1) Operation costing is a popular type of accounting system, one that combines selected
features of job-order and process-cost accounting.
Required:
A. Briefly discuss the basic features that are associated with an operation-costing
system.
B. Explain why a sweater manufacturer may have a need for an operation-costing
system.
2) The following selected data pertain to Phineus Corporation:
July’s cash disbursements are expected to be:
A.$404,000
B.$464,000
C.$674,000
D.$734,000
E.None of the other answers are correct
3) Drake Manufacturing sells a number of goods whose selling price is heavily
influenced by cost. A recent study of product no. 520 revealed a traditionally-derived
total cost of $1,623 and a selling price of $1,850 based on that figure. A newly
computed activity-based total cost is $1,215. Which of the following statements is true?
A.All other things being equal, Drake should consider increasing its sales price
B.Drake should increase the product’s selling price to maintain the same markup
percentage
C.Product no. 520 could be labeled as being overcosted by Drake’s traditional costing
procedures
D.If product no. 520 is undercosted by traditional accounting procedures, then all of
Drake’s other products must be undercosted as well
E.Generally speaking, the activity-based cost figure is “less accurate” than the
traditionally-derived cost figure
4) The following information was taken from the segmented income statement of
Restin, Inc., and the company’s three divisions:
In addition, the company incurred common fixed costs of $18,000.
Assuming use of a responsibility accounting system, which of the following amounts
should be used to evaluate the performance of the Los Angeles division manager?
A.$4,000
B.$8,000
C.$10,000
D.$25,000
E.$90,000
5) Wee Care is a nursery school for pre-kindergarten children. The school has
determined that the following biweekly revenues and costs occur at different levels of
enrollment:
The average cost per student when 16 students enroll in the school is:
A.$100
B.$125
C.$175
D.$300
E.$400
6) The internal rate of return on an asset can be calculated:
A.if the return is greater than the hurdle rate
B.if the asset’s cash flows are identical to the future value of a series of cash flows
C.if the future value of a series of cash flows can be arrived at by the annuity
accumulation factor
D.by finding a discount rate that yields a zero net present value
E.by finding a discount rate that yields a positive net present value
7) Roma Corporation has computed the following unit costs for the year just ended:
Under variable costing, each unit of the company’s inventory would be carried at:
A.$49
B.$54
C.$72
D.$104
E.None of the other answers are correct
8) Haskins Textile Co. manufactures a variety of fabrics. All materials are introduced at
the beginning of production; conversion cost is incurred evenly through manufacturing.
The Weaving Department had 2,000 units of work in process on April 1 that were 30%
complete as to conversion costs. During April, 9,000 units were completed and on April
30, 4,000 units remained in production, 40% complete with respect to conversion costs.
The equivalent units of conversion for April total:
A.9,000
B.10,600
C.11,200
D.12,000
E.12,600
9) Which of the following would produce the largest increase in the contribution margin
per unit?
A.A 7% increase in selling price
B.A 15% decrease in selling price
C.A 14% increase in variable cost
D.A 17% decrease in fixed cost
E.A 23% increase in the number of units sold
10) Edmonco Company produced and sold 45,000 units of a single product last year,
with the following results:
If Edmonco’s sales revenues increase 15%, what will be the percentage increase in
income before income taxes?
A.15%
B.45%
C.60%
D.75%
E.None of the other answers is correct
11) James Company has an asset that cost $5,000 and currently has accumulated
depreciation of $2,000. Suppose the firm sold the asset for $2,500 and is subject to a
30% income tax rate.
The loss on disposal would be:
A.$350
B.$500
C.$650
D.$2,500
E.None, because the transaction produced a gain
12) Narchie sells a single product for $50. Variable costs are 60% of the selling price,
and the company has fixed costs that amount to $400,000. Current sales total 16,000
units.
Each unit that Narchie sells will:
A.increase profit by $20
B.increase profit by $30
C.increase profit by $50
D.increase profit by some other amount
E.decrease profit by $5
13) The Razooks Company, which manufactures office equipment, is ready to introduce
a new line of portable copiers. The following copier data are available:
What price will the company charge if the firm uses cost-plus pricing based on total
cost and a markup percentage of 40%?
A.$462
B.$513
C.$567
D.$594
E.None of the other answers are correct
14) Consider the following factors related to an investment:
I. The net income from the investment.
II. The cash flows from the investment.
III. The timing of the cash flows from the investment.
Which of the preceding factors would be important considerations in a
net-present-value analysis?
A.I only
B.II only
C.I and II
D.II and III
E.I, II, and III
15) Hot’lanta, Inc., which uses the high-low method to analyze cost behavior, has
determined that machine hours best explain the company’s utilities cost. The company’s
relevant range of activity varies from a low of 600 machine hours to a high of 1,100
machine hours, with the following data being available for the first six months of the
year:
Using the high-low method, the utilities cost associated with 980 machine hours would
be:
A.$9,510
B.$9,660
C.$9,700
D.$9,790
E.None of the other answers is correct
16) Orion recently reported sales revenues of $800,000, a total contribution margin of
$300,000, and fixed costs of $180,000. If sales volume amounted to 10,000 units, the
company’s variable cost per unit must have been:
A.$12
B.$32
C.$50
D.$92
E.None of the other answers is correct
17) Hamilton Company had the following inventory balances at the beginning and end
of the year:
During the year, the company purchased $100,000 of raw material and incurred
$340,000 of direct labor costs. Other data: manufacturing overhead incurred, $450,000;
sales, $1,560,000; selling and administrative expenses, $90,000; income tax rate, 30%.
Required:
A. Calculate cost of goods manufactured.
B. Calculate cost of goods sold.
C. Determine Hamilton’s net income.
18) Economic Order Quantity, timing of orders and safety stock are three important
considerations in inventory management.
Required:
A. Explain each of these considerations.
B. How is EOQ affected by the timing of orders and safety stock?
19) Fiero Corporation adds all materials at the beginning of production and incurs
conversion cost evenly throughout manufacturing. The company completed 70,000
units during the year and had 12,000 units in process at year end, 20% complete with
respect to conversion cost. Equivalent units for the year total:
A.materials, 70,000; conversion, 70,000
B.materials, 70,000; conversion, 2,400
C.materials, 72,400; conversion, 72,400
D.materials, 82,000; conversion, 72,400
E.materials, 82,000; conversion, 82,000
20)
If the cost of goods manufactured for the year was $565,000, what was the amount of
direct materials used during the year?
A.$155,500
B.$140,500
C.$150,000
D.$145,500
E.None of the other answers are correct
21) The following data relate to product no. 89 of Des Moines Corporation:
Direct material standard: 3 square feet at $2.50 per square foot
Direct material purchased: 30,000 square feet at $2.60 per square foot
Direct material consumed: 29,200 square feet
Manufacturing activity: 9,600 units completed
Assume that the company computes variances at the earliest point in time.
The direct-material quantity variance is:
A.$1,000F
B.$1,000U
C.$1,040F
D.$1,040U
E.$2,000F
22) St. James, Inc., currently uses traditional costing procedures, applying $800,000 of
overhead to products Beta and Zeta on the basis of direct labor hours. The company is
considering a shift to activity-based costing and the creation of individual cost pools
that will use direct labor hours (DLH), production setups (SU), and number of parts
components (PC) as cost drivers. Data on the cost pools and respective driver volumes
follow.
The overhead cost allocated to Beta by using activity-based costing procedures would
be:
A.$240,000
B.$356,000
C.$444,000
D.$560,000
E.None of the other answers is correct
23) The procedure used to compute the present value of a series of cash flows is known
as:
A.compounding
B.the annuity method
C.discounting
D.the present-cost approach
E.indexing
24) Operation costing might be used to determine the cost of all of the following
products except:
A.sweaters
B.automobiles
C.living-room sofas
D.dishwashing detergent
E.high-definition (HD) and surround-sound cables
25) Of the five expenses that follow, which one is most likely treated differently than
the others when income taxes are considered in a discounted-cash-flow analysis?
A.Salaries expense
B.Advertising expense
C.Depreciation expense
D.Utilities expense
E.Office expense
26) You are a sports agent who is representing Jack Lofton, a star football player, in
contract negotiations with the New York Landmarks. The Landmarks have offered
Lofton a four-year contract, with annual raises and performance bonuses that will result
in a growing cash-flow stream for Lofton each year. Which table factor(s) should you
use to most efficiently determine the “value” of the contract?
A.Future value of $1
B.Future value of a $1 annuity
C.Present value of $1
D.Present value of a $1 annuity
E.Both Present value of $1 and Present value of a $1 annuity
27)
Assume that the company computes variances at the earliest point in time.
The direct-labor rate variance is:
A.$7,800F
B.$7,950F
C.$8,020F
D.$8,000U
E.none of the other answers are correct
28)
If direct materials used during the year were $135,000, what was cost of goods
manufactured?
A.$140,500
B.$539,000
C.$409,500
D.$544,500
E.None of the other answers are correct