Enz 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 this year?
A. $92,000
B. $56,000
C. $73,000
D. $75,000
Answer:
Excerpts from Dibello Corporation’s comparative balance sheet appear below:
Which of the following is the correct treatment within the operating activities section of
the statement of cash flows using the indirect method?
A. The change in Accounts Receivable is added to net income; The change in
Inventory is added to net income
B. The change in Accounts Receivable is added to net income; The change in Inventory
is subtracted from net income
C. The change in Accounts Receivable is subtracted from net income; The change in
Inventory is subtracted from net income
D. The change in Accounts Receivable is subtracted from net income; The change in
Inventory is added to net income
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 return on investment (ROI) is closest to:
A. 49.0%
B. 11.5%
C. 0.3%
D. 2.2%
Answer:
Reference: 8-20
Herard Corporation manufactures and sells a single product. The company uses units as
the measure of activity in its flexible budgets. During March, the company budgeted for
7,900 units, but its actual level of activity was 7,890 units. The company has provided
the following data concerning the formulas used in its budgeting and its actual results
for March:
Data used in budgeting:
Actual results for March:
The manufacturing overhead in the flexible budget for March would be closest to:
A) $50,730
B) $52,287
C) $50,713
D) $52,419
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 absorption costing?
A. $11,800
B. $3,700
C. $8,100
D. $(23,600)
Answer:
Compound Q11H is a raw material used to make Grater Corporation’s major product.
The standard cost of compound Q11H is $23.00 per ounce and the standard quantity is
3.8 ounces per unit of output. Data concerning the compound for October appear below:
The raw material was purchased on account.
The Materials Quantity Variance for October would be recorded as a:
A. Credit of $3,680
B. Debit of $4,140
C. Credit of $4,140
D. Debit of $3,680
Answer:
Binnie Corporation’s most recent balance sheet appears below:
Net income for the year was $83. Cash dividends were $16. The company did not
dispose of any property, plant, and equipment. It did not issue any bonds payable or
repurchase any of its own common stock. The following question pertain to the
company’s statement of cash flows.
The net cash provided by (used in) operating activities for the year was:
A. $99
B. $67
C. $16
D. $119
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 buy the model 230 machine rather than the model 330
machine, the differential cost was:
A. $34,000
B. $38,000
C. $4,000
D. $67,000
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.
The manufacturing cycle efficiency (MCE) for this operation is:
A. 55%
B. 45%
C. 6.6 hours
D. 5.4 hours
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 cost of goods sold adjusted to a cash basis would be:
A. $152,000
B. $160,000
C. $163,000
D. $155,000
Answer:
Reference: 8-16
Pong 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 December, the kennel budgeted for
2,000 tenant-days, but its actual level of activity was 1,980 tenant-days. The kennel has
provided the following data concerning the formulas used in its budgeting and its actual
results for December:
Data used in budgeting:
Actual results for December:
The facility expenses in the flexible budget for December would be closest to:
A) $14,640
B) $14,187
C) $14,475
D) $14,700
Answer:
Sensabaugh Inc., a company that produces and sells a single product, has provided its
contribution format income statement for January.
If the company sells 1,600 units, its total contribution margin should be closest to:
A. $22,200
B. $28,800
C. $4,800
D. $32,400
Answer:
The most recent balance sheet and income statement of Heldt Corporation appear
below:
The company paid a cash dividend and it did not dispose of any property, plant, and
equipment. The company did not purchase any bonds payable or repurchase any of its
own common stock. The following question pertain to the company’s statement of cash
flows.
The net cash provided by (used in) investing activities for the year was:
A. $102
B. $61
C. $(102)
D. $(61)
Answer:
Hunter Corporation sells a product for $180 per unit. The product’s current sales are
34,900 units and its break-even sales are 25,128 units.
What is the margin of safety in dollars?
A. $6,282,000
B. $4,188,000
C. $1,758,960
D. $4,523,040
Answer:
Data concerning Homme Corporation’s single product appear below:
The company is currently selling 2,000 units per month. Fixed expenses are $130,000
per month.
This question is to be considered independently of all other questions relating to
Homme Corporation. Refer to the original data when answering this question.
The marketing manager would like to introduce sales commissions as an incentive for
the sales staff. The marketing manager has proposed a commission of $14 per unit. In
exchange, the sales staff would accept a decrease in their salaries of $24,000 per month.
(This is the company’s savings for the entire sales staff.) The marketing manager
predicts that introducing this sales incentive would increase monthly sales by 100 units.
What should be the overall effect on the company’s monthly net operating income of
this change?
A. decrease of $45,800
B. increase of $154,200
C. increase of $22,600
D. increase of $2,200
Answer:
A company has two processing departments: A and B. Which of the following entries or
sets of journal entries would be used to record the transfer between processing
departments and from the final processing department to finished goods?
A. Option A
B. Option B
C. Option C
D. Option D
Answer:
Cress Company makes four products in a single facility. Data concerning these products
appear below:
The milling machines are potentially the constraint in the production facility. A total of
11,500 minutes are available per month on these machines.
How many minutes of milling machine time would be required to satisfy demand for all
four products?
A. 12,000
B. 10,800
C. 9,000
D. 11,500
Answer:
Personnel administration is an example of a:
A. Unit-level activity.
B. Batch-level activity.
C. Product-level activity.
D. Facility-level activity.
Answer:
Zumpano Inc. produces and sells a single product. The selling price of the product is
$170.00 per unit and its variable cost is $73.10 per unit. The fixed expense is $125,001
per month.
The break-even in monthly dollar sales is closest to:
A. $211,667
B. $125,001
C. $290,700
D. $219,300
Answer:
Snappy Company has a job-order costing system and uses a predetermined overhead
rate based on direct labor-hours to apply manufacturing overhead to jobs.
Manufacturing overhead cost and direct labor hours were estimated at $100,000 and
40,000 hours, respectively, for the year. In July, Job #334 was completed at a cost of
$5,000 in direct materials and $2,400 in direct labor. The labor rate is $6 per hour. By
the end of the year, Snappy had worked a total of 45,000 direct labor-hours and had
incurred $110,250 actual manufacturing overhead cost.
Snappy’s manufacturing overhead for the year was:
A. $10,250 underapplied
B. $12,500 overapplied
C. $12,500 underapplied
D. $2,250 overapplied
Answer:
The following partially completed T-accounts summarize the transactions of Belson
Company for last year:
At the end of the year, the company closes out the balance in the Manufacturing
Overhead account to Cost of Goods Sold.
The indirect labor cost is:
A. $6,000
B. $13,000
C. $16,000
D. $31,000
Answer:
Binnie Corporation’s most recent balance sheet appears below:
Net income for the year was $83. Cash dividends were $16. The company did not
dispose of any property, plant, and equipment. It did not issue any bonds payable or
repurchase any of its own common stock. The following question pertain to the
company’s statement of cash flows.
The net cash provided by (used in) investing activities for the year was:
A. $(63)
B. $(74)
C. $74
D. $63
Answer:
Heersink Corporation bases its predetermined overhead rate on variable manufacturing
overhead cost of $10.50 per machine-hour and fixed manufacturing overhead cost of
$108,108 per period. If the denominator level of activity is 2,700 machine-hours, the
fixed element in the predetermined overhead rate would be:
A. $1,050.00
B. $40.04
C. $10.50
D. $50.54
Answer:
Grasse Company had $160,000 in sales on account last year. The beginning accounts
receivable balance was $10,000 and the ending accounts receivable balance was
$12,000. The company’s average collection period was closest to:
A. 25.09 days
B. 22.81 days
C. 50.19 days
D. 27.38 days
Answer:
Manufacturing overhead consists of:
A. all manufacturing costs.
B. indirect materials but not indirect labor.
C. all manufacturing costs, except direct materials and direct labor.
D. indirect labor but not indirect materials.
Answer:
Rave Corporation produces and sells a single product. Data concerning that product
appear below:
The break-even in monthly unit sales is closest to:
A. 2,844 units
B. 3,620 units
C. 3,210 units
D. 1,701 units
Answer:
The Phelps Company applies overhead costs to products on the basis of standard direct
labor-hours. The standard cost card shows that 5 direct labor-hours are required per unit
of product. Phelps Company had the following budgeted and actual data for March:
The budgeted direct labor-hours is used as the denominator activity for the month.
The variable overhead efficiency variance for March is:
A. $8,000 unfavorable
B. $4,000 favorable
C. $8,000 favorable
D. $4,000 unfavorable
Answer:
Babuca Corporation has provided the following production and total cost data for two
levels of monthly production volume. The company produces a single product.
The best estimate of the total monthly fixed manufacturing cost is:
A. $1,424,400
B. $1,506,400
C. $932,400
D. $1,465,400
Answer:
Capalbo Corporation bases its predetermined overhead rate on the estimated
labor-hours for the upcoming year. At the beginning of the most recently completed
year, the company estimated the labor-hours for the upcoming year at 52,000
labor-hours. The estimated variable manufacturing overhead was $2.78 per labor-hour
and the estimated total fixed manufacturing overhead was $1,192,360. The actual
labor-hours for the year turned out to be 52,600 labor-hours. The predetermined
overhead rate for the recently completed year was closest to:
A. $2.78
B. $25.45
C. $25.71
D. $22.93
Answer:
Gasco Corporation’s balance sheet and income statement appear below:
Cash dividends were $54. The company sold equipment for $14 that was originally
purchased for $8 and that had accumulated depreciation of $1. It did not issue any
bonds payable or repurchase any of its own common stock.
The net cash provided by (used in) investing activities for the year was:
A. $(137)
B. $(151)
C. $14
D. $137
Answer:
Celius Midwiferys cost formula for its wages and salaries is $2,410 per month plus
$292 per birth. For the month of March, the company planned for activity of 113 births,
but the actual level of activity was 116 births. The actual wages and salaries for the
month was $35,340. The spending variance for wages and salaries in March would be
closest to:
A) $942 F
B) $66 F
C) $66 U
D) $942 U
Answer:
