The standards for product C54L specify 4.5 direct labor-hours per unit at $12.40 per
direct labor-hour. Last month 1,560 units of product C54L were produced using 7,000
direct labor-hours at a total direct labor wage cost of $86,100.
Required:
a. What was the labor rate variance for the month?
b. What was the labor efficiency variance for the month?
Answer:
The controller of Ferrence Company estimates the amount of materials handling
overhead cost that should be allocated to the company’s two products using the data that
are given below:
The total materials handling cost for the year is expected to be $16,486.40.
If the materials handling cost is allocated on the basis of direct labor-hours, how much
of the total materials handling cost should be allocated to the wall mirrors? (Round off
your answer to the nearest whole dollar.)
A. $13,220
B. $15,053
C. $9,892
D. $8,243
Answer:
The Gomez Company, a merchandising firm, has budgeted its activity for December
according to the following information:
– Sales at $500,000, all for cash.
– Merchandise Inventory on November 30 was $250,000.
– The cash balance at December 1 was $20,000.
– Selling and administrative expenses are budgeted at $50,000 for December and are
paid for in cash.
– Budgeted depreciation for December is $30,000.
– The planned merchandise inventory on December 31 is $260,000.
– The cost of goods sold represents 75% of the selling price.
– All purchases are paid for in cash.
The budgeted cash disbursements for December are:
A. $435,000
B. $385,000
C. $425,000
D. $465,000
Answer:
Nando Company uses the weighted-average method in its process costing system.
Department J is the second of three sequential processes at the company. During
October, Department J collected the following data:
All materials are added at the beginning of the process.
The total cost assigned to units transferred out during October was:
A. $264,600
B. $316,000
C. $342,000
D. $358,400
Answer:
Baldock Corporation’s balance sheet and income statement appear below:
Cash dividends were $23. The company sold equipment for $14 that was originally
purchased for $10 and that had accumulated depreciation of $10. The net cash provided
by (used in) operating activities for the year was:
A. $153
B. $162
C. $107
D. $139
Answer:
Reference: 8A-11
A manufacturer of playground equipment uses a standard costing system in which
standard machine-hours (MHs) is 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) $881 U
B) $484 U
C) $395 U
D) $1,500 F
Answer:
Human resource management is an example of an activity at which of the following
levels?
A. Unit-level activity.
B. Product-level activity.
C. Batch-level activity.
D. Facility-level activity.
Answer:
Data from Kempen Corporation’s most recent balance sheet and the company’s income
statement appear below:
The debt-to-equity ratio at the end of Year 2 is closest to:
A. 0.71
B. 0.33
C. 0.24
D. 0.57
Answer:
The following data pertain to Epsom Corporation’s operations:
The break-even level in sales dollars is:
A. $210,000
B. $120,000
C. $180,000
D. $84,000
Answer:
Reference: 8-29
Hurren Corporation makes a product with the following standard costs:
The company reported the following results concerning this product in June.
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) $185 F
B) $200 U
C) $185 U
D) $200 F
Answer:
The Western Company is considering the addition of a new product to its current
product lines. The expected cost and revenue data for the new product are as follows:
If the new product is added to the existing product line, then sales of existing products
will decline. As a consequence, the contribution margin of the other existing product
lines is expected to drop $78,000 per year.
If the new product is added next year, the increase in net operating income resulting
from this decision would be:
A. $387,000
B. $261,000
C. $183,000
D. $207,000
Answer:
The manufacturing overhead budget at Cutchin Corporation is based on budgeted direct
labor-hours. The direct labor budget indicates that 2,800 direct labor-hours will be
required in September. The variable overhead rate is $7.00 per direct labor-hour. The
company’s budgeted fixed manufacturing overhead is $43,120 per month, which
includes depreciation of $3,640. All other fixed manufacturing overhead costs represent
current cash flows. The September cash disbursements for manufacturing overhead on
the manufacturing overhead budget should be:
A. $59,080
B. $62,720
C. $19,600
D. $39,480
Answer:
Electrical costs at one of Reifel Corporation’s factories are listed below:
Management believes that electrical cost is a mixed cost that depends on
machine-hours.
Using the high-low method, the estimate of the fixed component of electrical cost per
month is closest to:
A. $5,594
B. $3,514
C. $5,875
D. $5,840
Answer:
In November, one of the processing departments at Ijames Corporation had ending
work in process inventory of $26,000. During the month, $426,000 of costs were added
to production and the cost of units transferred out from the department was $436,000.
The company uses the FIFO method in its process costing system. In the department’s
cost reconciliation report for November, the total cost to be accounted for would be:
A. $924,000
B. $888,000
C. $62,000
D. $462,000
Answer:
The management of Freshwater Corporation is considering dropping product C11B.
Data from the company’s accounting system appear below:
All fixed expenses of the company are fully allocated to products in the company’s
accounting system. Further investigation has revealed that $211,000 of the fixed
manufacturing expenses and $122,000 of the fixed selling and administrative expenses
are avoidable if product C11B is discontinued.
According to the company’s accounting system, what is the net operating income earned
by product C11B?
A. $74,000
B. $(521,000)
C. $(74,000)
D. $521,000
Answer:
Threets Corporation’s most recent comparative balance sheet appears below:
The company’s net income for the year was $109 and it paid a cash dividend. It did not
dispose of any property, plant, and equipment during the year. The company did not
issue any bonds payable or repurchase any of its own common stock.
The net cash provided by (used in) operating activities for the year was:
A. $120
B. $98
C. $(11)
D. $156
Answer:
A company that makes organic fertilizer has supplied the following data:
The company’s unit contribution margin is closest to:
A. $5.25
B. $4.05
C. $3.50
D. $2.35
Answer:
The Reed Division reports the following operating data for the past two years:
The return on investment at Reed was exactly the same in Year 1 and Year 2
Net operating income in Year 2 amounted to:
A. $60,000
B. $50,000
C. $40,000
D. $35,000
Answer:
Walsh Company expects sales of Product W to be 60,000 units in April, 75,000 units in
May and 70,000 units in June. The company desires that the inventory on hand at the
end of each month be equal to 40% of the next month’s expected unit sales. Due to
excessive production during March, on March 31 there were 25,000 units of Product W
in the ending inventory. Given this information, Walsh Company’s production of
Product W for the month of April should be:
A. 60,000 units
B. 65,000 units
C. 75,000 units
D. 66,000 units
Answer:
Alam Company is a manufacturing firm that uses job-order costing. At the beginning of
the year, the company’s inventory balances were as follows:
The company applies overhead to jobs using a predetermined overhead rate based on
machine-hours. At the beginning of the year, the company estimated that it would work
45,000 machine-hours and incur $180,000 in manufacturing overhead cost. The
following transactions were recorded for the year:
a. Raw materials were purchased, $416,000.
b. Raw materials were requisitioned for use in production, $420,000 ($380,000 direct
and $40,000 indirect).
c. The following employee costs were incurred: direct labor, $414,000; indirect labor,
$60,000; and administrative salaries, $212,000.
d. Selling costs, $141,000.
e. Factory utility costs, $20,000.
f. Depreciation for the year was $81,000 of which $73,000 is related to factory
operations and $8,000 is related to selling, general, and administrative activities.
g. Manufacturing overhead was applied to jobs. The actual level of activity for the year
was 48,000 machine-hours.
h. The cost of goods manufactured for the year was $1,004,000.
i. Sales for the year totaled $1,416,000 and the costs on the job cost sheets of the goods
that were sold totaled $989,000.
j. The balance in the Manufacturing Overhead account was closed out to Cost of Goods
Sold.
Prepare the appropriate journal entry for each of the items above (a. through j.). You can
assume that all transactions with employees, customers, and suppliers were conducted
in cash.
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 total predetermined overhead rate per machine-hour for November was:
A) $1.75
B) $2.40
C) $2.97
D) $1.40
Answer:
Data concerning the direct labor costs for April of Dimaio Corporation appear below:
The journal entry to record the incurrence of direct labor costs in April would include
the following for Work in Process:
A) debit of $341,658.
B) credit of $341,658.
C) credit of $294,174.
D) debit of $294,174.
Answer:
Abe Company, which has only one product, has provided the following data concerning
its most recent month of operations:
The total contribution margin for the month under the variable costing approach is:
A. $162,600
B. $378,000
C. $226,800
D. $319,200
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.
The cost of a completed unit transferred out of the department is closest to:
A. $74.51
B. $68.27
C. $74.02
D. $70.29
Answer:
Buell Corporation has provided the following data for June.
The volume variance for June is:
A. $10,830 F
B. $10,830 U
C. $3,610 U
D. $3,610 F
Answer:
Coakley Beet Processors, Inc., processes sugar beets in batches. A batch of sugar beets
costs $48 to buy from farmers and $10 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 $24 or processed further for $16 to make the end product
industrial fiber that is sold for $36. The beet juice can be sold as is for $44 or processed
further for $28 to make the end product refined sugar that is sold for $70. How much
profit (loss) does the company make by processing the intermediate product beet juice
into refined sugar rather than selling it as is?
A. $(31)
B. $(60)
C. $(2)
D. $(12)
Answer:
Enz Corporation manufactures a variety of products. The following data pertain to the
company’s operations over the last two years:
What was the absorption costing net operating income this year?
A. $92,000
B. $56,000
C. $73,000
D. $75,000
Answer:
Binnie Corporation’s most recent balance sheet appears below:
Net income for the year was $83. Cash dividends were $16. The company did not
dispose of any property, plant, and equipment. It did not issue any bonds payable or
repurchase any of its own common stock. The following question pertain to the
company’s statement of cash flows.
The net cash provided by (used in) investing activities for the year was:
A. $(63)
B. $(74)
C. $74
D. $63
Answer:
In February, one of the processing departments at Whisenhunt Corporation had
beginning work in process inventory of $35,000 and ending work in process inventory
of $11,000. During the month, the cost of units transferred out from the department was
$410,000. In the department’s cost reconciliation report for February, the total cost to be
accounted for would be:
A. $46,000
B. $807,000
C. $842,000
D. $421,000
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) operating activities for the year was:
A. $106
B. $85
C. $95
D. $111
Answer:
Kaiser Corporation bases its predetermined overhead rate on the estimated
machine-hours for the upcoming year. Data for the upcoming year appear below:
The predetermined overhead rate for the recently completed year was closest to:
A. $6.68
B. $25.02
C. $25.59
D. $18.34
Answer:
Carlton Company reported on its income statement sales for the year just ended of
$435,000. Sales during the year adjusted to the cash basis on its statement of cash flows
constructed using the direct method were $460,000. Carlton Company recorded the
following account balances:
Based on this information, the balance in Accounts Receivable at the beginning of the
year was:
A. $60,000
B. $63,000
C. $59,000
D. $10,000
Answer:
