1) the management of crapser corporation would like to investigate the possibility of
basing its predetermined overhead rate on activity at capacity. the company’s controller
has provided an example to illustrate how this new system would work. in this example,
the allocation base is machine-hours and the estimated amount of the allocation base for
the upcoming year is 58,000 machine-hours. in addition, capacity is 67,000
machine-hours and the actual level of activity for the year is 59,000 machine-hours. all
of the manufacturing overhead is fixed and is $2,098,440 per year. for simplicity, it is
assumed that this is the estimated manufacturing overhead for the year as well as the
manufacturing overhead at capacity. it is further assumed that this is also the actual
amount of manufacturing overhead for the year.
if the company bases its predetermined overhead rate on capacity, by how much was
manufacturing overhead underapplied or overapplied?
a.$250,560 underapplied
b.$36,180 underapplied
c.$250,560 overapplied
d.$36,180 overapplied
2) reuer midwifery’s cost formula for its wages and salaries is $2,900 per month plus
$475 per birth. for the month of march, the company planned for activity of 116 births,
but the actual level of activity was 117 births. the actual wages and salaries for the
month was $56,270. the activity variance for wages and salaries in march would be
closest to:
a.$1,730 u
b.$475 f
c.$475 u
d.$1,730 f
3) coles company, inc. makes and sells a single product, product r. three yards of
material k are needed to make one unit of product r. budgeted production of product r
for the next five months is as follows:
the company wants to maintain monthly ending inventories of material k equal to 20%
of the following month’s production needs. on july 31, this requirement was not met
since only 2,500 yards of material k were on hand. the cost of material k is $0.85 per
yard. the company wants to prepare a direct materials purchase budget for the rest of
the year.
the desired ending inventory of material k for the month of september is:
a.7,560 yards
b.8,400 yards
c.8,700 yards
d.9,300 yards
4) lesmerises 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
$2.85 per share.
the dividend payout ratio for year 2 is closest to:
a.66.7%
b.33.3%
c.83.3%
d.57.1%
5) cridwell company’s selling and administrative expenses for last year totaled
$210,000. during the year the company’s prepaid expense account balance increased by
$18,000 and accrued liabilities increased by $12,000. depreciation charges for the year
were $24,000. based on this information, selling and administrative expenses adjusted
to a cash basis under the direct method on the statement of cash flows would be:
a.$180,000
b.$192,000
c.$228,000
d.$240,000
6) vandall corporation manufactures and sells a single product. the company uses units
as the measure of activity in its budgets and performance reports. during april, the
company budgeted for 7,300 units, but its actual level of activity was 7,340 units. the
company has provided the following data concerning the formulas used in its budgeting
and its actual results for april:
the revenue variance for april would be closest to:
a.$4,274 f
b.$5,690 f
c.$5,690 u
d.$4,274 u
7) jemsen 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 per equivalent unit for conversion costs for the first department for the month is
closest to:
a.$19.28
b.$21.23
c.$22.29
d.$20.53
8) rising framing’s cost formula for its supplies cost is $2,210 per month plus $10 per
frame. for the month of january, the company planned for activity of 710 frames, but
the actual level of activity was 705 frames. the actual supplies cost for the month was
$9,500. the supplies cost in the flexible budget for january would be closest to:
a.$9,260
b.$9,244
c.$9,500
d.$9,310
9) earll company’s quality cost report is to be based on the following data:
what would be the total appraisal cost appearing on the quality cost report?
a.$92,000
b.$102,000
c.$184,000
d.$104,000
10) the following data (in thousands of dollars) have been taken from the accounting
records of karlana corporation for the just completed year.
the cost of the raw materials used in production during the year (in thousands of dollars)
was:
a.$180
b.$40
c.$120
d.$160
11) lutts 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 november, the kennel budgeted
for 3,800 tenant-days, but its actual level of activity was 3,850 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 november would be closest to:
a.$7,310
b.$7,520
c.$7,540
d.$7,215
12) smithson clinic uses client-visits as its measure of activity. during may, the clinic
budgeted for 3,300 client-visits, but its actual level of activity was 3,270 client-visits.
the clinic has provided the following data concerning the formulas used in its budgeting
and its actual results for may:
the net operating income in the flexible budget for may would be closest to:
a.$9,731
b.$9,555
c.$10,293
d.$10,770
13) the most recent balance sheet and income statement of flo corporation appear
below:
cash dividends were $
the net cash provided by (used by) investing activities for the year was:
a.($84)
b.$84
c.($86)
d.$86
14) a company’s current ratio and acid-test ratios are both greater than 1. if obsolete
inventory is written off, this would:
a.decrease the acid-test ratio
b.increase the acid-test ratio
c.increase net working capital
d.decrease the current ratio
15) baken corporation applies manufacturing overhead on the basis of direct
labor-hours. at the beginning of the most recent year, the company based its
predetermined overhead rate on total estimated overhead of $172,140 and 3,800
estimated direct labor-hours. actual manufacturing overhead for the year amounted to
$171,000 and actual direct labor-hours were 3,880.
the applied manufacturing overhead for the year was closest to:
a.$175,764
b.$174,600
c.$179,450
d.$170,992
16) wander company’s comparative balance sheet and income statement for last year
appear below:
the company declared and paid $39,000 in cash dividends during the year. the following
questions pertain to the company’s statement of cash flows.
the net cash provided by (used in) financing activities last year was:
a.$10,000
b.$(10,000)
c.$49,000
d.$(49,000)
17) feiner clinic uses client-visits as its measure of activity. during december, the clinic
budgeted for 2,200 client-visits, but its actual level of activity was 2,220 client-visits.
the clinic has provided the following data concerning the formulas to be used in its
budgeting:
the activity variance for net operating income in december would be closest to:
a.$690 u
b.$9,670 u
c.$690 f
d.$9,670 f
18) bessey hospital bases its budgets on patient-visits. the hospital’s static planning
budget for january appears below:
the spending variance for supplies costs in the flexible budget performance report for
the month is:
a.$4,180 f
b.$4,180 u
c.$2,560 f
d.$2,560 u