Mounts Corporation produces and sells two products. In the most recent month, Product
I05L had sales of $32,000 and variable expenses of $10,880. Product P42T had sales of
$45,000 and variable expenses of $18,380. And the fixed expenses of the entire
company were $46,070. The break-even point for the entire company is closest to:
A. $30,930
B. $75,330
C. $74,306
D. $46,070
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:
Heroman Corporation applies manufacturing overhead to products on the basis of
standard machine-hours. The budgeted fixed manufacturing overhead cost for the most
recent month was $26,550 and the actual fixed manufacturing overhead cost for the
month was $26,570. The company based its original budget on 5,900 machine-hours.
The standard hours allowed for the actual output of the month totaled 5,750
machine-hours. What was the overall fixed manufacturing overhead budget variance for
the month?
A) $20 unfavorable
B) $675 favorable
C) $20 favorable
D) $675 unfavorable
Answer:
The economic impact of the inability to reach a target denominator level of activity
would best be measured by:
A) the amount of the volume variance.
B) the contribution margin lost by failing to meet the target denominator level of
activity.
C) the amount of the fixed manufacturing overhead budget variance.
D) the amount of the variable overhead efficiency variance.
Answer:
More Company has two divisions, L and M. During July, the contribution margin in
Division L was $60,000. The contribution margin ratio in Division M was 40% and its
sales were $250,000. Division M’s segment margin was $60,000. The common fixed
expenses were $50,000 and the company net operating income was $20,000. The
segment margin for Division L was:
A. $0
B. $10,000
C. $50,000
D. $60,000
Answer:
When a decision is made among a number of alternatives, the benefit that is lost by
choosing one alternative over another is the:
A. realized cost.
B. opportunity cost.
C. conversion cost.
D. accrued cost.
Answer:
Reference: 8A-10
A furniture manufacturer 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:
What was the fixed manufacturing overhead budget variance for the period to the
nearest dollar?
A) $4,286 F
B) $1,800 U
C) $2,775 F
D) $1,575 F
Answer:
Which of the following statements provide(s) an argument in favor of including only a
plant’s net book value rather than gross book value as part of operating assets in the
ROI computation?
I. Net book value is consistent with how plant and equipment items are reported on a
balance sheet.
II. Net book value is consistent with the computation of net operating income, which
includes depreciation as an operating expense.
III. Net book value allows ROI to decrease over time as assets get older.
A. Only I.
B. Only III.
C. Only I and II.
D. Only I and III.
Answer:
Reference: 8A-18
The following data for April has been provided by Mittler Corporation.
The volume variance for April is:
A) $10,150 U
B) $8,120 U
C) $8,120 F
D) $10,150 F
Answer:
A manufacturer of tiling grout has supplied the following data:
The company’s contribution margin ratio is closest to:
A. 46.3%
B. 37.0%
C. 63.0%
D. 53.7%
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 labor rate variance for November is:
A) $2,363 U
B) $2,550 F
C) $2,550 U
D) $2,363 F
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 average collection period for Year 2 is closest to:
A. 57.3 days
B. 53.3 days
C. 0.9 days
D. 1.2 days
Answer:
The Materials Price Variance for May would be recorded as a:
A) Credit of $2,056
B) Debit of $2,640
C) Debit of $2,056
D) Credit of $2,640
Answer:
Southwest Industries produces a sports glove that sells for $15 per pair. Variable
expenses are $8 per pair and fixed expenses are $35,000 annually.
The break-even point for Southwest Industries in pairs of gloves is:
A. 8,000 pairs
B. 5,000 pairs
C. 4,375 pairs
D. 2.333 pairs
Answer:
Reference: 8-7
Edington Clinic uses client-visits as its measure of activity. During September, the
clinic budgeted for 2,800 client-visits, but its actual level of activity was 2,850
client-visits. The clinic has provided the following data concerning the formulas to be
used in its budgeting for September:
The net operating income in the planning budget for September would be closest to:
A) $16,387
B) $10,300
C) $11,200
D) $16,978
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.
Expected cash collections in December are:
A. $59,400
B. $140,000
C. $199,400
D. $200,000
Answer:
(Ignore income taxes in this problem.) Mary wants to have $20,000 available for use in
four years. How much should Mary invest now in order to have the $20,000 available in
four years if she can invest money at 16%:
A. $13,990
B. $2,760
C. $11,040
D. $16,800
Answer:
The following data pertain to last month’s operations:
The break-even point in dollars is:
A. $300,000
B. $240,000
C. $200,000
D. $160,000
Answer:
Abe Company, which has only one product, has provided the following data concerning
its most recent month of operations:
What is the unit product cost for the month under variable costing?
A. $99
B. $81
C. $106
D. $88
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 occupancy costs for the month is:
A) $1,980 F
B) $1,980 U
C) $2,860 U
D) $2,860 F
Answer:
Reference: 8-12
Nakhle Kennel uses tenant-days as its measure of activity; an animal housed in the
kennel for one day is counted as one tenant-day. During October, the kennel budgeted
for 3,000 tenant-days, but its actual level of activity was 2,960 tenant-days. The kennel
has provided the following data concerning the formulas used in its budgeting and its
actual results for October:
Data used in budgeting:
Actual results for October:
The administrative expenses in the planning budget for October would be closest to:
A) $7,484
B) $7,284
C) $7,585
D) $7,300
Answer:
Reference: 8A-3
The Chase Company uses a standard cost system in which manufacturing overhead
costs are applied to products on the basis of standard machine-hours. For November, the
companys flexible budget for manufacturing overhead showed the following total
budgeted costs at the denominator activity level of 40,000 machine-hours:
During November 42,000 machine-hours were used to complete 13,200 units of product
with the following actual overhead costs:
The standard time allowed to complete one unit of product is 3.6 machine-hours.
The total amount of overhead cost applied to Work in Process during November was:
A) $47,520
B) $66,528
C) $106,528
D) $114,048
Answer:
Reference: 8A-9
The Steff Company has the following flexible budget (in condensed form) for
manufacturing overhead:
The following data concerning production pertain to last years 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,s850 for the year.
– The standard direct labor time is two hours per unit of product.
The variable element of the predetermined overhead rate was (per DLH):
A) $4.15
B) $3.00
C) $2.00
D) $1.15
Answer:
Kelln Corporation’s most recent comparative balance sheet and income statement
appear below:
The company paid a cash dividend and it did not dispose of any property, plant, and
equipment. The company did not issue any bonds payable or repurchase any of its own
common stock. The following question pertain to the company’s statement of cash
flows.
The net cash provided by (used in) financing activities for the year was:
A. $(15)
B. $4
C. $(9)
D. $(10)
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:
Reference: 8-39
The Geurtz Company uses standard costing. The company makes and sells a single
product called a Roff. The following data are for the month of August:
– Actual cost of direct material purchased and used: $65,560
– Material price variance: $5,960 unfavorable
– Total materials variance: $22,360 unfavorable
– Standard cost per pound of material: $4
– Standard cost per direct labor-hour: $5
– Actual direct labor-hours: 6,500 hours
– Labor efficiency variance: $3,500 favorable
– Standard number of direct labor-hours per unit of Roff: 2 hours
– Total labor variance: $400 unfavorable
The actual direct labor rate per hour was:
A) $5.60
B) $5.00
C) $10.00
D) $4.40
Answer:
A manufacturing company that produces a single product has provided the following
data concerning its most recent month of operations:
What is the net operating income for the month under absorption costing?
A. $5,300
B. $3,000
C. $(12,700)
D. $8,300
Answer:
Hartzog 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 $5 thousand. The market price of common stock at the end of
Year 2 was $7.04 per share.
The price-earnings ratio for Year 2 is closest to:
A. 9.64
B. 16.37
C. 11.54
D. 17.60
Answer:
Reference: 8B-2
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:
Morvan Corporation uses the FIFO method in its process costing system. Data
concerning the first processing department for the most recent month are listed below:
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.
The total cost transferred from the first processing department to the next processing
department during the month is closest to:
A. $603,400
B. $597,619
C. $632,583
D. $614,400
Answer:
The FIFO method provides a major advantage over the weighted-average method in
that:
A. the calculation of equivalent units is less complex under the FIFO method.
B. the FIFO method treats units in the beginning inventory as if they were started and
completed during the current period.
C. the FIFO method provides measurements of work done during the current period.
D. the weighted-average method ignores units in the beginning and ending work in
process inventories.
Answer:
All other things being equal, if a division’s traceable fixed expenses increase:
A. the division’s contribution margin ratio will decrease.
B. the division’s segment margin ratio will remain the same.
C. the division’s segment margin will decrease.
D. the overall company profit will remain the same.
Answer:
Sugiki Corporation has two divisions: the Alpha Division and the Delta Division. The
Alpha Division has sales of $820,000, variable expenses of $369,000, and traceable
fixed expenses of $347,300. The Delta Division has sales of $460,000, variable
expenses of $294,400, and traceable fixed expenses of $134,100. The total amount of
common fixed expenses not traceable to the individual divisions is $97,300. What is the
company’s net operating income?
A. $135,200
B. $37,900
C. $616,600
D. $519,300
Answer:
Wilson Company has a process costing system. The Assembly Department had the
following costs for May:
Assume that Wilson uses the weighted-average method and that for May the company
computed 20,000 equivalent units for labor and overhead. The cost per equivalent unit
for labor and overhead for the month would have been:
A. $1.60
B. $10.00
C. $8.40
D. $16.00
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.
December cash disbursements for merchandise purchases would be:
A. $283,200
B. $196,000
C. $288,000
D. $282,400
Answer: