Raybould Corporation has provided the following data concerning its most important
raw material, compound M31P:
When recording the purchase of materials, Raw Materials would be:
A. credited for $49,950.
B. credited for $51,300.
C. debited for $49,950.
D. debited for $51,300.
Answer:
Lantto Air uses two measures of activity, flights and passengers, in the cost formulas in
its flexible budgets. The cost formula for plane operating costs is $34,810 per month
plus $2,850 per flight plus $12 per passenger. The company expected its activity in June
to be 70 flights and 292 passengers, but the actual activity was 69 flights and 291
passengers. The actual cost for plane operating costs in June was $236,550. The plane
operating costs in the flexible budget for June would be closest to:
A) $237,814
B) $234,952
C) $236,550
D) $234,417
Answer:
Reference: 8-54
The following data have been provided by Augustave Corporation:
Indirect labor and power are both elements of variable manufacturing overhead.
The variable overhead rate variance for power is closest to:
A) $1,428 F
B) $5,016 F
C) $5,016 U
D) $3,588 F
Answer:
Carr Company produces a single product. During the past year, Carr manufactured
25,000 units and sold 20,000 units. Production costs for the year were as follows:
Sales totaled $850,000, variable selling expenses totaled $110,000, and fixed selling
and administrative expenses totaled $170,000. There were no units in beginning
inventory. Assume that direct labor is a variable cost.
The contribution margin per unit would be:
A. $12.10
B. $22.10
C. $17.70
D. $16.60
Answer:
Conversion costs do NOT include:
A. depreciation.
B. direct materials.
C. indirect labor.
D. indirect materials.
Answer:
Carr Company produces a single product. During the past year, Carr manufactured
25,000 units and sold 20,000 units. Production costs for the year were as follows:
Sales totaled $850,000, variable selling expenses totaled $110,000, and fixed selling
and administrative expenses totaled $170,000. There were no units in beginning
inventory. Assume that direct labor is a variable cost.
Under absorption costing, the ending inventory for the year would be valued at:
A. $179,500
B. $213,500
C. $222,000
D. $152,000
Answer:
At Jacobson Company, indirect labor is a variable cost that varies with direct
labor-hours. Last month the actual indirect labor cost totaled $5,780 for the month and
that the associated spending variance was $245 F. If 24,100 direct labor-hours were
actually worked last month, then the flexible budget cost formula for indirect labor
must be (per direct labor-hour):
A) $0.20
B) $0.25
C) $0.30
D) $0.35
Answer:
Fluck Corporation’s balance sheet and income statement appear below:
The company sold equipment for $12 that was originally purchased for $5 and that had
accumulated depreciation of $3. The company paid a cash dividend and it did not issue
any bonds payable or repurchase any of its own common stock.
The net cash provided by (used in) investing activities for the year was:
A. $12
B. $(63)
C. $63
D. $(75)
Answer:
The following direct labor standards have been established for product E45O:
The following data pertain to last months operations:
Required:
a. What was the labor rate variance for the month?
b. What was the labor efficiency variance for the month?
Answer:
Green Enterprises produces a single product. The following data were provided by the
company for the most recent period:
For the period above, one would expect the net operating income under absorption
costing to be:
A. higher than the net operating income under variable costing.
B. lower than the net operating income under variable costing.
C. the same as the net operating income under variable costing.
D. The relation between absorption costing net operating income and variable costing
net operating income cannot be determined.
Answer:
Reference: 8A-10
A furniture 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 volume variance for the period to the
nearest dollar?
A) $2,486 U
B) $1,511 U
C) $975 U
D) $2,653 U
Answer:
Franklins fixed manufacturing overhead volume variance for the year is:
A) $6,000 unfavorable
B) $19,000 favorable
C) $25,000 favorable
D) $55,000 unfavorable
Answer:
Machining a part for a car axle is an example of a:
A. Unit-level activity.
B. Batch-level activity.
C. Product-level activity.
D. Facility-level activity.
Answer:
Selling and administrative expenses are considered to be:
A. a product cost under variable costing.
B. a product cost under absorption costing.
C. part of fixed manufacturing overhead under variable costing.
D. a period cost under variable costing.
Answer:
(Ignore income taxes in this problem.) Mary wants to have $20,000 available for use in
four years. How much should Mary invest now in order to have the $20,000 available in
four years if she can invest money at 16%:
A. $13,990
B. $2,760
C. $11,040
D. $16,800
Answer:
Reference: 8-49
Pikus Corporation makes a product that has the following direct labor standards:
In January the companys budgeted production was 3,400 units, but the actual
production was 3,500 units. The company used 640 direct labor-hours to produce this
output. The actual direct labor cost was $8,960.
The labor efficiency variance for January is:
A) $840 U
B) $900 U
C) $840 F
D) $900 F
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 selling and administrative expense adjusted to a
cash basis would be:
A. $270,000
B. $246,000
C. $294,000
D. $288,000
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:
Karo Corporation has provided the following data concerning its direct labor costs for
December:
The Labor Efficiency Variance for December would be recorded as a:
A. Debit of $9,682
B. Debit of $10,340
C. Credit of $10,340
D. Credit of $9,682
Answer:
The Labor Rate Variance for May would be recorded as a:
A) debit of $5,220.
B) credit of $6,212.
C) credit of $5,220.
D) debit of $6,212.
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 price variance is:
A) $400 U
B) $400 F
C) $600 F
D) $600 U
Answer:
Berol Company plans to sell 200,000 units of finished product in July and anticipates a
growth rate in sales of 5% per month. The desired monthly ending inventory in units of
finished product is 80% of the next month’s estimated sales. There are 150,000 finished
units in inventory on June 30.
Berol Company’s production requirement in units of finished product for the
three-month period ending September 30 is:
A. 712,025 units
B. 630,500 units
C. 664,000 units
D. 665,720 units
Answer:
The Carlquist Company makes and sells a product called Product K. Each unit of
Product K sells for $24 dollars and has a unit variable cost of $18. The company has
budgeted the following data for November:
– Sales of $1,152,200, all in cash.
– A cash balance on November 1 of $48,000.
– Cash disbursements (other than interest) during November of $1,160,000.
– A minimum cash balance on November 30 of $60,000.
If necessary, the company will borrow cash from a bank. The borrowing will be in
multiples of $1,000 and will bear interest at 2% per month. All borrowing will take
place at the beginning of the month. The November interest will be paid in cash during
November.
The amount of cash needed to be borrowed on November 1 to cover all cash
disbursements and to obtain the desired November 30 cash balance is:
A. $20,000
B. $21,000
C. $37,000
D. $38,000
Answer:
Budget data for the Bidwell Company are as follows:
The number of units Bidwell would have to sell to earn a net operating income of
$150,000 is:
A. 100,000 units
B. 120,000 units
C. 112,000 units
D. 145,000 units
Answer:
Hardy, Inc., has budgeted sales in units for the next five months as follows:
Past experience has shown that the ending inventory for each month should be equal to
20% of the next month’s sales in units. The inventory on May 31 contained 1,640 units.
The company needs to prepare a production budget for the next five months.
The beginning inventory for September should be:
A. 940 units
B. 720 units
C. 1,640 units
D. 520 units
Answer:
Holzhauer Corporation, a merchandising company, reported the following results for
March:
Cost of goods sold is a variable cost in this company.
The gross margin for March is:
A. $922,600
B. $1,120,000
C. $2,202,600
D. $1,360,000
Answer:
Financial statements for Larned Company appear below:
Dividends during Year 2 totaled $263 thousand, of which $12 thousand were preferred
dividends.
The market price of a share of common stock on December 31, Year 2 was $160.
Larned Company’s return on common stockholders’ equity for Year 2 was closest to:
A. 29.8%
B. 26.9%
C. 30.9%
D. 27.9%
Answer:
The following data pertains to activity and utility costs for two recent years:
Using the high-low method, the cost formula for utilities is:
A. $1.50 per unit
B. $1.20 per unit
C. $3,000 plus $3.00 per unit
D. $4,500 plus $0.75 per unit
Answer:
(Ignore income taxes in this problem.) In order to receive $12,000 at the end of three
years and $10,000 at the end of five years, how much must be invested now if you can
earn 14% rate of return?
A. $12,978
B. $8,100
C. $13,290
D. $32,054
Answer:
Kendall Company has sales of 1,000 units at $60 a unit. Variable expenses are 30% of
the selling price. If total fixed expenses are $30,000, the degree of operating leverage is:
A. 1.50
B. 5.00
C. 1.67
D. 3.50
Answer:
Kirson Corporation incurred $89,000 of actual Manufacturing Overhead costs during
December. During the same period, the Manufacturing Overhead applied to Work in
Process was $92,000. The journal entry to record the application of Manufacturing
Overhead to Work in Process would include a:
A. debit to Manufacturing Overhead of $92,000
B. debit to Work in Process of $89,000
C. credit to Manufacturing Overhead of $92,000
D. credit to Work in Process of $89,000
Answer:
