1) Product Q77H has been considered a drag on profits at Zenke Corporation for some
time and management is considering discontinuing the product altogether. Data from
the company’s accounting system appear below:
In the company’s accounting system all fixed expenses of the company are fully
allocated to products. Further investigation has revealed that $71,000 of the fixed
manufacturing expenses and $43,000 of the fixed selling and administrative expenses
are avoidable if product Q77H is discontinued. What would be the effect on the
company’s overall net operating income if product Q77H were dropped?
A.Overall net operating income would decrease by $95,000.
B.Overall net operating income would increase by $95,000.
C.Overall net operating income would increase by $4,000.
D.Overall net operating income would decrease by $4,000.
2) Tillinghast Corporation estimates that its variable manufacturing overhead is $9.60
per machine-hour and its fixed manufacturing overhead is $14,630 per period.
If the denominator level of activity is 1,000 machine-hours, the variable component in
the predetermined overhead rate would be:
A.$22.90 per machine-hour
B.$14.63 per machine-hour
C.$24.23 per machine-hour
D.$9.60 per machine-hour
3) Poskey Corporation uses an activity-based costing system with three activity cost
pools. The company has provided the following data concerning its costs and its activity
based costing system:
How much cost, in total, would be allocated in the first-stage allocation to the Assembly
activity cost pool?
A.$187,000
B.$264,000
C.$217,000
D.$165,000
4) In setting a transfer price, which of the following should not be considered?
A.Fixed production costs of the buying division.
B.Production capacity of the selling division.
C.Product demand from outside customers.
D.Costs eliminated by internal transfers.
5) Narciso Corporation is preparing a bid for a special order that would require 880
liters of material R19S. The company already has 280 liters of this raw material in stock
that originally cost $6.10 per liter. Material R19S 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 $5.45 per liter. New stocks of the material can be readily purchased for
$6.20 per liter. What is the relevant cost of the 880 liters of the raw material when
deciding how much to bid on the special order?
A.$5,006
B.$5,456
C.$4,796
D.$5,056
6) The company’s operating cycle for Year 2 is closest to:
A.95.9 days
B.75.3 days
C.162.0 days
D.9.2 days
7) A partial listing of costs incurred at Falkenberg Corporation during October appears
below:
Required:
a. What is the total amount of product cost listed above? Show your work.
b. What is the total amount of period cost listed above? Show your work.
8) The Work in Process inventory account of a manufacturing Corporation shows a
balance of $18,000 at the end of an accounting period. The job cost sheets of the two
uncompleted jobs show charges of $6,000 and $3,000 for materials, and charges of
$4,000 and $2,000 for direct labor. From this information, it appears that the
Corporation is using a predetermined overhead rate, as a percentage of direct labor
costs, of:
A.50%
B.200%
C.300%
D.20%
9) Results of operations for the Anderson Corporation indicated that the actual direct
labor rate for May was $9.75 while the standard rate was $10.00. The general ledger
entry to record the incurrence of direct labor cost would include:
A.a debit to Work In Process for the actual number of hours times $9.75 per hour.
B.a debit to Work In Process for the standard number of hours times $10.00 per hour.
C.a debit to Work In Process for the standard number of hours times $9.75 per hour.
D.a debit to Work In Process for the actual number of hours times $10.00 per hour.
10) The journal entry to record the incurrence of the actual Manufacturing Overhead
costs would include a:
A.debit to Manufacturing Overhead of $65,000
B.credit to Manufacturing Overhead of $65,000
C.credit to Work in Process of $60,000
D.debit to Work in Process of $60,000
11) The salary paid to the maintenance supervisor in a manufacturing plant is an
example of:
Product Cost Manufacturing Overhead
A) No Yes
B) Yes No
C) Yes Yes
D) No No
12) Gandrud Kennel uses tenant-days as its measure of activity; an animal housed in the
kennel for one day is counted as one tenant-day. During June, the kennel budgeted for
2,600 tenant-days, but its actual level of activity was 2,580 tenant-days. The kennel has
provided the following data concerning the formulas to be used in its budgeting:
The food and supplies in the flexible budget for June would be closest to:
A.$36,993
B.$37,569
C.$37,600
D.$37,320
13) Hardee Inc., which produces a single product, has provided the following data for
its most recent month of operations:
There were no beginning or ending inventories.
The unit product cost under absorption costing was:
A.$135 per unit
B.$30 per unit
C.$103 per unit
D.$33 per unit
14) Loomer Catering uses two measures of activity, jobs and meals, in the cost formulas
in its budgets and performance reports. The cost formula for catering supplies is $550
per month plus $95 per job plus $21 per meal. A typical job involves serving a number
of meals to guests at a corporate function or at a host’s home. The company expected its
activity in July to be 12 jobs and 136 meals, but the actual activity was 13 jobs and 137
meals. The actual cost for catering supplies in July was $4,770. The catering supplies in
the planning budget for July would be closest to:
A.$4,403
B.$4,770
C.$4,662
D.$4,546
15) Bradbeer Corporation uses direct labor-hours in its predetermined overhead rate. At
the beginning of the year, the estimated direct labor-hours were 17,500 hours. At the
end of the year, actual direct labor-hours for the year were 16,000 hours, the actual
manufacturing overhead for the year was $233,000, and manufacturing overhead for the
year was underapplied by $15,400. The estimated manufacturing overhead at the
beginning of the year used in the predetermined overhead rate must have been:
A.$249,375
B.$217,600
C.$228,000
D.$238,000
16) Up to how much should the company be willing to pay for one additional minute of
milling machine time if the company has made the best use of the existing milling
machine capacity? (Round off to the nearest whole cent.)
A) $11.00
B) $0.00
C) $4.55
D) $15.00
17) Hargenrader Inc. produces and sells two products. During the most recent month,
Product P02S’s sales were $24,000 and its variable expenses were $7,920. Product
O50U’s sales were $41,000 and its variable expenses were $14,180. The company’s
fixed expenses were $40,350.
Required:
a. Determine the overall break-even point for the company in total sales dollars. Show
your work!
b. If the sales mix shifts toward Product P02S with no change in total sales, what will
happen to the break-even point for the company? Explain.
18) Collins Corporation uses a predetermined overhead rate based on direct labor cost
to apply manufacturing overhead to jobs. The following information applies to the
Corporation for the current year:
The manufacturing overhead cost for the current year will be:
A.$17,000 overapplied
B.$17,000 underapplied
C.$55,000 overapplied
D.$55,000 underapplied
19) Kirston Company operates a free cafeteria for the benefit of its employees.
Budgeted and actual costs in the cafeteria for last year are given below:
The variable costs of the cafeteria are charged to operating departments on the basis of
the number of employees in these departments. Data concerning last year are given
below:
The level of budgeted fixed costs in the cafeteria is determined by the peak-period
requirements.
Required:
a. Compute the dollar amount of the variable and fixed costs that should have been
charged to each of the operating departments at the end of last year for purposes of
evaluating performance.
b. Identify the amount, if any, of actual cafeteria costs that should not be charged to the
operating departments.
20) Daab Products is a division of a major corporation. The following data are for the
most recent year of operations:
The division’s margin used to compute ROI is closest to:
A.2.8%
B.28.8%
C.10.8%
D.26.0%