BEC-nm-ca-4?

The sale of scrap from a manufacturing process usually is recorded as a(n)

Decrease in factory overhead control.

Which of the following listings correctly describes the order in which the four types of budgets must be prepared?

Sales, production, direct materials purchases, cash disbursements.

What is the required unit production level given the following factors? Units Projected sales 1,000 Beginning inventory 85 Desired ending inventory 100 Prior-year beginning inventory 200

1,015

Black Co.'s breakeven point was $780,000. Variable expenses averaged 60% of sales, and the margin of safety was $130,000. What was Black's contribution margin?

364,000

All of the following may allow a firm to set a lower coupon rate on a bond issued at par except a

Call provision.

A plan that is created using budgeted revenue and costs but is based on the actual units of output is known as a

Flexible budget.

A compensating balance

Compensates a financial institution for services rendered by providing it with deposits of funds.

Which one of the following best identifies a profit center?

A new car sales division for a large local auto agency.

Mason Company's board of directors has determined four options to increase working capital next year. Option 1 is to increase current assets by $120 and decrease current liabilities by $50. Option 2 is to increase current assets by $180 and increase current liabilities by $30. Option 3 is to decrease current assets by $140 and increase current liabilities by $20. Option 4 is to decrease current assets by $100 and decrease current liabilities by $75. Which option should Mason choose to maximize net working capital?

option 1

The following information pertains to Lap Co.'s Palo Division for the month just ended: Number Cost of of Units Materials Beginning work-in-process 15,000 $ 5,500 Started during the month 40,000 18,000 Units completed 42,500 Ending work-in-process 12,500 All materials are added at the beginning of the process. Using the weighted-average method, the cost per equivalent unit for materials is

$0.43

Jones Corp. had an opportunity to use its capacity to produce an extra 5,000 units with a contribution margin of $5 per unit, or to rent out the space for $10,000. What was the opportunity cost of using the capacity?

$10,000

Fact Pattern: The following amounts pertain to Arp Co.'s manufacturing operations for March: Inventories 3/1 3/31 Direct materials $18,000 $15,000 Work-in-process 9,000 6,000 Finished goods 27,000 36,000 Additional information for the month of March: Direct materials purchased $42,000 Direct labor payroll 30,000 Direct labor rate per hour 7.50 Factory overhead rate per direct labor hour 10.00 For the month of March, Arp's cost of goods manufactured was

$118,000

Fact Pattern: Berol Company plans to sell 200,000 units of finished product in July and anticipates a growth rate in sales of 5% per month. The desired monthly ending inventory in units of finished product is 80% of the next month's estimated sales. There are 150,000 finished units in inventory on June 30. Each unit of finished product requires 4 pounds of direct materials at a cost of $1.20 per pound. There are 800,000 pounds of direct materials in inventory on June 30. Assume Berol Company plans to produce 600,000 units of finished product in the 3-month period ending September 30 and to have direct materials inventory on hand at the end of the 3-month period equal to 25% of the use in that period. The estimated cost of direct materials purchases for the 3-month period ending September 30 is

$2,640,000

Selected data from White Corporation's financial statements for the year ended November 30, Year 2, are as follows (all sales are on credit). - he balance in accounts receivable at November 30, Year 2, is

$325,000

The standard direct materials cost to produce a unit of Lem is 4 meters of materials at $2.50 per meter. During May, 4,200 meters of materials costing $10,080 were purchased and used to produce 1,000 units of Lem. What was the materials price variance for May?

$420 favorable.

Jonathan Manufacturing adopted a job-costing system. For the current year, budgeted cost driver activity levels for direct labor hours and direct labor costs were 20,000 and $100,000, respectively. In addition, budgeted variable and fixed factory overhead costs were $50,000 and $25,000, respectively. Actual costs and hours for the year were as follows: Direct labor hours 21,000 Direct labor costs $110,000 Machine hours 35,000 For a particular job, 1,500 direct-labor hours were used. Using direct-labor hours as the cost driver, what amount of overhead should be applied to this job?

$5,625

Based on the following data, what is the gross profit for the company? Sales $1,000,000 Net purchases of raw materials 600,000 Cost of goods manufactured 800,000 Marketing and administrative expenses 250,000 Indirect manufacturing costs 500,000 Beginning Ending Inventory Inventory Work-in-process $500,000 $400,000 Finished goods 100,000 500,000

$600,000

Dahl Co. uses a standard costing system in connection with the manufacture of a "one size fits all" article of clothing. Each unit of finished product contains 2 yards of direct materials. However, a 20% direct materials spoilage calculated on input quantities occurs during the manufacturing process. The cost of the direct materials is $3 per yard. The standard direct materials cost per unit of finished product is

$7.50

The regression analysis results for ABC Co. is shown as y = 90x + 45. The standard error (Sb) is 30 and coefficient of determination (r2) is 0.81. The budget calls for production of 100 units. What is ABC's estimate of total costs?

$9,045

In connection with a standard cost system being developed by Flint Co., the following information is being considered with regard to standard hours allowed for output of one unit of product: Hours Average historical performance for the past 3 years 1.85 Production level to satisfy average consumer demand over a seasonal time span 1.60 Engineering estimates based on attainable performance 1.50 Engineering estimates based on ideal performance 1.25 To measure controllable production inefficiencies, what is the best basis for Flint to use in establishing standard hours allowed?

1.50

A company has an outstanding 1-year bank loan of $500,000 at a stated interest rate of 8%. The company is required to maintain a 20% compensating balance in its checking account. The company would maintain a zero balance in this account if the requirement did not exist. What is the effective interest rate of the loan?

10%

Para Co. is reviewing the following data relating to an energy-saving investment proposal: Cost $50,000 Residual value at the end of 5 years 10,000 Present value of an annuity of 1 at 12% for 5 years 3.60 Present value of 1 due in 5 years at 12% 0.57 Ignoring the tax effect, what would be the annual savings needed to make the investment realize a 12% yield?

12,306

Blasso Company's net accounts receivable were $500,000 at December 31, Year 3, and $600,000 at December 31, Year 4. Net cash sales for Year 4 were $200,000. The accounts receivable turnover for Year 4 was 5.0. What were Blasso's total net sales for Year 4?

2,950,000

This year, Nelson Industries increased earnings before interest and taxes (EBIT) by 17%. During the same period, earnings per share increased by 42%. The degree of financial leverage that existed during the year is

2.47

State College is using cost-volume-profit analysis to determine tuition rates for the upcoming school year. Projected costs for the year are as follows: Contribution margin per student $ 1,800 Variable expenses per student 1,000 Total fixed expenses 360,000 Based on these estimates, what is the approximate breakeven point in number of students?

200

A ceramics manufacturer sold cups last year for $7.50 each. Variable costs of manufacturing were $2.25 per unit. The company needed to sell 20,000 cups to break even. Net income was $5,040. This year, the company expects the following changes: sales price per cup to be $9.00, variable manufacturing costs to increase 33.3%, fixed costs to increase 10%, and the income tax rate to remain at 40%. Sales in the coming year are expected to exceed last year's sales by 1,000 units. How many units does the company expect to sell this year?

22600

Fitzgerald Company is planning to acquire a $250,000 machine that will provide increased efficiencies, thereby reducing annual operating costs by $80,000. The machine will be depreciated by the straight-line method over a 5-year life with no salvage value at the end of 5 years. Assuming a 40% income tax rate, the machine's payback period i

3.68 years

A company produces widgets with budgeted standard direct materials of 2 pounds per widget at $5 per pound. Standard direct labor was budgeted at 0.5 hour per widget at $15 per hour. The actual usage in the current year was 25,000 pounds and 3,000 hours to produce 10,000 widgets. What was the direct labor efficiency variance?

30,000 favorable

On June 30, a company is preparing the cash budget for the third quarter. The collection pattern for credit sales has been 60% in the month of sale, 30% in the first month after sale, and the rest in the second month after sale. Uncollectible accounts are negligible. There are cash sales each month equal to 25% of total sales. The total sales for the quarter are estimated as follows: July, $30,000; August, $15,000; September, $35,000. Accounts receivable on June 30 were $10,000. What amount would be the projected cash collections for September?

30,125

Using a 360-day year, what is the opportunity cost to a buyer of not accepting terms 3/10, net 45?

31.81%

Sharif Co. has total debt of $420,000 and equity of $700,000. Sharif is seeking capital to fund an expansion. Sharif is planning to issue an additional $300,000 in common stock and is negotiating with a bank to borrow additional funds. The bank requires a debt-to-equity ratio of .75. What is the maximum additional amount Sharif will be able to borrow?

330,000

DJ Co. has a job-order cost system. The following debits (credits) appeared in the work-in-process account for the month of March: March 1, balance $ 12,000 March 31, direct materials 40,000 March 31, direct labor 30,000 March 31, manufacturing overhead applied 27,000 March 31, to finished goods (100,000) DJ Co. applies overhead at a predetermined rate of 90% of direct labor cost. Job No. 101, the only job still in process at the end of March, has been charged with manufacturing overhead of $2,250. What was the amount of direct materials charged to Job No. 101?

4,250

Lin Co. is buying machinery it expects will increase average annual operating income by $40,000. The initial increase in the required investment is $60,000, and the average increase in required investment is $30,000. To compute the accrual accounting rate of return, what amount should be used as the numerator in the ratio?

40,000

Clay Co. has considerable excess manufacturing capacity. A special job order's cost sheet includes the following applied manufacturing overhead costs: Fixed costs $21,000 Variable costs 33,000 The fixed costs include a normal $3,700 allocation for in-house design costs, although no in-house design will be done. Instead, the job will require the use of external designers costing $7,750. What is the total amount to be included in the calculation to determine the minimum acceptable price for the job?

40,750

A processing department produces joint products Ajac and Bjac, each of which incurs separable production costs after split-off. Information concerning a batch produced at a $60,000 joint cost before split-off follows:

48,000

In the past, 4 direct labor hours were required to produce each unit of product Y. Material costs were $200 per unit, the direct labor rate was $20 per hour, and factory overhead was three times direct labor cost. In budgeting for next year, management is planning to outsource some manufacturing activities and to further automate others. Management estimates these plans will reduce labor hours by 25%, increase the factory overhead rate to 3.6 times direct labor costs, and increase material costs by $30 per unit. Management plans to manufacture 10,000 units. What amount should management budget for cost of goods manufactured?

5,060,000

ABC Co. had debt with a market value of $1 million and an after-tax cost of financing of 8%. ABC also had equity with a market value of $2 million and a cost of equity capital of 9%. ABC's weighted-average cost of capital would be

8.7%

Selected data from Sheridan Corporation's year-end financial statements are presented below. The difference between average and ending inventory is immaterial. Current ratio 2.0 Quick ratio 1.5 Current liabilities $120,000 Inventory turnover (based on cost of goods sold) 8 times Gross profit margin 40% Assuming no prepaid expenses are included in current assets, Sheridan's net sales for the year were

800,000

The following computations were made from Bruckner Co.'s current-year books: Number of days' sales in inventory 55 Number of days' sales in trade accounts receivable 26 What was the number of days in Bruckner's current-year operating cycle?

81

A company currently has 1,000 shares of common stock outstanding with zero debt. It has the choice of raising an additional $100,000 by issuing 9% long-term debt or issuing 500 shares of common stock. The company has a 40% tax rate. What level of earnings before interest and taxes (EBIT) would result in the same earnings per share (EPS) for the two financing options?

An EBIT of $27,000 would result in EPS of $10.80 for both.

Inventoriable costs

Are regarded as assets before the products are sold.

Bander Co. is determining how to finance some long-term projects. Bander has decided it prefers the benefits of no fixed charges, no fixed maturity date, and an increase in the credit-worthiness of the company. Which of the following would best meet Bander's financing requirements?

Common Stock

The most likely strategy to reduce the breakeven point would be to

Decrease the fixed costs and increase the contribution margin.

The calculation of depreciation is used in the determination of the net present value of an investment for which of the following reasons?

Depreciation increases cash flow by reducing income taxes.

Which criterion for allocation of common costs most likely promotes acceptance of the allocation?

Direct cause-and-effect relationship.

When production levels are expected to increase within a relevant range, what effect would be anticipated with respect to each of the following?

Fixed costs per unit - decrease variable costs per unit - no change

North Bank is analyzing Belle Corp.'s financial statements for a possible extension of credit. Belle's quick ratio is significantly better than the industry average. Which of the following factors should North consider as a possible limitation of using this ratio when evaluating Belle's creditworthiness?

Fluctuating market prices of short-term investments may adversely affect the ratio

In a comparison of Year 2 with Year 1, Baliol Co.'s inventory turnover ratio increased substantially although sales and inventory amounts were essentially unchanged. Which of the following statements explains the increased inventory turnover ratio?

Gross profit percentage decreased

The use of an accelerated method instead of the straight-line method of depreciation in computing the net present value of a project has the effect of

Increasing the present value of the depreciation tax shield.

Which of the following is an advantage of net present value modeling?

It accounts for compounding of returns.

Fact Pattern: Calculation of ratios and the determination of other factors are considered important in analysis of financial statements. Prior to the independent events described below, the corporation concerned had current and quick ratios in excess of one to one and reported a net income (as opposed to a loss) for the period just ended. Income tax effects are to be ignored. The corporation had only one class of shares outstanding. The effect of recording a 2-for-1 stock split is to

Leave working capital unaffected, decrease earnings per share, and decrease book value per share.

One hundred pounds of raw material W is processed into 60 pounds of X and 40 pounds of Y. Joint costs are $135. X is sold for $2.50 per pound, and Y can be sold for $3.00 per pound or processed further into 30 pounds of Z (10 pounds are lost in the second process) at an additional cost of $60. Each pound of Z can then be sold for $6.00. What is the effect on profits of further processing product Y into product Z?

No change.

The relevance of a particular cost to a decision is determined by

Potential effect on the decision.

Which one of the following statements is correct regarding the effect preferred stock has on a company?

Preferred shareholders' claims take precedence over the claims of common shareholders in the event of liquidation.

After performing a thorough study of Michigan Company's operations, an independent consultant determined that the firm's labor standards were too tight. Which of the following is inconsistent with the consultant's conclusion?

Production supervisors found several significant fluctuations in manufacturing volume, with short-term increases in output being followed by rapid, sustained declines.

Galad Corp. has current assets of $180,000 and current liabilities of $360,000. Which of the following transactions would improve Galad's current ratio?

Purchasing $100,000 of merchandise inventory with a short-term account payable.

A consultant recommends that a company hold funds for the following two reasons: Reason #1: Cash needs can fluctuate substantially throughout the year. Reason #2: Opportunities for buying at a discount may appear during the year. The cash balances used to address the reasons given above are correctly classified as

Reason #1 - precautionary balances Reason #2 - speculative balances

Charlie's Service Co. is a service center. For the month of June, Charlie's had the following operating statistics: Sales $750,000 Operating income 25,000 Net profit after taxes 8,000 Total assets available 500,000 Shareholders' equity 200,000 Cost of capital 6% Charlie's has a

Residual income (5000)

The Sarbanes-Oxley Act of 2002 (SOX) imposes which of the following requirements?

The audit committee must be composed entirely of independent members of the board.

To determine the best cost driver of warranty costs relating to glass breakage during shipments, Wymer Co. used simple linear regression analysis to study the relationship between warranty costs and each of the following variables: type of packaging, quantity shipped, type of carrier, and distance shipped. The analysis yielded the following statistics: Independent Coefficient of Standard Error Variable Determination of Regression Type of packaging 0.60 1,524 Quantity shipped 0.48 1,875 Type of carrier 0.45 2,149 Distance shipped 0.20 4,876 Based on these analyses, the best driver of warranty costs for glass breakage is

Type of packaging.

In inventory management, the safety stock will tend to increase if the

Variability of the lead time increases.

Under the two-variance method for analyzing overhead, which of the following variances consists of both variable and fixed overhead elements?

controllable variance - yes volume variance - no

Which changes in costs are most conducive to switching from a traditional inventory ordering system to a just-in-time ordering system?

cost per purchase order - decrease inventory unit carrying costs - increase

What is the normal effect on the numbers of cost pools and cost assignment bases when an activity-based cost (ABC) system replaces a traditional cost system?

cost pools - increase cost assignment bases - increase

Gram Co. develops computer programs to meet customers' special requirements. How should Gram categorize payments to employees who develop these programs?

direct costs - yes value - adding costs - yes

The controller of Nottingham Stores has asked a staff accountant to prepare detailed reports that summarize the firm's cash flows for the upcoming accounting period and cash position at the end of the period. Accordingly, the controller has requested preparation of a cash budget, a pro-forma statement of cash flows, a detailed listing of cash collections from customers, and a detailed listing of cash payments for merchandise purchases. Which one of the following correctly identifies the first and last document to be prepared by the accountant?

first document - listing of cash collections last document - pro forma statement of cash flows

Which of the following is one of the four perspectives of a balanced scorecard?

innovation

Which of the following is included in the economic order quantity formula?

inventory carrying cost - yes stock out cost - no

In computing the current period's manufacturing cost per equivalent unit of production (EUP), the FIFO method of process costing considers current period costs

only.

As required by GAAP, the fixed portion of the semivariable cost of electricity for a manufacturing plant is

period cost - no product cost - yes

For the current-period production levels, XL Molding Co. budgeted 8,500 board feet of production and used 9,000 board feet for actual production. Material cost was budgeted at $2 per foot. The actual cost for the period was $3 per foot. What was XL's material efficiency variance for the period?

1,000 unfavorable

Beatnik Company has a current ratio of 2.5 and a quick ratio of 2.0. The firm experienced $2 million in cost of sales and sustains an inventory turnover of 8.0. Assuming no prepaid expenses are included in current assets, what are the firm's current assets?

1,250,000

Which one of the following factors might cause a firm to increase the portion of debt in its financial structure?

An increase in the corporate income tax rate.

All of the following are considered operating budgets except the

Capital budget

Which of the following is necessary to be an audit committee financial expert according to the criteria specified in the Sarbanes-Oxley Act of 2002?

Experience with internal accounting controls.

If a $1,000 bond sells for $1,125, which of the following statements are true? I. The market rate of interest is greater than the coupon rate on the bond. II. The coupon rate on the bond is greater than the market rate of interest. III. The bond sells at a premium. IV. The bond sells at a discount.

II and III

A process costing system was used for a department that began operations in January. Approximately the same number of physical units, at the same degree of completion, were in work-in-process at the end of both January and February. Monthly conversion costs are allocated between ending work-in-process and units completed. Compared with the FIFO method, would the weighted-average method use the same or a greater number of equivalent units to calculate the monthly allocations?

January - same february - greater number

The optimal capitalization for an organization usually can be determined by the

Lowest total weighted-average cost of capital (WACC).

A typical firm doing business nationally cannot expect to accelerate its cash inflow by

Maintaining compensating balances rather than paying cash for bank services.

Determining the appropriate level of working capital for a firm requires

Offsetting the benefit of current assets and current liabilities against the probability of technical insolvency.

What costs are treated as product costs under variable costing?

Only variable production costs.

According to COSO, which of the following is a compliance objective?

To maintain a safe level of carbon dioxide emissions during production.

Which one of the following is a spontaneous source of financing?

Trade credit

By-products may have which of the following characteristics?

Zero costs beyond split off - yes additional costs beyond split off - yes

Which one of the following provides a spontaneous source of financing for a firm?

accounts payable

How is the average inventory used in the calculation of each of the following?

acid-test quick ratio - not used inventory turn over ratio - denominator

Buff Co. is considering replacing an old machine with a new machine. Which of the following items is economically relevant to Buff's decision? (Ignore income tax considerations.)

carrying amount of old machine - no disposal value of new machine - yes

The recommended technique for evaluating projects when capital is rationed and there are no mutually exclusive projects from which to choose is to rank the projects by

profitability index

How are the following used in the calculation of the internal rate of return of a proposed project? Ignore income tax considerations

residual sales value of project - include depreciation expense - exclude

Smart Co. uses a static budget. When actual sales are less than budget, Smart would report favorable variances on which of the following expense categories?

sales commissions - yes building rent - no