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SECTION A: This section is COMPULSORY. Answer ALL the questions. Identify the choice that best completes the statement or answers the question. (2 marks each; 70 marks)
Q 1
As the level of activity increases, how will a mixed cost in total and per unit behave?
In Total Per Unit
A)Increase Decrease
B)Increase Increase
C) Increase No effect
D) Decrease Increase
E) Decrease No effect
A) ChoiceA
B)Choice B
C)Choice C
D) ChoiceD
Q 2
A cost incurred in the past that is not relevant to any current decision is classified as a(n):
A) periodcost.
B)opportunitycost.
C) sunkcost.
D)differentialcost.
Q 3
The following data have been collected for four different cost items.
Cost at Cost at
Cost Item 100 units 140 units
W $ 8,000 $ 10,560
X $ 5,000 $ 5,000
Y $ 6,500 $ 9,100
Z $ 6,700 $ 8,580
Which of the following classifications of these cost items by cost behaviour is correct?
| Cost W | Cost X | Cost Y | Cost Z | |
| A) | variable | fixed | mixed | variable |
| B) | mixed | fixed | variable | mixed |
| C) | variable | fixed | variable | variable |
| D) | mixed | fixed | mixed | mixed |
A) ChoiceA
B)Choice B
C)Choice C
D) ChoiceD
Q 4
Ouzts Corporation is considering Alternative A and Alternative B. Costs associated with the alternatives are listed below:
Materials costs
Processing costs
Equipment rental
Occupancy costs
Alternative
A
$ 40,000
$ 37,000
$ 13,000
$ 15,000
Alternative
B
$ 56,000
$ 37,000
$ 13,000
$ 22,000
What is the financial advantage (disadvantage) of Alternative B over Alternative A?
A) $105,000
B) $23,000
C) $128,000
D) $116,500
Q 5
Privott, Inc., manufactures and sells two products: Product Z9 and Product N0. The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity:
Estimated Expected Activity Overhead
Activity Cost Pools Activity Measures Cost Product Z9 Product N0 Total
Labour-related DLHs $ 324,018 6,400 3,000 9,400
Product testing tests 45,747 400 500 900
Order size MHs 471,108 4,000 4,300 8,300
$ 840,873
The activity rate for the Labour-Related activity cost pool under activity-based costing is closest to:
A)$91.49 per DLH
B) $9330 per DLH
C) $114.37per DLH
D) $47 per DLH
Q 6
Puello Corporation has provided the following data concerning an investment project that it is considering:
Initial investment
Annual cash flow
$ 480,000 $ 145,000
per year
The life of the project is 4 years. The company’s discount rate is 8%. The net present value of the project is closest to:
A) $480,000
B) $480,240
C) $100,000
D) $240
Q 7
Stomberg Corporation has provided the following data concerning an investment project that it is considering:
Initial investment
Annual cash flow
Salvage value at the end of the project
$
$
550,000
180,000
14,000
per year
The life of the project is 4 years. The company’s discount rate is 10%. The net present value of the project is closest to:
A) $184,000
B) $579,982
C) $29,982
D) $20,420
MCQ 8
Suddeth Corporation has entered into a 6-year lease for a building it will use as a warehouse. The annual payment under the lease will be $2,468. The first payment will be at the end of the current year and all subsequent payments will be made at year-ends. If the discount rate is 5%, the present value of the lease payments is closest to (Ignore income taxes.):
A) $12,528
B) $14,103
C) $14,808
D) $11,050
Q 9
How much would you have to invest today in the bank at an interest rate of 8% to have an annuity of $4,800 per year for 7 years, with nothing left in the bank at the end of the 7 years? Select the amount below that is closest to your answer. (Ignore income taxes.)
A) $33,600
B) $2,798
C) $24,989
D) $31,111
Q 10
At an interest rate of 14%, approximately how much would you need to invest today if you wanted to have $2,000,000 in 10 years? (Ignore income taxes.)
A) $383,436
B) $540,000
C) $740,741
D) $1,043,200
Q 11
A company wants to have $40,000 at the end of a five-year period through investment of a single sum now. How much needs to be invested in order to have the desired sum in five years, if the money can be invested at 10% (Ignore income taxes.)?
A) $10,551
B) $8,000
C) $24,840
D) $12,882
Q 12
The Zingstad Corporation is considering an investment with the following data (Ignore income taxes.):
Investment
Cash inflow
Year 1
$ 32,000
$ 8,000
Year 2
$ 12,000
$ 8,000
Year 3
$ 20,000
Year 4
$ 16,000
Year 5
$ 16,000
Cash inflows occur evenly throughout the year. The payback period for this investment is:
A) 3.0 years
B) 3.5 years
C) 4.0 years
D) 4.5 years
Q 13
Fabri Corporation is considering eliminating a department that has an annual contribution margin of $35,000 and $70,000 in annual fixed costs. Of the fixed costs, $25,000 cannot be avoided. The annual financial advantage (disadvantage) for the company of eliminating this department would be:
A) $10,000
B) ($10,000)
C) $35,000
D) ($35,000)
Q 14
The Draper Corporation is considering dropping its Doombug toy due to continuing losses. Data on the toy for the past year follow:
Sales of 15,000 units
Variable expenses
Contribution margin
Fixed expenses
Net operating loss
$ 150,000
120,000
30,000
40,000
$ (10,000)
If the toys were discontinued, Draper could avoid $8,000 per year in fixed costs. The remainder of the fixed costs are not avoidable.
The annual financial advantage (disadvantage) for the company from discontinuing the production and sale of Doombugs would be:
A) ($30,000)
B) $10,000
C) ($22,000)
D) $18,000
Q 15
Jennifer Company has two products: A and B. The company uses activity-based costing. The estimated total cost and expected activity for each of the company’s three activity cost pools are as follows:
Activity Cost Pools
Product design
Assembling
Supporting customers
Estimated Expected Activity
Overhead
Cost Product A Product B Total
$ 23,500 400 100 500
$ 18,000 500 200 700
$ 34,600 600 300 900
The activity rate under the activity-based costing system for Supporting customers is closest to:
A)$36.24
B) $38.44
C) $84.56
D) $133
Q 16
All of the following are service organizations, except:
A) adry cleaner
B) apublicaccounting firm
C) a manufacturerofsporting goods
D) arealestate brokerage
Q 17
Which of the following products have a product life cycle of a few months?
A) Fashionclothinghas a product life cycle of a few months.
B) Automobileshavea product life cycle of a few
C) Planeshavea product life cycle of a few months.
D) Electricstoveshave a product life cycle of a few months.
Q 18
Stable sales level corresponds to which stage of the product life cycle?
A) Productdevelopmentstage corresponds to a stable sales level.
B) Introductiontomarket stage corresponds to a stable sales level.
C) Maturemarket stage corresponds to a stable sales level.
D) Phase-outofproduct stage corresponds to a stable sales level.
Q 19
The following information applies to Labs Plus, which supplies microscopes to laboratories throughout the country. Labs Plus purchases the microscopes from a manufacturer which has a reputation for very high quality in its manufacturing operation.
Annual demand (weekly demand= 1/52 of annual demand) Orders per year
Lead time in days
Cost of placing an order
15,600 units
20
15 days
$100
What are the annual relevant carrying costs, assuming each order was made at the economic- order-quantity amount?
A) $200
B) $1,000
C) $2,000
D) $6,000
Q 20
The following information applies to Labs Plus, which supplies microscopes to laboratories throughout the country. Labs Plus purchases the microscopes from a manufacturer which has a reputation for very high quality in its manufacturing operation.
Annual demand (weekly demand= 1/52 of annual demand) Orders per year
Lead time in days
Cost of placing an order
15,600 units
20
15 days
$100
What is the economic order quantity assuming each order is made at the economic-order- quantity amount?
A) 15 units
B) 20 units
C) 780 units
D) 1,040 units
Q 21
Cost of quality reports usually do not consider:
A) externalfailurecosts
B) opportunitycosts
C) internalfailurecosts
D) appraisalcosts
Q 22
Quality costs include ____________
A)purchasingcosts.
B)orderingcosts.
C) stockoutcosts.
D) preventioncosts.
Q 23
Rovinsky Corporation, a company that produces and sells a single product, has provided its contribution format income statement for November.
Sales (5,700 units) $ 319,200
Variable expenses 188,100
Contribution margin 131,100
Fixed expenses 106,500
Net operating income $ 24,600
If the company sells 5,300 units, its net operating income should be closest to:
A) $24,600
B) $2,200
C) $22,874
D) $15,400
Q 24
Sorin Inc., a company that produces and sells a single product, has provided its contribution format income statement for January.
Sales (4,200 units) $ 155,400
Variable expenses 100,800
Contribution margin 54,600
Fixed expenses 42,400
Net operating income $ 12,200
If the company sells 4,600 units, its total contribution margin should be closest to:
A) $54,600
B) $59,800
C) $69,400
D) $13,362
Q 25
Schister Systems uses the following data in its Cost-Volume-Profit analyses:
Total
Sales $ 400,000
Variable expenses 280,000
Contribution margin 120,000
Fixed expenses 100,000
Net operating income $ 20,000
What is total contribution margin if sales volume increases by 20%?
A) $80,000
B) $158,400
C) $200,000
D) $144,000
Q 26
Kelchner Corporation has provided the following contribution format income statement. Assume that the following information is within the relevant range.
Sales (3,000 units) $ 180,000
Variable expenses 108,000
Contribution margin 72,000
Fixed expenses 62,400
Net operating income $ 9,600
The contribution margin ratio is closest to:
A)67%
B) 40%
C) 33%
D)60%