Excerpts from Zorra Corporation’s most recent balance sheet appear below:
Sales on account in Year 2 amounted to $1,370 and the cost of goods sold was $850.
The acid-test ratio at the end of Year 2 is closest to:
A. 1.81
B. 2.62
C. 1.69
D. 1.36
Answer:
A company produces a single product. Last year, fixed manufacturing overhead was
$30,000, variable production costs were $48,000, fixed selling and administration costs
were $20,000, and variable selling administrative expenses were $9,600. There was no
beginning inventory. During the year, 3,000 units were produced and 2,400 units were
sold at a price of $40 per unit. Under variable costing, net operating income would be:
A. a profit of $6,000.
B. a profit of $4,000.
C. a loss of $2,000.
D. a loss of $4,400.
Answer:
Hirt Corporation sells its product for $12 per unit. Next year, fixed expenses are
expected to be $400,000 and variable expenses are expected to be $8 per unit. How
many units must the company sell to generate net operating income of $80,000?
A. 50,000 units
B. 120,000 units
C. 60,000 units
D. 100,000 units
Answer:
Reference: 8A-11
A manufacturer of playground equipment uses a standard costing system in which
standard machine-hours (MHs) is 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:
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:
Damon Corporation has provided the following data from its most recent balance sheet:
The debt-to-equity ratio is closest to:
A. 0.17
B. 6.00
C. 0.86
D. 7.00
Answer:
Reference: 8-35
Sande Corporation makes a product with the following standard costs:
In November the companys budgeted production was 2,900 units but the actual
production was 3,000 units. The company used 27,670 grams of the direct material and
1,390 direct labor-hours to produce this output. During the month, the company
purchased 31,700 grams of the direct material at a cost of $196,540. The actual direct
labor cost was $29,607 and the actual variable overhead cost was $2,502.
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 November is:
A) $420 U
B) $434 F
C) $420 F
D) $434 U
Answer:
Jay Company uses a standard cost system in which it applies manufacturing overhead to
units of product on the basis of standard direct labor-hours (DLHs). The information
below pertains to a recent months activity:
The volume variance would be:
A) $300 F
B) $300 U
C) $150 F
D) $180 F
Answer:
Tsuchiya Corporation manufactures a variety of products. Last year, the company’s
variable costing net operating income was $57,500. Fixed manufacturing overhead
costs deferred in inventory under absorption costing amounted to $35,400. What was
the absorption costing net operating income last year?
A. $22,100
B. $35,400
C. $57,500
D. $92,900
Answer:
Meltzer Corporation is presently making part O13 that is used in one of its products. A
total of 3,000 units of this part are produced and used every year. The company’s
Accounting Department reports the following costs of producing the part at this level of
activity:
An outside supplier has offered to produce and sell the part to the company for $27.00
each. If this offer is accepted, the supervisor’s salary and all of the variable costs,
including direct labor, can be avoided. The special equipment used to make the part was
purchased many years ago and has no salvage value or other use. The allocated general
overhead represents fixed costs of the entire company. If the outside supplier’s offer
were accepted, only $3,000 of these allocated general overhead costs would be avoided.
If management decides to buy part O13 from the outside supplier rather than to
continue making the part, what would be the annual impact on the company’s overall
net operating income?
A. Net operating income would decline by $23,100 per year.
B. Net operating income would decline by $26,100 per year.
C. Net operating income would decline by $20,100 per year.
D. Net operating income would decline by $8,700 per year.
Answer:
Johnson Company operates two plants, Plant A and Plant B. Last year, Johnson
Company reported a contribution margin of $40,000 for Plant A. Plant B had sales of
$200,000 and a contribution margin ratio of 40%. Net operating income for the
company was $27,000 and traceable fixed expenses for the two stores totaled $50,000.
Johnson Company’s common fixed expenses were:
A. $43,000
B. $50,000
C. $93,000
D. $120,000
Answer:
Beall Industries is a division of a major corporation. Last year the division had total
sales of $20,160,000, net operating income of $1,592,640, and average operating assets
of $8,000,000.
The division’s turnover is closest to:
A. 2.52
B. 2.10
C. 0.20
D. 12.66
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:
A manufacturer of cedar shingles has supplied the following data:
The company’s contribution margin ratio is closest to:
A. 66.9%
B. 33.1%
C. 41.4%
D. 58.6%
Answer:
Severn Company uses the FIFO method in its process costing system. The following
data were taken from the accounting records of the company for last month:
The cost of the units in the ending Work in Process inventory is:
A. $17,000
B. $20,000
C. $10,000
D. $22,500
Answer:
Whitney, Inc., produces a single product. The following data pertain to one month’s
operations:
The carrying value on the balance sheet of the ending finished goods inventory under
absorption costing would be:
A. $16,000
B. $10,000
C. $12,000
D. $21,000
Answer:
Cadarette Corporation’s most recent balance sheet and income statement appear below:
Dividends on common stock during Year 2 totaled $40 thousand. Dividends on
preferred stock totaled $10 thousand. The market price of common stock at the end of
Year 2 was $17.73 per share.
The dividend yield ratio for Year 2 is closest to:
A. 2.26%
B. 2.82%
C. 80.00%
D. 0.56%
Answer:
The following information pertains to Clove Co.:
Clove’s margin of safety is:
A. $300,000
B. $400,000
C. $500,000
D. $800,000
Answer:
Data from Kooistra Corporation’s most recent balance sheet appear below:
Sales on account in Year 2 amounted to $1,270 and the cost of goods sold was $770.
The average sale period for Year 2 is closest to:
A. 51.7 days
B. 221.3 days
C. 78.2 days
D. 85.3 days
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 unit product cost for the month under variable costing?
A. $62
B. $58
C. $91
D. $87
Answer:
A product sells for $20 per unit and has a contribution margin ratio of 40 percent. Fixed
expenses total $240,000 annually. How many units of the product must be sold to yield
a profit of $60,000?
A. 37,500 units
B. 40,000 units
C. 65,000 units
D. 30,000 units
Answer:
Balmforth Products, Inc. makes and sells a single product called a Bik. It takes three
yards of Material A to make one Bik. Budgeted production of Biks for the next five
months is as follows:
The company wants to maintain monthly ending inventories of Material A equal to 20%
of the following month’s production needs. On January 31, this target had not been
attained since only 2,000 yards of Material A were on hand. The cost of Material A is
$0.80 per yard. The company wants to prepare a Direct Materials Purchases Budget.
The desired ending inventory of Material A for the month of March is:
A. 9,300 yards
B. 7,140 yards
C. 3,100 yards
D. 8,400 yards
Answer:
The Porter Company has a standard cost system. In July the company purchased and
used 22,500 pounds of direct material at an actual cost of $53,000; the materials
quantity variance was $1,875 Unfavorable; and the standard quantity of materials
allowed for July production was 21,750 pounds. The materials price variance for July
was:
A) $2,725 F
B) $2,725 U
C) $3,250 F
D) $3,250 U
Answer:
A partial listing of costs incurred at Backes Corporation during November appears
below:
The total of the manufacturing overhead costs listed above for November is:
A. $348,000
B. $31,000
C. $592,000
D. $77,000
Answer:
Hoster Corporation keeps careful track of the time required to fill orders. The times
recorded for a particular order appear below:
The throughput time was:
A. 8.9 hours
B. 18 hours
C. 4.5 hours
D. 22.5 hours
Answer:
Reference: 8-35
Sande Corporation makes a product with the following standard costs:
In November the companys budgeted production was 2,900 units but the actual
production was 3,000 units. The company used 27,670 grams of the direct material and
1,390 direct labor-hours to produce this output. During the month, the company
purchased 31,700 grams of the direct material at a cost of $196,540. The actual direct
labor cost was $29,607 and the actual variable overhead cost was $2,502.
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 rate variance for November is:
A) $300 U
B) $278 U
C) $300 F
D) $278 F
Answer:
Laro Corporation produces and sells a single product with the following characteristics:
The company is currently selling 5,000 units per month. Fixed expenses are $302,000
per month.
This question is to be considered independently of all other questions relating to Laro
Corporation. Refer to the original data when answering this question.
Management is considering using a new component that would increase the unit
variable cost by $7. Since the new component would increase the features of the
company’s product, the marketing manager predicts that monthly sales would increase
by 500 units. What should be the overall effect on the company’s monthly net operating
income of this change?
A. increase of $1,000
B. decrease of $1,000
C. increase of $34,000
D. decrease of $34,000
Answer:
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 Rate Variance account?
A. $9,500 credit
B. $9,500 debit
C. $15,200 debit
D. $2,000 debit
Answer:
During the last year, Snyder Co. produced 10,000 units of its only product. Costs
incurred by Snyder during the year were as follows:
The unit product cost under variable costing was:
A. $3.20
B. $3.81
C. $4.12
D. $3.51
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.
The margin of safety as a percentage of sales is closest to:
A. 39%
B. 28%
C. 72%
D. 61%
Answer:
Reference: 8-47
Bonnot Corporation makes a product that has the following direct labor standards:
The company budgeted for production of 2,100 units in October, but actual production
was 1,900 units. The company used 410 direct labor-hours to produce this output. The
actual direct labor rate was $20.60 per hour.
The labor efficiency variance for October is:
A) $618 U
B) $630 F
C) $618 F
D) $630 U
Answer: