1) A static planning budget is:
A.a budget for a single level of activity.
B.a budget that ignores inflation.
C.used only for fixed costs.
D.used when the mix of products does not change.
2) The working capital at the end of Year 2 is:
A.$260 thousand
B.$680 thousand
C.$700 thousand
D.$540 thousand
3) Faas Wares is a division of a major corporation. The following data are for the latest
year of operations:
Required:
a. What is the division’s return on investment (ROI)?
b. What is the division’s residual income?
4) To the nearest whole cent, what should be the average cost of operating the helpline
per call at a volume of 31,300 calls in a month? (Assume that this call volume is within
the relevant range.)
A) $12.30
B) $11.79
C) $10.92
D) $12.05
5) If taxes are ignored, all of the following items are included in a discounted cash flow
analysis except:
A.future operating cash savings.
B.depreciation expense.
C.future salvage value.
D.investment in working capital.
6) The company’s return on total assets for Year 2 is closest to:
A.0.99%
B.1.00%
C.1.85%
D.1.83%
7) Jackson Industries uses a standard cost system in which direct materials inventory is
carried at standard cost. Jackson has established the following standards for one unit of
product.
During May, Jackson purchased 125,000 pounds of direct material at a total cost of
$475,000. The total factory wages for May were $364,000, 90 percent of which were
for direct labor. Jackson manufactured 22,000 units of product during May using
108,000 pounds of direct material and 28,000 direct labor-hours.
The price variance for the direct material acquired by Jackson Industries during May is:
A.$21,600 Favorable
B.$25,000 Unfavorable
C.$28,000 Favorable
D.$21,600 Unfavorable
8) Longview Hospital performs blood tests in its laboratory. The following standards
have been set for each blood test performed:
During May, the laboratory performed 1,500 blood tests. On May 1 there were no direct
materials (plates) on hand; after a plate is used for a blood test it is discarded. Variable
overhead is assigned to blood tests on the basis of standard direct labor-hours. The
following events occurred during May:
3,600 plates were purchased for $9,540
3,200 plates were used for blood tests
340 actual direct labor-hours were worked at a cost of $5,550
The direct materials purchases variance is computed when the materials are purchased.
The materials quantity variance for May is:
A.$1,650 F
B.$1,650 U
C.$550 U
D.$720 F
9) Reid Corporation uses a process costing system in which units go through several
departments. In the Cutting Department for June, units in the beginning work in process
inventory were 80% complete with respect to conversion costs. Units in the ending
work in process inventory were 25% complete with respect to conversion costs. Other
data for the department for June are as follows:
Assuming that the company uses the weighted-average method, the cost per equivalent
unit for conversion costs for June is closest to:
A.$1.64
B.$1.56
C.$1.74
D.$1.48
10) Bee Company’s contribution margin for the second quarter is:
A) $463,200
B) $540,000
C) $851,200
D) $431,200
11) Paradiso Medical Clinic measures its activity in terms of patient-visits. Last month,
the budgeted level of activity was 1,060 patient-visits and the actual level of activity
was 1,050 patient-visits. The cost formula for administrative expenses is $3.00 per
patient-visit plus $17,000 per month. The actual administrative expense was $19,300. In
the clinic’s flexible budget performance report for last month, the spending variance for
administrative expenses was:
A.$850 F
B.$220 U
C.$30 F
D.$880 F
12) Pevy Corporation has two divisions: Southern Division and Northern Division. The
following data are for the most recent operating period:
The common fixed expenses have been allocated to the divisions on the basis of sales.
What is the company’s overall net operating income if it operates at the break-even
points for its two divisions?
A.$(36,520)
B.$33,080
C.$0
D.$(206,520)
13) If machine-hours is Madison’s production constraint, then the ranking of the
products from the most profitable to the least profitable use of the constrained resource
is:
A.A, B, C
B.A, C, B
C.B, C, A
D.C, A, B
The constraint at Bonavita Corporation is time on a particular machine. The company
makes three products that use this machine. Data concerning those products appear
below:
14) Mahaxay Corporation has provided its contribution format income statement for
April.
Required:
a. Compute the degree of operating leverage to two decimal places.
b. Using the degree of operating leverage, estimate the percentage change in net
operating income that should result from a 9% increase in sales.
15) Wittels Corporation has provided the following data:
In Year 2, the company’s net operating income was $42,571, its net income before taxes
was $21,571, and its net income was $15,100. The company’s equity multiplier is
closest to:
A.1.14
B.0.53
C.0.88
D.1.87
16) Higgins Labs, Inc. uses a process costing system. The following data are available
for one department for October:
The department started 45,000 units into production during the month and completed
and transferred 50,000 units to the next department.
Assuming the FIFO method is used, the equivalent units for conversion for October
would be:
A.50,500 units
B.50,000 units
C.44,500 units
D.48,000 units
17) Kampmann Corporation is presently making part Z95 that is used in one of its
products. A total of 5,000 units of this part are produced and used every year. The
company’s Accounting Department reports the following costs of producing the part at
this level of activity:
An outside supplier has offered to make and sell the part to the company for $24.10
each. If this offer is accepted, the supervisor’s salary and all of the variable costs can be
avoided. The special equipment used to make the part was purchased many years ago
and has no salvage value or other use. The allocated general overhead represents fixed
costs of the entire company, none of which would be avoided if the part were purchased
instead of produced internally. If management decides to buy part Z95 from the outside
supplier rather than to continue making the part, what would be the annual impact on
the company’s overall net operating income?
A) Net operating income would decrease by $36,000 per year.
B) Net operating income would decrease by $34,000 per year.
C) Net operating income would increase by $34,000 per year.
D) Net operating income would increase by $36,000 per year.