The Western C<\/p>\n
\u2026<\/i>ompany is considering the addition of a new product to its current product
lines. The expected cost and revenue data for the new product are as follows:<\/p>\n
If the new product is added to the existing product line, then sales of existing products
will decline. As a consequence, the contribution margin of the other existing product lines
is expected to drop $78,000 per year.<\/p>\n
1. If the new product is added next year, the increase in net operating income resulting
from this decision would be:
A. $387,000
B. $261,000
C. $183,000
D. $207,000
2. What is the lowest selling price per unit among those listed below that could be
charged for the new product and still make it economically desirable to add the new
product?
A. $240
B. $222
C. $291
D. $249<\/p>\n
Condensed monthly operating income data for Cosmo Inc. for November is presented
below. Additional information regarding Cosmo\u2019s operations follows the statement.<\/p>\n
Three-quarters of each store\u2019s 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.<\/p>\n
3. A decision by Cosmo Inc. to close the Town Store would result in a monthly increase
(decrease) in Cosmo\u2019s operating income of:
A. $4,000
B. $(10,800)
C. $(800)
D. $(6,000)<\/p>\n
4. Cosmo is considering a promotional campaign at the Town Store that would not affect
the Mall Store. Increasing annual promotional expenses at the Town Store by $60,000
in order to increase Town Store sales by ten percent would result in a monthly
increase (decrease) in Cosmo\u2019s operating income of:
A. $(16,800)
B. $3,400
C. $7,000
D. $(1,400)<\/p>\n
The Varian Company makes a single product called a Horn. The company has the
capacity to produce 40,000 Horns per year. Per unit costs to produce and sell one Horn at
that activity level are:<\/p>\n
The regular selling price for one Horn is $60. A special order has been received at Varian
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, Varian would have to purchase a specialized machine to
engrave the Fairview name on each Horn 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.
5. If Varian can expect to sell 32,000 Homs next year through regular channels and the
special order is accepted at 15% off the regular selling price, the effect on net
operating income next year due to accepting this order would be a:
A. $52,000 increase
B. $80,000 increase
C. $24,000 decrease
D. $68,000 increase<\/p>\n
6. If Varian can expect to sell 32,000 Homs next year through regular channels, at what
special order price from Fairview should Varian be economically indifferent between
either accepting or not accepting this special order?
A. $51.00
B. $48.20
C. $42.50
D. $39.60
7. If Varian 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<\/p>\n
The RAH Manufacturing Company has two service departments: Maintenance and
Accounting. The Maintenance Department\u2019s costs of $300,000 are allocated on the basis
of machine hours. The Accounting Department\u2019s costs of $120,000 are allocated on the
basis of the number of employees within a specific department. The direct departmental
costs for A and B are $300,000 and $500,000, respectively.<\/p>\n
8. What is the Maintenance Department\u2019s cost allocated to Department A using the
direct method?
A. $92,000
B. $230,000
C. $276,000
D. $386,400
9.<\/p>\n
What is the Accounting Department\u2019s cost allocated to Department B using the direct
method?
A. $40,000
B. $80,000
C. $20,000
D. $10,000<\/p>\n
10. What is the Maintenance Department\u2019s cost allocated to Department B using the step
method and assuming the Maintenance Department\u2019s costs are allocated first?
A. $276,000
B. $230,000
C. $322,000
D. $23,810.00
11. What is the cost of the Accounting Department\u2019s cost allocated to Department A
using the step method and assuming the Maintenance Department\u2019s costs are allocated
first?
A. $81,333
B. $81,587
C. $80,000
D. $68,571<\/p>\n
The Moody Company produced three joint products at a joint cost of $100,000. Two of
these products were processed further. Production and sales were:<\/p>\n
12. If the estimated net realizable value method is used and product Q is accounted for as
a main product, how much of the joint costs would be allocated to product R?
A. $38,889
B. $41,667
C. $50,000
D. $62,500
13. Assume Q is a by-product and Moody uses the cost reduction method of accounting
for by-product cost. If estimated net realizable value is used, how much of the joint
costs would be allocated to product R?
A. $38,889
B. $43,750
C. $50,000
D. $62,500
14. If joint costs are allocated based on relative weight of the outputs and all products are
main products, how much of the joint costs would be allocated to product P?
A. $43,750
B. $50,000
C. $60,000
D. $62,500
15. What is the net income of Moody Company if the estimated net realizable value
method of joint cost allocation is used?
A. $20,000
B. $50,000
C. $150,000
D. $350,000<\/p>\n
16. Anchorage Company manufactures three main products, L, M and N, from a joint
process. Additional information for June production activity follows:<\/p>\n
Assuming that the 10,000 units of N were processed further and sold for $78,000
what was Anchorage\u2019s gross profit from this sale? Assume the physical quantities
method of allocation is used.
A. $21,000
B. $28,500
C. $30,000
D. $66,000<\/p>\n
17. The Morgan Company uses the weighted-average method in its process costing
system. For a particular department, the company had 54,000 equivalent units with
respect to conversion costs in March. There were 7,500 units in the department\u2019s
beginning work in process inventory, two thirds complete with respect to conversion
costs. During March, 52,500 units were started and 50,000 were completed and
transferred out of the department. The ending work in process inventory in the
department:
A. consisted of 5,000 units.
B. consisted of 2,500 units.
C. was 65% complete with respect to conversion costs.
D. was 40% complete with respect to conversion costs.<\/p>\n
18. Black Company uses the weighted-average method in its process costing system. The
company\u2019s ending work in process inventory consists of 5,000 units, 80% complete
with respect to materials and 50% complete with respect to labor and overhead. If the
total dollar value of the inventory is $60,000 and the cost per equivalent unit for labor
and overhead is $8.00, the cost per equivalent unit for materials must be:
A. $5.00
B. $10.00
C. $8.00
D. $4.00<\/p>\n
19. Strap Company uses the weighted-average method in its process costing system. The
company has only one processing department. The ending work in process inventory
consists of 10,000 units, 60% complete with respect to materials. The total dollar
value of this inventory is $38,000. The costs per equivalent unit are $5.00 for
materials and $4.00 for conversion costs for the period. With respect to conversion
costs, the ending work in process inventory is:
A. 10% complete
B. 20% complete
C. 38% complete
D. 30% complete<\/p>\n
20. Severn Company uses the FIFO method in its process costing system. The following
data were taken from the accounting records of the company for last month:<\/p>\n
The cost of the units in the ending Work in Process inventory is:
A. $17,000
B. $20,000
C. $10,000
D. $22,500<\/p>\n
Answer the following questions using the information below:
The Morgan Models company manufacturers replica plastic airplane and motorized
vehicle models. During October, the firm\u2019s Assembly Department started production of
60,000 models. During the month, the firm completed 66,000 models, and transferred
them to the Finishing Department. The firm ended the month with 22,000 models in
ending inventory. There were 28,000 models in beginning inventory. All direct materials
costs are added at the beginning of the production cycle and conversion costs are added
uniformly throughout the production process. The FIFO method of process costing is
used by Morgan. Beginning work in process was 25% complete as to conversion costs,
while ending work in process was 50% complete as to conversion costs.
Beginning inventory:
Direct materials costs $39,200
Conversion costs
$30,800
Manufacturing costs added during the accounting period:
Direct materials costs $90,000
Conversion costs
$280,000<\/p>\n
21. What were the equivalent units for conversion costs during October?
A) 21,000
B) 62,000
C) 70,000
D) 87,000
22. What is the amount of direct materials cost assigned to ending work-in-process
inventory at the end of October?
A) $22,000
B) $44,000
C) $39,200
D) $ 33,000<\/p>\n
23. What is the cost of the goods transferred out during October?
A) $363,000
B) $330,000
C) $340,000
D) $375,000<\/p>\n
Helmer Sporting Goods Company manufactured 100,000 units in 20X5 and reported the
following costs:
Sandpaper
$ 32,000
Leasing costs-plant $ 384,000
Materials handling 320,000
Depreciation-equipment
224,000
Coolants & lubricants 22,400 Property taxes-equipment
32,000
Indirect manufacturing labor 275,200
Fire insurance-equipment
16,000
Direct manufacturing labor 2,176,000
Direct material purchases
3,136,000
Direct materials, 1\/1\/X5
384,000
Direct materials, 12\/31\/X5
275,200
Finished goods, 1\/1\/X5
672,000
Sales revenue 12,800,000
Finished goods, 12\/31\/X5
1,280,000
Sales commissions 640,000
Work-in-process, 1\/1\/X5
96,000 Sales salaries 576,000
Work-in-process, 12\/31\/X5 64,000 Advertising costs
480,000
Administration costs 800,000<\/p>\n
24. What is the amount of direct materials used during 20X5?
A. $3,629,200
B. $3,276,800
C. $3,244,800
D. $3,606,800<\/p>\n
25. What is cost of goods manufactured for 20X5?
A. $6,384,000
B. $6,758,400
C. $6,726,400
D. $6,617,600<\/p>\n
26. What is the total fixed cost of the shipping department of Elaine Co. if it has the
following information for 2011?
Salaries
$800,000 75 percent of employees on guaranteed contracts
Packaging
$400,000 depending on size of item(s) shipped
Postage
$500,000 depending on weight of item(s) shipped
Rent of warehouse space
$250,000 annual lease
a.
b.
c.
d.<\/p>\n
$850,000
$900,000
$1,050,000
$1,950,000<\/p>\n
27. Last year, Twins Company reported $750,000 in sales (25,000 units) and a net
operating income of $25,000. At the break-even point, the company\u2019s total
contribution margin equals $500,000. Based on this information, the company\u2019s:
A. contribution margin ratio is 40%.
B. break-even point is 24,000 units.
C. variable expense per unit is $9.
D. variable expenses are 60% of sales.<\/p>\n
28. Loren Company\u2019s single product has a selling price of $15 per unit. Last year the
company reported total variable expenses of $180,000, fixed expenses of $90,000,
and a net operating income of $30,000. A study by the sales manager discloses that a
15% increase in the selling price would reduce unit sales by 10%. If her proposal is
adopted, net operating income would:
A. increase by $45,000
B. increase by $37,500
C. increase by $7,500
D. increase by $28,500<\/p>\n
29. If selling price per unit is $30, variable costs per unit are $20, total fixed costs are
$10,000, the tax rate is 30%, and the company sells 5,000 units, net income is:
A) $28,000
B) $14,000
C) $2,000
D) $40,000<\/p>\n
30. I Scream For Ice Cream sells specialty ice cream in three flavors: Rocky Road,
Peanut Butter, and Fruity Tooty. It sold 15,000 gallons last year. For every five
gallons of ice cream sold, one gallon is Fruity Tooty and the remainder is split evenly
between Peanut Butter and Rocky Road. Fixed costs for I Scream For Ice Cream are
$27,000 and additional information follows:
Rocky Road Peanut Butter
Sales price per pound
$ 5.50
$ 4.00
Variable cost per pound
$ 3.00
$ 2.00
Breakeven sales in dollars for I Scream For Ice Cream is
A) $22,275.
B) $17,357.
C) $60,750.
D) $33,750.<\/p>\n
Fruity Tooty
$ 3.50
$ 2.50<\/p>\n
31. For the current year, Paxman Company incurred $150,000 in actual manufacturing
overhead cost. The Manufacturing Overhead account showed that overhead was
overapplied in the amount of $6,000 for the year. If the predetermined overhead rate
was $8.00 per direct labor-hour, how many hours were worked during the year?
A. 19,500 hours
B. 18,000 hours
C. 18,750 hours
D. 17,750 hours<\/p>\n
32. Here are selected data for Campbell Company:<\/p>\n
Cost of goods manufactured
Work in process inventory, beginning
Work in process inventory, ending
Direct materials used<\/p>\n
$320,000
109,000
104,000
73,000<\/p>\n
Manufacturing overhead is allocated at 60% of direct labor cost.
What was the amount of direct labor costs?
A) $78,000
B) $162,581
C) $151,250
D) $242,000
33. Job 140 requires $12,000 of direct materials, $6,700 of direct labor, 550 direct labor
hours, and 270 machine hours. It also requires 9 hours of inspection at $40 per hour.
Manufacturing overhead is computed at $28 per direct labor hour used and $42 per
machine hour used.
The total amount of overhead allocated is
A) $34,100.
B) $26,740.
C) $45,440.
D) $15,400.<\/p>\n
34. The manufacturing overhead budget at Formica Corporation is based on budgeted
direct labor-hours. The direct labor budget indicates that 4,400 direct labor-hours will
be required in October. The variable overhead rate is $8.90 per direct labor-hour. The
company\u2019s budgeted fixed manufacturing overhead is $86,680 per month, which
includes depreciation of $16,280. All other fixed manufacturing overhead costs
represent current cash flows. The company recomputes its predetermined overhead
rate every month. The predetermined overhead rate for October should be:
A. $19.70
B. $24.90
C. $8.90
D. $28.60
Zela Company is preparing its annual profit plan. As part of its analysis of the
profitability of individual products, the controller estimates the amount of overhead that
should be allocated to the individual product lines from the information provided below.
(CMA based)<\/p>\n
Budgeted material handling costs: $50,000
35. Under a traditional costing system that allocates overhead on the basis of direct labor
hours, the materials handling costs allocated to one unit of specialty windows would
be
A. $1,500
B. $500
C. $2,000
D. $5,000<\/p>\n
36. Under an activity-based costing (ABC) system, the materials handling costs allocated
to one unit of specialty windows would be
A. $1,875.00
B. $937.50
C. $312.50
D. $1,500.00<\/p>\n
Hester Company budgets on an annual basis for its fiscal year. The following beginning
and ending inventory levels (in units) are planned for the fiscal year of July 1, 2004
through June 30, 2005.
July 1, 2004
June 30, 2005
Raw material1
40,000
10,000
Work-in-process
8,000
8,000
Finished goods
30,000
5,000
Three (3) units of raw material are needed to produce each unit of finished product.<\/p>\n
37.<\/p>\n
a.
b.
c.
d.<\/p>\n
38.<\/p>\n
a.
b.
c.
d.<\/p>\n
If Hester Company plans to sell 500,000 units during the 20042005 fiscal year, the
number of units it would have to manufacture during the year would be
505,000 units.
500,000 units.
480,000 units.
475,000 units.<\/p>\n
If 450,000 finished units were to be manufactured during the 20042005 fiscal year
by Hester Company, the units of raw material needed to be purchased would be
1,350,000 units.
1,360,000 units.
1,320,000 units.
1,330,000 units.<\/p>\n
39. Orion Corporation is preparing a cash budget for the six months beginning January 1.
Shown below are the company\u2019s expected collection pattern and the budgeted sales
for the period.
Expected collection pattern:
65% collected in the month of sale
20% collected in the month after sale
10% collected in the second month after sale
4% collected in the third month after sale
1% uncollectible
Budgeted sales:<\/p>\n
The estimated total cash collections during April from sales and accounts receivables
would be:
A. $155,900
B. $167,000
C. $171,666
D. $173,400
40. Information on Pruitt Companys direct-material costs for the month of July 2005 was
as follows:
Actual quantity purchased
Actual unit purchase price
Materials purchase-price variance
unfavorable (based on purchases)
Standard quantity allowed for actual production
Actual quantity used<\/p>\n
30,000 units
$2.75
$1,500
24,000 units
22,000 units<\/p>\n
For July 2005 there was a favorable direct-materials efficiency variance of
a.
$7,950.
b.
$5,500.
c.
$5,400.
d.
$5,600.<\/p>\n
Berman\u2019s Camera Shop has prepared the following flexible budget for September and is
in the process of interpreting the variances.
Flexible
Budget Price
Material A
Material B
Direct labor<\/p>\n
Variances
Efficiency
$40,000
$1,000F
60,000 500U 1,500F
80,000 500U 2,500F<\/p>\n
$3,000U<\/p>\n
41. The most likely explanation of the above variances for Material A is that:
A) Material A used during September was $2,000 less than expected
B) higher-quality raw materials were used than were planned
C) the company used a higher-priced supplier
D) a lower price than expected was paid for Material A<\/p>\n
42. The actual amount spent for Material B was:
A) $58,000
B) $59,000
C) $60,000
D) $61,000<\/p>\n
The Clark Company makes a single product and uses standard costing. Some data
concerning this product for the month of May follow:<\/p>\n
43. The variable overhead rate variance for May was closest to:
A. $2,290 F
B. $2,290 U
C. $1,710 F
D. $1,710 U<\/p>\n
44. The total standard (Budgeted) cost for direct labor for May was closest to:
A. $168,000
B. $180,000
C. $120,000
D. $161,000<\/p>\n
45. The total standard(Budgeted) cost for variable overhead for May was closest to:
A. $56,000
B. $40,000
C. $60,000
D. $50,000<\/p>\n
46. Evans Company produces a single product. During the most recent year, the
company had a net operating income of $90,000 using absorption costing and
$84,000 using variable costing. The fixed overhead application rate was $6 per
unit. There were no beginning inventories. If 22,000 units were produced last
year, then sales for last year were:
A. 15,000 units<\/p>\n
B. 21,000 units
C. 23,000 units
D. 28,000 units<\/p>\n
47. Hansen Company produces a single product. During the last year, Hansen had net
operating income under absorption costing that was $5,500 lower than its income
under variable costing. The company sold 9,000 units during the year, and its variable
costs were $10 per unit, of which $6 was variable selling expense. If fixed production
cost is $5 per unit under absorption costing every year, then how many units did the
company produce during the year?
A. 7,625 units
B. 8,450 units
C. 10,100 units
D. 7,900 units
48. A company that produces and sells a single product has provided the following
volume and average cost data for two accounting periods:<\/p>\n
The best estimates of the total fixed cost and variable cost per unit are closest to:
A. $2,000 fixed; $1.50 variable
B. $2,000 fixed; $7.00 variable
C. $3,000 fixed; $7.00 variable
D. $3,000 fixed; $8.50 variable<\/p>\n
49. The cost of goods sold in a retail store totaled $325,000. Fixed selling and
administrative expenses totaled $115,000 and variable selling and administrative
expenses were $210,000. If the store\u2019s contribution margin totaled $590,000, then
sales must have been:
A. $1,125,000
B. $1,030,000
C. $915,000
D. $650,000<\/p>\n
50. Pam\u2019s Stables used two different independent variables (trainer hours and number of
horses) in two different equations to evaluate the cost of training horses. The most
recent results of the two regressions are as follows:<\/p>\n
Trainer\u2019s hours:
Variable
Coefficient
Standard Error t-Value
Constant
$913.32
$198.12
4.61
Independent Variable $20.90 $2.94 7.11
r2 = 0.56
Number of horses:
Variable
Coefficient
Standard Error t-Value
Constant
$4,764.50
$1,073.09
4.44
Independent Variable $864.98
$247.14
3.50
r2 = 0.63
What is the estimated total cost for the coming year if 16,000 trainer hours are incurred
and the stable has 400 horses to be trained, based on the best cost driver?
A) $99,929.09
B) $350,756.50
C) $335,313.32
D) $13,844,444.50<\/p>\n","protected":false},"excerpt":{"rendered":"
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