1) What internal control procedures should a business adopt with respect to cash
payments?
2) In 2012, Ohio Company sold 50,000 of its only product at a selling price of $30 per
unit. Variable costs were $16 per unit, and Ohio’s margin of safety for the year was
20,000 units.
Required:
Calculate Ohio’s margin of safety ratio for 2012 .
What was the amount of Ohio’s fixed costs for 2012?
3) How does the treatment of goodwill differ between the US and the United Kingdom?
4) Describe what is meant by the term “Goodwill.”
5) Groovy Music Company produces compact discs of background music for
restaurants and other retail shops. Its disc recording machines are capable of producing
50 discs per hour, and Groovy Music has a total of 5,000 machine hours of capacity.
The unit-related cost of producing most discs is $3.00. The discs sell for $12.00 each.
Food Mood Music Co. has approached Groovy Music with an offer to buy 10,000
copies of a disc for $9.00. Groovy Music estimates that for this special order the
unit-related cost of producing the disc will be $5.00. In addition, to accept the special
order, Groovy Music will have to purchase an additional special-purpose machine that
will cost $6,000.
Required:
Assume that existing demand for Groovy Music’s compact discs is 200,000 units.
Prepare an analysis that indicates whether or not the special order should be accepted.
6) Indicate whether each of the following statements about costs is true or false.
1>Research and development costs are treated as product costs
2>Indirect labor cost is classified as a general, selling, and administrative cost
3>Indirect materials are classified as period costs
4>Direct materials are classified as product costs
5>Sales commissions and salaries paid to sales personnel are part of general, selling,
and administrative costs
7) Is depreciation on manufacturing equipment expensed in the period incurred?
Explain why or why not.