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With regard to the CVP graph, which of the following statements is not correct?
A. The CVP graph assumes that volume is the only factor affecting total cost.
B. The CVP graph assumes that selling prices do not change.
C. The CVP graph assumes that variable costs go down as volume goes up.
D. The CVP graph assumes that fixed expenses are constant in total within the relevant
range.
Answer:
Cung Inc. has some material that originally cost $68,400. The material has a scrap value
of $30,100 as is, but if reworked at a cost of $1,400, it could be sold for $30,800. What
would be the incremental effect on the company's overall profit of reworking and
selling the material rather than selling it as is as scrap?
A. -$69,100
B. -$700
C. $29,400
D. -$39,000
Answer:
Given the cost formula, Y = $9,000 + $2.50X, total cost for an activity level of 3,000
units would be:
A. $9,750
B. $12,000
C. $16,500
D. $7,500
Answer:
The following partially completed T-accounts summarize transactions for Fabatz
Company during the year:
The Cost of Goods Manufactured was:
A. $23,800
B. $5,400
C. $22,600
D. $46,400
Answer:
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 company's
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. $2,750 U
B. $2,570 U
C. $1,850 F
D. $161 F
Answer:
A segment is any portion or activity of an organization about which a manager seeks
revenue, cost, or profit data.
Answer:
Castle Company uses the FIFO method in its process costing system. In the Cutting
Department in June, units were four-fifths complete with respect to conversion in the
beginning work in process inventory and one-third complete with respect to conversion
in the ending work in process inventory. Other data for the department for June follow:
The cost per equivalent unit for conversion cost is closest to:
A. $1.40
B. $1.35
C. $1.21
D. $1.64
Answer:
Mate Corporation's 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.
The Labor Rate Variance for May would be recorded as a:
A. debit of $5,220.
B. credit of $6,212.
C. credit of $5,220.
D. debit of $6,212.
Answer:
Reference: 8-27
The Litton Company has established standards as follows:
Direct material: 3 pounds per unit @ $4 per pound = $12 per unit
Direct labor: 2 hours per unit @ $8 per hour = $16 per unit
Variable manufacturing overhead: 2 hours per unit @ $5 per hour = $10 per unit
Actual production figures for the past year are given below. The company records the
materials price variance when materials are purchased.
The company applies variable manufacturing overhead to products on the basis of
standard direct labor-hours.
The labor efficiency variance is:
A) $800 F
B) $800 U
C) $840 F
D) $840 U
Answer:
The following data pertain to the Whalen Division of Northern Industries.
The margin at Whalen was exactly the same in Year 2 as it was in Year 1.
The average operating assets for Year 2 amounted to:
A. $400,000
B. $800,000
C. $600,000
D. $500,000
Answer:
The ARB Company has two divisions: Electronics and DVD/Video Sales. Electronics
has traceable fixed expenses of $146,280 and the DBD/Video Sales has traceable fixed
expenses of $81,765. If ARB Company has a total of $322,490 in fixed expenses, what
are its common fixed expenses?
A. $94,445
B. $322,490
C. $228,045
D. $47,223
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 materials for the month in the first processing
department is closest to:
A. $18.88
B. $18.75
C. $18.33
D. $18.46
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) financing activities for the year was:
A. $3
B. $(4)
C. $(21)
D. $(22)
Answer:
Emilio Corporation reports that at an activity level of 3,400 units, its total variable cost
is $59,058 and its total fixed cost is $101,150.
What would be the average fixed cost per unit at an activity level of 3,500 units?
Assume that this level of activity is within the relevant range.
A. $29.75
B. $47.12
C. $35.26
D. $28.90
Answer:
Bordes Corporation has provided the following data concerning its most important raw
material, compound R85F:
The raw material was purchased on account.
The debits to the Raw Materials account for May would total:
A. $58,596
B. $75,240
C. $53,808
D. $77,880
Answer:
Spade Company recorded the following events last year:
On the statement of cash flows, some of these events are classified as operating
activities, some are classified as investing activities, and some are classified as
financing activities.
Based solely on the information above, the net cash provided by (used in) investing
activities on the statement of cash flows would be:
A. $(947,000)
B. $(430,000)
C. $(300,000)
D. $(620,000)
Answer:
Financial statements for Larned Company appear below:
Dividends during Year 2 totaled $263 thousand, of which $12 thousand were preferred
dividends.
The market price of a share of common stock on December 31, Year 2 was $160.
Larned Company's earnings per share of common stock for Year 2 was closest to:
A. $18.39
B. $27.22
C. $19.06
D. $11.03
Answer:
Mckerchie Inc. manufactures industrial components. One of its products, which is used
in the construction of industrial air conditioners, is known as G62. Data concerning this
product are given below:
The above per unit data are based on annual production of 9,000 units of the
component. Direct labor can be considered to be a variable cost.
Refer to the original data in the problem. What is the current contribution margin per
unit for component G62 based on its selling price of $160 and its annual production of
9,000 units?
A. $28
B. $134
C. $93
D. $132
Answer:
The most recent balance sheet and income statement of Marroquin Corporation appear
below:
The company paid a cash dividend and it did not dispose of any property, plant, and
equipment. The company 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. $130
B. $(130)
C. $(155)
D. $155
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.
The cost of December merchandise purchases would be:
A. $133,250
B. $68,250
C. $130,000
D. $143,000
Answer:
Selena Company has two products: A and B. The company uses activity-based costing.
The estimated total cost and expected activity for each of the company's three activity
cost pools are as follows:
The activity rate under the activity-based costing system for Supporting Customers is
closest to:
A. $46.33
B. $21.67
C. $65.00
D. $18.53
Answer:
Sproles Inc. manufactures a variety of products. Variable costing net operating income
was $90,500 last year and its inventory decreased by 3,500 units. Fixed manufacturing
overhead cost was $6 per unit. What was the absorption costing net operating income
last year?
A. $90,500
B. $21,000
C. $69,500
D. $111,500
Answer:
Reference: 8-6
Mock Clinic uses client-visits as its measure of activity. During August, the clinic
budgeted for 3,100 client-visits, but its actual level of activity was 3,150 client-visits.
The clinic has provided the following data concerning the formulas used in its
budgeting and its actual results for August:
Data used in budgeting:
Actual results for August:
The administrative expenses in the planning budget for August would be closest to:
A) $5,740
B) $5,934
C) $6,030
D) $5,760
Answer:
Ravalt Corporation uses the weighted-average method in its process costing system.
The Molding Department is the second department in its production process. The data
below summarize the department's operations in January.
The Molding Department's cost per equivalent unit for conversion cost for January was
$7.90.
How much conversion cost was assigned to the ending work in process inventory in the
Molding Department for January?
A. $27,729
B. $30,810
C. $3,081
D. $5,056
Answer:
Data concerning Homme Corporation's single product appear below:
The company is currently selling 2,000 units per month. Fixed expenses are $130,000
per month.
This question is to be considered independently of all other questions relating to
Homme Corporation. Refer to the original data when answering this question.
The marketing manager believes that a $12,000 increase in the monthly advertising
budget would result in a 190 unit increase in monthly sales. What should be the overall
effect on the company's monthly net operating income of this change?
A. increase of $2,440
B. decrease of $12,000
C. increase of $14,440
D. decrease of $2,440
Answer:
Qik Corporation uses the FIFO method in its process costing system. Operating data for
the Cutting Department for the month of March appear below:
According to the company's records, the conversion cost in beginning work in process
inventory was $45,662 at the beginning of March. Additional conversion costs of
$305,576 were incurred in the department during the month.
The cost per equivalent unit for conversion costs for March is closest to:
A. $5.77
B. $5.72
C. $5.91
D. $6.04
Answer:
The following is Allison Corporation's contribution format income statement for last
month:
The company has no beginning or ending inventories. The company produced and sold
10,000 units last month.
If sales increase by 200 units, by how much should net operating income increase?
A. $16,000
B. $5,000
C. $2,000
D. $10,000
Answer:
Financial statements for Larned Company appear below:
Dividends during Year 2 totaled $263 thousand, of which $12 thousand were preferred
dividends.
The market price of a share of common stock on December 31, Year 2 was $160.
Larned Company's price-earnings ratio on December 31, Year 2 was closest to:
A. 5.88
B. 14.50
C. 8.70
D. 8.40
Answer:
Reference: 8-33
Tidd Corporation makes a product with the following standard costs:
The company reported the following results concerning this product in November.
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 efficiency variance for November is:
A) $10,720 U
B) $10,720 F
C) $10,653 U
D) $10,653 F
Answer:
Reference: 8-20
Herard Corporation manufactures and sells a single product. The company uses units as
the measure of activity in its flexible budgets. During March, the company budgeted for
7,900 units, but its actual level of activity was 7,890 units. The company has provided
the following data concerning the formulas used in its budgeting and its actual results
for March:
Data used in budgeting:
Actual results for March:
The net operating income in the flexible budget for March would be closest to:
A) $19,599
B) $29,240
C) $29,124
D) $19,649
Answer:
