1) trend percentages state several years’ financial data in terms of a base year. for
example, sales for every year would be stated as a percentage of the sales in the base
year.
2) the production manager is usually held responsible for the labor efficiency variance.
3) the direct method has the disadvantage that it may leave some service department
costs unallocated.
4) when sales exceeds production for a period, absorption costing net operating income
will generally be greater than variable costing net operating income.
5) with automation, fixed costs increase relative to variable costs.
6) a quality cost report is usually compiled by the purchasing department to show the
added costs of purchasing higher quality components.
7) demand for a product is said to be elastic if a change in price has a substantial effect
on the number of units sold.
8) in the absence of a constraint, all business segments that are relatively profitable
should be retained.
9) six sigma is a process improvement method that targets a system’s constraint for
process improvement.
10) cole laboratories makes and sells a lawn fertilizer called fastgro. the company has
developed standard costs for one bag of fastgro as follows:
the company had no beginning inventories of any kind on jan. 1. variable overhead is
applied to production on the basis of standard direct labor-hours. during january, the
following activity was recorded by the company:
production of fastgro: 4,000 bags
direct materials purchased: 85,000 pounds at a cost of $32,300
direct labor worked: 390 hours at a cost of $4,875
variable overhead incurred: $1,475
inventory of direct materials on jan. 31: 3,000 pounds
the labor efficiency variance for january is:
a.$475 f
b.$350 u
c.$130 u
d.$110 f
11) leriche corporation has provided the following data for a recent month:
the variable overhead rate variance for indirect labor is closest to:
a.$7,178 u
b.$5,867 f
c.$7,178 f
d.$1,311 u
12) wolle corporation estimates that its variable manufacturing overhead is $11.60 per
machine-hour and its fixed manufacturing overhead is $298,936 per period.
if the denominator level of activity is 4,300 machine-hours, the variable element in the
predetermined overhead rate would be:
a.$11.60
b.$79.54
c.$69.52
d.$81.12
13) hanemann corporation’s most recent balance sheet appears below:
the net income for the year was $103. cash dividends were $23. the net cash provided
by (used by) financing activities for the year was:
a.($56)
b.($38)
c.($23)
d.$5
14) the northern division of the smith company had average operating assets totaling
$150,000 last year. if the minimum required rate of return is 12%, and if last year’s net
operating income at northern was $20,000, then the residual income for northern last
year was:
a.$20,000
b.$l8,000
c.$5,000
d.$2,000
15) wandrie inc. has provided the following data for the month of october. there were
no beginning inventories; consequently, the direct materials, direct labor, and
manufacturing overhead applied listed below are all for the current month.
manufacturing overhead for the month was overapplied by $3,000.
the company allocates any underapplied or overapplied overhead among work in
process, finished goods, and cost of goods sold at the end of the month on the basis of
the overhead applied during the month in those accounts.
the cost of goods sold for october after allocation of any underapplied or overapplied
overhead for the month is closest to:
a.$215,600
b.$210,980
c.$210,290
d.$216,290
16) which of the following budgets are prepared before the sales budget?
a.choice a
b.choice b
c.choice c
d.choice d
17) kraska corporation has provided the following data from its activity-based costing
system:
according to the activity-based costing system, the product margin for product o11w is:
a.$4,651.80
b.$1,688.10
c.$17,934.00
d.$3,956.10
18) kleppe corporation has provided the following data from its activity-based costing
accounting system:
the “other” activity cost pool consists of the costs of idle capacity and
organization-sustaining costs that are not assigned to products.
how much indirect factory wages and factory equipment depreciation cost would be
assigned to the customer orders activity cost pool?
a.$240,000
b.$72,000
c.$68,000
d.$480,000
19) (ignore income taxes in this problem.) purvell company has just acquired a new
machine. data on the machine follow:
the company uses straight-line depreciation and a $5,000 salvage value. (the company
considers salvage value in making depreciation deductions.) assume cash flows occur
uniformly throughout a year.
the simple rate of return would be closest to:
a.30.0%
b.17.5%
c.18.75%
d.12.5%
20) what is the net operating income for the month under absorption costing?
a.$9,500
b.$3,500
c.$5,700
d.$13,000
21) hon company makes three products in a single facility. data concerning these
products follow:
the mixing machines are potentially the constraint in the production facility. a total of
24,500 minutes are available per month on these machines.
direct labor is a variable cost in this company.
required:
a. how many minutes of mixing machine time would be required to satisfy demand for
all three products?
b. how much of each product should be produced to maximize net operating income?
(round off to the nearest whole unit.)
c. up to how much should the company be willing to pay for one additional hour of
mixing machine time if the company has made the best use of the existing mixing
machine capacity? (round off to the nearest whole cent.)
22) coles company, inc. makes and sells a single product, product r. three yards of
material k are needed to make one unit of product r. budgeted production of product r
for the next five months is as follows:
the company wants to maintain monthly ending inventories of material k equal to 20%
of the following month’s production needs. on july 31, this requirement was not met
since only 2,500 yards of material k were on hand. the cost of material k is $0.85 per
yard. the company wants to prepare a direct materials purchase budget for the rest of
the year.
the total cost of material k to be purchased in august is:
a.$40,970
b.$48,200
c.$33,840
d.$42,300
23) julison company produces a single product. the cost of producing and selling a
single unit of this product at the company’s normal activity level of 60,000 units per
month is as follows:
the normal selling price of the product is $79.80 per unit.
an order has been received from an overseas customer for 2,000 units to be delivered
this month at a special discounted price. this order would have no effect on the
company’s normal sales and would not change the total amount of the company’s fixed
costs. the variable selling and administrative expense would be $0.30 less per unit on
this order than on normal sales.
direct labor is a variable cost in this company.
required:
a. suppose there is ample idle capacity to produce the units required by the overseas
customer and the special discounted price on the special order is $71.60 per unit. by
how much would this special order increase (decrease) the company’s net operating
income for the month?
b. suppose the company is already operating at capacity when the special order is
received from the overseas customer. what would be the opportunity cost of each unit
delivered to the overseas customer?
c. suppose there is not enough idle capacity to produce all of the units for the overseas
customer and accepting the special order would require cutting back on production of
700 units for regular customers. what would be the minimum acceptable price per unit
for the special order?
24) (ignore income taxes in this problem.) purvell company has just acquired a new
machine. data on the machine follow:
the company uses straight-line depreciation and a $5,000 salvage value. (the company
considers salvage value in making depreciation deductions.) assume cash flows occur
uniformly throughout a year.
the payback period would be closest to:
a.3.33 years
b.3.0 years
c.8.0 years
d.2.9 years
25) (ignore income taxes in this problem.) eckels corporation is considering the
following three investment projects:
the profitability index of investment project n is closest to:
a.0.18
b.0.82
c.1.18
d.0.15
26) ldg corporation makes and sells a product called product wz. each unit of product
wz requires 2.0 hours of direct labor at the rate of $10.50 per direct labor-hour.
management would like you to prepare a direct labor budget for june.
the budgeted direct labor cost per unit of product wz would be:
a.$12.50
b.$10.50
c.$21.00
d.$5.25
27) magers corporation produces and sells a single product. data concerning that
product appear below:
required:
determine the monthly break-even in either unit or total dollar sales. show your work!
28) a customer has asked clougherty corporation to supply 4,000 units of product m97,
with some modifications, for $40.10 each. the normal selling price of this product is
$48.00 each. the normal unit product cost of product m97 is computed as follows:
direct labor is a variable cost. the special order would have no effect on the company’s
total fixed manufacturing overhead costs. the customer would like some modifications
made to product m97 that would increase the variable costs by $5.70 per unit and that
would require a one-time investment of $31,000 in special molds that would have no
salvage value. this special order would have no effect on the company’s other sales. the
company has ample spare capacity for producing the special order.
required:
determine the effect on the company’s total net operating income of accepting the
special order. show your work!
29) foshie corporation is about to launch a new product, h16, whose variable cost is
$104.30 per unit and that would require 6.00 centiliters of a key raw material that is the
company’s constrained resource. the opportunity cost of this raw material is $54.00 per
centiliter used.
required:
what advice would you give to the company concerning the price that should be
charged for the new product h16?
30) a number of companies in different industries are listed below:
natural gas production company
food caterer that supplies food for weddings and other special events
elevator production and installation company
coal mining company
contract printer that produces posters, books, and pamphlets to order
dairy farm
required:
for each company, indicate whether the company is most likely to use job-order costing
or process costing.
31) biello co. manufactures and sells medals for winners of athletic and other events. its
manufacturing plant has the capacity to produce 15,000 medals each month; current
monthly production is 14,250 medals. the company normally charges $115 per medal.
cost data for the current level of production are shown below:
the company has just received a special one-time order for 600 medals at $102 each. for
this particular order, no variable selling and administrative costs would be incurred. this
order would also have no effect on fixed costs.
required:
should the company accept this special order? why?
32) (ignore income taxes in this problem.) korber corporation is considering investing
$820,000 in a project. the life of the project would be 8 years. the project would require
additional working capital of $18,000, which would be released for use elsewhere at the
end of the project. the annual net cash inflows would be $246,000. the salvage value of
the assets used in the project would be $41,000. the company uses a discount rate of
19%.
required:
compute the net present value of the project.