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1) (ignore income taxes in this problem) the management of malit corporation is
investigating an investment in equipment that would have a useful life of 9 years. the
company uses a discount rate of 17% in its capital budgeting. the net present value of
the investment, excluding the annual cash inflow, is -$367,742. to the nearest whole
dollar how large would the annual cash inflow have to be to make the investment in the
equipment financially attractive?
a.$62,516
b.$82,620
c.$40,860
d.$367,742
2) lian corporation's standard wage rate is $12.10 per direct labor-hour (dlh) and
according to the standards, each unit of output requires 7.1 dlhs. in june, 4,500 units
were produced, the actual wage rate was $11.90 per dlh, and the actual hours were
35,930 dlhs.
the labor efficiency variance for june would be recorded as a:
a.debit of $47,362
b.debit of $48,158
c.credit of $48,158
d.credit of $47,362
3) (ignore income taxes in this problem.) the management of bischke corporation is
investigating an investment in equipment that would have a useful life of 8 years. the
company uses a discount rate of 16% in its capital budgeting. good estimates are
available for the initial investment and the annual cash operating outflows, but not for
the annual cash inflows and the salvage value of the equipment. the net present value of
the initial investment and the annual cash outflows is -$238,486.
ignoring any salvage value, to the nearest whole dollar how large would the annual cash
inflow have to be to make the investment in the equipment financially attractive?
a.$238,486
b.$54,900
c.$38,158
d.$29,811
4) the garnet company uses a job-order costing system. the following data were
recorded for february:
overhead is charged to jobs at the rate of 140% of direct labor cost.
jobs 1, 2, and 3 were completed during february and transferred to
finished goods. job 3 has been delivered to the customer.
the work in process inventory on february 28 was:
a.$7,310
b.$9,500
c.$3,950
d.$7,060
5) lutts kennel uses tenant-days as its measure of activity; an animal housed in the
kennel for one day is counted as one tenant-day. during november, the kennel budgeted
for 3,800 tenant-days, but its actual level of activity was 3,850 tenant-days. the kennel
has provided the following data concerning the formulas to be used in its budgeting:
the net operating income in the planning budget for november would be closest to:
a.$12,720
b.$9,648
c.$9,904
d.$13,115
6) the management of pundt corporation would like to investigate the possibility of
basing its predetermined overhead rate on activity at capacity. the company's controller
has provided an example to illustrate how this new system would work. in this example,
the allocation base is machine-hours and the estimated amount of the allocation base for
the upcoming year is 15,000 machine-hours. in addition, capacity is 19,000
machine-hours and the actual level of activity for the year is 15,100 machine-hours. all
of the manufacturing overhead is fixed and is $45,600 per year. for simplicity, it is
assumed that this is the estimated manufacturing overhead for the year as well as the
manufacturing overhead at capacity. it is further assumed that this is also the actual
amount of manufacturing overhead for the year. a number of jobs were worked on
during the year, one of which was job k41p. this job required 140 machine-hours.
if the company bases its predetermined overhead rate on capacity, the predetermined
overhead rate is closest to:
a.$2.40
b.$3.02
c.$3.04
d.$2.78
7) harmon company uses the weighted-average method in its process costing system.
the curing department of harmon company reported the following information for the
month of november.
all materials are added at the beginning of the process.
required:
compute the following items using the weighted-average method:
a. the equivalent units of production for materials.
b. the cost per equivalent unit for conversion.
c. the total cost assigned to units transferred out of the curing department during
november.
d. the cost assigned to work in process inventory as of november 30.
8) the most recent balance sheet and income statement of flo corporation appear below:
cash dividends were $33.
the net cash provided by (used by) operations for the year was:
a.$169
b.($1)
c.$119
d.$117
9) prime cost consists of direct materials combined with:
a.direct labor
b.manufacturing overhead
c.indirect materials
d.cost of goods manufactured
10) crystal company produces a single product. the company's variable costing income
statement for the month of may appears below:
the company produced 80,000 units in may and the beginning inventory consisted of
25,000 units. variable production costs per unit and total fixed costs have remained
constant over the past several months.
the dollar value of the company's inventory on may 31 under the absorption costing
method would be:
a.$120,000
b.$90,000
c.$75,000
d.$60,000
11) frawner company had $140,000 in sales on account last year. the beginning
accounts receivable balance was $12,000 and the ending accounts receivable balance
was $10,000. the company's accounts receivable turnover was closest to:
a.11.67
b.6.36
c.14.00
d.12.73
12) the vega division of ace company makes wheels which can either be sold to outside
customers or transferred to the walsh division of ace company. last month the walsh
division bought all 4,000 of its wheels from the vega division for $42 each. the
following data are available from last month's operations for the vega company:
if the vega division sells wheels to the walsh division, vega can avoid $2 per wheel in
sales commissions. an outside supplier has offered to supply wheels to the walsh
division for $41 each.
what is the maximum price per wheel that walsh should be willing to pay vega?
a.$28
b.$41
c.$42
d.$45
13) the following data pertain to last month's operations:
the break-even point in dollar sales is:
a.$18,000
b.$6,000
c.$11,250
d.$7,500
14) the management of fagundes corporation would like to have a better understanding
of the behavior of its inspection costs. the company has provided the following data:
management believes that inspection cost is a mixed cost that depends on direct
labor-hours.
required:
estimate the variable cost per direct labor-hour and the fixed cost per month using the
high-low method. show your work!
15) martorella corporation has provided the following data concerning its direct labor
costs for october:
required:
prepare the journal entry to record the incurrence of direct labor costs.
16) wynkoop corporation has provided the following data:
required:
compute the inventory turnover for this year:
17) laperriere corporation's balance sheet and income statement appear below:
cash dividends were $30.
required:
prepare the operating activities section of the statement of cash flows using the direct
method. in other words, determine the net cash provided by or used by operating
activities using the direct method.
18) (ignore income taxes in this problem.) dilworth corporation has provided the
following data concerning a proposed investment project:
the company uses a discount rate of 11%. the working capital would be released at the
end of the project.
required:
compute the net present value of the project.
19) during september, booker corporation budgeted for 20,000 customers, but actually
served 22,000 customers. the company uses the following revenue and cost formulas in
its budgeting, where q is the number of customers served:
revenue: $5.50q
wages and salaries: $28,300 + $1.70q
supplies: $1.00q
insurance: $6,300
miscellaneous: $5,400 + $0.40q
required:
prepare the company's flexible budget for september based on the actual level of
activity for the month.
20) (ignore income taxes in this problem.) monson company is considering three
investment opportunities with cash flows as described below:
required:
compute the net present value of each project assuming monson company uses a 12%
discount rate.
21) (ignore income taxes in this problem.) mcniel corporation is considering the
following three investment projects:
required:
rank the investment projects using the project profitability index. show your work!
22) karpin jeep tours operates jeep tours in the heart of the colorado rockies. the
company bases its budgets on two measures of activity (i.e., cost drivers), namely
guests and jeeps. one vehicle used in one tour on one day counts as a jeep. each jeep has
one tour guide. the company uses the following data in its budgeting:
in july, the company budgeted for 434 guests and 132 jeeps. the actual activity for the
month was 459 guests and 137 jeeps.
required:
prepare the company's flexible budget for the actual level of activity in july.
