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Corporate Accounting MCQs




Question;The Western Company is considering the addition of a new product to its current productlines. The expected cost and revenue data for the new product are as follows:If the new product is added to the existing product line, then sales of existing productswill decline. As a consequence, the contribution margin of the other existing product linesis expected to drop $78,000 per year.1. If the new product is added next year, the increase in net operating income resultingfrom this decision would be:A. $387,000B. $261,000C. $183,000D. $207,0002. What is the lowest selling price per unit among those listed below that could becharged for the new product and still make it economically desirable to add the newproduct?A. $240B. $222C. $291D. $249Condensed monthly operating income data for Cosmo Inc. for November is presentedbelow. Additional information regarding Cosmo's operations follows the statement.Three-quarters of each store's traceable fixed expenses are avoidable if the store were tobe 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 decreasein Mall Store sales, while closing the Mall Store would not affect Town Store sales.The operating results for November are representative of all months.3. A decision by Cosmo Inc. to close the Town Store would result in a monthly increase(decrease) in Cosmo's operating income of:A. $4,000B. $(10,800)C. $(800)D. $(6,000)4. Cosmo is considering a promotional campaign at the Town Store that would not affectthe Mall Store. Increasing annual promotional expenses at the Town Store by $60,000in order to increase Town Store sales by ten percent would result in a monthlyincrease (decrease) in Cosmo's operating income of:A. $(16,800)B. $3,400C. $7,000D. $(1,400)The Varian Company makes a single product called a Horn. The company has thecapacity to produce 40,000 Horns per year. Per unit costs to produce and sell one Horn atthat activity level are:The regular selling price for one Horn is $60. A special order has been received at Varianfrom the Fairview Company to purchase 8,000 Homs next year at 15% off the regularselling price. If this special order were accepted, the variable selling expense would bereduced by 25%. However, Varian would have to purchase a specialized machine toengrave 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 to40,000 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 thespecial order is accepted at 15% off the regular selling price, the effect on netoperating income next year due to accepting this order would be a:A. $52,000 increaseB. $80,000 increaseC. $24,000 decreaseD. $68,000 increase6. If Varian can expect to sell 32,000 Homs next year through regular channels, at whatspecial order price from Fairview should Varian be economically indifferent betweeneither accepting or not accepting this special order?A. $51.00B. $48.20C. $42.50D. $39.607. If Varian has an opportunity to sell 37,960 Homs next year through regular channelsand the special order is accepted for 15% off the regular selling price, the effect onnet operating income next year due to accepting this order would be a:A. $33,320 decreaseB. $33,320 increaseC. $35,480 decreaseD. $35,480 increaseThe RAH Manufacturing Company has two service departments: Maintenance andAccounting. The Maintenance Department's costs of $300,000 are allocated on the basisof machine hours. The Accounting Department's costs of $120,000 are allocated on thebasis of the number of employees within a specific department. The direct departmentalcosts for A and B are $300,000 and $500,000, respectively.8. What is the Maintenance Department's cost allocated to Department A using thedirect method?A. $92,000B. $230,000C. $276,000D. $386,4009.What is the Accounting Department's cost allocated to Department B using the directmethod?A. $40,000B. $80,000C. $20,000D. $10,00010. What is the Maintenance Department's cost allocated to Department B using the stepmethod and assuming the Maintenance Department's costs are allocated first?A. $276,000B. $230,000C. $322,000D. $23,810.0011. What is the cost of the Accounting Department's cost allocated to Department Ausing the step method and assuming the Maintenance Department's costs are allocatedfirst?A. $81,333B. $81,587C. $80,000D. $68,571The Moody Company produced three joint products at a joint cost of $100,000. Two ofthese products were processed further. Production and sales were:12. If the estimated net realizable value method is used and product Q is accounted for asa main product, how much of the joint costs would be allocated to product R?A. $38,889B. $41,667C. $50,000D. $62,50013. Assume Q is a by-product and Moody uses the cost reduction method of accountingfor by-product cost. If estimated net realizable value is used, how much of the jointcosts would be allocated to product R?A. $38,889B. $43,750C. $50,000D. $62,50014. If joint costs are allocated based on relative weight of the outputs and all products aremain products, how much of the joint costs would be allocated to product P?A. $43,750B. $50,000C. $60,000D. $62,50015. What is the net income of Moody Company if the estimated net realizable valuemethod of joint cost allocation is used?A. $20,000B. $50,000C. $150,000D. $350,00016. Anchorage Company manufactures three main products, L, M and N, from a jointprocess. Additional information for June production activity follows:Assuming that the 10,000 units of N were processed further and sold for $78,000what was Anchorage's gross profit from this sale? Assume the physical quantitiesmethod of allocation is used.A. $21,000B. $28,500C. $30,000D. $66,00017. The Morgan Company uses the weighted-average method in its process costingsystem. For a particular department, the company had 54,000 equivalent units withrespect to conversion costs in March. There were 7,500 units in the department'sbeginning work in process inventory, two thirds complete with respect to conversioncosts. During March, 52,500 units were started and 50,000 were completed andtransferred out of the department. The ending work in process inventory in thedepartment: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.18. Black Company uses the weighted-average method in its process costing system. Thecompany's ending work in process inventory consists of 5,000 units, 80% completewith respect to materials and 50% complete with respect to labor and overhead. If thetotal dollar value of the inventory is $60,000 and the cost per equivalent unit for laborand overhead is $8.00, the cost per equivalent unit for materials must be:A. $5.00B. $10.00C. $8.00D. $4.0019. Strap Company uses the weighted-average method in its process costing system. Thecompany has only one processing department. The ending work in process inventoryconsists of 10,000 units, 60% complete with respect to materials. The total dollarvalue of this inventory is $38,000. The costs per equivalent unit are $5.00 formaterials and $4.00 for conversion costs for the period. With respect to conversioncosts, the ending work in process inventory is:A. 10% completeB. 20% completeC. 38% completeD. 30% complete20. Severn Company uses the FIFO method in its process costing system. The followingdata were taken from the accounting records of the company for last month:The cost of the units in the ending Work in Process inventory is:A. $17,000B. $20,000C. $10,000D. $22,500Answer the following questions using the information below:The Morgan Models company manufacturers replica plastic airplane and motorizedvehicle models. During October, the firm's Assembly Department started production of60,000 models. During the month, the firm completed 66,000 models, and transferredthem to the Finishing Department. The firm ended the month with 22,000 models inending inventory. There were 28,000 models in beginning inventory. All direct materialscosts are added at the beginning of the production cycle and conversion costs are addeduniformly throughout the production process. The FIFO method of process costing isused 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 $39,200Conversion costs$30,800Manufacturing costs added during the accounting period:Direct materials costs $90,000Conversion costs$280,00021. What were the equivalent units for conversion costs during October?A) 21,000B) 62,000C) 70,000D) 87,00022. What is the amount of direct materials cost assigned to ending work-in-processinventory at the end of October?A) $22,000B) $44,000C) $39,200D) $ 33,00023. What is the cost of the goods transferred out during October?A) $363,000B) $330,000C) $340,000D) $375,000Helmer Sporting Goods Company manufactured 100,000 units in 20X5 and reported thefollowing costs:Sandpaper$ 32,000Leasing costs-plant $ 384,000Materials handling 320,000Depreciation-equipment224,000Coolants & lubricants 22,400 Property taxes-equipment32,000Indirect manufacturing labor 275,200Fire insurance-equipment16,000Direct manufacturing labor 2,176,000Direct material purchases3,136,000Direct materials, 1/1/X5384,000Direct materials, 12/31/X5275,200Finished goods, 1/1/X5672,000Sales revenue 12,800,000Finished goods, 12/31/X51,280,000Sales commissions 640,000Work-in-process, 1/1/X596,000 Sales salaries 576,000Work-in-process, 12/31/X5 64,000 Advertising costs480,000Administration costs 800,00024. What is the amount of direct materials used during 20X5?A. $3,629,200B. $3,276,800C. $3,244,800D. $3,606,80025. What is cost of goods manufactured for 20X5?A. $6,384,000B. $6,758,400C. $6,726,400D. $6,617,60026. What is the total fixed cost of the shipping department of Elaine Co. if it has thefollowing information for 2011?Salaries$800,000 75 percent of employees on guaranteed contractsPackaging$400,000 depending on size of item(s) shippedPostage$500,000 depending on weight of item(s) shippedRent of warehouse space$250,000 annual leasea.b.c.d.$850,000$900,000$1,050,000$1,950,00027. Last year, Twins Company reported $750,000 in sales (25,000 units) and a netoperating income of $25,000. At the break-even point, the company's totalcontribution margin equals $500,000. Based on this information, the company's: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.28. Loren Company's single product has a selling price of $15 per unit. Last year thecompany 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 a15% increase in the selling price would reduce unit sales by 10%. If her proposal isadopted, net operating income would:A. increase by $45,000B. increase by $37,500C. increase by $7,500D. increase by $28,50029. 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) $28,000B) $14,000C) $2,000D) $40,00030. 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 fivegallons of ice cream sold, one gallon is Fruity Tooty and the remainder is split evenlybetween Peanut Butter and Rocky Road. Fixed costs for I Scream For Ice Cream are$27,000 and additional information follows:Rocky Road Peanut ButterSales price per pound$ 5.50$ 4.00Variable cost per pound$ 3.00$ 2.00Breakeven sales in dollars for I Scream For Ice Cream isA) $22,275.B) $17,357.C) $60,750.D) $33,750.Fruity Tooty$ 3.50$ 2.5031. For the current year, Paxman Company incurred $150,000 in actual manufacturingoverhead cost. The Manufacturing Overhead account showed that overhead wasoverapplied in the amount of $6,000 for the year. If the predetermined overhead ratewas $8.00 per direct labor-hour, how many hours were worked during the year?A. 19,500 hoursB. 18,000 hoursC. 18,750 hoursD. 17,750 hours32. Here are selected data for Campbell Company:Cost of goods manufacturedWork in process inventory, beginningWork in process inventory, endingDirect materials used$320,000109,000104,00073,000Manufacturing overhead is allocated at 60% of direct labor cost.What was the amount of direct labor costs?A) $78,000B) $162,581C) $151,250D) $242,00033. Job 140 requires $12,000 of direct materials, $6,700 of direct labor, 550 direct laborhours, 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 permachine hour used.The total amount of overhead allocated isA) $34,100.B) $26,740.C) $45,440.D) $15,400.34. The manufacturing overhead budget at Formica Corporation is based on budgeteddirect labor-hours. The direct labor budget indicates that 4,400 direct labor-hours willbe required in October. The variable overhead rate is $8.90 per direct labor-hour. Thecompany's budgeted fixed manufacturing overhead is $86,680 per month, whichincludes depreciation of $16,280. All other fixed manufacturing overhead costsrepresent current cash flows. The company recomputes its predetermined overheadrate every month. The predetermined overhead rate for October should be:A. $19.70B. $24.90C. $8.90D. $28.60Zela Company is preparing its annual profit plan. As part of its analysis of theprofitability of individual products, the controller estimates the amount of overhead thatshould be allocated to the individual product lines from the information provided below.(CMA based)Budgeted material handling costs: $50,00035. Under a traditional costing system that allocates overhead on the basis of direct laborhours, the materials handling costs allocated to one unit of specialty windows wouldbeA. $1,500B. $500C. $2,000D. $5,00036. Under an activity-based costing (ABC) system, the materials handling costs allocatedto one unit of specialty windows would beA. $1,875.00B. $937.50C. $312.50D. $1,500.00Hester Company budgets on an annual basis for its fiscal year. The following beginningand ending inventory levels (in units) are planned for the fiscal year of July 1, 2004through June 30, 2005.July 1, 2004June 30, 2005Raw material140,00010,000Work-in-process8,0008,000Finished goods30,0005,000Three (3) units of raw material are needed to produce each unit of finished product.37.a.b.c.d.38.a.b.c.d.If Hester Company plans to sell 500,000 units during the 20042005 fiscal year, thenumber of units it would have to manufacture during the year would be505,000 units.500,000 units.480,000 units.475,000 units.If 450,000 finished units were to be manufactured during the 20042005 fiscal yearby Hester Company, the units of raw material needed to be purchased would be1,350,000 units.1,360,000 units.1,320,000 units.1,330,000 units.39. Orion Corporation is preparing a cash budget for the six months beginning January 1.Shown below are the company's expected collection pattern and the budgeted salesfor the period.Expected collection pattern:65% collected in the month of sale20% collected in the month after sale10% collected in the second month after sale4% collected in the third month after sale1% uncollectibleBudgeted sales:The estimated total cash collections during April from sales and accounts receivableswould be:A. $155,900B. $167,000C. $171,666D. $173,40040. Information on Pruitt Companys direct-material costs for the month of July 2005 wasas follows:Actual quantity purchasedActual unit purchase priceMaterials purchase-price varianceunfavorable (based on purchases)Standard quantity allowed for actual productionActual quantity used30,000 units$2.75$1,50024,000 units22,000 unitsFor July 2005 there was a favorable direct-materials efficiency variance ofa.$7,950.b.$5,500.c.$5,400.d.$5,600.Berman's Camera Shop has prepared the following flexible budget for September and isin the process of interpreting the variances.FlexibleBudget PriceMaterial AMaterial BDirect laborVariancesEfficiency$40,000$1,000F60,000 500U 1,500F80,000 500U 2,500F$3,000U41. The most likely explanation of the above variances for Material A is that:A) Material A used during September was $2,000 less than expectedB) higher-quality raw materials were used than were plannedC) the company used a higher-priced supplierD) a lower price than expected was paid for Material A42. The actual amount spent for Material B was:A) $58,000B) $59,000C) $60,000D) $61,000The Clark Company makes a single product and uses standard costing. Some dataconcerning this product for the month of May follow:43. The variable overhead rate variance for May was closest to:A. $2,290 FB. $2,290 UC. $1,710 FD. $1,710 U44. The total standard (Budgeted) cost for direct labor for May was closest to:A. $168,000B. $180,000C. $120,000D. $161,00045. The total standard(Budgeted) cost for variable overhead for May was closest to:A. $56,000B. $40,000C. $60,000D. $50,00046. Evans Company produces a single product. During the most recent year, thecompany had a net operating income of $90,000 using absorption costing and$84,000 using variable costing. The fixed overhead application rate was $6 perunit. There were no beginning inventories. If 22,000 units were produced lastyear, then sales for last year were:A. 15,000 unitsB. 21,000 unitsC. 23,000 unitsD. 28,000 units47. Hansen Company produces a single product. During the last year, Hansen had netoperating income under absorption costing that was $5,500 lower than its incomeunder variable costing. The company sold 9,000 units during the year, and its variablecosts were $10 per unit, of which $6 was variable selling expense. If fixed productioncost is $5 per unit under absorption costing every year, then how many units did thecompany produce during the year?A. 7,625 unitsB. 8,450 unitsC. 10,100 unitsD. 7,900 units48. A company that produces and sells a single product has provided the followingvolume and average cost data for two accounting periods:The best estimates of the total fixed cost and variable cost per unit are closest to:A. $2,000 fixed, $1.50 variableB. $2,000 fixed, $7.00 variableC. $3,000 fixed, $7.00 variableD. $3,000 fixed, $8.50 variable49. The cost of goods sold in a retail store totaled $325,000. Fixed selling andadministrative expenses totaled $115,000 and variable selling and administrativeexpenses were $210,000. If the store's contribution margin totaled $590,000, thensales must have been:A. $1,125,000B. $1,030,000C. $915,000D. $650,00050. Pam's Stables used two different independent variables (trainer hours and number ofhorses) in two different equations to evaluate the cost of training horses. The mostrecent results of the two regressions are as follows:Trainer's hours:VariableCoefficientStandard Error t-ValueConstant$913.32$198.124.61Independent Variable $20.90 $2.94 7.11r2 = 0.56Number of horses:VariableCoefficientStandard Error t-ValueConstant$4,764.50$1,073.094.44Independent Variable $864.98$247.143.50r2 = 0.63What is the estimated total cost for the coming year if 16,000 trainer hours are incurredand the stable has 400 horses to be trained, based on the best cost driver?A) $99,929.09B) $350,756.50C) $335,313.32D) $13,844,444.50


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