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Hocking Corporation's comparative balance sheet appears below:
The company's net income (loss) for the year was $10,000 and its cash dividends were
$1,000. It did not sell or retire any property, plant, and equipment during the year. The
company uses the indirect method to determine the net cash provided by operating
activities.
Which of the following is correct regarding the operating activities section of the
statement of cash flows?
A. The change in Prepaid Expenses will be added to net income; The change in Income
Taxes Payable will be subtracted from net income
B. The change in Prepaid Expenses will be subtracted from net income; The change in
Income Taxes Payable will be subtracted from net income
C. The change in Prepaid Expenses will be subtracted from net income; The change in
Income Taxes Payable will be added to net income
D. The change in Prepaid Expenses will be added to net income; The change in Income
Taxes Payable will be added to net income
Answer:
Salvadore Inc., a local retailer, has provided the following data for the month of
September:
The net operating income for September was:
A. $60,000
B. $128,000
C. $127,000
D. $59,000
Answer:
A manufacturing company uses a standard costing system in which standard
machine-hours (MHs) is 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:
What was the variable overhead rate variance for the period to the nearest dollar?
A. $1,750 U
B. $820 F
C. $1,750 F
D. $820 U
Answer:
Clements Company, which has only one product, has provided the following data
concerning its most recent month of operations:
The total gross margin for the month under the absorption costing approach is:
A. $19,500
B. $51,000
C. $74,000
D. $55,500
Answer:
Dabney 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 monthly fixed manufacturing cost is:
A. $778,400
B. $1,457,400
C. $1,505,900
D. $1,554,400
Answer:
Compound V11V is used to make Hickenbottom Corporations major product. The
standard cost of V11V is $21.50 per ounce and the standard quantity is 3.6 ounces per
unit of output. In the most recent month, 1,600 ounces of the raw material were
purchased at a cost of $21.00 per ounce. When recording the purchase of materials,
Raw Materials would be:
A) credited for $34,400.
B) credited for $33,600.
C) debited for $34,400.
D) debited for $33,600.
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 variable element of the predetermined overhead rate was (per DLH):
A. $4.15
B. $3.00
C. $2.00
D. $1.15
Answer:
During the last year, Snyder Co. produced 10,000 units of its only product. Costs
incurred by Snyder during the year were as follows:
The unit product cost under absorption costing was:
A. $5.43
B. $3.81
C. $4.71
D. $4.12
Answer:
In an income statement segmented by product line, a fixed expense that cannot be
allocated among product lines on a cause-and-effect basis should be:
A. classified as a traceable fixed expense and not allocated.
B. allocated to the product lines on the basis of sales dollars.
C. allocated to the product lines on the basis of segment margin.
D. classified as a common fixed expense and not allocated.
Answer:
Reference: 8A-14
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 fixed element in the
predetermined overhead rate would be:
A) $610.00
B) $6.10
C) $57.20
D) $51.10
Answer:
Reference: 8-27
The Litton Company has established standards as follows:
Direct material: 3 pounds per unit @ $4 per pound = $12 per unit
Direct labor: 2 hours per unit @ $8 per hour = $16 per unit
Variable manufacturing overhead: 2 hours per unit @ $5 per hour = $10 per unit
Actual production figures for the past year are given below. The company records the
materials price variance when materials are purchased.
The company applies variable manufacturing overhead to products on the basis of
standard direct labor-hours.
The labor rate variance is:
A) $480 F
B) $480 U
C) $440 F
D) $440 U
Answer:
Mclaughlin Corporation's most recent balance sheet and income statement appear
below:
The debt-to-equity ratio at the end of Year 2 is closest to:
A. 0.69
B. 0.40
C. 0.35
D. 0.93
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.
Expected cash collections in December are:
A. $59,400
B. $140,000
C. $199,400
D. $200,000
Answer:
Hart Manufacturing operates an automated steel fabrication process. For one operation,
Hart has found that 45% of the total throughput (manufacturing cycle) time is spent on
non-value-added activities. Delivery cycle time is 12 hours, waiting time during the
production process is 3 hours, queue time prior to starting the production process is 2
hours, and inspection time is 1.2 hours.
The manufacturing cycle efficiency (MCE) for this operation is:
A. 55%
B. 45%
C. 6.6 hours
D. 5.4 hours
Answer:
Reference: 8-28
Cox Engineering performs cement core tests in its laboratory. The following standards
have been set for each core test performed:
During March, the laboratory performed 2,000 core tests. On March 1 no direct
materials (sand) were on hand. Variable manufacturing overhead is assigned to core
tests on the basis of standard direct labor-hours. The following events occurred during
March:
- 8,600 pounds of sand were purchased at a cost of $7,310.
- 7,200 pounds of sand were used for core tests.
- 840 actual direct labor-hours were worked at a cost of $8,610.
- Actual variable manufacturing overhead incurred was $3,200.
The materials quantity variance for March is:
A) $900 favorable
B) $1,950 favorable
C) $1,950 unfavorable
D) $900 unfavorable
Answer:
Fixed manufacturing overhead is included in product costs under:
A. Option A
B. Option B
C. Option C
D. Option D
Answer:
Which of the following would be considered a cash outflow in the investing activities
section of the statement of cash flows?
A. Dividends paid to the company's own stockholders.
B. Payment of interest to a lender.
C. Purchase of equipment.
D. Retirement of bonds payable.
Answer:
Cargin Company uses the FIFO method in its process costing system. The Assembly
Department started the month with 15,000 units in its beginning work in process
inventory that were 50% complete with respect to conversion costs. An additional
71,000 units were transferred in from the prior department during the month to begin
processing in the Assembly Department. There were 9,000 units in the ending work in
process inventory of the Assembly Department that were 30% complete with respect to
conversion costs.
What were the equivalent units for conversion costs in the Assembly Department for the
month?
A. 79,700
B. 77,000
C. 65,000
D. 72,200
Answer:
Starwalt Corporation produces and sells a single product. The company has provided its
contribution format income statement for March.
If the company sells 7,300 units, its net operating income should be closest to:
A. $46,700
B. $75,100
C. $59,100
D. $71,199
Answer:
Last month, when 10,000 units of a product were manufactured, the cost per unit was
$60. At this level of activity, variable costs are 50% of total unit costs. If 10,500 units
are manufactured next month and cost behavior patterns remain unchanged the:
A. total variable cost will remain unchanged.
B. fixed costs will increase in total.
C. variable cost per unit will increase.
D. total cost per unit will decrease.
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 dividend yield ratio on December 31, Year 2 was closest to:
A. 8.7%
B. 9.1%
C. 8.3%
D. 5.5%
Answer:
Chaffee Corporation staffs a helpline to answer questions from customers. The costs of
operating the helpline are variable with respect to the number of calls in a month. At a
volume of 33,000 calls in a month, the costs of operating the helpline total $742,500.
To the nearest whole dollar, what should be the total cost of operating the helpline costs
at a volume of 34,800 calls in a month? (Assume that this call volume is within the
relevant range.)
A. $742,500
B. $783,000
C. $704,095
D. $762,750
Answer:
Reference: 8-33
Tidd Corporation makes a product with the following standard costs:
The company reported the following results concerning this product in November.
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 November is:
A) $8,460 F
B) $8,460 U
C) $9,460 U
D) $9,460 F
Answer:
The following data have been taken from the budget reports of Brandon company, a
merchandising company.
Forty percent of purchases are paid for in cash at the time of purchase, and 30% are
paid for in each of the next two months. Purchases for the previous November and
December were $150,000 per month. Employee wages are 10% of sales for the month
in which the sales occur. Selling and administrative expenses are 20% of the following
month's sales. (July sales are budgeted to be $220,000.) Interest payments of $20,000
are paid quarterly in January and April. Brandon's cash disbursements for the month of
April would be:
A. $140,000
B. $254,000
C. $200,000
D. $248,000
Answer:
Zurasky Corporation is considering two alternatives: A and B. Costs associated with the
alternatives are listed below:
Are the materials costs and processing costs relevant in the choice between alternatives
A and B? (Ignore the equipment rental and occupancy costs in this question.)
A. Neither materials costs nor processing costs are relevant
B. Only processing costs are relevant
C. Only materials costs are relevant
D. Both materials costs and processing costs are relevant
Answer:
Falquez Company sells three products: R, S, and T. Data for activity of Falquez
Company during July are as follows:
Common fixed expenses for July amounted to $90,000.
The contribution margin for Product R was:
A. $48,750
B. $63,500
C. $51,000
D. $48,000
Answer:
The cost of leasing production equipment is classified as:
A. Option A
B. Option B
C. Option C
D. Option D
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 fixed manufacturing overhead budget variance for October was:
A) $48,000 Unfavorable
B) $150,000 Unfavorable
C) $300,000 Favorable
D) $390,000 Unfavorable
Answer:
Slappy Corporation leases its corporate headquarters building. This lease cost is fixed
with respect to the company's sales volume. In a recent month in which the sales
volume was 20,000 units, the lease cost was $482,000.
To the nearest whole cent, what should be the average lease cost per unit at a sales
volume of 19,200 units in a month? (Assume that this sales volume is within the
relevant range.)
A. $28.52
B. $24.60
C. $25.10
D. $24.10
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 materials quantity variance for May is:
A) $14,400 unfavorable
B) $1,100 favorable
C) $17,100 unfavorable
D) $17,100 favorable
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 total assets for Year 2 was closest to:
A. 15.8%
B. 17.2%
C. 18.6%
D. 17.8%
Answer:
