Wesi Corporation prepares its statement of cash flows using the direct method. Which
of the following should Wesi classify as an operating activity on its statement?
A. Option A
B. Option B
C. Option C
D. Option D
Answer:
Pedulla Inc, which produces and sells a single product, has provided its contribution
format income statement for February.
If the company sells 2,100 units, its total contribution margin should be closest to:
A. $90,300
B. $25,765
C. $68,300
D. $111,800
Answer:
Atwich 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 5,100 units were started and 4,400 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 75% complete with respect to materials and 10% 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 conversion costs for the first department for the month
is closest to:
A. $34.18
B. $39.93
C. $43.00
D. $45.15
Answer:
Which of the following will not result in an increase in the residual income, assuming
other factors remain constant?
A. An increase in sales.
B. An increase in the minimum required rate of return.
C. A decrease in expenses.
D. A decrease in operating assets.
Answer:
The following data pertain to Epsom Corporation’s operations:
The variable expense per unit is:
A. $10.00 per unit
B. $17.50 per unit
C. $7.50 per unit
D. $15.00 per unit
Answer:
A company using lean production methods likely would show approximately the same
net operating income under both absorption and variable costing because:
A. ending inventory would be valued in the same manner for both methods under lean
production.
B. production is geared to sales under lean production and thus there would be little or
no ending inventory.
C. under lean production fixed manufacturing overhead costs are charged to the period
incurred rather than to the product produced.
D. there is no distinction made under lean production between fixed and variable costs.
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:
Rostad Corporation applies manufacturing overhead to products on the basis of
standard machine-hours. Budgeted and actual overhead costs for the most recent month
appear below:
The company based its original budget on 7,100 machine-hours. The company actually
worked 7,060 machine-hours during the month. The standard hours allowed for the
actual output of the month totaled 6,990 machine-hours. What was the overall fixed
manufacturing overhead volume variance for the month?
A. $512 favorable
B. $512 unfavorable
C. $1,408 favorable
D. $1,408 unfavorable
Answer:
Variable manufacturing overhead is applied to products on the basis of standard direct
labor-hours. If the direct labor efficiency variance is unfavorable, the variable overhead
efficiency variance will be:
A) favorable.
B) unfavorable.
C) either favorable or unfavorable.
D) zero.
Answer:
A manufacturer of industrial equipment has a standard costing system based on
standard direct labor-hours (DLHs) as the measure of activity. Data from the company’s
flexible budget for manufacturing overhead are given below:
The following data pertain to operations for the most recent period:
How much overhead was applied to products during the period to the nearest dollar?
A. $44,712
B. $44,125
C. $43,125
D. $44,850
Answer:
Jastak Company uses the weighted-average method in its process costing system.
Operating data for the Painting Department for the month of April appear below:
What were the equivalent units for conversion costs in the Painting Department for
April?
A. 106,100
B. 91,500
C. 98,970
D. 106,270
Answer:
Echenko Corporation uses a job-order costing system and applies overhead to jobs
using a predetermined overhead rate. During the year the company’s Finished Goods
inventory account was debited for $380,000 and credited for $335,500. The ending
balance in the Finished Goods inventory account was $62,300. At the end of the year,
manufacturing overhead was overapplied by $2,900.
The balance in the Finished Goods inventory account at the beginning of the year was:
A. $2,900
B. $62,300
C. $44,500
D. $17,800
Answer:
Drake Company’s contribution format income statement for the most recent year
appears below:
If the company desires a net operating income of $20,000, the number of units needed
to be sold is:
A. 28,500 units
B. 31,000 units
C. 31,750 units
D. 26,500 units
Answer:
A manufacturing company that produces a single product has provided the following
data concerning its most recent month of operations:
What is the absorption costing unit product cost for the month?
A. $102
B. $130
C. $97
D. $125
Answer:
Danneman Corporation’s fixed monthly expenses are $13,000 and its contribution
margin ratio is 56%. Assuming that the fixed monthly expenses do not change, what is
the best estimate of the company’s net operating income in a month when sales are
$41,000?
A. $9,960
B. $5,040
C. $22,960
D. $28,000
Answer:
Jackson Company’s operating results for last year are given below:
If the company wants to increase its total contribution margin by 40% over last year, it
will need to increase its sales by:
A. $17,160
B. $24,960
C. $38,400
D. $26,400
Answer:
Dosier Corporation has a standard cost system in which it applies manufacturing
overhead to products on the basis of standard machine-hours (MHs). The company has
provided the following data for the most recent month:
What was the fixed manufacturing overhead budget variance for the month?
A. $2,000 unfavorable
B. $2,000 favorable
C. $610 unfavorable
D. $610 favorable
Answer:
Data concerning Celenza Corporation’s single product appear below:
Assume the company’s monthly target profit is $25,000. The unit sales to attain that
target profit are closest to:
A. 6,492 units
B. 4,247 units
C. 12,087 units
D. 3,143 units
Answer:
Within the relevant range, variable cost per unit will:
A. increase as the level of activity increases.
B. remain constant.
C. decrease as the level of activity increases.
D. none of these.
Answer:
Delreal Corporation has provided the following data concerning its only product:
The margin of safety as a percentage of sales is closest to:
A. 18%
B. 82%
C. 78%
D. 22%
Answer:
A cement manufacturer has supplied the following data:
What is the company’s unit contribution margin?
A. $2.00
B. $0.32
C. $4.30
D. $2.30
Answer:
Bargas Framings cost formula for its supplies cost is $2,240 per month plus $6 per
frame. For the month of May, the company planned for activity of 808 frames, but the
actual level of activity was 810 frames. The actual supplies cost for the month was
$7,090. The supplies cost in the flexible budget for May would be closest to:
A) $7,088
B) $7,090
C) $7,106
D) $7,100
Answer:
Millonzi Corporation has a standard cost system in which it applies manufacturing
overhead to products on the basis of standard machine-hours (MHs). The company has
provided the following data for the most recent month:
What was the variable overhead rate variance for the month?
A) $4,350 favorable
B) $2,000 unfavorable
C) $2,650 favorable
D) $1,700 favorable
Answer:
Mowrer Corporation produces and sells a single product. Data concerning that product
appear below:
Fixed expenses are $567,000 per month. The company is currently selling 9,000 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 $11
per unit. In exchange, the sales staff would accept a decrease in their salaries of $84,000
per month. (This is the company’s savings for the entire sales staff.) The marketing
manager predicts that introducing this sales incentive would increase monthly sales by
600 units. What should be the overall effect on the company’s monthly net operating
income of this change?
A. increase of $77,400
B. increase of $21,600
C. increase of $669,600
D. decrease of $146,400
Answer:
Reference: 8-37
Arrow Industries uses a standard cost system in which direct materials inventory is
carried at standard cost. Arrow has established the following standards for the prime
costs of one unit of product.
During May, Arrow purchased 160,000 pounds of direct material at a total cost of
$304,000. The total direct labor wages for May were $37,800. Arrow manufactured
19,000 units of product during May using 142,500 pounds of direct material and 5,000
direct labor-hours.
The direct labor rate variance for May is:
A) $2,200 favorable
B) $1,900 unfavorable
C) $2,000 unfavorable
D) $2,090 favorable
Answer:
Reference: 8-24
Rushton Hospital bases its budgets on patient-visits. The hospitals static planning
budget for May appears below:
Actual results for the month were:
The spending variance for laundry costs for the month is:
A) $960 F
B) $1,660 F
C) $960 U
D) $1,660 U
Answer:
Cress Company makes four products in a single facility. Data concerning these products
appear below:
The milling machines are potentially the constraint in the production facility. A total of
11,500 minutes are available per month on these machines.
Which product makes the MOST profitable use of the milling machines?
A. Product A
B. Product B
C. Product C
D. Product D
Answer:
Wadhams Snow Removals cost formula for its vehicle operating cost is $1,900 per
month plus $430 per snow-day. For the month of December, the company planned for
activity of 16 snow-days, but the actual level of activity was 21 snow-days. The actual
vehicle operating cost for the month was $11,470. The vehicle operating cost in the
planning budget for December would be closest to:
A) $10,930
B) $11,470
C) $8,739
D) $8,780
Answer:
Colasuonno Corporation has two divisions: the West Division and the East Division.
The corporation’s net operating income is $88,800. The West Division’s divisional
segment margin is $39,500 and the East Division’s divisional segment margin is
$166,900. What is the amount of the common fixed expense not traceable to the
individual divisions?
A. $255,700
B. $206,400
C. $117,600
D. $128,300
Answer:
An example of a committed fixed cost is:
A. a training program for salespersons.
B. executive travel expenses.
C. property taxes on the factory building.
D. new product research and development.
Answer: