Fixed manufacturing overhead is included in product costs under:
A. Option A
B. Option B
C. Option C
D. Option D
Answer:
The following is Allison Corporation’s contribution format income statement for last
month:
The company has no beginning or ending inventories. The company produced and sold
10,000 units last month.
What is the company’s break-even sales in dollars?
A. $0
B. $640,000
C. $700,000
D. $400,000
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:
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 product line segment margin for Product A for June was:
A. $200,000
B. $80,000
C. $65,000
D. $10,000
Answer:
The Labor Rate Variance for May would be recorded as a:
A) debit of $5,220.
B) credit of $6,212.
C) credit of $5,220.
D) debit of $6,212.
Answer:
Reference: 8-30
Snuggs Corporation makes a product with the following standard costs:
The company reported the following results concerning this product in October.
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 variable overhead rate variance for October is:
A) $33 F
B) $35 U
C) $35 F
D) $33 U
Answer:
Lucas Company recorded the following events last year:
On the statement of cash flows, some of these events are classified as operating
activities, some are classified as investing activities, and some are classified as
financing activities.
Based solely on the information above, the net cash provided by (used in) financing
activities on the statement of cash flows would be:
A. $85,000
B. $(80,000)
C. $(145,000)
D. $170,000
Answer:
The most recent balance sheet and income statement of Swanigan Corporation appear
below:
Cash dividends were $18. The company did not sell or retire any property, plant, and
equipment during the year. The net cash provided by (used in) operating activities for
the year was:
A. $127
B. $39
C. $49
D. $126
Answer:
Carbaugh Corporation has provided the following production and average cost data for
two levels of monthly production volume. The company produces a single product.
The best estimate of the total cost to manufacture 3,300 units is closest to:
A. $637,560
B. $612,975
C. $588,390
D. $619,680
Answer:
Elhard Company produces a single product. The cost of producing and selling a single
unit of this product at the company’s normal activity level of 40,000 units per month is
as follows:
The normal selling price of the product is $51.10 per unit.
An order has been received from an overseas customer for 2,000 units to be delivered
this month at a special discounted price. This order would have no effect on the
company’s normal sales and would not change the total amount of the company’s fixed
costs. The variable selling and administrative expense would be $0.10 less per unit on
this order than on normal sales.
Direct labor is a variable cost in this company.
Suppose there is ample idle capacity to produce the units required by the overseas
customer and the special discounted price on the special order is $41.60 per unit. By
how much would this special order increase (decrease) the company’s net operating
income for the month?
A. $2,000
B. $25,200
C. $(8,400)
D. $(18,800)
Answer:
Broze Company makes four products in a single facility. These products have the
following unit product costs:
Additional data concerning these products are listed below.
The grinding machines are potentially the constraint in the production facility. A total of
53,600 minutes are available per month on these machines.
Direct labor is a variable cost in this company.
How many minutes of grinding machine time would be required to satisfy demand for
all four products?
A. 56,100
B. 40,900
C. 53,600
D. 13,000
Answer:
Cockriel Inc., which produces a single product, has provided the following data for its
most recent month of operations:
There were no beginning or ending inventories. The variable costing unit product cost
was:
A. $42
B. $43
C. $37
D. $48
Answer:
Grosseiller Corporation uses the weighted-average method in its process costing
system. This month, the beginning inventory in the first processing department
consisted of 900 units. The costs and percentage completion of these units in beginning
inventory were:
A total of 6,400 units were started and 5,200 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 65% complete with respect to materials and 15% 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. $26.89
B. $22.34
C. $31.05
D. $29.57
Answer:
The following monthly data are available for the W.K. Kent Company:
The break-even sales for the month for the company are closest to:
A. $170,089
B. $189,200
C. $139,164
D. $127,567
Answer:
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:
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 debt-to-equity ratio at the end of Year 2 is closest to:
A. 0.61
B. 0.28
C. 0.53
D. 0.19
Answer:
Hanzely Corporation’s balance sheet and income statement appear below:
Cash dividends were $10. The company sold equipment for $17 that was originally
purchased for $11 and that had accumulated depreciation of $9. The net cash provided
by (used in) operating activities for the year was:
A. $67
B. $62
C. $52
D. $48
Answer:
The following data were supplied by Reader Corporation:
The break-even point in sales dollars is:
A. $470,000
B. $180,000
C. $420,000
D. $561,000
Answer:
Valles Corporation had $22,000 of raw materials on hand on February 1. During the
month, the company purchased an additional $75,000 of raw materials. The journal
entry to record the purchase of raw materials would include a:
A. credit to Raw Materials of $97,000
B. debit to Raw Materials of $97,000
C. credit to Raw Materials of $75,000
D. debit to Raw Materials of $75,000
Answer:
Reference: 8-56
Hickory Corporation, which produces commercial safes, has provided the following
data:
Supplies cost is an element of variable manufacturing overhead.
The variable overhead rate variance for supplies is closest to:
A) $47,251 F
B) $42,901 U
C) $47,251 U
D) $42,901 F
Answer:
A manufacturer of cedar shingles has supplied the following data:
The company’s degree of operating leverage is closest to:
A. 7.85
B. 1.63
C. 2.34
D. 18.97
Answer:
Casper Corporation makes and sells a product called a Miniwarp. One Miniwarp
requires 3.5 kilograms of the raw material Jurislon. Budgeted production of Miniwarps
for the next five months is as follows:
The company wants to maintain monthly ending inventories of Jurislon equal to 10% of
the following month’s production needs. On July 31, this requirement was not met since
only 6,900 kilograms of Jurislon were on hand. The cost of Jurislon is $3.00 per
kilogram. The company wants to prepare a Direct Materials Purchase Budget for the
next five months.
The desired ending inventory of Jurislon for the month of September is:
A. $5,550
B. $21,315
C. $6,090
D. $19,425
Answer:
The following transactions occurred last year at Jogger Company:
Based solely on the above information, the net cash provided by financing activities for
the year on the statement of cash flows would be:
A. $424,000
B. $(138,000)
C. $(1,000)
D. $7,000
Answer:
Green Enterprises produces a single product. The following data were provided by the
company for the most recent period:
Under variable costing, the unit product cost is:
A. $20
B. $18
C. $15
D. $22
Answer:
A partial listing of costs incurred at Backes Corporation during November appears
below:
The total of the period costs listed above for November is:
A. $244,000
B. $321,000
C. $348,000
D. $77,000
Answer:
The following partially completed T-accounts summarize transactions for Fabatz
Company during the year:
The direct materials cost was:
A. $3,300
B. $8,700
C. $6,300
D. $7,300
Answer:
Frizz Hair Salon had net income of $93,000 for the year just ended. Frizz collected the
following additional information to prepare its statement of cash flows for the year:
Frizz uses the indirect method to prepare its statement of cash flows. What is Frizz’s net
cash provided (used) by operating activities?
A. $92,000
B. $102,000
C. $120,000
D. $126,000
Answer:
The Varone Company makes a single product called a Hom. The company has the
capacity to produce 40,000 Homs per year. Per unit costs to produce and sell one Hom
at that activity level are:
The regular selling price for one Hom is $60. A special order has been received at
Varone from the Fairview Company to purchase 8,000 Homs next year at 15% off the
regular selling price. If this special order were accepted, the variable selling expense
would be reduced by 25%. However, Varone would have to purchase a specialized
machine to engrave the Fairview name on each Hom in the special order. This machine
would cost $12,000 and it would have no use after the special order was filled. The total
fixed costs, both manufacturing and selling, are constant within the relevant range of
30,000 to 40,000 Homs per year. Assume direct labor is a variable cost.
If Varone can expect to sell 32,000 Homs next year through regular channels and the
special order is accepted at 15% off the regular selling price, the effect on net operating
income next year due to accepting this order would be a:
A. $52,000 increase
B. $80,000 increase
C. $24,000 decrease
D. $68,000 increase
Answer:
Power Systems Inc. manufactures jet engines for the United States armed forces on a
cost-plus basis. The production cost of a particular jet engine is shown below:
If production of this engine was discontinued, the production capacity would be idle,
and the supervisor would be laid off. The depreciation referred to above is for special
equipment that would have no resale value and that does not wear out through use.
When asked to bid on the next contract for this engine, the minimum unit price that
Power Systems should bid is:
A. $408,000
B. $365,000
C. $397,000
D. $385,000
Answer:
Trecroci Corporation applies manufacturing overhead to products on the basis of
standard machine-hours. The company bases its predetermined overhead rate on 2,500
machine-hours. The companys total budgeted fixed manufacturing overhead is $5,750.
In the most recent month, the total actual fixed manufacturing overhead was $6,030.
The company actually worked 2,600 machine-hours during the month. The standard
hours allowed for the actual output of the month totaled 2,490 machine-hours. What
was the overall fixed manufacturing overhead volume variance for the month?
A) $230 favorable
B) $280 unfavorable
C) $23 unfavorable
D) $230 unfavorable
Answer: