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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 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 volume variance for the period to the
nearest dollar?
A. $900 F
B. $649 F
C. $180 U
D. $720 F
Answer:
Sohr Corporation processes sugar beets that it purchases from farmers. Sugar beets are
processed in batches. A batch of sugar beets costs $50 to buy from farmers and $15 to
crush in the company's plant. Two intermediate products, beet fiber and beet juice,
emerge from the crushing process. The beet fiber can be sold as is for $20 or processed
further for $19 to make the end product industrial fiber that is sold for $58. The beet
juice can be sold as is for $41 or processed further for $23 to make the end product
refined sugar that is sold for $58.
Which of the intermediate products should be processed further?
A. beet fiber should NOT be processed into industrial fiber; beet juice should be
processed into refined sugar
B. beet fiber should NOT be processed into industrial fiber; beet juice should NOT be
processed into refined sugar
C. beet fiber should be processed into industrial fiber; beet juice should be processed
into refined sugar
D. beet fiber should be processed into industrial fiber; beet juice should NOT be
processed into refined sugar
Answer:
Van Aalst Company's comparative balance sheet and income statement for last year
appear below:
The company declared and paid $77,000 in cash dividends during the year. It did not
sell or retire 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 income tax expense adjusted to a cash basis would
be:
A. $27,000
B. $75,000
C. $51,000
D. $38,000
Answer:
In a standard cost system, the volume variance will be unfavorable when:
A. actual hours are greater than the denominator hours.
B. the standard hours allowed for the output of the period are less than the denominator
hours.
C. the standard hours allowed for the output of the period are greater than the actual
hours incurred.
D. actual hours are less than the denominator hours.
Answer:
Management of Modugno Corporation is considering whether to purchase a new model
370 machine costing $441,000 or a new model 240 machine costing $387,000 to
replace a machine that was purchased 7 years ago for $429,000. The old machine was
used to make product M25A until it broke down last week. Unfortunately, the old
machine cannot be repaired.
Management has decided to buy the new model 240 machine. It has less capacity than
the new model 370 machine, but its capacity is sufficient to continue making product
M25A.
Management also considered, but rejected, the alternative of simply dropping product
M25A. If that were done, instead of investing $387,000 in the new machine, the money
could be invested in a project that would return a total of $430,000.
In making the decision to buy the model 240 machine rather than the model 370
machine, the sunk cost was:
A. $430,000
B. $429,000
C. $387,000
D. $441,000
Answer:
Data concerning three of the activity cost pools of Burlingame LLC, a legal firm, have
been provided below:
The activity rate for the "meeting with clients" activity cost pool is closest to:
A. $1,102,050 per meeting hour
B. $63 per meeting hour
C. $116 per meeting hour
D. $158 per meeting hour
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:
Rank the products in order of their current profitability from most profitable to least
profitable. In other words, rank the products in the order in which they should be
emphasized.
A. WP,FE,MB
B. FE,WP,MB
C. FE,MB,WP
D. MB,FE,WP
Answer:
Kilihea Corporation produces a single product. The company's absorption costing
income statement for July follows:
The company's variable production costs are $20 per unit and its fixed manufacturing
overhead totals $80,000 per month.
Net operating income under the variable costing method for July would be:
A. $53,000
B. $49,800
C. $61,000
D. $57,000
Answer:
Able Control Company, which manufactures electrical switches, uses a standard cost
system in which manufacturing overhead costs are applied to units of product on the
basis of standard direct labor-hours (DLHs). The standard overhead costs are shown
below:
*Based on 300,000 DLHs per month.
The following information is available for the month of October:
- Plans called for the production of 60,000 switches.
- 56,000 switches were actually produced.
- 275,000 direct labor-hours were worked at a total cost of $2,550,000.
- Actual variable manufacturing overhead costs were $2,340,000.
- Actual fixed manufacturing overhead costs were $3,750,000.
The variable overhead rate variance for October was:
A. $60,000 Favorable
B. $110,000 Unfavorable
C. $100,000 Unfavorable
D. $140,000 Unfavorable
Answer:
Davol Corporation is preparing its Manufacturing Overhead Budget for the fourth
quarter of the year. The budgeted variable manufacturing overhead rate is $6.80 per
direct labor-hour; the budgeted fixed manufacturing overhead is $72,000 per month, of
which $20,000 is factory depreciation.
If the budgeted direct labor time for November is 5,000 hours, then the total budgeted
cash disbursements for November must be:
A. $54,000
B. $52,000
C. $106,000
D. $86,000
Answer:
Jumper Company uses the weighted-average method in its process costing system. The
following data pertain to operations in the first processing department for a recent
month:
How many units were in the ending work in process inventory?
A. 600 units
B. 1,000 units
C. 800 units
D. 1,400 units
Answer:
A partial listing of costs incurred during December at Gagnier Corporation appears
below:
The total of the period costs listed above for December is:
A. $89,000
B. $310,000
C. $325,000
D. $399,000
Answer:
The Assembly Department started the month with 14,000 units in its beginning work in
process inventory. An additional 296,000 units were transferred in from the prior
department during the month to begin processing in the Assembly Department. There
were 14,000 units in the ending work in process inventory of the Assembly Department.
How many units were transferred to the next processing department during the month?
A. 293,000
B. 310,000
C. 324,000
D. 296,000
Answer:
Which of the following would be considered a product cost for external financial
reporting purposes?
A. Cost of a warehouse used to store finished goods.
B. Cost of guided public tours through the company's facilities.
C. Cost of travel necessary to sell the manufactured product.
D. Cost of sand spread on the factory floor to absorb oil from manufacturing machines.
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 variable overhead efficiency variance for June is:
A) $54 F
B) $54 U
C) $60 F
D) $60 U
Answer:
Condit Corporation manufactures a variety of products. Variable costing net operating
income was $75,600 last year and was $80,100 this year. Last year, inventory decreased
by 3,400 units. This year, inventory increased by 3,000 units. Fixed manufacturing
overhead cost is $5 per unit.
What was the absorption costing net operating income this year?
A. $78,100
B. $95,100
C. $65,100
D. $73,600
Answer:
Data concerning Lancaster Corporation's single product appear below:
Fixed expenses are $105,000 per month. The company is currently selling 1,000 units
per month. Management is considering using a new component that would increase the
unit variable cost by $44. Since the new component would increase the features of the
company's product, the marketing manager predicts that monthly sales would increase
by 400 units. What should be the overall effect on the company's monthly net operating
income of this change?
A. decrease of $38,400
B. decrease of $5,600
C. increase of $5,600
D. increase of $38,400
Answer:
Crinks Corporation uses direct labor-hours in its predetermined overhead rate. At the
beginning of the year, the estimated direct labor-hours were 11,200 hours and the total
estimated manufacturing overhead was $259,840. At the end of the year, actual direct
labor-hours for the year were 10,800 hours and the actual manufacturing overhead for
the year was $254,840. Overhead at the end of the year was:
A. $4,280 overapplied
B. $9,280 overapplied
C. $9,280 underapplied
D. $4,280 underapplied
Answer:
Reference: 8-59
Mazzo Corporation makes a product with the following standards for direct labor and
variable overhead:
In February the companys budgeted production was 5,000 units, but the actual
production was 5,100 units. The company used 2,090 direct labor-hours to produce this
output. The actual variable overhead cost was $6,688. The company applies variable
overhead on the basis of direct labor-hours.
The variable overhead rate variance for February is:
A) $408 U
B) $418 F
C) $418 U
D) $408 F
Answer:
Cockriel Inc., which produces a single product, has provided the following data for its
most recent month of operations:
There were no beginning or ending inventories. The variable costing unit product cost
was:
A. $42
B. $43
C. $37
D. $48
Answer:
Last year Burford Company's cash account decreased by $19,000. Net cash used in
investing activities was $9,000. Net cash provided by financing activities was $16,000.
On the statement of cash flows, the net cash flow provided by (used in) operating
activities was:
A. $(19,000)
B. $(26,000)
C. $(12,000)
D. $7,000
Answer:
Stephen Company has the following data for its three stores last year:
Given the above data, the total company sales were:
A. $1,250,000
B. $1,375,000
C. $1,450,000
D. $800,000
Answer:
Reference: 8A-3
The Chase Company uses a standard cost system in which manufacturing overhead
costs are applied to products on the basis of standard machine-hours. For November, the
companys flexible budget for manufacturing overhead showed the following total
budgeted costs at the denominator activity level of 40,000 machine-hours:
During November 42,000 machine-hours were used to complete 13,200 units of product
with the following actual overhead costs:
The standard time allowed to complete one unit of product is 3.6 machine-hours.
The variable overhead efficiency variance for utilities cost for November was:
A) $2,760 favorable
B) $3,760 unfavorable
C) $3,760 favorable
D) $1,000 favorable
Answer:
Kempler Corporation processes sugar cane in batches. The company purchases a batch
of sugar cane for $34 from farmers and then crushes the cane in the company's plant at
the cost of $15. Two intermediate products, cane fiber and cane juice, emerge from the
crushing process. The cane fiber can be sold as is for $26 or processed further for $17 to
make the end product industrial fiber that is sold for $41. The cane juice can be sold as
is for $32 or processed further for $22 to make the end product molasses that is sold for
$51. Which of the intermediate products should be processed further?
A. Cane fiber should be processed into industrial fiber; Cane juice should be processed
into molasses
B. Cane fiber should NOT be processed into industrial fiber; Cane juice should NOT
be processed into molasses
C. Cane fiber should be processed into industrial fiber; Cane juice should NOT be
processed into molasses
D. Cane fiber should NOT be processed into industrial fiber; Cane juice should be
processed into molasses
Answer:
Diltex Farm Supply is located in a small town in the rural west. Data regarding the
store's operations follow:
o Sales are budgeted at $220,000 for November, $200,000 for December, and $210,000
for January.
o Collections are expected to be 70% in the month of sale, 27% in the month following
the sale, and 3% uncollectible.
o The cost of goods sold is 65% of sales.
o The company desires to have an ending merchandise inventory at the end of each
month equal to 50% of the next month's cost of goods sold. Payment for merchandise is
made in the month following the purchase.
o Other monthly expenses to be paid in cash are $22,500.
o Monthly depreciation is $19,000.
o Ignore taxes.
Retained earnings at the end of December would be:
A. $132,500
B. $155,000
C. $196,500
D. $183,900
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:
Compound Q11H is a raw material used to make Grater Corporation's major product.
The standard cost of compound Q11H is $23.00 per ounce and the standard quantity is
3.8 ounces per unit of output. Data concerning the compound for October appear below:
The raw material was purchased on account.
The Materials Quantity Variance for October would be recorded as a:
A. Credit of $3,680
B. Debit of $4,140
C. Credit of $4,140
D. Debit of $3,680
Answer:
Hatch Company has two divisions, O and E. During the year just ended, Division O had
a segment margin of $9,000 and variable expenses equal to 70% of sales. Traceable
fixed expenses for Division E were $19,000. Hatch Company as a whole had a
contribution margin ratio of 40%, a segment margin of $25,000, and sales of $200,000.
Given this data, the sales for Division E for last year were:
A. $50,000
B. $150,000
C. $87,500
D. $116,667
Answer:
Karo Corporation has provided the following data concerning its direct labor costs for
December:
The journal entry to record the incurrence of direct labor costs in December would
include the following for Work in Process:
A. Credit of $142,780
B. Debit of $142,780
C. Debit of $124,012
D. Credit of $124,012
Answer:
Kilihea Corporation produces a single product. The company's absorption costing
income statement for July follows:
The company's variable production costs are $20 per unit and its fixed manufacturing
overhead totals $80,000 per month.
The contribution margin per unit during July was:
A. $17
B. $20
C. $25
D. $6
Answer:
