ACC 305: Final Exam

Which of the following represents the correct order in which the indicated budget documents for a manufacturing company would be prepared?

Sales budget, cash budget, production budget, direct materials budget

Which of the following departments would not be a cost center?

University book store

Which of the following is not a reason identified by executives that corporate costs are allocated?

Which of the following is not a reason identified by executives that corporate costs are allocated?

Budgeted Balance sheets combine all of the following except:

an examination of all revenues, costs, and other transactions in terms of their effects on cash.

The following is a summarized income statement for McClaron Manor Company's profit center 12608 for April: Contribution Margin $ 182,000Period Expenses$ 18,000 Manager' s Salary$ 2,700 Corporate Expense Allocation$ 8,700$ (29,400)Net Income $ 152,600 Which of the following amounts is most likely subject to the control of the profit center's manager? (CMA adapted)

contribution margin of $182,000

Residual income is a better measure for performance evaluation of an investment center manager than return on investment because: (CMA adapted)

desirable investment decisions are less likely to be neglected by high-return divisions.

The major objectives of any budget system are to: (CIA adapted)

foster the planning of operations, provide a framework for performance evaluation, and promote communication and coordination among organization segments.

In responsibility accounting, a center's performance is measured by those costs which are controllable. Controllable costs are best described as including: (CMA adapted)

only those costs that the manager can influence in the current period.

The master budget process usually begins with the: (CMA adapted)

sales budget

One advantage of decentralization is faster response time to changes in the organization's environment by local managers.

true

One problem associated with using accounting measures to evaluate divisional performance is that the measures are based on historical information.

true

Barrington Box Enterprises has two divisions, large and small, that share the common costs of the company's communications network. The annual common costs are $4,860,000. You have been provided with the following information for the upcoming year: CallsTime on Network (hours)Large104,000121,000Small76,000365,000 What is the allocation rate for the upcoming year, assuming Barrington Box uses the single-rate method and allocates common costs based on the time on the network?

$10

Center Company makes collections on sales according to the following schedule: 30% in the month of sale 60% in the month following sale 5% in the second month following sale The following sales are expected: Expected SalesJanuary$ 112,000February$ 148,000March$ 131,000 Cash collections in March should be budgeted to be:

$133,700

Riff, Incorporated is working on its cash budget for June. The budgeted beginning cash balance is $17,000. Budgeted cash receipts total $189,000 and budgeted cash disbursements total $188,000. The desired ending cash balance is $42,000. The excess (deficiency) of cash available over disbursements for June will be:

$18,000

A company has the following annual budget data: Beginning finished goods inventory43,000unitsSales73,000unitsEnding finished goods inventory33,000unitsDirect materials$ 15per unitDirect labor$ 20per unitVariable factory overhead$ 4per unitSelling costs$ 2per unitFixed factory overhead$ 83,000 What are total budgeted production costs for the year? (CIA adapted)

$2,540,000

Barrington Box Enterprises has two divisions, large and small, that share the common costs of the company's communications network. The annual common costs are $4,680,000. You have been provided with the following information for the upcoming year: CallsTime on Network (hours)Large106,000139,000Small89,000251,000 What is the allocation rate for the upcoming year, assuming Barrington Box uses the single-rate method and allocates common costs based on the number of calls?

$24

The Copy Department in the College of Business at State University provides photocopying services for both the Marketing and Economics Departments. The following budget has been prepared for the year. Available capacity6,700,000pagesBudgeted usage: Marketing4,300,000pagesEconomics2,150,000pagesCost equation$ 141,000 + $ 0.060per page If the Copy Department uses a dual-rate for allocating its costs based on usage, how much cost will be allocated to the Marketing Department?

$352,000

Ari, Incorporated is working on its cash budget for December. The budgeted beginning cash balance is $28,000. Budgeted cash receipts total $141,000 and budgeted cash disbursements total $140,000. The desired ending cash balance is $68,000. Any borrowing is in multiples of $1,000 and interest is paid in the month following the borrowing. To attain its desired ending cash balance for December, the company needs to borrow:

$39,000

The Country Garden Company's current after-tax income is $24,165 and its average assets are $89,500. The Country Garden's cost of capital is 24%. A new project being considered would require an investment of $21,500 and would generate annual after-tax income of $5,590. What is the residual income of the new project?

$430

Page Company makes 40% of its sales for cash and 60% on account. 70% of the credit sales are collected in the month of sale, 20% in the month following sale, and 6% in the second month following sale. The remainder is uncollectible. The following information has been gathered for the current year: Month1234Total sales$73,000$85,000$63,000$43,000 Total cash receipts in Month 4 will be:

$45,880

The following information is available for Kiss Company: After-tax income$ 10,800Operating assets$ 43,200Stockholders' equity$ 33,000Cost of capital12% What is Kiss Company's residual income?

$5,616

The Variable Speed Company manufactures a line of high-quality tools. The company sold 1,100,000 hammers at a price of $5.00 per unit last year. The company estimates that this volume represents a 20% share of the current hammers market. The market is expected to increase by 5%. Marketing specialists have determined that, as a result of a new advertising campaign and packaging, the company will increase its share of this larger market to 24%. Due to changes in prices, the new price for the hammer will be $5.30 per unit. This new price is expected to be in line with the competition and have no effect on the volume estimates. What are the estimated sales revenues in the coming year?

$7,345,800

The following data are available for the South Division of Manhattan Products, Incorporated and the single product it makes: Asset turnover1.5ROI21%Divisional assets$ 170,000 What is South's profit margin ratio?

14%

The following information is available for Sweet Dreams Company: Sales$ 125,000Operating expenses$ 116,000Divisional assets$ 50,000Stockholders' equity$ 31,250Cost of capital15% What is Sweet Dreams Company's return on investment (ROI)?

18%

The following information was presented by Outdoors Manufacturing Company for an asset purchased at the beginning of the previous year. Original cost of the asset$ 20,000 Useful life of the asset10yearsCash flow annual operating profit$ 4,000 Salvage value$ -0- What is the return on investment (ROI) assuming Outdoors uses (a) the straight-line method for depreciation and (b) beginning-of-year net book values to compute ROI?

22.2%

The Dry Wall Division reports the following operating data for the past two years: Year 1Year 2Profit margin ratio16%?Asset turnover3.02Divisional assets?$ 154,000After-tax income$ 40,800?Stockholders' equity$ 81,600$ 129,000Sales?? The return on investment at the Dry Wall Division was exactly the same in Year 1 and Year 2.The profit margin ratio in Year 2 was:

24%

The following budgeted information is provided: Month123Sales in units33,00038,00036,000Production in units34,00040,00033,000 One pound of materials is required for each finished unit. The inventory of materials at the end of each month should equal 20% of the following month's production needs. At the beginning of Month 1, there were 6,800 pounds of materials on hand. Purchases of raw materials for Month 1 would be (in pounds):

35,200

How will decreases in the following items affect return on investment (ROI)?

Decrease in Sales: Decrease ROI Decrease in Equipment: Decrease in ROI

Controllable revenue is included in a performance report of a(n):

Profit Center: Yes Investment Center: Yes

Which of the following statements does not represent a limitation of using return on investment (ROI) for measuring and evaluating performance?

ROI cannot be used to compare divisions of different sizes.