ACCT 281 - Final

Unique Corporation manufactures two products; data are shown below: CMR Relative Sales Mix Product D 50% 40% Product F 30% 60% If Unique's monthly fixed costs average $400,000, what is its break-even point expressed in sales dollars? (Round the answer to the nearest dollar.)

$1,052,632 Explanation:

The following information has been taken from the perpetual inventory system of Elite Mfg. Co. for the month ended August 31: [image] 2. Total manufacturing costs charged (debited) to Work in Process during August amount to:

$112,000. Explanation: Direct Mats + Direct Labor + Manufacturing overhead = debited to WIP

Shown below is information relating to the stockholders' equity of Reeve Corporation as of December 31, 2018: 4.0% cumulative preferred stock, $100 par $700,000 Common stock, $10 par, 300,000 shares authorized, 128,000 shares issued and outstanding 1,280,000 Additional paid-in capital: Common stock 512,000 Retained earnings (Deficit) (64,000) Dividends in arrears 28,000 5. Book value per share of common stock is: (Round to 2 decimal places.)

$13.28. Explanation: 1,280,000 + 512,000 - 64,000 - 28,000 = 1,700,000 / 128,000 = 13.28

The Parry Company's breakeven point in units is 20,000. Assuming that variable costs are 30% and fixed costs are $100,000, what is the company's projected operating income if sales are $750,000?

$425,000 Explanation: ($750,000 × (100% − 30%)) − $100,000 = $425,000

Roman Mfg.'s July production involved actual direct labor costs of $58,124 for 4,400 direct labor hours. The budget for the July level of production called for 4,500 direct labor hours at $13.20 per hour, using a standard cost system. 1. Roman's labor rate variance for July is:

$44 unfavorable. Explanation: (4,400 x $13.20) - $58,124 = $44 unfavorable.

Accents Associates sells only one product, with a current selling price of $70 per unit. Variable costs are 40% of this selling price, and fixed costs are $12,000 per month. Management has decided to reduce the selling price to $65 per unit in an effort to increase sales. Assume that the cost of the product and fixed operating expenses are not changed by this reduction in selling price. 3. At the current selling price of $70 per unit, what dollar volume of sales per month is required for Accents to earn a monthly operating income of $15,000?

$45,000. Explanation: ($12,000 + $15,000) ÷ 0.6 = $45000

During its first year of operations, Brown Company incurred the following product costs: Direct materials used in production $200,000; Direct labor $175,000; and Manufacturing overhead $145,500. The Brown Company's ending Work in Process Inventory amounted to $35,000 at the end of the year. What is the company's cost of finished goods manufactured for the year?

$485,500

A company with monthly revenue of $120,000, variable costs of $50,000, and fixed costs of $40,000 has a contribution margin of:

$70,000. Explanation: $120,000 - $50,000 = $70,000

Mentha Company currently has the following statistics: Days in inventory - 80 Days in accounts receivable - 68 What is Mentha's operating cycle?

148 days Explanation: 80 + 68 = 148 days

If the unit sales price is $7 and variable costs are $3, how many units have to be sold to earn a profit of $3,600 if fixed costs equal $5,000?

2,150 units Explanation: $5,000 + $3,600/($7 - $3) = 2,150 units

If 8,000 units were in beginning inventory, 26,000 units were started, and 6,000 units were in the ending inventory, how many units were transferred out?

28,000 units Explanation: 8,000 + 26,000 - 6,000 = 28,000

Which element of a master budget would normally be prepared last?

A budgeted balance sheet

When a company reports both diluted earnings per share and basic earnings per share:

Basic EPS would be greater than fully diluted EPS.

Which of the following is not considered an operating budget?

Capital expenditures budget

Cash flows from investing activities include all of the following except:

Cash proceeds from borrowing.

Quick assets include which of the following?

Cash, marketable securities, and receivables.

A semivariable cost:

Changes in response to a change in volume, but not proportionately.

The wages paid to employees working directly on a company's products would be shown as a:

Debit to Direct Labor.

When a job is completed:

Finished goods inventory is debited.

Which of the following is not a characteristic of managerial accounting?

Information must be developed in conformity with generally accepted accounting principles or with income tax regulations.

Debits to the Manufacturing Overhead account record:

The actual amounts of overhead costs incurred during a period.

As the volume of output increases:

Variable costs per unit will not change.

When products are completed:

Work in Process Inventory is credited.

Nanu Corporation manufactures two products; data are shown below: CMR Relative Sales Mix Product X 40% 40% Product Y 30% 60% If Nanu's monthly fixed costs average $425,000, what is its break-even point expressed in sales dollars?

$1,250,000 Explanation: Average contribution margin = (40% × 40%) + (30% × $60%) = 34% $425,000 ÷ 34% = $1,250,000

Roman Mfg.'s July production involved actual direct labor costs of $58,124 for 4,400 direct labor hours. The budget for the July level of production called for 4,500 direct labor hours at $13.20 per hour, using a standard cost system. 2. Roman's labor efficiency variance for July is:

$1,320 favorable. Explanation: (4,500 - 4,400) x $13.20 = $1,320 favorable.

If the standard quantity of materials is 84,500 units at $0.15 per unit and the actual quantity is 95,000 units at $0.12 per unit, then the materials quantity variance is:

$1,575 Unfavorable. Explanation: (95,000 × $0.15) - (84,500 × $0.15) = $1,575, Unfavorable

The following information is available: Sales $90,000 Break-even sales $50,000 Contribution margin ratio 26% What is the operating income?

$10,400 Explanation: ($90,000 - $50,000) × 0.26 = $10,400

Baskin Promotions, Inc. sells T-shirts decorated for a variety of concert performers. The company has developed the following budget for the coming year based on a sales forecast of 88,000 T-shirts: Sales $1,547,040 Cost of Goods Sold $909,040 Gross Profit $638,000 Operating Expenses ($100,000 is fixed) $450,240 Operating Income $187,760 Income Taxes (30% of operating income) $56,328 Net Income $131,432 Cost of goods sold and variable operating expenses vary directly with sales, and the income tax rate is 30% at all levels of operating income. If the concert season is slow due to poor weather, Baskin estimates that sales could fall to as low as 68,000 T-shirts. 2. What unit cost did Baskin use in budgeting the cost of goods sold for the year?

$10.33 per unit Explanation: 909,040/88,000 = 10.33

The Davidson Company's breakeven point in units is 40,000. Assuming that variable costs are 60% and fixed costs are $300,000, what is the company's projected operating income if sales are $1,000,000?

$100,000 Explanation: ($1,000,000 × 40%) − $300,000 = $100,000

The following information has been taken from the perpetual inventory system of Elite Mfg. Co. for the month ended August 31: [image] 3. The cost of finished goods manufactured in August is:

$108,500. Explanation: Aug 1 WIP + Direct Mats Used + Direct Labor + Manufacturing Overhead - Aug 31 WIP = COGM

John Boyd Corporation manufactures and sells 1,000 tractors each month. The primary component in each tractor is the motor. John Boyd has the monthly capacity to produce 1,300 motors. The variable costs associated with manufacturing each motor are shown below: Direct materials . . . . . . . . . . . . . . . . . . . $24 Direct labor . . . . . . . . . . . . . . . . . . . . . . . $16 Variable manufacturing overhead . . . $29 Fixed manufacturing overhead per month (for up to 1,300 units of production) averages $27,000. Joan Reid, Inc. has offered to purchase 200 motors from John Boyd per month to be used in its own outboard motors. 3. Assuming John Boyd wants to earn a pretax profit of $10,000 on this special order, what price must it charge Joan Reid?

$119 per unit

The Gillett Company's breakeven point in units is 25,000. Assuming that variable costs are 50% and fixed costs are $500,000, what is the company's projected operating income if sales are $1,250,000?

$125,000 Explanation: ($1,250,000 × 50%) − $500,000 = $125,000

A company with an operating income of $72,000 and a contribution margin ratio of 56% has a margin of safety of: (Round the answer to the nearest whole number.)

