Stanfa Corporation’s 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:
On April 1, Stelter Corporation had $34,000 of raw materials on hand. During the
month, the company purchased an additional $60,000 of raw materials. During April,
$70,000 of raw materials were requisitioned from the storeroom for use in production.
These raw materials included both direct and indirect materials. The indirect materials
totaled $7,000. Prepare journal entries to record these events. Use those journal entries
to answer the following questions:
The debits to the Manufacturing Overhead account as a consequence of the raw
materials transactions in April total:
A. $7,000
B. $63,000
C. $0
D. $70,000
Answer:
During December at Ingrim Corporation, $74,000 of raw materials were requisitioned
from the storeroom for use in production. These raw materials included both direct and
indirect materials. The indirect materials totaled $6,000. The journal entry to record the
requisition from the storeroom would include a:
A. debit to Raw Materials of $74,000
B. debit to Work in Process of $68,000
C. credit to Manufacturing Overhead of $6,000
D. debit to Work in Process of $74,000
Answer:
An automated turning machine is the current constraint at Naik Corporation. Three
products use this constrained resource. Data concerning those products appear below:
Rank the products in order of their current profitability from most profitable to least
profitable. In other words, rank the products in the order in which they should be
emphasized.
A. OP,KU,YY
B. YY,OP,KU
C. KU,YY,OP
D. YY,KU,OP
Answer:
Lafountaine Manufacturing Corporation has a standard cost system in which it applies
manufacturing overhead to products on the basis of standard machine-hours (MHs). The
companys cost formula for variable manufacturing overhead is $4.70 per MH. During
the month, the actual total variable manufacturing overhead was $20,210 and the actual
level of activity for the period was 4,700 MHs. What was the variable overhead rate
variance for the month?
A) $400 unfavorable
B) $1,880 favorable
C) $1,880 unfavorable
D) $400 favorable
Answer:
Reference: 8-31
Kibodeaux Corporation makes a product with the following standard costs:
The company budgeted for production of 3,300 units in June, but actual production was
3,400 units. The company used 33,240 liters of direct material and 320 direct
labor-hours to produce this output. The company purchased 35,900 liters of the direct
material at $4.90 per liter. The actual direct labor rate was $22.70 per hour and the
actual variable overhead rate was $2.70 per hour.
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 June is:
A) $96 U
B) $102 F
C) $96 F
D) $102 U
Answer:
Qdynamic Corporation uses the FIFO 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.
How many units were started AND completed during the month in the first processing
department?
A. 6,100
B. 5,500
C. 7,600
D. 7,000
Answer:
Frymire Corporation produces and sells a single product. Data concerning that product
appear below:
Assume the company’s monthly target profit is $46,000. The dollar sales to attain that
target profit is closest to:
A. $3,228,703
B. $1,961,477
C. $1,590,257
D. $1,065,472
Answer:
Brandon Company’s net income last year was $65,000 and its interest expense was
$20,000. Total assets at the beginning of the year were $640,000 and total assets at the
end of the year were $690,000. The company’s income tax rate was 30%. The
company’s return on total assets for the year was closest to:
A. 9.8%
B. 10.7%
C. 12.8%
D. 11.9%
Answer:
Getchman Marketing, Inc., a merchandising company, reported sales of $592,500 and
cost of goods sold of $305,000 for April. The company’s total variable selling expense
was $37,500; its total fixed selling expense was $16,000; its total variable
administrative expense was $35,000; and its total fixed administrative expense was
$38,900. The cost of goods sold in this company is a variable cost.
The contribution margin for April is:
A. $465,100
B. $287,500
C. $160,100
D. $215,000
Answer:
Reference: 8-36
Landram Corporation makes a product with the following standard costs:
In March the company produced 4,700 units using 10,230 kilos of the direct material
and 2,210 direct labor-hours. During the month, the company purchased 10,800 kilos of
the direct material at a cost of $76,680. The actual direct labor cost was $38,233 and the
actual variable overhead cost was $11,934.
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 efficiency variance for March is:
A) $756 U
B) $700 F
C) $756 F
D) $700 U
Answer:
Resendes Refiners, Inc., processes sugar cane that it purchases from farmers. Sugar
cane is processed in batches. A batch of sugar cane costs $48 to buy from farmers and
$16 to crush in the company’s plant. Two intermediate products, cane fiber and cane
juice, emerge from the crushing process. The cane fiber can be sold as is for $24 or
processed further for $17 to make the end product industrial fiber that is sold for $38.
The cane juice can be sold as is for $34 or processed further for $23 to make the end
product molasses that is sold for $76.
How much profit (loss) does the company make by processing one batch of sugar cane
into the end products industrial fiber and molasses?
A. $16
B. $(104)
C. $(6)
D. $10
Answer:
Operating data from Tindall Company for last year follows:
The margin used in ROI calculations was closest to:
A. 18.00%
B. 8.00%
C. 6.67%
D. 15.00%
Answer:
Holzhauer Corporation, a merchandising company, reported the following results for
March:
Cost of goods sold is a variable cost in this company.
The contribution margin for March is:
A. $922,600
B. $1,120,000
C. $1,962,600
D. $1,360,000
Answer:
(Ignore income taxes in this problem.) How much would you have to invest today in the
bank at an interest rate of 7% to have an annuity of $2,800 per year for 9 years, with
nothing left in the bank at the end of the 9 years? Select the amount below that is
closest to your answer.
A. $25,200
B. $18,242
C. $23,551
D. $1,523
Answer:
A furniture manufacturer has a standard costing system based on standard direct
labor-hours (DLHs) as 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 overhead rate to the nearest cent?
A. $13.40
B. $13.61
C. $13.81
D. $13.20
Answer:
Sohr Corporation processes sugar beets that it purchases from farmers. Sugar beets are
processed in batches. A batch of sugar beets costs $50 to buy from farmers and $15 to
crush in the company’s plant. Two intermediate products, beet fiber and beet juice,
emerge from the crushing process. The beet fiber can be sold as is for $20 or processed
further for $19 to make the end product industrial fiber that is sold for $58. The beet
juice can be sold as is for $41 or processed further for $23 to make the end product
refined sugar that is sold for $58.
How much profit (loss) does the company make by processing one batch of sugar beets
into the end products industrial fiber and refined sugar?
A. $(107)
B. $(4)
C. $9
D. $13
Answer:
Waldrop Corporation’s comparative balance sheet appears below:
The company did not dispose of any property, plant, and equipment during the year. Its
net income for the year was $4,000. The net cash provided by operating activities is:
A. $35,000
B. $14,000
C. $41,000
D. $43,000
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:
Carter Corporation applies manufacturing overhead on the basis of machine-hours. At
the beginning of the most recent year, the company based its predetermined overhead
rate on total estimated overhead of $135,850. Actual manufacturing overhead for the
year amounted to $145,000 and actual machine-hours were 5,660. The company’s
predetermined overhead rate for the year was $24.70 per machine-hour.
The overhead for the year was:
A. $5,198 overapplied
B. $3,952 underapplied
C. $3,952 overapplied
D. $5,198 underapplied
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 cost of beginning work in
process inventory for the department would be:
A. $51,000
B. $10,000
C. $76,000
D. $60,000
Answer:
Iwasaki Inc. is considering whether to continue to make a component or to buy it from
an outside supplier. The company uses 13,000 of the components each year. The unit
product cost of the component according to the company’s cost accounting system is
given as follows:
Assume that direct labor is a variable cost. Of the fixed manufacturing overhead, 30%
is avoidable if the component were bought from the outside supplier. In addition,
making the component uses 1 minute on the machine that is the company’s current
constraint. If the component were bought, this machine time would be freed up for use
on another product that requires 2 minutes on this machine and that has a contribution
margin of $5.20 per unit.
When deciding whether to make or buy the component, what cost of making the
component should be compared to the price of buying the component?
A. $22.40
B. $19.80
C. $17.28
D. $19.88
Answer:
A portion of the total fixed manufacturing overhead cost incurred during a period may:
A. be excluded from cost of goods sold under absorption costing.
B. be charged as a period cost with the remainder deferred under variable costing.
C. never be excluded from cost of goods sold under absorption costing.
D. never be excluded from cost of goods sold under variable costing.
Answer:
Carpon Lumber sells lumber and general building supplies to building contractors in a
medium-sized town in Montana. Data regarding the store’s operations follow:
o Sales are budgeted at $340,000 for November, $350,000 for December, and $370,000
for January.
o Collections are expected to be 55% in the month of sale, 44% in the month following
the sale, and 1% uncollectible.
o The cost of goods sold is 75% of sales.
o The company desires to have an ending merchandise inventory equal to 60% 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 $21,100.
o Monthly depreciation is $19,000.
o Ignore taxes.
Accounts payable at the end of December would be:
A. $271,500
B. $105,000
C. $166,500
D. $262,500
Answer:
The Yost Company makes and sells a single product, Product A. Each unit of Product A
requires 1.2 hours of labor at a labor rate of $8.40 per hour. Yost Company needs to
prepare a Direct Labor Budget for the second quarter.
The budgeted direct labor cost per unit of Product A is:
A. $8.40
B. $7.00
C. $10.08
D. $9.60
Answer:
Which of the following statements regarding fixed costs is incorrect?
A. Expressing fixed costs on a per unit basis usually is the best approach for decision
making.
B. Fixed costs expressed on a per unit basis will decrease with increases in activity.
C. Total fixed costs are constant within the relevant range.
D. Fixed costs expressed on a per unit basis will increase with decreases in activity.
Answer:
Reference: 8-17
Hamp 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 3,000 tenant-days, but its actual level of activity was 3,050 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 December would be closest to:
A) $7,126
B) $7,245
C) $7,605
D) $7,600
Answer:
Addy Company has two products: A and B. The annual production and sales of Product
A is 1,700 units and of Product B is 1,100 units. The company has traditionally used
direct labor-hours as the basis for applying all manufacturing overhead to products.
Product A requires 0.3 direct labor-hours per unit and Product B requires 0.6 direct
labor-hours per unit. The total estimated overhead for next period is $98,785.
The company is considering switching to an activity-based costing system for the
purpose of computing unit product costs for external reports. The new activity-based
costing system would have three overhead activity cost pools–Activity 1, Activity 2,
and General Factory–with estimated overhead costs and expected activity as follows:
(Note: The General Factory activity cost pool’s costs are allocated on the basis of direct
labor-hours.)
The overhead cost per unit of Product B under the activity-based costing system is
closest to:
A. $50.66
B. $26.09
C. $35.28
D. $38.16
Answer:
Reference: 8-3
Macphail Corporation manufactures and sells a single product. The company uses units
as the measure of activity in its flexible budgets. During April, the company budgeted
for 5,600 units, but its actual level of activity was 5,650 units. The company has
provided the following data concerning the formulas used in its budgeting and its actual
results for April:
Data used in budgeting:
Actual results for April:
The spending variance for manufacturing overhead in April would be closest to:
A) $875 F
B) $970 U
C) $970 F
D) $875 U
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 labor efficiency variance for May is:
A) $2,200 favorable
B) $2,000 favorable
C) $2,000 unfavorable
D) $1,800 unfavorable
Answer: