1. Under Ricky Co.’s job order costing system, manufacturing overhead is applied to work in process using a predetermined annual overhead rate. During January, Ricky’s transactions included the follo


Under Ricky Co.’s job order costing system, manufacturing overhead is applied to work in process using a predetermined annual overhead rate. During January, Ricky’s transactions included the following:

Direct materials issued to production $ 90,000

Indirect materials issued to production $ 8,000

Manufacturing overhead incurred $125,000

Manufacturing overhead applied $113,000

Direct labor costs $107,000

Ricky had neither beginning nor ending work-in-process inventory. What was the cost of jobs completed in January?

a. $302,000

b. $310,000

c. $322,000

d. $330,000


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

a. $10,000 favorable

b. $20,000 favorable

c. $10,000 unfavorable

d. $20,000 unfavorable


During June, Dinky Co. experienced scrap, normal spoilage, and abnormal spoilage in its manufacturing process. The cost of units produced includes

a. Scrap, but not spoilage

b. Normal spoilage, but neither scrap nor abnormal spoilage

c. Scrap and normal spoilage, but not abnormal spoilage

d. Scrap, normal spoilage, and abnormal spoilage


Veggie Corp. uses a standard cost system. In May, Veggie purchased and used 17,500 pounds of materials at a 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?

a. $17,500 favorable

b. $17,500 unfavorable

c. $15,000 favorable

d. $15,000 unfavorable


Kaffy Caterers quotes a price of $60 per person for a 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 Kaffy price the food?

a. $56.40

b. $51.00

c. $49.22

d. $47.40


Product Cott has sales of $200,000, a contribution margin of 20%, and a margin of safety of $80,000. What is Cott’s fixed cost?

a. $16,000

b. $24,000

c. $80,000

d. $96,000


Nonfinancial measures provide information about

A. the economic effect of operations and decisions

B. aspects of operations that cannot be measured in dollars

C. the dollar value of a particular cost containment strategy

D. the operating margin


Why is the evaluation of subunits and subunit managers important?

A. It helps determine whether or not to expand or contract operations.

B. It encourages manager motivation to take actions that maximize the value of the firm.

C. Both a and b.

D. They should not be evaluated separately.


Which of the following is a problem with the ROI calculation?

A. Increased profits cause ROI to decrease.

B. Investment in assets is measured using current value costs.

C. An undue emphasis on ROI may lead managers to delay the purchase of modern equipment needed to stay competitive.

D. It does not hold managers responsible for assets.


Beam Company currently has 100,000 shares of common stock outstanding and a price-earnings ratio of seven. Net income for the recently ended year is $375,000. Beam’s board of directors declared a 15-for-2 stock split. Sunshine owned 100 shares of Beam before the split. What is the approximate value of Sunshine’s investment in Beam immediately after the split?

a. $ 26

b. $ 350

c. $2,625

d. $5,250

Please show me how you get your answer:

Problem 1

The Frackle Department is the first of a two-stage production process. Spoilage is identified when the

units have completed the Forming process. Costs of spoiled units are assigned to units completed and

transferred to the second department in the period spoilage is identified. The following information

concerns Forming’s conversion costs in May:

Units Conversion costs

Beginning work-in-process (50% complete) 2,000 $10,000

Units started during May 8,000 75,500

Spoilage—normal 500

Units completed & transferred 7,000

Ending work-in-process (80% complete) 2,500

Using the weighted average method, what was Forming’s conversion cost transferred to the second production department?

Problem 2

BadBoy, Inc. makes two products, X and Y, that require allocation of indirect manufacturing costs. The following data was compiled by the accountant before making any allocations:

Product X Product Y

Quantity produced 10,000 20,000

Direct manufacturing labor hours 15,000 5,000

Setup hours 500 1,500

The total cost of setting up manufacturing processes and equipment is $400,000. The company uses a

job-costing system with a single indirect cost rate. Under this system, allocated costs were $300,000 and

$100,000 for X and Y, respectively. If an activity-based system is used, what would be the allocated

costs for each product?

Product X = ?? Product Y = ???

Problem 3

Universal Company has made changes in its inventory handling policies that are expected to increase turnover from 7 to 8 times per year. Unity’s budgeted sales and costs of sales for the next year are $42 million and $28 million, respectively. At a 6% interest rate, what are Unity’s expected savings from the lower inventory level?

Problem 4

Para Co. is reviewing the following data relating to an energy saving investment proposal:

Cost $50,000

Residual value at the end of 5 years 10,000

Present value of an annuity of 1 at 12% for 5 years 3.60

Present value of 1 due in 5 years at 12% 0.57

What would be the annual savings needed to make the investment realize a 12% yield?

Leave a Comment