Assume that activity cost is $93,000, predetermined total overhead is $120,000, actual
overhead is $98,000, and the company has three product lines, the activity rate is
a. $32,667 per product line
b. $31,000 per product line
c. $40,000 per product line
d. None of these answer choices are correct.
Kevin Jarvis is the controller of Bitterroot Industries. Kevin prepared the following
budgeted income statement at various levels of sales. After careful review of the
budgeted income statements, and after discussions with the sales and production
managers, the CEO determines that the best alternative is to base the budget on a sales
volume of 30,000 units.
Actual results for the year were 28,000 units, reflected in the following income
statement:
What is the flexible budget variance for direct labor?
a. $14,000 favorable
b. $14,000 unfavorable
c. $16,000 favorable
d. $30,000 unfavorable
Welk’s Weekend Spa charges $75 for a two-hour all natural facial treatment. It pays a
$500 annual charge plus $10 per hour for a facial massage machine used during the
treatment.
Required:
a.What is Welk’s total annual cost for the facial machine if 30 facials are sold? If 40 are
sold? If 50 are sold?
b.What is the company’s cost per facial for the machine if 30 facials are sold? If 40 are
sold? If 50 are sold?
c.Why does the machine’s cost per facial differ at the three levels of activity?
Which of the following is not a step in preparing the direct materials purchases budget?
a. Enter the budgeted sales from the sales budget.
b. Calculate the direct materials production needs by multiplying the number of units to
be produced by the direct materials standard quantity for one unit.
c. Calculate the total direct materials required for the period by adding the ending
inventory to the direct materials production needs.
d. All of these answer choices are steps in preparing the direct materials purchases
budget.
The practice of using data from other organizations to identify the processes and
practices associated with world-class performance is referred to as
a. Benchmarking.
b. Dashboarding.
c. Industry flowcharting.
d. Scorecarding.
Which of the following is a similarity between job order costing and process costing
systems?
a. Both mass-produce identical products
b. Both accumulate direct materials, direct labor and manufacturing overhead costs
c. Both accumulate product cost on a departmental production report
d. None of these answer choices are similarities between job costing and process
costing systems.
The managers of Red Heart Draperies are planning for the upcoming year. In years past,
the company has applied overhead based on direct labor costs. However, management
believes that direct labor hours are a better basis for applying overhead and plans to use
direct labor hours to apply overhead for the upcoming year.
What is the predetermined overhead rate for the upcoming year(round all answers to the
nearest cent)?
a. $18.60/DLH
b. $21.82/DLH
c. $1.17/DLH
d. $.85/DLH
The formula for the contribution margin ratio is
a.Contribution margin divided by sales
b.Contribution margin divided by net income
c.Contribution margin divided by gross profit
d.Contribution margin divided by (sales less variable costs)
The formula for calculating ROI is
a. Segment margin divided by average operating assets.
b. Segment margin divided by internal rate of return.
c. Internal rate of return divided by average operating assets.
d. None of these answer choices are correct.
A traditional GAAP income statement does not help managers predict the financial
results of their decisions because the format of the statement is based on cost function
rather than cost behavior. Which of the following is not classified as a cost function?
a.Product
b.Sales
c.Administration
d.Variable
Which of the following is a suggested source for forecasting sales for a new business?
a. Industry projections
b. Market data
c. Both industry projections and market data.
d. Neither industry projections nor market data.
Dusk Industries produces industrial convection ovens. For the year, management
estimated that total manufacturing overhead would be $3,079,980. Management
decided to use direct labor hours to apply manufacturing overhead and budgeted
144,600 direct labor hours. The following information was compiled before an
adjustment had been made to close Manufacturing Overhead Control:
If Dusk closes the entire amount of under-or overapplied overhead to Cost of Goods
Sold, what was the ending balance in that account?
a. $4,846,610
b. $4,830,422
c. $4,897,578
d. $4,864,000
The formula used in preparing a common-size balance sheet is
a. Individual Asset Account Balance Total Assets
b. Individual Asset Account Balance Previous Year Account Balance
c. Current Year Account Balance – Previous Year Account Balance Previous Year
Account Balance
d. Individual Asset Account Balance Total Assets and Liabilities
The price at which the exchange between divisions takes place is referred to as
a. Intercompany relay price.
b. Transfer price.
c. Both intercompany relay price and transfer price.
d. Neither intercompany relay price nor transfer price.
An investment center manager ‘s performance can be based on
a. The same methods as managers of cost centers.
b. The same methods as managers of profit centers.
c. Either the same methods as managers of cost centers or the same methods as
managers of profit centers.
d. Neither the same methods as managers of cost centers nor the same methods as
managers of profit centers.
Comprehensive Cash Budget’ƒSedona Gear Company a rapidly growing distributor of
camping equipment, is formulating its plants for the coming year. Cody Mosbay, the
firm ‘s marketing director, has completed the following sales forecast.
Patti Bodkin, an accountant in the Planning and Budgeting Department, is responsible
for preparing the cash flow projection. She has gathered the following information.
– All sales are made on credit.
– Sedona ‘s excellent record in accounts receivable collection is expected to continue,
with 65 percent of billings collected in the month after sale and the remaining 35
percent collected in the second month after the sale.
– Cost of goods sold, Sedona ‘s largest expense, is estimated to equal 45 percent of sales
dollars. Seventy percent of inventory is purchased one month prior to sale and 30
percent during the month of sale. For example, in April, 30 percent of April cost of
goods sold is purchased and 70 percent of May cost of goods sold is purchased.
– All purchases are made on account. Historically, 70 percent of accounts payable have
been paid during the month of purchase, and the remaining 30 percent in the month
following purchase. Required:
a. Prepare the cash receipts budget for the second quarter.
b. Prepare the purchases budget for the second quarter.
c. Prepare the cash payments budget for the second quarter.
Summer Time Sports operates an ocean side rental stand for motorcycles, bicycles, and
small watercraft along with umbrellas, chairs, toys and rubber rafts. Because several
other stands are in the area, it is important for Summer Time to remain competitive.
Summer Time must generate enough cash revenue during the summer to carry it
through the slower winter months.
Required:
Identify two measures for each of the four balanced scorecard perspectives that will
help Summer Time to achieve its strategy.
Learning and Growth perspective:
1>
2>
Internal Business Processes perspective:
1>
2>
Customer perspective:
1>
2>
Financial perspective
1>
2>
ABC Manufacturing is evaluating two capital projects. The company’s choice will be
based on the profitability index. Project #1 has a present value of cash flows of
$200,000 and a net initial investment of $180,000 while Project #2 has a present value
of future cash flows of $820,000 and a net initial investment of $800,000. Which
project will ABC choose? Why?
The following list includes activities that are performed in a manufacturing company
that produces children’s toys. . Classify each activity as value-added or non-value
added.
Ethan Allen Interiors, Inc. is a leading manufacturer and retailer of furniture and home
decorating accessories. Classify the following costs by placing an “X” in the
appropriate columns.
The following balances were gathered from Brandon Company’s general ledger.
Required:
Using the indirect method, prepare the cash flows provided by operating activities
section of Brandon’s statement of cash flows.
Outfitters, Inc. is a manufacturer of ultra-light sleeping bags. Budgeted production is
20,000 units for January and 18,000 for February and 15,000 for March. Each sleeping
bag requires two hours of direct labor. The standard wage rate is $8.
Required:
Prepare a direct labor budget for the first quarter.
Custom Design manufactures t-shirts for new parents and grandparents by turning a
client ‘s newborn baby ‘s picture into a design on the shirt. The following information
has been provided by various units within Custom Design ‘s departments. The company
purchases cotton t-shirts in bundles of 100 at a price of $400 per bundle. Custom
Design has to pay shipping charges of $10 per bundle. The process of transferring
pictures onto the shirts costs $0.75 per shirt. Each shirt is boxed in a cardboard box that
costs $0.15 each. It takes one worker 10 minutes to prepare a shirt and transfer the
picture onto the shirt and another worker 5 minutes to check the shirt for flaws in the
printing and package the shirt. Workers are paid $7 per hour. Custom Design applies
overhead at a rate of 100% of direct labor cost.
Required:
Compute the standard cost of producing one t-shirt.
Paris Manufacturing Company Inc. uses 400 units of Part #4317 each year in the
manufacture of one of its products. The company currently produces the part internally,
but an outside supplier has offered to provide the part at a price of $20 per part. If Paris
chooses to purchase the part from the outside supplier, one third of it ‘s the fixed
manufacturing overhead will be eliminated. The company ‘s standard unit cost of
producing the part is listed below.
Required
Ignoring qualitative factors, should Paris continue to make the parts internally or
purchase them from the outside supplier? Why?
Last year Boxer Corporation had net income of $24,000, income tax expense of $7,200
and interest expense of $2,000. What is Boxer’s times interest earned ratio?