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.
Odle Company purchased material on account. The entry to record the purchase of
materials will include a:
A. credit to Work in Process.
B. debit to Accounts Receivable.
C. credit to Accounts Payable.
D. credit to Raw Materials Inventory.
Answer:
In a job-order costing system, direct labor cost is ordinarily debited to:
A. Manufacturing Overhead.
B. Cost of Goods Sold.
C. Finished Goods.
D. Work in Process.
Answer:
Hartzog 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 $5 thousand. The market price of common stock at the end of
Year 2 was $7.04 per share.
The dividend payout ratio for Year 2 is closest to:
A. 81.3%
B. 75.0%
C. 70.6%
D. 1250.0%
Answer:
Robledo Corporation produces and sells a single product. Data concerning that product
appear below:
Fixed expenses are $625,000 per month. The company is currently selling 9,000 units
per month.
This question is to be considered independently of all other questions relating to
Robledo Corporation. Refer to the original data when answering this question.
The marketing manager would like to cut the selling price by $6 and increase the
advertising budget by $46,000 per month. The marketing manager predicts that these
two changes would increase monthly sales by 800 units. What should be the overall
effect on the company’s monthly net operating income of this change?
A. increase of $13,200
B. increase of $29,200
C. decrease of $13,200
D. decrease of $40,800
Answer:
Data concerning Delmore Corporation’s single product appear below:
The break-even in monthly dollar sales is closest to:
A. $646,300
B. $1,794,920
C. $1,009,700
D. $1,150,230
Answer:
Temblador Corporation purchased a machine 7 years ago for $319,000 when it
launched product E26T. Unfortunately, this machine has broken down and cannot be
repaired. The machine could be replaced by a new model 330 machine costing
$323,000 or by a new model 230 machine costing $285,000. Management has decided
to buy the model 230 machine. It has less capacity than the model 330 machine, but its
capacity is sufficient to continue making product E26T. Management also considered,
but rejected, the alternative of dropping product E26T and not replacing the old
machine. If that were done, the $285,000 invested in the new machine could instead
have been invested in a project that would have returned a total of $386,000.
In making the decision to invest in the model 230 machine, the opportunity cost was:
A. $386,000
B. $319,000
C. $285,000
D. $323,000
Answer:
Data concerning Celenza Corporation’s single product appear below:
Assume the company’s monthly target profit is $18,000. The dollar sales to attain that
target profit are closest to:
A. $967,324
B. $1,478,766
C. $715,820
D. $2,753,154
Answer:
Last year Jason Company had a net income of $250,000, income tax expense of
$78,000, and interest expense of $30,000. The company’s times interest earned was
closest to:
A. 4.73
B. 9.33
C. 11.93
D. 8.33
Answer:
Reference: 8-8
Diiorio Clinic uses client-visits as its measure of activity. During February, the clinic
budgeted for 2,700 client-visits, but its actual level of activity was 2,750 client-visits.
The clinic has provided the following data concerning the formulas used in its
budgeting and its actual results for February:
Data used in budgeting:
Actual results for February:
The occupancy expenses in the flexible budget for February would be closest to:
A) $11,250
B) $11,160
C) $11,183
D) $10,780
Answer:
Butscher Company allocates materials handling cost to the company’s two products
using the below data:
The total materials handling cost for the year is expected to be $9,072.
If the materials handling cost is allocated on the basis of direct labor-hours, how much
of the total materials handling cost should be allocated to the prefab barns? (Round off
your answer to the nearest whole dollar.)
A. $3,187
B. $1,134
C. $9,072
D. $4,536
Answer:
In May, one of the processing departments at Lukman Corporation had beginning work
in process inventory of $11,000. During the month, $120,000 of costs were added to
production and the cost of units transferred out from the department was $94,000. The
company uses the FIFO method in its process costing system.
In the department’s cost reconciliation report for May, the total cost to be accounted for
would be:
A. $48,000
B. $251,000
C. $262,000
D. $131,000
Answer:
Gardner Furniture Company produces two kinds of chairs: an oak model and a chestnut
wood model. The oak model sells for $60 and the chestnut wood model sells for $100.
The variable expenses are as follows:
Expected sales in units next year are: 5,000 oak chairs and 1,000 chestnut chairs. Fixed
expenses are budgeted at $135,000 per year.
The company’s overall contribution margin ratio for the expected sales mix is:
A. 40%
B. 45%
C. 50%
D. 60%
Answer:
Reference: 8-13
Foxworthy 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 July, the kennel budgeted for
2,000 tenant-days, but its actual level of activity was 2,050 tenant-days. The kennel has
provided the following data concerning the formulas to be used in its budgeting:
The net operating income in the planning budget for July would be closest to:
A) $6,645
B) $4,141
C) $4,351
D) $6,000
Answer:
The salary of the president of a manufacturing company would be classified as which of
the following?
A. Product cost
B. Period cost
C. Manufacturing overhead
D. Direct labor
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 total assets for Year 2 is closest to:
A. 9.35%
B. 10.23%
C. 9.42%
D. 10.16%
Answer:
The activity in Nolan Company’s Blending Department for the month of April is given
below:
All materials are added at the beginning of processing in the Blending Department.
The equivalent units for labor and overhead for the month, using the weighted-average
method, are:
A. 50,000 units
B. 51,000 units
C. 47,000 units
D. 55,000 units
Answer:
Gabruk Inc. is a merchandising company. Last month the company’s merchandise
purchases totaled $88,000. The company’s beginning merchandise inventory was
$15,000 and its ending merchandise inventory was $13,000. What was the company’s
cost of goods sold for the month?
A. $88,000
B. $90,000
C. $86,000
D. $116,000
Answer:
Reference: 8-51
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 rate variance for the month?
A) $3,721 F
B) $3,721 U
C) $3,440 F
D) $3,440 U
Answer:
Van Aalst Company’s comparative balance sheet and income statement for last year
appear below:
The company declared and paid $77,000 in cash dividends during the year. It did not
sell or retire any property, plant, and equipment during the year. The company uses the
direct method to determine the net cash provided by operating activities.
On the statement of cash flows, the cost of goods sold adjusted to a cash basis would
be:
A. $350,000
B. $383,000
C. $317,000
D. $334,000
Answer:
A study has been conducted to determine if Product A should be dropped. Sales of the
product total $200,000 per year; variable expenses total $140,000 per year. Fixed
expenses charged to the product total $90,000 per year. The company estimates that
$40,000 of these fixed expenses will continue even if the product is dropped. These data
indicate that if Product A is dropped, the company’s overall net operating income
would:
A. decrease by $20,000 per year
B. increase by $20,000 per year
C. decrease by $10,000 per year
D. increase by $30,000 per year
Answer:
The Gomez Company, a merchandising firm, has budgeted its activity for December
according to the following information:
– Sales at $500,000, all for cash.
– Merchandise Inventory on November 30 was $250,000.
– The cash balance at December 1 was $20,000.
– Selling and administrative expenses are budgeted at $50,000 for December and are
paid for in cash.
– Budgeted depreciation for December is $30,000.
– The planned merchandise inventory on December 31 is $260,000.
– The cost of goods sold represents 75% of the selling price.
– All purchases are paid for in cash.
The budgeted net income for December is:
A. $75,000
B. $45,000
C. $125,000
D. $65,000
Answer:
Reference: 8A-11
A manufacturer of playground equipment uses a standard costing system in which
standard machine-hours (MHs) is the measure of activity. Data from the companys
flexible budget for manufacturing overhead are given below:
The following data pertain to operations for the most recent period:
What was the fixed manufacturing overhead volume variance for the period to the
nearest dollar?
A) $486 F
B) $1,105 U
C) $619 U
D) $612 U
Answer:
Whitney, Inc., produces a single product. The following data pertain to one month’s
operations:
For the month referred to above, net operating income under variable costing will be:
A. higher than net operating income under absorption costing.
B. lower than net operating income under absorption costing.
C. the same as net operating income under absorption costing.
D. The relation between variable costing and absorption costing net operating income
cannot be determined.
Answer:
The average stockholders’ equity for Horn Co. last year was $2,000,000. Included in
this figure was $200,000 of preferred stock. Preferred dividends were $16,000. If the
return on common stockholders’ equity was 12.5% for the year, net income was:
A. $225,000
B. $250,000
C. $241,000
D. $234,000
Answer:
Turnover is computed by dividing average operating assets into:
A. invested capital.
B. total assets.
C. net operating income.
D. sales.
Answer:
The margin of safety percentage is computed as:
A. Break-even sales ÷ Total sales.
B. Total sales – Break-even sales.
C. (Total sales – Break-even sales) ÷ Break-even sales.
D. (Total sales – Break-even sales) ÷ Total sales.
Answer:
Alkine Company’s comparative balance sheet appears below:
Alkine reported the following net income for the year:
Dividends were declared and paid during the year. A gain of $8,000 was recorded on the
sale of the long-term investments. The company did not purchase any long-term
investments or dispose of any property, plant, and equipment during the year. It also did
not issue any bonds payable or repurchase any of its own common stock.
Under the direct method, the sales adjusted to a cash basis would be:
A. $252,000
B. $244,000
C. $260,000
D. $250,000
Answer:
The following information relates to Clyde Corporation which produced and sold
50,000 units last month.
There were no beginning or ending inventories. Production and sales next month are
expected to be 40,000 units. The company’s unit contribution margin next month should
be:
A. $16.63
B. $3.10
C. $7.98
D. $13.30
Answer:
Harbor Company, a retailer, had cost of goods sold of $170,000 last year. The beginning
inventory balance was $20,000 and the ending inventory balance was $24,000. The
company’s inventory turnover was closest to:
A. 7.08
B. 7.73
C. 3.86
D. 8.50
Answer:
Financial statements for Marcell Company appear below:
Marcell Company’s inventory turnover for Year 2 was closest to:
A. 16.2
B. 23.2
C. 14.2
D. 9.9
Answer:
Lucas Company recorded the following events last year:
On the statement of cash flows, some of these events are classified as operating
activities, some are classified as investing activities, and some are classified as
financing activities.
Based solely on the information above, the net cash provided by (used in) investing
activities on the statement of cash flows would be:
A. $(5,000)
B. $10,000
C. $70,000
D. $(30,000)
Answer:
Galanis Corporation keeps careful track of the time required to fill orders. Data
concerning a particular order appear below:
The throughput time was:
A. 38.8 hours
B. 33.4 hours
C. 14.1 hours
D. 5.4 hours
Answer:
Clovis Midwiferys cost formula for its wages and salaries is $2,680 per month plus
$245 per birth. For the month of September, the company planned for activity of 118
births, but the actual level of activity was 121 births. The actual wages and salaries for
the month was $33,290. The wages and salaries in the flexible budget for September
would be closest to:
A) $32,393
B) $31,590
C) $32,325
D) $33,290
Answer:
Reference: 8A-11
A manufacturer of playground equipment uses a standard costing system in which
standard machine-hours (MHs) is the measure of activity. Data from the companys
flexible budget for manufacturing overhead are given below:
The following data pertain to operations for the most recent period:
What is the predetermined fixed manufacturing overhead rate to the nearest cent?
A) $11.05 per MH
B) $11.19 per MH
C) $11.00 per MH
D) $10.86 per MH
Answer:
National Telephone company has been forced by competition to put much more
emphasis on planning and controlling its costs. Accordingly, the company’s controller
has suggested initiating a formal budgeting process. Which of the following steps will
NOT help the company gain maximum acceptance by employees of the proposed
budgeting system?
A. Implementing the change quickly.
B. Including in departmental responsibility reports only those items that are under the
department manager’s control.
C. Demonstrating top management support for the budgeting program.
D. Ensuring that favorable deviations of actual results from the budget, as well as
unfavorable deviations, are discussed with the responsible managers.
Answer: