Stanfa Corporations standard wage rate is $10.50 per direct labor-hour (DLH) and
according to the standards, each unit of output requires 8.0 DLHs. In January, 3,700
units were produced, the actual wage rate was $10.80 per DLH, and the actual hours
were 25,280 DLHs. In the journal entry to record the incurrence of direct labor costs in
January, the Work in Process entry would consist of a:
A) debit of $310,800.
B) credit of $273,024.
C) credit of $310,800.
D) debit of $273,024.
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.
Required:
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:
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.
Cosmo is considering a promotional campaign at the Town Store that would not affect
the Mall Store. Increasing annual promotional expenses at the Town Store by $60,000
in order to increase Town Store sales by ten percent would result in a monthly increase
(decrease) in Cosmo’s operating income of:
A. $(16,800)
B. $3,400
C. $7,000
D. $(1,400)
Answer:
Van Aalst Company’s comparative balance sheet and income statement for last year
appear below:
The company declared and paid $77,000 in cash dividends during the year. It did not
sell or retire any property, plant, and equipment during the year. The company uses the
direct method to determine the net cash provided by operating activities.
On the statement of cash flows, the sales revenue adjusted to a cash basis would be:
A. $796,000
B. $767,000
C. $790,000
D. $813,000
Answer:
Reference: 8-13
Foxworthy 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 July, the kennel budgeted for
2,000 tenant-days, but its actual level of activity was 2,050 tenant-days. The kennel has
provided the following data concerning the formulas to be used in its budgeting:
The administrative expenses in the planning budget for July would be closest to:
A) $8,220
B) $8,200
C) $8,300
D) $8,098
Answer:
Would the following costs be classified as product or period costs under variable
costing at a retail clothing store?
A. Option A
B. Option B
C. Option C
D. Option D
Answer:
Saffer Corporation keeps careful track of the time required to fill orders. Data
concerning a particular order appear below:
The delivery cycle time was:
A. 7.5 hours
B. 29.1 hours
C. 30.9 hours
D. 3.1 hours
Answer:
Sperberg Corporation’s operating leverage is 3.7. If the company’s sales increase by
12%, its net operating income should increase by about:
A. 44.4%
B. 3.7%
C. 12.0%
D. 30.8%
Answer:
Dengel Inc. is working on its cash budget for November. The budgeted beginning cash
balance is $24,000. Budgeted cash receipts total $177,000 and budgeted cash
disbursements total $167,000. The desired ending cash balance is $50,000.
To attain its desired ending cash balance for November, the company needs to borrow:
A. $0
B. $16,000
C. $50,000
D. $84,000
Answer:
The following data pertains to activity and utility costs for two recent years:
Using the high-low method, the cost formula for utilities is:
A. $1.50 per unit
B. $1.20 per unit
C. $3,000 plus $3.00 per unit
D. $4,500 plus $0.75 per unit
Answer:
In January, one of the processing departments at Seidl Corporation had ending work in
process inventory of $35,000. During the month, $111,000 of costs were added to
production and the cost of units transferred out from the department was $86,000.
In the department’s cost reconciliation report for January, the total cost accounted for
would be:
A. $242,000
B. $232,000
C. $121,000
D. $45,000
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 inventory turnover ratio for the year was closest to:
A. 8
B. 3
C. 5
D. 7.5
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 variable overhead rate variance for maintenance cost for November was:
A. $7,420 unfavorable
B. $2,400 favorable
C. $9,820 unfavorable
D. $5,620 unfavorable
Answer:
Would plant security and assembly activities be best classified at an appliance
manufacturing plant as unit-level, batch-level, product-level, or facility-level?
A. Product Unit
B. Batch Batch
C. Facility Unit
D. Facility Product
Answer:
The Gasson Company sells three products, Product A, Product B and Product C, and
had sales of $1,000,000 during the month of June. The company’s overall contribution
margin ratio was 37% and fixed expenses totaled $350,000. Sales were: Product A,
$500,000; Product B, $300,000; and Product C, $200,000. Traceable fixed costs were:
Product A, $120,000; Product B, $100,000; and Product C, $60,000. The variable
expenses of Product A were $300,000 and the variable expenses of Product B were
$180,000.
The net operating income for the company as a whole for June was:
A. $20,000
B. $90,000
C. $170,000
D. $300,000
Answer:
Data concerning the direct labor costs for April of Dimaio Corporation appear below:
The journal entry to record the incurrence of direct labor costs in April would include
the following for Work in Process:
A. debit of $341,658.
B. credit of $341,658.
C. credit of $294,174.
D. debit of $294,174.
Answer:
The Ammon Company uses a standard cost system in which manufacturing overhead is
applied to units on the basis of standard machine-hours. During July, the company
budgeted $350,000 in manufacturing overhead cost at a denominator activity of 25,000
machine-hours. At standard, each unit of finished product requires 5 machine-hours.
The following cost and activity were recorded during July:
The amount of overhead cost that the company applied to work in process for July was:
A) $292,500
B) $315,000
C) $322,000
D) $325,000
Answer:
Sales and average operating assets for Company P and Company Q are given below:
What is the margin that each company will have to earn in order to generate a return on
investment of 20%?
A. 12% and 16%
B. 50% and 100%
C. 8% and 4%
D. 2.5% and 5%
Answer:
Clovis Midwiferys cost formula for its wages and salaries is $2,680 per month plus
$245 per birth. For the month of September, the company planned for activity of 118
births, but the actual level of activity was 121 births. The actual wages and salaries for
the month was $33,290. The wages and salaries in the flexible budget for September
would be closest to:
A) $32,393
B) $31,590
C) $32,325
D) $33,290
Answer:
Lothian 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 cost of ending work in process inventory in the first processing department
according to the company’s cost system is closest to:
A. $8,919
B. $15,405
C. $5,925
D. $23,700
Answer:
Reference: 8-10
Caballes Clinic uses client-visits as its measure of activity. During November, the clinic
budgeted for 3,100 client-visits, but its actual level of activity was 3,070 client-visits.
The clinic has provided the following data concerning the formulas used in its
budgeting and its actual results for November:
Data used in budgeting:
Actual results for November:
The personnel expenses in the planning budget for November would be closest to:
A) $63,400
B) $66,600
C) $64,020
D) $66,300
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:
Young Enterprises 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
10% of the next month’s sales in units. The inventory on May 31 fell short of this goal
since it contained only 400 units. The company needs to prepare a Production Budget
for the next five months.
The total number of units to be produced in July is:
A. 7,740 units
B. 7,200 units
C. 7,020 units
D. 7,280 units
Answer:
Fudala Snow Removals cost formula for its vehicle operating cost is $1,480 per month
plus $308 per snow-day. For the month of March, the company planned for activity of
11 snow-days, but the actual level of activity was 16 snow-days. The actual vehicle
operating cost for the month was $6,130. The spending variance for vehicle operating
cost in March would be closest to:
A) $1,262 U
B) $278 F
C) $278 U
D) $1,262 F
Answer:
Farver Air uses two measures of activity, flights and passengers, in the cost formulas in
its flexible budgets. The cost formula for plane operating costs is $44,420 per month
plus $2,008 per flight plus $1 per passenger. The company expected its activity in May
to be 80 flights and 281 passengers, but the actual activity was 81 flights and 277
passengers. The actual cost for plane operating costs in May was $199,650. The
spending variance for plane operating costs in May would be closest to:
A) $5,691 F
B) $7,695 U
C) $7,695 F
D) $5,691 U
Answer:
The credits to the Raw Materials account for October would total:
A) $52,440
B) $48,760
C) $52,900
D) $53,130
Answer:
Severn Corporation prepares its statement of cash flows using the direct method. Last
year, Severn reported Income Tax Expense of $27,000. At the beginning of last year,
Severn had a $2,000 balance in the Income Taxes Payable account. At the end of last
year, Severn had a $5,000 balance in the account. On its statement of cash flows for last
year, what amount should Severn have shown for its Income Tax Expense adjusted to a
cash basis (i.e., income taxes paid)?
A. $20,000
B. $22,000
C. $24,000
D. $30,000
Answer:
Data from Davoren Corporation’s most recent balance sheet and income statement
appear below:
The average sale period for this year is closest to:
A. 55.7 days
B. 64.4 days
C. 112.0 days
D. 122.1 days
Answer:
Division B had an ROI last year of 15%. The division’s minimum required rate of return
is 10%. If the division’s average operating assets last year were $450,000, then the
division’s residual income for last year was:
A. $67,500
B. $22,500
C. $37,500
D. $45,000
Answer:
Rameriz Company erred in selecting a denominator activity and chose a much higher
level than was realistic. This error would most likely result in a large:
A. favorable variable overhead efficiency variance.
B. favorable fixed manufacturing overhead budget variance.
C. unfavorable overhead volume variance.
D. unfavorable fixed manufacturing overhead budget variance.
Answer: