John Molson School of Business
1. Utah Corporation has an after-tax operating income of $2,600,000 and a 10% weighted-average cost
Assets total $8,000,000 and current liabilities total $400,000.
On the basis of this
information, Utah's economic value added is:
2. More Company has two divisions: L and M.
During July, the contribution margin in Division L was
$60,000. The contribution margin ratio in Division M was 40%, and its sales were $250,000. Division
M's segment margin was $60,000. The common fixed expenses were $50,000, and the company net
income was $20,000. What was the segment margin for Division L?
3. Why may departmental overhead rates NOT correctly assign overhead costs?
A. Because of the use of direct labour hours in allocating overhead costs to products rather than
machine time or quantity of materials.
B. Because of the high correlation between direct labour hours and the incurrence of overhead costs.
C. Because of the over-reliance on volume as a basis for allocating overhead costs where products
differ regarding the number of units produced, lot size, or complexity of production.
D. Because of the difficulties associated with identifying cost pools for the first stage of the
4. Sharp Company's records show that overhead was overapplied by $10,000 last year. This overapplied
overhead was closed out to the Cost of Goods Sold account at the end of the year. In trying to
determine why overhead was overapplied by such a large amount, the company has discovered that
$6,000 of amortization on factory equipment was charged to administrative expense in error. Given
the above information, which of the following statements is true?
A. Manufacturing overhead was actually overapplied by $16,000 for the year.
B. The company's net income is understated by $6,000 for the year.
C. Under the circumstances described above, the error in recording amortization would have no
effect on net income for the year.
D. The $6,000 in amortization should have been charged to Work in Process rather than to