Accy 309 Ch 4, 17, 5, 6, & 7 Quiz Corrections

(4-6) Which of the following accounts is not classified as an asset? a. Manufacturing Overhead Control b. Materials Control c. Work-in-Process Control d. Finished Goods Control

A

(5-3) The average cost data are for In-Sync Fixtures Company's (a retailer) only two product lines, Marblette and Italian Marble. Marblette. Italian Marble Purchase volume 20,000 1,000 Purchase cost per unit. $50 $50 Shipments received 12 12 Hours used per shipment * 5 3 *These data were accumulated after a careful activity analysis. Currently, In-Sync Fixtures uses a traditional costing system with indirect costs allocated using purchased cost of goods as a basis. In-Sync Fixtures is considering refining the allocation of their receiving costs of $40,000. They realize that the Italian Marble is heavier and requires more care than the Marblette but that the Marblette comes in larger volume. Which statement can be made using the results of the activity analysis performed by In-Sync Fixtures? a. The use of this refined activity-based costing system will increase the accuracy of the resulting product costs because a more appropriate cost driver will be used as the allocation base. b. The traditional allocation method currently being used is causing product-cost cross-subsidization with the product line Marblette being undercosted. c. The cost allocated to the Italian Marble product line under the current traditional system is more than the activity-based costing allocated cost. d. The use of this refined activity-based costing system will increase the accuracy of the resulting product costs because it probably will cost less to trace the costs to the product lines.

A

(5-5) The allocation of indirect costs in an activity-based costing system a. may require other costs to be allocated to activities before the costs of the activities can be allocated to the products. b. is simplified because more costs are identified as direct costs. c. requires the use of heterogeneous cost pools. d. is simplified because a limited number of activities are identified as cost objects.

A

(7-7) Performance evaluation using variance analysis should guard against a. emphasis on a single performance measure. b. emphasis on total company objectives. c. basing effect of a manager's action on total costs of the company as a whole. d. highlighting individual aspects of performance.

A

(7-8) The basic principles and concepts of variance analysis can be applied to activity-based costing a. by application as to the levels of cost hierarchy. b. through careful classification of costs as direct and indirect as applied to the product or job. c. with use of standard costing systems only. d. only through those activities related to individual units of product or service.

A

(17-2) Top That manufactures baseball-style hats. Material is introduced at the beginning of the process in the Cutting Department. Conversion costs are incurred (and allocated) uniformly throughout the process. As the cutting of material is completed, the pieces are immediately transferred to the Sewing Department. Data for the Cutting Department for the month of February 2009 follow: Work-in-process, January 31—50,000 units [100% complete for direct materials; 40% completed for conversion costs actual costs of direct materials, $70,500; actual costs of conversion, $34,050] Units started during February, 225,000 Units completed during February 200,000 Work-in-process, February 28 75,000 units [100% complete for direct materials; 20% completed for conversion costs] Direct materials added during Feb. [actual costs] $342,000 Conversion costs added during Feb. [actual costs] $352,950 Assuming Top That used the weighted-average method to account for inventories, the cost per equivalent whole unit produced during February is a. $3.30. b. $3.55. c. $3.77. d. $4.00.

A (342,000 + 70,500/275,000 = $1.50/unit for Materials 352,950 + 34,050/215,000 = $1.80/ unit for Conversion Cost $1.50 + $1.80 = $3.30)

(7-3) Bartholomew Corporation's master budget calls for the production of 6,000 units of product monthly. The master budget includes indirect labor of $396,000 annually; Bartholomew considers indirect labor to be a variable cost. During the month of September, 5,600 units of product were produced, and indirect labor costs of $30,970 were incurred. A performance report utilizing flexible budgeting would report a flexible-budget variance for indirect labor of a. $170 unfavorable. b. $170 favorable. c. $2,030 unfavorable. d. $2,030 favorable.

A (Actual DL $30,970 Flexible budget 5,600x$5.50 30,800 Flexible-budget variance 170 U)

(17-6) Top That manufactures baseball-style hats. Material is introduced at the beginning of the process in the Cutting Department. Conversion costs are incurred (and allocated) uniformly throughout the process. As the cutting of material is completed, the pieces are immediately transferred to the Sewing Department. Data for the Cutting Department for the month of February 2009 follow: Work-in-process, January 31—50,000 units [100% complete for direct materials; 40% completed for conversion costs actual costs of direct materials, $70,500; actual costs of conversion, $34,050] Units started during February, 225,000 Units completed during February 200,000 Work-in-process, February 28 75,000 units [100% complete for direct materials; 20% completed for conversion costs] Direct materials added during Feb. [actual costs] $342,000 Conversion costs added during Feb. [actual costs] $352,950 Assuming Top That uses the first-in, first-out (FIFO) method to account for inventories, the assignment of costs to units completed and transferred to the Sewing Department during February is a. $658,350. b. $636,450. c. $666,000. d.$652,000.

A (Beginning Work-in-Process $104,550 To complete Beg WIP 50,000 x 0.6 x 1.81 54,300 $158,850 Started & Completed 150,000 x 3.33 499,500 Transferred to Sewing $658,350)

(6-2) Dewitt Co. budgeted its activity for October 2004 from the following information: · Sales are budgeted at $750,000. All sales are credit sales and a provision for doubtful accounts is made monthly at the rate of 2% of sales. · Merchandise inventory was $120,000 at September 30, 2004, and an increase of $10,000 is planned for the month. · All merchandise is marked up to sell at invoice cost plus 50%. · Estimated cash disbursements for selling and administrative expenses for the month are $105,000. · Depreciation for the month is projected at $25,000. Dewitt is projecting operating income for October 2004 in the amount of a. $105,000. b. $119,000. c. $129,000. d. $230,000.

A (Sales $750.000 Cost of goods sold (500,000) (750,000/Cost + 0.5 Cost) Bad debts expense (15,000) S & A expense (105,000) Depreciation expense (25,000) Operating income 105,000)

(4-8) The Precision Widget Company had the following balances in their accounts at the end of the accounting period: Work-in-Process $ 5,000 Finished Goods 20,000 Cost of Goods Sold 200,000 If their manufacturing overhead was overallocated by $8,000 and Precision Widget adjusts their accounts using a proration based on total ending balances, the revised ending balance for Cost of Goods Sold would be a. $192,880. b. $200,000. c. $207,120. d. $208,000.

A (Work-in-Process $5,000/225,000 2.2%x$8,000 = 176 Finished Goods $20,000/225,000 8.9%x$8,000 = 712 Cost of Goods Sold $200,000/225,000 88.9%x$8,000 = 7,120 200,000 - 7,120 = $192,880)

(4-1) A cost-allocation base may be any of the following except a a. cost driver. b. cost pool. c. way to link indirect costs to a cost object. d. nonfinancial quantity.

B

(5-10) Which of the following statements is more representative of activity-based costing in comparison to a department costing system? a. The use of multiple cost-allocation bases b. The use of indirect-cost rates for significant resource use c. The use of activities having a cause-and-effect relationship d. The use of multiple cost pools

B

(6-10) Budgetary slack a. is going to be included in budget estimates, so it should just be ignored. b. provides managers with a hedge against unexpected circumstances. c. should be totally eliminated from the budget. d. is not found in governmental budgets.

B

(6-3) Which of the following is not a major benefit of budgets? a. Compels planning b. Eliminates innovation c. Provides performance criteria d. Promotes coordination and communication

B

(6-6) Which of the following does not pertain to financial planning models in software form? a. Reduces computational burden and time required to prepare budgets b. Eliminates need to update budgets as uncertainty resolved c. Assists managers with sensitivity analysis d. Performs calculations that are mathematical representations of relationships in master budget

B

(7-1) Flexible budgets a. accommodate changes in the inflation rate. b. accommodate changes in activity levels. c. are used to evaluate capacity utilization. d. are static budgets that have been revised for changes in price(s).

B

(7-4) Which of the following is not an advantage for using standard costs for variance analysis? a. Standards simplify product costing. b. Standards are developed using past costs and are available at a relatively low cost. c. Standards are usually expressed on a per-unit basis. d. Standards can take into account expected changes planned to occur in the budgeted period

B

(5-6) Jackson Enterprises manufactures two products—a basic gizmo and an advanced model gizmo. The company is using an activity-based costing system. They have identified three activities for allocation of indirect costs. Activity Cost Driver Cost-Allocation Rate Materials receiving Number of parts $2.00 per part Production setup Number of setups $500.00 per setup Quality inspection Inspection time $90 per hour A production run for the basic model is 250 units, for the advanced model, 100 units. Each unit of product consumes the following activities: Number of Parts Number of Setups Inspection Time Basic Gizmo 10 1 setup 10 minutes Advanced Gizmo 15 1 setup 20 minutes Direct costs for the two products are as follows: Direct Materials Direct Labor Basic Gizmo $50.00 $ 75.00 Advanced Gizmo $95.00 $125.00 The amount of overhead allocated to one unit of the basic model would be a. $592. b. $37. c. $162. d. $65.

B ((2 x 10) + ($500/250) + ($90/60 x 10) = $37)

(6-12) Information pertaining to Brenton Corporation's sales revenue is presented in the following table. February March April Cash sales $160,000 $150,000 $120,000 Credit sales 300,000 400,000 280,000 Total sales $460,000 $550,000 $400,000 Management estimates that 5% of credit sales are not collectible. Of the credit sales that are collectible, 60% are collected in the month of sale and the remainder in the month following the sale. Cost of purchases of inventory each month is 70% of the next month's projected total sales. All purchases of inventory are on account; 25% are paid in the month of purchase, and the remainder is paid in the month following the purchase. Brenton's budgeted total cash payments in March for inventory purchases are a. $385,000. b. $358,750. c. $306,250. d. $280,000.

B (February purchases 550,000 x 0.7 = 385,000 75% paid in March = $288,750 March purchases 400,000 x 0.7 = 280,000 25% paid in March = 70,000 Total cash payments in March = 358,750

(17-4) Top That manufactures baseball-style hats. Material is introduced at the beginning of the process in the Cutting Department. Conversion costs are incurred (and allocated) uniformly throughout the process. As the cutting of material is completed, the pieces are immediately transferred to the Sewing Department. Data for the Cutting Department for the month of February 2009 follow: Work-in-process, January 31—50,000 units [100% complete for direct materials; 40% completed for conversion costs actual costs of direct materials, $70,500; actual costs of conversion, $34,050] Units started during February, 225,000 Units completed during February 200,000 Work-in-process, February 28 75,000 units [100% complete for direct materials; 20% completed for conversion costs] Direct materials added during Feb. [actual costs] $342,000 Conversion costs added during Feb. [actual costs] $352,950 If Top That uses the first-in, first-out (FIFO) method to account for inventories, the equivalent units of work for the month of February are Direct Materials Conversion Costs a. 225,000 225,000 b. 225,000 195,000 c. 275,000 200,000 d. 200,000 195,000

B (Materials = 225,000 EU (number of units started) Conversion Cost BI 50,000 x 0.6 = 30,000 S&C = 150,000 EI 75,000 x 0.2 = 15,000 195,000)

(4-3) The first step in the seven-step approach to job costing is to a. select the cost-allocation base to use in assigning indirect costs to the job. b. identify the direct costs of the job. c. identify the job that is the chosen cost object. d. identify the indirect-cost pools associated with the job.

C

(4-4) Using normal costing rather than actual costing requires that the allocating of indirect manufacturing costs to work-in-process be a. done on a more timely basis, such as every two weeks rather than every month. b. journalized only at year end when adjusting entries are normally made. c. calculated by using the budgeted rate times actual quantity of allocation base. d. calculated by using the budgeted rate times the budgeted quantity of allocation base.

C

(5-2) In refining a cost system a. total direct costs are unchanged because they can be traced in an economically feasible way to the product and traced costs are more accurate. b. the costs are grouped in homogeneous pools of the same or similar amounts. c. the criterion of cause-and-effect is used to relate indirect costs to a factor that systematically links to a cost object. d. the organization looks for cost-allocation bases that will provide a uniform spreading of indirect costs to each product

C

(5-4) Advertising of a specific product is an example of a. unit-level costs. b. batch-level costs. c. product-sustaining costs. d. facility-sustaining costs.

C

(5-8) A significant limitation of activity-based costing is the a. attention given to indirect cost allocation. b. many necessary calculations. c. operations staff's attitude toward the accounting staff. d. use it makes of technology.

C

(5-9) Evaluating customer reaction of the tradeoff of giving up some features of a product for a lower price would best fit which category of management decisions under activity-based management? a. Pricing and product-mix decisions b. Cost reduction decisions c. Design decisions d. Discretionary decisions

C

(6-7) The major cost management concept used in Kaizen budgeting is that of a. eliminating inventories of every type but materials. b. refinements in the indirect-cost categories for costing systems. c. continuous improvement. sensitivity analysis using computer-based financial planning models.

C

(7-2) The following information is available for the Gabriel Products Company for the month of July: Static Budget Actual Units 5,000 5,100 Sales revenue $60,000 $58,650 Variable manufacturing costs $15,000 $16,320 Fixed manufacturing costs $18,000 $17,000 Variable mktg & admin expense $10,000 $10,500 Fixed mktg & admin expense $12,000 $11,000 The total sales-volume variance for operating income for the month of July would be a. $2,550 unfavorable. b. $1,350 unfavorable. c. $700 favorable. d. $100 favorable.

C (5,100 - 5,000 = 100 units x $7* = $700F *Unit CM = 60,000 - 15,000 - 10,000/35,000 = $7)

(4-9) Liberty Box Company calculated an indirect-cost rate of $12.50 per labor hour for fringe benefits for use in their normal costing system. At the end of the year, the actual cost of fringe benefits was $980,000. The total of labor hours worked for the year was the same amount as budgeted, 70,000 hours. If Job #640 required the use of 15 labor hours and the company used the adjusted allocation rate approach, by what amount would the cost of Job #640 change? a. $560.00 b. $281.25 c. $22.50 d. $20.50

C (980.000/70,000 = $14.00 (actual rate) $14,000 - $12.50 = $1.50 excess of actual over budget 1.50 x 15 hours - $22.50 additional cost)

(7-5) Actual quantity purchased 30,000 units Actual unit purchase price $2.75 Materials purchase-price variance —unfavorable (based on purchases) $1,500 Standard quan. allowed for actual production 24,000 units Actual quantity used 22,000 units For July 2005 there was a favorable direct-materials efficiency variance of a. $7,950. b. $5,500. c. $5,400. d.$5,600

C (Actual price 30,000 x 2.75 82,500 Minus unfavorable price variance 1,500 Materials at standard 81,000 81,000/30,000 = $2.70 standard price per unit Actual quantity 22,000 units Standard quantity 24,000 units Efficiency variance 2,000 x 1.70 = $5,400 F)

(6-11) Information pertaining to Brenton Corporation's sales revenue is presented in the following table. February March April Cash sales $160,000 $150,000 $120,000 Credit sales 300,000 400,000 280,000 Total sales $460,000 $550,000 $400,000 Management estimates that 5% of credit sales are not collectible. Of the credit sales that are collectible, 60% are collected in the month of sale and the remainder in the month following the sale. Cost of purchases of inventory each month is 70% of the next month's projected total sales. All purchases of inventory are on account; 25% are paid in the month of purchase, and the remainder is paid in the month following the purchase. Brenton's budgeted total cash receipts in April are a. $448,000. b. $437,000. c. $431,600. d.$328,000.

C (Cash receipts From April cash sales $120,000 From April credit sales 0.60(280,000 x 0.95) 159,600 From March credit sales 0.40(400,000 x 0.95) 152,000 Total collections $431,600)

(17-1) Top That manufactures baseball-style hats. Material is introduced at the beginning of the process in the Cutting Department. Conversion costs are incurred (and allocated) uniformly throughout the process. As the cutting of material is completed, the pieces are immediately transferred to the Sewing Department. Data for the Cutting Department for the month of February 2009 follow: Work-in-process, January 31—50,000 units [100% complete for direct materials; 40% completed for conversion costs actual costs of direct materials, $70,500; actual costs of conversion, $34,050] Units started during February, 225,000 Units completed during February 200,000 Work-in-process, February 28 75,000 units [100% complete for direct materials; 20% completed for conversion costs] Direct materials added during Feb. [actual costs] $342,000 Conversion costs added during Feb. [actual costs] $352,950 1. Assuming Top That uses the weighted-average method to account for inventories, the equivalent units of work for the month of February are Direct Materials Conversion Costs a. 225,000 225,000 b. 200,000 200,000 c. 275,000 215,000 d. 225,000 200,000

C (DM = 50,000 + 225,000 = 275,000 EU CC = 200,000 + 0.20(75,000) = 215,000 EU)

(6-5) Hester Company budgets on an annual basis for its fiscal year. The following beginning and ending inventory levels (in units) are planned for the fiscal year of July 1, 2004 through June 30, 2005. (3 units of RM required per FG) .July 1, 2004 June 30, 2005 Raw material1 40,000 10,000 Work-in-process 8,000 8,000 Finished goods 30,000 5,000 If 450,000 finished units were to be manufactured during the 2004-2005 fiscal year by Hester Company, the units of raw material needed to be purchased would be a. 1,350,000 units. b. 1,360,000 units. c. 1,320,000 units. d.1,330,000 units.

C (Required for production 3 x 450,000 = 1,350,000 + Ending inventory 10,000 - Beginning inventory (40,000) Purchases 1,320,000)

(4-10) If each professional in a service company is paid on an annual salary basis, why might the firm want to use a predetermined or budgeted rate for direct or professional labor? a. A predetermined or budgeted rate is easier to justify to a client who might question a billing rate. b. Professional staff persons do not keep accurate records of the jobs on which they work. c. Professional staff incurs more client costs, such as travel, lodging, and out-of-town meals, while working on a job. d. Year-end bonuses paid to the professional staff are difficult to trace to individual jobs.

D

(4-2) A company that manufactures dentures for use by local dentists would use a. process costing. b. personal costing. c. operations costing. d. job costing

D

(4-5) Manufacturing Overhead Control a. represents actual overhead costs incurred. b. has a normal debit balance. c. is a control account with a subsidiary ledger detailing the components of manufacturing overhead. d. All of the above

D

(4-7) The costs incurred on jobs that are currently in production but are not yet complete would appear in the a. Materials Control account. b. Finished Goods Control account. c. Manufacturing Overhead Control account. d. Work-in-Process Control account.

D

(5-1) Production-cost cross-subsidization results from a. allocating indirect costs to multiple products. b. assigning traced costs to each product. c. assigning costs to different products using varied costing systems within the same organization. d. assigning broadly averaged costs across multiple products without recognizing amounts of resources used by which products.

D

(6-1) Budgeting is the common accounting tool companies' use for planning and controlling. Budgets a. provide a measure of planned financial results. b. are prepared independent of the company's long-term strategies. c. do not usually reflect actual results, so they are a useless exercise. d. serve as the financial expression of management's plans for the upcoming period.

D

(6-8) Which of the following statements does not describe responsibility accounting? a. It measures the plans and actions of each responsibility center. b. It budgets to emphasize that for which each responsibility center is accountable. c. It calculates variances between budgeted and actual accountability for each responsibility center. d. It identifies managers at fault for operating problems by reports for each responsibility center.

D

(6-9) Controllability a. is always clear cut as to who has responsibility for a cost. b. is another term for responsibility. c. is the responsibility of the corporate controller. d. is the degree of influence a specific manager has over costs, revenues, and other items

D

(7-9) Benchmarking is a. relatively easy to do with the amount of available financial information about companies. b. best done with the best in their field regardless of type of company. c. simply reporting the magnitude of differences in costs or revenues across companies. d. making comparisons to direct attention to why differences in costs exist across companies.

D

(5-7) Jackson Enterprises manufactures two products—a basic gizmo and an advanced model gizmo. The company is using an activity-based costing system. They have identified three activities for allocation of indirect costs. Activity Cost Driver Cost-Allocation Rate Materials receiving Number of parts $2.00 per part Production setup Number of setups $500.00 per setup Quality inspection Inspection time $90 per hour A production run for the basic model is 250 units, for the advanced model, 100 units. Each unit of product consumes the following activities: Number of Parts Number of Setups Inspection Time Basic Gizmo 10 1 setup 10 minutes Advanced Gizmo 15 1 setup 20 minutes Direct costs for the two products are as follows: Direct Materials Direct Labor Basic Gizmo $50.00 $ 75.00 Advanced Gizmo $95.00 $125.00 The total cost of an advanced model would be a. $162. b. $65. c. $200. d. $285.

D ($95 + $125 + ($2 x 15) + ($500/100) + ($90/60 x 20))

(17-7) Top That manufactures baseball-style hats. Material is introduced at the beginning of the process in the Cutting Department. Conversion costs are incurred (and allocated) uniformly throughout the process. As the cutting of material is completed, the pieces are immediately transferred to the Sewing Department. Data for the Cutting Department for the month of February 2009 follow: Work-in-process, January 31—50,000 units [100% complete for direct materials; 40% completed for conversion costs actual costs of direct materials, $70,500; actual costs of conversion, $34,050] Units started during February, 225,000 Units completed during February 200,000 Work-in-process, February 28 75,000 units [100% complete for direct materials; 20% completed for conversion costs] Direct materials added during Feb. [actual costs] $342,000 Conversion costs added during Feb. [actual costs] $352,950 In the Sewing Department, additional direct materials are added to the product at the end of production. Without prejudice to your answer for questions 1 through 6, assume that 200,000 units were transferred from the Cutting Department and that the weighted-average method is used. Data for February follow: Work-in-process, January 31—70,000 units (30% complete as to conversion) Units completed during February—240,000 units Work-in-process, February 28—30,000 units (80% complete as to conversion) For the Sewing Department, the equivalent units of work done in February is Transferred In Direct Materials Conversion Costs a. 200,000 200,000 200,000 b. 200,000 170,000 194,000 c. 240,000 240,000 245,000 d. 270,000 240,000 264,000

D (1. Transferred in (240,000 x 100% + 30,000 x 100%) = 270,000 Direct Material (240,000 x 100%) + 30,000 x 0%) = 240,000 Conversion Costs (240,000 x 100% + 30,000 x 80%) = 264,000)

(17-5) Top That manufactures baseball-style hats. Material is introduced at the beginning of the process in the Cutting Department. Conversion costs are incurred (and allocated) uniformly throughout the process. As the cutting of material is completed, the pieces are immediately transferred to the Sewing Department. Data for the Cutting Department for the month of February 2009 follow: Work-in-process, January 31—50,000 units [100% complete for direct materials; 40% completed for conversion costs actual costs of direct materials, $70,500; actual costs of conversion, $34,050] Units started during February, 225,000 Units completed during February 200,000 Work-in-process, February 28 75,000 units [100% complete for direct materials; 20% completed for conversion costs] Direct materials added during Feb. [actual costs] $342,000 Conversion costs added during Feb. [actual costs] $352,950 If Top That uses the FIFO method to account for inventories, the costs per equivalent unit for February are .Direct Materials Conversion Costs a. $1.50 $1.76 b. $1.83 $1.72 c. $1.71 $1.81 d. $1.52 $1.81

D (342,000/225,000 = $1.52/unit for Materials 352,950/195,000 = $1.81/unit for Conversion Cost)

(17-3) Top That manufactures baseball-style hats. Material is introduced at the beginning of the process in the Cutting Department. Conversion costs are incurred (and allocated) uniformly throughout the process. As the cutting of material is completed, the pieces are immediately transferred to the Sewing Department. Data for the Cutting Department for the month of February 2009 follow: Work-in-process, January 31—50,000 units [100% complete for direct materials; 40% completed for conversion costs actual costs of direct materials, $70,500; actual costs of conversion, $34,050] Units started during February, 225,000 Units completed during February 200,000 Work-in-process, February 28 75,000 units [100% complete for direct materials; 20% completed for conversion costs] Direct materials added during Feb. [actual costs] $342,000 Conversion costs added during Feb. [actual costs] $352,950 1. Assuming Top That uses the weighted-average method to account for inventories, the assignment of costs to work-in-process at the end of February is a. $300,000. b. $266,250. c $166,525. d. $139,500.

D (75,000 x 1.50 = $112,500 75,000 x 0.5 x 1.80 = 27,000 $139,500)

(7-6) Actual direct-labor hours 34,500 hours Standard direct-labor hours 35,000 hours Total direct-labor payroll $241,500 Direct-labor efficiency variance—favorable $3,200 What is Garner's direct-labor price (or rate) variance? a. $21,000 favorable b. $21,000 unfavorable c. $17,250 unfavorable d.$20,700 unfavorable

D (Actual direct labor cost $241,500 Standard 34,500 x 6.40 $220,800 Price variance 20,700 U Standard rate = 3,200/(35,000 - 34,500) = $6.40)

(6-4) Hester Company budgets on an annual basis for its fiscal year. The following beginning and ending inventory levels (in units) are planned for the fiscal year of July 1, 2004 through June 30, 2005. (3 units of RM required per FG) .July 1, 2004 June 30, 2005 Raw material1 40,000 10,000 Work-in-process 8,000 8,000 Finished goods 30,000 5,000 If Hester Company plans to sell 500,000 units during the 2004-2005 fiscal year, the number of units it would have to manufacture during the year would be a. 505,000 units. b. 500,000 units. c. 480,000 units. d. 475,000 units.

D (Sales 500,000 + Ending inventory 5,000 - Beginning inventory (30,000) Production 475,000)