Cash receipts budget with discounts’ƒGarden Gnomes Company produces various types
of lawn ornaments. The company ‘s sales budget for the first six months of the coming
year is as follows. All sales are made on credit.
Garden Gnomes is planning to change its credit policies in the coming year. For the first
time in its history, the company is offering a 2 percent discount to customers who pay
within 15 days of the invoice date. Based on industry trends, Garden Gnomes estimates
that this change will result in 60 percent of credit sales being paid within the discount
period; another 20 percent of sales, within the month of sale (but outside of the discount
period); and another 15 percent of sales, during the month after the sale. An estimated 5
percent of sales will be uncollectible. Required: a. Prepare Garden Gnomes ‘ cash
receipts budget for the second quarter of the coming year.
b. How much cash will Garden Gnomes sacrifice in the second quarter by offering the
new discount?
c. What do you think led Garden Gnomes to offer the new discount to customers?
Barry Co. manufactures leather briefcases and carryalls. Barry ‘s production manager
has provided the following production budget. Each briefcase or carryall requires 1.2
yards of leather fabric and Barry maintains an ending inventory of leather fabric equal
to 25% of the next month ‘s production needs.
If each yard of leather fabric costs $8.60, how much should Barry budget for purchases
of fabric in April?
a. $784,320
b. $629,520
c. $619,200
d. $524,600
The Delta division of Georgia Corporation generated division generated net revenues of
$6,000,000 and variable expenses of $3,500,000 during the year. If direct fixed costs
were $1,000,000 and the segment margin was $1,500,000, what are the common
corporate fixed costs?
a. $1,500,000
b. $4,500,000
c. $5,00,000
d. The answer cannot be determined from the information given.
Which of the following is least likely to be in a company ‘s code of ethics?
a.Profit margin expected
b.Transparency of information
c.Political activity
d.Commitment to the environment
The costs that should be included in an outsourcing decision are the:
a. Sunk costs.
b. Recurring costs.
c. Relevant costs.
d. All of these answer choices are correct.
Which of the following is not a type of unethical behavior employees might observe?
a.Requiring employees to sign an acknowledgement they understand and will adhere to
the corporate code of conduct.
b.Putting one ‘s own interest ahead of the organization ‘s interest.
c.Misreporting of hours worked.
d.Lying to employees.
Unit 1-3,
Which of the following is not a use of trend analysis?
a. For revealing more information about performance than is revealed by just one year’s
worth of change
b. For comparing changes in related accounts.
c. To measure liquidity
d. All of these answer choices are uses of trend analysis
Since a mixed cost has both a fixed and a variable component,
a.Neither total cost nor unit cost will vary with changes in the level of activity.
b.Total cost will vary with changes in the level of activity, but unit cost will not.
c.Unit cost will vary with changes in the level of activity, but total cost will not.
d.Both the total cost and the unit cost will vary with changes in the level of activity.
Brandi’s Bakery’s current degree of operating leverage is 15. Additional advertising is
expected to increase her sales by 8%. What is the expected impact on operating
income?
a. 12%
b. 53%
c. 120%
d. 187%
On the breakeven graph, the point at which the total sales revenue line and the total cost
line intersect is called
a. Contribution margin.
b. Breakeven point.
c. Net income.
d. Operating income.
Raw Materials Inventory increases when
a. Materials are purchased.
b. Materials are used.
c. Materials are transferred to Work in Process.
d. Goods are sold.
Assembly line workers at Thompson Manufacturing worked a total of 12,000 direct
labor hours to produce 36,000 units. The standard for producing one unit is 15 minutes
at a wage rate of $10. If the actual wage rate was $10.50 per direct labor hour,
Thompson’s direct labor rate variance is
a. $6,000 favorable
b. $6,000 unfavorable
c. $4,500 favorable
d. $4,500 unfavorable
Which of the following is a method companies use to reduce their labor costs?
a. Paying overtime to get a job done in fewer days
b. Offshoring
c. Both paying overtime to get a job done in fewer days and offshoring.
d. None of these answer choices are correct.
Sienna Company produces earrings, bracelets, and necklaces that are in high demand.
Following is information for each of these products:
Sienna has 2,000 machine hours available each month. Demand for each item exceeds
Sienna ‘s capacity to produce the item. In order to maximize the company ‘s total
contribution margin, in what sequence should Sienna fill orders for the three products?
a. Necklaces first, then bracelets, then earrings.
b. Earrings first, then necklaces, then bracelets.
c. Bracelets first, then earrings, then necklaces.
d. Necklaces first, then earrings, then bracelets.
Which of the following is one of the major reasons that small businesses fail?
a. Inadequate cash flow
b. Inadequate net income
c. Inadequate earnings per share
d. Inadequate assets
Andrea Kris is opening a small flower shop that will focus primarily on delivery, but
will provide a small showroom for walk-in customers. A local florist is retiring and
selling her small flower shop to Andrea for $162,500. The shop has a remaining life of
20 years. Andrea expects to have revenues of $81,250 per year and pay approximately
60% of revenues in operating costs. What is the payback period for Andrea’s flower
shop?
a. 5 years
b. 2 years
c. 3.33 years
d. 6.66 years
Gant Wholesale Company has $2,000 in cash, $20,000 in accounts receivable, $34,000
in inventory, and $1,600 in prepaid expenses. Liabilities totaled $120,000, with $36,000
current and $84,000 long-term. What is Gant’s current ratio?
What is the basic form of the statement of cash flows?
Adler Industries uses a standard cost system. Adler has established the following
standards for one unit of product: standard labor of .25 hour and standard wage rate of
$8 per hour. During January, Adler used 5,000 hours of direct labor and paid $37,800 in
wages in producing 18,700 units.
Required:
Calculate the direct labor rate variance and indicate whether the variance is favorable or
unfavorable.
An organizational structure in which decision-making authority for the entire
organization rests in the hands of one person or a small group of people in a single
location is called decentralization.
ROI is a relative measure of return, in other words, the result is a dollar amount of
return.
List and describe the four functions of managers
Organization-level activities – required to provide productive capacity and to keep the
business in operation. These activities do not provide identifiable benefits to specific
products or services. An example is managing the corporate office.
Calculate cash flows provided (used) by investing activities.