1) the lean thinking model focuses on reducing defects to as close to zero as possible.
2) corporate social responsibility refers to the moral obligation of all corporations to
make substantial monetary contributions to charitable causes.
3) all cost variances should be considered exceptions that require the attention of
management.
4) if the actual level of activity is 4% less than planned, then the costs in the static
budget should be reduced by 4% before comparing them to actual costs.
5) wages paid to production supervisors would be considered direct labor.
6) working capital equals current assets, plus noncurrent liabilities and stockholders’
equity, less total assets.
7) purchase of poor quality materials will generally result in a favorable materials price
variance and an unfavorable labor rate variance.
8) the “costs to be accounted for” portion of the cost reconciliation report includes the
cost of beginning work in process inventory and the cost of ending work in process
inventory.
9) the inventory turnover ratio is equal to the average inventory balance divided by the
cost of goods sold.
10) actual manufacturing overhead costs are traced to specific jobs.
11) relative profitability should be measured by dividing the incremental profit from a
segment by the amount of the constrained resource required by that segment.
12) an allocation basis for service department costs should reflect how much cost the
operating departments can bear. for this reason, the sales of the operating departments is
often a good allocation basis.
13) use of a single, plantwide overhead rate is generally appropriate only for very large
manufacturing companies.
14) the constraint at angstadt inc. is a key raw material. a total of 9,700 ounces of this
constrained resource are available. data concerning the company’s two products, b03
and p22, appear below:
each unit of product b03 requires 6 ounces of the constrained raw material; each unit of
product p22 requires 2 ounces.
required:
a. in the present circumstances, which product is most profitable?
b. how much of each product should be produced?
c. the company is considering launching a new product whose variable cost is $158 and
that requires 14 ounces of the constrained resource. what is the minimum acceptable
selling price for the new product?
15) osman corporation uses the fifo method in its process costing system. data
concerning the first processing department for the most recent month are listed below:
note: your answers may differ from those offered below due to rounding error. in all
cases, select the answer that is the closest to the answer you computed. to reduce
rounding error, carry out all computations to at least three decimal places.
what are the equivalent units for conversion costs for the month in the first processing
department?
a.8,100
b.560
c.8,835
d.10,000
16) ivenson corporation uses the weighted-average method in its process costing
system. data concerning the first processing department for the most recent month are
listed below:
note: your answers may differ from those offered below due to rounding error. in all
cases, select the answer that is the closest to the answer you computed. to reduce
rounding error, carry out all computations to at least three decimal places.
what are the equivalent units for conversion costs for the month in the first processing
department?
a.6,425
b.6,200
c.225
d.7,700
17) lucas company uses the weighted-average method in its process costing system. the
company adds materials at the beginning of the process in the forming department,
which is the first of two stages in its production process. information concerning
operations in the forming department in october follows:
what was the materials cost of work in process at october 31?
a.$3,060
b.$5,520
c.$6,000
d.$6,120
18) a manufacturing company that produces a single product has provided the following
data concerning its most recent month of operations:
the total gross margin for the month under absorption costing is:
a.$163,800
b.$7,800
c.$170,800
d.$312,000
19) kuchler corporation has four products that use the same constrained resource. data
concerning those products appear below:
the company does not have enough of the constrained resource to satisfy for demand of
all four products.
from the standpoint of the entire company, if it is a choice between sales of one unit of
one product versus another, which product should the salespersons emphasize?
a.u400
b.u200
c.u300
d.u100
20) vandinter corporation produces and sells a single product. data concerning that
product appear below:
the break-even in monthly dollar sales is closest to:
a.$536,320
b.$670,400
c.$2,681,600
d.$1,296,160
21) excerpts from stys corporation’s most recent balance sheet and income statement
appear below:
dividends on common stock during year 2 totaled $50 thousand. dividends on preferred
stock totaled $10 thousand. the market price of common stock at the end of year 2 was
$8.20 per share.
the dividend payout ratio for year 2 is closest to:
a.60.0%
b.1000.0%
c.45.5%
d.50.0%
22) lucena corporation purchased a machine 7 years ago for $339,000 when it launched
product x05k. unfortunately, this machine has broken down and cannot be repaired. the
machine could be replaced by a new model 360 machine costing $353,000 or by a new
model 280 machine costing $332,000. management has decided to buy the model 280
machine. it has less capacity than the model 360 machine, but its capacity is sufficient
to continue making product x05k. management also considered, but rejected, the
alternative of dropping product x05k and not replacing the old machine. if that were
done, the $332,000 invested in the new machine could instead have been invested in a
project that would have returned a total of $426,000.
in making the decision to buy the model 280 machine rather than the model 360
machine, the differential cost was:
a.$21,000
b.$87,000
c.$7,000
d.$14,000
23) the charade company is preparing its manufacturing overhead budget for the fourth
quarter of the year. the budgeted variable factory overhead is $5.00 per direct
labor-hour; the budgeted fixed factory overhead is $75,000 per month, of which
$15,000 is factory depreciation.
if the budgeted direct labor time for december is 8,000 hours, then total budgeted
factory overhead per direct labor-hour is (rounded):
a.$14.38
b.$9.38
c.$12.50
d.$16.25
24) hardey corporation’s balance sheet and income statement appear below:
cash dividends were $8. the company sold equipment for $13 that was originally
purchased for $8 and that had accumulated depreciation of $8.
the net cash provided by (used by) operations for the year was:
a.$50
b.$93
c.$80
d.$88
25) which of the following statements is true?
a.expenses are not usually separated into variable and fixed elements in externally
reported income statements
b.even if there is no change in units sold, selling price, or cost structure, a company can
increase its absorption costing net operating income from one year to the next just by
producing more units
c.when finished goods inventory decreases during a period, a manufacturing company’s
absorption costing net operating income for that period will usually be greater than its
variable costing net operating income
d.both a and b above
26) in october, haldeman corporation, a manufacturing company, reported the following
financial data:
the company had no beginning or ending inventories.
the gross margin for october was:
a.$282,000
b.$183,000
c.$264,000
d.$5,000
27) kissack corporation produces large commercial doors for warehouses and other
facilities. in the most recent month, the company budgeted production of 4,000 doors.
actual production was 4,300 doors. according to standards, each door requires 9.3
machine-hours. the actual machine-hours for the month were 40,430 machine-hours. the
budgeted supplies cost is $6.20 per machine-hour. the actual supplies cost for the month
was $234,614. the variable overhead efficiency variance for supplies cost is:
a.$2,728 f
b.$2,728 u
c.$13,324 u
d.$13,324 f
28) the materials quantity variance is:
a.$1,120 u
b.$1,820 f
c.$1,820 u
d.$1,120 f
29) danoff corporation has provided data concerning the company’s manufacturing
overhead account for the month of october. prior to the closing of the overapplied or
underapplied balance to cost of goods sold, the total of the debits to the manufacturing
overhead account was $68,000 and the total of the credits to the account was $77,000.
which of the following statements is true?
a.actual manufacturing overhead incurred during the month was $77,000
b.manufacturing overhead applied to work in process for the month was $68,000
c.manufacturing overhead transferred from finished goods to cost of goods sold during
the month was $68,000
d.manufacturing overhead for the month was overapplied by $9,000
30) during the year the balance in the accounts payable account decreased by $8,000. in
order to adjust the company’s net income to a cash basis using the direct method on the
statement of cash flows, it would be necessary to:
a.deduct the $8,000 from the sales revenue reported on the income statement
b.add the $8,000 to the sales revenue reported on the income statement
c.deduct the $8,000 from the cost of goods sold reported on the income statement
d.add the $8,000 to the cost of goods sold reported on the income statement
31) forest corporation has prepared the following budgeted data based on a sales
forecast of $3,000,000:
what would be the amount of dollar sales at the break-even point?
a.$1,125,000
b.$2,000,000
c.$2,650,000
d.$1,750,000
32) two alternatives, code-named x and y, are under consideration at donat corporation.
costs associated with the alternatives are listed below.
are the materials costs and processing costs relevant in the choice between alternatives
x and y? (ignore the equipment rental and occupancy costs in this question.)
a.both materials costs and processing costs are relevant
b.only materials costs are relevant
c.only processing costs are relevant
d.neither materials costs nor processing costs are relevant
33) gaffigan corporation uses process costing. the following data pertain to its assembly
department for december.
required:
determine the equivalent units of production for the assembly department for december
using the weighted-average method.
34) authement corporation has provided the following data from its most recent income
statement:
required:
compute the times interest earned ratio. show your work!
35) (ignore income taxes in this problem.) mink, inc., is considering the purchase of a
machine that would cost $480,000 and would last for 7 years, at the end of which, the
machine would have a salvage value of $82,000. the machine would reduce labor and
other costs by $101,000 per year. additional working capital of $2,000 would be needed
immediately, all of which would be recovered at the end of 7 years. the company
requires a minimum pretax return of 9% on all investment projects.
required:
determine the net present value of the project. show your work!
36) ruvolo jeep tours operates jeep tours in the heart of the colorado rockies. the
company bases its budgets on two measures of activity (i.e., cost drivers), namely
guests and jeeps. one vehicle used in one tour on one day counts as a jeep. each jeep has
one tour guide. the company uses the following data in its budgeting:
in february, the company budgeted for 436 guests and 162 jeeps. the company’s income
statement showing the actual results for the month appears below:
required:
prepare a report showing the company’s revenue and spending variances for february.
label each variance as favorable (f) or unfavorable (u).
37) leckbee corporation’s net income for the most recent year was $3,270,000. a total of
500,000 shares of common stock and 200,000 shares of preferred stock were
outstanding throughout the year. dividends on common stock were $2.70 per share and
dividends on preferred stock were $1.10 per share.
required:
compute the earnings per share of common stock. show your work!
38) spina corporation’s net income last year was $5,472,000. the dividend on common
stock was $10.70 per share and the dividend on preferred stock was $3.00 per share. the
market price of common stock at the end of the year was $49.20 per share. throughout
the year, 400,000 shares of common stock and 100,000 shares of preferred stock were
outstanding.
required:
compute the dividend payout ratio. show your work!
39) in march, branford corporation, a manufacturing company, reported the following
financial data:
required:
prepare an income statement in good form for march using the contribution approach.
40) (ignore income taxes in this problem.) corin corporation is considering the purchase
of a machine that would cost $420,000 and would last for 8 years. at the end of 8 years,
the machine would have a salvage value of $97,000. the machine would reduce labor
and other costs by $76,000 per year. the company requires a minimum pretax return of
16% on all investment projects.
required:
determine the net present value of the project. show your work!
41) dennehy corporation, which makes sophisticated industrial valves, has provided the
following data from its standard costing system and for its actual operations in
november:
required:
compute the variable overhead rate variances for indirect labor and for power for
november. indicate whether each of the variances is favorable (f) or unfavorable (u).
show your work!