Financial statements for Narita Company appear below:
Narita Company’s debt-to-equity ratio at the end of Year 2 was closest to:
A. 0.17
B. 0.58
C. 0.25
D. 0.42
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:
The ratio of cash, trade receivables, and marketable securities to current liabilities is:
A. the working capital of a company.
B. the acid-test ratio.
C. the current ratio.
D. the debt to equity ratio.
Answer:
The Work in Process inventory account of a manufacturing firm shows a balance of
$3,000 at the end of an accounting period. The job cost sheets of two uncompleted jobs
show charges of $500 and $300 for direct materials, and charges of $400 and $600 for
direct labor. From this information, it appears that the company is using a
predetermined overhead rate, as a percentage of direct labor costs, of:
A. 83%
B. 120%
C. 40%
D. 300%
Answer:
During October, Crusan Corporation incurred $62,000 of direct labor costs and $4,000
of indirect labor costs. The journal entry to record the accrual of these wages would
include a:
A. debit to Work in Process of $66,000
B. credit to Work in Process of $66,000
C. debit to Work in Process of $62,000
D. credit to Work in Process of $62,000
Answer:
The Odle Company makes and sells a single product called a Kitt. Odle uses a standard
costing system. Each Kitt has a standard cost of 5 pounds of material at $12 per pound
and 0.9 direct labor-hours at $15 per hour. There were no inventories of any kind on
June 1. During June, the following events occurred:
– Purchased 17,000 pounds of material at a total cost of $190,000.
– Used 15,000 pounds of material to produce 2,400 Kitts.
– Used 1,900 hours of direct labor time at a total cost of $38,000.
To record the purchase of direct materials, the general ledger would include what kind
of entry to the Materials Price Variance Account?
A. $14,000 credit
B. $14,000 debit
C. $10,000 credit
D. $10,000 debit
Answer:
Reference: 8-30
Snuggs Corporation makes a product with the following standard costs:
The company reported the following results concerning this product in October.
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 October is:
A) $620 F
B) $616 F
C) $616 U
D) $620 U
Answer:
Wright Company produces products I, J, and K from a single raw material input.
Budgeted data for the next month follows:
If the cost of the raw material input is $78,000, which of the products should be
processed beyond the split-off point?
A. Option A
B. Option B
C. Option C
D. Option D
Answer:
Reference: 8-47
Bonnot Corporation makes a product that has the following direct labor standards:
The company budgeted for production of 2,100 units in October, but actual production
was 1,900 units. The company used 410 direct labor-hours to produce this output. The
actual direct labor rate was $20.60 per hour.
The labor rate variance for October is:
A) $164 F
B) $164 U
C) $152 U
D) $152 F
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.
The company has received a special, one-time-only order for 300 units of component
G62. There would be no variable selling expense on this special order and the total
fixed manufacturing overhead and fixed selling and administrative expenses of the
company would not be affected by the order. However, assume that Mckerchie has no
excess capacity and this special order would require 50 minutes of the constraining
resource, which could be used instead to produce products with a total contribution
margin of $6,900. What is the minimum price per unit on the special order below which
the company should not go?
A. $90
B. $23
C. $49
D. $78
Answer:
Reference: 8-2
Roye 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 September, the kennel budgeted for
3,300 tenant-days, but its actual level of activity was 3,330 tenant-days. The kennel has
provided the following data concerning the formulas used in its budgeting and its actual
results for September:
Data used in budgeting:
Actual results for September:
The revenue variance for September would be closest to:
A) $1,789 U
B) $2,830 U
C) $2,830 F
D) $1,789 F
Answer:
The economic impact of the inability to reach a target denominator level of activity
would best be measured by:
A. the amount of the volume variance.
B. the contribution margin lost by failing to meet the target denominator level of
activity.
C. the amount of the fixed manufacturing overhead budget variance.
D. the amount of the variable overhead efficiency variance.
Answer:
The Gasson Company uses the weighted-average method in its process costing system.
The company’s ending work in process inventory consists of 10,000 units, 100%
complete with respect to materials and 70% complete with respect to labor and
overhead. If the costs per equivalent unit are $4.50 for the materials and $2.00 for labor
and overhead, the balance of the ending work in process inventory account would be:
A. $44,500
B. $50,500
C. $59,000
D. $65,000
Answer:
Reference: 8-10
Caballes Clinic uses client-visits as its measure of activity. During November, the clinic
budgeted for 3,100 client-visits, but its actual level of activity was 3,070 client-visits.
The clinic has provided the following data concerning the formulas used in its
budgeting and its actual results for November:
Data used in budgeting:
Actual results for November:
The occupancy expenses in the flexible budget for November would be closest to:
A) $12,898
B) $13,090
C) $13,347
D) $12,940
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 dividend payout ratio for Year 2 is closest to:
A. 72.7%
B. 54.5%
C. 46.2%
D. 1818.2%
Answer:
The Pacific Company manufactures a single product. The following data relate to the
year just completed:
During the last year, 5,000 units were produced and 4,800 units were sold. There were
no beginning inventories.
Under variable costing, the unit product cost would be:
A. $91.00
B. $72.00
C. $58.00
D. $43.00
Answer:
Reference: 8-7
Edington Clinic uses client-visits as its measure of activity. During September, the
clinic budgeted for 2,800 client-visits, but its actual level of activity was 2,850
client-visits. The clinic has provided the following data concerning the formulas to be
used in its budgeting for September:
The administrative expenses in the planning budget for September would be closest to:
A) $6,480
B) $6,405
C) $6,293
D) $6,485
Answer:
Sturrock Corporation has provided the following data concerning its only product:
What is the margin of safety in dollars?
A. $5,122,000
B. $4,558,580
C. $3,414,667
D. $563,420
Answer:
Guillet Inc. produces and sells a single product. The selling price of the product is
$180.00 per unit and its variable cost is $46.80 per unit. The fixed expense is $618,048
per month.
The break-even in monthly dollar sales is closest to:
A. $1,276,785
B. $2,377,108
C. $618,048
D. $835,200
Answer:
Ahsan Company makes 60,000 units per year of a part it uses in the products it
manufactures. The unit product cost of this part is computed as follows:
An outside supplier has offered to sell the company all of these parts it needs for $45.70
a unit. If the company accepts this offer, the facilities now being used to make the part
could be used to make more units of a product that is in high demand. The additional
contribution margin on this other product would be $318,000 per year.
If the part were purchased from the outside supplier, all of the direct labor cost of the
part would be avoided. However, $3.50 of the fixed manufacturing overhead cost being
applied to the part would continue even if the part were purchased from the outside
supplier. This fixed manufacturing overhead cost would be applied to the company’s
remaining products.
How much of the unit product cost of $40.50 is relevant in the decision of whether to
make or buy the part?
A. $40.50
B. $15.20
C. $27.90
D. $37.00
Answer:
Financial statements for Narita Company appear below:
Narita Company’s times interest earned for Year 2 was closest to:
A. 14.7
B. 26.0
C. 10.3
D. 15.7
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:
Reference: 8-15
Maliszewski 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 March, the kennel budgeted for
3,400 tenant-days, but its actual level of activity was 3,410 tenant-days. The kennel has
provided the following data concerning the formulas to be used in its budgeting:
The expendables in the flexible budget for March would be closest to:
A) $32,800
B) $31,598
C) $32,895
D) $31,413
Answer:
Excerpts from Tigner Corporation’s most recent balance sheet appear below:
Sales on account in Year 2 amounted to $1,230 and the cost of goods sold was $820.
The inventory turnover for Year 2 is closest to:
A. 0.86
B. 1.17
C. 6.31
D. 6.83
Answer:
A company’s current net operating income is $16,800 and its average operating assets
are $80,000. The company’s required rate of return is 18%. A new project being
considered would require an investment of $15,000 and would generate annual net
operating income of $3,000. What is the residual income of the new project?
A. 20.8%
B. 20%
C. ($150)
D. $300
Answer:
Gasco Corporation’s balance sheet and income statement appear below:
Cash dividends were $54. The company sold equipment for $14 that was originally
purchased for $8 and that had accumulated depreciation of $1. 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. $(54)
B. $2
C. $(72)
D. $(20)
Answer:
Data from Concepcion Corporation’s most recent balance sheet and income statement
appear below:
The average collection period for this year is closest to:
A. 54.3 days
B. 7.4 days
C. 7.2 days
D. 54.7 days
Answer:
Data concerning Knipp Corporation’s single product appear below:
Fixed expenses are $587,000 per month. The company is currently selling 4,000 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 $16
per unit. In exchange, the sales staff would accept a decrease in their salaries of $57,000
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
100 units. What should be the overall effect on the company’s monthly net operating
income of this change?
A. increase of $55,400
B. increase of $745,800
C. increase of $9,800
D. decrease of $104,200
Answer:
Galluzzo Corporation processes sugar beets in batches. A batch of sugar beets costs $51
to buy from farmers and $14 to crush in the company’s plant. Two intermediate
products, beet fiber and beet juice, emerge from the crushing process. The beet fiber can
be sold as is for $20 or processed further for $18 to make the end product industrial
fiber that is sold for $45. The beet juice can be sold as is for $41 or processed further
for $21 to make the end product refined sugar that is sold for $62. How much profit
(loss) does the company make by processing one batch of sugar beets into the end
products industrial fiber and refined sugar?
A. $(104)
B. $(4)
C. $7
D. $3
Answer:
Data from Davoren Corporation’s most recent balance sheet and income statement
appear below:
The average sale period for this year is closest to:
A. 55.7 days
B. 64.4 days
C. 112.0 days
D. 122.1 days
Answer:
A manufacturing company 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:
What was the variable overhead efficiency variance for the period to the nearest dollar?
A. $1,746 U
B. $70 U
C. $820 F
D. $74 U
Answer: