TEST QUESTIONS:
Questions 1-3 refer to the following:
The following selected data for March were taken from Rubenstein
Companys financial statements:
Cost of goods available for sale Manufacturing overhead
Cost of goods manufactured
Finished goods inventory – ending
Direct materials used
Sales
Selling and administrative expenses
Direct labor
Work in process inventory – beginning
$ 65,000
20,000
51,000
10,000
15,000
105,000
30,000
20,000
0
1. The gross margin was:
1. $55,000.
2. $54,000.
3. $50,000.
4. $40,000.
2. The beginning finished goods inventory was:
1. $24,000.
2. $ 9,000.
3. $10,000.
4. $14,000.
3. The ending work in process inventory was:
1. $ 4,000.
2. $ 8,000.
3. $10,000.
4. $0.
4. Farber Company uses a job order cost system. The information below is from the
financial records of the company for last year:
Total manufacturing costs $2,500,000
Cost of goods manufactured $2,425,000
Predetermined overhead rate 80% of direct labor cost
Applied overhead was 30% of total manufacturing costs. The Work in Process inventory at
January 1 was 75% of the Work in Process inventory at December 31.
Farber Companys total direct labor cost was:
1. $750,000.
2. $600,000.
3. $900,000.
4. $937,500.
5. Dukes Company used a predetermined overhead rate this year of $2 per direct labor
hour, based on an estimate of 20,000 direct labor hours to be worked during the year.
Actual costs and activity during the year were:
Actual manufacturing overhead cost incurred $38,000
Actual direct labor hours worked 18,500
The under- or overapplied overhead for the year was:
1. $1,000 underapplied.
2. $1,000 overapplied.
3. $3,000 underapplied.
4. $3,000 overapplied.
6. Krumbly Company uses the FIFO method in its process costing system. At the
beginning of the month, Department Ds work in process inventory contained 2,000 units.
These units were fully complete with respect to materials and 40% complete with respect
to conversion costs, with a total cost at that point of $3,600. During the month, conversion
costs amounted to $8 per equivalent unit of production. If all 2,000 units are fully complete
by the end of the month, their total cost by that time will be:
1. $19,600.
2. $10,000.
3. $13,200.
4. $9,000.
7. Details of the manufacturing activity in Amy Companys Assembly Department for the
month of December are given below:
Number
of Units
Labor and Overhead
Percent Complete
Work in process inventory, Dec. 1
Started in assembly during the month
Work in process inventory, Dec. 31
10,000
80,000
15,000
70%
40%
All materials are added at the beginning of processing in the Assembly Department.
The equivalent units of production for labor and overhead for the month, using the FIFO
method, are:
1. 90,000.
2. 70,000.
3. 80,000.
4. 74,000.
8. Lap Company uses the weighted-average method in its process costing system. The
beginning inventory in a particular department consisted of 80,000 units, 100% complete
with respect to materials and 25% complete with respect to conversion costs. The total
dollar value of this inventory was $226,000. During the month, 150,000 units were
transferred out of the department. The costs per equivalent unit of production for the
month were $2.00 for materials and $3.50 for conversion costs. The value of the units
completed and transferred out of the department was:
1. $681,000.
2. $765,000.
3. $821,000.
4. $825,000.
9. Robin Company uses activity-based costing to compute product costs for external
reports. The company has three activity centers and applies overhead using predetermined
overhead rates for each activity center. Estimated costs and activities for the current year
are presented below for the three activity centers:
Estimated
Overhead Expected
Cost Activity
Activity 1 $44,148 2,600
Activity 2 $24,570 2,700
Activity 3 $21,956 1,100
Actual costs and activities for the current year were as follows:
Actual
Overhead Actual
Cost Activity
Activity 1 $44,098 2,585
Activity 2 $24,715 2,695
Activity 3 $21,901 1,120
The amount of overhead applied for Activity 2 during the year was closest to:
1. $24,570.00.
2. $24,715.00.
3. $24,524.50.
4. $38,182.25.
10. Shipping cost at Junk Food Imports is a mixed cost with variable and fixed
components. Past records indicate total shipping cost was $18,000 for 16,000 pounds
shipped and $22,500 for 22,000 pounds shipped. If the company plans to ship 18,000
pounds next month, the expected shipping cost is:
1. $18,500.
2. $20,400.
3. $19,500.
4. $24,000.
11. Erg Manufacturing Company has developed the following overhead cost formulas:
Cost Formula
Depreciation $500
Set up $400 plus $0.20 per machine-hour
Lubrication $ 50 plus $0.25 per machine-hour
Utilities $0.40 per machine-hour
Based on these cost formulas, the total overhead cost expected if 200 machine hours are
worked is:
1. $ 620.
2. $ 900.
3. $ 170.
4. $1,120.
12. Alpha Company reported the following data for its most recent year: sales, $500,000;
variable expenses, $300,000; and fixed expenses, $150,000. The companys degree of
operating leverage is:
1. 10
2. 2
3. 4
4. 2.5
13. As total sales increase in a company beyond the breakeven point, the
Operating Breakeven Margin of
Leverage in Sales Safety
1. will increase will increase will increase
2. will increase will decrease will decrease
3. will decrease remain the same will increase
4. will decrease will increase will decrease
14. The following data pertain to last years operations at Hruska Corp.:
Units in beginning inventory
Units produced
Units sold
0
5,000
4,000
Selling price per unit
$180.00
Variable costs per unit:
Direct materials
Direct labor
Variable manufacturing overhead
Variable selling and administrative
$20.00
30.00
10.00
20.00
Fixed costs per year:
Fixed manufacturing overhead
Fixed selling and administrative
$100,000
300,000
What was the variable costing net income last year?
1. $20,000
2. $80,000
3. $0
4. $60,000
15. The following data pertain to last year operations at Clarkson, Incorporated:
Units in beginning inventory 0
Units produced 100,000
Units sold 98,000
Selling price per uni $10.00
Variable costs per unit:
Direct materials $1.50
Direct labor 2.50
Variable manufacturing overhead 1.00
Variable selling and administrative 2.00
Fixed costs per year:
Fixed manufacturing overhead $200,000
Fixed selling and administrative 50,000
What was the absorption costing net income last year?
1. $44,000
2. $48,000
3. $50,000
4. $49,000
16. Home Company will open a new store on January 1. Based on experience from its
other retail outlets, Home Company is making the following sales projections:
Cash Sales Credit Sales
January $60,000 $40,000
February $30,000 $50,000
March $40,000 $60,000
April $40,000 $80,000
Home Company estimates that 70% of the credit sales will be collected in the month
following the month of sale, with the balance collected in the second month following the
