1) Which of the following would be classified as an external failure cost on a quality
cost report?
A.Net cost of scrap.
B.Product recalls.
C.Rework labor and overhead.
D.Downtime caused by quality problems.
2) Holding all other things constant, an increase in fixed production costs will affect:
A.the markup under the absorption costing approach to cost-plus pricing.
B.the markup used to compute the profit-maximizing price.
C.both the markup under the absorption costing approach to cost-plus pricing and the
markup used to compute profit-maximizing price.
D.neither the markup under the absorption costing approach to cost-plus pricing nor the
markup used to compute profit-maximizing price.
3) Discretionary fixed costs:
A) have a planning horizon that covers many years.
B) may be reduced for short periods of time with minimal damage to the long-run goals
of the organization.
C) cannot be reduced for even short periods of time without making fundamental
changes.
D) are most effectively controlled through the effective utilization of facilities and
organization.
4) Redshaw Corporation has provided the following data concerning its two products:
The profitability index for product N43J is closest to:
A.0.87
B.0.40
C.$18.00 per ounce
D.$7.20 per ounce
5) Jackson Industries uses a standard cost system in which direct materials inventory is
carried at standard cost. Jackson has established the following standards for one unit of
product.
During May, Jackson purchased 125,000 pounds of direct material at a total cost of
$475,000. The total factory wages for May were $364,000, 90 percent of which were
for direct labor. Jackson manufactured 22,000 units of product during May using
108,000 pounds of direct material and 28,000 direct labor-hours.
The labor rate variance for May is:
A.$8,400 Favorable
B.$7,200 Unfavorable
C.$8,400 Unfavorable
D.$6,000 Favorable
6) The West Division of Frede Corporation had average operating assets of $700,000
and net operating income of $120,800 in December. The minimum required rate of
return for performance evaluation purposes is 16%.
What was the West Division’s minimum required return in December?
A.$112,000
B.$120,800
C.$131,328
D.$19,328
7) The ending balance of accounts receivable was $69,000. Sales, adjusted to a cash
basis using the direct method on the statement of cash flows, were $354,000. Sales
reported on the income statement were $378,000. Based on this information, the
beginning balance in accounts receivable was:
A.$93,000
B.$24,000
C.$94,000
D.$45,000
8) Melrose Corporation makes a product that uses a material with the following
standards:
The company budgeted for production of 5,800 units in September, but actual
production was 5,900 units. The company used 50,210 pounds of direct material to
produce this output. The company purchased 55,100 pounds of the direct material at
$5.80 per pound.
The direct materials purchases variance is computed when the materials are purchased.
The materials price variance for September is:
A.$11,020 F
B.$9,912 U
C.$9,912 F
D.$11,020 U
9) The net cash provided by (used in) financing activities for the year was:
A.$(19)
B.$(53)
C.$1
D.$(71)
10) Fuhrer Hotel bases its budgets on guest-days. The hotel’s static budget for
December appears below:
The total overhead cost at an activity level of 7,500 guest-days per month should be:
A.$227,250
B.$215,140
C.$216,140
D.$206,040
11) Illies Corporation’s comparative balance sheet appears below:
The company did not dispose of any property, plant, and equipment during the year. Its
net income for the year was $5,000 and its cash dividends were $4,000. The company
did not issue any bonds payable or purchase any of its own common stock during the
year. Its net cash provided by operating activities and net cash used in financing
activities are:
A.net cash provided by operating activities, $33,000; net cash used in financing
activities, $1,000
B.net cash provided by operating activities, $35,000; net cash used in financing
activities, $7,000
C.net cash provided by operating activities, $33,000; net cash used in financing
activities, $7,000
D.net cash provided by operating activities, $35,000; net cash used in financing
activities, $1,000
12) The company’s gross margin percentage for Year 2 is closest to:
A.62.5%
B.4.2%
C.38.5%
D.2381.0%
13) Pizzi, Inc. had the following fixed manufacturing overhead variances last year:
Pizzi uses machine-hours as an activity base for overhead and used 48,000
machine-hours as the denominator activity level for the year. Total actual fixed
manufacturing overhead was $150,000. The actual number of machine-hours incurred
were 50,000. What were Pizzi’s standard hours allowed for actual output?
A.40,000
B.42,000
C.50,400
D.52,500
14) Broch Corporation’s income statement appears below:
The company’s times interest earned is closest to:
A.4.87
B.1.41
C.3.16
D.2.16
15) The company’s dividend payout ratio for Year 2 is closest to:
A.26.3%
B.2.5%
C.18.4%
D.1.0%