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Financial statements for Orange Company appear below:
Dividends during Year 2 totaled $156 thousand, of which $18 thousand were preferred
dividends.
The market price of a share of common stock on December 31, Year 2 was $100.
Orange Company's return on total assets for Year 2 was closest to:
A. 15.5%
B. 15.9%
C. 16.5%
D. 14.5%
Answer:
If Q equals the level of output, P is the selling price per unit, V is the variable expense
per unit, and F is the fixed expense, then the break-even point in units is:
A. Q ÷ (P-V).
B. F ÷ (P-V).
C. V ÷ (P-V).
D. F ÷ [Q(P-V)].
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 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:
Olds Inc., which produces a single product, has provided the following data for its most
recent month of operations:
There were no beginning or ending inventories. The absorption costing unit product
cost was:
A. $97
B. $130
C. $99
D. $207
Answer:
At a volume of 10,000 units, Company P incurs $30,000 in factory overhead costs,
including $10,000 in fixed costs. Assuming that this activity is within the relevant
range, if volume increases to 12,000 units, Company P would expect to incur total
factory overhead costs of:
A. $36,000
B. $34,000
C. $30,000
D. $32,000
Answer:
Dieringer Corporation's most recent balance sheet and income statement appear below:
The acid-test ratio at the end of Year 2 is closest to:
A. 1.69
B. 1.97
C. 1.39
D. 1.52
Answer:
Sommers Fabrication Corporation has a standard cost system in which it applies
manufacturing overhead to products on the basis of standard machine-hours (MHs) at
$9.70 per MH. The company budgeted its fixed manufacturing overhead cost at
$67,000 for the month. During the month, the actual total variable manufacturing
overhead was $66,660 and the actual total fixed manufacturing overhead was $70,000.
The actual level of activity for the period was 6,600 MHs. What was the total of the
variable overhead rate and fixed manufacturing overhead budget variances for the
month?
A) $2,640 unfavorable
B) $5,640 favorable
C) $2,640 favorable
D) $5,640 unfavorable
Answer:
The Tingey Company has 500 obsolete microcomputers that are carried in inventory at
a total cost of $720,000. If these microcomputers are upgraded at a total cost of
$100,000, they can be sold for a total of $160,000. As an alternative, the
microcomputers can be sold in their present condition for $50,000.
What is the net advantage or disadvantage to the company from upgrading the
computers rather than selling them in their present condition?
A. $110,000 advantage
B. $660,000 disadvantage
C. $10,000 advantage
D. $60,000 advantage
Answer:
The following data were supplied by Reader Corporation:
The contribution margin is:
A. $420,000
B. $54,000
C. $474,000
D. $180,000
Answer:
Operating data from Tindall Company for last year follows:
The margin used in ROI calculations was closest to:
A. 18.00%
B. 8.00%
C. 6.67%
D. 15.00%
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:
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:
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.
The accounts receivable balance, net of uncollectible accounts, at the end of December
would be:
A. $82,000
B. $113,400
C. $60,000
D. $54,000
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.
The company's net cash provided by operating activities is:
A. $47,000
B. $51,000
C. $43,000
D. $24,000
Answer:
Zurasky Corporation is considering two alternatives: A and B. Costs associated with the
alternatives are listed below:
Are the materials costs and processing costs relevant in the choice between alternatives
A and B? (Ignore the equipment rental and occupancy costs in this question.)
A. Neither materials costs nor processing costs are relevant
B. Only processing costs are relevant
C. Only materials costs are relevant
D. Both materials costs and processing costs are relevant
Answer:
Park Company purchased $100,000 in inventory from its suppliers, on account. The
company's acid-test ratio would:
A. increase.
B. decrease.
C. remain unchanged.
D. be impossible to determine from the given information.
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:
Fluck Corporation's balance sheet and income statement appear below:
The company sold equipment for $12 that was originally purchased for $5 and that had
accumulated depreciation of $3. The company paid a cash dividend and it did not issue
any bonds payable or repurchase any of its own common stock.
The net cash provided by (used in) investing activities for the year was:
A. $12
B. $(63)
C. $63
D. $(75)
Answer:
Pong Incorporated's income statement for the most recent month is given below.
If Store G sales increase by $40,000 with no change in fixed costs, the overall company
net operating income should:
A. increase by $4,000
B. increase by $8,000
C. increase by $24,000
D. increase by $20,000
Answer:
An outdoor barbecue grill 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 budget variance for the period to the
nearest dollar?
A. $2,750 U
B. $2,570 U
C. $1,850 F
D. $161 F
Answer:
The following partially completed T-accounts summarize transactions for Fabatz
Company during the year:
The manufacturing overhead applied was:
A. $2,200
B. $3,000
C. $5,800
D. $13,900
Answer:
Trecroci Corporation applies manufacturing overhead to products on the basis of
standard machine-hours. The company bases its predetermined overhead rate on 2,500
machine-hours. The company's total budgeted fixed manufacturing overhead is $5,750.
In the most recent month, the total actual fixed manufacturing overhead was $6,030.
The company actually worked 2,600 machine-hours during the month. The standard
hours allowed for the actual output of the month totaled 2,490 machine-hours. What
was the overall fixed manufacturing overhead volume variance for the month?
A. $230 favorable
B. $280 unfavorable
C. $23 unfavorable
D. $230 unfavorable
Answer:
Reference: 8A-13
A manufacturer of industrial equipment has a standard costing system based on
standard direct labor-hours (DLHs) as 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:
How much overhead was applied to products during the period to the nearest dollar?
A) $44,712
B) $44,125
C) $43,125
D) $44,850
Answer:
Beilke Corporation processes sugar beets in batches that it purchases from farmers for
$53 a batch. A batch of sugar beets costs $12 to crush in the company's plant. Two
intermediate products, beet fiber and beet juice, emerge from the crushing process. The
beet fiber can be sold as is for $20 or processed further for $10 to make the end product
industrial fiber that is sold for $26. The beet juice can be sold as is for $30 or processed
further for $29 to make the end product refined sugar that is sold for $79. Which of the
intermediate products should be processed further?
A. beet fiber should be processed into industrial fiber; beet juice should be processed
into refined sugar
B. beet fiber should NOT be processed into industrial fiber; beet juice should be
processed into refined sugar
C. beet fiber should NOT be processed into industrial fiber; beet juice should NOT be
processed into refined sugar
D. beet fiber should be processed into industrial fiber; beet juice should NOT be
processed into refined sugar
Answer:
Smotherman Corporation produces and sells a single product. Data concerning that
product appear below:
The break-even in monthly dollar sales is closest to:
A. $307,160
B. $164,640
C. $514,640
D. $242,200
Answer:
LHU Corporation makes and sells a product called Product WZ. Each unit of Product
WZ requires 2.5 hours of direct labor at the rate of $15.00 per direct labor-hour.
Management would like you to prepare a Direct Labor Budget for June.
The budgeted direct labor cost per unit of Product WZ would be:
A. $37.50
B. $6.00
C. $15.00
D. $17.50
Answer:
Dowen Corporation applies manufacturing overhead to products on the basis of
standard machine-hours. For the most recent month, the company based its budget on
4,400 machine-hours. Budgeted and actual overhead costs for the month appear below:
The company actually worked 4,460 machine-hours during the month. The standard
hours allowed for the actual output were 4,310 machine-hours for the month. What was
the overall variable overhead efficiency variance for the month?
A) $2,198 favorable
B) $1,695 unfavorable
C) $150 unfavorable
D) $503 favorable
Answer:
On April 1, Stelter Corporation had $34,000 of raw materials on hand. During the
month, the company purchased an additional $60,000 of raw materials. During April,
$70,000 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 $7,000. Prepare journal entries to record these events. Use those journal entries
to answer the following questions:
The credits to the Raw Materials account for the month of April total:
A. $94,000
B. $34,000
C. $70,000
D. $60,000
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 working capital at the end of Year 2 is:
A. $630
B. $810
C. $680
D. $420
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:
Carter Corporation applies manufacturing overhead on the basis of machine-hours. At
the beginning of the most recent year, the company based its predetermined overhead
rate on total estimated overhead of $135,850. Actual manufacturing overhead for the
year amounted to $145,000 and actual machine-hours were 5,660. The company's
predetermined overhead rate for the year was $24.70 per machine-hour.
The applied manufacturing overhead for the year was closest to:
A. $135,850
B. $149,218
C. $143,869
D. $139,802
Answer:
Which of the following accounts is debited when direct labor is recorded?
A. Work in process
B. Salaries and wages expense
C. Salaries and wages payable
D. Manufacturing overhead
Answer:
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 cent, what should be the average sales commission per unit at a
sales volume of 36,800 units? (Assume that this sales volume is within the relevant
range.)
A. $13.49
B. $12.17
C. $12.80
D. $12.49
Answer:
Balmforth Products, Inc. makes and sells a single product called a Bik. It takes three
yards of Material A to make one Bik. Budgeted production of Biks for the next five
months is as follows:
The company wants to maintain monthly ending inventories of Material A equal to 20%
of the following month's production needs. On January 31, this target had not been
attained since only 2,000 yards of Material A were on hand. The cost of Material A is
$0.80 per yard. The company wants to prepare a Direct Materials Purchases Budget.
The total needs (i.e., production requirements plus desired ending inventory) of
Material A for the month of May are:
A. 37,800 yards
B. 45,360 yards
C. 46,500 yards
D. 38,940 yards
Answer:
