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The job cost sheet is used in both job-order and process costing.
Answer:
Reynold Enterprises sells a single product for $25. The variable expense per unit is $15
and the fixed expense per unit is $5 at the current level of sales. The company's net
operating income will increase by $5 if one more unit is sold.
Answer:
An increase in the discount rate will result in an increase in the present value of a given
cash flow.
Answer:
In a contribution format income statement for a merchandising company, cost of goods
sold is a variable cost that gets included in the "Variable expenses" portion of the
income statement.
Answer:
If the actual direct labor-hours used is less than the standard direct labor-hours allowed
for the actual output, then the journal entry to record the Labor Efficiency Variance
would be a debit.
Answer:
Depreciation is always considered a product cost for external financial reporting
purposes in a manufacturing firm.
Answer:
Costs classified as batch-level costs should depend on the number of batches processed
rather than on the number of units produced, the number of units sold, or other
measures of volume.
Answer:
The production budget is typically prepared prior to the sales budget.
Answer:
Both planning and control are needed for an effective budgeting system.
Answer:
If fixed expenses increase by $10,000 per year, then the level of sales needed to break
even will also increase by $10,000.
Answer:
At the break-even point: Sales - Variable expenses = Fixed expenses.
Answer:
Managers of cost centers are evaluated according to the profits which their departments
are able to generate.
Answer:
Fixed costs are irrelevant in a decision.
Answer:
For asset accounts, credits are added to the beginning balance on the statement of cash
flows.
Answer:
Cash payments to retire bonds payable are reported as a cash outflow in the financing
activities section of the statement of cash flows.
Answer:
If the fixed manufacturing overhead volume variance is unfavorable, too much has been
spent on fixed manufacturing overhead items.
Answer:
In the cost reconciliation report, the costs accounted for equals the cost of beginning
work in process inventory plus the cost of ending work in process inventory.
Answer:
Advertising costs should be charged to the Manufacturing Overhead account.
Answer:
If the actual quantity of materials used is less than the standard quantity of materials
allowed for the actual output, then the journal entry to record the Direct Materials
Quantity Variance would be a credit.
Answer:
Manufacturing overhead combined with direct materials is known as conversion cost.
Answer:
The weighted-average method and the FIFO method of process costing use the same
manufacturing accounts.
Answer:
The ending and beginning balances of Parma Corporation's balance sheet accounts for
the most recent year are listed below:
The company's net income (loss) for the year was $0 and its cash dividends were
$4,000. It did not dispose of any property, plant, and equipment, retire any bonds
payable, or repurchase any of its own common stock during the year.
Compute the change in each noncash balance sheet account. Indicate whether the
change in each balance will be recorded in the operating, investing, or financing
activities section of the statement of cash flows. For items recorded in the operating
activities section, also indicate whether the change will be added to or subtracted from
net income. For all other items, indicate whether the change will be added as a cash
inflow or subtracted as a cash outflow.
Answer:
A company has a standard cost system in which fixed and variable manufacturing
overhead costs are applied to products on the basis of direct labor-hours. The amount of
overhead that the company would apply to finished production would ordinarily be the
standard hours allowed for the actual units of finished output times the predetermined
overhead rate per direct labor-hour.
Answer:
If the fixed expenses increase in a company, and all other factors remain unchanged,
then one would expect the margin of safety to decrease.
Answer:
Contribution margin and segment margin mean the same thing.
Answer:
Canler Inc. uses the weighted-average method in its process costing system. The
following data concern the operations of the company's first processing department for
a recent month.
Using the weighted-average method, determine the equivalent units of production for
materials and conversion costs.
Answer:
In external financial reports, factory utilities costs may be included in an asset account
on the balance sheet at the end of the period.
Answer:
The total volume in sales dollars that would be required to attain a given target profit is
determined by dividing the sum of the fixed expenses and the target profit by the
contribution margin ratio.
Answer:
In activity-based costing, unit product costs computed for external financial reports
include manufacturing overhead costs that are computed by multiplying activity rates
by the direct labor-hours required to produce a product.
Answer:
If the actual quantity of materials used is less than the standard quantity of materials
allowed for the actual output, then the journal entry to record the Direct Materials
Quantity Variance would be a credit.
Answer:
A balanced scorecard should contain every performance measure that can be expected
to influence a company's profits.
Answer:
Holtrop Corporation has received a request for a special order of 9,000 units of product
Z74 for $46.50 each. The normal selling price of this product is $51.60 each, but the
units would need to be modified slightly for the customer. The normal unit product cost
of product Z74 is computed as follows:
Direct labor is a variable cost. The special order would have no effect on the company's
total fixed manufacturing overhead costs. The customer would like some modifications
made to product Z74 that would increase the variable costs by $6.20 per unit and that
would require a one-time investment of $46,000 in special molds that would have no
salvage value. This special order would have no effect on the company's other sales.
The company has ample spare capacity for producing the special order.
Determine the effect on the company's total net operating income of accepting the
special order. Show your work!
Answer:
Free cash flow increases when a company issues common stock for cash.
Answer:
Nutall Corporation is considering dropping product N28X. Data from the company's
accounting system appear below:
All fixed expenses of the company are fully allocated to products in the company's
accounting system. Further investigation has revealed that $199,000 of the fixed
manufacturing expenses and $114,000 of the fixed selling and administrative expenses
are avoidable if product N28X is discontinued.
a. According to the company's accounting system, what is the net operating income
earned by product N28X? Show your work!
b. What would be the effect on the company's overall net operating income of dropping
product N28X? Should the product be dropped? Show your work!
Answer:
Under the FIFO method, the percentage of completion of the ending inventory must be
greater than the percentage of completion of the beginning inventory.
Answer:
The following costs should be considered by a law firm to be indirect costs of
defending a particular client in court: rent on the law firm's offices, the law firm's
receptionist's wages, the costs of heating the law firm's offices, and the depreciation on
the personal computer in the office of the attorney who has been assigned the client.
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) investing activities for the year was:
A. $(28)
B. $(58)
C. $28
D. $58
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:
The standards for product C54L specify 4.5 direct labor-hours per unit at $12.40 per
direct labor-hour. Last month 1,560 units of product C54L were produced using 7,000
direct labor-hours at a total direct labor wage cost of $86,100.
Required:
a. What was the labor rate variance for the month?
b. What was the labor efficiency variance for the month?
Answer:
Gayles Corporation's most recent balance sheet appears below:
The net income for the year was $144. Cash dividends were $31. The company did not
issue any bonds or repurchase any of its common stock during the year. The net cash
provided by (used in) financing activities for the year was:
A. $(46)
B. $(31)
C. $1
D. $(76)
Answer:
The Steff Company has the following flexible budget (in condensed form) for
manufacturing overhead:
The following data concerning production pertain to last year's 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, $850 for the year.
- The standard direct labor time is two hours per unit of product.
The fixed manufacturing overhead cost applied to work in process was:
A. $27,400
B. $30,000
C. $30,850
D. $13,700
Answer:
Salvadore Inc., a local retailer, has provided the following data for the month of
September:
The cost of goods sold for September was:
A. $132,000
B. $134,000
C. $133,000
D. $200,000
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 current ratio at the end of Year 2 is closest to:
A. 0.96
B. 0.30
C. 0.31
D. 1.61
Answer:
Leis Retail Company has two Stores, M and N. Store N had sales of $180,000 during
March, a segment margin of $54,000, and traceable fixed expenses of $26,000. The
company as a whole had a contribution margin ratio of 25% and $120,000 in total
contribution margin. Based on this information, total variable expenses in Store M for
the month must have been:
A. $140,000
B. $260,000
C. $300,000
D. $360,000
Answer:
Mate Corporation's standard wage rate is $11.90 per direct labor-hour (DLH) and
according to the standards, each unit of output requires 4.5 DLHs. In May, 2,900 units
were produced, the actual wage rate was $11.50 per DLH, and the actual hours were
15,530 DLHs.
In the journal entry to record the incurrence of direct labor costs in May, the Work in
Process entry would consist of a:
A. credit of $155,295.
B. debit of $155,295.
C. credit of $178,595.
D. debit of $178,595.
Answer:
A study has been conducted to determine if Product A should be dropped. Sales of the
product total $200,000 per year; variable expenses total $140,000 per year. Fixed
expenses charged to the product total $90,000 per year. The company estimates that
$40,000 of these fixed expenses will continue even if the product is dropped. These data
indicate that if Product A is dropped, the company's overall net operating income
would:
A. decrease by $20,000 per year
B. increase by $20,000 per year
C. decrease by $10,000 per year
D. increase by $30,000 per year
Answer:
Part I51 is used in one of Pries Corporation's products. The company makes 18,000
units of this part each year. The company's Accounting Department reports the
following costs of producing the part at this level of activity:
An outside supplier has offered to produce this part and sell it to the company for
$15.80 each. If this offer is accepted, the supervisor's salary and all of the variable
costs, including direct labor, can be avoided. The special equipment used to make the
part was purchased many years ago and has no salvage value or other use. The allocated
general overhead represents fixed costs of the entire company. If the outside supplier's
offer were accepted, only $26,000 of these allocated general overhead costs would be
avoided.
If management decides to buy part I51 from the outside supplier rather than to continue
making the part, what would be the annual impact on the company's overall net
operating income?
A. Net operating income would decline by $81,800 per year.
B. Net operating income would decline by $55,800 per year.
C. Net operating income would decline by $119,800 per year.
D. Net operating income would decline by $29,800 per year.
Answer:
The average stockholders' equity for Horn Co. last year was $2,000,000. Included in
this figure was $200,000 of preferred stock. Preferred dividends were $16,000. If the
return on common stockholders' equity was 12.5% for the year, net income was:
A. $225,000
B. $250,000
C. $241,000
D. $234,000
Answer:
Reference: 8-50
Fabiano Corporation makes a product whose direct labor standards are 0.5 hours per
unit and $23.00 per hour. In February the company produced 3,300 units using 1,640
direct labor-hours. The actual direct labor cost was $38,540.
The labor efficiency variance for February is:
A) $230 F
B) $235 F
C) $230 U
D) $235 U
Answer:
The standard cost card for a product shows that the product should use 4 kilograms of
material B per finished unit and that the standard price of material B is $4.50 per
kilogram. During April, when the budgeted production level was 1,000 units, 1,040
units were actually made. A total of 4,100 kilograms of material B were used in
production and the inventories of material B were reduced by 300 kilograms during
April. The total cost of material B purchased during April was $14,400. The material
variances for material B during April were:
Material Price Variance Material Quantity Variance
A) $2,700 F $1,620 F
B) $2,700 F $270 F
C) $4,050 F $270 F
D) $4,050 F $1,620 F
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 variable overhead efficiency variance for utilities cost for November was:
A) $2,760 favorable
B) $3,760 unfavorable
C) $3,760 favorable
D) $1,000 favorable
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 dividend yield ratio for Year 2 is closest to:
A. 2.26%
B. 2.82%
C. 80.00%
D. 0.56%
Answer:
Tronnes Corporation's net income last year was $1,750,000. The dividend on common
stock was $2.60 per share and the dividend on preferred stock was $2.50 per share. The
market price of common stock at the end of the year was $57.70 per share. Throughout
the year, 300,000 shares of common stock and 100,000 shares of preferred stock were
outstanding. The price-earnings ratio is closest to:
A. 17.85
B. 11.54
C. 24.04
D. 9.89
Answer:
Consider the following production and cost data for two products, X and Y:
The company has 15,000 machine hours available each period, and there is unlimited
demand for each product. What is the largest possible total contribution margin that can
be realized each period?
A. $120,000
B. $125,000
C. $135,000
D. $150,000
Answer:
Broze Company makes four products in a single facility. These products have the
following unit product costs:
Additional data concerning these products are listed below.
The grinding machines are potentially the constraint in the production facility. A total of
53,600 minutes are available per month on these machines.
Direct labor is a variable cost in this company.
Up to how much should the company be willing to pay for one additional minute of
grinding machine time if the company has made the best use of the existing grinding
machine capacity? (Round off to the nearest whole cent.)
A. $35.90
B. $0.00
C. $8.58
D. $11.60
Answer:
Dabney 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. $778,400
B. $1,457,400
C. $1,505,900
D. $1,554,400
Answer:
Watson Company's comparative balance sheet and income statement for last year
appear below:
The company declared and paid a cash dividend during the year. It did not purchase or
dispose of any property, plant, and equipment. It did not issue any bonds 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) investing activities last year was:
A. $20,000
B. $119,000
C. $(20,000)
D. $(119,000)
Answer:
A company's current net operating income is $16,800 and its average operating assets
are $80,000. The company's required rate of return is 18%. A new project being
considered would require an investment of $15,000 and would generate annual net
operating income of $3,000. What is the residual income of the new project?
A. 20.8%
B. 20%
C. ($150)
D. $300
Answer:
Data concerning Delmore Corporation's single product appear below:
The break-even in monthly unit sales is closest to:
A. 7,804 units
B. 4,390 units
C. 2,810 units
D. 5,001 units
Answer:
The advertising costs that Pepsi incurred to air its commercials during the Super Bowl
can best be described as a:
A. variable cost.
B. fixed cost.
C. product cost.
D. prime cost.
Answer:
Bakker Corporation has provided the following production and average cost data for
two levels of monthly production volume. The company produces a single product.
The best estimate of the total variable manufacturing cost per unit is:
A. $89.70
B. $131.80
C. $19.50
D. $112.30
Answer:
Alam Company is a manufacturing firm that uses job-order costing. At the beginning of
the year, the company's inventory balances were as follows:
The company applies overhead to jobs using a predetermined overhead rate based on
machine-hours. At the beginning of the year, the company estimated that it would work
45,000 machine-hours and incur $180,000 in manufacturing overhead cost. The
following transactions were recorded for the year:
a. Raw materials were purchased, $416,000.
b. Raw materials were requisitioned for use in production, $420,000 ($380,000 direct
and $40,000 indirect).
c. The following employee costs were incurred: direct labor, $414,000; indirect labor,
$60,000; and administrative salaries, $212,000.
d. Selling costs, $141,000.
e. Factory utility costs, $20,000.
f. Depreciation for the year was $81,000 of which $73,000 is related to factory
operations and $8,000 is related to selling, general, and administrative activities.
g. Manufacturing overhead was applied to jobs. The actual level of activity for the year
was 48,000 machine-hours.
h. The cost of goods manufactured for the year was $1,004,000.
i. Sales for the year totaled $1,416,000 and the costs on the job cost sheets of the goods
that were sold totaled $989,000.
j. The balance in the Manufacturing Overhead account was closed out to Cost of Goods
Sold.
Prepare the appropriate journal entry for each of the items above (a. through j.). You can
assume that all transactions with employees, customers, and suppliers were conducted
in cash.
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 rate variance for the month?
A) $400 F
B) $80 U
C) $80 F
D) $400 U
Answer:
Ring, Incorporated's income statement for the most recent month is given below.
Refer to the original data.
The marketing department believes that a promotional campaign at Store P costing
$5,000 will increase sales by $15,000. If the campaign is adopted, overall company net
operating income should:
A. decrease by $800
B. decrease by $5,800
C. increase by $5,800
D. increase by $10,000
Answer:
Nando Company uses the weighted-average method in its process costing system.
Department J is the second of three sequential processes at the company. During
October, Department J collected the following data:
All materials are added at the beginning of the process.
The total cost assigned to ending work in process inventory was:
A. $75,400
B. $101,400
C. $152,800
D. $59,000
Answer:
Reference: 8-27
The Litton Company has established standards as follows:
Direct material: 3 pounds per unit @ $4 per pound = $12 per unit
Direct labor: 2 hours per unit @ $8 per hour = $16 per unit
Variable manufacturing overhead: 2 hours per unit @ $5 per hour = $10 per unit
Actual production figures for the past year are given below. The company records the
materials price variance when materials are purchased.
The company applies variable manufacturing overhead to products on the basis of
standard direct labor-hours.
The labor efficiency variance is:
A) $800 F
B) $800 U
C) $840 F
D) $840 U
Answer:
Paxton Corp has provided the following data concerning its operations last month:
Paxton Corp is a retailing organization.
The break-even sales in dollars is (round to the nearest dollar):
A. $148,148
B. $266,667
C. $333,333
D. $350,000
Answer:
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 rate variance for March is:
A. $7,000 unfavorable
B. $9,000 unfavorable
C. $13,000 unfavorable
D. $11,000 unfavorable
Answer:
Job 599 was recently completed. The following data have been recorded on its job cost
sheet:
The company applies manufacturing overhead on the basis of direct labor-hours. The
predetermined overhead rate is $20 per direct labor-hour.
Compute the unit product cost that would appear on the job cost sheet for this job.
Answer:
Financial statements for Qualle Company appear below:
Dividends during Year 2 totaled $149 thousand, of which $10 thousand were preferred
dividends.
The market price of a share of common stock on December 31, Year 2 was $280.
Compute the following for Year 2:
a. Earnings per share of common stock.
b. Price-earnings ratio.
c. Dividend yield ratio.
d. Return on total assets.
e. Return on common stockholders' equity.
f. Book value per share.
Answer:
Torri Inc. produces and sells two products. During the most recent month, Product
C34M's sales were $25,000 and its variable expenses were $5,750. Product Y03Z's
sales were $40,000 and its variable expenses were $9,850. The company's fixed
expenses were $48,310.
a. Determine the overall break-even point for the company. Show your work!
b. If the sales mix shifts toward Product C34M with no change in total sales, what will
happen to the break-even point for the company? Explain.
Answer:
The constraint at Vrana Inc. is an expensive milling machine. The three products listed
below use this constrained resource.
a. Rank the products in order of their current profitability from the most profitable to
the least profitable. In other words, rank the products in the order in which they should
be emphasized. Show your work!
b. Assume that sufficient constraint time is available to satisfy demand for all but the
least profitable product. Up to how much should the company be willing to pay to
acquire more of the constrained resource?
Answer:
Hilario Urban Diner is a charity supported by donations that provides free meals to the
homeless. The diners budget for September is to be based on 2,600 meals. The diners
director has provided the following cost data to use in the budget: groceries, $2.10 per
meal; kitchen operations, $5,600 per month plus $1.80 per meal; administrative
expenses, $3,700 per month plus $0.55 per meal; and fundraising expenses, $1,400 per
month.
Required:
Prepare the diners budget for the month of September. The budget will only contain the
costs listed above; no revenues will be on the budget.
Answer:
Rubidoux Jeep Tours operates jeep tours in the heart of the Colorado Rockies. The
company bases its budgets on two measures of activity (i.e., cost drivers), namely
guests and jeeps. One vehicle used in one tour on one day counts as a jeep. Each jeep
has one tour guide. The company uses the following data in its budgeting:
In September, the company budgeted for 483 guests and 240 jeeps. The companys
income statement showing the actual results for the month appears below:
Required:
Prepare a report showing the companys revenue and spending variances for September.
Label each variance as favorable (F) or unfavorable (U).
Answer:
Answer:
Heavey Fabrication is a division of a major corporation. Last year the division had total
sales of $21,120,000, net operating income of $2,006,400, and average operating assets
of $6,000,000. The company's minimum required rate of return is 12%.
What is the division's return on investment (ROI)?
Answer:
Condensed financial statements for Blackhurst Company appear below:
There were 72,000 shares of common stock outstanding throughout the year. Dividends
on common stock amounted to $320,400 and dividends on preferred stock amounted to
$45,000. The market value of a share of common stock was $54 at the end of the year.
On the basis of the information given above, fill in the blanks with the appropriate
figures:
Example: The gross margin as a percent of sales would be computed by dividing
$2,160,000 by $5,400,000.
a. The earnings per share of common stock for the year would be computed by dividing
_______________ by _________________.
b. The times interest earned for the year would be computed by dividing
_______________ by _________________.
c. The price-earnings ratio at the end of the year would be computed by dividing
_______________ by _________________.
d. The dividend payout ratio for the year would be computed by dividing
_______________ by _________________.
e. The dividend yield ratio for the year would be computed by dividing
_______________ by _________________.
f. The return on total assets for the year would be computed by dividing
_______________ by _________________.
g. The return on common stockholders' equity for the year would be computed by
dividing _______________ by _________________.
h. The acid-test ratio at the end of the year would be computed by dividing
_______________ by _________________.
i. The accounts receivable turnover for the year would be computed by dividing
_______________ by _________________.
j. The inventory turnover for the year would be computed by dividing
_______________ by _________________.
k. The debt-to-equity ratio at the end of the year would be computed by dividing
_______________ by _________________.
Answer:
Answer:
Answer:
Goodenough Inc. has provided the following data for August:
Prepare T-accounts for Raw Materials, Work in Process, Finished Goods, and
Manufacturing Overhead, and Cost of Goods Sold. Record the beginning balances and
each of the transactions listed above. Finally, determine the ending balances.
Answer:
Last year, Holroyd Corporation's variable costing net operating income was $95,000.
The fixed manufacturing overhead costs deferred in inventory under absorption costing
amounted to $29,000.
Determine the absorption costing net operating income last year. Show your work!
Answer:
Caplan Corporation's balance sheet and income statement appear below:
The company did not dispose of any property, plant, and equipment, issue any bonds
payable, or repurchase any of its own common stock during the year. The company
declared and paid a cash dividend.
Prepare a statement of cash flows in good form using the indirect method.
Answer:
Cuffee Inc., which produces a single product, has provided the following data for its
most recent month of operation:
The company had no beginning or ending inventories.
a. Compute the unit product cost under absorption costing. Show your work!
b. Compute the unit product cost under variable costing. Show your work!
Answer:
