Revques t3 Sub 2011

REVQUES T3 SuB 2011
Student: ___________________________________________________________________________ 1. In a recent period 12,250 units were made and there was a favorable labor efficiency variance of $22,500. If 41,000 labor-hours were worked and the standard wage rate was $12 per labor-hour, the standard hours allowed per unit of output is closest to: A. 3.19 B. 3.35 C. 3.50 D. 6.00
A manufacturing company that has only one product has established the following standards for its variable overhead. The company uses direct labor-hours (DLHs) as its measure of activity.
The following data pertain to operations for the last month:
2. What is the variable overhead efficiency variance for the month? A. $504 U B. $1,120 U C. $1,120 F D. $1,144 F
The following data have been provided by Wordell Corporation:
3. The variable overhead rate variance for power is closest to: A. $84 F B. $765 U C. $765 F D. $849 U
4. The standards that allow for no machine breakdowns or other work interruptions and that require peak efficiency at all times are referred to as: A. normal standards. B. practical standards. C. ideal standards. D. budgeted standards.
The following data have been provided by Dicus Corporation:
5. The variable overhead rate variance for lubricants is closest to: A. $113 U B. $120 U C. $7 U D. $113 F
Reenu Company manufactures wigs out of used dental floss. The variable cost standards for wig production developed by Reenu are as follows:
Variable overhead at Reenu is based on direct labor-hours. The actual results for the month of October were as follows:
6. What is Reenu's labor efficiency variance for October? A. $2,700 favorable B. $7,200 unfavorable C. $9,900 unfavorable D. $27,600 favorable
7. The variable overhead rate variance for supplies is closest to: A. $133 U B. $47 F C. $180 U D. $133 F
The Holmes Division recorded operating data as follows for the past year:
8. For the past year, the turnover was: A. 25 B. 10 C. 4 D. 2
9. Lyons Company consists of two divisions, A and B. Lyons Company reported a contribution margin of $50,000 for Division A, and had a contribution margin ratio of 30% in Division B, when sales in Division B were $200,000. Net operating income for the company was $25,000 and traceable fixed expenses were $40,000. Lyons Company's common fixed expenses were: A. $85,000 B. $70,000 C. $45,000 D. $40,000
Ahina Industries is a division of a major corporation. Data concerning the most recent year appears below:
10. The division's return on investment (ROI) is closest to: A. 21.1% B. 2.5% C. 26.7% D. 7.0%
Ceder Products is a division of a major corporation. Last year the division had total sales of $21,520,000, net operating income of $538,000, and average operating assets of $8,000,000. The company's minimum required rate of return is 18%.
11. The division's return on investment (ROI) is closest to: A. 0.2% B. 6.7% C. 1.8% D. 18.0%
Data for September for Mossman Corporation and its two major business segments, North and South, appear below:
In addition, common fixed expenses totaled $319,000 and were allocated as follows: $160,000 to the North business segment and $159,000 to the South business segment.
12. A properly constructed segmented income statement in a contribution format would show that the segment margin of the North business segment is: A. $211,000 B. $51,000 C. $259,000 D. $121,000
The following information relates to the Cranberry Division of Innovative Bologna Corporation for last year:
13. Assume that Cranberry was being evaluated solely on the basis of return on investment (ROI). Which of the following investment opportunities would Cranberry want to invest in?
A. A B. B C. C D. D
Harstin Corporation has provided the following data:
14. The turnover for the past year was: A. 2.5 B. 6.94 C. 2.98 D. 1.4
Kava Inc. manufactures industrial components. One of its products, which is used in the construction of industrial air conditioners, is known as K65. Data concerning this product are given below:
The above per unit data are based on annual production of 4,000 units of the component. Direct labor can be considered to be a variable cost.
15. Refer to the original data in the problem. What is the current contribution margin per unit for component K65 based on its selling price of $180 and its annual production of 4,000 units? A. $142 B. $102 C. $40 D. $140
Creelman Company makes four products in a single facility. Data concerning these products appear below:
The milling machines are potentially the constraint in the production facility. A total of 13,000 minutes are available per month on these machines.
16. Up to how much should the company be willing to pay for one additional minute of milling machine time if the company has made the best use of the existing milling machine capacity? (Round off to the nearest whole cent.) A. $10.40 B. $13.80 C. $0.00 D. $4.74
17. Vanikoro Corporation currently has two divisions which had the following operating results for last year:
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? A. $10,000 higher B. $40,000 lower C. $50,000 higher D. $100,000 lower
Elgot Company produces a single product. The cost of producing and selling a single unit of this product at the company's normal activity level of 30,000 units per month is as follows:
The normal selling price of the product is $51.10 per unit. An order has been received from an overseas customer for 3,000 units to be delivered this month at a special discounted price. This order would have no effect on the company's normal sales and would not change the total amount of the company's fixed costs. The variable selling and administrative expense would be $0.50 less per unit on this order than on normal sales. Direct labor is a variable cost in this company.
18. Suppose there is not enough idle capacity to produce all of the units for the overseas customer and accepting the special order would require cutting back on production of 1,200 units for regular customers. The minimum acceptable price per unit for the special order is closest to: A. $51.10 B. $39.68 C. $40.90 D. $49.40
19. Which product makes the LEAST profitable use of the milling machines? A. Product A B. Product B C. Product C D. Product D
20. The company has received a special, one-time-only order for 500 units of component K65. There would be no variable selling expense on this special order and the total fixed manufacturing overhead and fixed selling and administrative expenses of the company would not be affected by the order. Assuming that Kava has excess capacity and can fill the order without cutting back on the production of any product, what is the minimum price per unit on the special order below which the company should not go? A. $180 B. $38 C. $59 D. $78
21. JB Lumber Corporation is downsizing operations and has to decide which of its large saws should be sold. JB currently has four saws but only needs to keep three. All four saws have a remaining useful life of 3 years and will all have a salvage value of zero at the end of those 3 years. Also, all four saws have equal annual operating costs and output efficiency. Information related to the four saws is provided below:
In order to maximize profits for the next three years, which machine would be most beneficial for JB to sell? A. 1 B. 2 C. 3 D. 4
Jones and Company has just purchased a new piece of equipment, the cost characteristics of which are given below:
The company uses a required rate of return of 10% and depreciates equipment using the straight-line method.
22. The payback period for the investment is: A. 5 years B. 15 years C. 2 years D. 7.143 years
Eckels Corporation is considering the following three investment projects:
23. The profitability index of investment project N is closest to: A. 0.18 B. 0.82 C. 1.18 D. 0.15
24. 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: A. 0.13 B. 1.13 C. 0.87 D. 0.12
The Wisbley Company is contemplating the purchase of a helicopter for its executives to use in their business trips. This helicopter could be either purchased or leased from the manufacturer. The useful life of the helicopter is four years. Data concerning these two alternatives follow:
If the helicopter is leased, it would be returned to the manufacturer in four years. Wisbley's required rate of return is 22%.
25. The present value of the cash outflows for repairs, assuming the helicopter is purchased, would be: A. $(14,000) B. $(8,682) C. $(2,000) D. $(8,440)
26. The following data pertain to an investment:
The net present value of the proposed investment is: A. $3,355 B. $(3,430) C. $0 D. $621
Steinmann Inc. is considering the acquisition of a new machine that costs $410,000 and has a useful life of 5 years with no salvage value. The incremental net operating income and incremental net cash flows that would be produced by the machine are:
27. If the discount rate is 14%, the net present value of the investment is closest to: A. $410,000 B. $239,000 C. $446,002 D. $36,141
The Connelly Company has funds available to invest in the following project:
The working capital needed now would be released at the end of the seven years for investment elsewhere.
28. Consider only the cash flows for the third year. The present value of the net cash flows (cash inflows less cash outflows) for this year only is: A. $6,090 B. $36,540 C. $8,720 D. $30,450
29. (Ignore income taxes in this problem.) White Company's required rate of return on capital budgeting projects is 12%. The company is considering an investment opportunity which would yield a cash flow of $10,000 in five years. What is the most that the company should be willing to invest in this project? A. $36,050 B. $2,774 C. $17,637 D. $5,670
30. (Ignore income taxes in this problem.) Knipper Corporation has entered into a 9 year lease for a piece of equipment. The annual payment under the lease will be $2,300, with payments being made at the beginning of each year. If the discount rate is 11%, the present value of the lease payments is closest to: A. $18,649 B. $14,136 C. $20,700 D. $8,092
REVQUES T3 SuB 2011 Key
1. In a recent period 12,250 units were made and there was a favorable labor efficiency variance of $22,500. If 41,000 labor-hours were worked and the standard wage rate was $12 per labor-hour, the standard hours allowed per unit of output is closest to: A. 3.19 B. 3.35 C. 3.50 D. 6.00
AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: Analysis Brewer - Chapter 09 #40 Learning Objective: 3 Level: Hard Source: CIMA, adapted
A manufacturing company that has only one product has established the following standards for its variable overhead. The company uses direct labor-hours (DLHs) as its measure of activity.
The following data pertain to operations for the last month:
Brewer - Chapter 09
2. What is the variable overhead efficiency variance for the month? A. $504 U B. $1,120 U C. $1,120 F D. $1,144 F SH = 2,400 0.7 = 1,680 Variable overhead efficiency variance = SR (AH - SH) = $14.30 (1,600 - 1,680) = $1,144 F
AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: Application Brewer - Chapter 09 #99 Learning Objective: 4 Level: Medium
The following data have been provided by Wordell Corporation:
Brewer - Chapter 09
3. The variable overhead rate variance for power is closest to: A. $84 F B. $765 U C. $765 F D. $849 U AR = $33,105 11,520 = $2.87 (rounded) Variable overhead rate variance = AH (AR - SR) = 11,520 ($2.87 - $2.80) = $8,49 U (rounded)
AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: Application Brewer - Chapter 09 #103 Learning Objective: 4 Level: Easy
4. The standards that allow for no machine breakdowns or other work interruptions and that require peak efficiency at all times are referred to as: A. normal standards. B. practical standards. C. ideal standards. D. budgeted standards.
AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: Knowledge Brewer - Chapter 09 #14 Learning Objective: 1 Level: Easy
The following data have been provided by Dicus Corporation:
Brewer - Chapter 09
5. The variable overhead rate variance for lubricants is closest to: A. $113 U B. $120 U C. $7 U D. $113 F AR = $2,387 2,500 = $0.95 (rounded) Variable overhead rate variance = AH (AR - SR) = 2,500 ($0.95 - $1.00) = $113 F (rounded)
Reenu Company manufactures wigs out of used dental floss. The variable cost standards for wig production developed by Reenu are as follows:
Variable overhead at Reenu is based on direct labor-hours. The actual results for the month of October were as follows:
Brewer - Chapter 09
6. What is Reenu's labor efficiency variance for October? A. $2,700 favorable B. $7,200 unfavorable C. $9,900 unfavorable D. $27,600 favorable SH = 12,500 0.75 = 9,375 Direct labor efficiency variance = SR (AH - SH) = $12.00 (10,200 - 9,375) = $9,900 U
7. The variable overhead rate variance for supplies is closest to: A. $133 U B. $47 F C. $180 U D. $133 F AR = $3,703 2,500 = $1.48 (rounded) Variable overhead rate variance = AH (AR - SR) = 2,500 ($1.48 - $1.50) = $47 F (rounded)
The Holmes Division recorded operating data as follows for the past year:
Brewer - Chapter 10
8. For the past year, the turnover was: A. 25 B. 10 C. 4 D. 2 Turnover = Sales Average operating assets = $200,000 $100,000 = 2
9. Lyons Company consists of two divisions, A and B. Lyons Company reported a contribution margin of $50,000 for Division A, and had a contribution margin ratio of 30% in Division B, when sales in Division B were $200,000. Net operating income for the company was $25,000 and traceable fixed expenses were $40,000. Lyons Company's common fixed expenses were: A. $85,000 B. $70,000 C. $45,000 D. $40,000
*Given Solve in the following steps: 1) $200,000 30% = $60,000 2) $50,000 + $60,000 = $110,000 3) $110,000 - $40,000 = $70,000 4) $70,000 - $25,000 = $45,000
AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: Application Brewer - Chapter 10 #20 Learning Objective: 1 Level: Hard
Ahina Industries is a division of a major corporation. Data concerning the most recent year appears below:
Brewer - Chapter 10
10. The division's return on investment (ROI) is closest to: A. 21.1% B. 2.5% C. 26.7% D. 7.0% ROI = Net operating income Average operating assets = $533,920 $2,000,000 = 26.7% (rounded)
Ceder Products is a division of a major corporation. Last year the division had total sales of $21,520,000, net operating income of $538,000, and average operating assets of $8,000,000. The company's minimum required rate of return is 18%.
Brewer - Chapter 10
11. The division's return on investment (ROI) is closest to: A. 0.2% B. 6.7% C. 1.8% D. 18.0% ROI = Net operating income Average operating assets = $538,000 $8,000,000 = 6.725%
Data for September for Mossman Corporation and its two major business segments, North and South, appear below:
In addition, common fixed expenses totaled $319,000 and were allocated as follows: $160,000 to the North business segment and $159,000 to the South business segment.
Brewer - Chapter 10
12. A properly constructed segmented income statement in a contribution format would show that the segment margin of the North business segment is: A. $211,000 B. $51,000 C. $259,000 D. $121,000
The following information relates to the Cranberry Division of Innovative Bologna Corporation for last year:
Brewer - Chapter 10
13. Assume that Cranberry was being evaluated solely on the basis of return on investment (ROI). Which of the following investment opportunities would Cranberry want to invest in?
A. A B. B C. C D. D ROI = Net operating income Average operating assets = $60,000 $280,000 = 21.4% (rounded) Would not invest in any project with an ROI less than 21.4%.
Harstin Corporation has provided the following data:
Brewer - Chapter 10
14. The turnover for the past year was: A. 2.5 B. 6.94 C. 2.98 D. 1.4 Turnover = Sales Average operating assets = $625,000 $250,000 = 2.5
Kava Inc. manufactures industrial components. One of its products, which is used in the construction of industrial air conditioners, is known as K65. Data concerning this product are given below:
The above per unit data are based on annual production of 4,000 units of the component. Direct labor can be considered to be a variable cost.
Brewer - Chapter 11
15. Refer to the original data in the problem. What is the current contribution margin per unit for component K65 based on its selling price of $180 and its annual production of 4,000 units? A. $142 B. $102 C. $40 D. $140
AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: Application Brewer - Chapter 11 #71 Learning Objective: 4 Level: Easy Source: CMA, adapted
Creelman Company makes four products in a single facility. Data concerning these products appear below:
The milling machines are potentially the constraint in the production facility. A total of 13,000 minutes are available per month on these machines.
Brewer - Chapter 11
16. Up to how much should the company be willing to pay for one additional minute of milling machine time if the company has made the best use of the existing milling machine capacity? (Round off to the nearest whole cent.) A. $10.40 B. $13.80 C. $0.00 D. $4.74
The company should be willing to pay up to $4.74 per minute to obtain more of the constrained resource since this is the value to the company of using this constrained resource to make more of product B. By assumption, the other products will already have been produced up to demand.
17. Vanikoro Corporation currently has two divisions which had the following operating results for last year:
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? A. $10,000 higher B. $40,000 lower C. $50,000 higher D. $100,000 lower The segment margin of the Rubber Division represents the amount by which the company's overall net income would drop if the Rubber Division were to be dropped.
Elgot Company produces a single product. The cost of producing and selling a single unit of this product at the company's normal activity level of 30,000 units per month is as follows:
The normal selling price of the product is $51.10 per unit. An order has been received from an overseas customer for 3,000 units to be delivered this month at a special discounted price. This order would have no effect on the company's normal sales and would not change the total amount of the company's fixed costs. The variable selling and administrative expense would be $0.50 less per unit on this order than on normal sales. Direct labor is a variable cost in this company.
Brewer - Chapter 11
18. Suppose there is not enough idle capacity to produce all of the units for the overseas customer and accepting the special order would require cutting back on production of 1,200 units for regular customers. The minimum acceptable price per unit for the special order is closest to: A. $51.10 B. $39.68 C. $40.90 D. $49.40
AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: Analysis Brewer - Chapter 11 #76 Learning Objective: 4 Level: Hard
19. Which product makes the LEAST profitable use of the milling machines? A. Product A B. Product B C. Product C D. Product D
20. The company has received a special, one-time-only order for 500 units of component K65. There would be no variable selling expense on this special order and the total fixed manufacturing overhead and fixed selling and administrative expenses of the company would not be affected by the order. Assuming that Kava has excess capacity and can fill the order without cutting back on the production of any product, what is the minimum price per unit on the special order below which the company should not go? A. $180 B. $38 C. $59 D. $78
AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: Application Brewer - Chapter 11 #69 Learning Objective: 4 Level: Medium Source: CMA, adapted
21. JB Lumber Corporation is downsizing operations and has to decide which of its large saws should be sold. JB currently has four saws but only needs to keep three. All four saws have a remaining useful life of 3 years and will all have a salvage value of zero at the end of those 3 years. Also, all four saws have equal annual operating costs and output efficiency. Information related to the four saws is provided below:
In order to maximize profits for the next three years, which machine would be most beneficial for JB to sell? A. 1 B. 2 C. 3 D. 4
AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: Application Brewer - Chapter 11 #25 Learning Objective: 1 Level: Hard
Jones and Company has just purchased a new piece of equipment, the cost characteristics of which are given below:
The company uses a required rate of return of 10% and depreciates equipment using the straight-line method.
Brewer - Chapter 12
22. The payback period for the investment is: A. 5 years B. 15 years C. 2 years D. 7.143 years The payback period is the investment cost of $30,000 divided by the $6,000 annual cash flow; $30,000 $6,000 = 5 years.
Eckels Corporation is considering the following three investment projects:
Brewer - Chapter 12
23. The profitability index of investment project N is closest to: A. 0.18 B. 0.82 C. 1.18 D. 0.15 Profitability index = ($56,640 - $48,000) $48,000 = $8,640 $48,000 = 0.18
24. 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: A. 0.13 B. 1.13 C. 0.87 D. 0.12 The profitability index is 0.13 ($8,060 $62,000).
The Wisbley Company is contemplating the purchase of a helicopter for its executives to use in their business trips. This helicopter could be either purchased or leased from the manufacturer. The useful life of the helicopter is four years. Data concerning these two alternatives follow:
If the helicopter is leased, it would be returned to the manufacturer in four years. Wisbley's required rate of return is 22%.
Brewer - Chapter 12
25. The present value of the cash outflows for repairs, assuming the helicopter is purchased, would be: A. $(14,000) B. $(8,682) C. $(2,000) D. $(8,440) Present value = ($6,000 0.672) + ($8,000 0.551) = $4,032 + $4,408 = $8,440
26. The following data pertain to an investment:
The net present value of the proposed investment is: A. $3,355 B. $(3,430) C. $0 D. $621
Steinmann Inc. is considering the acquisition of a new machine that costs $410,000 and has a useful life of 5 years with no salvage value. The incremental net operating income and incremental net cash flows that would be produced by the machine are:
Brewer - Chapter 12
27. If the discount rate is 14%, the net present value of the investment is closest to: A. $410,000 B. $239,000 C. $446,002 D. $36,141
AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: Application Brewer - Chapter 12 #50 Learning Objective: 1 Level: Medium Source: CMA, adapted
The Connelly Company has funds available to invest in the following project:
The working capital needed now would be released at the end of the seven years for investment elsewhere.
Brewer - Chapter 12
28. Consider only the cash flows for the third year. The present value of the net cash flows (cash inflows less cash outflows) for this year only is: A. $6,090 B. $36,540 C. $8,720 D. $30,450 Present value = ($60,000 - $50,000) 0.609 = $10,000 0.609 = $6,090
29. (Ignore income taxes in this problem.) White Company's required rate of return on capital budgeting projects is 12%. The company is considering an investment opportunity which would yield a cash flow of $10,000 in five years. What is the most that the company should be willing to invest in this project? A. $36,050 B. $2,774 C. $17,637 D. $5,670
AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: Application Brewer - Chapter 12A... #7 Learning Objective: 5 Level: Medium
30. (Ignore income taxes in this problem.) Knipper Corporation has entered into a 9 year lease for a piece of equipment. The annual payment under the lease will be $2,300, with payments being made at the beginning of each year. If the discount rate is 11%, the present value of the lease payments is closest to: A. $18,649 B. $14,136 C. $20,700 D. $8,092
AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: Analysis Brewer - Chapter 12A... #14 Learning Objective: 5 Level: Hard
REVQUES T3 SuB 2011 Summary

Category AACSB: Analytic AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: Analysis Bloom's: Application Bloom's: Knowledge Brewer - Chapter 09 Brewer - Chapter 10 Brewer - Chapter 11 Brewer - Chapter 12 Brewer - Chapter 12A... Learning Objective: 1 Learning Objective: 2 Learning Objective: 3 Learning Objective: 4 Learning Objective: 5 Level: Easy Level: Hard Level: Medium Source: CIMA, adapted Source: CMA, adapted # of Questions 29 1 30 30 3 26 1 11 13 10 12 2 8 8 3 7 4 13 5 12 1 3

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REVQUES T3 SuB 2011

The following data pertain to operations for the last month:

The following data have been provided by Wordell Corporation:

The following data have been provided by Dicus Corporation:

8. For the past year, the turnover was: A. 25 B. 10 C. 4 D. 2

Harstin Corporation has provided the following data:

Eckels Corporation is considering the following three investment projects:

26. The following data pertain to an investment: