When there is a production constraint, a company should emphasize the products with:
A. the highest unit contribution margins.
B. the highest contribution margin ratios.
C. the highest contribution margin per unit of the constrained resource.
D. the highest contribution margins and contribution margin ratios.
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 personnel expenses in the planning budget for August would be closest to:
A) $81,155
B) $80,989
C) $82,295
D) $80,370
Answer:
A company’s current ratio and acid-test ratios are both greater than 1. The collection of
a current accounts receivable of $29,000 would:
A. increase the current ratio.
B. decrease the current ratio.
C. not affect the current ratio or the acid-test ratio.
D. decrease the acid-test ratio.
Answer:
Dengel Inc. is working on its cash budget for November. The budgeted beginning cash
balance is $24,000. Budgeted cash receipts total $177,000 and budgeted cash
disbursements total $167,000. The desired ending cash balance is $50,000.
The excess (deficiency) of cash available over disbursements for November will be:
A. $34,000
B. $201,000
C. $10,000
D. $14,000
Answer:
Reference: 8A-8
The Hawkins Company uses a standard costing system in which manufacturing
overhead is applied on the basis of standard direct labor-hours (DLHs). During
February, the company actually used 9,200 direct labor-hours and made 2,900 units of
finished product. The standard cost card for one unit of product includes the following:
Variable factory overhead: 3 DLHs @ $4.75 per DLH
Fixed factory overhead: 3 DLHs @ $3.00 per DLH
For February, the company incurred $28,450 in fixed manufacturing overhead costs and
recorded a $900 favorable volume variance.
The amount of fixed manufacturing overhead cost contained in the companys budget
for February is:
A) $27,000
B) $27,550
C) $25,200
D) $29,350
Answer:
When the actual amount of a raw material used in production is greater than the
standard amount allowed for the actual output, the journal entry would include:
A) Debit to Raw Materials; Credit to Materials Quantity Variance
B) Debit to Work-In-Process; Credit to Materials Quantity Variance
C) Debit to Raw Materials; Debit to Materials Quantity Variance
D) Debit to Work-In-Process; Debit to Materials Quantity Variance
Answer:
Reference: 8-33
Tidd Corporation makes a product with the following standard costs:
The company reported the following results concerning this product in November.
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 variable overhead efficiency variance for November is:
A) $2,680 F
B) $2,546 F
C) $2,680 U
D) $2,546 U
Answer:
At the end of the year, a company’s Manufacturing Overhead account contained the
following data:
If the denominator activity for the year was 40,000 machine-hours, and if 36,400
machine-hours were allowed for the year’s production, then the predetermined overhead
rate per machine-hour was:
A. $2.15
B. $1.96
C. $2.26
D. $2.05
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 earnings per share of common stock for Year 2 is closest to:
A. $0.55
B. $0.93
C. $1.01
D. $0.65
Answer:
Wert Corporation uses a predetermined overhead rate based on direct labor cost to
apply manufacturing overhead to jobs. Last year, the company’s estimated
manufacturing overhead was $1,200,000 and its estimated level of activity was 50,000
direct labor-hours. The company’s direct labor wage rate is $12 per hour. Actual
manufacturing overhead amounted to $1,240,000, with actual direct labor cost of
$650,000. For the year, manufacturing overhead was:
A. overapplied by $60,000
B. underapplied by $60,000
C. overapplied by $40,000
D. underapplied by $44,000
Answer:
Behring Corporation applies manufacturing overhead to products on the basis of
standard machine-hours. Budgeted and actual fixed manufacturing overhead costs for
the most recent month appear below:
The company based its original budget on 3,200 machine-hours. The company actually
worked 3,170 machine-hours during the month. The standard hours allowed for the
actual output of the month totaled 3,250 machine-hours. What was the overall fixed
manufacturing overhead volume variance for the month?
A. $435 favorable
B. $261 unfavorable
C. $435 unfavorable
D. $261 favorable
Answer:
Brewster Company has an acid-test ratio of 1.5 and a current ratio of 2.5. Current assets
equal $200,000, of which $10,000 is prepaid expenses. The company’s current assets
consist of cash, marketable securities, accounts receivable, prepaid expenses, and
inventory. Brewster Company’s inventory must be:
A. $30,000
B. $110,000
C. $70,000
D. $80,000
Answer:
During September, Stutzman Corporation incurred $86,000 of actual Manufacturing
Overhead costs. During the same period, the Manufacturing Overhead applied to Work
in Process was $81,000.
The journal entry to record the application of Manufacturing Overhead to Work in
Process would include a:
A. credit to Manufacturing Overhead of $81,000
B. credit to Work in Process of $86,000
C. debit to Manufacturing Overhead of $81,000
D. debit to Work in Process of $86,000
Answer:
Reference: 8A-17
Buell Corporation has provided the following data for June.
The volume variance for June is:
A) $10,830 F
B) $10,830 U
C) $3,610 U
D) $3,610 F
Answer:
Reference: 8A-10
A furniture manufacturer has a standard costing system based on standard direct
labor-hours (DLHs) as 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 overhead rate to the nearest cent?
A) $13.40
B) $13.61
C) $13.81
D) $13.20
Answer:
Which of the following is the correct formula to compute the predetermined overhead
rate?
A. Estimated total units in the allocation base divided by estimated total manufacturing
overhead costs.
B. Estimated total manufacturing overhead costs divided by estimated total units in the
allocation base.
C. Actual total manufacturing overhead costs divided by estimated total units in the
allocation base.
D. Estimated total manufacturing overhead costs divided by actual total units in the
allocation base.
Answer:
Colasuonno Corporation has two divisions: the West Division and the East Division.
The corporation’s net operating income is $88,800. The West Division’s divisional
segment margin is $39,500 and the East Division’s divisional segment margin is
$166,900. What is the amount of the common fixed expense not traceable to the
individual divisions?
A. $255,700
B. $206,400
C. $117,600
D. $128,300
Answer:
Herston Company uses the FIFO method in its process costing system. The beginning
work in process inventory in a particular department consisted of 6,000 units,
two-thirds complete with respect to conversion costs. During the month, 42,000 units
were started and 40,000 units were completed and transferred out of the department.
The company had 40,000 equivalent units for conversion costs. The ending work in
process inventory in the department consisted of:
A. 8,000 units, 25% complete with respect to conversion costs
B. 0 units
C. 8,000 units, 50% complete with respect to conversion costs
D. 4,000 units, 100% complete with respect to conversion costs
Answer:
Overapplied manufacturing overhead occurs when:
A. applied overhead exceeds actual overhead.
B. applied overhead exceeds estimated overhead.
C. actual overhead exceeds estimated overhead.
D. budgeted overhead exceeds actual overhead.
Answer:
Loll Company uses the weighted-average method in its process costing system.
Operating data for the first processing department for the month of June appear below:
According to the company’s records, the conversion cost in beginning work in process
inventory was $46,915 at the beginning of June. Additional conversion costs of
$825,183 were incurred in the department during the month.
What was the cost per equivalent unit for conversion costs for the month? (Round off to
three decimal places.)
A. $8.420
B. $6.934
C. $8.530
D. $8.322
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) operating activities for the year was:
A. $106
B. $85
C. $95
D. $111
Answer:
Stock Manufacturing Corporation has prepared the following overhead budget for next
month.
The companys variable overhead costs are driven by machine-hours.
What would be the total budgeted overhead cost for next month if the activity level is
6,600 machine-hours rather than 6,900 machine-hours?
A) $84,321.00
B) $87,590.00
C) $84,794.00
D) $83,781.74
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 cost of ending work in
process inventory would be:
A. $15,000
B. $63,000
C. $37,000
D. $26,000
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.
Suppose the price for the subcomponent has not been set. At what price per unit charged
by the outside supplier would Meacham be economically indifferent between making
the subcomponent or buying it from the outside?
A. $30.25
B. $29.25
C. $26.50
D. $31.50
Answer:
Gangwer Corporation produces a single product and has the following cost structure:
The absorption costing unit product cost is:
A. $95
B. $119
C. $61
D. $56
Answer:
Reference: 8-48
Davidson Corporation makes a product that has the following direct labor standards:
In September the company produced 4,900 units using 2,210 direct labor-hours. The
actual direct labor rate was $22.40 per hour.
The labor efficiency variance for September is:
A) $5,520 F
B) $5,376 F
C) $5,520 U
D) $5,376 U
Answer:
Lantto Air uses two measures of activity, flights and passengers, in the cost formulas in
its flexible budgets. The cost formula for plane operating costs is $34,810 per month
plus $2,850 per flight plus $12 per passenger. The company expected its activity in June
to be 70 flights and 292 passengers, but the actual activity was 69 flights and 291
passengers. The actual cost for plane operating costs in June was $236,550. The plane
operating costs in the flexible budget for June would be closest to:
A) $237,814
B) $234,952
C) $236,550
D) $234,417
Answer:
Selected year-end data for the Brayer Company are presented below:
The company has no prepaid expenses and inventories remained unchanged during the
year. Based on these data, the company’s inventory turnover ratio for the year was
closest to:
A. 1.20
B. 2.40
C. 1.67
D. 2.33
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 FIFO method, are:
A. 47,000 units
B. 51,000 units
C. 5,000 units
D. 54,000 units
Answer:
Dodrill Company makes two products from a common input. Joint processing costs up
to the split-off point total $43,200 a year. The company allocates these costs to the joint
products on the basis of their total sales values at the split-off point. Each product may
be sold at the split-off point or processed further. Data concerning these products appear
below:
What is the net monetary advantage (disadvantage) of processing Product X beyond the
split-off point?
A. $26,800
B. $7,000
C. $4,800
D. $29,000
Answer:
Nikkel Corporation, a merchandising company, reported the following results for July:
The gross margin for July is:
A. $358,500
B. $209,000
C. $233,700
D. $164,700
Answer:
Krug Corporation manufactures a variety of products. The following data pertain to the
company’s operations over the last two years:
What was the absorption costing net operating income last year?
A. $86,200
B. $89,100
C. $88,800
D. $91,400
Answer: