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.
The difference between cash receipts and cash disbursements in December would be:
A. $17,000
B. $24,300
C. $41,300
D. $65,600
Answer:
Dodrill Company makes two products from a common input. Joint processing costs up
to the split-off point total $43,200 a year. The company allocates these costs to the joint
products on the basis of their total sales values at the split-off point. Each product may
be sold at the split-off point or processed further. Data concerning these products appear
below:
What is the net monetary advantage (disadvantage) of processing Product Y beyond the
split-off point?
A. $(4,200)
B. $21,800
C. $24,400
D. $(1,600)
Answer:
The following is Allison Corporation’s contribution format income statement for last
month:
The company has no beginning or ending inventories. The company produced and sold
10,000 units last month.
How many units would the company have to sell to attain target profits of $120,000?
A. 10,800 units
B. 12,000 units
C. 10,400 units
D. 11,200 units
Answer:
The terms standard quantity allowed or standard hours allowed means:
A) the actual output in units multiplied by the standard output allowed.
B) the actual input in units multiplied by the standard output allowed.
C) the actual output in units multiplied by the standard input allowed.
D) the standard output in units multiplied by the standard input allowed.
Answer:
The Materials Quantity Variance for May would be recorded as a:
A) Debit of $4,788
B) Debit of $16,644
C) Credit of $4,788
D) Credit of $16,644
Answer:
Byklea Corporation uses the weighted-average method in its process costing system.
This month, the beginning inventory in the first processing department consisted of 200
units. The costs and percentage completion of these units in beginning inventory were:
A total of 7,000 units were started and 6,700 units were transferred to the second
processing department during the month. The following costs were incurred in the first
processing department during the month:
The ending inventory was 90% complete with respect to materials and 45% complete
with respect to conversion costs.
Note: Your answers may differ from those offered below due to rounding error. In all
cases, select the answer that is the closest to the answer you computed. To reduce
rounding error, carry out all computations to at least three decimal places.
The total cost transferred from the first processing department to the next processing
department during the month is closest to:
A. $351,100
B. $366,552
C. $356,800
D. $341,097
Answer:
Hansen Company produces a single product. During the last year, Hansen had net
operating income under absorption costing that was $5,500 lower than its income under
variable costing. The company sold 9,000 units during the year, and its variable costs
were $10 per unit, of which $6 was variable selling expense. If fixed production cost is
$5 per unit under absorption costing every year, then how many units did the company
produce during the year?
A. 7,625 units
B. 8,450 units
C. 10,100 units
D. 7,900 units
Answer:
Kierst Company, which has only one product, has provided the following data
concerning its most recent month of operations:
The company produces the same number of units every month, although the sales in
units vary from month to month. The company’s variable costs per unit and total fixed
costs have been constant from month to month.
What is the net operating income for the month under absorption costing?
A. $7,500
B. $16,200
C. $6,200
D. $10,600
Answer:
Aujla Corporation uses activity-based costing to determine product costs for external
financial reports. The company has provided the following data concerning its
activity-based costing system:
Assuming that actual activity turns out to be the same as expected activity, the total
amount of overhead cost allocated to Product X would be closest to:
A. $235,000
B. $563,000
C. $316,600
D. $357,500
Answer:
Reference: 8-15
Maliszewski 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 March, the kennel budgeted for
3,400 tenant-days, but its actual level of activity was 3,410 tenant-days. The kennel has
provided the following data concerning the formulas to be used in its budgeting:
The facility expenses in the flexible budget for March would be closest to:
A) $19,664
B) $18,912
C) $18,880
D) $19,780
Answer:
Diltex Farm Supply is located in a small town in the rural west. Data regarding the
store’s operations follow:
o Sales are budgeted at $220,000 for November, $200,000 for December, and $210,000
for January.
o Collections are expected to be 70% in the month of sale, 27% in the month following
the sale, and 3% uncollectible.
o The cost of goods sold is 65% of sales.
o The company desires to have an ending merchandise inventory at the end of each
month equal to 50% 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 $22,500.
o Monthly depreciation is $19,000.
o Ignore taxes.
The cash balance at the end of December would be:
A. $116,900
B. $16,000
C. $100,900
D. $56,400
Answer:
A manufacturing company prepays its insurance coverage for a three-year period. The
premium for the three years is $2,700 and is paid at the beginning of the first year.
Eighty percent of the premium applies to manufacturing operations and 20% applies to
selling and administrative activities. What amounts should be considered product and
period costs respectively for the first year of coverage?
A. Option A
B. Option B
C. Option C
D. Option D
Answer:
Brasher Company manufactures and sells a single product that has a positive
contribution margin. If the selling price and variable expenses both decrease by 5% and
fixed expenses do not change, then what would be the effect on the contribution margin
per unit and the contribution margin ratio?
A. Option A
B. Option B
C. Option C
D. Option D
Answer:
Butteco Corporation has provided the following cost data for last year when 100,000
units were produced and sold:
All costs are variable except for $100,000 of manufacturing overhead and $100,000 of
selling and administrative expense. There are no beginning or ending inventories. If the
selling price is $10 per unit, the net operating income from producing and selling
110,000 units would be:
A. $450,000
B. $385,000
C. $405,000
D. $560,000
Answer:
Would plant security and assembly activities be best classified at an appliance
manufacturing plant as unit-level, batch-level, product-level, or facility-level?
A. Product Unit
B. Batch Batch
C. Facility Unit
D. Facility Product
Answer:
In a job-order costing system, the use of direct materials that have been previously
purchased is recorded as a debit to:
A. Raw Materials inventory.
B. Work in Process inventory.
C. Finished Goods inventory.
D. Manufacturing Overhead.
Answer:
Broze Company makes four products in a single facility. These products have the
following unit product costs:
Additional data concerning these products are listed below.
The grinding machines are potentially the constraint in the production facility. A total of
53,600 minutes are available per month on these machines.
Direct labor is a variable cost in this company.
Up to how much should the company be willing to pay for one additional minute of
grinding machine time if the company has made the best use of the existing grinding
machine capacity? (Round off to the nearest whole cent.)
A. $35.90
B. $0.00
C. $8.58
D. $11.60
Answer:
Carbaugh Corporation has provided the following production and average cost data for
two levels of monthly production volume. The company produces a single product.
The best estimate of the total cost to manufacture 3,300 units is closest to:
A. $637,560
B. $612,975
C. $588,390
D. $619,680
Answer:
If the number of units produced exceeds the number of units sold, then net operating
income under absorption costing will:
A. be equal to the net operating income under variable costing.
B. be greater than net operating income under variable costing.
C. be equal to the net operating income under variable costing plus total fixed
manufacturing costs.
D. be equal to the net operating income under variable costing less total fixed
manufacturing costs.
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 selling and administrative expenses in the planning budget for July would be
closest to:
A) $23,960
B) $24,690
C) $24,628
D) $23,950
Answer:
Accola Company uses activity-based costing. The company has two products: A and B.
The annual production and sales of Product A is 1,100 units and of Product B is 700
units. There are three activity cost pools, with estimated costs and expected activity as
follows:
The activity rate for Activity 3 is closest to:
A. $119.72
B. $116.18
C. $26.67
D. $56.70
Answer:
Reference: 8A-9
The Steff Company has the following flexible budget (in condensed form) for
manufacturing overhead:
The following data concerning production pertain to last years operations:
– The company used a denominator activity of 15,000 direct labor-hours to compute
the predetermined overhead rate.
– The company made 6,850 units of product and worked 14,200 actual hours during
the year.
– Actual variable manufacturing overhead was $15,904 and actual fixed
manufacturing overhead was $30,s850 for the year.
– The standard direct labor time is two hours per unit of product.
The fixed manufacturing overhead budget variance was:
A) $3,450 unfavorable
B) $3,450 favorable
C) $850 unfavorable
D) $1,200 favorable
Answer:
Drake Company’s contribution format income statement for the most recent year
appears below:
The break-even point in sales dollars is:
A. $731,250
B. $676,000
C. $675,000
D. $720,000
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 book value per share at December 31 was closest to:
A. $7.00
B. $15.00
C. $24.00
D. $30.00
Answer:
Financial statements for Marcell Company appear below:
Marcell Company’s acid-test ratio at the end of Year 2 was closest to:
A. 0.33
B. 1.35
C. 0.60
D. 0.74
Answer:
Data for June for Ozaki Corporation and its two major business segments, North and
South, appear below:
In addition, common fixed expenses totaled $145,000 and were allocated as follows:
$73,000 to the North business segment and $72,000 to the South business segment.
The contribution margin of the South business segment is:
A. $343,000
B. $63,000
C. $119,000
D. $192,000
Answer:
Odle Company purchased material on account. The entry to record the purchase of
materials will include a:
A) credit to Work in Process.
B) debit to Accounts Receivable.
C) credit to Accounts Payable.
D) credit to Raw Materials Inventory.
Answer:
Reference: 8A-15
Seroka Corporation estimates that its variable manufacturing overhead is $6.90 per
machine-hour and its fixed manufacturing overhead is $745,290 per period.
If the denominator level of activity is 9,100 machine-hours, the predetermined overhead
rate would be:
A) $88.80
B) $690.00
C) $6.90
D) $81.90
Answer:
The gross margin percentage is most likely to be used to assess:
A. how quickly accounts receivables can be collected.
B. how quickly inventories are sold.
C. the efficiency of administrative departments.
D. the overall profitability of the company’s products.
Answer:
Reference: 8-7
Edington Clinic uses client-visits as its measure of activity. During September, the
clinic budgeted for 2,800 client-visits, but its actual level of activity was 2,850
client-visits. The clinic has provided the following data concerning the formulas to be
used in its budgeting for September:
The net operating income in the planning budget for September would be closest to:
A) $16,387
B) $10,300
C) $11,200
D) $16,978
Answer:
A manufacturing company that produces a single product has provided the following
data concerning its most recent month of operations:
The total gross margin for the month under absorption costing is:
A. $42,000
B. $14,700
C. $69,000
D. $79,800
Answer:
Excerpts from Zorra Corporation’s most recent balance sheet appear below:
Sales on account in Year 2 amounted to $1,370 and the cost of goods sold was $850.
The accounts receivable turnover for Year 2 is closest to:
A. 6.85
B. 0.87
C. 1.15
D. 6.37
Answer:
In February, one of the processing departments at Grosz Corporation had beginning
work in process inventory of $18,000 and ending work in process inventory of $11,000.
During the month, the cost of units transferred out from the department was $204,000.
The company uses the FIFO method in its process costing system.
In the department’s cost reconciliation report for February, the total cost accounted for
would be:
A. $29,000
B. $412,000
C. $215,000
D. $430,000
Answer:
On April 1, Stelter Corporation had $34,000 of raw materials on hand. During the
month, the company purchased an additional $60,000 of raw materials. During April,
$70,000 of raw materials were requisitioned from the storeroom for use in production.
These raw materials included both direct and indirect materials. The indirect materials
totaled $7,000. Prepare journal entries to record these events. Use those journal entries
to answer the following questions:
The credits to the Raw Materials account for the month of April total:
A. $94,000
B. $34,000
C. $70,000
D. $60,000
Answer: