Reference: 8-34
Caquias Corporation makes a product with the following standard costs:
The company reported the following results concerning this product in August.
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 quantity variance for August is:
A) $1,620 F
B) $1,674 F
C) $1,620 U
D) $1,674 U
Answer:
The Yost Company makes and sells a single product, Product A. Each unit of Product A
requires 1.2 hours of labor at a labor rate of $8.40 per hour. Yost Company needs to
prepare a Direct Labor Budget for the second quarter.
If the budgeted direct labor cost for May is $161,280, then the budgeted production of
Product A for May is:
A. 16,000 units
B. 19,200 units
C. 23,040 units
D. 16,800 units
Answer:
Jarvinen Company, which has only one product, has provided the following data
concerning its most recent month of operations:
The company produces the same number of units every month, although the sales in
units vary from month to month. The company’s variable costs per unit and total fixed
costs have been constant from month to month.
What is the net operating income for the month under absorption costing?
A. $2,900
B. $0
C. $8,700
D. $11,600
Answer:
The changes in Tener Company’s balance sheet account balances for last year appear
below:
The company’s income statement for the year appears below:
The company declared and paid $67,000 in cash dividends during the year. It did not
dispose of 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 sales revenue adjusted to a cash basis would be:
A. $940,000
B. $948,000
C. $950,000
D. $952,000
Answer:
Sinclair Company’s single product has a selling price of $25 per unit. Last year the
company reported a profit of $20,000 and variable expenses totaling $180,000. The
product has a 40% contribution margin ratio. Because of competition, Sinclair
Company will be forced in the current year to reduce its selling price by $2 per unit.
How many units must be sold in the current year to earn the same profit as was earned
last year?
A. 15,000 units
B. 12,000 units
C. 16,500 units
D. 12,960 units
Answer:
Iadanza Corporation is a wholesaler that sells a single product. Management has
provided the following cost data for two levels of monthly sales volume. The company
sells the product for $195.70 per unit.
The best estimate of the total contribution margin when 6,300 units are sold is:
A. $752,220
B. $638,190
C. $100,170
D. $177,030
Answer:
The controller of Ferrence Company estimates the amount of materials handling
overhead cost that should be allocated to the company’s two products using the data that
are given below:
The total materials handling cost for the year is expected to be $16,486.40.
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 wall mirrors? (Round off
your answer to the nearest whole dollar.)
A. $13,220
B. $15,053
C. $9,892
D. $8,243
Answer:
Peluso Company, a manufacturer of snowmobiles, is operating at 70% of plant capacity.
Peluso’s plant manager is considering making the headlights now being purchased from
an outside supplier for $11 each. The Peluso plant has idle equipment that could be used
to manufacture the headlights. The design engineer estimates that each headlight
requires $4 of direct materials, $3 of direct labor, and $6.00 of manufacturing overhead.
Forty percent of the manufacturing overhead is a fixed cost that would be unaffected by
this decision. A decision by Peluso Company to manufacture the headlights should
result in a net gain (loss) for each headlight of:
A. $(2.00)
B. $1.60
C. $0.40
D. $2.80
Answer:
The terms ‘standard quantity allowed” or ‘standard hours allowed” means:
A. the actual output in units multiplied by the standard output allowed.
B. the actual input in units multiplied by the standard output allowed.
C. the actual output in units multiplied by the standard input allowed.
D. the standard output in units multiplied by the standard input allowed.
Answer:
Chace Products is a division of a major corporation. Last year the division had total
sales of $21,300,000, net operating income of $575,100, and average operating assets of
$5,000,000. The company’s minimum required rate of return is 12%.
The division’s residual income is closest to:
A. $575,100
B. $1,175,100
C. $(1,980,900)
D. $(24,900)
Answer:
Gotay Corporations 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:
Reference: 8-43
Cuda Corporation makes a product that uses a material with the following standards:
The company budgeted for production of 3,500 units in November, but actual
production was 3,300 units. The company used 23,050 pounds of direct material to
produce this output. The company purchased 26,000 pounds of the direct material at a
total cost of $158,600. The direct materials purchases variance is computed when the
materials are purchased.
The materials price variance for November is:
A) $2,145 U
B) $2,145 F
C) $2,600 U
D) $2,600 F
Answer:
The standards for direct labor for a product are 2.5 hours at $8 per hour. Last month,
9,000 units of the product were made and the labor efficiency variance was $8,000 F.
The actual number of hours worked during the past period was:
A) 23,500
B) 22,500
C) 20,500
D) 21,500
Answer:
Franklin Glass Works uses a standard cost system in which manufacturing overhead is
applied on the basis of standard direct labor-hours. Each unit requires two standard
hours of direct labor for completion. The denominator activity for the year was based
on budgeted production of 200,000 units. Total overhead was budgeted at $900,000 for
the year, and the fixed manufacturing overhead rate was $1.50 per direct labor-hour.
The actual data pertaining to the manufacturing overhead for the year are presented
below:
The standard hours allowed for actual production for the year total:
A. 247,500
B. 396,000
C. 400,000
D. 495,000
Answer:
Njombe Corporation manufactures a variety of products. In the past, Njombe has been
using a traditional costing system in which the predetermined overhead rate was 150%
of direct labor cost. Selling prices had been set by multiplying total product cost by
200%. Sensing that this system was distorting costs and selling prices, Njombe has
decided to switch to an activity-based costing system for manufacturing overhead costs
using three activity cost pools. Selling prices are still to be set at 200% of unit product
cost under the new system. Information on these cost pools for next year are as follows:
Information (on a per unit basis) related to three popular products at Njombe are as
follows:
Under the traditional system, what would be the selling price of one unit of Model #36?
A. $2,536
B. $2,712
C. $4,080
D. $5,506
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: 8-21
Hanekamp Corporation manufactures and sells a single product. The company uses
units as the measure of activity in its flexible budgets. During August, the company
budgeted for 5,400 units, but its actual level of activity was 5,440 units. The company
has provided the following data concerning the formulas to be used in its budgeting:
The direct materials in the flexible budget for August would be closest to:
A) $59,840
B) $60,686
C) $59,797
D) $59,400
Answer:
All of the following should be recorded in the operating activities section of the
statement of cash flows EXCEPT:
A. a decrease in inventory.
B. the total credits to the accumulated depreciation account.
C. a decrease in prepaid expenses.
D. a purchase of equipment in exchange for cash.
E. an increase in income taxes payable.
Answer:
Electrical costs at one of Reifel Corporation’s factories are listed below:
Management believes that electrical cost is a mixed cost that depends on
machine-hours.
Using the high-low method, the estimate of the variable component of electrical cost
per machine-hour is closest to:
A. $0.12
B. $20.38
C. $7.98
D. $8.22
Answer:
(Ignore income taxes in this problem.) You have deposited $21,618 in a special account
that has a guaranteed interest rate of 18% per year. If you are willing to completely
exhaust the account, what is the maximum amount that you could withdraw at the end
of each of the next 9 years? Select the amount below that is closest to your answer.
A. $5,024
B. $7,080
C. $2,402
D. $2,834
Answer:
On April 1, Stelter Corporation had $34,000 of raw materials on hand. During the
month, the company purchased an additional $60,000 of raw materials. During April,
$70,000 of raw materials were requisitioned from the storeroom for use in production.
These raw materials included both direct and indirect materials. The indirect materials
totaled $7,000. Prepare journal entries to record these events. Use those journal entries
to answer the following questions:
The debits to the Manufacturing Overhead account as a consequence of the raw
materials transactions in April total:
A. $7,000
B. $63,000
C. $0
D. $70,000
Answer:
Kilihea Corporation produces a single product. The company’s absorption costing
income statement for July follows:
The company’s variable production costs are $20 per unit and its fixed manufacturing
overhead totals $80,000 per month.
The contribution margin per unit during July was:
A. $17
B. $20
C. $25
D. $6
Answer:
Lueckenhoff Corporation’s most recent balance sheet appears below:
The company’s net income for the year was $153 and it did not sell or retire any
property, plant, and equipment during the year. Cash dividends were $28. The net cash
provided by (used in) operating activities for the year was:
A. $34
B. $187
C. $119
D. $219
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 working capital at the end of Year 2 is:
A. $610 thousand
B. $860 thousand
C. $310 thousand
D. $710 thousand
Answer:
Elbon 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 absorption costing?
A. $1,400
B. $(19,000)
C. $8,800
D. $10,200
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 times interest earned for Year 2 is closest to:
A. 3.40
B. 8.34
C. 4.84
D. 5.84
Answer:
Management of Mcentire Corporation has asked your help as an intern in preparing
some key reports for April. Direct materials cost was $64,000, direct labor cost was
$47,000, and manufacturing overhead was $75,000. Selling expense was $15,000 and
administrative expense was $44,000.
The conversion cost for April was:
A. $186,000
B. $100,000
C. $128,000
D. $122,000
Answer:
A manufacturing company that produces a single product has provided the following
data concerning its most recent month of operations:
What is the variable costing unit product cost for the month?
A. $103
B. $99
C. $94
D. $90
Answer:
Selected financial data for Bragg Company appear below:
Bragg Company’s inventory turnover ratio for Year 2 was closest to:
A. 2.00
B. 2.67
C. 4.80
D. 4.00
Answer:
A manufacturer of playground equipment 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:
How much fixed manufacturing overhead was applied to products during the period to
the nearest dollar?
A. $85,571
B. $84,690
C. $86,190
D. $85,085
Answer: