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survey of accounting

Questions and Answers of Survey of Accounting

=+The investment was justified not merely on cost savings but also on the basis of qualitative consider¬ations. Monsanto management viewed the invest¬ment as a critical element in achieving its
=+16. Monsanto, a large chemical and fibers company, invested $37 million in state-of-the-art systems to improve process control, laboratory automation, and local area network (LAN) communications.
=+14. What are the major advantages ofleasing a fixed asset rather than purchasing it?
=+13. What method can be used to place two capital investment proposals with unequal useful lives on a comparable basis?
=+6. Why would the cash payback method understate the attractiveness of a project with a large salvage value?
=+5. Aproject is estimated to generate cash flows of$40,000 per year for 10 years. The cost ofthe project is $226,000. What is the internal rate ofreturn for this project?A. 8% C. 12%B. 10% D.
=+4. A project that will cost $120,000 is estimated to gener¬ate cash flows of $25,000 per year for 8 years. What is the net present value ofthe project, assuming a 10%required rate ofreturn? (Use
=+2. Management is considering a $ 100,000 investment in a project with a 5-year life and no residual value. Ifthe total income from the project is expected to be $60,000 and recognition is given to
=+3. Dixon Company expects $650,000 of credit sales in March and $800,000 of credit sales in April. Dixon historically collects 70% ofits sales in the month ofsale and 30% in the following month. How
=+4.The actual and standard direct materials costs for producing a specified quantity of product are as follows:Actual: 51,000 pounds at $5.05 $257,550 Standard: 50,000 pounds at $5.00 $250,000 The
=+5.Bower Company produced 4,000 units ofproduct.Each unit requires 0.5 standard hour. The standard labor rate is $12 per hour. Actual direct labor for the period was $22,000 (2,200 hours X $10 per
=+5. When would a company use zero-based budgeting?
=+8. What is the first step in preparing a master budget?
=+10. Why should the timing of direct materials purchases be closely coordinated with the production budget?
=+12.a. Discuss the purpose ofthe cash budget.
=+b. Ifthe cash for the first quarter ofthe fiscal year indicates excess cash at the end of each ofthe first two months, how might the excess cash be used?
=+13. Give an example ofhow the capital expenditures bud¬get affects other operating budgets.
=+14. How are standards used in budgetary performance evaluation?
=+15.a. What are the two variances between the actual cost and the standard cost for direct materials?
=+b. Discuss some possible causes ofthese variances.
=+16. The materials cost variance report for Nickols Inc.indicates a large favorable materials price variance and a significant unfavorable materials quantity variance.
=+What might have caused these offsetting variances?
=+17.a. What are the two variances between the actual cost and the standard cost for direct labor?
=+b. Who generally has control over the direct labor cost?
=+19. Would the use ofstandards be appropriate in a non¬manufacturing setting, such as a fast-food restaurant?
=+20. Briefly explain why firms might use nonfinancial per¬formance measures.
=+Flexible budget for selling and administrative expenses Objs 1,2 SPREADSHEET/ Total selling and ad¬ministrative expenses at $140,000 sales,$65,550
=+7,420 units Master Electronics Company uses Sales commissions Advertising expense Miscellaneous selling expense Office salaries expense Office supplies expense Miscellaneous administrative expense
=+Prepare a flexible selling and administrative expenses budget for January 2008 for sales vol umes of $100,000, $120,000, and $140,000. (Use Exhibit 4 as a model.)Steelcase Inc. is one ofthe largest
=+Prepare a flexible budget for 12,000, 15,000, and 18,000 filing cabinets for the month of October 2008, similar to Exhibit 4, assuming that inventories are not significant.Melody Audio Company
=+Estimated inventory (units), September 1 380 140 Desired inventory (units), September 30 Expected sales volume (units):450 110 East Region 4,400 3,200 West Region 2,950 2,100 Unit sales price
=+E13-4 Professional fees budget Obj 2 SPREADSHEET/ Total professional fees, $13,956,000 Kimble and Sanchez, CPAs, offer three types ofservices to clients: auditing, tax, and small busi¬ness
=+Budgeting and Standard Cost Systems 515 Billable Hours Audit Department:Staff 34,500 Partners 5,200 Tax Department:Staff 27,700 Partners 4,150 Small Business Accounting Department:Staff 22,800
=+The average billing rate for staffis $120 per hour, and the average billing rate for partners is $240 per hour. Prepare a professional fees earned budget for Kimble and Sanchez, CPAs, for the year
=+E13-5 Professional labor cost budget Obj 2 SPREADSHEET y Stafftotal labor cost,$6,375,000 Based on the data in Exercise 13-4 and assuming that the average compensation per hour for staffis $75 and
=+E13-6 Direct materials purchases budget Obj 2 SPREADSHEET/ Total cheese purchases, $131,813 Roma Frozen Pizza Inc. has determined from its production budget the following estimated production
=+Units 12 " Pizza 16 " Pizza Budgeted production volume 16,400 25,600 There are three direct materials used in producing the two types of pizza. The quantities of direct materials _
=+expected to be used for each pizza are as follows:12 " Pizza_16 " Pizza Direct materials:Dough 1.00 lb. per unit 1.50 lbs. per unit Tomato 0.60 0.90 Cheese 0.80 1.30 In addition, Roma has
=+E13-7 ya. Total production of 501 Jeans, 47,000 Coca-Cola Enterprises is the largest bottler ofCoca-Cola® in North America. The company purchases Coke® and Sprite® concentrate from The Coca-Cola
=+In addition, assume that the concentrate costs $75 per pound for both Coke and Sprite and is used at a rate of 0.2 pound per 100 liters of carbonated water in blending Coke and 0.15 pound per 100
=+Match Point Racket Company manufactures two types oftennis rackets, the Junior and Pro Striker models. The _
=+production budget for March for the two rackets is as follows:Junior_Pro Striker Production budget 7,300 units 18,400 units Both rackets are produced in two departments, Forming and Assembly. The
=+Prepare the direct labor cost budget for March 2008.
=+Levi Strauss & Co. manufactures slacks and jeans under a variety ofbrand names, such as Dockers® and 501 Jeans®. Slacks and jeans are assembled by a variety of different sewing opera tions.
=+----Dockers 501 Jeans March 1 estimated inventory 320 1,230 March 31 desired inventory 520 2,030
=+Assume the following direct labor data per 10 pairs ofDockers and 501 sewing operations: Jeans for four different Budgeting and Standard Cost Systems 517 Direct Labor per 10 Pairs Dockers_501 Jeans
=+a. Prepare a production budget for March. Prepare the budget in two columns: Dockers® and 501 Jeans®.
=+b. Prepare the March direct labor cost budget for the four sewing operations, assuming a $12 wage per hour for the inseam and outerseam sewing operations and a $14 wage per hour for the pocket and
=+E13-10 Factory overhead cost budget
=+Fresh Mint Candy Company budgeted the following costs for anticipated production for July 2008:
=+Obj 2 Advertising expenses $275,000 Production supervisor wages $125,000 SPREADSHEET 1 Manufacturing supplies 14,000 Production control salaries 33,000
=+•/ Total variable factory Power and light 42,000 Executive officer salaries 205,000 overhead costs, Sales commissions 290,000 Materials management salaries 29,000$243,000 Factory insurance 23,000
=+El 3-11 Cost ofgoods sold budget Ob', 2 SPREADSHEET V Cost ofgoods sold,$397,320
=+The controller ofMoravian Ceramics Inc. wishes to prepare a cost of goods sold budget for April. The controller assembled the following information for constructing the cost of goods sold
=+Direct labor cost: Department Department Total Total direct labor cost budgeted for Ap ril $37,500 $134,400 $171,900 Finished goods inventories: Dish Bowl Figurine Total Estimated inventory, April
=+Work in process inventories:Estimated inventory, April 1, 2008 Desired inventory, April 30, 2008$2,800 1,750 Budgeted factory overhead costs for April:Indirect factory wages $55,500 Depreciation of
=+E13-12 Schedule ofcash collections ofaccounts receivable Obj 2 SPREADSHEET/ Total cash collected in May, $535,700 Happy Tails Wholesale Inc., a pet wholesale supplier, was organized on March 1,
=+The company expects to sell 10% ofits merchandise for cash. Ofsales on account, 50% are expected to be collected in the month ofthe sale, 40% in the month following the sale, and the remainder in
=+El 3-13 Schedule ofcash collections ofaccounts receivable Obj 2 SPREADSHEET V Total cash collected in January, $307,600 Office Warehouse Supplies Inc. has “cash and carry” customers and credit
=+January $220,000 February 275,000 March 260,000 The Accounts Receivable balance on December 31, 2007, was $180,000.Prepare a schedule of cash collections from sales for January, February, and
=+in August, $107,875 A+ Learning Systems Inc. was organized on May 31, 2009. Projected selling and administrative expenses for each ofthe first three months of operations are as follows:June
=+Depreciation, insurance, and property taxes represent $20,000 ofthe estimated monthly expenses. The annual insurance premium was paid on May 31, and property taxes for the year will be paid in
=+Prepare a schedule indicating cash payments for selling and administrative expenses for June, July, and August.Budgeting and Standard Cost Systems 519
=+vEl 3-15 Schedule ofcash payments Gbj 2 SPREADSHEET V Total cash payments in December,$128,720
=+Total Flex Physical Therapy Inc. is planning its cash payments for operations for the fourth quarter (October-December), 2009. The Accrued Expenses Payable balance on October 1 is$22,600. The
=+Other operating expenses include $10,500 ofmonthly depreciation expense and $600 of monthly insurance expense that was prepaid for the year on March 1 ofthe current year. Ofthe remaining expenses,
=+Prepare a schedule of cash payments for operations for October, November, and December.
=+E13-16 Capital expenditures budget Gbj 2 SPREADSHEET V Total capital expenditures in 2008,$7,000,000 On January 1, 2008, the controller ofGarden Master Tools Inc. is planning capital expenditures
=+Director ofFacilities: A construction contract was signed in late 2007 for the construction of a new factory building at a contract cost of $12,000,000. The construction is scheduled to begin in
=+Vice President ofManufacturing: Once the new factory building is finished, we plan to purchase$1.5 million in equipment in late 2009.1 expect that an additional $300,000 will be needed early in the
=+Vice President ofMarketing: We have really been growing lately. I wouldn’t be surprised ifwe need to expand the size of our new factory building in 2011 by at least 40%.Fortunately, we expect
=+Director ofInformation Systems: We need to upgrade our information systems to wireless network technology. It doesn’t make sense to do this until after the new factory building is completed and
=+President: I am excited about our long-term prospects. My only short-term concern is financ¬ing the $7,000,000 of construction costs on the portion ofthe new factory building sched¬uled to be
=+Use the interview information above to prepare a capital expenditures budget for Garden Master Tools Inc. for the years 2008-2011.
=+Carolina Furniture Company manufactures unfinished oak furniture. Carolina uses a standard cost system. The direct labor, direct materials, and factory overhead standards for an unfinished dining
=+Direct labor:Direct materials (oak):Variable factory overhead:Fixed factory overhead:standard rate standard time per unit standard price standard quantity standard rate standard rate$1 7.00 per
=+Determine the standard cost per dining room table.
=+Vernon Bottle Company (VBC) manufactures plastic two-liter bottles for the beverage industry.The cost standards per 100 two-liter bottles are as follows:Standard Cost Cost Category_per 100
=+At the beginning of August, VBC management planned to produce 620,000 bottles. The actual number of bottles produced for August was 650,000 bottles. The actual costs for August ofthe current year
=+a. Prepare the August manufacturing standard cost budget (direct labor, direct materials, and factory overhead) for VBC, assuming planned production.
=+b. Prepare a budget performance report for manufacturing costs, showing the total cost vari¬ances for direct materials, direct labor, and factory overhead for August.
=+c. Interpret the budget performance report.The following data relate to the direct materials cost for the production of 4,000 automobile tires:Actual: 130,240 pounds at $1.65 $214,896 Standard: 1
=+a. Determine the price variance, quantity variance, and total direct materials cost variance.
=+b. To whom should the variances be reported for analysis and control?The following data relating to direct materials cost for March ofthe current year are taken from the records ofTop Toys Inc., a
=+Budgeting and Standard Cost Systems 521 Quantity of direct materials used 40,000 pounds Actual unit price of direct materials $1.48 per pound Units offinished product manufactured 7,600 units
=+Determine the standard direct materials cost per unit offinished product, assuming that there was no inventory ofwork in process at either the beginning or the end ofthe month.
=+H.J. Heinz Company uses standards to control its materials costs. Assume that a batch of ketchup (1,500 pounds) has the following standards:Standard Quantity_Standard Price Whole tomatoes 2,400
=+The actual materials in a batch may vary from the standard due to tomato characteristics.Assume that the actual quantities ofmaterials for batch W196 were as follows:2,500 pounds oftomatoes 115
=+a. Determine the standard unit materials cost per pound for a standard batch.
=+b. Determine the direct materials quantity variance for batch W196.The following data relate to labor cost for production of 12,500 cellular telephones:Actual: 13,600 hours at $16.15 $219,640
=+a. Determine the rate variance, time variance, and total direct labor cost variance.
=+b. Discuss what might have caused these variances.
=+E13-23 Direct labor variances Obj 5 ya. Time variance,$1,281 F Blue Ridge Bicycle Company manufactures mountain bikes. The following data for May ofthe current year are available:Quantity of direct
=+a. Determine the direct labor rate and time variances.
=+b. How much direct labor should be debited to Work in Process?1,400 hours$16.15 per hour 280 5.30 hours$15.25 per hour 210 522 Chapter 13 E13-24 Direct materials and direct labor variances Ob] 5/
=+The standard materials price is $0.80 per pound. The standard direct labor rate is $14 per hour. At the end ofJuly, the actual direct materials and direct labor costs were as follows:Actual direct
=+At the beginning ofJuly, Commercial Printers Company budgeted 14,000 books to be printed in July at standard direct materials and direct labor costs as follows:Direct materials $28,000 Direct labor
=+There were no direct materials price or direct labor rate variances for July. In addition, assume no changes in the direct materials inventory balances in July. Commercial Printers Company actually
=+E13-25 Standards for nonmanufac¬turing expenses Obj 6/a. $2,520 Midlands Hospital began using standards to evaluate its Admissions Department. The standard was broken into two types of admissions
=+Type ofAdmission_Admission Record Unscheduled admission 60 minutes Scheduled admission 40 minutes

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