Use the following to answer question 1:



Use the following to answer question 1:

Marger, Inc., provided the following data for two recent months:

[pic]

|1. |Which of the following classifications best describes the behavior of Cost T? |

|A) |Variable |

|B) |Fixed |

|C) |Mixed |

|D) |None of the above |

|2. |The following data pertains to activity and maintenance costs for two recent years: |

| | |

| |[pic] |

| |Using the high-low method, the cost formula for maintenance would be: |

|A) |$1.50 per unit. |

|B) |$1.25 per unit. |

|C) |$3,000 plus $1.50 per unit. |

|D) |$6,000 plus $0.75 per unit. |

|3. |Rible Company has observed that at an activity level of 8,000 units the cost for maintenance is $15,000, and at 10,000 units the|

| |cost for maintenance is $16,500. Using the high-low method, the cost formula for maintenance is: |

|A) |$15,000 plus $0.15 per unit. |

|B) |$9,000 plus $0.75 per unit. |

|C) |$1.65 per unit. |

|D) |$1.875 per unit. |

|4. |Which of the following types of firms likely would have a high proportion of variable costs in its cost structure? |

|A) |Public utility. |

|B) |Airline. |

|C) |Fast food outlet. |

|D) |Architectural firm. |

|5. |Factory overhead is an example of a: |

|A) |mixed cost. |

|B) |fixed cost. |

|C) |variable cost. |

|D) |irrelevant cost. |

Use the following to answer question 6:

Buffo Company fabricates metal folding chairs. Data concerning the company's revenue and cost structure follow:

[pic]

|6. |If Buffo plans to produce and sell 3,000 units next month, the expected contribution margin would be: |

|A) |$30,750. |

|B) |$74,250. |

|C) |$26,750. |

|D) |$96,500. |

Use the following to answer question 7:

Frank Company operates a cafeteria for its employees. The number of meals served each week over the last seven weeks, along with the total costs of operating the cafeteria are given below:

[pic]

Assume that the relevant range includes all of the activity levels mentioned in this problem.

|7. |Using the high-low method of analysis, the variable cost per meal served in the cafeteria would be estimated to be: |

|A) |$1.50. |

|B) |$2.00. |

|C) |$2.80. |

|D) |$1.00. |

Use the following to answer question 8:

Stewart Company is attempting to classify costs according to their cost behavior. Data concerning activity and costs are listed below:

[pic]

|8. |If Stewart Company sells 1,150 units in March and this activity is within the relevant range, the expected total cost would most|

| |likely be closest to: |

|A) |$2,610.50. |

|B) |$1,774.00. |

|C) |$4,343.92. |

|D) |$4,384.50. |

|9. |A disadvantage of the high-low method of cost analysis is that: |

|A) |it cannot be used when there are a very large number of observations. |

|B) |it is too time consuming to apply. |

|C) |it uses two extreme data points, which may not be representative of normal conditions. |

|D) |it relies totally on the judgment of the person performing the cost analysis. |

Use the following to answer question 10:

Marger, Inc., provided the following data for two recent months:

[pic]

|10. |Which of the following classifications best describes the behavior of Cost U? |

|A) |Variable |

|B) |Fixed |

|C) |Mixed |

|D) |None of the above |

|11. |Fox Company's contribution margin ratio is 20%. If the degree of operating leverage is 15 at the $225,000 sales level, net |

| |operating income at the $225,000 sales level must equal: |

|A) |$2,250. |

|B) |$6,750. |

|C) |$3,000. |

|D) |$5,063. |

|12. |Korn Company sells two products, as follows: |

| | |

| |[pic] |

| |Fixed expenses total $300,000 annually. The expected sales mix in units is 60% for product Y and 40% for product Z. How much is |

| |Korn's expected break-even sales in dollars? |

|A) |$300,000 |

|B) |$420,000 |

|C) |$475,000 |

|D) |$544,000 |

|13. |Brown Company has sales of 2,000 units at $70 per unit. Variable expenses are 40% of the selling price. If total fixed expenses |

| |are $44,000, the degree of operating leverage is: |

|A) |0.79. |

|B) |1.40. |

|C) |3.50. |

|D) |2.10. |

Use the following to answer question 14:

Budget data for the Bidwell Company are as follows:

[pic]

|14. |If fixed expenses increased $31,500, the break-even sales in units would be: |

|A) |34,500 units. |

|B) |80,500 units. |

|C) |69,000 units. |

|D) |94,500 units. |

Use the following to answer question 15:

Evergreen Corp. has provided the following data:

[pic]

|15. |The number of units needed to achieve a target net operating income of $49,500 would be: |

|A) |1,238 units |

|B) |2,750 units. |

|C) |3,200 units. |

|D) |2,057 units. |

Use the following to answer question 16:

A manufacturer of premium wire strippers has supplied the following data:

[pic]

|16. |The company's degree of operating leverage is closest to: |

|A) |20.09 |

|B) |7.73 |

|C) |1.86 |

|D) |55.64 |

Use the following to answer question 17:

Consider the following budgeted data for Urqhart Corporation:

[pic]

|17. |If the unit contribution margin is increased by 10%, the total fixed expense is decreased by 20%, and all other data remain as |

| |in the budget, net operating income will be: |

|A) |$102,500. |

|B) |$105,000. |

|C) |$ 90,000. |

|D) |$ 93,750. |

Use the following to answer question 18:

The costs of publishing a grade school textbook can be assumed to be as follows:

[pic]

Each book sells for $10 per copy.

|18. |The unit contribution margin for each copy of the book is: |

|A) |$5.15. |

|B) |$4.15. |

|C) |$5.40. |

|D) |$7.15. |

|19. |If a company decreases the variable expense per unit while increasing the total fixed expenses, the total expense line relative |

| |to its previous position will: |

|A) |shift downward and have a steeper slope. |

|B) |shift downward and have a flatter slope. |

|C) |shift upward and have a flatter slope. |

|D) |shift upward and have a steeper slope. |

Use the following to answer question 20:

A company that makes organic fertilizer has supplied the following data:

[pic]

|20. |The company's degree of operating leverage is closest to: |

|A) |3.50 |

|B) |1.49 |

|C) |9.54 |

|D) |2.41 |

|21. |Trumbull Company budgeted sales on account of $120,000 for July, $211,000 for August, and $198,000 for September. Collection |

| |experience indicates that none of the budgeted sales will be collected in the month of the sale, 60% will be collected the month|

| |after the sale, 36% in the second month, and 4% will be uncollectible. The cash receipts from accounts receivable that should be|

| |budgeted for September would be: |

|A) |$169,800. |

|B) |$147,960. |

|C) |$197,880. |

|D) |$194,760. |

Use the following to answer question 22:

Young Enterprises has budgeted sales in units for the next five months as follows:

[pic]

Past experience has shown that the ending inventory for each month should be equal to 10% of the next month's sales in units. The inventory on May 31 fell short of this goal since it contained only 400 units. The company needs to prepare a Production Budget for the next five months.

|22. |The desired ending inventory for August is: |

|A) |540 units. |

|B) |680 units. |

|C) |720 units. |

|D) |380 units. |

Use the following to answer question 23:

Balmforth Products, Inc. makes and sells a single product called a Bik. It takes three yards of Material A to make one Bik. Budgeted production of Biks for the next five months is as follows:

[pic]

The company wants to maintain monthly ending inventories of Material A equal to 20% of the following month's production needs. On January 31, this target had not been attained since only 2,000 yards of Material A were on hand. The cost of Material A is $0.80 per yard. The company wants to prepare a Direct Materials Purchases Budget.

|23. |The desired ending inventory of Material A for the month of March is: |

|A) |9,300 yards. |

|B) |7,140 yards. |

|C) |3,100 yards. |

|D) |8,400 yards. |

Use the following to answer question 24:

The Gomez Company, a merchandising firm, has budgeted its activity for December according to the following information:

* Sales at $500,000, all for cash.

* Merchandise Inventory on November 30 was $250,000.

* The cash balance at December 1 was $20,000.

* Selling and administrative expenses are budgeted at $50,000 for December and are paid for in cash.

* Budgeted depreciation for December is $30,000.

* The planned merchandise inventory on December 31 is $260,000.

* The cost of goods sold represents 75% of the selling price.

* All purchases are paid for in cash.

|24. |The budgeted cash receipts for December are: |

|A) |$125,000. |

|B) |$375,000. |

|C) |$530,000. |

|D) |$500,000. |

Use the following to answer question 25:

Young Enterprises has budgeted sales in units for the next five months as follows:

[pic]

Past experience has shown that the ending inventory for each month should be equal to 10% of the next month's sales in units. The inventory on May 31 fell short of this goal since it contained only 400 units. The company needs to prepare a Production Budget for the next five months.

|25. |The beginning inventory in units for September should be: |

|A) |460 units. |

|B) |6,800 units. |

|C) |540 units. |

|D) |680 units. |

Use the following to answer question 26:

May Company, a merchandising firm, has budgeted sales as follows for the third quarter of the year:

[pic]

Cost of goods sold is equal to 65% of sales. The company wants to maintain a monthly ending inventory equal to 130% of the Cost of Goods Sold for the following month. The inventory on June 30 is less than this ideal since it is only $65,000. The company is now preparing a Merchandise Purchases Budget.

|26. |The desired beginning inventory for September is: |

|A) |$117,000. |

|B) |$ 76,050. |

|C) |$ 91,000. |

|D) |$ 59,150. |

Use the following to answer question 27:

Smith Company makes and sells a single product called a Pod. Each Pod requires 1.4 hours of labor at a labor rate of $9.60 per hour. Smith Company needs to prepare a Direct Labor Budget for the second quarter of the year.

|27. |The budgeted direct labor cost per Pod would be: |

|A) |$13.44. |

|B) |$9.60. |

|C) |$7.38. |

|D) |$11.00. |

|28. |Self-imposed budgets typically are: |

|A) |not subject to review by higher levels of management since to do so would contradict the participative aspect of the |

| |budgeting processing. |

|B) |not subject to review by higher levels of management except in specific cases where the input of higher management is |

| |required. |

|C) |subject to review by higher levels of management in order to prevent the budgets from becoming too loose. |

|D) |not critical to the success of a budgeting program. |

|29. |Shocker Company's sales budget shows quarterly sales for the next year as follows: |

| | |

| |[pic] |

| |Company policy is to have a finished goods inventory at the end of each quarter equal to 20% of the next quarter's sales. |

| |Budgeted production for the second quarter of the next year would be: |

|A) |7,200 units. |

|B) |8,000 units. |

|C) |8,800 units. |

|D) |8,400 units. |

|30. |The Carlquist Company makes and sells a product called Product K. Each unit of Product K sells for $24 dollars and has a unit |

| |variable cost of $18. The company has budgeted the following data for November: |

| | |

| | |

| |* Sales of $1,152,000, all in cash. |

| | |

| | |

| |* A cash balance on November 1 of $48,000. |

| | |

| | |

| |* Cash disbursements (other than interest) during November of $1,160,000. |

| | |

| | |

| |* A minimum cash balance on November 30 of $60,000. |

| | |

| | |

| |If necessary, the company will borrow cash from a bank. The borrowing will be in multiples of $1,000 and will bear interest at |

| |2% per month. All borrowing will take place at the beginning of the month. The November interest will be paid in cash during |

| |November. |

| | |

| |The amount of cash that must be borrowed on November 1 to cover all cash disbursements and to obtain the desired November 30 |

| |cash balance is: |

|A) |$20,000. |

|B) |$21,000. |

|C) |$37,000. |

|D) |$38,000. |

Use the following to answer question 31:

The following materials standards have been established for a particular product:

[pic]

|31. |What is the materials quantity variance for the month? |

|A) |$1,740 U |

|B) |$4,350 U |

|C) |$4,590 U |

|D) |$1,836 U |

Use the following to answer question 32:

The following standards for variable manufacturing overhead have been established for a company that makes only one product:

[pic]

|32. |What is the variable overhead spending variance for the month? |

|A) |$3,010 F |

|B) |$3,010 U |

|C) |$10,435 U |

|D) |$10,435 F |

Use the following to answer question 33:

The following materials standards have been established for a particular product:

[pic]

|33. |What is the materials quantity variance for the month? |

|A) |$5,050 U |

|B) |$5,125 U |

|C) |$9,292 U |

|D) |$9,430 U |

Use the following to answer question 34:

Arrow Industries employs a standard cost system in which direct materials inventory is carried at standard cost. Arrow has established the following standards for the prime costs of one unit of product.

[pic]

During May, Arrow purchased 160,000 pounds of direct material at a total cost of $304,000. The total direct labor wages for May were $37,800. Arrow manufactured 19,000 units of product during May using 142,500 pounds of direct material and 5,000 direct labor hours.

|34. |The direct material price variance for May is: |

|A) |$16,000 favorable. |

|B) |$16,000 unfavorable. |

|C) |$14,250 favorable. |

|D) |$14,250 unfavorable. |

|35. |Perkins Company, which has a standard cost system, had 500 pounds of raw material X in its inventory at June 1, purchased in May|

| |for $1.20 per pound and carried at a standard cost of $1.00 per pound. The following information pertains to raw material X for |

| |the month of June: |

| | |

| |[pic] |

| |The unfavorable materials purchase price variance for raw material X for June was: |

|A) |$ 0. |

|B) |$130. |

|C) |$140. |

|D) |$150. |

|36. |If variable manufacturing overhead is applied on the basis of direct labor-hours and the variable overhead spending variance is |

| |favorable, then the: |

|A) |actual variable manufacturing overhead rate exceeded the standard rate. |

|B) |standard variable manufacturing overhead rate exceeded the actual rate. |

|C) |actual direct labor-hours exceeded the standard direct labor-hours allowed for the actual output. |

|D) |standard direct labor-hours allowed for the actual output exceeded the actual hours. |

Use the following to answer questions 37-38:

The Odle Company makes and sells a single product called a Kitt. Odle employs a standard costing system. Each Kitt has a standard cost of 5 pounds of material at $12 per pound and 0.9 direct labor hours at $15 per hour. There were no inventories of any kind on June 1. During June, the following events occurred:

- Purchased 17,000 pounds of material at a total cost of $190,000.

- Used 15,000 pounds of material to produce 2,400 Kitts.

- Used 1,900 hours of direct labor time at a total cost of $38,000.

|37. |To record the incurrence of direct labor cost and its use in production, the general ledger would include what kind of entry to |

| |the Labor Rate Variance account? |

|A) |$ 9,500 credit. |

|B) |$ 9,500 debit. |

|C) |$15,200 debit. |

|D) |$ 2,000 debit. |

|38. |Odle Company purchased material on account. The entry to record the purchase of materials will include a: |

|A) |credit to Work in Process. |

|B) |debit to Accounts Receivable. |

|C) |credit to Accounts Payable. |

|D) |credit to Raw Materials Inventory. |

Use the following to answer question 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

|39. |The labor rate variance was: |

|A) |$3,900 favorable. |

|B) |$3,900 unfavorable. |

|C) |$3,100 unfavorable. |

|D) |$3,100 favorable. |

|40. |Home Company manufactures tables with vinyl tops. The standard material cost for the vinyl used per Type-R table is $7.80 based |

| |on six square feet of vinyl at a cost of $1.30 per square foot. A production run of 1,000 tables in January resulted in usage of|

| |6,400 square feet of vinyl at a cost of $1.20 per square foot, a total cost of $7,680. The quantity variance resulting from the |

| |above production run was: |

|A) |$120 favorable. |

|B) |$480 unfavorable. |

|C) |$520 unfavorable. |

|D) |$640 favorable. |

Use the following to answer question 41:

The Chase Company has a standard cost system in which manufacturing overhead is applied to units of product on the basis of direct labor-hours (DLHs). The company recorded the following activity and cost data relating to manufacturing overhead for October:

[pic]

|41. |The fixed overhead budget variance for September was: |

|A) |$2,700 favorable. |

|B) |$2,700 unfavorable. |

|C) |$5,400 favorable. |

|D) |$5,400 unfavorable. |

Use the following to answer question 42:

A furniture manufacturer has a standard costing system based on machine-hours (MHs) as the measure of activity. Data from the company's flexible budget for manufacturing overhead are given below:

[pic]

|42. |What was the fixed overhead budget variance for the period to the nearest dollar? |

|A) |$2,440 F |

|B) |$1,200 U |

|C) |$1,999 U |

|D) |$704 F |

Use the following to answer question 43:

A manufacturing company has a standard costing system based on direct labor-hours (DLHs) as the measure of activity. Data from the company's flexible budget for manufacturing overhead are given below:

[pic]

|43. |How much overhead was applied to products during the period to the nearest dollar? |

|A) |$79,118 |

|B) |$76,035 |

|C) |$77,440 |

|D) |$80,145 |

Use the following to answer question 44:

The Chase Company has a standard cost system in which manufacturing overhead is applied to units of product on the basis of direct labor-hours (DLHs). The company recorded the following activity and cost data relating to manufacturing overhead for October:

[pic]

|44. |The amount of fixed overhead cost contained in the company's overhead budget for September was: |

|A) |$45,900. |

|B) |$54,768. |

|C) |$49,920. |

|D) |$47,703. |

|45. |Baxter Corporation's master budget calls for the production of 5,000 units of its product monthly. The master budget includes |

| |indirect labor of $144,000 annually; Baxter considers indirect labor to be a variable cost. During the month of April, 4,500 |

| |units of product were produced, and indirect labor costs of $10,100 were incurred. A performance report utilizing flexible |

| |budgeting would report a spending variance for indirect labor of: |

|A) |$1,900 unfavorable. |

|B) |$700 favorable. |

|C) |$1,900 favorable. |

|D) |$700 unfavorable. |

Use the following to answer question 46:

Wicks Company has established a flexible budget for manufacturing overhead based on direct labor-hours. Budgeted costs at 100,000 direct labor-hours are as follows:

[pic]

|46. |If Wicks Company plans to operate at 90,000 direct labor-hours during the next period, the flexible budget would show indirect |

| |labor costs of: |

|A) |$144,000. |

|B) |$63,000. |

|C) |$90,000. |

|D) |$81,000. |

Use the following to answer questions 47-48:

The Steff Company has the following flexible budget (in condensed form) for manufacturing overhead:

[pic]

The following data concerning production pertain to last year's 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 overhead was $15,904 and actual fixed overhead was $30,850 for the year.

- The standard direct labor time is two hours per unit of product.

|47. |The fixed overhead budget variance was: |

|A) |$3,450 unfavorable. |

|B) |$3,450 favorable. |

|C) |$850 unfavorable. |

|D) |$1,200 favorable. |

|48. |The fixed element of the predetermined overhead rate was (per DLH): |

|A) |$4.15. |

|B) |$3.00. |

|C) |$2.00. |

|D) |$1.15. |

Use the following to answer question 49:

Barrick Company has established a flexible budget for manufacturing overhead based on direct labor-hours. Total budgeted costs at 200,000 direct labor-hours are as follows:

[pic]

|49. |At an activity level of 170,000 direct labor-hours, the flexible budget for factory overhead would show the budgeted amount for |

| |utilities as: |

|A) |$ 85,000. |

|B) |$140,000. |

|C) |$160,000. |

|D) |$100,000. |

Use the following to answer question 50:

The Steff Company has the following flexible budget (in condensed form) for manufacturing overhead:

[pic]

The following data concerning production pertain to last year's 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 overhead was $15,904 and actual fixed overhead was $30,850 for the year.

- The standard direct labor time is two hours per unit of product.

|50. |The fixed overhead cost applied to work in process was: |

|A) |$27,400. |

|B) |$30,000. |

|C) |$30,850. |

|D) |$13,700. |

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