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Segment margin is sales minus:
A. variable expenses.
B. traceable fixed expenses.
C. variable expenses and common fixed expenses.
D. variable expenses and traceable fixed expenses.
Answer:
Bordes Corporation has provided the following data concerning its most important raw
material, compound R85F:
The raw material was purchased on account.
The Materials Price Variance for May would be recorded as a:
A. Credit of $2,056
B. Debit of $2,640
C. Debit of $2,056
D. Credit of $2,640
Answer:
The management of Fries Corporation has been concerned for some time with the
financial performance of its product R89H and has considered discontinuing it on
several occasions. Data from the company's accounting system appear below:
In the company's accounting system all fixed expenses of the company are fully
allocated to products. Further investigation has revealed that $31,000 of the fixed
manufacturing expenses and $46,000 of the fixed selling and administrative expenses
are avoidable if product R89H is discontinued.
What would be the effect on the company's overall net operating income if product
R89H were dropped?
A. Overall net operating income would decrease by $66,000.
B. Overall net operating income would decrease by $8,000.
C. Overall net operating income would increase by $66,000.
D. Overall net operating income would increase by $8,000.
Answer:
Inspection costs at one of Krivanek Corporation's factories are listed below:
Management believes that inspection cost is a mixed cost that depends on units
produced.
Using the high-low method, the estimate of the fixed component of inspection cost per
month is closest to:
A. $8,743
B. $8,887
C. $8,683
D. $6,869
Answer:
Green Enterprises produces a single product. The following data were provided by the
company for the most recent period:
Under variable costing, the unit product cost is:
A. $20
B. $18
C. $15
D. $22
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 material moves, how much of
the total materials handling cost should be allocated to the specialty windows? (Round
off your answer to the nearest whole dollar.)
A. $3,266
B. $9,274
C. $8,243
D. $6,595
Answer:
The Varone Company makes a single product called a Hom. The company has the
capacity to produce 40,000 Homs per year. Per unit costs to produce and sell one Hom
at that activity level are:
The regular selling price for one Hom is $60. A special order has been received at
Varone from the Fairview Company to purchase 8,000 Homs next year at 15% off the
regular selling price. If this special order were accepted, the variable selling expense
would be reduced by 25%. However, Varone would have to purchase a specialized
machine to engrave the Fairview name on each Hom in the special order. This machine
would cost $12,000 and it would have no use after the special order was filled. The total
fixed costs, both manufacturing and selling, are constant within the relevant range of
30,000 to 40,000 Homs per year. Assume direct labor is a variable cost.
If Varone can expect to sell 32,000 Homs next year through regular channels, at what
special order price from Fairview should Varone be economically indifferent between
either accepting or not accepting this special order?
A. $51.00
B. $48.20
C. $42.50
D. $39.60
Answer:
Data concerning Runnells Corporation's single product appear below:
The company is currently selling 6,000 units per month. Fixed expenses are $424,000
per month. The marketing manager believes that a $7,000 increase in the monthly
advertising budget would result in a 100 unit increase in monthly sales. What should be
the overall effect on the company's monthly net operating income of this change?
A. increase of $8,000
B. increase of $1,000
C. decrease of $7,000
D. decrease of $1,000
Answer:
Reference: 8B-1
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 incurrence of direct labor cost and its use in production, the general ledger
would include what kind of entry to the Labor Efficiency Variance account?
A) $7,500 credit
B) $5,600 debit
C) $5,600 credit
D) $3,900 credit
Answer:
What was the fixed manufacturing overhead budget variance for the period to the
nearest dollar?
A) $1,800 U
B) $222 F
C) $1,010 U
D) $785 U
Answer:
Data from Saldivar Corporation's most recent balance sheet appear below:
A total of 150,000 shares of common stock and 40,000 shares of preferred stock were
outstanding at the end of the year. The book value per share is closest to:
A. $2.73
B. $5.00
C. $6.53
D. $7.87
Answer:
Craft Company produces a single product. Last year, the company had a net operating
income of $80,000 using absorption costing and $74,500 using variable costing. The
fixed manufacturing overhead cost was $5 per unit. There were no beginning
inventories. If 21,500 units were produced last year, then sales last year were:
A. 16,000 units
B. 20,400 units
C. 22,600 units
D. 27,000 units
Answer:
Reference: 8-40
The following materials standards have been established for a particular product:
The following data pertain to operations concerning the product for the last month:
What is the materials price variance for the month?
A) $660 U
B) $600 U
C) $660 F
D) $600 F
Answer:
Rojo Corporation has received a request for a special order of 8,000 units of product
W68 for $27.20 each. Product W68's unit product cost is $18.50, determined as follows:
Direct labor is a variable cost. The special order would have no effect on the company's
total fixed manufacturing overhead costs. The customer would like modifications made
to product W68 that would increase the variable costs by $7.90 per unit and that would
require an investment of $31,000 in special molds that would have no salvage value.
This special order would have no effect on the company's other sales. The company has
ample spare capacity for producing the special order. If the special order is accepted,
the company's overall net operating income would increase (decrease) by:
A. $(4,400)
B. $69,600
C. $30,600
D. $(24,600)
Answer:
Each of the following would be a period cost except:
A. the salary of the company president's secretary.
B. the cost of a general accounting office.
C. depreciation of a machine used in manufacturing.
D. sales commissions.
Answer:
The Western Company is considering the addition of a new product to its current
product lines. The expected cost and revenue data for the new product are as follows:
If the new product is added to the existing product line, then sales of existing products
will decline. As a consequence, the contribution margin of the other existing product
lines is expected to drop $78,000 per year.
What is the lowest selling price per unit among those listed below that could be charged
for the new product and still make it economically desirable to add the new product?
A. $240
B. $222
C. $291
D. $249
Answer:
The following data are available for the South Division of Redride Products, Inc. and
the single product it makes:
If South wants a residual income of $50,000 and the minimum required rate of return is
10%, the annual turnover will have to be:
A. 0.32
B. 0.80
C. 1.25
D. 1.50
Answer:
The Labor Efficiency Variance for December would be recorded as a:
A) Debit of $9,682
B) Debit of $10,340
C) Credit of $10,340
D) Credit of $9,682
Answer:
Reference: 8-56
Hickory Corporation, which produces commercial safes, has provided the following
data:
Supplies cost is an element of variable manufacturing overhead.
The variable overhead rate variance for supplies is closest to:
A) $47,251 F
B) $42,901 U
C) $47,251 U
D) $42,901 F
Answer:
Heller Corporation uses the weighted-average method in its process costing system.
Data concerning the first processing department for the most recent month are listed
below:
Note: Your answers may differ from those offered below due to rounding error. In all
cases, select the answer that is the closest to the answer you computed. To reduce
rounding error, carry out all computations to at least three decimal places.
What are the equivalent units for conversion costs for the month in the first processing
department?
A. 8,650
B. 9,700
C. 8,300
D. 350
Answer:
Reference: 8-22
Friou Corporation manufactures and sells a single product. The company uses units as
the measure of activity in its flexible budgets. During July, the company budgeted for
6,300 units, but its actual level of activity was 6,250 units. The company has provided
the following data concerning the formulas used in its budgeting and its actual results
for July:
Data used in budgeting:
Actual results for July:
The direct labor in the planning budget for July would be closest to:
A) $27,295
B) $28,350
C) $28,125
D) $27,513
Answer:
Reference: 8-5
Yewston Hotel bases its budgets on guest-days. The hotels static budget for April
appears below:
The total fixed cost at the activity level of 3,400 guest-days per month should be:
A) $52,360
B) $35,420
C) $95,880
D) $64,860
Answer:
Abe 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. $11,400
B. $16,800
C. $5,400
D. $(12,900)
Answer:
Stelluti Corporations variable overhead is applied on the basis of direct labor-hours. The
standard cost card for product H67F specifies 7.8 direct labor-hours per unit of H67F.
The standard variable overhead rate is $6.50 per direct labor-hour. During the most
recent month, 400 units of product H67F were made and 2,900 direct labor-hours were
worked.
The actual variable overhead incurred was $20,155.
Required:
a. What was the variable overhead rate variance for the month?
b. What was the variable overhead efficiency variance for the month?
Answer:
Cezar Corporation's comparative balance sheet appears below:
The company did not dispose of any property, plant, and equipment during the year. Its
net income for the year was $10,000 and its cash dividends were $4,000. The company
did not retire any bonds payable or issue any common stock during the year. Its net cash
provided by operating activities and net cash used in financing activities are:
A. net cash provided by operating activities, $35,000; net cash used in financing
activities,$8,000
B. net cash provided by operating activities, $35,000; net cash used in financing
activities,$4,000
C. net cash provided by operating activities, $39,000; net cash used in financing
activities,$8,000
D. net cash provided by operating activities, $39,000; net cash used in financing
activities,$4,000
Answer:
Byklea Corporation uses the weighted-average method in its process costing system.
This month, the beginning inventory in the first processing department consisted of 200
units. The costs and percentage completion of these units in beginning inventory were:
A total of 7,000 units were started and 6,700 units were transferred to the second
processing department during the month. The following costs were incurred in the first
processing department during the month:
The ending inventory was 90% complete with respect to materials and 45% complete
with respect to conversion costs.
Note: Your answers may differ from those offered below due to rounding error. In all
cases, select the answer that is the closest to the answer you computed. To reduce
rounding error, carry out all computations to at least three decimal places.
What are the equivalent units for conversion costs for the month in the first processing
department?
A. 6,925
B. 7,200
C. 6,700
D. 225
Answer:
Coskey Corporation applies manufacturing overhead to products on the basis of
standard machine-hours. Budgeted and actual overhead costs for the month appear
below:
The company based its original budget on 3,900 machine-hours. The company actually
worked 3,580 machine-hours during the month. The standard hours allowed for the
actual output of the month totaled 3,770 machine-hours. What was the overall fixed
manufacturing overhead budget variance for the month?
A. $1,280 favorable
B. $320 favorable
C. $320 unfavorable
D. $1,280 unfavorable
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 believes that a $7,000 increase in the monthly advertising
budget would result in a 100 unit increase in monthly sales. What should be the overall
effect on the company's monthly net operating income of this change?
A. decrease of $1,000
B. decrease of $7,000
C. increase of $1,000
D. increase of $8,000
Answer:
Data for June for Ozaki Corporation and its two major business segments, North and
South, appear below:
In addition, common fixed expenses totaled $145,000 and were allocated as follows:
$73,000 to the North business segment and $72,000 to the South business segment.
A properly constructed segmented income statement in a contribution format would
show that the net operating income of the company as a whole is:
A. $(56,000)
B. $89,000
C. $343,000
D. $234,000
Answer:
Jolly Company uses the FIFO method in its process costing system. Beginning
inventory in the mixing processing center consisted of 4,000 units, 75% complete with
respect to conversion costs. Ending work in process inventory consisted of 3,000 units,
60% complete with respect to conversion costs. If 12,000 units were transferred to the
next processing center during the period, the equivalent units for conversion costs
would be:
A. 13,200 units
B. 10,800 units
C. 12,000 units
D. 13,000 units
Answer:
Furson Corporation makes a single product. In a recent period 6,500 units were made
and there was an unfavorable labor efficiency variance of $26,000. Direct labor workers
were paid $8 per hour and total wages were $182,000. The labor rate variance was zero.
The standard labor-hours per unit of output is closest to:
A) 3.0
B) 3.5
C) 4.0
D) 4.5
Answer:
Reference: 8A-6
Able Control Company, which manufactures electrical switches, uses a standard cost
system in which manufacturing overhead costs are applied to units of product on the
basis of standard direct labor-hours (DLHs). The standard overhead costs are shown
below:
*Based on 300,000 DLHs per month.
The following information is available for the month of October:
- Plans called for the production of 60,000 switches.
- 56,000 switches were actually produced.
- 275,000 direct labor-hours were worked at a total cost of $2,550,000.
- Actual variable manufacturing overhead costs were $2,340,000.
- Actual fixed manufacturing overhead costs were $3,750,000.
The variable overhead efficiency variance for October was:
A) $40,000 Favorable
B) $60,000 Favorable
C) $160,000 Unfavorable
D) $210,000 Unfavorable
Answer:
