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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:
A manufacturing company 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 was the fixed manufacturing overhead budget variance for the period to the
nearest dollar?
A. $1,800 U
B. $222 F
C. $1,010 U
D. $785 U
Answer:
Estes Company has assembled the following data for its divisions for the past year:
Division A's sales are:
A. $400,000
B. $625,000
C. $125,000
D. $200,000
Answer:
Hocking Corporation's comparative balance sheet appears below:
The company's net income (loss) for the year was $10,000 and its cash dividends were
$1,000. It did not sell or retire any property, plant, and equipment during the year. The
company uses the indirect method to determine the net cash provided by operating
activities.
Which of the following is correct regarding the operating activities section of the
statement of cash flows?
A. The change in Prepaid Expenses will be added to net income; The change in Income
Taxes Payable will be subtracted from net income
B. The change in Prepaid Expenses will be subtracted from net income; The change in
Income Taxes Payable will be subtracted from net income
C. The change in Prepaid Expenses will be subtracted from net income; The change in
Income Taxes Payable will be added to net income
D. The change in Prepaid Expenses will be added to net income; The change in Income
Taxes Payable will be added to net income
Answer:
Reference: 8-20
Herard Corporation manufactures and sells a single product. The company uses units as
the measure of activity in its flexible budgets. During March, the company budgeted for
7,900 units, but its actual level of activity was 7,890 units. The company has provided
the following data concerning the formulas used in its budgeting and its actual results
for March:
Data used in budgeting:
Actual results for March:
The net operating income in the flexible budget for March would be closest to:
A) $19,599
B) $29,240
C) $29,124
D) $19,649
Answer:
Lemar Corporation's net cash provided by operating activities was $70; its income taxes
were $13; its capital expenditures were $67; and its cash dividends were $5. The
company's free cash flow was:
A. $155
B. -$59
C. $11
D. -$2
Answer:
Njombe Corporation manufactures a variety of products. In the past, Njombe has been
using a traditional costing system in which the predetermined overhead rate was 150%
of direct labor cost. Selling prices had been set by multiplying total product cost by
200%. Sensing that this system was distorting costs and selling prices, Njombe has
decided to switch to an activity-based costing system for manufacturing overhead costs
using three activity cost pools. Selling prices are still to be set at 200% of unit product
cost under the new system. Information on these cost pools for next year are as follows:
Information (on a per unit basis) related to three popular products at Njombe are as
follows:
In comparing the traditional system with the activity-based costing system, which of
Njombe's Models had higher unit product costs under the traditional system?
A. #19
B. #58
C. #19 and #58
D. #36 and #58
E. #19, #36, and #58
Answer:
The activity in Nolan Company's Blending Department for the month of April is given
below:
All materials are added at the beginning of processing in the Blending Department.
The equivalent units for material for the month, using the weighted-average method,
are:
A. 48,000 units
B. 50,000 units
C. 58,000 units
D. 52,000 units
Answer:
During October, Crusan Corporation incurred $62,000 of direct labor costs and $4,000
of indirect labor costs. The journal entry to record the accrual of these wages would
include a:
A. debit to Work in Process of $66,000
B. credit to Work in Process of $66,000
C. debit to Work in Process of $62,000
D. credit to Work in Process of $62,000
Answer:
Gasco Corporation's balance sheet and income statement appear below:
Cash dividends were $54. The company sold equipment for $14 that was originally
purchased for $8 and that had accumulated depreciation of $1. It did not issue any
bonds payable or repurchase any of its own common stock.
The net cash provided by (used in) operating activities for the year was:
A. $261
B. $299
C. $214
D. $207
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 dollar sales is closest to:
A. $1,276,785
B. $2,377,108
C. $618,048
D. $835,200
Answer:
Scheidel Enterprises, Inc. produces and sells a single product whose selling price is
$190.00 per unit and whose variable expense is $81.70 per unit. The company's
monthly fixed expense is $682,290.
Assume the company's monthly target profit is $31,000. The dollar sales to attain that
target profit are closest to:
A. $1,251,386
B. $1,207,830
C. $713,290
D. $1,658,814
Answer:
Evans Company produces a single product. During the most recent year, the company
had a net operating income of $90,000 using absorption costing and $84,000 using
variable costing. The fixed overhead application rate was $6 per unit. There were no
beginning inventories. If 22,000 units were produced last year, then sales for last year
were:
A. 15,000 units
B. 21,000 units
C. 23,000 units
D. 28,000 units
Answer:
Reference: 8-52
The Richie Company uses a standard costing system in which variable manufacturing
overhead is assigned to production on the basis of the number of machine setups. Data
for the month of October include the following:
- Variable manufacturing overhead cost incurred: $42,750
- Total variable manufacturing overhead variance: $5,430 favorable
- Standard machine setups allowed for actual production: 2,920 setups
- Actual machine setups incurred: 2,850 setups
The standard variable overhead rate per machine setup is:
A) $16.91
B) $12.78
C) $15.00
D) $16.50
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 selling and administrative expenses in the planning budget for May would be
closest to:
A) $30,956
B) $30,940
C) $32,286
D) $32,191
Answer:
Jersey Corporation has total interest expense of $10,000, sales of $1 million, a tax rate
of 40%, and net income (after taxes) of $60,000. What is this firm's times interest
earned ratio?
A. 16
B. 11
C. 10
D. 7
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:
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 overall revenue and spending variance (i.e., the variance for net operating income
in the revenue and spending variance column) for April would be closest to:
A) $4,880 U
B) $4,090 F
C) $4,090 U
D) $4,880 F
Answer:
Reference: 8-51
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) $3,192 U
B) $6,913 F
C) $7,161 U
D) $6,913 U
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) operating activities for the year was:
A. $54
B. $80
C. $58
D. $2
Answer:
The spending variance for facility expenses in September would be closest to:
A) $290 F
B) $191 U
C) $290 U
D) $191 F
Answer:
Reference: 8A-12
The Chase Company has a standard cost system in which manufacturing overhead is
applied on the basis of standard direct labor-hours (DLHs). The company recorded the
following activity and cost data relating to manufacturing overhead for October:
The fixed manufacturing overhead budget variance for September was:
A) $2,700 favorable
B) $2,700 unfavorable
C) $5,400 favorable
D) $5,400 unfavorable
Answer:
Reference: 8A-11
A manufacturer of playground equipment uses a standard costing system in which
standard machine-hours (MHs) is the measure of activity. Data from the companys
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) $486 F
B) $1,105 U
C) $619 U
D) $612 U
Answer:
Two alternatives, code-named X and Y, are under consideration at Afalava Corporation.
Costs associated with the alternatives are listed below.
Are the materials costs and processing costs relevant in the choice between alternatives
X and Y? (Ignore the equipment rental and occupancy costs in this question.)
A. Only materials costs are relevant
B. Only processing costs are relevant
C. Both materials costs and processing costs are relevant
D. Neither materials costs nor processing costs are relevant
Answer:
Meltzer Corporation is presently making part O13 that is used in one of its products. A
total of 3,000 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 $27.00
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. If the outside supplier's offer
were accepted, only $3,000 of these allocated general overhead costs would be avoided.
In addition to the facts given above, assume that the space used to produce part O13
could be used to make more of one of the company's other products, generating an
additional segment margin of $26,000 per year for that product. What would be the
impact on the company's overall net operating income of buying part O13 from the
outside supplier and using the freed space to make more of the other product?
A. Net operating income would decline by $49,100 per year.
B. Net operating income would increase by $26,000 per year.
C. Net operating income would increase by $2,900 per year.
D. Net operating income would increase by $17,300 per year.
Answer:
Dickonson Products is a division of a major corporation. The following data are for the
last year of operations:
The division's turnover is closest to:
A. 3.78
B. 41.67
C. 4.16
D. 0.10
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 contribution margin ratio?
A. 62.5%
B. 160.0%
C. 500%
D. 20%
Answer:
Reference: 8-25
Lotson Corporation bases its budgets on machine-hours. The companys static planning
budget for May appears below:
Actual results for the month were:
The spending variance for power costs for the month should be:
A) $1,550 F
B) $4,160 F
C) $1,550 U
D) $4,160 U
Answer:
A proper journal entry to close overapplied manufacturing overhead to Cost of Goods
Sold would be:
A. Option A
B. Option B
C. Option C
D. Option D
Answer:
Jumper Company uses the weighted-average method in its process costing system. The
following data pertain to operations in the first processing department for a recent
month:
How many units were in the ending work in process inventory?
A. 600 units
B. 1,000 units
C. 800 units
D. 1,400 units
Answer:
Soderquist Corporation uses residual income to evaluate the performance of its
divisions. The company's minimum required rate of return is 11%. In April, the
Commercial Products Division had average operating assets of $100,000 and net
operating income of $9,400. What was the Commercial Products Division's residual
income in April?
A. -$1,600
B. $1,600
C. $1,034
D. -$1,034
Answer:
Vanstee Corporation manufactures a variety of products. Variable costing net operating
income last year was $60,000 and this year was $67,000. Last year, $37,000 in fixed
manufacturing overhead costs were deferred in inventory under absorption costing. This
year, $8,000 in fixed manufacturing overhead costs were released from inventory under
absorption costing.
What was the absorption costing net operating income this year?
A. $38,000
B. $96,000
C. $75,000
D. $59,000
Answer:
The following information relates to Clyde Corporation which produced and sold
50,000 units last month.
There were no beginning or ending inventories. Production and sales next month are
expected to be 40,000 units. The company's unit contribution margin next month should
be:
A. $16.63
B. $3.10
C. $7.98
D. $13.30
Answer:
