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Guerra Electronics manufactures a variety of electronic gadgets for use in the home.
Which of the following would probably be the most accurate measure of activity to use
for allocating the cost of inspecting the finished products at Guerra?
A. Machine-hours
B. Direct labor-hours
C. Inspection time
D. Number of inspections
Answer:
Todco planned to produce 3,000 units of its single product, Teragram, during
November. The standard specifications for one unit of Teragram include six pounds of
material at $0.30 per pound. Actual production in November was 3,100 units of
Teragram. The accountant computed a favorable materials purchase price variance of
$380 and an unfavorable materials quantity variance of $120. Based on these variances,
one could conclude that:
A) more materials were purchased than were used.
B) more materials were used than were purchased.
C) the actual cost of materials was less than the standard cost.
D) the actual usage of materials was less than the standard allowed.
Answer:
Grosseiller Corporation uses the weighted-average method in its process costing
system. This month, the beginning inventory in the first processing department
consisted of 900 units. The costs and percentage completion of these units in beginning
inventory were:
A total of 6,400 units were started and 5,200 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 65% complete with respect to materials and 15% 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.
How many units are in ending work in process inventory in the first processing
department at the end of the month?
A. 2,100
B. 1,200
C. 5,500
D. 900
Answer:
Hadlock Company, which has only one product, has provided the following data
concerning its most recent month of operations:
What is the unit product cost for the month under variable costing?
A. $61
B. $71
C. $69
D. $79
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:
Favini Company, which has only one product, has provided the following data
concerning its most recent month of operations:
What is the unit product cost for the month under absorption costing?
A. $91
B. $125
C. $118
D. $98
Answer:
Reference: 8B-5
Mate Corporations standard wage rate is $11.90 per direct labor-hour (DLH) and
according to the standards, each unit of output requires 4.5 DLHs. In May, 2,900 units
were produced, the actual wage rate was $11.50 per DLH, and the actual hours were
15,530 DLHs.
In the journal entry to record the incurrence of direct labor costs in May, the Work in
Process entry would consist of a:
A) credit of $155,295.
B) debit of $155,295.
C) credit of $178,595.
D) debit of $178,595.
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:
(Ignore income taxes in this problem.) You have deposited $5,188 in a special account
that has a guaranteed interest rate. If you withdraw $1,400 at the end of each year for 7
years, you will completely exhaust the balance in the account. The guaranteed interest
rate is closest to:
A. 13%
B. 27%
C. 19%
D. 89%
Answer:
Froment 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 7,900 units were started and 7,400 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 65% complete with respect to materials and 25% 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 total cost transferred from the first processing department to the next processing
department during the month is closest to:
A. $328,155
B. $309,200
C. $311,600
D. $299,796
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:
Watson Company's comparative balance sheet and income statement for last year
appear below:
The company declared and paid a cash dividend during the year. It did not purchase or
dispose of any property, plant, and equipment. It did not issue any bonds 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) financing activities last year was:
A. $99,000
B. $(50,000)
C. $(99,000)
D. $50,000
Answer:
Dolittle Company purchased materials on account. The entry to record the purchase of
materials having a standard cost of $0.50 per pound from a supplier at $0.60 per pound
would include a:
A) credit to Raw Materials Inventory.
B) debit to Work in Process.
C) credit to Materials Price Variance.
D) debit to Materials Price Variance.
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 fixed component of office expense per
month is closest to:
A. $6,692
B. $8,064
C. $7,376
D. $7,720
Answer:
Deshaies Corporation is preparing its cash budget for November. The budgeted
beginning cash balance is $10,000. Budgeted cash receipts total $100,000 and budgeted
cash disbursements total $104,000. The desired ending cash balance is $30,000.
The excess (deficiency) of cash available over disbursements for November is:
A. $110,000
B. $6,000
C. ($4,000)
D. $14,000
Answer:
Hick 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 $20 thousand. The market price of common stock at the end of
Year 2 was $9.57 per share.
The return on total assets for Year 2 is closest to:
A. 9.35%
B. 10.23%
C. 9.42%
D. 10.16%
Answer:
The Lahn Company produces and sells a single product. Standards have been
established for the product as follows:
Direct materials: 5 pounds @ $3.50 per pound = $17.50
Direct labor: 3 hours @ $5.50 per hour = $16.50
Actual cost and usage figures for the past month follow:
Required:
Prepare journal entries to record:
a. The purchase of raw materials.
b. The usage of raw materials in production.
c. The incurrence of direct labor cost.
Answer:
The Immanuel Company has just obtained a request for a special order of 6,000 jigs to
be shipped at the end of the month at a selling price of $7 each. The company has a
production capacity of 90,000 jigs per month with total fixed production costs of
$144,000. At present, the company is selling 80,000 jigs per month through regular
channels at a selling price of $11 each. For these regular sales, the cost for one jig is:
If the special order is accepted, Immanuel will not incur any selling expense; however,
it will incur shipping costs of $0.30 per unit. Total fixed production cost would not be
affected by this order.
If Immanuel accepts this special order, the change in monthly net operating income will
be a:
A. $12,600 increase
B. $14,400 increase
C. $3,600 increase
D. $1,800 increase
Answer:
Mennig Corporation produces a single product and has the following cost structure:
The unit product cost under variable costing is:
A. $182
B. $92
C. $87
D. $94
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:
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 per equivalent unit for conversion costs for the first department for the month
is closest to:
A. $32.03
B. $30.81
C. $33.63
D. $31.64
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:
Forker Corporation has provided the following data concerning its direct labor costs for
April:
The Labor Efficiency Variance for April would be recorded as a:
A) debit of $54,634.
B) debit of $57,875.
C) credit of $54,634.
D) credit of $57,875.
Answer:
Reference: 8-15
Maliszewski Kennel uses tenant-days as its measure of activity; an animal housed in the
kennel for one day is counted as one tenant-day. During March, the kennel budgeted for
3,400 tenant-days, but its actual level of activity was 3,410 tenant-days. The kennel has
provided the following data concerning the formulas to be used in its budgeting:
The net operating income in the flexible budget for March would be closest to:
A) $14,625
B) $11,220
C) $11,408
D) $14,711
Answer:
Lone International Corporation's only product sells for $230.00 per unit and its variable
expense is $80.50. The company's monthly fixed expense is $822,250 per month. The
unit sales to attain the company's monthly target profit of $33,000 is closest to:
A. 3,718 units
B. 6,688 units
C. 10,624 units
D. 5,721 units
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:
Abe Company, which has only one 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. $11,400
B. $16,800
C. $5,400
D. $(12,900)
Answer:
Faraz Corporation has provided the following production and total cost data for two
levels of monthly production volume. The company produces a single product.
The best estimate of the total cost to manufacture 5,300 units is closest to:
A. $1,002,230
B. $1,021,780
C. $1,063,180
D. $941,280
Answer:
At the end of the year, actual manufacturing overhead costs were $110,000 and applied
manufacturing overhead costs were $118,800. If the denominator activity for the year
was 20,000 machine-hours, and if 22,000 standard machine-hours were allowed for the
year's production, the predetermined overhead rate per machine-hour was:
A. $5.00
B. $5.94
C. $5.50
D. $5.40
Answer:
Temores Corporation applies manufacturing overhead to products on the basis of
standard machine-hours. The company's predetermined overhead rate for fixed
manufacturing overhead is $1.50 per machine-hour and the denominator level of
activity is 5,600 machine-hours. In the most recent month, the total actual fixed
manufacturing overhead was $8,510 and the company actually worked 5,840
machine-hours during the month. The standard hours allowed for the actual output of
the month totaled 5,980 machine-hours. What was the overall fixed manufacturing
overhead volume variance for the month?
A. $360 favorable
B. $360 unfavorable
C. $570 favorable
D. $210 favorable
Answer:
Drewniak Corporation has provided the following data from its activity-based costing
system:
The company makes 430 units of product O37W a year, requiring a total of 690
machine-hours, 40 orders, and 10 inspection-hours per year. The product's direct
materials cost is $35.72 per unit and its direct labor cost is $29.46 per unit.
According to the activity-based costing system, the unit product cost of product O37W
is closest to:
A. $94.11 per unit
B. $89.72 per unit
C. $65.18 per unit
D. $92.49 per unit
Answer:
All other things the same, which of the following would increase residual income?
A. Increase in average operating assets.
B. Decrease in average operating assets.
C. Increase in minimum required return.
D. Decrease in net operating income.
Answer:
Qdynamic 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. To reduce
rounding error, carry out all computations to at least three decimal places.
The cost per equivalent unit for conversion costs for the first department for the month
is closest to:
A. $42.49
B. $43.96
C. $45.00
D. $41.87
Answer:
