The Consumer Products Division of Weiter Corporation had average operating assets of
$570,000 and net operating income of $65,100 in March. The minimum required rate of
return for performance evaluation purposes is 12%.
What was the Consumer Products Division’s residual income in March?
A. -$3,300
B. $3,300
C. -$7,812
D. $7,812
Answer:
Malcolm Company uses a predetermined overhead rate based on direct labor-hours to
apply manufacturing overhead to jobs.
The cost records for September will show:
A. Overapplied manufacturing overhead of $1,500
B. Underapplied overhead of $1,500
C. Overapplied manufacturing overhead of $3,500
D. Underapplied overhead of $3,500
Answer:
Financial statements for Marcell Company appear below:
Marcell Company’s current ratio at the end of Year 2 was closest to:
A. 1.04
B. 0.42
C. 0.48
D. 1.22
Answer:
Given the cost formula Y = $15,000 + $5X, total cost at an activity level of 8,000 units
would be:
A. $23,000
B. $15,000
C. $55,000
D. $40,000
Answer:
Dieringer Corporation’s most recent balance sheet and income statement appear below:
The average sale period for Year 2 is closest to:
A. 36.9 days
B. 248.0 days
C. 22.3 days
D. 32.8 days
Answer:
Byron 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. $86
B. $77
C. $83
D. $92
Answer:
Casper Corporation makes and sells a product called a Miniwarp. One Miniwarp
requires 3.5 kilograms of the raw material Jurislon. Budgeted production of Miniwarps
for the next five months is as follows:
The company wants to maintain monthly ending inventories of Jurislon equal to 10% of
the following month’s production needs. On July 31, this requirement was not met since
only 6,900 kilograms of Jurislon were on hand. The cost of Jurislon is $3.00 per
kilogram. The company wants to prepare a Direct Materials Purchase Budget for the
next five months.
The total cost of Jurislon to be purchased in August is:
A. $233,625
B. $407,700
C. $214,200
D. $212,925
Answer:
Lagasca Corporation’s contribution format income statement for December appears
below:
The degree of operating leverage is closest to:
A. 10.56
B. 0.21
C. 4.69
D. 0.09
Answer:
Financial statements for Harwich Company for the most recent year appear below:
The balances in the Cash, Accounts Receivable, Inventory, Bonds Payable, Common
Stock, and Additional Paid-In Capital accounts are unchanged from the beginning of the
year. A $0.75 per share dividend was declared and paid during the year. On December
31, Harwich Company’s common stock was trading at $24.00 per share.
Harwich Company’s dividend payout ratio for the year was closest to:
A. 75%
B. 25%
C. 5%
D. 3.125%
Answer:
Slappy Corporation leases its corporate headquarters building. This lease cost is fixed
with respect to the company’s sales volume. In a recent month in which the sales
volume was 20,000 units, the lease cost was $482,000.
To the nearest whole dollar, what should be the total lease cost at a sales volume of
16,900 units in a month? (Assume that this sales volume is within the relevant range.)
A. $407,290
B. $482,000
C. $570,414
D. $444,645
Answer:
Financial statements for Harwich Company for the most recent year appear below:
The balances in the Cash, Accounts Receivable, Inventory, Bonds Payable, Common
Stock, and Additional Paid-In Capital accounts are unchanged from the beginning of the
year. A $0.75 per share dividend was declared and paid during the year. On December 31,
Harwich Company’s common stock was trading at $24.00 per share.
Harwich Company’s acid-test ratio at December 31 was closest to:
A. 0.45
B. 0.83
C. 2.00
D. 1.20
Answer:
Heller Corporation uses the weighted-average 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 of ending work in process inventory in the first processing department
according to the company’s cost system is closest to:
A. $14,930
B. $23,466
C. $9,778
D. $39,110
Answer:
Reference: 8-38
The Thompson Company uses standard costing and has established the following direct
material and direct labor standards for each unit of Lept.
Direct materials: 2 gallons at $4 per gallon
Direct labor: 0.5 hours at $8 per hour
During September, the company made 6,000 Lepts and incurred the following costs:
Direct materials purchased: 13,400 gallons at $4.10 per gallon
Direct materials used: 12,600 gallons
Direct labor used: 2,800 hours at $7.65 per hour
The labor efficiency variance for September was:
A) $33,600 favorable
B) $1,600 favorable
C) $22,400 favorable
D) $3,200 favorable
Answer:
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 labor rate variance for November is:
A) $787 U
B) $720 F
C) $787 F
D) $720 U
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 debits to the Raw Materials account for May would total:
A) $58,596
B) $75,240
C) $53,808
D) $77,880
Answer:
The opportunity cost of making a component part in a factory with no excess capacity is
the:
A. variable manufacturing cost of the component.
B. fixed manufacturing cost of the component.
C. total manufacturing cost of the component.
D. net benefit foregone from the best alternative use of the capacity required.
Answer:
Reference: 8-47
Bonnot Corporation makes a product that has the following direct labor standards:
The company budgeted for production of 2,100 units in October, but actual production
was 1,900 units. The company used 410 direct labor-hours to produce this output. The
actual direct labor rate was $20.60 per hour.
The labor efficiency variance for October is:
A) $618 U
B) $630 F
C) $618 F
D) $630 U
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 cost per equivalent unit for conversion costs for the first department for the month
is closest to:
A. $48.50
B. $44.72
C. $42.59
D. $43.33
Answer:
Gradert Framings cost formula for its supplies cost is $1,540 per month plus $12 per
frame. For the month of September, the company planned for activity of 668 frames,
but the actual level of activity was 666 frames. The actual supplies cost for the month
was $9,980. The supplies cost in the planning budget for September would be closest
to:
A) $10,010
B) $9,532
C) $9,556
D) $9,980
Answer:
Reference: 8-22
Friou Corporation manufactures and sells a single product. The company uses units as
the measure of activity in its flexible budgets. During July, the company budgeted for
6,300 units, but its actual level of activity was 6,250 units. The company has provided
the following data concerning the formulas used in its budgeting and its actual results
for July:
Data used in budgeting:
Actual results for July:
The net operating income in the flexible budget for July would be closest to:
A) $19,050
B) $28,279
C) $18,475
D) $27,832
Answer:
The Rodgers Company makes 27,000 units of a certain component each year for use in
one of its products. The cost per unit for the component at this level of activity is as
follows:
Rodgers has received an offer from an outside supplier who is willing to provide 27,000
units of this component each year at a price of $25 per component. Assume that direct
labor is a variable cost. None of the fixed manufacturing overhead would be avoidable
if this component were purchased from the outside supplier.
Assume that there is no other use for the capacity now being used to produce the
component and the total fixed manufacturing overhead of the company would be
unaffected by this decision. If Rodgers Company purchases the components rather than
making them internally, what would be the impact on the company’s annual net
operating income?
A. $94,500 increase
B. $81,000 decrease
C. $237,600 decrease
D. $124,000 increase
Answer:
A furniture manufacturer has a standard costing system based on standard direct
labor-hours (DLHs) as 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. $4,286 F
B. $1,800 U
C. $2,775 F
D. $1,575 F
Answer:
Estes Company has assembled the following data for its divisions for the past year:
Division A’s residual income is:
A. $20,000
B. $30,000
C. $35,000
D. $45,000
Answer:
Raybould Corporation has provided the following data concerning its most important
raw material, compound M31P:
When recording the purchase of materials, Raw Materials would be:
A) credited for $49,950.
B) credited for $51,300.
C) debited for $49,950.
D) debited for $51,300.
Answer:
Van Aalst Company’s comparative balance sheet and income statement for last year
appear below:
The company declared and paid $77,000 in cash dividends during the year. It did not
sell or retire any property, plant, and equipment during the year. The company uses the
direct method to determine the net cash provided by operating activities.
On the statement of cash flows, the selling and administrative expense adjusted to a
cash basis would be:
A. $270,000
B. $246,000
C. $294,000
D. $288,000
Answer:
Reference: 8-25
Lotson Corporation bases its budgets on machine-hours. The companys static planning
budget for May appears below:
Actual results for the month were:
The spending variance for supplies costs for the month should be:
A) $600 U
B) $600 F
C) $270 F
D) $270 U
Answer:
On April 1, Stelter Corporation had $34,000 of raw materials on hand. During the
month, the company purchased an additional $60,000 of raw materials. During April,
$70,000 of raw materials were requisitioned from the storeroom for use in production.
These raw materials included both direct and indirect materials. The indirect materials
totaled $7,000. Prepare journal entries to record these events. Use those journal entries
to answer the following questions:
The credits to the Work in Process account as a consequence of the raw materials
transactions in April total:
A. $70,000
B. $63,000
C. $0
D. $60,000
Answer:
Meister Electronics Corporation has a standard cost system in which it applies
manufacturing overhead to products on the basis of standard machine-hours (MHs). The
company had budgeted its fixed manufacturing overhead cost at $68,800 for the month
and its level of activity at 2,000 MHs. The actual total fixed manufacturing overhead
was $73,300 for the month and the actual level of activity was 1,800 MHs. What was
the fixed manufacturing overhead budget variance for the month to the nearest dollar?
A. $11,380 unfavorable
B. $4,500 unfavorable
C. $11,380 favorable
D. $4,500 favorable
Answer:
Reference: 8A-4
The Phelps Company applies overhead costs to products on the basis of standard direct
labor-hours. The standard cost card shows that 5 direct labor-hours are required per unit
of product. Phelps Company had the following budgeted and actual data for March:
The budgeted direct labor-hours is used as the denominator activity for the month.
The variable overhead efficiency variance for March is:
A) $8,000 unfavorable
B) $4,000 favorable
C) $8,000 unfavorable
D) $4,000 unfavorable
Answer:
Data for June for Ozaki Corporation and its two major business segments, North and
South, appear below:
In addition, common fixed expenses totaled $145,000 and were allocated as follows:
$73,000 to the North business segment and $72,000 to the South business segment.
A properly constructed segmented income statement in a contribution format would
show that the net operating income of the company as a whole is:
A. $(56,000)
B. $89,000
C. $343,000
D. $234,000
Answer:
The following data have been taken from your company’s financial records for the
current year:
The price-earnings ratio is:
A. 12.5
B. 6.0
C. 8.0
D. 7.5
Answer:
To record the purchase of direct materials, the general ledger would include what kind
of entry to the Materials Price Variance Account?
A) $14,000 credit
B) $14,000 debit
C) $10,000 credit
D) $10,000 debit
Answer: