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Rothe Company manufactures and sells a single product that it sells for $90 per unit and
has a contribution margin ratio of 35%. The company's fixed expenses are $46,800. If
Rothe desires a monthly target net operating income equal to 15% of sales, the amount
of sales in units will have to be (rounded):
A. 1,486 units
B. 3,467 units
C. 1,040 units
D. 2,600 units
Answer:
Fluck Corporation's balance sheet and income statement appear below:
The company sold equipment for $12 that was originally purchased for $5 and that had
accumulated depreciation of $3. The company paid a cash dividend and it did not issue
any bonds payable or repurchase any of its own common stock.
The net cash provided by (used in) financing activities for the year was:
A. $3
B. $(4)
C. $(21)
D. $(22)
Answer:
Hick Corporation's most recent balance sheet and income statement appear below:
Dividends on common stock during Year 2 totaled $60 thousand. Dividends on
preferred stock totaled $20 thousand. The market price of common stock at the end of
Year 2 was $9.57 per share.
The return on common stockholders' equity for Year 2 is closest to:
A. 12.44%
B. 13.02%
C. 15.38%
D. 10.53%
Answer:
Reference: 8-26
Wayland Corporations static planning budget for April appears below. The company
bases its budgets on machine-hours.
In April, the actual number of machine-hours was 6,600, the actual supplies cost was
$64,040, the actual power cost was $7,070, the actual salaries cost was $88,300, and the
actual equipment depreciation was $7,430.
The spending variance for supplies cost for the month should be:
A) $5,540 F
B) $4,640 U
C) $4,640 F
D) $5,540 U
Answer:
Abe 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. $162,600
B. $378,000
C. $226,800
D. $319,200
Answer:
Eagle Corporation manufactures a picnic table. Shown below is Eagle's cost structure:
In its first year of operations, Eagle produced and sold 10,000 tables. The tables sold for
$120 each.
How would Eagle's variable costing net operating income have been affected in its first
year if only 9,000 tables were sold instead of 10,000?
A. net operating income would have been $37,100 lower
B. net operating income would have been $45,800 lower
C. net operating income would have been $56,000 lower
D. net operating income would have been $62,000 lower
Answer:
East Company has the following budgeted cost and revenue data:
A 10% increase in fixed expense would result in:
A. a 10% decrease in net operating income.
B. a $14,000 increase in total contribution margin.
C. an increase in the margin of safety.
D. an increase in the break-even point.
Answer:
Compound V11V is used to make Hickenbottom Corporation's major product. The
standard cost of V11V is $50 per ounce and the standard quantity is 3.6 ounces per unit
of output. In the most recent month, 1,600 ounces of the raw material were purchased at
a cost of $00 per ounce. When recording the purchase of materials, Raw Materials
would be:
A. credited for $34,400.
B. credited for $33,600.
C. debited for $34,400.
D. debited for $33,600.
Answer:
Moncrief Inc. produces and sells a single product. The selling price of the product is
$170.00 per unit and its variable cost is $62.90 per unit. The fixed expense is $300,951
per month. The break-even in monthly unit sales is closest to:
A. 4,785 units
B. 2,810 units
C. 3,122 units
D. 1,770 units
Answer:
Frymire Corporation produces and sells a single product. Data concerning that product
appear below:
Assume the company's monthly target profit is $46,000. The dollar sales to attain that
target profit is closest to:
A. $3,228,703
B. $1,961,477
C. $1,590,257
D. $1,065,472
Answer:
Ingrum Framings cost formula for its supplies cost is $1,120 per month plus $11 per
frame. For the month of June, the company planned for activity of 611 frames, but the
actual level of activity was 607 frames. The actual supplies cost for the month was
$8,150. The spending variance for supplies cost in June would be closest to:
A) $353 F
B) $309 U
C) $353 U
D) $309 F
Answer:
Fayard Corporation uses the weighted-average method in its process costing system.
The Assembly Department started the month with 5,000 units in its beginning work in
process inventory that were 70% complete with respect to conversion costs. An
additional 67,000 units were transferred in from the prior department during the month
to begin processing in the Assembly Department. During the month 63,000 units were
completed in the Assembly Department and transferred to the next processing
department. There were 9,000 units in the ending work in process inventory of the
Assembly Department that were 50% complete with respect to conversion costs.
What were the equivalent units for conversion costs in the Assembly Department for the
month?
A. 71,000
B. 64,000
C. 63,000
D. 67,500
Answer:
The Collins Company uses predetermined overhead rates to apply manufacturing
overhead to jobs. The predetermined overhead rate is based on labor cost in Dept. A and
machine-hours in Dept. B. At the beginning of the year, the company made the
following estimates:
What predetermined overhead rates would be used in Dept A and Dept B, respectively?
A. 71% and $4.00
B. 140% and $4.00
C. 140% and $4.80
D. 71% and $4.80
Answer:
The following standards for variable manufacturing overhead have been established for
a company that makes only one product:
The following data pertain to operations for the last month:
What is the variable overhead efficiency variance for the month?
A) $9,219 U
B) $10,179 U
C) $9,867 U
D) $648 U
Answer:
Meacham Company has traditionally made a subcomponent of its major product.
Annual production of 20,000 subcomponents results in the following costs:
Meacham has received an offer from an outside supplier who is willing to provide
20,000 units of this subcomponent each year at a price of $28 per subcomponent.
Meacham knows that the facilities now being used to make the subcomponent would be
rented to another company for $75,000 per year if the subcomponent were purchased
from the outside supplier. Otherwise, the fixed overhead would be unaffected.
If Meacham decides to purchase the subcomponent from the outside supplier, how
much higher or lower will net operating income be than if Meacham continued to make
the subcomponent?
A. $45,000 higher
B. $70,000 higher
C. $30,000 lower
D. $70,000 lower
Answer:
Madengrad Company manufactures a single product called a densimeter. This product
is a density monitoring device attached to large industrial mixing machines used in
flour, rubber, petroleum, and chemical manufacturing. A densimeter sells for $900 per
unit. The following variable expenses are incurred to produce and sell each densimeter:
Madengrad's annual fixed expenses are $6,600,000.
If Madengrad Company achieves a sales and production volume of 8,000 units, the
annual net operating income (loss) is expected to be:
A. $(4,200,000)
B. $1,780,000
C. $(2,520,000)
D. $(420,000)
Answer:
Reference: 8-5
Yewston Hotel bases its budgets on guest-days. The hotels static budget for April
appears below:
The total variable cost at the activity level of 3,200 guest-days per month should be:
A) $40,960
B) $49,280
C) $29,440
D) $35,420
Answer:
The overall revenue and spending variance (i.e., the variance for net operating income
in the revenue and spending variance column) for September would be closest to:
A) $3,200 F
B) $3,470 F
C) $3,200 U
D) $3,470 U
Answer:
Coskey Corporation applies manufacturing overhead to products on the basis of
standard machine-hours. Budgeted and actual overhead costs for the month appear
below:
The company based its original budget on 3,900 machine-hours. The company actually
worked 3,580 machine-hours during the month. The standard hours allowed for the
actual output of the month totaled 3,770 machine-hours. What was the overall fixed
manufacturing overhead budget variance for the month?
A) $1,280 favorable
B) $320 favorable
C) $320 unfavorable
D) $1,280 unfavorable
Answer:
The Kelsh Company has two divisions--North and South. The divisions have the
following revenues and expenses:
Management at Kelsh is pondering the elimination of North Division. If North Division
were eliminated, its traceable fixed expenses could be avoided. The total common
corporate expenses would be unaffected. Given these data, the elimination of North
Division would result in an overall company net operating income of:
A. $100,000
B. $150,000
C. $(140,000)
D. $50,000
Answer:
Atwich 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 5,100 units were started and 4,400 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 75% complete with respect to materials and 10% 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. 4,400
B. 4,530
C. 130
D. 5,700
Answer:
Cress Company makes four products in a single facility. Data concerning these products
appear below:
The milling machines are potentially the constraint in the production facility. A total of
11,500 minutes are available per month on these machines.
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. $7.46
B. $15.20
C. $19.40
D. $0.00
Answer:
Reference: 8-32
Gentile Corporation makes a product with the following standard costs:
The company produced 6,000 units in May using 36,970 kilos of direct material and
4,340 direct labor-hours. During the month, the company purchased 40,400 kilos of the
direct material at $4.70 per kilo. The actual direct labor rate was $13.70 per hour and
the actual variable overhead rate was $2.70 per hour.
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 price variance for May is:
A) $11,880 U
B) $11,880 F
C) $12,120 F
D) $12,120 U
Answer:
Mckerchie Inc. manufactures industrial components. One of its products, which is used
in the construction of industrial air conditioners, is known as G62. Data concerning this
product are given below:
The above per unit data are based on annual production of 9,000 units of the
component. Direct labor can be considered to be a variable cost.
Refer to the original data in the problem. What is the current contribution margin per
unit for component G62 based on its selling price of $160 and its annual production of
9,000 units?
A. $28
B. $134
C. $93
D. $132
Answer:
Buckeye Company has provided the following data for maintenance cost:
The best estimate of the cost formula for maintenance would be:
A. $21,625 per year plus $0.625 per machine hour
B. $7,000 per year plus $0.625 per machine hour
C. $7,000 per year plus $1.60 per machine hour
D. $27,000 per year plus $1.60 per machine hour
Answer:
Gotay Corporation's standard wage rate is $12.00 per direct labor-hour (DLH) and
according to the standards, each unit of output requires 5.8 DLHs. In December, 4,900
units were produced, the actual wage rate was $11.00 per DLH, and the actual hours
were 27,870 DLHs. The Labor Rate Variance for December would be recorded as a:
A. debit of $28,420.
B. credit of $28,420.
C. credit of $27,870.
D. debit of $27,870.
Answer:
Osborne 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. 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. $16.87
B. $15.65
C. $15.09
D. $18.00
Answer:
Each of the following would be a period cost except:
A. the salary of the company president's secretary.
B. the cost of a general accounting office.
C. depreciation of a machine used in manufacturing.
D. sales commissions.
Answer:
Clements 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. $61,500
B. $51,000
C. $55,500
D. $43,600
Answer:
Lothian Corporation uses the weighted-average 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. To reduce
rounding error, carry out all computations to at least three decimal places.
The cost per equivalent unit for conversion costs for the first department for the month
is closest to:
A. $34.05
B. $32.17
C. $32.43
D. $30.30
Answer:
The Labor Efficiency Variance for December would be recorded as a:
A) Debit of $9,682
B) Debit of $10,340
C) Credit of $10,340
D) Credit of $9,682
Answer:
