1) The controller has asked you to examine different distribution methods for applying
factory overhead to the various production orders that are processed during a year.
The following information was taken from the annual budget:
Actual results for the year follow:
2) Costs that remain the same, in total, when production levels change are:
A.fixed costs
B.semivariable costs
C.direct labor costs
D.factory burden costs
3) Rowe Co.’s Job 401 for the manufacture of 2,200 wagons was completed during
August at the unit costs presented below. Final inspection of Job 401 disclosed 200
wagons that were sold to a jobber for $6,000.
Assume that the spoilage loss is charged to all production during August. What would
be the journal entry to record the spoilage?
A.Factory Overhead 11,200
Work in Process 11,200
B.Spoiled Goods Inventory 6,000
Work in Process 6,000
C.Spoiled Goods Inventory 6,000
Factory Overhead 5,200
Work in Process 11,200
D.Spoiled Goods Inventory 11,200
4) Xander Company anticipates that usage of Component T will be 100 units daily,
which equates to around 25,000 for the year. The material is expected to cost $5 per
unit. Once an order is placed with its vendor, it takes five days to receive the goods, and
the cost of placing each order is $50. As a result, Xander keeps 1,000 units on hand to
avoid stockouts. The carrying cost associated with each unit is $10.
5) The direct labor costs for Boundary Company follow:
What was Boundary’s standard direct labor rate?
A.$ 11.95
B.$ 11.49
C.$ 11.60
D.$ 12.00
6) Sanborn Architectural Designs Inc. has three partners that each earn $80,000 per
year, and three associates that earn $58,000 per year. Each partner and associate has
2,000 billable hours per year. Using an activity-based costing approach, if a partner
worked 10 hours on a project, the amount of labor cost that should be billed to the
project is:
A.$200
B.$320
C.$400
D.$500
7) Chapman Corporation manufactures lamps. Management is currently studying
whether the company should continue to make the cord assembly or purchase them
from Graham Company for $5.25. Chapman needs 20,000 cord assemblies a year. If the
part is purchased, the company can not use the released facilities for another
manufacturing activity.
Chapmans unit cost to manufacture the cord assembly is:
The decision Chapman should make and the related differential income is:
Decision Differential Income
A.Buy from Graham $10,000
B.Make the assembly $10,000
C.Make the assembly $25,000
D.Buy from Graham $25,000
8) The budget should use historical data:
A.Only as a stepping-off point for aiding projections into the future
B.Because things dont really change
C.And add a 5% growth factor for each year
D.Because management is satisfied with historical results
9) The first budget to be prepared for a professional services firm should be the:
A.Direct expense budget
B.Labor budget
C.Overhead budget
D.Revenue budget
10) The balance in Post Industries Finished Goods account at December 30 was
$425,000. Its December cost of goods manufactured was $1,350,000, its total
manufacturing costs were $1,500,000 and its cost of goods sold in December was
$1,455,000. What was the balance in Posts Finished Goods at December 1?
A.$380,000
B.$320,000
C.$470,000
D.$530,000
11) Paul Manufacturers has adopted the following standards:
Paul’s January budget was based on normal volume of 100,000 standard labor hours.
During January, Paul produced 26,000 units with records indicating the following data:
Assuming Paul uses the three-variance method of analyzing factory overhead, compute
the following variances for the month of January and indicate whether each is favorable
or unfavorable:
a. Factory overhead spending variance
b. Factory overhead production-volume variance
c. Factory overhead efficiency variance
12) At the end of the period, the balance in the Materials account should represent
A.the cost of materials purchased
B.the cost of materials on hand
C.the cost of materials issued into production
D.the cost of materials included in Work in Process and Finished Goods
13) Rhodes Corporation manufactures a product with the following standard costs:
Standards are based on normal monthly production involving 2,000 direct labor hours
(500 units of output).
The following information pertains to the month of July:
b. Give potential reasons for each of the variances. Be sure to consider
inter-relationships among variances.
14) Responsibility accounting would most likely hold a manager of a manufacturing
unit responsible for:
A.cost of raw materials
B.quantity of raw materials used
C.the number of units ordered
D.amount of taxes incurred
15) The use of either absorption or variable costing will make little difference in
companies
A.with large inventories
B.using JIT
C.with high fixed costs
D.with high variable costs
16) The Wagner Companys Schedule of Earnings and Payroll Taxes for May is
summarized as follows:
(a) Prepare the journal entry to distribute payroll under each of the following scenarios:
(1) Overtime resulted from priority scheduling of Job 3bX for which the company
received a rush order.
(2) Overtime resulted from random scheduling of jobs.
(b) Prepare the journal entry to record and distribute the employers payroll taxes.
17) Taft Company produces 5,000 pallets each day. The average number of units in
work in process is 10,000, having an average cost of $35,000. The annual carrying costs
related to inventory are 20%.
Consultants have determined that the work in process could be reduced by as much as
25% by rearranging the factory floor. What would the throughput time be if Harrison
implements the recommended changes?
A.Twelve hours
B.One day
C.One and one-half days
D.Two days
18) Lots of Locks is an upscale hair salon with eight stylists. Its budget information
follows:
Since all of the stylists are paid the same rate, the proprietor allocates overhead to jobs
based on direct labor hours. Angela Arnold brought her wedding party to Lots of Locks
for styling. It took three designers two hours each and the supplies totaled $50. How
much overhead was applied to the Arnold job?
A.$50
B.$60
C.$120
D.$500
19) Which of the following would cause the break-even point to change?
A.Sales volume increased
B.Fixed costs increased due to addition to physical plant
C.Total variable costs increased as a function of higher production
D.Total production decreased
20) Features of a 401(k) plan include all of the following except:
A.Pension benefits are based on past earnings and length of service with the company
B.The employer may match a certain portion of the employees investment
C.Taxes are deferred on wages invested in the plan
D.Investments may be made in company stock, mutual funds or other investment
vehicles
21) The difference in cost between two alternatives, such as to make a component part
of a final product versus buying the part from an outside supplier is called:
A.Variable cost
B.Differential cost
C.Product cost
D.Indirect cost
22) As a result of recent accounting scandals involving companies such as Enron and
World Com, the Sarbanes-Oxley Act of 2002 was written to protect shareholders of
public companies by improving
A.management accounting
B.corporate governance
C.professional competence
D.the corporate legal process
23) Darla Draperies manufactures top of the line window treatments. A standard
package involves 18 yard of decorative fabric costing $5.00 per yard. Darla has 10,000
yards of fabric on hand at the beginning of the month, but management would like to
reduce inventory levels, so it would like to have 8,000 yards on hand at the end of the
month.
If Darlas production budget is 3,000 packages, what should the companys direct
materials budget be?
A.$280,000
B.$270,000
C.$260,000
D.$268,000
24) Which of the following is not considered when preparing the cost of goods sold
budget?
A.Budgeted factory overhead
B.Budgeted dollar value of finished goods inventory at the end of the period
C.Budgeted sales dollars
D.Budgeted dollar value of work-in-process inventory at the beginning of the year
25) Thomas Company uses a standard cost system and recognizes the materials
purchase price variance at the time materials are purchased. Information for raw
materials for Product RBI for the month of October follows:
What is the entry to record the purchase of materials?
A.Materials 6,600
Material purchase price variance 400
Accounts payable 7,000
B.Materials 7,000
Material purchase price variance 400
Accounts payable 6,600
C.Materials 6,600
Accounts payable 6,600
D.Materials 6,600
26) Kehler Corporation wished to market a new product for $2.00 a unit. Fixed costs to
manufacture this product are $100,000. The contribution margin is 40 percent. How
many units must be sold to realize net income of $100,000 from this product?
A.200,000
B.250,000
C.300,000
D.350,000
27) Spire Ridge Company produces bells. Fixed costs are $800,000. Variable costs per
bell are $60.00, and each bell sells for $100.00. The company sales budget calls for
sales of 24,000 units.
At the budgeted level of sales, what is the margin of safety ratio?
A.20.0%
B.16.7%
C.44.4%
D.33.3%
28) The results of a least squares regression to separate the monthly utilities cost into its
fixed and variable components were as follows:
Y = 5,472 + .036 X
X = the number of units produced
R2 = .735
Which of the following statements is not true of the cost model?
A.Y represents the total semi-variable cost
B.The total monthly fixed utilities costs are $5,472
C.X is referred to as the dependent variable
D.The equation would be represented as a straight line on a graph
29) Patrick Poplin is a factory worker at Ingram Inc. earning $15.00 per hour. Patrick is
eligible for ten paid holidays and three weeks vacation and is paid time-and-a-half for
overtime. He is also eligible for a $700 bonus at the end of the year. Patricks earnings
so far this year are $7,000.
Tax rates are as follows:
Employee income tax 15% on all earnings
FICA 8% on first $100,000 of earnings
FUTA 1% on first $8,000 of earnings
SUTA 4% on first $8,000 of earnings
Assuming Patrick worked 48 hours this week, calculate the total expense to Ingram Inc.
for this weeks wages, payroll taxes and fringe benefits.
30) OReilly Outfitters Inc. has forecasted sales of 32,000 tents for the upcoming year.
The anticipated finished goods inventory at January 1 is 5,000 units, but management
desires this inventory level to be reduced by 20% on December 31 .
Two materials are used in the production of tents: 36 square yards of nylon having a
standard cost of $2.00 per yard, and 20 feet of metal tubing having a standard cost of
$.50 per linear foot. Raw material inventory information is as follows:
(1) Prepare a production budget for the upcoming year.
(2) Prepare a direct materials budget for the upcoming year.
31) The Roberto Company had computed the flow of units for Department B for the
month of May as follows:
Materials are added at the end of the process. There were 8,000 units of work in process
at May 31 . The work in process at May 1 was 30 percent complete as to conversion
costs and the work in process at May 31 was 20 percent complete as to conversion
costs. What was the cost of the goods transferred out and in ending work in process
using the FIFO method? (Ignore transferred-in costs).
32) Logan Lighting, a manufacturer of light fixtures, has the following budgeted
expenses for the year:
Prepare a selling and administrative expense budget for the year.
33) The following information is from Franklin Industries master budget for the current
year:
Prepare flexible budgets for the production and sale of 14,000, 15,000 and 16,000 units,
respectively.
34) Joleen Harmon, CPA, has two clients and uses a job order cost system. Client A
requires 20 hours of partner time and 100 hours of staff time. Client B will use 12 hours
of partner time and 75 hours of staff time. Partners are paid $85 an hour and bill support
time at 50% of their hourly rate. Staff are paid $25 an hour and bill support time at $20
per billable hour. What is the total charge to each of these clients if profit is added at
20% over cost?
35) On July 1, Ossege Company began to manufacture a new product. The company
uses a standard cost system to account for manufacturing costs. The standard costs per
unit for the new product are as follows:
In addition, the following data came from Osseges books for the month of July:
There were no beginning or ending balances in Materials.
Compute each of the following items for Ossege for the month of July:
1> Standard quantity of raw materials allowed for actual production.
2> Actual quantity of raw materials used.
3> Standard direct labor hours allowed.
4> Actual direct labor hours worked.
5> Actual direct labor rate.
6> Actual total overhead.
36)
37) Logan, Inc., had 9,000 units of work in process in Department M on March 1 that
were 50 percent complete as to conversion costs. Materials are introduced at the
beginning of the process. During March, 18,000 units were started, 20,000 units were
completed, and there were 1,000 units of normal losses. Logan had 6,000 units of work
in process at March 31 that were 60 percent complete as to conversion costs. Under
Logan’s cost accounting system, lost units reduce the number of units over which total
cost can be spread. Using the average cost method, what were the equivalent units for
March for conversion costs?
38) The following information is from Devon Manufacturing master budget for the
current year:
Franklin actually produced 33,000 units. Its actual results follow:
Prepare a performance report for the year.
