1) The Green Company processes unprocessed goat milk up to the splitoff point where
two products, condensed goat milk and skim goat milk result. The following
information was collected for the month of October:
The costs of purchasing the of unprocessed goat milk and processing it up to the splitoff
point to yield a total of 98,000 gallons of saleable product was $184,480. There were no
inventory balances of either product.
Condensed goat milk may be processed further to yield 42,000 gallons (the remainder is
shrinkage) of a medicinal milk product, Xyla, for an additional processing cost of $4
per usable gallon. Xyla can be sold for $20 per gallon.
Skim goat milk can be processed further to yield 54,200 gallons of skim goat ice cream,
for an additional processing cost per usable gallon of $4. The product can be sold for $9
per gallon.
There are no beginning and ending inventory balances.
What is the estimated net realizable value of the skim goat ice cream at the splitoff
point?
A) $271,000
B) $287,400
C) $672,000
D) $712,600
2) Which of the following is a direct manufacturing cost?
A) plant maintenance
B) plant rent
C) fringe benefits paid to machine operators
D) property taxes on plant
3) Assume your goal in life is to retire with 3 million dollars. How much would you
need to save at the end of each year if investment rates average 8% and you have a
14-year work life?
A) $41,159
B) $ 123,891
C) $ 175,706
D) $ 82,582
4) Bismith Company reported:
To record the write-off of these variances at the end of the accounting period, Bismith
would ________.
A) credit Fixed Manufacturing Overhead Allocated for $500,000
B) debit Fixed Manufacturing Overhead Spending Variance for $30,000
C) credit Fixed Manufacturing Production-Volume Variance for $20,000
D) debit Fixed Manufacturing Control for $500,000
5) Stark Corporation has two departments, Car Rental and Truck Rental. Central costs
may be allocated to the two departments in various ways.
If the facility lease expense of $384,000 is allocated on the basis of vehicles in the fleet,
the amount allocated to the Truck Rental Department would be ________.
A) $125,000
B) $127,000
C) $129,000
D) $123,000
6) Capital Investments has three divisions. Each division’s required rate of return is
15%. Planned operating results for 2015 are as follows:
The company is planning an expansion, which will require each division to increase its
investments by $25,000,000 and its income by $4,500,000.
Required:
a.Compute the current ROI for each division.
b.Compute the current residual income for each division.
c.Rank the divisions according to their current ROIs and residual incomes.
d.Determine the effects after adding the new project to each division’s ROI and residual
income.
e.Assuming the managers are evaluated on either ROI or residual income, which
divisions are pleased with the expansion and which ones are unhappy?
7) If the contribution margin ratio is 0.40, targeted operating income is $80,000, and
targeted sales volume in dollars is $500,000, then the degree of operating leverage is
________.
A) 1.50 times
B) 2.00 times
C) 2.50 times
D) 3.00 times
8) Which of the following is an advantage of internal rate of return method?
A) Sum of IRRs of individual projects gives an IRR of a combination or portfolio of
projects.
B) The percentage returns computed under the IRR method are easy to understand and
compare.
C) It can be expressed as a unique number.
D) It can be used when the required rate of return varies over the life of a project.
9) Trintal Corporation manufactures two models of motorized go-carts, a standard and a
deluxe model. The following activity and cost information has been compiled:
Assume a traditional costing system applies the $40,000 of overhead costs based on
direct labor hours. What is the total amount of overhead cost assigned to the standard
model?
A) $16,000
B) $24,000
C) $25,000
D) $15,000
10) To minimize the chances of violating pricing laws, a company should ________.
A) keep detailed records of variable costs for all value-chain business functions
B) use a variable cost-plus markup method of pricing
C) underprice products on a consistent basis, rather than sporadically
D) use dumping only when a product is at the end of its life cycle
11) Jamal, Kareem, Rashid and Associates are in the process of evaluating its new client
services for the business consulting division.
Estate Planning, a new service, incurred $100,000 in development costs and employee
training.
The direct costs of providing this service, which is all labor, averages $27 per hour.
Other costs for this service are estimated at $400,000 per year.
The current program for estate planning is expected to last for two years. At that time, a
new law will be in place that will require new operating guidelines for the tax
consulting.
Customer service expenses average $95 per client, with each job lasting an average of
400 hours. The current staff expects to bill 40,000 hours for each of the two years the
program is in effect. Billing averages $42 per hour.
What are estimated life-cycle revenues?
A) $1,680,000
B) $90,500
C) $3,360,000
D) $181,000
12) Best products, an Atlanta based company, is in the midst of its budgeting process. It
has already prepared its direct materials usage budget and is now in the process of
preparing its direct material purchase budget. In addition to the details gathered to
prepare the direct materials usage budget, Best also must know ________.
A) the level of direct material inventory to be maintained
B) the ratio of direct materials to cost of goods sold
C) the beginning direct materials inventory level
D) the quantity of direct materials to be purchased
13) An unfavorable sales-volume variance could result from ________.
A) an inappropriate assignment of labor or machines to specific jobs
B) competitors taking market share
C) an inefficiency of a purchasing manager in bargaining with suppliers
D) a decrease in actual selling price compared to anticipated selling price