1) When a multi-product factory operates at full capacity, decisions must be made about
what products to emphasize. In making such decisions, products should be ranked
based on:
A) selling price per unit
B) contribution margin per unit
C) contribution margin per unit of the constraining resource
D) unit sales volume
2) Anderson Corporation has two service departments and two producing departments.
The costs of the Personnel Department are allocated to other departments on the basis
of the number of employees in the departments. Departments and number of employees
are as follows:
Costs in the Personnel Department total $900,000 per year. Under the step-down
method, the costs of the Personnel Department are allocated before the costs of the
Engineering Department are allocated. The amount of this cost allocated to the
Engineering Department under the step-down method is closest to:
A.$0
B.$81,000
C.$83,505
D.$92,046
3) Cieslak, Inc., allocates service department costs to operating departments using the
step-down method. The company has two service departments, Administration and
Physical Plant, and two operating departments, Assembly and Testing. Data concerning
those departments follow:
Administration Department costs are allocated first on the basis of employee time and
Physical Plant Department costs are allocated second on the basis of space occupied.
The total Testing Department cost after allocations is closest to:
A.$623,963
B.$622,864
C.$623,760
D.$613,680
4) Roberts Corporation manufactures home cleaning products. One of the products,
Quickclean, requires 2 pounds of Material A and 5 pounds of Material B per unit
manufactured. Material A is purchased from the supplier for $0.30 per pound and
Material B is purchased for $0.50 per pound. The finished goods inventory on hand at
the end of each month should equal 4,000 units plus 25% of the next month’s sales. The
raw materials inventory on hand at the end of each month (for either Material A or
Material B) should equal 80% of the following month’s production needs.
The production budget calls for 26,000 units of Quickclean to be manufactured in June
and 32,000 units of Quickclean to be manufactured in July. On May 31 there will be
41,600 pounds of Material A and 104,000 pounds of Material B in inventory.
Assume that on January 1 the inventory of Quickclean was 8,000 units. Expected sales
in January are 14,000 units and expected sales in February are 18,000 units. The
number of units needed to be produced in January would be:
A.10,500
B.14,000
C.14,500
D.15,000
5) Charlie Company has provided the following data concerning power consumption in
the company’s two operating departments:
The company has a Power Services department which provides electrical power for the
operating departments. Fixed costs in Power Services are budgeted at $300,000 for the
year and are incurred in order to support peak-period power requirements. How much
of this cost should be charged to Department 1?
A.$120,000
B.$150,000
C.$180,000
D.$0
6) The standards for product F28 call for 2.7 pounds of a raw material that costs $16.50
per pound. Last month, 4,100 pounds of the raw material were purchased for $70,520.
The actual output of the month was 1,300 units of product F28. A total of 3,500 pounds
of the raw material were used to produce this output.
Required:
a. What is the materials price variance for the month?
b. What is the materials quantity variance for the month?
c. Prepare journal entries to record the purchase and use of the raw material during the
month. (All raw materials are purchased on account.)
7) What would the annual cost of additional supervision have to be in order for Hadley
to be indifferent between making or buying the component? (Assume everything else
remains the same.)
A) $20,000
B) $19,000
C) $18,000
D) $17,000
8) Vontungeln Corporation uses activity-based costing to compute product margins. In
the first stage, the activity-based costing system allocates two overhead
accounts-equipment depreciation and supervisory expense-to three activity cost
pools-Machining, Order Filling, and Other-based on resource consumption. Data to
perform these allocations appear below:
In the second stage, Machining costs are assigned to products using machine-hours
(MHs) and Order Filling costs are assigned to products using the number of orders. The
costs in the Other activity cost pool are not assigned to products.
Finally, sales and direct cost data are combined with Machining and Order Filling costs
to determine product margins.
What is the overhead cost assigned to Product I6 under activity-based costing?
A.$11,760
B.$24,072
C.$34,000
D.$12,312
9) Upchurch Corporation produces and sells a single product. Data concerning that
product appear below:
Assume the company’s target profit is $12,000. The unit sales to attain that target profit
is closest to:
A.3,242 units
B.4,912 units
C.9,535 units
D.5,896 units
10) Kopas Corporation has provided the following data:
The inventory turnover for this year is closest to:
A.3.09
B.0.98
C.1.03
D.3.05
11) Pearse Kennel uses tenant-days as its measure of activity; an animal housed in the
kennel for one day is counted as one tenant-day. During December, the kennel budgeted
for 3,000 tenant-days, but its actual level of activity was 2,980 tenant-days. The kennel
has provided the following data concerning the formulas used in its budgeting and its
actual results for December:
Data used in budgeting:
Actual results for December:
The overall revenue and spending variance (i.e., the variance for net operating income
in the revenue and spending variance column on the flexible budget performance
report) for December would be closest to:
A.$640 F
B.$840 F
C.$640 U
D.$840 U
12) The Maxwell Corporation has a standard costing system in which variable
manufacturing overhead is assigned to production on the basis of standard
machine-hours. The following data are available for July:
Actual variable manufacturing overhead cost incurred: $22,620
Actual machine-hours worked: 1,600 hours
Variable overhead rate variance: $3,420 Unfavorable
Total variable overhead spending variance: $4,620 Unfavorable
The standard number of machine-hours allowed for July production is:
A.1,500 hours
B.1,600 hours
C.1,700 hours
D.2,270 hours