Schlender Corporation produces and sells two products. In the most recent month,
Product L40O had sales of $22,000 and variable expenses of $8,580. Product Y27L had
sales of $49,000 and variable expenses of $17,690. The fixed expenses of the entire
company were $43,950.
The break-even point for the entire company is closest to:
A. $27,050
B. $70,220
C. $69,762
D. $43,950
Answer:
The January contribution format income statement of Brotherton Corporation appears
below:
The degree of operating leverage is closest to:
A. 6.26
B. 0.27
C. 0.16
D. 3.64
Answer:
Salvadore Inc., a local retailer, has provided the following data for the month of
September:
The cost of goods sold for September was:
A. $132,000
B. $134,000
C. $133,000
D. $200,000
Answer:
The constraint at Dalbey Corporation is time on a particular machine. The company
makes three products that use this machine. Data concerning those products appear
below:
Assume that sufficient time is available on the constrained machine to satisfy demand
for all but the least profitable product. Up to how much should the company be willing
to pay to acquire more of this constrained resource?
A. $12.50 per minute
B. $29.96 per unit
C. $10.70 per minute
D. $71.92 per unit
Answer:
Kahn Company is a merchandiser that reported net income of $90,000. Additional
information follows:
Based on this information, under the indirect method the cash provided by operating
activities on the statement of cash flows would be:
A. $90,000
B. $99,000
C. $81,000
D. $79,000.
Answer:
The most recent balance sheet and income statement of Woodside Corporation appear
below:
Cash dividends were $13. The company did not retire or sell any property, plant, and
equipment during the year. The net cash provided by (used in) operating activities for
the year was:
A. $61
B. $31
C. $66
D. $15
Answer:
Fudala Snow Removals cost formula for its vehicle operating cost is $1,480 per month
plus $308 per snow-day. For the month of March, the company planned for activity of
11 snow-days, but the actual level of activity was 16 snow-days. The actual vehicle
operating cost for the month was $6,130. The spending variance for vehicle operating
cost in March would be closest to:
A) $1,262 U
B) $278 F
C) $278 U
D) $1,262 F
Answer:
Jersey Corporation has total interest expense of $10,000, sales of $1 million, a tax rate
of 40%, and net income (after taxes) of $60,000. What is this firm’s times interest
earned ratio?
A. 16
B. 11
C. 10
D. 7
Answer:
The Ammon Company uses a standard cost system in which manufacturing overhead is
applied to units on the basis of standard machine-hours. During July, the company
budgeted $350,000 in manufacturing overhead cost at a denominator activity of 25,000
machine-hours. At standard, each unit of finished product requires 5 machine-hours.
The following cost and activity were recorded during July:
The amount of overhead cost that the company applied to work in process for July was:
A. $292,500
B. $315,000
C. $322,000
D. $325,000
Answer:
The weighted-average method of process costing differs from the FIFO method of
process costing in that the weighted-average method:
A. can be used under any cost flow assumption.
B. does not require the use of predetermined overhead rates.
C. keeps costs in the beginning inventory separate from current period costs.
D. does not consider the degree of completion of units in the beginning work in process
inventory when computing equivalent units of production.
Answer:
Entin Corporation reported the following data for the month of January:
The cost of goods manufactured for January is:
A. $202,000
B. $214,000
C. $217,000
D. $199,000
Answer:
A cement manufacturer has supplied the following data:
If the company increases its unit sales volume by 3% without increasing its fixed
expenses, then total net operating income should be closest to:
A. $84,460
B. $99,940
C. $2,460
D. $83,316
Answer:
Which of the following should NOT be included as part of manufacturing overhead at a
company that makes office furniture?
A. sheet steel in a file cabinet made by the company.
B. manufacturing equipment depreciation.
C. idle time for direct labor.
D. taxes on a factory building.
Answer:
If Q equals the level of output, P is the selling price per unit, V is the variable expense
per unit, and F is the fixed expense, then the break-even point in units is:
A. Q ÷ (P-V).
B. F ÷ (P-V).
C. V ÷ (P-V).
D. F ÷ [Q(P-V)].
Answer:
Bennett Company reported sales on its income statement last year of $345,000. On the
company’s statement of cash flows, sales adjusted to a cash basis were $337,000. (The
company uses the direct method to determine the net cash provided by operating
activities.) Bennett Company reported the following account balances on its
comparative balance sheet:
Based on this information, the beginning Accounts Receivable balance was:
A. $12,000
B. $17,000
C. $28,000
D. $14,000
Answer:
The manufacturing overhead budget at Mahapatra Corporation is based on budgeted
direct labor-hours. The direct labor budget indicates that 7,900 direct labor-hours will
be required in May. The variable overhead rate is $9.50 per direct labor-hour. The
company’s budgeted fixed manufacturing overhead is $112,970 per month, which
includes depreciation of $18,170. All other fixed manufacturing overhead costs
represent current cash flows.
The May cash disbursements for manufacturing overhead on the manufacturing
overhead budget should be:
A. $75,050
B. $188,020
C. $94,800
D. $169,850
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 fixed manufacturing overhead budget variance for September was:
A) $2,700 favorable
B) $2,700 unfavorable
C) $5,400 favorable
D) $5,400 unfavorable
Answer:
Last year, Salada Corporation’s variable costing net operating income was $97,000.
Fixed manufacturing overhead costs released from inventory under absorption costing
amounted to $14,000. What was the absorption costing net operating income last year?
A. $14,000
B. $111,000
C. $97,000
D. $83,000
Answer:
Supply costs at Lattea Corporation’s chain of gyms are listed below:
Management believes that supply cost is a mixed cost that depends on client-visits.
Using the high-low method to estimate the variable and fixed components of this cost,
those estimates would be closest to:
A. $2.44 per client-visit; $28,623 per month
B. $1.33 per client-visit; $12,768 per month
C. $0.79 per client-visit; $19,321 per month
D. $0.75 per client-visit; $19,826 per month
Answer:
Galino Company, which has only one product, has provided the following data
concerning its most recent month of operations:
What is the total period cost for the month under the variable costing approach?
A. $31,200
B. $104,400
C. $117,400
D. $135,600
Answer:
Reference: 8A-9
The Steff Company has the following flexible budget (in condensed form) for
manufacturing overhead:
The following data concerning production pertain to last years operations:
– The company used a denominator activity of 15,000 direct labor-hours to compute
the predetermined overhead rate.
– The company made 6,850 units of product and worked 14,200 actual hours during
the year.
– Actual variable manufacturing overhead was $15,904 and actual fixed
manufacturing overhead was $30,s850 for the year.
– The standard direct labor time is two hours per unit of product.
The fixed manufacturing overhead cost applied to work in process was:
A) $27,400
B) $30,000
C) $30,850
D) $13,700
Answer:
Break-even analysis assumes that:
A. total costs are constant.
B. the average fixed expense per unit is constant.
C. the average variable expense per unit is constant.
D. variable expenses are nonlinear.
Answer:
Durrant Corporation has provided the following data concerning its most important raw
material, compound O96H:
When recording the use of materials in production, Raw Materials would be:
A. debited for $55,930.
B. debited for $54,264.
C. credited for $55,930.
D. credited for $54,264.
Answer:
Which of the following would probably be the least appropriate allocation base for
allocating overhead in a highly automated manufacturer of specialty valves?
A. machine-hours
B. power consumption
C. direct labor-hours
D. machine setups
Answer:
A manufacturing company that produces a single product has provided the following
data concerning its most recent month of operations:
What is the net operating income for the month under variable costing?
A. $21,600
B. $(15,200)
C. $8,000
D. $13,600
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 dividend payout ratio for the year was closest to:
A. 75%
B. 25%
C. 5%
D. 3.125%
Answer:
Reference: 8A-16
An outdoor barbecue grill manufacturer has a standard costing system based on
standard direct labor-hours (DLHs) as 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:
What was the fixed manufacturing overhead budget variance for the period to the
nearest dollar?
A) $2,750 U
B) $2,570 U
C) $1,850 F
D) $161 F
Answer:
The following is Allison Corporation’s contribution format income statement for last
month:
The company has no beginning or ending inventories. The company produced and sold
10,000 units last month.
What is the company’s degree of operating leverage?
A. 0.2
B. 8.0
C. 1.7
D. 5.0
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.
To attain its desired ending cash balance for November, the company needs to borrow:
A. $0
B. $16,000
C. $50,000
D. $84,000
Answer:
Gaudy Inc. produces and sells a single product. The company has provided its
contribution format income statement for May.
If the company sells 4,300 units, its net operating income should be closest to:
A. $7,700
B. $25,513
C. $26,700
D. $19,500
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.
The cost of ending work in process inventory in the first processing department
according to the company’s cost system is closest to:
A. $22,910
B. $15,703
C. $25,455
D. $11,455
Answer:
Reference: 8-3
Macphail Corporation manufactures and sells a single product. The company uses units
as the measure of activity in its flexible budgets. During April, the company budgeted
for 5,600 units, but its actual level of activity was 5,650 units. The company has
provided the following data concerning the formulas used in its budgeting and its actual
results for April:
Data used in budgeting:
Actual results for April:
The spending variance for direct materials in April would be closest to:
A) $3,215 U
B) $2,260 U
C) $2,260 F
D) $3,215 F
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 margin is closest to:
A. 26.2%
B. 23.5%
C. 2.7%
D. 11.5%
Answer:
Dunford Company produces three products with the following costs and selling prices:
If Dunford has a limit of 30,000 machine hours but no limit on units sold or direct labor
hours, then the ranking of the products from the most profitable to the least profitable
use of the constrained resource is:
A. Y, Z, X
B. X, Y, Z
C. X, Z, Y
D. Z, X, Y
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.
The segment margin for Product T was:
A. $45,000
B. $85,000
C. $(10,000)
D. $80,000
Answer:
