Man accounting final review

Lag indicators

reveal the results of past actions and decisions (i.e. - net income)

p-8 Cash disbursements

section consists of all cash payments excluding repayments of principal and interest;

p-8 Cash receipts

section lists all cash inflows excluding cash received from financing;

p-9 A benchmark used in measuring performance is called a(n)

standard

Redmond Awnings, a division of Wrap-up Corp., has a net operating income of $60,000 and average operating assets of $300,000. The required rate of return for the company is 15%. What is the division's residual income?

$ 15,000

p-12 What is the net present value of the contract with the local bank?

$ 28,230

p-8 The formula for the production budget is

Expected sales in units + desired ending inventory - beginning inventory

p-9 The standard hours per unit includes both direct and indirect labor hours.

False

Return on Investment (ROI) Formula

Net OPERATING INCOME / AVERAGE OPERATING ASSETS

Redmond Awnings, a division of Wrap-up Corp., has a net operating income of $60,000 and average operating assets of $300,000. If the manager of the division is evaluated based on ROI, will she want to make an investment of $100,000 that would generate additional net operating income of $18,000 per year?

No

p-12 Which of the following is NOT a capital budgeting decision?

Planning a year-end celebration

p-12

Project X

p-8 Which of the following budgets is prepared first?

Sales budget

p-12 Preference decisions

Selecting from among several competing courses of action.

p-12 A capital budgeting expenditure should be made if

The IRR is greater than the required rate of return.

p-12 A Capital Budgeting expenditure should be undertaken if

The project has a Net Present Value (NPV) greater than or equal to zero.

Variable costing in a manufacturing company

Treats the fixed manufacturing overhead as a cost of the accounting period instead of allocating it to units of inventory.

If the manager of the Redmond Awnings division is evaluated based on residual income, will she want to make an investment of $100,000 that would generate additional net operating income of $18,000 per year?

Yes

To compute the unit contribution margin what should be subtracted from the sales price per unit?

all variable costs

p-9 The materials price variance is the difference between the actual price of materials

and the standard price for materials with the difference multiplied by the actual quantity of materials

p-9 The cost formulas usedto prepare a flexiblebudget can

be adjusted

p-12 How managers plan significant investments in projects that have long term implications such as purchasing new equipment or introducing new products is called

capital budgeting

p-12 The net present value method compares the present value of a project's cash inflows with the present value of its

cash outflows

p-12 The capital budgeting techniques that best recognize the time value of money are those that involve

discounted cash flows

p-12 If the NPV of a project equals zero, the project earns a return that is

Equal to the required return

p-8 Sales for the first quarter were $100,000. Sales are expected to increase by 12% in the next quarter. What are budgeted sales for the second quarter.

$112,000

Hanson Inc. has the following variablemanufacturing overhead standard tomanufacture one Zippy: 1.5 standard hours per Zippy at$3.00 per direct labor hour Last week, 1,550 hours were worked to make 1,000 Zippies, and $5,115 was spent for variable manufacturing overhead p-9 Hanson's efficiency variance (VMEV) for variable manufacturing overhead for the week was:

$150 unfavorable

p-8 If each unit requires 2 hours of labor, and each hour of labor costs $20, what is the labor budget to produce 50,000 units?

$2,000,000

Hanson Inc. has the following direct materials standard to manufacture one Zippy: 1.5 pounds per Zippy at $4.00 per pound Last week, 1,700 pounds of materials were purchased and used to make 1,000 Zippies. The materials cost a total of $6,630. p-9 How many pounds of materials should Hanson have used to make 1,000 Zippies?

1,500 pounds.

p-12 The expected annual net cash inflow from a project is $22,000 over the next 5 years. The required investment now in the project is $79,310. What is the internal rate of return on the project?

12%

In 2014, CW, Inc. Retail division had Net operating income of $10 million. Sales were $50 million. Average operating assets were $80 million, and the required rate of return was 10%. What was the division's ROI?

12.5%

Redmond Awnings, a division of Wrap-up Corp., has a net operating income of $60,000 and average operating assets of $300,000. The required rate of return for the company is 15%. What is the division's ROI?

20%

p-8 See pictures

46,000

p-8 Marcy Manufacturing plans to sell 8,000 units in the first quarter and 10,000 units in the second quarter. The company wants ending inventory to equal 20% of the next quarter's sales. Finished goods at the start of the first quarter are 1,600 units. How many units should be produced in the first quarter.

8,400

p-12 Once you have computed a net present value, you should interpret the results as follows:

A positive net present value indicates that the project's return exceeds the discount rate. .A negative net present value indicates that the project's return is less than the discount rate.

1) Selected financial information for Belfast Manufacturing is presented in the following table (000s omitted). Sales revenuePurchases of direct materialsDirect laborManufacturing overheadOperating expensesBeginning raw materials inventory Ending raw materials inventory Beginning work in process inventory Ending work in process inventory Beginning finished goods inventory Ending finished goods inventory Sales revenue $ 4,000 Purchases of direct materials $ 500 Direct labor $ 450 Manufacturing overhead $ 620 Operating expenses $ 700 Beginning raw materials inventory $ 150 Ending raw materials inventory $ 170 Beginning work in process inventory $ 320 Ending work in process inventory $ 310 Beginning finished goods inventory $ 250 Ending finished goods inventory $ 200 How much was cost of goods manufactured?

A) $1,560

An investment center manager is responsible for

All of the above

Sable Company uses direct labor hours as the cost allocation base for allocating manufacturing overhead. At the end of the period overhead is underallocated. This implies that.

B) Overhead costs were higher than expected or less labor hours were worked than expected.

p-9 Favorable cost variances are

Credits

p-9 Unfavorable cost variances are

Debits

p-12 As the time between now and the receipt of a cash flow increases, the present value of the cash flow:

Decreases

p-9 The standard cost for Blank______ manufacturing overhead is computed the same way as the standard cost for direct labor.

variable

p-9 The standard rate per unit that a company expects to pay for variable overhead equals the Blank______.

variable portion of the predetermined overhead rate

p-12 Current assets minus current liabilities is called

working capital

Hanson Inc. has the following direct materials standard to manufacture one Zippy: 1.5 pounds per Zippy at $4.00 per pound Last week, 1,700 pounds of materials were purchased and used to make 1,000 Zippies. The materials cost a total of $6,630. p-9 Hanson's materials price variance (MPV)for the week was

$170 favorable

In 2014, CW, Inc. Retail division had Net operating income of $10 million. Sales were $50 million. Average operating assets were $80 million, and the required rate of return was 10%. What was the division's Residual Income?

$2.0 million

p-9 What should the total wages and salaries cost be in a flexible budget for 600 lawns?

$23,000

Hannish Orchards, a juice manufacturer, uses a process that adds all the raw materials at the beginning of the process. Conversion costs are evenly distributed. Assume there are no beginning inventories.During the period the company started making 10,000 gallons. There were 2,000 gallons left in ending WIP that were 40% of the way through the process. Costs incurred during the period were: $ 16,000 Raw materials $ 5,500 Conversion costs The cost assigned to ending work in process would be closest to:

$3,700

Hanson Inc. has the following direct materials standard to manufacture one Zippy: 1.5 pounds per Zippy at $4.00 per pound Last week, 1,700 pounds of materials were purchased and used to make 1,000 Zippies. The materials cost a total of $6,630. p-9 From the last slide: Last week, Hanson purchased 1,700 pounds of materials and used it to make 1,000 Zippies. The materials cost a total of $6,630. What was the actual price per pound of materials purchased?

$3.90

p-8 Which of the following budgeted items does not require a cash flow?

Depreciation expense

p-12 Screening decisions.

Does a proposed project meet some preset standard of acceptance?

If the manager of the Redmond Awnings division is evaluated based on residual income, will she want to make an investment of $100,000 that would herate additional net operating income of $18,000 per year?

Yes

The company's required rate of return is 15%. Would the company want the manager of the Redmond Awnings division to make an investment of $100,000 that would generate additional net operating income of $18,000 per year?

Yes

p-9 The materials price variance is calculated using the Blank______ quantity of the input purchased.

actual

p-9 More than one cost driver may be needed to

adequately explain all ofthe costs in an organization.

Budgets Blank_

communicate management's plan throughout the organization

Gathering feedback to ensure that the plan is being followed is referred to as

control

p-8 Financing section

details the borrowings and repayments projected to take place during the budget period.

p-8 Cash excess or deficiency

determines if the company will need to borrow money or if it will be able to repay funds previously borrowed;

In a manufacturing company, the Blank______ budget details the raw materials that must be purchased to fulfill the production budget and provide for adequate inventories

direct materials

In a manufacturing company, the_______budget details the raw materials that must be purchased to fulfill the production budget and to provide for adequate inventories.

direct,materials

p-9 When 100% peak effort from the most skilled and efficient workers is assumed, the direct labor hours required per unit is being set using

ideal standards

Planning

involves developing objectives and preparing various budgets to achieve those objectives.

p-12 payback period

is the length of time that it takes for a project to recoup its initial cost out of the cash receipts that it generates.

Residual income

is the net operating income above some minimum return on operating assets.

p-12 The difference between cash inflows and cash outflows is

the net present value.

The cost of making 2,000 sets of bindings last month was as follows: Outdoor Life manufactures snowboards. Direct materials $18,000 Direct Labor 3,000 Variable overhead 3,000 Fixed Overhead. 8,000 Total Manufacturing Cost $32,000 Cost per set $16 The cost of making 2,000 sets of bindings last month was as follows: An outside supplier has offered to supply outdoor Life with the bindings for $14 each including shipping costs to its facility. If Outdoor Life accepts the offer it will be able to avoid $3,000 of fixed overhead. In addition if the offer is accepted Outdoor Life will be able to use the freed up facilities to produce another product that will contribute $3,500 to profit per month. Including the opportunity cost, how much will Outdoor Life save each month by accepting the offer from the outside supplier instead of making the bindings if they will need 2,500 sets of bindings next month?

$1,500

Hanson Inc. has the following direct laborstandard to manufacture one Zippy: 1.5 standard hours per Zippy at$12.00 per direct labor hour Last week, 1,550 direct labor hours wereworked at a total labor cost of $18,910to make 1,000 Zippies. p-9 Hanson's labor rate variance (LRV) for the week was

$310 unfavorable

p-8 Beginning cash balance is budgeted to be $25,000. Total cash receipts for the quarter are budgeted to be $150,000, and disbursements of $ |97,000 are projected. How much will the company have to borrow to maintain a cash balance of $20,000?

$42,000

Hanson Inc. has the following variablemanufacturing overhead standard tomanufacture one Zippy: 1.5 standard hours per Zippy at$3.00 per direct labor hour Last week, 1,550 hours were worked to make 1,000 Zippies, and $5,115 was spent for variable manufacturing overhead p-9 Hanson's rate variance (VMRV) for variable manufacturing overhead for the week was

$465 unfavorable.

p-12 Suppose you will receive $1,200 per year at the end of the next 5 years, plus $500 at the end of 5 years. Your required return is 8%. The PV of $1 at 8% in 5 years is .6806. The PV of an annuity of $1 for 5 years is 3.9927. What is the present value of this prospect, rounded to the nearest dollar?

$5,132

Hanson Inc. has the following direct laborstandard to manufacture one Zippy: 1.5 standard hours per Zippy at$12.00 per direct labor hour Last week, 1,550 direct labor hours wereworked at a total labor cost of $18,910to make 1,000 Zippies. p-9Hanson's labor efficiency variance (LEV) for the week was:

$600 unfavorable.

p-9 Acme hotel decorates its lobby and guest rooms with fresh flowers. It's flexible budget for flowers is $325 per day plus $7.20 per room-day. If, for April, there were 30 days and 7,680 room-days, what would be its flexible budget for flowers for the month of April? Actual

$65,046

Hanson Inc. has the following direct materials standard to manufacture one Zippy: 1.5 pounds per Zippy at $4.00 per pound Last week, 1,700 pounds of materials were purchased and used to make 1,000 Zippies. The materials cost a total of $6,630. p-9 Hanson's materials quantity variance (MQV)for the week was:

$800 unfavorable

p-8 What will be the total cash collections for the quarter?

$940,000

p-9 Acme hotel decorates its lobby and guest rooms with fresh flowers. It's flexible budget for flowers is $325 per day plus $7.20 per room-day. If actual April spending on flowers was $61,978, and there were 30 days and 7,500 room-days in April, what was the spending variance for the month?

. $1,772 (F)

p-12 A project with a useful life of 5 years requires an investment of $100,000 and is expected to generate Net Operating Income of $10,000 per year. Assuming no salvage value, what is the simple rate of return on the project?

. 10%

p-8 Which of the following budgets has both fixed and variable components:

.Manufacturing Overhead

p-12 Identify capital budgeting decisions.

Expansion decisions Equipment replacement decisions

Control

involves the steps taken by management to increase the likelihood that the objectives set down while planning are attained and that all parts of the organization are working together toward that goal.

A budget

is a detailed quantitative plan for acquiring and using financial and other resources over a specified forthcoming time period.

p-12 A postaudit

is a follow-up after the project has been completed to see whether or not expected results were actually realized.

p-12 capital. budgeting

is used to describe how managers plan significant investments in projects that have

p-12 A capital investment project's payback period is the Blank_

length of time it takes for the project to recover its initial cost from the net cash inflows generated

p-12 The term capital budgeting is used to describe how managers plan significant investments in projects that have Blank______ implications.

long-term

Using budgeting assumptions when preparing the master budget, Blank_

makes it easier to answer "what-if" questions

A detailed plan used by a merchandising company that shows the amount of goods that must be purchased from suppliers during the period is called a(n)

merchandise purchases

The amount of goods to be acquired from suppliers during the period is shown on the Blank______ budget.

merchandise purchases

p-12 The concept of the time value of money is based on the notion that a dollar today is worth (more/less)_______than a dollar a year from now.

more

p-12 Working capital

often increases when a company takes on a new project

p-12 The length of time that it takes for a project to recover its initial cost from the net cash inflows that it generates is the

payback

Developing goals and preparing various budgets to achieve those goals is part of

planning

Developing goals and preparing various budgets to achieve those goals is part of the________process.

planning

Lead indicators

predict future performance and are harder to evaluate because they are future oriented ( i.e. - customer satisfaction surveys or FedEx shipments) could be used to predict future levels of business activity

p-9 (Actual cost per unit - standard cost per unit) × actual quantity = the materials b

price variance.

In a manufacturing company, the Blank______ budget shows the number of units that must be manufactured to satisfy sales needs and provide for the desired ending inventory.

production

In a manufacturing company, the _______, budget shows the number of units that must be manufactured to satisfy sales needs and provide for the desired ending inventory.

production

In a manufacturing company, the________budget is prepared right after the sales budget.

production

p-9 The difference between the actual amount of materials used in production and the standard amount of materials allowed for the actual output, multiplied by the standard price per unit of materials is the materials

quantity variance.