1. The work-in-process inventory account of a manufacturing
company shows a balance of $3,000 at the end of an
accounting period. The job-cost sheets of the two incomplete
jobs show charges of $500 and $300 for direct
materials, and charges of $400 and $600 for direct labor.
From this information, it appears that the company is
using a predetermined overhead rate as a percentage of
direct labor costs. What percentage is the rate?
2. The break-even point in dollar sales for Rice Company is
$480,000 and the company’s contribution margin ratio
is 40 percent. If Rice Company desires a profit of
$84,000, how much would sales have to total?
3. Williams Company’s direct labor cost is 25 percent of its
conversion cost. If the manufacturing overhead for the
last period was $45,000 and the direct material cost was
$25,000, how much is the direct labor cost?
4. Grading Company`s cash and cash equivalents consist of
cash and marketable securities. Last year the company`s
cash account decreased by $16,000 and its marketable
securities account increased by $22,000. Cash provided
by operating activities was $24,000. Net cash used for
financing activities was $20,000. Based on this information,
was the net cash flow from investing activities on
the statement of cash flows a net increase or decrease?
By how much?
5. Gladstone Footwear Corporation`s flexible budget cost
formula for supplies, a variable cost, is $2.82 per unit of
output. The company`s flexible budget performance report
for last month showed an $8,140 unfavorable spending
variance for supplies. During that month, 21,250 units
were produced. Budgeted activity for the month had
been 20,900 units. What is the actual cost per unit for
indirect materials?
6. Lyons Company consists of two divisions, A and B. Lyons
Company reported a contribution margin of $60,000 for
Division A, and had a contribution margin ratio of 30
percent in Division B, when sales in Division B were
$240,000. Net operating income for the company was
$22,000 and traceable fixed expenses were $45,000. How
much were Lyons Company`s common fixed expenses?
7. Atlantic Company produces a single product. For the most
recent year, the company`s net operating income computed
by the absorption costing method was $7,800, and its net
operating income computed by the variable costing method
was $10,500. The company`s unit product cost was $15
under variable costing and $24 under absorption costing.
If the ending inventory consisted of 1,460 units, how
many units must have been in the beginning inventory
8. Black Company uses the weighted-average method in its
process costing system. The company`s ending work in process
inventory consists of 6,000 units, 75 percent
Complete with respect to materials and 50 percent complete
with respect to labor and overhead. If the total
dollar value of the inventory is $80,000 and the cost per
equivalent unit for labor and overhead is $6.00, what is
the cost per equivalent unit for materials?
9. At Overland Company, maintenance cost is exclusively a
variable cost that varies directly with machine-hours. The
performance report for July showed that actual maintenance
costs totaled $11,315 and that the associated rate
variance was $146 unfavorable. If 7,300 machine-hours
were actually worked during July, what is the budgeted
maintenance cost per machine-hour?
10. The cost of goods sold in a retail store totaled $650,000.
Fixed selling and administrative expenses totaled $115,000
and variable selling and administrative expenses were
$420,000. If the store`s contribution margin totaled
$590,000, how much were the sales?
11. Denny Corporation is considering replacing a technologically
obsolete machine with a new state-of-the-art
numerically controlled machine. The new machine would
cost $600,000 and would have a 10-year useful life.
Unfortunately, the new machine would have no salvage
value. The new machine would cost $20,000 per year to
operate and maintain, but would save $125,000 per year
in labor and other costs. The old machine can be sold
now for scrap for $50,000. What percentage is the simple
rate of return on the new machine rounded to the nearest
tenth of a percent? (Ignore income taxes in this problem.
12. Lounsberry Inc. regularly uses material O55P and currently
has in stock 375 liters of the material, for which it paid
$2,700 several weeks ago. If this were to be sold as is on
the open market as surplus material, it would fetch $6.35
per liter. New stocks of the material can be purchased
on the open market for $7.20 per liter, but it must be
purchased in lots of 1,000 liters. You`ve been asked to
determine the relevant cost of 900 liters of the material
to be used in a job for a customer. What is the relevant
cost of the 900 liters of material O55P?
13. Harwichport Company has a current ratio of 3.0 and
an acid-test ratio of 2.8. Current assets equal $210,000,
of which $5,000 consists of prepaid expenses. The
remainder of current assets
company shows a balance of $3,000 at the end of an
accounting period. The job-cost sheets of the two incomplete
jobs show charges of $500 and $300 for direct
materials, and charges of $400 and $600 for direct labor.
From this information, it appears that the company is
using a predetermined overhead rate as a percentage of
direct labor costs. What percentage is the rate?
2. The break-even point in dollar sales for Rice Company is
$480,000 and the company’s contribution margin ratio
is 40 percent. If Rice Company desires a profit of
$84,000, how much would sales have to total?
3. Williams Company’s direct labor cost is 25 percent of its
conversion cost. If the manufacturing overhead for the
last period was $45,000 and the direct material cost was
$25,000, how much is the direct labor cost?
4. Grading Company`s cash and cash equivalents consist of
cash and marketable securities. Last year the company`s
cash account decreased by $16,000 and its marketable
securities account increased by $22,000. Cash provided
by operating activities was $24,000. Net cash used for
financing activities was $20,000. Based on this information,
was the net cash flow from investing activities on
the statement of cash flows a net increase or decrease?
By how much?
5. Gladstone Footwear Corporation`s flexible budget cost
formula for supplies, a variable cost, is $2.82 per unit of
output. The company`s flexible budget performance report
for last month showed an $8,140 unfavorable spending
variance for supplies. During that month, 21,250 units
were produced. Budgeted activity for the month had
been 20,900 units. What is the actual cost per unit for
indirect materials?
6. Lyons Company consists of two divisions, A and B. Lyons
Company reported a contribution margin of $60,000 for
Division A, and had a contribution margin ratio of 30
percent in Division B, when sales in Division B were
$240,000. Net operating income for the company was
$22,000 and traceable fixed expenses were $45,000. How
much were Lyons Company`s common fixed expenses?
7. Atlantic Company produces a single product. For the most
recent year, the company`s net operating income computed
by the absorption costing method was $7,800, and its net
operating income computed by the variable costing method
was $10,500. The company`s unit product cost was $15
under variable costing and $24 under absorption costing.
If the ending inventory consisted of 1,460 units, how
many units must have been in the beginning inventory
8. Black Company uses the weighted-average method in its
process costing system. The company`s ending work in process
inventory consists of 6,000 units, 75 percent
Complete with respect to materials and 50 percent complete
with respect to labor and overhead. If the total
dollar value of the inventory is $80,000 and the cost per
equivalent unit for labor and overhead is $6.00, what is
the cost per equivalent unit for materials?
9. At Overland Company, maintenance cost is exclusively a
variable cost that varies directly with machine-hours. The
performance report for July showed that actual maintenance
costs totaled $11,315 and that the associated rate
variance was $146 unfavorable. If 7,300 machine-hours
were actually worked during July, what is the budgeted
maintenance cost per machine-hour?
10. The cost of goods sold in a retail store totaled $650,000.
Fixed selling and administrative expenses totaled $115,000
and variable selling and administrative expenses were
$420,000. If the store`s contribution margin totaled
$590,000, how much were the sales?
11. Denny Corporation is considering replacing a technologically
obsolete machine with a new state-of-the-art
numerically controlled machine. The new machine would
cost $600,000 and would have a 10-year useful life.
Unfortunately, the new machine would have no salvage
value. The new machine would cost $20,000 per year to
operate and maintain, but would save $125,000 per year
in labor and other costs. The old machine can be sold
now for scrap for $50,000. What percentage is the simple
rate of return on the new machine rounded to the nearest
tenth of a percent? (Ignore income taxes in this problem.
12. Lounsberry Inc. regularly uses material O55P and currently
has in stock 375 liters of the material, for which it paid
$2,700 several weeks ago. If this were to be sold as is on
the open market as surplus material, it would fetch $6.35
per liter. New stocks of the material can be purchased
on the open market for $7.20 per liter, but it must be
purchased in lots of 1,000 liters. You`ve been asked to
determine the relevant cost of 900 liters of the material
to be used in a job for a customer. What is the relevant
cost of the 900 liters of material O55P?
13. Harwichport Company has a current ratio of 3.0 and
an acid-test ratio of 2.8. Current assets equal $210,000,
of which $5,000 consists of prepaid expenses. The
remainder of current assets
13. Harwichport
Company has a current ratio of 3.0 and
Company has a current ratio of 3.0 and
an acid-test ratio
of 2.8. Current assets equal $210,000,
of 2.8. Current assets equal $210,000,
of which $5,000
consists of prepaid expenses. The
consists of prepaid expenses. The
remainder of
current assets consists of cash, accounts
current assets consists of cash, accounts
receivable,
marketable securities, and inventory. What
marketable securities, and inventory. What
is the amount of
Harwichport Company`s inventory?
Harwichport Company`s inventory?
14. Tolla Company
is estimating the following sales for the
is estimating the following sales for the
first six months
of next year:
of next year:
January $350,000
February $300,000
March $320,000
April $410,000
May $450,000
June $470,000
Sales at Tolla are
normally collected as 70 percent in the
normally collected as 70 percent in the
month of sale, 25
percent in the month following the sale,
percent in the month following the sale,
and the remaining
5 percent being uncollectible. Also, customers
5 percent being uncollectible. Also, customers
paying in the
month of sale are given a 2 percent
month of sale are given a 2 percent
discount. Based on
this information, how much cash
this information, how much cash
should Tolla
expect to collect during the month of April?
expect to collect during the month of April?
15. Trauscht
Corporation has provided the following data
Corporation has provided the following data
from its
activity-based costing system:
activity-based costing system:
The company makes
360 units of product P23F a year,
360 units of product P23F a year,
requiring a total
of 725 machine-hours, 85 orders, and 45
of 725 machine-hours, 85 orders, and 45
inspection-hours
per year. The product`s direct materials
per year. The product`s direct materials
cost is $42.30 per
unit and its direct labor cost is $14.55
unit and its direct labor cost is $14.55
per unit. The
product sells for $132.10 per unit. According
product sells for $132.10 per unit. According
to the
activity-based costing system, what is the product
activity-based costing system, what is the product
margin for product
P23F?
P23F?
16. Williams
Company`s direct labor cost is 30 percent of its
Company`s direct labor cost is 30 percent of its
conversion cost.
If the manufacturing overhead for the
If the manufacturing overhead for the
last period was
$59,500 and the direct materials cost
$59,500 and the direct materials cost
was $37,000, what
is the direct labor cost?
is the direct labor cost?
17. In a recent
period, 13,000 units were produced, and there
period, 13,000 units were produced, and there
was a favorable
labor efficiency variance of $23,000.
labor efficiency variance of $23,000.
If 40,000
labor-hours were worked and the standard
labor-hours were worked and the standard
wage rate was $13
per labor-hour, what would be the
per labor-hour, what would be the
standard hours
allowed per unit of output?
allowed per unit of output?
18. The balance in
White Company`s work-in-process inventory
White Company`s work-in-process inventory
account was
$15,000 on August 1 and $18,000 on
$15,000 on August 1 and $18,000 on
August 31. The
company incurred $30,000 in direct labor
company incurred $30,000 in direct labor
cost during August
and requisitioned $25,000 in raw
and requisitioned $25,000 in raw
materials (all
direct material). If the sum of the debits to
direct material). If the sum of the debits to
the manufacturing
overhead account total $28,000 for the
overhead account total $28,000 for the
month, and if the
sum of the credits totaled $30,000, then
sum of the credits totaled $30,000, then
was Finished Goods
debited or credited? By how much?
debited or credited? By how much?
Activity Cost Pool
Total Cost Total Activity
Total Cost Total Activity
Assembly $704,880
44,000 machine-hours
44,000 machine-hours
Processing orders
$91,428 1,900 orders
$91,428 1,900 orders
Inspection
$117,546 1,950 inspection-hours
$117,546 1,950 inspection-hours
19. A company has
provided the following data:
provided the following data:
Sales 4,000 units
Sales price $80
per unit
per unit
Variable cost $50
per unit
per unit
Fixed cost $30,000
If the dollar
contribution margin per unit is increased
contribution margin per unit is increased
by 10 percent,
total fixed cost is decreased by 15 percent,
total fixed cost is decreased by 15 percent,
and all other
factors remain the same, will net operating
factors remain the same, will net operating
income increase or
decrease? By how much?
decrease? By how much?
20. For the
current year, Paxman Company incurred
current year, Paxman Company incurred
$175,000 in actual
manufacturing overhead cost. The
manufacturing overhead cost. The
manufacturing
overhead account showed that overhead
overhead account showed that overhead
was overapplied in
the amount of $9,000 for the year.
the amount of $9,000 for the year.
If the
predetermined overhead rate was $8.00 per
predetermined overhead rate was $8.00 per
direct labor-hour,
how many hours were worked
how many hours were worked
during the year?
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