The following data are available for the South Division of Redride Products, Inc. and
the single product it makes:
How many units must South sell each year to have an ROI of 16%?
A. 240,000
B. 1,300,000
C. 52,000
D. 65,000
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 medical supplies in the flexible budget for June would be closest to:
A) $14,637
B) $15,056
C) $15,140
D) $14,455
Answer:
Compton Company uses a predetermined overhead rate in applying overhead to
production orders on a labor cost basis in Department A and on a machine-hours basis
in Department B. At the beginning of the most recently completed year, the company
made the following estimates:
What predetermined overhead rate would be used in Department A and Department B,
respectively?
A. 83% and $5
B. 83% and $3
C. 120% and $3
D. 83% and $4
Answer:
Entin Corporation reported the following data for the month of January:
The adjusted cost of goods sold that appears on the income statement for January is:
A. $197,000
B. $200,000
C. $201,000
D. $199,000
Answer:
Scarfo Hotel bases its budgets on guest-days. The hotels static budget for December
appears below:
The total overhead cost at an activity level of 2,900 guest-days per month should be:
A) $20,680
B) $17,640
C) $24,360
D) $20,890
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 fixed manufacturing overhead budget variance was:
A. $3,450 unfavorable
B. $3,450 favorable
C. $850 unfavorable
D. $1,200 favorable
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 collection period for Year 2 is closest to:
A. 0.9 days
B. 70.3 days
C. 1.1 days
D. 67.6 days
Answer:
Heller Corporation uses the weighted-average 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 total cost transferred from the first processing department to the next processing
department during the month is closest to:
A. $246,800
B. $270,979
C. $240,400
D. $231,869
Answer:
Freestone Company is considering renting Machine Y to replace Machine X. It is
expected that Y will waste less direct materials than does X. If Y is rented, X will be
sold on the open market. For this decision, which of the following factors is (are)
relevant?
I. Cost of direct materials used
II. Resale value of Machine X
A. Only I
B. Only II
C. Both I and II
D. Neither I nor II
Answer:
East Company manufactures and sells a single product with a positive contribution
margin. If the selling price and the variable expense per unit both increase 5% and fixed
expenses do not change, what is 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:
The following labor standards have been established for a particular product:
The following data pertain to operations concerning the product for the last month:
Required:
a. What is the labor rate variance for the month?
b. What is the labor efficiency variance for the month?
Answer:
Reference: 8A-6
Able Control Company, which manufactures electrical switches, uses a standard cost
system in which manufacturing overhead costs are applied to units of product on the
basis of standard direct labor-hours (DLHs). The standard overhead costs are shown
below:
*Based on 300,000 DLHs per month.
The following information is available for the month of October:
– Plans called for the production of 60,000 switches.
– 56,000 switches were actually produced.
– 275,000 direct labor-hours were worked at a total cost of $2,550,000.
– Actual variable manufacturing overhead costs were $2,340,000.
– Actual fixed manufacturing overhead costs were $3,750,000.
The variable overhead rate variance for October was:
A) $60,000 Favorable
B) $110,000 Unfavorable
C) $100,000 Unfavorable
D) $140,000 Unfavorable
Answer:
Stampka Corporation is a specialty component manufacturer with idle capacity.
Management would like to use its extra capacity to generate additional profits. A
potential customer has offered to buy 4,200 units of component JJF. Each unit of JJF
requires 6 units of material O38 and 9 units of material P56. Data concerning these two
materials follow:
Material O38 is in use in many of the company’s products and is routinely replenished.
Material P56 is no longer used by the company in any of its normal products and
existing stocks would not be replenished once they are used up.
What would be the relevant cost of the materials, in total, for purposes of determining a
minimum acceptable price for the order for product JJF?
A. $146,790
B. $199,080
C. $155,610
D. $212,340
Answer:
Reference: 8-3
Macphail Corporation manufactures and sells a single product. The company uses units
as the measure of activity in its flexible budgets. During April, the company budgeted
for 5,600 units, but its actual level of activity was 5,650 units. The company has
provided the following data concerning the formulas used in its budgeting and its actual
results for April:
Data used in budgeting:
Actual results for April:
The spending variance for direct materials in April would be closest to:
A) $3,215 U
B) $2,260 U
C) $2,260 F
D) $3,215 F
Answer:
Chace Products is a division of a major corporation. Last year the division had total
sales of $21,300,000, net operating income of $575,100, and average operating assets of
$5,000,000. The company’s minimum required rate of return is 12%.
The division’s turnover is closest to:
A. 3.82
B. 4.26
C. 0.12
D. 37.04
Answer:
The following labor standards have been established for a particular product:
The following data pertain to operations concerning the product for the last month:
What is the labor efficiency variance for the month?
A) $13,805 U
B) $13,530 U
C) $15,305 U
D) $15,305 F
Answer:
Damon Corporation has provided the following data from its most recent balance sheet:
The debt-to-equity ratio is closest to:
A. 0.17
B. 6.00
C. 0.86
D. 7.00
Answer:
When the actual direct labor-hours is less than the standard direct labor-hours allowed
for the actual output of the period, the journal entry would include:
A. Debit to Wages Payable; Credit to Labor Efficiency Variance
B. Debit to Work-In-Process; Credit to Labor Efficiency Variance
C. Debit to Wages Payable; Debit to Labor Efficiency Variance
D. Debit to Work-In-Process; Debit to Labor Efficiency Variance
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:
The activity rate for the batch setup activity cost pool is closest to:
A. $70.40
B. $29.40
C. $26.10
D. $234.90
Answer:
Raybould Corporation has provided the following data concerning its most important
raw material, compound M31P:
When recording the purchase of materials, Raw Materials would be:
A. credited for $49,950.
B. credited for $51,300.
C. debited for $49,950.
D. debited for $51,300.
Answer:
Financial statements for Larned Company appear below:
Dividends during Year 2 totaled $263 thousand, of which $12 thousand were preferred
dividends.
The market price of a share of common stock on December 31, Year 2 was $160.
Larned Company’s return on common stockholders’ equity for Year 2 was closest to:
A. 29.8%
B. 26.9%
C. 30.9%
D. 27.9%
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 average collection period for the year was closest to:
A. 72 days
B. 8 days
C. 120 days
D. 46 days
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:
Reference: 8-6
Mock Clinic uses client-visits as its measure of activity. During August, the clinic
budgeted for 3,100 client-visits, but its actual level of activity was 3,150 client-visits.
The clinic has provided the following data concerning the formulas used in its
budgeting and its actual results for August:
Data used in budgeting:
Actual results for August:
The net operating income in the planning budget for August would be closest to:
A) $8,404
B) $17,880
C) $16,820
D) $8,678
Answer:
Mccloe Corporation’s balance sheet and income statement appear below:
Cash dividends were $9. The company did not issue any bonds or repurchase any of its
own common stock during the year. The net cash provided by (used in) financing
activities for the year was:
A. $5
B. $(22)
C. $(18)
D. $(9)
Answer:
Weiss Corporation produces two models of wood chairs, Colonial and Early American.
The Colonial sells for $60 per chair and the Early American sells for $80 per chair.
Variable expenses for each model are as follows:
Total fixed expenses are $39,600 per month. Expected monthly sales are: Colonial,
1,800 units; Early American, 600 units.
If the sales mix and sales units are as expected, the break-even in sales dollars is closest
to:
A. $132,000
B. $148,500
C. $143,000
D. $139,764
Answer:
Canon Company has two sales areas: North and South. During last year, the
contribution margin in the North Area was $50,000, or 20% of sales. The segment
margin in the South was $15,000, or 8% of sales. Traceable fixed expenses are $15,000
in the North and $10,000 in the South. During last year, the company reported total net
operating income of $26,000.
The total fixed expenses (traceable and common) for Canon Company for the year
were:
A. $49,000
B. $25,000
C. $24,000
D. $50,000
Answer:
Reference: 8-38
The Thompson Company uses standard costing and has established the following direct
material and direct labor standards for each unit of Lept.
Direct materials: 2 gallons at $4 per gallon
Direct labor: 0.5 hours at $8 per hour
During September, the company made 6,000 Lepts and incurred the following costs:
Direct materials purchased: 13,400 gallons at $4.10 per gallon
Direct materials used: 12,600 gallons
Direct labor used: 2,800 hours at $7.65 per hour
The materials price variance for September was:
A) $1,340 favorable
B) $1,260 favorable
C) $1,260 unfavorable
D) $1,340 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 price-earnings ratio for Year 2 is closest to:
A. 14.72
B. 17.40
C. 9.48
D. 10.29
Answer:
Overhead is applied to work in process in a standard costing system by:
A. multiplying actual hours times the predetermined rate.
B. multiplying standard hours allowed for the output of the period times the
predetermined rate.
C. multiplying actual hours times the actual rate.
D. multiplying standard hours allowed for the output of the period times the actual rate.
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:
The Cabinet Shoppe is considering the addition of a new line of kitchen cabinets to its
current product lines. Expected cost and revenue data for the new cabinets are as
follows:
If the new cabinets are added, it is expected that the contribution margin of other
product lines at the cabinet shop will drop by $20,000 per year.
What is the lowest selling price per unit that could be charged for the new cabinets from
the following list and still make it economically desirable to add the new product line?
A. $160
B. $164
C. $171
D. $151
Answer: