1) Up to how much should the company be willing to pay for one additional minute of
grinding machine time if the company has made the best use of the existing grinding
machine capacity? (Round off to the nearest whole cent.)
A.$10.60
B.$21.90
C.$0
D.$19.25
2) The following data have been provided by Petri Corporation:
Indirect labor and power are both elements of variable manufacturing overhead.
The variable overhead rate variance for indirect labor is closest to:
A.$1,725 F
B.$3,590 F
C.$3,590 U
D.$5,315 F
3) Prophit Clinic uses the step-down method to allocate service department costs to
operating departments. The clinic has two service departments, Personnel and
Information Technology (IT), and two operating departments, Family Medicine and
Pediatrics. Data concerning those departments follow:
Personnel costs are allocated first on the basis of employees and IT costs are allocated
second on the basis of PCs. The total Pediatrics Department cost after allocations is
closest to:
A.$231,638
B.$223,132
C.$232,286
D.$182,936
4) Dilbert Farm Supply is located in a small town in the rural west. Data regarding the
store’s operations follow:
Sales are budgeted at $260,000 for November, $230,000 for December, and $210,000
for January.
Collections are expected to be 80% in the month of sale, 19% in the month following
the sale, and 1% uncollectible.
The cost of goods sold is 65% of sales.
The company desires to have an ending merchandise inventory at the end of each
month equal to 60% of the next month’s cost of goods sold. Payment for merchandise is
made in the month following the purchase.
Other monthly expenses to be paid in cash are $20,300.
Monthly depreciation is $20,000.
Ignore taxes.
Accounts payable at the end of December would be:
A.$81,900
B.$141,700
C.$59,800
D.$149,500
5) How many units of product T62D should be produced each month?
A.0
B.372
C.730
D.1,398
6) Pardoe, Inc., manufactures a single product in which variable manufacturing
overhead is assigned on the basis of standard direct labor-hours. The company uses a
standard cost system and has established the following standards for one unit of
product:
During March, the following activity was recorded by the company:
The company produced 3,000 units during the month.
A total of 8,000 pounds of material were purchased at a cost of $23,000.
There was no beginning inventory of materials on hand to start the month; at the end of
the month, 2,000 pounds of material remained in the warehouse.
During March, 1,600 direct labor-hours were worked at a rate of $6.50 per hour.
Variable manufacturing overhead costs during March totaled $1,800.
The direct materials purchases variance is computed when the materials are purchased.
The materials price variance for March is:
A.$1,000 F
B.$1,000 U
C.$750 F
D.$750 U
7) In addition to the facts given above, assume that the space used to produce part J56
could be used to make more of one of the company’s other products, generating an
additional segment margin of $13,000 per year for that product. What would be the
impact on the company’s overall net operating income of buying part J56 from the
outside supplier and using the freed space to make more of the other product?
A.Net operating income would decline by $31,000 per year.
B.Net operating income would decline by $23,000 per year.
C.Net operating income would increase by $3,000 per year.
D.Net operating income would increase by $13,000 per year.
8) Jennifer Company has two products: A and B. The company uses activity-based
costing. The total cost and activity for each of the company’s three activity cost pools
are as follows:
The activity rate under the activity-based costing system for Activity 3 is closest to:
A.$36.24
B.$38.44
C.$84.56
D.$115.33
9) What is the maximum amount the company should be willing to pay an outside
supplier per unit for the part if the supplier commits to supplying all 40,000 units
required each year?
A) $6.60 per unit
B) $44.60 per unit
C) $59.90 per unit
D) $66.50 per unit
10) The change in the company’s overall annual net operating income that would result
from making the component, rather than buying it, would be:
A.$17,000 increase.
B.$1,000 decrease.
C.$14,000 decrease.
D.$5,000 increase.