Brarin Corporation is a small wholesaler of gourmet food products. Data regarding the
store’s operations follow:
o Sales are budgeted at $340,000 for November, $360,000 for December, and $350,000
for January.
o Collections are expected to be 55% in the month of sale, 44% in the month following
the sale, and 1% uncollectible.
o The cost of goods sold is 80% of sales.
o The company would like to maintain ending merchandise inventories equal to 70% of
the next month’s cost of goods sold. Payment for merchandise is made in the month
following the purchase.
o Other monthly expenses to be paid in cash are $23,100.
o Monthly depreciation is $21,000.
o Ignore taxes.
December cash disbursements for merchandise purchases would be:
A. $283,200
B. $196,000
C. $288,000
D. $282,400
Answer:
Celius Midwiferys cost formula for its wages and salaries is $2,410 per month plus
$292 per birth. For the month of March, the company planned for activity of 113 births,
but the actual level of activity was 116 births. The actual wages and salaries for the
month was $35,340. The spending variance for wages and salaries in March would be
closest to:
A) $942 F
B) $66 F
C) $66 U
D) $942 U
Answer:
Reference: 8-16
Pong Kennel uses tenant-days as its measure of activity; an animal housed in the kennel
for one day is counted as one tenant-day. During December, the kennel budgeted for
2,000 tenant-days, but its actual level of activity was 1,980 tenant-days. The kennel has
provided the following data concerning the formulas used in its budgeting and its actual
results for December:
Data used in budgeting:
Actual results for December:
The net operating income in the flexible budget for December would be closest to:
A) $8,001
B) $6,300
C) $8,164
D) $6,042
Answer:
Hick Corporation’s most recent balance sheet and income statement appear below:
Dividends on common stock during Year 2 totaled $60 thousand. Dividends on
preferred stock totaled $20 thousand. The market price of common stock at the end of
Year 2 was $9.57 per share.
The dividend yield ratio for Year 2 is closest to:
A. 1.05%
B. 4.18%
C. 75.00%
D. 3.13%
Answer:
Reference: 8-19
Amadon Corporation manufactures and sells a single product. The company uses units
as the measure of activity in its flexible budgets. During July, the company budgeted for
7,900 units, but its actual level of activity was 7,920 units. The company has provided
the following data concerning the formulas to be used in its budgeting:
The net operating income in the planning budget for July would be closest to:
A) $22,360
B) $22,150
C) $15,082
D) $15,158
Answer:
The overall revenue and spending variance (i.e., the variance for net operating income
in the revenue and spending variance column) for May would be closest to:
A) $230 F
B) $1,200 U
C) $1,200 F
D) $230 U
Answer:
The following data have been provided by a retailer that sells a single product.
What is the best estimate of the company’s contribution margin for this year?
A. $252,000
B. $300,000
C. $158,000
D. $120,000
Answer:
Excerpts from Harris Corporation’s comparative balance sheet appear below:
Which of the following is the correct treatment within the operating activities section of
the statement of cash flows using the indirect method?
A. The change in Accounts Payable is added to net income; The change in Accrued
Liabilities is subtracted from net income
B. The change in Accounts Payable is added to net income; The change in Accrued
Liabilities is added to net income
C. The change in Accounts Payable is subtracted from net income; The change in
Accrued Liabilities is added to net income
D. The change in Accounts Payable is subtracted from net income; The change in
Accrued Liabilities is subtracted from net income
Answer:
Blore Corporation reports that at an activity level of 7,300 units, its total variable cost is
$511,803 and its total fixed cost is $76,650. What would be the total cost, both fixed
and variable, at an activity level of 7,500 units? Assume that this level of activity is
within the relevant range.
A. $604,575
B. $602,475
C. $596,514
D. $588,453
Answer:
Frizz Hair Salon had net income of $93,000 for the year just ended. Frizz collected the
following additional information to prepare its statement of cash flows for the year:
Frizz uses the indirect method to prepare its statement of cash flows. What is Frizz’s net
cash provided (used) by operating activities?
A. $92,000
B. $102,000
C. $120,000
D. $126,000
Answer:
Hartzog Corporation’s most recent balance sheet and income statement appear below:
Dividends on common stock during Year 2 totaled $60 thousand. Dividends on
preferred stock totaled $5 thousand. The market price of common stock at the end of
Year 2 was $7.04 per share.
The book value per share at the end of Year 2 is closest to:
A. $6.60
B. $4.30
C. $3.80
D. $0.40
Answer:
Wert Corporation uses a predetermined overhead rate based on direct labor cost to
apply manufacturing overhead to jobs. Last year, the company’s estimated
manufacturing overhead was $1,200,000 and its estimated level of activity was 50,000
direct labor-hours. The company’s direct labor wage rate is $12 per hour. Actual
manufacturing overhead amounted to $1,240,000, with actual direct labor cost of
$650,000. For the year, manufacturing overhead was:
A. overapplied by $60,000
B. underapplied by $60,000
C. overapplied by $40,000
D. underapplied by $44,000
Answer:
At an activity level of 4,400 units in a month, Goldbach Corporation’s total variable
maintenance and repair cost is $313,632 and its total fixed maintenance and repair cost
is $93,104. What would be the total maintenance and repair cost, both fixed and
variable, at an activity level of 4,600 units in a month? Assume that this level of activity
is within the relevant range.
A. $420,992
B. $425,224
C. $415,980
D. $406,736
Answer:
The following production and average cost data for two levels of monthly production
volume have been supplied by a company that produces a single product:
The best estimate of the total variable manufacturing cost per unit is:
A. $22.10
B. $66.70
C. $88.80
D. $15.70
Answer:
The Hawkins Company uses a standard costing system in which manufacturing
overhead is applied on the basis of standard direct labor-hours (DLHs). During
February, the company actually used 9,200 direct labor-hours and made 2,900 units of
finished product. The standard cost card for one unit of product includes the following:
Variable factory overhead: 3 DLHs @ $4.75 per DLH
Fixed factory overhead: 3 DLHs @ $3.00 per DLH
For February, the company incurred $28,450 in fixed manufacturing overhead costs and
recorded a $900 favorable volume variance.
The amount of fixed manufacturing overhead cost contained in the company’s budget
for February is:
A. $27,000
B. $27,550
C. $25,200
D. $29,350
Answer:
Franklin Glass Works uses a standard cost system in which manufacturing overhead is
applied on the basis of standard direct labor-hours. Each unit requires two standard
hours of direct labor for completion. The denominator activity for the year was based
on budgeted production of 200,000 units. Total overhead was budgeted at $900,000 for
the year, and the fixed manufacturing overhead rate was $1.50 per direct labor-hour.
The actual data pertaining to the manufacturing overhead for the year are presented
below:
The standard hours allowed for actual production for the year total:
A. 247,500
B. 396,000
C. 400,000
D. 495,000
Answer:
Nordquist Company’s net income last year was $33,000. The company did not sell or
retire any property, plant, and equipment last year. Changes in selected balance sheet
accounts for the year appear below:
Based solely on this information, the net cash provided by operating activities under the
indirect method on the statement of cash flows would be:
A. $80,000
B. $18,000
C. $48,000
D. $56,000
Answer:
The Dodge Company makes and sells a single product and uses a standard cost system
in which manufacturing overhead costs are applied to units of product on the basis of
standard direct labor-hours. The standard cost card shows that 5 direct labor-hours are
required per unit of product. The Dodge Company had the following budgeted and
actual data for the year:
The budgeted direct labor-hours is used as the denominator activity for the month.
The variable overhead efficiency variance was:
A. $6,000 U
B. $6,000 F
C. $12,000 U
D. $12,000 F
Answer:
Which of the following would be added to net income in the operating activities section
of a statement of cash flows prepared using the indirect method?
A. an increase in accounts receivable.
B. an increase in accounts payable.
C. an increase in common stock.
D. an increase in bonds payable.
Answer:
During September, Stutzman Corporation incurred $86,000 of actual Manufacturing
Overhead costs. During the same period, the Manufacturing Overhead applied to Work
in Process was $81,000.
The journal entry to record the incurrence of the actual Manufacturing Overhead costs
would include a:
A. credit to Manufacturing Overhead of $86,000
B. debit to Manufacturing Overhead of $86,000
C. credit to Work in Process of $81,000
D. debit to Work in Process of $81,000
Answer:
Reference: 8-46
The following labor standards have been established for a particular product:
The following data pertain to operations concerning the product for the last month:
What is the labor rate variance for the month?
A) $400 F
B) $80 U
C) $80 F
D) $400 U
Answer:
A customer has requested that Inga Corporation fill a special order for 2,000 units of
product K81 for $25.00 a unit. While the product would be modified slightly for the
special order, product K81’s normal unit product cost is $19.90:
Direct labor is a variable cost. The special order would have no effect on the company’s
total fixed manufacturing overhead costs. The customer would like modifications made
to product K81 that would increase the variable costs by $1.20 per unit and that would
require an investment of $10,000 in special molds that would have no salvage value.
This special order would have no effect on the company’s other sales. The company has
ample spare capacity for producing the special order. If the special order is accepted,
the company’s overall net operating income would increase (decrease) by:
A. $13,000
B. $(9,700)
C. $10,200
D. $(2,200)
Answer:
Reference: 8B-4
Karo Corporation has provided the following data concerning its direct labor costs for
December: The journal entry to record the incurrence of direct labor costs in
December would include the following for Work in Process:
A) Credit of $142,780
B) Debit of $142,780
C) Debit of $124,012
D) Credit of $124,012
Answer:
(Ignore income taxes in this problem.) Judy Soope just received an annual raise of $500
starting with the current year. If Judy anticipates working for eight more years
(including the current year) and the cash flows are discounted at 8%, what cash award
today would be equivalent to the pay raise?
A. $4,000
B. $2,874
C. $2,160
D. $2,603
Answer:
Menlove Company had the following income statement for the most recent year:
Given this data, the unit contribution margin was:
A. $2 per unit
B. $15 per unit
C. $6 per unit
D. $4 per units
Answer:
Budget data for the Bidwell Company are as follows:
Bidwell’s break-even sales in units is:
A. 30,000 units
B. 91,000 units
C. 60,000 units
D. 70,000 units
Answer:
Daane Company had only one job in process on May 1. The job had been charged with
$1,000 of direct materials, $3,302 of direct labor, and $5,382 of manufacturing
overhead cost. The company assigns overhead cost to jobs using the predetermined
overhead rate of $20.70 per direct labor-hour.
During May, the following activity was recorded:
Work in process inventory on May 30 contains $2,921 of direct labor cost. Raw
materials consist solely of items that are classified as direct materials.
The amount of direct materials cost in the May 30 work in process inventory account
was:
A. $5,680
B. $19,900
C. $8,400
D. $11,500
Answer:
Financial statements for Harwich Company for the most recent year appear below:
The balances in the Cash, Accounts Receivable, Inventory, Bonds Payable, Common
Stock, and Additional Paid-In Capital accounts are unchanged from the beginning of the
year. A $0.75 per share dividend was declared and paid during the year. On December
31, Harwich Company’s common stock was trading at $24.00 per share.
Harwich Company’s inventory turnover ratio for the year was closest to:
A. 8
B. 3
C. 5
D. 7.5
Answer:
Reference: 8-50
Fabiano Corporation makes a product whose direct labor standards are 0.5 hours per
unit and $23.00 per hour. In February the company produced 3,300 units using 1,640
direct labor-hours. The actual direct labor cost was $38,540.
The labor efficiency variance for February is:
A) $230 F
B) $235 F
C) $230 U
D) $235 U
Answer:
A company has two processing departments: A and B. Which of the following entries or
sets of journal entries would be used to record the transfer between processing
departments and from the final processing department to finished goods?
A. Option A
B. Option B
C. Option C
D. Option D
Answer:
In computing the margin in a ROI analysis, which of the following is used?
A. Sales in the denominator
B. Net operating income in the denominator
C. Average operating assets in the denominator
D. Residual income in the denominator
Answer:
Leija Manufacturing Company uses a job-order costing system and started the month of
March with one job in process (Job #359). This job had $500 of cost assigned to it at
this time. During March, Leija assigned production costs as follows to the jobs worked
on during the month:
During March, Leija completed and sold Job #359. Job #360 was also completed but
was not sold by month end. Job #361 was not completed by the end of March.
What is Leija’s work in process inventory balance at the end of March?
A. $1,900
B. $2,400
C. $2,900
D. $10,000
Answer:
Casper Corporation makes and sells a product called a Miniwarp. One Miniwarp
requires 3.5 kilograms of the raw material Jurislon. Budgeted production of Miniwarps
for the next five months is as follows:
The company wants to maintain monthly ending inventories of Jurislon equal to 10% of
the following month’s production needs. On July 31, this requirement was not met since
only 6,900 kilograms of Jurislon were on hand. The cost of Jurislon is $3.00 per
kilogram. The company wants to prepare a Direct Materials Purchase Budget for the
next five months.
The desired ending inventory of Jurislon for the month of September is:
A. $5,550
B. $21,315
C. $6,090
D. $19,425
Answer:
The following cost data pertain to the operations of Mancia Department Stores, Inc., for
the month of February.
The Brentwood Store is just one of many stores owned and operated by the company.
The Shoe Department is one of many departments at the Brentwood Store. The central
warehouse serves all of the company’s stores.
What is the total amount of the costs listed above that are direct costs of the Shoe
Department?
A. $80,000
B. $88,000
C. $130,000
D. $92,000
Answer: