1) Nemec Manufacturing uses job costing. In May, material requisitions were $44,000
($39,000 of these were direct materials), and raw material purchases were $60,000. The
end of month balance in raw materials inventory was $24,300. What was the beginning
raw materials inventory balance?
A) $74,700
B) $45,300
C) $8,300
D) $23,000
2) The manager at Wheeling Mulch has been trying to calculate the portion of the
company’s overhead expenses that is fixed and the portion that is variable. Over the past
twelve months, the number of yards of mulch processed was highest in July, when the
total monthly overhead costs totaled $28,000 for 32,000 yards of mulch processed. The
lowest number of yards of mulch processed in the last twelve months occurred in
October, when total overhead costs were $26,000 for 28,000 yards of mulch processed.
What was the variable cost per yard?
A) $0.50
B) $2.00
C) $0.88
D) $0.93
3) Feeney Furniture prepared the following sales budget:
Credit collections are 15% two months following the sale, 50% in the month following
the sale, and 30% in the month of sale. The remaining 5% is expected to be
uncollectible.
What are the total cash collections in June?
A) $36,800
B) $90,800
C) $86,000
D) $96,600
4) In a process system with multiple processes, the cost of units completed in
department one is transferred to
A) finished goods
B) WIP in department two
C) cost of goods sold
D) overhead
5) Marie’s Magic Shoppe provides the following information about its single product.
What is the contribution margin ratio?
A) 1.92
B) 0.52
C) 0.13
D) 0.48
6) The following information is provided by Bynes Company:
The units in ending WIP inventory were 85% complete for materials and 25% complete
for conversion costs.
Required:
a.What are the total equivalent units for direct materials?
b.At the end of the year, what are the equivalent units for conversion costs?
7) The following data relates to Logan Electric and its Light Bulb Division.
What is the Light Bulb Division’s sales margin?
A) 250%
B) 10%
C) 18.33%
D) 25%
8) The formula for computing book value per share of common stock is
A) market price per share of common stock/earning per share
B) annual dividend per share of common stock/market price per share of common stock
C) (net income – preferred dividends)/number of shares of common stock outstanding
D) (yotal stockholders’ equity – preferred equity)/number of shares of common stock
outstanding
9) Merchandising companies prepare which of the following budgets?
A) Sales
B) Cash
C) Operating expense
D) All of the above
10) Solid Oak Bureau uses job costing. Solid Oak Bureau Company has two
departments, Trimming and Finishing. Manufacturing overhead is allocated based on
direct labor cost in the Trimming Department and direct labor hours in the Finishing
Department. The following additional information is available:
Actual data for completed Job No. 650 is as follows:
If Job No. 650 consists of 500 units of product, the average unit cost of this job is
closest to
A) $452.04
B) $414.46
C) $157.04
D) $295.00
11) Which of the following are merchandising companies?
A) Manufacturers
B) Retailers
C) Wholesalers
D) Both retailers and wholesalers
12) Using product cost information to determine sales prices is an example of
A) directing and planning
B) directing and controlling
C) controlling, directing, and planning
D) controlling and planning
13) Oscar Incorporated currently sells its products for $400 per unit. Management is
contemplating a 10% increase in the selling price for the next year. Variable costs are
currently 20% of sales revenue and are not expected to change next year. Fixed
expenses are $140,000 per year.
If fixed costs were to decrease 10% during the current year and the new selling price
goes into effect, how many units will need to be sold to breakeven?
A) 1,283 units
B) 296 units
C) 350 units
D) 154,000 units
14) Blue Technologies manufactures and sells DVD players. Great Products Company
has offered Blue Technologies $22 per DVD player for 10,000 DVD players. Blue
Technologies’ normal selling price is $30 per DVD player. The total manufacturing cost
per DVD player is $18 and consists of variable costs of $14 per DVD player and fixed
overhead costs of $4 per DVD player. (NOTE: Assume excess capacity and no effect on
regular sales.)
How much are the expected increase (decrease) in revenues and expenses from the
special sales order?
A) Expected increase in revenues $220,000; expected increase in expenses $140,000
B) Expected increase in revenues $220,000; expected increase in expenses $40,000
C) Expected increase in revenues $300,000; expected increase in expenses $140,000
D) Expected increase in revenues $220,000; expected increase in expenses $120,000
15) Solid Oak Bureau Company uses job costing. Solid Oak Bureau Company has two
departments, Trimming and Finishing. Manufacturing overhead is allocated based on
direct labor cost in the Trimming Department and direct labor hours in the Finishing
Department. The following additional information is available:
Actual data for completed Job No. 650 is as follows:
What is the predetermined manufacturing overhead rate for the Finishing Department?
A) $6.50 per direct labor hour
B) $52.00 per direct labor hour
C) $10.00 per direct labor hour
D) $10.40 per direct labor hour
16) Which of the following would not be considered a product cost for a manufacturer?
A) Direct labor
B) Direct materials
C) Manufacturing overhead
D) Freight out
17) On the line in front of each variance, enter the letters of the items needed to
compute that variance. You will enter more than one item on each line.
A. Actual labor rate
B. Actual labor hours
C. Standard labor rate
D. Standard labor hours
______Direct labor rate variance
______Direct labor efficiency variance
18) For each of the following statements, determine if it would be handled:
A)Before the period
B)During the period
C)At the end of the period
Put the correct letter on the line in front of each statement.
____Calculate the amount of overallocated or underallocated manufacturing overhead.
____Compute the predetermined manufacturing overhead rate.
____Adjust cost of goods sold for the amount of overallocated or underallocated
manufacturing overhead.
____Allocate the manufacturing overhead costs.
19) Which of the following is a benefit of budgeting?
A) Focuses management’s attention on the future
B) Improved decision-making processes
C) Improved motivation by employees
D) All of the above
20) O’Mally Department Stores is considering two possible expansion plans. One
proposal involves opening 5 stores in Indiana at the cost of $1,920,000. Under the other
proposal, the company would focus on Kentucky and open 6 stores at a cost of
$2,500,000. The following information is available:
The accounting rate of return for the Kentucky proposal is closest to
A) 10.32%
B) 11.09%
C) 10.00%
D) 20.00%
21) In a sell or process further decision, the company should process further if
A) the extra cost of processing further is the same as the extra revenue
B) the extra revenue from processing further is less than the extra cost
C) the extra cost of processing further is greater than the extra revenue
D) the extra cost of processing further is less than the extra revenue
22) A basic tenet of variable costing is that fixed manufacturing overhead costs be
currently expensed. What is the rationale behind this?
A) Fixed manufacturing overhead costs are generally immaterial in amount
B) Fixed manufacturing overhead costs occur regardless of level of production
C) Allocation of fixed manufacturing costs are arbitrary at best
D) Fixed manufacturing costs change as production changes
23) The standard variable overhead cost rate for Harris Manufacturing is $24 per unit.
Budgeted fixed overhead cost is 42,000. Harris Manufacturing budgeted 3,800 units for
the current period and actually produced 3,900 finished units. What is the fixed
overhead volume variance?
Assume the allocation base for fixed overhead costs is the number of units expected to
be produced.
A) $2,400 favorable
B) $1,105 favorable
C) $2,400 unfavorable
D) $1,105 unfavorable
24) Manufacturing overhead is overallocated if the amount
A) estimated for the period is greater than the actual amount incurred
B) allocated during the period is greater than the actual amount incurred
C) amount estimated for the period is less than the actual amount incurred
D) allocated during the period is less than the actual amount incurred
25) Alamo Corporation processes all of its products through a lathe machine. The lathe
is only available for 60 hours per week and is the constraint for all of the products. Data
regarding Alamo Corporation’s three products follows:
In what order should Alamo Corporation emphasize its products to maximize its
contribution margin? (Rank the products in order from most profitable to least
profitable.)
A) Product B, Product A, Product C
B) Product A, Product C, Product B
C) Product A, Product B, Product C
D) Product B, Product C, Product A
26) Raw materials purchased were $18,640 and ending inventory of raw materials was
$5,200. If raw materials beginning inventory was 30% of materials used in the process,
what was the cost of materials used in production?
A) $ 9,408
B) $19,200
C) $34,057
D) $26,629
27) Which of the following is the last step of the 5-step process costing procedure?
A) Summarize total costs to account for
B) Assign total costs to units completed and to units in ending WIP inventory
C) Compute the cost per equivalent unit
D) Summarize the flow of physical units
28) If a company were to increase its appraisal costs by inspecting more units as the
units are are in production (during production), the company’s external failure costs
would most likely
A) decrease
B) increase
C) not be affected
D) Unable to predict
29) The following data relates to Logan Electric and its Light Bulb Division.
What is the Light Bulb Division’s capital turnover?
A) 10.0
B) 4.0
C) 2.5
D) 5.5
30) Philadelphia Swim Club is planning for the coming year. Investors would like to
earn a 10% return on the company’s $30 million of assets. The company primarily
incurs fixed costs to maintain the swimming pool. Fixed costs are projected to be
$12,500,000 for the year. About 500,000 members are expected to swim each year.
Variable costs are about $10 per swimmer. The Philadelphia Swim Club has a favorable
reputation in the area and therefore, has some control over the membership price. Using
a cost-plus approach, what price should Philadelphia Swim Club charge for a
membership?
A) $41.00
B) $37.50
C) $29.00
D) $ 0.17
31) (Present value tables are needed.) O’Mally Department Stores is considering two
possible expansion plans. One proposal involves opening 5 stores in Indiana at the cost
of $1,920,000. Under the other proposal, the company would focus on Kentucky and
open 6 stores at a cost of $2,500,000. The following information is available:
The net present value of the Kentucky proposal is closest to
A) $557,300
B) $572,500
C) $603,380
D) $684,600
32) Operating activities resulting from the sales of goods and services relate to
A) retained earnings reported on the balance sheet
B) assets and liabilities reported on the balance sheet
C) the income statement
D) net income on the retained earnings statement
33) Randolph runs a lemonade stand and wants to make $150 in the next week. He sells
each cup of lemonade for $0.75, while the variable cost is $0.15 for the cups and
ingredients. Fixed costs such as posters and signs are $15.00.
Calculate the following:
a.Contribution margin per unit sold
b.Contribution margin ratio
c.Breakeven point in units
d.Units to be sold to earn the targeted operating income
34) Common fixed costs that are allocated between departments are generally
A) direct fixed costs of the department
B) relevant to the decision of whether to discontinue the department
C) irrelevant to the decision of whether to discontinue the department
D) direct fixed costs of other departments