The most recent comparative balance sheet of Broekemeier Corporation appears below:
The company uses the indirect method to construct the operating activities section of its
statements of cash flows.
Which of the following is correct regarding the operating activities section of the
statement of cash flows?
A. The change in Accounts Receivable will be subtracted from net income; The change
in Inventory will be added to net income
B. The change in Accounts Receivable will be added to net income; The change in
Inventory will be subtracted from net income
C. The change in Accounts Receivable will be added to net income; The change in
Inventory will be added to net income
D. The change in Accounts Receivable will be subtracted from net income; The change
in Inventory will be subtracted from net income
Answer:
Gore Corporation has two divisions: the Business Products Division and the Export
Products Division. The Business Products Division’s divisional segment margin is
$55,700 and the Export Products Division’s divisional segment margin is $70,600. The
total amount of common fixed expenses not traceable to the individual divisions is
$107,400. What is the company’s net operating income?
A. $233,700
B. $(126,300)
C. $126,300
D. $18,900
Answer:
A labor efficiency variance resulting from the use of poor quality materials should be
charged to:
A) the production manager.
B) the purchasing agent.
C) manufacturing overhead.
D) the industrial engineering department.
Answer:
Activity rates from Quattrone Corporation’s activity-based costing system are listed
below. The company uses the activity rates to assign overhead costs to products:
Last year, Product F76D included the following activities: 2 customer orders, 434
assembly hours, and 20 batches. How much overhead cost would be assigned to
Product F76D using the activity-based costing system?
A. $1,041.80
B. $2,000.04
C. $66,908.88
D. $146.73
Answer:
The activity in Nolan Company’s Blending Department for the month of April is given
below:
All materials are added at the beginning of processing in the Blending Department.
The equivalent units for material for the month, using the FIFO method, are:
A. 50,000 units
B. 58,000 units
C. 54,000 units
D. 60,000 units
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.
Accounts payable at the end of December would be:
A. $271,500
B. $105,000
C. $166,500
D. $262,500
Answer:
Gary Corporation prepares its statement of cash flows using the indirect method. Which
of the following would be subtracted from net income in the operating activities section
of the statement?
A. Option A
B. Option B
C. Option C
D. Option D
Answer:
Last year, Flynn Company reported a profit of $70,000 when sales totaled $520,000 and
the contribution margin ratio was 40%. If fixed expenses increase by $10,000 next year,
what amount of sales will be necessary in order for the company to earn a profit of
$80,000?
A. $600,000
B. $570,000
C. $562,500
D. $625,000
Answer:
Stanfa Corporation’s standard wage rate is $10.50 per direct labor-hour (DLH) and
according to the standards, each unit of output requires 8.0 DLHs. In January, 3,700
units were produced, the actual wage rate was $10.80 per DLH, and the actual hours
were 25,280 DLHs. In the journal entry to record the incurrence of direct labor costs in
January, the Work in Process entry would consist of a:
A. debit of $310,800.
B. credit of $273,024.
C. credit of $310,800.
D. debit of $273,024.
Answer:
Compound K47E is used to make Goforth Corporation’s major product. The standard
cost of compound K47E is $24.50 per ounce and the standard quantity is 6.1 ounces per
unit of output. In the most recent month, 5,030 ounces of the compound were used to
make 700 units of the output. When recording the use of materials in production, Raw
Materials would be:
A. credited for $123,235.
B. debited for $123,235.
C. debited for $104,615.
D. credited for $104,615.
Answer:
Callander Corporation is a wholesaler that sells a single product. Management has
provided the following cost data for two levels of monthly sales volume. The company
sells the product for $151.60 per unit.
The best estimate of the total contribution margin when 6,300 units are sold is:
A. $450,450
B. $518,490
C. $121,590
D. $66,780
Answer:
Reference: 8A-5
The Dodge Company makes and sells a single product and uses a standard cost system
in which manufacturing overhead costs are applied to units of product on the basis of
standard direct labor-hours. The standard cost card shows that 5 direct labor-hours are
required per unit of product. The Dodge Company had the following budgeted and
actual data for the year:
The budgeted direct labor-hours is used as the denominator activity for the month.
The fixed manufacturing overhead budget variance was:
A) $750 F
B) $3,750 F
C) $7,500 F
D) $3,000 U
Answer:
The break-even point in unit sales increases when variable expenses:
A. increase and the selling price remains unchanged.
B. decrease and the selling price remains unchanged.
C. decrease and the selling price increases.
D. remain unchanged and the selling price increases.
Answer:
Fahey Company manufactures a single product that it sells for $25 per unit. The
company has the following cost structure:
There were no units in beginning inventory. During the year, 18,000 units were
produced and 15,000 units were sold.
Under absorption costing, the unit product cost is:
A. $9
B. $12
C. $13
D. $16
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 times interest earned ratio for the year was closest to:
A. 11.0
B. 10.5
C. 12.0
D. 22.0
Answer:
Holzhauer Corporation, a merchandising company, reported the following results for
March:
Cost of goods sold is a variable cost in this company.
The contribution margin for March is:
A. $922,600
B. $1,120,000
C. $1,962,600
D. $1,360,000
Answer:
Grosseiller Corporation uses the weighted-average method in its process costing
system. This month, the beginning inventory in the first processing department
consisted of 900 units. The costs and percentage completion of these units in beginning
inventory were:
A total of 6,400 units were started and 5,200 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 65% complete with respect to materials and 15% 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 materials for the month in the first processing
department?
A. 1,365
B. 6,565
C. 7,300
D. 5,200
Answer:
Equivalent units for a process costing system using the weighted-average method would
be equal to:
A. units completed during the period and transferred out.
B. units started and completed during the period plus equivalent units in the ending
work in process inventory.
C. units completed during the period less equivalent units in the beginning inventory,
plus equivalent units in the ending work in process inventory.
D. units completed during the period plus equivalent units in the ending work in
process inventory.
Answer:
Turner Company’s contribution margin ratio is 15%. If the degree of operating leverage
is 12 at the $150,000 sales level, net operating income at the $150,000 sales level must
equal:
A. $1,500
B. $2,700
C. $2,160
D. $1,875
Answer:
Intask Company uses the FIFO method in its process costing system. Beginning
inventory in the mixing department consisted of 6,000 units that were 75% complete
with respect to conversion costs. Ending work in process inventory consisted of 5,000
units that were 60% complete with respect to conversion costs. If 12,000 units were
transferred to the next processing department during the period, the equivalent units for
conversion cost would be:
A. 12,500 units
B. 10,500 units
C. 13,500 units
D. 13,000 units
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 quantity variance for June is:
A) $1,760 U
B) $1,782 F
C) $1,760 F
D) $1,782 U
Answer:
Favini 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. $98
B. $125
C. $118
D. $91
Answer:
Phillipson Corporation has two divisions: the IEB Division and the PIH Division. The
corporation’s net operating income is $83,900. The IEB Division’s divisional segment
margin is $149,700 and the PIH Division’s divisional segment margin is $60,100. What
is the amount of the common fixed expense not traceable to the individual divisions?
A. $233,600
B. $209,800
C. $144,000
D. $125,900
Answer:
At the end of the year, a companys Manufacturing Overhead account contained the
following data:
If the denominator activity for the year was 40,000 machine-hours, and if 36,400
machine-hours were allowed for the years production, then the predetermined overhead
rate per machine-hour was:
A) $2.15
B) $1.96
C) $2.26
D) $2.05
Answer:
Drama Company’s working capital is $16,000 and its current liabilities are $94,000. The
company’s current ratio is closest to:
A. 1.17
B. 0.17
C. 6.88
D. 0.83
Answer:
Furson Corporation makes a single product. In a recent period 6,500 units were made
and there was an unfavorable labor efficiency variance of $26,000. Direct labor workers
were paid $8 per hour and total wages were $182,000. The labor rate variance was zero.
The standard labor-hours per unit of output is closest to:
A) 3.0
B) 3.5
C) 4.0
D) 4.5
Answer:
Snappy Company has a job-order costing system and uses a predetermined overhead
rate based on direct labor-hours to apply manufacturing overhead to jobs.
Manufacturing overhead cost and direct labor hours were estimated at $100,000 and
40,000 hours, respectively, for the year. In July, Job #334 was completed at a cost of
$5,000 in direct materials and $2,400 in direct labor. The labor rate is $6 per hour. By
the end of the year, Snappy had worked a total of 45,000 direct labor-hours and had
incurred $110,250 actual manufacturing overhead cost.
If Job #334 contained 200 units, the unit product cost on the completed job cost sheet
would be:
A. $37.00
B. $42.00
C. $41.90
D. $39.50
Answer:
A drop in the market price of a firm’s common stock will immediately affect its:
A. return on common stockholders’ equity.
B. current ratio.
C. dividend payout ratio.
D. dividend yield ratio.
Answer:
Data concerning Moscowitz Corporation’s single product appear below:
Fixed expenses are $375,000 per month. The company is currently selling 8,000 units
per month. The marketing manager would like to cut the selling price by $15 and
increase the advertising budget by $23,000 per month. The marketing manager predicts
that these two changes would increase monthly sales by 3,100 units. What should be the
overall effect on the company’s monthly net operating income of this change?
A. decrease of $128,900
B. increase of $426,500
C. increase of $8,900
D. increase of $128,900
Answer:
If an investment has cash outflows of Q dollars at the end of each year for three years,
then the present value of these cash outflows under a 10% rate of return will be:
A. greater than under a 12% rate of return.
B. less than under a 12% rate of return.
C. equal to that under a 12% rate of return.
D. unknown because it depends on the size of Q.
Answer: