1) The North Division of Barter Company makes and sells a single product, which is a
part used in manufacturing trucks. The annual production capacity is 35,000 units and
the variable cost of each unit is $24. Presently the North Division sells 32,000 units per
year to outside customers at $40 per unit. The South Division of Barter Company would
like to buy 15,000 units a year from North to use in its production. There would be no
savings in variable costs from transferring the units internally rather than selling them
externally. The lowest acceptable transfer price from the standpoint of the North
Division should be closest to:
A.$36.80
B.$24.00
C.$32.00
D.$40.00
2) Gwinnett Barbecue Sauce Corporation manufactures a specialty barbecue sauce.
Gwinnett has the capacity to manufacture and sell 10,000 cases of sauce each year but
is currently only manufacturing and selling 9,000. The following costs relate to annual
operations at 9,000 cases:
Gwinnett normally sells its sauce for $30 per case. A local school district is interested in
purchasing Gwinnett’s excess capacity of 1,000 cases of sauce but only if they can get
the sauce for $15 per case. This special order would not affect regular sales or total
fixed costs or variable costs per unit. If this special order is accepted, Gwinnett’s profits
for the year will:
A) increase by $600
B) decrease by $1,000
C) decrease by $4,000
D) decrease by $6,600
3) Hardee Inc., which produces a single product, has provided the following data for its
most recent month of operations:
There were no beginning or ending inventories.
The unit product cost under variable costing was:
A.$35 per unit
B.$32 per unit
C.$103 per unit
D.$33 per unit
4) CS Company has a profit margin of 11%. Sales are $320,000, net operating income
is $35,200, and average operating assets are $128,000. What is the company’s return on
investment (ROI)?
A.2.5
B.11%
C.27.5%
D.0.40
5) The product’s profit-maximizing price according to the formula in the text is closest
to:
A.$259.84
B.$33.99
C.$40.89
D.$31.81
6) Weldon Industrial Gas Corporation supplies acetylene and other compressed gases to
industry. Data regarding the store’s operations follow:
Sales are budgeted at $360,000 for November, $380,000 for December, and $350,000
for January.
Collections are expected to be 75% in the month of sale, 20% in the month following
the sale, and 5% uncollectible.
The cost of goods sold is 65% of sales.
The company desires an ending merchandise inventory equal to 60% of the cost of
goods sold in the following month.
Payment for merchandise is made in the month following the purchase.
Other monthly expenses to be paid in cash are $21,900.
Monthly depreciation is $20,000.
Ignore taxes.
Required:
a. Prepare a Schedule of Expected Cash Collections for November and December.
b. Prepare a Merchandise Purchases Budget for November and December.
c. Prepare Cash Budgets for November and December.
d. Prepare Budgeted Income Statements for November and December.
e. Prepare a Budgeted Balance Sheet for the end of December.
7) Stelmack Corporation, a manufacturing Corporation, has provided data concerning
its operations for September. The beginning balance in the raw materials account was
$20,000 and the ending balance was $27,000. Raw materials purchases during the
month totaled $63,000. Manufacturing overhead cost incurred during the month was
$53,000, of which $3,000 consisted of raw materials classified as indirect materials.
The direct materials cost for September was:
A.$56,000
B.$53,000
C.$70,000
D.$63,000
8) Comings Corporation produces and sells two products. In the most recent month,
Product R19J had sales of $30,000 and variable expenses of $9,000. Product O37G had
sales of $34,000 and variable expenses of $10,840. The fixed expenses of the entire
company were $35,560. If the sales mix were to shift toward Product R19J with total
dollar sales remaining constant, the overall break-even point for the entire company:
A.would increase.
B.would not change.
C.could increase or decrease.
D.would decrease.
9) The income tax expense in year 2 is:
A.$14,000
B.$112,000
C.$28,000
D.$154,000
10) 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 FIFO cost method, the cost per equivalent unit for
conversion costs for June is closest to:
A.$1.80
B.$1.40
C.$1.64
D.$1.35
11) Muzyka 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.
The cost per equivalent unit for materials for the month in the first processing
department is closest to:
A.$23.14
B.$18.91
C.$21.42
D.$22.06
12) Which of the following entries would correctly record the application of overhead
cost?
A.Option A
B.Option B
C.Option C
D.Option D
13) Which of the following is not an effective way of dealing with a production
constraint (i.e., bottleneck)?
A) Reduce the number of defective units produced at the bottleneck.
B) Pay overtime to workers assigned to the bottleneck.
C) Pay overtime to workers assigned to work stations located after the bottleneck in the
production process.
D) Subcontract work that would otherwise required use of the bottleneck.
14) If the equipment is rebuilt, the present value of the cash flows that occur now is:
A.$(55,000)
B.$(25,000)
C.$(16,000)
D.$(23,000)
15) The sunk cost in this situation is:
A) $40,000
B) $750,000
C) $690,000
D) $1,100,000
16) The total of the manufacturing overhead costs listed above for December is:
A) $30,000
B) $82,000
C) $647,000
D) $340,000
17) The Bolton Company operates a Health Care service department for its employees.
The variable costs of this department are charged to the company’s two operating
departments, Assembly and Finishing, based on the number of employees in each
department. The Health Care Department’s total variable cost was budgeted at $55,000
for the past year; its actual total variable cost was $56,112. Additional data for the past
year follow:
How much Health Care variable cost should be charged to Finishing at the end of the
year?
A.$21,670
B.$22,000
C.$22,064
D.$22,400
18) Fimbrez Corporation has provided the following data concerning an investment
project that it is considering:
The net present value of the project is closest to:
A.$358,484
B.$360,000
C.$(1,516)
D.$112,000