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business
fundamental accounting

Questions and Answers of Fundamental Accounting

Explain transfer pricing and methods to set transfer prices.
Describe allocation of joint costs across products.
Define cycle time and cycle efficiency, and explain their importance to production management
A retailer has three departments-housewares, appliances, and clothing-and buys advertising that benefits all departments. Ad- vertising expense is $150,000 for the year, and departmental sales for
Indirect expensesa. Cannot be readily traced to one department.b. Are allocated to departments based on the relative benefit each department receives.c. Are the same as uncontrollable expenses.d.a,
A division reports the information below. What is the division’s investment (asset) turnover?a. 37.5%b. 15c. 2.5d. 2.67e. 4 Sales... $500,000 Income... 75,000 Average assets. 200,000
A company operates three retail departments as profit centers, and the following information is available for each. Which department has the largest dollar amount of departmental contribution to
Using the data in question 4, Department X’s contribution to overhead as a percentage of sales isa. 20%b. 30%c. 12%d. 48%e. 32%
In each blank next to the following terms, place the identifying letter of its best description -23 1. 2. 3. Cost center Investment center Departmental accounting system Operating department 4. 451
In each blank next to the following terms, place the identifying letter of its best description Indirect expenses Controllable costs Direct expenses Uncontrollable costs A. Costs not within a
Refer to information in QS 24-5. Assume a target income of 12% of average invested assets. Compute residual income for each division
Classify each of the performance measures below into the most likely balanced scorecard perspective it relates to. Label your answers using C (customer), P (internal process), I (innovation and
Walt Disney reports the following information for its two Parks and Resorts divisions.Assume Walt Disney uses a balanced scorecard and sets a target of 90% occupancy in its resorts. Using Exhibit
Refer to information in QS 24-11. If the Windshield division has excess capacity, what is the range of possible transfer prices that could be used on transfers between the Windshield and Assembly
Car Mart pays $130,000 rent each year for its two-story building. The space in this building is occupied by five departments as specified here.The company allocates 65% of total rent expense to the
Compute and interpret (a) manufacturing cycle time and (b) manufacturing cycle efficiency using the following information from a manufacturing company. Process time Inspection time Move time Wait
Woh Che Co. has four departments: materials, personnel, manufacturing, and packaging. In a recent month, the four departments incurred three shared indirect expenses. The amounts of these indirect
(1) Use this information to allocate each of the three indirect expenses across the four departments.(2) Prepare a summary table that reports the indirect expenses assigned to each of the four
Below are departmental income statements for a guitar manufacturer. The manufacturer is considering dropping its electric guitar department since it has a net loss. The company classifies
The following is a partially completed lower section of a depmtmental expense allocation spreadsheet for ’Cozy Bookstore. It reports the total amounts of direct and indirect expenses allocated to
Jessica Porter works in both the jewelry department and the hosiery department of a retail store. Porter assists customers in both departments and arranges and stocks merchandise in both departments.
You must prepare a return on investment analysis for the regional manager of Fast & Great Burgers. This growing chain is trying to decide which outlet of two alternatives to open. The first location
Refer to information in Exercise 24-8. Compute profit margin and investment turnover for each department. Which department generates the most net income per dollar of sales? Which department is most
USA Airlines uses the following performance measures. Classify each of the performance measures be¬ low into the most likely balanced scorecard perspective it relates to. Label your answers using C
The Trailer department of Baxter Bicycles makes bike trailers that attach to bicycles and can carry children or cargo. The trailers have a retail price of $200 each. Each trailer incurs $80 of
Heart & Home Properties is developing a subdivision that includes 600 home lots. The 460 lots in the Canyon section are below a ridge and do not have views of the neighboring canyons and hills; the
Pirate Seafood Company purchases lobsters and processes them into tails and Bakes. It sells the lobster tails for $21 per pound and the Bakes for $ 14 per pound. On average, 100 pounds of lobster tue
National Bank has several departments that occupy both floors of a two-story building. The departmental accounting system has a single account. Building Occupancy Cost, in its ledger. The types and
Oakwood Company produces maple bookcases to customer order. It received an order from a customer to produce 5,000 bookcases. The following information is available for the production of the
Harmon’s has several departments that occupy all floors of a two-story building that includes a basement I floor. Harmon rented this building under a long-term lease negotiated when rental rates
Bonanza Entertainment began operations in January 2013 with two operating (selling) departments and one service (office) department. Its departmental income statements follow.The company plans to
Best Ink produces ink-jet printers for personal computers. It received an order for 500 printers from a customer. The following information is available for this orderRequired 1. Compute the
Review Polaris’ income statement in Appendix A and identify its revenues for the years ended December 31, 2011, December 31, 2010, and December 31, 2009. For the year ended December 31, 2011,
Improvement Station is a national home improvement chain with more than 100 stores throughout the country. The manager of each store receives a salary plus a bonus equal to a percent of the store’s
This chapter described and used spreadsheets to prepare various managerial reports (see Exhibit 24-6). You can download from Websites various tutorials showing how spreadsheets are used in managerial
What is the main responsibility of the budget committee?
What is the usual time period covered by a budget?
What are rolling budgets?.
A master budget (a) always includes a manufacturing budget specifying the units to be produced: (b) is prepared with a process starting with the operating budgets and continues with the capital
What are the three primary categories of budgets in the master budget?
In preparing monthly budgets for the third quarter, a company budgeted sales of 120 units for July and 140 units for August. Management wants each month's ending inventory to be 60% of next month's
How do the operating budgets for merchandisers and manufacturers differ?
How does a just-in-time inventory system differ from a safety stock system?
In preparing a budgeted balance sheet, (a) plant assets are determined by analyzing the capital expenditures budget and the balance sheet from the beginning of the budget period,(b) liabilities are
What sequence is followed in preparing the budgets that constitute the master budget?
Wild Wood Company’s management asks you to prepare its master budget using the following information. The budget is to cover the months of April, May, and June of 2013Additional Informationa. Sales
Describe the importance and benefits of budgeting and the process of budget administration.
Describe a master budget and the process of preparing it
Analyze expense planning using activity-based budgeting.
A plan that reports the units or costs of merchandise to be pur¬ chased by a merchandising company during the budget period is called aa. Capital expenditures budget.b. Cash budget.c. Merchandise
A hardware store has budgeted sales of $36,000 for its power tool department in July. Management wants to have $7,000 in power tool inventory at the end of July. Its beginning inventory of power
A store has the following budgeted sales for the next five monthsCash sales are 25% of total sales and all credit sales are expected to be collected in the month following the sale. The total amount
A plan that shows the expected cash inflows and cash outflows during the budget period, including receipts from loans needed to maintain a minimum cash balance and repayments of such loans, is
The following sales are predicted for a company’s next four monthsEach month’s ending inventory of finished goods should be 30% of the next month’s sales. At September 1, the finished goods
Which one of the following sets of items are all necessary components of the master budget? 1. Operating budgets, historical income statement, and budgeted balance sheet. 2. Prior sales reports,
Refer to information from QS 22-8. Forrest Company assigns variable overhead at the rate of $1.50 per unit of production. Fixed overhead equals $4,600,000 per month. Prepare a factory overhead budget
Refer to information from QS 22-10. Grace pays a sales manager a monthly salary of $6,000 and a commission of 8% of camera sales (in dollars). Prepare a selling expense budget for the month of June.
Refer to information from QS 22-10. Assume 60% of Grace’s sales are for cash. The remaining 40% are credit sales; these customers pay in the month following the sale. Compute the budgeted cash
Messers Company is preparing a cash budget for February. The company has $20,000 cash at the beginning of February and anticipates $75,000 in cash receipts and $100,250 in cash disbursements during
Use the information in Exercise 22-3 and the following additional information to prepare a budgeted in¬ come statement for the month of July and a budgeted balance sheet for July 31.a. Cost of goods
Hardy Company’s cost of goods sold is consistently 60% of sales. The company plans to carry ending merchandise inventory for each month equal to 20% of the next month’s budgeted cost of good
Big Sound, a merchandising company specializing in home computer speakers, budgets its monthly cost of goods sold to equal 70% of sales. Its inventory policy calls for ending inventory in each month
Refer to information from Exercise 22-8. Each transmission requires 0.80 pounds of a key raw material. Electro Company aims to end each quarter with an ending inventory of direct materials equal to
Refer to information from Exercise 22-8. Each transmission requires 4 direct labor hours, at a cost of $12 per hour. Prepare a direct labor budget for the second quarter
Fortune, Inc., is preparing its master budget for the first quarter. The company sells a single product at a price of $25 per unit. Sales (in units) are forecasted at 45,000 for January, 55,000 for
Match the definitions 1 through 9 with the term or phrase a through i. A. Budget B. Merchandise purchases budget C. Cash budget D. Safety stock E. Budgeted income statement F. General and
Render Co. CPA is preparing activity-based budgets for 2013. The partners expect the firm to generate bill- able hours for the year as follows:The company pays $10 per hour to data-entry clerks, $40
Rida, Inc., a manufacturer in a seasonal industry, is preparing its direct materials budget for the second quarter. It forecasts sales of 225,000 units in the second quarter and 262,500 units in the
Refer to Exercise 22-25. For the second quarter, prepare (1) a direct labor budget and (2) a factory overhead budget,
Refer to Exercise 22-27. For April, May, and June, prepare (1) a direct labor budget and (2) a factory overhead budget,
Merline, a one-product mail-order firm, buys its product for $75 per unit and sells it for $150 per unit. The sales staff receives a 10% commission on the sale of each unit. Its December income
Black Diamond Company produces snow skis. Each ski requires 2 pounds of carbon fiber. The company’s management predicts that 5,000 skis and 6,000 pounds of carbon fiber will be in inventory on June
Comp-Media buys its product for $60 and sells it for $130 per unit. The sales staff receives a 10% com¬ mission on the sale of each unit. Its June income statement followsManagement expects June’s
Adria Lopez expects second quarter 2014 sales of her new line of computer furniture to be the same as the first quarter’s sales (reported below) without any changes in strategy. Monthly sales
Financial statements often serve as a starting point in formulating budgets. Review Polaris’ financial statements to determine its cash paid for acquisitions of property and equipment in the
One source of cash savings for a company is improved management of inventory. To il¬ lustrate, assume that Polaris and Arctic Cat both have $ 1,000,000 per month in sales of one model of snowmobiles
Access information on e-budgets through The Manage Mentor:http://vvww.themanagementor.com/kuniverse/kmailers_universe/finance_kmailers/cfa/budgeting2.htm Read the information provided.Required 1.
To help understand the factors impacting a sales budget, you are to visit three businesses with the same ownership or franchise membership. Record the selling prices of two identical products at each
A flexible budget (a) shows fixed costs as constant amounts of cost per unit of activity,(b) shows variable costs as constant amounts of cost per unit of activity, or (c) is prepared based on one
What is the initial step in preparing a flexible budget?
What is the main difference between a fixed and a flexible budget?
A Standard cost (a) changes in direct proportion to changes in the level of activity, (b) is an amount incurred at the actual level of production for the period, or (c) is an amount incurred under
The following information is available for York Company.The labor efficiency variance is (a) $3,750 U, (b) $3,750 F or (c) $3,875 U. Actual direct labor hours per unit... Standard direct labor hours
Refer to Quick Check 7; the labor rate variance is (a) $625 F or [b) $625 U.
If a materials quantity variance is favorable and a materials price variance is unfavorable, can the total materials cost variance be favorable?
Under what conditions is an overhead volume variance considered favorable?
To use management by exception, a company (a) need not study fixed overhead variances,(b) should compute variances from flexible budget amounts to allow management to focus its attention on
A company uses a standard cost accounting system. Prepare the journal entry to record these direct materials variances:Direct materials cost actuallyincurred. $73,200 Direct materials quantity
If standard costs are recorded in the manufacturing accounts, how are recorded variances treated at the end of an accounting period?
Pacific Company provides the following information about its budgeted and actual results for June 2013. Although the expected June volume was 25,000 units produced and sold, the company actually
Define standard costs and explain how standard cost information is useful for management by exception
Describe variances and what they reveal about performance
A company predicts its production and sales will be 24,000 units. At that level of activity, its fixed costs are budgeted at $300,000, and its variable costs are budgeted at $246,000. If its activity
Using the following information about a single product com¬ pany, compute its total actual cost of direct materials used.• Direct materials standard cost: 5 lbs. X $2 per lb. = $10.• Total
Acompany uses four hours of direct labor to produce a product unit. The standard direct labor cost is $20 per hour. This period the company produced 20,000 units and used 84,160 hours of direct labor
A company’s standard for a unit of its single product is $6 per unit in variable overhead (4 hours X $1.50 per hour). Actual data for the period show variable overhead costs of $150,000 and
A company’s standard for a unit of its single product is $4 per unit in fixed overhead ($24,000 total/6,000 units bud¬ geted). Actual data for the period show total actual fixed overhead of
Is it possible for a retail store such as Apple to Apple use variances in analyzing its operating performance?Explain.
Beech Company sold 105,000 units of its product in May. For the level of production achieved in May, the budgeted amounts were: sales, $1,300,000; variable costs, $750,000; and fixed costs, $300,000.
Refer to information in QS 23-2. Assume the actual cost to manufacture one metal bat was $40. Compute the cost variance and classify it as favorable or unfavorable.

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