Final Practice with Solutions
Final Practice Key
1. Bridget Company uses activity-based costing. The company has two products: A and B. The annual production and sales of Product A is 2,000 units and of Product B is 3,000 units. There are three activity cost pools, with estimated total cost and expected activity as follows:
The overhead cost per unit of Product A under activity-based costing is closest to:
A. $6.00
B. $9.60
C. $8.63
D. $13.80
2. Austin Wool Products purchases raw wool and processes it into yarn. The spindles of yarn can then be sold directly to stores or they can be used by Austin Wool Products to make afghans. Each afghan requires one spindle of yarn. Current cost and revenue data for the spindles of yarn and for the afghans are as follows:
Each month 4,000 spindles of yarn are produced that can either be sold outright or processed into afghans.
If Austin chooses to produce 4,000 afghans each month, the change in the monthly net operating income as compared to selling 4,000 spindles of yarn is:
A. $24,000 decrease
B. $24,000 increase
C. $16,000 decrease
D. $16,000 increase
3. The actual manufacturing overhead incurred at Hogans Corporation during April was $59,000, while the manufacturing overhead applied to Work in Process was $74,000. The company's Cost of Goods Sold was
$289,000 prior to closing out its Manufacturing Overhead account. The company closes out its Manufacturing
Overhead account to Cost of Goods Sold. Which of the following statements is true?
A. Manufacturing overhead was overapplied by $15,000; Cost of Goods Sold after closing out the
Manufacturing Overhead account is $274,000
B. Manufacturing overhead was underapplied by $15,000; Cost of Goods Sold after closing out the
Manufacturing Overhead account is $274,000
C. Manufacturing overhead was overapplied by $15,000; Cost of Goods Sold after closing out the
Manufacturing Overhead account is $304,000
D. Manufacturing overhead was underapplied by $15,000; Cost of Goods Sold after closing out the
1. Bridget Company uses activity-based costing. The company has two products: A and B. The annual production and sales of Product A is 2,000 units and of Product B is 3,000 units. There are three activity cost pools, with estimated total cost and expected activity as follows:
The overhead cost per unit of Product A under activity-based costing is closest to:
A. $6.00
B. $9.60
C. $8.63
D. $13.80
2. Austin Wool Products purchases raw wool and processes it into yarn. The spindles of yarn can then be sold directly to stores or they can be used by Austin Wool Products to make afghans. Each afghan requires one spindle of yarn. Current cost and revenue data for the spindles of yarn and for the afghans are as follows:
Each month 4,000 spindles of yarn are produced that can either be sold outright or processed into afghans.
If Austin chooses to produce 4,000 afghans each month, the change in the monthly net operating income as compared to selling 4,000 spindles of yarn is:
A. $24,000 decrease
B. $24,000 increase
C. $16,000 decrease
D. $16,000 increase
3. The actual manufacturing overhead incurred at Hogans Corporation during April was $59,000, while the manufacturing overhead applied to Work in Process was $74,000. The company's Cost of Goods Sold was
$289,000 prior to closing out its Manufacturing Overhead account. The company closes out its Manufacturing
Overhead account to Cost of Goods Sold. Which of the following statements is true?
A. Manufacturing overhead was overapplied by $15,000; Cost of Goods Sold after closing out the
Manufacturing Overhead account is $274,000
B. Manufacturing overhead was underapplied by $15,000; Cost of Goods Sold after closing out the
Manufacturing Overhead account is $274,000
C. Manufacturing overhead was overapplied by $15,000; Cost of Goods Sold after closing out the
Manufacturing Overhead account is $304,000
D. Manufacturing overhead was underapplied by $15,000; Cost of Goods Sold after closing out the