1) Nantua Corporation has two divisions, Southern and Northern. The following
information was taken from last year’s income statement segmented by division:
Net operating income last year for Nantua Corporation was $400,000.
If the Northern Division’s sales last year were $300,000 higher, how would this have
changed Nantua’s net operating income? (Assume no change in selling prices, variable
expenses per unit, or fixed expenses.)
A.$30,000 increase
B.$80,000 increase
C.$120,000 increase
D.$300,000 increase
2) The gross margin for December is:
A) $1,193,100
B) $929,100
C) $1,369,400
D) $2,597,800
3) The direct materials used in production during the year totaled:
A.$180,000
B.$240,000
C.$130,000
D.$120,000
4) Jackson Painting paints the interiors and exteriors of homes and commercial
buildings. The company uses an activity-based costing system for its overhead costs.
The company has provided the following data concerning its activity-based costing
system.
The “Other” activity cost pool consists of the costs of idle capacity and
organization-sustaining costs.
The company has already finished the first stage of the allocation process in which
costs were allocated to the activity cost centers. The results are listed below:
Required:
a. Compute the activity rates (i.e., cost per unit of activity) for the Painting and Job
Support activity cost pools. Round off all calculations to the nearest whole cent.
b. Prepare an action analysis report in good form of a job that involves painting 63
square meters and has direct materials and direct labor cost of $2,070. The sales
revenue from this job is $2,500.
For purposes of this action analysis report, direct materials and direct labor should be
classified as a Green cost; production overhead as a Red cost; and office expense as a
Yellow cost.
5) Keske Corporation has an activity-based costing system with three activity cost
pools-Machining, Order Filling, and Other. In the first stage allocations, costs in the two
overhead accounts, equipment depreciation and supervisory expense, are allocated to
the three activity cost pools based on resource consumption. Data used in the first stage
allocations follow:
Machining costs are assigned to products using machine-hours (MHs) and Order Filling
costs are assigned to products using the number of orders. The costs in the Other
activity cost pool are not assigned to products. Activity data for the company’s two
products follow:
Finally, the costs of Machining and Order Filling are combined with the following sales
and direct cost data to determine product margins.
What is the overhead cost assigned to Product L6 under activity-based costing?
A.$36,500
B.$9,160
C.$32,694
D.$23,534
6) Welcome Corporation produces metal telephone poles. In the most recent month, the
company budgeted production of 4,100 poles. Actual production was 4,400 poles.
According to standards, each pole requires 7.0 machine-hours. The actual
machine-hours for the month were 31,140 machine-hours. The standard variable
manufacturing overhead rate is $2.50 per machine-hour. The actual variable
manufacturing overhead cost for the month was $83,787. The variable overhead
efficiency variance is:
A.$6,787 F
B.$6,787 U
C.$850 F
D.$850 U
7) What is the net advantage or disadvantage to the company from upgrading the
computers rather than selling them in their present condition?
A) $20,000 advantage
B) $20,000 disadvantage
C) $60,000 advantage
D) $60,000 disadvantage
8) Senff Corporation uses the following activity rates from its activity-based costing to
assign overhead costs to products:
Data concerning two products appear below:
How much overhead cost would be assigned to Product V91Z using the activity-based
costing system?
A.$113,774.55
B.$132.45
C.$3,195.50
D.$14,751.04
9) Prehn Corporation manufactures and sells one product. The following information
pertains to the company’s first year of operations:
The company does not have any variable manufacturing overhead costs or variable
selling and administrative costs. During its first year of operations, the company
produced 36,000 units and sold 30,000 units. The company’s only product is sold for
$251 per unit.
The company is considering using either super-variable costing or a variable costing
system that assigns $28 of direct labor cost to each unit that is produced. Which of the
following statements is true regarding the net operating income in the first year?
A.Super-variable costing net operating income exceeds variable costing net operating
income by $168,000.
B.Super-variable costing net operating income exceeds variable costing net operating
income by $420,000.
C.Variable costing net operating income exceeds super-variable costing net operating
income by $420,000.
D.Variable costing net operating income exceeds super-variable costing net operating
income by $168,000.
10) Muzyka 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.
The cost of ending work in process inventory in the first processing department
according to the company’s cost system is closest to:
A.$26,369
B.$22,808
C.$52,738
D.$21,095
11) Pascarelli Corporation’s inventory at the end of Year 2 was $122,000 and its
inventory at the end of Year 1 was $150,000. Cost of goods sold amounted to $870,000
in Year 2. The company’s average sale period (turnover in days) for Year 2 is closest to:
A.230.1 days
B.51.2 days
C.57.0 days
D.32.3 days
12) A manufacturer of playground equipment uses a standard costing system in which
standard machine-hours (MHs) is the measure of activity. Data from the company’s
flexible budget for manufacturing overhead are given below:
The following data pertain to operations for the most recent period:
The predetermined fixed manufacturing overhead rate is closest to:
A.$12.24 per MH
B.$13.55 per MH
C.$13.87 per MH
D.$11.96 per MH
13) Desue Corporation makes a product with the following standards for labor and
variable overhead:
The company budgeted for production of 6,500 units in December, but actual
production was 6,300 units. The company used 610 direct labor-hours to produce this
output. The actual variable overhead rate was $6.40 per hour. The company applies
variable overhead on the basis of direct labor-hours.
The variable overhead rate variance for December is:
A.$366 U
B.$366 F
C.$378 F
D.$378 U
14) Orzel Corporation has provided the following data concerning its overhead costs for
the coming year:
The company has an activity-based costing system with the following three activity cost
pools and estimated activity for the coming year:
The Other activity cost pool does not have a measure of activity; it is used to
accumulate costs of idle capacity and organization-sustaining costs.
The distribution of resource consumption across activity cost pools is given below:
The activity rate for the Assembly activity cost pool is closest to:
A.$2.70 per labor-hour
B.$9.00 per labor-hour
C.$9.90 per labor-hour
D.$16.20 per labor-hour
15) At the beginning of last year, Tari Corporation budgeted $300,000 of fixed
manufacturing overhead and chose a denominator level of activity of 600,000
machine-hours. At the end of the year, Tari’s fixed manufacturing overhead budget
variance was $9,000 favorable. Its fixed manufacturing overhead volume variance was
$15,000 favorable. Actual direct labor-hours for the year were 625,000. What was Tari’s
total standard machine-hours allowed for last year’s output?
A.570,000
B.630,000
C.648,000
D.656,250
16) Barker Corporation uses the weighted-average method in its process costing
system. This month, the beginning inventory in the first processing department
consisted of 300 units. The costs and percentage completion of these units in beginning
inventory were:
A total of 9,100 units were started and 8,700 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 85% complete with respect to materials and 20% 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 of ending work in process inventory in the first processing department
according to the company’s cost system is closest to:
A.$32,501
B.$7,647
C.$38,237
D.$19,773
17) If 24,000 units are sold during the third quarter and this activity is within the
relevant range, Bee Company’s expected contribution margin would be:
A) $646,800
B) $762,000
C) $810,000
D) $760,080
18) On the statement of cash flows, the sales adjusted to a cash basis would be:
A.$976,000
B.$982,000
C.$984,000
D.$980,000
19) The Santos Corporation made an error when selecting a denominator level of
activity and chose a much lower level than was realistic. This error would most likely
result in a large:
A.favorable variable overhead efficiency variance.
B.favorable fixed manufacturing overhead budget variance.
C.favorable fixed manufacturing overhead volume variance.
D.unfavorable fixed manufacturing overhead budget variance.