accounting final

Derst Incorporated sells a particular textbook for $35. Variable expenses are $26 per book. At the current volume of 47,000 books sold per year the company is just breaking even. Given these data, the annual fixed expenses associated with the textbook total:

$423,000 explanation Unit contribution margin = Selling price per unit − Variable expenses per unit = $35 per book − $26 per book = $9 per book Unit sales to break even = Fixed expenses ÷ Unit contribution margin 47,000 books = Fixed expenses ÷ $9 per book Fixed expenses = 47,000 books × $9 per book = $423,000

Which of the following statements is false?

Budgets enable each department to function independently from other departments.

Which of the following measures would most likely appear in the Customer perspective of a company's balanced scorecard?

Customer defection rate

Assume the following information for a company that produced 10,000 units and sold 9,000 units during its first year of operations: Per Unit Per Year Selling price $200 Direct materials $75 Direct labor $50 Variable manufacturing overhead $10 Sales commission $8 Fixed manufacturing overhead $290,000 Which of the following choices explains the relationship between the absorption costing net operating income and the variable costing net operating income?

The absorption costing net operating income will be higher than the variable costing net operating income by $29,000. explanation Step 1: Calculate the fixed manufacturing overhead per unit under absorption costing: Total fixed manufacturing overhead (a)$290,000 Number of units produced (b) 10,000 Fixed manufacturing overhead per unit (a) ÷ (b)$29.00 Step 2: Calculate the fixed manufacturing overhead deferred in ending inventory under absorption costing: Units produced but not sold (10,000 units − 9,000 units) (a) 1,000 Fixed manufacturing overhead per unit (b)$29.00 Fixed manufacturing overhead deferred in ending inventory (a) × (b)$29,000 Note: Under variable costing, all $290,000 of the fixed manufacturing overhead will be expensed on the income statement. Under absorption costing, only $261,000 of fixed manufacturing overhead ($290,000 − $29,000) will be expensed on the income statement.

Which of the following statements is false?

Variable costing treats fixed manufacturing overhead as a product cost.

Which of the following statements is true?

When the units produced are less than the units sold, absorption costing income will be less than variable costing income because absorption costing releases some fixed manufacturing overhead cost from ending inventory whereas variable costing expenses each period's fixed manufacturing overhead on the income statement

The cost of testing incoming materials received from suppliers would be classified as a(n):

appraisal cost.

The corporate social responsibility measure of "Total workers' compensation costs" is an example of which performance measure category?

financial

Delivery cycle time is an example of which performance measure category?

internal business processes.

Which of the following costs are always irrelevant in decision making?

sunk costs

A manufacturer of premium wire strippers has supplied the following data: Units produced and sold 580,000 Sales revenue $ 4,176,000 Variable manufacturing expense$ 2,871,000 Fixed manufacturing expense$ 778,000 Variable selling and administrative expense$ 348,000 Fixed selling and administrative expense$ 104,000 Net operating income$ 75,000 The company's unit contribution margin is closest to:

$1.65 per unit explanation Contribution margin = Sales − Variable expenses= $4,176,000 − ($2,871,000 + $348,000)= $4,176,000 − $3,219,000 = $957,000 Unit contribution margin = Contribution margin ÷ Unit sales= $957,000 ÷ 580,000 units = $1.65 per unit

A manufacturing company that produces a single product has provided the following data concerning its most recent month of operations: Selling price$ 130 Units in beginning inventory0 Units produced2,100 Units sold1,900 Units in ending inventory200 Variable costs per unit: Direct materials$ 41 Direct labor$ 39 Variable manufacturing overhead$ 4 Variable selling and administrative expense$ 11 Fixed costs: Fixed manufacturing overhead$52,500 Fixed selling and administrative expense$ 3,800 What is the net operating income for the month under variable costing?

$10,200 explanation Variable costing unit product cost Direct materials$ 41 Direct labor39 Variable manufacturing overhead4 Variable costing unit product cost$ 84 Variable costing income statement Sales (1,900 units sold × $130 per unit) $247,000 Variable expenses: Variable cost of goods sold(1,900 units sold × $84 per unit) $159,600 Variable selling and administrative expense(1,900 units sold × $11 per unit) 20,900 180,500 Contribution margin 66,500 Fixed expenses: Fixed manufacturing overhead 52,500 Fixed selling and administrative expenses 3,800 56,300 Net operating income $ 10,200

Fabrick Company's quality cost report is to be based on the following data: Lost sales due to poor quality$ 17,300 Quality data gathering, analysis, and reporting$ 71,200 Net cost of spoilage$ 66,500 Re-entering data because of keying errors$ 25,000 Test and inspection of in-process goods$ 16,200 Final product testing and inspection$ 44,700 Statistical process control activities$ 42,800 Returns arising from quality problems$ 37,700 Downtime caused by quality problems$ 58,000 What would be the total prevention cost appearing on the quality cost report?

$114,000 explanation Total prevention cost = $71,200 + $42,800 = $114,000

Aaron Corporation, which has only one product, has provided the following data concerning its most recent month of operations: Selling price $102 Units in beginning inventory0 Units produced4,800 Units sold3,980 Units in ending inventory820 Variable costs per unit: Direct materials$ 18 Direct labor$ 44 Variable manufacturing overhead$ 7 Variable selling and administrative expense$ 4 Fixed costs: Fixed manufacturing overhead$50,600 Fixed selling and administrative expense$ 2,500 The total contribution margin for the month under variable costing is

$115,,420 explanation Direct materials$18 Direct labor44 Variable manufacturing overhead7 Variable costing unit product cost$69 Unit CM = Selling price per unit − Variable expenses per unit = $102 per unit − ($69 per unit + $4 per unit) = $102 per unit − $73 per unit = $29 per unit Contribution margin = Unit CM × Unit sales = $29 per unit × 3,980 units = $115,420

Sedita Incorporated is working on its cash budget for July. The budgeted beginning cash balance is $13,000. Budgeted cash receipts total $182,000 and budgeted cash disbursements total $181,000. The desired ending cash balance is $35,000. The excess (deficiency) of cash available over disbursements for July will be:

$14,000 explanation Beginning cash balance$ 13,000 Add cash receipts (all sales are for cash)182,000 Total cash available195,000 Less cash disbursements181,000 Excess (deficiency) of cash available over disbursements$ 14,000

Dacker Products is a division of a major corporation. The following data are for the most recent year of operations: Sales$ 38,080,000 Net operating income$ 3,608,960 Average operating assets$ 9,600,000 The company's minimum required rate of return15% The division's residual income is closest to:

$2,168,960 explanation Net operating income$ 3,608,960 Minimum required return ($9,600,000 × 15%)1,440,000 Residual income$ 2,168,960

Data concerning Follick Corporation's single product appear below: Selling price per unit $ 170.00 Variable expense per unit $ 66.30 Fixed expense per month $ 127,490 The break-even in monthly dollar sales is closest to:

$209,000 explanation Contribution margin ratio = Unit contribution margin ÷ Unit selling price = ($170.00 per unit − $66.30 per unit) ÷ $170.00 per unit = $103.70 per unit ÷ $170.00 per unit = 0.61 Dollar sales to break even = Fixed expenses ÷ Contribution margin ratio = $127,490 ÷ 0.61 = $209,000

Assume the following information: Amount Selling price $30 Variable expense per unit $10 Fixed expenses $8,000 per month Unit sales 1,200 per month The margin of safety is closest to:

$24,000 explanation Step 1: Calculate the break-even point in dollar sales: Fixed expenses (a)$8,000 Contribution margin ratio (($30 - $10) ÷ $30) (b) 66.67% Break-even point in dollar sales (rounded) (a) ÷ (b)$12,000 Step 2: Calculate the margin of safety as follows: Sales (1,200 units × $30) (a)$36,000 Break-even point in dollar sales (b)$12,000 Margin of safety (a) - (b)$24,000

Beamish Incorporated, which produces a single product, has provided the following data for its most recent month of operations: Number of units produced 3,700 Variable costs per unit: Direct materials$ 131 Direct labor$ 65 Variable manufacturing overhead$ 12 Variable selling and administrative expense$ 16 Fixed costs: Fixed manufacturing overhead$118,400 Fixed selling and administrative expense$288,600 There were no beginning or ending inventories. The absorption costing unit product cost was:

$240 per unit explanation Direct materials$ 131 Direct labor65 Variable manufacturing overhead12 Fixed manufacturing overhead cost ($118,400 ÷ 3,700 units)32 Absorption costing unit product cost$ 240

Cybil Baunt just inherited a 1958 Chevy Impala from her late Aunt Joop. Aunt Joop purchased the car 40 years ago for $8,000. Cybil is either going to sell the car for $10,000 or have it restored and then sell it for $22,000. The restoration will cost $9,000. Cybil would be financially better off by:

$3,000 to have the vehicle restored explanation Final sales value after restoration $ 22,000 Less sales value before restoration 10,000 Incremental revenue from restoration 12,000 Less cost of restoration 9,000 Financial advantage (disadvantage) from restoration$ 3,000

Azuki Corporation operates in two sales territories, Urban and Rural. Data concerning last year's operations appear below: UrbanRuralSales $ 320,000 $ 80,000 Variable expenses 208,000 56,000 Contribution margin 112,000 24,000 Traceable fixed expenses 48,000 30,000 Segment margin $ 64,000$ (6,000) Azuki's common fixed expenses were $25,000 last year. What was Azuki Corporation's overall net operating income for last year?

$33,000 explanation Total Company Urban Rural Segment margin 58,000 $ 64,000 $ (6,000) Common fixed expenses 25,000 Net operating income$ 33,000

Assume the following information: Amount Per Unit Sales $300,000 $40 Variable expenses 112,500 15 Contribution margin 187,500 $25 Fixed expenses 44,000 Net operating income $143,500 The dollar sales to attain a target profit of $187,000 is:

$369,600 explanation Step 1: Calculate the contribution margin ratio: Contribution margin per unit (a)$25 Selling price per unit (b)$40 Contribution margin ratio (a) ÷ (b) 62.5% Step 2: Calculate the dollar sales to attain the target profit: Fixed expenses + Target profit ($44,000 + $187,000) (a) $231,000 Contribution margin ratio (b) 62.5%Dollar sales to attain target profit (a) ÷ (b)$369,600

Assume a company is preparing a budget for its first two months of operations. During the first and second months it expects credit sales of $45,000 and $63,000, respectively. The company expects to collect 45% of its credit sales in the month of the sale and the remaining 55% in the following month. What amount of cash collections from credit sales would the company include in its cash budget for the second month?

$53,100 explanation Month 1 Month 2 Total Credit sales (a)$45,000 $63,000 Cash collection percentage for month 2 (b) 55% 45% Expected cash collections in month 2 from credit sales (a) × (b) $24,750 $28,350 $53,100

Nantor Corporation has two divisions, Southern and Northern. The following information was taken from last year's income statement segmented by division: Total Company Southern Northern Sales $ 4,400,000 $ 2,740,000 $ 1,660,000 Contribution margin $ 1,850,000 $ 1,170,000 $ 680,000 Divisional segment margin $ 970,000 $ 780,000 $ 190,000 Net operating income last year for Nantor Corporation was $440,000. In last year's income statement segmented by division, what were Nantor's total common fixed expenses?

$530,000 explanation Net operating income = Total segment margin − Common fixed expenses $440,000 = $970,000 − Common fixed expenses Common fixed expenses = $970,000 − $440,000 = $530,000

Assume Division A has provided the following information regarding the one product that it manufactures and sells on the outside market: Selling price per unit (on the outside market)$100 Variable cost per unit$67 Fixed costs per unit (based on capacity)$10 Capacity in units 30,000 Division A has been offered the opportunity to sell 5,000 units of its only product to another division within the same company. The other division can either agree to a transfer price with Division A or purchase a comparable product on the outside market for $100. If Division A is currently selling 25,500 units on the outside market, what is the range of acceptable transfer prices between the two divisions?

$70.30 ≤ Transfer price ≤ $100.00 explanation Step 1: Calculate the lowest acceptable transfer price for the seller (Division A):Note: Division A's capacity is 30,000 units. It is currently selling 25,500 units on the outside market. That leaves unused capacity of 4,500 units. Because Division A does not have enough idle capacity to fill the entire order from Division B, there are lost outside sales of 500 units (or Division B's requirement of 5,000 − unused capacity of 4,500 units). Transfer price ≥ $67 + ($100 − $67) × 5005,000Transfer price ≥ $67 + $100 - $67 × 5005,000 ≥ $67 + $3.30 = $70.30≥ $67 + $3.30 = $70.30 Step 2: Calculate the highest acceptable transfer price for the buyer: Transfer price ≤ Cost of buying from outside supplier = $100.00 Step 3: Calculate the range of acceptable transfer prices:$70.30 ≤ Transfer price ≤ $100.00

A manufacturing company that produces a single product has provided the following data concerning its most recent month of operations: Selling price$ 170 Units in beginning inventory 0 Units produced15,400 Units sold13,700 Units in ending inventory1,700 Variable costs per unit: Direct materials$ 53 Direct labor$ 51 Variable manufacturing overhead$ 15 Variable selling and administrative expense$ 6 Fixed costs: Fixed manufacturing overhead$446,600 Fixed selling and administrative expense$178,100 What is the total period cost for the month under variable costing?

$706,900 explanation Variable selling and administrative expense($6 per unit × 13,700 units sold)$82,200 Fixed manufacturing overhead446,600 Fixed selling and administrative expense178,100 Variable costing total period cost$706,900

Fingado Products, Incorporated, has a Detector Division that manufactures and sells a number of products, including a standard detector that could be used by another division in the company, the Commercial Security Division, in one of its products. Data concerning that detector appear below: Capacity in units87,000 Selling price to outside customers$ 98 Variable cost per unit$ 32 Fixed cost per unit (based on capacity)$ 51 The Commercial Security Division is currently purchasing 6,000 of these detectors per year from an overseas supplier at a cost of $91 per detector. What is the maximum price that the Commercial Security Division should be willing to pay for detectors transferred from the Detector Division?

$91 per unit explanation From the perspective of the purchasing division, the transfer is financially attractive if and only if: Transfer price < Cost of buying from outside supplier Transfer price < $91 per unit

Rebelo Corporation is presently making part E07 that is used in one of its products. A total of 17,000 units of this part are produced and used every year. The company's Accounting Department reports the following costs of producing the part at this level of activity: Per UnitDirect materials$ 3.80 Direct labor$ 3.80 Variable manufacturing overhead$ 1.10 Supervisor's salary$ 2.50 Depreciation of special equipment$ 1.40 Allocated general overhead$ 8.60 An outside supplier has offered to make and sell the part to the company for $20.80 each. If this offer is accepted, the supervisor's salary and all of the variable costs, including direct labor, can be avoided. The special equipment used to make the part was purchased many years ago and has no salvage value or other use. The allocated general overhead represents fixed costs of the entire company, none of which would be avoided if the part were purchased instead of produced internally. If management decides to buy part E07 from the outside supplier rather than to continue making the part, what would be the annual impact on the company's overall net operating income?

($163,200) explanation MakeDirect materials (17,000 units × $3.80 per unit)$ 64,600 Direct labor (17,000 units × $3.80 per unit)64,600 Variable overhead (17,000 units × $1.10 per unit)18,700 Supervisor's salary (17,000 units × $2.50 per unit)42,500 Depreciation of special equipment (not relevant)0 Allocated general overhead (avoidable only))0 Total relevant cost to make$ 190,400 Make Total cost to buy (17,000 units × $20.80 per unit)$ 353,600 Total relevant cost to make190,400 Higher cost to buy$ 163,200

Lusk Corporation produces and sells 14,600 units of Product X each month. The selling price of Product X is $28 per unit, and variable expenses are $22 per unit. A study has been made concerning whether Product X should be discontinued. The study shows that $74,000 of the $101,000 in monthly fixed expenses charged to Product X would not be avoidable even if the product was discontinued. If Product X is discontinued, the monthly financial advantage (disadvantage) for the company of eliminating this product should be:

($60,600) explanation Keep Product X Drop Product X DifferenceSales (14,600 units × $28 per unit)$ 408,800 $ 0$ (408,800) Variable expenses (14,600 units × $22 per unit) 321,2000 321,200 Contribution margin 87,600 0 (87,600) Fixed expenses 101,000 74,000 27,000 Financial advantage (disadvantage)$ (13,400)$ (74,000)$ (60,600)

Part U16 is used by Mcvean Corporation to make one of its products. A total of 13,000 units of this part are produced and used every year. The company's Accounting Department reports the following costs of producing the part at this level of activity: Per Unit Direct materials$ 2.90 Direct labor$ 7.50 Variable manufacturing overhead$ 8.00 Supervisor's salary$ 3.40 Depreciation of special equipment$ 1.80 Allocated general overhead$ 7.00 An outside supplier has offered to make the part and sell it to the company for $29.80 each. If this offer is accepted, the supervisor's salary and all of the variable costs, including the direct labor, can be avoided. The special equipment used to make the part was purchased many years ago and has no salvage value or other use. The allocated general overhead represents fixed costs of the entire company, none of which would be avoided if the part were purchased instead of produced internally. In addition, the space used to make part U16 could be used to make more of one of the company's other products, generating an additional segment margin of $25,000 per year for that product. The annual financial advantage (disadvantage) for the company as a result of buying part U16 from the outside supplier should be:

($79,000) explanation Make Direct materials (13,000 units × $2.90 per unit)$ 37,700 Direct labor (13,000 units × $7.50 per unit)97,500 Variable overhead (13,000 units × $8.00 per unit)104,000 Supervisor's salary (13,000 units × $3.40 per unit)44,200 Depreciation of special equipment (not relevant)0 Allocated general overhead (avoidable only)0 Opportunity cost25,000 Total relevant cost to make$ 308,400 Make Outside purchase price (13,000 units × $29.80 per unit)$ 387,400 Total relevant cost to make308,400 Higher cost to purchase$ 79,000

Halpert Corporation has been in operation for one year. The only product they produce is a specific bicycle chain. They want to make sure they are effectively utilizing the machinery they use to create this product. Below is the information concerning the machine that produces the bicycle chain: Actual run time this week2,500Minutes Machine time available per week3,125Minutes Actual run rate this week2.4Units per minute Ideal run rate3.2Units per minute Defect-free output this week5,100Units Total output this week (including defects)6,000Units Halpert's efficiency rate was:

.75 explanation Efficiency rate = Actual run rate / Ideal run rate= 2.4 units per minute / 3.2 units per minute = 0.75

Assume the following information: Hours Queue time33 Wait time24 Process time2 Move time2 Inspection time4 The manufacturing cycle efficiency (MCE) is closest to:

0.05. explanation Step 1: Calculate the throughput (manufacturing cycle) time: Hours Queue time33 Process time2 Move time2 Inspection time4 Throughput time41 Step 2: Calculate the manufacturing cycle efficiency (MCE): Value added time (a)2 Throughput time (b)41 Manufacturing cycle efficiency (a) ÷ (b)0.05

Assume the following information: Amount Selling price $30 Variable expense per unit $12 Fixed expenses $11,000 per month Unit sales 2,060 per month The degree of operating leverage is closest to:

1.42 explanation Step 1: Construct an income statement as follows: Sales (2,060 units × $30 per unit) $61,800 Variable expenses (2,060 units × $12 per unit) 24,720 Contribution margin 37,080 Fixed expenses 11,000 Net operating income $26,080 Step 2: Calculate the degree of operating leverage: Contribution margin (a) $37,080 Net operating income (b) $26,080 Degree of operating leverage (rounded) (a) ÷ (b) 1.42

The Jung Corporation's production budget calls for the following number of units to be produced each quarter for next year: Budgeted production Quarter 145,000 units Quarter 238,000 units Quarter 334,000 units Quarter 448,000 units Each unit of product requires three pounds of direct material. The company's policy is to begin each quarter with an inventory of direct materials equal to 30% of that quarter's direct material requirements. Budgeted direct materials purchases for the third quarter would be:

114,600 pounds explanation Direct Materials Budget Quarter 3 Required production in units34,000 Raw materials required per unit3 Raw materials needed to meet the production102,000 Add desired ending raw materials inventory(48,000 units × 3 pounds per unit × 30%)43,200 Total raw materials needs145,200 Less beginning raw materials inventory(34,000 units × 3 pounds per unit × 30%)30,600 Raw materials to be purchased114,600

Bertucci Corporation makes three products that use the current constraint which is a particular type of machine. Data concerning those products appear below: TC GL NG Selling price per unit$ 494.40 $ 449.43 $ 469.68 Variable cost per unit$ 395.20 $ 320.21 $ 373.92 Minutes on the constraint 8.00 7.10 7.60 Assume that sufficient constraint time is available to satisfy demand for all but the least profitable product. Up to how much should the company be willing to pay to acquire more of the constrained resource? (Round your intermediate calculations to 2 decimal places.)

12.40 per minute explanations TC GL NG Selling price per unit$ 494.40$ 449.43$ 469.68 Variable cost per unit 395.20 320.21 373.92 Contribution margin per unit (a)$ 99.20 129.22 $ 95.76 Amount of the constrained resource required to produce one unit (b) 8.00 7.10 7.60 Contribution margin per unit of the constrained resource (a) ÷ (b)$ 12.40 $ 18.20 $ 12.60 Ranking 3 1 2 The company should be willing to pay up to the contribution margin per minute for the marginal job, which is $12.40 per minute for TC.

Schuepfer Incorporated bases its selling and administrative expense budget on budgeted unit sales. The sales budget shows 1,300 units are planned to be sold in March. The variable selling and administrative expense is $4.20 per unit. The budgeted fixed selling and administrative expense is $19,240 per month, which includes depreciation of $3,380 per month. The remainder of the fixed selling and administrative expense represents current cash flows. The cash disbursements for selling and administrative expenses on the March selling and administrative expense budget should be:

21,320 explanation Selling and Administrative Expense Budget March Budgeted unit sales1,300 Variable selling and administrative expense per unit$ 4.20 Variable selling and administrative expense$ 5,460 Fixed selling and administrative expense19,240 Total selling and administrative expense24,700 Less depreciation3,380 Cash disbursements for selling and administrative expenses$ 21,320

Rovinsky Corporation, a company that produces and sells a single product, has provided its contribution format income statement for November. Sales (6,600 units)$ 429,000 Variable expenses 297,000 Contribution margin 132,000 Fixed expenses 103,500 Net operating income$ 28,500 If the company sells 6,500 units, its net operating income should be closest to

26,500 Explanation: Selling price per unit = Sales ÷ Quantity sold = $429,000 ÷ 6,600 units = $65 per unit Variable expenses per unit = Variable expenses ÷ Quantity sold = $297,000 ÷ 6,600 units = $45 per unit Unit contribution margin = Selling price per unit − Variable expenses per unit = $65 per unit − $45 per unit = $20 per unit Profit = (Unit contribution margin × Q) − Fixed expenses = ($20 per unit × 6,500 units) − $103,500 = $130,000 − $103,500 = $26,500

Assume a company reported the following results: Sales ? Net operating income$120,000 Average operating assets$240,000 Margin ? Turnover 1.25 Return on investment (ROI) ? What is the sales?

300,000 explanation Average operating assets (a)$240,000 Turnover (b) 1.25 Sales (a) × (b)$300,000

Assume the following information: Hours Queue time23 Wait time24 Process time2 Move time2 Inspection time4 The throughput time (manufacturing cycle time) is:

31 hours explanation Hours Queue time23 Process time2 Move time2 Inspection time4 Throughput time31

Cabell Products is a division of a major corporation. Last year the division had total sales of $25,720,000, net operating income of $2,124,320, and average operating assets of $6,400,000. The company's minimum required rate of return is 12%. The division's turnover is closest to:

4.02 explanation Turnover = Sales ÷ Average operating assets = $25,720,000 ÷ $6,400,000 = 4.02

The Bandeiras Corporation, a merchandising firm, has budgeted its activity for December according to the following information: Sales at $550,000, all for cash. Merchandise inventory on November 30 was $300,000. The cash balance at December 1 was $25,000. Selling and administrative expenses are budgeted at $60,000 for December and are paid in cash. Budgeted depreciation for December is $35,000. The planned merchandise inventory on December 31 is $270,000. The cost of goods sold is 75% of the sales price. All purchases are paid for in cash. There is no interest expense or income tax expense. The budgeted net income for December is:

42,500 explanation Sales$ 550,000 Cost of goods sold (75% × $550,000)412,500 Gross margin137,500 Selling and administrative expense60,000 Depreciation35,000 Net income$ 42,500

Crocetti Corporation makes one product and has provided the following information to help prepare the master budget for the next four months of operations: Budgeted selling price per unit$ 121 Budgeted unit sales (all on credit): January7,000 February7,500 March11,900 April14,900 Credit sales are collected: 40% in the month of the sale 60% in the following month The budgeted accounts receivable balance at the end of February is closest to:

544,500 explanation The budgeted accounts receivable balance at the end of February is: February sales 7,500 units × $121 per unit (a)$ 907,500 Percent uncollected (b)60% Accounts receivable (a) × (b)$ 544,500

The following are Silver Corporation's unit costs of making and selling an item at a volume of 8,000 units per month (which represents the company's capacity): Manufacturing: Direct materials$ 4 Direct labor$ 5 Variable overhead$ 2 Fixed overhead$ 8 Selling and administrative: Variable$ 1 Fixed$ 6 Present sales amount to 7,000 units per month. An order has been received from a customer in a foreign market for 1,000 units. The order would not affect regular sales. Total fixed costs, both manufacturing and selling and administrative, would not be affected by this order. The variable selling and administrative costs would have to be incurred for this special order as well as all other sales. Assume that direct labor is a variable cost. What is the financial advantage (disadvantage) for the company from this special order if it prices the 1,000 units at $20 per unit?

8,000 explanation Incremental revenue (1,000 units × $20 per unit) $ 20,000 Less incremental costs: Direct materials (1,000 units × $4 per unit)$ 4,000 Direct labor (1,000 units × $5 per unit) 5,000 Variable manufacturing overhead (1,000 units × $2 per unit) 2,000 Variable selling and administrative (1,000 units × $1 per unit) 1,000 12,000 Financial advantage (disadvantage) $ 8,000

Assume the following information: Amount Selling price $30 Variable expense ratio 40% Fixed expenses $8,000 per month Unit sales 1,000 per month A 5% increase in sales will generate what percent increase in net operating income?

9% Explanation Step 1: Construct an income statement as follows: Sales (1,000 units × $30 per unit) $30,000 Variable expenses (1,000 units × ($30 × 40%)) 12,000 Contribution margin 18,000 Fixed expenses 8,000 Net operating income $10,000 Step 2: Calculate the degree of operating leverage: Contribution margin (a)$18,000 Net operating income (b)$10,000 Degree of operating leverage (rounded) (a) ÷ (b) 1.8 Step 3: Calculate the percent increase in net operating income: Percent increase in sales (a) 5% Degree of operating leverage (b) 1.8 Percent increase in net operating income (a) × (b) 9%

Cardle Corporation makes one product. Budgeted unit sales are shown below: January February March April Budgeted unit sales 7,300 8,600 10,100 13,600 The ending finished goods inventory should equal 30% of the following month's sales. The budgeted required production for February is closest to:

9050 units explanation The budgeted required production for February is computed as follows: Budgeted sales in units 8,600 Add desired ending inventory*3,030 Total needs11,630 Less beginning inventory**2,580 Required production9,050 *March sales of 10,100 units × 30% = 3,030 units ** February sales of 8,600 units × 30% = 2,580 units

Priddy Corporation processes sugar cane in batches. The company purchases a batch of sugar cane for $62 from farmers and then crushes the cane in the company's plant at the cost of $18. Two intermediate products, cane fiber and cane juice, emerge from the crushing process. The cane fiber can be sold as is for $28 or processed further for $13 to make the end product industrial fiber that is sold for $36. The cane juice can be sold as is for $43 or processed further for $23 to make the end product molasses that is sold for $85. Which of the intermediate products should be processed further?

Cane fiber should NOT be processed into industrial fiber; Cane juice should be processed into molasses explanation Industrial Fiber Molasses Final sales value after further processing$ 36 $ 85 Less sales value at split-off point 28 43 Incremental revenue from further processing 8 42 Less cost of further processing 13 23 Financial advantage (disadvantage) from further processing$ (5) $ 19 Cane fiber should NOT be processed into industrial fiber but cane juice should be processed into molasses.

In variable costing, a complete definition of unit product cost includes

Direct materials, direct labor, and variable manufacturing overhead.

Assume that a company has decided to include "number of process improvement suggestions per employee" and "non-value-added activity costs" as performance measures within its balance scorecard. The if-then hypothesis statement that would best describe the company's goal with respect to these two measures would be?

If the number of process improvement suggestions per employee increases, then the non-value-added activity costs will decrease.

Which of the following statements is true?

If the process time and wait time both increase and all else holds constant, then the delivery cycle time will always increase explanation: Delivery cycle time = Wait time + throughput time. Therefore, if the process time increases (thereby increasing the throughput time) and the wait time also increases, then it will always increase the delivery cycle time.

Which of the following statements is true?

Increasing sales while holding expenses constant will increase margin.

Which of the following statements is false with respect to the selling and administrative expense budget?

It excludes depreciation expense because selling and administrative expenses are period costs and not product costs.

Which of the following statements is true with respect to a budgeted income statement?

Its net income will impact the ending retained earnings balance shown on the balance sheet.

Godina Products, Incorporated, has a Receiver Division that manufactures and sells a number of products, including a standard receiver that could be used by another division in the company, the Industrial Products Division, in one of its products. Data concerning that receiver appear below: Capacity in units58,000 Selling price to outside customers$ 89 Variable cost per unit$ 35 Fixed cost per unit (based on capacity)$ 42 The Industrial Products Division is currently purchasing 10,000 of these receivers per year from an overseas supplier at a cost of $81 per receiver. Assume that the Receiver Division is selling all of the receivers it can produce to outside customers. Does there exist a transfer price that would make both the Receiver and Industrial Products Division financially better off than if the Industrial Products Division were to continue buying its receivers from the outside supplier?

No, the minimum transfer price that the selling division should be willing to accept exceeds the maximum transfer price that the buying division should be willing to accept. explanation The total contribution margin on lost sales is computed as follows: Selling price to outside customers$ 89 Variable cost per unit$ 35 Unit contribution margin$ 54 Reduction in outside unit sales10,000 Total contribution margin on lost sales$ 540,000 From the perspective of the selling division, profits would increase as a result of the transfer if and only if: Transfer price > Variable cost per unit + (Total contribution margin on lost sales ÷ Number of units transferred) Transfer price > $35 per unit + ($540,000 ÷ 10,000 units) = $35 per unit + $54 per unit = $89 per unit From the perspective of the purchasing division, the transfer is financially attractive if and only if: Transfer price < Cost of buying from outside supplier Transfer price < $81 per unit No transfer will be made between the two divisions because the minimum price that the selling division is willing to accept is greater than the maximum price that the buying division is willing to pay.

Assume a company has two divisions, Division A and Division B. Division A has provided the following information regarding the one product that it manufactures and sells on the outside market: Selling price per unit (on the outside market)$60 Variable cost per unit$43 Fixed costs per unit (based on capacity)$8 Capacity in units 20,000 Division B could use Division A's product as a component part in the manufacture of 4,000 units of its own newly-designed product. Division B has received a quote of $58 from an outside supplier for a component part that is comparable to the one that Division A makes. Also assume that the company's divisional managers are evaluated based on their division's profits and that Division A is currently selling 15,000 units on the outside market. If the managers of the two divisions do not agree on a transfer price and Division B purchases 4,000 component parts from an outside supplier, what would be the effect on the company's profits?

Profits would decrease by $60,000 explanation Step 1: Calculate the excess price paid per unit: Price Division B pays to outside supplier (a)$58 Division A's variable cost per unit (b)$43 Excess price paid per unit (a) − (b)$15 Step 2: Calculate the decrease in the company's profits: Quantity of units purchased from outside supplier (a) 4,000 Excess price paid per unit (b)$15 Decrease in the company's profits (a) × (b)$60,000

Which of the following statements is true?

Using residual income to evaluate managers will motivate them to pursue investments that increase their residual income even if it lowers their return on investment (ROI).

Banfield Corporation makes three products that use compound W, the current constrained resource. Data concerning those products appear below: VP YI WX Selling price per unit$ 248.04 $ 230.66 $ 505.44 Variable cost per unit $ 190.71 $ 172.14 $ 388.80 Centiliters of compound W 3.90 3.80 8.10 Rank the products in order of their current profitability from most profitable to least profitable. In other words, rank the products in the order in which they should be emphasized.

YI, VP, WX explanation VP YI WX Selling price per unit $ 248.04 $ 230.66 $ 505.44 Variable cost per unit$ 190.71 $ 172.14 $ 388.80 Contribution margin per unit (a)$ 57.33 $ 58.52 $ 116.64 Amount of the constrained resource required toproduce one unit (b)3.90 3.80 8.10 Contribution margin per unit of the constrained resource (a) ÷ (b) $ 14.70 $ 15.40$ 14.40 Ranking 2 1 3

Last year, Salas, Inc., sold 50,000 units. The contribution margin ratio was 70%. Total fixed costs were $30,000. Assume that an increase in unit sales will lead to an increase in total sales by $50,000 next year. If cost behavior patterns remain unchanged, by how much will the company's net operating income change?

net operating income will increase by $35,000 explanation CM = CM ratio x Sales Change in CM = CM ratio x Change in sales Change in CM = 0.7 x $50,000 Change in CM = $35,000 Change in Net operating income = Change in CM - Change in Fixed costs Change in Net operating income = $35,000 - 0 = $35,000 increase in Net operating income

Knight forward, a division of King Corp., has a net operating income of $60,000 and average operating assets of $300,000. The minimum required rate of return for the company is 15%. If the manager of the Knight forward division is evaluated based on residual income, will she want to make an investment of $100,000 that would generate additional net operating income of $14,000 per year?

no New investment Opportunity - Residual income Net operating income $14,000 Required return (15% of $100,000) (15,000) Residual income ($1,000) Yields a decrease of $1,000 in the residual income.

Accepting a special order will improve overall net operating income if the revenue from the special order exceeds:

the incremental costs associated with the order.

Assume the following (1) variable expenses = $288,000, (2) unit sales = 10,000, (3) the contribution margin ratio = 25%, and (4) net operating income = $10,000. Given these four assumptions, which of the following is true? M

total sales= $384,000 explanation: Variable expenses (a)$288,000 Variable expense ratio (1 - 25%) (b) 75%Total sales (a) ÷ (b)$384,000