Niemiec Corporation keeps careful track of the time required to fill orders. The times
recorded for a particular order appear below:
The manufacturing cycle efficiency (MCE) was closest to:
A. 0.20
B. 0.06
C. 0.12
D. 0.96
Answer:
Stock Manufacturing Corporation has prepared the following overhead budget for next
month.
The companys variable overhead costs are driven by machine-hours.
What would be the total budgeted overhead cost for next month if the activity level is
6,600 machine-hours rather than 6,900 machine-hours?
A) $84,321.00
B) $87,590.00
C) $84,794.00
D) $83,781.74
Answer:
Reference: 8A-3
The Chase Company uses a standard cost system in which manufacturing overhead
costs are applied to products on the basis of standard machine-hours. For November, the
companys flexible budget for manufacturing overhead showed the following total
budgeted costs at the denominator activity level of 40,000 machine-hours:
During November 42,000 machine-hours were used to complete 13,200 units of product
with the following actual overhead costs:
The standard time allowed to complete one unit of product is 3.6 machine-hours.
The total amount of overhead cost applied to Work in Process during November was:
A) $47,520
B) $66,528
C) $106,528
D) $114,048
Answer:
The purchasing agent of the Clampett Company ordered materials of lower quality in an
effort to economize on price and in response to the demands of the production manager
due to a mistake in production scheduling. The materials were shipped by airfreight at a
rate higher than that ordinarily charged for shipment by truck, resulting in an
unfavorable materials price variance. The lower quality material proved to be unsuitable
on the production line and resulted in excessive waste. In this situation, who should be
held responsible for the materials price and quantity variances?
Materials Price Variance Materials Quantity Variance
A) Purchasing Agent Purchasing Agent
B) Production Manager Production Manager
C) Production Manager Purchasing Agent
D) Purchasing Agent Production Manager
Answer:
Tepla Corporation uses the FIFO method in its process costing system. Operating data
for the Curing Department for the month of March appear below:
According to the company’s records, the conversion cost in beginning work in process
inventory was $40,608 at the beginning of March. The cost per equivalent unit for
conversion costs for March was $9.
How much conversion cost would be assigned to the units completed and transferred
out of the department during March?
A. $562,152
B. $561,720
C. $520,800
D. $521,544
Answer:
Shiraki Corporation produces and sells a single product. Data concerning that product
appear below:
The break-even in monthly dollar sales is closest to:
A. $650,000
B. $687,722
C. $396,500
D. $1,016,667
Answer:
Prasad 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. To reduce
rounding error, carry out all computations to at least three decimal places.
The cost per equivalent unit for conversion costs for the first department for the month
is closest to:
A. $38.96
B. $43.33
C. $40.98
D. $40.91
Answer:
Part N29 is used by Farman Corporation to make one of its products. A total of 11,000
units of this part are produced and used every year. The company’s Accounting
Department reports the following costs of producing the part at this level of activity:
An outside supplier has offered to make the part and sell it to the company for $21.20
each. If this offer is accepted, the supervisor’s salary and all of the variable costs,
including the direct labor, can be avoided. The special equipment used to make the part
was purchased many years ago and has no salvage value or other use. The allocated
general overhead represents fixed costs of the entire company, none of which would be
avoided if the part were purchased instead of produced internally. In addition, the space
used to make part N29 could be used to make more of one of the company’s other
products, generating an additional segment margin of $29,000 per year for that product.
What would be the impact on the company’s overall net operating income of buying
part N29 from the outside supplier?
A. Net operating income would decline by $38,900 per year.
B. Net operating income would increase by $29,000 per year.
C. Net operating income would decline by $32,600 per year.
D. Net operating income would increase by $19,100 per year.
Answer:
The Chase Company uses a standard cost system in which manufacturing overhead
costs are applied to products on the basis of standard machine-hours. For November, the
company’s flexible budget for manufacturing overhead showed the following total
budgeted costs at the denominator activity level of 40,000 machine-hours:
During November 42,000 machine-hours were used to complete 13,200 units of product
with the following actual overhead costs:
The standard time allowed to complete one unit of product is 3.6 machine-hours.
The total amount of overhead cost applied to Work in Process during November was:
A. $47,520
B. $66,528
C. $106,528
D. $114,048
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 gross margin percentage for Year 2 is closest to:
A. 82.9%
B. 45.3%
C. 446.2%
D. 22.4%
Answer:
The following data pertain to Epsom Corporation’s operations:
Net operating income at sales of 12,000 units is:
A. $0
B. $36,000
C. $120,000
D. $300,000
Answer:
Dickison Corporation reported the following data for the month of December:
The prime cost for December was:
A. $109,000
B. $111,000
C. $107,000
D. $66,000
Answer:
Reference: 8-2
Roye 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 September, the kennel budgeted for
3,300 tenant-days, but its actual level of activity was 3,330 tenant-days. The kennel has
provided the following data concerning the formulas used in its budgeting and its actual
results for September:
Data used in budgeting:
Actual results for September:
The spending variance for expendables in September would be closest to:
A) $1,185 F
B) $1,185 U
C) $750 F
D) $750 U
Answer:
The Materials Price Variance for October would be recorded as a:
A) Debit of $230
B) Credit of $212
C) Debit of $212
D) Credit of $230
Answer:
At a volume of 10,000 units, Company P incurs $30,000 in factory overhead costs,
including $10,000 in fixed costs. Assuming that this activity is within the relevant
range, if volume increases to 12,000 units, Company P would expect to incur total
factory overhead costs of:
A. $36,000
B. $34,000
C. $30,000
D. $32,000
Answer:
Reference: 8-53
A manufacturing company that has only one product has established the following
standards for its variable manufacturing overhead. The company bases its variable
manufacturing overhead standards on machine-hours.
The following data pertain to operations for the last month:
What is the variable overhead rate variance for the month?
A) $1,220 U
B) $5,885 F
C) $1,220 F
D) $5,885 U
Answer:
Duhamel Corporation uses the weighted-average method in its process costing system.
This month, the beginning inventory in the first processing department consisted of 600
units. The costs and percentage completion of these units in beginning inventory were:
A total of 7,800 units were started and 7,000 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 55% complete with respect to materials and 50% 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 cost per equivalent unit for materials for the month in the first processing
department is closest to:
A. $25.74
B. $23.81
C. $24.87
D. $26.89
Answer:
Financial statements for Orange Company appear below:
Dividends during Year 2 totaled $156 thousand, of which $18 thousand were preferred
dividends.
The market price of a share of common stock on December 31, Year 2 was $100.
Orange Company’s current ratio at the end of Year 2 was closest to:
A. 1.24
B. 0.55
C. 0.44
D. 1.71
Answer:
Lusk Company produces and sells 15,000 units of Product A each month. The selling
price of Product A is $20 per unit, and variable expenses are $14 per unit. A study has
been made concerning whether Product A should be discontinued. The study shows that
$70,000 of the $100,000 in fixed expenses charged to Product A would continue even if
the product was discontinued. These data indicate that if Product A is discontinued, the
company’s overall net operating income would:
A. decrease by $60,000 per month
B. increase by $10,000 per month
C. increase by $20,000 per month
D. decrease by $20,000 per month
Answer:
Abe Company, which has only one product, has provided the following data concerning
its most recent month of operations:
What is the unit product cost for the month under variable costing?
A. $99
B. $81
C. $106
D. $88
Answer:
Equivalent units for a process costing system using the weighted-average method would
be equal to:
A. units completed during the period and transferred out.
B. units started and completed during the period plus equivalent units in the ending
work in process inventory.
C. units completed during the period less equivalent units in the beginning inventory,
plus equivalent units in the ending work in process inventory.
D. units completed during the period plus equivalent units in the ending work in
process inventory.
Answer:
Pong Incorporated’s income statement for the most recent month is given below.
If Store G sales increase by $40,000 with no change in fixed costs, the overall company
net operating income should:
A. increase by $4,000
B. increase by $8,000
C. increase by $24,000
D. increase by $20,000
Answer:
Meister Electronics Corporation has a standard cost system in which it applies
manufacturing overhead to products on the basis of standard machine-hours (MHs). The
company had budgeted its fixed manufacturing overhead cost at $68,800 for the month
and its level of activity at 2,000 MHs. The actual total fixed manufacturing overhead
was $73,300 for the month and the actual level of activity was 1,800 MHs. What was
the fixed manufacturing overhead budget variance for the month to the nearest dollar?
A. $11,380 unfavorable
B. $4,500 unfavorable
C. $11,380 favorable
D. $4,500 favorable
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.
The cost per equivalent unit for conversion costs for the first department for the month
is closest to:
A. $48.50
B. $44.72
C. $42.59
D. $43.33
Answer:
Hunter Corporation sells a product for $180 per unit. The product’s current sales are
34,900 units and its break-even sales are 25,128 units.
What is the margin of safety in dollars?
A. $6,282,000
B. $4,188,000
C. $1,758,960
D. $4,523,040
Answer:
Martinez Aerospace Company uses a job-order costing system. The direct materials for
Job #045391 were purchased in July and put into production in August. The job was not
completed by the end of August. At the end of August, in what account would the direct
material cost assigned to Job #045391 be located?
A. raw materials inventory
B. work in process inventory
C. finished goods inventory
D. cost of goods manufactured
Answer:
Addy Company has two products: A and B. The annual production and sales of Product
A is 1,700 units and of Product B is 1,100 units. The company has traditionally used
direct labor-hours as the basis for applying all manufacturing overhead to products.
Product A requires 0.3 direct labor-hours per unit and Product B requires 0.6 direct
labor-hours per unit. The total estimated overhead for next period is $98,785.
The company is considering switching to an activity-based costing system for the
purpose of computing unit product costs for external reports. The new activity-based
costing system would have three overhead activity cost pools–Activity 1, Activity 2,
and General Factory–with estimated overhead costs and expected activity as follows:
(Note: The General Factory activity cost pool’s costs are allocated on the basis of direct
labor-hours.)
The overhead cost per unit of Product B under the traditional costing system is closest
to:
A. $50.66
B. $5.49
C. $26.09
D. $11.45
Answer:
Which of the following entries would correctly record charging direct labor costs to
Work in Process, given an unfavorable labor efficiency variance and a favorable labor
rate variance?
A) Work in Process
Labor Rate Variance
Labor Efficiency Variance
Wages Payable
B) Work in Process
Wages Payable
C) Labor Efficiency Variance
Labor Rate Variance
D) Work in Process
Labor Efficiency Variance
Labor Rate Variance
Wages Payable
Answer:
Reference: 8-30
Snuggs Corporation makes a product with the following standard costs:
The company reported the following results concerning this product in October.
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 October is:
A) $510 U
B) $480 F
C) $480 U
D) $510 F
Answer:
A partial listing of costs incurred at Backes Corporation during November appears
below:
The total of the product costs listed above for November is:
A. $77,000
B. $348,000
C. $592,000
D. $244,000
Answer: