Jurper Corporation used $150,000 of direct materials during April. At the end of April,
Jurper’s direct materials inventory was $25,000 more than it was at the beginning of the
month. Direct materials purchases during the April amounted to:
A. $0
B. $125,000
C. $150,000
D. $175,000
Answer:
The amount by which a company’s sales can decline before losses are incurred is called
the:
A. contribution margin.
B. degree of operating leverage.
C. margin of safety.
D. contribution margin ratio.
Answer:
Kramer 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. $32,527
B. $46,467
C. $34,317
D. $39,497
Answer:
Lunderville Inc. bases its selling and administrative expense budget on budgeted unit
sales. The sales budget shows 3,200 units are planned to be sold in December. The
variable selling and administrative expense is $3.10 per unit. The budgeted fixed selling
and administrative expense is $60,800 per month, which includes depreciation of
$6,720 per month. The remainder of the fixed selling and administrative expense
represents current cash flows. The cash disbursements for selling and administrative
expenses on the December selling and administrative expense budget should be:
A. $70,720
B. $54,080
C. $64,000
D. $9,920
Answer:
Sartain Corporation is in the process of preparing its annual budget. The following
beginning and ending inventory levels are planned for the year.
Each unit of finished goods requires 2 grams of raw material.
How much of the raw material should the company purchase during the year?
A. 1,430,000 grams
B. 1,450,000 grams
C. 1,480,000 grams
D. 1,440,000 grams
Answer:
The following standards have been established for a raw material used to make product
P62:
The following data pertain to a recent months operations:
Required:
a. What is the materials price variance for the month?
b. What is the materials quantity variance for the month?
Answer:
In September direct labor was 40% of conversion cost. If the manufacturing overhead
for the month was $66,000 and the direct materials cost was $20,000, the direct labor
cost was:
A. $13,333
B. $44,000
C. $99,000
D. $30,000
Answer:
The Pacific Company manufactures a single product. The following data relate to the
year just completed:
During the last year, 5,000 units were produced and 4,800 units were sold. There were
no beginning inventories.
Under absorption costing, the cost of goods sold for the year would be:
A. $206,400
B. $345,600
C. $278,400
D. $360,000
Answer:
Pong Incorporated’s income statement for the most recent month is given below.
The marketing department believes that a promotional campaign for Store H costing
$8,000 will increase the store’s sales by $15,000. If the campaign is adopted, overall
company net operating income should:
A. decrease by $5,000
B. decrease by $5,500
C. increase by $2,000
D. increase by $7,000
Answer:
Wedd Corporation had $35,000 of raw materials on hand on May 1. During the month,
the company purchased an additional $68,000 of raw materials. During May, $92,000
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
$5,000. The debits to the Work in Process account as a consequence of the raw
materials transactions in May total:
A. $92,000
B. $0
C. $68,000
D. $87,000
Answer:
Avitia Inc. bases its manufacturing overhead budget on budgeted direct labor-hours.
The direct labor budget indicates that 3,700 direct labor-hours will be required in
September. The variable overhead rate is $5.70 per direct labor-hour. The company’s
budgeted fixed manufacturing overhead is $48,100 per month, which includes
depreciation of $5,550. All other fixed manufacturing overhead costs represent current
cash flows. The company recomputes its predetermined overhead rate every month. The
predetermined overhead rate for September should be:
A. $5.70
B. $13.00
C. $18.70
D. $17.20
Answer:
Under variable costing, costs that are treated as period costs include:
A. only fixed manufacturing costs.
B. both variable and fixed manufacturing costs.
C. all fixed costs.
D. only fixed selling and administrative costs.
Answer:
Which of the following is the correct formula to compute the predetermined overhead
rate?
A. Estimated total units in the allocation base divided by estimated total manufacturing
overhead costs.
B. Estimated total manufacturing overhead costs divided by estimated total units in the
allocation base.
C. Actual total manufacturing overhead costs divided by estimated total units in the
allocation base.
D. Estimated total manufacturing overhead costs divided by actual total units in the
allocation base.
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 current ratio at December 31 was closest to:
A. 1.95
B. 2.67
C. 1.33
D. 2.00
Answer:
Data from Kooistra Corporation’s most recent balance sheet appear below:
Sales on account in Year 2 amounted to $1,270 and the cost of goods sold was $770.
The working capital at the end of Year 2 is:
A. $990
B. $170
C. $1,010
D. $450
Answer:
The February contribution format income statement of Caines Corporation appears
below:
If the company’s sales increase by 18%, its net operating income should increase by
about:
A. 18%
B. 197%
C. 9%
D. 63%
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 efficiency variance for November is:
A) $2,530 U
B) $2,530 F
C) $2,343 F
D) $2,343 U
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 fixed manufacturing overhead budget variance for November was:
A) $2,970 unfavorable
B) $4,550 favorable
C) $7,520 favorable
D) $22,900 unfavorable
Answer:
Sales and average operating assets for Company P and Company Q are given below:
What is the margin that each company will have to earn in order to generate a return on
investment of 20%?
A. 12% and 16%
B. 50% and 100%
C. 8% and 4%
D. 2.5% and 5%
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:
Able Control Company, which manufactures electrical switches, uses a standard cost
system in which manufacturing overhead costs are applied to units of product on the
basis of standard direct labor-hours (DLHs). The standard overhead costs are shown
below:
*Based on 300,000 DLHs per month.
The following information is available for the month of October:
– Plans called for the production of 60,000 switches.
– 56,000 switches were actually produced.
– 275,000 direct labor-hours were worked at a total cost of $2,550,000.
– Actual variable manufacturing overhead costs were $2,340,000.
– Actual fixed manufacturing overhead costs were $3,750,000.
The variable overhead efficiency variance for October was:
A. $40,000 Favorable
B. $60,000 Favorable
C. $160,000 Unfavorable
D. $210,000 Unfavorable
Answer:
Maze Company’s cash and cash equivalents consist of cash and marketable securities.
Last year the company’s cash account increased by $24,000 and its marketable
securities account decreased by $16,000. Cash provided by operating activities was
$40,000. Net cash used in financing activities was $39,000. Based on this information,
the net cash flow from investing activities on the statement of cash flows was:
A. a net $9,000 increase.
B. a net $23,000 increase.
C. a net $39,000 increase.
D. a net $7,000 increase.
Answer:
Mark Corporation produces two models of calculators. The Business model sells for
$60, and the Math model sells for $40. The variable expenses are given below:
The fixed expenses are $75,000 per month. The expected monthly sales of each model
are: Business, 1,000 units; Math, 500 units.
The contribution margin ratio for the Business model is:
A. 40%
B. 75%
C. 85%
D. 60%
Answer:
Babuca Corporation has provided the following production and total cost data for two
levels of monthly production volume. The company produces a single product.
The best estimate of the total monthly fixed manufacturing cost is:
A. $1,424,400
B. $1,506,400
C. $932,400
D. $1,465,400
Answer:
Reference: 8-16
Pong 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 December, the kennel budgeted for
2,000 tenant-days, but its actual level of activity was 1,980 tenant-days. The kennel has
provided the following data concerning the formulas used in its budgeting and its actual
results for December:
Data used in budgeting:
Actual results for December:
The wages and salaries in the planning budget for December would be closest to:
A) $14,460
B) $14,606
C) $14,500
D) $14,390
Answer:
Haar Inc. is a merchandising company. Last month the company’s cost of goods sold
was $61,000. The company’s beginning merchandise inventory was $11,000 and its
ending merchandise inventory was $21,000. What was the total amount of the
company’s merchandise purchases for the month?
A. $61,000
B. $51,000
C. $71,000
D. $93,000
Answer:
Excerpts from Tigner Corporation’s most recent balance sheet appear below:
Sales on account in Year 2 amounted to $1,230 and the cost of goods sold was $820.
The current ratio at the end of Year 2 is closest to:
A. 1.12
B. 1.54
C. 0.35
D. 1.00
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 sales revenue adjusted to a cash basis would be:
A. $796,000
B. $767,000
C. $790,000
D. $813,000
Answer:
In determining the dollar amount to use for operating assets in the return on investment
(ROI) calculation, companies will generally use either net book value or gross cost of
the assets. Which of the following is an argument for the use of net book value rather
than gross cost?
A. It is consistent with how assets are reported on the balance sheet.
B. It eliminates the depreciation method as a factor in ROI calculations.
C. It encourages the replacement of old, worn-out equipment.
D. all of the above.
Answer:
The following data pertains to activity and maintenance costs for two recent years:
Using the high-low method, the cost formula for maintenance would be:
A. $1.50 per unit
B. $1.25 per unit
C. $3,000 plus $1.50 per unit
D. $6,000 plus $0.75 per unit
Answer:
Fiene Sales, Inc., a merchandising company, reported sales of 2,200 units in June at a
selling price of $600 per unit. Cost of goods sold, which is a variable cost, was $364 per
unit. Variable selling expenses were $23 per unit and variable administrative expenses
were $33 per unit. The total fixed selling expenses were $30,500 and the total
administrative expenses were $55,300.
The contribution margin for June was:
A. $1,111,000
B. $396,000
C. $310,200
D. $519,200
Answer:
Temores Corporation applies manufacturing overhead to products on the basis of
standard machine-hours. The companys predetermined overhead rate for fixed
manufacturing overhead is $1.50 per machine-hour and the denominator level of
activity is 5,600 machine-hours. In the most recent month, the total actual fixed
manufacturing overhead was $8,510 and the company actually worked 5,840
machine-hours during the month. The standard hours allowed for the actual output of
the month totaled 5,980 machine-hours. What was the overall fixed manufacturing
overhead volume variance for the month?
A) $360 favorable
B) $360 unfavorable
C) $570 favorable
D) $210 favorable
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:
Reference: 8-28
Cox Engineering performs cement core tests in its laboratory. The following standards
have been set for each core test performed:
During March, the laboratory performed 2,000 core tests. On March 1 no direct
materials (sand) were on hand. Variable manufacturing overhead is assigned to core
tests on the basis of standard direct labor-hours. The following events occurred during
March:
– 8,600 pounds of sand were purchased at a cost of $7,310.
– 7,200 pounds of sand were used for core tests.
– 840 actual direct labor-hours were worked at a cost of $8,610.
– Actual variable manufacturing overhead incurred was $3,200.
The labor rate variance for March is:
A) $4,578 unfavorable
B) $1,470 unfavorable
C) $4,578 favorable
D) $1,470 favorable
Answer: