1) The formula for the average sale period is: Average sale period = Accounts
receivable turnover Inventory turnover.
2) The super-variable costing net operating income period can be computed by
multiplying the number of units sold by the contribution margin per unit and then
subtracting total fixed costs.
3) Earnings per share is computed by multiplying net income by the average number of
common shares outstanding.
4) When completed goods are sold, the transaction is recorded as a debit to Cost of
Goods Sold and a credit to Finished Goods.
5) The activity variance for revenue is unfavorable if the actual level of activity for the
period is less than the planned level of activity.
6) Goodwyn Corporation manufactures and sells one product. In the company’s first
year of operations, the variable cost consisted solely of direct materials of $89 per unit.
The annual fixed costs were $1,269,000 of direct labor cost, $3,619,000 of fixed
manufacturing overhead expense, and $1,260,000 of fixed selling and administrative
expense. The company does not have any variable manufacturing overhead costs or
variable selling and administrative costs. During its first year of operations, the
company produced 47,000 units and sold 42,000 units. The company’s only product is
sold for $259 per unit.
Required:
a. Assume the company uses super-variable costing. Compute the unit product cost for
the year and prepare an income statement for the year.
b. Assume that the company uses a variable costing system that assigns $27 of direct
labor cost to each unit that is produced. Compute the unit product cost for the year and
prepare an income statement for the year.
7) Job 593 was recently completed. The following data have been recorded on its job
cost sheet:
The Corporation applies manufacturing overhead on the basis of machine-hours. The
predetermined overhead rate is $14 per machine-hour. The total cost that would be
recorded on the job cost sheet for Job 593 would be:
A.$6,705
B.$3,219
C.$5,249
D.$4,255
8) The company’s operating cycle for Year 2 is closest to:
A.10.4 days
B.79.5 days
C.141.3 days
D.72.2 days
9) The company’s operating cycle for Year 2 is closest to:
A.10.4 days
B.79.5 days
C.141.3 days
D.72.2 days
10) Garcia Veterinary Clinic expects the following operating results next year:
What is Garcia’s break-even point next year in sales dollars?
A.$240,000
B.$375,000
C.$400,000
D.$420,000
11) A furniture manufacturer uses a standard costing system in which standard
machine-hours (MHs) is 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:
The fixed manufacturing overhead budget variance for the period is closest to:
A.$2,675 U
B.$1,450 F
C.$3,691 F
D.$1,270 F
12) The company’s inventory turnover for Year 2 is closest to:
A.6.54
B.5.67
C.6.07
D.0.87
13) The Covey Corporation is preparing its Manufacturing Overhead Budget for the
fourth quarter of the year. The budgeted variable manufacturing overhead rate is $4.00
per direct labor-hour; the budgeted fixed manufacturing overhead is $64,000 per month,
of which $18,000 is factory depreciation.
If the budgeted direct labor time for December is 4,000 hours, then the average
budgeted manufacturing overhead per direct labor-hour is:
A.$16.00 per direct labor-hour
B.$15.50 per direct labor-hour
C.$20.00 per direct labor-hour
D.$24.50 per direct labor-hour
14) Higgins Corporation sells three products, Product A, Product B, and Product C.
Data concerning the company’s most recent month of operations, June, appear below:
The total fixed expense for the company was $525,000.
The net operating income for the company as a whole for June was:
A.$45,000
B.$105,000
C.$150,000
D.$570,000
15) Gillis Corporation’s marketing manager believes that every 10% increase in the
selling price of one of the company’s products would lead to a 15% decrease in the
product’s total unit sales. The product’s absorption costing unit product cost is $20.00.
The variable production cost is $6.00 per unit and the variable selling and
administrative cost is $3.00. The fixed selling and administrative expense averages
$0.50 per unit.
Required:
a. Compute the product’s price elasticity of demand as defined in the text to two
decimal places.
b. Compute the product’s profit-maximizing price according to the formula in the text.
16) ( A company with $600,000 in operating assets is considering the purchase of a
machine that costs $72,000 and which is expected to reduce operating costs by $18,000
each year. These reductions in cost occur evenly throughout the year. The payback
period for this machine in years is closest to:
A.4 years
B.8.3 years
C.0.25 years
D.33.3 years
17) Yukon Perfume Corporation manufactures three distinct perfumes (I, II, and III)
from a single joint process. The three perfumes can be sold to discount stores in the
form they are in at the split-off point. However, if the perfumes are further processed,
they can be sold to specialty stores. Costs related to each batch of perfume separation is
as follows:
For which product(s) above would it be more profitable for Yukon to sell after further
processing rather than at the split-off point?
A) I only
B) III only
C) I and II only
D) II and III only
E) I, II, and III
18) Sowers Inc. has provided the following data for October:
Required:
Prepare T-accounts for Raw Materials, Work in Process, Finished Goods, and
Manufacturing Overhead, and Cost of Goods Sold. Record the beginning balances and
each of the transactions listed above. Finally, determine the ending balances.
19) ( Bill Anders retires in 5 years. He would have to purchase equipment costing
$500,000 to equip the outlet and invest an additional $150,000 for inventories and other
working capital needs. Other outlets in the fast-food chain have an annual net cash
inflow of about $160,000. Mr. Anders would close the outlet in 5 years. He estimates
that the equipment could be sold at that time for about 10% of its original cost and the
working capital would be released for use elsewhere. Mr. Anders’ required rate of return
is 16%.
Required:
What is the investment’s net present value? Is this an acceptable investment?
20) The following data has been provided by Klemm Inc., a company that uses the
FIFO method in its process costing system. The data concern the company’s Shaping
Department for the month of March.
Required:
Determine the cost of ending work in process inventory and the cost of the units
transferred out of the department during March using the FIFO method.
21) Belk Corporation’s balance sheet appears below:
The net income for the year was $126. Cash dividends were $21. The company did not
dispose of any property, plant, and equipment, issue 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.
22) Voyer Corporation uses the FIFO method in its process costing. The following data
pertain to its Assembly Department for August.
Required:
Compute the equivalent units of production for both materials and conversion costs for
the Assembly Department for August using the FIFO method.
23) Flinders Company has two service departments, Factory Administration and
Maintenance, and two operating departments. Selected information relating to these
departments is given below:
The company allocates service department costs by the step-down method. Costs of
Factory Administration are allocated first on the basis of number of employees, and
then costs of Maintenance are allocated on the basis of total labor hours.
Required:
Prepare a schedule showing the allocation of service department costs to other
departments.
24) Bracamonte Hospital bases its budgets on patient-visits. The hospital’s static
planning budget for November appears below:
Required:
Prepare a flexible budget for 8,900 patient-visits per month.
25) Data concerning Phung Corporation’s single product appear below:
Fixed expenses are $991,000 per month. The company is currently selling 8,000 units
per month.
Required:
The marketing manager believes that a $23,000 increase in the monthly advertising
budget would result in a 190 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!
26) Sydnor Inc. has provided the following data concerning the Assembly Department
for the month of April. The company uses the weighted-average method in its process
costing.
During the month, 7,000 units were completed and transferred from the Assembly
Department to the next department.
Required:
Determine the cost of ending work in process inventory and the cost of units transferred
out of the department during April using the weighted-average method.