Reference: 8-12
Nakhle 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 October, the kennel budgeted
for 3,000 tenant-days, but its actual level of activity was 2,960 tenant-days. The kennel
has provided the following data concerning the formulas used in its budgeting and its
actual results for October:
Data used in budgeting:
Actual results for October:
The wages and salaries in the planning budget for October would be closest to:
A) $22,920
B) $22,644
C) $22,614
D) $22,900
Answer:
Reference: 8-60
Marten Corporation makes a product with the following standards for direct labor and
variable overhead:
In May the company produced 2,800 units using 300 direct labor-hours. The actual
variable overhead cost was $1,620. The company applies variable overhead on the basis
of direct labor-hours.
The variable overhead rate variance for May is:
A) $112 U
B) $112 F
C) $120 F
D) $120 U
Answer:
Reference: 8-16
Pong 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 December, the kennel budgeted for
2,000 tenant-days, but its actual level of activity was 1,980 tenant-days. The kennel has
provided the following data concerning the formulas used in its budgeting and its actual
results for December:
Data used in budgeting:
Actual results for December:
The wages and salaries in the planning budget for December would be closest to:
A) $14,460
B) $14,606
C) $14,500
D) $14,390
Answer:
The formula for the gross margin percentage is:
A. (Sales – Cost of goods sold)/Cost of goods sold
B. (Sales – Cost of goods sold)/Sales
C. Net income/Sales
D. Net income/Cost of goods sold
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:
The most recent balance sheet and income statement of Woodside Corporation appear
below:
Cash dividends were $13. The company did not retire or sell any property, plant, and
equipment during the year. The net cash provided by (used in) operating activities for
the year was:
A. $61
B. $31
C. $66
D. $15
Answer:
Data concerning Homme Corporation’s single product appear below:
The company is currently selling 2,000 units per month. Fixed expenses are $130,000
per month.
This question is to be considered independently of all other questions relating to
Homme Corporation. Refer to the original data when answering this question.
The marketing manager believes that a $12,000 increase in the monthly advertising
budget would result in a 190 unit increase in monthly sales. What should be the overall
effect on the company’s monthly net operating income of this change?
A. increase of $2,440
B. decrease of $12,000
C. increase of $14,440
D. decrease of $2,440
Answer:
The following information pertains to Clove Co.:
Clove’s margin of safety is:
A. $300,000
B. $400,000
C. $500,000
D. $800,000
Answer:
A manufacturer of playground equipment 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 is the predetermined fixed manufacturing overhead rate to the nearest cent?
A. $11.05 per MH
B. $11.19 per MH
C. $11.00 per MH
D. $10.86 per MH
Answer:
Krug Corporation manufactures a variety of products. The following data pertain to the
company’s operations over the last two years:
What was the absorption costing net operating income this year?
A. $91,300
B. $93,300
C. $95,900
D. $88,500
Answer:
The following production and average cost data for two levels of monthly production
volume have been supplied by a company that produces a single product:
The best estimate of the total monthly fixed manufacturing cost is:
A. $25,600
B. $114,400
C. $47,700
D. $69,800
Answer:
Morisey Corporation bases its predetermined overhead rate on variable manufacturing
overhead cost of $8.60 per machine-hour and fixed manufacturing overhead cost of
$457,002 per period. If the denominator level of activity is 6,300 machine-hours, the
predetermined overhead rate would be:
A. $81.14
B. $860.00
C. $72.54
D. $8.60
Answer:
The Odle Company makes and sells a single product called a Kitt. Odle uses a standard
costing system. Each Kitt has a standard cost of 5 pounds of material at $12 per pound
and 0.9 direct labor-hours at $15 per hour. There were no inventories of any kind on
June 1. During June, the following events occurred:
– Purchased 17,000 pounds of material at a total cost of $190,000.
– Used 15,000 pounds of material to produce 2,400 Kitts.
– Used 1,900 hours of direct labor time at a total cost of $38,000.
To record the use of direct materials in production, the general ledger would include
what kind of entry to the Materials Quantity Variance Account?
A. $46,000 debit
B. $60,000 credit
C. $60,000 debit
D. $36,000 debit
Answer:
Last year a company had stockholder’s equity of $160,000, net operating income of
$16,000 and sales of $100,000. The turnover was 0.5. The return on investment (ROI)
was:
A. 10%
B. 9%
C. 8%
D. 7%
Answer:
Guillet Inc. produces and sells a single product. The selling price of the product is
$180.00 per unit and its variable cost is $46.80 per unit. The fixed expense is $618,048
per month.
The break-even in monthly unit sales is closest to:
A. 3,434 units
B. 4,640 units
C. 7,093 units
D. 13,206 units
Answer:
The Donaldson Company uses a job-order costing system. The following data were
recorded for July:
Overhead is applied to jobs at the rate of 80% of direct materials cost. Jobs 475, 477,
and 478 were completed during July and transferred to finished goods. Jobs 475 and
478 have been delivered to the customer. Donaldson’s Work in Process inventory
balance on July 31 was:
A. $7,280
B. $2,600
C. $3,160
D. $3,320
Answer:
Which of the following three statements are correct?
I. A profit center has control over both cost and revenue.
II. An investment center has control over invested funds, but not over costs and
revenue.
III. A cost center has no control over sales
A. Only I
B. Only II
C. Only I and III
D. Only I and II
Answer:
Reference: 8-44
Carskadon Corporation makes a product that uses a material with the following direct
material standards:
The company produced 3,000 units in December using 6,270 pounds of the material.
During the month, the company purchased 7,100 pounds of the direct material at a total
cost of $13,490. The direct materials purchases variance is computed when the
materials are purchased.
The materials quantity variance for December is:
A) $660 F
B) $660 U
C) $627 F
D) $627 U
Answer:
Ladabouche Corporation’s total current assets are $390,000, its noncurrent assets are
$630,000, its total current liabilities are $330,000, its long-term liabilities are $420,000,
and its stockholders’ equity is $270,000. The current ratio is closest to:
A. 0.85
B. 0.79
C. 1.18
D. 0.62
Answer:
Buell Corporation has provided the following data for June.
The volume variance for June is:
A. $10,830 F
B. $10,830 U
C. $3,610 U
D. $3,610 F
Answer:
Cindy, Inc. sells a product for $10 per unit. The variable expenses are $6 per unit, and
the fixed expenses total $35,000 per period. By how much will net operating income
change if sales are expected to increase by $40,000?
A. $16,000 increase
B. $5,000 increase
C. $24,000 increase
D. $11,000 decrease
Answer:
Olaf Corporation prepares its statement of cash flows using the direct method. The
following items were listed on Olaf’s income statement. Which of these items would
also be listed in the operating activities section of Olaf’s statement of cash flows?
A. Option A
B. Option B
C. Option C
D. Option D
Answer:
The following partially completed T-accounts summarize transactions for Fabatz
Company during the year:
The manufacturing overhead was:
A. $2,200 underapplied
B. $2,200 overapplied
C. $400 overapplied
D. $400 underapplied
Answer:
Jaune Company uses a standard cost system in which it applies manufacturing overhead
to units of product on the basis of standard direct labor-hours (DLHs). The following
data pertain to last month’s operations:
The fixed manufacturing overhead budget variance is:
A. $500 U
B. $500 F
C. $2,200 U
D. $1,700 U
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 price-earnings ratio on December 31, Year 2 was closest to:
A. 5.88
B. 14.50
C. 8.70
D. 8.40
Answer:
Reference: 8-21
Hanekamp Corporation manufactures and sells a single product. The company uses
units as the measure of activity in its flexible budgets. During August, the company
budgeted for 5,400 units, but its actual level of activity was 5,440 units. The company
has provided the following data concerning the formulas to be used in its budgeting:
The manufacturing overhead in the flexible budget for August would be closest to:
A) $39,040
B) $39,140
C) $39,000
D) $39,722
Answer:
The statement of cash flows:
A. serves as a replacement for the income statement and balance sheet.
B. explains the change in the cash balance at one point in time.
C. explains the change in the cash balance for one period of time.
D. both A and B above.
Answer:
Patterson Company’s variable expenses are 55% of sales. At a $400,000 sales level, the
degree of operating leverage is 5. If sales increase by $30,000, the new degree of
operating leverage will be (rounded):
A. 5.00
B. 3.18
C. 2.91
D. 3.91
Answer:
Newburn Corporation’s most recent balance sheet appears below:
The company’s net income for the year was $53 and it did not sell or retire any property,
plant, and equipment during the year. Cash dividends were $11. The net cash provided
by (used in) investing activities for the year was:
A. $(33)
B. $33
C. $(66)
D. $66
Answer:
Mitchell Company had the following budgeted sales for the last half of last year:
The company is in the process of preparing a cash budget and must determine the
expected cash collections by month. To this end, the following information has been
assembled:
Collections on credit sales:
60% in month of sale
30% in month following sale
10% in second month following sale
Assume that the accounts receivable balance on July 1 was $75,000. Of this amount,
$60,000 represented uncollected June sales and $15,000 represented uncollected May
sales. Given these data, the total cash collected during July would be:
A. $150,000
B. $235,000
C. $215,000
D. $200,000
Answer:
Last year Burford Company’s cash account decreased by $19,000. Net cash used in
investing activities was $9,000. Net cash provided by financing activities was $16,000.
On the statement of cash flows, the net cash flow provided by (used in) operating
activities was:
A. $(19,000)
B. $(26,000)
C. $(12,000)
D. $7,000
Answer:
Dickonson Products is a division of a major corporation. The following data are for the
last year of operations:
The division’s return on investment (ROI) is closest to:
A. 0.2%
B. 41.6%
C. 10.0%
D. 1.9%
Answer:
The following data pertain to Epsom Corporation’s operations:
Net operating income at sales of 12,000 units is:
A. $0
B. $36,000
C. $120,000
D. $300,000
Answer:
