At a sales volume of 35,000 units, Thoma Corporation’s sales commissions (a cost that
is variable with respect to sales volume) total $448,000.
To the nearest whole dollar, what should be the total sales commissions at a sales
volume of 33,200 units? (Assume that this sales volume is within the relevant range.)
A. $424,960
B. $448,000
C. $436,480
D. $472,289
Answer:
The Materials Price Variance for October would be recorded as a:
A) Debit of $230
B) Credit of $212
C) Debit of $212
D) Credit of $230
Answer:
The following events occurred last year at Dewhurst Company:
Based on the above information, the cash provided (used) by investing activities for the
year on the statement of cash flows would net to:
A. $(21,000)
B. $(15,000)
C. $(7,000)
D. $(37,000)
Answer:
Data from Kooistra Corporation’s most recent balance sheet appear below:
Sales on account in Year 2 amounted to $1,270 and the cost of goods sold was $770.
The acid-test ratio at the end of Year 2 is closest to:
A. 0.75
B. 1.61
C. 0.96
D. 1.05
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 amount of fixed manufacturing overhead cost applied to work in process during
September was:
A) $47,832
B) $26,520
C) $42,432
D) $43,605
Answer:
The Pacific Company manufactures a single product. The following data relate to the
year just completed:
During the last year, 5,000 units were produced and 4,800 units were sold. There were
no beginning inventories.
Under variable costing, the unit product cost would be:
A. $91.00
B. $72.00
C. $58.00
D. $43.00
Answer:
Mckerchie Inc. manufactures industrial components. One of its products, which is used
in the construction of industrial air conditioners, is known as G62. Data concerning this
product are given below:
The above per unit data are based on annual production of 9,000 units of the
component. Direct labor can be considered to be a variable cost.
The company has received a special, one-time-only order for 300 units of component
G62. There would be no variable selling expense on this special order and the total
fixed manufacturing overhead and fixed selling and administrative expenses of the
company would not be affected by the order. However, assume that Mckerchie has no
excess capacity and this special order would require 50 minutes of the constraining
resource, which could be used instead to produce products with a total contribution
margin of $6,900. What is the minimum price per unit on the special order below which
the company should not go?
A. $90
B. $23
C. $49
D. $78
Answer:
Ozogus Company uses the FIFO method in its process costing system. Operating data
for the Brazing Department for the month of November appear below:
What were the equivalent units for conversion costs in the Brazing Department for
November?
A. 36,600
B. 35,800
C. 39,300
D. 34,800
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) operating activities for the year was:
A. $264
B. $149
C. $221
D. $36
Answer:
The following data were taken from the accounting records of the Hazel Corporation
which uses the weighted-average method in its process costing system:
The equivalent units for conversion costs was:
A. 102,000 units
B. 112,000 units
C. 111,000 units
D. 100,000 units
Answer:
Ring, Incorporated’s income statement for the most recent month is given below.
Refer to the original data.
Currently the sales clerks receive a salary of $17,000 per month in Store Q. A proposal
has been made to change from a fixed salary to a sales commission of 5%. Assume that
this proposal is adopted, and that as a result sales in Store Q increase by $40,000. The
new segment margin for Store Q should be:
A. $47,000
B. $61,000
C. $85,000
D. $44,000
Answer:
Reference: 8A-9
The Steff Company has the following flexible budget (in condensed form) for
manufacturing overhead:
The following data concerning production pertain to last years operations:
– The company used a denominator activity of 15,000 direct labor-hours to compute
the predetermined overhead rate.
– The company made 6,850 units of product and worked 14,200 actual hours during
the year.
– Actual variable manufacturing overhead was $15,904 and actual fixed
manufacturing overhead was $30,s850 for the year.
– The standard direct labor time is two hours per unit of product.
The fixed element of the predetermined overhead rate was (per DLH):
A) $4.15
B) $3.00
C) $2.00
D) $1.15
Answer:
The Nichols Company uses the weighted-average method in its process costing system.
The company recorded 29,500 equivalent units for conversion costs for November in a
particular department. There were 6,000 units in the ending work in process inventory
on November 30, 75% complete with respect to conversion costs. The November 1
work in process inventory consisted of 8,000 units, 50% complete with respect to
conversion costs. A total of 25,000 units were completed and transferred out of the
department during the month. The number of units started during November in the
department was:
A. 24,500 units
B. 23,000 units
C. 27,000 units
D. 21,000 units
Answer:
Reference: 8A-14
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 6,900 machine-hours, the fixed element in the
predetermined overhead rate would be:
A) $610.00
B) $6.10
C) $57.20
D) $51.10
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 traditional costing system is closest
to:
A. $50.66
B. $5.49
C. $26.09
D. $11.45
Answer:
Pitkin Company produces a part used in the manufacture of one of its products. The unit
product cost of the part is $33, computed as follows:
An outside supplier has offered to provide the annual requirement of 10,000 of the parts
for only $27 each. The company estimates that 30% of the fixed manufacturing
overhead costs above will continue if the parts are purchased from the outside supplier.
Assume that direct labor is an avoidable cost in this decision. Based on these data, the
per unit dollar advantage or disadvantage of purchasing the parts from the outside
supplier would be:
A. $3 advantage
B. $1 advantage
C. $1 disadvantage
D. $4 disadvantage
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 earnings per share of common stock for Year 2 is closest to:
A. $0.40
B. $0.73
C. $0.61
D. $0.43
Answer:
Which of the following would probably be the least appropriate allocation base for
allocating overhead in a highly automated manufacturer of specialty valves?
A. machine-hours
B. power consumption
C. direct labor-hours
D. machine setups
Answer:
Van Aalst Company’s comparative balance sheet and income statement for last year
appear below:
The company declared and paid $77,000 in cash dividends during the year. It did not
sell or retire any property, plant, and equipment during the year. The company uses the
direct method to determine the net cash provided by operating activities.
On the statement of cash flows, the income tax expense adjusted to a cash basis would
be:
A. $27,000
B. $75,000
C. $51,000
D. $38,000
Answer:
Over an extended period of time in which the final ending inventories are zero, the
accumulated net operating income figures reported under absorption costing will be:
A. greater than those reported under variable costing.
B. less than those reported under variable costing.
C. the same as those reported under variable costing.
D. higher or lower since no generalization can be made.
Answer:
Cridman Company’s selling and administrative expenses for last year totaled $180,000.
During the year the company’s prepaid expense account balance decreased by $5,000
and accrued liabilities increased by $8,000. Depreciation for the year was $12,000.
Based on this information, selling and administrative expenses adjusted to a cash basis
under the direct method on the statement of cash flows would be:
A. $205,000
B. $181,000
C. $155,000
D. $179,000
Answer:
The spending variance for occupancy expenses in May would be closest to:
A) $135 U
B) $135 F
C) $80 U
D) $80 F
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:
Abe Company, which has only one product, has provided the following data concerning
its most recent month of operations:
What is the total period cost for the month under the absorption costing approach?
A. $156,600
B. $210,000
C. $151,200
D. $366,600
Answer:
Reference: 8-33
Tidd Corporation makes a product with the following standard costs:
The company reported the following results concerning this product in November.
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 materials quantity variance for November is:
A) $7,530 U
B) $7,028 U
C) $7,530 F
D) $7,028 F
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 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:
A company using lean production methods likely would show approximately the same
net operating income under both absorption and variable costing because:
A. ending inventory would be valued in the same manner for both methods under lean
production.
B. production is geared to sales under lean production and thus there would be little or
no ending inventory.
C. under lean production fixed manufacturing overhead costs are charged to the period
incurred rather than to the product produced.
D. there is no distinction made under lean production between fixed and variable costs.
Answer:
Gordon Company produces a single product that sells for $10 per unit. Last year there
were no beginning inventories, 100,000 units were produced, and 80,000 units were
sold. The company has the following cost structure:
The carrying value on the balance sheet of the ending finished goods inventory under
absorption costing would be:
A. $80,000
B. $104,000
C. $110,000
D. $124,000
Answer:
Rostad Corporation applies manufacturing overhead to products on the basis of
standard machine-hours. Budgeted and actual overhead costs for the most recent month
appear below:
The company based its original budget on 7,100 machine-hours. The company actually
worked 7,060 machine-hours during the month. The standard hours allowed for the
actual output of the month totaled 6,990 machine-hours. What was the overall fixed
manufacturing overhead volume variance for the month?
A) $512 favorable
B) $512 unfavorable
C) $1,408 favorable
D) $1,408 unfavorable
Answer:
The following data pertain to the Whalen Division of Northern Industries.
The margin at Whalen was exactly the same in Year 2 as it was in Year 1.
The average operating assets for Year 2 amounted to:
A. $400,000
B. $800,000
C. $600,000
D. $500,000
Answer:
At an activity level of 5,300 machine-hours in a month, Clyburn Corporation’s total
variable maintenance cost is $114,268 and its total fixed maintenance cost is $154,336.
What would be the average fixed maintenance cost per unit at an activity level of 5,600
machine-hours in a month? Assume that this level of activity is within the relevant
range.
A. $50.68
B. $27.56
C. $35.79
D. $29.12
Answer:
The difference between total sales in dollars and total variable expenses is called:
A. net operating income.
B. net profit.
C. the gross margin.
D. the contribution margin.
Answer:
The Gasson Company sells three products, Product A, Product B and Product C, and
had sales of $1,000,000 during the month of June. The company’s overall contribution
margin ratio was 37% and fixed expenses totaled $350,000. Sales were: Product A,
$500,000; Product B, $300,000; and Product C, $200,000. Traceable fixed costs were:
Product A, $120,000; Product B, $100,000; and Product C, $60,000. The variable
expenses of Product A were $300,000 and the variable expenses of Product B were
$180,000.
The contribution margin ratio for Product C is:
A. 75%
B. 69%
C. 31%
D. 25%
Answer:
