Kaelker Corporation has provided the following data:
The inventory turnover for this year is closest to:
A. 3.36
B. 0.87
C. 1.15
D. 3.15
Answer:
The following monthly data are available for the Eager Company and its only product:
The margin of safety for the company for March was:
A. $315,000
B. $225,000
C. $135,000
D. $495,000
Answer:
Bakker 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 $77,250 and 2,500 estimated direct
labor-hours. Actual manufacturing overhead for the year amounted to $79,000 and
actual direct labor-hours were 2,400.
The predetermined overhead rate for the year was closest to:
A. $29.66
B. $32.92
C. $31.60
D. $30.90
Answer:
Reference: 8-18
Brothern Corporation manufactures and sells a single product. The company uses units
as the measure of activity in its flexible budgets. During May, the company budgeted
for 6,800 units, but its actual level of activity was 6,820 units. The company has
provided the following data concerning the formulas used in its budgeting and its actual
results for May:
Data used in budgeting:
Actual results for May:
The direct labor in the planning budget for May would be closest to:
A) $22,356
B) $22,506
C) $22,440
D) $22,290
Answer:
Slappy Corporation leases its corporate headquarters building. This lease cost is fixed
with respect to the company’s sales volume. In a recent month in which the sales
volume was 20,000 units, the lease cost was $482,000.
To the nearest whole dollar, what should be the total lease cost at a sales volume of
16,900 units in a month? (Assume that this sales volume is within the relevant range.)
A. $407,290
B. $482,000
C. $570,414
D. $444,645
Answer:
Simoneaux Corporation bases its predetermined overhead rate on the estimated
machine-hours for the upcoming year. At the beginning of the most recently completed
year, the company estimated the machine-hours for the upcoming year at 22,000
machine-hours. The estimated variable manufacturing overhead was $8.65 per
machine-hour and the estimated total fixed manufacturing overhead was $609,400. The
predetermined overhead rate for the recently completed year was closest to:
A. $36.35 per machine-hour
B. $27.70 per machine-hour
C. $33.32 per machine-hour
D. $8.65 per machine-hour
Answer:
At the beginning of the year, a company’s current ratio is 2.2. At the end of the year, the
company has a current ratio of 2.5. Which of the following could help explain the
change in the current ratio?
A. An increase in inventories.
B. An increase in accounts payable.
C. An increase in property, plant, and equipment.
D. An increase in bonds payable.
Answer:
Acitelli Corporation, which applies manufacturing overhead on the basis of
machine-hours, has provided the following data for its most recent year of operations.
The estimates of the manufacturing overhead and of machine-hours were made at the
beginning of the year for the purpose of computing the company’s predetermined
overhead rate for the year.
The applied manufacturing overhead for the year is closest to:
A. $357,979
B. $360,547
C. $359,520
D. $362,088
Answer:
Meacham Company has traditionally made a subcomponent of its major product.
Annual production of 20,000 subcomponents results in the following costs:
Meacham has received an offer from an outside supplier who is willing to provide
20,000 units of this subcomponent each year at a price of $28 per subcomponent.
Meacham knows that the facilities now being used to make the subcomponent would be
rented to another company for $75,000 per year if the subcomponent were purchased
from the outside supplier. Otherwise, the fixed overhead would be unaffected.
Suppose the price for the subcomponent has not been set. At what price per unit charged
by the outside supplier would Meacham be economically indifferent between making
the subcomponent or buying it from the outside?
A. $30.25
B. $29.25
C. $26.50
D. $31.50
Answer:
The journal entry to record the incurrence of indirect labor costs is:
A. Option A
B. Option B
C. Option C
D. Option D
Answer:
Diltex Farm Supply is located in a small town in the rural west. Data regarding the
store’s operations follow:
o Sales are budgeted at $220,000 for November, $200,000 for December, and $210,000
for January.
o Collections are expected to be 70% in the month of sale, 27% in the month following
the sale, and 3% uncollectible.
o The cost of goods sold is 65% of sales.
o The company desires to have an ending merchandise inventory at the end of each
month equal to 50% 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 $22,500.
o Monthly depreciation is $19,000.
o Ignore taxes.
Accounts payable at the end of December would be:
A. $65,000
B. $68,250
C. $130,000
D. $133,250
Answer:
The following standards for variable manufacturing overhead have been established for
a company that makes only one product:
The following data pertain to operations for the last month:
What is the variable overhead efficiency variance for the month?
A) $9,219 U
B) $10,179 U
C) $9,867 U
D) $648 U
Answer:
Assuming stable business conditions, an increase in the accounts receivable turnover
ratio could be explained by:
A. stricter policies with respect to the granting of credit to customers.
B. an easing of policies with respect to the granting of credit to customers.
C. a slowdown in collecting accounts receivables from customers.
D. none of these.
Answer:
The following partially completed T-accounts summarize the transactions of Belson
Company for last year:
At the end of the year, the company closes out the balance in the Manufacturing
Overhead account to Cost of Goods Sold.
The manufacturing overhead applied is:
A. $28,000
B. $29,000
C. $30,000
D. $38,000
Answer:
Knaack Corporation is presently making part R20 that is used in one of its products. A
total of 18,000 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 produce and sell the part to the company for $27.70
each. If this offer is accepted, the supervisor’s salary and all of the variable costs,
including direct labor, 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.
In addition to the facts given above, assume that the space used to produce part R20
could be used to make more of one of the company’s other products, generating an
additional segment margin of $27,000 per year for that product. What would be the
impact on the company’s overall net operating income of buying part R20 from the
outside supplier and using the freed space to make more of the other product?
A. Net operating income would increase by $27,000 per year.
B. Net operating income would decline by $135,000 per year.
C. Net operating income would decline by $23,400 per year.
D. Net operating income would decline by $189,000 per year.
Answer:
Vanwagenen Inc. has provided the following data for the month of April:
The cost of goods manufactured for April is:
A. $198,000
B. $201,000
C. $197,000
D. $202,000
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:
Grasse Company had $160,000 in sales on account last year. The beginning accounts
receivable balance was $10,000 and the ending accounts receivable balance was
$12,000. The company’s average collection period was closest to:
A. 25.09 days
B. 22.81 days
C. 50.19 days
D. 27.38 days
Answer:
Dickonson Products is a division of a major corporation. The following data are for the
last year of operations:
The division’s residual income is closest to:
A. $(320,640)
B. $1,119,360
C. $399,360
D. $(2,595,840)
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:
Favreau Corporation estimates that its variable manufacturing overhead is $6.10 per
machine-hour and its fixed manufacturing overhead is $352,590 per period.
If the denominator level of activity is 7,000 machine-hours, the predetermined overhead
rate would be:
A. $50.37
B. $56.47
C. $610.00
D. $6.10
Answer:
The most recent balance sheet and income statement of Marroquin Corporation appear
below:
The company paid a cash dividend and it did not dispose of any property, plant, and
equipment. The company 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. $3
B. $(65)
C. $(24)
D. $(44)
Answer:
DeAnne Company produces a single product. The company’s variable costing income
statement for August appears below:
The company produced 35,000 units in August and the beginning inventory consisted of
8,000 units. Variable production costs per unit and total fixed costs have remained
constant over the past several months.
Under absorption costing, for the month ended August 31, the company would report a:
A. $20,000 profit
B. $5,000 loss
C. $35,000 profit
D. $5,000 profit
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 average sale period for Year 2 is closest to:
A. 60.0 days
B. 35.1 days
C. 62.4 days
D. 213.6 days
Answer:
The following direct labor standards have been established for product H91D:
The following data pertain to the most recent months operations during which 3,860
units of product H91D were made:
Required:
a. What was the labor rate variance for the month?
b. What was the labor efficiency variance for the month?
c. Prepare a journal entry to record direct labor costs during the month, including the
direct labor variances.
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 was the fixed manufacturing overhead volume variance for the period to the
nearest dollar?
A. $2,486 U
B. $1,511 U
C. $975 U
D. $2,653 U
Answer:
The standards for product U31 call for 7.1 liters of a raw material that costs $12.10 per
liter. Last month, 1,900 liters of the raw material were purchased for $23,180. The
actual output of the month was 200 units of product U31. A total of 1,200 liters 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?
Answer:
Ire 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.
What are the equivalent units for conversion costs for the month in the first processing
department?
A. 8,800
B. 1,045
C. 10,700
D. 9,845
Answer:
Reference: 8-28
Cox Engineering performs cement core tests in its laboratory. The following standards
have been set for each core test performed:
During March, the laboratory performed 2,000 core tests. On March 1 no direct
materials (sand) were on hand. Variable manufacturing overhead is assigned to core
tests on the basis of standard direct labor-hours. The following events occurred during
March:
– 8,600 pounds of sand were purchased at a cost of $7,310.
– 7,200 pounds of sand were used for core tests.
– 840 actual direct labor-hours were worked at a cost of $8,610.
– Actual variable manufacturing overhead incurred was $3,200.
The labor efficiency variance for March is:
A) $480 favorable
B) $480 unfavorable
C) $192 favorable
D) $192 unfavorable
Answer:
Dickison Corporation reported the following data for the month of December:
The conversion cost for December was:
A. $107,000
B. $142,000
C. $111,000
D. $178,000
Answer:
Glen Lake Corporation recorded the following transactions for the just completed
month:
a. $60,000 in raw materials were purchased on account.
b. $51,000 in raw materials were requisitioned for use in production. Of this amount,
$42,000 was for direct materials and the remainder was for indirect materials.
c. Total labor wages of $92,000 were incurred and paid. Of this amount, $81,000 was
for direct labor and the remainder was for indirect labor.
d. Additional manufacturing overhead cost of $155,000 were incurred. All were on
account.
Record the above transactions in journal entries.
Answer:
The following standards for variable manufacturing overhead have been established for
a company that makes only one product:
The following data pertain to operations for the last month:
What is the variable overhead rate variance for the month?
A) $1,200 F
B) $9,625 F
C) $8,425 F
D) $990 U
Answer:
Parmentier Company uses the weighted-average method in its process costing system.
The Molding Department is the second department in its production process. The data
below summarize the department’s operations in January.
The accounting records indicate that the conversion cost that had been assigned to
beginning work in process inventory was $5,096 and a total of $87,668 in conversion
costs were incurred in the department during January.
What was the cost per equivalent unit for conversion costs for January in the Molding
Department? (Round off to three decimal places.)
A. $1.654
B. $1.752
C. $1.490
D. $1.499
Answer:
Austin Wool Products purchases raw wool and processes it into yarn. The spindles of
yarn can then be sold directly to stores or they can be used by Austin Wool Products to
make afghans. Each afghan requires one spindle of yarn. Current cost and revenue data
for the spindles of yarn and for the afghans are as follows:
Each month 4,000 spindles of yarn are produced that can either be sold outright or
processed into afghans.
What is the lowest price Austin should be willing to accept for one afghan as long as it
can sell spindles of yarn to the outside market for $12 each?
A. $32
B. $30
C. $28
D. $26
Answer:
Pedulla Inc, which produces and sells a single product, has provided its contribution
format income statement for February.
If the company sells 2,900 units, its net operating income should be closest to:
A. $35,581
B. $44,800
C. $31,900
D. $58,000
Answer:
