# POST ACC211 ALL QUIZZES

June 3, 2016

Question
UNIT 1 C1
QUESTION 1

A partial listing of costs incurred at Backes Corporation during November appears below:

The total of the product costs listed above for November is:

\$77,000

\$348,000

\$592,000

\$244,000

Question 2

A partial listing of costs incurred during December at Gagnier Corporation appears below:

The total of the period costs listed above for December is:

\$89,000

\$310,000

\$325,000

\$399,000

Question 3

A partial listing of costs incurred during December at Gagnier Corporation appears below:

The total of the product costs listed above for December is:

\$310,000

\$89,000

\$635,000

\$325,000

Question 4

At an activity level of 4,400 units in a month, Goldbach Corporation’s total variable maintenance and repair cost is \$313,632 and its total fixed maintenance and repair cost is \$93,104. What would be the total maintenance and repair cost, both fixed and variable, at an activity level of 4,600 units in a month? Assume that this level of activity is within the relevant range.

\$420,992

\$425,224

\$415,980

\$406,736

Question 5

At an activity level of 5,300 machine-hours in a month, Clyburn Corporation’s total variable maintenance cost is \$114,268 and its total fixed maintenance cost is \$154,336.

What would be the average fixed maintenance cost per unit at an activity level of 5,600 machine-hours in a month? Assume that this level of activity is within the relevant range.

\$50.68

\$27.56

\$35.79

\$29.12

Question 6

Green Company’s costs for the month of August were as follows: direct materials, \$27,000; direct labor, \$34,000; selling, \$14,000; administrative, \$12,000; and manufacturing overhead, \$44,000. The beginning work in process inventory was \$16,000 and the ending work in process inventory was \$9,000. What was the cost of goods manufactured for the month?

\$105,000

\$132,000

\$138,000

\$112,000

Question 7

Corcetti Company manufactures and sells prewashed denim jeans. Large rolls of denim cloth are purchased and are first washed in a giant washing machine. After the cloth is dried, it is cut up into jean pattern shapes and then sewn together. The completed jeans are sold to various retail chains.

Which of the following terms could be used to correctly describe the cost of the soap used to wash the denim cloth?

Direct Cost – Yes; Product Cost – Yes

Direct Cost – Yes; Product Cost – No

Direct Cost – No; Product Cost – Yes

Direct Cost – No; Product Cost – No

C2
QUESTION 1

Question 2

Malcolm Company uses a predetermined overhead rate based on direct labor-hours to apply manufacturing overhead to jobs.

The cost records for September will show:

Question 3

The Collins Company uses predetermined overhead rates to apply manufacturing overhead to jobs. The predetermined overhead rate is based on labor cost in Dept. A and machine-hours in Dept. B. At the beginning of the year, the company made the following estimates:

What predetermined overhead rates would be used in Dept A and Dept B, respectively?

71% and \$4.00

140% and \$4.00

140% and \$4.80

71% and \$4.80

Question 4

Kelsh Company uses a predetermined overhead rate based on machine-hours to apply manufacturing overhead to jobs. The company has provided the following estimated costs for next year:

Kelsh estimates that 5,000 direct labor-hours and 10,000 machine-hours will be worked during the year. The predetermined overhead rate per hour will be:

\$6.80

\$6.40

\$3.40

\$8.20

Question 5

The actual manufacturing overhead incurred at Hogans Corporation during April was \$59,000, while the manufacturing overhead applied to Work in Process was \$74,000. The company’s Cost of Goods Sold was \$289,000 prior to closing out its Manufacturing Overhead account. The company closes out its Manufacturing Overhead account to Cost of Goods Sold. Which of the following statements is true?

Manufacturing overhead was overapplied by \$15,000; Cost of Goods Sold after closing out the Manufacturing Overhead account is \$274,000

Manufacturing overhead was underapplied by \$15,000; Cost of Goods Sold after closing out the Manufacturing Overhead account is \$274,000

Manufacturing overhead was overapplied by \$15,000; Cost of Goods Sold after closing out the Manufacturing Overhead account is \$304,000

Manufacturing overhead was underapplied by \$15,000; Cost of Goods Sold after closing out the Manufacturing Overhead account is \$304,000

Question 6

Bakker Corporation applies manufacturing overhead on the basis of direct labor-hours. At the beginning of the most recent year, the company based its predetermined overhead rate on total estimated overhead of \$77,250 and 2,500 estimated direct labor-hours. Actual manufacturing overhead for the year amounted to \$79,000 and actual direct labor-hours were 2,400.

The applied manufacturing overhead for the year was closest to:

\$74,160

\$71,184

\$75,840

\$79,008

Question 7

Acitelli Corporation, which applies manufacturing overhead on the basis of machine-hours, has provided the following data for its most recent year of operations.

Estimated machine hours 8,500

Actual machine hours 8,560

The estimates of the manufacturing overhead and of machine-hours were made at the beginning of the year for the purpose of computing the company’s predetermined overhead rate for the year.

The predetermined overhead rate is closest to:

\$42.30

\$41.82

\$42.12

\$42.00

Question 8

Carter Corporation applies manufacturing overhead on the basis of machine-hours. At the beginning of the most recent year, the company based its predetermined overhead rate on total estimated overhead of \$135,850. Actual manufacturing overhead for the year amounted to \$145,000 and actual machine-hours were 5,660. The company’s predetermined overhead rate for the year was \$24.70 per machine-hour.

The overhead for the year was:

\$5,198 overapplied

\$3,952 underapplied

\$3,952 overapplied

\$5,198 underapplied

C3

Question 1

In activity-based costing, the total overhead cost in an activity cost pool can be computed by:

dividing the total activity in the activity cost pool by the activity rate for the activity cost pool.

multiplying the total activity in the activity cost pool by the activity rate for the activity cost pool.

dividing the total direct labor-hours in the activity cost pool by the activity rate for the activity cost pool.

multiplying the total direct labor-hours in the activity cost pool by the activity rate for the activity cost pool.

Question 2

Human resource management is an example of an activity at which of the following levels?

Unit-level activity.

Product-level activity.

Batch-level activity.

Facility-level activity.

Question 3

Designing a new product is an example of a:

Unit-level activity.

Batch-level activity.

Product-level activity.

Facility-level activity.

Question 4

Machining a part for a car axle is an example of a:

Unit-level activity.

Batch-level activity.

Product-level activity.

Facility-level activity.

Question 5

Bridget Company uses activity-based costing. The company has two products: A and B. The annual production and sales of Product A is 2,000 units and of Product B is 3,000 units. There are three activity cost pools, with estimated total cost and expected activity as follows:

The overhead cost per unit of Product A under activity-based costing is closest to:

\$6.00

\$9.60

\$8.63

\$13.80

Question 6

Gaucher Corporation has provided the following data from its activity-based costing accounting system:

The activity rate for the “designing products” activity cost pool is closest to:

Estimated

Activities Costs Expected Activity

Designing products \$582,016 4,547 product design hours

Setting up batches \$29,760 960 batch set ups

Assembling products \$19,440 1,620 assembly hours

\$78 per product design hour

\$582,016 per product design hour

\$128 per product design hour

\$89 per product design hour

Question 7

Wecker Corporation uses the following activity rates from its activity-based costing to assign overhead costs to products:

Data concerning two products appear below:

V09X A09X

Number of batches 69 12

Number of customer orders 20 9

Number of assembly hours 492 697

How much overhead cost would be assigned to Product V09X using the activity-based costing system?

\$157.87

\$91,722.47

\$10,385.22

\$5,485.50

Question 8

Addy Company has two products: A and B. The annual production and sales of Product A is 1,700 units and of Product B is 1,100 units. The company has traditionally used direct labor-hours as the basis for applying all manufacturing overhead to products. Product A requires 0.3 direct labor-hours per unit and Product B requires 0.6 direct labor-hours per unit. The total estimated overhead for next period is \$98,785.

The company is considering switching to an activity-based costing system for the purpose of computing unit product costs for external reports. The new activity-based costing system would have three overhead activity cost pools–Activity 1, Activity 2, and General Factory–with estimated overhead costs and expected activity as follows:

(Note: The General Factory activity cost pool’s costs are allocated on the basis of direct labor-hours.)

The predetermined overhead rate under the traditional costing system is closest to:

\$9.15

\$43.48

\$84.43

\$19.08

Question 9

Butscher Company allocates materials handling cost to the company’s two products using the below data:

The total materials handling cost for the year is expected to be \$9,072.

If the materials handling cost is allocated on the basis of direct labor-hours, how much of the total materials handling cost should be allocated to the prefab barns? (Round off your answer to the nearest whole dollar.)

\$3,187

\$1,134

\$9,072

\$4,536

C5
Question 1

The difference between total sales in dollars and total variable expenses is called:

net operating income.

net profit.

the gross margin.

Correct the contribution margin.

Question 2

East Company manufactures and sells a single product with a positive contribution margin. If the selling price and the variable expense per unit both increase 5% and fixed expenses do not change, what is the effect on the contribution margin per unit and the contribution margin ratio?

Option A

Option B

Option C

Option D

Question 3

With a selling price per unit of \$60, a contribution margin of 40%, and fixed expenses of \$60,000, the break-even in unit sales will be:

2,500

5,000

6,000

500

Question 4

Copy of A company that makes organic fertilizer has supplied the following data:

The company’s unit contribution margin is closest to:

\$5.25

\$4.05

\$3.50

\$2.35

Question 5

A manufacturer of tiling grout has supplied the following data:

The company’s break-even in kilograms is closest to:

215,000 kilograms

55,302 kilograms

307,765 kilograms

464,865 kilograms

Question 6

A manufacturer of tiling grout has supplied the following data:

The company’s contribution margin ratio is closest to:

46.3%

37.0%

63.0%

53.7%

Question 7

A tile manufacturer has supplied the following data:

If the company increases its unit sales volume by 3% without increasing its fixed expenses, then total net operating income should be closest to:

\$3,000

\$101,371

\$115,480

\$103,000

Question 8

All other things the same, which of the following would be true of the contribution margin and variable expenses of a company with high fixed costs and low variable costs as compared to a company with low fixed costs and high variable costs?

Option A

Option B

Option C

Option D

Question 9

Aziz Corporation produces and sells a single product. Data concerning that product appear below:

Selling price per unit = \$130.00

Variable expense per unit = \$27.30

Fixed expense per month = \$165,347

Determine the monthly break-even in unit and total dollar sales.

1,410 units; \$183,300

1,610 units; \$209,300

1,500 units, \$195,000

2,000 units; \$260,000

Question 10

Cindy, Inc. sells a product for \$10 per unit. The variable expenses are \$6 per unit, and the fixed expenses total \$35,000 per period. By how much will net operating income change if sales are expected to increase by \$40,000?

\$16,000 increase

\$5,000 increase

\$24,000 increase

\$11,000 decrease

Question 11

Budget data for the Bidwell Company are as follows:

The number of units Bidwell would have to sell to earn a net operating income of \$150,000 is:

100,000 units

120,000 units

112,000 units

145,000 units

C6
Question 1

Fixed manufacturing overhead is included in product costs under:

Option A

Option B

Option C

Option D

Question 2

Which of the following are considered to be product costs under variable costing?

I.

I and II.

I and III.

I, II, and III.

Question 3

Which of the following are considered to be product costs under absorption costing?

I, II, and III.

I and II.

I and III.

I.

Question 4

Gangwer Corporation produces a single product and has the following cost structure:

The absorption costing unit product cost is:

\$95

\$119

\$61

\$56

Question 5

Swiatek Corporation produces a single product and has the following cost structure:

The variable costing unit product cost is:

\$161

\$225

\$153

\$158

Question 6

Roy Corporation produces a single product. During July, Roy produced 10,000 units. Costs incurred during the month were as follows:

Under absorption costing, any unsold units would be carried in the inventory account at a unit product cost of:

\$5.10

\$4.40

\$3.80

\$3.50

Question 7

Cockriel Inc., which produces a single product, has provided the following data for its most recent month of operations:

There were no beginning or ending inventories. The variable costing unit product cost was:

\$42

\$43

\$37

\$48

Question 8

A manufacturing company that produces a single product has provided the following data concerning its most recent month of operations:

What is the absorption costing unit product cost for the month?

\$102

\$130

\$97

\$125

Question 9

A manufacturing company that produces a single product has provided the following data concerning its most recent month of operations:

What is the total period cost for the month under absorption costing?

\$58,300

\$37,100

\$259,900

\$201,600

Question 10

A manufacturing company that produces a single product has provided the following data concerning its most recent month of operations:

What is the net operating income for the month under variable costing?

\$21,600

\$(15,200)

\$8,000

\$13,600

Question 11

A manufacturing company that produces a single product has provided the following data concerning its most recent month of operations:

What is the net operating income for the month under absorption costing?

\$5,300

\$3,000

\$(12,700)

\$8,300

Question 12

A manufacturing company that produces a single product has provided the following data concerning its most recent month of operations:

The total gross margin for the month under absorption costing is:

\$42,000

\$14,700

\$69,000

\$79,800

Question 13

A manufacturing company that produces a single product has provided the following data concerning its most recent month of operations:

The total contribution margin for the month under variable costing is:

\$183,600

\$90,000

\$70,400

\$169,200

Question 14

Last year, Heidenescher Corporation’s variable costing net operating income was \$63,600 and its inventory decreased by 600 units. Fixed manufacturing overhead cost was \$1 per unit. What was the absorption costing net operating income last year?

\$64,200

\$63,000

\$63,600

\$600

Question 15

Sproles Inc. manufactures a variety of products. Variable costing net operating income was \$90,500 last year and its inventory decreased by 3,500 units. Fixed manufacturing overhead cost was \$6 per unit. What was the absorption costing net operating income last year?

\$90,500

\$21,000

\$69,500

\$111,500

C7
Question 1

Budgeted sales in Allen Company over the next four months are given below:

Twenty-five percent of the company’s sales are for cash and 75% are on account. Collections for sales on account follow a stable pattern as follows: 50% of a month’s credit sales are collected in the month of sale, 30% are collected in the month following sale, and 15% are collected in the second month following sale. The remainder are uncollectible. Given these data, cash collections for December should be:

\$138,000

\$133,500

\$120,000

\$103,500

Question 2

Berol Company plans to sell 200,000 units of finished product in July and anticipates a growth rate in sales of 5% per month. The desired monthly ending inventory in units of finished product is 80% of the next month’s estimated sales. There are 150,000 finished units in inventory on June 30.

Berol Company’s production requirement in units of finished product for the three-month period ending September 30 is:

712,025 units

630,500 units

664,000 units

665,720 units

Question 3

Hagos Corporation is working on its direct labor budget for the next two months. Each unit of output requires 0.84 direct labor-hours. The direct labor rate is \$9.40 per direct labor-hour. The production budget calls for producing 2,100 units in June and 1,900 units in July. If the direct labor work force is fully adjusted to the total direct labor-hours needed each month, what would be the total combined direct labor cost for the two months?

\$15,792.00

\$15,002.40

\$16,581.60

\$31,584.00

Question 4

The manufacturing overhead budget at Cutchin Corporation is based on budgeted direct labor-hours. The direct labor budget indicates that 2,800 direct labor-hours will be required in September. The variable overhead rate is \$7.00 per direct labor-hour. The company’s budgeted fixed manufacturing overhead is \$43,120 per month, which includes depreciation of \$3,640. All other fixed manufacturing overhead costs represent current cash flows. The September cash disbursements for manufacturing overhead on the manufacturing overhead budget should be:

\$59,080

\$62,720

\$19,600

\$39,480

Question 5

The manufacturing overhead budget at Latronica Corporation is based on budgeted direct labor-hours. The direct labor budget indicates that 7,100 direct labor-hours will be required in August. The variable overhead rate is \$8.60 per direct labor-hour. The company’s budgeted fixed manufacturing overhead is \$132,770 per month, which includes depreciation of \$24,850. All other fixed manufacturing overhead costs represent current cash flows. The company recomputes its predetermined overhead rate every month. The predetermined overhead rate for August should be:

\$8.60

\$27.30

\$23.80

\$18.70

Question 6

The selling and administrative expense budget of Breckinridge Corporation is based on budgeted unit sales, which are 5,500 units for June. The variable selling and administrative expense is \$1.00 per unit. The budgeted fixed selling and administrative expense is \$101,200 per month, which includes depreciation of \$6,050 per month. The remainder of the fixed selling and administrative expense represents current cash flows. The cash disbursements for selling and administrative expenses on the June selling and administrative expense budget should be:

\$100,650

\$106,700

\$5,500

\$95,150

Question 7

Deschambault Inc. is working on its cash budget for December. The budgeted beginning cash balance is \$14,000. Budgeted cash receipts total \$127,000 and budgeted cash disbursements total \$126,000. The desired ending cash balance is \$40,000. To attain its desired ending cash balance for December, the company needs to borrow:

\$25,000

\$0

\$55,000

\$40,000

Question 8

The Kafusi Company has the following budgeted sales:

The regular pattern of collection of credit sales is 30% in the month of sale, 60% in the month following the month of sale, and the remainder in the second month following the month of sale. There are no bad debts.

The budgeted cash receipts for July would be:

\$400,000

\$430,000

\$435,000

\$390,000

Question 9

LHU Corporation makes and sells a product called Product WZ. Each unit of Product WZ requires 2.5 hours of direct labor at the rate of \$15.00 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:

\$37.50

\$6.00

\$15.00

\$17.50

Question 10

Young Enterprises has budgeted sales in units for the next five months as follows:

Past experience has shown that the ending inventory for each month should be equal to 10% of the next month’s sales in units. The inventory on May 31 fell short of this goal since it contained only 400 units. The company needs to prepare a Production Budget for the next five months.

The desired ending inventory for August is:

540 units

680 units

720 units

380 units

Question 11

Young Enterprises has budgeted sales in units for the next five months as follows:

Past experience has shown that the ending inventory for each month should be equal to 10% of the next month’s sales in units. The inventory on May 31 fell short of this goal since it contained only 400 units. The company needs to prepare a Production Budget for the next five months.

The total number of units to be produced in July is:

7,740 units

7,200 units

7,020 units

7,280 units

Response Feedback:

Production Budget

Question 12

Davol Corporation is preparing its Manufacturing Overhead Budget for the fourth quarter of the year. The budgeted variable manufacturing overhead rate is \$6.80 per direct labor-hour; the budgeted fixed manufacturing overhead is \$72,000 per month, of which \$20,000 is factory depreciation.

If the budgeted direct labor time for October is 5,000 hours, then the total budgeted manufacturing overhead for October is:

\$52,000

\$106,000

\$54,000

\$86,000

Question 13

Salge Inc. bases its manufacturing overhead budget on budgeted direct labor-hours. The variable overhead rate is \$8.10 per direct labor-hour. The company’s budgeted fixed manufacturing overhead is \$74,730 per month, which includes depreciation of \$20,670. All other fixed manufacturing overhead costs represent current cash flows. The direct labor budget indicates that 5,300 direct labor-hours will be required in September.

The company recomputes its predetermined overhead rate every month. The predetermined overhead rate for September should be:

\$18.30

\$14.10

\$8.10

\$22.20

Question 14

Deshaies Corporation is preparing its cash budget for November. The budgeted beginning cash balance is \$10,000. Budgeted cash receipts total \$100,000 and budgeted cash disbursements total \$104,000. The desired ending cash balance is \$30,000.

The excess (deficiency) of cash available over disbursements for November is:

\$110,000

\$6,000

(\$4,000)

\$14,000

Question 15

Deshaies Corporation is preparing its cash budget for November. The budgeted beginning cash balance is \$10,000. Budgeted cash receipts total \$100,000 and budgeted cash disbursements total \$104,000. The desired ending cash balance is \$30,000.

To attain its desired ending cash balance for November, the company should borrow:

\$36,000

\$30,000

\$24,000

\$0

C8
Question 1

The Porter Company has a standard cost system. In July the company purchased and used 22,500 pounds of direct material at an actual cost of \$53,000; the materials quantity variance was \$1,875 Unfavorable; and the standard quantity of materials allowed for July production was 21,750 pounds. The materials price variance for July was:

\$2,725 F

\$2,725 U

\$3,250 F

\$3,250 U

Question 2

Lots on Corporation bases its budgets on machine-hours. The company’s static planning budget for May appears below:

Actual results for the month were:

The spending variance for equipment depreciation for the month should be:

\$320 F

\$3,310 U

\$320 U

\$3,310 F

Question 3

The Litton Company has established standards as follows:

Direct material: 3 pounds per unit @ \$4 per pound = \$12 per unit

Direct labor: 2 hours per unit @ \$8 per hour = \$16 per unit

Variable manufacturing overhead: 2 hours per unit @ \$5 per hour = \$10 per unit

Actual production figures for the past year are given below. The company records the materials price variance when materials are purchased.

The company applies variable manufacturing overhead to products on the basis of standard direct labor-hours.

The variable overhead efficiency variance is:

\$520 F

\$520 U

\$500 U

\$500 F

Question 4

Lotson Corporation bases its budgets on machine-hours. The company’s static planning budget for May appears below:

Actual results for the month were:

The spending variance for power costs for the month should be:

\$1,550 F

\$4,160 F

\$1,550 U

\$4,160 U

Question 5

Lotson Corporation bases its budgets on machine-hours. The company’s static planning budget for May appears below:

Actual results for the month were:

The spending variance for supplies costs for the month should be:

\$600 U

\$600 F

\$270 F

\$270 U

Question 6

The Litton Company has established standards as follows:

Direct material: 3 pounds per unit @ \$4 per pound = \$12 per unit

Direct labor: 2 hours per unit @ \$8 per hour = \$16 per unit

Variable manufacturing overhead: 2 hours per unit @ \$5 per hour = \$10 per unit

Actual production figures for the past year are given below. The company records the materials price variance when materials are purchased.

The company applies variable manufacturing overhead to products on the basis of standard direct labor-hours.

The labor rate variance is:

\$480 F

\$480 U

\$440 F

\$440 U

Question 7

Karmazyn Hospital bases its budgets on patient-visits. The hospital’s static budget for October appears below:

The total variable cost at the activity level of 9,000 patient-visits per month should be:

\$157,530

\$209,700

\$207,370

\$159,300

Question 8

The Litton Company has established standards as follows:

Direct material: 3 pounds per unit @ \$4 per pound = \$12 per unit

Direct labor: 2 hours per unit @ \$8 per hour = \$16 per unit

Variable manufacturing overhead: 2 hours per unit @ \$5 per hour = \$10 per unit

Actual production figures for the past year are given below. The company records the materials price variance when materials are purchased.

The company applies variable manufacturing overhead to products on the basis of standard direct labor-hours.

The materials quantity variance is:

\$800 U

\$4,000 U

\$760 U

\$760 F

Question 9

The following labor standards have been established for a particular product:

The following data pertain to operations concerning the product for the last month:

What is the labor efficiency variance for the month?

\$13,805 U

\$13,530 U

\$15,305 U

\$15,305 F

Question 10

The following labor standards have been established for a particular product:

The following data pertain to operations concerning the product for the last month:

Required:

a. What is the labor rate variance for the month?

b. What is the labor efficiency variance for the month?

a. Labor rate variance = (AH × AR) – (AH × SR)

= \$130,975 – (6,500 hours × \$19.70 per hour)

= \$130,970 – \$128,050 = \$2,925 U

b. SH = 1,400 units × 4.5 hours per unit = 6,300 hours

Labor efficiency variance = (AH – SH) SR

= (6,500 hours – 6,300 hours) \$19.70 per hour

= (200 hours) \$19.70 per hour = \$3,940 U

Question 11

The Litton Company has established standards as follows:

Direct material: 3 pounds per unit @ \$4 per pound = \$12 per unit

Direct labor: 2 hours per unit @ \$8 per hour = \$16 per unit

Variable manufacturing overhead: 2 hours per unit @ \$5 per hour = \$10 per unit

Actual production figures for the past year are given below. The company records the materials price variance when materials are purchased.

The company applies variable manufacturing overhead to products on the basis of standard direct labor-hours.

The labor efficiency variance is:

\$800 F

\$800 U

\$840 F

\$840 U

Question 12

Karmazyn Hospital bases its budgets on patient-visits. The hospital’s static budget for October appears below:

The total cost at the activity level of 9,200 patient-visits per month should be:

\$364,900

\$377,200

\$370,770

\$370,210

Question 13

The Litton Company has established standards as follows:

Direct material: 3 pounds per unit @ \$4 per pound = \$12 per unit

Direct labor: 2 hours per unit @ \$8 per hour = \$16 per unit

Variable manufacturing overhead: 2 hours per unit @ \$5 per hour = \$10 per unit

Actual production figures for the past year are given below. The company records the materials price variance when materials are purchased.

The company applies variable manufacturing overhead to products on the basis of standard direct labor-hours.

The variable overhead rate variance is:

\$240 U

\$220 U

\$220 F

\$240 F

Question 14

Farver Air uses two measures of activity, flights and passengers, in the cost formulas in its flexible budgets. The cost formula for plane operating costs is \$44,420 per month plus \$2,008 per flight plus \$1 per passenger. The company expected its activity in May to be 80 flights and 281 passengers, but the actual activity was 81 flights and 277 passengers. The actual cost for plane operating costs in May was \$199,650. The spending variance for plane operating costs in May would be closest to:

\$5,691 F

\$7,695 U

\$7,695 F

\$5,691 U

Question 15

Celius Midwifery’s cost formula for its wages and salaries is \$2,410 per month plus \$292 per birth. For the month of March, the company planned for activity of 113 births, but the actual level of activity was 116 births. The actual wages and salaries for the month was \$35,340. The spending variance for wages and salaries in March would be closest to:

\$942 F

\$66 F

\$66 U

\$942 U

Question 16

Edington Clinic uses client-visits as its measure of activity. During September, the clinic budgeted for 2,800 client-visits, but its actual level of activity was 2,850 client-visits. The clinic has provided the following data concerning the formulas to be used in its budgeting for September:

The personnel expenses in the planning budget for September would be closest to:

\$62,946

\$67,040

\$66,420

\$64,070

Question 17

The following standards for variable manufacturing overhead have been established for a company that makes only one product:

The following data pertain to operations for the last month:

What is the variable overhead efficiency variance for the month?

\$9,219 U

\$10,179 U

\$9,867 U

\$648 U

Question 18

Gradert Framing’s cost formula for its supplies cost is \$1,540 per month plus \$12 per frame. For the month of September, the company planned for activity of 668 frames, but the actual level of activity was 666 frames. The actual supplies cost for the month was \$9,980. The supplies cost in the planning budget for September would be closest to:

\$10,010

\$9,532

\$9,556

\$9,980

Question 19

The Litton Company has established standards as follows:

Direct material: 3 pounds per unit @ \$4 per pound = \$12 per unit

Direct labor: 2 hours per unit @ \$8 per hour = \$16 per unit

Variable manufacturing overhead: 2 hours per unit @ \$5 per hour = \$10 per unit

Actual production figures for the past year are given below. The company records the materials price variance when materials are purchased.

The company applies variable manufacturing overhead to products on the basis of standard direct labor-hours.

The materials price variance is:

\$400 U

\$400 F

\$600 F

\$600 U

C9
Question 1

Chace Products is a division of a major corporation. Last year the division had total sales of \$21,300,000, net operating income of \$575,100, and average operating assets of \$5,000,000. The company’s minimum required rate of return is 12%.

The division’s residual income is closest to:

\$575,100

\$1,175,100

\$(1,980,900)

\$(24,900)

Response Feedback:

Question 2

Chace Products is a division of a major corporation. Last year the division had total sales of \$21,300,000, net operating income of \$575,100, and average operating assets of \$5,000,000. The company’s minimum required rate of return is 12%.

The division’s margin is closest to:

26.2%

23.5%

2.7%

11.5%

Question 3

The West Division of Shekarchi Corporation had average operating assets of \$620,000 and net operating income of \$80,100 in March. The minimum required rate of return for performance evaluation purposes is 14%.

What was the West Division’s minimum required return in March?

\$80,100

\$86,800

\$11,214

\$98,014

Question 4

Chace Products is a division of a major corporation. Last year the division had total sales of \$21,300,000, net operating income of \$575,100, and average operating assets of \$5,000,000. The company’s minimum required rate of return is 12%.

The division’s return on investment (ROI) is closest to:

49.0%

11.5%

0.3%

2.2%

Question 5

Aide Industries is a division of a major corporation. Data concerning the most recent year appears below:

The division’s margin is closest to:

21.8%

5.0%

23.0%

28.0%

Question 6

Chace Products is a division of a major corporation. Last year the division had total sales of \$21,300,000, net operating income of \$575,100, and average operating assets of \$5,000,000. The company’s minimum required rate of return is 12%.

The division’s turnover is closest to:

3.82

4.26

0.12

37.04

C10

Question 1

Two alternatives, code-named X and Y, are under consideration at Afalava Corporation. Costs associated with the alternatives are listed below.

Are the materials costs and processing costs relevant in the choice between alternatives X and Y? (Ignore the equipment rental and occupancy costs in this question.)

Only materials costs are relevant

Only processing costs are relevant

Both materials costs and processing costs are relevant

Neither materials costs nor processing costs are relevant

Question 2

Ahsan Company makes 60,000 units per year of a part it uses in the products it manufactures. The unit product cost of this part is computed as follows:

An outside supplier has offered to sell the company all of these parts it needs for \$45.70 a unit. If the company accepts this offer, the facilities now being used to make the part could be used to make more units of a product that is in high demand. The additional contribution margin on this other product would be \$318,000 per year.

If the part were purchased from the outside supplier, all of the direct labor cost of the part would be avoided. However, \$3.50 of the fixed manufacturing overhead cost being applied to the part would continue even if the part were purchased from the outside supplier. This fixed manufacturing overhead cost would be applied to the company’s remaining products.

How much of the unit product cost of \$40.50 is relevant in the decision of whether to make or buy the part?

\$40.50

\$15.20

\$27.90

\$37.00

Question 3

The Tingey Company has 500 obsolete microcomputers that are carried in inventory at a total cost of \$720,000. If these microcomputers are upgraded at a total cost of \$100,000, they can be sold for a total of \$160,000. As an alternative, the microcomputers can be sold in their present condition for \$50,000.

Suppose the selling price of the upgraded computers has not been set. At what selling price per unit would the company be as well off upgrading the computers as if it just sold the computers in their present condition?

\$100

\$770

\$300

\$210

Question 4

The management of Freshwater Corporation is considering dropping product C11B. Data from the company’s accounting system appear below:

All fixed expenses of the company are fully allocated to products in the company’s accounting system. Further investigation has revealed that \$211,000 of the fixed manufacturing expenses and \$122,000 of the fixed selling and administrative expenses are avoidable if product C11B is discontinued.

According to the company’s accounting system, what is the net operating income earned by product C11B?

\$74,000

\$(521,000)

\$(74,000)

\$521,000

Question 5

Lusk Company produces and sells 15,000 units of Product A each month. The selling price of Product A is \$20 per unit, and variable expenses are \$14 per unit. A study has been made concerning whether Product A should be discontinued. The study shows that \$70,000 of the \$100,000 in fixed expenses charged to Product A would continue even if the product was discontinued. These data indicate that if Product A is discontinued, the company’s overall net operating income would:

decrease by \$60,000 per month

increase by \$10,000 per month

increase by \$20,000 per month

decrease by \$20,000 per month

Question 6

Peluso Company, a manufacturer of snowmobiles, is operating at 70% of plant capacity. Peluso’s plant manager is considering making the headlights now being purchased from an outside supplier for \$11 each. The Peluso plant has idle equipment that could be used to manufacture the headlights. The design engineer estimates that each headlight requires \$4 of direct materials, \$3 of direct labor, and \$6.00 of manufacturing overhead. Forty percent of the manufacturing overhead is a fixed cost that would be unaffected by this decision. A decision by Peluso Company to manufacture the headlights should result in a net gain (loss) for each headlight of:

\$(2.00)

\$1.60

\$0.40

\$2.80

Question 7

The Tingey Company has 500 obsolete microcomputers that are carried in inventory at a total cost of \$720,000. If these microcomputers are upgraded at a total cost of \$100,000, they can be sold for a total of \$160,000. As an alternative, the microcomputers can be sold in their present condition for \$50,000.

What is the net advantage or disadvantage to the company from upgrading the computers rather than selling them in their present condition?

Question 8

Two alternatives, code-named X and Y, are under consideration at Afalava Corporation. Costs associated with the alternatives are listed below.

What is the differential cost of Alternative Y over Alternative X, including all of the relevant costs?

\$103,000

\$39,000

\$142,000

\$122,500

C11
Question 1

(Ignore income taxes in this problem.) Sibble Corporation is considering the purchase of a machine that would cost \$330,000 and would last for 5 years. At the end of 5 years, the machine would have a salvage value of \$50,000. By reducing labor and other operating costs, the machine would provide annual cost savings of \$76,000. The company requires a minimum pretax return of 12% on all investment projects. The net present value of the proposed project is closest to:

-\$56,020

-\$6,020

-\$48,764

-\$27,670

Question 2

(Ignore income taxes in this problem.) The Higgins Company has just purchased a piece of equipment at a cost of \$120,000. This equipment will reduce operating costs by \$40,000 each year for the next eight years. This equipment replaces old equipment which was sold for \$8,000 cash. The new equipment has a payback period of:

8.0 years

2.8 years

10.0 years

3.0 years

Question 3

(Ignore income taxes in this problem.) Hartong Corporation is contemplating purchasing equipment that would increase sales revenues by \$185,000 per year and cash operating expenses by \$89,000 per year. The equipment would cost \$416,000 and have a 8 year life with no salvage value. The annual depreciation would be \$52,000. The simple rate of return on the investment is closest to:

23.8%

12.5%

10.6%

23.1%

Question 4

(Ignore income taxes in this problem.) Gull Inc. is considering the acquisition of equipment that costs \$480,000 and has a useful life of 6 years with no salvage value. The incremental net cash flows that would be generated by the equipment are:

The payback period of this investment is closest to:

3.1 years

2.9 years

5.0 years

3.5 years

Question 5

(Ignore income taxes in this problem.) The management of Melchiori Corporation is considering the purchase of a machine that would cost \$310,000, would last for 6 years, and would have no salvage value. The machine would reduce labor and other costs by \$116,000 per year. The company requires a minimum pretax return of 16% on all investment projects.

The present value of the annual cost savings of \$116,000 is closest to:

\$427,460

\$696,000

\$175,448

\$1,041,462

Question 6

(Ignore income taxes in this problem.) The management of Melchiori Corporation is considering the purchase of a machine that would cost \$310,000, would last for 6 years, and would have no salvage value. The machine would reduce labor and other costs by \$116,000 per year. The company requires a minimum pretax return of 16% on all investment projects.

The net present value of the proposed project is closest to:

\$286,179

\$386,000

\$117,460

\$158,431

Question 7

(Ignore income taxes in this problem.) The Finney Company is reviewing the possibility of remodeling one of its showrooms and buying some new equipment to improve sales operations. The remodeling would cost \$120,000 now and the useful life of the project is 10 years. Additional working capital needed immediately for this project would be \$30,000; the working capital would be released for use elsewhere at the end of the 10-year period. The equipment and other materials used in the project would have a salvage value of \$10,000 in 10 years. Finney’s discount rate is 16%.

The immediate cash outflow required for this project would be:

\$(120,000)

\$(150,000)

\$(90,000)

\$(130,000)

C12
Question 1

In a statement of cash flows, all of the following would be classified as financing activities except:

the collection of cash related to a loan made to another entity.

the payment of a cash dividend on the company’s own common stock.

the cash paid to retire bonds payable.

the sale of the company’s own common stock for cash.

Question 2

The statement of cash flows:

serves as a replacement for the income statement and balance sheet.

explains the change in the cash balance at one point in time.

explains the change in the cash balance for one period of time.

both A and B above.

Question 3

Which of the following would be classified as a financing activity on the statement of cash flows?

Interest paid to a lender.

Correct Dividends paid to the company’s common stockholders.

Cash paid to acquire a long-term investment.

Question 4

All of the following should be recorded in the operating activities section of the statement of cash flows EXCEPT:

a decrease in inventory.

the total credits to the accumulated depreciation account.

a decrease in prepaid expenses.

a purchase of equipment in exchange for cash.

an increase in income taxes payable.

Question 5

In a statement of cash flows, receipts from sales of property, plant, and equipment should be classified as a(n):

Operating activity.

Financing activity.

Investing activity.

Selling activity.