In February, one of the processing departments at Whisenhunt Corporation had
beginning work in process inventory of $35,000 and ending work in process inventory
of $11,000. During the month, the cost of units transferred out from the department was
$410,000. In the department’s cost reconciliation report for February, the total cost to be
accounted for would be:
A. $46,000
B. $807,000
C. $842,000
D. $421,000
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 is the predetermined overhead rate to the nearest cent?
A. $18.17 per MH
B. $18.31 per MH
C. $18.70 per MH
D. $18.84 per MH
Answer:
Which of the following costs is often important in decision making, but is omitted from
conventional accounting records?
A. Fixed cost.
B. Sunk cost.
C. Opportunity cost.
D. Indirect cost.
Answer:
Reference: 8A-15
Seroka Corporation estimates that its variable manufacturing overhead is $6.90 per
machine-hour and its fixed manufacturing overhead is $745,290 per period.
If the denominator level of activity is 9,100 machine-hours, the predetermined overhead
rate would be:
A) $88.80
B) $690.00
C) $6.90
D) $81.90
Answer:
Reference: 8-18
Brothern Corporation manufactures and sells a single product. The company uses units
as the measure of activity in its flexible budgets. During May, the company budgeted
for 6,800 units, but its actual level of activity was 6,820 units. The company has
provided the following data concerning the formulas used in its budgeting and its actual
results for May:
Data used in budgeting:
Actual results for May:
The direct labor in the planning budget for May would be closest to:
A) $22,356
B) $22,506
C) $22,440
D) $22,290
Answer:
Favini Company, which has only one product, has provided the following data
concerning its most recent month of operations:
What is the net operating income for the month under variable costing?
A. $11,800
B. $3,700
C. $8,100
D. $(23,600)
Answer:
The cost of beginning inventory under the weighted-average method is:
A. added in with current period costs in determining costs per equivalent unit for a
given period.
B. ignored in determining the costs per equivalent unit for a given period.
C. considered separately from costs incurred during the current period.
D. subtracted from current period costs in determining costs per equivalent unit for a
given period.
Answer:
In an income statement segmented by product line, a fixed expense that cannot be
allocated among product lines on a cause-and-effect basis should be:
A. classified as a traceable fixed expense and not allocated.
B. allocated to the product lines on the basis of sales dollars.
C. allocated to the product lines on the basis of segment margin.
D. classified as a common fixed expense and not allocated.
Answer:
Garnick Corporation keeps careful track of the time required to fill orders. The times
recorded for a particular order appear below:
The delivery cycle time was:
A. 3.5 hours
B. 8.7 hours
C. 34.9 hours
D. 36.1 hours
Answer:
Zippy Company has a process costing system. Information about units processed and
processing costs incurred during a recent month in the Refining Department follow:
The beginning work in process inventory had $10,946 of processing cost attached to it
at the beginning of the month. During the month, the Department incurred an additional
$289,954 in processing cost.
Assuming that the company uses the weighted-average method, what are the equivalent
units for processing costs for the Department for the month?
A. 94,000
B. 100,300
C. 100,000
D. 112,000
Answer:
Rubyor Corporation bases its predetermined overhead rate on variable manufacturing
overhead cost of $10.70 per machine-hour and fixed manufacturing overhead cost of
$821,104 per period. If the denominator level of activity is 7,300 machine-hours, the
variable element in the predetermined overhead rate would be:
A) $112.48
B) $123.18
C) $121.66
D) $10.70
Answer:
(Ignore income taxes in this problem.) Virani Corporation has entered into a 8 year
lease for a piece of equipment. The annual payment under the lease will be $2,000, with
payments being made at the beginning of each year. If the discount rate is 9%, the
present value of the lease payments is closest to:
A. $8,030
B. $12,066
C. $16,000
D. $14,679
Answer:
Erastic Company has $14,000 in cash, $8,000 in marketable securities, $34,000 in
account receivable, $40,000 in inventories, and $42,000 in current liabilities. The
company’s current assets consist of cash, marketable securities, accounts receivable, and
inventory. The company’s acid-test ratio is closest to:
A. 1.33
B. 0.81
C. 2.29
D. 1.14
Answer:
A manufacturing company prepays its insurance coverage for a three-year period. The
premium for the three years is $2,700 and is paid at the beginning of the first year.
Eighty percent of the premium applies to manufacturing operations and 20% applies to
selling and administrative activities. What amounts should be considered product and
period costs respectively for the first year of coverage?
A. Option A
B. Option B
C. Option C
D. Option D
Answer:
Roberts Company produces a single product. This year, the company’s net operating
income under absorption costing was $2,000 lower than under variable costing. The
company sold 8,000 units during the year, and its variable costs were $8 per unit, of
which $2 was variable selling and administrative expense. If production cost was $10
per unit under absorption costing, then how many units did the company produce
during the year? (The company produced the same number of units last year.)
A. 7,500 units
B. 7,000 units
C. 9,000 units
D. 8,500 units
Answer:
Kuhner Corporation produces and sells two products. Data concerning those products
for the most recent month appear below:
Fixed expenses for the entire company were $33,100.
If the sales mix were to shift toward Product B64P with total dollar sales remaining
constant, the overall break-even point for the entire company:
A. would not change.
B. would decrease.
C. would increase.
D. could increase or decrease.
Answer:
At the beginning of the year, manufacturing overhead for the year was estimated to be
$267,500. At the end of the year, actual direct labor-hours for the year were 22,100
hours, the actual manufacturing overhead for the year was $262,500, and manufacturing
overhead for the year was overapplied by $13,750. If the predetermined overhead rate is
based on direct labor-hours, then the estimated direct labor-hours at the beginning of the
year used in the predetermined overhead rate must have been:
A. 22,100 direct labor-hours
B. 19,900 direct labor-hours
C. 21,000 direct labor-hours
D. 21,400 direct labor-hours
Answer:
Hart Manufacturing operates an automated steel fabrication process. For one operation,
Hart has found that 45% of the total throughput (manufacturing cycle) time is spent on
non-value-added activities. Delivery cycle time is 12 hours, waiting time during the
production process is 3 hours, queue time prior to starting the production process is 2
hours, and inspection time is 1.2 hours.
What is the throughput (manufacturing cycle) time for the operation?
A. 12.0 hours
B. 9.0 hours
C. 10.0 hours
D. 5.8 hours
Answer:
Rickers Inc. produces and sells two products. Data concerning those products for the
most recent month appear below:
The fixed expenses of the entire company were $38,940. The break-even point for the
entire company is closest to:
A. $80,590
B. $76,353
C. $38,940
D. $46,060
Answer:
Reference: 8-6
Mock Clinic uses client-visits as its measure of activity. During August, the clinic
budgeted for 3,100 client-visits, but its actual level of activity was 3,150 client-visits.
The clinic has provided the following data concerning the formulas used in its
budgeting and its actual results for August:
Data used in budgeting:
Actual results for August:
The administrative expenses in the planning budget for August would be closest to:
A) $5,740
B) $5,934
C) $6,030
D) $5,760
Answer:
Within the relevant range, variable cost per unit will:
A. increase as the level of activity increases.
B. remain constant.
C. decrease as the level of activity increases.
D. none of these.
Answer:
Excerpts from Goodrow Corporation’s most recent balance sheet and income statement
appear below:
Dividends on common stock during Year 2 totaled $20 thousand. Dividends on
preferred stock totaled $10 thousand. The market price of common stock at the end of
Year 2 was $5.34 per share.
The price-earnings ratio for Year 2 is closest to:
A. 8.22
B. 15.26
C. 17.80
D. 10.68
Answer:
Paxton Corp has provided the following data concerning its operations last month:
Paxton Corp is a retailing organization.
The operating leverage is:
A. 3
B. 8
C. 0.33
D. 5
Answer:
The following account balances have been provided for the end of the most recent year:
The book value per share of common stock is:
A. $22
B. $25
C. $20
D. $28
Answer:
Emilio Corporation reports that at an activity level of 3,400 units, its total variable cost
is $59,058 and its total fixed cost is $101,150.
What would be the average fixed cost per unit at an activity level of 3,500 units?
Assume that this level of activity is within the relevant range.
A. $29.75
B. $47.12
C. $35.26
D. $28.90
Answer:
Tennison Corporation has two major business segments-Consumer and Commercial.
Data for the segment and for the company for May appear below:
In addition, common fixed expenses totaled $371,000 and were allocated as follows:
$186,000 to the Consumer business segment and $185,000 to the Commercial business
segment.
A properly constructed segmented income statement in a contribution format would
show that the segment margin of the Consumer business segment is:
A. $272,000
B. $270,000
C. $86,000
D. $514,000
Answer:
Zurasky Corporation is considering two alternatives: A and B. Costs associated with the
alternatives are listed below:
What is the differential cost of Alternative B over Alternative A, including all of the
relevant costs?
A. $44,000
B. $149,000
C. $105,000
D. $127,000
Answer:
The following data have been taken from your company’s financial records for the
current year:
The price-earnings ratio is:
A. 7.5
B. 10.0
C. 9.4
D. 13.3
Answer:
Wadhams Snow Removals cost formula for its vehicle operating cost is $1,900 per
month plus $430 per snow-day. For the month of December, the company planned for
activity of 16 snow-days, but the actual level of activity was 21 snow-days. The actual
vehicle operating cost for the month was $11,470. The vehicle operating cost in the
planning budget for December would be closest to:
A) $10,930
B) $11,470
C) $8,739
D) $8,780
Answer:
Stryker Corporation has two major business segments-East and West. In April, the East
business segment had sales revenues of $500,000, variable expenses of $280,000, and
traceable fixed expenses of $80,000. During the same month, the West business
segment had sales revenues of $970,000, variable expenses of $514,000, and traceable
fixed expenses of $184,000. The common fixed expenses totaled $280,000 and were
allocated as follows: $112,000 to the East business segment and $168,000 to the West
business segment.
A properly constructed segmented income statement in a contribution format would
show that the segment margin of the East business segment is:
A. $108,000
B. $28,000
C. $140,000
D. $280,000
Answer:
The following data pertains to activity and maintenance costs for two recent years:
Using the high-low method, the cost formula for maintenance would be:
A. $1.50 per unit
B. $1.25 per unit
C. $3,000 plus $1.50 per unit
D. $6,000 plus $0.75 per unit
Answer: