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.
What is the company’s break-even sales in dollars?
A. $0
B. $640,000
C. $700,000
D. $400,000
Answer:
Data concerning Hewell Enterprises Corporation’s single product appear below:
The unit sales to attain the company’s monthly target profit of $14,000 is closest to:
A. 4,408 units
B. 8,186 units
C. 5,153 units
D. 2,865 units
Answer:
A soft drink bottler incurred the following plant utility costs: 1,800 units bottled with
utility costs of $5,750, and 1,500 units bottled with utility costs of $5,200. What is the
variable cost per unit bottled (Use the High-low method. Round to the nearest cent.)
A. $3.47
B. $3.19
C. $1.83
D. None of the above is TRUE.
Answer:
Reference: 8-39
The Geurtz Company uses standard costing. The company makes and sells a single
product called a Roff. The following data are for the month of August:
– Actual cost of direct material purchased and used: $65,560
– Material price variance: $5,960 unfavorable
– Total materials variance: $22,360 unfavorable
– Standard cost per pound of material: $4
– Standard cost per direct labor-hour: $5
– Actual direct labor-hours: 6,500 hours
– Labor efficiency variance: $3,500 favorable
– Standard number of direct labor-hours per unit of Roff: 2 hours
– Total labor variance: $400 unfavorable
The actual material cost per pound was:
A) $4.00
B) $3.67
C) $3.30
D) $4.40
Answer:
Dieringer Corporation’s most recent balance sheet and income statement appear below:
The inventory turnover for Year 2 is closest to:
A. 1.25
B. 9.89
C. 11.13
D. 0.80
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.
What is the company’s margin of safety percentage?
A. 25%
B. 20%
C. 40%
D. 10%
Answer:
For a lamp manufacturing company, the cost of the insurance on its vehicles that deliver
lamps to customers is best described as a:
A. prime cost.
B. manufacturing overhead cost.
C. period cost.
D. differential (incremental) cost of a lamp.
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:
Franklin’s fixed manufacturing overhead volume variance for the year is:
A. $6,000 unfavorable
B. $19,000 favorable
C. $25,000 favorable
D. $55,000 unfavorable
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 earnings per share of common stock for Year 2 is closest to:
A. $0.55
B. $0.93
C. $1.01
D. $0.65
Answer:
Reference: 8-34
Caquias Corporation makes a product with the following standard costs:
The company reported the following results concerning this product in August.
The company applies variable overhead on the basis of direct labor-hours. The direct
materials purchases variance is computed when the materials are purchased.
The variable overhead efficiency variance for August is:
A) $200 F
B) $205 U
C) $205 F
D) $200 U
Answer:
Frymire Corporation produces and sells a single product. Data concerning that product
appear below:
The unit sales to attain that the target profit of $36,000 is closest to:
A. 13,327 units
B. 4,398 units
C. 6,564 units
D. 8,096 units
Answer:
Resendes Refiners, Inc., processes sugar cane that it purchases from farmers. Sugar
cane is processed in batches. A batch of sugar cane costs $48 to buy from farmers and
$16 to crush in the company’s plant. Two intermediate products, cane fiber and cane
juice, emerge from the crushing process. The cane fiber can be sold as is for $24 or
processed further for $17 to make the end product industrial fiber that is sold for $38.
The cane juice can be sold as is for $34 or processed further for $23 to make the end
product molasses that is sold for $76.
Which of the intermediate products should be processed further?
A. Cane fiber should NOT be processed into industrial fiber; Cane juice should be
processed into molasses
B. Cane fiber should be processed into industrial fiber; Cane juice should be processed
into molasses
C. Cane fiber should NOT be processed into industrial fiber; Cane juice should NOT
be processed into molasses
D. Cane fiber should be processed into industrial fiber; Cane juice should NOT be
processed into molasses
Answer:
Lampshire Inc. is considering using stocks of an old raw material in a special project.
The special project would require all 160 kilograms of the raw material that are in stock
and that originally cost the company $1,136 in total. If the company were to buy new
supplies of this raw material on the open market, it would cost $7.25 per kilogram.
However, the company has no other use for this raw material and would sell it at the
discounted price of $6.50 per kilogram if it were not used in the special project. The
sale of the raw material would involve delivery to the purchaser at a total cost of $75
for all 160 kilograms. What is the relevant cost of the 160 kilograms of the raw material
when deciding whether to proceed with the special project?
A. $1,040
B. $965
C. $1,136
D. $1,160
Answer:
A manufacturer of tiling grout has supplied the following data:
The company’s break-even in kilograms is closest to:
A. 215,000 kilograms
B. 55,302 kilograms
C. 307,765 kilograms
D. 464,865 kilograms
Answer:
Cadarette Corporation’s most recent balance sheet and income statement appear below:
Dividends on common stock during Year 2 totaled $40 thousand. Dividends on
preferred stock totaled $10 thousand. The market price of common stock at the end of
Year 2 was $17.73 per share.
The return on common stockholders’ equity for Year 2 is closest to:
A. 11.43%
B. 11.61%
C. 10.29%
D. 12.90%
Answer:
The Phelps Company applies overhead costs to products on the basis of standard direct
labor-hours. The standard cost card shows that 5 direct labor-hours are required per unit
of product. Phelps Company had the following budgeted and actual data for March:
The budgeted direct labor-hours is used as the denominator activity for the month.
The fixed manufacturing overhead budget variance for March is:
A. $2,000 favorable
B. $500 favorable
C. $2,000 unfavorable
D. $2,500 favorable
Answer:
Reference: 8-34
Caquias Corporation makes a product with the following standard costs:
The company reported the following results concerning this product in August.
The company applies variable overhead on the basis of direct labor-hours. The direct
materials purchases variance is computed when the materials are purchased.
The labor efficiency variance for August is:
A) $480 F
B) $500 U
C) $500 F
D) $480 U
Answer:
Morvan Corporation uses the FIFO method in its process costing system. Data
concerning the first processing department for the most recent month are listed below:
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.
What are the equivalent units for materials for the month in the first processing
department?
Refer To: 4A-5
A. 9,000
B. 375
C. 8,300
D. 8,715
Answer:
Deshaies Corporation is preparing its cash budget for November. The budgeted
beginning cash balance is $10,000. Budgeted cash receipts total $100,000 and budgeted
cash disbursements total $104,000. The desired ending cash balance is $30,000.
The excess (deficiency) of cash available over disbursements for November is:
A. $110,000
B. $6,000
C. ($4,000)
D. $14,000
Answer:
Megna Company’s net income last year was $143,000. Changes in the company’s
balance sheet accounts for the year appear below:
The company paid a cash dividend and it did not dispose of any long-term investments
or property, plant, and equipment. The company did not issue any bonds payable or
repurchase any of its own common stock. The following question pertain to the
company’s statement of cash flows.
The net cash provided by (used in) financing activities last year was:
A. $20,000
B. $(20,000)
C. $69,000
D. $(69,000)
Answer:
The salary paid to the production manager in a factory is:
A. a variable cost.
B. part of prime cost.
C. part of conversion cost.
D. both a variable cost and a prime cost.
Answer:
The following data were taken from the accounting records of Abacus Company which
uses the FIFO method in its process costing system:
The equivalent units are:
A. Material, 90,000 units; labor and overhead, 89,000 units
B. Material, 100,000 units; labor and overhead, 91,000 units
C. Material, 60,000 units; labor and overhead, 53,000 units
D. Material, 80,000 units; labor and overhead, 79,000 units
Answer:
Reference: 8-11
Doubleday Clinic uses client-visits as its measure of activity. During June, the clinic
budgeted for 3,200 client-visits, but its actual level of activity was 3,180 client-visits.
The clinic has provided the following data concerning the formulas to be used in its
budgeting for June:
The administrative expenses in the planning budget for June would be closest to:
A) $3,429
B) $3,408
C) $3,520
D) $3,518
Answer:
Froment 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 7,900 units were started and 7,400 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 65% complete with respect to materials and 25% 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. $328,155
B. $309,200
C. $311,600
D. $299,796
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 application of Manufacturing Overhead to Work in
Process would include a:
A. credit to Manufacturing Overhead of $81,000
B. credit to Work in Process of $86,000
C. debit to Manufacturing Overhead of $81,000
D. debit to Work in Process of $86,000
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 inventory turnover for Year 2 is closest to:
A. 4.05
B. 4.36
C. 1.17
D. 0.86
Answer:
Excerpts from Tigner Corporation’s most recent balance sheet appear below:
Sales on account in Year 2 amounted to $1,230 and the cost of goods sold was $820.
The accounts receivable turnover for Year 2 is closest to:
A. 7.10
B. 0.91
C. 8.79
D. 1.10
Answer:
The February contribution format income statement of Caines Corporation appears
below:
The degree of operating leverage is closest to:
A. 3.49
B. 0.09
C. 0.29
D. 10.94
Answer:
Two alternatives, code-named X and Y, are under consideration at Afalava Corporation.
Costs associated with the alternatives are listed below.
What is the differential cost of Alternative Y over Alternative X, including all of the
relevant costs?
A. $103,000
B. $39,000
C. $142,000
D. $122,500
Answer:
Reference: 8-32
Gentile Corporation makes a product with the following standard costs:
The company produced 6,000 units in May using 36,970 kilos of direct material and
4,340 direct labor-hours. During the month, the company purchased 40,400 kilos of the
direct material at $4.70 per kilo. The actual direct labor rate was $13.70 per hour and
the actual variable overhead rate was $2.70 per hour.
The company applies variable overhead on the basis of direct labor-hours. The direct
materials purchases variance is computed when the materials are purchased.
The materials price variance for May is:
A) $11,880 U
B) $11,880 F
C) $12,120 F
D) $12,120 U
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 net operating income in the flexible budget for March would be closest to:
A) $14,625
B) $11,220
C) $11,408
D) $14,711
Answer:
Edeen Corporation has provided the following production and total cost data for two
levels of monthly production volume. The company produces a single product.
The best estimate of the total variable manufacturing cost per unit is:
A. $62.20
B. $96.50
C. $109.30
D. $12.80
Answer:
The Steff Company has the following flexible budget (in condensed form) for
manufacturing overhead:
The following data concerning production pertain to last year’s 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, $850 for the year.
– The standard direct labor time is two hours per unit of product.
The volume variance was:
A. $2,000 favorable
B. $2,600 unfavorable
C. $1,000 favorable
D. $800 favorable
Answer:
The term “relevant range” means the range of activity over which:
A. relevant costs are incurred.
B. costs may fluctuate.
C. production may vary.
D. the assumptions about fixed and variable cost behavior are reasonably valid.
Answer:
The management of Paye Corporation expects sales in April to be $130,000. The
company’s contribution margin ratio is 65% and its fixed monthly expenses are
$54,000.
Estimate the company’s net operating income for April, assuming that the fixed monthly
expenses do not change. Show your work!
Answer:
Arcade Corporation’s balance sheet and income statement appear below:
The company did not dispose of any property, plant, and equipment, retire any bonds
payable, or repurchase any of its own common stock during the year. The company
declared and paid a cash dividend.
Prepare a statement of cash flows in good form using the indirect method.
Answer:
The following data for November have been provided by Rickenbaker Corporation, a
producer of precision drills for oil exploration:
Required:
Compute the variable overhead rate variances for indirect labor and for power for
November. Indicate whether each of the variances is favorable (F) or unfavorable (U).
Show your work!
Answer:
Dubitsky Corporation produces and sells a single product. Data concerning that product
appear below:
Fixed expenses are $516,000 per month. The company is currently selling 7,000 units
per month.
The marketing manager would like to introduce sales commissions as an incentive for
the sales staff. The marketing manager has proposed a commission of $9 per unit. In
exchange, the sales staff would accept an overall decrease in their salaries of $55,000
per month. The marketing manager predicts that introducing this sales incentive would
increase monthly sales by 200 units. What should be the overall effect on the company’s
monthly net operating income of this change? Show your work!
Answer:
Answer:
Hereford Corporation has provided the following data for February.
a. Compute the budget variance for February. Show your work!
b. Compute the volume variance for February. Show your work!
Answer:
The management of Harrigill Corporation would like to have a better understanding of
the behavior of its inspection costs. The company has provided the following data:
Management believes that inspection cost is a mixed cost that depends on direct
labor-hours.
Estimate the variable cost per direct labor-hour and the fixed cost per month using the
high-low method. Show your work! Round off all calculations to the nearest whole
cent.
Answer:
The following data has been provided by Palafox Inc., a company that uses the FIFO
method in its process costing system. The data concern the company’s Shaping
Department for the month of March.
Determine the cost of ending work in process inventory and the cost of the units
transferred out of the department during March using the FIFO method.
Answer:
Verhague Corporation’s net cash provided by operating activities was $84,000; its net
income was $61,000; its capital expenditures were $74,000; and its cash dividends were
$14,000.
Determine the company’s free cash flow.
Answer:
Production and cost data for the month of February for Process A of the Packer
manufacturing Company follow:
The company uses the weighted-average cost method in its process costing system.
a. Calculate the equivalent units and cost per equivalent unit for February for materials
and for conversion costs. (Carry calculations out to the nearest tenth of a cent.)
b. Determine the cost transferred to finished goods.
c. Determine the amount of cost that should be assigned to the ending work in process.
Answer:
Malbrough Corporation’s most recent balance sheet and income statement appear
below:
Compute the following for Year 2:
a. Working capital.
b. Current ratio.
c. Acid-test ratio.
d. Accounts receivable turnover.
e. Average collection period.
f. Inventory turnover.
g. Average sale period.
Answer:
A number of costs and measures of activity are listed below.
For each item above, indicate whether the cost is MAINLY fixed or variable with
respect to the possible measure of activity listed next to it.
Answer:
Dana Inc. uses the FIFO method in its process costing system. The following data
concern the operations of the company’s first processing department for a recent month.
Using the FIFO method:
a. Determine the equivalent units of production for materials and conversion costs.
b. Determine the cost per equivalent unit for materials and conversion costs.
c. Determine the cost of ending work in process inventory.
d. Determine the cost of units transferred out of the department during the month.
Answer:
Guitian Corporation produces and sells a single product. The company’s contribution
format income statement for June appears below:
Redo the company’s contribution format income statement assuming that the company
sells 5,700 units.
Answer:
Heningburg Corporation’s total current assets are $230,000, its noncurrent assets are
$530,000, its total current liabilities are $140,000, its long-term liabilities are $370,000,
and its stockholders’ equity is $250,000.
Compute the company’s working capital. Show your work!
Answer:
Humes Corporation makes a range of products. The company’s predetermined overhead
rate is $16 per direct labor-hour, which was calculated using the following budgeted
data:
Management is considering a special order for 700 units of product J45K at $64 each.
The normal selling price of product J45K is $75 and the unit product cost is determined
as follows:
If the special order were accepted, normal sales of this and other products would not be
affected. The company has ample excess capacity to produce the additional units.
Assume that direct labor is a variable cost, variable manufacturing overhead is really
driven by direct labor-hours, and total fixed manufacturing overhead would not be
affected by the special order.
If the special order were accepted, what would be the impact on the company’s overall
profit?
Answer:
Dull Corporation applies overhead to products based on machine-hours. The
denominator level of activity is 8,600 machine-hours. The budgeted fixed
manufacturing overhead costs are $286,380. In October, the actual fixed manufacturing
overhead costs were $274,330 and the standard machine-hours allowed for the actual
output were 8,400 machine-hours.
a. Compute the budget variance for October. Show your work!
b. Compute the volume variance for October. Show your work!
Answer:
Gulick Corporation’s most recent income statement appears below:
The beginning balance of total assets was $320,000 and the ending balance was
$280,000.
Compute the return on total assets. Show your work!
Answer:
During February, Poetker Corporation budgeted for 29,000 customers, but actually
served 28,000 customers. Revenue should be $4.70 per customer served. Wages and
salaries should be $31,700 per month plus $1.50 per customer served. Supplies should
be $0.80 per customer served. Insurance should be $8,400 per month. Miscellaneous
expenses should be $7,400 per month plus $0.40 per customer served.
Required:
Prepare the companys flexible budget for February based on the actual level of activity
for the month.
Answer:
Holvey Company makes three products in a single facility. Data concerning these
products follow:
The mixing machines are potentially the constraint in the production facility. A total of
6,300 minutes are available per month on these machines. Direct labor is a variable cost
in this company.
a. How many minutes of mixing machine time would be required to satisfy demand for
all three products?
b. How much of each product should be produced to maximize net operating income?
(Round off to the nearest whole unit.)
c. Up to how much should the company be willing to pay for one additional hour of
mixing machine time if the company has made the best use of the existing mixing
machine capacity? (Round off to the nearest whole cent.)
Answer:
