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Diorio Corporation keeps careful track of the time required to fill orders. The times
recorded for a particular order appear below:
The delivery cycle time was:
A. 29.1 hours
B. 30.6 hours
C. 8 hours
D. 2.7 hours
Answer:
Dieringer Corporation's most recent balance sheet and income statement appear below:
The current ratio at the end of Year 2 is closest to:
A. 1.97
B. 0.72
C. 0.30
D. 0.41
Answer:
To record the use of direct materials in production, the general ledger would include
what kind of entry to the Materials Quantity Variance Account?
A) $46,000 debit
B) $60,000 credit
C) $60,000 debit
D) $36,000 debit
Answer:
Porl Corporation makes and sells a single product called a Yute. The company is in the
process of preparing its Selling and Administrative Expense Budget for the last quarter
of the year. The following budget data are available:
All of these expenses (except depreciation) are paid in cash in the month they are
incurred.
If the company has budgeted to sell 22,000 Yutes in November, then the total budgeted
selling and administrative expenses for November would be:
A. $426,800
B. $231,000
C. $413,800
D. $195,800
Answer:
Morvan Corporation uses the FIFO 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.
What are the equivalent units for conversion costs for the month in the first processing
department?
A. 9,000
B. 8,500
C. 8,300
D. 150
Answer:
Reference: 8-19
Amadon 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
7,900 units, but its actual level of activity was 7,920 units. The company has provided
the following data concerning the formulas to be used in its budgeting:
The selling and administrative expenses in the planning budget for July would be
closest to:
A) $23,960
B) $24,690
C) $24,628
D) $23,950
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:
A manufacturer of playground equipment uses a standard costing system in which
standard machine-hours (MHs) is the measure of activity. Data from the company's
flexible budget for manufacturing overhead are given below:
The following data pertain to operations for the most recent period:
What was the fixed manufacturing overhead budget variance for the period to the
nearest dollar?
A. $881 U
B. $484 U
C. $395 U
D. $1,500 F
Answer:
Wilson Company has a process costing system. The Assembly Department had the
following costs for May:
Assume that Wilson uses the FIFO method, and that for May the company computed
16,000 equivalent units for materials. The cost per equivalent unit for materials for the
month would have been:
A. $12.50
B. $3.00
C. $5.00
D. $9.50
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:
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 times interest earned for Year 2 was closest to:
A. 16.0
B. 28.3
C. 17.0
D. 11.2
Answer:
Heroman Corporation applies manufacturing overhead to products on the basis of
standard machine-hours. The budgeted fixed manufacturing overhead cost for the most
recent month was $26,550 and the actual fixed manufacturing overhead cost for the
month was $26,570. The company based its original budget on 5,900 machine-hours.
The standard hours allowed for the actual output of the month totaled 5,750
machine-hours. What was the overall fixed manufacturing overhead budget variance for
the month?
A. $20 unfavorable
B. $675 favorable
C. $20 favorable
D. $675 unfavorable
Answer:
In a sell or process further decision, which of the following costs are relevant?
I. A variable production cost incurred prior to the split-off point.
II. An avoidable fixed production cost incurred after the split-off point.
A. Only I.
B. Only II.
C. Both I and II.
D. Neither I nor II.
Answer:
If the number of units produced exceeds the number of units sold, then net operating
income under absorption costing will:
A. be equal to the net operating income under variable costing.
B. be greater than net operating income under variable costing.
C. be equal to the net operating income under variable costing plus total fixed
manufacturing costs.
D. be equal to the net operating income under variable costing less total fixed
manufacturing costs.
Answer:
In a job-order costing system, direct labor cost is ordinarily debited to:
A. Manufacturing Overhead.
B. Cost of Goods Sold.
C. Finished Goods.
D. Work in Process.
Answer:
Nyman Company successfully switched to a lean production system at the beginning of
March. Therefore, as shown by the summary below, there were no work in process
inventories on hand at the end of the month.
If Nyman Company uses the FIFO cost method, the March equivalent units for
conversion would be:
A. 150,000 units
B. 190,000 units
C. 172,000 units
D. 168,000 units
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 price variance for July is:
A) $22,080 U
B) $19,950 U
C) $22,080 F
D) $19,950 F
Answer:
In a statement of cash flows, receipts from sales of property, plant, and equipment
should be classified as a(n):
A. Operating activity.
B. Financing activity.
C. Investing activity.
D. Selling activity.
Answer:
Reference: 8-27
The Litton Company has established standards as follows:
Direct material: 3 pounds per unit @ $4 per pound = $12 per unit
Direct labor: 2 hours per unit @ $8 per hour = $16 per unit
Variable manufacturing overhead: 2 hours per unit @ $5 per hour = $10 per unit
Actual production figures for the past year are given below. The company records the
materials price variance when materials are purchased.
The company applies variable manufacturing overhead to products on the basis of
standard direct labor-hours.
The materials quantity variance is:
A) $800 U
B) $4,000 U
C) $760 U
D) $760 F
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 is the cost per
equivalent unit for processing for the month?
A. $2.89
B. $2.98
C. $3.00
D. $3.08
Answer:
Behring Corporation applies manufacturing overhead to products on the basis of
standard machine-hours. Budgeted and actual fixed manufacturing overhead costs for
the most recent month appear below:
The company based its original budget on 3,200 machine-hours. The company actually
worked 3,170 machine-hours during the month. The standard hours allowed for the
actual output of the month totaled 3,250 machine-hours. What was the overall fixed
manufacturing overhead volume variance for the month?
A) $435 favorable
B) $261 unfavorable
C) $435 unfavorable
D) $261 favorable
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.
How many units are in ending work in process inventory in the first processing
department at the end of the month?
A. 500
B. 900
C. 300
D. 6,800
Answer:
The following data pertains to activity and the cost of cleaning and maintenance for two
recent months:
The best estimate of the total month 1 variable cost for cleaning and maintenance is:
A. $300
B. $500
C. $800
D. $100
Answer:
Reference: 8-32
Gentile Corporation makes a product with the following standard costs:
The company produced 6,000 units in May using 36,970 kilos of direct material and
4,340 direct labor-hours. During the month, the company purchased 40,400 kilos of the
direct material at $4.70 per kilo. The actual direct labor rate was $13.70 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 variable overhead efficiency variance for May is:
A) $1,380 F
B) $1,242 U
C) $1,242 F
D) $1,380 U
Answer:
The Baily Division recorded operating data as follows for the past two years:
Baily Division's turnover was exactly the same in both Year 1 and Year 2.
The margin in Year 2 was:
A. 18.75%
B. 27.00%
C. 22.50%
D. 12.00%
Answer:
How much overhead was applied to products during the period to the nearest dollar?
A) $128,140
B) $130,601
C) $130,900
D) $127,160
Answer:
Hick Corporation's most recent balance sheet and income statement appear below:
Dividends on common stock during Year 2 totaled $60 thousand. Dividends on
preferred stock totaled $20 thousand. The market price of common stock at the end of
Year 2 was $9.57 per share.
The dividend payout ratio for Year 2 is closest to:
A. 72.7%
B. 54.5%
C. 46.2%
D. 1818.2%
Answer:
Reference: 8-8
Diiorio Clinic uses client-visits as its measure of activity. During February, the clinic
budgeted for 2,700 client-visits, but its actual level of activity was 2,750 client-visits.
The clinic has provided the following data concerning the formulas used in its
budgeting and its actual results for February:
Data used in budgeting:
Actual results for February:
The net operating income in the flexible budget for February would be closest to:
A) $15,889
B) $15,316
C) $10,920
D) $11,750
Answer:
Which of the following would NOT be treated as a product cost for external financial
reporting purposes?
A. Depreciation on a factory building.
B. Salaries of factory workers.
C. Indirect labor in the factory.
D. Advertising expenses.
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:
Which of the following is not a potential source of financial leverage?
A. Long-term debt.
B. Common stock.
C. Accounts payable.
D. Interest payable.
Answer:
Glatt Inc., an escrow agent, has provided the following data concerning its office
expenses:
Management believes that office expense is a mixed cost that depends on the number of
escrows completed. Note: Real estate purchases usually involve the services of an
escrow agent that holds funds and prepares documents to complete the transaction.
Using the high-low method, the estimate of the variable component of office expense
per escrow completed is closest to:
A. $101.08
B. $59.12
C. $17.11
D. $17.15
Answer:
Echenko Corporation uses a job-order costing system and applies overhead to jobs
using a predetermined overhead rate. During the year the company's Finished Goods
inventory account was debited for $380,000 and credited for $335,500. The ending
balance in the Finished Goods inventory account was $62,300. At the end of the year,
manufacturing overhead was overapplied by $2,900.
If the applied manufacturing overhead was $70,400, the actual manufacturing overhead
cost for the year was:
A. $73,300
B. $67,500
C. $129,800
D. $85,300
Answer:
