Carter Corporation applies manufacturing overhead on the basis of machine-hours. At
the beginning of the most recent year, the company based its predetermined overhead
rate on total estimated overhead of $135,850. Actual manufacturing overhead for the
year amounted to $145,000 and actual machine-hours were 5,660. The company’s
predetermined overhead rate for the year was $24.70 per machine-hour.
The overhead for the year was:
A. $5,198 overapplied
B. $3,952 underapplied
C. $3,952 overapplied
D. $5,198 underapplied
Answer:
Young Enterprises has budgeted sales in units for the next five months as follows:
Past experience has shown that the ending inventory for each month should be equal to
10% of the next month’s sales in units. The inventory on May 31 fell short of this goal
since it contained only 400 units. The company needs to prepare a Production Budget
for the next five months.
The beginning inventory in units for September should be:
A. 460 units
B. 6,800 units
C. 540 units
D. 680 units
Answer:
Ciubal Corporation has provided the following data concerning its direct labor costs for
December:
The Labor Rate Variance for December would be recorded as a:
A) credit of $19,440.
B) credit of $21,168.
C) debit of $19,440.
D) debit of $21,168.
Answer:
Reference: 8-43
Cuda Corporation makes a product that uses a material with the following standards:
The company budgeted for production of 3,500 units in November, but actual
production was 3,300 units. The company used 23,050 pounds of direct material to
produce this output. The company purchased 26,000 pounds of the direct material at a
total cost of $158,600. The direct materials purchases variance is computed when the
materials are purchased.
The materials quantity variance for November is:
A) $9,600 U
B) $9,760 U
C) $9,760 F
D) $9,600 F
Answer:
Carpon Lumber sells lumber and general building supplies to building contractors in a
medium-sized town in Montana. Data regarding the store’s operations follow:
o Sales are budgeted at $340,000 for November, $350,000 for December, and $370,000
for January.
o Collections are expected to be 55% in the month of sale, 44% in the month following
the sale, and 1% uncollectible.
o The cost of goods sold is 75% of sales.
o The company desires to have an ending merchandise inventory equal to 60% of the
next month’s cost of goods sold. Payment for merchandise is made in the month
following the purchase.
o Other monthly expenses to be paid in cash are $21,100.
o Monthly depreciation is $19,000.
o Ignore taxes.
The accounts receivable balance, net of uncollectible accounts, at the end of December
would be:
A. $154,000
B. $157,500
C. $85,500
D. $303,600
Answer:
Toye Corporation has provided its contribution format income statement for March.
The degree of operating leverage is closest to:
A. 0.16
B. 0.05
C. 18.62
D. 6.34
Answer:
Kempler Corporation processes sugar cane in batches. The company purchases a batch
of sugar cane for $34 from farmers and then crushes the cane in the company’s plant at
the cost of $15. Two intermediate products, cane fiber and cane juice, emerge from the
crushing process. The cane fiber can be sold as is for $26 or processed further for $17 to
make the end product industrial fiber that is sold for $41. The cane juice can be sold as
is for $32 or processed further for $22 to make the end product molasses that is sold for
$51. Which of the intermediate products should be processed further?
A. Cane fiber should be processed into industrial fiber; Cane juice should be processed
into molasses
B. Cane fiber should NOT be processed into industrial fiber; Cane juice should NOT
be processed into molasses
C. Cane fiber should be processed into industrial fiber; Cane juice should NOT be
processed into molasses
D. Cane fiber should NOT be processed into industrial fiber; Cane juice should be
processed into molasses
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.
How many units are in ending work in process inventory in the first processing
department at the end of the month?
A. 1,400
B. 7,200
C. 900
D. 800
Answer:
Galino Company, which has only one product, has provided the following data
concerning its most recent month of operations:
The total contribution margin for the month under the variable costing approach is:
A. $124,800
B. $49,400
C. $20,400
D. $143,000
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:
Vanwagenen Inc. has provided the following data for the month of April:
The adjusted cost of goods sold that appears on the income statement for April is:
A. $197,000
B. $195,000
C. $200,000
D. $199,000
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 break-even point in unit sales for the expected sales mix is closest to:
A. 833 of each product
B. 1,667 Business Model and 833 Math Model
C. 1,667 of each product
D. 833 Business Model and 1,667 Math Model
Answer:
Waldrop Corporation’s comparative balance sheet appears below:
The company did not dispose of any property, plant, and equipment during the year. Its
net income for the year was $4,000. The net cash provided by operating activities is:
A. $35,000
B. $14,000
C. $41,000
D. $43,000
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:
Hoster Corporation keeps careful track of the time required to fill orders. The times
recorded for a particular order appear below:
The throughput time was:
A. 8.9 hours
B. 18 hours
C. 4.5 hours
D. 22.5 hours
Answer:
The following selected data are for Geneva Company:
The earnings per share of common stock for Year 2 is closest to:
A. $1.60
B. $2.07
C. $3.27
D. $3.67
Answer:
Scherer Corporation is preparing a bid for a special order that would require 720 liters
of material U48N. The company already has 560 liters of this raw material in stock that
originally cost $6.30 per liter. Material U48N is used in the company’s main product
and is replenished on a periodic basis. The resale value of the existing stock of the
material is $5.80 per liter. New stocks of the material can be readily purchased for
$6.65 per liter. What is the relevant cost of the 720 liters of the raw material when
deciding how much to bid on the special order?
A. $4,592
B. $4,788
C. $4,456
D. $4,176
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:
What is the materials quantity variance for the month?
A) $19,460 F
B) $9,730 U
C) $10,115 U
D) $20,230 F
Answer:
In May, one of the processing departments at Lukman Corporation had beginning work
in process inventory of $11,000. During the month, $120,000 of costs were added to
production and the cost of units transferred out from the department was $94,000. The
company uses the FIFO method in its process costing system.
In the department’s cost reconciliation report for May, the total cost to be accounted for
would be:
A. $48,000
B. $251,000
C. $262,000
D. $131,000
Answer:
Dodrill Company makes two products from a common input. Joint processing costs up
to the split-off point total $43,200 a year. The company allocates these costs to the joint
products on the basis of their total sales values at the split-off point. Each product may
be sold at the split-off point or processed further. Data concerning these products appear
below:
What is the minimum amount the company should accept for Product X if it is to be
sold at the split-off point?
A. $26,800
B. $19,800
C. $52,200
D. $45,200
Answer:
Mowrer Corporation produces and sells a single product. Data concerning that product
appear below:
Fixed expenses are $567,000 per month. The company is currently selling 9,000 units
per month. The marketing manager would like to introduce sales commissions as an
incentive for the sales staff. The marketing manager has proposed a commission of $11
per unit. In exchange, the sales staff would accept a decrease in their salaries of $84,000
per month. (This is the company’s savings for the entire sales staff.) The marketing
manager predicts that introducing this sales incentive would increase monthly sales by
600 units. What should be the overall effect on the company’s monthly net operating
income of this change?
A. increase of $77,400
B. increase of $21,600
C. increase of $669,600
D. decrease of $146,400
Answer:
Buell Corporation has provided the following data for June.
The budget variance for June is:
A. $5,740 F
B. $3,610 F
C. $3,610 U
D. $5,740 U
Answer:
Financial statements for Marcell Company appear below:
Marcell Company’s average sale period for Year 2 was closest to:
A. 15.7 days
B. 25.8 days
C. 36.9 days
D. 22.6 days
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.
What are the equivalent units for materials for the month in the first processing
department?
Refer To: 4A-5
A. 9,000
B. 375
C. 8,300
D. 8,715
Answer:
Which of the following are considered to be product costs under absorption costing?
I. Variable manufacturing overhead.
II. Fixed manufacturing overhead.
III. Selling and administrative expenses.
A. I, II, and III.
B. I and II.
C. I and III.
D. I.
Answer:
Gordon Company produces a single product that sells for $10 per unit. Last year there
were no beginning inventories, 100,000 units were produced, and 80,000 units were
sold. The company has the following cost structure:
Net operating income under variable costing would be:
A. $114,000
B. $210,000
C. $234,000
D. $330,000
Answer:
Which of the following would be considered a product cost for external financial
reporting purposes?
A. Cost of a warehouse used to store finished goods.
B. Cost of guided public tours through the company’s facilities.
C. Cost of travel necessary to sell the manufactured product.
D. Cost of sand spread on the factory floor to absorb oil from manufacturing machines.
Answer:
Davol Corporation is preparing its Manufacturing Overhead Budget for the fourth
quarter of the year. The budgeted variable manufacturing overhead rate is $6.80 per
direct labor-hour; the budgeted fixed manufacturing overhead is $72,000 per month, of
which $20,000 is factory depreciation.
If the budgeted direct labor time for November is 5,000 hours, then the total budgeted
cash disbursements for November must be:
A. $54,000
B. $52,000
C. $106,000
D. $86,000
Answer:
Compound Q11H is a raw material used to make Grater Corporation’s major product.
The standard cost of compound Q11H is $23.00 per ounce and the standard quantity is
3.8 ounces per unit of output. Data concerning the compound for October appear below:
The raw material was purchased on account.
The Materials Price Variance for October would be recorded as a:
A. Debit of $230
B. Credit of $212
C. Debit of $212
D. Credit of $230
Answer:
The Western Company is considering the addition of a new product to its current
product lines. The expected cost and revenue data for the new product are as follows:
If the new product is added to the existing product line, then sales of existing products
will decline. As a consequence, the contribution margin of the other existing product
lines is expected to drop $78,000 per year.
What is the lowest selling price per unit among those listed below that could be charged
for the new product and still make it economically desirable to add the new product?
A. $240
B. $222
C. $291
D. $249
Answer:
(Ignore income taxes in this problem.) In order to receive $12,000 at the end of three
years and $10,000 at the end of five years, how much must be invested now if you can
earn 14% rate of return?
A. $12,978
B. $8,100
C. $13,290
D. $32,054
Answer:
Gabruk Inc. is a merchandising company. Last month the company’s merchandise
purchases totaled $88,000. The company’s beginning merchandise inventory was
$15,000 and its ending merchandise inventory was $13,000. What was the company’s
cost of goods sold for the month?
A. $88,000
B. $90,000
C. $86,000
D. $116,000
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.
The cost per equivalent unit for materials for the month in the first processing
department is closest to:
A. $25.74
B. $23.81
C. $24.87
D. $26.89
Answer:
Dunford Company produces three products with the following costs and selling prices:
If Dunford has a limit of 30,000 machine hours but no limit on units sold or direct labor
hours, then the ranking of the products from the most profitable to the least profitable
use of the constrained resource is:
A. Y, Z, X
B. X, Y, Z
C. X, Z, Y
D. Z, X, Y
Answer:
The Casket Division of Rosencranz Corporation had average operating assets of
$150,000 and net operating income of $27,800 in March. The company uses residual
income to evaluate the performance of its divisions, with a minimum required rate of
return of 17%.
What was the Casket Division’s residual income in March?
Answer:
Krouse Corporations manufacturing overhead includes $14.70 per machine-hour for
variable manufacturing overhead and $191,580 per period for fixed manufacturing
overhead.
Required:
Determine the predetermined overhead rate for the denominator level of activity of
3,100 machine-hours.
Answer:
Madlem, Inc., produces and sells a single product whose selling price is $240.00 per
unit and whose variable expense is $86.40 per unit. The company’s fixed expense is
$720,384 per month.
Determine the monthly break-even in either unit or total dollar sales. Show your work!
Answer:
Edwards Company has projected sales and production in units for the second quarter of
the year as follows:
a. Cash production costs are budgeted at $6 per unit produced. Of these production
costs, 40% are paid in the month in which they are incurred and the balance in the
following month. Selling and administrative expenses (all paid in cash) amount to
$60,000 per month. The accounts payable balance on March 31 totals $96,000, all of
which will be paid in April. Prepare a schedule for each month showing budgeted cash
disbursements for Edwards Company.
b. Assume that all units will be sold on account for $15 each. Cash collections from
sales are budgeted at 60% in the month of sale, 30% in the month following the month
of sale and the remaining 10% in the second month following the month of sale.
Accounts receivable on March 31 totaled $255,000 $(45,000 from February’s sales and
the remainder from March.) Prepare a schedule for each month showing budgeted cash
receipts for Edwards Company.
Answer:
Data from Adame Corporation’s most recent balance sheet and income statement appear
below:
Compute the average collection period for this year:
Answer:
The following information is taken from the operating activities section of the statement
of cash flows for the Parks Company for the year just ended:
The following information is taken from the company’s income statement for the year
just ended:
a. For each of the adjustments to convert net income to the cash basis, indicate whether
the account increased or decreased.
b. Determine the net cash provided by operating activities using the direct method. You
need not prepare the formal operating activities section of the statement of cash flows
but you should show the adjustments that must be made to sales, expenses, and so forth
and the cash flow balances of sales, expenses, etc.
Answer:
At an activity level of 5,900 units, Haas Corporation’s total variable cost is $347,982
and its total fixed cost is $284,321.
For the activity level of 6,100 units, compute: (a) the total variable cost; (b) the total
fixed cost; (c) the total cost; (d) the average variable cost per unit; (e) the average fixed
cost per unit; and (f) the average total cost per unit. Assume that this activity level is
within the relevant range.
Answer:
Last year, Teneyck Corporation’s variable costing net operating income was $63,500
and ending inventory decreased by 200 units. Fixed manufacturing overhead cost per
unit was $5.
Determine the absorption costing net operating income for last year. Show your work!
Answer:
Mountain Manufacturing uses a standard cost system in which manufacturing overhead
is applied to units of product on the basis of standard machine-hours. At standard, each
unit of product requires one machine-hour to complete. The standard variable overhead
is $1.75 per machine-hour and Budgeted Fixed Manufacturing Costs are $300,000 per
year. The denominator level of activity is 150,000 machine-hours, or 150,000 units.
Actual data for the year were as follows:
a. What are the predetermined variable and fixed manufacturing overhead rates for the
year?
b. Compute the variable overhead rate and efficiency variances for the year.
c. Compute the fixed manufacturing overhead budget and volume variances for the
year.
Answer:
Enciso Corporation is preparing its cash budget for November. The budgeted beginning
cash balance is $31,000. Budgeted cash receipts total $135,000 and budgeted cash
disbursements total $141,000. The desired ending cash balance is $50,000. The
company can borrow up to $100,000 at any time from a local bank, with interest not
due until the following month.
Prepare the company’s cash budget for November in good form.
Answer:
Gordy Corporation manufactures a variety of products. Last year, variable costing net
operating income was $81,000. The fixed manufacturing overhead costs released from
inventory under absorption costing amounted to $39,000.
Determine the absorption costing net operating income last year. Show your work!
Answer:
Dehne Corporation has provided the following data from its most recent income
statement:
Compute the times interest earned ratio. Show your work!
Answer:
Durkee Corporation keeps careful track of the time required to fill orders. The times
required for a particular order appear below:
a. Determine the throughput time. Show your work!
b. Determine the manufacturing cycle efficiency (MCE), Show your work!
c. Determine the delivery cycle time. Show your work!
Answer:
Sperazza International, Inc., produces and sells a single product. The product sells for
$240.00 per unit and its variable expense is $96.00 per unit. The company’s monthly
fixed expense is $699,840.
Determine the monthly break-even in total dollar sales. Show your work!
Answer:
The contribution margin ratio of Thronson Corporation’s only product is 69%. The
company’s monthly fixed expense is $455,400 and the company’s monthly target profit
is $41,400.
Determine the dollar sales to attain the company’s target profit. Show your work!
Answer:
Wahlen Corporation has provided the following data concerning its direct labor costs
for November:
Required:
Prepare the journal entry to record the incurrence of direct labor costs.
Answer:
Vanstraten Inc. has provided the following data concerning the Assembly Department
for the month of April. The company uses the weighted-average method in its process
costing.
During the month, 4,800 units were completed and transferred from the Assembly
Department to the next department.
Determine the cost of ending work in process inventory and the cost of units transferred
out of the department during April using the weighted-average method.
Answer: