If the selling price per unit is $30, unit variable cost is $24, and total fixed costs are $360,000, the number of units that the company must sell to earn its target net income is a.. T
Trang 1ISV Managerial Accounting, 4e Instructor
Section # _ Date
Score
PART I — MULTIPLE CHOICE (60 points)
Instructions: Designate the best answer for each of the following questions.
1 A responsibility center that incurs costs (and expenses) and generates revenues is
classified as a(n)
a cost center
b revenue center
c profit center
d investment center
2 The most useful measure for evaluating a manager's performance in controlling
revenues and costs in a profit center is
a contribution margin
b contribution net income
c contribution gross profit
d controllable margin
3 Ramsey Corporation desires to earn target net income of $90,000 If the selling price
per unit is $30, unit variable cost is $24, and total fixed costs are $360,000, the number of units that the company must sell to earn its target net income is
a 30,000
b 75,000
c 45,000
d 60,000
4 Shane Corporation uses a process cost accounting system Given the following data,
compute the number of units transferred out during the current period
Beginning Work in Process 20,000 units (1/2 complete)
Ending Work in Process 25,000 units (1/3 complete)
Started into Production 150,000 units
a 125,000
b 141,667
c 145,000
d 150,000
Trang 25 Witten Company applies overhead on the basis of machine hours Given the following
data, compute overhead applied and the under- or overapplication of overhead for the period:
Estimated annual overhead cost $1,200,000 Actual annual overhead cost $1,150,000
a $1,120,000 applied and $30,000 underapplied
b $1,200,000 applied and $30,000 overapplied
c $1,120,000 applied and $30,000 overapplied
d $1,150,000 applied and neither under- nor overapplied
6 The following data has been collected for use in analyzing the behavior of
main-tenance costs of Ridell Corporation:
Using the high-low method to separate the maintenance costs into their variable and fixed cost components, these components are
a $5 per hour plus $20,000
b $5 per hour plus $30,000
c $4 per hour plus $41,000
d $3 per hour plus $61,000
7 Given the following information for Hett Company, compute the company's ROI: Sales
— $1,000,000; Controllable Margin — $120,000; Average Operating Assets —
$500,000
a 40%
b 50%
c 12%
d 24%
8 Given the following data for Glennon Company, compute (A) total manufacturing costs
and (B) costs of goods manufactured:
Direct materials used $120,000 Beginning work in process $20,000
Manufacturing overhead 150,000 Beginning finished goods 25,000 Operating expenses 175,000 Ending finished goods 15,000 (A) (B)
Trang 39 The production cost report shows both quantities and costs Costs are reported in
three sections: (1) costs accounted for, (2) unit costs, and (3) costs charged to department The sections are listed in the following order:
a (1), (2), (3)
b (1), (3), (2)
c (2), (1), (3)
d (2), (3), (1)
10 The starting point of a master budget is the preparation of the
a cash budget
b sales budget
c production budget
d budgeted balance sheet
11 The most useful measure for evaluating the performance of the manager of an
investment center is
a contribution margin
b controllable margin
c return on investment
d income from operations
12 Which of the following capital budgeting techniques explicitly takes the time value of
money into consideration?
a Annual rate of return
b Internal rate of return
c Net present value
d Both (b) and (c) above
13 The cost classification scheme most relevant to responsibility accounting is
a controllable vs uncontrollable
b fixed vs variable
c semivariable vs mixed
d direct vs indirect
Use the following information for questions 14 and 15
Grant Company estimates its sales at 60,000 units in the first quarter and that sales will increase
by 6,000 units each quarter over the year It has, and desires, a 25% ending inventory of finished goods Each unit sells for $25 40% of the sales are for cash 70% of the credit customers pay within the quarter The remainder is received in the quarter following sale
14 Cash collections for the third quarter are budgeted at
a $1,017,000
b $1,476,000
c $1,773,000
d $2,052,000
15 Production in units for the third quarter should be budgeted at
a 73,500
b 69,000
c 91,500
d 72,000
Trang 416 Stine Company incurs the following costs in producing 50,000 units of product:
Variable manufacturing overhead 100,000 Fixed manufacturing overhead 300,000
An outside supplier has offered to supply the 50,000 units at $7.00 each All of Stine's related variable costs, but only $200,000 of the fixed costs would be eliminated if the offer is accepted Acceptance will result in a
a savings of $200,000
b loss of $100,000
c savings of $100,000
d loss of $200,000
17 Finney Company has a production process where two products result from a joint
processing procedure; both can be sold immediately or processed further Given the following additional per unit information, determine which of the products should be processed further
Product Joint Cost Selling Price Processing Cost Selling Price
a A
b B
c Both
d Neither
18 A flexible budget
a is also called a static budget
b can be considered a series of related static budgets
c can be prepared for sales or production budgets, but not for an operating expense budget
d typically uses an activity index different from that used in developing the predetermined overhead rate
19 Carey Company's equipment account increased $800,000 during the period; the
related accumulated depreciation increased $60,000 New equipment was purchased
at a cost of $1,400,000 and used equipment was sold at a loss of $40,000 Depreciation expense was $200,000 Proceeds from the sale of the used equipment were
a $420,000
b $500,000
c $560,000
d $640,000
20 Which of the following combinations presents correct examples of liquidity, profitability,
and solvency ratios, respectively?
a Inventory turnover Inventory turnover Times interest earned
b Current ratio Inventory turnover Debt to total assets
c Receivables turnover Return on assets Times interest earned
Trang 521 A company’s planned activity level for next year is expected to be 100,000 machine
hours At this level of activity, the company budgeted the following manufacturing overhead costs:
Variable Fixed Indirect materials $60,000 Depreciation $25,000
Factory supplies 10,000 Supervision 20,000
A flexible budget prepared at the 90,000 machine hours level of activity would allow total manufacturing overhead costs of
a $135,000
b $180,000
c $185,000
d $150,000
22 A company developed the following per unit materials standards for its product: 3
gallons of direct materials at $5 per gallon If 4,000 units of product were produced last month and 12,500 gallons of direct materials were used, the direct materials quantity variance was
a $1,500 favorable
b $2,500 unfavorable
c $1,500 unfavorable
d $2,500 favorable
23 The standard direct labor cost for producing one unit of product is 5 direct labor hours
at a standard rate of pay of $8 Last month, 5,000 units were produced and 24,500 direct labor hours were actually worked at a total cost of $180,000 The direct labor quantity variance was
a $4,000 unfavorable
b $6,000 unfavorable
c $6,000 favorable
d $4,000 favorable
*24 Smythe Company applies overhead to products based on direct labor hours
Manufacturing overhead at the expected normal level of activity is $50,000 per month plus $5 per direct labor hour During June, actual manufacturing overhead costs amounted to $85,000 when 6,100 actual direct labor hours were worked The standard number of direct labor hours that should have been worked for the output achieved was 6,000 direct labor hours The overhead controllable variance for June was
a $4,500 unfavorable
b $3,400 favorable
c $5,000 unfavorable
d $5,000 favorable
25 Under the time-and-material-pricing approach, the charges for any particular job
include each of the following except the
a labor charge
b charge for materials
c material loading charge
d overhead charge
Trang 626 The transfer pricing approach that does not reflect the selling division’s true
profit-ability is the
a cost-based approach
b market-based approach
c negotiated price approach
d time-and-material-pricing approach
Use the following information for questions 27 and 28
Robot Toy Company manufactures two products: X-O-Tron and Mechoman Robot’s overhead costs consist of setting up machines, $200,000; machining, $450,000; and inspecting, $150,000 Additional information on the two products is:
27 Overhead applied to Mechoman using traditional costing is
a $320,000
b $384,000
c $416,000
d $500,000
28 Overhead applied to X-O-Tron using activity-based costing is
a $300,000
b $384,000
c $416,000
d $480,000
29 An appropriate cost driver for an assembling cost pool is the number of
a purchase orders
b setups
c parts
d direct labor hours
30 Which of the following is included in the cost of goods manufactured under absorption
costing but not under variable costing?
a Direct materials
b Variable factory overhead
c Fixed factory overhead
d Direct labor
Trang 7PART II — MATCHING (18 points)
Instructions: Designate the terminology that best represents the definition or statement given
below by placing the identifying letter(s) in the space provided No term should be used more than once
A Activity-based costing N Job cost sheet
B Annual rate of return O Noncontrollable costs
E Contribution margin ratio *R Overhead controllable variance
K Equivalent units of production X Value-added activity
1 Costs that a manager has the authority to incur within a given period of time
2 A form used to record the costs chargeable to a job
3 A responsibility center that incurs costs and also generates revenues
4 The difference between overhead budgeted for standard hours allowed and overhead
incurred
5 The amount of revenue remaining after deducting variable costs
6 Used to apply costs to similar products that are mass produced in a continuous
fashion
7 Costs that vary in total directly and proportionately with changes in the activity level 8 The differences between actual costs and standard costs
9 Determines profitability of a capital expenditure by dividing expected net income by
the average investment
10 The rate a company must pay to obtain funds from creditors and stockholders
11 Costs that are an integral part of producing the finished product
12 Allocates overhead to multiple cost pools and assigns the cost pools to products by
means of cost drivers
13 Involves the measuring, recording, and reporting of product costs
14 A measure of the work done during the period, expressed in fully completed units 15 A costing approach in which all manufacturing costs are charged to the product
16 Increase the worth of a product or service to customers
17 The amount of cash from operations after deducting capital expenditures and cash
dividends paid
18 Individual budgets that culminate in a budgeted income statement
Trang 8PART III — VARIANCE ANALYSIS (19 points)
The Olson Company developed the following standard costs for its product in 2008:
Standard Cost Card Unit Standard Cost
Manufacturing overhead
$80 The company planned to work 100,000 direct labor hours and produce 25,000 units of product in
2008 Actual results for 2008 are as follows:
24,000 units of product were produced
Actual direct materials purchased and used during the year amounted to 122,000 pounds at a cost of $475,800
Actual direct labor costs were $779,000 for 95,000 direct labor hours worked
Total actual manufacturing overhead incurred amounted to $685,500
Instructions
Calculate the following variances showing all computations supporting your answers Indicate if the variances are favorable (F) or unfavorable (U)
(a) Direct materials price and direct materials quantity variances
(b) Direct labor price and direct labor quantity variances
*(c) Overhead controllable and overhead volume variances
Trang 9PART IV — RATIO ANALYSIS (14 points)
The condensed financial statements of Jenner Corporation for 2008 are presented below
December 31, 2008 For the Year Ended December 31, 2008
investments $ 30,000 Selling and administrative
equipment (net) 760,000 Income tax expense 100,000
Liabilities and Stockholders' Equity
Current liabilities $ 100,000
Long-term liabilities 350,000
Stockholders' equity 550,000
Total liabilities and
stockholders' equity $1,000,000
Additional data as of December 31, 2007: Inventory = $100,000; Total assets = $800,000; Stockholders' equity = $450,000
Instructions: Compute the following ratios for 2008 showing supporting calculations.
(a) Current ratio = _ (b) Debt to total assets ratio = _ (c) Times interest earned = _ (d) Inventory turnover = (e) Profit margin = (f) Return on stockholders' equity = (g) Return on assets = _
Trang 10PART V — MISCELLANEOUS MANAGERIAL MINI-PROBLEMS (14 points)
Carson Corporation manufactures paper shredding equipment You are requested to "audit" a sampling of computations made by Carson's internal accountants via your independent recalculation of the information
Instructions: Compute the requested information for each of the following independent situations
(present supporting calculations)
(a) Carson uses a process costing system 2,000 units were in process at the beginning of the period, 60% complete 20,000 units were started into production during the period; 1,000 were in process at the end of the period, 60% complete Compute equivalent units for conversion costs
(b) Carson sells each unit for $500 Variable costs per unit equal $300 Total fixed costs equal
$800,000 Carson is currently selling 5,000 units per period and would like to earn net income of $400,000 Compute: (1) break-even point in dollars; (2) sales units necessary to attain desired income; and (3) margin of safety ratio for current operations
(1) Break-even point = $ (2) Desired sales = _ units
(3) Margin of safety = _%