$128,571. Explanation: $72,000 ÷ 0.56 = $128,571

During July, the equivalent units of direct materials added to the product worked on by Department A amounted to a total of 90,000 applied as follows: beginning inventory, 20,000 units; units started and completed in July, 60,000 units; and ending inventory, 10,000 units. Assuming that the cost of direct materials requisitioned by the department in July was $135,000; the amount of the materials cost to be assigned to the ending inventory would be: (Do not round intermediate calculations.)

$15,000 Explanation: (10,000 ÷ 90,000) × $135,000 = $15,000

Baskin Promotions, Inc. sells T-shirts decorated for a variety of concert performers. The company has developed the following budget for the coming year based on a sales forecast of 88,000 T-shirts: Sales $1,547,040 Cost of Goods Sold $909,040 Gross Profit $638,000 Operating Expenses ($100,000 is fixed) $450,240 Operating Income $187,760 Income Taxes (30% of operating income) $56,328 Net Income $131,432 Cost of goods sold and variable operating expenses vary directly with sales, and the income tax rate is 30% at all levels of operating income. If the concert season is slow due to poor weather, Baskin estimates that sales could fall to as low as 68,000 T-shirts. 3. Assume Baskin actually achieves the 68,000 unit sales level, and that net income actually earned at this level was $88,400. A performance report would indicate that net income was:

$2,748 over budget. Explanation: Sales per unit: 1,547,040/88,000 = 17.58 x 68,000 = 1,195,440 Cost of Goods: 909,040/88,000 = 10.33 x 68,000 = 702,440 Gross Profit: 1,195,440 - 702,440 = 493,000 Operating Expenses ($100,000 is fixed): 450,240 - 100,000/88,000 = 3.98 x 68,000 + 100,000 = 370,640 Operating Income: 493,000 - 370,640 = 122,360 Income taxes (30% of operating income): 122,360 x 0.30 = 36,708 Net Income: 122,360 - 36,708 = 85,652 88,400 - 85,652 = 2,748 over budget

If the standard quantity of materials is 84,500 units at $0.15 per unit and the actual quantity is 95,000 units at $0.12 per unit, then the materials price variance is:

$2,850 Favorable. Explanation: (95,000 × $0.12) - (95,000 × $0.15) = $2,850, Favorable

Accents Associates sells only one product, with a current selling price of $70 per unit. Variable costs are 40% of this selling price, and fixed costs are $12,000 per month. Management has decided to reduce the selling price to $65 per unit in an effort to increase sales. Assume that the cost of the product and fixed operating expenses are not changed by this reduction in selling price. 2. At the current selling price of $70 per unit, the dollar volume of sales per month necessary for Accents to break-even is:

$20,000. Explanation: $12,000 ÷ 0.6 = $20,000

Armstrong, Inc. uses a flexible budget. Armstrong produced 16,000 units in May incurring direct materials cost of $20,480. Its master budget for the year projected direct materials cost of $362,500, at a production volume of 290,000 units. A flexible budget for May should reflect direct materials cost of:

$20,000. Explanation: $362,500 ÷ 290,000 = $1.25; $1.25 × 16,000 = $20,000

Wateredge Corporation has budgeted a total of $361,800 in costs and expenses for the upcoming quarter. Of this amount, $45,000 represents depreciation expense and $7,300 represents the expiration of prepayments. Wateredge's current payables balance is $265,000 at the beginning of the quarter. Budgeted payments on current payables for the quarter amount to $370,000. The company's estimated current payables balance at the end of the quarter is:

$204,500. Explanation: $265,000 + ($361,800 - $45,000 - $7,300) − $370,000 = $204,500

Sherman has budgeted sales for the upcoming quarter as follows: . . . . . . . . April . . . . May . . . . . June Units . . . 1,600 . . . . 1,900 . . . . 1,750 The desired ending finished goods inventory for each month is one-half of next month's budgeted sales. Three pounds of direct material are required for each unit produced. If direct material costs $5 per pound, and must be paid for in the month of purchase, the budgeted direct materials purchases (in dollars) for April are:

$26,250. Explanation: (0. 5 × 1,600) + (0. 5 × 1,900) = 1,750; 1,750 × 3 = 5,250; 5,250 × $5 = $26,250

A company with monthly fixed costs of $170,000 expects to earn monthly operating income of $25,000 by selling 6,500 units per month. What is the company's expected unit contribution margin?

$30 per unit Explanation: $170,000 + $25,000 = 6,500 × CM; CM = $30

Raymond & Sons generates an average contribution margin ratio of 45% on its sales. Management estimates that by spending $3,500 more per month to rent additional facilities, the business will be able to increase operating income by $10,000 per month. Management must feel that the additional facilities will increase monthly sales volume (in dollars) by:

$30,000. Explanation: 0.45x - $3,500 = $10,000 0.45x = $13,500 x = $30,000

Eagle Company uses a standard cost system that has provided the following data: Units of output manufactured: 80 Direct labor: Standard hours allowed: 2 hours per unit of product Standard wage rate: $15.50 per hour Actual direct labor: 180 hours, total cost of $3,150 2. The direct labor efficiency variance for the period was:

$310 unfavorable. Explanation: (180 x $15.50) - ((80 x 2) x 15.50) = 310 unfavorable

Eagle Company uses a standard cost system that has provided the following data: Units of output manufactured: 80 Direct labor: Standard hours allowed: 2 hours per unit of product Standard wage rate: $15.50 per hour Actual direct labor: 180 hours, total cost of $3,150 1. The direct labor rate variance for the period was:

$360 unfavorable. Explanation: $3,150 - (180 x $15.50) = 360 unfavorable

Stupper Corporation manufactures two products; data are shown below: CMR Relative Sales Mix Product D 50% 60% Product F 60% 40% If Stupper's monthly fixed costs average $200,000, what is its break-even point expressed in sales dollars? (Round the answer to the nearest dollar.)

$370,370

Baskin Promotions, Inc. sells T-shirts decorated for a variety of concert performers. The company has developed the following budget for the coming year based on a sales forecast of 88,000 T-shirts: Sales $1,547,040 Cost of Goods Sold $909,040 Gross Profit $638,000 Operating Expenses ($100,000 is fixed) $450,240 Operating Income $187,760 Income Taxes (30% of operating income) $56,328 Net Income $131,432 Cost of goods sold and variable operating expenses vary directly with sales, and the income tax rate is 30% at all levels of operating income. If the concert season is slow due to poor weather, Baskin estimates that sales could fall to as low as 68,000 T-shirts. 1. In a flexible budget for sales of 68,000 T-shirts, how much would Baskin budget for operating expenses?

$370,640 Explanation: 450,240 - 100,000/88,000 = 3.98 3.98 x 68,000 + 100,000 = 370,640

The Fine Point Company currently produces all of the components for its one product, an electric pencil sharpener. The unit cost of manufacturing the motor for this pencil sharpener is: Direct materials . . . . . . $1.75 Direct labor . . . . . . . . . $1.65 Variable overhead . . . $0.75 Fixed overhead . . . . . . $0.60 The company is considering the possibility of buying this motor from a subcontractor and has been quoted a price of $3.60 per unit. The relevant cost of manufacturing the motor to be considered in reaching the decision is:

$4.15.

If monthly fixed costs are $21,000 and the contribution margin ratio is 42%, the monthly sales volume required to break even is:

$50,000. Explanation: $21,000 ÷ 0.42 = $50,000

The following data are available for product no. CK74, manufactured and sold by Ruby Corporation: Maximum capacity with present facilities 11,500 units Total fixed cost (per period) $612,000 Variable cost per unit $150.00 Sales price per unit $201.00 1. The contribution margin per unit for product no. CK74 is:

$51.00. Explanation: $201.00 − $150.00 = $51.00

Ross Corporation makes all sales on account. The June 30th balance sheet balance in its accounts receivable is $340,000, of which $210,000 pertain to sales that were made during June. Budgeted sales for July are $1,190,000. Ross collects 65% of sales in the month of sale; 15% in the following month; and the final 20% in the second month after the sale. 2. What is the budgeted balance of Ross's accounts receivable as of July 31?

$536,500 Explanation: 1,190,000 x (0.15 + 0.20) = 416,500 July sales in AR 210,000/0.35 = 600,000 June sales 600,000 x 0.20 = 120,000 June sales collect in Aug (2 month) 416,500 + 120,000 = 536,500

If a product sells for $8, variable costs are $6 and fixed costs are $150,000, what would total sales have to be in order to break-even?

$600,000 Explanation: $150,000 ÷ ($8 - $6) = 75,000 × $8 = $600,000

For the month of December, its first month of operations, the Radcliffe Corporation completed and transferred 800 units of product costing $80,000 to produce to Finished Goods Inventory. If Radcliffe sold 650 units during the same month, how much was cost of goods sold for the same period?

$65,000 Explanation: $80,000 ÷ 800 = $100 unit cost × 650 units sold = $65,000

John Boyd Corporation manufactures and sells 1,000 tractors each month. The primary component in each tractor is the motor. John Boyd has the monthly capacity to produce 1,300 motors. The variable costs associated with manufacturing each motor are shown below: Direct materials . . . . . . . . . . . . . . . . . . . $24 Direct labor . . . . . . . . . . . . . . . . . . . . . . . $16 Variable manufacturing overhead . . . $29 Fixed manufacturing overhead per month (for up to 1,300 units of production) averages $27,000. Joan Reid, Inc. has offered to purchase 200 motors from John Boyd per month to be used in its own outboard motors. 2. What is the incremental cost of producing each additional motor?

$69 per unit

If the unit sales price is $12, variable costs are $6 per unit, and fixed costs are $36,000, what sales volume (in dollars) is necessary to break-even?

$72,000 Explanation: $36,000 ÷ 0.50 = $72,000

The following information is available about the August transactions of the Helpful Tool Company: Invoices for product costs paid during the month: $493,000 Product costs charged to work in progress: $737,000 Cost of finished goods manufactured: $718,000 Cost of goods sold: $739,000 The product costs to be deducted from revenue in August amount to:

$739,000.

Moran Company uses a job order cost system and has established a predetermined overhead application rate for the current year of 150% of direct labor cost, based on budgeted overhead of $900,000 and budgeted direct labor cost of $600,000. Job No. 1 was charged with direct materials of $36,000 and with overhead of $27,000. What is the total cost of Job No. 1?

$81,000 Explanation: ($27,000 ÷ 150%) + $36,000 + $27,000 = $81,000

Legendary Motors has 7,000 defective autos on hand, which cost $12,880,000 to manufacture. Legendary can either sell these defective autos as scrap for $8,000 per auto, or spend an additional $18,320,000 on repairs and then sell them for $12,000 per unit. What is the net advantage to repair the autos compared to selling them for scrap?

$9,680,000 Explanation: Proceeds from sale of repaired autos (7,000× $12,000) $84,000,000 Less: Cost of repairs (18,320,000) Net proceeds from sale of repaired autos $65,680,000 Less: Scrap value of defective autos (7,000 × $8,000) (56,000,000) Net advantage if autos are repaired $9,680,000

The following information has been taken from the perpetual inventory system of Elite Mfg. Co. for the month ended August 31: [image] 4. The cost of goods sold in August is:

$93,400. Explanation: WIP + Aug 1 finished goods - Aug 31 finished goods = COGS

John Boyd Corporation manufactures and sells 1,000 tractors each month. The primary component in each tractor is the motor. John Boyd has the monthly capacity to produce 1,300 motors. The variable costs associated with manufacturing each motor are shown below: Direct materials . . . . . . . . . . . . . . . . . . . $24 Direct labor . . . . . . . . . . . . . . . . . . . . . . . $16 Variable manufacturing overhead . . . $29 Fixed manufacturing overhead per month (for up to 1,300 units of production) averages $27,000. Joan Reid, Inc. has offered to purchase 200 motors from John Boyd per month to be used in its own outboard motors. 1. If Joan Reid's order is rejected, what will be John Boyd 's average unit cost of manufacturing each motor?

$96 per unit

A product sells for $125, variable costs are $80, and fixed costs are $45,000. If the selling price can be increased by 20% with a similar increase in variable costs, how many fewer units would have to be sold to earn $300,000? (Round the answer to the nearest unit.)

1,278 units Explanation: [($45,000 + $300,000) ÷ ($125 - $80)] - [($45,000 + $300,000) ÷ {($125 × 120%) - ($80 × 120%)}] = 1,278 units

The following data are available for product no. CK74, manufactured and sold by Ruby Corporation: Maximum capacity with present facilities 11,500 units Total fixed cost (per period) $612,000 Variable cost per unit $150.00 Sales price per unit $201.00 2. The number of units of CK74 that Ruby must sell to break- even is:

12,000. Explanation: $612,000 ÷ $51.00 = 12,000

Product X sells for $35 per unit and has related variable costs of $25 per unit. The fixed costs of producing product X are $65,000 per month. How many units of product X must be sold each month to earn a monthly operating income of $85,000?

15,000 units Explanation: ($65,000 + $85,000) ÷ $10 = 15,000 units

Doyle Co. uses a job order cost accounting system. At year-end the Work-in-Process Inventory controlling account showed a debit balance of $43,125. For the two jobs in process at year-end, one showed $6,000 in direct materials and $4,500 in direct labor. The job cost sheet for the second job showed $9,000 in direct materials and $6,750 in direct labor. If the company is using a predetermined overhead application rate based on direct labor cost, the rate is:

150% Explanation: $43,125 - ($4,500 + $6,750 + $6,000 + $9,000) = $16,875 overhead; $16,875 ÷ ($4,500 + $6,750) = 150%

If the monthly sales volume required to break even is $190,000 and monthly fixed costs are $55,900, the contribution margin ratio is closest to:

29% Explanation: $190,000x = $55,900; x = 29%

If beginning inventory in Work in Process is zero, 2,000 units are started during the period, and 1,700 units were completed and transferred out, how many units remain in ending inventory?

300 units Explanation: 0 beginning inventory + 2,000 units started - 1,700 completed and transferred out = 300 ending inventory

If the unit sales price is $14, variable costs are $7 per unit and fixed costs are $42,000, how many units must be sold to earn an income of $250,000? (Round the answer up to the next whole number.)

41,715 units

A 45% contribution margin ratio means that:

45% of the company's revenue is available to cover fixed costs and to contribute toward operating income.

If the unit sales price is $12, variable costs are $6 per unit and fixed costs are $26,000 what is the contribution margin ratio per unit?

50% Explanation: ($12 - $6)/$12 = 50%

The Finishing Department of Berle Industries works on only one product, and all costs are incurred uniformly while these units remain in the department. On March 1, 6,000 units were in process that were 45% completed. An additional 60,000 units were transferred into the Finishing Department during March. At March 31, there were 25,000 units in process that were 75% completed. Compute the equivalent units of production for the Finishing Department during March.

57,050 units Explanation: (6,000 × 55%) + 35,000 + (25,000 × 75%) = 57,050

Accents Associates sells only one product, with a current selling price of $70 per unit. Variable costs are 40% of this selling price, and fixed costs are $12,000 per month. Management has decided to reduce the selling price to $65 per unit in an effort to increase sales. Assume that the cost of the product and fixed operating expenses are not changed by this reduction in selling price. 1. At the current selling price of $70 per unit, the contribution margin ratio is:

60% Explanation: 70 x 0.40 = 28; ($70 − $28) ÷ $70 = 60%

Mentha Company currently has the following statistics: Days in inventory - 80 Operating cycle - 148 What is Mentha's days in accounts receivable?

68 days Explanation: 148 - 80 = 68 days

A cash budget is affected directly by each of the following except:

A budgeted income statement.

Which of the following is a major component of a master budget?

A cash budget.

A factory produces 50,000 units for the month of June, although its budgeted output was 40,000 units. In this case:

A comparison of budgeted results and actual results will be misleading unless the company uses a flexible budget.

The entry to record the issuance of common stock at a price above its par value includes:

A credit to Additional Paid-in Capital: Common Stock.

During the month of June, $352,150 of costs were transferred from Department A to Department B. The journal entry to summarize the transfer of these costs includes:

A credit to department A for $352,150.

If the standard quantity of materials is 84,500 units at $0.15 per unit and the actual quantity is 95,000 units at $0.12 per unit, then the journal entry to record the cost of materials used includes:

A debit to Work in Process Inventory of $12,675. Explanation: 84,500 × $0.15 = $12,675

Eagle Company uses a standard cost system that has provided the following data: Units of output manufactured: 80 Direct labor: Standard hours allowed: 2 hours per unit of product Standard wage rate: $15.50 per hour Actual direct labor: 180 hours, total cost of $3,150 3. The journal entry to record the cost of direct labor used in this period includes:

A debit to Work in Process Inventory of $2,480. Explanation: (80 x 2) x $15.50 = 2480

If actual direct labor cost was $7,560 and standard labor cost was $7,000, the journal entry to record this would include:

A debit to the labor rate variance account of $560 and a credit to Direct Labor of $7,560.

Declaration and distribution of a stock dividend cause each of the following effects except:

A decrease in total assets of the issuing corporation.

If the actual amount of direct materials used in production was less than the standard amount allowed for units produced, there was:

A favorable materials quantity variance.

A budget that can be easily adjusted to show budgeted revenues, costs, and cash flows at different levels of activity is known as:

A flexible budget.

Equivalent units of production are:

A measure representing the percentage of a unit's cost that has been completed.

The contribution margin ratio is expressed as:

A percentage of revenue.

Manufacturing overhead is not:

A period cost.

A master budget usually includes all of the following except:

A projected tax return.

Which element of a master budget would normally be prepared first?

A sales forecast

Mell Co. manufactured 100 personal computers at a cost of $30,000. It can sell them as is for $65,000, or install hard disks in them for $25,000 and sell them for $105,000. The $30,000 original manufacturing cost is:

A sunk cost because it is not relevant to the decision.

In the year-end financial statements, the Manufacturing Overhead account should have:

A zero balance, since all overhead costs incurred during the period should have been assigned to the production of the period.

The payment of raw materials previously purchased on account is recorded by an entry debiting:

Accounts Payable.

The calculation of the labor rate variance is:

Actual Hours × (Standard Rate − Actual Rate).

There is an unfavorable labor efficiency variance when:

Actual hours are greater than standard hours.

The total overhead variance is the difference between:

Actual overhead and applied overhead.

The cost of the employee who computes total manufacturing costs would be considered:

Administrative costs.

Which of the following is a period cost?

Advertising expense

On January 1, 2018, Aili Corporation issued 60,000 shares of its total 200,000 authorized shares of $4 par value common stock for $18 per share. On December 31, 2018, Aili Corporation's common stock is trading at $32 per share. Assume Aili Corporation decides to issue an additional 10,000 shares of its common stock on December 31, 2018. How will the above increase in value affect Aili?

Aili can issue the 10,000 shares at a higher price than the initial 60,000 shares.

Manufacturing overhead is:

An indirect cost that cannot be traced to a specific job.

Using more direct labor hours for units produced than the amount allowed by the standard results in:

An unfavorable labor efficiency variance, regardless of the wage rate paid to employees.

Excessive overtime hours worked by direct labor workers often results in:

An unfavorable labor rate variance.

If the hourly wage rate actually paid during January is higher than the standard rate, the result is:

An unfavorable labor rate variance.

Process costing does not:

Apply overhead using an activity base.

Standard costs:

Are the costs that should be incurred to produce a product under normal conditions.

The break-even point in a cost-volume-profit graph is always found:

At the volume at which total revenue equals total fixed costs plus total variable costs.

In comparison with a financial statement prepared in conformity with generally accepted accounting principles, a managerial accounting report is more likely to:

Be tailored to the specific needs of an individual decision maker.

The computation of equivalent units is generally not necessary when:

Beginning and ending work in process inventories differ only slightly.

The most widely used budgeting philosophy is the:

Behavioral approach.

Which of the following is not a benefit of a careful and thorough budgeting process?

Budgeted net income assures the company of operating profitably.

Cigna Corporation's 2018 net income is smaller than net cash flow from operating activities. Which of the following would not be an explanation of why net income is smaller than net cash flow from operating activities?

Cigna paid dividends to shareholders during 2018.

Which of the following should not be classified as a manufacturing cost?

Commissions paid to salespeople.

Fancy Furniture produced a batch of 2,000 coffee tables at a cost of $355,000. It was discovered that the entire batch was finished improperly. Fancy can sell the tables as seconds for $305,000 or spend an additional $315,000 to refinish them and sell them for $605,000. 1. In deciding whether to rework the tables or sell them as is, management should:

Compare the $315,000 cost to refinish the tables with the incremental revenue of $300,000 if the tables are refinished.

Products for which sales of one contribute to the sales of another are called:

Complementary products.

To identify the cause of a change in a product total unit cost, management may:

Compute per unit product cost for each individual production department.

In evaluating the efficiency of a production department, management should:

Consider that department activities only.

A flexible budget:

Consists of estimates of costs and expenses for various possible levels of activity.

A flexible budget is one that:

Contains estimated cost data for several different levels of activity.

In order to calculate break-even sales units, fixed costs are divided by the:

Contribution margin per unit.

How will a company's contribution margin be affected by an investment in equipment that increases fixed costs in order to achieve a reduction in direct labor cost?

Contribution margin will increase.

The method used by managers when comparing unit costs with budgeted costs or other measures is broadly known as:

Cost control.

Flexible budgeting may be viewed as combining the concepts of budgeting and:

Cost-volume-profit analysis.

Select the best answer to complete the sentence: An effective cost accounting system should match processes that consume resources with the associated _____ in order to maintain competitive advantage.

Costs

In the area of cost-volume-profit analysis, the contribution margin ratio shows how much each dollar of sales contributes to:

Cover the fixed costs of the business and providing operating income.

Which of the following indicates cash receipts?

Credit entries in the Marketable Securities account.

Unfavorable standard cost variances are normally closed at the end of the period by:

Crediting the variance account and debiting Cost of Goods Sold.

The employee time card for John Winter indicates that he spent last week performing routine maintenance on factory machinery. Payments made to Winter for last week's work should be:

Debited to the Manufacturing Overhead account.

Favorable standard cost variances are normally closed at the end of the period by:

Debiting the variance account and crediting Cost of Goods Sold.

Seidman Company manufactures and sells 30,000 units of product X per month. Each unit of product X sells for $16 and has a contribution margin of $7. If product X is discontinued, $85,000 in fixed monthly overhead costs would be eliminated and there would be no effect on the sales volume of Seidman Company's other products. If product X is discontinued, Seidman Company's monthly income before taxes should:

Decrease by $125,000. Explanation: ($7 × 30,000) - $85,000 = $125,000 decrease

When volume increases, fixed cost per unit:

Decreases.

Which of the following is not a period cost?

Depreciation on factory equipment

Which of the following is an example of a fixed cost for an airline?

Depreciation on the corporate headquarters

Companies that compute equivalent units of production do so to:

Determine departmental per-unit costs.

All of the following are characteristics of the products of process costing except:

Different amounts of direct materials.

Equivalent units are usually computed for:

Direct materials, direct labor, and factory overhead costs.

In most process costing systems, per-unit costs are determined by:

Dividing the total manufacturing costs incurred during the period by the equivalent number of units completed during the period.

An unfavorable labor efficiency variance is most likely to occur if:

Employees are inefficient and units must be reworked.

The benefits of budgeting include all of the following except:

Enabling the company to produce more for less cost.

The ending inventory of a merchandising company corresponds most closely to which of the following amounts of a manufacturer?

Ending inventory of finished goods

Preparation of a budgeted income statement does not require:

Estimates of the timing of cash receipts and payments.

A predetermined overhead application rate:

Expresses an expected relationship between overhead costs and an activity base.

When budgeted amounts are set at reasonable and achievable levels:

Failure to stay within the budget is viewed as an unacceptable level of performance.

As the volume of output decrease:

Fixed costs per unit will increase.

A supervisor's salary is an example of:

Fixed manufacturing costs.

In a flexible budget for a profit center, which of the following items would not be expected to vary with the level of activity?

Fixed manufacturing overhead

In comparison with a financial statement prepared in conformity with generally accepted accounting principles, a managerial accounting report is less likely to:

Focus upon the entire organization as the accounting entity.

Which is an example of joint products?

Granulated charcoal and methyl alcohol

Sunk costs:

Have already been incurred as a result of past actions.

A company's most profitable products are often those which:

Have the highest contribution margin ratios and the highest sales volumes.

Benefits derived from budgeting include all of the following except:

Improved relationship with shareholders.

Component percentages indicate the relative size of each item included in a total. Which of the following statements is true?

Income statement items are expressed as a percentage of net sales, while balance sheet items are expressed as a percentage of total assets.

Aircraft Products, a manufacturer of aircraft landing gear, makes 1,000 units each year of a special valve used in assembling one of its products. The unit cost of producing this valve includes variable costs of $70 and fixed costs of $60. The valves could be purchased from an outside supplier at $77 each. If the valve were purchased from the outside supplier, 40% of the total fixed costs incurred in producing this valve could be eliminated. Buying the valves from the outside supplier instead of making them would cause the company's operating income to:

Increase by $17,000. Explanation: [Costs to Make ($70 + $60 = $130) - Costs to Buy ($77 + ($60 ×0.6) = $113)] × 1,000 = $17,000 Increase

JCN Industries normally produces and sells 5,000 keyboards for personal computers each month. Variable manufacturing costs amount to $25 per unit, and fixed costs are $146,000 per month. The regular sales price of the keyboards is $86 per unit. JCN has been approached by a foreign company that wants to purchase an additional 1,000 keyboards per month at a reduced price. Filling this special order would not affect JCN 's regular sales volume or fixed manufacturing costs. 2. Assume that the price offered by the foreign company is $43 per unit. Accepting the special order will cause JCN's operating income to:

Increase by $18,000.

Which of the following types of cost are always relevant to a decision?

Incremental costs

The principal difference between managerial accounting and financial accounting is that managerial accounting information is:

Intended primarily for use by decision makers inside the business organization.

An activity base is said to be a "driver" of overhead costs when the activity base:

Is a causal factor in the amount of overhead cost incurred.

The production schedule in units:

Is dependent upon the sales forecast for the period.

The overhead spending variance:

Is the portion of the total overhead variance that is considered "controllable" by the production manager.

Which of the following is a characteristic of manufacturing overhead in a job order cost system?

It is assigned to units produced by means of an overhead application rate.

JCN Industries normally produces and sells 5,000 keyboards for personal computers each month. Variable manufacturing costs amount to $25 per unit, and fixed costs are $146,000 per month. The regular sales price of the keyboards is $86 per unit. JCN has been approached by a foreign company that wants to purchase an additional 1,000 keyboards per month at a reduced price. Filling this special order would not affect JCN 's regular sales volume or fixed manufacturing costs. 1. On the basis of the above information only, which of the following is not true?

It would not be profitable for JCN to consider the special order at a price less than $49 per unit.

The cost of draining sap out of a maple tree to manufacture maple syrup and maple sugar is an example of:

Joint costs.

Products that emerge from a shared manufacturing process are referred to as:

Joint products.

Which of the following is not a commonly used cost accounting system?

Manufacturing yield costing

The dollar amount by which sales can decline before an operating loss is incurred is called the:

Margin of safety.

In a schedule of cost of finished goods manufactured, the figure for total manufacturing costs:

May be less than the cost of finished goods manufactured.

The number of equivalent units of production:

May be less than, equal to, or greater than the number of physical units completed during the period.

Incremental revenues:

May increase or decrease when one course of action is selected over another.

The Victor Corporation has been incurring favorable overhead volume variances in each of the last several months. These persistent favorable variances indicate:

Monthly output is consistently over that budgeted.

Benefits of activity-based costing include all of the following except:

More subjective product pricing decisions.

Operating income can be calculated by:

Multiplying the margin of safety by the contribution margin ratio.

On common size income statements, each component in the income statement is represented as a percentage of:

Net sales.

A 2-for-1 stock split will have what effect upon the following items? Total Assets | Total Stockholders' Equity | Shares issued | Shares Outstanding

None | None | Increase | Increase

A standard cost is the per-unit cost incurred under:

Normal, but efficient operating conditions.

Which of the following would likely be the most appropriate cost driver to allocate machinery set-up costs to products?

Number of production runs

Management expects total sales of $40 million, a margin of safety of $10 million, and a contribution margin ratio of 45%. Which of the following estimated amounts is not consistent with this information?

Operating income, $6 million Explanation: Variable costs = $40,000,000 - ($40,000,000 × 0.45) = $22,000,000 Fixed costs = $30,000,000 × 0.45 = $13,500,000 Break-even sales volume = $40,000,000 - $10,000,000 = $30,000,000 Only Operating income is not consistent ($4,500,000).

By choosing to go into business for himself, Jim Lazar foregoes the possibility of getting a highly paid job with a large company. This is called a(n):

Opportunity cost.

Costs that have not yet been incurred and that may vary among different courses of action are called:

Out-of-pocket costs.

Overhead costs are assigned to production using an overhead application rate, whereas no such "application rate" is used to assign the costs of direct materials and direct labor to production. The reason for this difference in procedures is that:

Overhead is an indirect cost which cannot be traced easily and directly to specific units of product.

Which of the following is not classified among the financing activities in a statement of cash flows?

Payment of interest to creditors.

The best cost system to use for a company producing a continuous stream of similar items would be a:

Process costing system.

A process costing system differs from a job order costing system in that:

Process costing systems are used when production involves large volumes of standardized products, whereas job order costing systems are used when each job or batch of products is uniquely different.

An unfavorable overhead volume variance results from:

Producing at levels of output that fall short of normal output levels.

Speedy Co. manufactures four products. Direct materials and direct labor are available in sufficient quantities, but machine capacity is limited to 3,000 hours. Cost and revenue data for the four products are given below: . . . . . . . . . . . . . . . . . . . . Product A | Product B | Product C | Product D Selling PPU . . . . . . . . . . . . . $36 . . . . . . . . $42 . . . . . . $46 . . . . . . . . $56 Variable CPU . . . . . . . . . . . . $19 . . . . . . . . $16 . . . . . . . $25 . . . . . . . . $37 Unit produced PMH . . . . . . . 3 . . . . . . . . . . 4 . . . . . . . . . 2 . . . . . . . . . . . 3 Of the four products, which is the most profitable for Speedy Co.?

Product B Explanation: Product A: Contribution Margin $17 × 9,000 = $153,000 Product B: Contribution Margin $26 × 12,000 = $312,000 Product C: Contribution Margin $21 × 6,000 = $126,000 Product D: Contribution Margin $19 × 9,000 = $171,000

Costs that are traceable to a particular unit and inventoriable are called:

Product costs.

Which of the following is not one of the three types of inventories of a manufacturing company?

Product inventory

Process costing would be suitable for:

Production of television sets.

Which of the following is not a measure of long-term credit risk?

Quick ratio.

The placing of direct materials into the production process is recorded by an entry crediting:

Raw Materials Inventory.

When a manufacturing company purchases raw materials or component parts to be used in manufacturing finished goods, these costs are initially debited to:

Raw Materials Inventory.

Manufacturing companies normally have three types of inventory

Raw materials, work in process, and finished goods.

Manufacturing companies normally have three types of inventory:

Raw materials, work in process, and finished goods.

Within the relevant range, fixed costs:

Remain steady when sales volume changes.

In comparison to selling a product with a low contribution margin ratio, selling a product with a high contribution margin ratio always:

Requires less dollar sales volume to cover a given level of fixed costs.

A segment of a master budget relating to that portion of a business under the control of a particular manager is termed a:

Responsibility budget.

A budget that adds a new month when the current month ends is called a:

Rolling budget.

Which of the following costs would not be considered part of the manufacturing overhead of a chemical plant?

Salaries of employees who operate distilling equipment used in the production process

Flexible budgeting may be used for profit centers by applying cost-volume-profit relationships to the actual level of:

Sales achieved.

Variable costs would include:

Sales commission expense.

An example of a non-cash investing or financing activity that is disclosed in a supplementary schedule accompanying the statement of cash flows is:

Selling land in exchange for a note receivable.

Capital expenditures budgets are typically prepared for a period of:

Several years.

It would be _____________ for managers to make decisions based only on financial information.

Short-sighted

All of the following statements regarding management accounting's role in assigning decision-making authority are true except:

Since management accounting information is used for decision-making purposes, historical information is unnecessary.

The calculation of the labor efficiency variance is:

Standard Hourly Rate × (Standard Hours − Actual Hours).

In a system designed to measure cost variances, goods transferred from the Work in Process account to the Finished Goods Inventory are valued at:

Standard cost.

Assuming there is no preferred stock, book value per share of common stock is derived by which of the following?

Stockholders' equity divided by the number of shares outstanding.

A cost that has already been incurred and cannot be changed is called a(n):

Sunk cost.

Which cost is not relevant in making financial decisions?

Sunk costs

Fancy Furniture produced a batch of 2,000 coffee tables at a cost of $355,000. It was discovered that the entire batch was finished improperly. Fancy can sell the tables as seconds for $305,000 or spend an additional $315,000 to refinish them and sell them for $605,000. 2. Which of the following is not relevant to management's decision regarding refinishing the tables or selling them as is?

The $355,000 manufacturing cost of the tables already incurred.

Since manufacturing costs (direct materials, direct labor, and overhead) are incurred in the process of manufacturing units of product, these costs are debited to:

The Work in Process Inventory account.

Which factor is not relevant in deciding whether or not to accept a special order?

The average cost of production if the special order is accepted

In a standard cost system, finished goods are reported in:

The balance sheet at standard cost.

In a manufacturing company, the cost of finished goods manufactured is equal to:

The beginning inventory of Work in Process, plus total manufacturing costs for the period, less the ending inventory of Work in Process.

All other things held constant, how will an increase in selling price affect the break-even point measured in units?

The break-even point will decrease.

The sales forecast directly affects many elements of the master budget. Which of the following would be least affected by short-term fluctuations in the sales forecasts?

The capital expenditures budget

Which of the following is considered a financial budget?

The capital expenditures budget

The "bottom line" in a statement of cash flows shows:

The cash (including cash equivalents) on the balance sheet at the end of the period.

Millar Company produces a single product that it sells for $89 a unit. If the fixed costs of manufacturing and selling the product are $68,400 a month and the variable costs are $57 a unit, which of the below is correct?

The contribution margin per unit of product is $32. Explanation: $89 - $57 = $32

The Magic Microbrewery has a limited amount of vat capacity available in which it can ferment beer. In deciding which beers to brew, Magic management should consider:

The contribution margin per unit of vat capacity of the individual beers.

Which of the following would be an example of a sunk cost?

The cost of an old inefficient oil burner that will be replaced by a more modern and efficient one

Amounts credited to the Work in Process inventory account may best be described as:

The cost of finished goods manufactured.

In a manufacturing company, the cost of goods sold is equal to:

The cost of goods available for sale, less the ending inventory of finished goods.

In either a job order or a process costing system, credits to the Materials Inventory account represent:

The cost of materials placed into production.

Perfect Plumbing Corporation currently manufactures a valve for use in water pumps that it produces for sale. The company is considering purchasing the valves from an outside supplier rather than manufacturing them. Which of the following costs is not relevant to the decision?

The cost of the machinery owned by Perfect Plumbing used exclusively to manufacture this valve.

A typical production cost report will contain all of the following except:

The costs assigned to each job.

In a cash budget, the budgeted level of cash receipts depends on all of the following except:

The credit terms offered by suppliers.

Which of the following is considered an operating budget?

The customer service budget

Incremental costs can be defined as:

The differences between costs incurred under alternative courses of action.

Accepting a special order is profitable whenever the revenue from the special order exceeds:

The incremental cost of producing the order.

The cost of finished goods manufactured will exceed the cost of goods sold whenever:

The inventory of finished goods increases over the period.

The document that provides information for the cost of goods manufactured is:

The job cost sheet.

The type of cost accounting system best suited to a particular company depends on:

The nature of the company's manufacturing operations.

Which of the following would usually be the greatest amount?

The number of shares authorized

Which of the following is an advantage of developing a predetermined overhead application rate?

The overhead application rate facilitates assigning overhead costs to the ending inventory of work in process.

A job cost sheet usually contains a record of each of the following except:

The overhead costs actually incurred on a particular job.

Which of the following would not be an important nonfinancial factor for a farming company to consider in making a decision about the application of fertilizer?

The planned fertilizing schedule of a competing farming company.

Management accounting systems are designed to assist organizations in the performance of all of the following functions except:

The preparation of income tax returns.

The measurement that best reflects investors' expectations about future earnings is:

The price-earnings ratio.

The master budget may be comprised of:

The production budget.

A company's relevant range of production is:

The production range over which CVP assumptions are valid.

Controlling the materials quantity variance is usually the responsibility of:

The production supervisor.

Which of the following is not a product cost?

The real estate tax of the showroom

Which philosophy in setting budgeted amounts assumes both the complete elimination of inefficiencies and a level of absolute efficiency?

The total quality management approach.

The set of linked activities and resources needed to create and deliver a product or service to the customer is referred to as:

The value chain.

Grand Co.'s ending inventory of work in process is twice as large as at the beginning of the period. Therefore:

Total manufacturing costs for the period must exceed the cost of finished goods manufactured.

In a process costing system, costs flow from one Work in Process Inventory account to the next in the same sequence as:

Units flow through production.

The advantage of using a predetermined overhead application rate is that:

Units produced are charged with a "normal" amount of manufacturing overhead regardless of whether they are produced in a high-volume month or a low-volume month.

In a process costing system, the number of units started and completed for a period is equal to:

Units transferred out less units in beginning work in process.

Ross Corporation makes all sales on account. The June 30th balance sheet balance in its accounts receivable is $340,000, of which $210,000 pertain to sales that were made during June. Budgeted sales for July are $1,190,000. Ross collects 65% of sales in the month of sale; 15% in the following month; and the final 20% in the second month after the sale. 1. What are Ross's budgeted collections for July?

Unknown?

Costs that rise and fall proportionately with the volume of output are often referred to as:

Variable costs.

EJB Company used a "normal" production level of 10,000 units to determine the standard per-unit cost of manufacturing overhead. Which of the following is not true?

When actual production is less than 10,000 units, use of standard costs results in an unfavorable total overhead variance.

The placing of direct materials into the production process is recorded by an entry debiting:

Work in Process Inventory.

In deciding whether or not to accept a special order, what is the opportunity cost of using machinery for which the firm has sufficient excess capacity to accept the order?

Zero

The following information has been taken from the perpetual inventory system of Elite Mfg. Co. for the month ended August 31: [image] 1. The total amount of inventory to be included in Elite's August 31st balance sheet amounts to:

c. Explanation - MAYBE?: Purchases + Direct mats + Aug 1 mats = inventory

Hamilton Company reported an increase of $370,000 in its accounts receivable during the year 2018. The company's statement of cash flows for 2018 reported $1 million of cash received from customers. What amount of net sales must Hamilton have recorded in 2018?

$1,370,000

Century Corporation issued 400,000 shares of $4 par value common stock at the time of its incorporation. The stock was issued for cash at a price of $16 per share. During the first year of operations, the company sustained a net loss of $100,000. The year-end balance sheet would show the balance of the Common Stock account to be:

$1,600,000.

Designs, Inc. had 4,000 shares of $7, $100 par preferred stock and 50,000 shares of common stock outstanding throughout 2018. During 2018, Designs declared a dividend of $7 per share on its common stock. Compute earnings per share for 2018 if Designs' income statement showed net income of $630,000.

$12.04 per share Explanation: ($630,000 - (4,000 × $7)) ÷ 50,000 = $12.04

On September 1, 2018, Maryland Corporation's common stock was selling at a market price of $200 per share. On that date, Maryland announced a 3 for 2 stock split. At what price would you expect the stock to trade immediately after the split goes into effect?

$133.33 per share Explanation: $200 × 2 ÷ 3 = 133.33

Shown below is information relating to the stockholders' equity of Reeve Corporation as of December 31, 2018: 4.0% cumulative preferred stock, $100 par $700,000 Common stock, $10 par, 300,000 shares authorized, 128,000 shares issued and outstanding 1,280,000 Additional paid-in capital: Common stock 512,000 Retained earnings (Deficit) (64,000) Dividends in arrears 28,000 2. What was the original issue price per share of common stock?

$14.00 per share. Explanation: (1,280,000 + 512,000) / 128,000 = 14

Marks Corporation has total stockholders' equity of $7,400,000. The company has outstanding 300,000 shares of $1 par value common stock and 20,000 shares of 8% preferred stock, $100 par value. (No dividends are in arrears.) The book value per share of common stock is:

$18.00.

If a retail store has a current ratio of 2.5 and working capital of $117,000. What are the total of the current assets?

$195,000 Explanation: CA - CL = $117,000; CA÷CL = 2.5, CA ÷ 2.5 = CL; CA - CA ÷ 2.5 = $117,000; CA = $195,000

Shown below is information relating to the stockholders' equity of Reeve Corporation as of December 31, 2018: 4.0% cumulative preferred stock, $100 par $700,000 Common stock, $10 par, 300,000 shares authorized, 128,000 shares issued and outstanding 1,280,000 Additional paid-in capital: Common stock 512,000 Retained earnings (Deficit) (64,000) Dividends in arrears 28,000 4. Total stockholders' equity is:

$2,428,000. Explanation: 700,000 + 1,280,000 + 512,000 - 64,000 = 2,428,000

Shown below is information relating to the stockholders' equity of Reeve Corporation as of December 31, 2018: 4.0% cumulative preferred stock, $100 par $700,000 Common stock, $10 par, 300,000 shares authorized, 128,000 shares issued and outstanding 1,280,000 Additional paid-in capital: Common stock 512,000 Retained earnings (Deficit) (64,000) Dividends in arrears 28,000 3. What is total paid-in capital?

$2,492,000. Explanation: 700,000 + 1,280,000 + 512,000 = 2,492,000

Shown below are selected data from the financial statements of Supreme Co. Dollar amounts are in millions (except for the per share data). [image] Supreme reported earnings per share for the year of $5 and paid cash dividends of $2 per share. At year-end, the Wall Street Journal listed Supreme's capital stock as trading at $82 per share. 2. What was Supreme's operating income (in millions)?

$210. Explanation: Net Sales (1110) - COGS (490) - Operating Expenses (410) = Operating Income (210)

Haven Corporation issued $700,000 of 10-year bonds payable at par in 2014. During 2018 Haven paid $50,000 interest and an additional $233,333 to retire one-third of the bonds at par. These activities would be reported in Haven's statement of cash flows for 2018 as:

$233,333 net cash used in financing activities, and $50,000 cash disbursed for operating activities.

For the current year, Voque Company reported basic earnings per share of $8 and diluted earnings per share of $3. The difference between these figures is attributable to outstanding shares of convertible preferred stock. If all this preferred stock had actually been converted into common stock at the beginning of the current year, Voque Company would have reported only one earnings per share amount, which would have been:

$3.

Topper Corporation has 60,000 shares of $1 par value common stock and 16,000 shares of cumulative 7%, $100 par preferred stock outstanding. Topper has not paid a dividend for the prior year. If Topper declares a $1.95 per common share dividend this year, what will be the total amount they must pay their shareholders?

$341,000 Explanation: 2 × (16,000 × $7) + ($1.95 × 60,000) = $341,000

At the end of the first year of operations, Meacham's balance sheet showed the following account balances: Accounts Receivable, $13,400; Inventory, $9,400; and Accounts Payable, $14,650. The company's income statement reports net income of $37,400, including depreciation expense of $10,400. Using only the given information, compute Meacham's net cash flow from operating activities using the indirect method.

$39,650 Explanation: $37,400 - $13,400 - $9,400 + $14,650 + $10,400 = $39,650

Rent expense in Marrin Company's 2018 income statement is $420,000. If Prepaid Rent was $70,000 at December 31, 2017, and is $95,000 at December 31, 2018, the cash paid for rent during 2018 is:

$445,000. Explanation: $420,000 + ($95,000 - $70,000) = $445,000

Chapin Company reported net income of $410,000 for 2018. Balances of selected current asset and current liability accounts are as shown on the indicated dates: Jan.1, 2018 Dec. 31, 2018 Accounts receivable $60,000 $69,400 Inventory $130,000 $141,000 Accounts payable $54,000 $48,000 Depreciation expense for 2018 amounted to $65,000. Using only the above information, compute Chapin's net cash flow from operating activities (indirect method) for 2018.

$448,600

Alexander Company reported an increase of $185,000 in its accounts receivable during the year. The company's statement of cash flows reported $500,000 of cash received from customers. What amount of net sales must Alexander have recorded?

$685,000 Explanation: $500,000 + $185,000 = $685,000

General Corporation was organized on January 1 and issued 500,000 shares of common stock on that date. On July 1, an additional 200,000 shares were issued for cash. Net income for the year was $5,184,000. Net earnings per share amounted to:

$8.64. Explanation: (500,000 × 6 ÷ 12) + (700,000 × 6 ÷ 12) = 600,000; $5,184,000 ÷ 600,000 = $8.64

Determine the amount of manufacturing overhead given the following information: Depreciation on a factory building $2,600 Telephone expense in factory office $950 Telephone expense in sales showroom $1,050 Factory foreman's salary $5,200 Maintenance costs for the factory $1,000 Maintenance costs for the sales showroom $880

$9,750 Explanation: Depreciation ($2,600) + Telephone in factory ($950) + Factory foreman salary ($5,200) + Maintenance costs factory ($1,000) = $9,750

During 2018, Gillespie Corporation made a loan of $155,000 to a major customer. By the end of 2018 the customer had paid back $60,000 of the loan plus interest of $12,000. In the statement of cash flows for 2018, Gillespie Corporation would report:

$95,000 net cash used for investing activities, and $12,000 cash provided from operating activities.

Shown below are selected data from the financial statements of Supreme Co. Dollar amounts are in millions (except for the per share data). [image] Supreme reported earnings per share for the year of $5 and paid cash dividends of $2 per share. At year-end, the Wall Street Journal listed Supreme's capital stock as trading at $82 per share. 5. Supreme's price-earnings ratio at year end was:

16.40. Explanation: Capital stock as trading (82) / earnings per share (5) = price-earnings ratio (16.4)

Shown below are selected data from the financial statements of Supreme Co. Dollar amounts are in millions (except for the per share data). [image] Supreme reported earnings per share for the year of $5 and paid cash dividends of $2 per share. At year-end, the Wall Street Journal listed Supreme's capital stock as trading at $82 per share. 4. Supreme's return on equity was:

18.33%. Explanation: Net Income (330) / Avg Total Equity (1800) = ROE (18.33)

On January 1, 2018, Alice Corporation had 20,000 shares of $6 par value common stock and 10,000 shares of 8%, $100 par value convertible preferred stock outstanding. The preferred shares carried a 3-for-1 conversion privilege. As of December 31, 2018, none of the preferred shares had been converted. What number of shares must Alice use in computing diluted earnings per share at December 31, 2018?

50,000 Explanation: 20,000 + (10,000 × 3) = 50,000

Shown below are selected data from the financial statements of Supreme Co. Dollar amounts are in millions (except for the per share data). [image] Supreme reported earnings per share for the year of $5 and paid cash dividends of $2 per share. At year-end, the Wall Street Journal listed Supreme's capital stock as trading at $82 per share. 1. Supreme's gross profit rate was:

55.86%. Explanation: Net Sales (1110) - COGS (490) = 620; 620/Net Sales (1110) = 55.86%

Shown below are selected data from the financial statements of Supreme Co. Dollar amounts are in millions (except for the per share data). [image] Supreme reported earnings per share for the year of $5 and paid cash dividends of $2 per share. At year-end, the Wall Street Journal listed Supreme's capital stock as trading at $82 per share. 3. Supreme's return on assets was:

6.18%. Explanation: Operating Income (210) / Avg Total Assets (3400) = ROA (6.18)

On January 1, 2018, Carleton Corporation had 55,000 shares of $6 par value common stock outstanding. On March 31, 2018, Carleton issued an additional 10,000 shares in exchange for a building. What number of shares will be used in the computation of earnings per share for the year 2018?

62,500

Shown below is information relating to the stockholders' equity of Reeve Corporation as of December 31, 2018: 4.0% cumulative preferred stock, $100 par $700,000 Common stock, $10 par, 300,000 shares authorized, 128,000 shares issued and outstanding 1,280,000 Additional paid-in capital: Common stock 512,000 Retained earnings (Deficit) (64,000) Dividends in arrears 28,000 1. How many shares of preferred stock are issued and outstanding?

7,000 shares. Explanation: 700,000 / 100 = 7,000

Which of the following individuals has the most power to influence corporate policy on a long-term basis?

A shareholder owning 60% of the outstanding common stock.

In an aircraft factory, the inventory of direct materials would not include:

Completed aircraft, available for sale.

The measurement of the relative size of each item included in a total is called:

Component percentages.

The ratio that measures total liabilities as a percentage of total assets is called the:

Debt ratio.

If a company has a current ratio of 2 to 1, and purchases inventory on credit, what will this do to its current ratio?

Decrease the current ratio.

Treasury stock:

Decreases total stockholders' equity.

Assume that net sales are increasing faster than the rate of inflation, and that the company's gross profit rate is rising. Of the following, the most logical conclusion is that:

Demand for the company's products is very strong.

The cost of the employee who installs the leather on the seats of a new automobile would be considered:

Direct labor.

Which of the following is not a characteristic of most preferred stock?

Dividends that vary as income changes.

After preparing the financial statements for 2018, the accountant for the Dawson Corporation discovered that a prior period adjustment had been omitted from the 2015 financial statements. Which of the following is most likely to require correction as a result of this oversight?

Ending retained earnings at December 31, 2018.

To receive the next cash dividend, an investor must purchase the stock before the:

Ex-dividend date.

In a "pump-and-dump" scheme, the owners of the company:

Falsely claim that the business has high growth potential, artificially raise the price of the stock, and sell the stock at a high price.

Earnings per share figures are shown in the income statement:

For income before non-recurring items and for income from continuing operations, as well as for net income.

The comparative balance sheets of Greenvale Games, Inc. show a net decrease in unexpired insurance of $400 and a net decrease in interest payable of $250. In order to reconcile net income with net cash flow from operating activities, net income should be:

Increased by $150. Explanation: $400 - $250 = $150

At the beginning of 2018, Baldwin Corporation bought an automobile for $36,000 by issuing a note payable. The automobile has a six-year life and is depreciated using the straight-line method. To determine net cash flow from operating activities for 2018 using the indirect method, net income should be:

Increased by $6,000. Explanation: 36000/6000 = 6000

All of the following are advantages of an increasing cash flow from operations except:

Large cash flows eliminate the need for borrowing.

Execucomp Corporation's financial statements in the current year show a loss from discontinued operations, a prior period adjustment, and an unusual and infrequent gain. If Execucomp's income statement is prepared according to generally accepted accounting principles (as illustrated in your text), which of the following four items would appear second in sequence in the income statement?

Loss from discontinued operations

Dividends become a liability of a corporation:

On the date the board of directors declares the dividend.

Current assets are those assets that can be converted into cash within:

One year or the operating cycle, whichever is longer.

Free cash flow arises out of:

Operating activities.

In a statement of cash flows, collections of accounts receivable are classified as:

Operating activities.

All of the following are true of operating expenses except:

Operating expenses are subdivided into the classifications of component and trend.

The interest coverage ratio is computed by dividing:

Operating income by annual interest expense.

A large stock dividend and a stock split are similar in that they both cause a:

Reduction in the market price per share.

In order for investors and creditors to decide whether to invest in a company or loan a company funds they should do all of the following except:

Rely on assurances of reliability by the company's leaders.

The par value of the common stock of a large listed corporation:

Represents legal capital and is not related to the market price of the stock.

Which of the following is not an addition to total paid-in-capital?

Retained earnings and treasury stock

A prior period adjustment is a correction made to:

Retained earnings of the beginning of the period.

Which of the following is a measure of profitability?

Return on assets.

Which of the following best describes the relationship between revenue and retained earnings?

Revenue increases net income, which in turn increases retained earnings.

Sovereign Foods suffered a $1,500,000 loss (net of tax) when the FDA prohibited the sale of food products containing red dye no. 3. On its other products, Sovereign Foods had net sales of $6,580,000 and costs and other expenses of $6,505,000. Which of the following statements is not true? (Ignore taxes)

Sovereign Foods combines the $1,500,000 loss with its other costs and expenses of $6,505,000, since this item does not qualify for any special disclosure.

If preferred stock is convertible, it is so at the option of the:

Stockholders.

Which statement is true as to the FASB's position on the presentation of the statement of cash flows?

The FASB recommends the use of the direct method, but most companies use the indirect method.

When comparing the current ratio to the quick ratio:

The current ratio will be greater or equal.

Dividends are first recorded and retained earnings are reduced on:

The date of declaration.

As a result of a 5% stock dividend:

The number of shares owned by each stockholder increases by 5%, but total stockholders' equity does not change.

A statement of cash flows is not intended to assist investors in evaluating:

The profitability of business operations.

Craig Corporation's reported net income for 2018 is less than its net cash flow from operating activities. One reason for this could be:

The sale of machinery at a loss in 2018.

A prior period adjustment appears in:

The statement of retained earnings, as an adjustment to the beginning balance of retained earnings.

Which of the following apply to closely held corporations?

There is no organized market for buying and selling the company's shares.

Comparative financial statements compare the company's current statements with:

Those of prior periods.

Which of the following is not a right of stockholders?

To select the Chief Executive Officer.

All of the following captions or subtotals are typical of a multiple-step income statement, except:

Total costs and expenses.

The term paid-in capital means:

Total stockholders' equity minus retained earnings.

The board of directors' primary functions include all of the following except:

Transacting corporate business.

Of the items listed, which would appear closest to the bottom of the income statement?

Unusual and infrequent non-recurring items

During the years 2016 through 2018, Powers, Inc. , reported the following amounts of net income (dollars in thousands): 2018 2017 2016 $170 $150 $120 Relative to the prior year, the percentage change in net income:

Was smaller in 2018 than in 2017. Explanation: 2016-2017 increase of 30,000/120 = .25 2017-2018 increase of 20,000/150 = .13

When direct labor employees contribute to the production process, the cost of their labor is applied by debiting:

Work in Process Inventory.

The excess of current assets over current liabilities is called:

Working capital.

During the year 2018, Torino Corporation suffered a $1,200,000 loss when its factory was severely damaged in an earthquake. Assuming the corporate income tax rate is 30%, what amount will Torino report as anon-recurring loss on its income statement for 2018? Assume earthquakes are not common in this area.

$1,200,000