Kramer 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 total cost transferred from the first processing department to the next processing
department during the month is closest to:
A. $306,682
B. $353,149
C. $334,000
D. $341,000
Answer:
Tavorn Corporation applies manufacturing overhead to products on the basis of
standard machine-hours. The companys standard variable manufacturing overhead rate
is $1.80 per machine-hour. The actual variable manufacturing overhead cost for the
month was $13,080. The original budget for the month was based on 7,100
machine-hours. The company actually worked 7,210 machine-hours during the month.
The standard hours allowed for the actual output of the month totaled 7,070
machine-hours. What was the variable overhead efficiency variance for the month?
A) $354 unfavorable
B) $252 unfavorable
C) $54 favorable
D) $102 unfavorable
Answer:
The Immanuel Company has just obtained a request for a special order of 6,000 jigs to
be shipped at the end of the month at a selling price of $7 each. The company has a
production capacity of 90,000 jigs per month with total fixed production costs of
$144,000. At present, the company is selling 80,000 jigs per month through regular
channels at a selling price of $11 each. For these regular sales, the cost for one jig is:
If the special order is accepted, Immanuel will not incur any selling expense; however,
it will incur shipping costs of $0.30 per unit. Total fixed production cost would not be
affected by this order.
At what selling price per unit should Immanuel be indifferent between accepting or
rejecting the special offer?
A. $7.40
B. $7.70
C. $6.40
D. $4.90
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:
Reference: 8-26
Wayland Corporations static planning budget for April appears below. The company
bases its budgets on machine-hours.
In April, the actual number of machine-hours was 6,600, the actual supplies cost was
$64,040, the actual power cost was $7,070, the actual salaries cost was $88,300, and the
actual equipment depreciation was $7,430.
The spending variance for equipment depreciation for the month should be:
A) $280 F
B) $170 U
C) $280 U
D) $170 F
Answer:
Designing a new product is an example of a:
A. Unit-level activity.
B. Batch-level activity.
C. Product-level activity.
D. Facility-level activity.
Answer:
The following materials standards have been established for a particular product:
The following data pertain to operations concerning the product for the last month:
What is the materials quantity variance for the month?
A) $19,460 F
B) $9,730 U
C) $10,115 U
D) $20,230 F
Answer:
Which of the following characteristics applies to process costing, but does not apply to
job order costing?
A. the need for averaging.
B. the use of equivalent units of production.
C. separate, identifiable jobs.
D. the use of predetermined overhead rates.
Answer:
Anaconda Mining Company shipped 9,000 tons of copper concentrate for $450,000 in
March and 11,000 tons for $549,000 in April. Shipping costs for 12,000 tons to be
shipped in May would be expected to be:
A. $548,780
B. $549,020
C. $594,000
D. $598,500
Answer:
Financial statements of Ansbro Corporation follow:
Cash dividends were $14. The company did not dispose of any property, plant, and
equipment. It did not issue any bonds payable or repurchase any of its own common
stock. The following question pertain to the company’s statement of cash flows.
The net cash provided by (used in) investing activities for the year was:
A. $13
B. $38
C. $(38)
D. $(13)
Answer:
Brarin Corporation is a small wholesaler of gourmet food products. Data regarding the
store’s operations follow:
o Sales are budgeted at $340,000 for November, $360,000 for December, and $350,000
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 80% of sales.
o The company would like to maintain ending merchandise inventories equal to 70% 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 $23,100.
o Monthly depreciation is $21,000.
o Ignore taxes.
The cost of December merchandise purchases would be:
A. $272,000
B. $288,000
C. $196,000
D. $282,400
Answer:
Diorio Corporation keeps careful track of the time required to fill orders. The times
recorded for a particular order appear below:
The throughput time was:
A. 4.2 hours
B. 9.5 hours
C. 30.6 hours
D. 26.4 hours
Answer:
The Dodge Company makes and sells a single product and uses a standard cost system
in which manufacturing overhead costs are applied to units of product on the basis of
standard direct labor-hours. The standard cost card shows that 5 direct labor-hours are
required per unit of product. The Dodge Company had the following budgeted and
actual data for the year:
The budgeted direct labor-hours is used as the denominator activity for the month.
The fixed manufacturing overhead volume variance as:
A. $7,500 F
B. $1,500 F
C. $3,750 U
D. $7,500 U
Answer:
When switching from a traditional costing system to an activity-based costing system
that includes some batch-level costs:
A. the unit product costs of high volume products typically change less than the unit
product costs of low volume products.
B. the unit product costs of high volume products typically change more than the unit
product costs of low volume products.
C. the unit product costs of high volume products change as much as the unit product
costs of low volume products.
D. the unit product costs of high volume do not change.
Answer:
Avril Company makes collections on sales according to the following schedule:
30% in the month of sale
60% in the month following sale
8% in the second month following sale
The following sales are expected:
Cash collections in March should be budgeted to be:
A. $110,000
B. $110,800
C. $105,000
D. $113,000
Answer:
Morvan 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.
The cost per equivalent unit for materials for the month in the first processing
department is closest to:
A. $27.70
B. $26.82
C. $28.13
D. $28.40
Answer:
Excerpts from Zorra Corporation’s most recent balance sheet appear below:
Sales on account in Year 2 amounted to $1,370 and the cost of goods sold was $850.
The average sale period for Year 2 is closest to:
A. 55.9 days
B. 90.1 days
C. 83.7 days
D. 226.5 days
Answer:
Compound K47E is used to make Goforth Corporation’s major product. The standard
cost of compound K47E is $24.50 per ounce and the standard quantity is 6.1 ounces per
unit of output. In the most recent month, 5,030 ounces of the compound were used to
make 700 units of the output. When recording the use of materials in production, Raw
Materials would be:
A. credited for $123,235.
B. debited for $123,235.
C. debited for $104,615.
D. credited for $104,615.
Answer:
Dodrill Company makes two products from a common input. Joint processing costs up
to the split-off point total $43,200 a year. The company allocates these costs to the joint
products on the basis of their total sales values at the split-off point. Each product may
be sold at the split-off point or processed further. Data concerning these products appear
below:
What is the net monetary advantage (disadvantage) of processing Product X beyond the
split-off point?
A. $26,800
B. $7,000
C. $4,800
D. $29,000
Answer:
Ethridge Corporation is presently making part H25 that is used in one of its products. A
total of 9,000 units of this part are produced and used every year. The company’s
Accounting Department reports the following costs of producing the part at this level of
activity:
An outside supplier has offered to make and sell the part to the company for $15.40
each. If this offer is accepted, the supervisor’s salary and all of the variable costs can be
avoided. The special equipment used to make the part was purchased many years ago
and has no salvage value or other use. The allocated general overhead represents fixed
costs of the entire company, none of which would be avoided if the part were purchased
instead of produced internally. If management decides to buy part H25 from the outside
supplier rather than to continue making the part, what would be the annual impact on
the company’s overall net operating income?
A. Net operating income would increase by $24,300 per year.
B. Net operating income would decline by $24,300 per year.
C. Net operating income would increase by $58,500 per year.
D. Net operating income would decline by $58,500 per year.
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 net operating income in the planning budget for December would be closest to:
A) $13,420
B) $12,020
C) $12,984
D) $11,500
Answer:
Financial statements of Ansbro Corporation follow:
Cash dividends were $14. The company did not dispose of any property, plant, and
equipment. It did not issue any bonds payable or repurchase any of its own common
stock. The following question pertain to the company’s statement of cash flows.
The net cash provided by (used in) financing activities for the year was:
A. $(6)
B. $(14)
C. $3
D. $(17)
Answer:
Activity rates from Quattrone Corporation’s activity-based costing system are listed
below. The company uses the activity rates to assign overhead costs to products:
Last year, Product F76D included the following activities: 2 customer orders, 434
assembly hours, and 20 batches. How much overhead cost would be assigned to
Product F76D using the activity-based costing system?
A. $1,041.80
B. $2,000.04
C. $66,908.88
D. $146.73
Answer:
Heller 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 materials for the month in the first processing
department is closest to:
A. $10.51
B. $10.12
C. $9.91
D. $9.54
Answer:
The standards for product J42 call for 3.6 feet of a raw material that costs $14.00 per
feet. Last month, 5,500 feet of the raw material were purchased for $76,175. The actual
output of the month was 1,260 units of product J42. A total of 4,800 feet of the raw
material were used to produce this output.
Required:
a. What is the materials price variance for the month?
b. What is the materials quantity variance for the month?
c. Prepare journal entries to record the purchase and use of the raw material during the
month. (All raw materials are purchased on account.)
Answer:
The most recent balance sheet and income statement of Heldt Corporation appear
below:
The company paid a cash dividend and it did not dispose of any property, plant, and
equipment. The company did not purchase any bonds payable or repurchase any of its
own common stock. The following question pertain to the company’s statement of cash
flows.
The net cash provided by (used in) operating activities for the year was:
A. $176
B. $140
C. $106
D. $17
Answer:
Bordes Corporation has provided the following data concerning its most important raw
material, compound R85F:
The raw material was purchased on account.
The Materials Quantity Variance for May would be recorded as a:
A. Debit of $4,788
B. Debit of $16,644
C. Credit of $4,788
D. Credit of $16,644
Answer:
Pappan Corporation makes three products that use compound W, the current
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. RH,GY,QF
B. GY,RH,QF
C. QF,GY,RH
D. RH,QF,GY
Answer:
Bridget Company uses activity-based costing. The company has two products: A and B.
The annual production and sales of Product A is 2,000 units and of Product B is 3,000
units. There are three activity cost pools, with estimated total cost and expected activity
as follows:
The overhead cost per unit of Product A under activity-based costing is closest to:
A. $6.00
B. $9.60
C. $8.63
D. $13.80
Answer:
Overhead is applied to work in process in a standard costing system by:
A. multiplying actual hours times the predetermined rate.
B. multiplying standard hours allowed for the output of the period times the
predetermined rate.
C. multiplying actual hours times the actual rate.
D. multiplying standard hours allowed for the output of the period times the actual rate.
Answer:
Deschambault Inc. is working on its cash budget for December. The budgeted
beginning cash balance is $14,000. Budgeted cash receipts total $127,000 and budgeted
cash disbursements total $126,000. The desired ending cash balance is $40,000. To
attain its desired ending cash balance for December, the company needs to borrow:
A. $25,000
B. $0
C. $55,000
D. $40,000
Answer:
The Hayes Company manufactures and sells several products, one of which is called a
slip differential. The company normally sells 30,000 units of the slip differential each
month. At this activity level, unit costs are:
An outside supplier has offered to produce the slip differentials for the Hayes Company,
and to ship them directly to the Hayes Company’s customers. This arrangement would
permit the Hayes Company to reduce its variable selling expenses by one third (due to
elimination of freight costs). The facilities now being used to produce the slip
differentials would be idle and fixed manufacturing overhead would continue at 60
percent of its present level. The total fixed selling expenses of the company would be
unaffected by this decision.
What is the maximum acceptable price quotation for the slip differentials from the
outside supplier?
Answer:
Data from Weichbrodt Corporation’s most recent balance sheet appear below:
Compute the company’s acid-test ratio. Show your work!
Answer:
Kawalek Corporation’s balance sheet appears below:
The net income for the year was $151. Cash dividends were $42. The company did not
dispose of any property, plant, and equipment, issue any bonds payable, or repurchase
any of its own common stock during the year.
Prepare a statement of cash flows in good form using the indirect method.
Answer:
In November, one of the processing departments at Shelp Corporation had beginning
work in process inventory of $27,000 and ending work in process inventory of $21,000.
During the month, the cost of units transferred out from the department was $311,000.
Construct a cost reconciliation report for the department for the month of November.
Answer:
Shapiro Corporation has provided the following data for the most recent month:
Prepare T-accounts for Raw Materials, Work in Process, Finished Goods,
Manufacturing Overhead, and Cost of Goods Sold. Record the beginning balances and
each of the transactions listed above. Finally, determine the ending balances.
Answer:
Suermann Corporation’s only product sells for $140 per unit. Its current sales are 17,500
units and its break-even sales are 14,350 units.
Compute the margin of safety in both dollars and as a percentage of sales.
Answer:
Mossor Corporation has two major business segments-Retail and Wholesale. In
December, the Retail business segment had sales revenues of $510,000, variable
expenses of $296,000, and traceable fixed expenses of $61,000. During the same
month, the Wholesale business segment had sales revenues of $510,000, variable
expenses of $240,000, and traceable fixed expenses of $82,000. Common fixed
expenses totaled $191,000 and were allocated as follows: $113,000 to the Retail
business segment and $78,000 to the Wholesale business segment.
Prepare a segmented income statement in the contribution format for the company.
Omit percentages; show only dollar amounts.
Answer:
Madrazo Corporation uses residual income to evaluate the performance of its divisions.
The minimum required rate of return for performance evaluation purposes is 19%. The
Games Division had average operating assets of $410,000 and net operating income of
$86,000 in June.
What was the Games Division’s residual income in June?
Answer:
Kindschuh Corporation is working on its direct labor budget for the next two months.
Each unit of output requires 0.07 direct labor-hours. The direct labor rate is $8.50 per
direct labor-hour. The production budget calls for producing 4,800 units in June and
5,300 units in July.
Construct the direct labor budget for the next two months, assuming that the direct labor
work force is fully adjusted to the total direct labor-hours needed each month.
Answer:
Caplan Corporation’s balance sheet and income statement appear below:
The company did not dispose of any property, plant, and equipment, issue any bonds
payable, or repurchase any of its own common stock during the year. The company
declared and paid a cash dividend.
Prepare a statement of cash flows in good form using the indirect method.
Answer:
Aziz Corporation produces and sells a single product. Data concerning that product
appear below:
Determine the monthly break-even in either unit or total dollar sales. Show your work!
Answer:
Moss Clinic bases its budgets on the activity measure patient-visits. During August, the
clinic planned for an activity level of 2,100 patient-visits, but the activity level was
actually 2,400 patient-visits. The clinic has provided the following data concerning the
formulas it uses in its budgeting:
Required:
Prepare the clinics flexible budget for August based on the actual level of activity for
the month.
Answer:
Sawyer Corporation’s balance sheet and income statement appear below:
Cash dividends were $7. The company sold equipment for $13 that was originally
purchased for $3 and that had accumulated depreciation of $2.
Using the direct method, determine the net cash provided by operating activities.
Answer:
Maga Company, which has only one product, has provided the following data
concerning its most recent month of operations:
a. What is the unit product cost for the month under variable costing?
b. What is the unit product cost for the month under absorption costing?
c. Prepare a contribution format income statement for the month using variable costing.
d. Prepare an income statement for the month using absorption costing.
e. Reconcile the variable costing and absorption costing net operating incomes for the
month.
Answer:
Bahr Corporation has provided the following data for February.
a. Compute the budget variance for February. Show your work!
b. Compute the volume variance for February. Show your work!
Answer:
Ok Corporation uses the weighted-average method in its process costing. The following
data concern the company’s Assembly Department for the month of June.
During the month, 7,100 units were completed and transferred from the Assembly
Department to the next department.
Determine the cost of ending work in process inventory and the cost of units transferred
out of the department during June using the weighted-average method.
Answer:
Eaglen Corporation has provided the following data:
Compute the inventory turnover for this year:
Answer: