PLAN

Question 1

Lincoln Company, glove manufacturer, has enough idle capacity available to accept a special order of 20,000 pairs of gloves at $12.00 pair. The normal selling price is $20.00 a pair. Variable manufacturing costs are $9.00 a pair, and fixed manufacturing costs are $3.00 a pair. Lincoln will not incur any selling expenses as result of the special order. What would be the effect on operating income if the special order could be accepted without affecting normal sales?

Answer 1

$60,000 increase.

Question 2

The production volume variance is due to

Answer 2

Difference from the planned level of the base used for overhead allocation and the actual level achieved.

Question 3

In preparing its cash budget for July 2012, Reed Company made the following projections:

Sales $1,500,000

Gross profit (based on sales) 25%

Decrease in inventories $ 70,000

Decrease in accounts payable

for inventories $120,000

For July 2012 what were the estimated cash disbursements for inventories?

Answer 3

$1,175,000

Question 4

A defense contractor for government space project has incurred $2,500,000 in actual design costs to date for guidance system whose total budgeted design cost is $3,000,000. If the design phase of the project is 60% complete, what is the amount of the contractor’s current overrun/savings on this design work?

Answer 4

$700,000 overrun

Question 5

Relevant information for material A follows:

Actual quantity purchased 6,500 lbs

Standard quantity allowed 6,000 lbs

Actual price $3.80

Standard price $4.00

What was the direct material quantity variance for material A?

Answer 5

$2,000 unfavorable.

Question 6

Gate Co. plans to discontinue a department with $48,000 contribution to overhead, and allocated overhead of $96,000, of which $42,000 cannot be eliminated. What would be the effect of this discontinuance on Gate’s pretax profit?

Answer 6

Increase of $6,000.

Question 7

The budgeting tool or process where estimates of revenues are prepared for each product beginning with the product’s research and development phase and traced through to its customer support phase is a

Answer 7

Life-cycle budget.

Question 8

Which of the following costs would decrease if production levels were increased within the relevant range?

a. Total fixed costs.
b. Fixed costs per unit.
c. Variable costs per unit.
d. Total variable costs.

Answer 8

Fixed costs per unit.

Question 9

Virgil Corp. uses standard cost system. In May, Virgil purchased and used 17,500 pounds of materials at cost of $70,000. The materials usage variance was $2,500 unfavorable and the standard materials allowed for May production was 17,000 pounds. What was the materials price variance for May?

Answer 9

$17,500 favorable.

Question 10

Johnson Co. is preparing its master budget for the first quarter of the next year. Budgeted sales and production for one of the company’s products are as follows:

Month SaIes Production

January 10,000 12,000

February 12,000 11,000

March 15,000 16,000

Each unit of this product requires four pounds of raw materials. Johnson’s policy is to have sufficient raw materials on hand at the end of each month for 40% of the following month’s production requirements. The January 1 raw materials inventory is expected to conform with this policy. How many pounds of raw materials should Johnson budget to purchase for January?

Answer 10

46,400

Question 11

“Committed costs” are costs that

Answer 11

Establish the present level of operating capacity and cannot be altered in the short run.

Question 12

Management has reviewed the standard cost variance analysis and is trying to explain an unfavorable labor efficiency variance of $3,000. Which of the following is the most likely cause of the variance?

a. The quality of raw materials has improved greatly.
b. The maintenance of machinery has been inadequate for the last few months.
c. The new labor contract increased wages.
d. The department manager has chosen to use highly skilled workers.

Answer 12

The maintenance of machinery has been inadequate for the last few months.

Question 13

JacKue Co. plans to produce 200,000 pairs of roller skates during January of next year. Planned production for February is 250,000 pairs. Sales are forecasted at 130,000 pairs for January and 240,000 pairs for February. Each pair of roller skates has eight Wheels. JacKue’s policy is to maintain 10% of the next month’s production in inventory at the end of month. How many wheels should JacKue purchase during January?

Answer 13

1,640,000

Question 14

To meet its monthly budgeted production goals, Acme Mfg. Co. planned a need for 10,000 widgets at price of $20 per widget. Acme’s actual units were 11,200 at price of $18.50 per widget. What amount reflected Acme’s price variance?

Answer 14

$16,800 favorable.

Question 15

Which of the following forecasting methods relies mostly on judgment?

a. Delphi.
b. Time series models.
c. Econometric models.
d. Regression.

Answer 15

Delphi.

Question 16

Which of the following inputs would be most beneficial to consider when management is developing the capital budget?

a. Profit center equipment requests.
b. Current product sales prices and costs.
c. Supply/demand for the company’s products.
d. Wage trends.

Answer 16

Profit center equipment requests.

Question 17

Segmented statements, prepared in a responsibility accounting reporting format, can be useful in performance evaluation and in operational decision making. An outline of segmented income statement prepared in accounting format and segmented by product line is presented below.

                                     Total company   Product A    Product B

Revenue from sales $xxx $xxx $xxx

Variable production costs xxx xxx xxx

Margin I $xxx $xxx $xxx

Variable selling and

administrative costs xxx xxx xxx

Margin II $xxx $xxx $xxx

Traceable discretionary

fixed costs xxx xxx xxx

Margin III $xxx $xxx xxx

Traceable committed

(infrastructure) fixed costs xxx xxx xxx

Margin IV $xxx $xxx $xxx

Common fixed costs xxx xxx xxx

Margin V $xxx $xxx $xxx

The common fixed costs which appear on this segmented income statement refer to costs which

Answer 17

Are incurred at one level for the benefit of two or more segments.

Question 18

Under standard cost system, the material price variances are usually the responsibility of the

Answer 18

Purchasing manager.

Question 19

For the current period production levels, Woodwork Co. budgeted 11,000 board feet of production and purchased 15,000 board feet. The material cost was budgeted at $7 per foot. The actual cost for the period was $8.50 per foot. What was Woodwork’s material price variance for the period?

Answer 19

$22,500 unfavorable.

Question 20

A manufacturing company is preparing the schedules that comprise its master budget. The forecasted production in units of finished goods for the first four months of the coming year are as follows:

Month Production (in units)

January 400,000

February 380,000

March 420,000

April 440,000

Additional details regarding inventory requirements and direct material purchases are as follows. The company pays for the direct material purchases in the month of the purchase and takes all discounts.

Item Requirement

Month-end direct materials 25% of the next month’s production

inventory requirement requirements

Direct material required

per unit of finished good One (I) pound of direct material

Invoice price (cost) of

direct material $5 per pound

Purchase terms for

direct material 2/10, n/30

The cash that would be required to pay for direct material purchases during the month of February would be

Answer 20

$1,911,000

Question 21

When production levels are expected to decline within a relevant range, and a flexible budget is used, what effect would be anticipated with respect to each of the following?

Variable costs per unit      Fixed costs per unit

a. No change No change
b. Increase No change
c. No change Increase
d. Increase Increase

Answer 21

No change Increase

Question 22

The process of developing plans for company’s expected operations and controlling the operations to help carry out those plans is known as

Answer 22

Budgetary control.

Question 23

Which of the following budgets provides information for preparation of the owner’s equity section of budgeted balance sheet?

a. Sales budget.
b. Cash budget.
c. Capital expenditures budget.
d. Budgeted income statement.

Answer 23

Budgeted income statement.

Question 24

An increase in production levels within relevant range most likely would result in

Answer 24

Increasing the total cost.

Question 25

In responsibility accounting, a center’s performance is measured by those costs which are controllable. Controllable costs are best described as including

Answer 25

Only those costs that the manager can influence in the current time period.

Question 26

A company’s target gross margin is 40% of the selling price of product that costs $89 per unit. The product’s selling price should be

Answer 26

$148.33

Question 27

The difference between standard hours at standard wage rates and actual hours at standard wage rates is referred to as which of the following types of variances?

Answer 27

Labor usage.

Question 28

Which of the following statements is true regarding opportunity cost?

a. Opportunity cost is representative of actual dollar outlay.
b. Idle space that has no alternative use has an opportunity cost of zero.
c. Opportunity cost is recorded in the accounts of an organization that has full costing system.
d. The potential benefit is not sacrificed when selecting an alternative.

Answer 28

Idle space that has no alternative use has an opportunity cost of zero.

Question 29

What is the required unit production level given the following factors?

                                                 Units

Projected sales 1,000

Beginning inventory 85

Desired ending inventory 100

Prior year beginning inventory 200

Answer 29

1,015

Question 30

A company produced and sold 100,000 units of component with a variable cost of $20 per unit. First quality components have a selling price of $50. The component’s specifications require its weight to be 20 kg. With a tolerance of +1 kg. Unfortunately, 1,200 of the units produced failed the company’s tolerance specifications. These 1,200 units were reworked at a cost of $12 per unit and sold as factory seconds at $45 each. Had the company had a quality assurance program in place such that all units produced conformed to specifications, the increase in the company’s contribution margin from this component would have been

Answer 30

$20,400

Question 31

Which of the following is a characteristic of flexible budget?

a. Provides budgeted numbers for various activity levels.
b. Allows for modification during the budgeted period.
c. Can be utilized by several product divisions.
d. Isolates the impact of variable costs on the overall budget.

Answer 31

Provides budgeted numbers for various activity levels.

Question 32

The following standard costs pertain to component part manufactured by Ashby Company:

Direct materials $2

Direct manufacturing labor 5

Factory overhead 20

Standard cost per unit $ 27

Factory overhead is applied at $1 per standard machine hour. Fixed capacity cost is 60% of applied factory overhead, and is not affected by any “make or buy” decision. It would cost $25 per unit to buy the part from an outside supplier. In the decision to “make or buy,” what is the total relevant unit manufacturing cost to be considered?

Answer 32

$15

Question 33

Segmented statements, prepared in a responsibility accounting reporting format, can be useful in performance evaluation and in operational decision making. An outline of segmented income statement prepared in accounting format and segmented by product line is presented below.

                                     Total company   Product A    Product B

Revenue from sales $xxx $xxx $xxx

Variable production costs xxx xxx xxx

Margin I $xxx $xxx $xxx

Variable selling and

administrative costs xxx xxx xxx

Margin II $xxx $xxx $xxx

Traceable discretionary

fixed costs xxx xxx xxx

Margin III $xxx $xxx xxx

Traceable committed

(infrastructure) fixed costs xxx xxx xxx

Margin IV $xxx $xxx $xxx

Common fixed costs xxx xxx xxx

Margin V $xxx $xxx $xxx

In the above segmented income statement, a product line manager, such as the manager of product line A, would be able to exercise control over all of the revenue and/or cost components which appear above

Answer 33

Margin III

Question 34

The following table contains Emerald Corp.’s quarterly revenues, in thousands, for the past three years. During that time, there were no major changes to Emerald’s selling strategies and total capital investment.

Year 1st Qtr. 2nd Qtr. 3 Qtr 4th Qtr.

Year I 500 500 500 750

Year 2 525 550 600 800

Year 3 550 525 625 850

Which of the following statements best describes the likely cause of the fluctuations in Emerald’s revenues and the best response to those fluctuations?

Answer 34

The fluctuations are from the seasonal demand for Emerald’s products, and Emerald should manage its inventories and cash flow to match the cycle.

Question 35

Which of the following is included in firm’s financial budget?

a. Budgeted income statement.
b. Capital budget.
c. Production budget.
d. Cost of goods sold budget.

Answer 35

Capital budget.

Question 36

Which of the following is a disadvantage of participative budgeting?

a. It decreases motivation.
b. It is less accurate.
c. It is more time-consuming.
d. It decreases acceptance.

Answer 36

It is more time-consuming.

Question 37

A company is offered a one-time special order for its product and has the capacity to take this order without losing current business. Variable costs per unit and fixed costs in total will be the same. The gross profit for the special order will be 10%, which is 15%, less than the usual gross profit. What impact will this order have on total fixed costs and operating income?

Answer 37

Total fixed costs do not change and operating income increases.

Question 38

Pinecrest Co. had variable costs of of 25% sales, and fixed costs of $30,000. Pinecrest’s breakeven point in sales dollars was

Answer 38

$ 40,000

Question 39

Koby Co. has sales of $200,000 with variable expenses of $150,000, fixed expenses of $60,000, and an operating loss of $10,000. By how much would Koby have to increase its sales in order to achieve an operating income of 10% of sales?

Answer 39

$200,000

Question 40

A favorable material price variance coupled with an unfavorable material usage variance would most likely result from

Answer 40

The purchase of lower than standard quality material.

Question 41

Ajax Division of Carlyle Corporation produces electric motors, 20% of which are sold to Bradley Division of Carlyle and the remainder to outside customers. Carlyle treats its divisions as profit centers and allows division managers to choose their sources of sale and supply. Corporate policy requires that all interdivisional sales and purchases be recorded at variable cost as transfer price. Ajax Division’s estimated sales and standard cost data for the year ending December 31, 2012, based on the full capacity of 100,000 units, are as follows:

                                Bradley                  Outsiders

Sales $ 900,000 $8,000,000

Variable costs (900,000) (3,600,000)

Fixed costs (300,000) (1,200,000)

Gross margin $ (300,000) $3,200,000

Units sales 20,000 80,000

Carlyle is considering permitting the division managers to negotiate the transfer price for 2013. The managers agreed on tentative transfer price of $75 per unit, to be reduced based on an equal sharing of the additional gross margin to Ajax resulting from sales to Bradley at $75 per unit instead of at variable cost. To evaluate this proposal, Carlyle would like to compare it with current policy based on 2012 results. Under the proposed action, the actual transfer price for 2012 sales of 20,000 motors would have been

Answer 41

$60.00

Question 42

Waldo Company, which produces only one product, provides its most current month’s data as follows:

Selling price per unit $80

Variable costs per unit:

Direct materials 21

Direct labor 10

Variable manufacturing

overhead 3

Variable selling and

administrative 6

Fixed costs:

Manufacturing overhead $76,000

Selling and administrative 58,000

Units:

Beginning inventory 0

Month’s production 5,000

Number sold 4,500

Ending inventory 500

Based upon the above information, what is the total contribution margin for the month under the variable costing approach?

Answer 42

$180,000

Question 43

Toller Co. is budgeting sales of 63,000 units of product Nous for October 2013. The manufacture of one unit of Nous requires four kilos of chemical Loire. During October 2013, Toller plans to reduce the inventory of Loire by 50,000 kilos and increase the finished goods inventory of Nous by 6,000 units. There is no Nous work in process inventory. How many kilos of Loire is Toller budgeting to purchase in October 2012?

Answer 43

226,000

Question 44

Breakeven analysis assumes over the relevant range that

Answer 44

Total costs are linear.

Question 45

Card Bicycle Co. has prepared production and raw materials budgets for next year. At the end of this year, the finished product inventory is expected to include 2,000 bicycles, and raw material inventory is expected to include 3,000 bicycle tires. Each finished bicycle requires two tires. The marketing department provided the following data from the sales budget for the first quarter:

                                           January   February    March

Expected bicycle sales (units) 12,000 16,000 18,000

The company inventory policy is to have finished product inventory equal to 20% of the following month’s sales requirements, and raw material equal to of 10% the following month’s production requirements. In the January budget for raw materials, how many tires are expected to be purchased?

Answer 45

26,680

Question 46

Dean Company is preparing a flexible budget for 2012 and the following maximum capacity estimates for department M are available:

                                                       At maximum capacity 

Direct manufacturing labor hours 60,000

Variable factory overhead $150,000

Fixed factory overhead $240,000

Assume that Dean’s normal capacity is 80% of maximum capacity. What would be the total factory overhead rate, based on direct manufacturing labor hours, in flexible budget at normal capacity?

Answer 46

$7.50

Question 47

A ceramics manufacturer sold cups last year for $7.50 each. Variable costs of manufacturing were $2.25 per unit. The company needed to sell 20,000 cups to break even. Net income was $5,040. This year, the company expects the price per cup to be $9.00; variable manufacturing costs to increase 33.3%; and fixed costs to increase 10%. How many cups (rounded) does the company need to sell this year to break even?

Answer 47

$19,250

Question 48

Birney Company is planning its advertising campaign for 2012 and has prepared the following budget data based on zero advertising expenditure:

Normal plant capacity 200,000 units

Sales 150,000 Units

Selling price $25.00 Per unit

Variable manufacturing costs $15.00 Per unit

Fixed costs:

Manufacturing $800,000

Sales and administrative $700,000

An advertising agency claims that an aggressive advertising campaign would enable airney to increase its unit sales by 20%. What is the maximum amount that Birney can pay for advertising and obtain an operating profit of $200,000?

Answer 48

$100,000

Question 49

The CPA reviewed the minutes of board of directors’ meeting of LQR Corp., an audit client. An order for widget handles was outsourced to SDT Corp. because LQR could not fill the order. By having SDT produce the order, LQR was able to realize $100,000 in sales profits that otherwise would have been lost. The outsourcing added cost of $10,000, but LQR was ahead by $90,000 when the order was completed. Which of the following statements is correct regarding LQR’s action?

a. Implicit costs are not opportunity costs because they are internal costs.
b. Accounting profit is total revenue minus explicit costs and implicit costs.
c. Explicit costs are opportunity costs from purchasing widget handles from resource market.
d. The use of resource markets outside of LQR involves opportunity cost.

Answer 49

The use of resource markets outside of LQR involves opportunity cost.

Question 50

A company is analyzing the performance of responsibility centers. Controllable costs would be included in the performance reports of which of the following types of centers?

a. Neither
b. Profit centers
c. Investment centers and Profit centers
d. Investment centers

Answer 50

Investment centers and Profit centers

Question 51

The regression analysis result for ABC Co. are shown as y=90x + 45. The standard error (S ) is 30 and coefficient of determination (r ) is 0.81. The budget calls for production of 100 units. What is ABC’s estimate of total costs?

Answer 51

$9,045

Question 52

A large manufacturing company has several autonomous divisions that sell their products in perfectly competitive external markets as well as internally to the other division of the company. Top management expects each of its divisional managers to take actions that will maximize the organization’s goals as well as their own goals. Top management also promotes a sustained level of management effort of all of its divisional managers. Under these circumstances, for products exchanged between divisions, the transfer price that will generally lead to optimal decisions for the manufacturing company would be transfer price equal to the

Answer 52

Market price of the product.

Question 53

Comparing actual results with a budget based on achieved volume is possible with the use of a

Answer 53

Flexible budget.

Question 54

In the past, four direct labor hours were required to produce each unit of product Y. Material costs were $200 per unit, the direct labor rate was $20 per hour, and factory overhead was 3 times direct labor cost. In budgeting for next year, management is planning to outsource some manufacturing activities and to further automate others. Management estimates these plans will reduce labor hours by 25%, increase the factory overhead rate to 3.6 times direct labor costs, and increase material costs by $30 per unit. Management plans to manufacture 10,000 units. What amount should management budget for cost of goods manufactured?

Answer 54

$5,060,000

Question 55

At annual sales of $900,000, the Ebo product has the following unit sales price and costs:

Sales price $20

Prime cost 6

Manufacturing overhead

Variable 1

Fixed 7

Selling & admin. costs

Variable 1

Fixed 3

                                               18

Profit 2

What is Ebo’s breakeven point in units?

Answer 55

37,500

Question 56

A company has $450,000 per year of fixed production costs, of which $150,000 are noncash outlays. The variable cost per unit is $15, and the unit selling price is $25. The breakeven volume in sales units for this company would be

Answer 56

45,000 units

Question 57

A company uses standard costing system. At the end of the current year, the company provides the following overhead information:

Actual overhead incurred

Variable $90,000

Fixed $62,000

Budgeted fixed overhead $ 65,000

Variable overhead rate (per

direct labor hour) 8

Standard hours allowed for

actual production 12,000

Actual labor hours used 11,000

What amount is variable overhead efficiency variance?

Answer 57

$8,000 favorable.

Question 58

Which of the following attributes of management report has the greatest impact on management’s ability to make effective decisions?

a. Summarization.
b. Conciseness.
c. Exception orientation.
d. Relevance.

Answer 58

Relevance.

Question 59

Snyder Co. manufactures fans with direct material costs of $10 per unit and direct labor of $7 per unit. A local carrier charges Snyder $5 per unit to make deliveries. Sales commissions are paid at 10% of the selling price. Fans are sold for $100 each. Indirect factory costs and administrative costs are $6,800 and $37,200 per month, respectively. How many fans must Snyder produce to break even?

Answer 59

648

Question 60

The cash receipts budget includes

Answer 60

Loan proceeds

Question 61

Wren Co. manufactures and sells products with selling prices and variable costs as follows:

                                  A                    B

Selling price $18.00 $22.00

Variable costs 12.00 14.00

Wren’s total annual fixed costs are $38,400. Wren sells four units of A for every unit of B. If operating income last year was $28,800, what was the number of units Wren sold?

Answer 61

10,500

Question 62

Fargo Mfg., small business, is developing budget for next year. Which of the following steps should Fargo perform first?

a. Identify costs of Fargo’s forecasted sales volume.
b. Compute the dollar amount of Fargo’s forecasted sales.
c. Forecast Fargo’s sales volume.
d. Determine the price of Fargo’s products.

Answer 62

Forecast Fargo’s sales volume.

Question 63

Which of the following listings correctly describes the order in which the four types of budgets must be prepared?

a. Cash disbursements, direct materials purchases, production, sales.
b. Production, direct materials purchases, sales, cash disbursements.
c. Sales, direct materials purchases, production, cash disbursements.
d. Sales, production, direct materials purchases, cash disbursements.

Answer 63

Sales, production, direct materials purchases, cash disbursements.

Question 64

Which of the following budgeting systems focuses on improving operations?

a. Kaizen budgeting
b. Responsibility budgeting.
c. Improvement budgeting.
d. Operational budgeting.

Answer 64

Kaizen budgeting.

Question 65

Relevant information for material A follows:

Quantity purchased 6,500 lbs.

Standard quantity allowed 6,000 lbs.

Actual price $3.80

Standard price $4.00

What was the direct material price variance for material A?

Answer 65

$1,300 favorable.

Question 66

Which one of the following is the best characteristic concerning the capital budget? The capital budget is a(n)

a. Plan that coordinates and communicates company’s plan for the coming year to all departments and divisions.
b. Plan that assesses the long-term needs of the company for plant and equipment purchases.
c. Exercise that sets the long-range goals of the company including the consideration of external influences caused by others in the market.
d. Plan to insure that there are sufficient funds available for the operating needs of the company.

Answer 66

Plan that assesses the long-term needs of the company for plant and equipment purchases.

Question 67

The master budget

Answer 67

Contains the operating budget.

Question 68

After the goals of the company have been established and communicated, the next step in the planning pacess would be the development of the

Answer 68

Sales budget.

Question 69

Under standard cost system, the material efficiency variances are the responsibility of

Answer 69

Production and industrial engineering.

Question 70

Smart Co. uses a static budget. When actual sales are less than budget, Smart would report favorable variances on which of the following expense categories?

a. SaIes commissions and Building rent
b. Sales commissions
c. Building rent
d. Neither

Answer 70

Sales commissions

Question 71

The following information is available on Crain Co.’s product lines:

                                      Chairs               Tables

Sales $180,000 $48,000

Variable costs (96,000) (30,000)

Contribution margin 84,000 18,000

Fixed casts:

Avoidable (36,000) (12,000)

Unavoidable (18.000) (10,800)

Operating income (loss) $ 30,000 ($4,800)

Assuming the tables line is discontinued, and the factory space previously used to make tables is rented for $24,000 per year, operating income will increase by what amount?

Answer 71

$18,000

Question 72

Egan Co. owns land that could be developed in the future. Egan estimates it can sell the land for $1,200,000, net of all selling costs. If it is not sold, Egan will continue with its plans to develop the land. As Egan evaluates its options for development or sale of the property, what type of cost would the selling price represent in Egan’s decision?

Answer 72

Opportunity.

Question 73

Light Company has 2,000 obsolete light fixtures that are carried in inventory at manufacturing cost of $30,000. If the fixtures are reworked for $10,000, they could be sold for $13,000. Alternately, the light fixtures could be sold for $3,000 to jobber located in a distant city. In decision model analyzing these alternatives, the opportunity cost would be

Answer 73

$3,000

Question 74

A company produces widgets with budgeted standard direct materials of 2 pounds per widget at $5 per pound. Standard direct labor was budgeted at O.5 hour per widget at $15 per hour. The actual usage in the current year was 25,000 and 3,000 hours to produce 10,000 widgets. What was the direct labor usage variance?

Answer 74

$30,000 favorable.

Question 75

Which of the following cycles does not have accounting information that is recorded into the general ledger reporting system?

a. Revenue.
b. Expenditure.
c. Planning.
d. Production.

Answer 75

Planning.

Question 76

The ratio of fixed costs to the contribution margin is

Answer 76

Breakeven point.

Question 77

Walman Company is budgeting sales of 42,000 units of product Y for March 2012. To make one unit of finished product, three pounds of raw material A are required. Actual beginning and desired ending inventories of raw material A and product Y are as follows:

                          3/1/12                          3/31/12

Raw material A 100,000 pounds 110,000 pounds

Product Y 22,000 units 24,000 units

There is no work in process inventory for product Y at the beginning and end of March. For the month of March, how many pounds of raw material A is Walman planning to purchase?

Answer 77

142,000

Question 78

All else being equal, the breakeven point in units will be higher if

Answer 78

​Unit variable costs are higher.

Question 79

A company manufactures product that has the direct material standard cost presented below. Budgeted and actual information for the current month for the manufacture of the finished product and the purchase and use of the direct material are also presented.

Standard cost for direct material

1.60 1b @ $2.50 per lb. = $4.00

                                                           Budget      Actual

Finished goods (in units) 30,000 32,000

Direct material usage (in pounds) 48,000 51,000

Direct material purchases (in pounds) 48,000 50,000

Total cost of direct material purchases $120,000 $120,000

The direct material efficiency (usage) variance for the current month is

Answer 79

$500 favorable.

Question 80

Aba Caterers quotes a price of $30 per person for dinner party. This price includes the 6% sales tax and the 15% service charge. Sales tax is computed on the food plus the service charge. The service charge is computed on the food only. At what amount does Aba price the food?

Answer 80

$24.61

Question 81

Central Winery manufactured two products, A and B. Estimated demand for product A was 10,000 bottles and for product B was 30,000 bottles. The estimated sales price per bottle for A was $6.00 and for B was $8.00. Actual demand for product A was 8,000 bottles and for product B was 33,000 bottles. The actual price per bottle for A was $6.20 and for B was $7.70. What amount would be the total selling price variance for Central Winery?

Answer 81

$8,300 unfavorable.

Question 82

A company manufactures product that has the direct material standard cost presented below. Budgeted and actual information for the current month for the manufacture of the finished product and the purchase and use of the direct material are also presented.

Standard cost for direct material

1.60 1b @ $2.50 per lb. = $4.00

                                                           Budget      Actual

Finished goods (in units) 30,000 32,000

Direct material usage (in pounds) 48,000 51,000

Direct material purchases (in pounds) 48,000 50,000

Total cost of direct material purchases $120,000 $120,000

The direct material price variance for the current month is

Answer 82

$5,000 favorable

Question 83

Sussex Company has budgeted its operations for February 2012. No change in inventory level during the month is planned. Selected data from estimated amounts are as follows:

Net loss $100,000

Increase in accounts payable 40,000

Depreciation expense 35,000

Decrease in gross amounts of

trade accounts receivable 60,000

Purchase of office equipment on

45-day credit terms 15,000

Provision for estimated warranty

liability 10,000

How much change in cash position is expected for February?

Answer 83

$45,000 increase.

Question 84

Carter Co. paid $1,000,000 for land three years ago. Carter estimates it can sell the land for $1,200,000, net of selling costs. If the land is not sold, Carter plans to develop the land at a cost of $1,500,000. Carter estimates net cash flow from the development in the first year of operations would be $500,000. What is Carter’s opportunity cost of the development?

Answer 84

$1,200,000

Question 85

A company that produces 10,000 units has fixed costs of $300,000, variable costs of $50 per unit, and a sales price of $85 per unit. After learning that its variable costs will increase by 20%, the company is considering an increase in production to 12,000 units. Which of the following statements is correct regarding the company’s next steps?

Answer 85

If production remains at 10,000 units, profits will decrease by $100,000.

Question 86

An unfavorable direct labor efficiency variance could be caused by an

Answer 86

Unfavorable material usage variance.

Question 87

Quick Co. was analyzing variances for one of its operations. The initial budget forecast production of 20,000 units during the year with variable manufacturing overhead rate of $10 per unit. Quick produced 19,000 units during the year. Actual variable manufacturing costs were $210,000. What amount would be Quick’s flexible budget variance for the year?

Answer 87

$20,000 unfavorable.

Question 88

Crisper, Inc. plans to sell 80,000 bags of potato chips in June, and each of these bags requires five potatoes. Pertinent data includes:

                                         Bags of potato chips   Potato

Actual June I inventory 15,000 bags 27,000 potatoes

Desired June 30 inventory 18,000 bags 23,000 potatoes

What number of units of raw material should Crisper plan to purchase?

Answer 88

411,000

Question 89

Ryan Co. projects the following monthly revenues for next year:

January $100,000 July $250,000

February 500,000 August 275,000

March 425,000 September 300,000

April 450,000 October 350,000

May 575,000 November 400,000

June 300, 000 December 525,000

Ryan’s terms are net 30 days. The company typically receives payment on 80% of sales the month following the sale, and 17% is collected two months after the sale. Approximately 3% of sales are deemed bad debt. What amount represents the expected cash collection in the second calendar quarter of next year?

Answer 89

$1,393,750

Question 90

Segmented statements, prepared in a responsibility accounting reporting format, can be useful in performance evaluation and in operational decision making. An outline of segmented income statement prepared in accounting format and segmented by product line is presented below.

                                     Total company   Product A    Product B

Revenue from sales $xxx $xxx $xxx

Variable production costs xxx xxx xxx

Margin I $xxx $xxx $xxx

Variable selling and

administrative costs xxx xxx xxx

Margin II $xxx $xxx $xxx

Traceable discretionary

fixed costs xxx xxx xxx

Margin III $xxx $xxx xxx

Traceable committed

(infrastructure) fixed costs xxx xxx xxx

Margin IV $xxx $xxx $xxx

Common fixed costs xxx xxx xxx

Margin V $xxx $xxx $xxx

The appropriate margin line to use to decide whether to accept a onetime special order when there is excess plant capacity is

Answer 90

Margin II

Question 91

On June 30, 2012, company is preparing the cash budget for the third quarter. The collection pattern for credit sales has been 60% in the month of sale, 30% in the first month after sale, and the rest in the second month after sales. Uncollectible accounts are negligible. There are cash sales each month equal to 25% of total sales. The total sales for the quarter are estimated as follows: July, $30,000; August, $15,000; September, $35,000. Accounts receivable on June 30, 2012, were $10,000. What amount would be the projected cash collections for September?

Answer 91

$30,125

Question 92

Oslo Co.’s industrial photo-finishing division, Rho, incurred the following costs and expenses in 2012:

                                                         VariabIe           Fixed 

Direct materials $200,000

Direct photo-finishing labor 150,000

Factory overhead 70,000 42,000

General, selling, and administrative 30,000 48,000

Total $450,000 $90,000

During 2012, Rho produced 300,000 units of industrial photo-prints, which were sold for $2.00 each. Oslo’s investment in Rho was $500,000 and $700,000 at January I, 2012, and December 31, 2012, respectively. Oslo normally imputes interest on investments at of 15% average invested capital. How many industrial photo-print units did Rho have to sell in 2012 to break even?

Answer 92

180,000

Question 93

A company has 7,000 obsolete toys which are carried in inventory at manufacturing cost of $6 per unit. If the toys are reworked for $2 per unit, they could be sold for $3 per unit. If the toys are scrapped, they could be sold for $1.85 per unit. Which alternative is more desirable (rework or scrap) and what is the total dollar amount of the advantage of that alternative?

Answer 93

Scrap, $5,950

Question 94

Spring Co. had two divisions, A and B. Division A created Product X, which could be sold on the outside market for $25 and used variable costs of $15. Division B could take Product X and apply additional variable costs of $40 to create Product Y, which could be sold for $100. Division B received a special order for a large amount of Product Y. If Division A were operating at full capacity, which of the following prices should Division A charge Division B for the Product X needed to fill the special order?

Answer 94

$25

Question 95

One hundred pounds of raw material W is processed into 60 pounds of X and 40 pounds of Y. Joint costs are $135. X is sold for $2.50 per pound and Y can be sold for $3.00 per pound or processed further into 30 pounds of Z (10 pounds are lost in the second process) at an additional cost of $60. Each pound of Z can then be sold for $6. What is the effect on profits of processing product Y further into product Z?

Answer 95

No change.

Question 96

A company’s controller is adjusting next year’s budget to reflect the impact of an expected5% inflation rate. Listed below are selected items from next year’s budget before the adjustment:

Total salaries expense $250,000

Health costs 100,000

Depreciation expense 65,000

Interest expense on 10-year

fixed-rate 37,750

After adjusting for the 5% inflation rate, what is the company’s total budget for the selected items before taxes for next year?

Answer 96

$470,250

Question 97

In the contribution margin approach to pricing, the price at which the income remains constant is equal to the price that covers

Answer 97

Variable costs.

Question 98

Which one of the following is a sales forecasting technique that can be utilized in preparing the annual profit plan?

a. Linear programming.
b. Queuing theory.
c. ProgramEvaluation and Review Technique (PERT).
d. Exponential smoothing.

Answer 98

Exponential smoothing.

Question 99

If a manufacturing company uses responsibility accounting, which one of the following items is least likely to appear in performance report for manager of an assembly line?

a. Equipment depreciation.
b. Direct labor.
c. Materials.
d. Repairs and maintenance.

Answer 99

Equipment depreciation.

Question 100

Multiple regression differs from simple regression in that it

Answer 100

Has more independent variables.

Question 101

Rodder, Inc. manufactures a component in auter assembly. The selling price and unit cost data for the component are as follows:

Selling price $15

Direct materials cost 3

Direct labor cost 3

Variable overhead cost 3

Fixed manufacturing overhead cost 2

Fixed selling and administration cost 1

The company received a special onetime order for 1,000 components. Rodder has an alternative use for production capacity for the 1,000 components that would produce contribution margin of $5,000. What amount is the lowest unit price Rodder should accept for the component?

Answer 101

$14

Question 102

Relevant information for product A follows:

Actual variable overhead cost per hour $8.00

Standard variable overhead cost per hour $7.50

Actual hours 4,500

Standards hours 5,000

What was the variable overhead spending variance for product A?

Answer 102

$2,250 unfavorable.

Question 103

Which of the following would be most impacted by the use of the percentage of sales forecasting method for budgeting purposes?

a. Mortgages payable.
b. Accounts payable.
c. Common stock.
d. Bonds payable.

Answer 103

Accounts payable.