The general model for calculating a price variance is:
A) actual quantity of inputs × (actual price – standard price).
B) standard price × (actual quantity of inputs – standard quantity allowed for output).
C) (actual quantity of inputs at actual price) – (standard quantity allowed for output at
standard price).
D) actual price × (actual quantity of inputs – standard quantity allowed for output).
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 cost of goods sold (after adjustment for underapplied or overapplied manufacturing
overhead) is:
A. $61,000
B. $62,000
C. $63,000
D. $64,000
Answer:
More Company’s net income last year was $37,000. The company paid a cash dividend
of $2,000 and did not sell or retire any property, plant, and equipment last year.
Changes in selected balance sheet accounts for the year appear below:
Based solely on this information, the net cash provided by operating activities under the
indirect method on the statement of cash flows would be:
A. $63,000
B. $32,000
C. $18,000
D. $56,000
Answer:
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:
Which of the following accounts is debited when direct labor is recorded?
A. Work in process
B. Salaries and wages expense
C. Salaries and wages payable
D. Manufacturing overhead
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 selling and administrative expense adjusted to a
cash basis would be:
A. $245,000
B. $222,000
C. $260,000
D. $298,000
Answer:
The advertising costs that Pepsi incurred to air its commercials during the Super Bowl
can best be described as a:
A. variable cost.
B. fixed cost.
C. product cost.
D. prime cost.
Answer:
Which of the following costs would not be included as part of manufacturing overhead?
A. Insurance on sales vehicles.
B. Depreciation of production equipment.
C. Lubricants for production equipment.
D. Direct labor overtime premium.
Answer:
Hereford Corporation has provided the following data for February.
Required:
a. Compute the budget variance for February. Show your work!
b. Compute the volume variance for February. Show your work!
Answer:
Financial statements for Orange Company appear below:
Dividends during Year 2 totaled $156 thousand, of which $18 thousand were preferred
dividends.
The market price of a share of common stock on December 31, Year 2 was $100.
Orange Company’s dividend yield ratio on December 31, Year 2 was closest to:
A. 3.1%
B. 1.1%
C. 3.5%
D. 2.7%
Answer:
Reference: 8-42
Fraize Corporation makes a product that uses a material with the quantity standard of
9.5 kilos per unit of output and the price standard of $4.00 per kilo. In July the company
produced 7,000 units using 68,850 kilos of the direct material. During the month the
company purchased 73,600 kilos of the direct material at $3.70 per kilo. The direct
materials purchases variance is computed when the materials are purchased.
The materials quantity variance for July is:
A) $9,400 U
B) $8,695 U
C) $9,400 F
D) $8,695 F
Answer:
Reed Company’s sales last year totaled $150,000 and its return on investment (ROI)
was 12%. If the company’s turnover was 3, then its net operating income for the year
must have been:
A. $6,000
B. $2,000
C. $18,000
D. it is impossible to determine from the data given.
Answer:
Zippy Company has a process costing system. Information about units processed and
processing costs incurred during a recent month in the Refining Department follow:
The beginning work in process inventory had $10,946 of processing cost attached to it
at the beginning of the month. During the month, the Department incurred an additional
$289,954 in processing cost.
Assuming that the company uses the weighted-average method, what are the equivalent
units for processing costs for the Department for the month?
A. 94,000
B. 100,300
C. 100,000
D. 112,000
Answer:
The Kafusi Company has the following budgeted sales:
The regular pattern of collection of credit sales is 30% in the month of sale, 60% in the
month following the month of sale, and the remainder in the second month following
the month of sale. There are no bad debts.
The budgeted cash receipts for July would be:
A. $400,000
B. $430,000
C. $435,000
D. $390,000
Answer:
Financial statements for Harwich Company for the most recent year appear below:
The balances in the Cash, Accounts Receivable, Inventory, Bonds Payable, Common
Stock, and Additional Paid-In Capital accounts are unchanged from the beginning of the
year. A $0.75 per share dividend was declared and paid during the year. On December
31, Harwich Company’s common stock was trading at $24.00 per share.
Harwich Company’s times interest earned ratio for the year was closest to:
A. 11.0
B. 10.5
C. 12.0
D. 22.0
Answer:
Falquez Company sells three products: R, S, and T. Data for activity of Falquez
Company during July are as follows:
Common fixed expenses for July amounted to $90,000.
Net operating income for the company was:
A. $166,000
B. $256,000
C. $334,000
D. $46,000
Answer:
Pitkin Company produces a part used in the manufacture of one of its products. The unit
product cost of the part is $33, computed as follows:
An outside supplier has offered to provide the annual requirement of 10,000 of the parts
for only $27 each. The company estimates that 30% of the fixed manufacturing
overhead costs above will continue if the parts are purchased from the outside supplier.
Assume that direct labor is an avoidable cost in this decision. Based on these data, the
per unit dollar advantage or disadvantage of purchasing the parts from the outside
supplier would be:
A. $3 advantage
B. $1 advantage
C. $1 disadvantage
D. $4 disadvantage
Answer:
Reference: 8A-12
The Chase Company has a standard cost system in which manufacturing overhead is
applied on the basis of standard direct labor-hours (DLHs). The company recorded the
following activity and cost data relating to manufacturing overhead for October:
The amount of fixed manufacturing overhead cost applied to work in process during
September was:
A) $47,832
B) $26,520
C) $42,432
D) $43,605
Answer:
The Willsey Merchandise Company has budgeted $40,000 in sales for the month of
December. The company’s cost of goods sold is 30% of sales. If the company has
budgeted to purchase $18,000 in merchandise during December, then the budgeted
change in inventory levels over the month of December is:
A. $6,000 increase
B. $10,000 decrease
C. $22,000 decrease
D. $15,000 increase
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:
Acitelli Corporation, which applies manufacturing overhead on the basis of
machine-hours, has provided the following data for its most recent year of operations.
The estimates of the manufacturing overhead and of machine-hours were made at the
beginning of the year for the purpose of computing the company’s predetermined
overhead rate for the year.
The predetermined overhead rate is closest to:
A. $42.30
B. $41.82
C. $42.12
D. $42.00
Answer:
Reference: 8-60
Marten Corporation makes a product with the following standards for direct labor and
variable overhead:
In May the company produced 2,800 units using 300 direct labor-hours. The actual
variable overhead cost was $1,620. The company applies variable overhead on the basis
of direct labor-hours.
The variable overhead rate variance for May is:
A) $112 U
B) $112 F
C) $120 F
D) $120 U
Answer:
Financial statements for Harwich Company for the most recent year appear below:
The balances in the Cash, Accounts Receivable, Inventory, Bonds Payable, Common
Stock, and Additional Paid-In Capital accounts are unchanged from the beginning of the
year. A $0.75 per share dividend was declared and paid during the year. On December 31,
Harwich Company’s common stock was trading at $24.00 per share.
Harwich Company’s acid-test ratio at December 31 was closest to:
A. 0.45
B. 0.83
C. 2.00
D. 1.20
Answer:
Dowen Corporation applies manufacturing overhead to products on the basis of
standard machine-hours. For the most recent month, the company based its budget on
4,400 machine-hours. Budgeted and actual overhead costs for the month appear below:
The company actually worked 4,460 machine-hours during the month. The standard
hours allowed for the actual output were 4,310 machine-hours for the month. What was
the overall variable overhead efficiency variance for the month?
A) $2,198 favorable
B) $1,695 unfavorable
C) $150 unfavorable
D) $503 favorable
Answer:
Drama Company’s working capital is $16,000 and its current liabilities are $94,000. The
company’s current ratio is closest to:
A. 1.17
B. 0.17
C. 6.88
D. 0.83
Answer:
Krast Company has total assets of $160,000 and total liabilities of $70,000. The
company’s debt-to-equity ratio is closest to:
A. 0.56
B. 0.44
C. 0.30
D. 0.78
Answer:
Reference: 8-31
Kibodeaux Corporation makes a product with the following standard costs:
The company budgeted for production of 3,300 units in June, but actual production was
3,400 units. The company used 33,240 liters of direct material and 320 direct
labor-hours to produce this output. The company purchased 35,900 liters of the direct
material at $4.90 per liter. The actual direct labor rate was $22.70 per hour and the
actual variable overhead rate was $2.70 per hour.
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 labor efficiency variance for June is:
A) $454 F
B) $454 U
C) $440 F
D) $440 U
Answer:
Reference: 8A-5
The Dodge Company makes and sells a single product and uses a standard cost system
in which manufacturing overhead costs are applied to units of product on the basis of
standard direct labor-hours. The standard cost card shows that 5 direct labor-hours are
required per unit of product. The Dodge Company had the following budgeted and
actual data for the year:
The budgeted direct labor-hours is used as the denominator activity for the month.
The variable overhead rate variance was:
A) $4,500 U
B) $10,500 U
C) $13,500 U
D) $16,500 U
Answer:
Providing the power required to run production equipment is an example of a:
A. Unit-level activity.
B. Batch-level activity.
C. Product-level activity.
D. Facility-level activity.
Answer:
Gorovitz Corporation’s most recent balance sheet appears below:
The company’s net income for the year was $86 and it did not issue any bonds or
repurchase any of its common stock during the year. Cash dividends were $23. The net
cash provided by (used in) financing activities for the year was:
A. $4
B. $(15)
C. $(23)
D. $(34)
Answer: