Reference no: EM131157709

Part1:

Question 1

Mendez Company provides the following information about its product:

Targeted operating income	$50,000
Selling price per unit	6.00
Variable cost per unit	1.50
Total fixed costs	125,000

What is the contribution margin ratio?
75%
100%
125%
25%

Question 2
The utility bill for a law firm consists of both fixed and variable costs. Refer to the 4-month data below and apply the high-low method to answer the question.

	Minutes	Total Bill
January	460	$3,000
February	200	$2,675
March	160	$2,625
April	300	$2,800

If the company uses 380 minutes in May, how much will the total bill be?
$2425
$2478
$2900
$3767

Question 3
Vatsala Company provides the following financial information:

Income from operations	$200,000
Interest expense	45,000
Gains/(losses) on sale of equipment	(2,500)
Net income	152,500
Total assets at Jan 1	2,600,000
Total assets at Dec 31	3,200,000

Calculate return on investment based on the information given above.
6.3%
5.3%
6.9%
7.2%

Question 4
Venkat Inc. manufactures and sells pens for $5 each. Wolf Corp. has offered Venkat Inc. $3 per pen for a one-time order of 3,500 pens. The total manufacturing cost per pen, using traditional costing, is $1 per unit, and consists of variable costs of $0.85 per pen and fixed overhead costs of $0.15 per watch. Assume that Venkat Inc. has excess capacity and that the special order would not adversely affect regular sales. What is the change in operating income that would result from accepting the special sales order?
$7000 increase
$7000 decrease
$7525 increase
$7525 decrease

Question 5
Benjamin Equipment Company has several divisions which are investment centers. Data for the Boat Division and the Trailer Division are shown here:

	Boat Division	Trailer Division
Operating income	$90,000	$36,000
Total assets at Jan 1	$670,000	$230,000
Total assets at Dec 31	$710,000	$220,000

Which of the following statements would be the most meaningful interpretation of this data?
Performance of Boat Division is better than that of Trailer Division because Boat Division has higher assets.
Trailer Division uses its assets more efficiently than Boat Division because it has higher ROI.
Boat Division shows more efficient use of assets than Trailer Division because it has higher operating income.
Boat Division is more financially successful than Trailer Division because it shows an increase in assets

Question 6
Jackson Company had a finished goods inventory of 55,000 units on January 1. It's projected sales for the next four months were: January - 200,000 units; February - 180,000 units; March - 210,000 units; and April - 230,000 units. The Jackson Company wishes to maintain a desired ending finished goods inventory of 20% of the following months sales.
What should the budgeted production be for January?
236000 units
181000 units
20000 units
219000 units

Question 7
Nebraska Corporation began its operations on September 1 of the current year. Budgeted sales for the first three months of business are $240,000, $300,000, and $420,000, respectively, for September, October, and November. The company expects to sell 20% of its merchandise for cash. Of sales on account, 70% are expected to be collected in the month of the sale, 25% in the month following the sale, and the remainder in the following month. The cash collections in September from accounts receivable are:
$240000
134400
192000
168000

Question 8
Florida Company began its operations on March 31 of the current year. Projected manufacturing costs for the first three months of business are $156,800, $195,200, and $217,600, respectively, for April, May, and June. Depreciation, insurance, and property taxes represent $28,800 of the estimated monthly manufacturing costs. Insurance was paid on March 31, and property taxes will be paid in November. Three-fourths of the remainder of the manufacturing costs are expected to be paid in the month in which they are incurred, with the balance to be paid in the following month. The cash payments for manufacturing in the month of June are:
$146000
$188800
$217600
$183200

Question 9
The following data relate to direct materials costs for November:

Actual costs	4,600 pounds at $5.50
Standard costs	4,500 pounds at $6.00

What is the direct materials price variance?
$2250 Favorable
$2250 Unfavorable
$2300 Favorable
$1700 Unfavorable

Question 10
The following data relate to direct materials costs for November:

Actual costs	4,600 pounds at $5.50
Standard costs	4,500 pounds at $6.00

What is the direct materials quantity variance?
$550 Unfavorable
$600 Favorable
$550 Favorable
$600 Unfavorable

Question 11
The following data relate to direct labor costs for February:

Actual costs	7,700 hours at $13
Standard costs	7,000 hours at $9

What is the direct labor time variance?
$9100 Favorable
$9100 Unfavorable
$6300 Unfavorable
$6300 favorable

Question 12
The following data relate to direct labor costs for February:

Actual costs	7,700 hours at $13
Standard costs	7,000 hours at $9

$28000 Favorable
$28000 Unfavorable
$30800 Favorable
$30800 Unfavorable

Question 13
Balance sheet and income statement data indicate the following:

Bonds payable, 10% (issued 1988 due 2012)	$1,000,000
Preferred 5% stock, $100 par (no change during year)	300,000
Common stock, $50 par (no change during year)	2,000,000
Income before income tax for year	350,000
Income tax for year	80,000
Common dividends paid	50,000
Preferred dividends paid	15,000

Based on the data presented above, what is the number of times bond interest charges were earned ?
3.7
4.4
4.5
3.5

Question 14
Kim Corporation has two major divisions: Agricultural Products and Industrial Products. It provides the following information for the year 2014

	Agriculture Division	Industrial Division
Sales revenue	$140,000	$1,040,000
Operating income	$46,400	$220,000
Average total assets	$300,000	$5,540,000
Target rate of return	14.0%	14.0%

Calculate the residual income for the Agriculture division.
$5500
$4400
$2500
$1800

Question 15
New York Inc. Inc. has a division that manufactures a component that sells for $150 and has a variable cost of $45. Another division of the company wants to purchase the component. Fixed cost per unit of component is $25. What is the minimum transfer price if the division is operating at capacity?
$150
$45
$55
$140

Question 16
Chesapeake Company provided the following manufacturing costs for the month of June.

Direct labor cost	$136,000
Direct materials cost	80,000
Equipment depreciation (straight-line)	24,000
Factory insurance	19,000
Factory manager's salary	12,800
Janitor's salary	5,000
Packaging costs	18,800
Property taxes	16,000

From the above information, calculate Chesapeake's total variable costs.
$311600
$62300
$234800
$38400

Question 17
Da Silva Company has variable costs of $0.60 per unit of product. In August, the volume of production was 24,000 units and units sold were 20,000. The total production costs incurred were $31,900. What are the fixed costs per month?
$17500
$19900
$9600
$14450

Question 18
Based on the following data, what is the quick ratio, rounded to one decimal point?

Accounts payable			$ 30,000
Accounts receivable			65,000
Accrued liabilities			7,000
Cash			20,000
Intangible assets			40,000
Inventory			72,000
Long-term investments			100,000
Long-term liabilities			75,000
Marketable securities			36,000
Notes payable (short-term)			20,000
Property, plant, and equipment			625,000
Prepaid expenses			2,000

2.4
3.4
2.1
1.5

Question 19
The Rand Corporation began the current year with a retained earnings balance of $25,000. During the year, the company corrected an error made in the prior year, which was a failure to record depreciation expense of $3,000 on equipment. Also, during the current year, the company earned net income of $12,000 and declared cash dividends of $5,000. Compute the year end retained earnings balance.
$29000
$35000
$39000
$45000

Question 20
A company with 100,000 authorized shares of $4 par common stock issued 40,000 shares at $8. Subsequently, the company declared a 2% stock dividend on a date when the market price was $11 a share. What is the amount transferred from the retained earnings account to paid-in capital accounts as a result of the stock dividend?
$3200
$6400
$4800
$8800

Question 21
Phan Company owns 28% of the common stock of San Company and accounts for the investment using the equity method. Assuming that Phan Company purchased the stock several years ago, the balance in the investment account would be equal to the cost of the
investment
investment plus Phan's share of San's net income earned since the investment was purchased
investment plus the total amount of dividends Phan has received from San since the investment was purchased
investment plus Phan's share of San's net income earned since the investment was purchased minus the total amount of dividends Phan has received from San since the investment was purchased

Question 22
A loss on disposal of a segment would be reported in the income statement as a(n)
administrative expense
other expense
deduction from income from continuing operations
selling expense

Question 23
The Krebhel Company issued $100,000 of 12% bonds on May 1, 2006 at face value. The bonds pay interest semiannually on January 1 and July 1. The bonds are dated January 1, 2006, and mature on January 1, 2010. The total interest expense related to these bonds for the year ended December 31, 2006 is
$2000
$4000
$8000
$12000

Question 24
When the market rate of interest was 12%, Patel Corporation issued $1,000,000, 11%, 10-year bonds that pay interest annually. The selling price of this bond issue was
$ 321,970
$1,000,000
$943,494
$621,524

Question 25
When the market rate of interest was 11%, Shah Corporation issued $100,000, 8%, 10-year bonds that pay interest semiannually. Using the straight-line method, the amount of discount or premium to be amortized each interest period would be
$4000
$896
$17926
$1793

Question 26
A corporation purchased 1,000 shares of its $5 par common stock at $10 and subsequently sold 500 of the shares at $20. What is the amount of revenue realized from the sale?
$0
$5000
$2500
$10000

Question 27
The cost of merchandise sold during the year was $50,000. Merchandise inventories were $12,500 and $10,500 at the beginning and end of the year, respectively. Accounts payable were $6,000 and $5,000 at the beginning and end of the year, respectively. Using the direct method of reporting cash flows from operating activities, cash payments for merchandise total
$49000
$47000
$51000
$53000

Question 28
Equipment with an original cost of $50,000 and accumulated depreciation of $20,000 was sold at a loss of $7,000. As a result of this transaction, cash would
increase by $23,000
decrease by $7,000
increase by $43,000
decrease by $30,000

Question 29
Littleton Co. can further process Product J to produce Product D. Product J is currently selling for $21 per pound and costs $15.75 per pound to produce. Product D would sell for $35 per pound and would require an additional cost of $8.75 per pound to produce. What is the differential revenue of producing Product D?
$7 per pound
$8.75 per pound
$14 per pound
$5.25 per pound

Question 30
At the end of the fiscal year, the usual adjusting entry for depreciation on equipment was omitted. Which of the following statements is true?
Total assets will be understated at the end of the current year.
The balance sheet and income statement will be misstated but the statement of owner's equity will be correct for the current year.
Net income will be overstated for the current year.
Total liabilities and total assets will be understated.

Question 31
Which of the statements below indicates that a company earned a net income for the period?
The sum of the debits exceeds the sum of the credits in the Balance Sheet columns on the work sheet.
The sum of the credits exceeds the sum of the debits in the Income Statement columns on the work sheet.
The sum of the debits exceeds the sum of the credits in the Income Statement columns on the work sheet.
Cash inflows exceeded cash outflows.

Question 32
A sales invoice from Norman Geological Services included the following information: merchandise price, $4,000; transportation, $300; terms 1/10, n/eom, FOB shipping point. Assuming that a credit for merchandise returned of $600 is granted prior to payment, that the transportation is prepaid by the Norman Geological Services, and that the invoice is paid within the discount period, what is the amount of cash received by Norman Geological Services ?
$3,366
$3,400
$3,666
$3,950

Question 33
Bombay Exporters sold Maryland ImportersY merchandise on account FOB shipping point, 2/10, net 30, for $10,000. Bombay Exporters prepaid the $200 shipping charge. Which of the following entries does Bombay Exporters make to record this sale?
Accounts Receivable- Maryland Importers, debit $10,000; Sales, credit $10,000
Accounts Receivable- Maryland Importers, debit $10,000; Sales, credit $10,000, and
Accounts Receivable- Maryland Importers, debit $200; Cash, credit $200
Accounts Receivable- Maryland Importers , debit $10,400; Sales, credit $10,400
Accounts Receivable- Maryland Importers, debit $10,000; Sales, credit $10,000, and Transportation Out, debit $200; Cash, credit $200

Question 34
A check drawn by a depositor in payment of a voucher for $725 was recorded in the journal as $257. What entry is required in the depositor's accounts?
debit Accounts Payable; credit Cash
debit Cash; credit Accounts Receivable
debit Cash; credit Accounts Payable
debit Accounts Receivable; credit Cash

Question 35
Which of the following items that appeared on the bank reconciliation of Shamina Event Planners didnot require an adjusting entry?
bank service charges
deposits in transit
NSF Checks
A check for $520, recorded in the check register for $250.
Question 36
A used machine with a purchase price of $77,000, requiring an overhaul costing $8,000, installation costs of $5,000, and special acquisition fees of $2,000, would have a cost basis of
$92000
$91000
$87000
$86000

Question 37
Select the most appropriate example of a capital expenditure below?
cleaning the carpet in the front room
tune-up for a company truck
replacing an engine in a company car
replacing all burned-out light bulbs in the factory

Question 38
Machinery was purchased on January 1, 2005 for $51,000 by Venkat Manufacturing Group. The machinery has an estimated life of 5 years and an estimated salvage value of $6,000. Sum-of-the-years'-digits depreciation for 2006 would be
$92000
$91000
$87000
$86000

Question 39
On the basis of the following data, what is the estimated cost of the merchandise inventory on October 31 by the retail method employed by Lazarus Fine Silks ?

	Cost	Retail
Oct. 1      Merchandise Inventory	$225,000	$324,500
Oct. 1-31  Purchases (net)	335,000	475,500
Oct. 1-31  Sales (net)		700,000

$372000
$140000
$100000
$70000

Question 40
Maryland Bakers overstates its Merchandise inventory at the end of the year . Which of the following statements correctly states the effect of the error?
owner's equity is overstated
cost of merchandise sold is overstated
gross profit is understated
net income is understated.

Part 2:

Problem 1.

Morgana Engineering  was organized on August 1 of the current year.  Projected sales for the next three months are as follows:

August	$100,000
September	185,000
October	225,000

The company expects to sell 40% of its merchandise for cash.  Of the sales on account, one third are expected to be collected in the month of the sale and the remainder in the following month.

Prepare a schedule indicating cash collections of accounts receivable for August, September, and October.

Problem 2.

The following information is for the standard and actual costs for Chesapeake Bay  Corporation.

Standard Costs:

Budgeted units of production - 16,000 (80% of capacity)

Standard labor hours per unit - 4

Standard labor rate $26 per hour

Standard material per unit - 8 lbs.

Standard material cost - $ 12 per lb.

Budgeted fixed overhead $640,000

Standard variable overhead rate - $15 per labor hour.

Fixed overhead rate is based on budgeted labor hours at 80% capacity.

Actual Cost:

Actual production - 16,500 units

Actual fixed overhead - $640,000

Actual variable overhead - $1,000,000

Actual labor - 65,000 hours, total labor costs $1,700,000

Actual material purchased and used - 130,000 lbs, total material cost $1,600,000

Actual variable overhead - $1,000,000

Determine: (a) the quantity variance, price variance, and total direct materials cost variance; (b) the time variance, rate variance, and total direct labor cost variance; and (c) the volume variance, controllable variance, and total factory overhead cost variance.

Problem 3:

Rajiv Company has been purchasing a component, Part Q, for $18.90 a unit.  Rajiv is currently operating at 70% of capacity and no significant increase in production is anticipated in the near future.  The cost of manufacturing a unit of Part Q, determined by absorption costing methods, is estimated as follows:

Direct materials	$11.25
Direct labor	4.50
Variable factory overhead	1.12
Fixed factory overhead	3.15
Total	$20.02

Prepare a differential analysis report, dated March 12 of the current year, on the decision to make or buy Part Q.

Problem 4.

Brielle Company had stock outstanding as follows during each of its first three years of operations: 2,500 shares of $10, $100 par, cumulative preferred stock and 50,000 shares of $10 par common stock.  The amounts distributed as dividends are presented below.  Determine the total and per share dividends for each class of stock for each year by completing the schedule.

		Preferred		Common
Year	Dividends	Total	Per Share	Total	Per Share
1	$10,000	_________	_________	_________	__________
2	25,000	_________	_________	_________	__________
3	60,000	_________	_________	_________	__________

Problem 5.

Indicate whether the following actions would (+) increase, (-) decrease, or (0) not affect a company's total assets, liabilities, and stockholders' equity.

				Stockholders'
		Assets	Liabilities	Equity
(1)	Declaring a cash dividend	_______	_______	_______
(2)	Paying the cash dividend
	declared in (1)	_______	_______	_______
(3)	Declaring a stock dividend	_______	_______	_______
(4)	Issuing stock certificates
	for the stock dividend
	declared in (3)	_______	_______	_______