Reference: 8-33
Tidd Corporation makes a product with the following standard costs:
The company reported the following results concerning this product in November.
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 November is:
A) $1,574 F
B) $1,440 U
C) $1,574 U
D) $1,440 F
Answer:
Reference: 8-57
Jardell Corporation makes a product with the following standards for labor and variable
overhead:
The company budgeted for production of 6,400 units in June, but actual production was
6,400 units. The company used 3,180 direct labor-hours to produce this output. The
actual variable overhead rate was $4.90 per hour. The company applies variable
overhead on the basis of direct labor-hours.
The variable overhead rate variance for June is:
A) $318 U
B) $320 F
C) $318 F
D) $320 U
Answer:
At the beginning of the year, manufacturing overhead for the year was estimated to be
$267,500. At the end of the year, actual direct labor-hours for the year were 22,100
hours, the actual manufacturing overhead for the year was $262,500, and manufacturing
overhead for the year was overapplied by $13,750. If the predetermined overhead rate is
based on direct labor-hours, then the estimated direct labor-hours at the beginning of the
year used in the predetermined overhead rate must have been:
A. 22,100 direct labor-hours
B. 19,900 direct labor-hours
C. 21,000 direct labor-hours
D. 21,400 direct labor-hours
Answer:
The Herald Company manufactures and sells a single product which sells for $50 per
unit and has a contribution margin ratio of 30%. The company’s monthly fixed expenses
are $25,000. If Herald desires a monthly target net operating income equal to 20% of
sales dollars, sales in units will have to be (rounded):
A. 2,500 units
B. 5,000 units
C. 1,666 units
D. 1,000 units
Answer:
The Tingey Company has 500 obsolete microcomputers that are carried in inventory at
a total cost of $720,000. If these microcomputers are upgraded at a total cost of
$100,000, they can be sold for a total of $160,000. As an alternative, the
microcomputers can be sold in their present condition for $50,000.
Suppose the selling price of the upgraded computers has not been set. At what selling
price per unit would the company be as well off upgrading the computers as if it just
sold the computers in their present condition?
A. $100
B. $770
C. $300
D. $210
Answer:
The wages of factory maintenance personnel would usually be considered to be:
A. Option A
B. Option B
C. Option C
D. Option D
Answer:
A partial listing of costs incurred at Backes Corporation during November appears
below:
The total of the period costs listed above for November is:
A. $244,000
B. $321,000
C. $348,000
D. $77,000
Answer:
Reference: 8-52
The Richie Company uses a standard costing system in which variable manufacturing
overhead is assigned to production on the basis of the number of machine setups. Data
for the month of October include the following:
– Variable manufacturing overhead cost incurred: $42,750
– Total variable manufacturing overhead variance: $5,430 favorable
– Standard machine setups allowed for actual production: 2,920 setups
– Actual machine setups incurred: 2,850 setups
The variable overhead rate variance is:
A) $4,275 favorable
B) $4,275 unfavorable
C) $1,050 unfavorable
D) $1,050 favorable
Answer:
Addy Company has two products: A and B. The annual production and sales of Product
A is 1,700 units and of Product B is 1,100 units. The company has traditionally used
direct labor-hours as the basis for applying all manufacturing overhead to products.
Product A requires 0.3 direct labor-hours per unit and Product B requires 0.6 direct
labor-hours per unit. The total estimated overhead for next period is $98,785.
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.)
The predetermined overhead rate under the traditional costing system is closest to:
A. $9.15
B. $43.48
C. $84.43
D. $19.08
Answer:
The following materials standards have been established for a particular product:
The following data pertain to operations concerning the product for the last month:
Required:
a. What is the materials price variance for the month?
b. What is the materials quantity variance for the month?
Answer:
Data concerning Moscowitz Corporation’s single product appear below:
Fixed expenses are $375,000 per month. The company is currently selling 8,000 units
per month. The marketing manager would like to cut the selling price by $15 and
increase the advertising budget by $23,000 per month. The marketing manager predicts
that these two changes would increase monthly sales by 3,100 units. What should be the
overall effect on the company’s monthly net operating income of this change?
A. decrease of $128,900
B. increase of $426,500
C. increase of $8,900
D. increase of $128,900
Answer:
Nyman Company successfully switched to a lean production system at the beginning of
March. Therefore, as shown by the summary below, there were no work in process
inventories on hand at the end of the month.
If Nyman Company uses the weighted-average cost method, the March equivalent units
for materials would be:
A. 190,000 units
B. 174,000 units
C. 150,000 units
D. 166,000 units
Answer:
Snappy Company has a job-order costing system and uses a predetermined overhead
rate based on direct labor-hours to apply manufacturing overhead to jobs.
Manufacturing overhead cost and direct labor hours were estimated at $100,000 and
40,000 hours, respectively, for the year. In July, Job #334 was completed at a cost of
$5,000 in direct materials and $2,400 in direct labor. The labor rate is $6 per hour. By
the end of the year, Snappy had worked a total of 45,000 direct labor-hours and had
incurred $110,250 actual manufacturing overhead cost.
If Job #334 contained 200 units, the unit product cost on the completed job cost sheet
would be:
A. $37.00
B. $42.00
C. $41.90
D. $39.50
Answer:
Favreau Corporation estimates that its variable manufacturing overhead is $6.10 per
machine-hour and its fixed manufacturing overhead is $352,590 per period.
If the denominator level of activity is 6,900 machine-hours, the fixed element in the
predetermined overhead rate would be:
A. $610.00
B. $6.10
C. $57.20
D. $51.10
Answer:
Reference: 8-46
The following labor standards have been established for a particular product:
The following data pertain to operations concerning the product for the last month:
What is the labor efficiency variance for the month?
A) $416 F
B) $416 U
C) $816 F
D) $848 F
Answer:
Reference: 8-42
Fraize Corporation makes a product that uses a material with the quantity standard of
9.5 kilos per unit of output and the price standard of $4.00 per kilo. In July the company
produced 7,000 units using 68,850 kilos of the direct material. During the month the
company purchased 73,600 kilos of the direct material at $3.70 per kilo. The direct
materials purchases variance is computed when the materials are purchased.
The materials price variance for July is:
A) $22,080 U
B) $19,950 U
C) $22,080 F
D) $19,950 F
Answer:
Cadarette Corporation’s most recent balance sheet and income statement appear below:
Dividends on common stock during Year 2 totaled $40 thousand. Dividends on
preferred stock totaled $10 thousand. The market price of common stock at the end of
Year 2 was $17.73 per share.
The return on total assets for Year 2 is closest to:
A. 7.75%
B. 8.67%
C. 7.69%
D. 8.61%
Answer:
Reference: 8-1
Nussey Clinic uses client-visits as its measure of activity. During May, the clinic
budgeted for 2,100 client-visits, but its actual level of activity was 2,050 client-visits.
The clinic has provided the following data concerning the formulas used in its
budgeting and its actual results for May:
Data used in budgeting:
Actual results for May:
The spending variance for medical supplies in May would be closest to:
A) $200 F
B) $200 U
C) $195 F
D) $195 U
Answer:
Mordue Corporation keeps careful track of the time required to fill orders. Data
concerning a particular order appear below:
The manufacturing cycle efficiency (MCE) was closest to:
A. 0.15
B. 0.53
C. 0.05
D. 0.16
Answer:
Gambarini 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 $197.80 per unit.
The best estimate of the total monthly fixed cost is:
A. $541,800
B. $1,192,100
C. $1,099,200
D. $1,145,650
Answer:
Estes Company has assembled the following data for its divisions for the past year:
Division A’s sales are:
A. $400,000
B. $625,000
C. $125,000
D. $200,000
Answer:
Osborne 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. To reduce
rounding error, carry out all computations to at least three decimal places.
The cost per equivalent unit for materials for the month in the first processing
department is closest to:
A. $16.87
B. $15.65
C. $15.09
D. $18.00
Answer:
A manufacturing company uses a standard costing system in which standard
machine-hours (MHs) is the measure of activity. Data from the company’s 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. $1,800 U
B. $222 F
C. $1,010 U
D. $785 U
Answer:
Management of Modugno Corporation is considering whether to purchase a new model
370 machine costing $441,000 or a new model 240 machine costing $387,000 to
replace a machine that was purchased 7 years ago for $429,000. The old machine was
used to make product M25A until it broke down last week. Unfortunately, the old
machine cannot be repaired.
Management has decided to buy the new model 240 machine. It has less capacity than
the new model 370 machine, but its capacity is sufficient to continue making product
M25A.
Management also considered, but rejected, the alternative of simply dropping product
M25A. If that were done, instead of investing $387,000 in the new machine, the money
could be invested in a project that would return a total of $430,000.
In making the decision to invest in the model 240 machine, the opportunity cost was:
A. $430,000
B. $441,000
C. $387,000
D. $429,000
Answer:
When there is a production constraint, a company should emphasize the products with:
A. the highest unit contribution margins.
B. the highest contribution margin ratios.
C. the highest contribution margin per unit of the constrained resource.
D. the highest contribution margins and contribution margin ratios.
Answer:
The following events occurred last year at Dewhurst Company:
Based on the above information, the cash provided (used) by investing activities for the
year on the statement of cash flows would net to:
A. $(21,000)
B. $(15,000)
C. $(7,000)
D. $(37,000)
Answer:
Gotay Corporation’s standard wage rate is $12.00 per direct labor-hour (DLH) and
according to the standards, each unit of output requires 5.8 DLHs. In December, 4,900
units were produced, the actual wage rate was $11.00 per DLH, and the actual hours
were 27,870 DLHs. The Labor Rate Variance for December would be recorded as a:
A. debit of $28,420.
B. credit of $28,420.
C. credit of $27,870.
D. debit of $27,870.
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:
Canon Company has two sales areas: North and South. During last year, the
contribution margin in the North Area was $50,000, or 20% of sales. The segment
margin in the South was $15,000, or 8% of sales. Traceable fixed expenses are $15,000
in the North and $10,000 in the South. During last year, the company reported total net
operating income of $26,000.
The total fixed expenses (traceable and common) for Canon Company for the year
were:
A. $49,000
B. $25,000
C. $24,000
D. $50,000
Answer:
Roy Corporation produces a single product. During July, Roy produced 10,000 units.
Costs incurred during the month were as follows:
Under absorption costing, any unsold units would be carried in the inventory account at
a unit product cost of:
A. $5.10
B. $4.40
C. $3.80
D. $3.50
Answer:
The Reed Division reports the following operating data for the past two years:
The return on investment at Reed was exactly the same in Year 1 and Year 2
The margin in Year 2 was:
A. 48%
B. 32%
C. 20%
D. 10%
Answer:
Financial statements for Marcell Company appear below:
Marcell Company’s average collection period for Year 2 was closest to:
A. 22.6 days
B. 15.7 days
C. 25.8 days
D. 36.9 days
Answer:
Moren Corporation’s net cash provided by operating activities was $95; its net income
was $71; its capital expenditures were $70; and its cash dividends were $18. The
company’s free cash flow was:
A. $254
B. $78
C. $7
D. -$17
Answer:
At a sales volume of 35,000 units, Thoma Corporation’s sales commissions (a cost that
is variable with respect to sales volume) total $448,000.
To the nearest whole dollar, what should be the total sales commissions at a sales
volume of 33,200 units? (Assume that this sales volume is within the relevant range.)
A. $424,960
B. $448,000
C. $436,480
D. $472,289
Answer: