BA225 Managerial Accounting
University of Maryland, Baltimore County (UMBC)
Fundamental Managerial Accounting Concepts
Thomas Edmonds, Philip Olds, Bor-Yi Tsay
BA 225 FINAL EXAM
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1. Johansson Company developed the following static budget at the beginning of the company's accounting period:
If actual production totals 8,400 units, the flexible budget would show variable costs of:
2. Pace Company makes computer chips. Sam is manager of the company's maintenance department. Because his maintenance technicians are so well trained in maintaining expensive and sensitive circuit board stamping equipment,
3. Which of the following would NOT be represented in the financing activities section of the statement of cash flows?
4. A customary assumption in capital budgeting analysis is that:
5. Lighthouse Tours provide seven-day guided tours along the New England coast. The company pays its guides a total of $100,000 per year.
6. If a company misclassifies a general, selling and administrative cost as a product cost in a period when production exceeds sales
7. Moore Company allocates overhead on the basis of direct labor hours. It allocates overhead costs of $6,400 to two different jobs as follows:
8. The following standard cost card is provided for Product Dolce2.
9. Payment of cash for production workers' wages is:
10. Standard cost systems facilitate the management practice known as:
11. Newton Company currently produces and sells 4,000 units of a product that has a contribution margin of $6 per unit.
12. Kritzberg Company sells a product at $60 per unit that has unit variable costs of $40.
13. The Mannix Company manufactures and sells two lines of china.
14. A manager refuses to replace an existing asset even though an extensive analysis indicates that replacement is desirable. One possible explanation for the manager's action is that:
15. For the year ended December 31, 2007, The Fell Company paid cash dividends of $13,000, paid cash for interest of $5,200, paid cash to suppliers of $7,500 and paid $17,000 to purchase equipment.
16. A materials requisition in a job-order cost system is used as a:
17. The following income statement was drawn from the annual report of Hurricane Company:
18. All of the following factors should influence the decision to investigate a variance except:
19. Bruce Company's sales budget shows the following expected total sales:
20. An investment that costs $30,000 will produce annual cash flows of $10,000 for a period of 4 years.
21. Moore Company uses process costing. The following information was available for October:
22. Prater Company made a $100,000 investment in new machinery.
23. Robert is deciding whether to remain in the home he has lived in for the past ten years, which is located very near his work, or to move into a newer home that is located in the suburbs further from his job.
24. Responsibility reports are prepared:
25. Banks Industries has budgeted the following information for March:
26. Casters, Inc. normally produces between 150,000 and 175,000 units each year.
27. Conger Company recently implemented an activity-based-costing system.
28. During its first year of operations, Martin Company paid $4,000 for direct materials and $8,500 for production workers' wages.
29. Expressing plans for a business in financial terms is commonly called:
30. Kent Company had 800 units of product in its work in process inventory at the beginning of the period.
31. Production in 2007 for Stowe Snow Mobile was at its highest point in the month of June when 40 units were produced at a total cost of $600,000.
32. Select the correct statement from the following.
33. Select the correct statement regarding opportunity costs.
34. Select the incorrect statement regarding postaudits of capital investment decisions.
35. St. Augustine Company is trying to decide which one of two contracts it will accept. The costs and revenues associated with each are listed below:
36. The following information is provided by the Atlantic Company:
37. The preferred method for setting transfer prices generally is some form of:
38. The research and development department of Pepsi-Cola Company would likely be organized as:
39. The statement of cash flows would not disclose the effects of:
40. The Sukahara Company recorded the following costs of quality during the current period:
41. The use of raw materials in production is:
42. Wall Company incurred $30,000 of fixed cost and $40,000 of variable cost when 2,000 units of product were made and sold.
43. Weinger Company has developed the following budgeted income statement:
44. What amount of cash would result at the end of one year, if $17,000 is invested today and the rate of return is 10%?
45. Which of the following statements concerning product costs versus general, selling, and administrative costs is true?
46. Which of the following transactions would cause net income for the period to be lower?
47. Which of the following activity costs would not likely be included in a unit-level activity cost pool?
48. Which of the following budgets needs to be prepared prior to preparing a purchases budget?
49. Which of the following cash transactions would not be shown under operating activities on the statement of cash flows?
50. Zoro, Inc. produces a product that has a variable cost of $6.00 per unit. The company's fixed costs are $30,000.
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Wednesday, June 30, 2010
BA225 Test 5: BA 225 Managerial Accounting
BA225 Managerial Accounting
University of Maryland, Baltimore County (UMBC)
Fundamental Managerial Accounting Concepts
Thomas Edmonds, Philip Olds, Bor-Yi Tsay
BA 225 TEST 5
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1. During the year Leyland Company completed 1,300 units of product. Ending inventory consisted of 400 units that were 50% complete. The total dollar cost associated with production of inventory was $45,000. The cost per equivalent whole unit would be which of the following? (Round all answers to the nearest whole penny.)
2. What is the name of the method of analyzing beginning and ending balances on the balance sheet and inferring the period's transactions from the income statement?
3. In a job-order cost system, as goods are produced, product costs (direct material, direct labor, and overhead) are accumulated in the:
4. The Work in Process account for Monty's Company contained the following entries: Work in Process Account Debit of $40,000 for direct raw materials Debit of $60,000 for direct labor Debit of $30,000 for manufacturing overhead Ending balance, $42,000, associated with Job #2 The company uses a job-order cost system. Work was only performed on two jobs during the period. What was the cost of Job # 1, which was started and completed during the period?
5. Congress Manufacturing is currently working on two jobs. The job order cost sheets for Job 101 and Job 102 showed the following information:
If overhead is applied to jobs at $.80 per direct labor dollar, the total manufacturing cost for the two jobs would be:
6. Assume that a statement of cash flows has been prepared. The sum of the three major components (operating activities, investing activities, financing activities) adds up to the:
7. A hybrid cost system contains:
8. The Ragan Corporation uses a process cost system. The company started March with 2,300 units in Work in Process-Dept. A. During the month 4,000 units were started. At the end of the month there were 3,200 units in ending Work in Process-Dept. A inventory that were 30% complete. The beginning work in process balance was $240,540 and total manufacturing cost for the period was $608,000. Based on this information, the amount of cost transferred from Work in Process-Dept. A to Work in Process-Dept. B was:
9. Alton Company experienced an event that affected its financial statements as indicated below:
What type of product costing system is being used by this company?
10. During the 2007 accounting period the XYZ Company earned $55,000 of sales revenue on account and accrued $32,500 of operating expenses. The company also earned $6,400 of service revenue that had previously been recorded as unearned revenue. In addition, a $2,200 stock dividend was issued to the stockholders. What can be said about cash flows considering these transactions?
11. In preparing the statement of cash flows by the indirect method, which of the following is an incorrect statement of one of the general rules to convert net income to a cash-basis equivalent?
12. Evelyn Company began the accounting period with $13,500 in accounts receivable. The ending balance in accounts receivable was $5,000. If the credit sales during the period were $22,000, what is the amount of cash received from customers?
13. Hatcher Company uses a process cost system. The following data applies to January 2007.
The ending work in process inventory is 90% complete. The total number of equivalent units for January was:
14. In a job-order cost system, the subsidiary accounts for the Work in Process account are the:
15. On January 1, 2008, the ABC Company purchased equipment for $26,000 cash. On December 31, 2008, depreciation of $8,000 was recorded. Which of the following correctly shows the combined effect of these two events on the income statement and statement of cash flows?
ABC uses the direct method to prepare the statement of cash flows.
16. Port Corporation reported a $1,800 balance in accounts receivable on January 1, 2006. During the year, $12,400 of sales on account were made. During the year, Port wrote off as uncollectible, accounts receivable of $850. If the ending balance of accounts receivable is $1,000, what is the amount of cash received from customers?
17. Select the correct formula for computing the cost to be assigned to ending inventory in a process costing system.
18. The entry to dispose of underapplied manufacturing overhead will include a:
19. The following income statement was drawn from the annual report of Hurricane Company:
The amount of cash flow from operating activities is:
20. The Lemmon Corporation reported a beginning balance of $600 in its Prepaid Insurance Account for 2008. During the year, a total of $8,000 was recognized as Insurance Expense and the Prepaid Insurance account had an ending balance of $800. How much cash did Lemmon pay for insurance during 2008?
21. What effect will recording depreciation expense have on net income and cash flows?
22. Which of the following is not a component of process cost systems?
23. Which of the following cash flows would be included under the operating activities section of the cash flow statement? Assume the direct method.
24. Which of the following transactions is a use of cash?
25. Which of the following would NOT be represented in the financing activities section of the statement of cash flows?
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University of Maryland, Baltimore County (UMBC)
Fundamental Managerial Accounting Concepts
Thomas Edmonds, Philip Olds, Bor-Yi Tsay
BA 225 TEST 5
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1. During the year Leyland Company completed 1,300 units of product. Ending inventory consisted of 400 units that were 50% complete. The total dollar cost associated with production of inventory was $45,000. The cost per equivalent whole unit would be which of the following? (Round all answers to the nearest whole penny.)
2. What is the name of the method of analyzing beginning and ending balances on the balance sheet and inferring the period's transactions from the income statement?
3. In a job-order cost system, as goods are produced, product costs (direct material, direct labor, and overhead) are accumulated in the:
4. The Work in Process account for Monty's Company contained the following entries: Work in Process Account Debit of $40,000 for direct raw materials Debit of $60,000 for direct labor Debit of $30,000 for manufacturing overhead Ending balance, $42,000, associated with Job #2 The company uses a job-order cost system. Work was only performed on two jobs during the period. What was the cost of Job # 1, which was started and completed during the period?
5. Congress Manufacturing is currently working on two jobs. The job order cost sheets for Job 101 and Job 102 showed the following information:
If overhead is applied to jobs at $.80 per direct labor dollar, the total manufacturing cost for the two jobs would be:
6. Assume that a statement of cash flows has been prepared. The sum of the three major components (operating activities, investing activities, financing activities) adds up to the:
7. A hybrid cost system contains:
8. The Ragan Corporation uses a process cost system. The company started March with 2,300 units in Work in Process-Dept. A. During the month 4,000 units were started. At the end of the month there were 3,200 units in ending Work in Process-Dept. A inventory that were 30% complete. The beginning work in process balance was $240,540 and total manufacturing cost for the period was $608,000. Based on this information, the amount of cost transferred from Work in Process-Dept. A to Work in Process-Dept. B was:
9. Alton Company experienced an event that affected its financial statements as indicated below:
What type of product costing system is being used by this company?
10. During the 2007 accounting period the XYZ Company earned $55,000 of sales revenue on account and accrued $32,500 of operating expenses. The company also earned $6,400 of service revenue that had previously been recorded as unearned revenue. In addition, a $2,200 stock dividend was issued to the stockholders. What can be said about cash flows considering these transactions?
11. In preparing the statement of cash flows by the indirect method, which of the following is an incorrect statement of one of the general rules to convert net income to a cash-basis equivalent?
12. Evelyn Company began the accounting period with $13,500 in accounts receivable. The ending balance in accounts receivable was $5,000. If the credit sales during the period were $22,000, what is the amount of cash received from customers?
13. Hatcher Company uses a process cost system. The following data applies to January 2007.
The ending work in process inventory is 90% complete. The total number of equivalent units for January was:
14. In a job-order cost system, the subsidiary accounts for the Work in Process account are the:
15. On January 1, 2008, the ABC Company purchased equipment for $26,000 cash. On December 31, 2008, depreciation of $8,000 was recorded. Which of the following correctly shows the combined effect of these two events on the income statement and statement of cash flows?
ABC uses the direct method to prepare the statement of cash flows.
16. Port Corporation reported a $1,800 balance in accounts receivable on January 1, 2006. During the year, $12,400 of sales on account were made. During the year, Port wrote off as uncollectible, accounts receivable of $850. If the ending balance of accounts receivable is $1,000, what is the amount of cash received from customers?
17. Select the correct formula for computing the cost to be assigned to ending inventory in a process costing system.
18. The entry to dispose of underapplied manufacturing overhead will include a:
19. The following income statement was drawn from the annual report of Hurricane Company:
The amount of cash flow from operating activities is:
20. The Lemmon Corporation reported a beginning balance of $600 in its Prepaid Insurance Account for 2008. During the year, a total of $8,000 was recognized as Insurance Expense and the Prepaid Insurance account had an ending balance of $800. How much cash did Lemmon pay for insurance during 2008?
21. What effect will recording depreciation expense have on net income and cash flows?
22. Which of the following is not a component of process cost systems?
23. Which of the following cash flows would be included under the operating activities section of the cash flow statement? Assume the direct method.
24. Which of the following transactions is a use of cash?
25. Which of the following would NOT be represented in the financing activities section of the statement of cash flows?
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BA225 Test 4: BA 225 Managerial Accounting
BA225 Managerial Accounting
University of Maryland, Baltimore County (UMBC)
Fundamental Managerial Accounting Concepts
Thomas Edmonds, Philip Olds, Bor-Yi Tsay
BA 225 TEST 4
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1. The kind of responsibility center that would be evaluated by comparing income on assets to the amount of assets invested is:
2. Thanks to her firm's decentralization and use of responsibility accounting, Melanie has more time to review a proposed new joint venture with one of the firm's business partners. What advantage of decentralization does this illustrate?
3. What amount of cash must be invested today in order to have $30,000 at the end of one year assuming the rate of return is 9%?
4. Chartreuse Company has two investment opportunities. Both investments cost $5,000 and will provide the following net cash flows:
The total present value of Investment A's cash inflows assuming a 10% minimum rate of return is (round to the nearest whole dollar):
5. Leon wants to determine the net present value for a proposed capital investment. He has determined the desired rate of return, the expected investment time period, a series of cash inflows of equal amount, the salvage value of the investment, and the required cash outflows. Which of the following tables would most likely be used to calculate the net present value of the investment?
6. A customary assumption in capital budgeting analysis is that:
7. Houston Corporation has two operating divisions, A and B. The following information is provided for Division A:
Division B uses the type of product produced by Division A and has approached Division A about buying the product internally. Division B is currently paying $45 to purchase the product from an outside source. If Division A sells internally it can save $1 per unit in variable costs. Assuming Division A is operating at capacity, what price should it charge Division B if the transfer is to be made?
8. The purposes of the postaudit for capital investments include all of the following except:
9. A capital investment project may provide cash inflows from:
10. An investment that cost $48,000 provided annual cash inflows of $9,000 per year for six years. The desired rate of return is 10%. The actual return from the investment was:
11. A tool that is often used to depict the lines of authority and responsibility within a firm is:
12. A major benefit of a decentralized organization is that:
13. A responsibility report provided to a manager typically includes:
14. Horak Company reported the following information for 2007:
The company's return on investment for 2007 was:
15. Johanssen Company reported the following information for 2007:
The company's operating income for 2007 was:
16. Management recently instituted a new training program for upper level managers. They budgeted the cost of the new program at $1,000 per employee trained but actual costs were $1,250 per employee trained. The difference between the budgeted cost for training and the actual cost of training is called a:
17. Melanie Company is considering a capital project that costs $16,000. The project will deliver the following cash flows:
Using the incremental approach, the payback period for the investment is:
18. Select the incorrect statement concerning the application of the controllability concept to responsibility accounting.
19. The Fairland Restaurant chain had a 12% return on a $60,000 investment in new ovens. The investment resulted in increased sales and an increase in income that was 4% of the increase in sales. The increase in sales was:
20. The rate of return that equates the present value of cash inflows and outflows is the:
21. Which capital budgeting technique defines returns in terms of income instead of cash flows?
22. Which of the following statements about return on investment is false?
23. Which of the following is not a factor in explaining why the present value of a future dollar is less than one dollar?
24. Which of the following would be considered a cash inflow in determining the value of a capital investment?
25. Which one of the following statements describes an ordinary annuity?
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University of Maryland, Baltimore County (UMBC)
Fundamental Managerial Accounting Concepts
Thomas Edmonds, Philip Olds, Bor-Yi Tsay
BA 225 TEST 4
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1. The kind of responsibility center that would be evaluated by comparing income on assets to the amount of assets invested is:
2. Thanks to her firm's decentralization and use of responsibility accounting, Melanie has more time to review a proposed new joint venture with one of the firm's business partners. What advantage of decentralization does this illustrate?
3. What amount of cash must be invested today in order to have $30,000 at the end of one year assuming the rate of return is 9%?
4. Chartreuse Company has two investment opportunities. Both investments cost $5,000 and will provide the following net cash flows:
The total present value of Investment A's cash inflows assuming a 10% minimum rate of return is (round to the nearest whole dollar):
5. Leon wants to determine the net present value for a proposed capital investment. He has determined the desired rate of return, the expected investment time period, a series of cash inflows of equal amount, the salvage value of the investment, and the required cash outflows. Which of the following tables would most likely be used to calculate the net present value of the investment?
6. A customary assumption in capital budgeting analysis is that:
7. Houston Corporation has two operating divisions, A and B. The following information is provided for Division A:
Division B uses the type of product produced by Division A and has approached Division A about buying the product internally. Division B is currently paying $45 to purchase the product from an outside source. If Division A sells internally it can save $1 per unit in variable costs. Assuming Division A is operating at capacity, what price should it charge Division B if the transfer is to be made?
8. The purposes of the postaudit for capital investments include all of the following except:
9. A capital investment project may provide cash inflows from:
10. An investment that cost $48,000 provided annual cash inflows of $9,000 per year for six years. The desired rate of return is 10%. The actual return from the investment was:
11. A tool that is often used to depict the lines of authority and responsibility within a firm is:
12. A major benefit of a decentralized organization is that:
13. A responsibility report provided to a manager typically includes:
14. Horak Company reported the following information for 2007:
The company's return on investment for 2007 was:
15. Johanssen Company reported the following information for 2007:
The company's operating income for 2007 was:
16. Management recently instituted a new training program for upper level managers. They budgeted the cost of the new program at $1,000 per employee trained but actual costs were $1,250 per employee trained. The difference between the budgeted cost for training and the actual cost of training is called a:
17. Melanie Company is considering a capital project that costs $16,000. The project will deliver the following cash flows:
Using the incremental approach, the payback period for the investment is:
18. Select the incorrect statement concerning the application of the controllability concept to responsibility accounting.
19. The Fairland Restaurant chain had a 12% return on a $60,000 investment in new ovens. The investment resulted in increased sales and an increase in income that was 4% of the increase in sales. The increase in sales was:
20. The rate of return that equates the present value of cash inflows and outflows is the:
21. Which capital budgeting technique defines returns in terms of income instead of cash flows?
22. Which of the following statements about return on investment is false?
23. Which of the following is not a factor in explaining why the present value of a future dollar is less than one dollar?
24. Which of the following would be considered a cash inflow in determining the value of a capital investment?
25. Which one of the following statements describes an ordinary annuity?
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BA225 Test 3: BA 225 Managerial Accounting
BA225 Managerial Accounting
University of Maryland, Baltimore County (UMBC)
Fundamental Managerial Accounting Concepts
Thomas Edmonds, Philip Olds, Bor-Yi Tsay
BA 225 TEST 3
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1. Cedar Furniture provided the following information relevant to its sales for December 2007 and the first quarter of 2008:
Based on the company's collection history, 2% of credit sales are uncollectible, 40% are collected in month of sale and the remainder is collected in the following month. Total budgeted cash receipts in February 2008 are expected to be:
2. Select the incorrect statement about the master budget.
3. Select the correct equation format for the purchases budget.
4. The Springer Company provides the following standard cost data:
The materials usage variance was:
5. The standard amount of materials required to make one unit of Product Q is 4 pounds. Tusa's static budget showed a planned production of 4,000 units. During the period the company actually produced 4,100 units of product. The actual amount of materials used averaged 4.1 pounds per unit. The standard price of material is $1 per pound. Based on this information, the materials usage variance was:
6. A difference between the static budget based on planned volume and a flexible budget prepared at actual volume is called a:
7. Standard cost systems facilitate the management practice known as:
8. Budgeting that involves the development of a master budget to direct the firm's activities over the short-term is referred to as:
9. Coronet Company provided the following information related to its inventory sales and purchases for December 2007 and the first quarter of 2008:
Desired ending inventory levels are 25% of the following month's projected cost of goods sold. Budgeted purchases of inventory in February 2008 would be:
10. Select the incorrect statement about budgeting and human behavior.
11. Summer Company's static budget is based on a planned activity level of 25,000 units. At the same time the static budget was prepared, the management accountant prepared two additional budgets, one based on 20,000 units and one based on 30,000. The company actually produced and sold 29,000 units. In evaluating its performance, management should compare the company's actual revenues and costs to which of the following budgets?
12. McDavid Company has completed its sales budget for the first quarter of 2007. Projected credit sales for the first four months of the year are shown below:
The company's past records show collection of credit sales as follows: 30% in the month of sale and the balance in the following month. The total cash collection from receivables in March is expected to be:
13. One of the tasks that managers at Greensboro Company have to complete during the budgeting process is to develop a contingency plan for their organization in case a downturn occurs in their business. This budgeting requirement is an example of:
14. Select the correct statement regarding general, selling, and administrative (GS&A) costs.
15. Select the incorrect statement about the planning process.
16. Sometimes employees will deliberately overstate the amount of materials and/or labor that should be required to complete a job. The difference between inflated and realistic standards is known as:
17. The resources used in the manufacturing process are frequently called:
18. The Russell Company provides the following standard cost data per unit of product:
The direct labor usage variance was:
19. Which manager is usually held responsible for materials usage variances?
20. Which of the following is not considered a pro forma financial statement?
21. Which of the following budgets or schedules uses data contained in the selling and administrative expense budget?
22. Which of the following budgets needs to be prepared prior to preparing a purchases budget?
23. Which of the following can reduce the amount of employees' budget gamesmanship?
24. Which of the following factors should be considered in establishing standards for use with a standard costing system?
25. Which of the following statements is true?
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University of Maryland, Baltimore County (UMBC)
Fundamental Managerial Accounting Concepts
Thomas Edmonds, Philip Olds, Bor-Yi Tsay
BA 225 TEST 3
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1. Cedar Furniture provided the following information relevant to its sales for December 2007 and the first quarter of 2008:
Based on the company's collection history, 2% of credit sales are uncollectible, 40% are collected in month of sale and the remainder is collected in the following month. Total budgeted cash receipts in February 2008 are expected to be:
2. Select the incorrect statement about the master budget.
3. Select the correct equation format for the purchases budget.
4. The Springer Company provides the following standard cost data:
The materials usage variance was:
5. The standard amount of materials required to make one unit of Product Q is 4 pounds. Tusa's static budget showed a planned production of 4,000 units. During the period the company actually produced 4,100 units of product. The actual amount of materials used averaged 4.1 pounds per unit. The standard price of material is $1 per pound. Based on this information, the materials usage variance was:
6. A difference between the static budget based on planned volume and a flexible budget prepared at actual volume is called a:
7. Standard cost systems facilitate the management practice known as:
8. Budgeting that involves the development of a master budget to direct the firm's activities over the short-term is referred to as:
9. Coronet Company provided the following information related to its inventory sales and purchases for December 2007 and the first quarter of 2008:
Desired ending inventory levels are 25% of the following month's projected cost of goods sold. Budgeted purchases of inventory in February 2008 would be:
10. Select the incorrect statement about budgeting and human behavior.
11. Summer Company's static budget is based on a planned activity level of 25,000 units. At the same time the static budget was prepared, the management accountant prepared two additional budgets, one based on 20,000 units and one based on 30,000. The company actually produced and sold 29,000 units. In evaluating its performance, management should compare the company's actual revenues and costs to which of the following budgets?
12. McDavid Company has completed its sales budget for the first quarter of 2007. Projected credit sales for the first four months of the year are shown below:
The company's past records show collection of credit sales as follows: 30% in the month of sale and the balance in the following month. The total cash collection from receivables in March is expected to be:
13. One of the tasks that managers at Greensboro Company have to complete during the budgeting process is to develop a contingency plan for their organization in case a downturn occurs in their business. This budgeting requirement is an example of:
14. Select the correct statement regarding general, selling, and administrative (GS&A) costs.
15. Select the incorrect statement about the planning process.
16. Sometimes employees will deliberately overstate the amount of materials and/or labor that should be required to complete a job. The difference between inflated and realistic standards is known as:
17. The resources used in the manufacturing process are frequently called:
18. The Russell Company provides the following standard cost data per unit of product:
The direct labor usage variance was:
19. Which manager is usually held responsible for materials usage variances?
20. Which of the following is not considered a pro forma financial statement?
21. Which of the following budgets or schedules uses data contained in the selling and administrative expense budget?
22. Which of the following budgets needs to be prepared prior to preparing a purchases budget?
23. Which of the following can reduce the amount of employees' budget gamesmanship?
24. Which of the following factors should be considered in establishing standards for use with a standard costing system?
25. Which of the following statements is true?
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BA225 Test 2: BA 225 Managerial Accounting
BA225 Managerial Accounting
University of Maryland, Baltimore County (UMBC)
Fundamental Managerial Accounting Concepts
Thomas Edmonds, Philip Olds, Bor-Yi Tsay
BA 225 TEST 2
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1. The Euro Company sells two kinds of luggage. The company projected the following cost information for the two products:
The company's total fixed costs are expected to be $280,000.
Based this information, what is the combined number of units of the two products that would be required to breakeven (round your answer to the nearest whole unit)
2. All of the following are variables that could be considered in a decision to outsource a component that is currently being produced in house. Which of the following is not likely to be relevant?
3. Brumlow Company has a contribution margin ratio of 25%. The company is considering a proposal that will increase sales by $100,000. What increase in profit can be expected assuming total fixed costs increase by $20,000?
4. Espy Company is trying to decide between the following two alternatives:
Which of the following conclusions can be drawn from this example?
5. All of the following are internal failure costs except:
6. Barney Company produces and sells two models of speakers for use with desktop computers. The following monthly data are provided:
Total monthly fixed costs are expected to be $15,000. What is the break-even volume in sales dollars at the expected sales mix?
7. A modern cost allocation process that employs multiple cost drivers is:
8. Hartsel 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, the company made 8,000 steel bars and 2,000 titanium bars. Setup costs amounted to $48,000 for the 24 batches (i.e., 12 of each type) of bars produced during the period. If activity-based costing is used to allocate overhead costs to the two products, the amount of setup cost assigned to the titanium bars will be:
9. Kleinfeldt Company allocates overhead on the basis of direct labor hours. It allocates overhead costs of $4,000 to two different jobs as follows: Job 1: (10 hours) = $2,000 Job 2: (10 hours) = $2,000 Assume that, then, the production process for Job 1 was automated. Now Job 1 requires only 2 hours of direct labor but four hours of mechanical processing. As a result, total overhead increased to $6,000. How much overhead cost will be assigned to Job 2 after automation?
10. Managing quality costs to achieve the highest level of customer satisfaction is known as:
11. All of the following are hierarchical categories in which a firm's overhead support costs can be classified except:
12. Hazell Company allocates overhead on the basis of direct labor hours. It allocates overhead costs of $4,000 to two different jobs as follows: Job 1: (10 hours) = $2,000 Job 2: (10 hours) = $2,000 Assume that, then, the production process for Job 1 was automated. Now Job 1 requires only 2 hours of direct labor but four hours of mechanical processing. As a result, total overhead increases to $6,000. Select the incorrect statement from the following.
13. Fernando Company reported the following information for its two products:
Due to labor constraints, demand for the products is greater than supply. Product X requires 2 hours of labor to produce and product Y requires 5 hours of labor to produce. Which of the following statements is true?
14. Great Products Company currently outsources an electrical switch that is a component in one of its products. The switches cost $20 each. The company is considering making the switches internally at the following projected annual production costs:
The company expects an annual need for 5,000 switches. If the company makes the product, it will have to utilize factory space currently being leased to another company for $1,500 a month. If the company decides to make the parts, total costs will be:
15. Andy is trying to decide which one of two job offers he will accept. Several items are presented below:
Select the items that are relevant to Andy's decision.
16. Gleam Clean cleans and waxes floors for commercial customers. The company is presently working at less than capacity with equipment and employees at times idle. The company recently received an order from a potential customer outside the company's normal geographic service region for a price of $9,000. The size of the proposed job is 22,000 square feet. The company's normal service costs are as follows:
If the company accepts the special offer:
17. Kritzberg Company sells a product at $60 per unit that has unit variable costs of $40. The company's break-even sales volume is $120,000. How much profit will the company make if it sells 4,000 units?
18. Quill Company sets the selling price for its product by adding a markup to the product's variable manufacturing costs. This approach to pricing is referred to as:
19. Select the correct statement regarding quantitative and qualitative information.
20. Select the correct statement regarding activity-based costing (ABC).
21. Serious Safety Products currently outsources an electrical switch that is a component in its sprinkler systems. The switches are purchased for $20 each. The company is considering making the switches internally and has conducted a study to determine the costs involved. The costs below are projected annual production costs:
Assume that the company needs 10,000 of the switches, which would be produced in two batches. Assume also that the company will still be operating within the relevant range. If Serious Safety decides to make the parts under these conditions, the total relevant costs will be:
22. The costs and revenues associated with two alternatives are listed below:
Which alternative should be selected based on this information?
23. The following information is provided for two products:
Assume the products will be sold in a store where shelf space is a scarce resource and there is sufficient room for only one of the two products. Expected sales for Product X are 8,000 units, and expected sales for Product Y are 6,000 units. Which product should be sold and why?
