Question-1
| Butler Corporation is considering the purchase of new equipment costing $63,000. The projected annual after-tax net income from the equipment is $2,300, after deducting $21,000 for depreciation. The revenue is to be received at the end of each year. The machine has a useful life of 3 years and no salvage value. Butler requires a 11% return on its investments. The present value of an annuity of 1 for different periods follows: |
| Periods | 11 Percent |
| 1 | 0.9009 |
| 2 | 1.7125 |
| 3 | 2.4437 |
| 4 | 3.1024 |
| What is the net present value of the machine? (closest to) |
$6,900.
$51,318.
$63,000.
$56,938.
$(6,062).
Question-2
Walters manufactures a specialty food product that can currently be sold for $22.50 per unit and has 20,500 units on hand. Alternatively, it can be further processed at a cost of $12,500 and converted into 12,500 units of Deluxe and 6,500 units of Super. The selling price of Deluxe and Super are $30.50 and $20.50, respectively. The incremental net income of processing further would be:
$53,250.
$44,500.
$40,750.
$12,500.
$18,500.
Question-3
Factor Co. can produce a unit of product for the following costs:
| Direct material | $8.50 |
| Direct labor | 24.50 |
| Overhead | 42.50 |
| Total costs per unit | $75.50 |
An outside supplier offers to provide Factor with all the units it needs at $45.88 per unit. If Factor buys from the supplier, the company will still incur 65% of its overhead. Factor should choose to:
Buy since the relevant cost to make it is $60.63.
Buy since the relevant cost to make it is $47.88.
Buy since the relevant cost to make it is $33.
Make since the relevant cost to make it is $47.88.
Make since the relevant cost to make it is $33.00.
Question-4
| A product sells for $200 per unit, and its variable costs are 65% of sales. The fixed costs are $420,000. What is the break-even point in sales dollars? (Do not round intermediate calculations.) |
$2,100.
$1,200,000.
$646,154.
$6,000.
$420,000.
Question-5
| Use the following selected information from Wheeler, LLC to determine the 2015 and 2014 common size percentages for cost of goods sold using Net sales as the base. |
|
| 2015 | 2014 |
| Net sales | $ 358,200 | $ 295,400 |
| Cost of goods sold | 174,400 | 131,540 |
| Operating expenses | 63,490 | 61,190 |
| Net earnings | 32,020 | 22,770 |
121.3% for 2015 and 100.0% for 2014.
66.4% for 2015 and 65.2% for 2014.
48.7% for 2015 and 44.5% for 2014.
8.9% for 2015 and 7.7% for 2014.
150.6% for 2015 and 153.3% for 2014.
Question-6
Flagstaff Company has budgeted production units for July of 7,700 units. Variable factory overhead is $1.2 per unit. Budgeted fixed factory overhead is $18,000, which includes $2,800 of factory equipment depreciation. Compute the total budgeted overhead to be reported on the factory overhead budget for the month.
$22,900.
$9,240.
$18,000.
$24,440.
$27,240.
Question-7
Data pertaining to a company's joint production for the current period follows:
|
| L | M |
| Quantities produced | 420 lbs. | 370 lbs. |
| Market value at split-off point | $12.4/lb. | $24.8/lb. |
Compute the cost to be allocated to Product L for this period's $924 of joint costs if the value basis is used. (Do not round intermediate calculations.)
$4,972.00.
$462.00.
$589.45.
$1,121.45.
$334.55.
Question-8
Wheeler Company can produce a product that incurs the following costs per unit: direct materials, $10.80; direct labor, $24.80, and overhead, $16.80. An outside supplier has offered to sell the product to Axle for $47.84. If Wheeler buys from the supplier, it will still incur 45% of its overhead cost. Compute the net incremental cost or savings of buying.
$3.00 cost per unit.
$4.68 cost per unit.
$3.00 savings per unit.
$4.89 savings per unit.
$4.89 cost per unit.
Question-9
Granfield Company has a piece of manufacturing equipment with a book value of $42,500 and a remaining useful life of four years. At the end of the four years the equipment will have a zero salvage value. The market value of the equipment is currently $22,500. Granfield can purchase a new machine for $125,000 and receive $22,500 in return for trading in its old machine. The new machine will reduce variable manufacturing costs by $19,500 per year over the four-year life of the new machine. The total increase or decrease in net income by replacing the current machine with the new machine (ignoring the time value of money) is:
$24,500 decrease
$24,500 increase
$78,000 decrease
$20,000 decrease
$53,750 increase
Question-10
| Product A has a sales price of $21 per unit. Based on a 12,000-unit production level, the variable costs are $9 per unit and the fixed costs are $8 per unit. Using a flexible budget for 14,500 units, what is the budgeted operating income from Product A? |
$96,000.
$52,500.
$22,500.
$14,500.
$78,000.
Question-11
| A company is considering the purchase of new equipment for $60,000. The projected annual net cash flows are $24,500. The machine has a useful life of 3 years and no salvage value. Management of the company requires a 12% return on investment. The present value of an annuity of 1 for various periods follows: |
| Periods | Present value of an annuity of 1 at 12% |
| 1 | 0.8929 |
| 2 | 1.6901 |
| 3 | 2.4018 |
| What is the net present value of this machine assuming all cash flows occur at year-end? |
$(1,156)
$3,500
$56,442
$23,500
$20,000
Question – 12
Current information for the Healey Company follows:
| Beginning raw materials inventory | $14,600 |
| Raw material purchases | 54,000 |
| Ending raw materials inventory | 16,000 |
| Beginning work in process inventory | 21,800 |
| Ending work in process inventory | 27,400 |
| Direct labor | 39,800 |
| Total factory overhead | 29,400 |
All raw materials used were traceable to specific units of product. Healey Company's total manufacturing costs for the year are:
$116,200.
$127,400.
$131,200.
$124,600.
$121,800.
Question-13
| Maxim manufactures a cat food product called Green Health. Maxim currently has 10,000 bags of Green Health on hand. The variable production costs per bag are $3.70 and total fixed costs are $10,000. The cat food can be sold as it is for $9.05 per bag or be processed further into Premium Green and Green Deluxe at an additional $2,100 cost. The additional processing will yield 10,000 bags of Premium Green and 3,100 bags of Green Deluxe, which can be sold for $8.05 and $6.05 per bag, respectively. If Green Health is processed further into Premium Green and Green Deluxe, the total gross profit would be: |
$101,355.
$50,155.
$99,255.
$60,155.
$97,155.
Question-14
| Fernwood Company is preparing the company's statement of cash flows for the fiscal year just ended. The following information is available: |
| Retained earnings balance at the beginning of the year | $ 253,000 |
| Cash dividends declared for the year | 55,000 |
| Proceeds from the sale of equipment | 93,800 |
| Gain on the sale of equipment | 5,100 |
| Cash dividends payable at the beginning of the year | 24,200 |
| Cash dividends payable at the end of the year | 32,000 |
| Net income for the year | 121,000 |
The amount of cash paid for dividends was:
$47,200.
$64,800.
$55,000.
$56,200.
$66,000.
Question-15
Ahngram Corp. has 1,000 defective units of a product that cost $2.90 per unit in direct costs and $6.40 per unit in indirect cost when produced last year. The units can be sold as scrap for $3.90 per unit or reworked at an additional cost of $2.40 and sold at full price of $11.70. The incremental net income (loss) from the choice of reworking the units would be:
($2,400).
$5,400.
$0.
$2,400.
$9,300.
Question-16
| A sporting equipment store expects to purchase $7,200 of ski boots in October. The store had $3,200 of ski boots in merchandise inventory at the beginning of October, and expects to have $2,200 of ski boots in merchandise inventory at the end of October to cover part of anticipated November sales. What is the budgeted cost of goods sold for October? |
$10,400.
$7,200.
$5,400.
$9,400.
$8,200.
Question-17
Bluebird Mfg. has received a special one-time order for 15,000 bird feeders at $3.60 per unit. Bluebird currently produces and sells 75,000 units at $7.60 each. This level represents 80% of its capacity. Production costs for these units are $4.40 per unit, which includes $2.55 variable cost and $1.85 fixed cost. If Bluebird accepts this additional business, the effect on net income will be:
$38,250 decrease.
$15,750 increase.
$12,000 decrease.
$54,000 increase.
$38,250 increase.
Question-18
| Carmel Corporation is considering the purchase of a machine costing $38,000 with a 4-year useful life and no salvage value. Carmel uses straight-line depreciation and assumes that the annual cash inflow from the machine will be received uniformly throughout each year. In calculating the accounting rate of return, what is Carmel's average investment? |
$38,000.
$23,750.
$19,000.
$11,875.
$9,500.
Question-19
| Bagwell's net income for the year ended December 31, Year 2 was $192,000. Information from Bagwell's comparative balance sheets is given below. Compute the cash received from the sale of its common stock during Year 2. |
| At December 31 | Year 2 | Year 1 |
| Common Stock, $5 par value | $ 507,000 | $ 456,300 |
| Paid-in capital in excess of par | 955,000 | 859,300 |
| Retained earnings | 695,000 | 588,300 |
$50,700.
$146,400.
$106,700.
$192,000.
$95,700.
Question-20
CWN Company uses a job order costing system and last period incurred $82,000 of actual overhead and $100,000 of direct labor. CWN estimates that its overhead next period will be $73,000. It also expects to incur $100,000 of direct labor. If CWN bases applied overhead on direct labor cost, its predetermined overhead rate for the next period should be:
122%.
112%.
73%.
137%.
82%.
Question-21
Alfarsi Industries uses the net present value method to make investment decisions and requires a 15% annual return on all investments. The company is considering two different investments. Each require an initial investment of $14,300 and will produce cash flows as follows:
| End of Year | Investment | |
| A | B | |
| 1 | $9,700 | $0 |
| 2 | 9,700 | 0 |
| 3 | 9,700 | 29,100 |
The present value factors of $1 each year at 15% are:
| 1 | 0.8696 |
| 2 | 0.7561 |
| 3 | .6575 |
The present value of an annuity of $1 for 3 years at 15% is 2.2832
The net present value of Investment A is:
$(14,300).
$14,800.
$(22,148).
$19,133.
$7,847.
Question-22
Lattimer Company had the following results of operations for the past year:
| Sales (15,000 units at $12.10) |
| $181,500 |
| Variable manufacturing costs | $99,000 |
|
| Fixed manufacturing costs | 22,500 |
|
| Selling and administrative expenses (all fixed) | 37,500 | (159,000) |
| Operating income |
| $22,500 |
A foreign company whose sales will not affect Lattimer's market offers to buy 5,200 units at $7.70 per unit. In addition to existing costs, selling these units would add a $0.27 selling cost for export fees. If Lattimer accepts this additional business, the special order will yield a:
$4,316 profit.
$8,684 loss.
$5,720 profit.
$3,484 loss.
$2,080 loss.
Question-23
| A company is considering purchasing a machine for $22,200. The machine will generate an after-tax net income of $3,800 per year. Annual depreciation expense would be $3,300. What is the payback period for the new machine? |
3.1 years.
6.7 years.
5.8 years.
44.4 years.
1.6 years.
Question-24
| A company has fixed costs of $95,200. Its contribution margin ratio is 34% and the product sells for $67 per unit. What is the company's break-even point in dollar sales? |
$190,400.
$44,800.
$280,000.
$184,800.
$145,600
Question-25
Pepper Department store allocates its service department expenses to its various operating (sales) departments. The following data is available for its service departments:
| Expense | Basis for allocation | Amount |
| Rent | Square feet of floor space | $27,000 |
| Advertising | Amount of dollar sales | $36,000 |
| Administrative | Number of employees | $54,000 |
The following information is available for its three operating (sales) departments:
|
| Square | Dollar | Number of |
| A | 3,300 | $289,000 | 9 |
| B | 3,700 | $309,000 | 11 |
| C | 3,900 | $432,000 | 13 |
| Totals | 10,900 | $1,030,000 | 33 |
What is the total advertising expense allocated to Department C?
$18,599.
$15,099 .
$36,000.
$8,400.
$16,899.
Question-26
| Minor Electric has received a special one-time order for 900 light fixtures (units) at $21 per unit. Minor currently produces and sells 4,500 units at $22.00 each. This level represents 75% of its capacity. Production costs for these units are $28.50 per unit, which includes $19.00 variable cost and $9.50 fixed cost. To produce the special order, a new machine needs to be purchased at a cost of $875 with a zero salvage value. Management expects no other changes in costs as a result of the additional production. If Minor wishes to earn $1,825 on the special order, the size of the order would need to be: |
1,350 units.
2,700 units.
1,303 units.
43 units.
5,400 units.
Question-27
| Georgia, Inc. has collected the following data on one of its products. The direct materials price variance is: |
| Direct materials standard (4 lbs @ $1/lb) | $ 4 per finished unit |
| Total direct materials cost variance—unfavorable | $ 22,750 |
| Actual direct materials used | 125,000 lbs |
| Actual finished units produced | 25,000 units |
$20,750 favorable.
$2,250 favorable.
$2,250 unfavorable.
$25,000 unfavorable.
$22,750 unfavorable.
Question-28
Vextra Corporation is considering the purchase of new equipment costing $40,500. The projected annual cash inflow is $12,100, to be received at the end of each year. The machine has a useful life of 4 years and no salvage value. Vextra requires a 12% return on its investments. The present value of an annuity of $1 for different periods follows:
| Periods | 12 Percent |
| 1 | 0.8929 |
| 2 | 1.6901 |
| 3 | 2.4018 |
| 4 | 3.0373 |
What is the net present value of the machine (rounded to the nearest whole dollar)?
$(36,751).
$(3,000).
$6,751.
$(3,749).
$40,500.
Question-30
The following data concerns a proposed equipment purchase:
| Cost | $125,000 |
| Salvage value | $3,000 |
| Estimated useful life | 4 years |
| Annual net cash flows | $45,100 |
| Depreciation method | Straight-line |
The annual average investment amount used to calculate the accounting rate of return is:
rev: 06_01_2016_QC_CS-50109
$31,250
$62,500
$61,000
$39,950
$64,000
Question-30
| Using the information below for Singing Dolls, Inc., determine cost of goods manufactured for the year: |
| Work in Process, January 1 | $52,000 |
| Work in Process, December 31 | 38,000 |
| Total Factory overhead | 6,500 |
| Direct materials used | 13,500 |
| Direct labor used | 27,500 |
$14,000.
$47,500.
$99,500.
$61,500.
$55,000.
Question-33
Markson Company had the following results of operations for the past year:
| Sales (8,000 units at $19.70) |
| $157,600 |
| Variable manufacturing costs | $84,800 |
|
| Fixed manufacturing costs | 14,700 |
|
| Variable selling and administrative expenses | 10,800 |
|
| Fixed selling and administrative expenses | 19,700 | (130,000) |
| Operating income |
| $27,600 |
A foreign company whose sales will not affect Markson's market offers to buy 2,000 units at $13.55 per unit. In addition to variable manufacturing costs, selling these units would increase fixed overhead by $1,570 for the purchase of special tools. If Markson accepts this additional business, its profits will:
Decrease by $5,400.
Decrease by $4,770.
Increase by $1,630.
Increase by $3,200.
Decrease by $1,570.
Question-34
The following present value factors are provided for use in this problem.
| Periods | Present Value of $1 at 8% | Present Value of anAnnuity of $1 at 8% |
| 1 | 0.9259 | 0.9259 |
| 2 | 0.8573 | 1.7833 |
| 3 | 0.7938 | 2.5771 |
| 4 | 0.7350 | 3.3121 |
Xavier Co. wants to purchase a machine for $36,800 with a four year life and a $1,000 salvage value. Xavier requires an 8% return on investment. The expected year-end net cash flows are $11,800 in each of the four years. What is the machine's net present value (round to the nearest whole dollar)?
$(3,018).
$(2,283).
$39,818.
$2,283.
$3,018.
Question-35
| The following present value factors are provided for use in this problem. |
| Periods | Present value | Present value of an annuity of 1 at 9% |
| 1 | 0.9174 | 0.9174 |
| 2 | 0.8417 | 1.7591 |
| 3 | 0.7722 | 2.5313 |
| 4 | 0.7084 | 3.2397 |
| Cliff Co. wants to purchase a machine for $82,000, but needs to earn an 9% return. The expected year-end net cash flows are $32,000 in each of the first three years, and $36,000 in the fourth year. What is the machine's net present value (round to the nearest whole dollar)? |
$(998).
$106,504.
$(56,498).
$132,000.
$24,504.
Question-32
| Dallas Company uses a job order costing system. The company's executives estimated that direct labor would be $3,990,000 (190,000 hours at $21/hour) and that factory overhead would be $1,490,000 for the current period. At the end of the period, the records show that there had been 170,000 hours of direct labor and $1,190,000 of actual overhead costs. Using direct labor hours as a base, what was the predetermined overhead rate? (Round your answer to two decimal places.) |
$8.76 per direct labor hour.
$6.93 per direct labor hour.
$6.26 per direct labor hour.
$7.84 per direct labor hour.
$7.34 per direct labor hour.
