Nilgiri 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. $40.57
B. $45.33
C. $39.31
D. $37.44
Answer:
DeAnne Company produces a single product. The company’s variable costing income
statement for August appears below:
The company produced 35,000 units in August and the beginning inventory consisted of
8,000 units. Variable production costs per unit and total fixed costs have remained
constant over the past several months.
Under absorption costing, for the month ended August 31, the company would report a:
A. $20,000 profit
B. $5,000 loss
C. $35,000 profit
D. $5,000 profit
Answer:
All other things equal, if a division’s traceable fixed expenses decrease:
A. the division’s segment margin will increase.
B. the overall company net operating income will decrease.
C. the division’s contribution margin will increase.
D. the division’s sales volume will increase.
Answer:
Reference: 8-31
Kibodeaux Corporation makes a product with the following standard costs:
The company budgeted for production of 3,300 units in June, but actual production was
3,400 units. The company used 33,240 liters of direct material and 320 direct
labor-hours to produce this output. The company purchased 35,900 liters of the direct
material at $4.90 per liter. The actual direct labor rate was $22.70 per hour and the
actual variable overhead rate was $2.70 per hour.
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 June is:
A) $238 U
B) $238 F
C) $224 U
D) $224 F
Answer:
Vessels Corporation’s net income for the most recent year was $2,532,000. A total of
200,000 shares of common stock and 200,000 shares of preferred stock were
outstanding throughout the year. Dividends on common stock were $3.80 per share and
dividends on preferred stock were $1.25 per share. The earnings per share of common
stock is closest to:
A. $12.66
B. $8.86
C. $7.61
D. $11.41
Answer:
Leija Manufacturing Company uses a job-order costing system and started the month of
March with one job in process (Job #359). This job had $500 of cost assigned to it at
this time. During March, Leija assigned production costs as follows to the jobs worked
on during the month:
During March, Leija completed and sold Job #359. Job #360 was also completed but
was not sold by month end. Job #361 was not completed by the end of March.
What is Leija’s work in process inventory balance at the end of March?
A. $1,900
B. $2,400
C. $2,900
D. $10,000
Answer:
The Varone Company makes a single product called a Hom. The company has the
capacity to produce 40,000 Homs per year. Per unit costs to produce and sell one Hom
at that activity level are:
The regular selling price for one Hom is $60. A special order has been received at
Varone from the Fairview Company to purchase 8,000 Homs next year at 15% off the
regular selling price. If this special order were accepted, the variable selling expense
would be reduced by 25%. However, Varone would have to purchase a specialized
machine to engrave the Fairview name on each Hom in the special order. This machine
would cost $12,000 and it would have no use after the special order was filled. The total
fixed costs, both manufacturing and selling, are constant within the relevant range of
30,000 to 40,000 Homs per year. Assume direct labor is a variable cost.
If Varone has an opportunity to sell 37,960 Homs next year through regular channels
and the special order is accepted for 15% off the regular selling price, the effect on net
operating income next year due to accepting this order would be a:
A. $33,320 decrease
B. $33,320 increase
C. $35,480 decrease
D. $35,480 increase
Answer:
Excerpts from Raimo Corporation’s comparative balance sheet appear below:
Which of the following is the correct treatment within the operating activities section of
the statement of cash flows using the indirect method?
A. The change in Inventory is added to net income; The change in Accounts Payable is
added to net income
B. The change in Inventory is added to net income; The change in Accounts Payable is
subtracted from net income
C. The change in Inventory is subtracted from net income; The change in Accounts
Payable is added to net income
D. The change in Inventory is subtracted from net income; The change in Accounts
Payable is subtracted from net income
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 yearly break-even point in total sales for the expected sales mix is:
A. $270,000
B. $300,000
C. $485,000
D. $500,000
Answer:
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 company’s
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:
Berol Company plans to sell 200,000 units of finished product in July and anticipates a
growth rate in sales of 5% per month. The desired monthly ending inventory in units of
finished product is 80% of the next month’s estimated sales. There are 150,000 finished
units in inventory on June 30.
Berol Company’s production requirement in units of finished product for the
three-month period ending September 30 is:
A. 712,025 units
B. 630,500 units
C. 664,000 units
D. 665,720 units
Answer:
Reference: 8-14
Tolentino 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 November, the kennel budgeted
for 2,600 tenant-days, but its actual level of activity was 2,620 tenant-days. The kennel
has provided the following data concerning the formulas used in its budgeting and its
actual results for November:
Data used in budgeting:
Actual results for November:
The facility expenses in the flexible budget for November would be closest to:
A) $21,052
B) $20,922
C) $20,604
D) $20,960
Answer:
Reference: 8A-3
The Chase Company uses a standard cost system in which manufacturing overhead
costs are applied to products on the basis of standard machine-hours. For November, the
companys flexible budget for manufacturing overhead showed the following total
budgeted costs at the denominator activity level of 40,000 machine-hours:
During November 42,000 machine-hours were used to complete 13,200 units of product
with the following actual overhead costs:
The standard time allowed to complete one unit of product is 3.6 machine-hours.
The fixed manufacturing overhead budget variance for November was:
A) $2,970 unfavorable
B) $4,550 favorable
C) $7,520 favorable
D) $22,900 unfavorable
Answer:
A partial listing of costs incurred during December at Gagnier Corporation appears
below:
The total of the manufacturing overhead costs listed above for December is:
A. $325,000
B. $635,000
C. $89,000
D. $40,000
Answer:
Kaelker Corporation has provided the following data:
The inventory turnover for this year is closest to:
A. 3.36
B. 0.87
C. 1.15
D. 3.15
Answer:
The West Division of Shekarchi Corporation had average operating assets of $620,000
and net operating income of $80,100 in March. The minimum required rate of return for
performance evaluation purposes is 14%.
What was the West Division’s minimum required return in March?
A. $80,100
B. $86,800
C. $11,214
D. $98,014
Answer:
The February contribution format income statement of Caines Corporation appears
below:
The degree of operating leverage is closest to:
A. 3.49
B. 0.09
C. 0.29
D. 10.94
Answer:
Reference: 8-39
The Geurtz Company uses standard costing. The company makes and sells a single
product called a Roff. The following data are for the month of August:
– Actual cost of direct material purchased and used: $65,560
– Material price variance: $5,960 unfavorable
– Total materials variance: $22,360 unfavorable
– Standard cost per pound of material: $4
– Standard cost per direct labor-hour: $5
– Actual direct labor-hours: 6,500 hours
– Labor efficiency variance: $3,500 favorable
– Standard number of direct labor-hours per unit of Roff: 2 hours
– Total labor variance: $400 unfavorable
The labor rate variance was:
A) $3,900 favorable
B) $3,900 unfavorable
C) $3,100 unfavorable
D) $3,100 favorable
Answer:
What was the fixed manufacturing overhead volume variance for the period to the
nearest dollar?
A) $2,565 F
B) $2,810 F
C) $225 U
D) $2,585 F
Answer:
The following production and average cost data for two levels of monthly production
volume have been supplied by a company that produces a single product:
The best estimate of the total variable manufacturing cost per unit is:
A. $22.10
B. $66.70
C. $88.80
D. $15.70
Answer:
Reference: 8-42
Fraize Corporation makes a product that uses a material with the quantity standard of
9.5 kilos per unit of output and the price standard of $4.00 per kilo. In July the company
produced 7,000 units using 68,850 kilos of the direct material. During the month the
company purchased 73,600 kilos of the direct material at $3.70 per kilo. The direct
materials purchases variance is computed when the materials are purchased.
The materials quantity variance for July is:
A) $9,400 U
B) $8,695 U
C) $9,400 F
D) $8,695 F
Answer:
The ratio of cash, trade receivables, and marketable securities to current liabilities is:
A. the working capital of a company.
B. the acid-test ratio.
C. the current ratio.
D. the debt to equity ratio.
Answer:
Cadarette Corporation’s most recent balance sheet and income statement appear below:
Dividends on common stock during Year 2 totaled $40 thousand. Dividends on
preferred stock totaled $10 thousand. The market price of common stock at the end of
Year 2 was $17.73 per share.
The dividend payout ratio for Year 2 is closest to:
A. 55.6%
B. 44.4%
C. 40.0%
D. 1111.1%
Answer:
In a statement of cash flows, which of the following would be classified as an operating
activity?
A. The purchase of equipment.
B. Dividends paid to the company’s own common stockholders.
C. Tax payments to governmental bodies.
D. The cash paid to retire bonds payable.
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:
Moren Corporation’s net cash provided by operating activities was $95; its net income
was $71; its capital expenditures were $70; and its cash dividends were $18. The
company’s free cash flow was:
A. $254
B. $78
C. $7
D. -$17
Answer:
Alkine Company’s comparative balance sheet appears below:
Alkine reported the following net income for the year:
Dividends were declared and paid during the year. A gain of $8,000 was recorded on the
sale of the long-term investments. The company did not purchase any long-term
investments or dispose of any property, plant, and equipment during the year. It also did
not issue any bonds payable or repurchase any of its own common stock.
The net cash provided (used) by operating activities would be:
A. $45,200
B. $60,000
C. $37,200
D. $55,200
Answer:
Reference: 8-9
Parisi Clinic uses client-visits as its measure of activity. During March, the clinic
budgeted for 2,300 client-visits, but its actual level of activity was 2,350 client-visits.
The clinic has provided the following data concerning the formulas to be used in its
budgeting:
The medical supplies in the flexible budget for March would be closest to:
A) $19,149
B) $19,395
C) $19,990
D) $19,010
Answer:
Payne Company makes two products, M and N, in a joint process. At the split-off point,
40,000 units of M and 50,000 units of N are available each month. Monthly joint
production costs are $270,000.
Product M can be sold at the split-off point for $4.20 per unit. Product N can either be
sold at the split-off point for $3.20 per unit or it can be processed further and sold for
$6.30 per unit. If N is processed further, additional processing costs of $2.50 per unit
will be incurred.
If N is processed further and then sold, rather than being sold at the split-off point, the
change in monthly operating income would be a:
A. $30,000 increase
B. $315,000 increase
C. $155,000 increase
D. $125,000 decrease
Answer:
Last year, Heidenescher Corporation’s variable costing net operating income was
$63,600 and its inventory decreased by 600 units. Fixed manufacturing overhead cost
was $1 per unit. What was the absorption costing net operating income last year?
A. $64,200
B. $63,000
C. $63,600
D. $600
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:
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:
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 debt-to-equity ratio at the end of the year was closest to:
A. 0.33
B. 0.50
C. 0.67
D. 1.00
Answer:
A company should use process costing, rather than job order costing, if:
A. production is only partially completed during the accounting period.
B. the product is manufactured in batches only as orders are received.
C. the product is composed of mass-produced homogeneous units.
D. the product goes through several steps of production.
Answer: