Multiple Choice 2
Question 1 : (TCO E) Designing a new product is a(n)
2. Question : (TCO G) Given the following data, what would ROI be?
Net operating income $10,000
Contribution margin $20,000
Average operating assets $50,000
Stockholder’s equity $25,000
1. Question : (TCO C) Longiotti Corporation produces and sells a single product. Data
concerning that product appear below.
Selling price per unit $375.00
Variable expense per unit $144.00
Fixed expense per month $1,686,300
Determine the monthly breakeven in units or dollar sales. Show your work!
2. Question : (TCO B) Maverick Corporation uses the weighted-average method in its
process costing system. Data concerning the first processing department for
the most recent month are listed below.
Work in process, beginning:
Units in beginning work in process inventory 400
Materials costs $6,900
Conversion costs $2,500
Percent complete for materials 80%
Percent complete for conversion 15%
Units started into production during the month 6,000
Units transferred to the next department during the month 5,600
Materials costs added during the month $112,500
Conversion costs added during the month $210,300
1. Question : (TCO D) Topple Company produces a single product. Operating data for the
company and its absorption costing income statement for the last year are
Units in beginning inventory 2,000
Units produced 9,000
Units sold 10,000
Less cost of goods sold:
Beginning inventory 12,000
Add cost of goods manufactured 54,000
Goods available for sale 66,000
Less ending inventory 6,000
Cost of goods sold 60,000
Gross margin 40,000
Less selling and admin. expenses 28,000
Net operating income $12,000
2. Question : (TCO I) (Ignore income taxes in this problem.) Bill Anders retires in 8 years.
He has $650,000 to invest and is considering a franchise for a fast-food
outlet. He would have to purchase equipment costing $500,000 to equip the
outlet and invest an additional $150,000 for inventories and other working
capital needs. Other outlets in the fast-food chain have an annual net cash
inflow of about $160,000. Mr. Anders would close the outlet in 8 years. He
estimates that the equipment could be sold at that time for about 10% of its
original cost. Mr. Anders’ required rate of return is 16%.
Part A: What is the investment’s net present value when the discount rate is
Part B: Refer to your calculations. Is this an acceptable investment? Why or
3. Question : (TCO A) The following data (in thousands of dollars) have been taken from the accounting records of the Maroon Corporation for the just-completed
Raw materials inventory, beginning 25
Raw materials inventory, ending 30
Purchases of raw materials 250
Direct labor 350
Manufacturing overhead 500
Administrative expenses 300
Selling expenses 250
Work in process inventory, beginning 150
Work in process inventory, ending 100
Finished goods inventory, beginning 80
Finished goods inventory, ending 110
Use the above data to prepare (in thousands of dollars) a schedule of Cost
of Goods Manufactured and a Schedule of Cost of Goods Sold for the year.
In addition, what is the impact on the financial statements if the ending
finished goods inventory is overstated or understated?
4. Question : (TCO F) Walker Corporation is preparing its cash budget for November. The
budgeted beginning cash balance is $43,000. Budgeted cash receipts total $117,000 and budgeted cash disbursements total $122,000. The desired
ending cash balance is $55,000. The company can borrow up to $100,000 at
any time from a local bank, with interest not due until the following month.
Prepare the company’s cash budget for November in good form. Make sure
to indicate what borrowing, if any, would be needed to attain the desired
ending cash balance
5. Question : (TCO F) Bella Lugosi Holdings, Inc. (BLH), has collected the following
operating information for its current month’s activity. Using this information,
prepare a flexible budget analysis to determine how well BLH performed in
terms of cost control.
Activity level (in units) 5,250 5,178
Indirect materials $24,182 $23,476
Utilities $22,356 $22,674
Administration $63,450 $65,500
Rent $65,317 $63,904
6. Question : (TCO H) Lindon Company uses 7,500 units of Part Y each year as a
component in the assembly of one of its products. The company is presently
producing Part Y internally at a total cost of $119,000 as follows.
Direct labor 28,000
Total costs $119,000
An outside supplier has offered to provide Part Y at a price of $12 per unit. If
Lindon stops producing the part internally, one third of the fixed
manufacturing overhead would be eliminated.
Required: Prepare a make-or-buy analysis showing the annual advantage or
disadvantage of accepting the outside supplier’s offer. Please state clearly
whether the part should be made or bought and share your work.
7. Question : (TCO B) Sandler Corporation bases its predetermined overhead rate on the
estimated machine hours for the upcoming year. Data for the upcoming year
Estimated machine hours 75,000
Estimated variable manufacturing
overhead $4.50 per machine hour
Estimated total fixed manufacturing
The actual machine hours for the year turned out to be 77,000.
Compute the company’s predetermined overhead rate.
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