Reference: 8-30
Snuggs Corporation makes a product with the following standard costs:
The company reported the following results concerning this product in October.
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 October is:
A) $82 U
B) $80 U
C) $82 F
D) $80 F
Answer:
Net operating income reported under absorption costing will exceed net operating
income reported under variable costing for a given period if:
A. production equals sales for that period.
B. production exceeds sales for that period.
C. sales exceed production for that period.
D. the variable manufacturing overhead exceeds the fixed manufacturing overhead.
Answer:
Knoke Corporation’s contribution margin ratio is 29% and its fixed monthly expenses
are $17,000. If the company’s sales for a month are $98,000, what is the best estimate of
the company’s net operating income? Assume that the fixed monthly expenses do not
change.
A. $81,000
B. $11,420
C. $52,580
D. $28,420
Answer:
The following data pertain to last month’s operations:
The break-even point in dollars is:
A. $300,000
B. $240,000
C. $200,000
D. $160,000
Answer:
The higher the denominator level of activity:
A) the higher the cost per unit of product.
B) the lower the cost per unit of product.
C) the less likely is the occurrence of a volume variance.
D) the more profitable operations likely will be.
Answer:
Faraz Corporation has provided the following production and total cost data for two
levels of monthly production volume. The company produces a single product.
The best estimate of the total cost to manufacture 5,300 units is closest to:
A. $1,002,230
B. $1,021,780
C. $1,063,180
D. $941,280
Answer:
The Ammon Company uses a standard cost system in which manufacturing overhead is
applied to units on the basis of standard machine-hours. During July, the company
budgeted $350,000 in manufacturing overhead cost at a denominator activity of 25,000
machine-hours. At standard, each unit of finished product requires 5 machine-hours.
The following cost and activity were recorded during July:
The amount of overhead cost that the company applied to work in process for July was:
A) $292,500
B) $315,000
C) $322,000
D) $325,000
Answer:
Reference: 8-57
Jardell Corporation makes a product with the following standards for labor and variable
overhead:
The company budgeted for production of 6,400 units in June, but actual production was
6,400 units. The company used 3,180 direct labor-hours to produce this output. The
actual variable overhead rate was $4.90 per hour. The company applies variable
overhead on the basis of direct labor-hours.
The variable overhead efficiency variance for June is:
A) $100 F
B) $98 F
C) $100 U
D) $98 U
Answer:
Cadarette Corporation’s most recent balance sheet and income statement appear below:
Dividends on common stock during Year 2 totaled $40 thousand. Dividends on
preferred stock totaled $10 thousand. The market price of common stock at the end of
Year 2 was $17.73 per share.
The dividend payout ratio for Year 2 is closest to:
A. 55.6%
B. 44.4%
C. 40.0%
D. 1111.1%
Answer:
On April 1, Bogdon Corporation had $30,000 of raw materials on hand. During the
month, the company purchased an additional $63,000 of raw materials. During April,
$76,000 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 $2,000.
The journal entry to record the requisition from the storeroom would include a:
A. debit to Raw Materials of $76,000
B. debit to Work in Process of $76,000
C. credit to Manufacturing Overhead of $2,000
D. debit to Work in Process of $74,000
Answer:
Kilihea Corporation produces a single product. The company’s absorption costing
income statement for July follows:
The company’s variable production costs are $20 per unit and its fixed manufacturing
overhead totals $80,000 per month.
The break-even point in units for the month under variable costing is:
A. 6,850 units
B. 4,000 units
C. 3,200 units
D. 5,100 units
Answer:
Iadanza Corporation is a wholesaler that sells a single product. Management has
provided the following cost data for two levels of monthly sales volume. The company
sells the product for $195.70 per unit.
The best estimate of the total contribution margin when 6,300 units are sold is:
A. $752,220
B. $638,190
C. $100,170
D. $177,030
Answer:
Young Enterprises has budgeted sales in units for the next five months as follows:
Past experience has shown that the ending inventory for each month should be equal to
10% of the next month’s sales in units. The inventory on May 31 fell short of this goal
since it contained only 400 units. The company needs to prepare a Production Budget
for the next five months.
The beginning inventory in units for September should be:
A. 460 units
B. 6,800 units
C. 540 units
D. 680 units
Answer:
Issuing new shares of stock in a five-for-one split of common stock would:
A. decrease the book value per share of common stock.
B. increase the book value per share of common stock.
C. increase total stockholders’ equity.
D. decrease total stockholders’ equity.
Answer:
Gradert Framings cost formula for its supplies cost is $1,540 per month plus $12 per
frame. For the month of September, the company planned for activity of 668 frames,
but the actual level of activity was 666 frames. The actual supplies cost for the month
was $9,980. The supplies cost in the planning budget for September would be closest
to:
A) $10,010
B) $9,532
C) $9,556
D) $9,980
Answer:
Saffer Corporation keeps careful track of the time required to fill orders. Data
concerning a particular order appear below:
The delivery cycle time was:
A. 7.5 hours
B. 29.1 hours
C. 30.9 hours
D. 3.1 hours
Answer:
The contribution margin ratio is 30% for the Honeyville Company and the break-even
point in sales is $150,000. If the company’s target net operating income is $60,000,
sales would have to be:
A. $200,000
B. $350,000
C. $250,000
D. $210,000
Answer:
The most recent comparative balance sheet of Broekemeier Corporation appears below:
The company uses the indirect method to construct the operating activities section of its
statements of cash flows.
Which of the following is correct regarding the operating activities section of the
statement of cash flows?
A. The change in Accounts Receivable will be subtracted from net income; The change
in Inventory will be added to net income
B. The change in Accounts Receivable will be added to net income; The change in
Inventory will be subtracted from net income
C. The change in Accounts Receivable will be added to net income; The change in
Inventory will be added to net income
D. The change in Accounts Receivable will be subtracted from net income; The change
in Inventory will be subtracted from net income
Answer:
The changes in Tener Company’s balance sheet account balances for last year appear
below:
The company’s income statement for the year appears below:
The company declared and paid $67,000 in cash dividends during the year. It did not
dispose of 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 sales revenue adjusted to a cash basis would be:
A. $940,000
B. $948,000
C. $950,000
D. $952,000
Answer:
Zippy Company has a process costing system. Information about units processed and
processing costs incurred during a recent month in the Refining Department follow:
The beginning work in process inventory had $10,946 of processing cost attached to it
at the beginning of the month. During the month, the Department incurred an additional
$289,954 in processing cost.
Assuming that the company uses the FIFO method, what is the cost per equivalent unit
of production for processing for the month?
A. $2.89
B. $2.98
C. $3.00
D. $3.09
Answer:
Seroka Corporation estimates that its variable manufacturing overhead is $6.90 per
machine-hour and its fixed manufacturing overhead is $745,290 per period.
If the denominator level of activity is 9,000 machine-hours, the variable element in the
predetermined overhead rate would be:
A. $88.80
B. $82.81
C. $89.71
D. $6.90
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 materials price variance for March is:
A) $940 F
B) $1,080 F
C) $1,080 U
D) $940 U
Answer:
What document is used to determine the actual amount of direct labor to record on a job
cost sheet?
A. time ticket
B. payroll register
C. production order
D. wages payable account
Answer:
Wilson Company has a process costing system. The Assembly Department had the
following costs for May:
Assume that Wilson uses the FIFO method, and that for May the company computed
16,000 equivalent units for materials. The cost per equivalent unit for materials for the
month would have been:
A. $12.50
B. $3.00
C. $5.00
D. $9.50
Answer:
Reference: 8-41
Johnny Corporation makes a product that uses a material with the following standards:
The company budgeted for production of 9,500 units in April, but actual production was
9,600 units. The company used 85,400 kilos of direct material to produce this output.
The company purchased 91,900 kilos of the direct material at $1.10 per kilo.
The direct materials purchases variance is computed when the materials are purchased.
The materials price variance for April is:
A) $7,872 F
B) $9,190 U
C) $9,190 F
D) $7,872 U
Answer:
Reference: 8-11
Doubleday Clinic uses client-visits as its measure of activity. During June, the clinic
budgeted for 3,200 client-visits, but its actual level of activity was 3,180 client-visits.
The clinic has provided the following data concerning the formulas to be used in its
budgeting for June:
The net operating income in the planning budget for June would be closest to:
A) $12,486
B) $15,573
C) $12,840
D) $15,379
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 variable overhead efficiency variance for November is:
A) $2,680 F
B) $2,546 F
C) $2,680 U
D) $2,546 U
Answer:
Sultzer 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 3,000 machine-hours. The company actually
worked 2,730 machine-hours during the month. The standard hours allowed for the
actual output of the month totaled 2,690 machine-hours. What was the overall fixed
manufacturing overhead budget variance for the month?
A. $3,317 favorable
B. $160 unfavorable
C. $3,317 unfavorable
D. $160 favorable
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. Assuming that Mckerchie has excess
capacity and can fill the order without cutting back on the production of any product,
what is the minimum price per unit on the special order below which the company
should not go?
A. $26
B. $67
C. $55
D. $160
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:
Nguyen Corporation uses the weighted-average method in its process costing system.
Operating data for the Lubricating Department for the month of October appear below:
What were the equivalent units for conversion costs in the Lubricating Department for
October?
A. 53,700
B. 52,280
C. 54,080
D. 50,100
Answer:
Porl Corporation makes and sells a single product called a Yute. The company is in the
process of preparing its Selling and Administrative Expense Budget for the last quarter
of the year. The following budget data are available:
All of these expenses (except depreciation) are paid in cash in the month they are
incurred.
If the company has budgeted to sell 22,000 Yutes in November, then the total budgeted
selling and administrative expenses for November would be:
A. $426,800
B. $231,000
C. $413,800
D. $195,800
Answer: