QUESTION 1
1.
Fab Manufacturing Corporation manufactures and sells stainless steel coffee mugs.
Expected mug sales at Fab (in units) for the next three months are as follows:
Fab likes to maintain a finished goods inventory equal to 30% of the next month's estimated
sales. How many mugs should Fab plan on producing during the month of November?
23,200 mugs
26,800 mugs
25,900 mugs
34,300 mugs
0.2 points
QUESTION 2
1.
Modesto Company produces and sells Product AlphaB. To guard against stockouts,
the company requires that 20% of the next month's sales be on hand at the end of each
month. Budgeted sales of Product AlphaB over the next four months are:
Budgeted production for August would be:
62,000
units
70,000
units
58,000
units
50,000
units
0.2 points
QUESTION 3
1.
The Waverly Company has budgeted sales for next year as follows:
The ending inventory of finished goods for each quarter should equal 25% of the next
quarter's budgeted sales in units. The finished goods inventory at the start of the year is
3,000 units. Scheduled production for the third quarter should be:
17,5
00
18,5
00
22,0
00
13,5
00
0.2 points
QUESTION 4
1.
A flexible budget is a budget that:
is updated with actual costs as they occur during the period.
is updated to reflect the actual level of activity during the period.
is prepared using a computer spreadsheet application.
contains only variable production costs.
0.2 points
QUESTION 5
1.
Elizarraras Air uses two measures of activity, flights and passengers, in the cost formulas
in its budgets and performance reports. The cost formula for plane operating costs is $39,820 per
month plus $2,938 per flight plus $8 per passenger. The company expected its activity in June to
be 64 flights and 229 passengers, but the actual activity was 66 flights and 225 passengers. The
actual cost for plane operating costs in June was $234,570. The plane operating costs in the
planning budget for June would be closest to:
$229,684
$227,462
$234,570
$235,528
0.12 points
QUESTION 6
1.
If variable overhead is applied on the basis of direct labor­hours and the variable
overhead rate variance is favorable, then:
actual variable overhead rate exceeded the standard rate.
standard variable overhead rate exceeded the actual rate.
actual direct labor­hours exceeded the standard direct labor­hours allowed for the actual output.
standard direct labor­hours allowed for the actual output exceeded the actual hours.
0.2 points
QUESTION 7
1.
Niforos Air uses two measures of activity, flights and passengers, in the cost formulas in
its budgets and performance reports. The cost formula for plane operating costs is $41,380 per
month plus $2,282 per flight plus $14 per passenger. The company expected its activity in
August to be 77 flights and 264 passengers, but the actual activity was 78 flights and 261
passengers. The actual cost for plane operating costs in August was $216,740. The plane
operating costs in the flexible budget for August would be closest to:
$220,790
$223,030
$223,657
$216,740
0.12 points
QUESTION 8
1.
Pollica Corporation's cost formula for its selling and administrative expense is $11,400
per month plus $94 per unit. For the month of March, the company planned for activity of 5,700
units, but the actual level of activity was 5,660 units. The actual selling and administrative
expense for the month was $522,860.
The selling and administrative expense in the planning budget for March would be closest to:
$522,860
$547,200
$543,440
$526,555
0.12 points
QUESTION 9
1.
Pollica Corporation's cost formula for its selling and administrative expense is $11,400
per month plus $94 per unit. For the month of March, the company planned for activity of 5,700
units, but the actual level of activity was 5,660 units. The actual selling and administrative
expense for the month was $522,860.
The selling and administrative expense in the flexible budget for March would be closest to:
$547,200
$522,860
$543,360
$543,440
0.12 points
QUESTION 10
1.
Pollica Corporation's cost formula for its selling and administrative expense is $11,400
per month plus $94 per unit. For the month of March, the company planned for activity of 5,700
units, but the actual level of activity was 5,660 units. The actual selling and administrative
expense for the month was $522,860.
The activity variance for selling and administrative expense in March would be closest to:
$24,340 F
$24,340 U
$3,760 U
$3,760 F
0.12 points
QUESTION 11
1.
Pollica Corporation's cost formula for its selling and administrative expense is $11,400
per month plus $94 per unit. For the month of March, the company planned for activity of 5,700
units, but the actual level of activity was 5,660 units. The actual selling and administrative
expense for the month was $522,860.
The spending variance for selling and administrative expense in March would be closest to:
$20,580 F
$24,340 U
$24,340 F
$20,580 U
0.12 points
QUESTION 12
1.
The Koski Company has established standards as follows:
Direct material
3 pounds @ $4/pound = $12 per unit
Direct labor
2 hour @ $8/hour = $16 per unit
Variable overhead
2 hours @ $5/hour = $10 per unit
Actual production figures for the past year were as follows:
Units produced
500
Direct material used
1,600 pounds
Direct material purchased (3,000 pounds)
$12,300
Direct labor cost (950 hours)
$7,790
Variable overhead cost incurred
$4,655
The materials price variance is:
$160 U
$6,300 U
$300 U
$150 U
0.12 points
QUESTION 13
1.
The following materials standards have been established for a particular product:
Standard quantity per unit of output
Standard Price
6.8 meters
$14.40 per meter
The following materials standards have been established for a particular product:
Actual materials purchased
Actual cost of materials purchased
Actual materials used in production
Actual output
4,400 meters
$60,500
3,800 meters
400 units
What is the materials price variance for the month?
$14,850 U
$8,250 U
$8,640 U
$2,860 F
0.12 points
QUESTION 14
1.
The following materials standards have been established for a particular product:
Standard labor- hour per unit of output
3.3 hours
Standard labor rate
$16.15 per hour
The following data pertain to operations concerning the product for the last month:
Actual hours worked
Actual total labor cost
Actual output
6,300 hours
$103,635
2,000 units
What is the labor rate variance for the month?
$2,955 F
$4,935 F
$2,955 U
$1,890 U
0.12 points
QUESTION 15
1.
The Koski Company has established standards as follows:
Direct material
3 pounds @ $4/pound = $12 per unit
Direct labor
2 hour @ $8/hour = $16 per unit
Variable overhead
2 hours @ $5/hour = $10 per unit
Actual production figures for the past year were as follows:
Units produced
500
Direct material used
1,600 pounds
Direct material purchased (3,000 pounds)
$12,300
Direct labor cost (950 hours)
$7,790
Variable overhead cost incurred
$4,655
The materials quantity variance is:
$400 U
$410 F
$410 U
$6,000 U
0.12 points
QUESTION 16
1.
Under a standard cost system, the materials price variances are usually the responsibility
of the:
production manager.
sales manager.
purchasing manager.
engineering manager.
0.12 points
QUESTION 17
1.
Werber Clinic uses client­visits as its measure of activity. During January, the clinic
budgeted for 2,700 client­visits, but its actual level of activity was 2,730 client­visits. The clinic
has provided the following data concerning the formulas used in its budgeting and its actual
results for January:
Fixed element per
month
Revenue
Personnel expenses
Medical supplies
Occupancy expenses
Administrative
Expenses
Total Expenses
Variable Element per client visit
$22,100
$1,100
$5,600
$33.60
$8.70
$6.60
$1.60
$3,700
$0.40
$32,500
$17.30
2.
Actual Result for January
Revenue
Personnel expenses
Medical expenses
Occupancy expenses
Administrative expenses
$93,408
$46,251
$19,348
$9,508
$4,772
3.
4.
The activity variance for personnel expenses in January would be closest to:
$661 U
$261 U
$261 F
$661 F
0.12 points
QUESTION 18
1.
The Holmes Division recorded operating data as follows for the past year:
Sales
$200,000
Net operating income
$25,000
Average operating assets
$100,000
Stockholders’ equity
$80,000
Residual income
$13,000
For the past year, the return on investment was:
15.75%
20.50%
25.00%
31.25%
0.12 points
QUESTION 19
1.
The Holmes Division recorded operating data as follows for the past year:
Sales
$200,000
Net operating income
$25,000
Average operating assets
$100,000
Stockholders’ equity
$80,000
Residual income
$13,000
For the past year, the margin was:
12.50%
13.00%
14.75%
15.00%
0.2 points
QUESTION 20
1.
The Holmes Division recorded operating data as follows for the past year:
Sales
$200,000
Net operating income
$25,000
Average operating assets
$100,000
Stockholders’ equity
$80,000
Residual income
$13,000
For the past year, the turnover was:
2
5
1
0
4
2
0.2 points
QUESTION 21
1.
The Holmes Division recorded operating data as follows for the past year:
Sales
$200,000
Net operating income
$25,000
Average operating assets
$100,000
Stockholders’ equity
$80,000
Residual income
$13,000
For the past year, the minimum required rate of return was:
11%
12%
13%
14%
0.2 points
QUESTION 22
1.
Curly Inc. is considering whether to continue to make a component or to buy it from an
outside supplier. The company uses 16,000 of the components each year. The unit product cost
of the component according to the company's cost accounting system is given as follows:
Direct materials
Direct labor
Variable manufacturing overhead
Fixed manufacturing overhead
Unit product cost
$8.10
6.40
1.70
4.40
$20.60
Assume that direct labor is a variable cost. Of the fixed manufacturing overhead, 30% is
avoidable if the component were bought from the outside supplier. In addition, making the
component uses 1 minutes on the machine that is the company's current constraint. If the
component were bought, this machine time would be freed up for use on another product that
requires 2 minutes on the constraining machine and that has a contribution margin of $8.10 per
unit.
When deciding whether to make or buy the component, what cost of making the component
should be compared to the price of buying the component?
$20.60
$17.52
$24.65
$21.57
0.2 points
QUESTION 23
For which of the following decisions are opportunity costs relevant?
1.
A
B
C
D
The decision
The decision
to keep or
to make or
drop a product
buy
line
Yes
Yes
Yes
No
No
Yes
No
No
2.
3. A
B
C
D
0.2 points
QUESTION 24
1.
Green Company produces 1,000 parts per year, which are used in the assembly of one of
its products. The unit product cost of these parts is:
Variable manufacturing cost
$12
Fixed manufacturing cost
9
Unit product cost
$21
The part can be purchased from an outside supplier at $20 per unit. If the part is purchased from
the outside supplier, two thirds of the fixed manufacturing costs can be eliminated. The annual
impact on the company's net operating income as a result of buying the part from the outside
supplier would be:
$1,000 increase
$1,000 decrease
$5,000 increase
$2,000 decrease
0.12 points
QUESTION 25
1.
Scales Corporation has received a request for a special order of 6,000 units of product
Y45 for $13.70 each. Product Y45's unit product cost is $11.50, determined as follows:
Direct materials
Direct labor
$2.50
1.90
Variable manufacturing overhead
2.30
Fixed manufacturing overhead
4,80
Unit product cost
$11.50
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 modifications made to product
Y45 that would increase the variable costs by $8.10 per unit and that would require an
investment of $20,000 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. If the special order is accepted, the company's
overall net operating income would increase (decrease) by:
($26,600)
$13,200
($55,400)
($21,300)
0.12 points
QUESTION 26
1.
The management of Austin Corporation is considering dropping product R97C. Data
from the company's accounting system appear below:
Sales
$130,000
Variable Expenses
$56,000
Fixed manufacturing expenses
$49,000
Fixed selling and administrative expenses
$35,000
In the company's accounting system all fixed expenses of the company are fully allocated to
products. Further investigation has revealed that $34,000 of the fixed manufacturing expenses
and $20,000 of the fixed selling and administrative expenses are avoidable if product R97C is
discontinued. What would be the effect on the company's overall net operating income if product
R97C were dropped?
Overall net operating income would increase by $20,000.
Overall net operating income would increase by $10,000.
Overall net operating income would decrease by $20,000.
Overall net operating income would decrease by $10,000.
0.12 points
QUESTION 27
1.
Vanikoro Corporation currently has two divisions which had the following operating
results for last year:
Sales
Variable costs
Contribution Margin
Fixed costs for the division
Segment margin
Allocated corporate fixed
costs
Net operating income (loss)
Cork
Rubber
Division
Division
$600,000
$300,000
$310,000
$200,000
$290,000
$100,000
$110,000
$60,000
$180,000
$40,000
$100,000
$50,000
$80,000
-$10,000
Since the Rubber Division sustained a loss, the president of Vanikoro is considering the
elimination of this division. All of the fixed costs for the division could be eliminated if the
division was dropped. If the Rubber Division was dropped at the beginning of last year, how
much higher or lower would Vanikoro's total net operating income have been for the year?
$10,000 higher
$40,000 lower
$50,000 higher
$100,000 lower
0.12 points
QUESTION 28
1.
(Ignore income taxes in this problem.) Henry wants to send his son to computer
school which will start one year from today. Payments of $2,000 are due at the end of each
of the next two years. What lump-sum will Henry have to invest now at 12% per year in
order to have $2,000 at the end of each of the next two years?
$4,2
40
$3,3
80
$1,5
94
$2,5
08
0.12 points
1.
QUESTION 29
(Ignore income taxes in this problem.) If you wanted to withdraw $12,000 from a
bank account at the end of each of the next 20 years, approximately how much would you
have to invest in the account today assuming a 6% interest rate?
$20,92
4
$38,46
2
$74,88
0
$137,6
04
0.12 points
QUESTION 30
1.
Glassett Corporation is considering a project that would require an investment of
$62,000. No other cash outflows would be involved. The present value of the cash inflows
would be $70,060. The profitability index of the project is closest to:
0.1
3
1.1
3
0.8
7
0.1
2
0.12 points
QUESTION 31
1.
Jarvey Company is studying a project that would have a ten-year life and would
require a $450,000 investment in equipment which has no salvage value. The project would
provide net operating income each year as follows for the life of the project:
The company's required rate of return is 12%. What is the payback period for this project?
3 years
2 years
4.28
years
9 years
0.12 points
QUESTION 32
1.
Kumanu, Inc. is considering investing in new FMS equipment for its factory. This
equipment will cost $80,000, is expected to last 6 years, and is expected to have a $10,000
salvage value at the end of 6 years. The new equipment is expected to generate cost
savings of $20,000 per year in each of the 6 years. Kumanu's discount rate is 16%. What is
the net present value of this equipment?
$(2,200
)
$3,700
$20,50
0
$(34,95
0)
0.12 points
QUESTION 33
1.
Parks Company is considering an investment proposal in which a working capital
investment of $10,000 would be required. The investment would provide cash inflows of
$2,000 per year for six years. The working capital would be released for use elsewhere when
the project is completed. If the company's discount rate is 10%, the investment's net
present value is:
$1,29
0
$(1,29
0)
$2,00
0
$4,35
0
0.12 points
QUESTION 34
1.
The management of Eversman Corporation is considering the following three
investment projects:
Rank the projects according to the profitability index, from most profitable to least profitable.
V,U,
W
U,W,
V
W,V,
U
V,W,
U
0.12 points
QUESTION 35
1.
Tighe Corporation is contemplating purchasing equipment that would increase sales
revenues by $420,000 per year and cash operating expenses by $231,000 per year. The
equipment would cost $747,000 and have a 9 year life with no salvage value. The annual
depreciation would be $83,000. The simple rate of return on the investment is closest to:
25.3
%
14.2
%
11.1
%
25.2
%