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Ekmark Corporation uses the following activity rates from its activity-based costing to
assign overhead costs to products:
Data for one of the company's products follow:
How much overhead cost would be assigned to Product P59G using the activity-based
costing system?
A. $54,482.56
B. $5,301.76
C. $10,014.40
D. $154.78
Answer:
Babuca 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. $82.00
B. $70.20
C. $56.70
D. $11.80
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 volume variance was:
A) $2,000 favorable
B) $2,600 unfavorable
C) $1,000 favorable
D) $800 favorable
Answer:
Last year, Shadow Corporation's dividend on common stock was $9.90 per share and
the dividend on preferred stock was $1.00 per share. The market price of common stock
at the end of the year was $68.10 per share. The dividend yield ratio is closest to:
A. 0.15
B. 0.16
C. 0.91
D. 0.01
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 average sale period for Year 2 is closest to:
A. 60.0 days
B. 35.1 days
C. 62.4 days
D. 213.6 days
Answer:
Bennett Company reported sales on its income statement last year of $345,000. On the
company's statement of cash flows, sales adjusted to a cash basis were $337,000. (The
company uses the direct method to determine the net cash provided by operating
activities.) Bennett Company reported the following account balances on its
comparative balance sheet:
Based on this information, the beginning Accounts Receivable balance was:
A. $12,000
B. $17,000
C. $28,000
D. $14,000
Answer:
Last year, Nye Company reported on its income statement sales of $475,000 and cost of
goods sold of $240,000. During the year, the balance in accounts receivable increased
$40,000, the balance in accounts payable decreased $25,000, and the balance in
inventory increased $10,000. The company uses the direct method to determine the net
cash provided by operating activities on its statement of cash flows.
Under the direct method, cost of goods sold adjusted to a cash basis would be:
A. $225,000
B. $205,000
C. $275,000
D. $255,000
Answer:
The following data have been provided by Spraglin Corporation, a company that
produces forklift trucks:
Supplies cost is an element of variable manufacturing overhead. The variable overhead
efficiency variance for supplies cost is:
A) $484 U
B) $2,643 U
C) $484 F
D) $2,643 F
Answer:
Bordes Corporation has provided the following data concerning its most important raw
material, compound R85F:
The raw material was purchased on account.
The debits to the Raw Materials account for May would total:
A. $58,596
B. $75,240
C. $53,808
D. $77,880
Answer:
Wecker Corporation uses the following activity rates from its activity-based costing to
assign overhead costs to products:
Data concerning two products appear below:
How much overhead cost would be assigned to Product V09X using the activity-based
costing system?
A. $157.87
B. $91,722.47
C. $10,385.22
D. $5,485.50
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 book value per share at the end of Year 2 is closest to:
A. $8.00
B. $0.90
C. $13.00
D. $9.00
Answer:
Dickonson Products is a division of a major corporation. The following data are for the
last year of operations:
The division's margin is closest to:
A. 26.4%
B. 10.0%
C. 2.4%
D. 24.0%
Answer:
Dolittle Company purchased materials on account. The entry to record the purchase of
materials having a standard cost of $0.50 per pound from a supplier at $0.60 per pound
would include a:
A. credit to Raw Materials Inventory.
B. debit to Work in Process.
C. credit to Materials Price Variance.
D. debit to Materials Price Variance.
Answer:
Reference: 8-12
Nakhle 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 October, the kennel budgeted
for 3,000 tenant-days, but its actual level of activity was 2,960 tenant-days. The kennel
has provided the following data concerning the formulas used in its budgeting and its
actual results for October:
Data used in budgeting:
Actual results for October:
The net operating income in the planning budget for October would be closest to:
A) $2,757
B) $9,500
C) $2,684
D) $9,900
Answer:
Fillip Corporation makes 4,000 units of part U13 each year. This part is used in one of
the company's products. 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 and sell the part to the company for $21.60
each. If this offer is accepted, the supervisor's salary and all of the variable costs,
including 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. If the outside supplier's offer
were accepted, only $3,000 of these allocated general overhead costs would be avoided.
In addition, the space used to produce part U13 would be used to make more of one of
the company's other products, generating an additional segment margin of $13,000 per
year for that product.
What would be the impact on the company's overall net operating income of buying
part U13 from the outside supplier?
A. Net operating income would increase by $13,000 per year.
B. Net operating income would decline by $42,600 per year.
C. Net operating income would decline by $68,600 per year.
D. Net operating income would increase by $9,200 per year.
Answer:
Binnie Corporation's most recent balance sheet appears below:
Net income for the year was $ Cash dividends were $16. The company did not dispose
of any property, plant, and equipment. It 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 for the year was:
A. $3
B. $(14)
C. $(27)
D. $(16)
Answer:
The Gasson Company uses the weighted-average method in its process costing system.
The company's ending work in process inventory consists of 10,000 units, 100%
complete with respect to materials and 70% complete with respect to labor and
overhead. If the costs per equivalent unit are $4.50 for the materials and $2.00 for labor
and overhead, the balance of the ending work in process inventory account would be:
A. $44,500
B. $50,500
C. $59,000
D. $65,000
Answer:
On April 1, Bogdon Corporation had $30,000 of raw materials on hand. During the
month, the company purchased an additional $63,000 of raw materials. During April,
$76,000 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 $2,000.
The journal entry to record the purchase of raw materials would include a:
A. debit to Raw Materials of $63,000
B. credit to Raw Materials of $63,000
C. credit to Raw Materials of $93,000
D. debit to Raw Materials of $93,000
Answer:
Hardy, Inc., has budgeted sales in units for the next five months as follows:
Past experience has shown that the ending inventory for each month should be equal to
20% of the next month's sales in units. The inventory on May 31 contained 1,640 units.
The company needs to prepare a production budget for the next five months.
The beginning inventory for September should be:
A. 940 units
B. 720 units
C. 1,640 units
D. 520 units
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:
Condensed monthly operating income data for Cosmo Inc. for November is presented
below. Additional information regarding Cosmo's operations follows the statement.
Three-quarters of each store's traceable fixed expenses are avoidable if the store were to
be closed.
Cosmo allocates common fixed expenses to each store on the basis of sales dollars.
Management estimates that closing the Town Store would result in a ten percent
decrease in Mall Store sales, while closing the Mall Store would not affect Town Store
sales.
The operating results for November are representative of all months.
A decision by Cosmo Inc. to close the Town Store would result in a monthly increase
(decrease) in Cosmo's operating income of:
A. $4,000
B. $(10,800)
C. $(800)
D. $(6,000)
Answer:
During February, Degan Inc. transferred $60,000 from Work in Process to Finished
Goods and recorded a Cost of Goods Sold of $65,000. The journal entries to record
these transactions would include a:
A. debit to Finished Goods of $65,000
B. credit to Cost of Goods Sold of $65,000
C. credit to Work in Process of $60,000
D. credit to Finished Goods of $60,000
Answer:
Reference: 8-29
Hurren Corporation makes a product with the following standard costs:
The company reported the following results concerning this product in June.
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 June is:
A) $995 U
B) $950 U
C) $995 F
D) $950 F
Answer:
The salary of the president of a manufacturing company would be classified as which of
the following?
A. Product cost
B. Period cost
C. Manufacturing overhead
D. Direct labor
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:
Kharbanda Corporation uses the FIFO method in its process costing system. Operating
data for the Enameling Department for the month of May appear below:
What were the equivalent units for conversion costs in the Enameling Department for
May?
A. 57,960
B. 55,800
C. 51,000
D. 55,920
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 cost of December merchandise purchases would be:
A. $133,250
B. $68,250
C. $130,000
D. $143,000
Answer:
Reference: 8-36
Landram Corporation makes a product with the following standard costs:
In March the company produced 4,700 units using 10,230 kilos of the direct material
and 2,210 direct labor-hours. During the month, the company purchased 10,800 kilos of
the direct material at a cost of $76,680. The actual direct labor cost was $38,233 and the
actual variable overhead cost was $11,934.
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 March is:
A) $2,660 F
B) $2,422 F
C) $2,422 U
D) $2,660 U
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 administrative expenses in the planning budget for September would be closest to:
A) $6,480
B) $6,405
C) $6,293
D) $6,485
Answer:
South Company sells a single product for $20 per unit. If variable expenses are 60% of
sales and fixed expenses total $9,600, the break-even point will be:
A. $24,000
B. $14,400
C. $9,600
D. $16,000
Answer:
The following accounts will be used in this problem:
A. Raw materials inventory
B. Accounts payable
C. Cost of goods sold
D. Work in process inventory
E. Manufacturing overhead
F. Wages and salaries expense
G. Accumulated depreciation
H. Depreciation expense
I. Finished goods inventory
J. Wages and salaries payable
K. Prepaid insurance
L. Insurance expense
Enter identifying letters in the blanks below to indicate the accounts debited and
credited under a job-order costing system for each of the following summary
transactions:
Answer:
Favreau Corporation estimates that its variable manufacturing overhead is $6.10 per
machine-hour and its fixed manufacturing overhead is $352,590 per period.
If the denominator level of activity is 6,900 machine-hours, the variable element in the
predetermined overhead rate would be:
A. $6.10
B. $51.10
C. $57.20
D. $56.47
Answer:
The Rial Company's income statement for June is given below:
A proposal has been made that will lower variable expenses in Division L to 35% of
sales. However, this reduction can only be accomplished by a $15,000 increase in
Division L's traceable fixed expenses. If this proposal is implemented and if sales
remain constant, overall company net operating income should:
A. increase by $15,000
B. increase by $24,000
C. decrease by $15,000
D. decrease by $6,000
Answer:
The following is last month's contribution format income statement:
What is the company's margin of safety percentage to the nearest whole percent?
A. 42%
B. 40%
C. 17%
D. 20%
Answer:
Salge Inc. bases its manufacturing overhead budget on budgeted direct labor-hours. The
variable overhead rate is $8.10 per direct labor-hour. The company's budgeted fixed
manufacturing overhead is $74,730 per month, which includes depreciation of $20,670.
All other fixed manufacturing overhead costs represent current cash flows. The direct
labor budget indicates that 5,300 direct labor-hours will be required in September.
The company recomputes its predetermined overhead rate every month. The
predetermined overhead rate for September should be:
A. $18.30
B. $14.10
C. $8.10
D. $22.20
Answer:
The following data pertain to the Milling Department of Gehle Corporation for July.
The company uses the FIFO method in its process costing.
Compute the equivalent units of production for both materials and conversion costs for
the Milling Department for July using the FIFO method.
Answer:
Titlow, Inc., produces and sells a single product. The product sells for $220.00 per unit
and its variable expense is $57.20 per unit. The company's monthly fixed expense is
$713,064.
Determine the monthly break-even in unit sales. Show your work!
Answer:
Bumpass Corporation's contribution margin ratio is 74% and its fixed monthly expenses
are $43,000. Assume that the company's sales for July are expected to be $102,000.
Estimate the company's net operating income for July, assuming that the fixed monthly
expenses do not change. Show your work!
Answer:
Capati Corporation is working on its direct labor budget for the next two months. Each
unit of output requires 0.41 direct labor-hours. The direct labor rate is $8.50 per direct
labor-hour. The production budget calls for producing 2,300 units in August and 2,200
units in September. The company guarantees its direct labor workers a 40-hour paid
work week. With the number of workers currently employed, that means that the
company is committed to paying its direct labor work force for at least 960 hours in
total each month even if there is not enough work to keep them busy.
Construct the direct labor budget for the next two months.
Answer:
In November, one of the processing departments at Shelp Corporation had beginning
work in process inventory of $27,000 and ending work in process inventory of $21,000.
During the month, the cost of units transferred out from the department was $311,000.
Construct a cost reconciliation report for the department for the month of November.
Answer:
Recent financial statements for Madison Company are given below:
Madison Company paid dividends of $3.15 per share during the year. The company's
common stock had a market price of $63 per share on December 31. Assets at the
beginning of the year totaled $1,100,000 and stockholders' equity totaled $725,000.
Compute the following:
a. Earnings per share of common stock.
b. Dividend payout ratio.
c. Dividend yield ratio.
d. Price-earnings ratio.
e. Return on total assets.
f. Return on common stockholders' equity.
g. Was financial leverage positive or negative for the year? Explain.
Answer:
The following data have been provided by Bicknese Corporation for the Circuit Prep
Department. The company uses the FIFO method in its process costing.
Determine the equivalent units of production for the Circuit Prep Department for
August using the FIFO method.
Answer:
Bonner Corporation's balance sheet and income statement appear below:
The company sold equipment for $10 that was originally purchased for $4 and that had
accumulated depreciation of $4. It paid a cash dividend during the year and did not
issue any bonds payable or repurchase any of its own common stock.
Prepare a statement of cash flows for the year using the indirect method.
Answer:
Ermoin 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:
Donmoyer Sales Corporation, a merchandising company, reported total sales of
$2,230,200 for May. The cost of goods sold (all variable) was $1,518,300, the total
variable selling expense was $214,200, the total fixed selling expense was $86,700, the
total variable administrative expense was $119,700, and the total fixed administrative
expense was $138,400.
a. Prepare a contribution format income statement for May.
b. Prepare a traditional format income statement for May.
Answer:
Answer:
Zide Corporation's most recent balance sheet and income statement appear below:
Compute the following for Year 2:
a. Times interest earned.
b. Debt-to-equity ratio.
Answer:
Bubb Corporation has provided the following data from its activity-based costing
system:
Compute the activity rates for each of the three cost pools. Show your work!
Answer:
Compound Y23Z is used by Mcfadin Corporation to make one of its products. The
standard cost of compound Y23Z is $38.70 per ounce and the standard quantity is 4.6
per unit of output. Data concerning the compound in the most recent month appear
below:
The raw material was purchased on account.
a. Record the purchase of the raw material in a journal entry.
b. Record the use of the raw material in production in a journal entry.
Answer:
Some companies use process costing and some use job-order costing. Which method a
company uses depends on its industry. A number of companies in different industries
are listed below:
1/ Contract water drilling company
2/ Commercial photographer
3/ Tortilla manufacturer
4/ Electric utility
5/ Mushroom farm that produces the standard button mushroom in caves
For each company, indicate whether the company is most likely to use job-order costing
or process costing.
Answer:
Meares Corporation bases its budgets on the activity measure customers served. During
May, the company plans to serve 27,000 customers. The company has provided the
following data concerning the formulas it uses in its budgeting:
Required:
Prepare the companys planning budget for May.
Answer:
The management of Therriault Corporation is considering dropping product U51Y. Data
from the company's accounting system appear below:
All fixed expenses of the company are fully allocated to products in the company's
accounting system. Further investigation has revealed that $280,000 of the fixed
manufacturing expenses and $140,000 of the fixed selling and administrative expenses
are avoidable if product U51Y is discontinued.
What would be the effect on the company's overall net operating income if product
U51Y were dropped? Should the product be dropped? Show your work!
Answer:
