Accounting – Study Practice

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Question 1: At the high level of activity in November, 7,000 machine hours were run and power costs were $12,000. In April, a month of low activity, 2,000 machine hours were run and power costs amounted to $6,000. Using the high-low method, the estimated fixed cost element of power costs is?

Variable Cost per machine hour = (12000-6000)/(7000-2000)=$1.2 per Machine Hour

Fixed Cost Element = 12000-(7000*1.2)= $3600

Question 2: Hartley, Inc. has a product with a selling price per unit of $200, the unit variable cost is $75, and the total monthly fixed costs are $300,000. How much is Hartley’s contribution margin ratio?

Contribution Margin Ration = (200-75)/200= .625 or 62.5%

Question 3: Kemper Company’s direct materials budget shows total cost of direct materials purchases for April $200,000, May $240,000 and June $280,000. Cash payments are 60% in the month of purchase and 40% in the following month. The budgeted cash payments for June are:

Budgeted Cash Payment = 280000*60% + 240000*40%= $264,000

Question 4: On January 1, Dooley Company has a beginning cash balance of $63,000. During the year, the company expects cash disbursements of $510,000 and cash receipts of $435,000. If Dooley requires an ending cash balance of $60,000, Dooley Company must borrow:

Amount Company must Borrow =(510,000+60000)-(63000+435000)= $72000

MULTIPLE CHOICE

From an internal control standpoint, the asset most susceptible to improper diversion and use is

  1. Prepaid insurance
  2. Cash
  3. Building
  4. Land

Manufacturing costs that cannot be classified as either direct materials or direct labor are known as

  1. Period costs
  2. Nonmanufacturing costs
  3. Selling and administrative expenses
  4. Manufacturing overhead

 A manufacturing process requires small amounts of glue. The glue used in the production process is classified as a(n)

  1. Period cost
  2. Indirect material
  3. Direct material
  4. Miscellaneous expense

Sales are $500,000 and variable costs are $350,000. What is the contribution margin ratio?

  1. 43%
  2. 30%
  3. 70%
  4. Cannot be determined because amounts are not expressed per unit.

A company desires to sell a sufficient quantity of products to earn a profit of $180,000. If the unit sales price is $20, unit variable cost is $12, and total fixed costs are $360,000, how many units must be sold to earn net income of $180,000?

  1. 101,250 units
  2. 67,500 units
  3. 54,000 units
  4. 40,500 units


If a check correctly written and paid by the bank for $428 is incorrectly recorded on the company’s books for $482, the appropriate treatment on the bank reconciliation would be to

  1. Add $54 to the bank’s balance
  2. Add $54 to the book’s balance
  3. Deduct $54 from the bank’s balance
  4. Deduct $428 from the book’s balance

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Hayward Manufacturing Company developed the following data

Beginning work-in-process inventory $270,000
Direct materials used 210,000
Actual overhead 330,000
Overhead applied 240,000
Cost of goods manufactured 360,000
Ending work in process 450,000

Hayward Manufacturing Company’s total manufacturing costs for the period is

  1. $570,000
  2. $540,000
  3. $390,000
  4. Cannot be determined from the data provided

The increased use of automation and less use of the work force in companies has caused a trend towards an increase in

  1. Both variable and fixed costs
  2. Fixed costs and a decrease in variable costs
  3. Variable costs and a decrease in fixed costs
  4. Variable costs and no change in fixed costs

When a job is completed and all costs have been accumulated on a job cost sheet, the journal entry that should be made is

tablepdf

Job cost sheets constitute the subsidiary ledger for the

  1. Finished Goods Inventory account
  2. Cost of Goods Sold account
  3. Work-in-Process Inventory account
  4. Cost of Goods Manufactured account

 

In CVP analysis, the term cost

  1. Includes only manufacturing costs
  2. Means cost of goods sold
  3. Includes manufacturing costs plus selling and administrative expenses
  4. Excludes all fixed manufacturing costs

Which of the following is not a manufacturing cost category?

  1. Cost of goods sold
  2. Direct materials
  3. Direct labor
  4. Manufacturing overhead

 

Vektek, Inc. thinks machine hours is the best activity base for its manufacturing overhead. The estimate of annual overhead costs for its jobs was $820,000. The company used 1,000 hours of processing on Job No. B12 during the period and incurred overhead costs totaling $840,000. The budgeted machine hours for the year totaled 20,000. How much overhead should be applied to Job No. B12?

  1. $840
  2. $41,000
  3. $42,000
  4. $820

 

For inventoriable costs to become expenses under the matching principle

  1. The product must be finished and in stock
  2. The product must be expensed based on its percentage of completion
  3. The product to which they attach must be sold
  4. All accounts payable must be settled

From an internal control standpoint, the asset most susceptible to improper diversion and use is

 

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