1) economists correctly point out that many costs that the accountant classifies as
variable are actually curvilinear.
2) screening decisions follow preference decisions and seek to rank investment
proposals in order of their desirability.
3) when a company prepares its statement of cash flows under the indirect method, an
increase in depreciation expense will also increase the net cash provided by operating
activities.
4) the price-earnings ratio is computed by dividing the market price per share by the
current earnings per share.
5) a decentralized organization is one in which decisions are made by top management
and then implemented by managers at lower operating levels.
6) lampert corporation manufactures and sells a single product. the company uses units
as the measure of activity in its budgets and performance reports. during march, the
company budgeted for 6,100 units, but its actual level of activity was 6,060 units. the
company has provided the following data concerning the formulas used in its budgeting
and its actual results for march:
the activity variance for selling and administrative expenses in march would be closest
to:
a.$906 u
b.$906 f
c.$24 u
d.$24 f
7) dilloo company uses an activity-based costing system with three activity cost pools.
the company has provided the following data concerning its costs and its activity based
costing system:
the “other” activity cost pool consists of the costs of idle capacity and
organization-sustaining costs.
you have been asked to complete the first-stage allocation of costs to the activity cost
pools.
how much cost, in total, would be allocated in the first-stage allocation to the customer
support activity cost pool?
a.$330,000
b.$231,000
c.$280,500
d.$309,000
8) marcy corporation’s current ratio is currently 1.75. the firm’s current ratio cannot fall
below 1.5 without violating agreements with its bondholders. if current liabilities are
presently $250 million, the maximum new short-term debt that can be issued to finance
an equivalent amount of inventory expansion is:
a.$41.67 million
b.$375.00 million
c.$125.00 million
d.$62.50 million
9) alarie tech is a for-profit vocational school. the school bases its budgets on two
measures of activity (i.e., cost drivers), namely student and course. the school uses the
following data in its budgeting:
in november, the school budgeted for 1,420 students and 139 courses. the actual activity
for the month was 1,220 students and 142 courses.
required:
prepare a report showing the school’s activity variances for november. label each
variance as favorable (f) or unfavorable (u).
10) the following data have been provided by hanover corporation, a company that
produces forklift trucks:
the variable overhead efficiency variance for supplies cost is:
a.$3,496 u
b.$5,145 u
c.$5,145 f
d.$3,496 f
11) leibson company, which has only one product, has provided the following data
concerning its most recent month of operations:
the company produces the same number of units every month, although the sales in
units vary from month to month. the company’s variable costs per unit and total fixed
costs have been constant from month to month.
required:
a. what is the unit product cost for the month under variable costing?
b. what is the unit product cost for the month under absorption costing?
c. prepare a contribution format income statement for the month using variable costing.
d. prepare an income statement for the month using absorption costing.
e. reconcile the variable costing and absorption costing net operating incomes for the
month.
12) under absorption costing, the carrying value on the balance sheet of the ending
inventory for the year would be:
a.$190,800
b.$170,000
c.$230,800
d.$0
13) in july, one of the processing departments at keen corporation had beginning work
in process inventory of $19,000 and ending work in process inventory of $18,000.
during the month, the cost of units transferred out from the department was $216,000.
the company uses the fifo method in its process costing system.
in the department’s cost reconciliation report for july, the costs added to production in
the department would be:
a.$217,000
b.$198,000
c.$197,000
d.$215,000
14) kassabian corporation uses an activity-based costing system with three activity cost
pools. the company has provided the following data concerning its costs and its activity
based costing system:
how much cost, in total, would be allocated in the first-stage allocation to the assembly
activity cost pool?
a.$314,000
b.$272,333
c.$215,000
d.$430,000
15) fairmont inc. uses an accounting system that charges costs to the manager who has
been delegated the authority to make decisions concerning the costs. for example, if the
sales manager accepts a rush order that will result in higher than normal manufacturing
costs, these additional costs are charged to the sales manager because the authority to
accept or decline the rush order was given to the sales manager. this type of accounting
system is known as:
a.responsibility accounting
b.contribution accounting
c.absorption accounting
d.operational budgeting
16) werber clinic uses client-visits as its measure of activity. during january, the clinic
budgeted for 2,700 client-visits, but its actual level of activity was 2,730 client-visits.
the clinic has provided the following data concerning the formulas used in its budgeting
and its actual results for january:
the activity variance for administrative expenses in january would be closest to:
a.$12 f
b.$8 f
c.$12 u
d.$8 u
17) trauscht corporation has provided the following data from its activity-based costing
system:
the company makes 340 units of product p23f a year, requiring a total of 710
machine-hours, 80 orders, and 40 inspection-hours per year. the product’s direct
materials cost is $40.05 per unit and its direct labor cost is $14.35 per unit. the product
sells for $121.90 per unit.
according to the activity-based costing system, the product margin for product p23f is:
a.$9,223.20
b.$7,853.60
c.$5,401.60
d.$22,950.00
18) madtack company’s beginning and ending inventories for the month of november
were as follows:
madtack applies manufacturing overhead cost to jobs at the rate of 70% of direct labor
cost incurred. the company does not close underapplied or overapplied manufacturing
overhead to cost of goods sold until the end of the year.
madtack company’s cost of goods manufactured for november was:
a.$469,000
b.$477,000
c.$495,000
d.$484,000
19) within the relevant range, the difference between variable costs and fixed costs is:
a.variable costs per unit fluctuate and fixed costs per unit remain constant
b.variable costs per unit are constant and fixed costs per unit fluctuate
c.both total variable costs and total fixed costs are constant
d.both total variable costs and total fixed costs fluctuate
20) the lagrange company had the following budgeted sales for the first half of the
current year:
the company is in the process of preparing a cash budget and must determine the
expected cash collections by month. to this end, the following information has been
assembled:
collections on sales: 60% in month of sale
30% in month following sale
10% in second month following sale
the accounts receivable balance on january 1 of the current year was $70,000, of which
$50,000 represents uncollected december sales and $20,000 represents uncollected
november sales.
the total cash collected during january by lagrange company would be:
a.$410,000
b.$254,000
c.$344,000
d.$331,500
21) data from sligh corporation’s most recent balance sheet and income statement
appear below:
required:
compute the average sale period for this year:
22) in october, one of the processing departments at julian corporation had ending work
in process inventory of $14,000. during the month, $240,000 of costs were added to
production and the cost of units transferred out from the department was $248,000.the
company uses the fifo method in its process costing system.
required:
construct a cost reconciliation report for the department for the month of october.
23) management of delaune corporation is considering a new product, an outdoor
speaker that would have a selling price of $45 per unit and projected sales of 70,000
units. launching the new product would require an investment of $200,000. the desired
return on investment is 12%.
required:
determine the target cost per unit for the outdoor speaker.
24) otterholt corporation uses residual income to evaluate the performance of its
divisions. the minimum required rate of return for performance evaluation purposes is
16%. the games division had average operating assets of $470,000 and net operating
income of $72,900 in september.
required:
what was the games division’s residual income in september?
25) mccarter clinic bases its budgets on the activity measure patient-visits. during april,
the clinic planned for 2,700 patient-visits, but its actual level of activity was 2,400
patient-visits. the clinic has provided the following data concerning the formulas it uses
in its budgeting:
required:
prepare a report showing the clinic’s activity variances for april. indicate in each case
whether the variance is favorable (f) or unfavorable (u).
26) some companies use process costing and some use job-order costing. which method
a company uses depends on its industry. a number of companies in different industries
are listed below:
custom boat builder
frozen cranberry juice processor
concrete block manufacturer
winery that produces a number of varietal wines
aluminum refiner that makes aluminum ingots from bauxite ore
required:
for each company, indicate whether the company is most likely to use job-order costing
or process costing.
27) in december, one of the processing departments at garoutte corporation had
beginning work in process inventory of $34,000 and ending work in process inventory
of $29,000. during the month, $357,000 of costs were added to production and the cost
of units transferred out from the department was $362,000.
required:
construct a cost reconciliation report for the department for the month of december.
28) therrien corporation bases its budgets on the activity measure customers served.
during september, the company plans to serve 30,000 customers. the company has
provided the following data concerning the formulas it uses in its budgeting:
required:
prepare the company’s planning budget for september.
29) dezan corporation is developing direct labor standards. a particular product requires
0.90 direct labor-hours per unit. the allowance for breaks and personal needs is 0.04
direct labor-hours per unit. the allowance for cleanup, machine downtime, and rejects is
0.13 direct labor-hours per unit.
required:
determine the standard direct labor-hours per unit of product. show your work!
