Nonfinancial accounting information is used more often for long-term operating
decisions than is financial information.
a. True
b. False
Tippi Company produces lamps that require 2.25 standard hours per unit at an hourly
rate of $15.00 per hour. Production of 7,700 units required 17,550 hours at an hourly
rate of $15.20 per hour.
What is the direct labor (a) rate variance, (b) time variance, and (c) total cost variance?
Panamint Systems Corporation is estimating activity costs associated with producing
disk drives, tapes drives, and wire drives. The indirect labor can be traced to four
separate activity pools. The budgeted activity cost and activity base data by product are
provided below.
Determine the activity rate for procurement per purchase order.
a. $43.53
b. $18.50
c. $15.42
d. $37.00
Revenue and expense data for Young Technologies are as follows:
(a) Prepare an income statement in comparative form, stating each item for both years
as an amount and as a percent of sales. Round to the nearest whole percent.
(b) Comment on the significant changes disclosed by the comparative income
statement.
Due to Medicare reimbursement cuts, Loving Home Care is considering shutting down
its Certified Nursing Assistant (CNA) Division. Fixed costs will have to be transferred
to the Nursing Division if the CNA division is discontinued. Based on the following
income statement make a recommendation to the president regarding this decision.
Loving Home Care
Condensed Income Statement
For the Year Ended December 31
A series of equal cash flows at fixed intervals is termed a(n)
a. present value index
b. price-level index
c. net cash flow
d. annuity
In contribution margin analysis, the effect of a difference in unit sales price or unit cost
on the number of units sold is termed the unit price or unit cost factor.
a. True
b. False
The balance sheets at the end of each of the first two years of operations indicate the
following:
If net income is $150,000 and interest expense is $20,000 for Year 2, what is the rate
earned on stockholders’ equity for Year 2?
a. 6.9%
b. 14.5%
c. 16.4%
d. 13.8%
The following data are taken from the balance sheet at the end of the current year.
Determine the (a) working capital, (b) current ratio, and (c) quick ratio. Round ratios to
the nearest tenth.
The management of Nebraska Corporation is considering the purchase of a new
machine costing $490,000. The company’s desired rate of return is 10%. The present
value factors for $1 at compound interest of 10% for 1 through 5 years are 0.909, 0.826,
0.751, 0.683, and 0.621, respectively. In addition to the foregoing information, use the
following data in determining the acceptability:
The cash payback period for this investment is
a. 5 years
b. 4 years
c. 2 years
d. 3 years
On the income statement of a manufacturing company, what replaces purchases in the
cost of goods sold section of a retail company?
a. finished goods
b. cost of merchandise available
c. cost of goods manufactured
d. work in process
Magpie Corporation uses the total cost concept of product pricing. Below is cost
information for the production and sale of 60,000 units of its sole product. Magpie
desires a profit equal to a 25% rate of return on invested assets of $700,000.
The unit selling price for the company’s product is
a. $15.00
b. $13.82
c. $15.80
d. $14.76
When units manufactured exceed units sold:
a. variable costing income equals absorption costing income
b. variable costing income is less than absorption costing income
c. variable costing income is greater than absorption costing income
d. variable costing income is greater by the number of units produced multiplied by the
variable cost ratio.
Differential revenue is the amount of income that would result from the best available
alternative proposed use of cash.
a. True
b. False
If in evaluating a proposal by use of the net present value method there is a deficiency
of the present value of future cash inflows over the amount to be invested, the proposal
should be accepted.
a. True
b. False
The management of Idaho Corporation is considering the purchase of a new machine
costing $430,000. The company’s desired rate of return is 10%. The present value
factors for $1 at compound interest of 10% for 1 through 5 years are 0.909, 0.826,
0.751, 0.683, and 0.621, respectively. In addition to the foregoing information, use the
following data in determining the acceptability of this investment:
The net present value for this investment is
a. $16,400
b. $25,200
c. $(99,600)
d. $(126,800)
If a business had sales of $4,000,000 and a margin of safety of 25%, the break-even
point was
a. $5,000,000
b. $3,000,000
c. $12,000,000
d. $1,000,000
Manufacturers use machinery and labor to convert direct materials into finished
products.
a. True
b. False
All of the following can be used as an allocation base for calculating factory overhead
rates except:
a. direct labor dollars
b. direct labor hours
c. machine hours
d. total units produced
What term is commonly used to describe the concept whereby the cost of manufactured
products is composed of direct materials cost, direct labor cost, and all factory overhead
cost?
a. Standard costing
b. Variable costing
c. Absorption costing
d. Marginal costing
Laurie Inc.’s static budget for 10,000 units of production includes $60,000 for direct
materials, $44,000 for direct labor, fixed utilities costs of $5,000, and supervisor
salaries of $25,000. A flexible budget for 12,000 units of production would show
a. the same cost structure in total
b. direct materials of $72,000, direct labor of $52,800, fixed utilities of $5,000, and
supervisor salaries of $25,000
c. total variable costs of $159,800
d. direct materials of $60,000, direct labor of $52,800, fixed utilities of $6,000, and
supervisor salaries of $25,000
Jensen Company reports the following:
Jensen Company’s period costs are
a. $345,000
b. $250,000
c. $400,000
d. $175,000
The Klamath Corp. produces two products, saws and drills. Three activities are used in
their manufacture. These activities and their associated costs and bases are as follows:
a) Determine the activity rate for each activity.
b) Determine the overhead cost per unit for each product.
The following data are taken from the financial statements:
