Last year, Farrer Corporation had sales of $1,500,000, variable expenses of $900,000,
and fixed expenses of $400,000. What would be the dollar sales at the break-even
point?
A. $1,300,000
B. $1,000,000
C. $1,380,000
D. $1,200,000
Answer:
Hartzog 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 $5 thousand. The market price of common stock at the end of
Year 2 was $7.04 per share.
The debt-to-equity ratio at the end of Year 2 is closest to:
A. 0.61
B. 0.28
C. 0.53
D. 0.19
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 December is 4,000 hours, then the predetermined
manufacturing overhead per direct labor-hour for December would be:
A. $6.80
B. $11.80
C. $19.80
D. $24.80
Answer:
Reference: 8A-15
Seroka Corporation estimates that its variable manufacturing overhead is $6.90 per
machine-hour and its fixed manufacturing overhead is $745,290 per period.
If the denominator level of activity is 9,000 machine-hours, the fixed element in the
predetermined overhead rate would be:
A) $6.90
B) $89.71
C) $690.00
D) $82.81
Answer:
East Company manufactures and sells a single product with a positive contribution
margin. If the selling price and the variable expense per unit both increase 5% and fixed
expenses do not change, what is the effect on the contribution margin per unit and the
contribution margin ratio?
A. Option A
B. Option B
C. Option C
D. Option D
Answer:
Higgins Company presently has a current ratio of 0.6. It is currently negotiating a loan,
but it has been informed it must improve its current ratio before the loan will be
approved. Which of the following actions would improve its current ratio?
A. Pay off a portion of its long-term debt.
B. Use cash to pay off some current liabilities.
C. Purchase additional inventory on credit.
D. Collect some of the current accounts receivable.
Answer:
Reference: 8-38
The Thompson Company uses standard costing and has established the following direct
material and direct labor standards for each unit of Lept.
Direct materials: 2 gallons at $4 per gallon
Direct labor: 0.5 hours at $8 per hour
During September, the company made 6,000 Lepts and incurred the following costs:
Direct materials purchased: 13,400 gallons at $4.10 per gallon
Direct materials used: 12,600 gallons
Direct labor used: 2,800 hours at $7.65 per hour
The labor efficiency variance for September was:
A) $33,600 favorable
B) $1,600 favorable
C) $22,400 favorable
D) $3,200 favorable
Answer:
Karo Corporation has provided the following data concerning its direct labor costs for
December:
The Labor Rate Variance for December would be recorded as a:
A. Credit of $9,086
B. Debit of $9,086
C. Credit of $8,428
D. Debit of $8,428
Answer:
Hartzog 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 $5 thousand. The market price of common stock at the end of
Year 2 was $7.04 per share.
The acid-test ratio at the end of Year 2 is closest to:
A. 2.03
B. 1.47
C. 1.60
D. 1.33
Answer:
A manufacturer of cedar shingles has supplied the following data:
The company’s break-even in bundles is closest to:
A. 111,724 bundles
B. 38,592 bundles
C. 226,866 bundles
D. 93,827 bundles
Answer:
Starwalt Corporation produces and sells a single product. The company has provided its
contribution format income statement for March.
If the company sells 7,900 units, its total contribution margin should be closest to:
A. $77,051
B. $322,200
C. $316,000
D. $308,000
Answer:
Sommers Fabrication Corporation has a standard cost system in which it applies
manufacturing overhead to products on the basis of standard machine-hours (MHs) at
$9.70 per MH. The company budgeted its fixed manufacturing overhead cost at
$67,000 for the month. During the month, the actual total variable manufacturing
overhead was $66,660 and the actual total fixed manufacturing overhead was $70,000.
The actual level of activity for the period was 6,600 MHs. What was the total of the
variable overhead rate and fixed manufacturing overhead budget variances for the
month?
A) $2,640 unfavorable
B) $5,640 favorable
C) $2,640 favorable
D) $5,640 unfavorable
Answer:
The following data pertains to activity and costs for two months:
Assuming that these activity levels are within the relevant range, the mixed cost for July
was:
A. $10,000
B. $35,000
C. $15,000
D. $40,000
Answer:
Scheidel Enterprises, Inc. produces and sells a single product whose selling price is
$190.00 per unit and whose variable expense is $81.70 per unit. The company’s
monthly fixed expense is $682,290.
Assume the company’s monthly target profit is $31,000. The dollar sales to attain that
target profit are closest to:
A. $1,251,386
B. $1,207,830
C. $713,290
D. $1,658,814
Answer:
Selected financial data for Bragg Company appear below:
Bragg Company’s inventory turnover ratio for Year 2 was closest to:
A. 2.00
B. 2.67
C. 4.80
D. 4.00
Answer:
South Company sells a single product for $20 per unit. If variable expenses are 60% of
sales and fixed expenses total $9,600, the break-even point will be:
A. $24,000
B. $14,400
C. $9,600
D. $16,000
Answer:
Balmforth Products, Inc. makes and sells a single product called a Bik. It takes three
yards of Material A to make one Bik. Budgeted production of Biks for the next five
months is as follows:
The company wants to maintain monthly ending inventories of Material A equal to 20%
of the following month’s production needs. On January 31, this target had not been
attained since only 2,000 yards of Material A were on hand. The cost of Material A is
$0.80 per yard. The company wants to prepare a Direct Materials Purchases Budget.
The total cost of Material A to be purchased in February is:
A. $45,200
B. $42,900
C. $39,440
D. $34,320
Answer:
Data concerning Odum Corporation’s single product appear below:
The break-even in monthly unit sales is closest to:
A. 1,413 units
B. 1,110 units
C. 622 units
D. 1,048 units
Answer:
Reference: 8B-3
Compound Q11H is a raw material used to make Grater Corporations 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 debits to the Raw Materials account for October would total:
A) $52,900
B) $52,440
C) $48,760
D) $53,130
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:
How much fixed manufacturing overhead was applied to products during the period to
the nearest dollar?
A. $85,571
B. $84,690
C. $86,190
D. $85,085
Answer:
Paxton Corp has provided the following data concerning its operations last month:
Paxton Corp is a retailing organization.
The contribution margin ratio is:
A. 12.5%
B. 33.0%
C. 25.0%
D. 37.5%
Answer:
Gest Inc. has provided the following data for the month of November. The balance in
the Finished Goods inventory account at the beginning of the month was $49,000 and at
the end of the month was $45,000. The cost of goods manufactured for the month was
$226,000. The actual manufacturing overhead cost incurred was $74,000 and the
manufacturing overhead cost applied to Work in Process was $70,000. The adjusted
cost of goods sold that would appear on the income statement for November is:
A. $226,000
B. $230,000
C. $222,000
D. $234,000
Answer:
The standards for direct labor for a product are 2.5 hours at $8 per hour. Last month,
9,000 units of the product were made and the labor efficiency variance was $8,000 F.
The actual number of hours worked during the past period was:
A) 23,500
B) 22,500
C) 20,500
D) 21,500
Answer:
Deschambault Corporation’s total current assets are $260,000, its noncurrent assets are
$700,000, its total current liabilities are $130,000, its long-term liabilities are $510,000,
and its stockholders’ equity is $320,000. Working capital is:
A. $260,000
B. $320,000
C. $190,000
D. $130,000
Answer:
A furniture 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:
How much overhead was applied to products during the period to the nearest dollar?
A. $86,394
B. $88,440
C. $89,760
D. $92,555
Answer:
Equivalent units for a process costing system using the FIFO method would be equal to:
A. units completed during the period plus equivalent units in the ending work in
process inventory.
B. units started and completed during the period plus equivalent units in the ending
work in process inventory.
C. units completed during the period and transferred out.
D. units started and completed during the period plus equivalent units in the ending
work in process inventory plus work needed to complete units in the beginning work in
process inventory.
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 net operating income in Year 1 was:
A. $90,000
B. $135,000
C. $140,000
D. $150,000
Answer:
Dickonson Products is a division of a major corporation. The following data are for the
last year of operations:
The division’s return on investment (ROI) is closest to:
A. 0.2%
B. 41.6%
C. 10.0%
D. 1.9%
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 ending work in process inventory in the first processing department
according to the company’s cost system is closest to:
A. $35,144
B. $16,775
C. $10,543
D. $26,358
Answer:
Estes Company has assembled the following data for its divisions for the past year:
Division B’s average operating assets is:
A. $81,200
B. $2,080,000
C. $1,333,333
D. $130,000
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 volume variance for the period to the
nearest dollar?
A) $900 F
B) $649 F
C) $180 U
D) $720 F
Answer: