Acct. 101B: Final Exam 21-28

Peyton Company manufactures Phone X and Phone Y. Peyton can sell all it can make of either phone. Based on the following data and assuming the number of hours is a constraint, which of the following statements is true? X Y Sales price $48 $44 Variable cost 38 28 Time needed to process 5 hours 8 hours

X and Y are equally profitable.

The following data relate to direct labor costs for August: actual costs for 5,500 hours at $24.00 per hour and standard costs for 5,000 hours at $23.70 per hour.The direct labor rate variance is

[B] DLRV = (actual quantity x actual rate) - (actual quantity x standard rate) (5,500 x 24) - (5,500 x 23.7) = 1,650 unfavorable

Schedule of Activity Costs Quality Control Activities Activity Cost Product testing $55,000 Assessing vendor quality 26,000 Recalls 18,000 Rework 29,000 Scrap disposal 8,000 Product design 30,000 Training machine operators 46,000 Warranty work 12,000 Process audits 22,000 From the provided schedule of activity costs, determine the (a) value-added and (b) non-value-added costs.

a. $179,000 = $55,000 + $26,000 + $30,000 + $46,000 + $22,000 b. $67,000 = $18,000 + $29,000 + $8,000 + $12,000

Standards that represent levels of operation that can be attained with reasonable effort are called _____ standards.

normal

Carolina, the accountant for Duke Manufacturing, tells Jacob, who works in customer service for Duke, that that their company's customer satisfaction rating predicts sales revenue in dollars. Carolina's comment indicates that the customer satisfaction rating is

a leading indicator

Mighty Safe Fire Alarm is currently buying 50,000 motherboards from MotherBoard, Inc., at a price of $65 per board. Mighty Safe is considering making its own boards. The costs to make the board are as follows: direct materials, $32 per unit; direct labor, $10 per unit; and variable factory overhead, $16 per unit. Fixed costs for the plant would increase by $75,000. Which option should be selected and why?

make, $275,000 increase in profits

The tendency for managers to see what they want to see in data is known as

motivated reasoning

Which of the following is considered non-value-added lead time?

moving from process to process

The benefits of CSR investments

must be evaluated qualitatively for the projects that cannot be evaluated quantitatively

The following data relate to direct materials costs for February: Materials cost per yard: standard, $2.00; actual, $2.10 Yards per unit: standard, 4.5 yards; actual, 4.75 yards Units of production: 9,500 The direct materials price variance is

(Actual Quantity x Actual Price) - (Actual Quantity x Standard Price) [(4.75 x 9,500) x 2.1] - [(4.75 x9,500) x 2] = $4512.5 unfavorable

Managers can use CSR and sustainability information as important feedback to guide decision making in a variety of areas. Which of the following areas is least likely to be impacted by this feedback?

FASB compliance with U.S. GAAP

Lofty Airlines has a flight for which the regular ticket price is $200 and the variable costs per passenger are $50. Fixed costs assigned to each flight are $12,000. Each flight has a capacity of 125 seats, with an average of 95 seats sold at the regular price. To attract customers to the last 30 unsold seats, Lofty discounts the tickets by 50% for standby passengers. The break-even number of regular-priced seats per flight is

$80

The revenue that is forgone from an alternative use of an asset, such as cash, is called

opportunity cost

Beaver Valley Oil Refinery produces various grades of petroleum products at its refinery operations. All of the following may be considered an initiative undertaken as a part of the company's CSR efforts except

providing training to the accounting staff so they better understand FASB requirements for applying accounting standards for financial reporting

If the actual quantity of direct materials used in producing a commodity differs from the standard quantity, the variance is a _____ variance.

quantity

The excess of divisional operating income over a minimum acceptable amount of divisional operating income is

residual income

In a profit center, the manager has responsibility and authority for making decisions that affect

revenues

Which of the following is not an external failure cost?

rework

AnaCarolina and Jaco work at Duke Manufacturing, and they are tasked with determining appropriate performance metrics for the internal processes perspective of Duke's balanced scorecard. Which of the following is the best metric for this situation?

sales revenue

The balanced scorecard elements are linked together by a

strategy map

The tendency for managers to behave like the performance metrics are the strategic objectives is known as

surrogation

the target costing method assumes that

the selling price is set by the marketplace

The expected relationships among performance metrics in the measure map are based on

the strategy map links strategic objectives

All of the following should be considered in a make-or-buy decision except

whether the supplier will make a profit that would no longer belong to the business

Schedule of Activity Costs Quality Control Activities Activity Cost Process audits $50,000 Training of machine operators 28,000 Processing returned products 19,000 Scrap processing (disposal) 25,000 Rework 8,000 Preventive maintenance 30,000 Product design 46,000 Warranty work 12,000 Finished goods inspection 23,000 From the provided schedule of activity costs, determine the prevention costs.

$104,000

Tipper Co. is considering a 10-year project that is estimated to cost $700,000 and has no residual value. Tipper seeks to earn an average rate of return of 15% on all capital projects. Determine the necessary average annual income (using straight-line depreciation) that must be achieved on this project for it to be acceptable to Tipper Co.

Average Annual Income/ average investment = Average Rate of Return X /($700,000 + $0) ÷ 2= 0.15 X / $350,000=0.15 X = $52,500

Determine the average rate of return for a project that is estimated to yield total income of $250,000 over 4 years, costs $480,000, and has a $20,000 residual value.

Average annual income: $62,500 ($250,000 ÷ 4 years) Average investment: $250,000 [($480,000 + $20,000) ÷ 2] Average rate of return: 25% ($62,500 ÷ $250,000)

Which of the following statements about CSR efforts and initiatives is true?

CSR efforts must be focused on responsibly impacting society and/or the improvement of the social well-being within and outside the firm to be considered a CSR initiative.

Which of the following statements regarding CSR and sustainability reporting is false?

Generally accepted accounting principles require firms to report CSR and sustainability efforts.

Which of the following is an example of a nonfinancial measure of performance used in lean manufacturing?

all of these choices

Which of the following is related to long lead times?

all of these choices

Which of the following results in fewer transactions in lean accounting?

all of these choices

Which of the following underlying problems may be hidden by high raw materials, work in process, and finished goods inventory levels?

all of these choices

Investment centers differ from profit centers in that they

are able to invest in assets

For higher levels of management, responsibility accounting reports

are more summarized than for lower levels of management

Ken and Laura are working toward implementing a balanced scorecard for their company. They ask their production and warehouse teams to provide several options regarding strategic initiatives for the internal processes perspective of the balanced scorecard. Which of the following suggestions made by the employees would be a good choice of a strategic initiative for this purpose?

automate the warehouse

The contribution margin ratio is computed as

contribution margin divided by the sales.

Lean manufacturing philosophy reduces all of the following except

conversion costs

Which of the following is not one of the elements of the balanced scorecard?

cost system

Alexander and Kristin are executive managers at Safety First Fall Safety Equipment Co. They realize that within the last several quarters, they have been heavily focused on the online customer satisfaction rating as though it is the strategic objective rather than focusing on the customers as the company's real goal. Alexander and Kristin realize they have fallen prey to a cognitive bias known as

surrogation

Which of the following is not a correct example of a performance target?

Include the internal processes component in the balanced scorecard.

Which of the following statements about performance metrics is false?

Performance metrics are needed for 80% of the strategic objectives.

The ratio of operating income to sales, which is also a factor in the DuPont formula for determining the return on investment (ROI), is called

Profit margin

A measure map is an important aspect of the balanced scorecard performance measurement system. Which of the following describes the role of the measure map?

The measure map shows the expected relationships among the performance metrics chosen by the organization.

A manager is responsible for costs only in a(n) _____ center.

cost

Businesses that are separated into two or more manageable units in which managers have authority and responsibility for operations are said to be

decentralized

Which of the following is characteristic of a lean production layout?

decentralized maintenance and small production batches

The profit margin for Division C is 6%, and the investment turnover is 1.2. The return on investment for Division B is a. 20% b. 6.7% c. 7.3% d. 7.2%

[D] .06 x 1.2 = .072 x100 = 7.2%

The formula for the return on investment (ROI) is

Operating Income ÷ Invested Assets

A form of CSR information that helps managers evaluate the savings generated by using fewer natural resources in a company's operations is known as a(n) _____ measure.

eco-efficiency

Which of the following transfer price approaches is used when the transfer price is set at the amount sold to outside buyers?

market price

The process of developing budget estimates by requiring managers to estimate sales, production, and other operating data as though operations were being initiated for the first time is referred to as _____ budgeting.

Zero-based

Which of the following methods used in applying the cost-plus approach to product pricing includes only desired profit in the markup?

total cost method

Ivell Packaging Company produces paper and plastic packaging products. All of the following may be considered an initiative undertaken as a part of the company's CSR efforts except

training customer service employees on the latest upgrade to the technology used to take orders from customers

For February, sales revenue is $700,000, sales commissions are 5% of sales, the sales manager's salary is $96,000, advertising expenses are $90,000, shipping expenses total 2% of sales, and miscellaneous selling expenses are $2,500 plus 1/2 of 1% of sales. Total selling expenses for the month of February are

$241,000

Assuming that the standard fixed overhead rate is based on full capacity, the cost of available but unused productive capacity is indicated by the

fixed factory overhead volume variance

Sometimes the phrase "corporate social responsibility" is used interchangeably with the phrase

sustainability efforts

If the actual direct labor hours spent producing a commodity differ from the standard hours, the variance is a _____ variance.

time

Sage Company is operating at 90% of capacity and is currently purchasing a part used in its manufacturing operations for $15 per unit. The unit cost for the business to make the part is $20, including fixed costs, and $11, not including fixed costs. If 30,000 units of the part are normally purchased during the year but could be manufactured using unused capacity, the amount of differential cost increase or decrease from making the part rather than purchasing it would be a

$120,000 cost decrease

Magpie Corporation uses the total cost method of product pricing. Below is cost information for the production and sale of 60,000 units of its sole product. Magpie desires a profit equal to a 25% return on invested assets of $700,000. Fixed factory overhead cost $38,700 Fixed selling and administrative costs 7,500 Variable direct materials cost per unit 4.60 Variable direct labor cost per unit 1.88 Variable factory overhead cost per unit 1.13 Variable selling and administrative cost per unit 4.50 The unit selling price for Magpie's product is

$15.79

Tennessee Corporation is analyzing a capital expenditure that will involve a cash outlay of $109,332. Estimated cash flows are expected to be $36,000 annually for 4 years. The present value factors for an annuity of $1 for 4 years at interest of 10%, 12%, 14%, and 15% are 3.170, 3.037, 2.914, and 2.855, respectively. The internal rate of return for this investment is

12%

Schedule of Activity Costs Quality Control Activities Activity Cost Process audits $50,000 Training of machine operators 28,000 Processing returned products 19,000 Scrap processing (disposal) 25,000 Rework 8,000Preventive maintenance 30,000 Product design 46,000 Warranty work 12,000 Finished goods inspection 23,000 From the provided schedule of activity costs, determine the non-value-added costs.

$64,000

Assume that Widgeon Co. produced enough product with the highest contribution margin per unit to use 1,000 hours of machine time. Product demand does not warrant any more production of that product. The maximum additional contribution margin that can be realized by utilizing the remaining 1,000 hours on the product with the second highest contribution margin per hour is

$7,000

Which of the following statements about performance targets is true?

Performance targets are levels of improvement that management wants to achieve for performance metrics.

ABC Corporation has three support departments with the following costs and cost drivers: The operating income of the Macro Division after all support department allocations will be

Operating income = Gross Income - Operating expenses - Depreciation and amortization Operating income = 850,000 - 70,000 - [30,0000(200,000/30,000-20,000) + 200,000 + 145,000] = $375,000

Under variable costing, which of the following costs would not be included in finished goods inventory?

SALARY OF FACTORY SUPERVISOR

The relative distribution of sales among the various products sold is referred to as the

SALES MIX.

Under absorption costing, which of the following costs would not be included in finished goods inventory?

VARIABLE AND FIXED SELLING AND ADMINISTRATIVE EXPENSES

Waterfield Company has three decentralized segments. Executive managers are looking for a way to measure the performance of each segment. Which of the following metrics might be used for this purpose?

the residual income of each segment

When using the product cost method of applying the cost-plus approach to product pricing, which of the following is included in the markup?

total selling and administrative expenses plus desired profit

At the end of the fiscal year, variances from standard costs are usually transferred to the _____ account.

Cost of goods sold

Tara Company's budget shows the following credit sales for the current year: September, $25,000; October, $36,000; November, $30,000; December, $32,000. Experience has shown that payment for credit sales is received as follows: 15% in the month of sale, 60% in the first month after sale, 20% in the second month after sale, and 5% is uncollectible. The amount of cash Tara Company will expect to collect in November as a result of current and past credit sales is

.15 x 30,000 = 4,500 (Nov.) .6 x 36,000 = 21,600 (Oct.) .2 x 25,000 = 5,000 (Sept.) November = add above = 31,100

Consider Derek's budget information: Materials to be used total $64,750; direct labor totals $198,400; factory overhead totals $394,800; work in process inventory on January 1 is $189,100; and work in progress inventory on December 31 is $197,600. The budgeted cost of goods manufactured for the year is

189,000 + (64,750 + 198,400 + 394,800) - 197,600 = 649,450

Under variable costing, which of the following costs would be included in finished goods inventory?

WAGES OF CARPENTERS IN A FURNITURE FACTORY

If the price paid per unit differs from the standard price per unit for direct materials, the variance is a _____ variance.

price

Schedule of Activity Costs Quality Control Activities Activity Cost Process audits $50,000 Training of machine operators 28,000 Processing returned products 19,000 Scrap processing (disposal) 25,000 Rework 8,000 Preventive maintenance 30,000 Product design 46,000 Warranty work 12,000 Finished goods inspection 23,000 From the provided schedule of activity costs, determine the total activity cost.

$241,000

Motel Corporation is analyzing a capital expenditure that will involve a cash outlay of $208,240. Estimated cash flows are expected to be $40,000 annually for 7 years. The present value factors for an annuity of $1 for 7 years at interest of 6%, 8%, 10%, and 12% are 5.582, 5.206, 4.868, and 4.564, respectively. The internal rate of return for this investment is

8%

The amount of income under absorption costing will be less than the amount of income under variable costing when units manufactured

ARE LESS THAN UNITS SOLD.

SeaSpray Resort pays housekeeping staff $15 per hour (standard) and expects its 1,000 rooms to be cleaned in 750 hours (standard). If staff logged 800 hours to clean the rooms, the direct labor time variance is

DLTV = (actual quantity x standard rate) - (standard quantity x standard rate) (800 x 15) - (750 x 15) = 750 unfavorable

Lucy Corporation purchased and used 129,000 board feet of lumber in production at a total cost of $1,548,000. Original production had been budgeted for 22,000 units with a standard materials quantity of 5.7 board feet per unit and a standard price of $12 per board foot. Actual production was 23,500 units. The direct materials quantity variance is

DMQV: (actual quantity - standard quantity) x standard price [129,000 - 5.7(23,500)] x 12 = - 59,400 favorable

The index developed to help assess a company's sustainability efforts is the

Dow Jones Sustainability Index

The amount of income under absorption costing will be more than the amount of income under variable costing when units manufactured

EXCEEDS UNITS SOLD.

Operating income for Division H is $220,000, and operating income before support department allocations is $975,000. As a result,

total support department allocations are $755,000

Which of the following is not a method commonly used in applying the cost-plus approach to product pricing?

fixed cost method

Periods in time that experience increasing price levels are known as periods of

inflation

Which of the following is not an example of a capital investment project that focuses on minimizing resource waste and environmental degradation as a CSR objective?

iron Mills Event Planning invests in an employee wellness and fitness center.

Metrics that are later in the value chain are normally considered to be _____ indicators.

lagging

An important consideration in establishing a measure map includes determining the

leading and lagging indicators

Inventory reduction is a(n) _____ principle.

lean

The level of inventory of a manufactured product has increased by 5,000 units during a period. The following data are also available: Unit manufacturing costs of the period: variable-$24.00 fixed-$10.00 Unit operating expenses of the period: variable-8.00 fixed-3.00 The effect on operating income if variable costing is used rather than absorption costing would be a

$10 x 5,000 = $50,000 decrease

The rate of earnings is 6% and the cash to be received in 4 years is $20,000. The present value amount, using the following partial table of present value of $1 at compound interest is Year 6% 10% 12% 1 0.943 0.909 0.893 2 0.890 0.826 0.797 3 0.840 0.751 0.712 4 0.792 0.683 0.636

$15,840

Magpie Corporation uses the total cost method of product pricing. Below is cost information for the production and sale of 60,000 units of its sole product. Magpie desires a profit equal to a 25% return on invested assets of $700,000. Fixed factory overhead cost $38,700 Fixed selling and administrative costs 7,500 Variable direct materials cost per unit 4.60 Variable direct labor cost per unit 1.88 Variable factory overhead cost per unit 1.13 Variable selling and administrative cost per unit 4.50 The dollar amount of desired profit from the production and sale of Magpie's product is

$175,000

Using the variable cost method, determine the selling price (rounded to the nearest dollar) for 30,000 units using the following data: Variable cost per unit $15 Total fixed costs $90,000 Desired profit $150,000

$23

The management of Idaho Corporation is considering the purchase of a new machine costing $430,000. The company's desired rate of return is 10%. The present value factors for $1 at compound interest of 10% for 1 through 5 years are 0.909, 0.826, 0.751, 0.683, and 0.621, respectively. In addition to the foregoing information, use the following data in determining the acceptability of this investment: Year, Operating Income, Net Cash Flow 1 $100,000 $180,000 2 40,000 120,000 3 20,000 100,000 4 10,000 90,000 5 10,000 90,000 The net present value for this investment is

$25,200

Yasmin Co. can further process Product B to produce Product C. Product B is currently selling for $30 per pound and costs $28 per pound to produce. Product C would sell for $55 per pound and would require an additional cost of $31 per pound to produce. The differential cost of producing Product C is

$31 per pound

From the provided schedule of activity costs, determine the external failure costs.

$31,000

A business operated at 100% of capacity during its first month and incurred the following costs: Production costs (10,000 units): Direct materials --- $80,000 Direct labor --- 120,000 Variable factory overhead --- 140,000 Fixed factory overhead --- 40,000 --- $380,000 Operating expenses: Variable operating expenses --- $65,000 Fixed operating expenses --- 25,000 --- 90,000 If 600 units remain unsold at the end of the month, the amount of inventory that would be reported on the absorption costing balance sheet is

(80,000 + 120,000 + 140,000 + 40,000) / 10,000 = $38 $38 x 600 units = $22,800

Finch Company began its operations on March 31 of the current year. Finch has the following projected costs: April May June Manufacturing costs: $156,800 - $195,200 - $217,600 Insurance expense: 1,000 - 1,000- 1,000 Depreciation expense: 2,000 2,000 2,000 Property tax expense***500 500 500 *Of the manufacturing costs, three-fourths is paid for in the month they are incurred; one-fourth is paid in the following month. **Insurance expense is $1,000 a month; however, the insurance is paid four times yearly in the first month of the quarter (i.e., January, April, July, and October).***Property tax is paid once a year in November. The cash payments for Finch Company expected in the month of June are

212,000

The following data relate to direct labor costs for the current period: Standard costs 6,000 hours at $12.00 Actual costs 7,500 hours at $11.40 The direct labor rate variance is

4,500 favorable

If the expected sales volume for the current period is 7,000 units, the desired ending inventory is 400 units, and the beginning inventory is 400 units, the number of units set forth in the production budget, representing total production for the current period, is

7,000 units

The profit margin for Division C is 6%, and the investment turnover is 1.2. The return on investment for Division B is

7.2%

Southern Company is preparing a cash budget for April. The company has $12,000 cash at the beginning of April and anticipates $30,000 in cash receipts and $34,500 in cash disbursements during April. Southern Company has an agreement with its bank to maintain a minimum cash balance of $10,000. To maintain the required balance during April, the company must

Beg. Inv.: 12,000 + Anticipated receipts: 30,000 = 42,000 42,000 - (34,500 + 10,000) = -2,500 Borrow $2,500

If budgeted beginning finished goods inventory is $8,000, budgeted ending finished goods inventory is $9,400, and budgeted cost of goods sold is $10,260, budgeted cost of goods manufactured should be

COGM = 10,260 - 8,000 + 9,400 = 11,660

What do lean manufacturers demand from their vendors?

all of these choices

Which of the following is an example of a strategic performance measurement system?

balanced scorecard

Which of the following is the best-known strategic performance measurement system?

balanced scorecard

Starling Co. is considering disposing of a machine with a book value of $12,500 and estimated remaining life of five years. The old machine can be sold for $1,500. A new high-speed machine can be purchased at a cost of $25,000. It will have a useful life of five years and no residual value. It is estimated that the annual variable manufacturing costs will be reduced from $26,000 to $23,500 if the new machine is purchased. The five-year differential effect on profit from replacing the machine is a(n)

decrease of $11,000

The lean philosophy attempts to reduce setup times, which will

decrease within-batch wait time

The standard price and quantity of direct materials are separated because

direct materials prices are controlled by the purchasing department and quantity used is controlled by the production department

The production budget is used to prepare which of the following budgets?

direct materials purchases, direct labor cost, and factory overhead cost

The term used to describe expenses that are incurred by a specific department is _____ expenses.

direct operating

Which of the following is an objective of lean manufacturing?

eliminating waste

Using the variable cost method, the markup per unit for 30,000 units (rounded to the nearest dollar) using the following data is Variable cost per unit $15 Total fixed costs $90,000 Desired profit $150,000

$8

A company's balanced scorecard may include

both leading and lagging indicators

Which of the following is the correct formula for the direct labor time variance in a service business?

(Actual Staff Hours - Standard Staff Hours) × Standard Rate per Hour

Which of the following is a characteristic of a lean accounting system?

all of these choices

Contribution margin reporting can be beneficial for analyzing which of the following?

ALL OF THESE CHOICES.

Which of the following is a value-added activity?

preventive maintenance

Which of the following is not an eco-efficiency measure?

material price efficiency

Which of the following budgets allows for adjustments in activity levels?

FLEXIBLE BUDGET

When using lean principles and activity analyses with service businesses, the "product" is normally

the customer

A franchisor may provide support to the franchisee in which of the following ways?

All of these choices

The condensed income statement for Hayden Corp. for the past year is as follows: Product T U Sales $ 680,000 $320,000 Costs: Variable costs $(540,000) $(220,000) Fixed costs (145,000) (40,000) Total costs $(685,000) $(260,000) Income (loss) $ (5,000) $ 60,000 Management is considering the discontinuance of the manufacture and sale of Product T at the beginning of the current year. The discontinuance would have no effect on the total fixed costs and expenses or on the sales of Product U. The amount of change in profit for the current year that will result from the discontinuance of Product T is a

$140,000 decrease

Dotterel Corporation uses the variable cost method of product pricing. Below is cost information for the production and sale of 35,000 units of its sole product. Dotterel desires a profit equal to an 11.2% return on invested assets of $350,000. Fixed factory overhead cost $105,000 Fixed selling and administrative costs 35,000 Variable direct materials cost per unit 4.34 Variable direct labor cost per unit 5.18 Variable factory overhead cost per unit 0.98 Variable selling and administrative cost per unit 0.70

$16.32

Keating Co. is considering disposing of equipment that cost $50,000 and has $40,000 of accumulated depreciation to date. Keating Co. can sell the equipment through a broker for $25,000 less a 5% commission. Alternatively, Gunner Co. has offered to lease the equipment for five years for a total of $48,750. Keating will incur repair, insurance, and property tax expenses estimated at $8,000 over the five-year period. At lease-end, the equipment is expected to have no residual value. The net differential profit or loss from the sell alternative is a

$17,000 loss

Delaney Company is considering replacing equipment that originally cost $600,000 and has accumulated depreciation of $420,000 to date. A new machine will cost $790,000. The sunk cost in this situation is

$180,000

An investment of $185,575 is expected to generate returns of $65,000 per year for each of the next 4 years. What is the investment's internal rate of return? Following is a table for the present value of $1 at compound interest: Year 6% 10% 12% 15% 1 0.943 0.909 0.893 0.870 2 0.890 0.826 0.797 0.756 3 0.840 0.751 0.712 0.658 4 0.792 0.683 0.636 0.572 5 0.747 0.621 0.567 0.497 Following is a table for the present value of an annuity of $1 at compound interest: Year 6% 10% 12% 15% 1 0.943 0.909 0.893 0.870 2 1.833 1.736 1.690 1.626 3 2.673 2.487 2.402 2.283 4 3.465 3.170 3.037 2.855 5 4.212 3.791 3.605 3.353

$185,575 ÷ $65,000 = 2.855 at 4 years = 15%

Following is a table for the present value of $1 at compound interest: Year 6% 10% 12% 1 0.943 0.909 0.893 2 0.890 0.826 0.797 3 0.840 0.751 0.712 4 0.792 0.683 0.636 5 0.747 0.621 0.567 Following is a table for the present value of an annuity of $1 at compound interest: Year 6% 10% 12% 1 0.943 0.909 0.893 2 1.833 1.736 1.690 3 2.673 2.487 2.402 4 3.465 3.170 3.037 5 4.212 3.791 3.605 Using the tables provided, the present value of $30,000 to be received 3 years from today, assuming an earnings rate of 6%, is

$25,200

Dickerson Co. is evaluating a project requiring a capital expenditure of $810,000. The project has an estimated life of 4 years and no salvage value. The estimated net income and net cash flow from the project are as follows: Year, Operating Income, Net Cash Flow 1 $ 75,000 $285,000 2 100,000 290,000 3 109,000 190,000 4 36,000 125,000 $320,000 $890,000 The company's minimum desired rate of return is 12%. The present value of $1 at compound interest of 12% for 1, 2, 3, and 4 years is 0.893, 0.797, 0.712, and 0.636, respectively.Determine the average rate of return on investment.

$320,000 ÷ 4 / ($810,000 + $0) ÷ 2= $80,000/405,000= 19.8%

Widgeon Co. manufactures three products: Bales, Tales, and Wales. The selling prices are $55, $78, and $32, respectively. The variable costs for each product are $20, $50, and $15, respectively. Each product must go through the same processing in a machine that is limited to 2,000 hours per month. Bales take 5 hours to process; Tales 7 hours; and Wales 1 hour. Assuming that Widgeon Co. can sell all of the products it can make, the maximum contribution margin it can earn per month is

$34,000

Sifton Electronics Corporation manufactures and assembles electronic motor drives for video cameras. The company assembles the motor drives for several accounts. The process consists of a lean cell for each customer. The following information relates to only one customer's lean cell for the coming year. For the year, projected labor and overhead was $7,370,000 and materials costs were $28 per unit. Planned production included 4,000 hours to produce 27,500 motor drives. Actual production for August was 1,600 units, and motor drives shipped amounted to 1,380 units. Conversion costs are applied based on units of production From the foregoing information, determine the production costs transferred to Cost of Goods Sold during August. a. $369,840

$408,480

Flyer Company sells a product in a competitive marketplace. Market analysis indicates that its product would probably sell at $48 per unit. Flyer management desires a 12.5% profit margin on sales. Flyer's current full cost for the product is $44 per unit. The target cost of the company's product is

$42

Lofty Airlines has a flight for which the regular ticket price is $200 and the variable costs per passenger are $50. Fixed costs assigned to each flight are $12,000. Each flight has a capacity of 125 seats, with an average of 95 seats sold at the regular price. To attract customers to the last 30 unsold seats, Lofty discounts the tickets by 50% for standby passengers. The contribution margin per standby passenger is

$50

Farris Company is considering a cash outlay of $500,000 for the purchase of land, which it could lease for $40,000 per year. If alternative investments are available that yield a 15% return, the opportunity cost of the purchase of the land is

$75,000

What is the present value of $8,000 to be received at the end of 6 years if the required rate of return is 15%?Following is a table for the present value of $1 at compound interest: Year 15% Year 15% 1 0.870 6 0.432 2 0.756 7 0.376 3 0.658 8 0.327 4 0.572 9 0.284 5 0.497 10 0.247 Following is a table for the present value of an annuity of $1 at compound interest: Year 15% Year 15% 1 0.870 6 3.785 2 1.626 7 4.160 3 2.283 8 4.487 4 2.855 9 4.772 5 3.353 10 5.019

$8,000 × 0.432 = $3,456

Nighthawk Inc. is considering disposing of an old machine with a book value of $22,500 and an estimated remaining life of three years. The old machine can be sold for $6,250. A new machine with a purchase price of $68,750 is being considered a replacement. It will have a useful life of three years and no residual value. It is estimated that the annual variable manufacturing costs will be reduced from $43,750 to $20,000 if the new machine is purchased. The three-year differential effect on profit from replacing the machine is a(n)

$8,750 increase

Woodpecker Co. has $296,000 in accounts receivable on January 1. Budgeted sales for January are $860,000. Woodpecker Co. expects to sell 20% of its merchandise for cash. Of the remaining 80% of sales on account, 75% are expected to be collected in the month of sale and the remainder the following month. The January cash collections from sales are

$984,000

Truliant Co. sells a product called Withitall and has predicted the following sales for the first four months of the current year: January February March April Sales in units - 1,700 1,900 2,100 1,600 Ending inventory for each month should be 20% of next month's sales. The number of units produced in February should be

1,940 units

A business operated at 100% of capacity during its first month and incurred the following costs: Production costs (20,000 units): Direct materials --- $180,000 Direct labor --- 240,000 Variable factory overhead --- 280,000 Fixed factory overhead --- 100,000 --- $800,000 Operating expenses: Variable operating expenses --- $130,000 Fixed operating expenses --- 50,000 --- 180,000 If 1,600 units remain unsold at the end of the month, the amount of inventory that would be reported on the variable costing balance sheet is

1. Variable cost per unit = (180,000 + 240,000 + 280,000) / 20,000 = $35 2. ($35 x 1,600) = $56,000

A business operated at 100% of capacity during its first month and incurred the following costs: Production costs (2,500 units): Direct materials --- $42,500 Direct labor --- 85,000 Variable factory overhead --- 47,500 Fixed factory overhead --- 12,500 --- $187,500 Operating expenses: Variable operating expenses --- $15,000 Fixed operating expenses --- 4,500 --- 19,500 If 75 units remain unsold at the end of the month, the amount of inventory that would be reported on the absorption costing balance sheet is

1. Variable cost per unit = (42,500 + 85,000 + 47,500+12,500) / 2,500 = $75 2. 75 units x $75 = 5,625

Dove Corporation began its operations on September 1 of the current year. Budgeted sales for the first three months of business are $250,000, $320,000, and $410,000, respectively, for September, October, and November. The company expects to sell 25% of its merchandise for cash. Of sales on account, 70% are expected to be collected in the month of the sale and 30% in the month following the sale. The cash collections in November are

389,750

A strategy map plays an important role for a company using the balanced scorecard approach to its performance measurement system. Which of the following is not a function of the strategy map?

A strategy map shows causal relationships between only the financial and internal processes perspectives of the balanced scorecard.

The management of Nebraska Corporation is considering the purchase of a new machine costing $490,000. The company's desired rate of return is 10%. The present value factors for $1 at compound interest of 10% for 1 through 5 years are 0.909, 0.826, 0.751, 0.683, and 0.621, respectively. In addition to the foregoing information, use the following data in determining the acceptability: Year, Operating Income, Net Cash Flow 1 $100,000 $180,000 2 40,000 120,000 3 40,000 100,000 4 10,000 90,000 5 10,000 120,000 The cash payback period for this investment is

4 years

Materials used by Square Yard Products Inc. in producing Division 3's product are currently purchased from outside suppliers at a cost of $5.00 per unit. However, the same materials are available from Division 6. Division 6 has unused capacity and can produce the materials needed by Division 3 at a variable cost of $3.00 per unit. A transfer price of $3.20 per unit is established, and 40,000 units of material are transferred, with no reduction in Division 6's current sales. Division 3's operating income will increase by

40,000 units x $5 = 200,000 (total cost for outside supplier) 40,000 units x $3.2 = 128,000 (transfer price) Difference = 200,000 - 128,000 = $72,000

Production and sales estimates for May for Cardinal Co. are as follow: Estimated inventory (units), May 1 19,500 Desired inventory (units), May 31 19,300 Expected sales volume (units): Territory W 6,000 Territory X 7,000 Territory Y 8,000 Unit sales price $20 The number of units expected to be sold in May is

6,000 + 7,000 + 8,000 = 21,000 units

Laurie Inc.'s static budget for 10,000 units of production includes $60,000 for direct materials, $44,000 for direct labor, fixed utility costs of $5,000, and supervisor salaries of $25,000. A flexible budget for 12,000 units of production would show

60,000 / 10,000 = 6 x 12,000 = 72,000 Direct materials 44,000 / 10,000 = 4.4 x 12,000 = 52,800 Direct labor 5,000 fixed utilities 25,000 Supervisor salary

Stephanie Corporation sells a single product. Budgeted sales for the year are anticipated to be 640,000 units, estimated beginning inventory is 108,000 units, and desired ending inventory is 90,000 units. The quantities of direct materials expected to be used for each unit of finished product are given below. Material A 0.50 lb./unit @ $0.70/ pound Material B 1.00 lb./unit @ $1.70 / pound Material C 1.20 lbs./unit @ $1.00 / pound The dollar amount of Material A used in production during the year is

640,000 [sales] + 90,000 [end. Inv] = 730,000 Cogm: 730,000 - 108,000 [beg. Inv.] = 622,000 622,000 x .5 x .7 = 217,700

A project has estimated annual net cash flows of $80,000. It is estimated to cost $600,000. Determine the cash payback period.

7.5 years ($600,000 ÷ $80,000)

The level of inventory of a manufactured product has increased by 8,000 units during a period. The following data are also available: Unit manufacturing costs of the period: variable-$24.00 fixed-$10.00 Unit operating expenses of the period: variable-$8.00 fixed-$3.00 The effect on operating income if absorption costing is used rather than variable costing would be a(n)

8,000 x $10 = 80,000 increase

A customer service department has the following resolution response time data: Average Response Time First contact 0.25 hr. Service scheduling 0.50 hr. Wait for service 24.00 hrs.Service 1.50 hrs. Total resolution time 26.25 hrs. What is the value-added ratio (rounded to one decimal place) in this process?

8.6%

As of January 1 of the current year, Grayson Company had accounts receivable of $40,000. The sales for January, February, and March were $120,000, $140,000, and $150,000, respectively. Of each month's sales, 20% are for cash. Of the remaining 80% (the credit sales), 60% are collected in the month of sale, with the remaining 40% collected in the following month. The total cash collected (both from accounts receivable and for cash sales) in the month of January is

Accounts receivable: $40,000 Cash 20%/month: (.2 x 120,000) = 24,000 Credit sales for Jan.: 120,000 - 24,000 = 96,000 60% collected in Jan.: .6 x 96,000 = 57,600 Total Jan. Cash Collected = 40,000 + 24,000 + 57,600 = 121,600

As of January 1 of the current year, Grackle Company had accounts receivable of $50,000. The sales for January, February, and March were $120,000, $140,000, and $150,000, respectively. Of each month's sales, 20% are for cash. Of the remaining 80% (the credit sales), 60% are collected in the month of sale, with the remaining 40% collected in the following month. The total cash collected (both from accounts receivable and cash sales) in the month of March is

Accounts receivable: 50,000 Jan.: (120,000 x .2) = 24,000 → credit sales:120,000 - 24,000 = 96,000 Feb.: (140,000 x .2) = 28,000 → credit sales: 140,000 - 28,000 = 112,000 Mar.: (150,000 x .2) = 30,000 → credit sales: 150,000 - 30,000 = 120,000 Feb.: 28,000 + (112,000 x .6) + (96,000 x .4) = 133600 March.: 30,000 + (120,000 x .6) + (112,000 x .4) = 146,800

A company is preparing its cash budget. Its cash balance on January 1 is $290,000, and it has a minimum cash requirement of $340,000. The following data have been provided: January February March Cash receipts $1,061,200 $1,182,400 $1,091,700 Cash payments 984,500 1,210,000 1,075,000 The amount of the deficiency or excess cash (after considering the minimum cash balance required) for January is a(n)

Beg. Inv.: 290,000 + Receipt 1,061,200 = 1,351,200 1,351,200 - (984,500 + 340,000) = Excess of 26,700

A business operated at 100% of capacity during its first month and incurred the following costs: Production costs (10,000 units): Direct materials --- $140,000 Direct labor --- 40,000 Variable factory overhead --- 20,000 Fixed factory overhead --- 4,000 --- $204,000 Operating expenses: Variable operating expenses --- $ 34,000 Fixed operating expenses --- 2,000 --- 36,000 If 2,000 units remain unsold at the end of the month and sales total $300,000 for the month, the amount of operating income reported on the variable costing income statement would be

Operating Income = Contribution Margin - Fixed Costs 1. Variable Cost Per Unit = (140,000 + 40,000 + 20,000) / 10,000 = $20 2. Manufacturing Margin = 300,000 - (8,000 x 20) = 140,000 3. Contribution Margin = 140,000 - 34,000 = 106,000 4. Fixed Costs = 4,000 + 2,000 = 6,000 5. Operating Income = 106,000 - 6,000 = 100,000

Planned sales are 10,000 units at $7.00 per unit. Actual sales are 11,000 units at $6.50 per unit. Which of the following statements is not true?

THE TOTAL REVENUE VARIANCE IS UNFAVORABLE.

Proposals M and N each cost $550,000, have 6-year lives, and have expected total cash flows of $750,000. Proposal M is expected to provide equal annual net cash flows of $125,000, while the net cash flows for Proposal N are as follows: Year 1 $250,000 Year 2 200,000 Year 3 150,000 Year 4 75,000 Year 5 50,000 Year 6 25,000 $750,000 Determine the cash payback period for each proposal.

Proposal M: $550,000 ÷ $125,000 = 4.4 years Proposal N: $250,000 + $200,000 + 2/3($150,000) = $550,000 = 2 2/3 years

Assume that Division Blue has achieved a yearly operating income of $110,000 using $900,000 of invested assets. If management has set a minimum acceptable return on investment of 11%, the residual income is

Residual income = Operating income - (min. Required return rate x cost of operating assets) Residual income = 110,000 - (900,000 x .11) = $11,000

Below is budgeted production and sales information for Flushing Company for the month of December. Estimated beginning inventory: xxx-32,000 units zzz-20,000 units Desired ending inventory: xxx-34,000 units zzz-17,000 units Region I, anticipated sales: xxx-320,000 units zzz-260,000 units Region II, anticipated sales: xxx-180,000 units zzz-140,000 units The unit selling price for product XXX is $5 and for product ZZZ is $15. Budgeted sales for the month is

Sales = Beg. Inv. + Production/Purchase - End. Inv XXX = 5(320,000+180,000) = 2,500,000 ZZZ = 15(260,000 +140,000) = 6,000,000 Total = 8,500,000

Cardinal Company has finished goods inventory of 55,000 units on January 1. Its projected sales for the next four months are: January, 200,000 units; February, 180,000 units; March, 210,000 units; and April, 230,000 units. Cardinal Company wishes to maintain a desired ending finished goods inventory of 20% of the following month's sales. The budgeted units of production for January would be

Sales = Beg. Inv. + purchases/production - end. Inv. Production = 200,000 - 55,000 + (.2 x 180,000) = 181,000 units

It would be acceptable to have the selling price of a product just above the variable costs and expenses of making and selling it in

Short run.

Which of the following statements best describes the relationship among the costs of quality?

Spending more on prevention and appraisal costs will reduce the total overall costs of quality.

Which of the following reasons would cause a company to reject an offer to accept business at a special price?

The additional sales will increase fixed expenses.

Identify four capital investment evaluation methods discussed in the chapter and discuss the strengths and weaknesses of each method.

The four capital investment models discussed in the chapter are the cash payback method, the average rate of return method, the net present value method, and the internal rate of return method. The cash payback method is easy to use and understand and is based on cash flows, which are of primary concern to many businesses. However, it ignores profitability and the time value of money. The average rate of return method is easy to use, considers the entire amount of income earned over the life of the proposal, and emphasizes accounting income, which is often used by investors and creditors to evaluate management performance. However, it does not directly consider the expected cash flows from the proposal or the timing of the expected cash flows. The net present value method and the internal rate of return method are both based on cash flows, profitability, and the time value of money. The disadvantages of these two methods are that they have more complex computations and they assume the cash flows can be reinvested at the minimum desired rate of return.

Several items are missing from the following table of return on investment and residual income. Determine the missing items, identifying each item by the appropriate letter (a-l). Round percentages to one decimal place. Division, Invested Assets, Operating Income, Return on Inv., Min. ROI, Min. Amt. of Operating Income, Residual Income East (a) (b) (c) 16.0% $128,000 $10,000 West $850,000 $153,000 (d) 12.0% (e) (f) North $825,000 (g) 20.0% (h) (i) $24,000 South (j) $129,000 24.0% (k) $60,000 (l)

a) $800,000 ($128,000 ÷ 16.0%) (b) $138,000 ($128,000 + $10,000) (c) 17.3% ($138,000 ÷ $800,000) (d) 18.0% ($153,000 ÷ $850,000) (e) $102,000 ($850,000 × 12.0%) (f) $51,000 ($153,000 - $102,000) (g) $165,000 ($825,000 × 20.0%) (h) 17.1% ($141,000 ÷ $825,000) (i) $141,000 ($165,000 - $24,000) (j) $537,500 ($129,000 ÷ 24.0%) (k) 11.2% ($60,000 ÷ $537,500) (l) $69,000 ($129,000 - $60,000)

A project has estimated annual cash flows of $95,000 for 4 years and is estimated to cost $260,000. Assume a minimum acceptable rate of return of 10%. Using the following tables, determine (a) the net present value of the project and (b) the present value index, rounded to two decimal places. Following is a table for the present value of $1 at compound interest: Year 6% 10% 12% 1 0.943 0.909 0.893 2 0.890 0.826 0.797 3 0.840 0.751 0.712 4 0.792 0.683 0.636 5 0.747 0.621 0.567 Following is a table for the present value of an annuity of $1 at compound interest: Year 6% 10% 12% 1 0.943 0.909 0.893 2 1.833 1.736 1.690 3 2.673 2.487 2.402 4 3.465 3.170 3.037 5 4.212 3.791 3.605

a. $41,150 [($95,000 × 3.170) - $260,000] b. 1.16 ($301,150 ÷ $260,000)

18. Tony's Company has the following information for March: Sales $1,000,000 Variable cost of goods sold 490,000 Fixed manufacturing costs 170,000 Variable selling and administrative expenses 112,000 Fixed selling and administrative expenses 100,000 Determine the March (a) manufacturing margin, (b) contribution margin, and (c) operating income for Tony's Company

a. $510,000 ($1,000,000-$490,000) b. $398,000 ($510,000-$112,000) c. $128,000 ($398,000-$170,000-$100,000)

At XLT Inc., variable costs are $80 per unit, and fixed costs are $40,000. Sales are estimated to be 4,000 units. a. How much would absorption costing operating income differ between a plan to produce 8,000 units and a plan to produce 10,000 units? b. How much would variable costing operating income differ between the two production plans?

a. $8,000 greater. 8,000 units x ($5.00- $4.00), or ($2,000 units x $4.00) b. there would be no difference in variable costing operating income between the two plans

Bottlebrush Company has operating income of $60,000, invested assets of $345,000, and sales of $786,000. Use the DuPont formula to compute the return on investment, and show (a) the profit margin, (b) the investment turnover, and (c) the return on investment. Round the profit margin percentage and the return on investment to two decimal places and the investment turnover to three decimal places.

a. profit margin=60,000 ÷ $786,000 = 7.63% b. Investment Turnover = $786,000 ÷ $345,000 = 2.278 c. Return on Investment = 7.63% × 2.278 = 17.38%

A company's balanced scorecard may include

both nonfinancial and financial metrics

A variant of fiscal-year budgeting whereby a 12-month projection into the future is maintained at all times is termed _____ budgeting.

continuous

Cody Paper Mill produces various grades of paper sheeting for industrial uses. All of the following may be considered an initiative undertaken as a part of the company's CSR efforts except

expanding the customer base to increase the net income of the company

Which of the following are present value methods of analyzing capital investment proposals?

net present value and internal rate of return

Traditional manufacturing emphasizes all of the following except

team-oriented employee involvement

Which of the following is not a prevention cost?

testing finished products

The total manufacturing cost variance is

the difference between total actual costs and total standard costs for the units produced

The signs that a manager is subject to motivated reasoning include all of the following except

the manager ignores good news