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 manufacturing overhead cost applied to work in process was:
A. $27,400
B. $30,000
C. $30,850
D. $13,700
Answer:
Byklea Corporation uses the weighted-average method in its process costing system.
This month, the beginning inventory in the first processing department consisted of 200
units. The costs and percentage completion of these units in beginning inventory were:
A total of 7,000 units were started and 6,700 units were transferred to the second
processing department during the month. The following costs were incurred in the first
processing department during the month:
The ending inventory was 90% complete with respect to materials and 45% complete
with respect to conversion costs.
Note: Your answers may differ from those offered below due to rounding error. In all
cases, select the answer that is the closest to the answer you computed. To reduce
rounding error, carry out all computations to at least three decimal places.
The cost per equivalent unit for conversion costs for the first department for the month
is closest to:
A. $32.03
B. $30.81
C. $33.63
D. $31.64
Answer:
Dolittle Company purchased materials on account. The entry to record the purchase of
materials having a standard cost of $0.50 per pound from a supplier at $0.60 per pound
would include a:
A) credit to Raw Materials Inventory.
B) debit to Work in Process.
C) credit to Materials Price Variance.
D) debit to Materials Price Variance.
Answer:
Veltri Corporation is working on its direct labor budget for the next two months. Each
unit of output requires 0.77 direct labor-hours. The direct labor rate is $11.20 per direct
labor-hour. The production budget calls for producing 7,100 units in October and 6,900
units in November. The company guarantees its direct labor workers a 40-hour paid
work week. With the number of workers currently employed, that means that the
company is committed to paying its direct labor work force for at least 5,480 hours in
total each month even if there is not enough work to keep them busy. What would be
the total combined direct labor cost for the two months?
A. $122,752.00
B. $120,736.00
C. $120,881.60
D. $122,606.40
Answer:
Bakker Corporation applies manufacturing overhead on the basis of direct labor-hours.
At the beginning of the most recent year, the company based its predetermined
overhead rate on total estimated overhead of $77,250 and 2,500 estimated direct
labor-hours. Actual manufacturing overhead for the year amounted to $79,000 and
actual direct labor-hours were 2,400.
The overhead for the year was:
A. $3,090 overapplied
B. $4,840 underapplied
C. $4,840 overapplied
D. $3,090 underapplied
Answer:
Haras 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 $141.30 per unit.
The best estimate of the total variable cost per unit is:
A. $123.40
B. $79.60
C. $57.90
D. $130.70
Answer:
Gardner Furniture Company produces two kinds of chairs: an oak model and a chestnut
wood model. The oak model sells for $60 and the chestnut wood model sells for $100.
The variable expenses are as follows:
Expected sales in units next year are: 5,000 oak chairs and 1,000 chestnut chairs. Fixed
expenses are budgeted at $135,000 per year.
The yearly break-even point in total sales for the expected sales mix is:
A. $270,000
B. $300,000
C. $485,000
D. $500,000
Answer:
Selected financial data from Osterville Company for the most recent year appear below:
The income tax rate is 40%.
Net income as a percentage of sales was:
A. 5%
B. 3%
C. 2.25%
D. 1.75%
Answer:
The Dodge Company makes and sells a single product and uses a standard cost system
in which manufacturing overhead costs are applied to units of product on the basis of
standard direct labor-hours. The standard cost card shows that 5 direct labor-hours are
required per unit of product. The Dodge Company had the following budgeted and
actual data for the year:
The budgeted direct labor-hours is used as the denominator activity for the month.
The fixed manufacturing overhead budget variance was:
A. $750 F
B. $3,750 F
C. $7,500 F
D. $3,000 U
Answer:
Pellman 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 unit product cost under variable costing was:
A. $33
B. $32
C. $72
D. $40
Answer:
During the year the balance in the Inventory account increased by $4,000. In order to
adjust the company’s net income to a cash basis using the direct method on the
statement of cash flows, it would be necessary to:
A. subtract the $4,000 from the sales revenue reported on the income statement.
B. add the $4,000 to the sales revenue reported on the income statement.
C. subtract the $4,000 from the cost of goods sold reported on the income statement.
D. add the $4,000 to the cost of goods sold reported on the income statement.
Answer:
Reference: 8-54
The following data have been provided by Augustave Corporation:
Indirect labor and power are both elements of variable manufacturing overhead.
The variable overhead rate variance for indirect labor is closest to:
A) $7,407 F
B) $4,347 F
C) $4,347 U
D) $3,060 F
Answer:
Reference: 8-24
Rushton Hospital bases its budgets on patient-visits. The hospitals static planning
budget for May appears below:
Actual results for the month were:
The spending variance for supplies costs for the month is:
A) $3,030 F
B) $2,520 U
C) $3,030 U
D) $2,520 F
Answer:
Cotuit Company has a current ratio of 3.2 and an acid-test ratio of 2.4. The company’s
current assets consist of cash, marketable securities, accounts receivable, and inventory.
The company’s inventory is $40,000. Cotuit Company’s current liabilities must be:
A. $40,000
B. $120,000
C. $50,000
D. $32,000
Answer:
The following is last month’s contribution format income statement:
What is the company’s break-even in sales dollars?
A. $1,200,000
B. $0
C. $1,800,000
D. $1,600,000
Answer:
Last month 75,000 pounds of direct material were purchased and 71,000 pounds were
used. If the actual purchase price per pound was $0.50 more than the standard purchase
price per pound, then the materials price variance was:
A) $2,000 F
B) $37,500 F
C) $37,500 U
D) $35,500 U
Answer:
Product engineering is an example of a:
A. Unit-level activity.
B. Batch-level activity.
C. Product-level activity.
D. Facility-level activity.
Answer:
Ladabouche Corporation’s total current assets are $390,000, its noncurrent assets are
$630,000, its total current liabilities are $330,000, its long-term liabilities are $420,000,
and its stockholders’ equity is $270,000. The current ratio is closest to:
A. 0.85
B. 0.79
C. 1.18
D. 0.62
Answer:
Heersink Corporation bases its predetermined overhead rate on variable manufacturing
overhead cost of $10.50 per machine-hour and fixed manufacturing overhead cost of
$108,108 per period. If the denominator level of activity is 2,700 machine-hours, the
fixed element in the predetermined overhead rate would be:
A. $1,050.00
B. $40.04
C. $10.50
D. $50.54
Answer:
Tanigawa Inc. has an operating leverage of 8.7. If the company’s sales increase by 8%,
its net operating income should increase by about:
A. 69.6%
B. 8.7%
C. 108.8%
D. 8.0%
Answer:
Reference: 8-20
Herard Corporation manufactures and sells a single product. The company uses units as
the measure of activity in its flexible budgets. During March, the company budgeted for
7,900 units, but its actual level of activity was 7,890 units. The company has provided
the following data concerning the formulas used in its budgeting and its actual results
for March:
Data used in budgeting:
Actual results for March:
The direct materials in the flexible budget for March would be closest to:
A) $117,847
B) $119,928
C) $117,549
D) $120,080
Answer:
Galino 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. $104,400
B. $31,200
C. $13,000
D. $135,600
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 materials price variance for August is:
A) $2,360 U
B) $2,360 F
C) $2,226 U
D) $2,226 F
Answer:
Grosseiller Corporation uses the weighted-average method in its process costing
system. This month, the beginning inventory in the first processing department
consisted of 900 units. The costs and percentage completion of these units in beginning
inventory were:
A total of 6,400 units were started and 5,200 units were transferred to the second
processing department during the month. The following costs were incurred in the first
processing department during the month:
The ending inventory was 65% complete with respect to materials and 15% complete
with respect to conversion costs.
Note: Your answers may differ from those offered below due to rounding error. In all
cases, select the answer that is the closest to the answer you computed. To reduce
rounding error, carry out all computations to at least three decimal places.
How many units are in ending work in process inventory in the first processing
department at the end of the month?
A. 2,100
B. 1,200
C. 5,500
D. 900
Answer:
Gore Corporation has two divisions: the Business Products Division and the Export
Products Division. The Business Products Division’s divisional segment margin is
$55,700 and the Export Products Division’s divisional segment margin is $70,600. The
total amount of common fixed expenses not traceable to the individual divisions is
$107,400. What is the company’s net operating income?
A. $233,700
B. $(126,300)
C. $126,300
D. $18,900
Answer:
Freestone Company is considering renting Machine Y to replace Machine X. It is
expected that Y will waste less direct materials than does X. If Y is rented, X will be
sold on the open market. For this decision, which of the following factors is (are)
relevant?
I. Cost of direct materials used
II. Resale value of Machine X
A. Only I
B. Only II
C. Both I and II
D. Neither I nor II
Answer:
The management of Heider Corporation is considering dropping product J14V. Data
from the company’s accounting system appear below:
In the company’s accounting system all fixed expenses of the company are fully
allocated to products. Further investigation has revealed that $211,000 of the fixed
manufacturing expenses and $172,000 of the fixed selling and administrative expenses
are avoidable if product J14V is discontinued. What would be the effect on the
company’s overall net operating income if product J14V were dropped?
A. Overall net operating income would decrease by $55,000.
B. Overall net operating income would increase by $160,000.
C. Overall net operating income would increase by $55,000.
D. Overall net operating income would decrease by $160,000.
Answer:
Hick 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 $20 thousand. The market price of common stock at the end of
Year 2 was $9.57 per share.
The return on common stockholders’ equity for Year 2 is closest to:
A. 12.44%
B. 13.02%
C. 15.38%
D. 10.53%
Answer:
When the actual amount of a raw material used in production is greater than the
standard amount allowed for the actual output, the journal entry would include:
A. Debit to Raw Materials; Credit to Materials Quantity Variance
B. Debit to Work-In-Process; Credit to Materials Quantity Variance
C. Debit to Raw Materials; Debit to Materials Quantity Variance
D. Debit to Work-In-Process; Debit to Materials Quantity Variance
Answer:
Evergreen Corp. has provided the following data:
The contribution margin ratio is:
A. 70%
B. 45%
C. 75%
D. 55%
Answer: