1) differential costs can be either fixed or variable.
2) activity-based costing uses a number of activity cost pools, each of which is allocated
to products on the basis of direct labor-hours.
3) the issuance of a stock dividend will appear in the financing activities section of the
statement of cash flows.
4) the planning horizons for committed fixed costs and discretionary fixed costs are
generally the same.
5) the variable cost per unit is constant and does not depend on how many units are
produced.
6) juncker corporation’s most recent balance sheet and income statement appear below:
the times interest earned for year 2 is closest to:
a.11.75
b.16.79
c.10.75
d.7.50
7) haan inc. is a merchandising company. last month the company’s cost of goods sold
was $66,000. the company’s beginning merchandise inventory was $14,000 and its
ending merchandise inventory was $16,000. what was the total amount of the
company’s merchandise purchases for the month?
a.$68,000
b.$96,000
c.$64,000
d.$66,000
8) the ratio of fixed expenses to the unit contribution margin is the:
a.break-even point in unit sales
b.profit margin
c.contribution margin ratio
d.margin of safety
9) which of the following companies would be most likely to use a job-order costing
system rather than a process costing system?
a.fast food restaurant
b.shipbuilding
c.crude oil refining
d.candy making
10) alvernaz inc. has provided the following data for the month of april. 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 $2,000.
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 journal entry to record the allocation of any underapplied or overapplied overhead
for april would include the following:
a.credit to cost of goods sold of $1,240
b.credit to cost of goods sold of $106,810
c.debit to cost of goods sold of $106,810
d.debit to cost of goods sold of $1,240
11) pricton corporation has a job-order costing system. for the month of april, the
following debits (credits) appeared in the work in process account:
pricton applies overhead at a predetermined rate of 90% of direct labor cost. job no. 50,
the only job still in process at the end of april, has been charged with manufacturing
overhead of $2,250. the amount of direct materials charged to job no. 50 was:
a.$9,000
b.$4,250
c.$2,500
d.$2,250
12) luc 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 5,000 units, but its actual level of activity was 4,950 units. the
company has provided the following data concerning the formulas used in its budgeting
and its actual results for february:
the spending variance for direct materials in february would be closest to:
a.$3,450 f
b.$2,525 u
c.$3,450 u
d.$2,525 f
13) shipping expense is $9,000 for 8,000 pounds shipped and $11,250 for 11,000
pounds shipped. assuming that this activity is within the relevant range, if the company
ships 9,000 pounds, its expected shipping expense is closest to:
a.$10,125
b.$8,583
c.$9,972
d.$9,750
14) guynn corporation’s most recent balance sheet and income statement appear below:
dividends on common stock during year 2 totaled $10 thousand. dividends on preferred
stock totaled $5 thousand. the market price of common stock at the end of year 2 was
$7.05 per share.
the return on common stockholders’ equity for year 2 is closest to:
a.7.33%
b.6.67%
c.5.88%
d.6.47%
15) johannsen catering uses two measures of activity, jobs and meals, in the cost
formulas in its budgets and performance reports. the cost formula for catering supplies
is $310 per month plus $103 per job plus $23 per meal. a typical job involves serving a
number of meals to guests at a corporate function or at a host’s home. the company
expected its activity in february to be 28 jobs and 187 meals, but the actual activity was
26 jobs and 192 meals. the actual cost for catering supplies in february was $7,620. the
catering supplies in the flexible budget for february would be closest to:
a.$7,495
b.$7,404
c.$7,620
d.$6,960
16) if stewart company sells 1,150 units in march and this activity is within the relevant
range, the expected total cost would most likely be closest to:
a.$2,610.50
b.$1,774.00
c.$4,343.92
d.$4,384.50
17) henkel clinic uses client-visits as its measure of activity. during november, the clinic
budgeted for 3,600 client-visits, but its actual level of activity was 3,550 client-visits.
the clinic has provided the following data concerning the formulas used in its budgeting
and its actual results for november:
the activity variance for administrative expenses in november would be closest to:
a.$215 u
b.$215 f
c.$5 f
d.$5 u
18) baaca corporation has provided the following production and total cost data for two
levels of monthly production volume. the company produces a single product.
the best estimate of the total monthly fixed manufacturing cost is:
a.$1,424,400
b.$1,506,400
c.$932,400
d.$1,465,400
19) if a cost object such as a product or customer has a positive red margin, then:
a.its yellow margin will be positive
b.its yellow margin may be positive, negative, or zero
c.its yellow margin will be negative
d.its yellow margin will be zero
20) joe ringworth, factory supervisor at winger enterprises, had been attending night
classes to earn a degree in business. he was particularly puzzled by what one of his
accounting professors had said in class the previous evening. the professor, who knew
that joe worked as a factory supervisor, had said that some of joe’s salary could end up
on the company’s balance sheet at the end of the month. this didn’t make any sense to
joe since he gets the salary, not the company.
required:
explain to joe why some of his salary could end up on the company’s balance sheet at
the end of the month.
21) elio corporation would like to use target costing for a new product that is under
consideration. at a selling price of $84 per unit, management projects sales of 40,000
units. the new product would require an investment of $400,000. the desired return on
investment is 11%.
required:
determine the target cost per unit for the new product.
22) the selling price of garey corporation’s only product is $170.00 per unit and its
variable expense is $39.10 per unit. the company’s monthly fixed expense is $641,410.
required:
assume the company’s monthly target profit is $65,450. determine the unit sales to
attain that target profit. show your work!
23) ewin corporation is developing direct labor standards. the basic direct labor wage
rate is $14.75 per hour. employment taxes are 9% of the basic wage rate. fringe benefits
are $3.98 per hour.
required:
determine the standard rate per direct labor-hour. show your work!
24) unified parcel, inc., operates a local parcel delivery service. the company keeps
detailed records relating to operating costs of trucks, and has found that if a truck is
driven 110,000 miles per year the operating cost is 7.5 cents per mile. this cost increases
to 8.75 cents per mile if a truck is driven 60,000 miles per year.
required:
estimate the cost formula for truck operating costs using the high-low method.
25) in july, neidich inc., a merchandising company, had sales of $295,000, selling
expenses of $24,000, and administrative expenses of $29,000. the cost of merchandise
purchased during the month was $215,000. the beginning balance in the merchandise
inventory account was $25,000 and the ending balance was $30,000.
required:
prepare an income statement in good form for july.
26) brynteson corporation bases its budgets on the activity measure customers served.
during september, the company planned to serve 24,000 customers, but actually served
19,000 customers. the company uses the following revenue and cost formulas in its
budgeting, where q is the number of customers served:
revenue: $2.90q
wages and salaries: $24,700 + $0.90q
supplies: $0.40q
insurance: $4,900
miscellaneous: $2,800 + $0.10q
required:
prepare a report showing the company’s activity variances for september. indicate in
each case whether the variance is favorable (f) or unfavorable (u).
