Joint products A and B emerge from common processing that costs $150,000 and yields
8,000 units of Product A and 4,000 units of Product B. Product A can be sold for $100
per unit. Product B can be sold for $80 per unit. What amount of the joint costs will be
assigned to Product B if joint costs are allocated on the basis of number of units
produced? (Do not round your intermediate calculations.)
A. $42,857
B. $66,667
C. $50,000
D. $100,000
Which of the following would not be included in the cash budget?
A. Receipts from customers
B. Ending cash balance
C. Interest expense
D. Depreciation expense
Which of the following is an incorrect statement regarding variances?
A. A variance is favorable when expected sales are more than actual sales.
B. A variance is a difference between budgeted and actual amounts.
C. A variance can be calculated for both revenues and expenses.
D. A variance can be both favorable and unfavorable.
Benton Company’s sales budget shows the following expected total sales:
The company expects 80% of its sales to be on account (credit sales). Credit sales are
collected as follows: 25% in the month of sale, 72% in the month following the sale
with the remainder being uncollectible and written off. The total cash inflows from
sales in April would be:
A. $16,000.
B. $28,160.
C. $24,640.
D. $36,160.
The following income statements are provided for two companies operating in the same
industry
Assuming sales increase by $1,000, select the correct statement from the following:
A. Felix’s net income will be more than Jinx’s.
B. Both companies will experience an increase in profit.
C. Felix’s net income will increase by $250.
D. Jinx’s net income will increase by 6%.
Jarvis Company produces a product that has a selling price of $20.00 and a variable
cost of $15.00 per unit. The company’s fixed costs are $50,000. What is the break-even
point measured in sales dollars?
A. $150,000
B. $200,000
C. $62,500
D. $100,000
What is the amount of sales commissions payable that the company will report on its
pro forma balance sheet at the end of the fourth quarter?
A. $5,500
B. $5,000
C. $5,300
D. $11,000
Scholastic Tours is trying to decide which one of two tours it will introduce. The costs
and revenues associated with each alternative are listed below:
What are the incremental (differential) costs of the Western Tour?
A. $4,000
B. $6,000
C. $8,000
D. None of these.
Which of the following items is qualitative?
A. Cost of new machine
B. Depreciation of existing machine
C. Book value of the existing machine
D. Degree to which the new machine can be integrated with existing machinery
What is the result when the actual rate paid for labor is less than the standard rate?
A. A favorable labor price variance
B. An unfavorable labor price variance
C. A favorable labor usage variance
D. An unfavorable labor usage variance
Performance Bicycle Company makes steel and titanium handle bars for bicycles. It
requires approximately 1 hour of labor to make one handle bar of either type. During
the most recent accounting period, Barr Company made 7,000 steel bars and 3,000
titanium bars. Setup costs amounted to $84,000. One batch of each type of bar was run
each month. If a single company-wide overhead rate based on direct labor hours is used
to allocate overhead costs to the two products, the amount of setup cost assigned to the
steel bars will be:
A. $8,400.
B. $84,000.
C. $49,000.
D. $58,800.
In April 2014, the Assembly Department’s beginning work in process was 10,000 units.
During the month, 40,000 units were transferred to the Finishing Department. The
Assembly Department had 20,000 units that were 60 percent complete in its ending
work in process. The Assembly Department’s total product costs for April were
$260,000.
Required:
(A) Calculate the number of equivalent whole units for the Assembly Department.
(B) Calculate the cost per equivalent whole unit.
(C) Determine the cost of the goods transferred to the Finishing Department.
(D) Determine the cost of the Assembly Departments ending work in process.
Based on the following cost data, items labeled (a) and (b) in the table below are which
of the following amounts, respectively?
A. (a) = $3.00; (b) = $3.00
B. (a) = $5.00; (b) = $4.00
C. (a) = $2.50; (b) = $2.00
D. (a) = $5.00; (b) = $2.00
Furst Company pays production workers’ salaries on account. The cost will be
recognized as an expense when:
A. the goods made by the production workers are sold.
B. the manufacturing process is complete.
C. the cash is paid to settle the associate account payable.
D. none of these.
Rocky Mountain Bottling Company produces a soft drink that is sold for a dollar. At
production and sales of 800,000 units, the company pays $600,000 in production costs,
half of which are fixed costs. At that volume, general, selling, and administrative costs
amount to $250,000 of which $70,000 are fixed costs. What is the amount of
contribution margin per unit?
A. $0.400
B. $0.5375
C. $0.250
D. None of these is correct.
All of the following are additions to net income when preparing the statement of cash
flows under the indirect method except:
A. losses on sales of long term assets.
B. a decrease in accounts payable.
C. a decrease in prepayments.
D. a decrease in accounts receivable.
Which of the following statements regarding a process cost system is false?
A. Use of a process cost system would be appropriate for a company that manufactures
luxury yachts.
B. Unit costs are computed for each department.
C. The number of equivalent whole units for a period takes into account the stage of
completion of ending work in process inventory.
D. Unit cost is determined for a designated period of time.
A capital investment project may provide cash inflows from:
A. incremental revenues.
B. cost savings.
C. the salvage value of the investment.
D. all of these answers are correct.
Select the incorrect statement regarding cost flows through a job-order cost system.
A. Product costs are accumulated separately by job.
B. The job order cost system is patterned after the physical flow of products as they
move through the production process.
C. The three inventory accounts used are maintained on a perpetual basis.
D. Costs are averaged for all jobs produced within a department.
Janelle Bates has just inherited $250,000 from her uncle’s estate. She is considering
opening a small sewing and fabric shop. She would need to purchase inventory costing
$50,000. Janelle plans to rent a shop in a local shopping center for $12,000 per year.
Fixtures, display equipment, and furniture will cost $18,000 and will be depreciated
$3,000 per year for 5 years to its expected salvage value of $3,000. Operating costs will
amount to $25,000 per year. Janelle estimates her revenues from sales and sewing
services will total $65,000. Because Janelle believes she can earn a 10% return by
investing in mutual funds, she does not want to start the business unless she can earn at
least this rate. Ignore income taxes.
Required:
1) Prepare a schedule of expected cash flows for the proposed investment by
completing the table provided below. In column 1 enter a brief description of the cash
flow. In column 2 indicate whether the cash flow is an inflow (I) or an outflow (O). In
column 3 enter the years in which the cash flow will occur. For example, if the cash
flow occurs immediately enter a 0. If the cash flow occurs each year enter 1-5, etc. In
column 4 enter the cash flow amount.
2) What is the initial outlay for this capital investment (the amount of the cash flow at
time = 0)?
3) What is the amount of the annual net cash flow for this capital investment?
4) What is the net present value of the proposed venture? Should Janelle proceed?
The Broaddus Company has requested a performance report that reports both sales
activity variances and flexible budget variances. The following table of information is
provided:
Required:
1) Compute and enter variances in columns 3 and 6. In column 3, enter the variance
(difference) between column 2 and column 5; in column 4, label the variance as
favorable (F) or unfavorable (U). In column 6, enter the variance between columns 5
and 8, and in column 7 indicate whether this variance is favorable or unfavorable.
2) Which column contains sales volume variances, and which column contains flexible
budget variances?
3) Comment on this company’s performance.
What benefits may result from use of a just in time system?
What is a primary drawback with examining and comparing absolute amounts from two
businesses’ financial statements?
Denver Corporation and Cheyenne Company are in different industries. Denver’s
current ratio is 1.89, while Cheyenne’s current ratio is 1.65. Therefore, is it safe to
conclude that Denver’s liquidity position is better than that of Cheyenne?
What is the high-low method used for?
Heavener Company produces and sells storage sheds. Its current sales are $500,000.
The company’s accountant provided the following cost information:
Required:
1) Compute the product’s contribution margin ratio.
2) Compute the company’s current net income.
3) Compute the product’s break-even point in dollars.
4) Compute the amount of revenue necessary to earn $60,000 in profit.
5) Compute the company’s current margin of safety ratio.
6) Should the company accept a proposal that increases sales by 20% and total fixed
costs by 25%?