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Excerpts from Goodrow Corporation's most recent balance sheet and income statement
appear below:
Dividends on common stock during Year 2 totaled $20 thousand. Dividends on
preferred stock totaled $10 thousand. The market price of common stock at the end of
Year 2 was $5.34 per share.
The book value per share at the end of Year 2 is closest to:
A. $0.30
B. $3.05
C. $6.10
D. $3.55
Answer:
Reference: 8-9
Parisi Clinic uses client-visits as its measure of activity. During March, the clinic
budgeted for 2,300 client-visits, but its actual level of activity was 2,350 client-visits.
The clinic has provided the following data concerning the formulas to be used in its
budgeting:
The occupancy expenses in the flexible budget for March would be closest to:
A) $14,510
B) $15,370
C) $15,147
D) $15,515
Answer:
Severn Company uses the FIFO method in its process costing system. The following
data were taken from the accounting records of the company for last month:
The cost of the units in the ending Work in Process inventory is:
A. $17,000
B. $20,000
C. $10,000
D. $22,500
Answer:
Reference: 8-27
The Litton Company has established standards as follows:
Direct material: 3 pounds per unit @ $4 per pound = $12 per unit
Direct labor: 2 hours per unit @ $8 per hour = $16 per unit
Variable manufacturing overhead: 2 hours per unit @ $5 per hour = $10 per unit
Actual production figures for the past year are given below. The company records the
materials price variance when materials are purchased.
The company applies variable manufacturing overhead to products on the basis of
standard direct labor-hours.
The materials price variance is:
A) $400 U
B) $400 F
C) $600 F
D) $600 U
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:
Deshaies Corporation is preparing its cash budget for November. The budgeted
beginning cash balance is $10,000. Budgeted cash receipts total $100,000 and budgeted
cash disbursements total $104,000. The desired ending cash balance is $30,000.
To attain its desired ending cash balance for November, the company should borrow:
A. $36,000
B. $30,000
C. $24,000
D. $0
Answer:
Which of the following entries would correctly record charging direct labor costs to
Work in Process, given an unfavorable labor efficiency variance and a favorable labor
rate variance?
A) Work in Process
Labor Rate Variance
Labor Efficiency Variance
Wages Payable
B) Work in Process
Wages Payable
C) Labor Efficiency Variance
Labor Rate Variance
D) Work in Process
Labor Efficiency Variance
Labor Rate Variance
Wages Payable
Answer:
Conversion cost consists of which of the following?
A. Manufacturing overhead cost.
B. Direct materials and direct labor cost.
C. Direct labor cost.
D. Direct labor and manufacturing overhead cost.
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 variable overhead efficiency variance for March is:
A) $320 unfavorable
B) $320 favorable
C) $360 unfavorable
D) $360 favorable
Answer:
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 dividend yield ratio on December 31, Year 2 was closest to:
A. 3.1%
B. 1.1%
C. 3.5%
D. 2.7%
Answer:
Pong Incorporated's income statement for the most recent month is given below.
The marketing department believes that a promotional campaign for Store H costing
$8,000 will increase the store's sales by $15,000. If the campaign is adopted, overall
company net operating income should:
A. decrease by $5,000
B. decrease by $5,500
C. increase by $2,000
D. increase by $7,000
Answer:
A manufacturing company that produces a single product has provided the following
data concerning its most recent month of operations:
The total gross margin for the month under absorption costing is:
A. $42,000
B. $14,700
C. $69,000
D. $79,800
Answer:
Reference: 8-34
Caquias Corporation makes a product with the following standard costs:
The company reported the following results concerning this product in August.
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 August is:
A) $105 F
B) $110 F
C) $105 U
D) $110 U
Answer:
Reference: 8-35
Sande Corporation makes a product with the following standard costs:
In November the companys budgeted production was 2,900 units but the actual
production was 3,000 units. The company used 27,670 grams of the direct material and
1,390 direct labor-hours to produce this output. During the month, the company
purchased 31,700 grams of the direct material at a cost of $196,540. The actual direct
labor cost was $29,607 and the actual variable overhead cost was $2,502.
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 November is:
A) $5,520 F
B) $6,340 F
C) $5,520 U
D) $6,340 U
Answer:
During the month of September, direct labor cost totaled $11,000 and direct labor cost
was 40% of prime cost. If total manufacturing costs during September were $73,000,
the manufacturing overhead was:
A. $16,500
B. $27,500
C. $62,000
D. $45,500
Answer:
The following accounts are from last year's books at Sharp Manufacturing:
Sharp uses job-order costing and applies manufacturing overhead to jobs based on
direct labor costs. What is the amount of cost of goods manufactured for the year?
A. $252,000
B. $227,000
C. $230,000
D. $255,000
Answer:
The Steff Company has the following flexible budget (in condensed form) for
manufacturing overhead:
The following data concerning production pertain to last year's 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, $850 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:
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:
The Baily Division recorded operating data as follows for the past two years:
Baily Division's turnover was exactly the same in both Year 1 and Year 2.
Sales in Year 1 amounted to:
A. $400,000
B. $900,000
C. $750,000
D. $1,200,000
Answer:
Mitchell Company had the following budgeted sales for the last half of last year:
The company is in the process of preparing a cash budget and must determine the
expected cash collections by month. To this end, the following information has been
assembled:
Collections on credit sales:
60% in month of sale
30% in month following sale
10% in second month following sale
What is the budgeted accounts receivable balance on December 1?
A. $80,000
B. $140,000
C. $94,500
D. $131,300
Answer:
Robledo Corporation produces and sells a single product. Data concerning that product
appear below:
Fixed expenses are $625,000 per month. The company is currently selling 9,000 units
per month.
This question is to be considered independently of all other questions relating to
Robledo Corporation. Refer to the original data when answering this question.
Management is considering using a new component that would increase the unit
variable cost by $3. Since the new component would increase the features of the
company's product, the marketing manager predicts that monthly sales would increase
by 400 units. What should be the overall effect on the company's monthly net operating
income of this change?
A. decrease of $30,800
B. decrease of $3,800
C. increase of $30,800
D. increase of $3,800
Answer:
Bordes Corporation has provided the following data concerning its most important raw
material, compound R85F:
The raw material was purchased on account.
The credits to the Raw Materials account for May would total:
A. $75,240
B. $77,880
C. $58,596
D. $53,808
Answer:
Last year, Nye Company reported on its income statement sales of $475,000 and cost of
goods sold of $240,000. During the year, the balance in accounts receivable increased
$40,000, the balance in accounts payable decreased $25,000, and the balance in
inventory increased $10,000. The company uses the direct method to determine the net
cash provided by operating activities on its statement of cash flows.
Under the direct method, sales adjusted to a cash basis would be:
A. $435,000
B. $455,000
C. $515,000
D. $375,000
Answer:
The purpose of the Data Processing Department of Falena Corporation is to assist the
various departments of the corporation with their information needs free of charge. The
Data Processing Department would best be evaluated as a:
A. cost center.
B. revenue center.
C. profit center.
D. investment center.
Answer:
Alkine Company's comparative balance sheet appears below:
Alkine reported the following net income for the year:
Dividends were declared and paid during the year. A gain of $8,000 was recorded on the
sale of the long-term investments. The company did not purchase any long-term
investments or dispose of any property, plant, and equipment during the year. It also did
not issue any bonds payable or repurchase any of its own common stock.
The net cash provided (used) by financing activities would be:
A. $3,000
B. $(5,000)
C. $(58,200)
D. $(61,200)
Answer:
Last month, when 10,000 units of a product were manufactured, the cost per unit was
$60. At this level of activity, variable costs are 50% of total unit costs. If 10,500 units
are manufactured next month and cost behavior patterns remain unchanged the:
A. total variable cost will remain unchanged.
B. fixed costs will increase in total.
C. variable cost per unit will increase.
D. total cost per unit will decrease.
Answer:
Ring, Incorporated's income statement for the most recent month is given below.
Refer to the original data.
If sales in Store Q increase by $30,000 as a result of a $7,000 increase in traceable fixed
costs:
A. Store Q's contribution margin should increase by $18,000
B. Store Q's segment margin should increase by $12,000
C. Store Q's contribution margin should increase by $11,000
D. Store Q's segment margin should increase by $5,000
Answer:
Dodrill Company makes two products from a common input. Joint processing costs up
to the split-off point total $43,200 a year. The company allocates these costs to the joint
products on the basis of their total sales values at the split-off point. Each product may
be sold at the split-off point or processed further. Data concerning these products appear
below:
What is the net monetary advantage (disadvantage) of processing Product Y beyond the
split-off point?
A. $(4,200)
B. $21,800
C. $24,400
D. $(1,600)
Answer:
Overhead is applied to work in process in a standard costing system by:
A) multiplying actual hours times the predetermined rate.
B) multiplying standard hours allowed for the output of the period times the
predetermined rate.
C) multiplying actual hours times the actual rate.
D) multiplying standard hours allowed for the output of the period times the actual rate.
Answer:
Budgeted sales in Allen Company over the next four months are given below:
Twenty-five percent of the company's sales are for cash and 75% are on account.
Collections for sales on account follow a stable pattern as follows: 50% of a month's
credit sales are collected in the month of sale, 30% are collected in the month following
sale, and 15% are collected in the second month following sale. The remainder are
uncollectible. Given these data, cash collections for December should be:
A. $138,000
B. $133,500
C. $120,000
D. $103,500
Answer:
The Wright Company has a standard costing system. The following data are available
for September:
The actual price per pound of direct materials purchased in September is:
A) $1.85
B) $2.00
C) $2.10
D) $2.15
Answer:
Washtenaw Corporation uses a job-order costing system. The following data are for last
year:
Washtenaw applies overhead using a predetermined rate based on direct labor-hours.
What predetermined overhead rate was used last year?
A. $3.55 per direct labor-hour
B. $3.25 per direct labor-hour
C. $3.08 per direct labor-hour
D. $3.36 per direct labor-hour
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:
