An automated turning machine is the current constraint at Naik Corporation. Three
products use this constrained resource. 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. OP,KU,YY
B. YY,OP,KU
C. KU,YY,OP
D. YY,KU,OP
Answer:
The most recent comparative balance sheet of Broekemeier Corporation appears below:
The company uses the indirect method to construct the operating activities section of its
statements of cash flows.
Which of the following is correct regarding the operating activities section of the
statement of cash flows?
A. The change in Accounts Payable will be added to net income; The change in
Accrued Liabilities will be subtracted from net income
B. The change in Accounts Payable will be subtracted from net income; The change in
Accrued Liabilities will be added to net income
C. The change in Accounts Payable will be subtracted from net income; The change in
Accrued Liabilities will be subtracted from net income
D. The change in Accounts Payable will be added to net income; The change in
Accrued Liabilities will be added to net income
Answer:
Lund Company applies manufacturing overhead to jobs using a predetermined
overhead rate of 75% of direct labor cost. Any underapplied or overapplied
manufacturing overhead cost is closed out to Cost of Goods Sold at the end of the
month. During March, the following transactions were recorded by the company:
The entry to dispose of the underapplied or overapplied manufacturing overhead cost
for the month would include:
A. a credit of $2,000 to Cost of Goods Sold.
B. a debit of $5,000 to the Cost of Goods Sold.
C. a debit of $5,000 to the Manufacturing Overhead account.
D. a credit of $2,000 to the Manufacturing Overhead account.
Answer:
Tanigawa Inc. has an operating leverage of 8.7. If the company’s sales increase by 8%,
its net operating income should increase by about:
A. 69.6%
B. 8.7%
C. 108.8%
D. 8.0%
Answer:
The general model for calculating a price variance is:
A) actual quantity of inputs × (actual price – standard price).
B) standard price × (actual quantity of inputs – standard quantity allowed for output).
C) (actual quantity of inputs at actual price) – (standard quantity allowed for output at
standard price).
D) actual price × (actual quantity of inputs – standard quantity allowed for output).
Answer:
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 variable element in the
predetermined overhead rate would be:
A. $88.80
B. $82.81
C. $89.71
D. $6.90
Answer:
Diston Company uses the weighted-average method in its process costing system. The
first processing department, the Welding Department, started the month with 18,000
units in its beginning work in process inventory that were 30% complete with respect to
conversion costs. The conversion cost in this beginning work in process inventory was
$44,820. An additional 90,000 units were started into production during the month.
There were 21,000 units in the ending work in process inventory of the Welding
Department that were 10% complete with respect to conversion costs. A total of
$677,970 in conversion costs were incurred in the department during the month.
What would be the cost per equivalent unit for conversion costs for the month? (Round
off to three decimal places.)
A. $8.112
B. $8.300
C. $7.533
D. $6.108
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 return on common stockholders’ equity for Year 2 is closest to:
A. 11.33%
B. 10.00%
C. 10.67%
D. 9.41%
Answer:
Cress Company makes four products in a single facility. Data concerning these products
appear below:
The milling machines are potentially the constraint in the production facility. A total of
11,500 minutes are available per month on these machines.
Which product makes the LEAST profitable use of the milling machines?
A. Product A
B. Product B
C. Product C
D. Product D
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:
Sartain Corporation is in the process of preparing its annual budget. The following
beginning and ending inventory levels are planned for the year.
Each unit of finished goods requires 2 grams of raw material.
How much of the raw material should the company purchase during the year?
A. 1,430,000 grams
B. 1,450,000 grams
C. 1,480,000 grams
D. 1,440,000 grams
Answer:
Hayne Corporation bases its predetermined overhead rate on the estimated
machine-hours for the upcoming year. Data for the most recently completed year appear
below:
The predetermined overhead rate for the recently completed year was closest to:
A. $7.89
B. $30.95
C. $24.52
D. $32.41
Answer:
Jay Company uses a standard cost system in which it applies manufacturing overhead to
units of product on the basis of standard direct labor-hours (DLHs). The information
below pertains to a recent month’s activity:
The volume variance would be:
A. $300 F
B. $300 U
C. $150 F
D. $180 F
Answer:
Sultzer Corporation applies manufacturing overhead to products on the basis of
standard machine-hours. Budgeted and actual overhead costs for the most recent month
appear below:
The company based its original budget on 3,000 machine-hours. The company actually
worked 2,730 machine-hours during the month. The standard hours allowed for the
actual output of the month totaled 2,690 machine-hours. What was the overall fixed
manufacturing overhead budget variance for the month?
A. $3,317 favorable
B. $160 unfavorable
C. $3,317 unfavorable
D. $160 favorable
Answer:
Saffer Corporation keeps careful track of the time required to fill orders. Data
concerning a particular order appear below:
The manufacturing cycle efficiency (MCE) was closest to:
A. 0.17
B. 0.05
C. 0.43
D. 0.19
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 is the predetermined fixed manufacturing overhead rate to the nearest cent?
A) $11.05 per MH
B) $11.19 per MH
C) $11.00 per MH
D) $10.86 per MH
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:
Financial statements for Harwich Company for the most recent year appear below:
The balances in the Cash, Accounts Receivable, Inventory, Bonds Payable, Common
Stock, and Additional Paid-In Capital accounts are unchanged from the beginning of the
year. A $0.75 per share dividend was declared and paid during the year. On December
31, Harwich Company’s common stock was trading at $24.00 per share.
Harwich Company’s current ratio at December 31 was closest to:
A. 1.95
B. 2.67
C. 1.33
D. 2.00
Answer:
Abe 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. $88
B. $99
C. $81
D. $106
Answer:
A company that makes organic fertilizer has supplied the following data:
The company’s degree of operating leverage is closest to:
A. 3.50
B. 1.49
C. 9.54
D. 2.41
Answer:
Tavorn Corporation applies manufacturing overhead to products on the basis of
standard machine-hours. The companys standard variable manufacturing overhead rate
is $1.80 per machine-hour. The actual variable manufacturing overhead cost for the
month was $13,080. The original budget for the month was based on 7,100
machine-hours. The company actually worked 7,210 machine-hours during the month.
The standard hours allowed for the actual output of the month totaled 7,070
machine-hours. What was the variable overhead efficiency variance for the month?
A) $354 unfavorable
B) $252 unfavorable
C) $54 favorable
D) $102 unfavorable
Answer:
Kelson Company applies overhead to jobs on the basis of 60% of direct labor cost. If
Job 201 shows $27,000 of manufacturing overhead applied, the direct labor cost on the
job was:
A. $16,200
B. $27,000
C. $37,800
D. $45,000
Answer:
Reference: 8-36
Landram Corporation makes a product with the following standard costs:
In March the company produced 4,700 units using 10,230 kilos of the direct material
and 2,210 direct labor-hours. During the month, the company purchased 10,800 kilos of
the direct material at a cost of $76,680. The actual direct labor cost was $38,233 and the
actual variable overhead cost was $11,934.
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 labor rate variance for March is:
A) $3,757 U
B) $3,757 F
C) $3,995 U
D) $3,995 F
Answer:
The management of Fries Corporation has been concerned for some time with the
financial performance of its product R89H and has considered discontinuing it on
several occasions. Data from the company’s accounting system appear below:
In the company’s accounting system all fixed expenses of the company are fully
allocated to products. Further investigation has revealed that $31,000 of the fixed
manufacturing expenses and $46,000 of the fixed selling and administrative expenses
are avoidable if product R89H is discontinued.
According to the company’s accounting system, what is the net operating income earned
by product R89H?
A. $143,000
B. $8,000
C. $(8,000)
D. $(143,000)
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.
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. $(71)
B. $(6)
C. $(39)
D. $(21)
Answer:
The selling and administrative expense budget of Breckinridge Corporation is based on
budgeted unit sales, which are 5,500 units for June. The variable selling and
administrative expense is $1.00 per unit. The budgeted fixed selling and administrative
expense is $101,200 per month, which includes depreciation of $6,050 per month. The
remainder of the fixed selling and administrative expense represents current cash flows.
The cash disbursements for selling and administrative expenses on the June selling and
administrative expense budget should be:
A. $100,650
B. $106,700
C. $5,500
D. $95,150
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:
Reference: 8-55
The following data have been provided by Pollo Corporation:
Lubricants and supplies are both elements of variable manufacturing overhead.
The variable overhead rate variance for lubricants is closest to:
A) $1,425 U
B) $13,448 U
C) $12,023 U
D) $12,023 F
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 free cash flow for the year was:
A. $38
B. $71
C. $285
D. $11
Answer:
Street Company’s fixed expenses total $150,000, its variable expense ratio is 60% and
its variable expenses are $4.50 per unit. Based on this information, the break-even point
in units is:
A. 50,000 units
B. 37,500 units
C. 33,333 units
D. 100,000 units
Answer:
Gardner Furniture Company produces two kinds of chairs: an oak model and a chestnut
wood model. The oak model sells for $60 and the chestnut wood model sells for $100.
The variable expenses are as follows:
Expected sales in units next year are: 5,000 oak chairs and 1,000 chestnut chairs. Fixed
expenses are budgeted at $135,000 per year.
The company’s overall contribution margin ratio for the expected sales mix is:
A. 40%
B. 45%
C. 50%
D. 60%
Answer:
Financial statements for Orange Company appear below:
Dividends during Year 2 totaled $156 thousand, of which $18 thousand were preferred
dividends.
The market price of a share of common stock on December 31, Year 2 was $
Orange Company’s earnings per share of common stock for Year 2 was closest to:
A. $7.23
B. $2.27
C. $10.91
D. $7.64
Answer:
A portion of the total fixed manufacturing overhead cost incurred during a period may:
A. be excluded from cost of goods sold under absorption costing.
B. be charged as a period cost with the remainder deferred under variable costing.
C. never be excluded from cost of goods sold under absorption costing.
D. never be excluded from cost of goods sold under variable costing.
Answer:
Shiraki Corporation produces and sells a single product. Data concerning that product
appear below:
The break-even in monthly dollar sales is closest to:
A. $650,000
B. $687,722
C. $396,500
D. $1,016,667
Answer: