The following data pertain to the Whalen Division of Northern Industries.
The margin at Whalen was exactly the same in Year 2 as it was in Year 1.
The return on investment in Year 1 was:
A. 48.00%
B. 32.50%
C. 7.58%
D. 1.92%
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 standard variable overhead rate per machine setup is:
A) $16.91
B) $12.78
C) $15.00
D) $16.50
Answer:
Reference: 8-4
Karmazyn Hospital bases its budgets on patient-visits. The hospitals static budget for
October appears below:
The total variable cost at the activity level of 9,000 patient-visits per month should be:
A) $157,530
B) $209,700
C) $207,370
D) $159,300
Answer:
Imbram Corporation uses the FIFO method in its process costing system. The first
processing department, the Forming Department, started the month with 23,000 units in
its beginning work in process inventory that were 40% complete with respect to
conversion costs. The conversion cost in this beginning work in process inventory was
$27,692. An additional 86,000 units were started into production during the month and
86,000 units were completed and transferred to the next processing department. There
were 23,000 units in the ending work in process inventory of the Forming Department
that were 10% complete with respect to conversion costs. A total of $221,480 in
conversion costs were incurred in the department during the month.
The cost per equivalent unit for conversion costs for the month is closest to:
A. $2.80
B. $2.29
C. $3.01
D. $2.58
Answer:
Which of the following is not correct regarding the manufacturing overhead budget?
A. Total budgeted cash disbursements for manufacturing overhead is equal to the total
of budgeted variable and fixed manufacturing overhead.
B. Manufacturing overhead costs should be broken down by cost behavior.
C. The manufacturing overhead budget should provide a schedule of all costs of
production other than direct materials and direct labor.
D. A schedule showing budgeted cash disbursements for manufacturing overhead
should be prepared for use in developing the cash budget.
Answer:
The Chase Company has a standard cost system in which manufacturing overhead is
applied on the basis of standard direct labor-hours (DLHs). The company recorded the
following activity and cost data relating to manufacturing overhead for October:
The fixed manufacturing overhead budget variance for September was:
A. $2,700 favorable
B. $2,700 unfavorable
C. $5,400 favorable
D. $5,400 unfavorable
Answer:
Aberge Company’s manufacturing overhead is 60% of its total conversion costs. If
direct labor is $38,000 and if direct materials are $21,000, the manufacturing overhead
is:
A. $57,000
B. $88,500
C. $25,333
D. $31,500
Answer:
Duhamel Corporation uses the weighted-average method in its process costing system.
This month, the beginning inventory in the first processing department consisted of 600
units. The costs and percentage completion of these units in beginning inventory were:
A total of 7,800 units were started and 7,000 units were transferred to the second
processing department during the month. The following costs were incurred in the first
processing department during the month:
The ending inventory was 55% complete with respect to materials and 50% complete
with respect to conversion costs.
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.
What are the equivalent units for conversion costs for the month in the first processing
department?
A. 8,400
B. 7,700
C. 7,000
D. 700
Answer:
Borden Enterprises uses standard costing. For the month of April, the company reported
the following data:
– Standard direct labor rate: $10 per hour
– Standard hours allowed for actual production: 8,000 hours
– Actual direct labor rate: $9.50 per hour
– Labor efficiency variance: $4,800 Favorable
The labor rate variance for April is:
A) $3,760 U
B) $3,760 F
C) $2,850 F
D) $2,850 U
Answer:
Sissac Catering uses two measures of activity, jobs and meals, in the cost formulas in its
flexible budgets. The cost formula for catering supplies is $470 per month plus $101
per job plus $24 per meal. A typical job involves serving a number of meals to guests at
a corporate function or at a hosts home. The company expected its activity in May to be
12 jobs and 123 meals, but the actual activity was 9 jobs and 126 meals. The actual cost
for catering supplies in May was $4,240. The spending variance for catering supplies in
May would be closest to:
A) $394 U
B) $394 F
C) $163 F
D) $163 U
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 manufacturing overhead in the flexible budget for July would be closest to:
A) $42,500
B) $43,616
C) $42,927
D) $42,580
Answer:
Last year, Heidenescher Corporation’s variable costing net operating income was
$63,600 and its inventory decreased by 600 units. Fixed manufacturing overhead cost
was $1 per unit. What was the absorption costing net operating income last year?
A. $64,200
B. $63,000
C. $63,600
D. $600
Answer:
Bakker Corporation applies manufacturing overhead on the basis of direct labor-hours.
At the beginning of the most recent year, the company based its predetermined
overhead rate on total estimated overhead of $77,250 and 2,500 estimated direct
labor-hours. Actual manufacturing overhead for the year amounted to $79,000 and
actual direct labor-hours were 2,400.
The applied manufacturing overhead for the year was closest to:
A. $74,160
B. $71,184
C. $75,840
D. $79,008
Answer:
Reference: 8-11
Doubleday Clinic uses client-visits as its measure of activity. During June, the clinic
budgeted for 3,200 client-visits, but its actual level of activity was 3,180 client-visits.
The clinic has provided the following data concerning the formulas to be used in its
budgeting for June:
The medical supplies in the flexible budget for June would be closest to:
A) $14,637
B) $15,056
C) $15,140
D) $14,455
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 current ratio at the end of Year 2 is closest to:
A. 0.38
B. 2.62
C. 0.52
D. 0.74
Answer:
Green Enterprises produces a single product. The following data were provided by the
company for the most recent period:
Under absorption costing, the unit product cost is:
A. $20
B. $18
C. $15
D. $25
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 volume variance was:
A) $2,000 favorable
B) $2,600 unfavorable
C) $1,000 favorable
D) $800 favorable
Answer:
In February, one of the processing departments at Carpentier Corporation had beginning
work in process inventory of $14,000 and ending work in process inventory of $29,000.
During the month, $148,000 of costs were added to production and the cost of units
transferred out from the department was $133,000. In the department’s cost
reconciliation report for February, the total cost to be accounted for would be:
A. $310,000
B. $162,000
C. $324,000
D. $43,000
Answer:
Janus Corporation has in stock 43,700 kilograms of material L that it bought five years
ago for $6.10 per kilogram. This raw material was purchased to use in a product line
that has been discontinued. Material L can be sold as is for scrap for $3.23 per
kilogram. An alternative would be to use material L in one of the company’s current
products, E99D, which currently requires 2 kilograms of a raw material that is available
for $9.45 per kilogram. Material L can be modified at a cost of $0.62 per kilogram so
that it can be used as a substitute for this material in the production of product E99D.
However, after modification, 3 kilograms of material L is required for every unit of
product E99D that is produced. Janus Corporation has now received a request from a
company that could use material L in its production process. Assuming that Janus
Corporation could use all of its stock of material L to make product E99D or the
company could sell all of its stock of the material at the current scrap price of $3.23 per
kilogram, what is the minimum acceptable selling price of material L to the company
that could use material L in its own production process?
A. $3.23
B. $5.68
C. $6.92
D. $2.45
Answer:
Gaucher Corporation has provided the following data from its activity-based costing
accounting system:
The activity rate for the “designing products” activity cost pool is closest to:
A. $78 per product design hour
B. $582,016 per product design hour
C. $128 per product design hour
D. $89 per product design hour
Answer:
Reference: 8-10
Caballes Clinic uses client-visits as its measure of activity. During November, the clinic
budgeted for 3,100 client-visits, but its actual level of activity was 3,070 client-visits.
The clinic has provided the following data concerning the formulas used in its
budgeting and its actual results for November:
Data used in budgeting:
Actual results for November:
The net operating income in the flexible budget for November would be closest to:
A) $20,172
B) $13,870
C) $13,249
D) $20,568
Answer:
Dimitrov Corporation, a company that produces and sells a single product, has provided
its contribution format income statement for July.
If the company sells 6,900 units, its net operating income should be closest to:
A. $35,979
B. $34,500
C. $36,500
D. $32,000
Answer:
Reference: 8-29
Hurren Corporation makes a product with the following standard costs:
The company reported the following results concerning this product in June.
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 materials price variance for June is:
A) $3,180 U
B) $2,860 F
C) $2,860 U
D) $3,180 F
Answer:
Njombe Corporation manufactures a variety of products. In the past, Njombe has been
using a traditional costing system in which the predetermined overhead rate was 150%
of direct labor cost. Selling prices had been set by multiplying total product cost by
200%. Sensing that this system was distorting costs and selling prices, Njombe has
decided to switch to an activity-based costing system for manufacturing overhead costs
using three activity cost pools. Selling prices are still to be set at 200% of unit product
cost under the new system. Information on these cost pools for next year are as follows:
Information (on a per unit basis) related to three popular products at Njombe are as
follows:
Under the traditional system, what would be the selling price of one unit of Model #36?
A. $2,536
B. $2,712
C. $4,080
D. $5,506
Answer:
Ozols Corporation’s most recent income statement appears below:
The gross margin percentage is closest to:
A. 33.2%
B. 55.7%
C. 300.8%
D. 125.6%
Answer:
Balonek Inc.’s contribution margin ratio is 57% and its fixed monthly expenses are
$41,000. Assuming that the fixed monthly expenses do not change, what is the best
estimate of the company’s net operating income in a month when sales are $112,000?
A. $63,840
B. $7,160
C. $71,000
D. $22,840
Answer:
The terms ‘standard quantity allowed” or ‘standard hours allowed” means:
A. the actual output in units multiplied by the standard output allowed.
B. the actual input in units multiplied by the standard output allowed.
C. the actual output in units multiplied by the standard input allowed.
D. the standard output in units multiplied by the standard input allowed.
Answer:
The sale of equipment at a gain would be shown on the statement of cash flows
prepared under the indirect method in which of the following manners?
A. Cash received would be shown under Investing Activities and the gain would be
subtracted from net income.
B. Cash received would be shown under Investing Activities and the gain would be
added to net income.
C. Cash received would be shown under Investing Activities and the gain would not
appear on the statement of cash flows.
D. Cash received would be shown as an adjustment to net income and the gain would
not appear on the statement of cash flows.
Answer:
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:
Accola Company uses activity-based costing. The company has two products: A and B.
The annual production and sales of Product A is 1,100 units and of Product B is 700
units. There are three activity cost pools, with estimated costs and expected activity as
follows:
The overhead cost per unit of Product A is closest to:
A. $59.22
B. $57.20
C. $47.89
D. $22.70
Answer:
Threets Corporation’s most recent comparative balance sheet appears below:
The company’s net income for the year was $109 and it paid a cash dividend. It did not
dispose of any property, plant, and equipment during the year. The company did not
issue any bonds payable or repurchase any of its own common stock.
The net cash provided by (used in) investing activities for the year was:
A. $(60)
B. $(57)
C. $57
D. $60
Answer:
At a sales volume of 27,000 units, Danielle Corporation’s property taxes (a cost that is
fixed with respect to sales volume) total $207,900.
To the nearest whole dollar, what should be the total property taxes at a sales volume of
30,900 units? (Assume that this sales volume is within the relevant range.)
A. $207,900
B. $181,660
C. $222,915
D. $237,930
Answer:
A company that had a $500 decrease in accounts receivable during a period would do
which of the following on its statement of cash flows prepared using the indirect
method?
A. Add the $500 to net income in order to arrive at net cash provided by operating
activities.
B. Subtract the $500 from net income in order to arrive at net cash provided by
operating activities.
C. Add the $500 to the net cash provided by investing activities.
D. Add the $500 to the net cash provided by financing activities.
Answer:
Variable cost:
A. increases on a per unit basis as the number of units produced increases.
B. remains constant on a per unit basis as the number of units produced increases.
C. remains the same in total as production increases.
D. decreases on a per unit basis as the number of units produced increases.
Answer: