall
effect on the company’s monthly net operating income of this change? show your work!
30) deviney corporation is working on its direct labor budget for the next two months.
each unit of output requires 0.86 direct labor-hours. the direct labor rate is $8.20 per
direct labor-hour. the production budget calls for producing 6,500 units in july and
6,000 units in august. the company guarantees its direct labor workers a 40-hour paid
work week. with the number of workers currently employed, that means that the
company is committed to paying its direct labor work force for at least 5,600 hours in
total each month even if there is not enough work to keep them busy.
required:
construct the direct labor budget for the next two months.
31) the management of archie corporation would like to better understand the behavior
of the company’s warranty costs. those costs are listed below for a number of recent
months:
management believes that warranty cost is a mixed cost that depends on the number of
product returns.
required:
estimate the variable cost per product return and the fixed cost per month using the
least-squares regression method.