1) Setting up a machine to change from producing one product to another is an example
of a:
A.Unit-level activity.
B.Batch-level activity.
C.Product-level activity.
D.Organization-sustaining activity.
2) Hasty Hardwood Floors installs oak and other hardwood floors in homes and
businesses. The company uses an activity-based costing system for its overhead costs.
The company has provided the following data concerning its annual overhead costs and
its activity based costing system:
The “Other” activity cost pool consists of the costs of idle capacity and
organization-sustaining costs.
The amount of activity for the year is as follows:
A ‘square” is a measure of area that is roughly equivalent to 1,000 square feet.
Required:
a. Prepare the first-stage allocation of overhead costs to the activity cost pools by filling
in the table below:
b. Compute the activity rates (i.e., cost per unit of activity) for the Installing Floors and
Job Support activity cost pools by filling in the table below:
c. Compute the overhead cost, according to the activity-based costing system, of a job
that involves installing 3.4 squares.
3) Majorn Auto Parts Store had net income of $81,000 for the year just ended. Majorn
collected the following additional information to prepare its statement of cash flows for
the year:
Majorn uses the indirect method to prepare its statement of cash flows. What is
Majorn’s net cash provided (used) by operating activities?
A.$41,000
B.$(53,000)
C.$185,000
D.$279,000
4) Italia Espresso Machina Inc. produces a single product. Data concerning the
company’s operations last year appear below:
Required:
a. Compute the unit product cost under both absorption and variable costing.
b. Prepare an income statement for the year using absorption costing.
c. Prepare a contribution format income statement for the year using variable costing.
d. Prepare a report reconciling the difference in net operating income between
absorption and variable costing for the year.
5) Biggs Enterprise’s flexible budget cost formula for indirect materials, a variable cost,
is $0.60 per unit of output. If the company’s performance report for last month shows a
$200 favorable spending variance for indirect materials and if 9,000 units of output
were produced last month, then the actual costs incurred for indirect materials for the
month must have been:
A.$5,600
B.$5,400
C.$6,000
D.$5,200
6) Smithj 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 February, the kennel budgeted
for 3,500 tenant-days, but its actual level of activity was 3,490 tenant-days. The kennel
has provided the following data concerning the formulas used in its budgeting and its
actual results for February:
Data used in budgeting:
Actual results for February:
The spending variance for facility expenses in February would be closest to:
A.$447 F
B.$400 F
C.$400 U
D.$447 U
7) The company’s total asset turnover for Year 2 is closest to:
A.10.17
B.0.10
C.1.02
D.0.98
8) The net present value of the entire project is closest to:
A.$161,748
B.$169,668
C.$221,000
D.$273,670
9) Eberley Corporation’s cost formula for its manufacturing overhead is $25,700 per
month plus $10 per machine-hour. For the month of July, the company planned for
activity of 5,900 machine-hours, but the actual level of activity was 5,920
machine-hours. The actual manufacturing overhead for the month was $86,800.
The spending variance for manufacturing overhead in July would be closest to:
A.$2,100 U
B.$1,900 F
C.$1,900 U
D.$2,100 F
10) Studler Corporation has an activity-based costing system with three activity cost
pools-Processing, Supervising, and Other. In the first stage allocations, costs in the two
overhead accounts, equipment expense and indirect labor, are allocated to the three
activity cost pools based on resource consumption. Data used in the first stage
allocations follow:
Processing costs are assigned to products using machine-hours (MHs) and Supervising
costs are assigned to products using the number of batches. The costs in the Other
activity cost pool are not assigned to products. Activity data for the company’s two
products follow:
What is the overhead cost assigned to Product R6 under activity-based costing?
A.$44,000
B.$60,900
C.$18,145
D.$42,755
11) Using the high-low method, the estimate of the variable component of office
expense per escrow completed is closest to:
A) $26.75
B) $118.23
C) $36.11
D) $72.49
12) The working capital at the end of Year 2 is:
A.$270
B.$500
C.$770
D.$740
13) Minist Corporation sells a single product for $15 per unit. Last year, the company’s
sales revenue was $225,000 and its net operating income was $18,000. If fixed
expenses totaled $72,000 for the year, the break-even point in unit sales was:
A.15,000
B.9,900
C.14,100
D.12,000
14) At the beginning of December, Sneeden Corporation had $32,000 of raw materials
on hand. During the month, the Corporation purchased an additional $71,000 of raw
materials. During December, $75,000 of raw materials were requisitioned from the
storeroom for use in production. The credits entered in the Raw Materials account
during the month of December total:
A.$32,000
B.$75,000
C.$71,000
D.$103,000
15) Brew Corporation’s most recent comparative balance sheet and income statement
appear below:
Cash dividends were $37. The company did not retire or sell any property, plant, and
equipment during the year. The net cash provided by (used in) operating activities for
the year was:
A.$185
B.$51
C.$83
D.$191
16) Fahringer Corporation makes three products that use compound W, the current
constrained resource. Data concerning those products appear below:
Rank the products in order of their current profitability from most profitable to least
profitable. In other words, rank the products in the order in which they should be
emphasized.
A.XS,BJ,QR
B.QR,BJ,XS
C.BJ,QR,XS
D.QR,XS,BJ
17) Lehnertz Corporation manufactures and sells a single product. The company uses
units as the measure of activity in its budgets and performance reports. During
February, the company budgeted for 7,100 units, but its actual level of activity was
7,150 units. The company has provided the following data concerning the formulas
used in its budgeting and its actual results for February:
Data used in budgeting:
Actual results for February:
The direct materials in the flexible budget for February would be closest to:
A.$74,456
B.$75,508
C.$76,680
D.$77,220
18) Rollison Corporation has two divisions: Retail Division and Wholesale Division.
The following data are for the most recent operating period:
The common fixed expenses of the company are $76,300.
The company’s overall break-even sales in dollars is closest to:
A.$469,884
B.$364,286
C.$105,599
D.$316,996