1) The predetermined overhead rate under the traditional costing system is closest to:
Adams Corporation makes two products: Product A and Product B. Annual production
and sales are 500 units of Product A and 900 units of Product B. The company has
traditionally used direct labor-hours as the basis for applying all manufacturing
overhead to products. Product A requires 0.4 direct labor-hours per unit and Product B
requires 0.5 direct labor-hours per unit. The total estimated overhead for next period is
$67,522.
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.)
A.$103.88
B.$13.83
C.$54.86
D.$8.91
2) Acuff 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 6,200 machine-hours. The company actually
worked 6,560 machine-hours during the month. The standard hours allowed for the
actual output of the month totaled 6,420 machine-hours. What was the overall fixed
manufacturing overhead budget variance for the month?
A.$320 Favorable
B.$320 Unfavorable
C.$972 Favorable
D.$972 Unfavorable
3) The following data have been provided by Graise Corporation from its activity-based
costing accounting system:
Distribution of Resource Consumption across Activity Cost Pools:
The “Other” activity cost pool consists of the costs of idle capacity and
organization-sustaining costs that are not assigned to products.
How much factory supervision and indirect factory labor cost would be assigned to the
Batch Set-Up activity cost pool?
A.$195,500
B.$230,000
C.$460,000
D.$185,000
4) Last year the Uptown Division of Gorcen Enterprises had sales of $300,000 and a net
operating income of $24,000. The average operating assets at Uptown last year
amounted to $120,000.
Last year at Uptown the margin used to calculate ROI amounted to:
A.8%
B.12%
C.20%
D.40%
5) Ortman Corporation makes a product with the following standard costs:
The company reported the following results concerning this product in May.
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 May is:
A.$112 F
B.$112 U
C.$109 F
D.$109 U
6) Galbraith Corporation applies overhead cost to jobs on the basis of 70% of direct
labor cost. If Job 201 shows $28,000 of manufacturing overhead applied, the direct
labor cost on the job was:
A.$40,000
B.$19,600
C.$28,000
D.$36,400
7) Grammer Corporation uses an activity-based costing system with three activity cost
pools. The company has provided the following data concerning its costs:
The distribution of resource consumption across the three activity cost pools is given
below:
How much cost, in total, would be allocated in the first-stage allocation to the Other
activity cost pool?
A.$135,000
B.$174,000
C.$162,000
D.$180,000
8) In a statement of cash flows, the sale of a long-term investment would ordinarily be
classified as:
A.an operating activity.
B.a financing activity.
C.an investing activity.
D.a lending activity.
9) The journal entry to record the application of Manufacturing Overhead to Work in
Process would include a:
A.debit to Work in Process of $65,000
B.credit to Work in Process of $65,000
C.credit to Manufacturing Overhead of $60,000
D.debit to Manufacturing Overhead of $60,000
10) Rariton Corporation uses the weighted-average method in its process costing
system. The Molding Department is the second department in its production process.
The data below summarize the department’s operations in January.
The Molding Department’s cost per equivalent unit for conversion cost for January was
$5.37.
How much conversion cost was assigned to the ending work in process inventory in the
Molding Department for January?
A.$4,081.20
B.$10,203.00
C.$10,310.40
D.$6,121.80
11) Excerpts from Neuwirth Corporation’s comparative balance sheet appear below:
Which of the following is the correct treatment within the operating activities section of
the statement of cash flows using the indirect method?
A.The change in Accounts Receivable is added to net income; The change in Inventory
is added to net income
B.The change in Accounts Receivable is added to net income; The change in Inventory
is subtracted from net income
C.The change in Accounts Receivable is subtracted from net income; The change in
Inventory is subtracted from net income
D.The change in Accounts Receivable is subtracted from net income; The change in
Inventory is added to net income
Decreases in current assets are added to net income.
12) Gainer Corporation’s standard wage rate is $11.70 per direct labor-hour (DLH) and
according to the standards, each unit of output requires 3.9 DLHs. In February, 7,800
units were produced, the actual wage rate was $12.50 per DLH, and the actual hours
were 29,940 DLHs. The Labor Rate Variance for February would be recorded as a:
A.debit of $23,952.
B.credit of $23,952.
C.credit of $24,336.
D.debit of $24,336.
13) Warvel Corporation’s management has found that every 5% increase in the selling
price of one of the company’s products leads to an 8% decrease in the product’s total
unit sales. The variable production cost of the product is $18.00 per unit and the
variable selling and administrative cost is $12.00 per unit.
According to the formula in the text, the product’s profit-maximizing price is closest to:
A.$63.08
B.$72.31
C.$96.41
D.$58.67
14) Freiman Corporation is considering investing in a project that would have a 4 year
expected useful life. The company would need to invest $160,000 in equipment that
will have zero salvage value at the end of the project. Annual incremental sales would
be $390,000 and annual cash operating expenses would be $270,000. In year 3 the
company would have to incur one-time renovation expenses of $70,000. Working
capital in the amount of $10,000 would be required. The working capital would be
released for use elsewhere at the end of the project. The company uses straight-line
depreciation on all equipment.
The income tax expense in year 2 is:
A.$24,000
B.$21,000
C.$36,000
D.$3,000
15) 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.$17,397 U
B.$16,817 U
C.$312 F
D.$17,085 U
16) Which of the intermediate products should be processed further?
A) Cane fiber should NOT be processed into industrial fiber; Cane juice should be
processed into molasses
B) Cane fiber should NOT be processed into industrial fiber; Cane juice should NOT be
processed into molasses
C) Cane fiber should be processed into industrial fiber; Cane juice should NOT be
processed into molasses
D) Cane fiber should be processed into industrial fiber; Cane juice should be processed
into molasses