24. Traditionally, the most popular company-wide base for allocating overhead to products was:
25. Which of the following activity costs would not likely be included in a unit-level activity cost pool?
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University of Maryland, Baltimore County (UMBC)
Fundamental Managerial Accounting Concepts
Thomas Edmonds, Philip Olds, Bor-Yi Tsay
BA 225 TEST 2
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1. The Euro Company sells two kinds of luggage. The company projected the following cost information for the two products:
The company's total fixed costs are expected to be $280,000.
Based this information, what is the combined number of units of the two products that would be required to breakeven (round your answer to the nearest whole unit)
2. All of the following are variables that could be considered in a decision to outsource a component that is currently being produced in house. Which of the following is not likely to be relevant?
3. Brumlow Company has a contribution margin ratio of 25%. The company is considering a proposal that will increase sales by $100,000. What increase in profit can be expected assuming total fixed costs increase by $20,000?
4. Espy Company is trying to decide between the following two alternatives:
Which of the following conclusions can be drawn from this example?
5. All of the following are internal failure costs except:
6. Barney Company produces and sells two models of speakers for use with desktop computers. The following monthly data are provided:
Total monthly fixed costs are expected to be $15,000. What is the break-even volume in sales dollars at the expected sales mix?
7. A modern cost allocation process that employs multiple cost drivers is:
8. Hartsel 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, the company made 8,000 steel bars and 2,000 titanium bars. Setup costs amounted to $48,000 for the 24 batches (i.e., 12 of each type) of bars produced during the period. If activity-based costing is used to allocate overhead costs to the two products, the amount of setup cost assigned to the titanium bars will be:
9. Kleinfeldt Company allocates overhead on the basis of direct labor hours. It allocates overhead costs of $4,000 to two different jobs as follows: Job 1: (10 hours) = $2,000 Job 2: (10 hours) = $2,000 Assume that, then, the production process for Job 1 was automated. Now Job 1 requires only 2 hours of direct labor but four hours of mechanical processing. As a result, total overhead increased to $6,000. How much overhead cost will be assigned to Job 2 after automation?
10. Managing quality costs to achieve the highest level of customer satisfaction is known as:
11. All of the following are hierarchical categories in which a firm's overhead support costs can be classified except:
12. Hazell Company allocates overhead on the basis of direct labor hours. It allocates overhead costs of $4,000 to two different jobs as follows: Job 1: (10 hours) = $2,000 Job 2: (10 hours) = $2,000 Assume that, then, the production process for Job 1 was automated. Now Job 1 requires only 2 hours of direct labor but four hours of mechanical processing. As a result, total overhead increases to $6,000. Select the incorrect statement from the following.
13. Fernando Company reported the following information for its two products:
Due to labor constraints, demand for the products is greater than supply. Product X requires 2 hours of labor to produce and product Y requires 5 hours of labor to produce. Which of the following statements is true?
14. Great Products Company currently outsources an electrical switch that is a component in one of its products. The switches cost $20 each. The company is considering making the switches internally at the following projected annual production costs:
The company expects an annual need for 5,000 switches. If the company makes the product, it will have to utilize factory space currently being leased to another company for $1,500 a month. If the company decides to make the parts, total costs will be:
15. Andy is trying to decide which one of two job offers he will accept. Several items are presented below:
Select the items that are relevant to Andy's decision.
16. Gleam Clean cleans and waxes floors for commercial customers. The company is presently working at less than capacity with equipment and employees at times idle. The company recently received an order from a potential customer outside the company's normal geographic service region for a price of $9,000. The size of the proposed job is 22,000 square feet. The company's normal service costs are as follows:
If the company accepts the special offer:
17. Kritzberg Company sells a product at $60 per unit that has unit variable costs of $40. The company's break-even sales volume is $120,000. How much profit will the company make if it sells 4,000 units?
18. Quill Company sets the selling price for its product by adding a markup to the product's variable manufacturing costs. This approach to pricing is referred to as:
19. Select the correct statement regarding quantitative and qualitative information.
20. Select the correct statement regarding activity-based costing (ABC).
21. Serious Safety Products currently outsources an electrical switch that is a component in its sprinkler systems. The switches are purchased for $20 each. The company is considering making the switches internally and has conducted a study to determine the costs involved. The costs below are projected annual production costs:
Assume that the company needs 10,000 of the switches, which would be produced in two batches. Assume also that the company will still be operating within the relevant range. If Serious Safety decides to make the parts under these conditions, the total relevant costs will be:
22. The costs and revenues associated with two alternatives are listed below:
Which alternative should be selected based on this information?
23. The following information is provided for two products:
Assume the products will be sold in a store where shelf space is a scarce resource and there is sufficient room for only one of the two products. Expected sales for Product X are 8,000 units, and expected sales for Product Y are 6,000 units. Which product should be sold and why?
24. Traditionally, the most popular company-wide base for allocating overhead to products was:
25. Which of the following activity costs would not likely be included in a unit-level activity cost pool?
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BA225 Test 1: BA 225 Managerial Accounting
BA225 Managerial Accounting
University of Maryland, Baltimore County (UMBC)
Fundamental Managerial Accounting Concepts
Thomas Edmonds, Philip Olds, Bor-Yi Tsay
BA 225 TEST 1
Click here for the SOLUTION
1. A cost that contains both fixed and variable elements is referred to as a:
2. Whirl Company sells cordless razors for $50. Variable costs are 40% of sales and total fixed costs are $40,000. What is the firm's magnitude of operating leverage if 2,000 units are sold?
3. Larry's Lawn Care incurs significant gasoline costs. This cost would be classified as a variable cost if the total gasoline cost:
4. Select the incorrect statement regarding costs and expenses.
5. Choose the answer that is not a distinguishing characteristic of financial accounting information.
6. All of the following are features of managerial accounting except:
7. During her first year with the company, Ann mistakenly accumulated some of the company's period costs in ending inventory. Which of the following indicates how this error affects the company's financial statements assuming number of units produced exceeded number of units sold during the period?
8. As a Certified Management Accountant, Jill is bound by the standards of ethical conduct issued by the Institute of Management Accountants. If she accepts an expensive gift from a vendor trying to win a contract with her firm, which of the following standards will she violate?
9. The excess of a product's selling price over its variable costs is referred to as:
10. Assuming a company's inventory increased during the period, which of the following misclassifications increases net income?
11. Based on the following cost data, items labeled (a) and (b) in the table below are which of the following amounts, respectively?
12. Identify the true statement regarding how product costs in a manufacturing company differ from product costs in a service company.
13. Hico Bottling Company pays its production manager a salary of $5,000 per month. Salespersons are paid strictly on commission, at $2 for each case of product sold. For Hico Bottling Company, the salespersons' commissions are an example of:
14. Casters, Inc. normally produces between 150,000 and 175,000 units each year. Producing more than 175,000 units alters the company's cost structure. For example, fixed costs increase because more space must be rented, and additional supervisors must be hired. The production range between 150,000 and 175,000 is called the:
15. Gypsy Joe's operates a chain of coffee shops. The company pays rent of $10,000 per year for each shop. Supplies (napkins, bags and condiments) are purchased as needed. The managers of each shop are paid a salary of $2,500 per month and all other employees are paid on an hourly basis. The costs of supplies relative to the number of customers in a particular shop and relative to the number of customers in the entire chain of shops is which kind of cost, respectively?
16. Select the correct statement from the following.
17. The following income statement is provided for Barron Company in 2006:
What amount was the company's contribution margin?
18. The following information relates to Minimart's 2007 accounting period:
Based on this information, what is the company's net income for 2007?
19. The following information is provided for Steinberg Company:
What is this company's contribution margin?
20. Wall Company incurred $30,000 of fixed cost and $40,000 of variable cost when 2,000 units of product were made and sold. If the company's volume increases to 2,500 units, the company's total costs will be:
21. What is the effect on the financial statements of recording a $100 purchase of raw materials?
22. Which of the following costs is not considered to be a product cost?
23. Which of the following should be recorded as an asset?
24. Which of the following is not one of the four Standards of Ethical Conduct for Management Accountants?
25. Why do accountants normally calculate cost per unit as an average?
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University of Maryland, Baltimore County (UMBC)
Fundamental Managerial Accounting Concepts
Thomas Edmonds, Philip Olds, Bor-Yi Tsay
BA 225 TEST 1
Click here for the SOLUTION
1. A cost that contains both fixed and variable elements is referred to as a:
2. Whirl Company sells cordless razors for $50. Variable costs are 40% of sales and total fixed costs are $40,000. What is the firm's magnitude of operating leverage if 2,000 units are sold?
3. Larry's Lawn Care incurs significant gasoline costs. This cost would be classified as a variable cost if the total gasoline cost:
4. Select the incorrect statement regarding costs and expenses.
5. Choose the answer that is not a distinguishing characteristic of financial accounting information.
6. All of the following are features of managerial accounting except:
7. During her first year with the company, Ann mistakenly accumulated some of the company's period costs in ending inventory. Which of the following indicates how this error affects the company's financial statements assuming number of units produced exceeded number of units sold during the period?
8. As a Certified Management Accountant, Jill is bound by the standards of ethical conduct issued by the Institute of Management Accountants. If she accepts an expensive gift from a vendor trying to win a contract with her firm, which of the following standards will she violate?
9. The excess of a product's selling price over its variable costs is referred to as:
10. Assuming a company's inventory increased during the period, which of the following misclassifications increases net income?
11. Based on the following cost data, items labeled (a) and (b) in the table below are which of the following amounts, respectively?
12. Identify the true statement regarding how product costs in a manufacturing company differ from product costs in a service company.
13. Hico Bottling Company pays its production manager a salary of $5,000 per month. Salespersons are paid strictly on commission, at $2 for each case of product sold. For Hico Bottling Company, the salespersons' commissions are an example of:
14. Casters, Inc. normally produces between 150,000 and 175,000 units each year. Producing more than 175,000 units alters the company's cost structure. For example, fixed costs increase because more space must be rented, and additional supervisors must be hired. The production range between 150,000 and 175,000 is called the:
15. Gypsy Joe's operates a chain of coffee shops. The company pays rent of $10,000 per year for each shop. Supplies (napkins, bags and condiments) are purchased as needed. The managers of each shop are paid a salary of $2,500 per month and all other employees are paid on an hourly basis. The costs of supplies relative to the number of customers in a particular shop and relative to the number of customers in the entire chain of shops is which kind of cost, respectively?
16. Select the correct statement from the following.
17. The following income statement is provided for Barron Company in 2006:
What amount was the company's contribution margin?
18. The following information relates to Minimart's 2007 accounting period:
Based on this information, what is the company's net income for 2007?
19. The following information is provided for Steinberg Company:
What is this company's contribution margin?
20. Wall Company incurred $30,000 of fixed cost and $40,000 of variable cost when 2,000 units of product were made and sold. If the company's volume increases to 2,500 units, the company's total costs will be:
21. What is the effect on the financial statements of recording a $100 purchase of raw materials?
22. Which of the following costs is not considered to be a product cost?
23. Which of the following should be recorded as an asset?
24. Which of the following is not one of the four Standards of Ethical Conduct for Management Accountants?
25. Why do accountants normally calculate cost per unit as an average?
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Seattle Roast Coffee Company produces Columbian coffee in batches of 8,000 pounds
ACCOUNTING
Warren, Reeve and Duchac
Financial Accounting
Managerial Accounting
Carl Warren, James M. Reeve, Jonathan E. Duchac
Chapter 25
EX 25-11 Seattle Roast Coffee Company produces Columbian coffee in batches of 8,000 pounds. The standard quantity of materials required in the process is 8,000 pounds,which cost $5.00 per pound. Columbian coffee can be sold without further processing for $10.80 per pound. Columbian coffee can also be processed further to yield Decaf Columbian, which can be sold for $12.50per pound. The processing into Decaf Columbian requires additional processing costs of $10,500 per batch. The additional processing will also cause a 5% loss of product due to evaporation.
a. Prepare a differential analysis report for the decision to sell or process further.
b. Should Seattle Roast sell Columbian coffee or process further and sell Decaf Columbian?
c. Determine the price of Decaf Columbian that would cause neither an advantage or disadvantage for processing further and selling Decaf Columbian.
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Warren, Reeve and Duchac
Financial Accounting
Managerial Accounting
Carl Warren, James M. Reeve, Jonathan E. Duchac
Chapter 25
EX 25-11 Seattle Roast Coffee Company produces Columbian coffee in batches of 8,000 pounds. The standard quantity of materials required in the process is 8,000 pounds,which cost $5.00 per pound. Columbian coffee can be sold without further processing for $10.80 per pound. Columbian coffee can also be processed further to yield Decaf Columbian, which can be sold for $12.50per pound. The processing into Decaf Columbian requires additional processing costs of $10,500 per batch. The additional processing will also cause a 5% loss of product due to evaporation.
a. Prepare a differential analysis report for the decision to sell or process further.
b. Should Seattle Roast sell Columbian coffee or process further and sell Decaf Columbian?
c. Determine the price of Decaf Columbian that would cause neither an advantage or disadvantage for processing further and selling Decaf Columbian.
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The management of Caribbean Sugar Company is considering whether to process further raw sugar into refined sugar
ACCOUNTING
Warren, Reeve and Duchac
Financial Accounting
Managerial Accounting
Carl Warren, James M. Reeve, Jonathan E. Duchac
Chapter 25
PR 25-4B The management of Caribbean Sugar Company is considering whether to process further raw sugar into refined sugar. Refined sugar can be sold for $1.90 per pound, and raw sugar can be sold without further processing for $1.10 per pound. Raw sugar is produced in batches of 27,000 pounds by processing 90,000 pounds of sugar cane,which costs $0.25 per pound. Refined sugar will require additional processing costs of $0.35 per pound of raw sugar, and 1.2 pounds of raw sugar will produce 1pound of refined sugar.
Instructions
1. Prepare a report as of January 30, 2010, presenting a differential analysis of the further processing of raw sugar to produce refined sugar.
2. Briefly report your recommendations.
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Warren, Reeve and Duchac
Financial Accounting
Managerial Accounting
Carl Warren, James M. Reeve, Jonathan E. Duchac
Chapter 25
PR 25-4B The management of Caribbean Sugar Company is considering whether to process further raw sugar into refined sugar. Refined sugar can be sold for $1.90 per pound, and raw sugar can be sold without further processing for $1.10 per pound. Raw sugar is produced in batches of 27,000 pounds by processing 90,000 pounds of sugar cane,which costs $0.25 per pound. Refined sugar will require additional processing costs of $0.35 per pound of raw sugar, and 1.2 pounds of raw sugar will produce 1pound of refined sugar.
Instructions
1. Prepare a report as of January 30, 2010, presenting a differential analysis of the further processing of raw sugar to produce refined sugar.
2. Briefly report your recommendations.
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On March 1, Midway Distribution Company is considering leasing a building and buying the necessary equipment to operate a public warehouse
ACCOUNTING
Warren, Reeve and Duchac
Financial Accounting
Managerial Accounting
Carl Warren, James M. Reeve, Jonathan E. Duchac
Chapter 25
PR 25-1A On March 1, Midway Distribution Company is considering leasing a building and buying the necessary equipment to operate a public warehouse. Alternatively, the company could use the funds to invest in $750,000of 7% U.S.Treasury bonds that mature in 14 years. The bonds could be purchased at face value. The following data have been assembled: Cost of equipment $750,000 Life of equipment 14 years Estimated residual value of equipment $76,000 Yearly costs to operate the warehouse, excluding depreciation of equipment $195,000 Yearly expected revenues—years 1–7 $330,000 Yearly expected revenues—years 8–14 $280,000
Instructions
1. Prepare a report as of March 1, 2010, presenting a differential analysis of the proposed operation of the warehouse for the 14 years as compared with present conditions.
2. Based on the results disclosed by the differential analysis, should the proposal be accepted?
3. If the proposal is accepted, what is the total estimated income from operations of the warehouse for the 14 years?
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Warren, Reeve and Duchac
Financial Accounting
Managerial Accounting
Carl Warren, James M. Reeve, Jonathan E. Duchac
Chapter 25
PR 25-1A On March 1, Midway Distribution Company is considering leasing a building and buying the necessary equipment to operate a public warehouse. Alternatively, the company could use the funds to invest in $750,000of 7% U.S.Treasury bonds that mature in 14 years. The bonds could be purchased at face value. The following data have been assembled: Cost of equipment $750,000 Life of equipment 14 years Estimated residual value of equipment $76,000 Yearly costs to operate the warehouse, excluding depreciation of equipment $195,000 Yearly expected revenues—years 1–7 $330,000 Yearly expected revenues—years 8–14 $280,000
Instructions
1. Prepare a report as of March 1, 2010, presenting a differential analysis of the proposed operation of the warehouse for the 14 years as compared with present conditions.
2. Based on the results disclosed by the differential analysis, should the proposal be accepted?
3. If the proposal is accepted, what is the total estimated income from operations of the warehouse for the 14 years?
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Sunshine Baking Company is a diversified food products company with three operating divisions organized as investment centers. Condensed data taken
ACCOUNTING
Warren, Reeve and Duchac
Financial Accounting
Managerial Accounting
Carl Warren, James M. Reeve, Jonathan E. Duchac
Chapter 24
PR 24-3A Sunshine Baking Company is a diversified food products company with three operating divisions organized as investment centers. Condensed data taken from the records of the three divisions for the year ended June 30,2010, are as follows:
Retail Snack Cake Bakeries Bread Division Division Division
Sales $ 8,100,000 $ 8,700,000 $7,800,000
Cost of goods sold 4,980,000 5,400,000 4,600,000
Operating expenses 1,662,000 1,995,000 1,484,000
Invested assets 10,800,000 10,875,000 6,000,000
The management of Sunshine Baking Company is evaluating each division as a basis for planning a future expansion of operations.
Instructions
1. Prepare condensed divisional income statements for the three divisions, assuming that there were no service department charges.
2. Using the DuPont formula for rate of return on investment, compute the profit margin, investment turnover, and rate of return on investment for each division.
3. If available funds permit the expansion of operations of only one division, which of the divisions would you recommend for expansion, based on parts (1) and (2)? Explain.
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Warren, Reeve and Duchac
Financial Accounting
Managerial Accounting
Carl Warren, James M. Reeve, Jonathan E. Duchac
Chapter 24
PR 24-3A Sunshine Baking Company is a diversified food products company with three operating divisions organized as investment centers. Condensed data taken from the records of the three divisions for the year ended June 30,2010, are as follows:
Retail Snack Cake Bakeries Bread Division Division Division
Sales $ 8,100,000 $ 8,700,000 $7,800,000
Cost of goods sold 4,980,000 5,400,000 4,600,000
Operating expenses 1,662,000 1,995,000 1,484,000
Invested assets 10,800,000 10,875,000 6,000,000
The management of Sunshine Baking Company is evaluating each division as a basis for planning a future expansion of operations.
Instructions
1. Prepare condensed divisional income statements for the three divisions, assuming that there were no service department charges.
2. Using the DuPont formula for rate of return on investment, compute the profit margin, investment turnover, and rate of return on investment for each division.
3. If available funds permit the expansion of operations of only one division, which of the divisions would you recommend for expansion, based on parts (1) and (2)? Explain.
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The condensed income statement for the International Division of King Industries Inc. is as follows (assuming no service department charges)
ACCOUNTING
Warren, Reeve and Duchac
Financial Accounting
Managerial Accounting
Carl Warren, James M. Reeve, Jonathan E. Duchac
Chapter 24
EX 24-13 The condensed income statement for the International Division of King Industries Inc. is as follows (assuming no service department charges):
Sales $1,200,000
Cost of goods sold 600,000 __________
Gross profit $ 600,000
Administrative expenses 300,000 __________
Income from operations $ 300,000 __________ __________
The manager of the International Division is considering ways to increase the rate of return on investment.
a. Using the DuPont formula for rate of return on investment,determine the profit margin, investment turnover, and rate of return on investment of the International Division, assuming that $2,000,000of assets have been invested in the International Division.
b. If expenses could be reduced by $60,000 without decreasing sales,what would be the impact on the profit margin, investment turnover, and rate of return on investment for the International Division?
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Warren, Reeve and Duchac
Financial Accounting
Managerial Accounting
Carl Warren, James M. Reeve, Jonathan E. Duchac
Chapter 24
EX 24-13 The condensed income statement for the International Division of King Industries Inc. is as follows (assuming no service department charges):
Sales $1,200,000
Cost of goods sold 600,000 __________
Gross profit $ 600,000
Administrative expenses 300,000 __________
Income from operations $ 300,000 __________ __________
The manager of the International Division is considering ways to increase the rate of return on investment.
a. Using the DuPont formula for rate of return on investment,determine the profit margin, investment turnover, and rate of return on investment of the International Division, assuming that $2,000,000of assets have been invested in the International Division.
b. If expenses could be reduced by $60,000 without decreasing sales,what would be the impact on the profit margin, investment turnover, and rate of return on investment for the International Division?
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Harris Corporation, a manufacturer of electronics and communications systems, uses a service department charge system to charge profit centers with
ACCOUNTING
Warren, Reeve and Duchac
Financial Accounting
Managerial Accounting
Carl Warren, James M. Reeve, Jonathan E. Duchac
Chapter 24
EX 24-6 Harris Corporation, a manufacturer of electronics and communications systems, uses a service department charge system to charge profit centers with Computing and Communications Services (CCS) service department costs. The following table identifies an abbreviated list of service categories and activity bases used by the CCS department. The table also includes some assumed cost and activity base quantity information for each service for April. CCS Service Assumed Activity Category Activity Base Assumed Cost Base Quantity Help desk Number of calls $88,400 2,600 Network center Number of devices monitored 609,375 9,750 Electronic mail Number of user accounts 67,080 6,450 Local voice support Number of phone extensions 152,720 9,200
One of the profit centers for Harris Corporation is the Communication Systems (COMM) sector. Assume the following information for the COMM sector:
• The sector has 3,000 employees, of whom 40% are office employees.
• All the office employees have a phone,and 75% of them have a computer on the network.
• Ninety-five percent of the employees with a computer also have an e-mail account.
• The average number of help desk calls for April was 1.0 call per individual with a computer.
• There are 250 additional printers, servers, and peripherals on the network beyond the personal computers.
a. Determine the service charge rate for the four CCS service categories for April.
b. Determine the charges to the COMM sector for the four CCS service categories for April.
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Warren, Reeve and Duchac
Financial Accounting
Managerial Accounting
Carl Warren, James M. Reeve, Jonathan E. Duchac
Chapter 24
EX 24-6 Harris Corporation, a manufacturer of electronics and communications systems, uses a service department charge system to charge profit centers with Computing and Communications Services (CCS) service department costs. The following table identifies an abbreviated list of service categories and activity bases used by the CCS department. The table also includes some assumed cost and activity base quantity information for each service for April. CCS Service Assumed Activity Category Activity Base Assumed Cost Base Quantity Help desk Number of calls $88,400 2,600 Network center Number of devices monitored 609,375 9,750 Electronic mail Number of user accounts 67,080 6,450 Local voice support Number of phone extensions 152,720 9,200
One of the profit centers for Harris Corporation is the Communication Systems (COMM) sector. Assume the following information for the COMM sector:
• The sector has 3,000 employees, of whom 40% are office employees.
• All the office employees have a phone,and 75% of them have a computer on the network.
• Ninety-five percent of the employees with a computer also have an e-mail account.
• The average number of help desk calls for April was 1.0 call per individual with a computer.
• There are 250 additional printers, servers, and peripherals on the network beyond the personal computers.
a. Determine the service charge rate for the four CCS service categories for April.
b. Determine the charges to the COMM sector for the four CCS service categories for April.
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Western Wood Products Company prepared the following factory overhead cost budget for the Press Department for February 2010, during which it expected
ACCOUNTING
Warren, Reeve and Duchac
Financial Accounting
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Carl Warren, James M. Reeve, Jonathan E. Duchac
Chapter 23
EX 23-14 Western Wood Products Company prepared the following factory overhead cost budget for the Press Department for February 2010, during which it expected to require 10,000 hours of productive capacity in the department: Variable overhead cost: Indirect factory labor $27,500 Power and light 3,600 Indirect materials 23,000 _______ Total variable cost $ 54,100 Fixed overhead cost: Supervisory salaries $42,000 Depreciation of plant and equipment 40,000 Insurance and property taxes 12,000 _______ Total fixed cost 94,000 ________ Total factory overhead cost $148,100 ________ ________
Assuming that the estimated costs for March are the same as for February, prepare a flexible factory overhead cost budget for the Press Department for March for 8,000, 10,000,and 12,000 hours of production.
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Warren, Reeve and Duchac
Financial Accounting
Managerial Accounting
Carl Warren, James M. Reeve, Jonathan E. Duchac
Chapter 23
EX 23-14 Western Wood Products Company prepared the following factory overhead cost budget for the Press Department for February 2010, during which it expected to require 10,000 hours of productive capacity in the department: Variable overhead cost: Indirect factory labor $27,500 Power and light 3,600 Indirect materials 23,000 _______ Total variable cost $ 54,100 Fixed overhead cost: Supervisory salaries $42,000 Depreciation of plant and equipment 40,000 Insurance and property taxes 12,000 _______ Total fixed cost 94,000 ________ Total factory overhead cost $148,100 ________ ________
Assuming that the estimated costs for March are the same as for February, prepare a flexible factory overhead cost budget for the Press Department for March for 8,000, 10,000,and 12,000 hours of production.
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Hickory Furniture Company manufactures unfinished oak furniture. Hickory uses a standard cost system.
ACCOUNTING
Warren, Reeve and Duchac
Financial Accounting
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Carl Warren, James M. Reeve, Jonathan E. Duchac
Chapter 23
EX 23-2 Hickory Furniture Company manufactures unfinished oak furniture. Hickory uses a standard cost system. The direct labor,direct materials,and factory overhead standards for an unfinished dining room table are as follows: Direct labor: standard rate $18.00 per hr. standard time per unit 2.5 hrs. Direct materials (oak): standard price $9.50 per bd. ft. standard quantity 18 bd. ft. Variable factory overhead: standard rate $2.80 per direct labor hr. Fixed factory overhead: standard rate $1.20 per direct labor hr.
Determine the standard cost per dining room table.
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Chapter 23
EX 23-2 Hickory Furniture Company manufactures unfinished oak furniture. Hickory uses a standard cost system. The direct labor,direct materials,and factory overhead standards for an unfinished dining room table are as follows: Direct labor: standard rate $18.00 per hr. standard time per unit 2.5 hrs. Direct materials (oak): standard price $9.50 per bd. ft. standard quantity 18 bd. ft. Variable factory overhead: standard rate $2.80 per direct labor hr. Fixed factory overhead: standard rate $1.20 per direct labor hr.
Determine the standard cost per dining room table.
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Rejuvenation Physical Therapy Inc. is planning its cash payments for operations for the third quarter (July–September), 2011
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Chapter 22
EX 22-21 Rejuvenation Physical Therapy Inc. is planning its cash payments for operations for the third quarter (July–September), 2011. The Accrued Expenses Payable balance on July 1 is $24,000. The budgeted expenses for the next three months are as follows: July August September Salaries $58,200 $63,500 $74,500 Utilities 5,300 5,600 7,100 Other operating expenses 48,500 52,700 58,200 ________ ________ ________ Total $112,000 $121,800 $139,800 ________ ________ ________ ________ ________ ________ Other operating expenses include $10,500of monthly depreciation expense and $600of monthly insurance expense that was prepaid for the year on March 1of the current year. Of the remaining expenses, 70% are paid in the month in which they are incurred, with the remainder paid in the following month. The Accrued Expenses Payable balance on July 1relates to the expenses incurred in June. Prepare a schedule of cash payments for operations for July, August, and September.
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Financial Accounting
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Chapter 22
EX 22-21 Rejuvenation Physical Therapy Inc. is planning its cash payments for operations for the third quarter (July–September), 2011. The Accrued Expenses Payable balance on July 1 is $24,000. The budgeted expenses for the next three months are as follows: July August September Salaries $58,200 $63,500 $74,500 Utilities 5,300 5,600 7,100 Other operating expenses 48,500 52,700 58,200 ________ ________ ________ Total $112,000 $121,800 $139,800 ________ ________ ________ ________ ________ ________ Other operating expenses include $10,500of monthly depreciation expense and $600of monthly insurance expense that was prepaid for the year on March 1of the current year. Of the remaining expenses, 70% are paid in the month in which they are incurred, with the remainder paid in the following month. The Accrued Expenses Payable balance on July 1relates to the expenses incurred in June. Prepare a schedule of cash payments for operations for July, August, and September.
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Coca-Cola Enterprises is the largest bottler of Coca-Cola® in North America. The company purchases Coke® and Sprite® concentrate from The Coca-Cola
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Chapter 22
EX 22-10 Coca-Cola Enterprises is the largest bottler of Coca-Cola® in North America. The company purchases Coke® and Sprite® concentrate from The Coca-Cola Company, dilutes and mixes the concentrate with carbonated water, and then fills the blended beverage into cans or plastic two-liter bottles. Assume that the estimated production for Coke and Sprite two-liter bottles at the Dallas, Texas, bottling plant are as follows for the month of March: Coke 214,000 two-liter bottles Sprite 163,000 two-liter bottles. In addition, assume that the concentrate costs $80 per pound for both Coke and Sprite and is used at a rate of 0.2 pound per 100 liters of carbonated water in blending Coke and 0.15 pound per 100 liters of carbonated water in blending Sprite. Assume that two- liter bottles cost $0.08 per bottle and carbonated water costs $0.06 per liter.
Prepare a direct materials purchases budget for March 2010, assuming no changes between beginning and ending inventories for all three materials.
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Financial Accounting
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Chapter 22
EX 22-10 Coca-Cola Enterprises is the largest bottler of Coca-Cola® in North America. The company purchases Coke® and Sprite® concentrate from The Coca-Cola Company, dilutes and mixes the concentrate with carbonated water, and then fills the blended beverage into cans or plastic two-liter bottles. Assume that the estimated production for Coke and Sprite two-liter bottles at the Dallas, Texas, bottling plant are as follows for the month of March: Coke 214,000 two-liter bottles Sprite 163,000 two-liter bottles. In addition, assume that the concentrate costs $80 per pound for both Coke and Sprite and is used at a rate of 0.2 pound per 100 liters of carbonated water in blending Coke and 0.15 pound per 100 liters of carbonated water in blending Sprite. Assume that two- liter bottles cost $0.08 per bottle and carbonated water costs $0.06 per liter.
Prepare a direct materials purchases budget for March 2010, assuming no changes between beginning and ending inventories for all three materials.
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Steelcase Inc. is one of the largest manufacturers of office furniture in the United States. In Grand Rapids, Michigan, it produces filing cabinets
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Chapter 22
EX 22-4 Steelcase Inc. is one of the largest manufacturers of office furniture in the United States. In Grand Rapids, Michigan, it produces filing cabinets in two departments: Fabrication and Trim Assembly. Assume the following information for the Fabrication Department:
Steel per filing cabinet . . . . . . . . . . . . . . 45 pounds
Direct labor per filing cabinet . . . . . . . . . 20 minutes
Supervisor salaries . . . . . . . . . . . . . . . . . $140,000 per month
Depreciation . . . . . . . . . . . . . . . . . . . . . . $22,000 per month
Direct labor rate . . . . . . . . . . . . . . . . . . . $21 per hour
Steel cost . . . . . . . . . . . . . . . . . . . . . . . . $1.45 per pound
Prepare a flexible budget for 12,000,15,000,and 18,000 filing cabinets for the month of October 2010, similar to Exhibit 5, assuming that inventories are not significant.
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Financial Accounting
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Chapter 22
EX 22-4 Steelcase Inc. is one of the largest manufacturers of office furniture in the United States. In Grand Rapids, Michigan, it produces filing cabinets in two departments: Fabrication and Trim Assembly. Assume the following information for the Fabrication Department:
Steel per filing cabinet . . . . . . . . . . . . . . 45 pounds
Direct labor per filing cabinet . . . . . . . . . 20 minutes
Supervisor salaries . . . . . . . . . . . . . . . . . $140,000 per month
Depreciation . . . . . . . . . . . . . . . . . . . . . . $22,000 per month
Direct labor rate . . . . . . . . . . . . . . . . . . . $21 per hour
Steel cost . . . . . . . . . . . . . . . . . . . . . . . . $1.45 per pound
Prepare a flexible budget for 12,000,15,000,and 18,000 filing cabinets for the month of October 2010, similar to Exhibit 5, assuming that inventories are not significant.
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Venus Chocolate Company processes chocolate into candy bars. The process begins by placing direct materials (raw chocolate,milk,and sugar)
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Chapter 20
PR 20-2A Venus Chocolate Company processes chocolate into candy bars. The process begins by placing direct materials (raw chocolate,milk,and sugar) into the Blending Department. All materials are placed into production at the beginning of the blending process. After blending, the milk chocolate is then transferred to the Molding Department, where the milk chocolate is formed into candy bars. The following is a partial work in process account of the Blending Department at January 31,2010
Instructions
1. Prepare a cost of production report, and identify the missing amounts for Work in Process—Blending Department.
2. Assuming that the January 1work in process inventory includes direct materials of $18,600,determine the increase or decrease in the cost per equivalent unit for direct materials and conversion between December and January.
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Chapter 20
PR 20-2A Venus Chocolate Company processes chocolate into candy bars. The process begins by placing direct materials (raw chocolate,milk,and sugar) into the Blending Department. All materials are placed into production at the beginning of the blending process. After blending, the milk chocolate is then transferred to the Molding Department, where the milk chocolate is formed into candy bars. The following is a partial work in process account of the Blending Department at January 31,2010
Instructions
1. Prepare a cost of production report, and identify the missing amounts for Work in Process—Blending Department.
2. Assuming that the January 1work in process inventory includes direct materials of $18,600,determine the increase or decrease in the cost per equivalent unit for direct materials and conversion between December and January.
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Prepare a cost of production report for the Cutting Department of Perma-Wear Carpet Company for October 2010, using the following data and assuming
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Chapter 20
EX 20-17 Prepare a cost of production report for the Cutting Department of Perma-Wear Carpet Company for October 2010, using the following data and assuming that all materials are added at the beginning of the process:
Work in process, October 1, 6,000 units, 75% completed $ 62,250* *
Direct materials (6,000 ??$7.60) $45,600
Conversion (6,000 ??75% ??$3.70) 16,650 _______ $62,250 _______
Materials added during October from Weaving Department, 162,000 units $1,215,000 Direct labor for October 362,080 Factory overhead for October 191,550 Goods finished during October (includes goods in process, October 1), 160,400 units — Work in process, October 31, 7,600 units, 30% completed —
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Chapter 20
EX 20-17 Prepare a cost of production report for the Cutting Department of Perma-Wear Carpet Company for October 2010, using the following data and assuming that all materials are added at the beginning of the process:
Work in process, October 1, 6,000 units, 75% completed $ 62,250* *
Direct materials (6,000 ??$7.60) $45,600
Conversion (6,000 ??75% ??$3.70) 16,650 _______ $62,250 _______
Materials added during October from Weaving Department, 162,000 units $1,215,000 Direct labor for October 362,080 Factory overhead for October 191,550 Goods finished during October (includes goods in process, October 1), 160,400 units — Work in process, October 31, 7,600 units, 30% completed —
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The charges to Work in Process—Assembly Department for a period, together with information concerning production, are as follows
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Chapter 20
EX 20-11 The charges to Work in Process—Assembly Department for a period, together with information concerning production, are as follows. All direct materials are placed in process at the beginning of production. Work in Process—Assembly Department Bal., 4,000 units, 35% completed 9,590 To Finished Goods, 92,200 units ? Direct materials, 94,000 units @ $1.75 164,500 Direct labor 134,800 Factory overhead 52,020 Bal. ? units, 45% completed ?
Determine the following:
a. The number of units in work in process inventory at the end of the period.
b. Equivalent units of production for direct materials and conversion.
c. Costs per equivalent unit for direct materials and conversion.
d. Cost of the units started and completed during the period.
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Financial Accounting
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Carl Warren, James M. Reeve, Jonathan E. Duchac
Chapter 20
EX 20-11 The charges to Work in Process—Assembly Department for a period, together with information concerning production, are as follows. All direct materials are placed in process at the beginning of production. Work in Process—Assembly Department Bal., 4,000 units, 35% completed 9,590 To Finished Goods, 92,200 units ? Direct materials, 94,000 units @ $1.75 164,500 Direct labor 134,800 Factory overhead 52,020 Bal. ? units, 45% completed ?
Determine the following:
a. The number of units in work in process inventory at the end of the period.
b. Equivalent units of production for direct materials and conversion.
c. Costs per equivalent unit for direct materials and conversion.
d. Cost of the units started and completed during the period.
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Sprint Nextelis one of the largest digital wireless service providers in the United States
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Chapter 21
EX 21-16 Sprint Nextelis one of the largest digital wireless service providers in the United States. In a recent year, it had approximately 41.5 million direct subscribers (accounts) that generated revenue of $40,146 million. Costs and expenses for the year were as follows (in millions): Cost of revenue $17,191 Selling, general, and administrative expenses 12,673 Depreciation 5,711. Assume that 75% of the cost of revenue and 35% of the selling, general, and administrative expenses are variable to the number of direct subscribers (accounts).
a. What is Sprint Nextel’s break-even number of accounts, using the data and assumptions above? Round units to one decimal place (in millions).
b. How much revenue per account would be sufficient for Sprint Nextel to break even if the number of accounts remained constant?
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Chapter 21
EX 21-16 Sprint Nextelis one of the largest digital wireless service providers in the United States. In a recent year, it had approximately 41.5 million direct subscribers (accounts) that generated revenue of $40,146 million. Costs and expenses for the year were as follows (in millions): Cost of revenue $17,191 Selling, general, and administrative expenses 12,673 Depreciation 5,711. Assume that 75% of the cost of revenue and 35% of the selling, general, and administrative expenses are variable to the number of direct subscribers (accounts).
a. What is Sprint Nextel’s break-even number of accounts, using the data and assumptions above? Round units to one decimal place (in millions).
b. How much revenue per account would be sufficient for Sprint Nextel to break even if the number of accounts remained constant?
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For the current year ending March 31, Jwork Company expects fixed costs of $440,000, a unit variable cost of $50, and a unit selling price of $75
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Chapter 21
EX 21-11 For the current year ending March 31, Jwork Company expects fixed costs of $440,000, a unit variable cost of $50, and a unit selling price of $75.
a. Compute the anticipated break-even sales (units).
b. Compute the sales (units) required to realize income from operations of $90,000.
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Chapter 21
EX 21-11 For the current year ending March 31, Jwork Company expects fixed costs of $440,000, a unit variable cost of $50, and a unit selling price of $75.
a. Compute the anticipated break-even sales (units).
b. Compute the sales (units) required to realize income from operations of $90,000.
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Willies Engine Shop uses a job order cost system to determine the cost of performing engine repair work
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Chapter 19
EX 19-10 Willies Engine Shop uses a job order cost system to determine the cost of performing engine repair work. Estimated costs and expenses for the coming period are as follows:
Engine parts $ 875,000
Shop direct labor 640,000
Shop and repair equipment depreciation 45,000
Shop supervisor salaries 125,800
Shop property tax 22,600
Shop supplies 16,600
Advertising expense 17,800
Administrative office salaries 75,000
Administrative office depreciation expense 10,000
Total costs and expenses $1,827,800
The average shop direct labor rate is $16 per hour.
Determine the predetermined shop overhead rate per direct labor hour.
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Chapter 19
EX 19-10 Willies Engine Shop uses a job order cost system to determine the cost of performing engine repair work. Estimated costs and expenses for the coming period are as follows:
Engine parts $ 875,000
Shop direct labor 640,000
Shop and repair equipment depreciation 45,000
Shop supervisor salaries 125,800
Shop property tax 22,600
Shop supplies 16,600
Advertising expense 17,800
Administrative office salaries 75,000
Administrative office depreciation expense 10,000
Total costs and expenses $1,827,800
The average shop direct labor rate is $16 per hour.
Determine the predetermined shop overhead rate per direct labor hour.
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Materials issued for the current month are as follows
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Chapter 19
EX 19-4 Materials issued for the current month are as follows:
Requisition No. Material Job No. Amount
101 Steel 210 $25,400
102 Plastic 215 19,600
103 Glue Indirect 1,450
104 Rubber 222 1,200
105 Aluminum 231 52,400
Journalize the entry to record the issuance of materials
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Financial Accounting
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Carl Warren, James M. Reeve, Jonathan E. Duchac
Chapter 19
EX 19-4 Materials issued for the current month are as follows:
Requisition No. Material Job No. Amount
101 Steel 210 $25,400
102 Plastic 215 19,600
103 Glue Indirect 1,450
104 Rubber 222 1,200
105 Aluminum 231 52,400
Journalize the entry to record the issuance of materials
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Sunday, June 27, 2010
The following events took place for Salsa Inc. during May 2010, the first month of operations as a producer of road bikes
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Chapter 19
EX 19-14 The following events took place for Salsa Inc. during May 2010, the first month of operations as a producer of road bikes:
• Purchased $244,000of materials.
• Used $210,000of direct materials in production.
• Incurred $180,000of direct labor wages.
• Applied factory overhead at a rate of 75% of direct labor cost.
• Transferred $510,000of work in process to finished goods.
• Sold goods with a cost of $485,000.
• Sold goods for $870,000.
• Incurred $210,000of selling expenses.
• Incurred $75,400of administrative expenses.
a. Prepare the May income statement for Salsa. Assume that Salsa uses the perpetual inventory method.
b. Determine the inventory balances at the end of the first month of operations.
Check: a. Income from operations, $99,600
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Financial Accounting
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Carl Warren, James M. Reeve, Jonathan E. Duchac
Chapter 19
EX 19-14 The following events took place for Salsa Inc. during May 2010, the first month of operations as a producer of road bikes:
• Purchased $244,000of materials.
• Used $210,000of direct materials in production.
• Incurred $180,000of direct labor wages.
• Applied factory overhead at a rate of 75% of direct labor cost.
• Transferred $510,000of work in process to finished goods.
• Sold goods with a cost of $485,000.
• Sold goods for $870,000.
• Incurred $210,000of selling expenses.
• Incurred $75,400of administrative expenses.
a. Prepare the May income statement for Salsa. Assume that Salsa uses the perpetual inventory method.
b. Determine the inventory balances at the end of the first month of operations.
Check: a. Income from operations, $99,600
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The following information is available for Deutsch Corporation for 2010
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Chapter 18
PR 18-5A The following information is available for Deutsch Corporation for 2010:
Inventories January 1 December 31
Materials $225,000 $280,000
Work in process 405,000 380,000
Finished goods 390,000 380,000
AND SO ON
Instructions
1. Prepare the 2010 Statement of Cost of Goods Manufactured
2. Prepare the 2010 Income Statement
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Chapter 18
PR 18-5A The following information is available for Deutsch Corporation for 2010:
Inventories January 1 December 31
Materials $225,000 $280,000
Work in process 405,000 380,000
Finished goods 390,000 380,000
AND SO ON
Instructions
1. Prepare the 2010 Statement of Cost of Goods Manufactured
2. Prepare the 2010 Income Statement
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PepsiCo, Inc., the parent company of Frito-Lay snack foods and Pepsi beverages, had the following current assets and current liabilities at the end of
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Chapter 17
EX 17-7 PepsiCo, Inc., the parent company of Frito-Lay snack foods and Pepsi beverages, had the following current assets and current liabilities at the end of two recent years:
Dec. 30, 2006 Dec. 31, 2005
(in millions) (in millions)
Cash and cash equivalents $1,651 $1,716
Short-term investments, at cost 1,171 3,166
Accounts and notes receivable, net 3,725 3,261
Inventories 1,926 1,693
Prepaid expenses and other current assets 657 618
Short-term obligations 274 2,889
Accounts payable and other current liabilities 6,496 5,971
Income taxes payable 90 546
a. Determine the (1) current ratio and (2) quick ratio for both years. Round to one decimal place.
b. What conclusions can you draw from these data?
Check: a. (1) Dec. 31, 2005 Current Ratio, 1.1
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Chapter 17
EX 17-7 PepsiCo, Inc., the parent company of Frito-Lay snack foods and Pepsi beverages, had the following current assets and current liabilities at the end of two recent years:
Dec. 30, 2006 Dec. 31, 2005
(in millions) (in millions)
Cash and cash equivalents $1,651 $1,716
Short-term investments, at cost 1,171 3,166
Accounts and notes receivable, net 3,725 3,261
Inventories 1,926 1,693
Prepaid expenses and other current assets 657 618
Short-term obligations 274 2,889
Accounts payable and other current liabilities 6,496 5,971
Income taxes payable 90 546
a. Determine the (1) current ratio and (2) quick ratio for both years. Round to one decimal place.
b. What conclusions can you draw from these data?
Check: a. (1) Dec. 31, 2005 Current Ratio, 1.1
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Friday, June 25, 2010
For 2010, Wiglaf Technology Company reported its most significant decline in net income in years
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Chapter 17
PR 17-1A For 2010, Wiglaf Technology Company reported its most significant decline in net income in years. At the end of the year, C.S. Lewis, the president, is presented with the following condensed comparative income statement:
Wiglaf Technology Company
Comparative Income Statement
For the Years Ended December 31, 2010 and 2009 AND SO ON
Instructions
1. Prepare a comparative income statement with horizontal analysis for the two-year period, using 2009 as the base year. Round to one decimal place.
2. To the extent the data permit, comment on the significant relationships revealed by the horizontal analysis prepared in (1).
Check: 1. Net sales 10.0% increase
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Financial Accounting
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Chapter 17
PR 17-1A For 2010, Wiglaf Technology Company reported its most significant decline in net income in years. At the end of the year, C.S. Lewis, the president, is presented with the following condensed comparative income statement:
Wiglaf Technology Company
Comparative Income Statement
For the Years Ended December 31, 2010 and 2009 AND SO ON
Instructions
1. Prepare a comparative income statement with horizontal analysis for the two-year period, using 2009 as the base year. Round to one decimal place.
2. To the extent the data permit, comment on the significant relationships revealed by the horizontal analysis prepared in (1).
Check: 1. Net sales 10.0% increase
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Xavier Stores Company and Lestrade Stores, Inc., are large retail department stores
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Chapter 17
EX 17-10 Xavier Stores Company and Lestrade Stores, Inc., are large retail department stores. Both companies offer credit to their customers through their own credit card operations. Information from the financial statements for both companies for two recent years is as follows (all numbers are in millions):
Xavier Lestrade
Merchandise sales $28,000 $65,000
Credit card receivables—beginning 2,750 15,000
Credit card receivables—ending 2,250 11,000
a. Determine the (1) accounts receivable turnover and (2) the number of days’ sales in receivables for both companies.Round to one decimal place.
b. Compare the two companies with regard to their credit card policies.
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Chapter 17
EX 17-10 Xavier Stores Company and Lestrade Stores, Inc., are large retail department stores. Both companies offer credit to their customers through their own credit card operations. Information from the financial statements for both companies for two recent years is as follows (all numbers are in millions):
Xavier Lestrade
Merchandise sales $28,000 $65,000
Credit card receivables—beginning 2,750 15,000
Credit card receivables—ending 2,250 11,000
a. Determine the (1) accounts receivable turnover and (2) the number of days’ sales in receivables for both companies.Round to one decimal place.
b. Compare the two companies with regard to their credit card policies.
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The cost of merchandise sold for Kohl’s Corporation for a recent year was $9,891 million
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Chapter 16
EX 16-20 The cost of merchandise sold for Kohl’s Corporation for a recent year was $9,891 million. The balance sheet showed the following current account balances (in millions):
Balance, Balance,
End of Year Beginning of Year
Merchandise inventories $2,588 $2,238
Accounts payable 934 830
Determine the amount of cash payments for merchandise.
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Financial Accounting
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Chapter 16
EX 16-20 The cost of merchandise sold for Kohl’s Corporation for a recent year was $9,891 million. The balance sheet showed the following current account balances (in millions):
Balance, Balance,
End of Year Beginning of Year
Merchandise inventories $2,588 $2,238
Accounts payable 934 830
Determine the amount of cash payments for merchandise.
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Miranda, Inc., manufactures and sells commercial and residential security equipment
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Chapter 15
PR 15-4A Miranda, Inc., manufactures and sells commercial and residential security equipment. The comparative unclassified balance sheets for December 31,2011 and 2010 are provided below. Selected missing balances are shown by letters... AND SO ON
Instructions
Determine the missing letters in the unclassified balance sheet. Provide appropriate supporting calculations.
Check: 1. b. 6,115
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Financial Accounting
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Chapter 15
PR 15-4A Miranda, Inc., manufactures and sells commercial and residential security equipment. The comparative unclassified balance sheets for December 31,2011 and 2010 are provided below. Selected missing balances are shown by letters... AND SO ON
Instructions
Determine the missing letters in the unclassified balance sheet. Provide appropriate supporting calculations.
Check: 1. b. 6,115
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The comparative balance sheet of Amelia Enterprises, Inc. at December 31, 2010 and 2009, is as follows:
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Chapter 16
PR 16-2A The comparative balance sheet of Amelia Enterprises, Inc. at December 31, 2010 and 2009, is as follows: AND SO ON
Additional data obtained from the income statement and from an examination of the accounts in the ledger for 2010 are as follows:
a. Net income, $126,000.
b. Depreciation reported on the income statement, $41,700.
c. Equipment was purchased at a cost of $81,400, and fully depreciated equipment costing $22,400 was discarded, with no salvage realized.
d. The mortgage note payable was not due until 2013, but the terms permitted earlier payment without penalty.
e. 7,000 shares of common stock were issued at $20 for cash.
f. Cash dividends declared and paid, $76,800.
Instructions Prepare a statement of cash flows, using the indirect method of presenting cash flows from operating activities.
Check: Net Cash Flow from Operating Activities: $169,600
Click here for the SOLUTION
Warren, Reeve and Duchac
Financial Accounting
Managerial Accounting
Carl Warren, James M. Reeve, Jonathan E. Duchac
Chapter 16
PR 16-2A The comparative balance sheet of Amelia Enterprises, Inc. at December 31, 2010 and 2009, is as follows: AND SO ON
Additional data obtained from the income statement and from an examination of the accounts in the ledger for 2010 are as follows:
a. Net income, $126,000.
b. Depreciation reported on the income statement, $41,700.
c. Equipment was purchased at a cost of $81,400, and fully depreciated equipment costing $22,400 was discarded, with no salvage realized.
d. The mortgage note payable was not due until 2013, but the terms permitted earlier payment without penalty.
e. 7,000 shares of common stock were issued at $20 for cash.
f. Cash dividends declared and paid, $76,800.
Instructions Prepare a statement of cash flows, using the indirect method of presenting cash flows from operating activities.
Check: Net Cash Flow from Operating Activities: $169,600
Click here for the SOLUTION
Selected data derived from the income statement and balance sheet of Jones Soda Co. for a recent year are as follows
ACCOUNTING
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Financial Accounting
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Carl Warren, James M. Reeve, Jonathan E. Duchac
Chapter 16
EX 16-16 Selected data derived from the income statement and balance sheet of Jones Soda Co. for a recent year are as follows:
Income statement data (in thousands):
Net earnings $4,574
Depreciation expense 256
Stock-based compensation expense (noncash) 1,196
Balance sheet data (in thousands):
Increase in accounts receivable $3,214
Increase in inventory 1,089
Increase in prepaid expenses 566
Increase in accounts payable 1,891
a. Prepare the Cash Flows from Operating Activities section of the statement of cash flows using the indirect method for Jones Soda Co. for the year.
b. Interpret your results in part (a).
Click here for the SOLUTION
Warren, Reeve and Duchac
Financial Accounting
Managerial Accounting
Carl Warren, James M. Reeve, Jonathan E. Duchac
Chapter 16
EX 16-16 Selected data derived from the income statement and balance sheet of Jones Soda Co. for a recent year are as follows:
Income statement data (in thousands):
Net earnings $4,574
Depreciation expense 256
Stock-based compensation expense (noncash) 1,196
Balance sheet data (in thousands):
Increase in accounts receivable $3,214
Increase in inventory 1,089
Increase in prepaid expenses 566
Increase in accounts payable 1,891
a. Prepare the Cash Flows from Operating Activities section of the statement of cash flows using the indirect method for Jones Soda Co. for the year.
b. Interpret your results in part (a).
Click here for the SOLUTION
Lance Co. purchased $36,000of 6%, 10-year Bergen County bonds on July 12, 2010, directly from the county at par value
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Financial Accounting
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Carl Warren, James M. Reeve, Jonathan E. Duchac
Chapter 15
EX 15-2 Lance Co. purchased $36,000 of 6%, 10-year Bergen County bonds on July 12, 2010, directly from the county at par value. The bonds pay semiannual interest on May 1and November 1. On December 1, 2010, Lance Co. sold $14,000 of the Bergen County bonds at 102 plus $70 accrued interest, less a $300 brokerage commission.
Provide the journal entries for:
a. the purchase of the bonds on July 12, plus 72 days of accrued interest.
b. semiannual interest on May 1and November 1.
c. sale of the bonds on December 1.
d. adjusting entry for accrued interest of $220on December 31
Check: Loss on Sale of Investments $20
Click here for the SOLUTION
Warren, Reeve and Duchac
Financial Accounting
Managerial Accounting
Carl Warren, James M. Reeve, Jonathan E. Duchac
Chapter 15
EX 15-2 Lance Co. purchased $36,000 of 6%, 10-year Bergen County bonds on July 12, 2010, directly from the county at par value. The bonds pay semiannual interest on May 1and November 1. On December 1, 2010, Lance Co. sold $14,000 of the Bergen County bonds at 102 plus $70 accrued interest, less a $300 brokerage commission.
Provide the journal entries for:
a. the purchase of the bonds on July 12, plus 72 days of accrued interest.
b. semiannual interest on May 1and November 1.
c. sale of the bonds on December 1.
d. adjusting entry for accrued interest of $220on December 31
Check: Loss on Sale of Investments $20
Click here for the SOLUTION
Wednesday, June 23, 2010
Western Capital Inc. is a regional investment company that began operations on January 1, 2010. The following transactions relate to trading
ACCOUNTING
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Financial Accounting
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Carl Warren, James M. Reeve, Jonathan E. Duchac
Chapter 15
PR 15-2A Western Capital Inc. is a regional investment company that began operations on January 1, 2010. The following transactions relate to trading securities acquired by Western Capital Inc., which has a fiscal year ending on December 31:
2010
Feb. 3. Purchased 2,500 shares of Titan Inc. as a trading security at $35 per share plus a brokerage commission of $500.
Mar. 12. Purchased 1,200 shares of Quick Tyme Inc. as a trading security at $14 per share plus a brokerage commission of $240.
May15. Sold 600 shares of Titan Inc. for $36 per share less a $80 brokerage commission.
June 12. Received an annual dividend of $0.12 per share on Titan Inc. stock.
Dec. 31. The portfolio of trading securities was adjusted to fair values of $15 and $39 per share for Quick Tyme Inc. and Titan Inc., respectively.
2011
Apr. 9. Purchased 1,100 shares of Aspire Inc. as a trading security at $41 per share plus a $165 brokerage commission.
June 15. Received an annual dividend of $0.15 per share on Titan Inc. stock.
Aug. 20. Sold 200shares of Aspire Inc.for $35 per share less a $60 brokerage commission.
Dec. 31. The portfolio of trading securities was adjusted to fair value using the following fair values per share for the trading securities:
Aspire Inc. $31
Quick Tyme Inc. 16
Titan Inc. 37
The portfolio of trading securities was adjusted to fair value.
Instructions
1. Journalize the entries to record these transactions.
2. Prepare the investment-related current asset balance sheet disclosures for Western Capital Inc. on December 31,2011.
3. How are unrealized gains or losses on trading investments disclosed on the financial statements of Western Capital Inc.
Click here for the SOLUTION
Warren, Reeve and Duchac
Financial Accounting
Managerial Accounting
Carl Warren, James M. Reeve, Jonathan E. Duchac
Chapter 15
PR 15-2A Western Capital Inc. is a regional investment company that began operations on January 1, 2010. The following transactions relate to trading securities acquired by Western Capital Inc., which has a fiscal year ending on December 31:
2010
Feb. 3. Purchased 2,500 shares of Titan Inc. as a trading security at $35 per share plus a brokerage commission of $500.
Mar. 12. Purchased 1,200 shares of Quick Tyme Inc. as a trading security at $14 per share plus a brokerage commission of $240.
May15. Sold 600 shares of Titan Inc. for $36 per share less a $80 brokerage commission.
June 12. Received an annual dividend of $0.12 per share on Titan Inc. stock.
Dec. 31. The portfolio of trading securities was adjusted to fair values of $15 and $39 per share for Quick Tyme Inc. and Titan Inc., respectively.
2011
Apr. 9. Purchased 1,100 shares of Aspire Inc. as a trading security at $41 per share plus a $165 brokerage commission.
June 15. Received an annual dividend of $0.15 per share on Titan Inc. stock.
Aug. 20. Sold 200shares of Aspire Inc.for $35 per share less a $60 brokerage commission.
Dec. 31. The portfolio of trading securities was adjusted to fair value using the following fair values per share for the trading securities:
Aspire Inc. $31
Quick Tyme Inc. 16
Titan Inc. 37
The portfolio of trading securities was adjusted to fair value.
Instructions
1. Journalize the entries to record these transactions.
2. Prepare the investment-related current asset balance sheet disclosures for Western Capital Inc. on December 31,2011.
3. How are unrealized gains or losses on trading investments disclosed on the financial statements of Western Capital Inc.
Click here for the SOLUTION
How does the accounting for a dividend received differ between the cost method and the equity method
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Financial Accounting
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Carl Warren, James M. Reeve, Jonathan E. Duchac
Chapter 15
Eye Openers 5. How does the accounting for a dividend received differ between the cost method and the equity method?
Click here for the SOLUTION
Warren, Reeve and Duchac
Financial Accounting
Managerial Accounting
Carl Warren, James M. Reeve, Jonathan E. Duchac
Chapter 15
Eye Openers 5. How does the accounting for a dividend received differ between the cost method and the equity method?
Click here for the SOLUTION
On July 1,2010, Brower Industries Inc.issued $32,000,000 of 10-year, 12% bonds at an effective interest rate of 13%, receiving cash of $30,237,139
ACCOUNTING
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Financial Accounting
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Chapter 14
Appendix 2 PR 14-5A On July 1,2010, Brower Industries Inc. issued $32,000,000 of 10-year, 12% bonds at an effective interest rate of 13%, receiving cash of $30,237,139. Interest on the bonds is payable semiannually on December 31and June 30. The fiscal year of the company is the calendar year.
Instructions
1. Journalize the entry to record the amount of cash proceeds from the sale of the bonds.
2. Journalize the entries to record the following: a. The first semiannual interest payment on December 31, 2010, and the amortization of the bond discount, using the straight-line method. (Round to the nearest dollar.) b. The interest payment on June 30,2011,and the amortization of the bond discount, using the straight-line method. (Round to the nearest dollar.)
3. Determine the total interest expense for 2010.
4. Will the bond proceeds always be less than the face amount of the bonds when the contract rate is less than the market rate of interest?
5. (Appendix 1) Compute the price of $30,237,139 received for the bonds by using the tables of present value in Appendix A at end of text.(Round to the nearest dollar.)
Check: 3. $1,965,414
Click here for the SOLUTION
Are you looking for PR 14-2A? Click here.
Warren, Reeve and Duchac
Financial Accounting
Managerial Accounting
Carl Warren, James M. Reeve, Jonathan E. Duchac
Chapter 14
Appendix 2 PR 14-5A On July 1,2010, Brower Industries Inc. issued $32,000,000 of 10-year, 12% bonds at an effective interest rate of 13%, receiving cash of $30,237,139. Interest on the bonds is payable semiannually on December 31and June 30. The fiscal year of the company is the calendar year.
Instructions
1. Journalize the entry to record the amount of cash proceeds from the sale of the bonds.
2. Journalize the entries to record the following: a. The first semiannual interest payment on December 31, 2010, and the amortization of the bond discount, using the straight-line method. (Round to the nearest dollar.) b. The interest payment on June 30,2011,and the amortization of the bond discount, using the straight-line method. (Round to the nearest dollar.)
3. Determine the total interest expense for 2010.
4. Will the bond proceeds always be less than the face amount of the bonds when the contract rate is less than the market rate of interest?
5. (Appendix 1) Compute the price of $30,237,139 received for the bonds by using the tables of present value in Appendix A at end of text.(Round to the nearest dollar.)
Check: 3. $1,965,414
Click here for the SOLUTION
Are you looking for PR 14-2A? Click here.
Tuesday, June 22, 2010
Krisch Enterprises Inc. produces aeronautical navigation equipment. The stockholders’ equity accounts of Krisch Enterprises Inc., with balances on
ACCOUNTING
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Financial Accounting
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Chapter 13
PR 13-4A Krisch Enterprises Inc. produces aeronautical navigation equipment. The stockholders’ equity accounts of Krisch Enterprises Inc., with balances on January 1,2010, are as follows:
Common Stock, $20 stated value (250,000 shares authorized, 175,000 shares issued) . . . $3,500,000
Paid-In Capital in Excess of Stated Value . . . 1,750,000
Retained Earnings. . .. . . 4,600,000
Treasury Stock (40,000 shares, at cost) . . . . 1,000,000
The following selected transactions occurred during the year: ... AND SO ON
Check: Total Stockholders’ Equity $11,407,975
Click here for the SOLUTION
Warren, Reeve and Duchac
Financial Accounting
Managerial Accounting
Carl Warren, James M. Reeve, Jonathan E. Duchac
Chapter 13
PR 13-4A Krisch Enterprises Inc. produces aeronautical navigation equipment. The stockholders’ equity accounts of Krisch Enterprises Inc., with balances on January 1,2010, are as follows:
Common Stock, $20 stated value (250,000 shares authorized, 175,000 shares issued) . . . $3,500,000
Paid-In Capital in Excess of Stated Value . . . 1,750,000
Retained Earnings. . .. . . 4,600,000
Treasury Stock (40,000 shares, at cost) . . . . 1,000,000
The following selected transactions occurred during the year: ... AND SO ON
Check: Total Stockholders’ Equity $11,407,975
Click here for the SOLUTION
Study Appendix 13. Consider the following data regarding factory overhead
ACC 561
Axia College of University of Phoenix (UoP)
Introduction to Management Accounting
Horngren, C. T., Sundem, G. L., Stratton, W. O., Burgstahler, D., & Schatzberg, J. (2008). Introduction to Management Accounting (14th ed.). Upper Saddle River, New Jersey: Pearson-Prentice Hall.
3. Individual Assignment: Text Exercises
• Complete the following Problem Sets from the text. Show your work.
Question 13-49, Variances, on p. 622
Click here for the SOLUTION
13-49 Variances
Study Appendix 13. Consider the following data regarding factory overhead:
Variable Fixed
Budget for actual hours of input $45,000 $70,000
Applied 41,000 64,800
Budget for standard hours allowed
for actual output achieved ? ?
Actual incurred 48,500 68,500
Using the above data, fill in the following blanks with the variance amounts. Use F for favorable or U
for unfavorable for each variance.
Total Overhead Variable Fixed
1. Spending variance ______ ______ ______
2. Efficiency variance ______ ______ ______
3. Production-volume variance ______ ______ ______
4. Flexible-budget variance ______ ______ ______
5. Underapplied overhead ______ ______ ______
Click here for the SOLUTION
Axia College of University of Phoenix (UoP)
Introduction to Management Accounting
Horngren, C. T., Sundem, G. L., Stratton, W. O., Burgstahler, D., & Schatzberg, J. (2008). Introduction to Management Accounting (14th ed.). Upper Saddle River, New Jersey: Pearson-Prentice Hall.
3. Individual Assignment: Text Exercises
• Complete the following Problem Sets from the text. Show your work.
Question 13-49, Variances, on p. 622
Click here for the SOLUTION
13-49 Variances
Study Appendix 13. Consider the following data regarding factory overhead:
Variable Fixed
Budget for actual hours of input $45,000 $70,000
Applied 41,000 64,800
Budget for standard hours allowed
for actual output achieved ? ?
Actual incurred 48,500 68,500
Using the above data, fill in the following blanks with the variance amounts. Use F for favorable or U
for unfavorable for each variance.
Total Overhead Variable Fixed
1. Spending variance ______ ______ ______
2. Efficiency variance ______ ______ ______
3. Production-volume variance ______ ______ ______
4. Flexible-budget variance ______ ______ ______
5. Underapplied overhead ______ ______ ______
Click here for the SOLUTION
Study Appendix 13. Consider the following data for the Rivera Company
ACC 561
Axia College of University of Phoenix (UoP)
Introduction to Management Accounting
Horngren, C. T., Sundem, G. L., Stratton, W. O., Burgstahler, D., & Schatzberg, J. (2008). Introduction to Management Accounting (14th ed.). Upper Saddle River, New Jersey: Pearson-Prentice Hall.
3. Individual Assignment: Text Exercises
• Complete the following Problem Sets from the text. Show your work.
Question 13-48, Overhead Variances, on p. 622
Click here for the SOLUTION
13-48 Overhead Variances
Study Appendix 13. Consider the following data for the Rivera Company:
Factory Overhead
Fixed Variable
Actual incurred $14,200 $13,300
Budget for standard hours allowed
for output achieved 12,500 11,000
Applied 11,600 11,000
Budget for actual hours of input 12,500 11,400
From the above information, fill in the blanks below. Be sure to mark your variances F for favorable
and U for unfavorable.
a. Flexible-budget variance $______ Fixed $______
Variable $______
b. Production-volume variance $______ Fixed $______
Variable $______
c. Spending variance $______ Fixed $______
Variable $______
d. Efficiency variance $______ Fixed $______
Variable $______
Click here for the SOLUTION
Axia College of University of Phoenix (UoP)
Introduction to Management Accounting
Horngren, C. T., Sundem, G. L., Stratton, W. O., Burgstahler, D., & Schatzberg, J. (2008). Introduction to Management Accounting (14th ed.). Upper Saddle River, New Jersey: Pearson-Prentice Hall.
3. Individual Assignment: Text Exercises
• Complete the following Problem Sets from the text. Show your work.
Question 13-48, Overhead Variances, on p. 622
Click here for the SOLUTION
13-48 Overhead Variances
Study Appendix 13. Consider the following data for the Rivera Company:
Factory Overhead
Fixed Variable
Actual incurred $14,200 $13,300
Budget for standard hours allowed
for output achieved 12,500 11,000
Applied 11,600 11,000
Budget for actual hours of input 12,500 11,400
From the above information, fill in the blanks below. Be sure to mark your variances F for favorable
and U for unfavorable.
a. Flexible-budget variance $______ Fixed $______
Variable $______
b. Production-volume variance $______ Fixed $______
Variable $______
c. Spending variance $______ Fixed $______
Variable $______
d. Efficiency variance $______ Fixed $______
Variable $______
Click here for the SOLUTION
Chan Manufacturing Company data for 20X7 follow
ACC 561
Axia College of University of Phoenix (UoP)
Introduction to Management Accounting
Horngren, C. T., Sundem, G. L., Stratton, W. O., Burgstahler, D., & Schatzberg, J. (2008). Introduction to Management Accounting (14th ed.). Upper Saddle River, New Jersey: Pearson-Prentice Hall.
3. Individual Assignment: Text Exercises
• Complete the following Problem Sets from the text. Show your work.
Question 13-45, Variable and Absorption Costing, on p. 621
Click here for the SOLUTION
Question 13-45, Variable and Absorption Costing
Chan Manufacturing Company data for 20X7 follow: Sales: 12,000 units at $17 each Actual production 15,000 units Expected volume of production 18,000 units Manufacturing costs incurred Variable $120,000 Fixed 63,000 Nonmanufacturing costs incurred Variable $ 24,000 Fixed 18,000 1. Determine operating income for 20X7, assuming the firm uses the variable-costing approach to product costing. (Do not prepare a statement.) 2. Assume that there is no January 1, 20X7, inventory; no variances are allocated to inventory; and the firm uses a “full absorption” approach to product costing. Compute (a) the cost assigned to December 31, 20X7, inventory; and (b) operating income for the year ended December 31, 20X7. (Do not prepare a statement.)
Click here for the SOLUTION
Axia College of University of Phoenix (UoP)
Introduction to Management Accounting
Horngren, C. T., Sundem, G. L., Stratton, W. O., Burgstahler, D., & Schatzberg, J. (2008). Introduction to Management Accounting (14th ed.). Upper Saddle River, New Jersey: Pearson-Prentice Hall.
3. Individual Assignment: Text Exercises
• Complete the following Problem Sets from the text. Show your work.
Question 13-45, Variable and Absorption Costing, on p. 621
Click here for the SOLUTION
Question 13-45, Variable and Absorption Costing
Chan Manufacturing Company data for 20X7 follow: Sales: 12,000 units at $17 each Actual production 15,000 units Expected volume of production 18,000 units Manufacturing costs incurred Variable $120,000 Fixed 63,000 Nonmanufacturing costs incurred Variable $ 24,000 Fixed 18,000 1. Determine operating income for 20X7, assuming the firm uses the variable-costing approach to product costing. (Do not prepare a statement.) 2. Assume that there is no January 1, 20X7, inventory; no variances are allocated to inventory; and the firm uses a “full absorption” approach to product costing. Compute (a) the cost assigned to December 31, 20X7, inventory; and (b) operating income for the year ended December 31, 20X7. (Do not prepare a statement.)
Click here for the SOLUTION
Consider the following information pertaining to a year’s operations of Youngstown Manufacturing
ACC 561
Axia College of University of Phoenix (UoP)
Introduction to Management Accounting
Horngren, C. T., Sundem, G. L., Stratton, W. O., Burgstahler, D., & Schatzberg, J. (2008). Introduction to Management Accounting (14th ed.). Upper Saddle River, New Jersey: Pearson-Prentice Hall.
3. Individual Assignment: Text Exercises
• Complete the following Problem Sets from the text. Show your work.
Question 13-B3, Comparison of Variable Costing and Absorption Costing, on p. 617
Click here for the SOLUTION
13-B3 Comparison of Variable Costing and Absorption Costing
Consider the following information pertaining to a year’s operations of Youngstown Manufacturing:
Units sold 1,400
Units produced 1,600
Direct labor $4,200
Direct materials used 3,500
Fixed manufacturing overhead 2,200
Variable manufacturing overhead 300
Selling and administrative expenses (all fixed) 700
Beginning inventories 0
Contribution margin 5,600
Direct-material inventory, end 800
There are no work-in-process inventories.
1. What is the ending finished-goods inventory cost under absorption costing?
2. What is the ending finished-goods inventory cost under variable costing?
Click here for the SOLUTION
Axia College of University of Phoenix (UoP)
Introduction to Management Accounting
Horngren, C. T., Sundem, G. L., Stratton, W. O., Burgstahler, D., & Schatzberg, J. (2008). Introduction to Management Accounting (14th ed.). Upper Saddle River, New Jersey: Pearson-Prentice Hall.
3. Individual Assignment: Text Exercises
• Complete the following Problem Sets from the text. Show your work.
Question 13-B3, Comparison of Variable Costing and Absorption Costing, on p. 617
Click here for the SOLUTION
13-B3 Comparison of Variable Costing and Absorption Costing
Consider the following information pertaining to a year’s operations of Youngstown Manufacturing:
Units sold 1,400
Units produced 1,600
Direct labor $4,200
Direct materials used 3,500
Fixed manufacturing overhead 2,200
Variable manufacturing overhead 300
Selling and administrative expenses (all fixed) 700
Beginning inventories 0
Contribution margin 5,600
Direct-material inventory, end 800
There are no work-in-process inventories.
1. What is the ending finished-goods inventory cost under absorption costing?
2. What is the ending finished-goods inventory cost under variable costing?
Click here for the SOLUTION
Scenario: Antonio Cleaning has asked you to help them determine the best method for allocating costs from their service departments to their producing
ACC 561
Axia College of University of Phoenix (UoP)
Introduction to Management Accounting
Horngren, C. T., Sundem, G. L., Stratton, W. O., Burgstahler, D., & Schatzberg, J. (2008). Introduction to Management Accounting (14th ed.). Upper Saddle River, New Jersey: Pearson-Prentice Hall.
3. Individual Assignment: Text Exercises
• Complete the following Problem Sets from the text. Show your work.
EXCEL Application Exercise 12-59, Allocating Costs Using Direct and Step-Down Methods, on p. 584
Click here for the SOLUTION
EXCEL Application Exercise 12-59, Allocating Costs Using Direct and Step-Down Methods
Goal: Create an Excel spreadsheet to allocate costs using the direct method and the stepdown
method. Use the results to answer questions about your findings.
Scenario: Antonio Cleaning has asked you to help them determine the best method for
allocating costs from their service departments to their producing departments. Additional
background information for your spreadsheet appears in Fundamental Assignment Material
12-B2. Exhibit 12-4 on page 532 illustrates the types of calculations that are used for
allocating costs using the direct method and the step-down method.
When you have completed your spreadsheet, answer the following questions:
1. What are the total costs for the Residential department using the direct method?
What are the total costs for the Commercial department using the direct method?
2. What are the total costs for the Residential department using the step-down method?
3. What are the total costs for the Commercial department using the step-down method?
4. Which method would you recommend that Antonio Cleaning use to allocate their
service departments’ costs to their producing departments? Why?
Step-by-Step:
1. Open a new Excel spreadsheet.
2. In column A, create a bold-faced heading that contains the following:
Row 1: Chapter 12 Decision Guideline
Row 2: Dallas Cleaning
Row 3: Cost Allocations from Service Departments to Producing Departments
Row 4: Today’s Date
3. Merge and center the four heading rows across columns A through H.
4. In row 7, create the following bold-faced, center-justified column headings:
Column B: Personnel
Column C: Administrative
Column D: Residential
Column E: Commercial
Column F: Total Res/Comm
Column G: Total Admin/Res/Comm
Column H: Grand Total
5. Change the format of the column headings in row 7 to permit the titles to be displayed
on multiple lines within a single cell.
Alignment tab: Wrap Text: Checked
Note: Adjust column widths so that headings use only two lines.
Adjust row height to ensure that row is same height as adjusted headings.
6. In column A, create the following row headings:
Row 8: Direct Department Costs
Row 9: Number of Employees
Skip 2 rows
Note: Adjust the width of column A to 27.14.
7. In column A, create the following bold-faced, underlined row heading:
Row 12: Direct Method:
8. In column A, create the following row headings:
Row 13: Direct Department Costs
Row 14: Personnel Allocation
Row 15: Administrative Allocation
Row 16: Total Costs
Skip 2 rows
9. In column A, create the following bold-faced, underlined row heading:
Row 19: Step-down Method:
10. In column A, create the following row headings:
Row 20: Direct Department Costs
Row 21: Step 1—Personnel Allocation
Row 22: Step 2—Administrative Allocation
Row 23: Total Costs
11. Use data from Fundamental Assignment 12-B2 to enter the amounts in columns B
through E for rows 8, 9, 13, and 20.
12. Use the appropriate calculations to do the totals in row 8 for columns F and H.
Use the appropriate calculations to do the totals in row 9 for columns F and G.
13. Use the appropriate formulas to allocate the costs from the service departments to the
producing departments using each of the methods.
14. Use the appropriate calculations to do the totals in columns B through E and in column H,
rows 16 and 23.
15. Format amounts in columns B through H, rows 8, 13, 16, 20, and 23 as
Number tab: Category: Accounting
Decimal: 0
Symbol: $
16. Format the amount in columns B through E, rows 14, 15, 21, and 22 as
Number tab: Category: Accounting
Decimal: 0
Symbol: None
17. Change the format of the total costs amounts in columns B through E, rows 16 and 23,
to display a top border, using the default line style.
Border tab: Icon: Top Border
18. Change the format of the amounts in row 9, columns B through G to center justified.
Click here for the SOLUTION
Axia College of University of Phoenix (UoP)
Introduction to Management Accounting
Horngren, C. T., Sundem, G. L., Stratton, W. O., Burgstahler, D., & Schatzberg, J. (2008). Introduction to Management Accounting (14th ed.). Upper Saddle River, New Jersey: Pearson-Prentice Hall.
3. Individual Assignment: Text Exercises
• Complete the following Problem Sets from the text. Show your work.
EXCEL Application Exercise 12-59, Allocating Costs Using Direct and Step-Down Methods, on p. 584
Click here for the SOLUTION
EXCEL Application Exercise 12-59, Allocating Costs Using Direct and Step-Down Methods
Goal: Create an Excel spreadsheet to allocate costs using the direct method and the stepdown
method. Use the results to answer questions about your findings.
Scenario: Antonio Cleaning has asked you to help them determine the best method for
allocating costs from their service departments to their producing departments. Additional
background information for your spreadsheet appears in Fundamental Assignment Material
12-B2. Exhibit 12-4 on page 532 illustrates the types of calculations that are used for
allocating costs using the direct method and the step-down method.
When you have completed your spreadsheet, answer the following questions:
1. What are the total costs for the Residential department using the direct method?
What are the total costs for the Commercial department using the direct method?
2. What are the total costs for the Residential department using the step-down method?
3. What are the total costs for the Commercial department using the step-down method?
4. Which method would you recommend that Antonio Cleaning use to allocate their
service departments’ costs to their producing departments? Why?
Step-by-Step:
1. Open a new Excel spreadsheet.
2. In column A, create a bold-faced heading that contains the following:
Row 1: Chapter 12 Decision Guideline
Row 2: Dallas Cleaning
Row 3: Cost Allocations from Service Departments to Producing Departments
Row 4: Today’s Date
3. Merge and center the four heading rows across columns A through H.
4. In row 7, create the following bold-faced, center-justified column headings:
Column B: Personnel
Column C: Administrative
Column D: Residential
Column E: Commercial
Column F: Total Res/Comm
Column G: Total Admin/Res/Comm
Column H: Grand Total
5. Change the format of the column headings in row 7 to permit the titles to be displayed
on multiple lines within a single cell.
Alignment tab: Wrap Text: Checked
Note: Adjust column widths so that headings use only two lines.
Adjust row height to ensure that row is same height as adjusted headings.
6. In column A, create the following row headings:
Row 8: Direct Department Costs
Row 9: Number of Employees
Skip 2 rows
Note: Adjust the width of column A to 27.14.
7. In column A, create the following bold-faced, underlined row heading:
Row 12: Direct Method:
8. In column A, create the following row headings:
Row 13: Direct Department Costs
Row 14: Personnel Allocation
Row 15: Administrative Allocation
Row 16: Total Costs
Skip 2 rows
9. In column A, create the following bold-faced, underlined row heading:
Row 19: Step-down Method:
10. In column A, create the following row headings:
Row 20: Direct Department Costs
Row 21: Step 1—Personnel Allocation
Row 22: Step 2—Administrative Allocation
Row 23: Total Costs
11. Use data from Fundamental Assignment 12-B2 to enter the amounts in columns B
through E for rows 8, 9, 13, and 20.
12. Use the appropriate calculations to do the totals in row 8 for columns F and H.
Use the appropriate calculations to do the totals in row 9 for columns F and G.
13. Use the appropriate formulas to allocate the costs from the service departments to the
producing departments using each of the methods.
14. Use the appropriate calculations to do the totals in columns B through E and in column H,
rows 16 and 23.
15. Format amounts in columns B through H, rows 8, 13, 16, 20, and 23 as
Number tab: Category: Accounting
Decimal: 0
Symbol: $
16. Format the amount in columns B through E, rows 14, 15, 21, and 22 as
Number tab: Category: Accounting
Decimal: 0
Symbol: None
17. Change the format of the total costs amounts in columns B through E, rows 16 and 23,
to display a top border, using the default line style.
Border tab: Icon: Top Border
18. Change the format of the amounts in row 9, columns B through G to center justified.
Click here for the SOLUTION
Goal: Create an Excel spreadsheet to allocate costs using the direct method and the stepdown method. Use the results to answer questions about your
ACC 561
Axia College of University of Phoenix (UoP)
Introduction to Management Accounting
Horngren, C. T., Sundem, G. L., Stratton, W. O., Burgstahler, D., & Schatzberg, J. (2008). Introduction to Management Accounting (14th ed.). Upper Saddle River, New Jersey: Pearson-Prentice Hall.
3. Individual Assignment: Text Exercises
• Complete the following Problem Sets from the text. Show your work.
EXCEL Application Exercise 12-59, Allocating Costs Using Direct and Step-Down Methods, on p. 584
Click here for the SOLUTION
EXCEL Application Exercise 12-59, Allocating Costs Using Direct and Step-Down Methods
Goal: Create an Excel spreadsheet to allocate costs using the direct method and the stepdown
method. Use the results to answer questions about your findings.
Scenario: Antonio Cleaning has asked you to help them determine the best method for
allocating costs from their service departments to their producing departments. Additional
background information for your spreadsheet appears in Fundamental Assignment Material
12-B2. Exhibit 12-4 on page 532 illustrates the types of calculations that are used for
allocating costs using the direct method and the step-down method.
When you have completed your spreadsheet, answer the following questions:
1. What are the total costs for the Residential department using the direct method?
What are the total costs for the Commercial department using the direct method?
2. What are the total costs for the Residential department using the step-down method?
3. What are the total costs for the Commercial department using the step-down method?
4. Which method would you recommend that Antonio Cleaning use to allocate their
service departments’ costs to their producing departments? Why?
Step-by-Step:
1. Open a new Excel spreadsheet.
2. In column A, create a bold-faced heading that contains the following:
Row 1: Chapter 12 Decision Guideline
Row 2: Dallas Cleaning
Row 3: Cost Allocations from Service Departments to Producing Departments
Row 4: Today’s Date
3. Merge and center the four heading rows across columns A through H.
4. In row 7, create the following bold-faced, center-justified column headings:
Column B: Personnel
Column C: Administrative
Column D: Residential
Column E: Commercial
Column F: Total Res/Comm
Column G: Total Admin/Res/Comm
Column H: Grand Total
5. Change the format of the column headings in row 7 to permit the titles to be displayed
on multiple lines within a single cell.
Alignment tab: Wrap Text: Checked
Note: Adjust column widths so that headings use only two lines.
Adjust row height to ensure that row is same height as adjusted headings.
6. In column A, create the following row headings:
Row 8: Direct Department Costs
Row 9: Number of Employees
Skip 2 rows
Note: Adjust the width of column A to 27.14.
7. In column A, create the following bold-faced, underlined row heading:
Row 12: Direct Method:
8. In column A, create the following row headings:
Row 13: Direct Department Costs
Row 14: Personnel Allocation
Row 15: Administrative Allocation
Row 16: Total Costs
Skip 2 rows
9. In column A, create the following bold-faced, underlined row heading:
Row 19: Step-down Method:
10. In column A, create the following row headings:
Row 20: Direct Department Costs
Row 21: Step 1—Personnel Allocation
Row 22: Step 2—Administrative Allocation
Row 23: Total Costs
11. Use data from Fundamental Assignment 12-B2 to enter the amounts in columns B
through E for rows 8, 9, 13, and 20.
12. Use the appropriate calculations to do the totals in row 8 for columns F and H.
Use the appropriate calculations to do the totals in row 9 for columns F and G.
13. Use the appropriate formulas to allocate the costs from the service departments to the
producing departments using each of the methods.
14. Use the appropriate calculations to do the totals in columns B through E and in column H,
rows 16 and 23.
15. Format amounts in columns B through H, rows 8, 13, 16, 20, and 23 as
Number tab: Category: Accounting
Decimal: 0
Symbol: $
16. Format the amount in columns B through E, rows 14, 15, 21, and 22 as
Number tab: Category: Accounting
Decimal: 0
Symbol: None
17. Change the format of the total costs amounts in columns B through E, rows 16 and 23,
to display a top border, using the default line style.
Border tab: Icon: Top Border
18. Change the format of the amounts in row 9, columns B through G to center justified.
Click here for the SOLUTION
Axia College of University of Phoenix (UoP)
Introduction to Management Accounting
Horngren, C. T., Sundem, G. L., Stratton, W. O., Burgstahler, D., & Schatzberg, J. (2008). Introduction to Management Accounting (14th ed.). Upper Saddle River, New Jersey: Pearson-Prentice Hall.
3. Individual Assignment: Text Exercises
• Complete the following Problem Sets from the text. Show your work.
EXCEL Application Exercise 12-59, Allocating Costs Using Direct and Step-Down Methods, on p. 584
Click here for the SOLUTION
EXCEL Application Exercise 12-59, Allocating Costs Using Direct and Step-Down Methods
Goal: Create an Excel spreadsheet to allocate costs using the direct method and the stepdown
method. Use the results to answer questions about your findings.
Scenario: Antonio Cleaning has asked you to help them determine the best method for
allocating costs from their service departments to their producing departments. Additional
background information for your spreadsheet appears in Fundamental Assignment Material
12-B2. Exhibit 12-4 on page 532 illustrates the types of calculations that are used for
allocating costs using the direct method and the step-down method.
When you have completed your spreadsheet, answer the following questions:
1. What are the total costs for the Residential department using the direct method?
What are the total costs for the Commercial department using the direct method?
2. What are the total costs for the Residential department using the step-down method?
3. What are the total costs for the Commercial department using the step-down method?
4. Which method would you recommend that Antonio Cleaning use to allocate their
service departments’ costs to their producing departments? Why?
Step-by-Step:
1. Open a new Excel spreadsheet.
2. In column A, create a bold-faced heading that contains the following:
Row 1: Chapter 12 Decision Guideline
Row 2: Dallas Cleaning
Row 3: Cost Allocations from Service Departments to Producing Departments
Row 4: Today’s Date
3. Merge and center the four heading rows across columns A through H.
4. In row 7, create the following bold-faced, center-justified column headings:
Column B: Personnel
Column C: Administrative
Column D: Residential
Column E: Commercial
Column F: Total Res/Comm
Column G: Total Admin/Res/Comm
Column H: Grand Total
5. Change the format of the column headings in row 7 to permit the titles to be displayed
on multiple lines within a single cell.
Alignment tab: Wrap Text: Checked
Note: Adjust column widths so that headings use only two lines.
Adjust row height to ensure that row is same height as adjusted headings.
6. In column A, create the following row headings:
Row 8: Direct Department Costs
Row 9: Number of Employees
Skip 2 rows
Note: Adjust the width of column A to 27.14.
7. In column A, create the following bold-faced, underlined row heading:
Row 12: Direct Method:
8. In column A, create the following row headings:
Row 13: Direct Department Costs
Row 14: Personnel Allocation
Row 15: Administrative Allocation
Row 16: Total Costs
Skip 2 rows
9. In column A, create the following bold-faced, underlined row heading:
Row 19: Step-down Method:
10. In column A, create the following row headings:
Row 20: Direct Department Costs
Row 21: Step 1—Personnel Allocation
Row 22: Step 2—Administrative Allocation
Row 23: Total Costs
11. Use data from Fundamental Assignment 12-B2 to enter the amounts in columns B
through E for rows 8, 9, 13, and 20.
12. Use the appropriate calculations to do the totals in row 8 for columns F and H.
Use the appropriate calculations to do the totals in row 9 for columns F and G.
13. Use the appropriate formulas to allocate the costs from the service departments to the
producing departments using each of the methods.
14. Use the appropriate calculations to do the totals in columns B through E and in column H,
rows 16 and 23.
15. Format amounts in columns B through H, rows 8, 13, 16, 20, and 23 as
Number tab: Category: Accounting
Decimal: 0
Symbol: $
16. Format the amount in columns B through E, rows 14, 15, 21, and 22 as
Number tab: Category: Accounting
Decimal: 0
Symbol: None
17. Change the format of the total costs amounts in columns B through E, rows 16 and 23,
to display a top border, using the default line style.
Border tab: Icon: Top Border
18. Change the format of the amounts in row 9, columns B through G to center justified.
Click here for the SOLUTION
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