Ingerson 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. $109
B. $79
C. $99
D. $89
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 element of the predetermined overhead rate was (per DLH):
A) $4.15
B) $3.00
C) $2.00
D) $1.15
Answer:
The following data are available for the South Division of Redride Products, Inc. and
the single product it makes:
How many units must South sell each year to have an ROI of 16%?
A. 240,000
B. 1,300,000
C. 52,000
D. 65,000
Answer:
At a sales volume of 27,000 units, Danielle Corporation’s property taxes (a cost that is
fixed with respect to sales volume) total $207,900.
To the nearest whole cent, what should be the average property tax per unit at a sales
volume of 27,600 units? (Assume that this sales volume is within the relevant range.)
A. $6.73
B. $7.70
C. $7.62
D. $7.53
Answer:
Rubyor Corporation bases its predetermined overhead rate on variable manufacturing
overhead cost of $10.70 per machine-hour and fixed manufacturing overhead cost of
$821,104 per period. If the denominator level of activity is 7,300 machine-hours, the
variable element in the predetermined overhead rate would be:
A. $112.48
B. $123.18
C. $121.66
D. $10.70
Answer:
Reference: 8A-13
A manufacturer of industrial equipment 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 is the predetermined overhead rate to the nearest cent?
A) $16.97
B) $17.25
C) $16.59
D) $17.65
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:
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:
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 price-earnings ratio for Year 2 is closest to:
A. 14.72
B. 17.40
C. 9.48
D. 10.29
Answer:
Prasad 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.
What are the equivalent units for materials for the month in the first processing
department?
A. 10,500
B. 960
C. 8,300
D. 9,530
Answer:
Hadlock 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. $192,000
B. $128,000
C. $72,800
D. $140,800
Answer:
Cannedy Corporation’s most recent balance sheet appears below:
The company’s net income for the year was $74 and it did not sell or retire any property,
plant, and equipment during the year. Cash dividends were $21. The net cash provided
by (used in) investing activities for the year was:
A. $(53)
B. $35
C. $(35)
D. $53
Answer:
Drake Company’s contribution format income statement for the most recent year
appears below:
The unit contribution margin is:
A. $17
B. $8
C. $1
D. $9
Answer:
At the beginning of August, Hogancamp Corporation had $26,000 of raw materials on
hand. During the month, the company purchased an additional $73,000 of raw
materials. During August, $77,000 of raw materials were requisitioned from the
storeroom for use in production. The credits to the Raw Materials account for the month
of August total:
A. $73,000
B. $77,000
C. $99,000
D. $26,000
Answer:
The spending variance for occupancy expenses in May would be closest to:
A) $135 U
B) $135 F
C) $80 U
D) $80 F
Answer:
Data from Kooistra Corporation’s most recent balance sheet appear below:
Sales on account in Year 2 amounted to $1,270 and the cost of goods sold was $770.
The acid-test ratio at the end of Year 2 is closest to:
A. 0.75
B. 1.61
C. 0.96
D. 1.05
Answer:
East Company has the following budgeted cost and revenue data:
To reach a target net operating income of $490,000, East Company must sell:
A. 7,000 units
B. 9,000 units
C. 12,250 units
D. 15,750 units
Answer:
Condensed monthly operating income data for Cosmo Inc. for November is presented
below. Additional information regarding Cosmo’s operations follows the statement.
Three-quarters of each store’s traceable fixed expenses are avoidable if the store were to
be closed.
Cosmo allocates common fixed expenses to each store on the basis of sales dollars.
Management estimates that closing the Town Store would result in a ten percent
decrease in Mall Store sales, while closing the Mall Store would not affect Town Store
sales.
The operating results for November are representative of all months.
A decision by Cosmo Inc. to close the Town Store would result in a monthly increase
(decrease) in Cosmo’s operating income of:
A. $4,000
B. $(10,800)
C. $(800)
D. $(6,000)
Answer:
Hart Manufacturing operates an automated steel fabrication process. For one operation,
Hart has found that 45% of the total throughput (manufacturing cycle) time is spent on
non-value-added activities. Delivery cycle time is 12 hours, waiting time during the
production process is 3 hours, queue time prior to starting the production process is 2
hours, and inspection time is 1.2 hours.
What is the move time recorded for the operation?
A. 1.5 hours
B. 6.5 hours
C. 5.8 hours
D. 0.85 hours
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 materials quantity variance for June is:
A) $1,760 U
B) $1,782 F
C) $1,760 F
D) $1,782 U
Answer:
Costs which are always relevant in decision making are those costs which are:
A. variable.
B. avoidable.
C. sunk.
D. fixed.
Answer:
Clayton Company produces a single product. Last year, the company’s variable
production costs totaled $8,000 and its fixed manufacturing overhead costs totaled
$4,800. The company produced 4,000 units during the year and sold 3,600 units.
Assuming no units in the beginning inventory:
A. under variable costing, the units in ending inventory will be costed at $3.20 each.
B. the net operating income under absorption costing for the year will be $480 lower
than net operating income under variable costing.
C. the ending inventory under variable costing will be $480 lower than the ending
inventory under absorption costing.
D. the net operating income under absorption costing for the year will be $800 lower
than net operating income under variable costing.
Answer:
The Cabinet Shoppe is considering the addition of a new line of kitchen cabinets to its
current product lines. Expected cost and revenue data for the new cabinets are as
follows:
If the new cabinets are added, it is expected that the contribution margin of other
product lines at the cabinet shop will drop by $20,000 per year.
What is the lowest selling price per unit that could be charged for the new cabinets from
the following list and still make it economically desirable to add the new product line?
A. $160
B. $164
C. $171
D. $151
Answer:
Aujla Corporation uses activity-based costing to determine product costs for external
financial reports. The company has provided the following data concerning its
activity-based costing system:
The activity rate for the batch setup activity cost pool is closest to:
A. $70.40
B. $29.40
C. $26.10
D. $234.90
Answer:
Jaune 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 following
data pertain to last month’s operations:
The fixed manufacturing overhead budget variance is:
A. $500 U
B. $500 F
C. $2,200 U
D. $1,700 U
Answer:
Brace Corporation uses direct labor-hours in its predetermined overhead rate. At the
beginning of the year, the estimated direct labor-hours were 21,600 hours. At the end of
the year, actual direct labor-hours for the year were 20,400 hours, the actual
manufacturing overhead for the year was $506,920, and manufacturing overhead for the
year was underapplied by $23,440. The estimated manufacturing overhead at the
beginning of the year used in the predetermined overhead rate must have been:
A. $501,920
B. $531,445
C. $483,480
D. $511,920
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:
The following selected data are for Geneva Company:
The earnings per share of common stock for Year 2 is closest to:
A. $1.60
B. $2.07
C. $3.27
D. $3.67
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 following cost formula relates to last year’s operations at Lemine Manufacturing
Corporation:
Y = $84,000 + $60.00X
In the formula above, 75% of the fixed cost and 90% of the variable cost are
manufacturing costs. Y is the total cost and X is the number of units produced and sold.
If Lemine produces and sells 7,000 units, what is the unit product cost under each of the
following methods?
A. Option A
B. Option B
C. Option C
D. Option D
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:
The cost of beginning inventory under the weighted-average method is:
A. added in with current period costs in determining costs per equivalent unit for a
given period.
B. ignored in determining the costs per equivalent unit for a given period.
C. considered separately from costs incurred during the current period.
D. subtracted from current period costs in determining costs per equivalent unit for a
given period.
Answer:
Ring, Incorporated’s income statement for the most recent month is given below.
Refer to the original data.
The marketing department believes that a promotional campaign at Store P costing
$5,000 will increase sales by $15,000. If the campaign is adopted, overall company net
operating income should:
A. decrease by $800
B. decrease by $5,800
C. increase by $5,800
D. increase by $10,000
Answer:
Last month Hamner Corporation actual indirect materials cost, a variable cost, was
$45,240 and the spending variance for indirect materials cost was $3,480 unfavorable.
During that month, the company worked 17,400 machine-hours. Budgeted activity for
the month had been 17,000 machine-hours. The cost formula per machine-hour for
indirect materials cost must have been closest to:
A) $2.46
B) $2.87
C) $2.40
D) $2.80
Answer: